 A revolution started about a dozen years ago in the federal government and is spreading to state, local, and commercial purchasing organizations. This revolution is about turning procurement efforts into a sustainable cash-flow-generating stimulus machine by extending available resources to get more spend under management, competitively bid spend more often, and take advantage of market dynamics that create marginal pricing opportunities. It is a change in thinking that drives maximum efficiency, maximum savings, and creates a truly holistic procurement management system that goes well beyond the 50% to 80% control that most organizations have. 

Many leading companies and organizations have worked hard during the past several years to become lean, agile, and flexible. Among other initiatives, they have taken a close look at support function staffing (including procurement) and have downsized, right-sized, outsourced, and off-shored with the net effect resulting in an environment where employees are having to do more with less resources or more without more resources. Another set of companies and organizations have taken a different path, and, as it relates to purchasing goods and services, have never upgraded the effort nor staffed their procurement organizations appropriately.  In either case, the net outcome has been one where real and significant savings have been left on the table because there were not enough resources or not enough skilled resources available to competitively bid a maximum amount of the company’s or organization’s spend for goods and services.

With the remaining resources, highly skilled organizations take a position of focusing on ensuring that crucial goods and services are protected by contracts and rebid every one to five years. These companies leave the smaller spends to sort themselves out with the help of dozens or even hundreds of business end-users following procurement policy to engage suppliers and hope for the best.  The companies that have less skilled purchasing departments continue to focus on transactional buying with little professional oversight. In both cases, organizations are paying more than they need to pay and also are putting their companies at risk by not formally vetting many of the suppliers they are using.

In the effort to cut costs, many companies in the pharmaceutical industry and other industries have purposely taken an approach that reduces cost by cutting infrastructure, including significant reductions in full-time employees. Although much of this cutting is needed and laudable, there are many examples where cuts have been equally applied to all internal functions (e.g., 15% for all support staff).  Although this approach fixes one part of the business (i.e., procurement labor costs), it has a negative impact on the organization as a whole.  Procurement is one of the few functions that can have a direct and ongoing impact on the bottom line and should be staffed or supported appropriately for maximum savings delivery and overall risk mitigation.  

To offer an example of the value of procurement, take the case of a small but growing pharmaceutical company that had no real center-led procurement strategy or organization. When it came to purchasing indirect goods and services (i.e., all goods and services with the exception of direct materials to make products), senior management and administrative assistants became the purchasing experts, which resulted in little, if any, competitive processes being used, suppliers not properly being screened, and generally creating unnecessary cost and risk for the organization. Poor procurement practice was evident when buying contract research organization services; marketing services; facility services; maintenance, repair, and operations; office supplies; benefits; and other services.After reviewing the company’s buying practices, limited policies, and several recent purchases, it was clear that the company was over-paying on average by a minimum of 20% for indirect goods and services. This organization spent approximately $100 million per year on indirect goods and services with revenues of approximately $250 million. It was recommended that the company make an investment in upgrading its procurement capability by naming a head of procurement to institute a center-led program for purchasing direct materials and indirect goods and services.  The investment would easily have a 50 times return during an 18- to 24-month period, according to conservative estimates. 

Approximately 10 years ago, federal agencies began using FedBid to buy common goods and basic services. FedBid is also available for commercial use and offers a highly efficient procurement solution for commodity products and basic services. There is never any cost to the participating sellers and no upfront cost to the buying organizations. A small transactional fee is added to the winning sellers’ bid and is paid by the buyer as part of the purchased price. After the buyer pays the seller, FedBid collects the transactional fee from the seller. Both parties win; the seller receives additonal revenue and the buyer nets average savings of > 10% (based on more than a decade of buying awards). If the product or service is not currently in the marketplace, the marketplace operator will at, no charge, find the right sellers and even train a company’s existing suppliers so they can compete on a regular basis in the marketplace. 

Today, the marketplace has more than 57,000 approved sellers. Buyers use a simple and efficient Internet-based user interface to enter the requirements of what they want to buy (i.e., a specification), and FedBid, being a fully-managed marketplace, takes full control of the sourcing process to ensure robust competition from multiple sellers, validate quality assurance of leading bids, and delivers final seller pricing options back to the buyer for award. The marketplace is fair, ethical, and transparent. It enables dynamic competition by providing the best market pricing available at the time the purchase is completed. FedBid is rapidly branching out into state and local governments, schools and universities, and commercial organizations.

Every organization has an opportunity to do a better job of buying indirect goods and services. Buying smart, saving money, and reducing risk by having better controls in place makes real economic sense, especially in today’s environment. 

 is senior vice-president of FedBid, and formerly senior advisor for A.T. Kearney Procurement and Analytic Solutions, 

Articles

Outsourcing

The procurement organization rethinks sourcing for maximum efficiency and results.

Creating a Holistic Procurement System

 The marriage of sustainability and innovation provides for a potent combination in new product demand. As in all product development, improving or creating new products to meet evolving customer needs is crucial for success. That function is further enhanced when it also satisfies sustainability concerns, a benefit for consumers as well as producers in potentially achieving improved costs and performance. 

A recent example is a pharmaceutical packaging solution, Shellpak Renew, developed by MeadWestvaco (MWW), which received the Best Sustainable Pharmaceutical Packaging award at CPhI Worldwide, which was held in Madrid in October. Shellpak® Renew is an environmentally friendly medication-adherence packaging solution. 

 Shellpak Renew was adapted based on customer research to deliver key patient improvements: decreased weight and size, including an environmentally friendly, curbside recyclable outer carton. Launched in April of this year, Shellpak Renew is part of MWV’s efforts to provide solutions for poor medication adherence. Shellpak Renew contains color-coded spine labels to help distinguish among drugs, easy-open, child-resistant push buttons, and an integrated calendar that helps patients track medication usage. Additionally, it provides a 40% weight-reduction compared with the company’s original Shellpak packaging and has an outer carton made of Natralock, an environmentally friendly paperboard that maximizes the use of recyclable materials and minimizes waste. 

 This year marked the introduction of the Best Sustainable Packaging award category of the CPhI Pharma Awards. The award recognizes companies that provide excellence in delivering a specific material, process or piece of equipment that enables pharmaceutical companies to achieve a more sustainable package or process. 

CSR and Sustainability Forum

MeadWestvaco is recognized at CPhI for its sustainable pharmaceutical packaging.

Advancing Sustainable Packaging

grants in India support programs in Jodhpur and Mumbai. Humana People to People will receive US $355,991 over two years to reduce diabetes-related morbidity and mortality and prevent the onset of Type 2 diabetes among those at increased risk for the disease through timely intervention and home-based diabetes care. United Way Mumbai Helpline will receive $205,362 over two years to use community-based lifestyle interventions for the prevention, early detection and management of type 2 diabetes among working adults and municipal and public school workers in Mumbai. 

 is a five-year, $115-million initiative launched in November 2010 by the Bristol-Myers Squibb Foundation to improve health outcomes of people living with type 2 diabetes in China, India and the United States by strengthening patient self-management education, community-based supportive services and broad-based community mobilization. 

 gave a gift of $12.4 million to the United Way, the the largest gift in the company's history. The donation represents the contributions of Lilly's US employees and retirees, plus a matching gift from the Lilly Foundation. In the aftermath of Hurricane Sandy, the Lilly Foundation also donate $200,000 to the American Red Cross in support of relief efforts in affected areas of the United States. Additionally, the foundation is contributing a $1 match for every dollar donated by Lilly employees to the American Red Cross or Salvation Army. 

 ranked top of the Index for Access to Medicines, which measures the performance of the top 20 pharmaceutical companies on their efforts to improve access to medicines and healthcare in developing countries. GSK  scored the highest in four categories, including general access to medicine management, R&D activity, capability advancement, and drug donation and philanthropy. The Index , the first of which was published in 2008, followed by a second in 2010,  provides an overall ranking of 20 pharmaceutical companies who are measured across a range of strategic and technical areas. It also analyzes industry trends in commitments, transparency, performance and innovation. GSK is also contributing $80,000 through the British Red Cross for relief efforts in the wider Caribbean region, specifically Haiti, Cuba, Jamaica and the Dominican Republic,  where Hurricane Sandy initially made landfall.  GSK is also matching dollar-for-dollar all employee contributions to the Red Cross and other relief organizations in the US.  The company is currently working through the process for an additional donation to support relief efforts in New Jersey. 

 through Merck for Mothers , a 10-year, $500-million initiative to reduce maternal mortality, has launched “Once Upon a Birth,” a campaign designed to raise awareness of maternal mortality in the United States. 

, Grantmakers In Aging (GIA), a national association of funders, today launched 

Community AGEnda: Improving America for All Age 

 and announced five grants of $150,000 each to local groups in Arizona, Florida, Georgia, Indiana, and the greater Kansas City area to accelerate their efforts to become “age-friendly.” 

 through its Sanofi Foundation for North America  is contributing $500,000 in cash, for disaster relief efforts to help assist the victims of Hurricane Sandy in New Jersey. The funds will be distributed to the Hurricane Sandy New Jersey Relief Fund, the Community Food Bank of New Jersey and the Children’s Health Fund for both immediate and long-term needs.  A special Hurricane Sandy Disaster Relief program sponsored by the Sanofi Foundation for North America will match dollar-for-dollar all donations between $25 and $2500 made by US employees directly to the American Red Cross. Sanofi US will continue its year-round matching gifts program through AmeriGives, which will match donations to 501(c)(3) organizations that meet program criteria.

 and the US President’s Emergency Plan for AIDS Relief (PEPFAR) announced a public-private partnership to improve the capacity of laboratorians and strengthen laboratory systems in African nations highly impacted by HIV/AIDS. Valued at $12 million over five years, the goal of the partnership is to build institutional capacity of regional and national partners by developing certification programs for laboratory technicians, strengthening pre-service curricula, and institutionalizing quality improvement in diagnostics services. 

A roundup of developments in corporate social responsibility (CSR) and sustainability from the bio/pharmaceutical industry, its suppliers, and other public and private organizations.

CSR and Sustainability in the News

One barometer of the health of the pharmaceutical/biopharmaceutical industry is new product development, and as 2012 comes to a close, how has the industry fared in this respect? In reviewing FDA approvals of new molecular entities (NMEs) and biologic license applications (BLAs) through Nov. 20, 2012, there are positive signs. FDA’s Center for Drug Evaluation and Research (CDER) approved 31 NMEs and BLAs through Nov. 20, 2012, on par with the 30 NME and BLAs that it approved in 2011. The number of approvals, however, is not a sole determinant of success. A further look into the drug approvals for 2012 shows which companies may be graduating on the top of this year’s class for new drug approvals. 

Of the 31 NMEs and BLAs approved by FDA’s CDER thus far in 2012, 26 NMEs and 5 BLAs were approved (see Table I). Leading the large pharmaceutical companies was Pfizer, with four NME approvals. Pfizer received FDA approval for Bosulif (bosutinib monohydrate), a kinase inhibitor for treating adult patients with chronic, accelerated, or blast-phase Ph-positive chronic myelogenous leukemia. Pfizer also received approval for Elelyso (taliglucerase alfa), a hydrolytic lysosomal glucocerebroside-specific enzyme indicated for long-term enzyme replacement therapy for adults with Type 1 Gaucher disease. Pfizer partnered with Protalix Biotherapeutics in developing Elelyso with the companies forming a collaboration in 2009. Pfizer gained approval for two more NMEs: Inlyta (axitinib), a kinase inhibitor for treating advanced renal cell carcinoma, and Xeljanz (tofacitinib), a Janus kinase inhibitor for treating adults with moderately to severely active rheumatoid arthritis with whom methotrexate did not work well (see 


Six companies—Astellas, Eisai, Forest Laboratories, Roche/Genentech, Sanofi, and Teva—each had two new drug approvals thus far in 2012 (see Table I). Astellas had two NMEs approved in 2012: Myrbetriq (mirabegron) and Xtandi (enzalutamide). Myrbetriq is a beta-3 adrenergic agonist for treating overactive bladder. Xtandi, developed with Medivation, is an androgen receptor inhibitor for treating patients with metastatic castration-resistant prostate cancer who have previously received docetaxel. 

 Eisai’s two NME approvals were for Belviq (lorcaserin hydrochloride) and Fycompa (perampanel). Belviq is a serotonin 2C receptor agonist indicated as an adjunct to a reduced-calorie diet and increased physical activity for chronic weight management. Belviq wasdeveloped by Arena Pharmaceuticals, a Zofingen, Switzerland-based company, for which it granted exclusive marketing and distribution rights to Eisai for most of North and South America. Fycompa is a noncompetitive AMPA glutamate receptor antagonist indicated as anadjunctive therapy for treating partial-onset seizures with or without secondarily generalized seizures in patients with epilepsy aged 12 years and older. 

 Forest Laboratories received approval for two NMEs in 2012: Linzess (linaclotide), developed with Ironwood Pharmaceuticals, and Tudorza Pressair (aclidinium bromide), developed with Almirall. Linzess is a guanylate cyclase-C agonist for treatingirritable bowel syndrome or chronic idiopathic constipation. Tudorza Pressair is an anticholinergic indicated as a long-term maintenance treatment of bronchospasm associated with chronic obstructive pulmonary disease.

 Roche/Genentech also had two new drug approvals, one for a NME, Erivedge (vismodegib), and one for a BLA, Perjeta (pertuzumab). Erivedge is a hedgehog pathway inhibitor for treating metastatic basal-cell carcinoma or locally advanced basal-cell carcinoma that has recurred following surgery or for pateints who are not candidates for surgery or radiation. Perjeta is a HER2/neu receptor antagonist indicated in combination with trastuzumab and docetaxel for treating patients with HER2-positive metastatic breast cancer.

 Sanofi received approval for its NME Aubagio (teriflunomide) and its BLA Zaltrap (ziv-aflibercept). Aubagio is a pyrimidine synthesis inhibitor for treating patients with relapsing forms of multiple sclerosis. Zaltrap is a recombinant fusion protein, which acts as a soluble receptor that binds to vascular endothelial growth factor-A (VEGF-A), VEGF-B, and placental growth factor and is used to treat metastatic colorectal cancer. Sanofi partnered with the biopharmaceutical company Regeneron Pharmaceuticals for Zaltrap. 

 The generic-drug company Teva had two approvals, one for its NME Synribo (omacetaxine mepesuccinate), a drug to treat leukemia, and a BLA for tbo-filgrastim, which was approved as an original BLA and not as a biosimiliar to Amgen’s Neupogen (filgrastim), which is a previously approved biologic. Tbo-filgrastim is a human granulocyte colony-stimulating factor produced by recombinant DNA technology for reducing neutropenia in patients with non-myeloid malignancies.


Approvals constitute a mixed bag for other large companies. Merck & Co. gained one new drug approval in 2012 for Zioptan (tafluprost ophthalmic solution), a prostaglandin analog indicated for reducing elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertension. Bayer received FDA approval for Stivarga (regorafenib), a kinase inhibitor for treating metastatic colorectal cancer. Eli Lilly╒s subsidiary Avid Radiopharmaceuticals received approval for the radioactive diagnostic agent, Amyvid (florbetapir F-18). Takeda Pharmaceutical and Affymax received approval for Omontys (peginesatide acetate), an erythropoiesis-stimulating agent to treat anemia.

Equally important in evaluating R&D productivity is seeing which companies did not receive FDA approval for NMEs or new biologics (excluding vaccines). Through Nov. 20, 2012, GlaxoSmithKline, Novartis, AstraZeneca, Bristol-Myers Squibb, and Abbott were among the large companies without a NME or original BLA FDA approval this year. As the industry waits for 2012 to come to a close, it has yet to be seen if their late-stage candidates under review will get the FDA nod this year. 

APIs

As 2012 comes to a close, Pfizer leads among Big Pharma companies for FDA approvals of new molecular entities and biologics.

The Class of 2012 for New Molecular Entities and Biologics

The end of a year provides reason to give pause and reflect on what transpired and what the future may hold. In performing that exercise with the pharmaceutical industry, certain key issues emerge. Overall macroeconomic conditions, the ongoing debate on US healthcare reform, and the underlying fundamentals shaping the industry, namely, growth in emerging markets, increased generic-drug incursion, and increased product development in biologics were key themes behind the major developments in 2012. 

The pharmaceutical industry, although less subject to macroeconomic cyclicality comparative to other industries, is influenced by overall economic conditions, particularly as they may relate to fiscal policy and healthcare spending and financing trends in the life-sciences sectors. The global economy is expected to make a hesitant and uneven recovery over the coming two years, according to a recent analysis by the Organization for Economic Cooperation and Development (OECD). OCED projects that growth in gross domestic product (GDP) in the United States at 2% in 2013 before rising to 2.8% in 2014. In Japan, GDP is expected to expand by 0.7% in 2013 and 0.8% in 2014. The euro area will remain in recession until early 2013, leading to a mild contraction in GDP of 0.1% next year, before growth picks up to 1.3% in 2014., according to GDP. 

As the macroeconomic picture unfolds, 2012 was significant for two events as it relates to US government policy on healthcare. The re-election of President Barack Obama in November 2012 and the US Supreme Court decision in July to uphold the Affordable Care Act ended uncertainty, at least in the short term, about the future of US healthcare reform, an issue still under consideration as US policymakers consider fiscal reform in addressing the so-called fiscal cliff.  For pharmaceutical and biotechnology companies, the US Supreme Court decision meant a continuation of FDA’s plan to implement the new biosimilars program under the healthcare law and a continuation of discounts to Medicare patients who reach the Part D doughnut hole, an important issues as it relates to reimbursement and spending for pharmaceuticals. 

Drilling down to the pharmaceutical industry

Although final projections are not in, 2012 may be regarded as a year of transition for the global pharmaceutical industry as it is poised to near or surpass the $1-trillion mark, led by growth in emerging markets. Tepid growth is expected for developed markets as the pharmaceutical majors continue to face increased generic-drug incursion. 

Following several years of slowing growth, the global market for medicines is expected to rebound from a recent low of 3–4% growth in 2012 to 5–7% growth in 2016, according to a recent analysis by the IMS Institute for Healthcare Informatics. Growth will primarily be from emerging markets as growth in established markets in the United States, Western Europe, and Japan remains weak comparative to historical levels. Overall, annual global spending on medicines will rise from $956 billion in 2011 to $1 trillion by 2013, to nearly $1.2 trillion in 2016, representing a compound annual growth rate (CAGR) of 3–6%. For purposes of the IMS analysis, spending is reported as ex-manufacturer prices and does not reflect off-invoice discounts and rebates and is converted from local currencies to US dollars. Absolute growth in global pharmaceutical spending between 2012–2016 will be between $220 billion and $250 billion, compared with $298 billion in the prior five years. 

Additionally, patent expiries, which peaked in 2012, as well as increased cost-containment actions by payers, will constrain branded-medicine spending growth through 2016, at 0–3%. Developed markets are expected to experience their lowest annual growth this year, at less than 1% or $3 billion, and then rebound to $18–20 billion in annual growth in the 2014–2016 period. Spending on medicines in developed nations will increase by a total of $60–70 billion from 2011 to 2016, following an increase of $104 billion between 2006 and 2011, according to IMS 

Growth in annual global spending is forecast to more than double by 2016 to as much as $70 billion, up from a $30-billion pace in 2012, driven by volume increases in what IMS terms the “pharmerging” markets and some uptick in spending in developed nations. The “pharmerging” markets are defined by IMS as counties with greater than $1 billion absolute spending growth of more than 2012–2016 and which have gross domestic product per capita of less than $25,000 at purchasing power parity. Using that criteria, China is classified as a Tier-1 country, and Brazil, Russia, and India as Tier-2 countries. Tier 3-countries are Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam. Health systems in pharmerging markets will nearly double their medicine spending in five years, according to IMS. Annual spending on medicines in the pharmerging markets will increase from $194 billion in 2011 to between $345 billion and $375 billion by 2016, or $91 in drug spending per capita, according to IMS. The increase will be driven by rising incomes, continued low cost for drugs, and government-sponsored programs designed to increase access to treatments. Generic drugs and other products, including over-the-counter medicines, diagnostics, and nontherapeutics, will account for approximately 83% of the increase. China’s pharmaceutical market is expected to reach $161 billion by 2016, Brazil’s $47 billion, India’s $29 billion, and Russia’s $27 billion. The Tier-3 pharmerging countries are expected to collectively reach $95 billion in pharmaceutical spending by 2016, according to IMS. 

The year 2012 was marked by the absence of major megadeals as the pharmaceutical majors continue to restructure, position in emerging markets, and make bolt-on acquisitions for portfolio enhancement. On the manufacturing front, companies are following a similar pattern by continuing restructuring activities and making investment in biologic-based manufacturing or other targeted manufacturing investment in emerging markets. 

. For Pfizer, perhaps the most important development thus far in 2012 is the revenue loss as a result of the US patent expiry for its top-selling product, the anticholesterol product, Lipitor (atorvastatin), which lost US patent exclusivity in November 2011. Other key developments for Pfizer were the sale of its nutrition business to Nestlé for $11.85 billion and the formation of new joint venture in China. In September 2012, Pfizer and the Chinese pharmaceutical company Zhejiang Hisun Pharmaceuticals launched Hisun-Pfizer Pharmaceuticals, a joint venture formed between the two companies to develop, manufacture, and commercialize off-patent pharmaceutical products in China and global market. 

On the manufacturing front, Sanofi is continuing with its Biolaunch project, which is designed to convert its chemical facilities to biotechnology-based production. It is on track to create a monoclonal antibody production facility at its site in Vitry-sur-Seine, France, and is investing in new biosynthetic processes as its sites in Saint-Aubin-Les Elbeuf and Vertaolaye, France. In May 2009, Sanofi began construction of a new EUR 300 million ($364 million) manufacturing center in Neuville-dur Saône, with the the goal to progressively transition existing chemical production to vaccine production beginning in 2013. 

In September 2012, Sanofi provided information on the adaptation of its upcoming R&D restructuring activities in France through 2015. The company plans to reorganize research activities over the next three years at its sites in France. The adaptations could result in the reduction of 900 positions in France by 2015. The company also plans to re-evaluate the economic performance of Sanofi Pasteur’s industrial units in accordance with competition in vaccine markets and streamline support functions to respond to the company’s diversification and address needs with regard to efficiency. 

In May 2012, Sanofi inaugurated a new assembling and packaging line for producing its prefilled insulin injection pen Lantus SoloStar at its facility in Beijing. The company announced a second phase $90-million project to install a cartridge aseptic product line at the facility. The facility has a designed capacity of 48 million units. Sanofi also began production of the enzyme-replacement therapy Fabrazyme (agalsidase beta) at its new facility in Framingham, Massachusetts, following approval of the facility by FDA and EMA in January 2012. In May 2012, EMA and FDA approved a second operation for fill–finish at Genyzme’s Waterford, Ireland, manufacturing plant, which nearly doubles capacity for fill–finish for Myozyme and Lumizyme (alglucosidase alfa) at the 4000-L scale. These developments follow a 2010 consent decree issued by FDA to Genzyme for manufacturing violations at its Allston, Massachusetts, facility and resulting requirements to transfer fill–finish production out of that facility. 

In March 2012, GlaxoSmithKline (GSK) announced plans to invest more than £500 million ($798 million) in the United Kingdom across its manufacturing sites to increase production of key active ingredients for its pharmaceutical products and vaccines. The company announced selection of Ulverston in Cumbria as the location for the first new GSK manufacturing facility to be built in the UK in almost 40 years. Investment also will be made at the company’s two manufacturing sites in Scotland at Montrose and Irvine. GSK’s announcement followed plans by the UK government to implement a “patent box” to encourage investment in R&D and related manufacturing in the UK by introducing a lower rate of corporation tax on profits generated from UK-owned intellectual property. On the acquisition front, GSK acquired the biopharmaceutical company Human Genome Sciences and increased its stake in the biopharmaceutical company Theravance 

.In October 2012, Novartis announced the construction of a new biotechnology facility in Singapore with an investment of more than $500 million. The new facility will focus on drug-substance manufacturing based on cell-culture technology and will be colocated with the pharmaceutical production site in Tuas, Singapore. Novartis used 2012 to improve quality-control issues at its consumer healthcare operations in Lincoln, Nebraska, and at three facilities of Sandoz. In December 2011, Novartis suspended production at is Lincoln manufacturing site in conjunction with a voluntary recall of all lots of select, bottle-packaged configurations of Excedrin, NoDoz, Bufferin, and Gas-X Prevention. In December 2011, FDA cited quality-control issues at three Sandoz manufacturing facilities in Broomfield, Colorado; Wilson, North Carolina; and Boucherville, Canada. Also, in a move to bolster the generic-drug business of Sandoz, Novartis acquired the specialty dermatology generic-drug company Fougera Pharmaceuticals for $1.5 billion. 

 In November 2012, Novartis received FDA approval for a seasonal influenza vaccine produced in cell culture. The vaccine, Flucelvax, is approved for use in individuals 18 years of age or older and is the first seasonal vaccine produced by this method to be approved in the US. The virus for the vaccine is produced under closed, sterile conditions in a well-characterized mammalian cell line rather than in chicken eggs. Cell-culture technology has been successfully used to manufacture other vaccines, including those distributed during the H1N1 pandemic, as well as vaccines for polio, rubella, and hepatitis. Novartis partnered with the US Department of Health and Human Services and the Biomedical Advanced Research and Development Authority to develop the cell-culture manufacturing technology, as well as to construct a manufacturing facility in Holly Springs, NC. Total public/private investment in the technology development and facility is more than $1 billion. Flucelvax will be produced in Holly Springs once the facility is ready for full-scale commercial production. 

 AstraZeneca began the second half of 2012 with a new interim CEO, Simon Lowth, formerly, chief financial officer, following the retirement of David Brennan as CEO. Pascal Soriot became the new CEO in October 2012. In February 2012, AstraZeneca announced new restructuring initiatives aimed at delivering annual cost-savings of $1.6 billion by the end of 2014. The restructuring will reduce headcount by 7300. The job cuts include 1350 positions in supply-chain and manufacturing operations. R&D reductions will affect 2200 positions. Part of these reductions result from a new R&D model for its neuroscience research that will employ a virtual model using staff from its R&D facilities in Boston and Cambridge, England. Also, in April, AstraZeneca agreed to acquire the biopharmaceutical company Ardea Biosciences for $1 billion (net of existing cash). 

 In May 2012, FDA approved Bristol-Myers Squibb’s biologics manufacturing facility in Devens, Massachusetts, for commercial production of the company’s arthritis drug Orencia (abatacept). The $750-million multiproduct bulk biologics manufacturing facility in Devens represents the largest capital project in the company's history. Also, Bristol-Myers Squibb acquired Inhibitex, a clinical-stage biopharmaceutical company in February 2012. The company’s lead compound is INX-189, a nucleotide polymerase inhibitor and antivral drug candidate in Phase II development. Also, in 2012, Bristol-Myers Squibb acquired the biopharmaceutical company Amylin Pharmaceuticals for a purchase price of $5.3 billion and an additional $1.7 billion for assuming Amylin’s net debt and a contractual payment obligation to Eli Lilly based on Amylin’s terminated agreement with Eli Lilly over the diabetes drug exenatide. Following the closing of the acquisition of Amylin by Bristol-Myers Squibb, AstraZeneca made a $3.2-billion payment to Bristol-Myers Squibb as part of the companies’ previously formed diabetes-drug collaboration. 

In May, Eli Lilly announced the opening of a new diabetes R&D center in Shanghai. The center employs 150 scientists and staff hired primarily from China. Eli Lilly also is constructing a new insulin production, packaging, and warehouse facility in Suzhou, China, which is expected to open later this year. In June 2012, Eli Lilly announced an expansion of their manufacturing capabilities in China through an expanded collaboration with Novast Laboratories, a generic and specialty pharmaceutical company based in Nantong, China. The collaboration will enhance Lilly’s efforts to build a portfolio of Lilly branded generic medicines in China, and eventually may be used to provide regional manufacturing support for Lilly’s pipeline of products in development

In 2012, Abbott has announced that AbbVie will be the name of the new, independent research-based pharmaceutical company. The naming of the new company is part of the process that began in October 2011, when Abbott announced it would separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. AbbVie will include Abbott’s current portfolio of proprietary pharmaceuticals and biologics. In November 2012, Abbott reported that its board of directors approved the separation of its research-based pharmaceuticals business

In October 2012, Merck & Co. announced plans to relocate the company’s global headquarters within the state of New Jersey with the transition expected to begin in 2014 and be completed by mid-2015. The company will close its current headquarters building in Whitehouse Station, New Jersey, where it has been since 1992, and move the headquarters less than 30 miles to the northeast to its existing property in Summit.  The Summit facility currently houses 1800 people in research, manufacturing, animal health, and consumer care operations. About 2000 employees and contractors currently working in Whitehouse Station will move to the Summit location or to other nearby facilities

 In June 2012, Roche announced that it will be closing its R&D site in Nutley, New Jersey, eliminating approximately 1000 positions. The action is being taken to streamline research activities and to reallocate resources to support programs in early clinical development. The company plans to complete the transfer of business operations in Nutley by the end of 2013. Roche’s Genentech division, based in South San Francisco, California, will not be affected by the reorganization. The site closure will be partially offset by the establishment of a Pharmaceuticals Translational Clinical Research Center on the east coast of the US, which is expected to employ approximately 240 people. The center will support US-based clinical trials and early development programs, support and maintain Roche interactions. 

To reflect the growing importance of generic-drugs in the pharmaceutical industry, two companies—Teva Pharmaceuticals and Mylan—were among the top 20 global pharmaceuticals in 2011, according to IMS. Seeking to build its position in the market, in November 2012, Watson Pharmaceuticals completed its EUR 4.25 billion ($5.4 billion) acquisition of the Actavis Group. The combination creates the world’s third largest generic-drug pharmaceutical company, with anticipated pro forma combined 2012 revenues in excess of $8 billion, according to Watson. In July 2012, Congress passed the Generic Drug User Fee Act (GDUFA) in an effort to get generic drugs to market in a timely manner, which authorizes the collection of user fees from generic-drug manufacturing companies for the first time in the generic-drug industry’s history.

Global Feature

As this year comes to a close, a look at the key events shaping the pharmaceutical and biopharmaceutical industry in 2012 and what may be on the horizon for 2013.

PTSM: Pharmaceutical Technology Sourcing and Management-12-05-2012

Creating a Holistic Procurement System

Advancing Sustainable Packaging

CSR and Sustainability in the News

The Class of 2012 for New Molecular Entities and Biologics

2012: The Year in Review