As
we emerge into the New Year, it is as good a time as any to take stock of where
we are as an industry and what we might expect in the months to come. There can be no doubt that 2010 was a
watershed year. The mergers of Pfizer
and Wyeth and GSK and Schering-Plough have brought unprecedented contraction in
the U.S.
marketplace and dramatically changed the competitive landscape. Around the world the market is poised to see
if China
can make the leap to parity with its western competitors by complying with its
new, more rigorous cGMP regulatory guidance.
In the U.S.
we have seen consumer confidence in the FDA and the industry shaken. High profile quality issues with consumer,
brand and generic drugs have created doubt as to whether the FDA can truly
protect the public and whether industry can address the fundamental quality
issues that lead to such a fall from grace.
Industries
that experience such tremendous turmoil must evolve fast or learn to live with
a new level of heightened scrutiny. I
believe 2011 will be a pivotal year for several reasons. First, the organizations that made headlines
have taken their medicine. They have made it clear that the practices of the
past will not meet the market’s needs for the future and are spending the
resources and capital to try and directly address the issues.
So
what can we expect to see in 2011? I believe we will see several trends
continue or emerge:
1. Payer cost
containment pressure will continue
to challenge the industry. As long as
the global economy is stalled, the cost of healthcare and medicine will remain
in the news. Meeting the key enrollment
and transition dates for the Federal Affordable Health Care Act that must take
place in 2011 will serve to feed the chaos of the transformation. It is uncertain what the federal healthcare
program will mean, but it is not a stretch to predict it will be windfall for
the generic market sector as it tightens the screws on innovators and the brand
market. The curious portion of this
transformation will be its impact on innovation. Many industry analysts expect the drug
delivery market sector to grow significantly in 2011. What will payer cost
pressure and the complexity of a new federal health care program mean to
insurance reimbursement? This
uncertainty will continue to fuel the cost cutting focus the industry is
immersed in today. However, on the positive side, it will also spur a renewed
focus on business performance. Cost
cutting and reductions in force are only effective if they can be done without
hurting the overall business performance.
This, in many cases, requires some level of organizational reengineering
that will open up the opportunity for analyzing current and forecasted business
processes. Holistically, this will strengthen companies as they brace for the
ambiguity of the next five years.
Regardless, it is likely that we will see the same sort of M&A
strategy deployed across the country as firms license or buy product portfolios
that will strengthen their existing market position.
2. QbD will get traction
The pressure on the FDA and industry to approve and
manufacture safe and efficacious products will be at an all time high. Many
would argue that this has been in the works since the agency issued their
landmark guidance in 2004 but the adoption has been slow. The high profile quality issues of the last
two years will begin to exert pressure on both FDA and industry to move away
from their “business as usual” attitude.
I believe 2011 will see a greater emphasis in this direction because of
the FDA’s new TRACK program. Any
government agency that agrees to be monitored for performance is ripe for
action. Accountability has never been a
strong point within federal programs.
The TRACK program will either catalyze the agency to enforce change or
will become window dressing designed to create the illusion of change. Regardless, the risk exposure from not
embracing a structured design approach during the development lifecycle will
gradually escalate as a business performance issue. Whether the industry jumps
in with both feet now or phases the transformation, the direction is clear
where we need to go to be competitive.
3. Operational
Excellence in R&D
Operational
excellence has achieved traction on the shop floor over the last decade. Six Sigma â was able to orient organizations to the concepts of
measurement and accountability as they pertain to process variation. Lean
manufacturing provided the impetus for quick and near term efficiency
gain. R&D represents nearly 19
percent of the overall cost of drug development within the pharmaceutical
industry, with an annual CAGR of about 11 percent. Do we need to do better? It
is likely that R&D will become the new focus for catalyzing business
performance. Most multinational
companies have been focusing on consolidating development activities. Site closures were commonplace in 2010 and
the trend is likely to continue.
However, this alone will not improve the cost basis for R&D. Productivity must become the mantra for the
development organization. Because of
this, lean will become more of a focus for R&D with business performance
metrics creeping into the development lexicon.
The challenge will be to establish metrics that are meaningful in the
development world. Many large Pharma
companies that have begun this journey have made the mistake of trying to apply
conventional lean manufacturing principles to the development environment.
Philosophies such as the Toyota Product Development program, are more
appropriate. These focus on organizational empowerment, and most importantly,
knowledge management as key pillars in the House of Lean as it applies to
product development. Embracing these
paradigm shifts will be essential if the development process is to be effectively
managed and measured in terms of business performance.
4. Drug
delivery will supplant NME innovation
The search for blockbuster drugs will take a turn in
2011. Over the last four or five years,
we have seen large biotech expand to small molecule product development as a
hedge against the protracted development timelines and risks inherent to
biotherapies. And, during the same
period, we have seen large pharma pursue M&A strategies to expand into the
biotech markets with the intent of becoming biotherapeutic powerhouses. These initiatives will continue, but the next
great thrust will be in the field of drug delivery. Drug delivery has the potential to circumvent
many of the risks and hurdles of the aforementioned strategies. Drug delivery includes platform solutions,
adjunct therapies and new delivery principles such as nanotechnology that can
offer both improved safety profiles and performance for existing therapies,
opening the door for 505 (b)(2) strategies to the promise of maximum
bioavailability for new molecular entities (NME). Maximum bioavailability translates into more
toxicology head room and greater clinical dosing flexibility, both of which
reduce the risk of failure in NME development.
More importantly, many large pharma companies are being challenged with
the expiry of some blockbuster products.
Conventional patent extension strategies revolve around developing
controlled release or modified release delivery versions of the current
therapy. These alone have been
marginally successful in protecting revenues.
Solubility enhancement or drug delivery alternatives will allow large
pharma to leverage currently available toxicology, and rapidly bring patentable
new therapies to the marketplace, which represents greater potential for more
effective line extension strategy.
5. FDA enforcement will escalate
I believe the FDA is in a difficult position. Consumer confidence is at an all time low,
and the disconnect between major pharma and the agency has not been this large
for some time. The FDA must move to reinforce the new principles it has put
forth in its guidances starting with the key components of the Critical Path
Initiative of 2004. The timing could not
be worse for many manufacturers, particularly in the generics industry, which
has traditionally lagged behind the brand industry in terms of quality system
development and product development rigor.
I believe there will be more regulatory actions as the bar is raised in
terms of CAPA investigation and resolution, and continuous improvement and QMS
management of Deviation and Exception reporting. The ability to demonstrate process stability
and correlate that data with product performance and safety will become
critical to surviving a surveillance audit.
Conclusion
While there is no crystal ball that can be used to
prepare for the coming year, there are unmistakable trends within industry and
the marketplace that we can prepare for.
Ignoring them will either put us further behind as an industry in terms
of responding to competitive pressures, or encumber organizational ability to
realize its strategic initiatives. It
will be interesting to see how quickly the two mega-mergers Pfizer-Wyeth and
Schering-Plough-GSK play out in moving these two mega corporations toward
greater effectiveness and competitiveness. One thing is for sure, the
approaches to product development and manufacturing we have used for the last
decade will begin to wane under the pressures of the new marketplace and we
will begin to see a shift toward embracing the principles necessary to be
competitive in the global marketplace in the years to come.