Faiz Kermani

Together, Europe and the US account for more than 70% of the global pharmaceutical market, and the growth of these markets is heavily dependent on distribution systems. At present, major changes are taking place in the European and US drug distribution systems, which will have important consequences for everyone in the pharmaceutical sector. 

To understand the implications of the dynamics in the distribution system, it is important to take a look at those that play a key role. In this respect, there are important distinctions between the European and US systems.

  Generally, most attention is focused on pharmaceutical manufacturers, wholesalers and pharmacists as it is the interaction between these that dictates the pharmaceutical distribution process. 

In the traditional structure of the supply chain, pharmaceuticals are manufactured by pharmaceutical companies and transferred by wholesalers through to pharmacies. From a US perspective, Pharmacy Benefit Managers (PBMs) are also of great importance to the distribution network as their role is to achieve savings for customers by negotiating discounts and through cost-containment programmes. It has been estimated that approximately two-thirds of all prescriptions written in the US are processed by a PBM. 

The pharmaceutical supply chain represents a high-value business, and manufacturers, wholesalers and pharmacists are constantly scrutinizing how the supply chain operates to achieve the maximum advantage for themselves. As with all buyer/supplier relationships, there is some degree of conflict between supply chain participants because of the varying objectives of the players involved. However, there are signs that the opinions of the different parties have diverged to such an extent that the make-up of the European and US supply chains are certain to change. Mistrust between manufacturers and wholesalers appears to be a growing feature of many European markets, while in the US changes are being driven by the most powerful wholesalers, who wish to achieve maximum dominance over the system through acquisitions. 

Traditionally, manufacturers sell their products to wholesalers that then compete among themselves to become the main suppliers to pharmacies. However, the traditional model of pharmaceutical distribution is under threat because of major changes that have taken place in the UK.

The main change is the adoption of a direct-to-pharmacy (DTP) model where pharmaceutical manufacturers sell their products directly to pharmacies and appoint a limited number of logistics service providers to deliver the medicines on their behalf. Pfizer's establishment of a DTP system in the UK involving Alliance UniChem signifies a new trend towards manufacturers establishing similar arrangements in other European countries and a number of other pharmaceutical companies are already setting up similar agreements.

  For pharmaceutical manufacturers, this model is ideal as it allows greater control over the supply chain.  

With European governments limiting profits through cost-containment measures and companies facing gaps in revenue because of patent expiries, many believe that changing distribution arrangements makes commercial sense. IBM has calculated that supply chain operations can cost companies more than a third of revenues, including cost of goods, inventory and assets, while also consuming approximately half of their headcount.

 In addition, pharmaceutical companies have become increasingly irritated by parallel trade and are determined to gain control over the supply chain. 

As wholesaler turnover in the EU exceeds €135 billion each year, the move is unpopular as it has the potential to drive certain wholesalers out of business if they do not become a preferred option for major manufacturers.

  A number of wholesaler associations are lobbying at the highest levels within the EU to prevent manufacturers implementing changes in the supply chain. However, if the UK experience is representative, they are unlikely to succeed. An official inquiry by the Office of Fair Trading highlighted concerns that DTP could lead to rising costs for the UK's healthcare system and diminished distribution service,

  but no concrete action has been taken. 

There is no appetite for DTP in the US market. Independent analyses of the US sector reveal that the huge financial investment required from pharmaceutical manufacturers to operate DTP has persuaded them to stick with the traditional system,

  as it is estimated that a comprehensive, US-wide direct distribution model would cost the equivalent of €35.3 billion to operate, assuming daily deliveries. This is a 15.5% increase on the cost of current distribution systems. 

Valued at $275 billion (€203 billion) in 2008, the prescription drug wholesale industry in the US is highly concentrated, following a wave of consolidation in the sector. Cardinal Health Inc., McKesson Corp. and AmerisourceBergen Corp., which have benefited from this trend, are driving further change in the market. Popularly known as the 'Big Three', these companies account for 90–95% of revenue within the sector. As well as being the major customers for manufacturers, the Big Three are in a powerful position for controlling delivery to pharmacies and other outlets. This dominance worries regulators as they could form a monopoly or oligopoly in the US market. These companies distribute a full line of drug products nationwide and their combined annual 2007 revenue was in the order of a quarter trillion dollars. Since they buy the large majority of their drugs directly from the manufacturers of the products, they are defined as primary distributors. Despite their dominance, these organizations have surprisingly tight margins. Booz Allen Hamilton has calculated the gross margin for branded pharmaceuticals earned by primary distributors in the US at 3%.

Despite their dominance, the Big Three continue to look for further acquisitions and market conditions favour a trend towards further consolidation. In particular, new regulations will restrict the activities of smaller distributors and may make them easier targets for the Big Three. Specifically, the 'pedigree' requirement of the Prescription Drug Marketing Act (PDMA), which came into effect in December 2006, may harm smaller distributors. The PDMA pedigree requirements necessitate that all prescription pharmaceutical transactions be accompanied by the appropriate paperwork, either going to the authorized distributor or to the manufacturer. According to PDMA's provisions, manufacturers and authorized distributors do not need a pedigree. From FDA's perspective, to qualify as an authorized distributor, a distributor must have an ongoing relationship with a manufacturer. Because of their volume of business this requirement is straightforward for the Big Three, but much harder for smaller competitors. 

The Federal Trade Commission (FTC), which works to eliminate unfair or deceptive marketplace practices, has shown a renewed interest in the activities of the Big Three. In the late 1990s, FTC blocked McKesson's plans to buy Amerisource and Cardinal's attempt to take control of Bergen Brunswig. However, in 2001 FTC relaxed its position to allow Amerisource and Bergen Brunswig to merge. At this point, the Big Three controlled approximately 80% of the drug wholesale sector. What appears to have worried regulators is that the dominance of these companies has far outgrown their expectations. Although there is no evidence of any gross violations, there is the potential for the market to be distorted because of the activities of these companies, as four out of every five drugs sold in the US are said to pass through the hands of the Big Three. Furthermore, their influence appears to be growing as they branch out into other activities, such as the distribution of medical devices. 

The growing concerns regarding the level of dominance of the Big Three led FTC to re-examine their activities.

  According to media reports, FTC has requested financial documents from McKesson's that were filed with the Securities and Exchange Commission. The investigations are likely to centre on whether the company has ever engaged in anticompetitive practices according to its filed statements. A similar investigation is reported to be occurring into the activities of Cardinal Health. 

There is also a concern that the activities of the Big Three are contributing to higher drug prices, as these companies tend to deal in bulk purchases and deliveries. There has been speculation that smaller facilities will be unable to gain a supply of medicines at a reasonable price from these companies. There are also anecdotal stories in the US media of small pharmacies being cut off because of their orders not reaching the threshold desired by a large distributor.

The changes in the European and US supply chains suggest a bleak future for the traditional model of drug distribution. The uncertainty is caused by the complex relationship between each of the parties in the supply chain. Although they all depend on each other for maintaining the distribution system, they all wish to have greater control of the process of delivering medicines to patients. Pharmaceutical manufacturers and pharmacists have their own opinions regarding the structure of the supply chain and their actions to reinforce their views will shape the future of the system.

Pharmaceutical Distribution in Europe: The Emergence of Direct-to-Pharmacy Supply

Pharmaceutical Distribution in the United States

et al., Pharma 2010: The value-creating supply chain

5. PGEU, "PGEU Statement: Direct To Pharmacy Distribution. The Pharmaceutical Group of the European Union" (2007).

Medicines distribution: An OFT Market Study

7. R. Britt, "Growing share of 'Big Three' gets federal attention" (2007).

The Role of Distributors in the U.S. Healthcare Industry

 (The Healthcare Distribution Management Association, Arlington, VA, USA, 2008).

Articles

Together, Europe and the US account for more than 70% of the global pharmaceutical market, and the growth of these markets is heavily dependent on distribution systems.

All change for drug distribution

Initially, pharmaceutical companies only handed select portions of clinical trial work to CROs and the arrangement was always characterized by a degree of 'fear of losing control' over the project. With time, this has changed, and CROs are now much more involved in the clinical trial process and expected to provide strategic input. The Tufts Center for the Study of Drug Development reported that in 2004, CROs managed 23000 Phase I–IV clinical trials worldwide, monitored more than 150000 clinical investigators and enrolled more than 640000 new subjects.

  The study also revealed that projects involving high CRO usage stuck closer to timelines as such projects were submitted more than 30 days closer to their projected submission date.    

In recognition of these trends, many CROs have expanded the number of services they offer. This has seen them move past simply helping with day-to-day operational tasks, and major CROs can now handle almost any aspect of the trial process and related activities.  

One area of drug development that pharmaceutical companies often struggle with is the regulatory stage. This final phase of drug development is the last hurdle before a drug reaches the market and is beyond the control of companies. There are often problems as the process involves an external regulatory agency that reviews the data in an independent fashion. As regulatory agencies are government bodies, and thus accountable to the public, public safety is paramount and their decision-making must be geared towards this factor rather than a company's hopes and expectations.  

CROs are in a powerful position to demonstrate their expertise. As they work on different projects, many have dealt with a range of international regulatory scenarios and are at an advantage as regulatory affairs departments in many pharmaceutical companies have often not been exposed to the same level of variation. 

The outcomes of regulatory reviews cannot be predicted, but companies can be better prepared by planning ahead and seeking good advice on regulatory options and guideline changes. If a sponsor is using the services of a CRO that has a regulatory affairs department, it would be wise for the sponsor to consider asking their opinion.

As CRO regulatory affairs personnel frequently deal with regulatory agencies, they often build up a more realistic picture of what is expected, whereas a sponsor can be overly biased because of expectations for a specific product. In addition, CRO regulatory personnel tend to work concurrently with numerous agencies in different global regions across various projects, whereas the sponsor is often limited to national markets for a set number of products. This allows CROs greater insight into the nuances of decision-making within regulatory agencies. Companies accustomed to dealing with a particular regulatory agency can find that changing countries dramatically alters the regulatory strategy and the time involved in gaining approval for a trial. 

As the pharmaceutical industry operates on an international basis, it is crucial to understand the manner in which international regulatory guidelines are changing. There is also a great deal of cross-talk between regulatory agencies, which should not be underestimated. Regulatory questions that arise with an agency on one side of the world may appear elsewhere. To provide value to sponsors, CROs have had to become experts in international guidelines so that they can provide advice at the outset of a trial.  

An example of how CROs can provide value occurred in May 2004 with the implementation of the European Clinical Trials Directive and its associated legislation. Prior to this date, there had been diverse processes of initiating and conducting clinical trials among Member States, as well as Iceland, Liechtenstein, Norway and other members of the European Economic Area where the Directive is also binding. Many sponsors had become accustomed to the pre-directive era and were frustrated by the impending changes. For CROs, there was no choice but to become as familiar with the new procedures as quickly as possible to advise potential clients.

Although it may not have appeared so initially, one of the primary aims of the directive was to unify the regulatory processes in different Member States. Until this point, a situation had existed whereby certain countries had a distinct advantage over others in attracting clinical trials to their territory. Many sponsors favoured certain countries for trials and found the changes disruptive to their plans.  

The changes were also complicated by the continuing expansion of the EU, leaving many sponsors confused about the implications for trials they wished to run in newer Member States. Also, as the regulatory changes manifested themselves in the form of a 'directive', additional steps were required for the principles to be incorporated into national laws, and CROs had to determine how these changes would be implemented in the different Member States and in what timeframe. This was difficult as the outcome depended on legislative processes. Despite the widespread media coverage of its implementation, some EU countries had not implemented or had only partially implemented the directive's provisions 6 months after the deadline. During the transition, companies found the processes unclear, but many CROs expected there would be advantages regarding standardized processes as countries defined their national legislation. 

US-based sponsors were particularly troubled by the implications of the directive. In light of the new requirements, some asked why they would want to incur the expense and disruption of conducting clinical trials in Europe when they could be performed in the US. As a strategic partner, it was important for the CRO to remind them of the long-term view and the end-result of their clinical trials — a marketing authorization application. All commercial sponsors want to maximize their profit and, with a population close to 500 million, the EU is an enormous potential marketplace that they simply cannot ignore! 

Pharmaceutical companies are conducting a growing number of clinical trials in emerging markets. The major drug development regions of the world remain North America, Europe and Japan, but markets such as those in Asia, Latin America and Africa have emerged as important locations for clinical trials. Costs in emerging regions are frequently perceived as less than in the main pharmaceutical markets because of fast patient recruitment and lower operating costs. Furthermore, these regions often feature a sizeable group of patients with the therapeutic conditions that pharmaceutical companies are interested in, and there is growing competition between companies to recruit patients for their trials in these regions. 

The trend in using emerging regions has further significance as they are also becoming important markets for new medicines. Through clinical trials, local physicians gain experience of new products and, therefore, it is in a company's interests to base some clinical research in these locations. In some countries, regulators expect some local clinical development of a product to have been conducted. 

This has allowed CROs to demonstrate their value through the provision of regulatory advice. In more established markets, the regulatory, ethical and clinical research environments are fairly well-defined, and so companies have sufficient previous experience to help them adapt to further changes. However, with emerging regions of the world environments are less clear-cut and guidelines that are acceptable elsewhere may not necessarily apply. Furthermore, many of the regulations in these countries are rapidly changing as agencies attempt to match the standards expected in major markets to attract clinical trials to their territory.  

Many CROs saw the value of emerging markets early and this practical experience has proved invaluable in aiding sponsors to get the best out of these markets. For example, in India the regulatory environment is being advanced through the revision of Schedule Y.

  Schedule Y deals with regulations relating to clinical trial requirements for import, manufacture and obtaining marketing approval for a new drug in India. The procedure for applying for marketing approval depends on the status of the new drug. Many sponsors need advice on what these revisions mean to take advantage of improvements in market conditions to run trials. 

Sponsors are becoming more reliant on CROs for their clinical trial projects and one of the major growth areas for CROs to provide value to their clients is through regulatory affairs. As drug development becomes more complex, so too will the requirements specified by regulators. CROs that are able to demonstrate knowledge in this field will be in a powerful position. Furthermore, the more international their regulatory experience, the stronger their position will be in bidding for the largest clinical trial programmes.?PTE 

1. January/February 2006 Tufts CSDD Impact Report, Association of Clinical Research Organizations. 

2. UK Corporate Solutions, "Chiltern announces EU Directive seminar dates" (2004).

3. U. Sahoo and F. Kermani, "The Contract Research Industry in India" in E.S. Langer (Ed.), 

Advances in Biopharmaceutical Technology in India

 (BioPlan Associates, Inc., Rockville, Maryland, USA, 2007) pp 281–312. 

All commercial sponsors want to maximize their profit and, with a population close to 500 million, the EU is an enormous potential marketplace that they simply cannot ignore!

Regulatory affairs: additional value?

The last decade has seen considerable investment in South Korea, and the country now represents the world's 11th largest economy and has the 11th largest GDP.

  With a population of approximately 50 million and a GDP of $14000 (€8880) per head, it is an important consumer base that international companies cannot afford to ignore.  

Unfortunately, external enthusiasm for the South Korean market was severely dented by the 1997 financial crisis, which led to many foreign investors selling their assets. Since then, the country has introduced major policy changes that have made it stronger and more focused than other Asian competitors; for example, South Korea's foreign-exchange reserves have been described as the second highest after Japan among the 30 international member countries that make up the Organization for Economic Co-operation and Development. This makes the likelihood of another financial crisis reminiscent of 1997 unlikely. 

As the country's economy has rebounded, so too has foreign interest. This was highlighted by the decision to hold the 2006 International Conference on Pharmaceutical Medicine (ICPM) in Seoul, South Korea's capital?— the first ICPM meeting to have been held in the Asian region.

The South Korean government has invested in infrastructure and improved funding for the healthcare system to alleviate uncertainties caused by the 1997 financial crisis, and to attract the attention of the global pharmaceutical sector. The National Health Insurance (NHI) Act, introduced in 1999, integrated multiple insurance societies into a single insurer system to enhance the equity of financing for healthcare. Backed by temporary measures through the 2002 Special Act for Financial Stabilization of National Health Insurance, the government attempted to provide comprehensive healthcare services to the public. The NHI system, overseen by the Ministry of Health and Welfare,

  is mandatory for Koreans living in the country, except for some medical aid beneficiaries. In October 2003, it was estimated that the NHI Programme covered 97% of the population. The Medical Aid Programme, a Korean social assistance programme, covered the remaining 3%. 

The new system has created considerable opportunities for foreign companies as there is strong demand from the population for new medicines. At present, pharmaceuticals account for approximately 30% of healthcare expenditure in South Korea.

  Estimates of the value of the country's pharmaceutical market vary, but Business Monitor International has predicted that it will reach $21.6 billion (€13.7 billion) by 2011.

A major attraction for pharmaceutical companies is the separation of medical prescribing and dispensing, which was a key reform of the South Korean healthcare system in July 2000. This process marked a shift from dispensing doctors to a retail pharmacy market and was strongly resisted by physicians, who had traditionally derived a large proportion of their income from pharmaceuticals.  

These measures appear to have benefited multinational pharmaceutical companies, which are dominating the market,

 and South Korean consumers are now more aware of branded medications. As foreign companies tend to introduce the latest breakthrough medicines, they have had the most success. In contrast, many local companies have become so reliant on income streams from the government for generic drugs that they have little desire to innovate. 

In 2007, South Korea concluded a free trade agreement with the US that is expected to increase the number of US pharmaceutical products entering the country.

  The agreement should remove restraints on imports, make regulatory processes more transparent and is also expected to ensure adequate enforcement of pharmaceutical patent rights. In the past, there have been frequent complaints by foreign pharmaceutical companies because the South Korean pharmaceutical pricing system and procedures appeared to favour domestic companies.  

However, the domestic pharmaceutical sector has been alarmed by these developments, particularly as additional agreements with Canada and the EU are expected to follow. In response, the South Korean Ministry of Health and Welfare announced it would invest $1.07 billion (€678.7 million) in the domestic sector during a 10-year period. Nearly 80% of this investment will be devoted to R&D initiatives, with the remainder being split between new infrastructure and assisting companies in exporting their products.

Despite this pessimistic scenario, there have been moves to encourage innovation in the domestic pharmaceutical sector. The Korea Drug Research Association, a nonprofit organization established in 1986, aimed to better coordinate activities of the domestic pharmaceutical industry and boost its standing. The organization represents its member companies and promotes joint projects between industry and academic institutes.

  Additionally, it manages the Korea New Drug Award scheme to reward innovation, and has set up a pharmaceutical technology business centre to advise companies on technology transfer issues.  

One of the major successes for the domestic industry was SK Chemical's 1999 local launch of Sunpla, a third-generation platinum complex anticancer drug.

  Another high point for the domestic industry was Daewoong Pharmaceuticals's 2001 launch of its epidermal growth factor, Easyef, for the treatment of diabetic foot ulcers. Easyef has been undergoing international trials and was recently launched in Jordan.

  The company hopes to license Easyef in the US, Europe and Japan, which would be a major boost for South Korean pharmaceutical companies. 

Despite high ambitions for its pharmaceutical and biotech sectors, South Korea still faces a number of hurdles against competing internationally. As multinational pharmaceutical companies already have considerable experience in developing and launching drugs internationally, they are in an advantageous position compared with their emerging South Korean counterparts. Furthermore, their R&D budgets dwarf those of South Korean companies, which spend 4–6% of their turnover on R&D,

  whereas multinational companies often spend a double-digit percentage of their turnover on research. 

South Korea has become an R&D base, and many foreign and domestic companies are conducting clinical trials there. There are approximately 280 general hospitals in the country, and a pool of 83000 nurses and 75000 physicians.

  According to PRA International, the number of global clinical trials in South Korea grew substantially from only five in 2000 to 95 in 2005.

 database lists more than 700 clinical trials that include centres in South Korea.

  Most internationally sponsored trials are located in urban centres where there are English-speaking physicians,

  and some industry observers have predicted that the central nervous system therapeutic field will be a particular strong area for outsourced clinical trials in South Korea.

South Korea is well suited for international studies after having adopted good clinical practice (GCP) in 1995 and then ICH-GCP in 2001.

  Furthermore, there has been an overt drive by the Korean Food and Drug Administration (KFDA) to improve transparency in the regulatory system and shorten time lines. Sponsors can now expect authorization within 30 days of receipt of the clinical trial application. The overall approval procedure in South Korea is further expedited because of the possibility of making parallel submissions to both the ethics committees and the competent authorities, with the import permit issued along with regulatory approval. Nevertheless, time must be allocated to ensure that the full Clinical Trial Application dossier is fully translated into Korean prior to submissions. At present, the KFDA plans to revise its regulations further to harmonize with international ICH guidelines to encourage sponsors to bring their global trials to the country. 

Improvements in the economy and continued investment in its healthcare system have once again sparked foreign interest in the South Korean pharmaceutical market. The market is currently dominated by foreign companies and all the signs are that this will continue. Furthermore, the country has attracted attention as a centre for R&D, particularly clinical trials. In the near term, domestic companies will find it difficult to compete with their foreign rivals. 

1. UK Trade & Investment Biotechnology Sector Group, "The South Korean Biotechnology, Life Science and Pharmaceutical Industry" (2006). 

2. International Conference on Pharmaceutical Medicine (2006). 

3. South Korean Ministry of Health and Welfare, "The Social Security System of Korea. National Health Insurance Corporation" (2002). http://english.mohw.go.kr/index.jsp  

4. Drug Researcher, "South Korea acts to save its pharma industry from US competition" (2007). 

5. Korea Drug Research Association, "An Overview of the Korean Pharmaceutical Industry and Its R&D Activities" (2001). 

6. SK Chemicals, "Sunpla: The First New Drug Developed in Korea" (2003). 

7. Daewoong Pharmaceutical Co., Ltd, "Easyef (Ingredient: EGF) With Excellent Effect Upon Treatment Of Chronic Injury And Scar Inhibition" (2005). 

Clinical Research in Taiwan, South Korea and Malaysia

10. Reuters, "What Pharmaceutical and Biotechnology Companies Want" (2008). 

Despite high ambitions for its pharmaceutical and biotech sectors, South Korea still faces a number of hurdles against competing internationally.

New interest in an old market: South Korea

China is generating huge interest as a destination for outsourced clinical trials, particularly since the US consulting firm AT Kearney ranked it above India in 2007 as the most attractive, low-cost location to run clinical trials outside the US.

  Other independent assessments have also ranked China highly.

  In March 2006, the UK Trade and Investment department examined clinical trial trends in China from both a sponsor's and an outsourcing partner's perspective. Discussions with representatives of government departments, and local and foreign companies showed that the clinical trial market was maturing and was not simply based on 'hype'.

A prime attraction for companies seeking to conduct clinical trials in China remains the country's large population, which offers a huge pool of patients. As China represents an estimated fifth of the world's population, it is likely that major diseases found elsewhere in the world will affect a sizeable number of people. An additional consideration is the rapid rate of urbanization, which has important healthcare implications. By 2050, 600 million Chinese people are expected to move from rural areas to urban districts. At present, China has more than 660 cities and 19000 towns. By 2050, 80% of towns will have grown into small- or medium-sized cities.

Rapid urbanization can transform the environment as people compete for limited natural resources and space, leading to overcrowding and poor hygiene, as well as a change in social attitudes. The growing number of trials being run in the infectious disease therapeutic area reflects this trend in urbanization; for example, approximately 25% of the patients enrolled in Novartis's ongoing chronic hepatitis B Phase III clinical trial, the GLOBE study, are from Chinese centres.

Apart from patient numbers, there are other attractions for conducting clinical trials in China, including positive patient attitudes and low costs. As the majority of the population is very poor, they have extremely limited access to healthcare. For such patients, clinical trials are seen as a means to receive free medical treatment and care. 

Another area that is becoming clearer to assess because of greater foreign company involvement is operational costs. Current thinking suggests that, in terms of general running costs, clinical trials can be conducted in China for approximately 10% of the equivalent cost in a Western country. More specific domestic estimates suggest that Phase I clinical trials in China are 15% of the price in the West, while Phase II trials cost 20% of the price in the West.

  These estimates are in-line with comments from the former CEO of AstraZeneca, Sir Tom McKillop, who was cited in a 2006 edition of the Wall Street Journal as stating that a major postmarketing clinical trial for two cardiovascular drugs (involving 46000 patients in 1250 hospitals in China) cost US$3 million (€1.9 million).

  Such a trial would be impossible to run in the West or Japan at the same low cost. 

When companies are interested in conducting a clinical trial, they first approach the Chinese State Food and Drug Administration (SFDA), after which they may choose one of the accredited hospitals from an official list for their study. In China, only medical institutes officially certified as 'National Institutes of Pharmaceutical Clinical Trials' by the SFDA may conduct clinical trials. At present, affiliated hospitals of medical universities, some large public hospitals and specialist hospitals can obtain certification, and Chinese hospitals have also become interested in competing for clinical trials. Each major hospital has a science and education department whose task is to document their involvement in clinical research. Physicians in charge of such departments have at least 10 years' experience and undergo continuous medical education training. 

The process to obtain clinical trial approval can be complex, but follows a five-step pattern:  

Contact must be made at local government level — often this involves simply informing the provincial SFDA office, but in special cases more formal approval is needed before proceeding further.

One of the concerns of global sponsors is whether Chinese clinical trials can be run to International Conference on Harmonisation (ICH) good clinical practice standards — the international quality standard that ensures clinical trials involving human participants are conducted in an ethical manner. Although some local observers have suggested that China could be used in a pilot capacity for clinical trials to evaluate the potential of a product for a foreign market, the country is far more sophisticated in its clinical trial nature.  

Foreign companies are showing growing confidence in using Chinese clinical data to support global clinical programmes. In 2003, Pfizer opened a clinical trial centre in Shanghai and stated that not only would this be concerned with developing drugs for local approval, but would also form part of the company's global R&D network.

  Similarly, since 1996 AstraZeneca has undertaken nine international multicentre clinical trials in the respiratory area in China with the involvement of more than 130 domestic hospitals and institutions. The company recently conducted clinical trials for its asthma product, TurbuHaler, in China and used the data to support the drug application overseas.

  The Chinese clinical work involved collaboration with professors who had worked on SARS and had valuable experience in the respiratory field. As previously mentioned, Novartis has been conducting a chronic hepatitis B clinical trial, which relies considerably on data from Chinese centres. 

Since its establishment in 2003, the SFDA has worked hard to modernize China's clinical practices, organize audits and create a database of physicians certified to conduct clinical research. During 2006, the agency was badly hit by a corruption scandal, which resulted in the execution of the agency's former Head, Zheng Xiaoyu.

  This harsh sentence was seen by many as evidence that the country's leadership was serious in improving external perceptions of its drug approval process.  

The increasing popularity of using China for clinical trials has encouraged the growth of the clinical research organization (CRO) sector. It has been estimated that there are 100 CROs operating in China working for both domestic and foreign pharmaceutical companies on clinical projects. A commonly held view among the Chinese CRO community is that the market is equivalent to that of the European and US CRO markets during the early 1980s. It is likely that the Chinese sector will experience rapid growth during the next decade because more companies are wanting to conduct clinical trials in the country, which will lead to more opportunities for CROs. Additionally, there may be some degree of consolidation because of competition between the different CROs. It is also possible that CROs may join up with partners in other cities to establish a stronger presence across the country, or that foreign CROs may buy local ones. 

Based on SFDA data from 2005, pharmaceutical companies obtained approval for more than 4000 clinical trials in China. Approximately 30% of clinical work was believed to have been outsourced, indicating a healthy future market for CROs. Large international CROs have either entered the Chinese market by themselves or through joint ventures with Chinese CROs. Several Japanese CROs are also operating in China, some of which have direct relationships with local institutions for clinical trials. The view among Chinese CROs is that they are more cost-effective and have better relationships with the SFDA and hospitals than foreign companies. They have described foreign CROs as growing slowly, with their high costs precluding them from working with Chinese companies. In contrast, domestic CROs have both the local experience and lower operating costs to attract work from international, as well as Chinese, pharmaceutical clients.  

China's clinical trial environment is improving rapidly and the SFDA is aspiring to be a world leader in drug development by 2010. Therefore, the agency is conducting wholescale reforms of its clinical trial process and has given rise to speculation about the results of these changes;

  for example, because of improving perceptions about the quality of Chinese data, it has been suggested that the country may soon be capable of producing FDA-quality data that could be used on its own to file for investigational new drugs (INDs) in the US. If this rumour is true, it will encourage a huge influx of international sponsors to invest in clinical trials in China, as the next logical step would be for FDA, and perhaps European agencies, to allow 'all-China data' for clinical trials. 

However, this seems most unlikely in the short-term, and so most companies should continue to use improving Chinese clinical data in conjunction with the data they generate in other markets to satisfy the major international regulatory agencies. Companies have much to gain from working in China, but must be cautious of over-extending themselves while the clinical trial environment continues to evolve.

1. In-Pharma Technologist, "China 'most attractive' offshore clinical trial location" (2007). 

Advances in Biopharmaceutical Technology in China

 (BioPlan Associates, Rockville, MD, USA, April 2007). 

3. Drug Researcher, "China lives up to ousourcing hype" (2007). 

4. Embassy of the People's Republic of China in the United States of America, "Experts: China's Urbanization Rate Tipped to Rise. Embassy of the People's Republic of China" (2002). 

5. Novartis, "New data show telbivudine superior to lamivudine in treatment of Chinese patients with chronic hepatitis B" (2006). http://

6. E. Berton, "More Chinese get free drugs in clinical trials" in 

7. China Daily, "Shanghai to get new Pfizer clinical trial centre" (2003).  

8. AstraZeneca, "AstraZeneca and China Medical Association jointly initiate research fund for chronic respiratory diseases" (2006). http://

9. China Daily, "Former SFDA chief executed for corruption" (2007). 

10. ChinaBio Today, "Rumors: SFDA to Speed INDs/US FDA OK with China Data" (2007).  

China captivates the clinical trial sector

India offers the global biopharmaceutical industry an array of opportunities in contract clinical research.

  The country has rapidly become one of the preferred destinations for clinical trials because of its large heterogeneous patient population and English-speaking western-educated physicians. It also has a track record of sincerity in meeting regulatory and recruitment timelines and, most importantly, well-accepted, good quality, auditable data. Although most media attention has been on the increasing clinical trial investment by major global pharmaceutical companies, there is growing interest in India from many other companies within the drug development sector. 

From a sponsor's perspective, there has been a change in how India is viewed for clinical trials — from scepticism to acceptance — with it now being a core region in global plans. As a result, many pharmaceutical players (Pfizer, Novartis, Astra Zeneca, Eli Lilly, GSK, Aventis, Novo Nordisk, Bristol-Myers Squibb, Roche and Amgen — to name but a few) have expanded their existing clinical research investment and infrastructure in India.

A decade ago, the contract research organization (CRO) sector was virtually nonexistent in India. As CROs were not operating in the country, there was a lack of commercial awareness concerning clinical trials and this created considerable apprehension in the minds of prospective clinical trial professionals. Pharmaceutical companies that performed clinical trials were mostly aiding their parent company in regulatory support and medical marketing functions. For professionally qualified pharmacists and medical doctors pursuing a career in the industry, clinical research was not seen as one of the best options, and most preferred a career in pharmaceutical sales and medical marketing. Only a handful of senior reputed doctors served as investigators for global multicentric studies under the direct monitoring of international sponsors.  

Throughout the decade, attitudes changed as companies invested in India and were pleasantly surprised by the results. In many cases, severe competition elsewhere in the global market forced companies to expand their outlook, and most local and global CROs now consider an operational presence in India key to overall business plans. Most of these are global CROs, such as Quintiles, Covance, Chiltern, PPD, ICON and Pharmanet. To achieve greater economies of scale and increase profitability of the business, some have even reduced their existing operations in western countries and expanded similar operations in India. Hence, to a degree, there has been a steady process of business expansion from Europe and the US to India and other emerging markets. The key enablers for the Indian CRO business are:  

 Availability of high-quality talented staff. 

 Availability of high-quality infrastructure and key resources. 

 Growing regulatory support from the government and better investor involvement.  

 The existence of well-qualified investigators and other clinical research professionals. 

Another factor that has attracted sponsors is the ability to conduct high-quality clinical research in India. The pace of change for improving quality was slow, with key stakeholders (i.e., sponsors, regulatory agency, ethics committee and investigators) being reactive and cautious to the challenges, which frustrated potential sponsors. As the number of trials conducted in India was small and global attention was limited, this unhurried style of facing key challenges was tolerable. However, in the modern era there has been a change in how clinical trial quality issues are viewed and the authorities have realized the benefits of making advances in these areas. An additional factor that makes India a favourite for clinical trials is the improvement in the intellectual property environment. 

Early pharmaceutical pioneers in India faced the daunting task of operating in an unfriendly regulatory and ethical environment for quality clinical trials. There was little in the way of formal regulatory guidelines, and it was difficult to find out what documents were needed and then guarantee receiving approval to go ahead with the trial on the basis of those documents when submitted.  

To make matters worse, there was also a dearth of experienced investigators and clinical research professionals. Despite this, with patience and persistence, these organizations and their supporters brought about a change in the quality of research professionals and made efforts to improve ethical aspects of clinical trial operations.  

The country has also progressed slowly towards good clinical practise (GCP) clinical trial standards.

  The Indian regulatory agency  — the Central Drugs Standard Control Organization (CDSCO) — is now very specific about what it needs and even informs you of the timelines you can expect before approval may be granted. Pressure from the industry (and proactive initiatives of the regulators) also encouraged the Central Ethics Committee on Human Research of the Indian Council of Medical Research (New Delhi) to issue 

Ethical Guidelines for Biomedical Research on Human Subjects

 in 2000. Subsequently in 2001, a central expert committee was formed by the Central Drugs Standard Control Organization to develop Indian GCP Guidelines in line with the latest World Health Organisation (WHO), International Conference on Harmonisation (ICH), FDA and Medicines and Healthcare Products Regulatory Agency (MHRA) guidelines. A continuation of this regulatory revolution has been the revision of Schedule Y, which deals with regulations relating to clinical trial requirements for import, manufacture and obtaining marketing approval for a new drug in India. The procedure for applying for marketing approval depends on the status of the new drug. When the revised Schedule Y fully comes into force, it will confirm India's image as a reliable clinical research destination. 

In the early 1990s, sponsors often posed the question, "Are Indian clinical trials acceptable globally?" and, at the time, this was difficult to answer. Now, it has become easier to convince sponsors to consider India within their major clinical research plans. In a similar way to how other emerging markets developed, India has shown that quality data can be generated to satisfy major regulatory agencies. Most major pharmaceutical companies have overcome the psychological hurdle concerning data quality and now routinely include India in their plans. 

According to CenterWatch, the approximate size of the Indian clinical trials market in 2002 (industry spend on CRO services and investigator grants) was US$30–35 million (€20.2–23.5 million). The estimated number of ICH-GCP clinical studies was 40–50, and the number of GCP-trained investigators was 200–250. Assuming there were 100 patients per study, or 20 patients per investigator, this translates to 4000–5000 patients. Most studies are conducted in 20–25 major public hospitals in major Indian cities, such as Mumbai, New Deli, Ahmedabad, Bangalore, Hyderabad and Chennai to name just a few.  

Although promising, it is important to note that the present size of the Indian industry is still very small by global standards. In the US, for example, the number of GCP trials is 60000 and there are more than 40000 GCP-trained investigators. However, global pressure on the industry to recruit patients faster and make trials economically justifiable means that large numbers of clinical trials are likely to be conducted in countries such as India. Because of this, a dramatic expansion of the Indian clinical trials market is anticipated to take place during the next 5 years. 

The most attractive business opportunity in clinical research appears to be setting up a CRO that can handle one or more functions for a sponsor. Today, there are at least 30 CROs that have established operations concentrating on the clinical monitoring work in Phases II–IV studies for the global pharmaceutical industry. Nevertheless, many global companies are managing the quality assurance, pharmacovigilance, medical affairs, regulatory affairs, medical writing work from their central offices outside India for reasons of control and absolute quality. As the Indian industry matures, it is likely that  these functions will be handled from India with the support of the domestic qualified medico-scientific community. This approach could also prove to be cost effective. The success of this business opportunity in India depends entirely on quality resources (which are scarce at present), dedicated and experienced leadership, and established global contacts to attract first time and repeat business. 

The contract research business is set to expand, and India's rapidly improving environment means that it is well-suited to accommodate this growth. The rise in pharmaceutical and biotech manufacturing, and contract research supported by IT skills, has also led to promising outsourcing business opportunities in various other segments including clinical trial data management and statistical analysis. The situation, at present, benefits all parties interested in clinical research, but long-term success depends on sustaining the improvements in the Indian environment to maintain quality and avoid complacency.

1. U. Sahoo and F. Kermani, "The Contract Research Industry in India," in E.S. Langer, Ed., 

 (BioPlan Associates Inc., Rockville, MD, USA, 2007). 

3. U. Sahoo, V. Sanghavi and F. Kermani, 

India's CRO sector on the rise

Spain is a major European pharmaceutical market with an estimated value of €11.3 billion, according to the latest data from the European Federation of Pharmaceutical Industries Associations (EFPIA).

  IMS Health values Spain's retail pharmacy market at US$12.9 billion (€8.7 billion) and estimates that it grew by 8% between September 2006 and August 2007. Interestingly, according to these IMS data, the growth rate of Spain's retail pharmaceutical market during this period was higher than that of the US, Canada, UK, France, Germany and Italy.

In terms of sales, the major therapeutic categories are cardiovascular, central nervous system (CNS), alimentary/metabolism and respiratory. Of these, the CNS area is proving popular — with sales having risen by 9% throughout 2006. Traditionally, antibiotics were considered to be a major product area, but sales in the anti-infectives class actually dropped by 3% in 2006.

Demographic and greater coverage of the population by the nationalized health system have played an important part in the growth of the country's pharmaceutical market. In recent years, the government has attempted to slow expenditure on pharmaceuticals through cost-containment measures, but these have proven highly unpopular with the pharmaceutical industry and, if it reduces patient access to newly launched medicines, the government will not gain the support of the public.  

A major demographic consideration that will drive further healthcare spending is the increase in the elderly population. The provision of healthcare for the elderly has become an important issue for industrialized countries, such as Spain, as the government shares much of the expenditure on medications. According to the Organization for Economic Cooperation and Development (OECD) those older than 65 years require four times as many healthcare resources as younger people.

  Spain is in a particularly difficult position as, by 2050, it is predicted to have one of the highest average-aged populations in the world.

  This rise, coupled with a decreasing national birth rate, will place greater pressure on the government to fund healthcare. 

Since 1985, the country has seen increasing investment from large, multinational pharmaceutical companies. This influx of investment is caused by Spain joining the EU and having implemented full patent protection on branded drugs. It is estimated that foreign companies now represent 75% of the country's pharmaceutical producers. Among the top ten leading the national market, only two are Spanish — Almirall Prodesfarma SA and Esteve SA.  

A major attraction for multinational companies is Spain's location, which enables good access to a combination of European and Mediterranean countries. As part of the EU, where there is a free circulation of goods, it represents an ideal location for distribution to neighbouring Member States and beyond. This has been a key part of the strategy utilized by multinational companies that have invested in Spain. At present, the value of pharmaceutical exports from the country is €5.4 billion.

However, its connections with other countries and its lower prices have also led to a rise in parallel trade within the EU. The pharmaceutical industry believes that the practice, which involves purchasing medicines at low prices in one Member State and their subsequent resale at higher prices in another, deprives it of valuable profits to fund R&D for new products. It is an issue that causes frequent legal battles between the pharmaceutical industry and parallel traders. 

Recently, Almirall launched an ambitious plan to expand beyond Spain, presumably because of the intense competition in its home market and the difficulty in sustaining growth by relying solely on Spanish sales.

  The company already has subsidiaries in Belgium, France, Germany, Italy, Portugal and Mexico, but during the next 5–10 years, it will concentrate on the major regional markets to position itself as a pan-European company. It is hoping that aclidinium bromide, which is currently in Phase III trials for chronic obstructive pulmonary disease will help fuel this growth. In addition, Almirall acquired Hermal in September 2007 giving it a strong presence in dermatology in the German market. 

In 2006, the Spanish pharmaceutical industry invested nearly €793 million in R&D.

  There has been some concern that the environment for pharmaceutical R&D in Spain is not as robust as it once was. Farmaindustria, an industry body representing pharmaceutical manufacturers, reported that R&D investment only grew by 3.6%.

  It notes that the growth in R&D investment at the beginning of the decade was closer to 20%, which suggests a substantial change in the environment for research. It believes that the government must do more to promote pharmaceutical R&D in and wishes to see better harmonization measures with the rest of the EU.  

Although overall pharmaceutical industry investment in R&D in Spain is growing at a slower annual level since 2004, investment in clinical trials remains strong. Clinical trials, particularly Phase III, are accounting for an ever greater share of total R&D expenditure, and it is likely this trend will continue for the foreseeable future.  

In 2006, €322 million was invested by the Spanish pharmaceutical industry in clinical trials, of which most was directed towards Phase III trials.

  There has also been increasing investment in Phase IV trials and postauthorization studies, which is starting to rival the level of investment in Phase II trials. In the same year, approximately €21 million was estimated to have been invested in pharmacovigilance studies. As regulators demand additional clinical data following approval of products, sponsors should expect to do more work in this area of clinical development. 

From an outsourcing perspective, the competition between providers suggests that there is rising demand for their services. In a 2003 survey by Biomedical bioestatistic, 95.7% of Spanish pharmaceutical industry respondents utilized the services of CROs.

  In addition, 91.5% of those surveyed believed that the clinical trials market in Spain was still set to grow, with only 4.3% believing that it had plateaued. 

As the Spanish government continues to introduce cost containment initiatives, pharmaceutical companies may turn to outsourcing providers to ensure their clinical trial programmes remain cost effective. As one of the top pharmaceutical R&D locations, the country is favoured when considering European clinical trial centres. In addition, its proximity to Portugal and links to Latin America have seen it being used by some CROs as a base to oversee trials further afield.  

Most major CROs are now well-established in Spain, being concentrated around the major pharmaceutical centres of Madrid and Barcelona. At present, the main demand for CRO operational services centres on Phase III trials. According to Quintiles, of the 122 trials it has run in Spain and Portugal since 1996, 114 have been Phase III trials. Generally, the international clinical research community has had greater interest in using Spain for the later stages of the clinical trials process (Phase III-b and Phase IV). This is because of perceptions regarding bureaucracy, but an increasing number of sponsors have moved beyond this and are using the country earlier in their clinical development programmes. Improvements in the clinical trial approval process and greater familiarity with Spanish regulations have facilitated this trend. 

There have been some concerns regarding the EU Clinical Trials Directive hampering clinical trials in Europe, and its implications for clinical research in Spain. The directive, which came into force in May 2004, was intended to create a harmonized framework for clinical drug research across Europe, but it continues to have its critics. At the 2007 European Cancer Conference, held in Barcelona, Dr Markus Hartmann, from European Consulting and Contracting in Oncology, suggested that there had been a decrease in the number of oncology clinical trials since the introduction of the directive.

  His findings suggested that Spain was being affected along with France, Germany, Italy, The Netherlands and the UK. However, the emphasis of these findings was on academic clinical trials rather than commercially sponsored ones. Currently, more than 80% of those clinical trials with Spanish centres on public registries are listed as industry-sponsored. From a Spanish perspective, the growth of the outsourcing market indicates that commercial sponsors are now beginning to get to grips with the finer points of the directive. Key to this growth will be the ability of outsourcing organizations to offer regulatory guidance and operational services when dealing with sponsors. 

Compared with a decade ago, the country's outsourcing market can be considered fairly mature. As companies have increased their investment, their expectations of potential outsourcing partners has grown. Major sponsors will expect CROs to offer a full range of clinical trial services, from monitoring and project management through to regulatory affairs and quality assurance. Furthermore, many CROs are introducing new clinical trial offerings into the Spanish market such as web-based clinical trial management and metrics systems, and professional training and contract personnel services in line with the services they provide in other key markets.  

1. European Federation of Pharmaceutical Industries Association, "The Pharmaceutical Industry in Figures" (2007). 

2. IMS Health, "IMS Retail Drug Monitor August 2007." 

3. IMS Health, "IMS Retail Drug Monitor December 2006." 

4. U-G Gerdtham et al., "Factors Affecting Health Spending: A Cross-Country Econometric Analysis in New Directions in Health Care Policies: Improving Cost Control and Effectiveness" (1995). 

5. BBC news, "Ageing Spain's Dilemma" (April 2002). http://

6. IMS Health, "Almirall goes public and steps out of Spain" (2007). 

7. Farmaindustria, "Revista Farmaindustria NBA 9. Verano 2007." 

8. PMFarma, "El Outsourcing se impone en los laboratorios  farmacéuticos" (2003). 

9. European Cancer Conference, "Clinical Trials Directive still  hampering academic medical research" (2007). 

Although overall pharmaceutical industry investment in R&D in Spain is growing at a slower annual level since 2004, investment in clinical trials remains strong.