The United States accounts for one third of the total global spend on medicines – reaching a staggering peak of $70 billion – and leads the surge in new-patented drugs, especially in areas such as oncology, diabetes and Hepatitis C. Driving this remarkable pharma economy is a healthcare system that spends over 50% more than any of it’s nearest rival countries, and is predicted to reach $1400 per capita spend on pharmaceuticals alone by 2018.

But the USA pharma market has a global significance, as its generous payment schemes and high rates of private healthcare ensure that big pharma has enough money to continue its R&D spend. Moreover, as well as funding the development of tomorrow’s breakthrough pharmaceuticals, the US through the FDA is also the leading source of global regulation and even inspections of manufacturing facilities all over the world. Without the US pharma economy much of the advances in global pharmaceuticals would be unachievable, and despite the regularly cited grumbles about pricing, the world owes a debt of thanks to the US market for improving safety and bringing about new treatments.

With such a well funded and research orientated pharma sector it is perhaps unsurprising that in 2015 there have been a raft of dynamic changes occurring in the USA. Most notably, we witnessed the increased adoption and implementation of the principals for quality

metrics, QbD and new manufacturing techniques amongst others. Outsourcing also continues to expand, with pharma players entering new markets and seeking the right distribution, ingredients, development and manufacturing partners. However, over the next year what we are likely to see is not only pharma companies looking to ‘license a product, but also to actually stimulate external innovation. Some pharma companies are sponsoring start-ups without expectation of further collaboration, while others are taking entire research groups out of academia and funding them in order to own the rights of their results.’ Matthew Hudes, US Managing Principle, Biotechnology Deloitte.

Perhaps the most significant impending developments for the USA, and therefore the international pharma market, concern the amendments to its trade agreements, (TTIP, TPP and TPA), generics fees (GDUFA), and the implications of serialization and the Affordable Healthcare Act.

Acquisitions have also continued to accelerate as manufacturing companies look to evolve their capabilities from traditional small molecule to large molecules and biologics. The result is that we are seeing a wave of small companies with specialist sterile development and manufacturing facilities being bought up across the region – any companies with FDA approved sites are proving especially desirable.

Generics production returning?
One major consequence of rising manufacturing costs in Asia, coupled with a desire for increased control over the drug supply line (from the FDA and general consumer) is that generics production may in part start to return to the USA. However, as costs remain high, what we are now seeing is a preference for ‘near-shore’ productions – e.g. in Mexico and Canada. In response, some of the larger and more established generics manufacturers are embarking on an acquisitional approach to the USA to gain a manufacturing site within the region. This is an especially profitable strategy for some of the vertically integrated companies that are already selling APIs into western markets – as they move to produce finished formulation generics.

“Costs have risen in China and India, as both economies have boomed and the price of labour has increased. [The United States] is an obvious choice for manufacturing as it is large, robust and resilient. The advantage of the US is the availability of infrastructure and high productivity levels, which is influencing the decisions of many companies to return to the United States for manufacturing. The overall attractiveness of the country as a manufacturing location is increasing, but it does not yet compare to lower-cost economies based on that factor alone.” Anil Andrade, Business Head, North America, Capsules Division, ACG North America LLC .

Accentuating the benefits that US based and larger international companies receive, is the fact that the controversial GDUFA (Generic Drug User Fee Amendment) fees are applied at a flat rate, irrespective of the volume of generics produced. As a result, we are seeing a consolidation in this market amongst medium sized companies, with the smaller players dropping out all together.

“Certainly it is a burden for smaller companies like Citron” said Vimal Kavuru, CEO at Citron Pharma, “[we] are being taxed at the same rate as larger companies.”

 Another factor is that with difficult to formulate compounds now emerging onto the market and, with the rise in biologics continuing, it is apparent that generics companies are diversifying their products lines and capabilities to match. So amongst the larger and intermediate firms, there is something of an arms race to get the right mix of technologies to manufacturer to get the more profitable future product lines. Furthermore, the buyer-side economics with around 85% of the distribution market controlled by three major players means that it is natural that manufacturers go through some consolidation to fight the inevitable pricing pressures that result.

Personalised care and biomarkers
A major area for growth identified by manufacturers in the USA was the use of increasing biomarkers and diagnostic tests in conjunction with new-patented drugs coming to market.

As we move towards personalised care and with new drug targets increasingly focused on smaller patient cohorts the use of biomarkers and diagnostic tests is a natural progression. “Investigators in clinical trials are able to use genome sequencing and biomarkers to determine each individual patient’s reaction and tolerance to a drug and thus determine the exact dosage needed to be most effective.” Bob Albanese, Vice President, Operations at Clinical Supplies Management Inc.

“The growth of personalised medicine and digitalised healthcare will influence the emergence of many trends. We are likely to see the development of a greater number of drugs with associated biomarkers, especially in oncology, immunology, CNS, paediatrics/prenatal, cardiovascular, and infectious diseases. This trend will likely be driven not only by pharmaceutical companies but also by hospitals and healthcare systems. In addition, we are likely to see an increased use of advanced diagnostics for screening, risk assessment, and therapeutic selection.” Dr. Feng Li, President, Alliance Pharmaceuticals

The effect of free trade agreements
The US Government is currently pushing ahead with negotiations on the Transatlantic Trade Investment Partnership (TTIP) and Trans-Pacific Partnership (TPP). Both free trade agreements are being negotiated in secret, but before their passage, Congress must pass the Trade Promotion Authority (TPA) act. This will give the President authority to negotiate these two trade agreements. Once TPA is approved, it will be much easier to have TTIP and TPP passed by Congress. The Senate has already approved TPA, with a House vote scheduled for June 12. The result of this is that pharma and chemical manufactures will be able to source ingredients from abroad without costly tariff charges – meaning domestic manufacturing is more competitive. However, this may also have negative implications for the generics industry, particularly in regards to biosimilars, where 12-year patents have been suggested.

Biologics impact and biosimilars
Over the next decade we will see the switching of the industry from 60:40 on small molecule to large molecule drugs to a 40:60 split. The consequences of this are particularly significant both for big pharma and manufacturers. In terms of pharma, we are seeing a concentration of R&D efforts on specialty products and increased scouring of the biotech community for technologies or early assets that they have been unable to develop themselves. For contract manufactures there is also urgency now to invest in high-potent facilities and sterile capabilities – particularly with many oncology products in the pipeline. However, not to miss an opportunity, many pharma companies are also seeing scope to either launch licensed generics and biosimilars. The latter is likely to be a key growth area, as with the complexities involved in approval, the original manufacturers are often best placed to produce a biosimilar. Ultimately, this means that we are going to see closer ties between big pharma and a smaller number of highly skilled contract manufacturer with whom they can potentially develop these products.

Acquisitions
“At present we are also seeing an increase in smaller acquisitions. This epitomises the scientific transformation of the biopharmaceutical industry as it moves towards more biotechnology. Larger molecule products, and the expertise required to design, develop and manufacture them, are fuelling the latest waves of acquisition.” Matthew Huddes, U.S. Managing principal for Deloitte’s biotechnology business segment. In fact the majority of companies surveyed with the US market (whether domestic or international in origin) have recently made acquisitions or plan to in the next year. Moreover, there is a clear trend amongst all manufacturers to look for niche and specialist technologies, especially those with IP protection, as it’s these technologies that could be the essential gateway to commercializing new biologics.

Angeliki Cooney, director of strategic planning at IMS Health echoed these sentiments: “Many larger companies are therefore buying small biotechs in order to acquire assets they have been unable to develop themselves. At present we are also seeing an increase in smaller acquisitions. This epitomises the scientific transformation of the biopharmaceutical industry as it moves towards a more biotechnology-oriented one. Larger molecule products, and the expertise required to design, develop and manufacture them, are fuelling the latest waves of acquisition.”

Quality,control and QbD
The FDA has long been seen globally as the benchmark regulatory agency and the driving force behind many of the industry’s greatest quality improvements - from cGMP to PAT, QbD and continuous processing. However, in recent years, it is clear that the burden of overseeing a globalised industry is taking its toll. Many analysts are concerned that despite the FDA opening many offices around the world (notably in India), it is spread too thin and should not try to police the World’s drug supply line. CPhI Annual Report expert, Prabir Basu has offered an inventive solution to this ongoing issue and believes the pharma industry itself should start to bear the costs of this regulatory burden – in a similar way to how GDUFA is speeding up ANDAs.

“I think if a company decides to source an ingredient, intermediate or a final product from a company outside the country, then they should submit a proposal for that to the FDA. FDA should train and support private certified inspectors, who would be assigned to inspect and certify to the FDA that these outsourcing partners are qualified to do so. FDA can review and spot check on these inspections.

These facilities abroad should be inspected at least once a year. The entire cost of this should be borne by the industry. There are a large number of qualified and well-trained people with experience available today. The FDA just needs to develop a program for training and certification. Pressure vessels, such as boilers, are inspected and certified by reputed inspection agencies, such as Lloyds of London. Why can’t we develop a similar system? Why do taxpayers have to pay for the cost of inspection?” Prabir Basu, President at Pharma Manufacturing.

In response to these concerns and some notable drug quality failures, the FDA established the Office for Pharmaceutical Quality (OPQ) in January 2015. Dr. Lawrence Yu, deputy director of the OPQ, explained: “In recent years, we have all seen a number of public health crises that are tied to issues of pharmaceutical quality, such as drug shortages and high rates of product recall. FDA strategies to meet these challenges are crystallised within the OPQ.”

The OPQ aims to work in a consistent and transparent manner and strives “to be a global benchmark for regulation of pharmaceutical quality,” according to Yu. It has implemented a system of team-based Integrated Quality Assessment (IQA), focusing on integrated review and communication by a group of specialists: “We draw in a concerted way from the entire scope of OPQ expertise and resources,” said Yu. The reorganization of the CDER, however, has come at a time when it already faces an unprecedented number of applications for Abbreviated New Drug Approvals (ANDAs) following the implementation of the Generic Drug User Fee Amendment in 2012. “The rigour of regulatory review and scientific development must be applied equally to both generic and innovator drugs,” added Yu.

The new standards that the FDA has set itself, including achieving inspection parity of domestic and foreign facilities by 2017, has had the knock-on effect of lengthening approval times. Not only is the OPQ ramping up its inspection levels, it is also introducing an entirely new model for the pharmaceutical industry in the United States. Its Vision for 21st Century Manufacturing has the ultimate aim of creating, in Yu’s words, “a maximally efficient, agile, flexible pharmaceutical manufacturing sector that reliably produces high quality drugs without extensive regulatory oversight.”