Tony Lakavage

Tony Lakavage, executive vice president and head of Global External Affairs, US Pharmacopeia (USP), discusses how IRA negotiations, Most Favored Nation pricing, US manufacturing push, and new FDA biosimilar guidance are reshaping the industry.

Top Pharmaceutical Industry Trends Impacting R&D and Manufacturing

The pharmaceutical industry is navigating one of its most disruptive periods in recent memory, according to Anthony Lakavage, executive vice president and head of Global External Affairs, US Pharmacopeia (USP), who sat down to discuss the sweeping pricing, regulatory, and manufacturing trends reshaping both the innovator and generic-drug sectors.

Lakavage identified two overlapping trends driving significant change. The first centers on drug pricing reform. The Inflation Reduction Act introduced mandatory government negotiations for high-cost medicines, and the Most Favored Nation (MFN) initiative has since prompted major pharmaceutical companies to voluntarily negotiate pricing agreements with the federal government. "I think the industry has never seen the kind of pricing disruption that it's seeing right now," Lakavage observed, noting that these pressures carry downstream consequences for R&D budgets, investment strategies, and manufacturing capacity.

The second major trend moves in a different direction: a strong policy push to reshore pharmaceutical manufacturing and research back to the US. Many companies have already announced significant investment commitments in response to administration encouragement.

Looking ahead, Lakavage sees these forces intensifying. IRA negotiations are set to continue expanding, and MFN programs through Centers for Medicare & Medicaid Services (CMS) Innovation Center (CMMI) are expected to shift from voluntary to mandatory participation.

On the regulatory front, Lakavage highlighted an important FDA draft guidance that would allow biosimilar medicines to be evaluated using analytical data rather than costly clinical efficacy trials. He noted that for biosimilars, any reduction in the cost and timeline of market entry is meaningful. "Anything that can reduce the cost of market entry and encourage faster, more efficient regulatory review is helpful," he said. "It changes the ROI [return on investment] calculation and hopefully should bring more biosimilar medicines to patients faster." His organization, USP, is actively developing standards to support this regulatory shift.

Editor's note: This transcript is a lightly edited rendering of the original audio/video content. It may contain errors, informal language, or omissions as spoken in the original recording.

Good afternoon. I'm Tony Lakavage, and I am the Executive Vice President and Head of Global External Affairs at USP. I think there were trends over the last year that could be looked at, some of them were mega trends as a matter of fact, that impact, the innovator industry in particular. But the downstream effects of some of this, especially the pricing trends that we're seeing and the pricing initiatives will have an effect on the generics industry as well, within a period of years. I think the industry has never seen the kind of pricing disruption that it's seeing right now. We had the Inflation Reduction Act and negotiated prices from that begin two years ago with the beginning of negotiations, and those have continued the selection of more and additional, high-cost medicines for mandatory negotiations. Now we also have MFN or the Most Favored Nation initiative where multiple, large pharma companies, innovators, have been negotiating agreements with the administration on the price of their medicines for federal programs. And those are major trends that have broad implications on the industry's R&D budgets and investments and manufacturing. The same time, there's this other mega trend where the administration is encouraging industry, both innovators and the generics industry, to invest more in both manufacturing and R&D in the United States. And we've seen a lot of companies make commitments for significant investments. Most of those commitments have been from innovators, but some have been from the generics industry as well. So taken together, it's been a very disruptive year in the pharmaceutical industry for sure, and I think looking forward, we can see these trends are continuing. They're kind of built in right now with IRA. MFN is going to have some additional initiatives that are part of the broader initiative with CMMI, the Centers for Medicaid and Medicare Innovation, initiating some additional programs. While right now MFN has been voluntary, those new programs are reportedly going to be mandatory, and then IRA will continue as well. Another really important trend, has been a regulatory trend where FDA issued a draft guidance that will change the way, biologic medicines or biosimilars are evaluated. And this is pretty significant because it's while it's not globally new, the US is joining the trend where regulators are relying on analytical data instead of costly clinical efficacy trials to demonstrate, in the case of biosimilars, biosimilarity. And that's important because the business model for biosimilars has been so broadly challenged with pricing challenges, formulary challenges, rebates, IP challenges, that anything that can reduce the cost of market entry and encourage faster, more efficient regulatory review is helpful. It changes the ROI calculation and hopefully should bring more biosimilar medicines to patients faster. So this is something that's really important. At USP, we're really excited about developing standards that can be supportive of this important new regulatory reform.

Videos

Tony Lakavage, executive vice president and head of Global External Affairs, US Pharmacopeia (USP), discusses drug supply chain vulnerabilities tied to China dependence, urging resilience through mapping, nearshoring, and manufacturing reform.

Inside USP's Strategy to Fortify Medicine Supply Chains

Tony Lakavage, executive vice president and head of Global External Affairs at the US Pharmacopeia (USP), outlines the key pressures facing the pharmaceutical supply chain with particular focus on geopolitical risk, generic-drug pricing, and the infrastructure USP is building to support long-term resilience.

Lakavage identified the potential weaponization of medicine supply chains as a central concern driving federal-level dialogue. "We're seeing a concern where the medicine supply chain could be used with trade tools as, almost weaponized," he said, "and that creates a vulnerability that I think we're not comfortable with from the perspective, both national security and, of course, patient care." He noted that calls to decouple supply chains from China are intensifying within current leadership.

To address these vulnerabilities, USP has developed the USP Resiliency Center, anchored by the USP Medicine Supply Map, which charts the upstream supply chain for all approved US medicines, including finished dose manufacturing, API sourcing, and key starting materials (KSMs). The mapping has revealed significant concentration risk, with many KSMs sourced predominantly from China, in some cases from a single supplier serving multiple medicines.

Lakavage described the mapping effort as a foundational step toward actionable solutions, including advanced manufacturing technology adoption, nearshoring to allied nations, and longer-term domestic onshoring. However, he stressed that economic realities complicate these goals. "The continual very low prices of critical generic medicines, sometimes even below the cost of production," he noted, undermine the investment case for reshoring production.

Lakavage also flagged ongoing tariff uncertainty as a complicating factor for manufacturers attempting to adjust their sourcing strategies, while suggesting that domestic sourcing offers a potential path toward simultaneously addressing tariff exposure and supply chain fragility.

Good afternoon. I'm Tony Lakavage, and I am the Executive Vice President and Head of Global External Affairs at USP. The other thing that we see especially for the generics industry is calls for decoupling the supply chain from China, in particular, to create more supply chain resilience. And we've seen over the past few years, supply chain has been a topic for many years and one of the key drivers of that has been in continuing and increasing drug shortages, so that the supply chain hasn't been able to withstand a whole range of disruptions. Some of them are natural disaster disruptions. But I think what we're seeing now, we've seen disruptions from the pandemic for sure, and now what we're seeing is a concern where the medicine supply chain could be used with trade tools as, almost weaponized. And that creates a vulnerability that I think we're not comfortable with from the perspective, both national security and of course patient care. So that's one where we see, especially for the generics industry, a lot of attention, a lot of dialogue at the federal government level in the Trump administration and at the congressional level. And, at USP, this has been an important focus of our work, where we're developing the USP Resiliency Center that includes a variety of programs to support resilience. The first of them is the USP Medicine Supply Map, which now maps the upstream supply chain for all approved US medicines. This is for generic and innovator medicines, but generic especially important here. And this includes where the finished dose is manufactured, where API is manufactured, and where the key starting materials come from. And while we saw concerns at each upward stage of the supply chain, now that we see KSMs, we see a lot of concern, where the concentration of key starting materials for a great deal of our medicines is concentrated in largely China in particular, but then some other nations. And in some cases, there'll be a single source for key starting materials for multiple medicines. The good news here is that for so many years, everybody talked about supply chain resilience being so difficult to attack because we couldn't understand it. Now we understand it. Every medicine has its own supply chain, every single one, so it's thousands of supply chains. And to build resilience, now we can see where the challenges are for each one. And there are levers that we can use to make the supply chain stronger. One of them is more advanced manufacturing technology, something that the FDA has been encouraging for decades now. The innovator industry has been embracing it, and the generics industry is beginning to embrace it. And we're working at USP to support that with standards and guidance to help the adoption of AMT. Then there's also opportunities to nearshore product developments and diversify it more broadly. And, that's one where talking with governments, that are friendly governments, about opportunities to expand their medicine supply manufacturing and ingredients. It's a great opportunity. It's an opportunity to increase the US's national security. It's also an economic development opportunity for those countries. And then of course onshoring, and that's a longer-term opportunity to build more resilience. It's also more costly, but more durable in the long term. So all of these things are key considerations, and in the USP Resiliency Center, that's why we created this, to look at all of this and help build long-term solutions. So those are some of the trends that we see. One other one I may add is that, in the generic space, we still see extreme pricing challenges. So as I just talked about, noted the imperative to build more resilience and onshore more production. The truth is, production is less costly in many, most other countries, and the economic model isn't there for the generics industry to make the kinds of investments needed. So this is a challenge that's gonna need to be addressed, is a continual very low prices of critical generic medicines, sometimes even below the cost of production. So hopefully in the next year this'll be something that gets more attention because it's essential to building a more resilient supply chain. The first thing that maybe I should note is that I think what we see is that the industry is looking for regulatory clarity, but tariff clarity too. So making adjustments to address tariffs has been a challenge because there's been a significant amount of uncertainty. But at the same time, there's tariff uncertainty, but there also is the imperative to create more resilience. So one way to address the tariff challenges are to, seek more or do more sourcing in the United States. It's also a way to make the supply chain more resilient. It's not always economically feasible though. So there's a fair amount of movement happening right now in terms of sourcing, and I think that is going to continue without a doubt.

Tony Lakavage

Articles