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Thursday, January 31, 2013

Can Falsified Medicine and Other Directives Backfire?

All of us who are concerned with pharmaceuticals have to follow and comply with different regulations and directives. In the last ten years number of do’s and don’ts and “how to” have increased. Competition for drugs and APIs from developing countries has increased. It has been most painful for members of SOCMA (Society of Chemical Manufacturers and Associate) and ECFG (European Fine Chemical Group). They have had significant loss of business.  

In their effort to stop the business loss Falsified Medicine Directive (FMD) will be promulgated in 2013. GDFUA (Generic Drug User Fee Amendments) has been enacted and will come in play. cGMP practices have been coordinated and updated. Overall expectation is that whatever is sold in the developed countries, where the profit margins are the highest, drugs will be safest and meet the established quality standards.

From drug safety perspective all these make perfect sense. It is expected that by having regulations and directives customers will have safe and quality drugs. However, if some of the new directives and barriers are fully enforced, customers could face the following.
  1. Possible shortages
  2. Higher drug prices from current levels

We are sure that governments will intervene in either case and do their best to prevent each from happening.

On other side of the coin, suppliers from developing countries who supply majority of the APIs for the generics and brand/ethical drugs are not going to roll over and let go of their business. I believe many will be hurt and could go out of business but they have options. Constraints applied under FMD and others could finally lead to implementation of best of technologies and practices that are overdue in pharmaceuticals. Constraints could force consolidation and it might be the best option for many.

Consolidation would lead to increased production volume per site. This would also be an opportunity to create and commercialize best of the manufacturing processes for the products. Best practices of chemical engineering, chemistry and economics would be applied. With economies of scale and best safe and sustainable technologies, my expectation would be that their costs would be lower and quality equal or better than the companies asking for constraints. Overall business process will also be better. Best of technologies and business practices should improve profits for the consolidated companies from current levels. Drug prices should be lower. Consolidation might take some time, as it would be marriage of existing competitors a challenge in itself.

If consolidated companies are successful, I would believe that many other would follow suit to create formidable competitors that are much stronger than what we currently have anywhere in pharma. Pharmaceuticals will finally be able to compete. I wonder if this happens would it be the last laugh of the companies from the developing countries. Let us watch what brews out of these directives and regulations.

Girish Malhotra, PE
EPCOT International

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