Will Chemical Engineers Save Pharma?

April 10, 2009

From Chemical Engineering Progress, Girish Malhotra presents his prescription for the pharmaceutical industry----QbD, PAT and control all play a key role, and chemical engineers will make it happen. The ultimate goal will be entirely new business models for pharma. Mr Malhotra discusses a new "Open Lab" open source R&D initiative in India that involves Sun Microsystems.

From Chemical Engineering Progress, Girish Malhotra presents his prescription for the pharmaceutical industry----QbD, PAT and control all play a key role, and chemical engineers will make it happen. The ultimate goal will be entirely new business models for pharma. Mr Malhotra discusses a new "Open Lab" open source R&D initiative in India that involves Sun Microsystems.

Clearly, such initiatives may become more common in the future. Especially as large pharma companies sell or lease more of their R&D and manufacturing space.

To register for access to the actual article from Chemical Engineering Progress, click here.

For an extended excerpt, read on. Mr. Malhotra will be speaking on this subject soon, in a conference to be held in Canada. Click here for more information.

Rx for Pharma

Chemical engineers could hold the key
that helps pharmaceutical companies "”
facing pressure to control rising drug
prices and competition from generics "”
reduce their manufacturing costs.

By Girish Malhotra, P.E., Epcot International

The pharmaceutical industry faces a lack of new
drugs in the development pipeline and competition
from generics. Drug prices are perceived to be
high and the manufacturing methods used are lagging
compared to those in the specialty and fine chemical

This article discusses the state of the pharmaceutical
industry and offers suggestions for reducing the
cost of active pharmaceutical ingredients (APIs).
It may be useful to start with a brief explanation of
what constitutes a drug and how a drug is made. Drug
manufacturing begins with the production of the active
pharmaceutical ingredient (API). The API is then combined
with excipients to form a dose than can be administered
to patients.

An API is a specialty chemical that has disease curing
value. (Other drugs treat symptoms and facilitate
life. Those are excluded from this discussion, but the
general principles of process simplification and quality
apply to them as well.) Many APIs are toxic, because
they kill organisms that cause disease. They are taken in
small doses, usually 250 mg or less.

The production of consistent-quality APIs is paramount.
The drug's formulation must be such that, when
administered, the API is released to carry out its intended
purpose. Each dose must have precisely the same
amount of API, and must perform exactly the same
way every time. Thus, product quality control is essential.
To achieve this, the pharmaceutical industry has
relied primarily on a "quality by analysis" method of
quality control.

A report by the U.S. Food and Drug Administration
(FDA) gives a good overview of the state of manufacturing
in the pharmaceutical industry (1). It suggests that
the methods used today to manufacture drugs are antiquated,
and recommends that the industry adopt modern
technologies to move from quality by analysis (QBA) to
quality by design (QBD). Indeed, many companies are
now reviewing their methods and working to incorporate
QBD into their batch processes, which must follow the
FDA's current good manufacturing practices (cGMP)
guidelines. It should be noted that the FDA does not
mention continuous processing in those guidelines.

Rethinking the pharma business model
Pharmaceutical companies have done an excellent job
developing new drugs and producing both ethical and
generic medications to keep the world's population
healthy. They have supplied what was needed, and have
been instrumental in extending life. To meet the growing
demands for such medicines around the world (especially
the biggest market, the U.S.), generic-drug companies
from the U.S., European Union and elsewhere (e.g.,
India and China) have supplied generic drugs that are
priced lower than their ethical equivalents, although the
prices of most generics are only marginally less.

For many years, ethical-pharmaceutical companies
were able to maintain high profit margins, so there has
been very little incentive to control costs. Recently,
however, the new-drug pipeline has started to dry up.
And with drugs worth about $100 billion/yr coming off
patent in the next few years, the pharma landscape is
changing rapidly.

Ethical-pharma companies now face "competitive
destruction" (2). With revenue and profits declining,
they are scrambling and taking such steps as laying off
employees, outsourcing R&D, manufacturing and clinical
trials, etc. business practices that have not always
been resounding successes when they were tried by
chemicals, steel, auto, and other businesses.

Major ethical-pharmaceutical companies are continually
challenged to develop new blockbuster drugs. If they
are unable to do so, it might become necessary for them
to change their business model, from providing only
blockbuster drugs to creating a new business model for
both the ethical and generic markets.

Under this type of business model, companies with
the best and least-expensive manufacturing technology
could prevent or delay producers of generic drugs from
entering the market. To date, ethical-drug makers have
made minimal effort to block generic producers through
R&D and manufacturing innovation.

Another business model was recently announced by
the government of India: an innovative drug-discovery
program that combines global information-technology
(IT) firms (Sun Microsystems), researchers (The Royal
Society (U.K.), Imperial College London, Medicine Sans
Frontiers, etc.), pharmaceutical companies, and young
minds at India's scientific laboratories to invent drugs at
a fraction of the cost of a drug developed by a multi -
national corporation (3). This open-source drug-research
platform, similar to the Wikipedia model, is an interesting
concept. If successful, it would genericize and commoditize
pharmaceuticals, creating additional pressures
on pharmaceutical companies to reduce costs. One way
to do this is to develop and implement process and manufacturing
technology improvements, which will reduce
manufacturing and total business costs, as well as
improve product quality.

Massachusetts Institute of Technology professors Stan
Finkelstein and Peter Temin have proposed a unique
business model aimed at reducing costs (4). They suggest
splitting drug companies into two separate entities
one that conducts discovery and development, the other
to handle marketing and distribution and creating an
intermediary nonprofit drug-development agency.

The checks and balances inherent in this model could reduce
or eliminate expenditures on drugs that are only marginally
better than existing drugs, freeing funds that could
be spent to develop better manufacturing processes.
The current state of manufacturing technology
One might wonder why the pharma industry has not
done more to prevent the onslaught of generics. The
answer is simple: unlike the prices of most products,
drug (ethical and generic) prices are not set by competitive
market forces, but rather reflect the highest price we
are willing to pay to extend our life.

In addition, the drug pipeline was always full, and companies were making or
exceeding their profit margins from their new drugs.
There was no incentive to reduce costs.
Fortunately, even these antiquated methods produce
quality drugs. This is achieved by analyzing the intermediates
after every processing step, using exotic and cumbersome
analytical methods. This in-process analysis can
extend batch cycle times by days or weeks.
Long batch cycles affect the entire business process,
as warehouses and tanks are needed to store raw materials,
work-in-process goods, and finished products. These
delays are considered a cost of doing business and are
built into the drugs high prices. In the specialty and finechemicals
industry sectors, such profit-reducing delays
would be considered a waste of money.

The term ethical pharmaceutical has several different interpretations.
Historically, "ethical" has been used to describe drugs
that require a prescription, regardless of whether they were
generic or brand-name.
In 2007, scientists at Imperial College London described a
new model for what they called ethical pharmaceuticals.
They said that by slightly altering the molecular structure of
an existing drug, they could develop and market a much less
expensive alternative without infringing the original patent.
The use of the word ethical in this context has been criticized
by those who consider such patent circumvention to be an
unethical practice from an intellectual property point of view.
In this article, ethical refers to prescription drugs that are
under patent protection. Once a patent expires, the drug is
referred to as generic, even if it requires a prescription.
Within the phrase ethical-pharmaceutical company, the
adjective modifies pharmaceutical, and is not meant as a
comment on the manufacturer.
Reducing or eliminating expenditures
on drugs that are only marginally better
than existing drugs would free up funds
that could be spent to develop better
manufacturing processes.

Implementing improved manufacturing technologies
could have a major impact on batch cycle times and total
business processes. API costs could be reduced significantly
although under present pricing practices, it
remains to be seen whether the reduced API cost would
be passed on to the consumer.

To understand how chemical engineers and chemists
can improve manufacturing in the pharmaceutical
industry, it is necessary to understand the relationships
among the API price, the formulation cost, and the
selling price of a drug. Until major retail chains entered
the prescription-drug market in 2006, consumers would
pay the price asked by the pharmacy, which could
be $1 or more per tablet, for a tablet that costs pennies
to produce.

Consider the following example (the costs are real,
but the drug is not identified for confidentiality reasons).
An API is manufactured in a process with a yield of
65%. A formulator purchases this API at a net selling
price of about $11/kg, and produces 500-mg tablets,
which in turn are sold to a wholesaler/distributor for
about 2¢ each. Mass merchandisers are selling a 30-day
supply of the drug for $4, or about 13¢ per tablet. Each
organization in the supply chain is making a profit.
If the yield is improved to 90% and the API is still
sold at the $11/kg price, the manufacturer's profit margin
would increase significantly. Alternatively, if the
API savings are shared throughout the supply chain, the
wholesaler/distributor's price of the tablet could drop to
about 1.5¢.

Conversely, at lower API yields, drug prices would
have to be significantly higher in order to preserve profit
margins (and the major retailers would not be able to
sell a 30-day supply for $4).

Currently, API yields as low as 20% are not
uncommon, and these low yields have been considered
acceptable, even normal. There is significant opportunity
to improve API and formulation yield, and this is a
challenge that chemical engineers and chemists can help
solve. Improving yields could produce higher profits,
which could be plowed back into research on new drugs
and/or improving manufacturing technologies.

How can API costs be reduced?
API production is an area of the pharmaceutical
business where chemical engineers can play an important
I believe that to reduce batch cycle times and successfully
transition to continuous processing, we should:
1. Understand the reaction kinetics, and use this
information to minimize reaction times and maximize
2. Understand the physical and chemical properties of
raw materials and intermediates. Based on this information,
select and design the proper unit operations and
unit processes.
3. Implement the simplest methods to determine conversions
after critical process steps. Laboratory practices,
such as the use of chromato graphs, spectrometers
and similar instrumentation, should remain in the lab

Methods that are simple and quick and that will
reduce batch cycle time are needed.

It is critical that we improve the conversion yield of
every reaction and process step, starting with basic
chemistry and continuing through process development.
Table 1 illustrates the cumulative impact of poor conversions.
If a specialty chemical operation had a product
yield of 10.7%, it would be considered an economically
unviable process. However, in the pharmaceutical business,
if the product cures a disease and someone is willing
to pay the price, regardless of product yield, the
product is deemed viable. In fact, it could have annual
sales of $1 billion and be considered a blockbuster drug.
There are no prescribed solutions to achieve cost and
process improvements (6) they are process- and
chemistry-specific. Doing so requires a team of chemists
and chemical engineers to develop, design and commercialize
an optimum and economical process. The API
should be thought of as a specialty or fine chemical
rather than as a pharmaceutical ingredient. By combining
the principles of organic and physical chemistry, kinetics,
stoichiometry, and unit operations, with the creativity
and entrepreneurship of the chemist and chemical engineer,
it is possible to create an economical process.
For every reaction step, compare the actual reaction
stoichiometry to the theoretical. Any excess beyond the

theoretical stoichiometry results in side reactions and
byproducts that must be processed or treated as wastes.
Since most APIs are toxic, their discharge in the plant
effluent needs to be minimized (7). A green and sustainavble
process should be the goal.
Review of the reaction stoichiometry can also lead to
improved kinetics and, ultimately, a better process.
Evaluation of the kinetics allows temperature parameters
to be selected so that the reaction can be completed
safely in the least amount of time. Changing the order of
addition or manner in which the reactants are added may
improve the overall process. This may enable a batch
process to be converted into a continuous process.

Manufacturing a single API might involve multiple
solvents, each selected to optimize a single process step.
Although this facilitates the process in the short run, it
can have a negative impact on the overall process. Each
solvent must be recovered, which requires energy to be
expended. The use of multiple solvents also requires
multiple storage tanks and multiple recovery units, and
results in higher costs. Use of the same solvent throughout
the process can take advantage of economies of scale,
minimizing investment and lowering operating costs.

The use of process analytical technology (PAT) in the
manufacture of APIs has garnered much attention in
recent years (8, 9). PAT is defined by the FDA as a system
for designing, analyzing, and controlling manufacturing
through timely measurements (i.e., during processing)
of critical quality and performance attributes of
raw and in-process materials and processes, with the
goal of ensuring final product quality (10). As in the
specialty chemical business, a properly designed process
outfitted with commercially available process controllers
can deliver a quality product.

Room for improvement also exists in the formulation
of drugs. The application of standard unit operations,
such as size reduction, blending, compaction and filling,
can increase product uniformity. Technologies familiar
to chemical engineers that are used in other industries
can be adapted to pharmaceutical manufacturing to
further reduce costs.

The bottom line
Pharmaceutical companies should review the technologies
being practiced in the food, plastics, polymerization,
petrochemicals, steel, textiles, and other industries,
and incorporate the most suitable options into
the manufacture of pharmaceuticals. As globalization
continues to increase, the challenge is to develop and
implement methods that will improve manufacturing
while complying with necessary regulations and
maximizing profits. CEP

GIRISH MALHOTRA, P.E., is president of EPCOT International (29150 Bryce
Rd., Pepper Pike, OH 44124; Phone: (216) 292-0626; Fax: (216) 591-
0932; E-mail: [email protected]), an independent consulting
company. He has more than 40 years of experience in the areas of
manufacturing, technology, and process and business development,
and has worked in the specialty and fine chemicals, pharmaceuticals,
coatings and resins industry sectors. Malhotra earned his BS and MS
degrees in chemical engineering from H. B. Technological Institute and
Clarkson Univ., respectively, and is a registered professional engineer
in Ohio and Illinois. He is a member of AIChE, the Commercial
Development and Marketing Association (CDMA), and the Association
of Consulting Chemists and Chemical Engineers. His book, "Chemical
Process Simplification: Improving Productivity and Sustainability," is
scheduled to be published by Wiley in 2010.

Literature Cited
1. U.S. Food and Drug Administration, Innovation and
Continuous Improvement in Pharmaceutical Manufacturing:
Pharmaceutical CGMPs for the 21st Century, PAT Team and
Manufacturing Science Working Group,
manufSciWP.pdf (Sept. 29, 2004).
2. Greenspan, A., "The Age of Turbulence," Penguin Press, New
York, NY, p. 48 (2007).
3. Banerjee, S., and G. C. Prasad, Government to Rope in Young
Minds to Invent Cheaper Drugs, The Economic Times,
cheaper_drugs/articleshow/2635842.cms (Dec 20, 2007).
4. Finkelstein, S., and P. Temin, Reasonable Rx: Solving the
Drug Price Crisis, FT Press, Upper Saddle River, NJ (2008).
5. Malhotra, G., API Manufacture Simplification and PAT,"
Pharmaceutical Processing, pp. 24-27 (Nov. 2005).
6. Malhotra, G., QBD: Myth or Reality?, Pharmaceutical
Processing, pp. 10-16 (Feb. 2007).
7 Malhotra, G., Pharmaceuticals, Their Manufacturing Methods,
Ecotoxicology, and Human Life Relationship, Pharmaceutical
Processing, pp. 18-23 (Nov. 2007).
8. Lange, A. J., Guarding Against PAT Hype, Process Analytical
Technology, pp. 18-20 (May/June 2005).
9. McMahon, T., What's Up With PAT?,Chem. Eng. Progress,
104 (6), p. 31 (June 2008).
10. U.S. Food and Drug Administration, Process Analytical
Technology (PAT) Initiative,FDA Office of Pharmaceutical
Science (OPS), www.fda.gov/cder/ops/pat.htm.

About the Author

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