Sean Milmo is a freelance writer based in Essex, UK.

Sean Milmo

	The European Union-United States mutual recognition agreement (MRA) on GMP inspections, announced in early March 2017 (1), was a big step forward in the EU’s eagerness to play a key role in the achievement of uniform standards in pharmaceuticals across the world. This quest for leadership in harmonizing standards is being driven by the EU’s network of regulatory agencies headed by the European Medicines Agency (EMA), which operates a uniform set of cross-border standards within the Union.
	
	The trans-Atlantic deal is by far the biggest of the MRAs on GMP inspections reached by the EU. But its complexity is likely to lead to a more gradual, incremental approach to MRAs by EMA. The agency is in no hurry to negotiate new MRAs. “At the moment, there are no plans for MRAs with other countries in the short term, [although] this is not to be excluded in the future,” an EMA spokesperson told 

.
	The only MRA talks on the agenda is an extension of an existing 15-year-old MRA with Japan, which has restricted coverage of types of medicinal products (2). Both sides want to make it “fully operational” so that it applies to the manufacture of all or most medicines on the market.
	The EU-US MRA has highlighted the difficulties of forming mutual GMP agreements among other non-EU countries. The agreement has taken approximately 20 years to set up, mainly because of the time needed to create trust between the two parties to the deal. It still will not come fully into force until 2019, while its scope in terms of types of medicines covered may not be finalized until July 2022 (3).

	MRAs, which essentially enable the granting of GMP certificates by regulatory agencies in one country to be recognized in another country and vice versa, could be important for the future of the globalized pharmaceuticals market. They cover the production of finished medicines and APIs, and could in theory be extended to starting materials as well. 

	As pharmaceutical supply chains broaden across the world, the inspectorates of regulatory agencies are becoming severely stretched. MRAs are needed to make better use of limited resources, avoid repeated inspections of individual plants, encourage the exchange of information between agencies, and to disseminate best practices. “Mutual recognition agreements on GMP inspection have been important tools to reduce unnecessary, duplicative inspection of manufacturing sites,” says a spokesman for the European Federation of Pharmaceutical Industries and Associations (EFPIA), Brussels. MRAs also enable agencies to concentrate more of their inspection activities on higher-risk plants, particularly in developing countries. 

	The EU is a significant force in the international expansion of MRAs because its own pharmaceutical market of 28 member states-soon likely to be reduced to 27 by the exit of the United Kingdom-is based on mutual recognition, not only of GMP inspections but also drug marketing approvals. Outside of the Union, the EU also has MRAs on GMP inspections with Switzerland, Australia, New Zealand, Israel, Japan, Canada, and now the US. Only three of those MRAs-with Australia, New Zealand, and Switzerland-are currently categorized as being fully operational. Some of these MRAs stretch back to the turn of the century or earlier when there was a spurt of mutual recognition deals between the EU and other countries embracing a range of product categories including pharmaceuticals. But they had limited scope or failed to be fully implemented. 

	Most of the EU’s new MRAs in medicines have been reached through the framework of free-trade talks. The EU-US agreement was achieved during negotiations on the Transatlantic Trade and Investment Partnership (TTIP), an EU-US proposed pact on the removal of tariff and non-tariff barriers on which discussions are currently deadlocked. A new EU-Canada MRA was finalized in 2016 during negotiations on a Comprehensive Economic and Trade Agreement (CETA) between the two partners (4), which has taken seven years to complete. Now there should be opportunities for more MRAs being reached through bilateral or sectoral agreements, which are likely to replace multilateral deals as the main means of increasing trade by lifting obstacles like different regulations and standards.

	The updated EU-US MRA has effectively become a separate sectoral deal while TTIP itself is on pause. The original agreement was reached in 1998 as part of a mutual recognition arrangement between the EU and US that also included telecommunications and electrical equipment (5). But the part on pharmaceuticals, which was limited in scope anyway, was never completely implemented. Among the main issues on both sides was to what extent the confidentiality of commercial information should be protected and above all, from the point of view of the US Food and Drug Administration (FDA), was the recognition of the competence of all national regulatory authorities in the EU. This became a critical matter after 10 new member states, most of them former communist Eastern European countries led by Poland, Hungary, Czech Republic, and Slovakia, joined the Union in 2004.

	The momentum toward an updated MRA started to gather pace from 2014 when FDA began to send its inspection teams to observe EMA’s regular audits of the efficiency of the GMP inspections of EU national regulatory agencies. In the period between 2014 to 2016, FDA has observed 12 of these audits of which five were of Eastern European agencies. A further 12, with FDA acting as observers, have been scheduled to take place this year.
	Under the EU-US MRA agreement, both parties are given time to complete final assessments of the competence of the other party’s regulatory authorities with regard to GMP inspections. For EMA, it just has to evaluate FDA’s efficiency in this area. But FDA has to assess the regulatory authorities in 28 countries.

	Over the past seven years, EMA and FDA have been collaborating in GMP inspection activities to help forge trust. In addition to FDA observing EMA’s audit of national agencies, there have been a joint GMP inspection pilot programme, work sharing on inspections, and regular meetings on inspection plans and outcomes. The text of the agreement states that by November 2017, FDA must have assessed authorities in eight EU countries to trigger the start of the implementation of the MRA (3). FDA’s assessment of the other 20 national authorities must be completed by 15 July 2019 (3). The EU has made clear that the MRA covers all EU member states so that if FDA has not completed its assessment of all of the EU’s national agencies by the 2019 deadline, the deal will be terminated (3).

	The EU is also taking a relatively tough line on the issue of the confidentiality of data generated by GMP inspections, such as proprietary information on manufacturing processes and other commercial secrets. “The foundation of this MRA is the ability to share information,” explained EMA’s spokesperson. “EMA and a majority of the EU countries can provide FDA with unredacted inspection reports as part of existing confidentiality arrangements. By contrast, currently, FDA is only able to exchange confidential information that is not classified as trade secrets in the US with EU authorities. FDA, therefore, redacts confidential information classified as trade secret information from inspection reports that it gives to the EU.”

	EMA argues that the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA) (6) allows FDA to share trade secrets with other regulators. “In the context of the MRA discussions, FDA has assessed and certified that all EU member states have the authority and can demonstrate the ability to protect trade secret information,” said the spokesperson. “This is an important step towards signing confidentiality arrangements with all EU member states in the future, which would enable FDA to share unredacted inspection reports with the EU member states.”

	The EU is currently negotiating approximately a dozen free-trade agreements (FTAs), the majority with countries in the Asia Pacific region. But with the exception of a proposed FTA with Japan, none currently include talks on MRAs on GMP inspections. One FTA under discussion is with New Zealand with which the EU already has a fully operational MRA on GMP inspections. EMA sees MRAs as being types of formalized mutual reliance that require a lengthy assessment of the each of the partners GMP inspection systems. “In the long-term, more MRAs with trusted international partners should be pursued as far as possible,” said the EMA spokesperson. 

	In the meantime, other kinds of cooperation can be encouraged. Data from GMP inspections can be shared by agencies so that certain sites can be categorized as being low risk, and therefore, allow inspection resources to be reallocated to other sites more at risk, according to the agency. These collaborative schemes can provide the groundwork for the eventual achievement of MRAs. But the reaching of these mutual agreements will take a long time.

	1. EMA, “European and US Regulators Agree on Mutual Recognition of Inspections of Medicines Manufacturers,” Press Release, 2 Mar. 2017. 
	2. European Union, “Agreement on Mutual Recognition Between the European Community and Japan,” 

 22001A1029(01) (Brussels, October 2001).
	3. European Commission, 

Decision on the Agreement on Mutual Recognition Between the European Community and the United States in order to Amend the Sectoral Annex on Pharmaceutical Good Manufacturing Practices 

(GMPs), C(2017) 1323, Annex 1 (Brussels, March 2017).
	4. European Union, 

Comprehensive Economic and Trade Agreement Between Canada and the European Union-Protocol on the Mutual Recognition of the Compliance and Enforcement Programme regarding Good Manufacturing Practices for Pharmaceutical Products

, COM(2016) 444, Annex 7 (Strasbourg, July 2016).
	5. European Community, “Agreement on Mutual Recognition Between the European Community and the United States of America,” 

Official Journal of the European Communities

 L 31/3 (Brussels, February 1999).
	6. US Congress, Food and Drug Administration Safety and Innovation Act, Public Law No: 112-144 (Washington DC, July 2012).


	Vol. 29, No. 4
	April 2017
	Pages: 10-11

	When referring to this article, please cite it as S. Milmo, "EU–US Mutual Recognition Agreement on GMP Inspections," 

Articles

Both the European Union and United States are still ironing out issues such as confidentiality of information and recognition of competence of each party’s regulatory authorities in their agreement on GMP inspections.

EU–US Mutual Recognition Agreement on GMP Inspections

	Efforts to gain greater uniformity in the implementation of pharmaceuticals regulations across the European Union are making progress, but it is a slow process. The achievement of more harmonization has not been helped by the rising scepticism among the European electorate about the need for more EU integration. Soon the EU’s 28 member states will be reduced to 27 because of the United Kingdom’s vote, in June 2016, to leave the Union altogether.

	The continued fragmentation of the EU medicines market was a prominent issue at the annual regulatory affairs conference held in London in late January 2017 by the Medicines for Europe, previously the European Generic and Biosimilar medicines Association (EGA). The association issued a report (1) in 2015 with proposals for increasing regulatory efficiency in the EU to help bring more generic medicines to European patients more quickly. Among its suggestions was a simplification of the EU’s regulatory system by removing duplication and creating a better balance between regulatory objectives and the administrative burden on pharmaceutical companies. It also urged better use of regulatory resources, quicker and more predictable outcomes of regulatory assessments, and more flexibility.

	“Over the past year there has been a lot of small improvements, but they have mostly been tiny,” Caroline Kleinjan, chair of Medicines for Europe’s regulatory and scientific affairs committee, told 

	“Now we’re looking for some big steps forward. These [steps] may not be made this year but perhaps we’ll make some progress towards achieving them.”

	Some major advances in pharmaceuticals regulations would have to be gained through new EU legislation, which EU leaders tend to want to avoid in the current political climate. “A lot can be done within existing regulations,” said Andrzej Rys, health systems, medical products and innovation director, directorate for health and food safety, European Commission, at the meeting.

	In the face of claims by some conference participants that a few member states were taking as long as two years to grant marketing or other approvals for products, regulatory officials argued that much progress had been made in reducing such delays. “Only two states have been holding back approvals that long,” said Peter Bachmann, chair of the Co-ordination Group for Mutual Recognition and Decentralized Procedures (CMDh). “It could have been far worse,” he added.

	However, in a number of emerging areas of importance in pharmaceuticals--such as pharmacovigilance, serialization of medicine packs, and quality controls in bioequivalence testing--there are pieces of legislation that have not yet been fully implemented or guidelines that have yet to be finalized. The prospect is of more new rules coming into effect, which could be enforced differently by individual member states.

	The pharmaceutical industry in Europe is watching carefully the activities of the Regulatory Optimization Group (ROG), which was founded in 2016 by the Heads of Medicines Agencies (HMA), representing the leaders of the national agencies running the EU’s decentralized system for the approval and control of medicines. The CMDh is run through the HMA. The objectives of the new organization, consisting mainly of agency representatives, are to eliminate any unnecessary national requirements for the control of medicines, taking away legal obstacles, and above all, to establish IT technology platforms to meet legislative and operational needs of the EU’s network of medicines agencies.

	“A lot of hopes are being pinned on the creation of ROG,” said Kleinjan. “It will have to show us over the next few years how it is going to move things forward. If it doesn’t, the whole exercise is going to be difficult.”

	Hugo Hurts, executive director, Medicines Evaluation Board (MEB), Netherlands, commented that “we are hoping that the setting up of ROG will stimulate change once its members agree on what actions to take.”

	Some of the issues that the ROG appears to be wanting to tackle are among the current priorities of Medicines for Europe. Kleinjan told the conference that the organization wanted action on reducing duplication, removing national regulatory barriers, more integration of databases, and improvements in the EU-wide IT infrastructure for medicines.

	With variations to approved market authorization dossiers, some headway had been made in using, as a source of information on minor variations, a central database set up under the EU’s pharmacovigilance legislation on all medicines on the European market. Updated information on the database, run by the European Medicines Agency (EMA) responsible for the EU’s centralized licensing system, would be accepted by the regulators as equivalent to a notification for minor do-and-tell variations.

	Centralizing submission process for generic drugs

	There have also been moves toward the simplification of procedures for marketing and other approval applications by centralizing the submissions process for generic drugs and allowing EU-wide single assessments of active substances (SAAS). Work has started on phase one of the Common European Single Submission Portal (CESSP), which is due to be introduced in early 2018 based on a standardized data system for new marketing authorization and extension applications. Later phases will aim to standardize the content of the applications so that their datasets can be reused.

	“CESSP is an excellent example of how to bring things together,” Georg Neuwirther, head of IT, Austrian Medicines and Medical Devices Agency (AGES), told the conference. The SAAS project is being handled through the HMA working group on the Active Substance Master File (ASMF) with the objective that active substances would be assessed separately from finished medicines. “The substance standards have been almost finalized,” said Constant van Belkum, MEB deputy director.

	APIs are an example of one major area in which extensions of the regulatory obligations of pharmaceutical producers are adding to their administrative burdens. Progress in easing workloads by streamlining the procedures for API and other assessments is being offset by the extra requirements linked to new rules.

	Marketing authorization holders (MAHs) are now, for example, obliged to monitor more closely their API supply chains through to the production and distribution of starting materials and sites for testing products and processes. These extra responsibilities are resulting in more information having to be collected and included in marketing authorization applications and in more variation notifications and approvals and other product lifecycle requirements.

	Between 2010 and 2014, the average number of variations per marketing authorization increased by 45% to 2.9, Koen Nauwelaerts, quality and regulatory affairs manager, Medicines for Europe, told the meeting. “The addition of extra API sites to be monitored will increase the numbers of variations by two to three times to over 400,000,” he added. “This sort of increase is contrary to the EU’s objectives [on regulatory efficiencies].”

	The additional responsibilities with APIs have also been raising other problems for drug companies. One of these is the controversial issue of conflicts of interest stemming from the necessity for third-party audits to be carried out to check standards down the supply chain. MAHs organize audits of the API producers while the active substance manufacturers arrange the auditing of their starting material suppliers.

	Some regulators in Europe have decided that supplying APIs and their intermediates creates a commercial relationship with their purchasers and vice versa, which results in a conflict of interests when third-party audits are being carried out. Others have concluded that despite the commercial relationship, the auditing does not constitute a conflict of interests while others are taking a case-by-case approach. The pharmaceutical industry has urged the EU authorities to clarify the matter, but even that might not be enough.

	“The CMDh decided at one of its meetings that a business relationship does not in the case of audits constitute a conflict of interests,” Nauwelaerts told 

 at the conference. “Yet some agencies are not taking any notice of this decision and are continuing to claim that business relationships do amount to a conflict of interest with audits.”

	There have also been proposals that GMP-type standards should be applied to other areas of pharmaceuticals quality control such as the way good clinical practice (GCP) criteria are used in bioequivalence testing of generic drugs. This could result in another new set of stricter rules that will have to be complied with. Susana Almeida, co-chair of the bioequivalence working group at Medicines for Europe, pointed out to the conference that while the results of GMP inspections are published and compliance certificates issued, results of GCP inspections are not, nor are compliance certificates issued. Following breaches in recent years of data requirements for bioequivalence tests, hundreds of marketing authorizations in Europe have been suspended. But a large proportion of the authorizations were found to be inactive, she said.

	The discovery of rising numbers of violations of data integrity rules among API and other pharmaceutical producers has prompted several agencies, including EMA, the US Food and Drug Administration, and the World Health Organization, to issue guidelines on data standards. Ignacio Moreno, EU team leader for corporate quality audits at Apotex Inc., highlighted at the conference the difficulty of dealing with a lack of quality culture at pharmaceutical manufacturers, which usually is identified as the root cause of the problem. Quality culture was virtually impossible for inspectors or auditors to measure objectively while data on the subject was open to different interpretations.

	In an era of almost infinite amounts of data, the challenge for regulators and industry will be to find ways of ensuring the data are applied and also interpreted consistently.

	1. European Generic and Biosimilar Medicines Association (now called Medicines for Europe), Regulatory Efficiency Report 2015 (Brussels, 2015).

	When referring to this article, please cite it as S. Milmo, "EU Strives for Regulatory Efficiency,"

Efforts to harmonize the fragmented regulatory framework for pharmaceuticals in the European Union continue to be a challenge.

EU Strives for Regulatory Efficiency

	Early access schemes are bringing in a new regulatory procedure for commercialization of innovative drugs in Europe-both at the national and European Union levels. The EU’s European Medicines Agency (EMA) has given the biggest impetus to accelerated access with its decision in 2016 to press ahead, after the completion of a pilot project, with an adaptive pathway (AP) programme. However, the position of the development of processes for the production of the new drugs within early-access systems remains unclear, especially for biologics whose manufacture is expensive and complex. This is particularly the case for advanced therapy medicinal products (ATMPs)-somatic-cell and gene therapies and tissue-engineered medicines.

	The main focus of early access projects is on making medicines for unmet needs, such as rare diseases or conditions that have inadequate treatments on the market, available to patients faster than the normal approval timespan. Under AP, the new drugs are fast tracked through clinical trials to be given marketing authorization with the proviso that the approval will have to be confirmed by real-world data (RWD) once on the market-such as electronic health records, prescription databases, patient registries, claims databases, and patient surveys.

	The APs programme being adopted by EMA emphasizes the pre-planning of the evidence generation in support of the new medicines-from the preclinical to the post-authorization stages. This planning is done at an early point in drug development, not just by the regulators but with the participation of other stakeholders, such as patient organizations, healthcare professionals groups, and health technology assessment (HTA) organizations that recommends newly approved drugs for reimbursement.

	EMA, which is responsible for the EU’s centralized approval of medicines, stresses that the AP is not a new route to marketing authorization. Instead, it offers a new approach to product development and data gathering. Drugs going through the AP procedure will still be approved under existing early access regulations such as those for conditional authorization or compassionate use.

	EMA has concluded that a two-year pilot project completed in 2016 had shown that the AP system can be an effective means of bringing different stakeholders together so that they can plan a product’s development in a way that ensures all the evidence needed are obtained. This can be achieved by using real-world data and evidence to complement information from randomized clinical trials (RCTs).

	Although the use of APs is not suitable for all products, it is particularly appropriate for supporting the development of medicines in therapeutic areas where evidence generation is challenging, such as infectious diseases, Alzheimer’s disease, degenerative diseases, and rare cancers, according to EMA.

	The AP system is based on an iterative approach to drug development. As more evidence is accumulated and more is learned about the benefits of a medicines, the regulator will approve broader applications. “The medicine will first be authorized in a patient population that is likely to benefit most from the medicine,” explained an EMA spokesman to 

. “Then, additional evidence is gathered over time, which potentially results in changes to the marketing authorization-for example, through (process) variations-reflecting the expanded knowledge acquired.”

	Nonetheless, AP and national early-access schemes pose difficulties for companies dealing with the high cost of developing processes for making new biological and other advanced medicines. Companies are expected to provide the drugs free when participating in early access schemes, usually after a Phase III, or even a Phase II, clinical trial. But at this stage, they cannot be sure what reimbursement price the medicine will be given. Furthermore, with some ATMPs especially, all the GMP standards or even regulations for new medicine technologies are still not in place.

	“ATMPs can be seen as a type of products where an adaptive approach might be both beneficial and challenging,” the EMA spokesman commented. “In some cases, the acceleration of clinical development might be competing with the refinement of the data on chemistry, manufacturing, and controls (CMC).”

	In a report (1) issued in 2016 on its AP pilot project, EMA acknowledges that CMC evolves continuously before and after authorization. “In the context of the lifecycle approach, certain validation and/or upscaling/change activities may be agreed to be conducted post-marketing with the use of appropriate regulatory tools available-e.g., post-approval change management protocols,” says the report (1). “The acceleration of development time presents challenges in delivering a product of appropriate quality for the conduct of clinical studies and reliable supply to the patient,” it continues. “The product used for the clinical trial needs to be representative of the product that will be submitted for approval.”

	Many of these difficulties can be eased during the early stages of R&D when companies have the opportunity to discuss plans for a product’s development, including CMC, with the regulator and other stakeholders such as HTA agencies. “The impact of any manufacturing changes must be proactively explored,” EMA explains in the report. “This is particularly true for ATMPs, where initial development costs are high, and logistics complex. It is important to agree on a strategy that ensures that initial clinical data are not invalidated by subsequent manufacturing changes.”

	Having to work out the course of CMC development as early as the preclinical phase, however, could push up the production costs of an innovative medicine even further. Some companies have been deterred from entering the United Kingdom’s Early Access to Medicines Scheme (EAMS) because of financial uncertainties stemming from high production costs, according to a review (2) of the two-year-old scheme by PricewaterhouseCoopers (PwC), the London-based professional services company.

	The BioIndustry Association, London, representing UK biotechnology companies, has complained about the absence of public sector financial support for product development for projects like EAMS. “The lack of funding poses a barrier to many small biotech companies from engaging with (EAMS),” Steve Bates, BIA chief executive, told 

. “Other nations have funded early access schemes that allow companies to recover some of the costs of engagement.”

	Companies which are reluctant to enter early access projects, tend to be SMEs, which have to tread carefully with the development of drugs with high production costs. Only a small proportion of the 18 products selected to participate in the EMA’s AP pilot scheme came from SMEs with those progressing to the final stages of the pilot being developed predominantly by multinationals.

	Among the most problematical of new technologies for SMEs and start-ups created by universities and other academic research institutes are gene and cell therapies in which the development of production processes and logistics seems to be lagging behind the progress of the science. They are even proving to be difficult for multinational pharmaceutical manufacturers.

	At a London conference on ATMPs development in December 2016, jointly organized by EMA and the Brussels-based trade association European Biopharmaceutical Enterprises (EBE), Steven Howe, head of process research at of the Cell and Gene Therapy Platform of GlaxoSmithKline (GSK), Stevenage, UK, listed several production challenges just in 

 autologous gene therapies. These challenges include the scale-up and scale-out of vector production and 

 cell processing, the approach to comparability in production change management, and logistics and supply chain issues.

	A major dilemma facing the gene-therapy sector is whether to opt for centralized or decentralized models for the processing and transfer of cells to patients. A regional hub solution could involve not only manufacturing in hospitals but by the bedside of the patient.

	“Close collaboration between industry, academia, and regulatory agencies is needed to bring these transformational medicines to a wider patient population,” Howe said. For smaller players in gene and cell therapy and other advanced medicines, there is, on the other hand, greater hope of receiving state funding. Governments are willing to give research grants not necessarily with the objective of helping to provide treatment of unmet needs but to progress development of novel technologies in a new area of medicine.

	Several European countries are anxious to establish centres of excellence for gene and cell therapies in what is predicted to become a fast growing pharmaceutical sector. The UK now has 22 GMP-compliant manufacturing units for gene- and cell-therapy products, many of them in state-funded universities and National Health Service (NHS) facilities. In neighbouring Ireland, GE Health of the US is investing €150 million ($160 million) in an ATMP and biopharmaceuticals project in Cork with staff being trained with the help of the state-funded National Institute for Bioprocessing Research and Training (NIBRT), Dublin.

	What role AP and early access procedures will play in the scientific and commercial progress of new advanced technologies remains uncertain. There is a lot of scepticism about AP in Europe among healthcare professionals, patient groups, and academics whose worries include increased risks to patients, doubts about the quality of RWD, and whether drug companies will honour their obligations to provide it and the reversibility of marketing approvals.

	APs and other early access systems have a lot to prove-not only that they can work successfully on the regulatory front and can provide positive benefits to patients. They also have to win over a lot of doubters in key areas of healthcare.

Final report on the adaptive pathways pilot.

 EMA/276376/2016 (London, July 28, 2016).
	2. PricewaterhouseCoopers (PwC), 

The Early Access to Medicines Scheme (EAMS).  An independent review 

Early-access schemes aim to make medicines available to patients faster but the regulatory framework remains unclear especially for biologics that involve complex manufacturing.

Moving Forward with Adaptive Licensing

	Governments in Europe are increasingly looking to health technology assessment (HTA) organizations to help them gain a tighter grip on expenditure within the region’s predominantly state-funded healthcare services. As a result, the pharmaceutical industry is having to deal with a rising number of HTA bodies. Currently there are more than 50 national and regional HTA organizations in the 28-member states of the European Union and in non-EU states such as Norway and Switzerland. Their main task is to assess the clinical effectiveness of a new medicine in relation to similar products on the market so that an HTA can help in the fixing of the drug’s price and of the level of reimbursement at the national level. 

	A broadening scope of responsibilities 

	Many of the HTA organizations tend to have different assessment procedures and criteria for judging the added value of a product. Furthermore, a growing number of HTAs are moving beyond the clinical domain to investigate aspects such as cost-effectiveness, budget impacts, ethical and legal issues, and broader social and economic questions. This shift is bringing HTAs into what some drug producers would regard as borderline areas such as consideration of preclinical R&D costs, process development, and choice of formulations.

	With some new medicines, acquiring a positive HTA can be as big a challenge as gaining authorization from a regulatory agency. There can be gaps of several years between a drug being licensed in a country and being given the go-ahead for reimbursement within its healthcare system. There are widening disparities in patients’ access to new medicines across the EU due to delays in reimbursement decisions. To speed up assessments by minimizing unexpected complications during investigation procedures, HTA bodies have been allowed to join regulators in giving preliminary scientific advice early in the drug development process. The objective is that this HTA guidance should concentrate on issues relating to the planning and design of clinical trials so that they provide data relevant to requirements of a technology assessment. 

	Governments are under pressure, however, to encourage HTA bodies to broaden their expertise so that they can have an even greater influence on drug development beyond clinical trials particularly in areas such as cost effectiveness. But the pharmaceutical industry has made clear that this widening of responsibilities should not involve assessments of manufacturing processes and their costs.

	“At present, HTA bodies do not hold the knowledge and understanding to provide scientific advice in respect of production processes, in particular bio-manufacturing processes,” a spokesman for the European Federation of Pharmaceutical Industries and Associations (EFPIA) told 

. He pointed out that the London-based European Medicines Agency (EMA) and national licensing authorities have specialist knowledge of how production processes can affect the quality, safety, and efficacy of medicines. “We would consider this kind of expertise [in HTA bodies] as unnecessary to assess the clinical benefit of a new medical technology, including new medicines,” he continued. “It would be a superfluous duplication of expertise, processes, and assessments, if HTA bodies were to set out to develop expertise on production processes.”

	EFPIA and other representatives of research-based drug companies are also not keen about the idea of HTAs’ scope being extended to R&D costs when dealing with cost effectiveness and impacts on healthcare budgets. “R&D costs are [not] relevant in setting reimbursement levels,” says the EFPIA spokesman. “Including R&D costs [in assessments] is not only difficult practically, as R&D costs are not attributable to one single product or country, but are shared across multiple projects and multiple regions. It is also inefficient. Setting the reimbursement level in relation purely to the costs of development, including R&D, would mean rewarding inefficient research and production processes.”

	Cost effectiveness and access to medicines

	Nonetheless, HTA organizations are participating in discussions with drug companies about lowering their planned prices for new medicines by cutting costs, including process costs, to make the prices more acceptable. The United Kingdom’s National Institute for Health and Care Excellence (NICE), one of Europe’s largest and longest established assessment bodies responsible for HTAs in England, has been given the role by the British government of vetting new oncology drugs, whose reimbursements costs are covered by a Cancer Drugs Fund (CDF). Money available annually under the fund was recently increased by NHS England, part of the UK’s state-funded National Health Service (NHS), more than five-fold since 2010 to £340 million ($432 million) (1).

	To make the CDF drugs more quickly accessible to cancer patients after they are licensed, they are assessed by NICE during their development on the basis of quality-adjusted life years (QALYs) or how many years a treatment adds to a person’s life and the quality of those years. One QALY is equivalent to one year of perfect health so that if a patient’s state of health falls below that level, it is rated less than one QALY per year. 

	NICE has been setting a threshold of £20,000-30,000 per QALY when deciding whether a new drug is cost-effective and should be approved for widespread use, according to a study by York University’s Centre for Health Economics (2). But it has also been approving new technologies at more than £40,000 per QALY (2). 

	In October 2016, NICE jointly proposed with NHS England a tiered system of categorizing new medicines by their cost-effectiveness on the basis of QALYs (3). Medicines whose cost effectiveness ratio fell below £10,000 per QALY could be put through a “fast track” NICE assessment. Medicines based on highly specialized technologies, such as those for treatments of rare diseases, would be given an upper limit of £100,000 per QALY to qualify for an HTA. Drug companies have been having to lower their prices by cutting costs to bring their medicines within the QALY threshold. 

	NICE stresses that when calculating cost-effectiveness, it does not need to investigate production processes or overall R&D costs. “Consideration of cost effectiveness does not require consideration of R&D costs,” an NICE official told 

. “[Our assessments] are based on patient outcomes measured in QALY with cost effectiveness measured in cost/QALY. The evaluation of production processes is part of the role of the regulator and NICE does not need to consider this.”

	Drug pricing, R&D, and production costs

	However, the political momentum behind calls for closer examination of the relationship between drug prices and R&D costs as well as production costs has been gathering pace. The European Parliament’s environment, public health, and food safety committee (ENVI) has demanded greater transparency of research data and costs. “The cost of development and clinical trials is crucial in order to set fair prices,” noted Soledad Cabezon Ruiz, rapporteur of an ENVI report on EU options for improving access to medicines (4). “A fair price should cover the cost of the drug development and production, plus a margin of profit,” she added.

	Amidst the potential for greater use of personalized medicines resulting from the application of advanced technologies such as gene and cell therapies, production is likely to take up a higher proportion of some individual drugs costs. As a result, these new technologies could raise the profile of manufacturing costs, in particular when inconsistencies in production performance in the early stages of development can raise total R&D costs.

	The European Council, representing the EU member states governments, urged in 2015 the drawing up of central guidance and criteria on HTAs of personalized medicines. It also suggested that there should be more co-operation between HTA bodies in the assessment of the medicines (5).

	Over the past few years, HTA agencies have been joining together through a European network (EUnetHTA) to carry out joint assessments so that they can share expertise more effectively, particularly in areas where there is a shortage of specialist knowledge within assessment bodies. “Collaboration and knowledge-sharing amongst HTA bodies can contribute to increased expertise and more efficient HTA systems,” Ancel.la Santos, policy advisor at Health Action International (HAI), a Dutch-based NGO campaigning on medicines access issues, told 

	“Cooperation can be particularly relevant in the context of more complex technologies and therapies,” she explained. “Collaboration between HTA bodies should preserve high quality standards, result in the improvement of methodologies and assessments where needed, and take into account local country specificities.” 

	EUnetHTA launched in June, 2016 its third and biggest joint action program for the period 2016-2020 with the objective of carrying out, with the help of mainly EU funds of €20 million, 80 joint assessments or projects, compared to 20 under the previous program (6). In an impact assessment of cooperation activities in HTAs, the European Commission, warned that the latest joint program may be the last to be financed by the EU (6). 

	“The uptake of joint work at EU level (for use in) national decision-making processes has remained low, leading to duplication of work by national/regional HTA authorities,” said the commission’s study (6). “It is not rational to invest public funds into HTA co-operation at European level if the uptake of the work is not improved and the duplication of the efforts is not avoided.” The big difficulty is that the EU states cling on to their right to reach their own drug pricing and reimbursement decisions. This independence is undermining the benefits of HTA co-operation and holding back the broadening of the expertise in HTA bodies.

	1. NHS England, Appraisal and Funding of Cancer Drugs from July 2016 (including the new Cancer Drugs Fund), (London, July 2016).
	2. Centre for Health Economics, York University, Policy & Research Briefing. Pharmaceutical Pricing: Early Access, The Cancer Drugs Fund and the Role of NICE (York, March 2016).
	3. NICE and NHS England, Proposals for Changes to the Arrangements for Evaluating and Funding Drugs and Other Health Technologies Appraised through NICE’s Technology Appraisal and Highly Specialized Technologies Programme (London, October 2016).
	4. Committee on the Environment, Public Health and Food Safety (ENVI), European Parliament, EU Options for Improving Access to Medicines, Draft report 2016/2057 (INI) (Brussels, September 2016).
	5. Council of the European Union, Council Conclusions on Personalized Medicine for Patients (2015/C 421/03) (Brussels, December 2015).
	6. European Commission, Inception Impact Assessment, “Strengthening of the EU cooperation in Health Technology Assessment (HTA)” (Brussels, September 2016). 


	Vol. 29, No. 1
	January 2017
	Pages: 12-13

	When referring to this article, please cite it as S. Milmo, "The Evolving Role of HTA Bodies Sparks Scrutiny," 

How involved should HTA bodies be in assessing cost effectiveness and reimbursements?

The Evolving Role of HTA Bodies Sparks Scrutiny

Contract manufacturers in Europe are benefiting from the pharmaceutical industry’s acceleration of production reorganization. In an effort to streamline API and finished-product manufacturing, large multinational pharmaceutical players are closing redundant plants and, in many cases, selling facilities to growing contract manufacturers. The contractors, in turn, are establishing themselves as a new class of specialized producers of APIs and dosage-form drugs, working in close partnership with both big and small pharmaceutical companies.

"The pharmaceutical industry is increasingly outsourcing its API business to custom manufacturers in order to cut costs," says Wolfgang Schmitz, Chief Executive of Saltigo, the fine chemicals unit of Lanxess in Leverkusen (Germany). "We can win new customers as well as increase capacities for existing companies by offering innovative product mixes and the latest technologies, as well as ensuring high quality and safety standards."

Reasons for plant closures and divestments


 Among the main drivers behind plant closures and divestments by pharmaceutical companies is a hike in the number of drugs coming off patent. In the British Isles, for example, GlaxoSmithKline (GSK, UK) is closing capacity in England for its epilepsy drug Lamictal (lamotrigine) and herpes treatment Valtrex (valacyclovir), both of which have recently or are about to come off patent. In addition, there is a desire among global firms to have a stronger presence in the emerging markets of Asia, Latin America, and Eastern Europe.

"We’re number two worldwide with a 6% share of the global pharma market, but in the emerging markets of Brazil, Russia, India, and China (BRIC), we have only 1.4%," said David Jones, GSK’s Senior Vice President for human resources, global manufacturing and supply, at an early March press briefing. "We have to change the whole dynamics of our business. We’ll have to produce more outside Europe and North America where manufacturing is less expensive."

One-third of GSK’s 30,000-plus workforce operates out of the UK. In the second half of 2008, the company announced the closure of two plants in southeast England, affecting more than 1000 employees. The company’s expenditure on outsourcing of APIs, intermediates, finished products and packaging now amounts to 55% of the £3.6 billion ($5.1 billion) spent on manufacturing annually.

AstraZeneca (UK), the UK’s second largest pharmaceutical company behind GSK, is focusing on formulation and packaging after announcing in 2007 that it intends to increase outsourcing of its APIs.

"We will continue to do formulations and packaging because they are areas close to the patient," says a spokesperson for AstraZeneca, which in January revealed that by 2013, it would be cutting approximately 20% of its global workforce or 15,000 jobs, many of them in manufacturing. "In fact, in packaging in Europe, we are bringing some activities back in house as part of a regionalization process."


The company has forged close ties and even partnerships with several contract manufacturers across Europe. One of these is the fast-growing Recipharm (Switzerland), which now has nine plants in Europe, all of them purchased from pharmaceutical companies, four from AstraZeneca."We’ve been following the classic model of acquiring plants and then doing a contract manufacturing deal with the vendor for the existing output while using the facility to gain other business from elsewhere," explains Mark Quick, Recipharm’s Vice President of corporate development. "We see potential this year for acquisitions from our leveraged competitors in contract manufacturing because we have cash in the bank."

Recipharm is positioning itself as a full-service player able to satisfy the needs of pharmaceutical companies from development to commercialization. "We’re taking over plants from the large pharma companies in order to meet the requirement of smaller ones wanting help with the development and manufacture of their products," says Quick.

Contract manufacturer Hovione, a Portuguese-based API development and manufacturing specialist, has made one of its biggest expansion moves in recent years with the acquisition in November of Pfizer’s API plant for Lipitor (atorvastatin) at Loughbeg (Ireland). 

"Pfizer offered us an agreement for the supply of Lipitor APIs from the plant, but we declined it," says Guy Vilax, Hovione’s Chief Executive. "It’s a high quality facility, and we want it to be a centre for new API development and manufacture.

"I think it is clear that the pharma industry is under very severe pressure and that its operating model will have to change quite dramatically with the obvious trend being a desegregation of the three key elements of discovery, sales and marketing, and manufacture," he continues. "We’re now entering the era of the specialist pharmaceutical manufacturer who will be able to handle everything from clinical trial quantities to bulk production."

The best-placed contract manufacturers in Europe are likely to be those who are active in biopharmaceuticals, potentially the fastest growing segment for outsourcing and medicinal chemicals. Leading contract manufacturer Lonza (Switzerland) reported a 9% rise in exclusive synthesis and biopharmaceutical sales last year, but much of that growth came from the chemicals side. Converesly, during the year, the Swiss company clinched  long-term biological manufacturing deals with Novartis (Switzerland) and Israel’s Teva Pharmaceutical Industries. In the coming years, contract manufacturers will need to be able to offset growth in one business against a slowdown in the other.

Sean Milmo is a freelance science writer based in the UK.

As the pharma industry desperately seeks to cut costs and streamline production, a new breed of CMO is growing in Europe. Find out how today's CMO is capitalizing on pharma's plant closures and divestments.