No Easy Answers for Drug Pricing

Improving manufacturing efficiencies offers most concrete possibilities for cost reduction

By Jerry Martin, pharmaceutical and life sciences consultant, PMMI

Drug pricing is a complex and controversial topic that does not have an easy or particularly straightforward remedy. The cost of medicine is a function of R&D and process development/validation costs, the cost of regulatory approval and manufacturing costs — with manufacturing costs accounting for the smallest portion of the burden.

Today the average estimated cost of discovery and development for a new molecular entity is $1.4 billion, a sharp increase from 2010, when that estimated cost was $830 million. A single clinical trial can cost well over $100 million, and a new drug can require multiple trials before approval.

Perhaps the most significant part of this equation for research-based drug manufacturers, however, is the cost of failure. When comparing total R&D spending to revenue of approved drugs per company, the cost per drug balloons to between $4-11 billion. Rather than assessing individual drug case studies, this estimate accounts for each failure a respective drug company sustained and the dollars spent on every drug that did not make it to market. With only one to two drugs per 10,000 new molecular entities ever making it to market, this consideration becomes significant.

Any macro changes to this system will require difficult choices and political impetus. Cost controls in other countries, for instance, deliver savings to the domestic patient population, but do so at the expense of a pharmaceutical company’s R&D budget. Thus, for new drugs, these companies are more dependent on research funded by approved drugs sold in the United States.

The other end of the cost equation — manufacturing — offers more concrete possibilities to reduce costs, and potentially pricing when those cost savings are passed on the patients, or to better subsidize R&D for new, better drugs. Suppliers of pharmaceutical machinery and equipment are constantly at work looking to improve drug manufacturing efficiency:

• In biotech, moving to single-use systems can reduce operational and utility costs by eliminating the need for cleaning and cleaning validation, sterilization and sterilization validation, and significantly reducing changeover time. Single-use also reduces costs associated with supply and shortage issues, as manufacturing drugs on a local level is made more tenable.

• The move from batch to continuous manufacturing with automated process controls also offers manufacturers the promise of a more efficient line by integrating processing with fewer steps and eliminating downtime for cleaning and re-setup.

• Processing and packaging equipment is becoming increasing modular and flexible, streamlining changeover of components and therefore reducing downtime.

• New software and sensors that monitor and make adjustments to equipment, known as the Industrial Internet of Things (IIoT), will likely become more widely adopted in drug manufacturing in the future and offer a host of benefits that can improve efficiencies and reduce costs.

In addition to employing their technical innovations, close collaboration with suppliers can help manufacturers mitigate process development, validation and regulatory costs. Even though the onus is on the drug manufacturer to assess the risk of its equipment from a regulatory perspective, suppliers are increasingly assisting customers in the validation of equipment by providing technical support, testing data and documentation for regulatory submissions.

Single-use suppliers, for instance, are now providing testing data on extractables and potential leachables to their customers. Providing this type of testing data is particularly valuable for the drug manufacturer, as it eliminates the cost of conducting the test themselves and, more importantly, reduces the time to market for the drug. Each day that FDA approval is delayed while testing data is gathered, represents a significant cost to the manufacturer. This type of collaboration is compounded when accounting for the fact that a supplier can share testing data with multiple customers, whereas previously, each of those companies would have undergone their own testing and incurred that cost separately.

For pharmaceutical manufacturers looking to improve operational efficiencies and strengthen relationships with suppliers, PACK EXPO East 2017 (Pennsylvania Convention Center, Philadelphia, Feb. 27-March 1) presents an opportunity to achieve both.

The three-day event, featuring 400 mostly East Coast exhibitors, will provide an opportunity to see the latest technologies in person as well as network with industry peers. The show will also include a conference program dedicate to healthcare. The Healthcare Packaging and Processing Conference will offer sessions and technology workshops that cover continuous manufacturing, machinery automations, logistics security, government regulations, serialization, innovations in biotech and pharmaceutical packaging, sustainability and more. Register online at www.packexpoeast.com.

ABOUT PMMI
PMMI, The Association for Packaging and Processing Technologies, represents the voice of more than 750 North American manufacturers and suppliers of equipment, components and materials as well as providers of related equipment and services to the packaging and processing industry. We work to advance a variety of industries by connecting consumer goods companies with manufacturing solutions through the world-class PACK EXPO portfolio of trade shows, leading trade media and a wide range of resources to empower our members. The PACK EXPO trade shows unite the world of processing and packaging to advance the industries they serve: PACK EXPO International, PACK EXPO Las Vegas, Healthcare Packaging EXPO, PACK EXPO East, EXPO PACK México, EXPO PACK Guadalajara and ProFood Tech, launching in April 2017. PMMI Media Group connects manufacturers to the latest solutions, trends and innovations in processing and packaging year-round through brands including Packaging World, Automation World, Healthcare Packaging, Contract Packaging, ProFood World and Packaging + Processing OEM. PMMI Business Drivers assist members in pursuing operational excellence through workforce development initiatives, deliver actionable business intelligence on economic, market and industry trends to support members' growth strategies, and actively connect the supply chain throughout the year. Learn more at PMMI.org and Packexpo.com and PMMIMediaGroup.com.

SOURCES
http://www.mckinsey.com/business-functions/operations/our-insights/outlook-on-pharma-operations
https://blogs.scientificamerican.com/the-curious-wavefunction/dont-mind-the-gap-manufacutring-costs-and-drug-prices/
http://www.forbes.com/sites/matthewherper/2012/02/10/the-truly-staggering-cost-of-inventing-new-drugs/#1e5069ff4477

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