Profitability through Simplicity

Drugs for Infectious Diseases, Funding and Opportunity

2011-12-11T10:11:00.011-05:00

Spread of infectious diseases such as HIV/AIDS, malaria, schistosomiasis, and tuberculosis are cause of a global concern. Pharmaceutical companies have and continue to develop and market drugs that are effective for their cure. Patients in the developed countries have been able to use their respective healthcare systems for their needs. However, similar healthcare systems are not available in the developing and underdeveloped countries. The number of patients in these countries is very large. Patients are not able to afford these drugs (1). Governments in these countries do not have the funding to educate and distribute the necessary medicines to cure and control their spread.

Many governments [notably US], NGOs, organizations and foundations [prominent among them are Clinton Foundation and Bill and Malinda Gates Foundation] through financial contributions are making significant effort for the cure and control of these diseases. This is being done through education and distribution of drugs.

Prices of the new medicines are set at a level and specifically designed for patients in the developed countries that have healthcare programs. Many patients in the developing and economically stressed countries cannot afford these drugs. Governments and companies in India, China and other countries are using compulsory/voluntary licensing along with emergency declaration to manufacture some of these drugs to fulfill the needs. The prices of the drugs in these countries are significantly lower compared to the prices in the developed countries but still can be high for these economies.

Every effort is being made to make a dent in the spread of these diseases. President Clinton (2) recently suggested use of emergency criterion even to distribute these drugs in the developed countries. With the current global financial crunch, funding is strained but the needs persist. There could be a financial shortfall also.

Mileage of the existing funds can be extended is by improving the process yields and manufacturing technologies of the active pharmaceutical ingredients and their formulations. Yields of the existing chemistries can be improved through their review and review of their manufacturing practices. Chemical process yield of many active pharmaceutical ingredients is less than 66%. There are many products in this category. Low yields are cost improvement opportunities.

Efforts to improve Tenofovir (part of the AIDS drug cocktail) conversion yield (3) have had good results. Its yield was improved from 13% to 24%. This has resulted in lowering the yearly cost to less than $90.00 per year. However, there are significant opportunities if the yield can be doubled to 48% or higher. Better execution of the process chemistries can also reduce the costs. Savings will improve the mileage of the contributed monies.

Based on published information yearly need for Praziquantel (4) (for schistosomiasis) is around 500,000 pounds per year and about one million pounds for Tenofovir (5) (for AIDS). Multiple plants are producing these products. Since the cumulative quantities are being produced at many sites, value of economies of scale and better technology are diluted. A consolidation opportunity exists.

Consolidation will force best of the chemistries to be used at few plants that will have best of the manufacturing technologies. Production costs will come down. Profits for the companies that will be producing them can be better than they are today.

Improved manufacturing methods can enhance productivity and reduce process cycle time i.e. improve asset utilization. This can be achieved at no or minimal cost. Improved productivity can result in better manufacturing technologies through economies of scale. Process sustainability can also be improved. All or part of the cost reductions can be passed on and funding monies will extend their mileage. There could be left over philanthropic dollars that could be used for other worthy causes.

Thought of external process and technology review and continuous process improvements does not prevail in pharmaceuticals manufacturing. Every inefficiency cost is passed on. If one or two companies break out of the pack and they will change the landscape for the whole pharmaceutical industry. Supply chain issues could be addressed and resolved. That would be a win-win for all.

Girish Malhotra, PE
EPCOT International

1)Drug Prices: Food vs. Medicine- A Difficult Choice for Some
2)http://www.washingtonpost.com/national/health-science/obama-proposes-helping-more-people-get-access-to-aids-drugs/2011/12/01/gIQAxa5qHO_story.html
2)Ripin etal, Process Improvements for the Manufacture of Tenofovir Disoproxil Fumarate at Commercial Scale, Organic Process Research & Development, 2010, 1194-1201
3)WHO publication WHO/SCHIST0/89.102 Rev. l
4)Francoise Renaud-Théry and others, Utilization Patterns and Projected Demand of Antiretroviral Drugs in Low- and Middle-Income Countries AIDS Research and Treatment, Volume 2011, Article ID 749041, 8 pages doi:10.1155/2011/749041

Does the Pharmaceutical Industry Need A Steve Jobs?

2011-11-08T16:47:00.005-05:00

Little over a month ago Steve Jobs passed away and tributes that have been forthcoming are breathtaking. This is in spite of his early career shortcomings. Besides creating amazing products he was a “simplicity” genius.

He took an industry that was looked complex to all of us in a different direction. In sixties and seventies computers were complex monsters humming in air-conditioned basements. He just simplified them. There were many contributors who participated in his simplification process, but his vision changed how the world interacts and socializes. He mesmerized us with simplicity of complex products. He created a progressive revolution and we all waited for the next storm when he came on stage. We anticipated the next best thing. He always had one last thing, we waited for it and he delivered.

Apple products are simple and intuitively operated without a written manual. Yes there are people who do not like what he did but its very likely they own some of his products. Complexity to simplicity became Steve Jobs’ hallmark.

We need a similar simplicity revolution or “creative destruction” in pharmaceuticals. Actually pharmaceuticals need a double revolution that have to be carried out in parallel, first in API manufacturing and second in formulation of a drug dose.

Is a pharmaceutical manufacturing technology revolution possible?

Yes it is and it has to start in the laboratory where we react chemicals to produce the API (Active Pharmaceutical Ingredient) and mix it with inert excipients to create a dose. Many will say we have been successfully doing this for over 50 years and the processes work. Yes the processes do work but we go through many hoops, iterations and gyrations to produce quality product. We recognize these deviations and anomalies and explain them using different acronyms. We are enamored with them and discuss them at every opportunity. We overlook how these can be eliminated and what is possible. There are many proposals on how to get out of the rut but there is more talk than action. If there was action we would see results and instead of discussing various acronyms will be discussing the results.

If we step back, look and listen to the chemicals, we will realize that they individually and collectively are telling us how to create a simple process. We are ignoring their shouting and hand waving as we are influenced by what our text books tell us and what we are practicing in the laboratories. All of this is being manifested by stoichiometry and yield of the process.

Text books teach us general principles. We have to combine what is in the text books and what the chemicals are telling us along with our own creativity to develop a process that is simple and creates a product that is exactly same irrespective of who and where on the planet it is produced.

Our inability to react to what the chemicals are telling us has led to processes that are inefficient, unsustainable and complex. Since our customers have no choice for cheaper alternates we have passed our costs to them. Our comfort with our profits does not give us any incentive to simplify our processes.

I suspect and it is inevitable before long some “pharmaceutical nerd” will come along and challenge the pharmaceutical manufacturing technology status quo and will create pharma-iPod or iPad. It could be by someone from any of the developing countries who are on tail of the developed countries. It would not be surprising if it happens sooner rather than later.

Steve Jobs would say to us pharmaceuticalites “Stay Hungry. Stay Foolish".

Girish Malhotra, PE

EPCOT International

Drug shortages: Causes and Cures

2011-10-13T14:11:00.001-04:00

Lately we have been reading and hearing shortages of many drugs. As a matter of fact the US FDA on a routine basis publishes the list of drugs that are in short supply. Families and doctors of patients who need these drugs have a cause of concern. Hospitals, where some of these drugs are needed, have become creative to determine what possible approved substitutes could be used. This can be a challenge. It would be worth reviewing the cause and cure of the shortages.

Before we begin to discuss the reasons for the shortages, I would like to clarify one point. We cannot and do not have any reason to blame any of the global regulatory bodies for these shortage. Regulations are minimal and might be a challenge who do not follow them and/or do not have equipment that is suited for the process. If the companies cannot follow these minimal standards then their being in the business should be a cause of concern.

Since drugs are manufactured, the shortages can be created by any or combination of the following. There can be other reasons also but I believe the following generally are the most important.

Raw materials
Process equipment
Product quality
Manpower

The above individually and or collectively can and will cause product shortages in any business where products are manufactured and/or are assembled. The reasons outlined above are not new. Every business and engineering curriculum, where manufacturing processes are discussed, review the effect and cause of the above four.

Since pharmaceuticals are highly regulated to protect patients, regulatory bodied particularly the US FDA proposed good manufacturing practices "cGMP". They have become the global benchmark. Some may consider them to be difficult to incorporate in their manufacturing routine but they are minimalist. Science and engineering curriculum teach us methods that if applied properly will exceed the "cGMP" guidelines and will cost less than any one can imagine. We just have to do the right things in the first pass. We all know that second or additional passes to achieve quality will cost additional money and there are no assurances that each subsequent pass will produce quality product.

Some of the steps to avoid shortages are well known. Occasional review helps.

Raw materials:

To ensure raw material supply, developers have to qualify more than one supplier who can supply materials on a timely and as needed basis. In addition, the process developers have to make sure that the materials from each alternate supplier can be converted to quality product. Such an exercise can minimize availability and scheduling issues.

Process Equipment:

If the equipment used to produce a product is not designed for the process, product quality issues will come up.

Another cause of delays can be equipment availability. We need to recognize that due to low dosage, API/formulated drug volume per batch per plant are generally low compared to the volume of fine/specialty chemical products. Since the API/drugs due to their toxicity cure a disease, it is necessary that the equipment be very clean to prevent cross contamination. This, due to low production volume, can result in equipment availability and scheduling challenges individually and/or collectively. All these can lead to product shortages. There are ways to eliminate these situations and requires a revamp of manufacturing and business strategies.

Product Quality:

Product quality is dependent on process robustness. However, in pharmaceutical manufacturing especially in the manufacture of API, due to low dosage resulting in significantly low volume of API per batch per plant economies of scale i.e. the best processes are not possible unless an effort is made to have designated equipment for the product. With the current methodologies and manufacturing set up engrained in our thinking the problems of shortages will persist. This can only be eliminated if we overhaul of the process development and manufacturing strategies. However, due to high profitability such a shift might not be in the offing.

Manufacturing technologies used in the pharmaceutical manufacturing are borrowed from the chemical industry. Chemical industry believes in process of continuous improvement, lean manufacturing, six-sigma and quality first through competitive innovation. Pharma has not done so and needs to do that. There is significant discussion and all seems to be focused at formulation of drugs. Many might not agree but API manufacturing, heart of every drug, is generally not considered part of the pharmaceutical manufacturing. This adds to the problem.

Manpower:

Why and how manpower enters into the quadratic shortage equation as it should not? Reason it does is due to very infrequent runs of the same product. Since many different products are produced using the same equipment, there is constant juggling of materials and methods. All this can lead to errors i.e. potential product shortages. Constant manpower training can add to manufacturing delays and lack of it can cause “off-quality” product resulting in shortages.

Companies need to consider and invent methods that will eliminate shortages. This could be higher production volume per run or better technologies so that different products can be produced in the same equipment. Re-training of manpower if needed would be more organized.

One solution can not fit every product or company. Each company has to review its situation and has to take steps to minimize shortages. They can be minimized if we want to.

Girish Malhotra, PE

EPCOT International

Generics Fees: A Fantastic Opportunity

2011-08-17T21:59:00.001-04:00

US FDA has created a fantastic opportunity for incorporation of the best manufacturing technologies in the pharmaceutical hemisphere by charging fee for every generic company globally. The carrot of early approval if that happens will drive to have the best processes for API & formulation if the companies want to produce repeatable quality and safe drugs. Early approvals also will mean quicker profits compared to the current status. It would be a win-win.

Early approval will require that the processes meet the regulatory requirements on the first pass. QbD will have to be the mantra. This can happen only when the filing company has command of the process through best of the manufacturing technologies. It would be in companies’ interest to implement technologies to recover cost of fees. Having the best of the technologies will also mean the companies that cannot meet the regulatory standards after paying fees will have to review their long-term business strategies. Best will survive. Long-term this could result in consolidation. Lower costs could be in the horizon also.

Consolidation would have additional benefits of capitalizing on economies of scale i.e. better manufacturing technologies and processes will be the driver for the companies to stay in business. Better quality drugs will mean that many of the TLA’s (three letter acronyms) that are prevalent in pharma will fit in the puzzle and might not be needed. QbD and PAT will become way of life rather than perceived voodoo science as many think. Before the fact rather than after the fact will force competition.

I firmly believe adoption of fees will be the best happening for the generic pharmaceutical companies. Companies who believe in technology will survive. Congratulations and thank you to all individuals who have been involved in driving this discussion.

Girish Malhotra, PE

EPCOT International

Pharmaceutical Quality: Is it a Company or Regulatory Responsibility?

2011-08-01T11:02:00.003-04:00

A recent report ⁽¹⁾ by a committee of Board of Directors essentially gives Johnson & Johnson a clean bill of health for the following incidents at McNeil OTC. I have not reviewed other issues discussed in the report.

· Motrin dissolution

· B. Cepacia issue

· Musty odor

· “Super potent” Tylenol

Fortunately no one died but what makes the report interesting is how it lays the partial blame on FDA for some of its guidelines, exonerates J&J from its quality lapses on self-induced manpower shortages and does not discuss company’s inaptitude which is obvious to anyone who is experienced with manufacturing operations.

Whatever the reasons of the problems, problems were created at the company and not by the regulatory agencies. Johnson & Johnson is globally known for quality. It seems attaining profits and bonus targets took precedence over product quality.

My conjecture is that for the Motrin and Cepacia problems are raw material issues. If J&J's suppliers did not supply material to spec or supplied contaminated materials they should be held accountable and responsible. Other question that could be asked to J&J is that were proper raw material specifications in place.

Strangely the “musty odor” is still around J&J and I wonder who is being held accountable for it. May be “Mr. Product Recall” should be called to the rescue or whitewash.

Since details of dissolution issue are not elaborated, one can conjecture that the dissolution problems happened due to material that was used, was different from the specified material. Thorough analysis of off-spec material would have identified the problem and it should have been part of the report. Why this is omitted is an interesting question?

Cepacia problem occurred due to contaminated raw material from the supplier. This suggests that either the specifications were not tight or some error happened. It should have been caught at the supplier’s lab or J&J lab during quality check before the product got used. FDA guidelines suggest that the companies check their incoming raw materials. I guess the company did not follow the regulatory guidelines.

Production of “super potent” Tylenol is not only a failure of “good manufacturing practices (poor scale-up)” but also a failure of “good accounting/business practices” especially as it happened over a period of time. During the five-month period J&J produced 10 batches. Error of overcharge (between 11-24% over specifications) should have been caught as soon as they happened through material and cost variances, a standard practice of inventory and cost management controls. Since they were not caught immediately is suggestive of McNeil had issues with their operation and management systems. Since it took about five months, if it is true, to find out over charges it is suggestive that the whole Tylenol profit center needs a thorough scrutiny. It makes one wonder how many other things are being hid under the carpet?

The following excerpt from the report needlessly points J&J’s problems to FDA regulations. It should not have been included as it basically suggests that US FDA’s cGMP guidelines are vague. It is like making FDA partially responsible for whatever happened at J&J. Similar implication could be extended to other global regulatory bodies.

US FDA or any other regulatory body should not be blamed for J&J’s inaptitude. These regulatory bodies are not in the business of designing processes and methods for companies’ products and processes. It is the responsibility of the companies to ensure they have processes and methods that deliver quality products based on good science and engineering principles.

The FDA is responsible for enforcement of the FD&C Act, and has promulgated regulations that require drug product manufacturers to employ “systems that assure proper design, monitoring, and control of manufacturing processes and facilities.” The FDA’s cGMP regulations are intended to “assure the identity, strength, quality, and purity of drug products by requiring that manufacturers of medications adequately control manufacturing operations. This includes strong quality management systems, obtaining appropriate quality raw materials, establishing robust operating procedures, detecting and investigating product quality deviations, and maintaining reliable testing laboratories.” The FDA does not differentiate between the manufacture of OTC medications and prescription medications, treating both as drugs subject to the same cGMP requirements.

The FD&C Act and the FDA regulations are sparse on the specifics of what constitutes cGMP. The FD&C Act states only that manufacturers of drug products must employ cGMP. The FDA’s implementing regulations, in turn, are only marginally more specific -- requiring, for example, that laboratory facilities be “adequate,” that manufacturing facilities be “of suitable size, construction and location,” and that certain equipment be used “when appropriate.” The FDA asserts that this level of generality provides a flexible approach “to allow each manufacturer to decide individually how to best implement the necessary controls . . . .”

Report citing “sparse on specifics” is really questioning the intelligence of every chemist and chemical engineer. Experienced chemists and chemical engineers while working at regulatory bodies have suggested cGMP guidelines that will allow the processes to produce quality products. Process developers at companies have to understand the intent of the regulations and develop and commercialize processes that will deliver quality product. If the feedback to the report writers is that the regulations are vague even then it is the responsibility of the company to use processes that produce quality products.

Regulatory bodies are not in the business of suggesting how each process should be designed and operated. It is the responsibility of the personnel at each company to ensure that the produced drugs meet established quality standards. If the members of Board of Directors of a company are suggesting that the regulatory bodies should design and specify equipment, operations and methods then the report writers do not understand the intent of CFR 21 Parts 210 & 211. Is it not the responsibility of the every company (public, private or government held) to ensure that their products are safe for their customers?

In this report J&J’s independent board members (many question their independence) are suggesting that lack of manpower caused the problem. It is management’s responsibility to make sure that they are staffed properly and the company delivers quality products to its customers. If the management is not responsible then the Board of Directors should be held responsible and accountable for company's actions or they should make sure that the right people are managing the company. Reoccurrence of odor issue is suggestive of that company has not learnt from past experiences.

Lately reoccurring drug quality problems have become part of our life. This is because companies are using the least technologically advanced and economic manufacturing methods to produce their products. Having fancy equipment does not guarantee quality product.

To ensure product quality pharmaceutical companies are relying on repeated quality by analysis (QbA) using technologically advanced analytical methods. Even with such technological sophistication they have had issues that have resulted in product recalls. We are all familiar with Baxter’s Heparin issue. Chinese raw material suppliers had adulterated their product with an inert.

Not understanding and/or having the right process should be a cause of concern. Analytical methods will only tell the after the fact problem. These instruments do not fix problems. Unless companies have command on their process and its raw materials the problems will persist. Regulatory bodies should not be blamed.

When the reason of quality problem is being passed on or an excuse is given and no one gets prosecuted, it might be time to change the laws. Tiered heavy fines could be levied. These fines could be at different points of the distribution chain with the heaviest being if the product gets to the pharmacy shelf. Penalties could include monetary fines along with prosecution of progressive levels of management.

The report mentions lack of attention by certain non-quality control workers such as “engineering and operations”. With such implication one would expect detailed investigation. Why did the board not explore this area and detail this lack of attention. It is fascinating that the word “engineering” has been mentioned only ONCE in the whole report but they are blamed. If it was operations that did not pay attention, it is suggestive that proper procedures were not put in place by the company management.

All of the above suggests that J&J has significant opportunities with their total business systems. Above issues may be just the tip of the iceberg. J&J is relying on post analysis (QbA) methods to produce quality products. A complete audit of their manufacturing processes and methods will unearth many issues that can save J&J significant monies. QbD (Quality by Design) methods could be implemented in many cases thereby assuring high quality and improving profitability. This is necessary and should be done if J&J wants to prevent future embarrassment.

I wonder how James Collins would feel today about J&J if he had to re-write his “Good to Great” book. Would J&J be part of the book?

Girish Malhotra, PE
EPCOT International

(1) http://freepdfhosting.com/bc85fe20b1.pdf

Drug Prices: Food vs. Medicine - A Difficult Choice for Some

2011-06-16T16:06:00.002-04:00

In my recent trip to India, during my discussion with physicians about the various drugs that are used for HIV and tuberculosis, I was informed that many times patients (lower and mid economic strata) do not complete their medication course in spite of the low drug prices. This is due to family has to make a choice between food for the family and medicines for an individual. I had to explore.

I was able to get the average prices of some of the drugs in India. Comparing the price of the same drugs in US was a shock. Yes compared to India the prices of the selected drugs are higher by multiples of 2 or 3 or more.

All this begs a question why we have multiple magnitude differences when many of the active ingredients are coming from India and China. There has to be a rationale for the drug pricing in different countries. My conjecture is that the drugs are priced based on local country economics rather than on competition. Since humans want to extend their life, the drug prices are set at their highest level the customer can afford. Even with the prices being set at levels so that the customers can afford the drugs to treat their illness, many at times have to make choice between drugs and food needs. Such situations exist across the world. A question needs to be asked and it is: how and what can be done to make drugs more affordable while the companies retain their profits.

Based on economic principles competition drives to lower prices and best of the technologies drive to retain profits. However, it seems that the drivers that work in every business do not work in pharmaceuticals. Best of the manufacturing technology is not needed to deliver profits. Pricing delivers profits.

Since I have not seen many articles published about setting drug prices, one would assume that there is minimal to no discussion in the public domain. Arguments have been put for prices being high due to monies needed for new product development and need to meet different regulatory and pharmacopeia standards. If so the prices should equalize across the board in every country but that is not the case.

There are ways to lower costs. If we have one global pharmacopeia standard instead of multiple standards, as we currently have, better manufacturing technologies through higher production volume will bring the production costs down. Global politics, disagreements and having controls of standards have prevented a single global standard.

Other factors that have prevented lower drug prices are lack of “economies of scale” and less than optimum technologies to manufacture the active pharmaceutical ingredients and their formulations. This is due to low volume of products being made at many sites. Some would disagree with my hypothesis but we all know as the production volume per site increases, manufacturing technologies improve and costs come down.

Since the pharmaceutical dosage is in milligrams, the total volume of the active pharmaceutical ingredient needed to serve customer needs is low. Volume per site is further reduced when many different companies manufacture the API. Depending on the selling price, a billion dollar drug sale per year administered at 0.5 milligram level can have total API demand of less than 2,000 pounds per year. If this API is manufactured at multiple sites, economies of scale will not exist. Most likely the manufacturing process will be inefficient and asset utilization will be less than desirable. Due to these factors regulatory compliance needs pose additional challenges. Improving on these is not part of the pharmaceutical business model as the companies are able to pass inefficiency costs to the customer and are able to satisfy their stakeholders by meeting their profit objectives.

Some might argue that my views do not hold water. I would illustrate my point using a fluoroquinolone, (Levofloxacin), an antiretroviral (Tenofovir) and Isoniazid used for tuberculosis.

Levofloxacin is used to treat a number of infections including: respiratory tract infections, tuberculosis, cellulitis, urinary tract infections, prostatitis, anthrax, endocarditis, meningitis, pelvic inflammatory disease, and traveler's diarrhea ⁽¹⁾.

Levofloxacin (750 mg) tablet can be purchased in India for about Rs. 10 per tablet (about $0.22 at Rs. 45 per dollar exchange rate) whereas the average wholesale price for the same dose tablet in US can range between $22-24.00 per tablet. At a local drug store an uninsured person would pay about $1343.00 for 30 tablets i.e. about $45.00 per tablet.

There are about 20 companies (12 are in India) on the Drug Master File that can manufacture levofloxacin. If the global sales were about $ 2.0 billion per year, the total API demand would be less than 200,000 pounds per year. If all of the 20 companies were manufacturing the API, there is a minimum possibility of taking advantage of economies of scale. Processes will be inefficient at best.

If the selling price of the levofloxacin API were about $100.00 per kilo then at 80% formulation efficiency the cost of API in each 750 milligram tablet would be about 9.5 cents. If the factory cost of the formulated and packaged shelf ready tablet were to be another 9.5 cents per tablet, the factory cost of the formulator would be about $0.19 cents per tablet. Considering the sale price of about 22 cents per tablet in India suggests that my API price assumption is high. It also suggests that huge profits are being made in the by the companies who are producing and selling Levaquin in US, the brand name for Levofloxacin.

Another fluoroquinolone API meeting US Pharmacopeia standards is sold at about $50.00 per kilo. Same API meeting Indian pharmacopeia is sold at about $30.00 per kilo. This suggests that we need a global pharmacopeia standard to remove price differential and gain on economies of scale.

In a recent paper the process yield of Tenofovir, a HIV drug, was increased to 24% from about 13%. This is significant improvement but the yield is still low. With this yield costs associated with waste treatment and process inefficiency are being passed to consumers. If Tenofovir were a specialty chemical, at the 24% yield, it would never be a commercial product. However, since it is a profitable drug, costs become irrelevant. Prices have come down by four folds ⁽²⁾. Clinton and Gates Foundations have helped to lower costs and distribute these drugs. If the yield could be improved from 24% to 65% or more and can capitalize on economies of scale and the costs would reduce drastically. However, there is no interest in reducing costs further as making drugs more affordable could possibly eliminate foundation funding.

In India Isoniazid 300 mg tablet (for tuberculosis) wholesales for about 2.0 cents per tablet. Same drug in US wholesales for about 7.6 cents per tablet. Even at the low price many in India have to choose between food and medicine.

To retain profits companies are raising prices. Governments are slowly moving towards new drug and price controls ⁽³⁾. If this were to happen across the board, companies would be forced to change their business model. Since generics have come to play also, the new landscape will be interesting.

Everyone would agree that competition improves quality and lowers costs. I wonder would a “subsidy-less” world bring real competition and innovation to the pharmaceutical world. Would the drug prices be lowered? I fully recognize that the healthcare programs are necessary for the masses but does that mean we have to live in the topsy-turvy world of drug price differentials and the drug prices could stay at their highest levels.

We have to recognize that the health insurance programs subsidize medicine prices for the consumers. Thus in the countries that have such programs an average consumer does not know or understand much about price of medicines. Even the physicians do not know the sale price of the medicines they prescribe. If there were no insurance programs, we all will have to pay for the medicines from our pockets. This could force many to choose between food and medicines. Should we accept the scenario of having to choose between food for the whole family and medicine for an individual? If this were to happen it would be a challenge and the ensuing debate would be of a kind that we have never imagined.

Girish Malhotra, PE

EPCOT International

Information Challenges for Product, Process Development and Process Design: A Reality Check

2011-04-10T21:17:00.001-04:00

Recently in my efforts to assist a client to find suppliers of certain product, I took the easy route i.e. search using one of the search engines. The results were very interesting. Most of the product/s were available from Chinese and/or Indian companies. All of the sites had minimal to no information on any physical properties or performance data. So asking them for information would have been a waste of time, as they have none.

Since I knew the application and potential products, and I have been following various mergers, my search by companies was an easier route. To my chagrin, I experienced the following: At the majority of websites if one clicked on “Contact Us” more than 75% of the time you get a form that you have to fill in [practically give your life away] and wait till the time whenever you get a response. For multinationals one has to dig deeper to get to your country and hope there is contact telephone number so you can get a customer service telephone number. You might be lucky if you get the headquarters phone number on their website. Your project is on the path for a delayed schedule.

Since not many customer service numbers are available, you can call the main office and hope you will be able to talk with a live person who will give you a customer service number. You have to go through a debriefing before you get a number. Once you get the number then there is a 50% chance that you will have to leave a voice mail message and leave your number and hope you will get a call. This could be an unknown time. Your project got further delayed.

If you are lucky and are able talk with a live customer service person, they want to have detailed information about you [e.g. e-mail, phone number, state besides your and company name] before they can tell you whether they have a product that could come close to your needs. It seems they are more interested in filling a form indicating they talked with a person rather than exploring what a potential customer needs. They also want to know the annual quantity when I do not know whether their product will work for my application. Since we are dealing with chemicals, they want to know how the product would be used. They even have the audacity to ask the details of your product development. If you tell them it is under development and confidential your chances of success reduce dramatically. One has to make up some application scenario to go past the customer service person to talk with the right technical person. Since a chemical could be common for different applications, you can be bounced around. You may still end up leaving a voice mail message. If one does not answer the questions correctly there is a good possibility that information might not be provided.

Yes everyone is busy and we do not have time. Are we too busy nursing our blackberries and e-mails that we do not have time to talk with the potential customer who puts food on our table? The question becomes how can the companies facilitate information availability to chemists and chemical engineers so that they can develop an efficient, economical and sustainable process or product? ICIS (OPD) and Chemical Week directories used to be an excellent source of information but not anymore. Their size has shrunk. Many producer companies have disappeared. I contacted some companies from the list for the products I needed. Many did not respond and other had the product category listed but no actual products. On one hand we want people to be productive but on the other hand create many road bumps for them to complete a project on time.

I can almost bet none of “C, MD, E, V or G” levels at any chemical companies have toyed with their website as a customer and found the challenges customers [existing and potential] have to face to get meaningful information. I am sorry to say most of the companies in the developed countries fall in this category. Companies in the developing countries will give you MSDS that has been copied and has minimal information. By having minimal information they might be fulfilling a regulatory obligation. I wonder if regulatory overseers have ever looked at them to see if they comply.

What are the downside consequences of ones inability to get the information on a timely basis?

1. Delayed project.

2. Disgruntled customer who has wasted her/his productive time.

3. Since the information is not readily/easily available, there is an excellent possibility that the developed product would not work and has to be redone or the process is inefficient, uneconomical and unsustainable or extra effort is needed after the fact to optimize what was to be an excellent product or process. Unfortunately for active pharmaceutical ingredients and their formulations once the process is “blessed” there are no second chances.

4. My conjecture is that the lack of information is the leading cause of not having “Quality by Design” processes for the manufacture of pharmaceuticals.

I asked my colleagues/clients in the business do they encounter similar challenges. Each one of them chimed in and shared their sad stories. Less than 25% had good experiences. They rely on their network and on the sales person knocking on their door to share virtues of their offerings.

In the good old days - it seems like a zillion years ago - companies had brochures that were helpful and we had them stashed for reference. By the way they were an excellent source of physical property information. We all know physical and chemical structures do not change with age. Personal libraries were shared. At mega companies there were data books.

As chemical companies went through reconfiguration, the data availability started to become scarce. Internet brought the hope that it will reduce personal data banks and could easily access the information to design efficient, economic and sustainable process. Unfortunately that did not happen. It has become harder and a challenge to get minimal information. Material safety data sheets (MSDS) are provided as a substitute of technical data sheet. They do not even come close. Many at the companies agree that their websites are difficult to navigate and leave lot to be desired. I wonder why they do not ring the bell up the chain.

If you want real product information, one has to register and almost sign their life away except for their family jewels and hope they will remember the password for future use. All this is dependent on one receiving a confirmation mail that one has to click to be part of the database. There is 50% chance one might not get lucky in these areas. I am sure there is some rationale reason for this personal information but I can bet none of this information is reviewed let alone used to follow up potential customer satisfaction. I also wonder how this information is being mined. Is it being abused? If you are able to log in and download the information there is no guarantee that necessary technical data including physical properties would be available.

The bottom line: The above discussion is not complaining or a recitation of actual experiences but an identification of an opening and excellent opportunity for the companies to look at filling their half empty glass. It is very possible that in today’s unsecure world “legal beagles” might advise against easy sharing of information but every crook will find the information one way or the other. By building road bumps and road blocks companies are ever lowering productivity of their own employees and their customers where information is needed to design a product and/or process.

How can one proceed to make their company’s information more accessible to potential customers? First, the problem has to be recognized by “C, MD, E, V or G” levels in a company. Let them go incognito on their own website or a search engine to see what the reality of life looks like. It seems that in the name of protecting intellectual property we have lowered our productivity and creative thinking. They might also find out the navigational challenges their website creates. Maybe they might lead us to the rainbow? In addition, website are designed by designers to look pretty. They are but I wonder how much input they have from the actual users. A point to cogitate!

Girish Malhotra, PE

EPCOT International

P&G and Teva is a win-win and herculean challenge for many.

2011-04-04T08:24:00.001-04:00

Last Week P&G and Teva Pharmaceuticals started a relationship. This is new frontier that will be a challenge.

I have posted my views at the link http://www.glgroup.com/News/PG-and-Teva-is-a-win-win-and-herculean-challenge-for-many.-53164.html

It will be interesting to see how the playing field changes.

Girish Malhotra

Are patents a double-edged sword? Perspective Matters.

2011-02-08T07:37:00.000-05:00

Patents are filed to preserve intellectual property for the duration of the patent life. This is the fundamental right of every inventor as they protect their invention from competitors and gives them competitive advantage. Pharmaceuticals have relied on this right to preserve their inventions. These patents are a treasure trove for the competitors and folks who want to violate someone else’s intellectual property.

Fine/specialty chemicals and coatings are generally commodity products and relative to pharmaceuticals do not face many contentious patent battles. However, due to high profit margins, the patent game is very different for the pharmaceuticals.

Tradition has been that when filing patent for a new chemical molecule generally extensive information about different synthesis paths that have been explored and could be used to manufacture the new molecule are included in the patent. The intent is to block competitors from making the same chemical by the routes that have been used and suggested in the patent. Information disclosed in the patents is of significant benefit to the competitors and/or other inventors to create processes that are better than the ones created by the original inventor/s.

With the changing economic global landscape the World Trade Organization (WTO) membership has grown. Suddenly the global creative pool has expanded multifold. Creative minds in the developing countries have started to exploit the knowledge in the public domain. Internet has been a boon to their creativity and imagination. They are able to reduce their process development time as they judiciously use the knowledge that is easily available. They are also able to develop and create processes and chemistries that are simpler and cheaper than the original invention. Ten years ago all this was unthinkable.

Generics as well as brand companies are using different strategies to capitalize on such fetes. Knowledge is being effectively used to challenge pharmaceutical patents following Hatch-Waxman Para IV provisions. Patents from competitors are being used to prevent cost reduction of existing products. Generics have enjoyed significant benefits through “pay for delay” and other collaborations. It is well known that “pay for delay” is being used to delay generic entry i.e. lower costs for the consumer. I call the patents and contained information a double edged sword.

As the global pharmaceutical playing field changes, businesses have to address a question. Any company that has invented a new molecule to cure a disease will file a patent. It has to give a method of synthesis but does it have to give its alternate routes from literature. By giving minimum information it would make the literature search for others a challenge. Inventor company would have developed proprietary manufacturing process/s. They are company’s confidential information and can be protected through proper documentation. Point is why make things easy for competitors in this competitive world. I have relied on such confidentiality and been able to protect the synthesis methods and associated technologies.

Patent attorney’s would defend what has been the tradition. Business people have to decide what should be path forward while considering the advice of their patent counsel. My conjecture is that least shared is most protected and could prevent patent invalidation/challenges based on synthesis routes. Any strategy that challenges competitors is an advantage for me. Anyone can chime in with their opinion.

Girish Malhotra, PE
EPCOT International

Pharmaceutical Companies Can Innovate If They Want To

2010-10-15T17:07:00.012-04:00

Pharmaceutical companies including API (active pharmaceutical ingredient) manufacturers have an uphill battle to achieve manufacturing perfection that will deliver quality product without regulatory oversight. I believe that the industry has created this regulatory juggernaut due to its inability to produce consistent and repeatable quality products.

Recent case of Johnson and Johnson was a failure of manufacturing and financial controls that are the fundamentals of good business. There are other similar incidents where the products were contaminated. Due to such repeated occurrences, regulatory noose gets tighter. Since industry created the juggernaut, it can and has the ability to loosen the noose provided it “rights” its practices.

Since the drugs are for human consumption, the manufacturers have to be reined in to assure quality. This has led to the establishment of “do and don’t” guidelines i.e. analysis paralysis. Industry besides inventing new molecules is more focused on how to meet and comply with the guidelines and regulations rather than developing and commercializing processes that are based on “best of the best” physical and social sciences (chemistry, physics and economics) i.e. chemical engineering.

Brand companies have lived with speed to market. Since they can make their financial margins and generics will take over the business, their thinking has been to invent new molecules and not to invest in new and better manufacturing technologies for the products that are short lived in their stable.

There are other factors that inhibit pharmaceutical companies to have the “best of the best” manufacturing processes for the manufacture of drugs. They are:

1. Drug pricing is based on the highest price customer will pay. Since companies can achieve their financial goals, there is no economic incentive to improve manufacturing technologies.

2. Due to drug dosage, annual volume of the drug per plant per year can be very low.

3. Companies have relied on fitting the process in the existing equipment. This has not resulted in having an optimum process for the products and can result in variable product quality. This is one of the causes that have lead pharmaceutical companies to the current state.

4. Ability to pass on the costs associated with inefficient processes to the customers.

5. Lack of competition during the patent period and also after the patent expiration. Later is due to the regulatory and other economic challenges companies have go through to commercialize drugs. Unless the volume is very large few venture the field.

6. Ability of the companies to recall any “off-spec” products from the market without much retribution.

All of the above collectively and individually can be overcome if the companies create excellent processes based on good physical sciences for the “new products only”. If done right they will improve the total business process such as inventory turns, minimize in-process testing and accumulation of intermediates.

Regulatory and financial investment is a deterrent to manufacturing technology innovation for the existing products. However, Generics can innovate manufacturing technologies for existing products as well as the products that are transitioning out of patent i.e. new generic products. They have incentive as they are there for the long haul.

There are possibilities and opportunities. We have to look at them individually and collectively. Some of them are listed as follows.

1. Improving raw material inventory turns by ensuring raw materials do not have to be tested and can be used “just in time”. There are ways this can be accomplished.

2. Improving and/or eliminating intermediate isolation and storage by completely eliminating in-process sampling and testing i.e. the process will have to be perfect and repeatable at every step.

3. Use of high-powered analytical instrumentation during development of API and drug formulation is necessary. However, we need to develop tests that are simple to give us the necessary answers in the shortest time. We do not need a rocket launch procedure when we can walk ten feet or need to use a Lamborghini when a bicycle would suffice.

Many of the puritans might not agree with my simplifications and perspective. Unless we try to simplify and take command of the processes and produce repeated quality product, regulations will prevent us from manufacturing innovation and simplification. Many of us may remember the jingle “Try it, You'll Like It”.

A systematic and well-orchestrated methodology can be developed and incorporated for pharmaceutical manufacturing. All of the elements exist. If done properly we can move from regulation-based manufacturing to science based and driven manufacturing. Science based technologies will produce consistent and repeatable quality product that will become the norm rather than the exception. Total business process (inventory turns, cash flow and capital investment) will improve and be simplified. In addition, processes will be economic and sustainable.

Girish Malhotra, PE
EPCOT International

Related Articles:

1. Malhotra, Girish: The Path Towards Continuous Processing, Pharmaceutical Processing
2. Malhotra, Girish: Process Centricity is the Key to Quality by Design, Profitability through Simplicity April 6, 2010
3. Malhotra, Girish: Pharmaceutical Costs, Technology Innovation, Opportunities and Reality, Pharmaceutical Processing, February 2010 pgs 20-24
4. Malhotra, Girish: Alphabet Shuffle: Moving From QbA to QbD - An Example of Continuous Processing, Pharmaceutical Processing, February 2009 pg 12-13
5. Will Chemical Engineers Save Pharma? Pharmamanufacturing.com April 10, 2009
6. Malhotra, Girish: API Manufacturing: A Road Map for Green Chemistry and Processes; pharmaQbD.com October 14, 2008
7. Malhotra, Girish; API Manufacture-Simplification and PAT; Pharmaceutical Processing, November 2005, Pages 24-27

Are The Rules A Constraint to Innovation, Competition and A Cause of Adulterated Product?

2010-10-01T01:50:00.003-04:00

Rules are generally created to be followed. They maintain discipline. To innovate many times they are broken intentionally or unintentionally. Such forays lead to the creation of new rules. However, if the rules to be followed are cumbersome or become cumbersome, they can be a deterrent to innovation and competition. Companies need to maintain profitability while following complex rules that are difficult to comply with could ship marginally unacceptable product to the market. Such a practice would be violation of the public trust.

A review of the proposed US FDA guidelines for “Process Validation: General Principles and Practices” suggest that the rules are complex. They instead of simplifying manufacturing operations will add complexity to the business operations. At times I wonder has anyone done a dry run and economic value analysis of the proposed or even of the adopted rules on any commercial process. The proposed rules will drive manufacturing by “regulatory centricity” rather than “product centricity”. “Process and product centricity” are needed rather than “regulatory centricity”. It will take an army of technocrats time to prepare, fill and comply with the regulatory paper work. My estimate is that it will be more than the time needed to simplify and/or develop complying processes.

It seems that the regulations are being used to produce a reproducible quality product using a less than efficient process rather than having an efficient and a process from the onset that will produce repeatable quality product. Simply said the rules dictate how and what of every step of the potato peeling process needs to be documented rather than assist in creating a simple, safe and sustainable process that will result in a repeatable quality product.

“Section III. Statutory and Regulatory Requirements For Process Validation” of the proposed “Process Validation: General Principles and Practices” rules got my attention. It states the following:

“Process validation for drugs (finished pharmaceuticals and components) is a legally enforceable requirement under section 501(a)(2)(B) of the Act, which states the following:

A drug . . . shall be deemed to be adulterated . . . if . . . the methods used in, or the facilities or controls used for, its manufacture, processing, packing, or holding do not conform to or are not operated or administered in conformity with current good manufacturing practice to assure that such drug meets the requirements of this Act as to safety and has the identity and strength, and meets the quality and purity characteristics, which it purports or is represented to possess.”

If the Federal Food, Drug, and Cosmetic Act gives the US federal government legal enforceability option then why is the government not enforcing its legal obligation for its citizens when it comes to drugs that do not comply with specifications or are contaminated with foreign substances.

Marketing and formulation companies through their alliance market a product that meets specification and has to be produced following the rules. In the recent years we have seen increasing amounts of unacceptable product in the market. It could be due to increased amounts being outsourced and the companies are not able to or want to follow the complicated rules. If the product that does not meet the specifications shows up in the public domain it is violation of the company’s committed public obligation and trust. A question needs to be asked, “Why are the companies failing in their public commitment?”

Governments have allowed recalls of bad product hiccups. If a commercialized material does not meet agreed specifications, could the distribution of “off-spec” products be considered criminal offence by the pharmaceutical companies as they have failed to adhere to the established standards? Could the complexity of rules that outline how, what and why of manufacturing allows some of the product slipping through the quality checks in place? Could the rules act as a deterrent to competition and also prevent innovation in pharmaceutical manufacturing processes?

Our objective should be to simplify the rules and the processes that will foster innovation and competition through manufacturing simplicity and produce a consistent quality product all the time.

Girish Malhotra, PE
President
EPCOT International

The Importance of Fundamentals

2010-08-30T17:35:00.002-04:00

Globally Johnson & Johnson is known for its integrity and product quality. Few years ago they handled the Tylenol situation extremely well and were commended for it.

It is astounding that Year 2010 has become a nightmare for Johnson & Johnson. It is heart breaking to read a statement “Certain over-the-counter (OTC) Children’s and Infants’ liquid products manufactured in the United States have been recalled as they may contain a higher concentration of active ingredient than is specified; others may contain inactive ingredients that may not meet internal testing requirements; and others may contain tiny particles.”

Overage of active ingredient and inclusion of tiny particles is simply failure of the people to do what they are supposed to do at any manufacturing operation. In any manufacturing operation people design, operate and maintain equipment to ensure that the process operates as designed. It is a good manufacturing practice to calibrate the equipment routinely to ensure that the equipment is operating as designed. Filters get replaced on a routine basis. In addition, a mass balance is made by every chemical blending operation to make sure the process is being operated at standard or better. Mass balance and cost calculations if done you on a daily, weekly or as chosen basis tell you if your costs and material usage are on track.

Any overuse of materials will show up as the material cost being higher than standard cost and will also show up as inventory shrinkage. Higher than standard cost will be a financial variance i.e. the operation is loosing money on the product. Inventory shrinkage also shows up as a financial variance. In the case of Johnson & Johnson or any manufacturing company the two safety nets, that are supposed to catch overuse, failed. In layman terms, they lost money i.e. someone was sleeping at the financial desk.

Overuse of active ingredient and contamination of particles in the product suggests that on the operations side the manufacturing, maintenance and quality control functions also failed.

What happened at Johnson & Johnson is a gross malfunction at a Global Fortune 125 company. It seems that many at J&J forgot to apply FINANCIAL AND ENGINEERING fundamentals. Based on what I have read, it seems profits took precedence over quality. Their “Quality Czar” will have his hands as he cleans the house.

Girish Malhotra, PE

President
EPCOT International

Square Plug In A Round Hole: Does This Scenario Exist in Pharmaceuticals?

2010-08-17T12:17:00.004-04:00

“Square plug in a round hole” is a statement about situations that do not fit in normal life but under the right circumstances we can live with them. If this happens in a manufacturing operation, common wisdom is that money is lost on such a product/process and it would not be commercialized. However, if it happens in an operation where the money can be recovered by passing the inefficiency costs to the customers, would any one worry? Probably not! It would be worth exploring if such a scenario prevails in the manufacture of pharmaceuticals.

Chemists/Chemical Engineers develop an optimum (quality by design) process for an active pharmaceutical ingredient. During the scale up and commercialization process they find that they do not have the right size equipment and/or the configuration that exacts their desired process. However, there is a high demand for the product. Considerable monies can be earned if we produce and market this product quickly without large investment. We can alter the process or modify the existing equipment at a minimum cost to fit the process in the available equipment. The product is being produced in equipment that is not a perfect fit. It requires continuous quality analysis and equipment cleaning to minimize contamination. Would such a process be an example of “square plug in a round hole”? Further analysis might be helpful.

Based on an optimum heat and mass balance for an active pharmaceutical ingredient (API), we need equipment of size and configuration “X” to produce the product at the lowest cost. Many manufacturing sites do not have the exact size and configuration available. However, we have equipment of size and configuration “Y” and our process could be modified to fit in it. With necessary modifications product of the desired quality can be produced. The costs would be higher than the costs of an optimized process. Product produced by such processes would require repeated analysis of the intermediates and the final product to ensure our process and equipment would deliver the desired quality product. Necessary manufacturing protocol would have to be strictly followed and enforced. Equipment would have to be thoroughly cleaned between batches. All of the associated manufacturing costs will be passed on to the customer. Due to high demand the product could be produced at different sites. The process or the equipment would have to be modified to fit the local situations.

Since we have force fitted a process in equipment that is not specifically designed for it, I would call such a process “square plug in a round hole” that has opportunities to lower costs but since the company is able to meet or exceed their profit margins lowest cost optimized process considerations and process innovation become irrelevant. Under these circumstances we also overlook “square plug in a round hole” connotation.

In the above scenario “quality by analysis” becomes a way of life. Pharmaceuticals are living in such an environment. Since the companies are able to demonstrate product quality repeatability, meet regulatory guidelines and achieve their profit margins having an optimum process or practicing the best manufacturing technology is not necessary. What do you think?

Girish Malhotra, PE

President
EPCOT International

Pharmaceutical Reverse Payments and Lower Drug Costs: An Interesting Dilemma!

2010-07-21T05:53:00.001-04:00

US Federal Trade Commission and the lawmakers have scorned “reverse payment” also called “pay-for delay” in the pharmaceutical business. US House of Representative recently voted 239-182 to restrict such payments in the hopes that stopping such payments will reduce the cost of drugs to the consumer. Legislators would like to see the drug costs lowered for their constituents. Everyone had expected that the entry of generics would significantly reduce the drug prices. Generics have put some pressure on brand companies but their presence has not lowered the costs of drugs by significant percentage.

US Federal Trade Commission estimates that the “reverse payments” could save US customers about $ 3.5 billion dollars per year. These savings might be there but they are not worth the effort and squabble compared to the yearly US drug revenue of about $480 billion dollars. These payments are less than three day’s revenue. Since every company wants to maximize their profits for the patented drugs, use of “reverse payment” is part of doing business. These costs are passed on to the consumer. In US customers, who are covered by a health plan do not know the real prices of the prescription drugs they just pay the co-pay.

Legislation is not going to lower the drug costs. Fundamental reason for the companies to be in the business is “profits”. If any government limits the profit margins or sets the prices, they that will be in direct conflict with the charter of every company i.e. to have the highest profits. Government’s price control would discourage innovation.

We need to understand the factors of prices/costs, how they can be lowered and passed on to the consumers. Underlying fact is that all of us want to extend our life and we will pay anything for that. Drug prices are based on this sentiment. Prices are set at the highest level companies believe customers can afford. Every company in the supply chain has used this sentiment for pricing. This also covers inefficiencies of the companies.

Limiting profits is against the economic principles. Laws of economics teach us that in a fair game, only competition can lower prices. Brand companies have lowered prices when they want to promote and/or grab the market share as evidenced by recent price drops in the selected developing countries. In the recent years limited number of prescription drugs are available from well-known merchandisers [$4.00 for 30 day and $10.00 for 90 day supply]. This is a clear indication that the drug prices can be lowered and everyone in the supply chain can make their desired profit.

Regulatory and appropriate government bodies have to facilitate competition. Companies in the supply chain also have to participate in this endeavor. Lowering of drug costs to the consumer by 8-10 percent or higher will have value for consumers provided they are passed on. Less than one percent cost reduction is of no value. Addressing minor issues like “reverse payment” just placates the constituents without accomplishing anything and upsets the brand pharmaceutical companies.

Real issues that will lower the drug costs need to be addressed and no one is addressing them.

Girish MALHOTRA, PE

Microscopic Examination of Indian Pharmaceutical Acquisitions by Multinational Companies

2010-05-25T16:47:00.001-04:00

Brand companies establishing beachhead in India is a logical choice as they see access to market to growing at 10+ percent. India is source of revenue and profit replenishment for the multinationals. End result of such acquisitions is going to higher drug prices for the masses or government intervention. It would be interesting to see what develops.

There is an underlying question about the sales of Indian pharmaceuticals companies. Why?

Since 2005 Indian companies have challenged the multinationals and have forced a landscape change. Why are the companies being sold now when they have created very successful franchises? One could say the price was too good to refuse. May be, but has anyone considered another reason i.e. lack of succession in the entrepreneur families or letting the trained managers run and grow the companies to compete with the brand companies.

Singh family (Ranbaxy) allegedly had family feud and they brought in Dr. Brian Tempest to cool the storm. However, under Singh family regime there were lapses as manifested by US FDA’s actions. Were the lapses beyond control to fix? Under these circumstances Singh family got an offer they could not refuse. Could that be the case with Piramal family?

Consolidation within India i.e. one successful company buying other pharmaceutical company is not in the culture. Thus unless there is strong succession planning, we will see repeats of Matrix Labs, Ranbaxy, Shantha Biotech and Piramal Healthcare.

If the entrepreneur families do not pass the baton to trained professionals, I believe Indian pharmaceuticals, API (active pharmaceutical ingredient) companies, formulators and other associated with the pharmaceuticals could be selling out to MNCs. It will be a case of take your money and run.

Process Centricity is the Key to Quality by Design

2010-04-06T10:26:00.002-04:00

It would be worth reviewing future of pharma’s most discussed acronyms (APT, QBA and QBD). The following are my interpretation of these acronyms.

PAT (Process Analytical Technologies) means various analytical methods that can be used to convey the state of the sample as soon it is tested.

QBA (Quality by Analysis) is a methodology where the intermediates are tested by “off-line” sampling. The results tell us an “after the fact” state of the manufacturing process. Repeated testing is used to tweak the process till the desired quality product is produced. Such testing is manifestation of lack of complete understanding of the chemistry, process, equipment and any and all variables that interact to produce a product.

QBD (Quality by Design) tells us that the people, who have developed and designed the process, have complete understanding of the process, equipment and their interaction as the sample tested would meet specifications any and all the time. No intermediate sampling is necessary.

Around 2001, the above acronyms were coined for the Pharmaceutical world. They were an instant buzz and synonymous with the current and future state of manufacturing. However, based on reading much of the published literature, I get the impression that “PAT” is considered a cure all and by waving this magic wand, we will produce quality product all the time. This is far from reality.

Published literature also suggests many differing interpretations of these TLA’s and that could be the one of the reasons for very little progress toward QBD adoption.

Any analytical equipment, that costs more than $30,000 (just a number) and requires an analytical chemist to operate and interpret the results for a commercial operation, is expensive. As stated earlier an intermediate process sample tells the state of the sample tested i.e. is the process on track or not. This testing will not and cannot fix the manufacturing process automatically unless the analytical equipment delivers real time results and has feedback loops to control the process stoichiometry and operating conditions. In order to have this level of process sophistication one has to have complete understanding of the chemistry, process equipment and operating conditions i.e. one has to move from “chemistry centricity” to “process centricity”.

What is process centricity? Process centricity to me means moving away from “chemistry centric” laboratory practices and commercializing unit processes by applying appropriate unit operations. This would allow operating personnel to have complete command of the chemistry, process equipment and operating conditions. They can create a process error, observe the process change and can correct the error in minimal time without producing off-spec product. Chemists and chemical engineers have to have incorporated this level of knowledge in the process. This would be perfection (almost) and will not require complex analytical methods to check the process and the product, as we will produce quality. We will achieve QBD i.e. NIRVANA.

Since majority of the APIs are fine/specialty chemicals, their manufacturing practices are very similar. Due to dosage needs the API annual manufacturing production volumes are significantly different from fine/specialty chemical volumes. Thus, it is necessary that we evaluate the current manufacturing practices. Process centricity might necessitate that we change/alter API manufacturing practices. We have to implement methods that are simple and based on good chemical engineering principles and practices. Technologies and methods exist to achieve this change but due to “chemistry centricity” we have not made any significant progress.

As I have explained in a recent article and blogs companies most suited for implementing “Quality by Design” are the API producers and the formulating companies. They have to move away from “chemistry centricity” to “manufacturing centricity” during the technology transfer and incorporate methods that do not require any intermediate product sampling and analysis. This might not look or sound easy, but is the only way to produce a product based on “quality by design”.

It is a bit disheartening for many that almost after ten years, we are still discussing PAT, QBA and QBD. If more than 51 percent of the API producers and formulators stop intermediate sampling, I will consider QBD would become a way of future life in the pharmaceutical world. If this does not happen soon (let us say in the next two to three years) my conjecture is that PAT, QBA and QBD will disappear from the pharmaceutical vocabulary like any other fad. That would be sad because we collectively would have failed to implement a good idea that not only will improve profits but also might facilitate regulatory requirements.

Girish MALHOTRA, PE
President
EPCOT International

Alternate Interpretation of Pharmaceutical TLAs; Three-letter Acronyms

2010-03-16T06:29:00.001-04:00

Around 2001 Dr. Ajaz Hussain and his colleagues at USFDA-based on their experiences-suggested and encouraged the global pharmaceutical industry to improve their process technologies so that the manufacturing practices could be simplified and quality products produced with minimum interference. It has been a noble effort and led to the coining of two acronyms QBA and QBD. Based on the amount of printed material, I have seen considerable analysis and discussion on how to move from “A” to “D”. I would like to restate these acronyms differently in a lighter perspective with the hope that we will improve our manufacturing technologies.

In the current state of manufacture of active pharmaceutical ingredients (APIs) and formulated products, we repeatedly check intermediates and the final product for quality. This practice has been appropriately called “Quality by Analysis” (QBA). It not only prolongs the manufacturing cycles and processes but also impacts the whole business process through increased inventories of raw materials, in-process materials and finished goods. The whole business process becomes complex and lowers profitability.

I would like to rename the acronym QBA and call it “Quality by Aggravation”. Why aggravation? Meticulous sampling and analysis is necessary to ensure we follow protocol at each step. This prolongs and extends the batch cycle times. Everyone gets aggravated if anything is not done as per procedures. Intermediate product not meeting specifications either is reworked or disposed of. All this costs money. In addition, it increases work in process inventories that affects the cash flow. Additional investment could be needed to quarantine intermediates and all this lower profits. In doing all these we aggravate our life and it has been our way of life.

Aggravation (mental and financial) in pharmaceutical manufacturing processes can be alleviated if we have complete command of the process chemistry and its unit operations so that we can produce quality product with minimum or no intermediate samplings. Since we will produce products based on “quality by design” QBD, I would also like to rename this acronym to “Quality by Desire”. We will have quality production. This will simplify manufacturing process and life. Our desire to have an excellent process could significantly reduce our aggravation. It even could be eliminated.

Pharmaceutical products have to meet the strictest of the quality standards no matter how the products are produced. The question that needs to be put on the table is what should be our method of choosing to produce a quality product. “Quality by Aggravation” or “Quality by Desire” are the two choices and we have to pick one.

Most of us know the correct answer. All of us have a choice and can do what we desire. Since maximizing profitability is the ultimate goal, I am not sure why we have avoided the right path for so long. Is the industry waiting for disruptive innovation?

QBA and QBD methods are applicable to everything we do in life. When we desire anything, we make sure that our methods to achieve the goals are swift and simple. We always pick QBD. Our choice in the manufacture of pharmaceuticals and their components is “Quality by Aggravation” or “Quality by Desire”. You pick.

Girish Malhotra, PE
President
EPCOT International

HIV Drug Availability and Potential Manufacturing Opportunity

2010-02-02T11:08:00.003-05:00

Global spread of HIV/AIDS has been and is a cause of alarm. Approximately 33.4 million people are estimated to be infected with HIV/AIDS and about 30% of this population can use the antiretroviral therapy (ART). Of this number about 42% are getting the treatment. This could be due to pricing and/or their availability or a combination of both. There are methods and means to lower the cost and increase availability. I have used AZT (Azidothymidine/Zidovudine) an ART component as an example to illustrate the need for manufacturing technology innovation that can lower prices and increase availability.

In general majority of the active pharmaceutical ingredients (API) are manufactured using batch processes. This is more due to tradition rather than the process chemistry and economics. This holds true for high and low volume actives. Some of the actives due to their chemistry and volume have become commodity chemicals and are produced by continuous processes. However, batch processing is still the preferred method of API manufacture in China and India irrespective of their volume.

Under Clinton Foundation HIV/AIDS Initiative (CHAI), prices of some of the HIV/AIDS drugs have been negotiated with the suppliers from India and China. AZT (300 milligram) tablet is priced at 13.3 cents.

Doing a reverse calculation and using about 80% tablet formulation yield, one can calculate potential bulk selling price of the azidothymidine. Using two 300-milligram tablets per day about 2.4 million pounds of azidothymidine would be needed for about 4 million patients. At $25.00 per kilo, the cost of the API content would be about 1.88 cents per tablet. If the formulation, excipient cost and profit were considered to be 5 times the cost of API (an estimate), the cost of finished tablet would be about 11.25 cents per tablet compared to 13.3 cents from CHAI. Thus the assumption of $25.00 per kilo for bulk API is not un-reasonable. All of the AZT in the above consideration is produced using batch processes.

In the coming years under the new World health Organization guidelines, if the number of people needing treatment grows to 14 Million, there would be a supply problem. The capacity of the existing batch processes would have to be increased to about 8.5 million pounds of AZT per year. Similar steps would be needed to increase capacity of other members of the ART cocktail. Other alternate is to develop and commercialize continuous processes.

A continuous process would not only increase throughput but also will lower the manufacturing cost and consistently produce product of high quality. Combination of improved manufacturing technology and throughput can easily lower costs by 20-25%. Based on the reported chemistry, it should be feasible to develop a continuous process. We should never forget that most of the actives are fine chemicals first and drugs second. Acceptance of this fact might facilitate development of better manufacturing technologies. If better technology drops the price of AZT from 11.25 cents per tablet to 9 cents this would be a significant improvement.

A continuous process would have much higher throughput than the batch processes facilitating availability of the needed drug. Plants can be ramped up and down to meet the market demand. Three plants using continuous processes and operating at about 400 pounds per hour (24/350 at 85% on-stream-time) could meet the global demand of AZT and give the operators higher profit margin. Strategy discussed above could be extended for other components of the HIV/AIDS cocktail. It would be a win-win.

Profitability through Simplicity: A Radical Approach to Fine/Specialty API Manufacturing

2010-01-20T13:28:00.000-05:00

Profitability through Simplicity: A Radical Approach to Fine/Specialty API Manufacturing

A Radical Approach to Fine/Specialty API Manufacturing

2010-01-20T13:20:00.001-05:00

Average wholesale price (AWP) of blockbuster drugs (sales greater than one billion dollar/year) and dosage determine the quantity of API needed. This calculation can be made easily based on information in the public domain. For a 200 milligram dose blockbuster, a decent process for a certain molecule at $10.00 AWP, would require about 25,000 kilos of API. API need would change with different AWP and dosage. Poor process and yield would mean that their pollution (not just carbon) footprint is much bigger. At $50 per kilo, the API revenue would be about $1.25 million dollars, which is miniscule compared to the total drug revenue.

Due to low volumes, the global API producers resort to the easy, traditional method that we are taught through our textbooks - batch process. The nature of the batch process diminishes/prevents any implementation of “Quality by design (QBD)” methods and we resort to “after the fact” analysis and fixes, which cost both money and time. This situation is the norm for in pharmaceutical fine chemical manufacturing.

Due to the price differential between AWP, the factory cost of API and the tablet/capsule, there is little financial incentive for the drug wholesaler to invest in manufacturing innovation. However, the API producer and the drug formulator have a major incentive to improve their profits – being the manufacturing technology innovation leader. However, a production paradigm shift on the part of producers and formulators is needed to achieve that goal.

Creative incorporation of physical properties and unit processes, as well as manipulation of unit operations and modular plants can facilitate QBD. This will serve to ensure continuous processes producing quality product the first time and all the time. Modular plants can produce almost any combination of fine or specialty chemicals. Since the API volumes are low, they can be campaigned allowing different products to be produced by companies with proficiency or expertise in specific chemistries and/or methods. Entities with knowledge of alternative manufacturing methods can easily produce some of the actives using continuous processes. A properly designed facility can produce about 55,000 pounds of product operating 24/7 at 100 pounds per hour in about four weeks. A batch process can take longer and would require greater investment.

Fine/specialty chemicals such as 3-(diaminomethylidene)-1,1-dimethylguanidine hydrochloride, 2-[1-(aminomethyl)cyclohexyl]acetic acid, (RS)-6-methoxy-2-((4-methoxy-3,5-dimethylpyridin-2-yl) methylsulfinyl)-1H-benzo[d]imidazole, various Fluoroquinolones derivatives, 2-[di(phenyl)methylsulfinyl]acetamide, 1-[(2R,4S,5S)-4-azido-5-(hydroxymethyl)oxolan-2-yl]-5-methyl-1,2,3,4-tetrahydropyrimidine-2,4-dione are a few examples of what can be produced by batch processes. However, continuous processes using modular unit operations can also produce these products. One must be creative and able to effectively incorporate the nuances of physical properties and reaction kinetics into the manufacturing processes. The above chemicals are examples of anti diabetic, anti bacterial, pump protein inhibitor, anti viral compound and other disease curing actives.

Traditionally, in the development of pharmaceutical fine/specialty chemicals we get enamored with incorporating regulatory practices and guidelines before we have an excellent process that will produce repeatable and consistent quality product without “in-process” analysis of intermediates. This is like trying to fit a square peg into a round hole. For manufacturing technology innovation, we have to step out of our comfort zone. The North American automobile industry, for example, got trapped in its comfort zone with very discomforting results. Chinese/Indian or any other companies could be the “creative destructionist” and change the global playing field.

Alternative manufacturing technologies and methods will force process efficiencies and lower the pollution footprint. API manufacturers and drug formulators must take the lead in utilizing these methods. Since such methods would be innovative, we could also see reduction or stoppage of job migration to developing countries. With the right technologies cGMP would be a given.

What is Jugaad (new management fad from India)?

2009-12-10T11:10:00.004-05:00

In the recent years we all have been reading and hearing about what the Indians have been doing in the areas of IT, chemicals, pharmaceuticals and petrochemicals etc. They have accomplished all through desire, creativity and Jugaad.

Recent issue of Business Week covers “India's Next Global Export: Innovation” called Jugaad. So, what does this new management fad mean? In the simplistic terms, Jugaad literally means an arrangement or a work around, which have to be used because of lack of resources.

This definition is very apropos. All of us have exercised Jugaad in our lives and may not have realized it. It could be developing a better process or a product. It could be stealing a base in baseball, kicking a soccer ball to score a goal or the topspin of the tennis racket to win the match i.e. achieving an objective using whatever it takes. All of us have the creativity to achieve our goals and objectives. We have what it takes.

Many of us might not have heard of Mr. Michael O’Leary. He is the chief executive of Ryanair Holdings Co., the Irish no-frills airline. He is putting his Jugaad to practice. His creativity is evident when he started a one-car taxi company to legally use Dublin’s bus lanes and cut an hour from his daily commute. This is Jugaad. Jugaad is not an Indian thing. It is everywhere. All of us have it. We just need to do things in a manner that simplify things and processes.

Can we apply Jugaad to the manufacture of chemicals, pharmaceuticals, polymers, resins and other chemical based products? Yes, we absolutely can. By learning the fundamentals of chemistry, physics, mathematics we have the knowledge base. Along with these fundamentals if we just apply our creativity and imagination we will have the simplest and cost effective processes producing highest quality products. Customer will come back time after time and we will generate sufficient and significant profits.

Girish Malhotra, PE
President
EPCOT International

An Interpretation of U.S. FDA Guidance for Pharma Manufacture

2009-10-08T16:16:00.003-04:00

About five years ago FDA issued its “PAT Guidance for Industry” (September 2004). FDA’s intent by issuing the guidelines is to encourage the Pharmaceutical Industry to improve and innovate its manufacturing practices so that they produce quality product the first time and all the time. Manufacturing innovation will be the lifeline for the Pharmaceuticals as their business model changes.

Regulatory bodies want the companies to move away from achieving quality through the current practice of “after the fact repeated analysis”. Achieving product quality “the first time” and all the time is the goal. This is not a difficult expectation.

The guideline is suggesting the industry of how and what needs to be done and the methodology for improving the processes. However, innovation has to come from within the industry rather than thrust upon them. The guidance is very legalese and can be interpreted in many different ways. As written it eludes more to drug formulation than to Active Pharmaceutical Ingredient (API) manufacture. However, the rules of the game for API and drug formulation are same as quality is the ultimate goal.

If we clear the forest and the legal jargon, FDA is saying “understand how the chemicals react, interact and behave with each other and have a process that if operated at the desired process conditions should deliver quality product the “first time” and all the time [basic tenants of chemical engineering, chemistry curriculum and process development]”. Anything short will not deliver first time quality product.

In product and process development, we need to understand the chemicals, their interaction, establish specifications and use different analytical technologies to ensure that the developed process will deliver the expected product. If one is expecting that the process analytical technologies will fix a bad process, then that would be a gross error and expectation. Analytical technologies tell us the result rather than the path to the result.

Good manufacturing practices and continuous improvement is a must for every manufacturing. PAT guidance suggests that the pharmaceutical industry should have discussion and approval from FDA on their existing process improvement plans. This is adding costs. The benefits of process improvement can be quantified but since the re-approval costs are not known, my conjecture is that the industry would not opt for any process improvement for their existing products as the costs could exceed the benefits. Estimated savings due to process innovations for the pharmaceutical companies are in the $100 to $200 billion dollars range. I hope this is good incentive to innovate.

Pharmaceuticals companies due to first to market pressures and following regulatory directives and guidelines are not able to apply good chemistry and engineering principles to have an efficient process that produces quality product. The current state of pharmaceutical manufacture is manifestation of our methods. If we are expecting it to change pharmaceutical companies have to take the lead. Innovation can happen for the products that will become generic in the coming years and for the new molecules that will be commercialized.

Development of innovative processes has to start during the process conceptualization and development. Even then it would have to be an effort as old methods and thinking would have to be discarded, which is not easy. The regulatory bodies will have to be flexible and encourage innovation. PAT guidelines and other guidelines are encouraging innovation but have too many constraints. I strongly believe that innovation can reduce regulation.

Girish Malhotra, PE
President
EPCOT International

Fine Chemicals: Quality Manufacturing and Technology Innovation in Pharmaceuticals

2009-09-25T08:07:00.005-04:00

A recent survey “Pharmaceutical Process Control: Is the Great Divide Growing?” makes one think and ponder about the direction of manufacturing technologies and process development methods in the changing pharmaceutical business model.

I found some of the answers to be conflicting. The problems of technology inefficiencies should go away are the expectation. However, costs and how to go about comes in the way. Survey suggests that PAT and QBD could be mutually exclusivity, this was a surprise and as they cannot be.

For a chemical process to produce quality product complete understanding and incorporation of the physical properties of chemicals, their reaction chemistry and interaction is necessary. Understanding facilitates development of an excellent process. These are the fundamental elements of QBD and PAT.

Survey raises the following questions.

1. Do the survey answers give the direction of the company as a whole or only the thinking of the participating staff? Is the staff opinion in sync with what the management wants?

2. What is management thinking with respect to manufacturing and process technologies?

3. Are the survey questions such that by answering “yes” to one part of the survey could result in an automatic “no” for the other part of the survey i.e. consistency or lack of it?

My focus is on having the best Process Development and Manufacturing technologies so that we can have a process that is safe, environmentally sustainable and produces quality product first time and all the time without repeated analysis.

If we understand the fundamental elements, our creativity and imagineering should result in “state of the art” processes that will produce a quality product. Proper process controls are derived from such knowledge.

Unless we understand the fundamental elements, after the fact improvement effort (Lean, Six Sigma etc.) would not result in an optimum process. Actually such an effort can be expensive. Incomplete understanding will result in less than an optimum process. It will be an expensive investment as is the case in Pharmaceutical Manufacturing.

Knowledge of elements will facilitate incorporation and adoption of state of the art and new technologies. Microreactors are the new “to be discussed” technology after the pharma acronyms. They are being touted as the next best thing after sliced bread.

For the last ten plus years “micro-reactors” have been a laboratory curiosity. Microreactors are simplistically a reaction space that act as an efficient heat exchange device also. If used properly can lead to an “efficient, green and sustainable” process. They are a modified/enhanced nano-version of plate and frame heat exchangers, which have been commercial for 40+ years. Such exchangers have been primarily used as heat exchangers rather than a combination reaction and heat transfer space. They perform extremely well in their dual role. These and similar technologies have to be understood and their value capitalized. Such reactors have a place in the pharmaceuticals (specialty chemicals) and fine chemical world.

Use of innovative technologies and improvement of manufacturing practices is only possible if we understand the fundamentals and apply principles of chemical engineering for an optimum process. Effort is not expensive and once incorporated, we would see very positive results.

Girish MALHOTRA, PE
President

EPCOT International

Profitability through Simplicity: A Pharmaceutical Challenge for Technocrats

2009-08-21T15:51:00.000-04:00

Profitability through Simplicity: A Pharmaceutical Challenge for Technocrats: "Twitter"

A Pharmaceutical Challenge for Technocrats

2009-08-21T14:16:00.004-04:00

Pharmaceuticals have their own unique technology and pricing positions compared with the other chemical products. Can we introduce innovative development and manufacturing technologies for the pharmaceuticals sector? The answer in unequivocal ‘yes!’ We just need to understand the roadblocks and overcome them.

Since we want to live forever, we are willing to pay the demanded price for a drug. Our willingness to pay for long life along with the monopoly during the life of the patent has been the primary driver for setting drug pricing. Drug prices are set at the highest level the market will bear. Once the patent expires, brand companies move on to invent new drugs.

The above two factors ensure the desired profit margins for the pharmaceutical companies. Any costs due to regulatory mandate are passed on to the consumer. Thus, the need for product, process development and manufacturing technology innovation has been minimal. Inefficiencies are an accepted part of doing business. Generics have followed ethical (brand) companies in their modus operandi.

Regulatory bodies have cajoled pharmaceutical companies toward innovation by creating PAT, CMC, QBD and other TLAs. However, these cannot be forced or mandated unless some other event takes place, which will have a financial return. [We are familiar with the phrase “you can lead the horse to water but cannot make it drink.”]

There has to be a solution for this dilemma. Only an “economic incentive” will result in innovation.

Latent blame for the lack of innovation is placed on regulatory agencies. This is unjust. The repeatability of quality at the active pharma ingredients (API) and the final formulated drug stages is mandated- as it should be. However, the “path to quality” should not be mandated. Companies should be held responsible for “quality failure”. Penalty for quality failure has to be severe. Companies should have the freedom to choose the “path to quality” as it is the road to innovation and creativity.

Providing manufacturers with the freedom to choose their “path to quality” is the equivalent of stopping the sampling of intermediates” for quality. This will force everyone to “drink the water”. Companies will save significant money, which will be additional incentive for pharmaceutical development and manufacturing technology innovation.

Stopping intermediate sampling could be encouraged and even mandated. It will happen only if we understand “everything about the raw materials and intermediates but were afraid to ask.” I am quite confident that based on the education and training that chemical engineers and chemists receive they can become the proponents of “stopping the sampling of intermediates.” With their backing we will arrive at the destination where the regulators want us to go. Technology innovation is not hard and for the technocrats it is the most exhilarating experience.

We need to keep API and drug formulation as separate processes and that will simplify innovation. In general, many articles discuss pharmaceutical process improvements. These do not include API manufacturing process improvements but only refer to formulation process improvements. McKinsey in a recent report suggests that the pharmaceutical companies have an opportunity that exceeds about $65 billion through productivity improvements in the drug formulation area. Based on my review of the API segment, I believe that the opportunity in the API sector based on yield, technology
improvements and conservation far exceeds $65 billion.

The question is: “Are the chemists and chemical engineers ready and willing to take the challenge?” I know the answer and it is “Yes we can”. If we do, many of the TLAs would become irrelevant.

Girish MALHOTRA, PE

President

Chemical Engineering: Understanding the Curriculum for Quality Manufacturing

2009-08-05T07:22:00.003-04:00

Chemical Engineers during their training are taught that they will commercialize and/or operate a process that will produce consistent quality product all the time (without re-work) using a safe, sustainable and an economic process.

To achieve these objectives, we review topics that teach us the understanding of the physical properties of material (raw material, intermediate, by-product and the product) involved in the process. This allows us to understand their interaction in a reactive and/or a blending process. Chem. E. uses this information to commercialize a robust process.

If we have mastered the properties and the interaction of chemicals involved, we should be able to define the operating conditions of a process having the highest yield with above defined process characteristics. We are also taught various unit operations that we can use as is, modify and/or manipulate to produce a quality product all the time. If we are not able to achieve the objective of producing quality product using a safe and sustainable process, the first time and all the time, we have to improve our understanding so that we can have the correct process.

If I translate the Chem. E. training fundamentals to acronyms, we are taught to develop and commercialize a QUALITY BY DESIGN (QBD) process. This is our “hippocratic oath”. Anything short of this objective suggests that we need to improve.

Regulatory bodies have introduced few other acronyms in the pharmaceutical manufacturing. They are fine to have but what they mean and tell us is not totally understood. Interpretations of these vary and introduce variability. My question is: are we trying to have the best pharmaceutical manufacturing technology or are we trying to conform to the current fashion crowd?

My interpretation of QBA, CQA, CMC, DS, and PAT is as follows. If my understanding is not what the “guru’s” expect it to be, then please help with the correct interpretation.

• CQA [critical quality attributes]: We need to understand the physical properties of the materials (raw material, intermediate, by-product and the final product) and how they interact with each other.

• DS [design space]: Definition of the process operating parameters that have been identified by the developers, which if followed will produce quality product all the time.

• CMC [chemistry, manufacturing and controls]: Reaction mechanism, kinetics and process controls that is understood and followed will allow production of quality product.

• PAT [process analytical technologies]: This acronym is the least understood. It is believed that by having PAT, all of the process ills will go away. That is far from the truth. Analytical instruments will let the manufacturing and quality people know that the process has erred. However, it will not correct the problem and give a solution to the problem. Only people who are familiar with the characteristics of the materials and chemistry can correct the process. Analytical instruments are an indicator and not the corrector. There is difference between process control technologies and process analytical technologies.

• QBA [quality by analysis]: It suggests that we have a problem and we do not meet quality. We have to go back and fix the problem so that we can produce the desired quality.

To summarize the above mentioned acronyms are the fundamentals of chemical engineering curriculum. If we understand pieces parts of the curriculum, then we should have a QBD process. Question then arises why it is so hard to implement the fundamentals of chemical engineering in the manufacture of a pharmaceutical (API or a blend of API and excipients) or did I miss something.

Girish Malhotra, PE
President

Climate Change and its impact on Industrial Production

2009-08-04T08:26:00.007-04:00

Climate change is a new challenge and a major discussion point between the developed and the developing countries. Some sort of emission limits will be placed as we move forward. There is lot of posturing and both sides are making point and counterpoint.

Developed countries did not have emission restrictions during their growth. With the current demand to curb emissions, some curbs will be negotiated. Developed and developing countries are afraid of the curtailment of their industrial machine. In order to retain their industrial complex developed countries will exert pressure. However, the developing countries especially India and China are not going to readily agree to any curbs. In Secretary Clinton’s recent trip India Rejected U.S. Proposal of Carbon Limits.

A recent article India and Climate Change takes India as example and excludes China, though both present similar challenges for the developed countries.

This article states “If (the) developed nations are held responsible for emissions that they historically contributed, oblivious to their impact on climate change, why shouldn't (the) developing nations take responsibility for producing generations of people who will generate emissions into the future?” Is it an indirect admission that the developed countries are afraid of the curbing their economic growth and are afraid of the growth of the developing countries? It seems to suggest that since the developed countries control their population, they can keep emitting at the current per capita rate. Is it also suggesting that the living standards of the developed countries should stay high and of the developing countries should not? If this is the latent intent, it is not going to sit well with the developing countries.

Are we saying “Maslow’s hierarchy of needs” only applicable to the developed countries? Developed countries have had the developing countries as their market, but now they challenging us on our turf, we are not willing to accept the challenge. The game has changed and we will have to play with the new rules. Their development and negotiation is going to be a challenge.

Recently International Council of Chemical Associations engaged McKinsey & Co. to suggest steps the chemical industry needs to take to curb emissions and still innovate. This study excludes chemicals that improve the living standards (including pharmaceuticals) and assumes gross savings from such chemicals to be zero.

I have concerns about this exclusion as we are excluding an important segment (pharmaceuticals about $800 billion revenue out of $3 trillion dollars per year) that has a large carbon imprint. Pharmaceuticals (API and formulated products) present an opportunity to reduce their imprint. There is an opportunity to improve their manufacturing inefficiencies (low yield) and reduce their solvent use, there by achieving an offsetting positive impact. Technology improvement will also reduce healthcare costs. An effort is needed in earnest.

Development and global sharing of the low carbon emission technologies might be the answer. Other choice for the companies in the developed countries is to move their factories to the developing countries. Thus they would not have to implement tougher emission standards. This is not a viable option.

In the last 15-20 years countries have become dependent on each other. What was environmentally acceptable yesterday will not be acceptable tomorrow. Since the global warming will affect us all, we will have to compromise and live with the new rules whatever they might be.

Girish Malhotra, PE
President

Recycling Coatings: An Environmental and Business Opportunity

2009-07-08T12:43:00.003-04:00

In today’s environmental concerns and how to reduce green house gases (GHG)/carbon imprint, an opportunity exists in the coating business areas and that can appease many. This is through recycling of coatings.

Recycling of coatings is a possibility and a challenge. The challenge comes from the perspective of the formulators and the raw material suppliers. Raw materials deliver the desired coating performance. If the raw materials can be used interchangeably to deliver the required performance, we can have the makings of easier recycling and better manufacturing (batch à continuous) technologies. Certain scenarios exist.

Kelly Moore, a California based coatings company, is producing recycled coatings and selling them under the “e-coat ®” brand. Their coatings must contain a minimum of 50% post consumer waste. This suggests that they have made an effort and succeeded in recycling. Thus, there is a distinct possibility for other coating companies to recycle.

Over the last many years, different methods and applications of surplus coating have been considered with sporadic success. Sustained success is needed to reduce environmental impact of the coatings.

If the government mandates coating recycling through EPA regulations, it would be called meddling in the business. However, the government can assist by creating an incentive program for the companies who recycle. This could be through VOC credits. This presents the best opportunity and any company’s effort in recycling should be awarded.

A joint effort will be needed to establish such VOC credit program. Companies should decide how they develop and incorporate the recycled material in their products. Companies have the knowledge base and the creativity to develop coatings that can have significant recycled material as a part of their formulation. Strategic and interchangeable use of different raw materials is the key for recycling. This would be a win-win.

Girish Malhotra

Pharmaceuticals: What is Holding Back Quality By Design?

2009-06-12T15:43:00.004-04:00

We come across many TLAs and their number is increasing. What is a TLA? It stands for “three letter acronym”.

In the regulatory world, TLAs keep us on our toes. In the pharmaceutical world two TLAs are in vogue. They are QBA and QBD. Everyone associated with the manufacture of pharmaceuticals is familiar with these acronyms. But just to re-iterate, QBA is product “quality by analysis” and QBD is “quality by design”. QBA is the current tradition of the pharmaceutical manufacturing processes whereas QBD presents what the technology should be or the future.

Level of going on discussion is suggestive of that there is a significant hesitation to improve technology. One has to ask the question, why it is so difficult to move from “A” to “D” and I am sure many have. There has to be a monumental hurdle/roadblock for the pharmaceuticals to move from QBA to QBD.

I do not think there are any hurdles. We are just up against tradition. Since the traditions are entrenched in pharmaceuticals, we have accepted the current manufacturing practices. They have not been challenged. We are also afraid of the “Regulatory Gods”. Move from QBA to QBD is very simple and the roadblock is staring at us. However, it has not been obvious to us. I define the hurdle/roadblock for the move from “A” to “D” to be “the isolation of intermediates of the reaction or the formulation steps”. The mantra for QBD is “stopping isolation of intermediates”.

If we isolate a reaction product after every reaction step or a mix after every formulation step to test the quality and the conversion yield, we are acknowledging that we do not have a complete understanding, control of the process step and its mechanism. If we did have the understanding, we would not be isolating the reaction step and/or blend intermediate and testing them for their quality.

Specialty/Fine chemical industry by and large has a complete understanding and control of the processes. It does not necessitate isolation of the intermediates, as the quality is designed in the products. If we can achieve the same level of proficiency for the pharmaceuticals, we would move from quality by “A” [analysis] to quality by “D” [design].

In the pharmaceutical industry move from “A” → “D”, will be a major accomplishment in simplifying the manufacturing technologies and processes. It will not only improve process efficiencies and but also reduce the carbon footprint of the fine, specialty chemicals and the pharmaceutical manufacturing processes. It will reduce the cycle time for many batch processes and could nudge quite a few products to be manufactured by continuous processes.

Jumping the “A” to “D” hurdle is simple and easy. We just have to set our heart and mind to it. If it happens, my conjecture is the even the “Regulatory Gods” will celebrate.

Girish MALHOTRA, PE
President
EPCOT International

Process of Continuous Improvement and Pharmaceuticals

2009-06-01T06:55:00.011-04:00

In every industry, “process of continuous improvement” is a religion as it improves their profitability. A recent article "Drug CEOs Switch Tactics on Reform" in The Wall Street Journal discusses new strategies being developed by the Pharmaceutical companies. Pharmaceutical CEO’s believe that the drug costs do not contribute to the high health-care costs. The following points are mentioned in the article.

Prescription drugs account for "just about 10% of the overall (health care) cost".
Reforms shouldn't force doctors and patients to choose a drug based on cost if the more expensive treatment would have a better outcome.
The drug makers have been pushing through hefty price increases. Prices for many drugs were up more than 15% in the first quarter from a year earlier, according to data from Credit Suisse.
Drug industry executives are worried about Medicare’s authority to negotiate the prices for drugs dispensed through its Part D benefit. That could limit the prices pharmaceutical companies can charge.
Pharmaceutical executives argue that such steps (negotiated drug prices) would hamper drug makers' ability to pay for costly research into new treatments. "It would knock our legs out".

If the health-care costs are to be reduced, it has to be full court press on every element of the costs and that includes drug costs. Drug costs cannot and should not be excluded even if they are small part of the overall costs. The pharmaceutical companies should make any effort to lower drug prices as part of their continuous business improvement process. Point #5 suggests that the drug companies want to fund the development of new drugs through raising drug prices only. If an effort is made to improve their R&D methods and manufacturing technologies, which is definitely feasible and possible, the pharmaceutical companies will not only have more funds to develop new drugs will also have higher profits.

It is well known that the current drug manufacturing technologies and methods are inefficient. Effort needs to be made to improve the manufacturing technologies. Improvement in API and drug formulation yield e.g. from 60% to 90% might not seem to be major improvement in the cost but every dollar saved adds up. These savings might be in billions of Dollars or Euros and will be more than sufficient to pay for new drug research and development.

We all need to work together to reduce healthcare costs rather than saying problem is some place else. Suggesting that the problem is elsewhere is an indirect acknowledgment by the pharmaceutical industry that we do not believe in “process of continuous improvement” thereby cannot reduce drug costs. With the effort being made by every government to reduce health care costs, I hope the pharmaceutical companies are not saying that we have no room for such improvements and “do not tread on me.”

Based on the fundamentals taught in engineering schools, every student will say that the current manufacturing methods can be improved. The real question is why such effort has not been made and what is blocking the path of “continuous improvement”. It is well known that if manufacturing methods are improved, they will improve profit margins to levels that are much higher than the current levels and some of the savings can be passed on to the customers to make it a win-win.

Question is “can and/or should an effort to reduce drug costs be made?” The answer is we should and if someone says it cannot be done then the question is why not.

Girish Malhotra, PE

President, EPCOT International

Pharmaceuticals in the Water

2009-04-24T15:22:00.004-04:00

Every so often we read about how pharmaceuticals are being discharged into global water systems. It’s good that we’re being told and reminded that this is a problem we’ve created for ourselves. Unless these pharmaceuticals are removed from water, they will accumulate to a level that will have ill effects on both our bodies and our ecosystems.

There are two distinct issues here, and they really should be separated. Every article I’ve read combines the two issues – this makes it more difficult to find a real solution to the problem.

The two issues are:

1) Pharmaceuticals in the water due to humans discarding them. There are no laws to control these discharges.

2) Pharmaceuticals from the manufacturing plants leaking into water. Regulatory bodies have guidelines and laws to control BOD (biological oxygen demand), COD (chemical oxygen demand), and suspended and dissolved solids to certain levels. There is no incentive for companies that abide by the rules to cut toxic chemical levels any further.

We can analyze and talk about the toxicity of pharmaceuticals and their ill effects on humans and eco-systems, but if there are no laws to control them, little will be done.

Talk, unfortunately, is cheap. Yes, the manufacturing process efficiencies need to be improved, but if I can make my profit margin and meet the water discharge regulations, there’s no reason for me to spend extra money to ensure water safety. There is simply no prospect of a return on such an investment.

Conscience does matter to a certain extent, but the economics drive these decisions.

Unless we make a concerted effort to fix this problem, we are going to see another Patancheru. The ball is in our court.

Nano and Paradigm shift

2009-03-27T10:56:00.002-04:00

Nano car, when conceived was the joke of the night shows and most of the news broadcasters. Earlier this week reporters wanted to touch and feel “Oh my God” no radio, no air-conditioning and it is a tin can. May be it is. It might be bottom of the rug but it illustrates what is feasible. We have a new point to go forward from.

It is a HUGE paradigm shift not only for the automobile industry but also for every manufacturing industry. Gives 55 miles per gallon and gets you from point A to point B. Yes, it has its deficiencies but still we all talk about it over a drink.

Nano shows us that “Element Human Hu” can do unique things. It can go to point “x” which is out there, beyond our imagination, if we put our mind to it. Is it new iPod of the manufacturing industry? May be.

At the turn of the twentieth century, the four-wheel gasoline buggy fascinated us. Did we ever think in nineteen eighties that we will have laptop that can launch a missile? Most of us will say NO. We have driven film photography to a Technology Museum.

We are now looking at the next generation of adventure. Human creativity is beyond control and Nano is a rendition of possibilities of manufacturing and technology innovation. It should be celebrated. Hats off to the Human element.

Can we do anything? Yes we can!

Pharmaceuticals and Return on Investment (ROI)

2009-03-26T14:38:00.001-04:00

Every reader is an investor. Investors know that there has to be a good return on their investment irrespective of the place of investment.

We have all been taught that different risks necessitate different ROI. For “low risk investments,” ROI of 10-24% is suggested, 24% being in Pharmaceuticals. The ROI range for “average risk” is about 15-40%. Again, 40% is for pharmaceuticals. ROI for high-risk investments should be 24-56% with 56% for Pharmaceuticals (1).

In the past few weeks, three major pharmaceutical mergers have been announced. Total investment is about $156 billion U.S. dollars. If the total investment is equally distributed between the three companies and each would like to have a “Five years ROI”, then [due to high risk] one should expect “before tax” return of about $20 billion dollars per year per deal. Another way to look at earning $20 billion/year is that the each company will have to have 10-20 blockbuster drugs on the market beginning in 2010. Based on each company’s pipeline, I just do not see such a gusher. Unless the acquiring players know something we do not know, I believe these are risky investments considering that less than 5% of drugs become blockbusters and past acquisitions and their assimilation have not been stellar.

I would like the readers to opine on the recent pharmaceutical investments, share their thoughts and what they think are the short and long-term options for pharmaceutical companies?

(1) J. Frank Valle-Riestra, Project evaluation in the chemical process industries, McGraw Hill 1983 p 433.

Global Fine/Specialty Chemical industry and its challenges:

2009-03-05T09:12:00.001-05:00

Current situation:

Global chemical industry is going through multiple transformations under the current economic environment is not helping either. It needs to address the following.

1. How to react to the current slow down?

2. What are their long-term prospects?

Companies in Europe and US innovated and developed many unique molecules that have improved our quality of life and life style. Products include pharmaceuticals, polymers, additives, flavors and fragrances, fertilizers and list goes on.

Some of the old giants have disappeared. Recent re-factoring of the European companies to rationalize their businesses has caused more turmoil than solved as the companies are still loosing money. Some are trying to find themselves and some have given themselves new names after reorganization. Some of the new entities have not found equilibrium.

Lack of growth (i.e. growth equal to GDP growth is no growth) has been a challenge [some segments have had higher than GDP growth but many are lower]. On the other hand growth better than plan has been exhilarating. These have impacted their profitability.

As the world grapples with the current slow down, more so in the developed countries than the developing countries, the future looks murky. To conserve profits companies have selectively shuttered their plants. This might be prudent for the short-term but mothballing plants might not solve the long-term ills.

Impact of expiration of the pharmaceutical patents and lack of new drugs in the pipeline will reposition the global fine chemical industry. We will begin to see a sea change in the second half of 2010.

What is the recourse for the future?

Current markets for the chemical products can be categorized as follows.

• Slow or no growth [growth equal to or less than GDP]

• Growth [growth greater than GDP]

In the current economic down turn, the human and social impact of shutting down and/or moving R&D and manufacturing from the slow and/no growth countries to the growth countries can have significant negative connotations. However, such moves might be necessary for the multinational companies. In the slowing global economy, due to political sensitivity moving from developed countries and investing in growth markets is a going to take longer than normal time and effort. Lack of rapid decision-making might further complicate strategy development.

Until few years ago growth in the under-developed countries was slow and these markets could be supplied from the developed countries. However, with much higher growth in these under-developed countries, it has become necessary for the multinationals to fulfill the market needs either by opening R&D and manufacturing sites or collaborate with local partners. This poses an interesting dilemma for the multinationals. Should they consolidate their plants and supply the needs of the developed countries, if possible, from the plants in the developing countries and shutter their operations is the developed countries? This option has its own challenges. How to explain to its shareholders including its employees of such moves and how to blend in the local culture and nuances.

Multinationals face another challenge in the developing countries. It comes from the local enterprises that have served the local and global markets. These enterprises might not be technologically strong but is a matter of time when they could become fierce competitors.

More than 50 percent of the global population lives outside the developed countries. In the next few years, growth is going to come from these markets. They might not require the technologies currently used in the developed countries. Technologies to suit the local market preferences and environment might have to be developed. A joint collaboration between the local companies and multinationals can be a fast track option. Go alone could be an option also. However, it would require understanding of the local markets. In addition, multinational companies will have to invest in technologies and capacities that are economic and can meet the market needs from fewer plants. This could be a challenge but is necessary for the survival.

Manufacturing of commodity (slow or no growth) products will move to the lowest wage countries. India and China could benefit from such moves. Only offset to such moves is the development of better manufacturing technologies for commodity products e.g. plastic additives, flame-retardants, corrosion inhibitors, rubber chemicals to name a few. They have to be such that they offset the lower labor cost advantage offered by low cost countries.

The newest technology (growth better than GDP) products will be developed in the labs in the developed countries and could be manufactured anywhere to serve their respective needs.

World is changing faster than we can strategize and implement.

A Fine Chemical Version of Chernobyl? Patancheru, India: An opportunity for Quality by Design and Environmental Sustainability

2009-02-25T08:01:00.012-05:00

A study by Dr. Joakim Larsson etal (1) in September 2007 has suddenly become an eye of a storm in India (2, 3, 4, 5, 6, 7). There are denials of the scientific study as it exposes weak links. For the long term, these issues have to be addressed. If the problems are not corrected, the area could be equated to Chernobyl of the fine/specialty chemicals and pharmaceutical industries. There is a solution out of this quandary.

Solution touches the heart of manufacture of active pharmaceutical ingredients and their subsequent formulations. Using Professor Larsson’s study, I have presented potential scenarios for Patancheru problem and solution (8). The process yield can be improved. Effort is needed. Depending on total ciprofloxacin capacity, which is a quinolone, the companies can collectively reduce out fall by 30-60 kg/day. This might not look a big number but based total daily production this is big. Based on toxicity this is significant. Similar saving can be achieved on other quinolones and other drugs.

In the recent brouhaha ciprofloxacin has been identified as the culprit. Actually the problem is much bigger. There are other quinolones and actives pharma ingredients being produced and formulated by many companies in the Hyderabad and vicinity. Not only there are producers of these products, there are suppliers of the necessary raw materials for these products in the area. Effluents from these chemical plants also discharges in water bodies of the area. Even if the effluent meets the established local standards of chemical discharge, no one has established the toxicity of every chemical that is trickling in the ecosystem.

If we want to salvage the Patancheru eco-system, we should establish toxicity levels of associated chemicals and use them rather than the current chemical limits to control effluent. We have to recognize that every active pharmaceutical ingredient is toxic to varying degree and their toxicity kills the disease causing bacteria. The lessons learnt from Patancheru could be applied globally.

Why we have a problem?

High levels of chemicals entering the effluent treatment plant point to inefficient manufacturing technology and low yields of the manufacturing process. Questions should be asked that why we have a problem and if the yields could be improved to reduce the effluent load, why it has not been improved. There is a simple answer to these questions and it encompasses the following.

1. Since high profit margins are made with the existing processes, there is no incentive to improve them. If the companies can meet the local water, solid and air effluent standards, there is no need to worry about the eco-toxic or toxicity effect, as there are no standards.

2. The current process with their current low yield produces a chemical that meets a certain impurity profile that has been approved the drug regulatory agencies. If the yield is improved, the producer should be able to reduce the chemical discharge load. This improvement could change the impurity profile of the active ingredient. Under the current regulatory laws of various countries (9), the producer might have to re-qualify the higher drug produced by an improved process for its performance and efficacy. This is an expensive and long drawn process. In addition, processes might have to re-audited. No one wants to invest any money in this effort.

3. Since the current processes are not efficient, the product quality is controlled at every intermediate step and this is called quality by analysis. Reasons of low yield i.e. high amount of chemicals in the effluent are that the processes are not completely understood. Lack of complete process understanding and control can result is a product that is made on day 100 of one year and day 200 of the same year to be slightly different or might not meet specifications. If the product does not meet the defined specifications that have been filed and approved, the product could be reworked or disposed. These products and their intermediates are equally or more toxic and could leach out in the soil and water. Quality by analysis insures high quality and this is expensive. These costs can be contained or eliminated if we understand have repeatable processes.

Problems identified by Professor Larsson do exist in many areas of the world where active pharmaceutical ingredients are produced. However, they have not been studied. I am sure we will find similar problems.

Solution:

Only solution out of the dilemma in Hyderabad is to improve the process manufacturing technologies. This has to be done for the short and the long haul. If the manufacturing processes can be improved, depending on the total capacity of the quinolone plants in Patancheru area, significant quantities of ciprofloxacin instead of going to waste water and solid disposal can be recovered as a product. It will make a big impact on the local ecosystem. Ciprofloxacin is one of the many quinolones being produced in Hyderabad. The plants producing ciprofloxacin also produce other quinolones. In addition, we have to recognize that there are ancillary plants in the area that produce raw materials for these products. Their effluent is part of the wastewater and solid sludge system. There are many other actives produced in the area and their levels have not been tested.

Manufacturing technology improvement is the only solution to reduce chemicals in the eco-system. Drug regulatory agencies have lately suggested that manufacturing improvements should be done. Formulators and producers of actives pharmaceutical ingredients claim that there are hurdles of bureaucracy and insufficient ROI. I have difficulty believing that. Meeting chemical effluent standards at Patancheru would be the first step. Unless effluent toxicity standards are established, not much will change. Intervention is needed to rationalize toxicity and address the “Patancheru problem”. We have to maximize our effort to improve manufacturing technologies.

1. D.G. Joakim Larsson, Cecilia de Pedro, and Nicklas Paxeus, Effluent from drug manufactures contains extremely high levels of pharmaceuticals; Journal of Hazardous Materials, Volume 148, Issue 3, 30 September 2007, Pages 751-755

2. Margie Mason, Associated Press, Drug waste creates highest disaster zone in Andhra Times of India, January 27, 2009

3. Rajeev Deshpande, TNN, PMO orders testing of Patancheru water, Times of India, January 28, 2009

4. Manjula Kolanu, TNN, Officials sleep as pollution sinks Patancheru Greens To Step Up Anti-Pollution Drive, Times of India, January 29, 2009

5. Times of India, Independent lab to test Patancheru water, Jan 31, 2009

6. Times of India, Silent streams turn Patancheru's sorrow, January 31, 2009

7. Times of India, Drug traces in Patancheru wells, February 17, 2009

8. Girish Malhotra, Pharmaceuticals, Their Manufacturing Methods, Ecotoxicology, and Human Life Relationship, Pharmaceutical Processing, pg 18-22, November 2007

9. Link to global regulatory bodies

Profitability through Simplicity: Why Have the Fine and Specialty Chemical Sectors Been Moving from Developed Countries?

2009-02-12T11:02:00.000-05:00

Profitability through Simplicity: Why Have the Fine and Specialty Chemical Sectors Been Moving from Developed Countries?

Why Have the Fine and Specialty Chemical Sectors Been Moving from Developed Countries?

2009-02-09T08:21:00.002-05:00

I am sure we all have been wondering about the shift. I have my own rationale, potential solution and would like to share. I believe there are opportunities to innovate and we can capitalize on them.

I speculate and believe the industry moved for combination of the following reasons.

1. Environmental laws
2. Health and Safety laws
3. Significantly lower labor costs in the third world countries.
4. We did not invest in the technologies to improve processes.

In early seventies, the developed countries were adopting new environmental protection laws. They seemed unrealistic and unachievable [this is based on my being at a state EPA] to some. Many complied. For some it was easier to shut down rather than invest in the complying technologies. In my view, improving process technologies was a missed innovation opportunity. The chemicals were needed and since there was a need, companies in China and India filled in the supply gap.

India and China also had advantage of Rupee/Yuan/Dollar parity. This made investments in their country cheaper.

Laxity of health and safety laws persists in the developing countries. The associated expenses are low compared to the developed countries. In my recent trips, I saw workers with open toe shoes, without safety glasses, wearing street cloths and eating meals on the operating floor. These might not be across the board but is there. Human life needs to be valued as an asset.

Environmental laws are comparatively lax also compared to the laws in the developed countries. Thus, the respective investment in pollution abatement is lower. I have seen multi-colored water bodies next to the plants. Abatement of eco-toxicity is not a high priority. In the developed countries endocrine disruptors have been found in the drinking waters. I am sure these and other chemicals exist in the water in the developing countries also and the scale is different.

Labor costs in China and India are magnitude levels lower than the costs in the developed countries e.g. a plant operator in India could be paid $200 per month (we have to recognize high Yuan/Rupee/Dollar parity) compared to $4000.00 per month or more in US.

Combination of the above factors has resulted in China, India and some of the East European countries making the fine and specialty chemicals to feed the insatiable need for these chemicals in the developed countries.

As the time has progressed, these suppliers found that their products were being used to produce the active pharmaceutical ingredients or other higher valued products i.e. moving up the supply chain. These companies also moved up the supply chain. These have resulted in additional plant closures in the developed countries.

With time the costs in the developing countries are going up as they incorporate better safety, health and environmental laws but are not to the levels in the developed countries. They still have price advantage and customers wiling to purchase their products.

Now we have a situation where many of the pharma APIs and other strategic drugs and products are coming from China and India. This is discomforting as expressed in a recent New Times article. Drug Making’s Move Abroad Stirs Concerns.

We have to recognize that the pharmaceutical and other companies are buying products (API, intermediates and fine specialty chemicals) from the companies in India and China who are alleged not to be playing by the rules companies in the developed countries have to live by. It is a demand and supply question and rules in every country are different.

Can this be reduced, prevented or stopped? Do we have a way out of this quandary? Yes we do, but it would require an effort. We have to have total involvement of the suppliers and buyers, which might not be easy. If such an attempt is made, I hope it would not turn out like “the Doha WTO negotiations” as many companies/countries have lot to loose and/or gain. I doubt if any trade organization can influence any country’s environmental, health, safety and pay scale policies. Those changes have to come from within. Maslow still rules.

SOCMA, CEFIC and other organizations could identify the highest imported chemicals, API or formulated products. Interested companies in the developed countries could develop technologies for these products that will offset the cost advantages of the imported products and convince the companies in the developed countries to buy their products. Every advantage perceived or otherwise from the developing countries will have to be offset by cost and quality through better technologies.

Partial protectionism under a “strategic defense initiative” could be a temporary alternate for certain chemicals or drugs. Such a program cannot be government subsidized. This could give interested companies a “time window” to develop better technologies. With many countries now part of WTO, such an initiative is not going to sit well with many countries, companies and organizations.

Competing technologies that will offset the costs due to local wages, environmental, health and safety rules and methods is the only answer. If this does not work safeguards leading to continuous supply of strategically vital products can be implemented but there are costs associated with that strategy. A win-win strategy needs to be developed.

Commoditization of Drugs

2009-02-04T10:29:00.002-05:00

Until 2006 low cost drugs could be purchased outside US only. Wal-Mart started to sell 30-day and 90-day supply at $4.00 and $10.00 respectively in 2006. Recently other pharma-sellers have joined to serve the growing market. These prices were unheard of before 2006. Even at these prices respective members of the supply chain (producers, formulators and HMO’s) are making “good” margins.

Commoditization had begun in 2006 and we did not realize it. With the current global economic downturn, an ever-increasing aging population and economic upswing of the under-developed countries demanding common ailment drugs, the commoditization pace has accelerated. As we go forward the number of the drugs in the 30 and 90-day pool will increase. With the larger customer base, the annual volume for many of the active pharmaceutical ingredients (API) will increase.

Fine and specialty chemical companies (e.g. BASF and Albemarle among others are producers of ibuprofen and naproxen (Non-steroidal anti-inflammatory drugs: NSAID)) and generic drug companies are producing common cure APIs (i.e. specialty fine chemicals that have disease curing value). Many generics formulate various dosages for sale. Most of the drugs US pharma-sellers are offering for sale are being produced and formulated outside US. Big pharmaceutical companies are not involved in these programs.

As more brand name drugs become generic and the volume of generics increases, entrepreneurs, existing and new, would want to take advantage of the business opportunity. Market economics and desire for profits will result in the development of better processes and movement from batch processes to continuous processes. Better process technologies will reduce the costs of active pharmaceutical ingredient (API) resulting in higher profits for the members of the supply chain. All this will be result in higher profits and increased commoditization of the “off-patent” drugs.

It is expected that successes of better process technologies for the generic APIs might result in better manufacturing technologies for the ethical/brand drugs also thereby increasing their respective profits. It is possible that the lower costs from better processes for generics and ethical drugs might not be necessarily passed on to the consumers.

A hidden “diamond in the rough”

2009-01-13T07:25:00.001-05:00

There are companies in the specialty chemical world that have good technologies and product applications. Their unique niche and technologies enhance the performance of their customer’s products. I call them the “real specialty chemical” company. Such uniqueness should have value. However, the “Wall Street mind-readers or investing aficionados” have not had much penchant for them. One can only conclude such an oversight is due to lack of the investors understanding of the technologies of such companies. One such company is International Specialty Products, Inc.

In 2002 ISP went back to being a publicly held company to being a privately held company. Their sales from 1999 to 2001 were around $787 million for each year with profits going through its cycles. In 2007 ISP revenue was about $1.6 billion about 10% revenue growth per year. Samuel Heyman being an astute investor has had margins to his liking in the last nine years with his management. If the margins were not there, he would have unloaded the business.

Since ISP is privately held company and away from the daily Wall Street scrutiny, they have also managed to stay under the acquisition radar. I believe that 2009 or 2010 may be the year when someone will realize their full potential and buy them out. It would have to be a company, which values technologies and would want to cross-fertilize ISP technologies to other applications and realize their full potential.

“Bail out or Hand out” is not the answer but Innovation and Conservation is.

2009-01-01T20:20:00.018-05:00

Recent turmoil in the financial markets is taking its global toll. However, this event, once in lifetime event, is also giving us a message and presenting us with an opportunity. The message is “It is time to have innovative technologies that also conserve our resources”.

US Automobile industry lost its focus when it quit innovation in sixties and were not farsighted to raise the fuel efficiency. They fought tooth and nail against raising gas mileage standards. Japanese came with better quality, pizzazz and hybrids. But Detroit thought it was not a good idea to have a “better idea”.
Lately we have read about plants of many chemical companies being shuttered for lack of demand. We will probably hear more such closures before things come back. Bankruptcies would be there also.

I wonder if the closures are a reflection of not having the best technologies to manufacture the products. Had the technologies been such that the feed rates could be lowered or increased to meet the prevailing demand, plant shutdowns could have been avoided. Lack of the best methods suggest that there is an opportunity to have better manufacturing technologies. Better equals high conservation i.e. produce more from less.

Pharmaceuticals, which are disease-curing chemicals, cannot think conservation when they are able to make their profit margins on “human desire” to extend their life. Poor yields, high in-process inventory and producing quality only by checking every milligram are acceptable suggest significant opportunities. Consumer pays for every in-efficiency e.g. inventories, poor quality and costs related with inefficient use of their raw materials. In 2007-2008 we saw loss of employment and knowledge base accelerate. When a pharmaceutical company can close more than 50 plants, it suggests that companies have technologies that need total overhaul. They need to develop and implement technologies for their survival.

Their blockbuster model is dying on the vine and their new product pipeline is heading from gusher to a trickle in the next few years. Pharma needs to create a new business model. Due to toxicity of their chemicals Pharma needs to improve their manufacturing technologies to levels better than “non-disease-curing” chemicals. Higher yields mean higher profitability and less effluent or/and emissions in our eco system.

In my recent trip to China, I saw electrically charged bikes to move around town. Similarly in Europe and China they have low cost and simple solar water heaters on their rooftops to provide them with the hot water for their daily use. Roof top heaters do not look esthetically bad but tell us the inherent character of inhabitant’s and their nature to conserve and use nature’s gift of sun’s heat. A missing rooftop heater suggests a “missing link”. Communities in US have prevented such installations with the thinking that they look ugly and will lower real estate value. Esthetics is more important than conservation.

Chinese company BYD is introducing an electrical car and an Indian company TATA is introducing about $2500.00 car. This suggests innovation is possible if we step up to the challenge.

We need to move from a “consumption zealots” to “conservation zealots”. Conservation and preservation will not result in any hardship but will lead to innovation that will improve profitability. Present slow down is the best time to innovate and we need to spend effort so that we can reap benefits in future.

Is "Creative Destruction" the way to go for the Pharmaceuticals?

2008-12-12T16:13:00.013-05:00

Roche Chief Warns of a Likely Shakeout makes an interesting admittance of the need for the change in the pharmaceutical industry.

World is seeing the automobile (premier) industry requesting salvation from the government as they drove themselves in a ditch. Are the Pharmaceuticals heading in the same direction?

Recent Wall Street article "How Detroit Drove Into a Ditch" is an excellent review of the auto industry. It clearly suggests that they lagged innovation and are suffering. Recent admissions by management of General Motors also stated that. Only way out is to innovate and do it in a hurry if they want to survive. Only time will tell but based on their past record, future looks bleak.

Pharmaceuticals have lived on the "blockbuster model" and have won. One player of the team has led them to victory for many years. Now it is time for the whole team to play together.

Unless R&D and Manufacturing become strong, Ethical Pharmaceuticals cannot compete in the global market. Marginally better drugs and personal medicines will not generate the revenue stream once the patents have expired. It is time to compete on the global scale i.e. serve the needs of 6.2 billion by serving across the globe rather than a small percentage of the population. Manufacturing and R&D need to innovate.

Dr. Severin Schwan, chief executive Roche Holdings AG is correct. It is time to change the business model. Are Pharmaceuticals Antithesis of Creative Destruction?
I do not think so. We need to innovate for the long term survival.

Is Auto Bailout a prelude for others to ask for help and an admission of “lack of vision”?

2008-11-23T20:10:00.010-05:00

Head Line:

"An Auto Bailout Would Be Terrible for Free Trade"

Does anyone really expect other countries to ignore our subsidies?"

American automobile industry gave the world automobiles and held everyone in awe. However, the dire straights of automobile industry suggest that it never thought much of the future. German cars were always considered a luxury and quality product and never considered a threat for the mass producers. It was the Japanese followed by the Korean cars who really changed the playing field by bringing quality from the get go. Their quality, styling and innovation were the first threat to the survival of the US automobile industry. However, the US automobile industry has been slow to catch up. A recent article in Wall Street Journal How Detroit Drove Into a Ditch gave an excellent overview of how the industry has arrived at its current state.

Japanese brought quality to the masses of the world and the world jumped on quality without paying luxury prices. World was hungry for quality and fuel efficiency and did not get it from American carmakers.

Now the American carmakers are in trouble asking for the government help. If they are given a straw would they ask for more? Would other industries that are not able to compete with quality and cost would ask for government help and protection. It is very possible.

Why are we there? Blame would lie squarely on the management of the companies for the lack of their foresight in innovation and delivering to the customer anticipated fuel efficiency. Whatever happens in the auto world, it will work out for the good of the country. Better management is the answer. Asking for a government handout is taking advantage of the current economic woes rather than being responsible for their own inability.

If we step back and see any similarity with any other industry that has served the human kind but is experiencing some turbulent waters. It is the Ethical Pharmaceuticals.

Since 2005 the Ethical pharmaceuticals have been facing head winds with their age-old “blockbuster” model. They will loose about $60 billion dollars in revenue in the next three to four years. They have very little in their pipeline. They are scrambling to determine how they can sustain their revenue growth. The Generic pharmaceutical companies are also challenging them on their turf.

Would pharmaceuticals be the next in the handout line if they cannot solve their challenges i.e. start growing their revenue with new drugs? History is repeating for the pharmaceuticals as it did for the chemicals, textiles and steel industry. Chemical and textile industries have mostly moved overseas. Steel industry innovated its technologies to survive. May be the time has come for the pharmaceuticals to innovate their R&D and manufacturing technologies which they have acknowledged needs attention.

Is Pharmaceutical Consolidation on Horizon?

2008-11-04T12:19:00.006-05:00

Recently I had opined the following. Since then I keep reading views at other websites. [http://www.pharmatimes.com/WorldNews/article.aspx?id=14672]. I still believe that a consolidation is needed to quickly fill the pipeline. Industry is venerable and the only reason Venture Capitalists have not moved in due to the current credit crunch. Once the monetary crunch eases, we should see the beginning of consolidation. Increasing layoffs are suggesting that financial preservation is a must but it is coming at the expense of the basic knowledge base which is going to be difficult to replace. R&D and Manufacturing technologies need to be brought to 21st Century. Even with that, the basic business model will have to be revised. With increasing global effluence, market size will increase. In the increased market size the need for generics will be higher than the ethical drugs.

"If one sifts through and compiles the news about the pharmaceutical companies, a clear trend with respect to their shifting business model starts to emerge. Slowly but surely, major pharmaceutical companies are behind the scene inching toward being a combination of "Block Buster, Bio-tech and Generic" model. This is their last and the only hope. Merck is experimenting a new business model of selling patented drug (Januvia) at one-fifth the US price level in India. Glaxo is venturing in South Africa and Egypt. These are undeclared secrets. Daiichi Sanyo has bought Ranbaxy. I am sure others are in the works.

I believe Ethical pharmaceuticals are not very clear about what they want to be. As a result, they are dabbling with every opportunity they see i.e. riding many boats with the hope that one will take them to the promise land. If they clearly define their mission, they might just need one big and strong boat (it could be a combination of blockbuster, bio-tech and generic) to take them to the goal. This will allow them to properly focus their attention.

Competing with the Generic producers is going to be a challenge for the Ethical producers. Their knowledge base is shrinking through lay-offs. Their manufacturing technology is not current. If the Ethical companies do want to go in serve ethical and generic markets, they will have to have very efficient manufacturing technologies that can offset generic producers cost advantages. They can achieve this by collaborating and/or acquiring Indian or Chinese companies. With the globe shrinking, second option is more likely. If this happens, it will lead to an eventual global consolidation in the pharmaceuticals."

US FDA citations to Ranbaxy are an excellent opportunity

2008-09-17T21:03:00.002-04:00

I am sure the deficiencies of the Ranbaxy plants will be remedied. However, the US FDA citations should be considered a positive wake up call and an opportunity for Ranbaxy and rest of the Indian pharmaceutical companies. Only way they should rest easy is exceed any and every global standard. They have to take that extra step, walk the extra mile to establish and exceed the toughest standards. In fact, they could use the opportunity to establish a higher standard that could become a showpiece of the industry.

It is not going to be costly and/or a monumental effort to get to a higher plateau. It just takes resolve to get their. Economically it is not expensive and the return on investment will be significantly better at the higher standard. Customer will be pleased when their quality demand is exceeded. They will always come back even at a higher price.

While Ranbaxy is setting up to meet and/or exceed FDA standards, they and the other Indian pharmaceutical companies should consider producing single specification active pharmaceutical ingredient (API) and formulated product for every market rather than multiple specification API and products for different markets. It will simplify their manufacturing, reduce costs and would take away every bit of laxity, as they will have only one standard to follow.

Ranbaxy and other Indian pharmaceutical companies have to keep in mind that since 2005 they are catering to a much larger customer base. Their job would be simplified and will be cost effective if they catered every market with one formulated product rather than multiple formulated products using multiple specifications API.

If the formulation processes were converted from a batch process to a continuous process, which would be definitely feasible when using single spec API and excipients, many of the problems could be self corrected, as product uniformity would be there. Costs would be lower than a corresponding batch process.

These steps will simplify their total business process, inventory management, manufacturing methods and processes giving them higher profitability. Savings due to these steps would give the Indian companies an unprecedented competitive advantage.

Reshuffling of the global pharmaceutical drug deck

2008-07-22T09:24:00.001-04:00

In the last five weeks, we have seen the global generic pharmaceutical playing field change with the acquisition of Ranbaxy and Barr.

Until recently, the blockbuster model has worked for the ethical pharmaceutical companies, but with about $80 billion of ethical drug patents expiring in the next four years and with not much in the pipeline of major pharmaceuticals their business model needs a re-look.

Major pharmaceuticals need to consider a strategy that would allow them to develop new drugs and also serve a large market that needs low cost drugs whether they are patented or otherwise. It could be the last opportunity for the majors to get in the generic business (similar to Novartis).

Recently Merck US took a bold step in this direction without declaring a shift in its blockbuster model (Merck’s low-priced diabetes drug might change a few rules). If they are successful, it would have other majors consider similar options. Acquisition and assimilation of the generics could be an option also.

In order for Merck to have success in selling their patented drugs at a lower price and maintain their profit margins, they will need to lower their API manufacturing and formulation costs. This will require a complete overhaul of their manufacturing technologies i.e. moving from “quality by analysis” to “quality by design.” Depending on Merck’s success, other companies could follow the lead. This would be a giant leap for the pharmaceutical companies from their current manufacturing practices.

Opportunities for Private Equity companies in India

2008-07-10T09:37:00.006-04:00

Ranbaxy-Daiichi deal has opened many doors and possibilities especially for the private equity (PE) companies in India (PE firms review plans after Ranbaxy deal). Some PE companies are participating in the pharmaceutical ventures. However, there are large number of Indian companies that could be ripe for PE participation.

The opportunity:

Many of the Active Pharmaceutical Ingredient (API) and Pharmaceutical companies have been producing API and generic drugs before India joined WTO. These companies have flourished as they were supplying to major pharmaceuticals, competing against them, and satisfying the need of low cost generics and ethical drugs. Entrepreneurs who are now approaching their golden age started these companies.

With WTO participation, new set of entrepreneurs have joined in to capitalize on the growing opportunities. These new companies are based on narrow niches.

Entrepreneurs who started many of the companies have majority holdings in these companies. As the time has progressed, succession has been an issue and will continue to be an issue. This is especially true in India. Recent examples are Singh’s at Reliance, Birla’s, Singhania’s, Bajaj, Piramal and the list goes on. Lupin Pharmaceuticals, Sun Pharmaceuticals, Wockhardt, Neuland Labs, Shasun Chemicals, Dr. Reddy’s, Biocon, Hetero Group, Cipla, Cadila Pharmaceuticals, Aurobindo Pharma Ltd. etc. for that matter any of the Indian companies with a majority single family holding can be in play.

With India’s pharmaceutical companies participating in the competitive global world, it is necessary for them to operate at their peak levels even if there are succession issues. Sometimes it might become necessary for the promoters to dilute their holdings or bring in an outsider (e.g. Mittal Steel diluted their holding as part of the Arcelor acquisition, Ranbaxy brought in a GSK veteran, Dr. Brian Tempest), to placate the markets or the corporate governance needs.

PE firms have invested in Indian companies as long as they have confidence in original entrepreneurs/promoters (Emcure Pharmaceuticals-Pune: Blackstone Gr.; Granules India- Hyderabad: ISP Investco, Ridgeback Capital Investments).

PE firms are well versed with Specialty Chemicals. Thus, their foray in API (specialty chemicals with a disease curing value) companies in India is the easiest entry and presents them with a huge opportunity. In India, PE companies could hold a majority position but the operations might have to be operated by the local management as they know the political and social climate and can maneuver in it. Individual options will have to be reviewed.

Ranbaxy and Daiichi Sankyo relationship

2008-06-11T11:49:00.003-04:00

Ranbaxy and Daiichi Sankyo relationship is going to change the pharmaceutical landscape. Not only these are two different companies originating from two different (Japanese and Indian) cultures but also two different work methodologies with one common element i.e. to make money for the stakeholders.

Ranbaxy has had confrontational (challenged patents) and friendly relationships with challenged companies. This has worked for them but the question would be how the two cultures marry to make the relationship successful. Takashi Shoda, President & CEO of Daiichi Sankyo Company, Limited has said “While both companies will closely cooperate to explore how to fully optimize our growth opportunities, we will respect Ranbaxy’s autonomy as a standalone company as well.”

My conjecture is that the two strong cultures would have differences and assimilation will take time and would be interesting for all of us to watch. Another question is “Is the Singh family bailing out”?

Would Ranbaxy Daiichi Sankyo marriage open door for other relationships? If they are to happen, they would be between Indian companies and non-American and non-EU companies. Time will tell us.

Ranbaxy, AstraZeneca, Nexium and NEW opportunities

2008-04-16T14:44:00.003-04:00

We may not know who is the winner and looser today or in the near future in this settlement of the Nexium deal between Ranbaxy and AstraZeneca. The deal allows AstraZeneca (AZN) to keep its sales of $30 billion for the next five years. However, I believe Ranbaxy had a big win.

In addition, a new way to settle a drug dispute was established.

A generic producer sued and eventually settled with the ethical drug manufacturer of API to produce the API and formulate. They also received benefits of distribution of other drugs. Ranbaxy win.
If AZN did make any payments or concessions to Ranbaxy as part of this settlement, we would eventually come to know. It would be another win for the Ranbaxy.

Would similar settlements happen in the future? The answer would be “why not?”

Ranbaxy is a big winner, as they would have the API and formulation know-how and capabilities. They can optimize their manufacturing processes before the patents expire and keep others a bay.

Teva and Dr. Reddy’s may have been stopped for Nexium but they and other generic companies can use the current resolution model to scout for other opportunities.

How many “genies” have been uncorked by the Nexium deal?

New Management style: New experiment in Management?

2008-03-23T13:34:00.002-04:00

Merger, Indian Style Buy a Brand and Leave It Alone. Is this story a preamble of new way to manage as the world economy globalizes?

Mr. Mohandas Karamchand Gandhi aka Mahatma Gandhi.” He took on Henry David Thoreau’s non-violence and civil disobedience philosophies, modified them to shake the British Empire, and delivered the “unthinkable” independence to India. He had stepped out of the sand box.

Are Tata, Essar Global, Bharat Forge, Infosys, Wipro are also stepping out of the traditional management box and creating a new management style, which combines the proven management philosophies with the wisdom of empowerment and trust giving people the power to shape their own destiny?

Acquisitions following the proven management styles result in layoffs, as cost cutting accelerates the realization of their desired return on investment. This has worked for many companies but the social and intellectual downside is enormous. It is a major disruption to the company personnel, associated communities, and its knowledge base. It is not easy to monetarize the financial value of these occurrences. Communities readjust and recover. However, the knowledge base is lost forever. Companies in the developed countries are grappling with these especially with the intellectual losses.

If the Indian companies mentioned in the article and other companies are successful with their experiment and succeed in achieving their goals, they will strengthen the social structure and win many friends. It would be a new management style for the twenty first century. It will be an amalgamation of different cultures and philosophies, a real globalization.

Heparin Contamination: effort to maximize profits?

2008-03-19T17:23:00.041-04:00

FDA Identifies Contaminant Found in Baxter's Heparin makes an interesting story.

Let us assume that the identified contaminant, oversulfated chondroitin sulfate, appears at the same point as Heparin on chromatographic analysis. If the cost of this chemical is significantly lower than the cost of Heparin API, it presents an argument that how much of this contaminant was added to lower the total cost of the Active being shipped. This was all in an effort to increase profits. If people lost their lives, it did not matter to the API producers.

There has to be a minimum threshold below which side effects of the contaminant were not noticeable. Could it be that the API producers did not know the highest safe threshold? Since they did not know the safe threshold, stepwise increasing amounts of the contaminant were added by overzealous entrepreneurs to lower the cost and maximize their profits. Unfortunately, the recent lots the additive reached the threshold where the side effects were pronounced, some people lost their lives, and others became sick.

We can blame FDA for non-inspection, ill inspection, and Baxter for not having the necessary protocol in place. They are not to be blamed 100%.

Finding the sulfate contaminant is a case of pure adulteration. It is very similar to the pet feed contamination, where melamine was added to increase the nitrogen content of the pet food.

Low or no value additives can be added to bulk up the product hoping that no one will notice. Some very smart people are involved in these issues. They know how to use the knowledge base for profit. Greed comes into play. Unfortunately, people lost their life.

Pharma companies and regulatory agencies have to increase their due diligence and understand mindset of the people who are willing to “make a buck” at any cost.

“Quality by Analysis” cannot compete against “Quality by Design”

2008-03-15T17:18:00.008-04:00

FDA Orders Heparin Shipments to be tested at the U. S. Border is the only choice but it is a manifestation of material failure of “quality by analysis” methods.

The explanation of “contaminant being a heparin-like molecule” begs me to ask questions. This is not a comforting explanation but seems like an attempt to placate the audience. Complete details showing the scientific details need to be in print.

Pharmaceutical industry has to implement “Quality by Design” NOW. Had the production of Heparin been done using “QBD” methods, we would not have seen the current global dilemma.

I have said repeatedly that “QBD” is based on “complete understanding” of the manufacturing process, which is the “P” of the PAT. Unless we understand the “process,” we cannot produce quality.

Based on my experiences, complete understanding the processing steps allows one to repeat the mistakes and that is where we need to be rather than playing “Monday morning quarterback.”

Drug safety, side effects, FDA, and its challenges

2008-03-09T14:05:00.007-04:00

Recently USFDA announced "Safety First" program for the drugs that are in the market. WSJ reports, “Top Food and Drug Administration officials said this week consumers should expect to see more advisories and warnings from the agency about drug-side effects.”

It is an interesting and an intriguing program. I am not sure of its efficacy and how it will help the consumers. The side effects of drugs that are commercial are public information and available. If one is expecting that the database is going to list every and all side effects, it is not going to do it and is going to come short of what everyone will expect.

We need to revisit and understand what the drugs are. Drugs are toxic specialty/fine chemicals. Fine/specialty chemicals, to a chemist are organic molecules that are mostly heterocyclic ring/s with nitrogen, sulfur, halogen, phosphorous and/or oxygen incorporated in the ring/s and/or in their side chains. It is very likely that they have unsaturated bonds.

Drug evolution, development, and regulatory review process leads to the introduction of many drugs. I am sure during the development process close attention is paid to how the drug will interact with human body. There are checks and balances in place and only the drugs that have no or minimum ill effects enter the approval progression process. I do not believe that the interaction with every possible drug on humans take can be identified and quantified.

Developers and/or the regulators do not know or have where-with-alls of how an unsaturated complex organic molecule is going to interact with another unsaturated complex molecule/s and acid/alkali of the human body. I do not know if anyone speculate and/or can conjecture how the molecules will breakdown and possibly recombine to create a new complex molecule in the human body. Only way to make a scientific conclusion is to actually study the effect of combination of drugs.

Since the interaction of the drugs is happening in the human body, the resulting chemicals cannot be sampled and studied for their good and/or bad effects. We all know that the human body is a well-controlled reaction system. Every bad effect on human body is manifested by an illness, which is called side effect.

Why did USFDA take on this task? They are the “FOOD AND DRUG SAFETY PATROL” and this additional task is being taken on to placate its critics. Everyone eventually is going to treat FDA database as gospel and indicator of all ill effects. It is going to come short on expectations and FDA again is going to be blamed.

In addition, I do not know how they will carry out this enormous task when it does not have sufficient money and/or the manpower to higher priority tasks. This task is impossible at best. It is a loose-loose situation at best.

Heparin and Quality by design

2008-02-26T11:01:00.001-05:00

The Wall Street Journal February 19, 2008 published an article on Heparin.

Following are some excerpts.

“Baxter, which supplies about half the U.S. heparin market, said last week it had temporarily stopped production because of about 350 bad reactions, including four fatalities, potentially tied to the drug. About 40% of the reactions were classified as serious, ranging from stomach pain to vomiting and diarrhea, low blood pressure, speeding heartbeats and fainting.”

In pharmaceutical business, the current methodology to produce consistent performance quality drug is to follow “quality by analysis,” which is analyze everything. In the case of Baxter International, casualties and bad reactions are a clear failure of the prevailing “quality by analysis” culture.

Legislators and consumers are demanding increased inspections. The FDA does not have enough staff to inspect every drug that is imported in US. FDA inspects only 7% of the incoming drugs (FDA inspections). It will not only take increased funding but also time to train inspectors to achieve 100% inspection. We have neither luxury.

Even if FDA could do 100% inspection, they would be following “quality by analysis” methods, which FDA wants the pharmaceutical companies to abandon. It is well known that “quality by analysis” is an inefficient and expensive method of producing drugs. Consumer pays for every mistake, rework, and disposal, if the drugs do not meet their respective specifications.

It has been mentioned that USFDA or EU regulatory agencies should be stationed in China, India and/or other countries exporting drugs. This can only happen if there are agreements in place between various governments. We are nowhere close to such agreements.

If a supplier/manufacturer is behind schedule, there is pressure to release the drug to the market as soon as it is produced. In such circumstances, mistakes like Heparin are going to happen. As more drugs are imported in the future, we are going to hear more about the mistakes. Heparin mistake also suggests that there is a failure on part of the pharmaceutical importer to set up strict standards and stringent protocols. Laxity has to be completely eliminated.

Pharmaceutical industry has to move from “quality by analysis” culture to “quality by design (QBD)” methods. Until this happens, increasing FDA inspectorate and passing new legislation is not going to solve situations similar to the current situation. QBD builds quality in the product from onset. It will change the culture, improve quality and will significantly reduce pressure on FDA and/or any regulatory bodies. Someone has to make a move.

Is close good enough? Heparin fiasco.

2008-02-14T08:12:00.003-05:00

The recent fiasco of Heparin being sold by Baxter International is going to lay the blame of FDA (lack of inspection) and companies from China and India for making poor quality product and shipping it to US sellers. This is very myopic thinking.

Companies in EU or US who are importing active pharmaceutical ingredients (API) from China and India very well know which manufacturing facilities in these two countries have been inspected by USFDA and EU regulators. If they are importing API and formulated drugs from un-inspected facilities, then the blame of non-compliance has to be squarely put on the companies selling these products in EU and US.

It is well known that the regulatory agencies do not have sufficient staff to be inspecting every facility. With that being the case, the companies that are selling the pharmaceuticals have shrugged their “corporate responsibility” of selling products that have to meet regulatory standards.

We saw the case of melamine being incorporated in the dog food to enhance the superficial nitrogen content to give the analytical people the “good feeling” of meeting the necessary standards. No one has studied the toxicity of a substituted non-food product on human and animal health. Same thing happened with toothpaste.

Baxter International did not set up the proper protocol with their Chinese suppliers. I am sure they had set up the standards that have to be strictly met. However, there were sufficient laxities in the spec and/or the protocol for slightly off-spec API to pass through. I would not be surprised that the API met every spec but was slightly off spec that if not carefully reviewed would meet the set specifications.

Having manufactured products that have dual use i.e. food grade and non-food grade, I can speculate and speak from experience. In the case of Heparin, the API could not be reworked to meet the specs. Since it was marginally off specification and might meet the spec if overlooked must have been the case for the lots imported by Baxter International.

Press, legislators, and consumers have to look at the facts before they jump to conclusion that FDA is not doing its job and companies in China and India are bad. Any company anywhere if gets a similar opportunity will try to use a short cut and reduce rework, which cuts into profits.

Let us think rationally and understand the facts. Right or wrong, the seller has to be blamed no matter what the facts are. They did not live to their responsibility.

Girish Malhotra

Challenges to Ethical and Generic Drug producers

2007-12-23T00:31:00.000-05:00

If the current scenario of “drying of the blockbuster pipeline” and Generics increasing their market share holds, we could see most of the API manufacture, formulation and clinical testing moving to low cost countries. Since “Laws of Economics” prevail, this could be considered inevitable. Ethical and Generic companies have to develop and implement strategies that could give them competitive edge and allow them to move forward on their chosen path. Since Ethical and Generic producers are adversaries, it would be interesting to see the playing out of respective strategies. It is a real Chess game.

Ethical Pharmaceuticals:

Major pharmaceuticals have developed and commercialized blockbuster drugs. However, they have not retained these drugs in their portfolio after the patents expire, as they have been busy developing new drugs. Producing “patent expired” drugs has not been part of their strategy.

Due to high profit margins, Generics have taken over the patent expired drugs and have lately made every effort to take over the patented drugs through litigation. With aggressive entry of Generic producers from Israel, Iceland, and India, the turbulence in the pharma field has dramatically increased.

With the drying of blockbuster pipeline, escalating clinical trial costs, and relentless pressure of Generics to capture the market, Ethical drugs producers are trying to implement strategies to reduce their costs and retain their stronghold on the drug development chain. Some of the strategies being implemented are as follows:

Outsource drug development·
Outsource active pharma ingredients (API) manufacture and formulations
Synergize small molecules and/or biotech combinations
Acquire small biotech developers
Whatever else works i.e. collaborations

Some of these strategies might work as a short term fix to retain profits. However, the long-term impact of these strategies is going to be significant. The biggest consequence is going to be the shift, disappearance, and/or reduction of knowledge base from “Major Pharma” companies to the outsourced companies. Since the “outsourced companies” are in low cost countries, they have dual benefit of the above relationships. It makes them intellectually and financially stronger to become formidable generic competitors. We are beginning to see the happenings of this.

Generic Pharmaceuticals:

Generic pharmaceuticals are enjoying what I will call best of all worlds. They are basking in an unprecedented growth. I do not believe any of the financial analysts and pundits would have predicted this in the beginning of 2005.

Customers would like to have drugs at lower prices. Generics are able to fulfill this need in every market as a result the demand for generic drugs has increased. This surge has increased generic business dramatically in the recent years.

They have used these profits to grow organically and acquire sites that are being shed by API producers and formulators at significantly low costs. They have also been beneficiary of technology and intellectual property that comes with these acquisitions.

Strategies ⁽¹⁾being implemented by the Generic companies are unconventional and this is causing additional turmoil in the Pharma field.

Future and strategies:

Pharmaceutical companies have achieved handsome profit margins by inventing new drugs and by producing generics. Customers have paid for every inefficiency in the development, clinical testing, manufacturing, and supply chain. Since the pharma companies have been able to make respectable profits, they never saw a burning need to minimize costs of each step. Everyone has been comfortable in their respective arenas. However, the drying of the blockbuster pipeline and Generics trying to encroach on the playing field of Ethical companies is changing the market dynamics.

The price we pay for the drugs in US and some other countries are not market driven but driven by what the market can bear. Many consider these prices high and are getting low cost drugs every way they can e.g. Canada, Mexico, imports, and/or Internet. This has led to considerable debate and discussions as healthcare costs increase. Wal-Mart and few other companies are offering drugs at low price. This puts pressure on the companies in the supply chain to make an effort to continuously lower their costs. Companies will have to consider and implement new strategies.

If the major pharma companies are not able to develop new blockbuster or biotech drugs, they could start making generic drugs. This could lead to consolidation and formation of “Mega” companies. My definition of “mega” merger is combination of an Ethical and Generic company to be players in both markets. These mega companies not only will develop new drugs but they also will have to make every effort to retain the patent expired drugs as part of their portfolio. If this happens, every step of the supply chain (especially manufacturing technologies) would be critically evaluated and methods implemented to reduce costs. The business model of mega companies could be a combination of market and consumer driven companies trying to maximize their market share. This should reduce global healthcare costs.

Government of India ⁽²⁾has announced an innovative drug discovery program combining global IT firms (Sun Microsystems), researchers (Royal Society of UK, Imperial College of London, Medicine Sans Frontiers etc.), companies, and young minds at India’s scientific laboratories to invent drugs at a fraction of the cost of a multi national company (MNC) developed drug. An open platform of drug research like Linux development is an interesting and innovative concept and path. Success here would genericize and commoditize pharmaceuticals and add additional pressures on pharma companies to implement technology improvements to reduce costs. Other business models will emerge and it would be interesting. I expect that better than 50% of the pharmaceutical market would be a commodity market in the next five years and we will see prices drop.

⁽¹⁾Generic Antidepressant May Affect Wyeth http://www.forbes.com/feeds/ap/2007/12/20/ap4461011.html?partner=alerts accessed Dec 20, 2007

⁽²⁾Govt to rope in young minds to invent cheaper drugs http://economictimes.indiatimes.com/News/News_By_Industry/Healthcare__Biotech/Govt_to_rope_in_young_minds_to_invent_cheaper_drugs/articleshow/2635842.cms accessed Dec 20, 2007

Girish Malhotra

Year 2007 in Pharmaceuticals

2007-12-11T12:10:00.000-05:00

Year 2007 might be remembered as an eventful year for the Pharmaceutical industry. I have not kept a tally but the number of layoffs and plant closures are significant. I do not believe anyone would have thought about this five years ago.

Pharma industry has had a myopic vision. They have believed in that the pipeline will always be full and the “generics” will live on crumbs. It never invested in upgrading manufacturing technologies. Simpler technologies could have prevented generics from taking over the crumbs. Crumbs are now becoming stronger, boulder and they will haunt the majors.

Unfortunately, the pipeline is sputtering and has leaks. Now the majors do not know what to do. The world needs cheaper medicines to live and generics can fill the need.

Jacob Schumpeter of Harvard said that industries go through “creative destruction” and it is a necessary part of the progress. Is the Pharma heading that way?

Girish Malhotra

Things we know about drug prices but are afraid to ask.

2007-11-19T21:50:00.000-05:00

Recently an article presented a perspective titled “Cost per day/Cost per kilogram: What’s the right price for an API? That depends whether you see things like a pharma company – or like a CMO.”

This article illustrates why the drug prices are high. Drugs are competitively priced with similar molecules. I do not believe anyone has asked the customer what can she/he pay or should pay. Customer wants to live and she/he is going to pay whatever is the demanded price.

Due to large price differences of medicines in US and many other countries, people explored alternate sources for their medicines. Internet made that easier. This led to import of drugs that could also be counterfeit and illicit. Hopefully, Wal-Mart’s offer of $4.00 for a month’s supply generics will reduce these imports and counterfeits.

The referenced article suggests that the Wal-Mart’s prices are lower due to shorter supply chain. Is Wal-Mart not making any “enough” money? I believe they are making their targeted profit margin, as their goal is to make money for their shareholders.

Wal-Mart has done its homework at $4.00 price level. It might be worth looking at the price of formulated drug. The following is an illustrative case and has no similarity to any drug.

I have assumed an active (API) cost price is $50.00 per kilo. It is also assumed that the combined cost of excipients is $25.00 per kilo. The API to excipient ratio in the tablet is 1 to 9. Based on these assumptions, component cost of API and excipient for a 100-milligram tablet is 0.5 cent and 2.25 cents respectively. I have assumed that the cost to formulate and package is 2 cents per tablet. This brings the total cost of finished tablet to 4.75 cents.

At $4.00 for a 30-day supply, per tablet price to the customer is 13.33 cents. Thus, there is a profit margin of 8.58 cents (about ~60%) per tablet between the formulator, distributor, and Wal-Mart. 8.58 cents might look a small number but when you sell millions of tablets, dollars add up.

Cost of the API is about 3.75% of the Wal-Mart selling price. It is a low number. The API producer has made their desired profit margin. If Wal-Mart, CVS, Target, Walgreens, and other major drug sellers along with the API producer want to increase further their margin, they can do that by having the API supplier and the formulator to reduce their costs by implementing improved manufacturing technologies. In addition to improving their margin, the API producer and formulator will have fewer toxins to treat for safe waste disposal i.e. reduced cost and will also reduce environmental impact. Besides making higher profit though innovation, we have an obligation to “our planet earth.” We have to do our best to preserve its serenity and grandeur. We owe this to ourselves and for the generations to come. Thus, technology innovation is necessary.

It is conjectured that the cost of API component of a tablet is small compared to the selling price and for that reason; there is no incentive to develop and implement better technologies. This to me is a morbid thinking. It is like saying why improve our business practices if the business can make significant money because the customer would pay sellers price as she/he want to live. Complacency and lack of desire to improve invites competition and we are seeing that in the Pharma world.

Girish Malhotra

Environmentalism, Technology and Human Life

2007-11-15T09:01:00.000-05:00

Environmental conservation became a way of life in early seventies. Every manufacturing industry had to comply with appropriate effluent standards. Conservation technologies were developed and implemented to meet necessary regulations. Chemical industry used either of the following options to comply with the regulations.

Improve processes to maximize conversion of the raw materials to finished goods so that the waste treatment load is minimized.
Develop and use technologies to treat and dispose the unconverted raw materials and intermediates.

Commodity, specialty, and fine chemicals, due to their competitive pressures maximized their efforts to improve the raw material conversion and relied on option #1. However, the Brahmin cousins of chemicals “pharmaceuticals,” who have a disease curing and life extension value due to their toxicity to bacteria have mostly relied on the second option. This has been possible as pharmaceuticals have been able to achieve their profit margins due to relatively low competitive pressures and their ability to charge their demanded price. Customers have paid for the low conversion of raw materials in useful products as well as disposal of the undesirable reaction byproducts.

Since 2005, the global pharmaceutical playing field has suddenly seen many players challenging their big brothers. With about $100 billion dollars of ethical drugs coming off-patents and pressure from their generic brethren, major players are under considerable pressure to meet stock market and shareholder expectations. Lack of blockbuster drugs in the pipeline is also adding to their woes.

Brahmins who until recently were “untouchables” have become vulnerable and are scrambling to retain their profit margins. It is surprising that they are following the same road that has been unsuccessfully travelled by many in the chemical and other industries. Recently we have seen layoffs, plant closures and they are accelerating. Research is moving offshore. I guess the Brahmins are no longer the “untouchables.”

Short term with the current strategy the Pharmaceuticals might be able to retain their profits. However, there is a downside and it is disappearance of the knowledge base while the generics becoming stronger competitors. Generics are taking advantage of this situation and expanding as they have a growing customer base, (almost everyone in the world wants lower cost drugs).

Is there a way out of this dilemma? There is and it is through manufacturing technology improvements. Companies need to develop processes where they do not have a double jeopardy, which they currently have. Double jeopardy is low raw material conversion to finished goods and then spending monies to convert the toxic materials to products, which can be properly and safely disposed to meet the necessary environmental regulations.

Pharmaceutical manufacturing plants may meet the established environmental standards but the small percentage of chemicals in the effluent could still be toxic to the plant and aquatic life. Thus to prevent damage to the life, pharmaceutical companies might have to meet an “ecotoxic” standard.

Ecotoxic definitions and control limits would have to be developed for most of the pharma raw materials, their intermediates, and actives. This can be a prolonged and expensive process. This will be resisted by the industry. It is difficult to conjecture the implementation costs but would be high. All this could raise costs and potentially make drugs more expensive.

Is there a choice and can we reduce the cost of drugs rather than raising them to achieve a certain eco-balance? Life extension also becomes a part of the economic equation. These issues can be discussed and I am not sure of the “correct” answer. However, while all this is debated, the pharmaceuticals will still be needed. Is there an economic interim solution? There is, and it is “need to improve the active pharmaceutical manufacturing and formulation processes.” Some could say that in the overall scheme of things, such an exercise is not worth the effort. Such efforts will not only reduce pharma costs but will also reduce the toxic load on the effluent wastewater treatment and soil. And finally, if some one says or believes that in total scheme of things technology improvement and cost reductions are not important and they have “NO” impact on our planet’s environment, then we need to think about the legacy we will leave behind for the next generation and the generations to come.

Girish Malhotra

What is India?

2007-11-03T16:02:00.000-04:00

I just returned from India and the changes I see in the last 18 months are enormous. It begs a question "What is India?"

India

is a complex mix of every imaginable culture, color, creed, religion, caste, and social structure. In 2007,

India

celebrated its 60^thIndependence anniversary. This is a milestone but I do not look at

India

as a 60 year old but a 16-year-old youngster who has a “can-do” attitude. Why the 16 year old?

Even though

India

became independent in 1947, it was shackled by its stringent policies, which suppressed economic growth and bread every ailment that goes with it. In 1991, by stroke of crisis, luck, quirk, and/or their combination, then Prime Minister Mr. P. V. Narasimha Rao changed the course of

India

on advice of the current Prime Minister, Dr. Manmohan Singh, Finance Minister P. Chidambaram and others. Thus, a sixteen year.

Any visitor can be awed by

India

when they land at any of its gateway airports. Traffic, people, vehicles, and chaos at any road intersection overwhelm many visitors from “the developed countries.” For some strange reason this chaos teaches

India

tolerance and desire to get ahead. This chaos also lets an Indian look at multiple scenarios simultaneously and come up with a solution.

I look at

India

as a runaway train with its 20-40 year old having a time of their life. This is evident by their totally blue-sky goals and objectives. Can they make it?

My answer is yes. Majority of the 16 year old grow up to be a fine young person. They do stumble but with societal support, they quickly recover, grow stronger, and move forward. This is how I see

India

.

Star date 2025 will give us an interesting picture. Signs are there.

India's stock exchange index has gone from 10, 000 to 20,000 in twenty months. Bill Gates used to be the richest person on the planet. Last week Mr. Mukesh Ambani became Numero Uno.

Girish Malhotra

Purchase Power Parity

2007-10-29T07:48:00.000-04:00

In the globalized world “purchase power parity” is a necessary and an important consideration. However, this is never discussed in most of the printed news.

Reasons for this consideration are very simple. Except for few financially savvy individuals, majority does not understand it. People convert one currency into other, look at the absolute number, and compare them. This is especially true when British pound, dollar, Euro, or other currencies are converted to currencies of supposedly low cost countries.

Normally Press converts the foreign currency to the currency of their readership. Since the readers are not familiar with the purchase power of one currency to the other, reader gets the impression that the people are living in poverty or living like kings. The disparity between the absolute numbers is the reason why the jobs are going to low wage countries.

An example will illustrate the point. In India, a five pack of chewing gum costs about Rs. 5. In US, the same five pack costs about $0.80. At the rounded exchange rate of $1.00 = Rs. 40.00, one can buy about eight five packs for Rs. 40.00 in India. This clearly states that the buying power of the Indian rupee is higher than the buying power of dollar. McKinsey & Co. in its one of its report suggests the purchase power parity of Indian rupee to US dollar to be about 8.5.

Thus, it is relevant that the wages etc be compared on apple-to-apple basis rather than apple to tomato basis, since both happen to be round objects.

“Purchase power parity” can be offset by innovation.

Girish Malhotra

Downsizing

2007-10-27T01:20:00.000-04:00

The news of layoffs at pharma companies had been unheard off and were unimaginable. Reasons were simple. Companies made profits, as there was no realistic competition. Generics from India have changed the playing field. The status quo does not exist anymore. Drugs are being commoditized and profits are going to shrink. In addition, the blockbuster model is not working.

This is history repeating itself. We saw this in chemicals, textiles, steel etc. in the developed countries. Toyota changed the playing field and US automobile companies did not react. Did anyone ever imagine GM would seize to the largest auto company? Globalization is bringing new intellectual capital to every aspect. This has resulted in some improvements in manufacturing processes and technologies in every aspect of business in the companies from India. This is not being the case at companies in the developed countries. With the layoffs, the knowledge base will start disappearing.

Established companies have followed the practice of closing plants, reducing R&D and outsourcing everything they can. These are short-term gains to appease the stock markets. Cumulative effect of layoffs is demoralizing on the work force. Why would some one want to put their heart and soul in innovation if he/she might not have a job? Humans pride in innovation. If that road is closed, humans stop putting their best and in the long run, the knowledge base is lost. Recent announcements at major pharma companies are just the start of reduction in knowledge base and intellectual capital.

There may be still opportunities. This is through simplification of the manufacturing technologies and processes, the heart of any manufacturing company. We need to revive the heart before it totally fails. This can only happen if the chemistry, physics and engineering of a chemical reaction and formulation is properly understood and accordingly commercialized. This has not been the case. USFDA clearly states that the current practices are antiquated.

Companies have to step out the box and use every possible resource (inside or outside) to re-invigorate the manufacturing and R&D of their companies. This is necessary to stop the downward spiral.

It is well known in the specialty chemicals businesses that the yield and the on-stream-time have to be high for any business to survive. In pharmaceuticals (specialty chemicals with disease curing value) the yield of active ingredients are low. I have seen yields as low as 5% and “on-stream time” is less than 50%. Yes, one can charge high price for the drug to cover up for inefficiencies and lack of innovation for some time. However, this cannot last forever. One has to improve the processes to reduce overall business costs. If this is not done, history will repeat itself and we are beginning to see this in pharmaceuticals. Is it too late? Again, the answer is NO. Pharma companies need to put an effort to improve manufacturing and process technologies and that is the only way companies will survive.

Girish Malhotra

India's contribution to humanity

2007-10-24T23:32:00.000-04:00

Few years ago Pharma companies in

India

“genericized” drugs for AIDS. Many thought it was a bad business decision. However, others thought this was service to humanity. Many of

India

’s pharma entrepreneurs have been able to profit and service humanity.

In US, there has been a squabble about use of the stem cell. Others are using the stem cell therapy to serve humanity. Fortune magazine’s October 24, 2007 issue covers the use of stem cell to restore “eye sight.”

This is “WOW” contribution. Interestingly the stem cell procedure for eyes is being done at Hyderabad, an IT hub of India.

Is IT a Catalyst for India’s Drug Industry? http://www.pharmamanufacturing.com/articles/2007/155.html

gives us additional clues.
Girish

Pharmaceutical buzzwords

2007-10-13T13:07:00.000-04:00

In the last few years we have been reading about PAT (Process analytical technology), QBD (Quality by design), Kaizen and Six Sigma etc. Kaizen and Six Sigma can improve the development of a process and improve an existing commercial operation. PAT and QBD are not magic wands. In addition, PAT and QBD do not happen by themselves. Their deliver value only after we understand the process before it is commercialized. This can only happen if we follow the following road map and make an effort to get there.

1. If we do not have a thorough knowledge of the chemistry, kinetics, economics and do not know how to translate a lab process to commercial scale, we are not going to able to apply principles of chemical engineering to design an economic process that is going to give us quality product. We will be stuck in post analysis and fixing mode, the current mode of API manufacture.

2. If we have more than one solvent in the process, we have to go back to the lab and justify why. More than one solvent means we need separate storage tanks, recovery and disposal methods. All of these cost money.

3. I do believe that IR, HPLC, Spectroscopy etc. are an excellent process development tools. However, if we use them to monitor the reaction progress and completion of each step, it does not sit well with me. I consider this an expensive way to cover what we did not do “right” from the start. Application of these exotic tools forces us to have a process where we have to analyze the intermediate product to make sure we have the proper compound of desired purity and yield. This is a batch process and capital investment increases. The total business process slows down as the cycle time from raw material to finished product increases. We have to implement methods that reduce the testing time i.e. the resulting cycle time.

4. If the process has multiple steps and the overall yield is anything less than 85%, (I can already hear in the background: is he dreaming?) the process is inefficient. OK 85% may be asking too much, can we settle for 70-75%? We have to figure out how to get to higher yields. Recently I was reading a patent that had an eight-step process. The yield was less than 5%. I come from “old school” where I was taught high yield means less pollution and more money in the bank. I hope when this company commercializes their process, they would have figured out how to get a better yield.

5. Process control technologies that can control the reaction, flow, and stoichiometry exist. I equate our current development and subsequent commercialization processes to “a car running us” rather than “we running the car.” Wouldn’t it be nice if we have developed a process that we can control?

6. Low process yield means that the unconverted raw materials are going in the effluent that has to be treated to meet the effluent water quality standards. Unconverted raw materials have to be disposed in a safe manner. We are loosing money two ways. a) lost raw materials, b) money to dispose them. Thus, it is in our interest to maximize the conversion yields.

I am not criticizing the existing processes or the processes that are in the pipeline. We have to attempt to have the best possible process from the very beginning of the process development. Again, to achieve the highest value from a process we have to have a complete and through understanding of the chemistry and appropriate unit operations, we are developing and want to commercialize.

It is well know that the pharmaceutical processes (glorified specialty chemical) have less than 40% on-stream time. This is poor. A process developed with the above road map when commercialized will have much higher equipment utilization time and should produce quality product requiring minimum in-process analysis.

API (active pharmaceutical ingredient) and specialty chemical costs

2007-10-10T17:03:00.000-04:00

Recently there have been write-ups about a significant percentage of API are coming from China and India. These beg a question: Are the Pharma companies importing APIs from non-cGMP complaint companies? The answer is NO.

In 2006, SOCMA (Society of Organic Chemical Manufacturers Association) and EFCG (European Fine Chemicals Group) issued a joint position saying that some countries are “not playing according to rules”. “Patient safety and national security compromise” was the theme of this position paper. This seems to be challenging the very foundations of the buying pharma companies. It is indirectly saying that the Pharma companies are not caring of patient safety and national security. I do not believe that the Pharma companies are going to put anyone in jeopardy intentionally. In addition, India has the highest number of FDA approved facilities outside US. China is striving to get there. If the imported API and the drugs being sold do not meet the regulatory standards, the reputation and credibility of the pharma companies will be lost in an instant. They cannot afford such en event. Unscrupulous business people are always going to be there. We have to stay away from them.

Since the Chinese and Indians are not going to go away, EFCG at the Milan CPhI October 2007 meeting reversed its position. “We are not anti-Asia.”

API are being imported as they meet the desired quality standards and their costs are lower than the comparable product being made in the developed countries. Combination of better technology, lower investment and lower labor cost influence cost and quality. We know this but we should review it again.

If the process technology used by the companies in India and China is simpler than the technology used by the API manufacturers in the industrialized world, then the companies in the developed countries have an opportunity to improve their technology. Simpler technology also means lower investment. Many a times the intermediate products in the synthesis of an API are analyzed before the next step. This is “analysis paralysis.” Technology should be such that the intermediate testing can be minimized. This will reduce cycle time i.e. improve productivity and lower costs. If testing has to be done, the test methods have to be the simplest. Exotic equipment needs high-powered personnel and that adds cost.

With respect to labor costs, they are lower in China and India when compared on a dollar to dollar (converting local currency to dollars) basis. However, this is not the correct comparison, as it does not give a realistic picture. Indian wages are lower but they have a higher buying power. A family of four in US earning poverty level wage is about $20,000 per year ($1666.67 per month). The same dollars converted to the Indian currency translates to about salary of Rupees 66,650 per month. This money could allow the family in India to have a full time house help and a chauffer. Very few can afford such a life style in the developed countries. Another case in point, in US, we pay about one dollar for five sticks of chewing gum. One would pay less than 15 cents for the same five sticks in India.

Since the playing field has changed, the only choice for the companies in the developed countries is to achieve and/or beat the costs from China and India. This can only be done through innovation of process development methods, technologies, and manufacturing practices. We have to simplify (Profitability through simplicity) and remove the redundancies. A new reality is there and we have no choice. It is a “do or die” situation.

Companies in India have to improve their technologies also as China is coming in with lower raw material and labor costs.

Pharmaceuticals

2007-10-05T14:10:00.000-04:00

Every pharmaceutical we take has an active pharmaceutical ingredient (API) that is formulated with inert excipients to facilitate dispensation. Significant attention has been given to the formulation manufacturing processes. In the formulation process, the intent is to make sure that the active ingredient is uniformly distributed in the pill or capsule when they are produced. I am sure everyone knows why we have 1 mg (milligram) pill of a certain drug but it looks much bigger. Inert excipients are used to facilitate dispensing. If this was not done, it will be difficult to consume as many of the APIs have bad/poor taste and we could loose the small quantity.

Since a lot of process development work has been done on the formulation, I will skip it and focus on API manufacture. API come in two forms, free flowing solid or liquid. Solids are produced mostly through crystallization, spray drying or grinding and drying of the API. These unit operations can be batch or continuous and are well covered in any chemical engineering curriculum.

Majority of API are organic compounds. Every API is a specialty chemical that has a disease curing and life prolonging value. Thus, the manufacturing practices and philosophies applied for the specialty or fine chemicals can and should be applied to the chemicals that cure disease. Since API cures a disease, this means they are toxic and kill bacteria that make humans as well as animals sick.

Most of the times an API manufacturing process are a batch process. Many a times the commercial process is a scale up of how the process was developed in the lab. The purity after each step is analyzed by high-powered analytical instruments and then the next step is carried out. This is a “risk-averse” approach and can be called “quality by analysis.” We are and should be thankful to the approach, as we have had safe drugs. We cannot imagine not checking quality of the drugs. We do not want fiascos similar to the recent animal feed and lead paint on toys. Nevertheless, I call our current pharma methods “belt, suspenders and harness” approach. This approach has big financial implications on a company. Physical structure and equipment investment, raw material, work-in-process and finished goods inventories go up.

We have not applied the best scientific and engineering methods, principles, and practices we taught the world and have practiced in the manufacture of specialty/fine chemicals to the pharmaceutical manufacturing. USFDA in one of its reports suggests the current manufacturing practices are “inefficient and costly.” they are being polite. Regulatory agencies would like the industry to move from “quality by analysis” to “quality by design” but it takes more than words. Regulatory agencies cannot dictate any company how to manufacture their products.

USFDA in its cGMP guidelines has no mention of “continuous processes.” The word “continuous” does not exist in any of their approved guidelines. Pharmaceutical manufacturing chemists and engineers have two challenges: 1) improve their existing processes 2) figure out how to convert their laboratory developments to a continuous process.

Continuous processes are not “voodoo science.” They are based on sound scientific and engineering principles. They deliver consistent quality product “quality by design” (QBD) and are economic. Continuous process also means continuously converting a starting raw material to an API and then formulating the API to produce a dispensable medicine.

Welcome

2007-10-04T17:52:00.000-04:00

Welcome to my blog.

My intent is to write down my experiences and observations as they relate to manufacturing, technology practices and strategy of Pharmaceutical, Chemical and Coating companies.

I will share my experiences in these areas. You are welcome to ask a question and comment on my observations.

With globalization , the world has changed and internet has accelerated this change. It has become 24/7 world. Things happen and they impact the landscape.