Patricia Van Arnum was executive editor of Pharmaceutical Technology.

Patricia Van Arnum

As pharmaceutical companies increase their level of outsourcing, the models for partnering ar evolving. Preferred-provider relationship are highly collaborative and strategic partnerships between pharmaceutical companies and select CROs, CDMOs, and CMOs. The author examines recent examples of such collaborations. 

Facing pressure to improve timelines in drug development and reduce costs in drug development and commercialization, the pharmaceutical majors are increasing their level of external development and manufacturing. At the same time, they are looking to manage these external relationships more efficiently and cost-effectively. The result is the  preferred-provider relationship in outsourcing. Unlike simple transactional or fee-for-service outsourcing, preferred-provider relationships represent a deeper, more collaborative, and enhanced strategic partnership between sponsor companies and their third-party providers and satisfy an interest by pharmaceutical companies to work with fewer suppliers. During the past several years, select pharmaceutical majors have entered into preferred-provider relationships, particularly with CROs, although manufacturing-based relationships also have been formed. 

In May 2011, Pfizer formed strategic partnerships with the CROs Icon and Parexel, both of which will serve as strategic providers of clinical-trial implementation services over a five-year period beginning in June 2011. The new partnerships will be fully implemented over an 18-to-24 month period. 

In announcing the collaborations with Icon and Parexel, Pfizer said that the two-partner model will simplify its processes by reducing the number of external service providers that the company uses for clinical-trial execution. Pfizer says this new strategic partnership model does not substantially change the proportion of clinical-trial implementation services that the company outsources. Pfizer is retaining scientific ownership of the clinical-development process and is maintaining oversight and quality standards relating to patient safety and regulatory compliance.  

"We've also [have] taken a look at the value chain inside our research organization and have outsourced a lot of our clinical work with a strategic partnership with Icon and Parexel," said Ian Read, chairman and CEO at Pfizer at the JPMorgan Healthcare Conference, which was held in January 2012 (1). "I think that's a major strategy for us. We've rationalized our efforts there. Before we were dealing with 18, 19, 20 plus partners. It was very difficult to control. It was very difficult to get quality work and get savings. We now have a strategic partnership with two global players." 

 Pfizer's partnership with Icon and Parexel followed an earlier partnership made by Bristol-Myers Squibb with Icon and Parexl. In June 2010, Bristol-Myers Squibb signed three-year agreements with Icon and Parexel for joint strategic, operational, and capability support of Bristol-Myers Squibb's clinical-development program. In August 2011, Bristol-Myers Squibb selected Icon as a preferred provider for full-service clinical pharmacology and exploratory clinical studies  

Table I: Publicly announced preferred-provider deals.			

Bristol-Myers Squibb has since followed with other preferred-provider arrangements. In March 2011, Bristol-Myers Squibb and the CRO WuXi AppTec formed a strategic partnership for stability studies of small-molecule new chemical entities. Under the agreement, WuXi will build, equip, and operate a dedicated, fully cGMP-compliant 25,000-ft

  analytical testing facility in Shanghai to store and test stability samples and to perform other services for Bristol-Myers Squibb. WuXi also will employ a dedicated staff for stability testing, sample management, analytical testing, pharmaceutical science, quality assurance, metrology, and other services, including stability-data reporting in support of all global dossier submissions by Bristol-Myers Squibb. 

Bristol-Myers Squibb also had adopted a facility component in its preferred-provider relationship with Syngene International, a subsidiary of the Indian biotechnology company Biocon. In March 2009, Syngene opened a fully dedicated R&D facility for Bristol-Myers Squibb in Bangalore, India. The 200,000-ft

  facility is focused on discovery and early-drug development. Construction on the facility began in March 2007 when Bristol-Myers Squibb and Biocon entered into an agreement to develop integrated drug-discovery and development capabilities at Syngene.  

In October 2010, Sanofi and the CRO Covance finalized a 10-year, $2 billion R&D alliance, which included an asset and staff transfer of two R&D facilities and approximately 300 associated scientific and technical staff. Under the agreement, Sanofi sold its Porcheville, France, and Alnwick, United Kingdom, sites and facilities to Covance for approximately $25 million. Under the agreements, Sanofi is using Covance's global R&D portfolio of discovery support, toxicology, chemistry, clinical Phase I–IV, central-laboratory, and market-access services with annual commitments for these services increasing over the next decade. These agreements included a 10-year sole-source relationship for central-laboratory services. Covance gained chemistry, manufacturing, and controls (CMC) services with the addition of the Porcheville and Alnwick sites, including preformulation, drug formulation, preclinical, early-stage clinical API manufacturing, and radiolabeled chemistry. When announced in 2010, Covance expected the alliance to generate revenues between $1.2 billion and $2.2 billion.  

. Covance's partnership with Sanofi followed another long-term, high-value partnership with Eli Lilly. In August 2008, Eli Lilly and Covance entered into a long-term strategic alliance in which Covance acquired Eli Lilly's preclinical research facility in Greenfield, Indiana, for $50 million. As part of the agreement, Covance hired 264 former Eli Lilly employees, and Eli Lilly committed to providing $1.6 billion in work to Covance over 10 years for a broad range of drug-development services. Covance also assumed responsibility for all of Lilly's toxicology testing and discovery support activities at Greenfield. 

Eli Lilly has further used the preferred-provider model in its clinical-trial-materials supply activities. In March 2010, Thermo Fisher Scientific  expanded its clinical-trial material supply relationship with Eli Lilly as part of a new, five-year agreement. Under the agreement, Fisher Clinical Services, a business of Thermo Fisher, took over responsibility for Eli Lilly's in-house clinical-trial-materials manufacturing, packaging, and labeling operations onsite at the Lilly Technology Center North in Indianapolis, Indiana. Fisher Clinical Services also is handling the distribution of clinical-trial materials for Eli Lilly throughout North America. The agreement included Fisher Clinical Services' purchase of Lilly's clinical-trial manufacturing and packaging equipment. This relationship was expanded to support Lilly's new operating model, which is designed to speed drug development while reducing fixed costs.  

Eli Lilly adopted a preferred-provider approach in API manufacturing as well. In January 2010, Eli Lilly finalized the sale of its Tippecanoe Laboratories API manufacturing facility in Lafayette, Indiana, to Evonik Industries in a deal first announced in 2009. The facility produces APIs, fine chemicals, and animal-health products. In connection with the sale of the site, the two companies entered into a nine-year supply and services agreement, whereby Evonik will manufacture final APIs and intermediates for certain Eli Lilly human and animal-health products. The sale of Tippecanoe Laboratories was the culmination of Lilly's strategic review of the site that was announced in July 2008. The decision to sell the site was based upon a projected decline in utilization of the site due to several factors, including upcoming patent expirations on certain medicines made at the site, Lilly's strategic decision to purchase, rather than manufacture, many late-stage chemical intermediates, and the evolution of the Lilly pipeline toward more biotechnology medicines. 

Two preferred-provider relationships from GlaxoSmithKline (GSK) involve manufacturing with the CMO Lonza and R&D with the CDMO Aptuit. On the manufacturing side, GSK partnered with Lonza in September 2010 for securing capacity and expertise in biological manufacturing by which Lonza is supplying manufacturing capacity for five early-stage monoclonal antibodies of GSK. 

Under the terms of the agreement, Lonza will initially manufacture clinical-trial batches of five compounds currently in Phase I and II for GSK. Lonza also will provide access to flexible capacity to enable GSK to respond to future demand dependent upon progression of the molecules through late-stage development and commercial launch. As part of the agreement, GSK will work with Lonza to assess options for the design, specification, location, and construction of a biopharmaceutical manufacturing facility within the UK. 

On the R&D side, in July 2010, GSK and Aptuit finalized an agreement under which Aptuit acquired operations at GSK's Medicines Research Center in Verona, Italy, for supplying R&D services to GSK. Aptuit gained the scientific expertise and knowledge of approximately 500 staff at the research center through the transfer of the facility. The agreement allows Aptuit to combine its expertise with the Verona Medicines Research Center's expertise in drug discovery, lead optimization, API development and manufacturing, and preclinical and clinical drug development.  

Although the high-profile deals with the pharmaceutical majors garner much of the attention in preferred-provider partnerships, smaller bio/pharmaceutical companies also may use this model with their outsourcing partners. For example, in January 2012, AMRI, a contract research and manufacturing organization, entered into a preferred-provider agreement with BioPontis Alliance, an asset-based investment capital fund and R&D company that has scientific alliances with research universities. BioPontis focuses on developing treatments for cancer, neurology, inflammation, and infectious diseases.  

The BioPontis Alliance has agreements with New York University, Columbia University, Memorial Sloan–Kettering Cancer Center, University of Pennsylvania, University of North Carolina (Chapel Hill), University of Virginia, University of Kansas, Oregon Health and Sciences University, Thomas Jefferson University, and the University of Florida. In addition to these partnerships aimed at identifying early technology, BioPontis has entered into preferred-partnership agreements with pharmaceutical companies, including Janssen Biotech (wholly owned by Johnson & Johnson), Pfizer, and Merck & Co. 

The goal of the BioPontis Alliance is to identify promising early-stage product opportunities and use a preferred network of CROs and research companies to apply appropriate expertise to develop these opportunities enough to attract pharmaceutical companies as licensing partners. Under BioPontis Alliance's agreement with AMRI, AMRI will provide its services in small-molecule discovery, development, and manufacturing in support of BioPontis' drug-discovery research programs and need for proof-of-concept data that is required for pharmaceutical-company licensing. 

In September 2011, the regenerative-medicine company Mesoblast and Lonza entered into a strategic alliance for clinical and long-term commercial production of Mesoblast's off-the-shelf (allogeneic) adult stem-cell products. The alliance provides Mesoblast with certainty of capacity to meet long-term global supply of its proprietary Mesenchymal Precursor Cell (MPC) products. Under the agreement, Lonza will supply Mesoblast's clinical and long-term commercial MPC product needs globally. Mesoblast can trigger a process requiring Lonza to construct a purpose-built manufacturing facility exclusively for Mesoblast's marketed products. In return, Mesoblast will purchase agreed quantities of marketed products from the facility. Mesoblast can exercise its right to buy out this manufacturing facility at a pre-agreed purchase price two years after the facility receives regulatory approval. Mesoblast will have exclusive access to Lonza's cell-therapy facilities in Singapore for the manufacture of allogeneic cell-therapy products, subject to certain exceptions. Lonza will use its proprietary intellectual property to facilitate reductions in Mesoblast's manufacturing costs and help enable development of enhanced second-generation products. 

Although not strictly a preferred-provider relationship, contract service providers also may partner in highly strategic ways to expand their range of capabilites. For example, the CMO Kemwell partnered with the contract services business of Boehringer Ingelheim in 2009 for building a biopharmaceutical manufacturing plant in Bangalore, India. The 15,000-m

  facility was designed for process development, production, purification,  and formulation of biologics for early-phase preclinical and clinical studies. The facility consists of a cGMP drug-substance manufacturing facility and a sterile fill–finish facility for drug products with a floor for process-development laboratories to support production of protein therapeutics from mammalian-cell culture or microbial fermentation. Boehringer Ingelheim is contributing cell-line development with its BI Hex technology platform and preferred access to its large-scale commercial production facilities in Europe. 

 1.  I. Read, presentation at the JP Morgan Healthcare Conference 2012 (San Francisco, Jan. 10, 2012), 

www.pfizer.com/files/investors/presentations/jp_morgan_transcript_011012.pdf

Articles

The author examines recent examples of preferred-provider collaborations.

Strategies for Preferred-Provider Partnerships

A multitude of contract service providers compete in the outsourcing segments for  API manufacturing and finished drug product manufacturinga. Added to this mix are the contract manufacturing activities of large innovator-drug companies and generic-drug companies. The author examines the opportunities and positioning of such players. 

Contract manufacturing of APIs and finished drug products is an important sector in the pharmaceutical outsourcing market. Although these contract services generally are provided by pure-play third-party providers, such as CDMOs and CMOs, pharmaceutical companies themselves can be a part of the supply base for contract-manufacturing activities. Seeking to monetize internal manufacturing capacity through external manufacturing activities, third-party manufacturing can be an attractive proposition for pharmaceutical companies.  

Recent analysis shows moderate to strong growth for contract pharmaceutical manufacturing, depending on the specific sector involved. Global pharmaceutical contracting revenues totaled nearly $218 billion in 2011, and are expected to reach nearly $361 billion in 2016, increasing at a compound annual growth rate (CAGR) of 10.6%, according to recent research by the market research firm Business Communications Company (BCC). BCC divides pharmaceutical contracting into four segments: contract manufacture of over-the-counter (OTC) drugs and nutraceuticals; contract manufacture of bulk drugs and dosage-forms; contract research; and contract packaging. 

The OTC drug and nutraceutical segment accounted for nearly $128 billion in 2011, and is expected to grow at a CAGR of 10.9% to reach nearly $215 billion in 2016, according to BCC. Global revenues for contract manufacturing of bulk drugs and dosage forms were valued at $53.4 billion in 2011, and are expected to increase at a CAGR of 10.1% to reach $86.3 billion in 2016. The contract-research segment was worth $30.2 billion in 2011, and is expected to increase to $50.5 billion in 2016, a CAGR of 10.8%, according to BCC. The packaging segment, worth $6.4 billion in 2011, and is expected to grow to $9.3 billion in 2016, a CAGR of 7.8%. 

Drilling down specifically to APIs, moderate growth is expected for contract manufacturing of APIs. The global market for APIs for human use was valued at $101 billion in 2010, according to data from the Italian Chemical Pharmaceutical Generic Association (CPA) in its recent report, "Competition in the World API Market." Of the total market value, the captive market (i.e., APIs produced within pharmaceutical companies themselves for their own needs) accounted for 61.4% of the total API market, or $62 billion in 2010. The merchant market for APIs (i.e., APIs sold by third parties) accounted for the remaining 38.6%, or $39 billion, according to CPA. For purposes of this market, "API" refers to the active ingredient and advanced intermediates (i.e., intermediates requiring GMP compliance). The global API merchant market is almost evenly divided between APIs supplied to the generic-drug market and APIs supplied to the innovator-drug market. Of the global merchant market for APIs, generic APIs accounted for approximately 48.7%, or $19 billion, in 2010, and branded (i.e., innovator) APIs accounted for the remaining 51.3%, or $20 billion, according to CPA (1).  

The world merchant API market (i.e., APIs sold by third parties) for both generic and branded/innovator APIs is projected to increase at an average rate of 5.1% during the next five years to reach $50 billion by 2015, up from $39 billion in 2010, according to CPA. The demand for generic APIs, however, will outpace growth for branded/innovator APIs. The merchant market for generic APIs is projected to increase at an annual rate of 7.3% to reach $27 billion by 2015. The merchant market for branded/innovator APIs is forecast to increase at the annual rate of only 2.8% to reach $23 billion by 2015, according to CPA. This differential in growth rates will cause the share of generic APIs in the merchant market to increase from 49.7% in 2010 to 54% by 2015 and for the share of innovator APIs in the merchant market to decrease from 51.3% in 2010 to 46% by 2015, according to CPA (1).  

Providing contract-manufacturing services is not in of itself new for pharmaceutical companies, and several large pharmaceutical companies have well-established contract activities. As the underlying fundamentals for cost-effectively managing a manufacturing and supply network evolve, however, these third-party services provide another way to monetize capacity and fixed assets. The interest of Big Pharma companies in highlighting their contract-manufacturing activities was evident by the participation of pharmaceutical companies at recent trade shows. A case in point is CPhI Worldwide, the large trade show of contract API manufacturers and fine-chemical producers, which is colocated with the International Contract Service Expo (ICSE), which includes contract manufacturers of finished drug products. At the recent CPhI/ICSE event held in Frankfurt, Germany, in October 2011, the contract-manufacturing arms of several large pharmaceutical companies, both innovator-drug companies and generic drug companies, were on display.  

 On the innovator-drug company side, these companies included the contract services of Pfizer (Pfizer CentreSource), Sanofi (Commercial and External Partnership, Industrial Affairs [CePiA]), GlaxoSmithKline, Mitsubishi Tanabe Pharma (API Corporation), Bayer (Bayer Healthcare Pharmaceuticals), Boehringer Ingelheim, Abbott, and Merck & Co. (MSD API). Generic-drug companies at CPhI/ICSE offering contract services included Sandoz (the generic-drug business of Novartis), Teva Pharmaceutical Industries (Teva Active Pharmaceutical Ingredients [TAPI]), Activas, and Mylan. A review of these companies' activities shows capabilities in both API and finished product manufacturing.  

For example, Pfizer CentreSource, headquartered in Kalamazoo, Michigan, is a provider of APIs and dosage-form manufacturing. It is a supplier of fine chemicals, steroid APIs (e.g., corticosteroids and hormonal steroids), and steroid intermediates. It also provides custom fermentation services as well as sterile manufacturing (blow/fill/seal/services) and solid dosage manufacturing, including high-containment services.  

The CMO division of Sanofi, CEPiA, provides corticosteroids, steroid diuretics, vitamin B12, cardiovasculars, analgesics, anti-inflammatories, antihistamines, antibiotics, prostaglandins, and opiods (morphine and codeine salts). The company has expertise is multistep custom synthesis, steroid chemistry, prostaglandins chemistry, enzymatic conversions, synthesis of high-potency compounds, peptide and protein chemistry, micronization, and large-scale chromatography. The contract arm uses Sanofi's chemical, fermentation, and biotechnological facilities in France, Germany, Italy, Hungary, Eastern Europe, Singapore, and India  

On the API side, Bayer Healthcare Pharmaceuticals uses several plants for its contract activities. Its supply center in Bergkamen, Germany, is Bayer Pharma's major facility for the production of intermediates, active ingredients, and bulk pharmaceutical chemicals for steroid hormones through chemical and microbiological synthesis. It also has a micronization plant in Berlin-Charlottenburg, another API plant in Elberfeld, Germany, and a second major chemical facility for hormone and steroid production in Orizaba, Mexico.   

On the API side, the contract-services arm of Boehringer Ingelheim provides contract manufacturing of biologic-based APIs, chemical APIs, and fine chemicals.  On the biologics side, a key offering is its BI Hex high-expression system for monoclonal antibody production. The company recently launched a new program, "Lean-to-Clinic," which consists of streamlined work packages and which speeds up cell-line development, Phase I process development, and preclinical and clinical supplies from mammalian cell cultures. 

Although small relative to the revenues generated by drug sales, the contract-manufacturing activities of pharmaceutical companies can contribute positively to a company's bottom line. For example, TAPI, the contract manufacturing arm of Teva Pharmaceutical Industries, the largest generic-drug company, generates approximately $640 million in annual third-party sales, according to company information. The contract-services arm operates through 21 production plants, which includes the company's major manufacturing facility in Israel.  

Through its acquisition of a controlling interest in Matrix Laboratories in 2007, the generic-drug and specialty pharmaceutical company Mylan gained a position in API manufacturing. Based in Hyderabad, India, Mylan Laboratories (the former Matrix Laboratories) has several operating units, including a network of API and intermediate manufacturing facilities in India and China.  

The author examines the opportunities and positioning of contract service providers.

Evaluating Competitive Forces in Contract Manufacturing

 Personalized medicine, which targets individualized treatment and care based on personal and genetic variations, holds much promise for the pharmaceutical industry. Several pharmaceutical majors continue to invest in this emerging field as evident by Roche’s $5.7-billion bid last week for Illumina, a provider of gene-sequencing tools and related analytics.

		Roche, perhaps, more than any other pharmaceutical company, is banking heavily on the combination of diagnostics and drug development to drive pharmaceutical innovation. In reporting its 2010 results in February 2011, Roche reported that it had 12 new molecular entities in late-stage development, of which six were potential personalized healthcare medicines with planned companion diagnostic tests, which included Zelboraf (vemurafenib) and its companion diagnostic for BRAF mutation-positive metastatic melanoma. FDA approved Zelboraf for treating BRAF V600E mutation-positive, inoperable, or metastatic melanoma and the cobas 4800 BRAF V600 Mutation Test, a diagnostic test developed by Roche, in August 2011.

		Earlier this month, the European Medicines Agency’s Committee for Medicinal Products for Human Use recommended that Zelboraf be granted full marketing authorization as a monotherapy for treating adult patients with BRAF V600 mutation-positive unresectable or metastatic melanom. The corresponding European Commission decision on the marketing authorization of Zelboraf is expected in February 2012. Marketing authorization submissions for Zelboraf also are under review by health authorities in Australia, New Zealand, Brazil, India, Mexico, Canada, and other countries worldwide.

		Roche also is using its diagnostic strategy to support new indications for existing drugs. Last month, Roche reported that the cobas EGFR Mutation Test was CE-marked, an indicator of a product’s conformity with EU requirements, and is now commercially availabile in Europe and other countries that recognize the CE mark. The cobas EGFR Mutation Test is a companion diagnostic to identify patients with non-small-cell lung cancer (NSCLC) who harbor mutations in the EGFR (epidermal growth factor receptor) gene and who may benefit from treatment with anti-EGFR tyrosine kinase inhibitors, such as Roche’ Tarceva (erlotinib). Tarceva, an oral EGFR inhibitor, was first approved in September 2004 to treat locally advanced or metastatic NSCLC after failure of at least one other chemotherapy treatment. It later was approved by the European Commission in September 2011 as a first-line monotherapy in people with locally advanced or metastatic NSCLC with EGFR-activating mutations.

		Other companies also are reporting success with certain personalized medicines. In August 2011, FDA approved Pfizer’s Xalkori (crizotinib) for treating locally advanced or metastatic NSCLC that expresses the abnormal anaplastic lymphoma kinase (ALK) as detected by an FDA-approved test. The agency approved the drug along with a diagnostic test for the ALK gene abnormality, Abbott Molecular’s Vysis ALK Break Apart FISH Probe Kit. Up to 7% of those patients with NSCLC, typically patients without a history of smoking, have the gene abnormality.

		Although personalized medicines will likely hold only a small part of the overall pharmaceutical market by value and volume in the near term, these successes portend of a changing paradigm in drug development.

Personalized medicine, which targets individualized treatment and care based on personal and genetic variations, holds much promise for the pharmaceutical industry.

Roche Makes Bid to Advance Position in Personalized Medicine

 for three user-fee programs: the fifth authorization of the Prescription Drug User Fee Act (PDUFA) and new user-fee programs for human generic drugs and biosimilar biological products. The recommendations were transmitted to Congress, which will evaluate the recommendations.

		Under a user-fee program, industry agrees to pay fees to help fund a portion of the FDA’s drug-review activities while the FDA agrees to overall performance goals, such as reviewing a certain percentage of applications within a particular timeframe. The proposed user-fee programs for generic drugs and biosimilars are modeled on the PDUFA program. PDUFA was created by Congress in 1992 and must be reauthorized every five years. The current program, known as PDUFA IV, will expire on Sept. 30, 2012, unless reauthorized by Congress. FDA’s recommendations for PDUFA V were developed in consultation with drug-industry representatives and with patient and consumer advocates, according to an FDA

		The proposed new generic-drug user-fee program would provide the FDA with funding at a time when generic-drug applications are on the rise. FDA receives 800 to 900 new generic-drug-related applications annually, according to the agency. In exchange for fees on facilities and product applications, the proposal includes performance metrics, such as review timeframes and a commitment to achieve parity between surveillance inspections of foreign and domestic establishments by fiscal year 2017. FDA expects that the proposal would effectively eliminate the review backlog and significantly reduce review times.

		The Generic Pharmaceutical Association (GPhA) issued its support for a proposed Generic Drug User Fee Act (GDUFA) and FDA’s recommendations for a generic-drug user-fee program. “This is an important landmark that could not have been achieved without the extraordinary efforts of the FDA, my colleagues in the generic industry, and all other stakeholders,” said Ralph G. Neas, President and CEO of GPhA, in a Jan. 13, 2012, GPhA 

. “We now look forward to working with members of Congress in the weeks and months ahead to ensure that the final program is one that expedites access to low-cost, high-quality generic drugs for Americans and further safeguards the quality and accessibility of our nation’s drug supply.”

		GDUFA calls for the generic-drug industry to pay $299 million annually in user fees for the next five years, beginning Oct. 1, 2012. This funding is supplemental to what Congress appropriates to FDA each year and will enable  FDA’s Office of Generic Drugs to hire the scientific resources needed to provide timely approval of generic medicines, according to GPhA. The new fees also will boost spending for generic-drug manufacturer facility inspections, which are required before new generic drugs can be approved.

		The proposed Biosimilar and Interchangeable Products User Fee program is intended for products approved under a new abbreviated approval pathway for biological products shown to be biosimilar to or interchangeable with an FDA-licensed biological product. The 

e Biologics Price Competition and Innovation Act 

, which established this pathway. The recommended user-fee program for biosimilars includes fees for products in development to generate revenue in the near term and to provide FDA with the resources needed to support development-phase meetings with sponsors of biosimilar biological product candidates.

		The Pharmaceutical Research and Manufacturers of America (PhRMA) supports the premise of a biosimilar user-free program.” We endorse a clear, science-based, separately funded regulatory program for biosimilars that is supported by a mix of appropriations dollars and user fees,” said a PhRMA Vice-President Sascha Haverfield-Gross in a Dec. 6, 2011, 

		The Biotechnology Industry Organization (BIO) did not comment on the proposed generic-drug and biosimilar user-fee programs, but offered its support for the reauthorization of PDUFA. “BIO strongly supports the PDUFA V recommendations as they will enhance the drug-development and review process through increased transparency and scientific dialogue, advance regulatory science, and strengthen postmarket surveillance,” said BIO president and CEO Jim Greenwood, in a Jan. 13, 2012, 

. “Most importantly, PDUFA V will provide patients and doctors with earlier access to innovative new therapies.”

		Congress will take up the issue of user fees in a series of Congressional hearings, scheduled for next month. The House Energy and Commerce Health Subcommittee will hold 

 on Feb. 1, 2012, on PDUFA reauthorization and on Feb. 7, 2012, on the proposed generic-drug user fee and biosimilar user-fee programs. Senators Tom Harkin (D-IA) and Mike Enzi (R-WY), the chairman and ranking member of the Senate Committee on Health, Education, Labor and Pensions (HELP), offered their support for the PDUFA reauthorization and the proposed generic-drug and biosimilar user fee programs. “These user fee agreements are crucial to ensuring that medications become available to the American public quickly and safely,” said the senators in joint Jan. 13, 2012, 

. “We applaud the FDA and the industries for the dedication and hard work it took to finalize these agreements.” During the past several months, the HELP Committee has convened a series of hearings to explore issues related to the user-fee legislation.

		With strong fiscal constraints, the user-fee programs, both the PDUFA reauthorization and user-fee programs for generic drugs and biosimilars seem likely. The key item in the coming months is to see if Congress will be able to move forward with the initiatives per FDA’s recommendations.

FDA issued last week its recommendations for three user-fee programs: the fifth authorization of the Prescription Drug User Fee Act (PDUFA) and new user-fee programs for human generic drugs and biosimilar biological products.

Generic Drug and Biosimilar User Fees Gain Traction

Moderate growth is expected for the global market for APIs. The generic API market is stronger as recent and projected growth rates are expected to outpace growth of innovator/branded APIs. India, China, and Italy will continue to be major suppliers of APIs to the global market, with India suppliers expected to see strong growth during the next five years. 

The global market for APIs for human use was valued at $101 billion in 2010, according to data from the Italian Chemical Pharmaceutical Generic Association (CPA) in its recent report, “Competition in the World API Market. “ Of the total market value, the captive market (i.e., APIs produced within pharmaceutical companies themselves for their own needs) accounted for 61.4% of the total API market, or $62 billion, in 2010. The merchant market for APIs (i.e., APIs sold by third parties) accounted for the remaining 38.6%, or $39 billion, according to CPA. For purposes of this market, “API” refers to the active pharmaceutical ingredient and advanced intermediates (i.e., intermediates requiring GMP compliance). 

The global API merchant market is almost evenly divided between APIs supplied to the generic-drug market and APIs supplied to the innovator-drug market. Of the global merchant market for APIs, generic APIs accounted for approximately 48.7%, or $19 billion, and branded (i.e., innovator) APIs accounted for the remaining 51.3%, or $20 billion,in 2010, according to CPA. Of the global generic API market of $19 billion, Asia-Pacific accounted for the largest share at 37.5%, the United States, the second largest share at 21.2%, and Western Europe for 16.8%. As of 2010, China had become the largest single market for generic APIs, accounting for 21.3% of the world market or $4.05 billion, which surpassed the US market for generic APIs, which is valued at $4.03 billion, according to CPA. In Western Europe, the largest markets for generic APIs are Germany and the United Kingdom. In Eastern Europe and the Commonwealth of Independent States, Russia is the largest single market, accounting for 45.8% of this region’s generic API market. 

The world merchant API market as a whole, both generic and branded/innovator APIs, is projected to increase at an average rate of 5.1% during the next five years to reach $50 billion by 2015, up from $39 billion in 2010, according to CPA. The demand for generic APIs, however, will outpace growth for branded/innovator APIs. The merchant market for generic APIs is projected to increase at an annual rate of 7.3% to reach $27 billion by 2015. The merchant market for branded/innovator APIs is forecast to increase at the annual rate of only 2.8% to reach $23 billion by 2015, according to CPA. This differential in growth rates will cause the share for generic APIs in the merchant market to increase from 49.7% in 2010 to 54% by 2015 and for the share of innovator APIs in the merchant market to decrease from 51.3% in 2010 to 46% by 2015, according to CPA. 

The fastest growth rates for the generic API merchant market during the next five years will be in China (12.6% yearly average), Brazil (11.1% yearly average), India (10.3% yearly average), South Korea (8.3% yearly average), Russia (8.0% yearly average), and Ukraine (6.1% yearly average). Other smaller emerging markets that are set to rise above the world average during the next several years are Vietnam, Laos, Thailand, Pakistan, Chile, Colombia, and Peru, according to CPA. 

Italy is the largest generic API producer in Western Europe followed by Spain. Historically, Italy had been the largest generic API producer globally before the rise of China and India in the global API market. Italy, however, still holds a prominent position in the global API market. The market share held by Italian fine-chemical companies/API manufacturers in the global API merchant market (generic and innovator APIs) has remained stable during the past five years: 10.4% in 2010 and 10.3% in 2005, according to CPA. Italy’s share of the global generic API merchant market has decreased from 18.1% in 2005 to 16.3% in 2010. 

Italy’s share in the Western European market has increased. The market share held by Italian fine-chemical companies/API manufacturers in the Western European generic API merchant market has risen from 29.6% in 2005 to 31.5% in 2010, according to CPA. The percentage share of Italian fine-chemical companies/API manufacturers for the US generic API merchant market also has risen: from 25.1% in 2005 to 30.8% in 2010, according to CPA. Overall, Italy’s share in the world API merchant  market is expected to remain stable during the next five years at approximately 10%, but its share in the global generic API merchant market is expected to decrease to 14.7% by 2015 from 16.3% in 2010, according to CPA. 

The market share held by Spanish API manufactures in the global API merchant market (generic APIs and branded/innovator APIs) was 3.2% in 2010. The country’s share in the world generic API merchant market was 5.5% in 2010, according to CPA. 

The market share held by Indian API manufacturers in the global API merchant market (generic APIs and branded/innovator APIs) was 6.5% in 2005, 12.0% in 2010, and is expected to increase to 22.0% by 2015, according to CPA. India’s share of the global generic API merchant market has increased from 13.5% in 2005 to 22.1% in 2010 and is expected to increase to 33.3% by 2015. Export sales of generic APIs from India increased at an average of 18.9% between 2005–2010 compared with an annual average of 15.9% to the country’s domestic market. 

India is expected to be the fastest growing API supplier during the next five years and will keep its position above China. The market share held by Chinese companies in the global API merchant market (generic APIs and branded/innovative APIs) has risen from 14.2% in 2005 to 19% in 2010, according to CPA. The market share held by Chinese companies in the global generic API merchant market increased from 31.1% in 2005 to 35.6% in 2010. Although China remains the largest API supplier on a global basis, growth rates from 2005–2010 of Chinese API suppliers were less than those of Indian suppliers. China’s share of the Western European generic API merchant market fell from 39.2% in 2005 to 35% in 2010. China’s share of the US generic API merchant market increased slightly from 11.5% to 12.9% in 2010, according to CPA. From 2010 through 2015, sales of Chinese API manufactures to the global API merchant market (generic and innovator APIs) are projected to increase at an annual average rate of 9.2% compared with an annual average of 18.5% for Indian API manufacturers, according to CPA. For the global generic API merchant market, sales by Chinese API manufacturers are expected to increase at a yearly rate of 8.1% compared with 16.5% for Indian API manufactures between the forecast period of 2010 to 2015, according to CPA. 

The market for contract API manufacturing and fine chemicals is forecast to be fairly strong, and growth for generic APIs is expected to outpace growth for innovator APIs.

API Market Outlook

Vaccines represent an important way to reduce disease burden in the developing world and are part of many global health initiatives. Public–private sector collaborations, in particular, are an important tool and have been the recent focus of renewed commitments by pharmaceutical companies. 


 In December 2011, Pfizer reported that it has entered into a second supply agreement that will broaden and extend its participation in supplying vaccines for pneumococcal disease to children and infants in the developing world. Pfizer will supply up to a total of 480 million doses of Prevenar 13 (pneumococcal polysaccharide conjugate vaccine ([13-valent, adsorbed]) through 2023, which builds on its original commitment announced in March 2010 to supply up to 300 million doses of the vaccine under the auspices of the Advance Market Commitment (AMC) for pneumococcal vaccines.

The AMC, an innovative program piloted by the GAVI Alliance, is a public–private approach to health funding designed to create a sustainable marketplace, ensure an affordable and stable supply of pneumococcal vaccines at a discounted price, and stimulate the development and expansion of manufacturing capacity for vaccines specifically for the world’s poorest countries. The agreements for supply of pneumococcal vaccines have been financed by GAVI, five donor countries (i.e., Italy, the United Kingdom, Canada, the Russian Federation, and Norway) and the Bill and Melinda Gates Foundation.

“Pfizer is proud to broaden and extend access to our vaccine to advance public health,” said Mark Swindell, president of vaccines at Pfizer, in a Dec. 13, 2011, company press release. “Public-private partnership programs like the AMC are vital to accelerating the availability of affordable vaccines, faster than ever before, to those children who are most vulnerable. We are proud to help protect even more children at risk for the potentially devastating consequences of pneumococcal disease, which claims more young children lives than any other vaccine-preventable disease.”

In December 2010, Pfizer’s 13-valent pneumococcal conjugate vaccine was introduced into the childhood immunization program of Nicaragua, the first developing country to launch a program under the auspices of the AMC. “Prevenar 13 was introduced into the childhood immunization program of a developing country within one year of its launch in the United States and European Union, a historic precedent given the average 10–15 year lag between the introduction of newer vaccines in developed versus developing countries,” said Swindell in the release. “One year later, Prevenar 13 is now available in 14 of 16 countries that have launched pneumococcal immunization programs under the AMC. While there is much more work to be done, we are encouraged by this progress.”

To date, Prevenar 13 has been introduced into the national childhood immunization programs of the following GAVI-eligible countries: Benin, Burundi, Cameroon, Central African Republic, Democratic Republic of Congo, the Gambia, Guyana, Honduras, Malawi, Mali, Nicaragua, Rwanda, Sierra Leone, and Yemen.

 
 GlaxoSmithKline (GSK) also announced in December 2011 that it has expanded its agreement with the GAVI Alliance for vaccines for preventing pneumococcal disease. Pneumococcal disease can lead to pneumonia, meningitis, and sepsis and is a leading cause of death in children under the age of five in developing countries.

Under a new agreement, GSK commits to provide an additional 180 million doses of its pneumococcal vaccine, Synflorix, to GAVI over the next 12 years to help expand immunization programmes against pneumococcal disease to 72 developing countries by 2023.The additional support builds on the 300 million doses that GSK committed to GAVI in March 2010 through the AMC. In total, up to 160 million children in developing countries could be protected with Synflorix against pneumococcal disease by 2023. The new commitment by GSK follows GAVI's recent decision to support the introduction of pneumococcal vaccination in an additional 18 countries, bringing the total number of countries currently supported by GAVI to 37 countries.

By stepping up our contribution of Synflorix to GAVI, we can help ensure there is enough pneumococcal vaccine available to meet the increasing demand across the world,” said Jean Stéphenne, chairman of GSK Biologicals, in a Dec. 16, 2011, GSK press release. “We are committed to playing our part in addressing healthcare challenges in developing countries, which includes adopting new strategies to help accelerate access to vaccines for diseases such polio, rotavirus, measles, and pneumococcal around the world. Vaccines are one the most effective ways to improve public health and the economical development of these countries. Increasing vaccination means more children will be able to live healthy lives." More than 90% of deaths due to pneumococcal disease occur in developing countries where children frequently do not have access to pneumococcal vaccination or early treatment, according to the GSK release

With its partnership with GAVI, GKS supplies more than 80% of its total vaccine volumes to developing countries. In June 2011, GSK made a new offer to supply its rotavirus vaccine, Rotarix, to GAVI at discounted prices to developed-world prices. It is estimated that more than half a million children worldwide die of rotavirus gastroenteritis each year, the equivalent of one child per minute worldwide, and it is responsible for the hospitalization of millions more. Rotavirus-related diarrhea and pneumococcal disease are two leading diseases among children in developing countries. 

GSK has committed to provide the additional 180 million doses of Synflorix to GAVI at a small cost relative to developed-world prices. Synflorix helps protect against diseases due to pneumococcus. It contains 10 serotypes, three of which, serotype 1, 5, and 14, were required to be included in the vaccine for the AMC due to the high burden of invasive diseases caused by these serotypes in the developing world, according to the GSK press release. Over the next 12 years, GSK has committed to provide 480 million doses of Synflorix. To date, more than 12 million doses have been delivered in Ethiopia and Kenya. Kenya was the first African country to include pneumococcal vaccines in its national immunization program under the AMC. Ethiopia represents to date the largest introduction of pneumococcal vaccines under the AMC, according to the GSK release. GSK has invested more than $400 million in a dedicated manufacturing plant in Singapore that will produce several hundred million doses of the vaccine annually in the coming years. Synflorix was the first pneumococcal vaccine to receive World Health Organization (WHO) prequalification" for global use, a regulatory endorsement that is a precondition for participation in the AMC, notes GSK. 


 In November 2011, responding to demand from developing countries, the GAVI Alliance reported it will take the first steps toward the introduction of human papillomavirus (HPV) and rubella vaccines in developing countries. GAVI reported that if negotiations to secure a sustainable price from manufacturers are successful and countries can demonstrate their ability to deliver the vaccines, up to two million women and girls in nine countries could be protected from cervical cancer by 2015, according to a Nov. 17, 2011, GAVI press release. 

Responding to projected demand from 30 countries and WHO recommendations, the board of the GAVI Alliance also agreed to open a funding window for vaccines against the rubella virus, which threatens pregnancies and child health. The plan is to reach 588 million children by 2015. “These two initiatives have huge potential impact for women and families in the developing world,” said Seth Berkley MD, CEO of GAVI, in the GAVI press release. GAVI supports seven other vaccines. 

The GAVI board also said it will consider funding a vaccine against Japanese encephalitis once an appropriate vaccine is prequalified by WHO. The GAVI board also said it looked forward to the development of an appropriate conjugate vaccine against typhoid. The board also reviewed progress on the roll out of pneumococcal and rotavirus vaccines, approved a new supply and procurement strategy, discussed new options for results-based funding and tailored solutions for countries with large numbers of unvaccinated children.

GAVI-funded rubella vaccines will be combined for easy delivery with measles vaccines in a single measles–rubella (MR) shot, supporting the global measles immunization effort. If contracted by pregnant women, rubella can lead to multiple severe birth defects that cause lifelong disabilities. Some 90,000 birth defects occur each year in GAVI-eligible countries, equivalent to 80% of the global burden, according to the GAVI press release. 

Since GAVI began introducing support for pneumococcal vaccines in December 2010, more than three million children have been immunized, according to GAVI. Another 10 million are expected to receive the vaccine in 2012. By the end of 2012, an estimated 4.8 million additional children will have received the rotavirus vaccine, protecting them from rotavirus diarrhea, another leading cause of vaccine-preventable child mortality.

In November 2010, the GAVI Alliance Board approved a five-year;strategyto ensure the alliance delivers on its overall mission from 2011–2015. Full implementation of  four strategic goals will see GAVI immunize about 240 million children by 2015 and prevent nearly four million future deaths. This includes the roll-out of pneumooccal and rotavirus vaccines to protect against pneumonia and diarrhea, as well as sustained progress in providing the pentavalent, meningitis and yellow-fever vaccines

The pharmaceutical majors advance vaccines for the developing world.