Patricia Van Arnum was executive editor of Pharmaceutical Technology.

Patricia Van Arnum

 David Crockett/Getty ImagesExternal manufacturing plays a crucial role in pharmaceutical companies’ supply strategy. The author examines market trends for the captive (i.e., in-house ) and merchant (i.e., third-party) global market for active pharmaceutical ingredients and intermediates. 

The overall trends of increased globalization, generic-drug incursion, and the rising importance of emerging markets can be further seen in the demand and supply patterns of the API market. In keeping with overall pharmaceutical industry trends, recent growth in the global API market has slowed although the overall market is still increasing at a moderate pace. Led by India and China, Asia Pacific has had the highest recent growth in the API market although North America and the US remain the largest markets, respectively, on a regional and country basis. Generic APIs are outpacing growth for branded, innovator APIs. On a global supply basis, China remains the largest producer of generic APIs, largely for its domestic market as well as the largest exporter of APIs on global basis, primarily to emerging markets. Italy retains its historical position as the largest supplier of generic APIs to both Western Europe and the US although India’s position as a supplier to developed markets is on the rise.

. The global API market (including both the merchant market and the captive market) was valued at $113 billion in 2012, up from $91 billion in 2008, according to a recent report, The World API Market, by the Chemical Pharmaceutical Generic Association (CPA), an organization representing Italian API manufacturers (1). The captive API market is defined as APIs used by pharmaceutical companies for in-house production of finished dosage forms; the merchant API market is defined as APIs sold by third parties. From 2008-2012, the global API market grew at an average annual rate of 5.6% compared to an annual growth rate of 7.2% from 2004-2008. The slowing market is attributable to factors affecting the pharmaceutical industry as a whole: slowing global economic growth, increased pricing pressure due to cost-containment policies adopted by most countries, increased competition from generic drugs, higher risk of pipeline failures with elevated costs for drug discovery, and increasing competition from low-cost producing countries.

On a geographic basis, the highest growth rate for APIs between 2008 and 2012 was in Asia-Pacific (excluding Japan), which experienced average annual growth rate of 13.9%, followed by the Middle East with 8.7% average annual growth, and Eastern Europe and the Commonwealth of States (CIS) with 8.2% average annual growth, according to the CPA report (1). The developed markets in Western Europe, North America, and Japan had slower annual growth rate. Western Europe’s API market had the lowest annual average growth rate, 2.5%, followed by Japan at 3.4% and North America at 3.8%. (1).

On an absolute basis, however, North America is still the largest API market (including both captive and merchant markets) followed by Asia Pacific, although Asia Pacific is gaining ground. The North American share of the global API market declined three percentage points between 2008 and 2012 as the share of Asia Pacific increased. North America’s share was 43% in 2012, down from 46% in 2008. Asia Pacific’s share was 28.3% in 2012, up from 24.2% in 2008, according to the CPA report (1). The US remains the largest global market on a country basis, accounting for 39.7% of the global API market in 2012.

These market positions change, however, if looking at the generic API merchant market alone. Led by China, Asia Pacific accounted for 39.6% of the global generic API merchant market in 2012. China is the largest consumer on a country basis of generic APIs in the merchant market, accounting for 23.7% of the global total, surpassing the North American market as a whole (21.9%) and the US (20.4%). Between 2008-2012, China registered the fastest annual average growth rate in the generic API merchant market at 13.2%, followed by India at 11.9%. Collectively, the two countries accounted for 29.7% of the global generic API merchant market, according to the CPA report (1).

. During 2008-2012, the global captive API market grew at a slightly higher rate comparated to the global merchant market and is larger on an absolute basis. In 2008, the global captive API market was valued at $55 billion and rose to $69 billion in 2012, representing average annual growth of 5.8%, according to the CPA analysis. The global merchant API market was valued at $36 billion in 2008 and increased to $44 billion in 2012 (1).

. Within the global merchant API market, the generic API market is outpacing the branded, innovator API market. The global generic API merchant market was valued at $17 billion in 2008 and rose to $22.5 billion in 2012, representing average annual growth of 7.3%. In 2012, the global branded, innovator API merchant market was valued at $21.5 billion, slightly less than the generic market. Annual average growth in the global branded, innovator API merchant market between 2008 and 2012 was 3.1%, less than half of growth in the generic API merchant market.

The strength of the generic API merchant market is expected to continue. Overall, the generic API merchant is expected to increase at an average annual rate of 7.7% from $22.5 billion in 2012 to $30.6 billion in 2016. The market in Asia Pacific is projected to increase at 10.8% during the next four years, making it the fastest growing region in the generic API merchant market. By 2016, China is expected to account for 27.7% of the global generic API merchant market, making it the largest market and surpassing the US, which will be the second largest global market with a 18.2% share. India will remain as the third largest merchant market for generic APIs with a projected 7.2% by 2016, according to the CPA report (1). Ten emerging markets are projected to experience double-digit growth of 10% to 14% in the generic API market. These countries are Brazil, China, Egypt, India, Jordan, Pakistan, South Africa, Thailand, Turkey, and Vietnam (1).

. Western Europe ranks second behind Asia Pacific in the supply of generic APIs on a global basis, but its market share declined from 16.7% in 2008 to 14.2% in 2012. Italy remains the largest producer of generic APIs in Western Europe, accounting for 58.3% of the region’s total, followed by Spain at 21%. Italy is also the largest supplier of generic APIs to the US market. Italian API producers accounted for 31.2% of the supply to the US generic API market in 2012, and their growth in supplying the US increased at an annual average growth of 5.2% between 2008 and 2012. India is the second largest supplier of generic APIs to the US market with a 24.4% share, according to the CPA report. India is also increasing its supply to Western Europe, accounting for 19.2% of the supply to the region (1).

. In Asia Pacific, China is the largest generic API producer, with its domestic market representing its strength. Between 2008 and 2012, overall API production in China increased at an average annual rate of 7% from $6.43 billion in 2008 to $8.44 billion in 2012. During this period, sales to China’s domestic increased at an average annual rate of 11% while export growth increased only 5.8%. Sales to emerging markets represented the largest target for China’s API export sales, accounting for 63.1% of production. China’s export sales to developed markets (North America, Western Europe, and Japan) accounted for 36.9% of overall export sales and 24.7% of total API production, according to the CPA report (1). Overall, China ranks as the largest producer of generic APIs in the world and the largest exporter of APIs, followed by India.

But unlike China, whose domestic market is the largest target for its API production, India relies heavily on export sales. India’s API production was valued at $4.70 billion in 2012, up from $2.27 billion in 2008. India’s supply to the US market increased at an average annual rate of 44% between 2008 and 2012, increasing from $255 million in 2008 to $1.12 billion in 2012 (1).

   1.	Chemical Pharmaceutical Generic Association (CPA), The World API Market (Milan, March 2013), www.cpa-italy.org/en/indexen.php, accessed July 15, 2013.

Articles

External manufacturing plays a crucial role in pharmaceutical companies’ supply strategy. The author examines market trends for the captive and merchant global market for active pharmaceutical ingredients and intermediates.

A Shifting Landscape for the Global API Market

 Adam Gault/Getty ImagesEmerging markets are playing an increasingly important role in the strategy of pharmaceutical companies from both a revenue and supply perspective. Attendant to that increased globalization comes additional regulatory oversight and cooperation. The author highlights recent efforts by FDA to develop greater collaborative and innovative approaches in overseeing the pharmaceutical supply chain.

The increased globalization of the pharmaceutical industry is not only reflected in the rising importance of emerging markets to pharmaceutical companies’ bottom lines, but also in the supply chain for pharmaceutical ingredients. As overall trade, including pharmaceuticals, increases between the United States and other countries, regulatory agencies are tasked with overseeing an increasingly more expansive and complex supply chain. 

“Sweeping economic and technological changes have revolutionized international trade over the last several decades, creating a truly global marketplace for goods and services,” said Steven Solomon, associate director for global operations and policy in FDA’s Office of Global Regulatory Operations and Policy, in testimony before the Congressional–Executive Commission on China in May 2013. Solomon offered input on FDA’s work in ensuring global product safety and quality and the agency’s work in China (1). To illustrate the extent of globalization, Solomon offered certain key statistics. The number of FDA-regulated shipments (includes food, drugs, and other FDA-regulated products) has more than tripled from 8 million import entry lines per year a decade ago to 28 million entry lines in fiscal year (FY) 2012. In FY 2013, entry lines are anticipated to reach 34 million. The agency tracks import shipments using entry lines, which refer to each portion of a shipment that is listed as a separate item on an entry document. “As trade increases and US consumers continue to demand global products, FDA’s ability to ensure the safety and quality of these imported products will depend on its execution of a myriad of global engagement strategies,” he said. For pharmaceuticals, approximately 40% of finished drugs in the US comes from overseas, and approximately 80% of manufacturers of APIs are located outside the US (1). 

The increased trade in FDA-regulated products, including pharmaceuticals, has obliged the agency to develop more collaborative and resourceful approaches with foreign counterparts. “FDA’s success in protecting the American public depends increasingly on its ability to reach beyond US borders and engage with its government regulatory counterparts in other nations, as well as with industry and regional and international organizations, to encourage the implementation of science-based standards to ensure the quality and safety of products before they reach our country,” said Solomon in his testimony. “FDA is working with its many partners to enhance responsibility and oversight for safety and quality throughout the supply chain” (1). 

To address these challenges, FDA is using a variety of engagement strategies. Solomon noted that these efforts are in line with the 2012 US National Strategy for Global Supply Chain Security, which emphasizes a layered, risk-based approach for achieving global supply-chain systems that are secure, efficient, and resilient (1, 2). In 2011, FDA also released its report, 

Pathway to Global Product Safety and Quality

, which outlines the agency’s strategy to transform itself from a predominantly domestically focused agency to one that is engaged in the complex, globalized regulatory environment (1, 3). Solomon further outlined some of those activities as they apply to international offices, risk-based monitoring of imported products, technical cooperation and capacity building, and new laws to increase FDA’s authority. 

. FDA’s international offices and posts are designed to build partnerships with foreign counterparts by providing enhanced opportunities for cooperation and capacity building. They also are designed to expand the agency’s knowledge base and provide a platform for inspection of foreign facilities. The agency has a permanent FDA presence in 12 foreign posts in nine countries with employees located in China, India, Latin America, Europe, the Middle East, and South Africa, noted Solomon (1). 

Risk-based monitoring of imported products

. Solomon also pointed to FDA’s strategy of using risk-based monitoring for imported products. “While FDA does not have sufficient resources to physically inspect all imported shipments, even if we had such resources, physically inspecting all imports would be neither practical nor strategic,” said Solomon. “However, the agency electronically screens all imports using an automated risk-based system to determine if shipments meet identified criteria for physical examination or other review,” he said (1). To enhance the agency’s ability to target high-risk products, FDA developed the Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting (PREDICT). PREDICT is a screening system that uses intelligence from many sources, such as intrinsic product risks, past inspection results, intelligence data, and other information that would affect shipments, to provide the entry reviewer with risk scores on every import line. PREDICT uses information sources that include FDA and US Customs and Border Protection (CBP) data as well as data collected from foreign offices, foreign regulatory counterparts, other federal agencies, and US state counterparts. It also uses risk analyses received from agreements with academic institutions and international organizations (1). 

Technical cooperation and capacity building

. Part of FDA’s strategy also involves engaging in regulatory cooperation with other global partners. “The capacities of governments to manage, assess, and regulate products within increasingly complex supply chains are a fundamental factor affecting product safety and efficacy,” said Solomon in his testimony (1). “FDA is working strategically with a range of countries to provide information, tools, training, and exchange programs that contribute to building or strengthening regulatory capacity of our trading partners,” he added. 

. Solomon also pointed to recent legislation to facilitate FDA in its efforts, most notably,  the Food and Drug Administration Safety and Innovation Act (FDASIA). With the passage of FDASIA in 2012, Congress granted FDA important new authorities, reauthorized human drug and device user fees, and authorized new user fees for generic human drugs and biosimilar biologics (1). From a FDA perspective, these authorities and fees are intended to maintain a predictable and efficient review process for medical products, provide incentives for developing new antibacterial and antifungal drugs, combat drug shortages, and enhance the agency’s efforts to ensure that US consumers have more timely access to safe, high-quality, and affordable medicines. 

Title VII of FDASIA focuses on improving the safety and integrity of drugs imported into and sold in the US (1). The new authority increases FDA’s ability to collect and analyze data to enable risk-informed decision-making, advance risk-based approaches to facility evaluation, partner with foreign regulatory authorities to leverage resources through information-sharing and recognition of foreign inspection, and allow the use of other tools intended to improve quality throughout the supply chain (1). In his testimony, Solomon pointed to the law’s requirement that foreign and domestic companies provide information on threats to the security of the drug-supply chain and improvements to current registration and listing information. 

With increasing overall trade with China, FDA is also faced with the challenge to provide strengthened oversight for products coming from China. During FY 2007–2012, the total number of shipments of FDA-regulated products from China increased from approximately 1.3 million entry lines to 4.5 million lines. Of the 4.5 million lines arriving from China in FY 2012, 67% were drugs and medical devices, and 6% were human food products. Approximately 5% of imports into the US of drug and biologics come from China (1).  

Solomon noted that FDA has 13 officers posted in three locations in China: Beijing, Shanghai, and Guangzhou. This staffing includes eight US employees and five Chinese staff.  The purpose of FDA’s China office is to strengthen the safety, quality, and effectiveness of FDA-regulated products produced in China for export to the US. Solomon noted several ways in which the agency is seeking to meet that goal. These efforts include: collaborating, capacity-building, and confidence-building with Chinese regulatory counterparts at the central, provincial, and municipal level; reaching out to regulated Chinese firms that wish to export their products to the US to enhance understanding of and compliance with FDA standards; monitoring and reporting on conditions, trends, and events that could affect the safety and effectiveness of FDA-regulated products exported to the US; conducting inspections at facilities that manufacture FDA-regulated goods; and increasing the knowledge base and understanding of key stakeholders about FDA regulations and science-based approaches to strengthen product safety, quality, and effectiveness (1). 

In mid-April 2013, FDA met with the China Food and Drug Administration (CFDA) in Washington, DC to discuss the collaboration between FDA and CFDA across more than a dozen topic areas. “While much of the strengthening of our relationship with CFDA has come through day-to-day collaboration between FDA’s China office and CFDA officials in Beijing, there are other significant ties in multiple areas across our agencies,” said Solomon (1). These efforts include regular meetings with a CFDA and US working group on economically motivated adulteration. It also involves collaboration by FDA and CFDA in working under the auspices of the World Health Organization’s Working Group for Member States on Substandard, Spurious, Falsely Labeled, Falsified and Counterfeit Medicines (1). Solomon also said that FDA and CFDA inspectors regularly observe one another’s inspections. Additionally, in May 2013, FDA and CFDA cohosted a workshop to enhance collaboration in addressing Internet-based, illegal distribution of adulterated drugs (1). 

Solomon noted other examples as well. Between 2010 and 2012, FDA held a series of workshops on good clinical practices for Chinese inspectors who inspect sites that conduct clinical trials to support the development of pharmaceuticals. “Prior to the workshops, CFDA had few well-trained inspectors able to conduct inspections of clinical research sites,” said Solomon, in his testimony. “FDA’s training in this area helped CFDA to establish its national clinical research inspectorate. FDA regularly invites these CFDA inspectors to observe agency [FDA] clinical research inspections in China to continue to enhance CFDA’s understanding of FDA requirements” (1). 

Solomon also noted that at the request of CFDA, FDA’s China Office and Office of Criminal Investigations worked with US Internet-hosting companies to shut down 16 Chinese-language websites that illegally sold unapproved medical products through servers located in the US (1). Also, in 2012, CFDA provided to FDA’s China Office a list of Chinese pharmaceutical firms against which CFDA had taken regulatory action because of their failure to comply with relevant standards for good manufacturing practices. From the list, FDA identified 61 firms that had shipped products to the US and targeted these firms as priorities for inspection (1). 

 1. S. Solomon, “FDA’s Activities Related to China,” testimony before the Congressional–Executive Commission on China (Washington, DC, May 22, 2013). 

 2. Office of the President of the United States, “National Strategy for Global Supply Chain Security (Washington DC, January 2012). 

Increased pharmaceutical trade creates new challenges for regulatory oversight.

Evaluating China's Supply Chain

 Ensuring product quality is of utmost importance to the pharmaceutical industry, and appropriate controls and oversight are required for both the drug-manufacturing process and the supply chain for pharmaceutical ingredients. Several key  measures in the United States and European Union that address these issues are progressing with either implementation or further discussion slated for July 2013.  			

On top of the agenda is the implementation of the European Falsified Medicines Directive. The directive seeks to prevent falsified medicines entering the legal supply chain in the EU. The directive was adopted in July 2011, and EU member states began applying provisions in January 2013. The directive harmonizes and strengthens safety and control measures across Europe in four main areas: safety features of medicines, supply chain and good distribution practices (GDPs), active substances and excipients, and Internet sales (1, 2). 			

On the pharmaceutical ingredient side, beginning in July 2013, all active substances manufactured outside the EU and imported into the EU must be accompanied by a written confirmation from the regulatory authority of the exporting country. These statements are to be issued per manufacturing site and per active substance to ensure that standards of GMP equivalent to those in force in the EU are upheld, according to the directive (1, 2). Several countries have already committed to issuing written confirmations. Exporting countries with an "equivalent" regulatory framework will not need to issue these written confirmations. The European Commission (EC), together with the European Medicines Agency and member states, is assessing the regulatory frameworks of countries applying for equivalent status (1, 2).  

To meet the requirement for the import of APIs under the European Falsified Medicines Directive, FDA reported on June 21, 2013, that the US is now a "listed country" within the EC so that US companies need not obtain an export certificate from FDA before shipping certain pharmaceutical products to Europe. Without the waiver, all US companies shipping APIs to Europe after July 1, 2013 would have had to first submit documentation from FDA that the product was manufactured in accordance with Europe's GMPs (3). 

To avoid that burden for companies, FDA filed a formal "listing request" with the EC in January 2013 requesting that FDA's GMPs be considered at least equivalent to those in Europe. The EC approved that request following an audit of FDA's regulatory and inspectional oversight of APIs. The audit took place from May 13–20, 2013 (3). 

The news of the waiver was welcomed by industry groups representing contract API manufacturers and fine-chemical producers. "We are pleased that US drug manufacturers will not be required to provide written confirmation of quality for the exportation of active pharmaceutical ingredients into the EU," said John DiLoreto, executive director of the Bulk Pharmaceutical Task Force (BPTF), an affiliate of the Society of Chemical Manufacturers and Affiliates (SOCMA), in a June 21, 2013 SOMCA statement. SOCMA represents batch and custom manufacturers. "We hope FDA and EU officials will continue to attain the maximum achievable level of information sharing and greater harmonization on implementation of GMPs throughout the drug-supply chain," DiLoreto added. BPTF said it supports negotiations between the US and the EU to eliminate trade barriers, to promote greater global harmonization of GMPs, and to improve the safety of drugs throughout the supply chain. 

The European Falsified Medicines Directive also puts into place measures on the distribution side of the pharmaceutical supply chain. It includes new responsibilities for wholesalers and a definition of brokering activities as well as new responsibilities for brokers. EMA's revised GDP guideline, which was finalized in March 2013, includes specific provisions for brokering activities (4).  

Reflecting the inclusion of GDP into European provisions, the EudraGMDP database also now includes information on GDP. EudraGMDP is a modification of the EudraGMP database, which was launched in April 2007, to facilitate the exchange of information on compliance and noncompliance with GMP among the regulatory authorities within the European medicines network. The new database, now called EudraGMDP, was a deliverable of the European Falsified Medicines Directive. It is gradually being updated by medicines regulatory authorities in EU member states with distribution-related information and will maintained on an ongoing basis (5). The additional information will include: wholesale distribution authorizations; GDP certificates; statements of non-compliance with GDP; and registrations of manufacturers, importers (including information on their suppliers), and distributors of active substances (5). 

The other two main areas in the European Falsified Medicines Directive relate to end-market activity. The directive requires that barcodes be printed on or attached to every single pack of medicines subject to prescription and other medicines at risk of being falsified. The barcodes must be checked into a database by the manufacturer and checked out when dispensed by a pharmacy. These safety features are intended to make sure that there has been no tampering of the outer packaging of pharmaceuticals (1, 2).  

The directive also introduced an obligatory logo to be placed on the websites of legally operating online pharmacies to allow patients and consumers to identify authorized online pharmacies providing authentic, authorized medicines. These online pharmacy websites must also register with a member state. Medicines regulatory authorities in EU members states will publish lists of authorized internet pharmacies on their websites (1, 2). 

In the US, later this month (July 12, 2013), FDA will hold a day-long public meeting to discuss how to implement the drug supply-chain provisions found in Title VII of the Food and Drug Administration Safety and Innovation Act of 2012. Title VII gave FDA new authorities to address the challenges posed by an increasingly global drug supply chain. According to FDA, 40% of finished drugs are imported, and nearly 80% of active ingredients come from overseas sources (6).  

The purpose of the July 12th meeting is to provide an overview of Title VII, discuss how FDA plans to implement it, and hear public comment about those provisions that specifically address imported drugs and importers. Under Title VII, FDA is authorized to require that importers submit information demonstrating that their drug complies with applicable requirements of the Federal Food, Drug and Cosmetic Act before their products can enter the US. In addition, commercial importers must register with FDA and meet good importer practices (6). 

Another key milestone this month is the end of the public comment period for FDA's draft guidance, 

Contract Manufacturing Arrangements for Drugs: Quality Agreements. 

The draft guidance, which was issued in May 2013, describes the agency's current thinking on defining, establishing, and documenting the responsibilities of parties involved in contract cGMP manufacturing of drugs. Public comment on the draft guidance is open until July 29, 2013 (7).  

The draft guidance describes how parties involved in contract manufacturing of drugs can use quality agreements to delineate their responsibilities and ensure drug quality, safety, and efficacy. The guidance applies to the commercial manufacturing of APIs (drug substances or their intermediates), finished drug products, combination products, and biological drug products. The draft guidance describes how contract manufacturing operations fit within the larger scheme of pharmaceutical quality systems. FDA says the draft guidance incorporates provisions from ICH guidelines, including ICH Q7 

Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, 

 (7–10). The draft guidance notes that although written quality agreements are not explicitly required under existing cGMP, owners and contracted facilities can draw on quality-management principles to carry out the complicated process of contract drug manufacturing by defining, establishing, and documenting the responsibilities of all parties involved in drug manufacturing, testing, or other support operations. Accordingly, FDA recommends that owners and contracted facilities implement written quality agreements as a tool to delineate responsibilities to ensure the quality, safety, and effectiveness of drug products. 

www.emaeuropa.eu/ema/index.jsp?curl=pages/special_topics/general/general_content_000186.jsp&mid=WC0b01ac058002d4e8

 3. FDA, "FDA Obtains Waiver from European Commission to Facilitate Export for US Pharmaceutical Manufacturers," Press Release (June 21, 2013).  

Good Distribution Practice of Medicinal Products for Human Use

 5. EMA, "Key Deliverable of Falsified Medicines Directive Achieved," Press Release  (Apr. 8, 2013).  

 6. FDA, "Food and Drug Administration Safety and Innovation Act Title VIIDrug Supply Chain; Standards for Admission of Imported Drugs, Registration of Commercial Importers and Good Importer Practices; Notification of Public Meeting; Request for Comments," 

Contract Manufacturing–Arrangements for Drugs: Quality Agreements 

ood Manufacturing Practice Guide for Active Pharmaceutical Ingredients (

The US and EU move forward with measures to fortify the pharmaceutical supply chain.

Strengthening the Supply Chain for Pharmaceutical Ingredients

The first round of the trade and investment talks for the Transatlantic Trade and Investment Partnership (TTIP), a new trade pact between the United States and the European Union, began this week in Washington DC. The agreement, which would be the largest bilateral trade deal ever negotiated, would also have important implications for the pharmaceutical industry.  

The first round of TTIP negotiations beginning this week in early July 2013 is the result of a multiyear effort between the US and EU. The Transatlantic Economic Council (TEC) was set up in 2007 to guide and stimulate the work on transatlantic economic convergence. The TEC is a high-level forum between the EU and US for discussing economic issues of mutual interest and for serving as a platform to give political guidance and direction to this work. The TEC also provides a political forum for discussing strategic global economic questions. The TEC brings together members of the European Commission and US Cabinet Members who carry the political responsibility for closer economic ties. Three "advisory" groups have been set up to help guide the work of the TEC: the Transatlantic Legislators’ Dialogue, the Transatlantic Consumer Dialogue, and the Transatlantic Business Dialogue. 

In November 2011, the TEC established a High-Level Working Group on Jobs and Growth (HLWG) led by EU Trade Commissioner Karel De Gucht and US Trade Representative Ron Kirk.  The HLWG was tasked to identify policies and measures to increase EU-US trade and investment to support mutually beneficial job creation, economic growth, and international competitiveness. Leaders asked the HLWG to work closely with all public and private sector stakeholder groups and to draw on existing dialogues and mechanisms as appropriate. 

The HLWG provided an interim report in June 2012 and a final report in February 2013. The HLWG reached the conclusion that a comprehensive agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and which contributes to the development of global rules, would provide the most significant mutual benefit of the various options considered. The US and EU endorsed the recommendation and announced that each side will initiate the internal procedures necessary to launch the TIPP agreement. On June 14, 2013, the member states of the EU gave the European Commission the green light to start the talks with the US, and the negotiations have begun this week. 

The impetus behind TIPP is to remove trade barriers between the US and EU as a means to stimulate investment, production, and trade between the two regions. A pact hopes to build on an already strong relationship between the US and EU. According to information from the EC, the EU and the US economies account together for about half the world’s gross domestic product (GDP). Total US investment in the EU is three times higher than in all of Asia. EU investment in the US is approximately eight times the amount of EU investment in India and China together. Also, current EU-US trade is an important part of individual company growth. It is estimated that one-third of the trade across the Atlantic consists of intra-company transfers, according to the EC. 

“Our aim is to release the untapped potential of a comprehensive transatlantic trade and investment partnership (TTIP) by bringing our economies closer together than ever before,” said EU Trade Commissioner Karel De Gucht in a June 14, 2013 EC press statement. “We will achieve this through increased access to the US market, by working with the US towards setting global standards and by greater compatibility between our respective regulations. In short, this deal will be about streamlining our economies where it makes sense to do so by making it easier and faster for our companies to do business together.” 

United States Trade Representative Michael Froman, said in a July 8, 2013 statement: “In TTIP, we have the opportunity to accomplish something very significant for our economies, for our relationship, and for the global trading system as a whole. We have an opportunity to spur growth and to generate significant increases in the already substantial number of jobs supported by transatlantic trade and investment. We have the opportunity to complement one of the greatest alliances of all time with an equally compelling economic relationship. And we have the opportunity to work together to establish and enforce international norms and standards that will help inform and strengthen the multilateral, rules-based trading system.” 

Given the low average tariffs (under 3%) between the US and EU, the key focus to TIPP lies in the tackling of non-tariff barriers. These consist mainly of customs procedures and behind-the-border regulatory restrictions. The non-tariff barriers come from diverging regulatory systems (standards definitions notably), but also other non-tariff measures, such as those related to certain aspects of security or consumer protection, according to the EC. 

An economic study by the EC projects that if such a trade pact were to be implemented that EU exports to the US would go up by 28%, equivalent to an additional EUR 187 billion ($240 billion) worth of exports of EU goods and services. EU and US trade with the rest of the world would also increase by over EUR 33 billion ($42 billion). Overall, the extra bilateral trade between the two blocs, together with their increased trade with other partners, would represent a rise of 6% in total EU exports and of 8% in US exports. This would mean an additional EUR 220 billion ($282 billion) and EUR 240 billion ($308 billion) worth of sales of goods and services for EU- and US-based producers, respectively, according to the EC report. 

 An in-depth study by the Centre for Economic Policy Research, a London-based research group that was commissioned by the EC to examine the impact of TIPP, also provided favorable outcomes on the potential effects on TIPP. If the agreement is fully implemented, an ambitious and comprehensive trans-Atlantic trade and investment partnership could bring significant economic gains as a whole for the EU at EUR 119 billion ($153 billion) a year and the US at EUR 95 billion ($122 billion) a year. The report also finds that liberalizing trade between the EU and the US would have a positive impact on worldwide trade and income, increasing GDP in the rest of the world by almost EUR 100 billion ($128 billion). “To the extent that the EU and the US can work together towards better trade rules and less regulatory divergence in the future, some of the reductions achieved in the cost of doing trade will also benefit other partners,” said the report. “The economic importance of the EU and the US will mean that their partners will also have an incentive to move towards the new transatlantic standards. This has the potential to spread gains across the global economy, which is increasingly interdependent especially given the ever greater complexity of global value chains.”

Pharmaceuticals constitute one sector seeking to benefit from more robust bilateral trade. Total bilateral trade in goods between the EU and US in 2011 amounted to EUR 455 billion ($583 billion). The US was the EU's third largest supplier, selling it representing around 11% of total EU imports and the EU's main export market, representing around 17% of total EU exports. These trade flows are complemented and supported by a dynamic investment climate and activity. In 2011, US companies invested around €150 billion ($192 billion) in the EU and EU firms approximately EUR 123 billion ($158 billion) in the US.  On the pharmaceutical side, US exports of pharmaceuticals on a global basis totaled $48.6 billion in 2012, according to the American Chemistry Council (ACC), and US imports of pharmaceuticals were $89.0 billion. 

Negotiations begin this week on the Transatlantic Trade and Investment Partnership, a new trade pact between the United States and European Union. What will be the implications for the pharmaceutical industry?

Boom or Bust for Pharma on a New US-EU Trade Pact?

Led by strong demand for oncology drugs, high-potency manufacturing   continues to be an active area of investment, particularly for antibody drug conjugates (ADCs). ADCs, which consist of a monoclonal antibody (mAb) chemically linked to a small-molecule therapeutic, are a promising modality for certain therapeutic areas. ADCs are attracting the interest of both small and large pharmaceutical companies in their drug-development efforts as well as contract manufacturers specializing in high-potency manufacturing.  

The potential of ADCs was affirmed earlier this year when Roche's Genentech received FDA approval for Kadcyla (ado-trastuzumab emtansine or T-DM1) for treating HER2-positive metastatic breast cancer (mBC). The drug combines trastuzumab (Herceptin), which targets human epidermal growth factor receptor 2 (HER2) receptors with a maytansine derivative DM1, a small-molecule cytotoxin that binds to tubulin to prevent microtubule formation, through a stable thioether linker (4-[

-maleimidomethyl] cyclohexane-1-carboxylate) (1–3). Roche/Genentech has more than 25 ADCs in development, with eight ADCs in Phase I or Phase II studies for different types of cancer. 

Kadcyla is the first FDA-approved ADC for treating HER2-positive mBC, and one of the few commercially approved ADCs. In August 2011, FDA approved Adcetris (brentuximab vedotin), codeveloped by Seattle Genetics and Millennium Pharmaceuticals (now part of Takeda Pharmaceutical). Adcetris consists of three parts: the chimeric IgG1 antibody cAC10, specific for human CD30, the microtubule-disrupting agent monomethyl auristatin E (MMAE), and a protease-cleavable linker that covalently attaches MMAE to cAC10 (1, 2). Before the approval of Adcetris, the only other ADC approved by FDA was Mylotarg (gemtuzumab ozogamicin), approved more than 10 years ago in 2000. The drug, an anti-CD33 mAb conjugated to the cytotoxin calicheamicin, was developed by Wyeth (now part of Pfizer) and granted accelerated approval in 2000 but was voluntarily withdrawn by Pfizer in 2010 because a required Phase III trial failed to demonstrate a survival advantage (1, 3).  

Pfizer suffered another setback in its ADC development program earlier this year, when in May, it discontinued a Phase III study for one of its investigational ADCs, inotuzumab ozogamicin, for treating non-Hodgkin lymphoma. The drug continues to be evaluated as a treatment in adult acute lymphoblastic leukemia. Inotuzumab ozogamicin was originally developed by Celltech (now UCB) before Pfizer acquired all manufacturing and development rights. 

Pfizer, like other pharmaceutical companies, is partnering with smaller biopharmaceutical companies to advance ADCs. In June 2013, Pfizer formed a global strategic collaboration, worth up to $635 million, with CytomX to develop and commercialize multiple CytomX Probody Drug Conjugates (PDCs), propertiary ADCs of CytomX. Pfizer has exclusive rights to pursue development and commercialization of select PDCs. The companies will work together on preclinical research. Pfizer is responsible for development and potential commercialization of any selected PDCs with CytomX eligible to receive upfront, research, and preclinical milestone payments as well as potential tiered royalties.  

In May 2013, Ambrx, a clinical-stage biopharmaceutical company, partnered with Bristol-Myers Squibb for the discovery and development of ADCs using Ambrx's protein medicinal chemistry technology. Ambrx will receive an upfront payment of $15 million, funding for discovery and   research activities, potential development, and regulatory and sales milestones of as much as $97 million per product. BMS will have worldwide rights to develop and commercialize products resulting from the collaboration, and Ambrx is eligible to receive royalties on sales. In April 2013, Ambrx partnered with Astellas in an ADC deal worth up to $300 milllion. Ambrx received an upfront payment of $15 million from Astellas and may receive up to $285 million in potential milestones for an undisclosed number of targets for ADCs in oncology. Ambrx also inked a deal in ADC development with Merck & Co. in 2012. In June 2013, Ambrx partnered with the Chinese pharmaceutical Zhejiang Medicine  (ZMC) to develop and commercialize ARX788, Ambrx's ADC targeting HER2-positive breast cancer. Ambrx and ZMC will continue the development of ARX788, with ZMC bearing the ongoing development cost. ZMC will manufacture the drug on a commercial basis. The CRO WuXi PharmaTech will develop and manufacture the toxin, antibody, and ADC as well as provide preclinical development and clinical trials.  

The "new normal" in biopharmaceutical financing			

Seattle Genetics, which partnered with Takeda for developing Adcetris, is collaborating with Genentech, Pfizer, AbbVie (formerly Abbott), Bayer HealthCare, Progenics, and Genmab for ADCs using Seattle Genetics' proprietary ADC technology. Seattle Genetics' technology uses synthetic cytotoxic agents, such as E (MMAE) and monomethyl auristatin F (MMAF), and stable linker systems. In April 2013, Seattle Genetics reported on a newly developed cytotoxic agent, a pyrrolobenzodiazepine (PBD) dimer. PBDs are a class of highly potent, synthetic DNA-crosslinking agents, and the company presented data on ADCs using the company's site-specific conjugation technology (EC-mAbs) to link PBDs to mAbs targeted to CD33 and CD70. The company also reported on its preclinical candidate, SGN-LIV1A, which uses the same proprietary ADC technology as Adcetris and presented research on a new method for making highly stable linkers, specifically self-stabilizing maleimido-DPR linkers (4).  

In June 2013, Genmab and ADC Therapeutics teamed to develop a new ADC product combining Genmab's HuMax-TAC antibody and ADC Therapeutics' PBD-based cytotoxic and linker technology. In 2012, Spirogen announced a multiyear collaboration and license agreement with Genentech for the discovery and development of ADCs using Spirogen's PBD-based drugs and associated linker technology. Spirogen is primarily responsible for synthesizing and manufacturing drug reagents while Genentech is using Spirogen's drug reagents to generate ADCs and evaluate their potential therapeutic utility. Genentech has the exclusive license to fully develop and commercialize licensed products that contain these ADCs (3). 

Mersana Therapeutics, which is developing ADCs using its Fleximer polymer and customizable linker chemistries, formed a $270-million collaboration with Endo Pharmaceuticals in early 2012. The Fleximer polymer is customized to improve the pharmacokinetics of targeting moieties, such as antibody fragments, and also to optimize the quantity of cytotoxic payload carried per targeted conjugate and the stability of the drug–polymer linkage as well as the targeting moiety–polymer linkage (3). In July 2012, Mersana received $27 million in venture-capital funding, which included investment by Pfizer Venture Investments. Biotecnol and PolyTherics formed a collaboration in 2012 for multispecific tribody drug conjugates to use Biotecnol's tribody technology with PolyTherics' proprietary site-specific linker technologies. Tribody molecules are multispecific antibody products that, from a single molecule, enable the targeting of two or three tumor antigens in the same disease or two or three epitopes on the same tumour target. PolyTherics' ThioBridge linker technology is a conjugation technology for creating more stable, less heterogeneous ADCs through site-specific linkage and rebridging of disulfide bonds (3).  

Contract API manufacturers offering high-potency manufacturing and related services are expanding in response to increased demand for ADCs and other highly potent compounds. In January 2013, Lonza announced plans to invest CHF 14 million ($15 million) to expand ADC manufacturing capacity in Visp, Switzerland. The expansion of the ADC facility will double the company's existing large-scale manufacturing capacity in Visp. The expansion is expected to be completed in the second quarter of 2014.  

In 2012, Carbogen Amcis and ADC Biotechnology (ADC Bio) partnered for ADC development and manufacturing services. ADC Bio is providing proprietary solid-phase immobilization technologies for conjugation and long-term storage of ADCs, and Carbogen Amcis is providing small- to large-scale GMP supply and the formulation of ADCs. ADC Bio also recently expanded its facility in St. Asaph, United Kingdom in northern Wales with the addition of a new technical service laboratory. Commissioned in April 2013, the additional facility at St. Asaph provides ADC screening, process development, and scale-up capabilites. 

In October 2012, Fujifilm Diosynth Biotechnologies formed a strategic alliance with Piramal for ADC production, whereby the two parties will offer contract development and manufacture of ADCs. Piramal offers ADC production at its site in Grangemouth, Scotland. Fujifilm recently announced an expansion of its cGMP manufacturing facilities at its sites in Research Triangle Park, North Carolina, and Billingham, UK. Novasep announced in 2012 a EUR 3 million ($3.9-million) investment to expand its highly potent API manufacturing capabilities at its Le Mans, France facility, which is part of the company's strategy to be positioned in the ADCs.  

Earlier this year, Catalent Pharma Solutions acquired an exclusive license to market Redwood Bioscience's proprietary SMARTag protein-chemical engineering technology used in site-specific protein modification and linker chemistry for ADCs. Catalent will have the exclusive right to sublicense the SMARTagtechnology and will work with Redwood to comarket the technology and support sublicense programs. As part of the collaboration, Catalent will also take a minority equity stake in Redwood, which may increase over time up to a potential acquisition. 

Companies also are expanding on the finished product side. In February 2013, Baxter International's BioPharma Solutions business began an approximately 1750-m

  capacity expansion at the company's fill–finish cytotoxic contract manufacturing facility in Halle (Westfalen), Germany. This expansion follows previous expansions in Halle in 2007 and 2011. In April 2013, Goodwin Technology and Coldstream Laboratories agreed to develop and manufacture high-potency, highly cytotoxic materials, such as small molecules, protein toxins, cytotoxic ADCs, and other bioconjugates. GBI will use Coldstream's cGMP platform of services, including analytical testing, formulation, liquid or lyophilized fill–finish, storage and shipment of manufactured highly-potent bioconjugates. 

In May 2013, Penn Pharma successfully completed the first batch of coated tablets at its new contained manufacturing facility in South Wales, UK. The facility is designed for the clinical and commercial manufacture of tablets and capsules. In November 2011, Metrics began offering neat API capsule-filling at its potent and cytotoxic facility in Greenville, North Carolina. The company secured a Capsugel Xcelodose system, a powder microdoser and automated encapsulator that places API directly into capsules with a high level of accuracy. Metrics also installed a custom-built isolation system for the equipment. The company offers dedicated and segregated potent and cytotoxic cGMP manufacturing for Phase I–III projects. It opened a new potent and cytotoxic drug-development facility in 2009 as part of an expansion of the company's Greenville facility. 

Other companies are positioned in both API and finished product manufacturing for highly potent compounds. For example, CordenParma has facilities in Plankstadt (Germany), Latina (Italy), and Boulder (Colorado) for manufacturing highly potent APIs and drug products. Aesica, based in Newcastle-Upon-Tyne, UK, opened a new high-potency manufacturing facility in Queenborough for formulated products in late 2011. The company later upgraded its UK-based API manufacturing facilities in Cramlington and Queenborough to manufacture high-potency APIs.   

 485 Route One South,  Bldg F, First Floor,  Iselin, NJ 08830 tel. 732.346.3072,  

 2. FDA, "Label for Adcetris, BLA 125338," FDA Approved Drug Products: Drugs@FDA, accessed June 5, 2013. 

 4. Seattle Genetics, "Seattle Genetics and Collaborators Highlight Multiple Antibody-Drug Conjugate (ADC) Programs and Technology Advances at AACR," Press Release, Apr. 9, 2013. 

Contract service providers expand capabilities in API and finished product manufacturing to meet demand for high-potency drugs.

Gauging Investment in High-Potency Manufacturing

 ALEAIMAGE/GETTY IMAGESEnsuring product quality is of utmost importance to the pharmaceutical industry, and appropriate controls and oversight are required for both the drug-manufacturing process and the supply chain for pharmaceutical ingredients. Several key  measures in the United States and European Union that address these issues are progressing with either implementation or further discussion slated for July 2013.  			