Industry 4.0 (Digitization): Its Benefits to Pharma and Other Chemical Industries

Digital transformation ⁽¹⁾, Industry 4.0, is being touted as the manufacturing’s next act and it might as well be. BASF is an aggressive player in the chemical arena. Others are considering their options. McKinsey ⁽²⁾ and PriceWaterhouseCooper ⁽³⁾ are bullish on industries incorporating digital transformation. Virtues of digitization are being discussed. The concept is in its infancy. However, I strongly believe that the chemical industry that includes pharmaceuticals, specialty/fine chemicals, coating, additive, polymers producing companies will benefit significantly from digitization.  

With respect to digitization, my focus is on chemical and physical property information. Benefit of the generated information when diligently used in process development, commercialization and manufacturing could be higher than the EBIDTA suggested in McKinsey report ⁽²⁾.  

I would like to share my perspective of why and how digitization of physical and chemical properties can immensely help process development, scale up and commercialization of every product that is chemicals based. Till Internet came along essentially every supplier company shared physical and chemical properties of the raw materials. If the chemical and physical property data was not readily available much of it could be calculated using thermodynamic principles ^{(4, 5)}. Chemical and physical behavior postulated using thermodynamics had to be reconfirmed at times in the laboratory but was extremely helpful in developing and designing rather quite efficient processes. Solubilities and mutual behavior could be extrapolated. If the mutual behavior of chemicals was not available it was generated in the lab.

Value of the generated data was enormous as it reduced process development and commercialization time. It also assisted in evaluating and considering different process design parameters and operating conditions to create very near an optimum process that produced quality products from the get go. Due to differences in equipment size and behavior, physical and chemical property data assisted in transitioning from laboratory to pilot plant to commercial scale. All of the property data assisted in troubleshooting and optimizing processes.

As the Internet developed companies stopped sharing physical and chemical properties. Companies did offer Material Safety Data Sheets. Contained information was for safety compliance and had minimum information that could be used for process design. In order to get the necessary data for project feasibility one had to reveal and share significant product and process information. There was hesitation on both sides. Lack of reliable and useful physical and chemical properties meant delays in process development and commercialization ⁽⁶⁾.

I still recall Exxon’s Blue Book that we used in process design. Data Book of Hydrocarbons by J.B. Maxwell [D. Van Nostrand Company] based on Exxon’s Blue Book was an excellent source in public domain. In mid sixties Hydrocarbon Processing magazine published physical properties of hydrocarbons. All these were of great value.

If the physical and chemical properties and mutual behavior can be digitized and readily available through a central depository, chemists and chemical engineers would be developing best of the best processes and producing quality products. Doing it right the first time would mean significant financial savings from better processes and elimination of waste that requires remediation investment. Commercialization time would also be reduced. For brand pharma, digitization could mean patent life extension. Generics could consider taking advantage of economies of scale to make many drugs affordable.

Mr. Christoph Schmitz, senior partner at McKinsey ⁽¹⁾ correctly points that the right kind of talent (combination of chemists and chemical engineers and IT) would be needed for digitization. Chemists and chemical engineers would be assisted by IT personnel to digitize the needed data. It is time for everyone associated with any form of chemical producing and handling company to support Industry 4.0.

Digitized data would assist chemists and chemical engineers to develop and commercialize processes that will have comparatively higher process yield and productivity. Processes would be economic and more sustainable that the current processes. Pharmaceutical could become affordable. Global healthcare costs could be lowered.  

I can imagine improving process yield of the active pharmaceutical ingredient by 20% or more, reducing batch cycle time, using a single solvent instead of multiple solvents and producing a single active isomer if the product had two isomers. Additional benefits will come from significant improvements in inventory turns, asset utilization and product quality management.    

Additives, coatings, resins, polymers and petrochemicals will also benefit from digitized data. Global chemical and chemical engineering associations along with universities and government think tanks could join forces to digitize chemical and physical property data. All said and done digitization has value that has been proven over and over again within the companies who have used it. If the benefits more than trillion dollars value ⁽¹⁾ can be realized Digitization, Industry 4.0, is worth the effort.

Girish Malhotra, PE
President

EPCOT International

1. Westervelt, Rob, Digital Transformation, Chemical Week, October 17, 2016 pgs. 17-22
   
   
2. Baur, Cornelius, Wee, and Dominik: Manufacturing’s next act, McKinsey & Co. June 2015, accessed November 3, 2016
   
   

3.     Industry 4.0: Building the digital enterprise, PriceWaterhouseCooper, accessed November 3, 2016
 

4. Dodge, B.F., Chemical Engineering Thermodynamics, McGraw-Hill Book Company, 1944
   
   
5. National Institute of Science and Technology
   
   
6. Malhotra, Girish, Information Challenges for Product, Process Development and Process Design: A Reality Check, Profitability through Simplicity, April 10, 2011

Can Senate And House Bills S2615 And HR 4784 [Increasing Competition in Pharmaceuticals Act] Alter the Pharmaceutical Landscape?

Senate and House bills [S2615 ⁽¹⁾ And HR 4784 ⁽²⁾] are an interesting attempt by the US government to increase competition in the pharmaceutical industry. One would and if they have not asked the question, should ask why the pharmaceutical industry has to be coaxed or nudged to compete. Shouldn’t that be the natural part of the business process for the companies to compete, be the most profitable and have the largest market share?

A review of the two identical bills suggests that there are issues with the proposed bills. In my estimation, it is highly unlikely that the US government or for that matter any government would succeed in guaranteeing the necessary lower priced generic drug supply. Desire to compete on product quality, price and profits has to come from within the industry. Government has to lower the regulatory barrier while holding companies accountable for any missteps.

Two proposed bills are a half-hearted approach to generate enthusiasm in the industry but red tape and slow process will mire the path to reduce time to market.

Language of the proposed bill “The Secretary shall prioritize the review no later than 150 calendar days after the date of the submission of an application that has been submitted and accepted for review under this subsection, or on a supplement to such an application” suggests to me very clearly that regulators are the bottleneck and these bills do not solve the problems.

The proposed bill suggests intervention by the Secretary “no later than 150 calendar days”. This in itself suggests that is system is flawed. Applications should be sequentially prioritized as they are filed. If the regulators cannot get the review completed on a timely basis and get the product commercialized, we all need to look at the value of the proposed bill. Industry and regulators need to develop and promulgate a program that that assures quality and safe drugs at the lowest price on a timely basis.

I suggest the following modifications to the proposed Senate and House bills. Industry and the regulators have to on top of their game to deliver the best results.

Since company’s intent is to make profits, they should have every “t” crossed and “i” dotted about the process and method of manufacture before they submit review application to the regulators. Industry needs to wean itself from the regulators. Do this or that or this is missing or explain why is a clear dialog between the company and regulators is an indicator that the company does not and would not have command of the process and produce products by repeated analysis [quality by aggravation].

Company’s submission of the best of the technology, quality control processes, inventory management and business process information would be clear indicator that they can commercialize the product as fast as possible. Such an attempt will reduce the regulatory review process and time. That should create competition. If the submitted information is flawed or incomplete, the application under review should be returned to the company for completion and if the company decides to submit their ANDA application, the process time clock would start all over again. This would be an excellent indicator of company’s command and capabilities of commercializing a process that produces quality products. Repeated back and forth between companies and FDA would suggest there are serious issues at the companies.

US Legislature has recognized that there are delays in getting necessary approval from the USFDA. To expedite the process review the “review clock” should start from the day ANDA approval application is submitted. Regulators should be given maximum of 150 days from the date of filing to finish the review and act on the application. If the company has submitted all of the necessary information and their application can be approved in 150 days or less, they should be given “priority review voucher” which they can use for future submissions or sell to any other company. Issuance of priority review vouchers could be on a sliding scale. If the company’s ANDA application is approved in 90 days, Applicant Company gets two “priority review vouchers” and one “priority review voucher” if after 120 days.

My conjecture is that the proposed changes in the Senate and House bill would get the ANDA approved faster, increase competition and lower costs. A transparent ANDA application progress indicator that is updated on FDA website would be of great value. Some of the vested interests would intervene but my hope is that the best should come out that would benefit companies, patients and the pharmacy benefit managers. Current Senate and House bills are toothless and worthless as far as lowering drug prices and increasing competition.

Girish Malhotra, PE

President

EPCOT International

1. S.2615 - Increasing Competition in Pharmaceuticals Act, https://www.congress.gov/bill/114th-congress/senate-bill/2615
   
   
2. H.R.4784 - Lower Drug Costs through Competition Act, https://www.congress.gov/bill/114th-congress/house-bill/4784

Potential Pathway to Alleviate Drug Shortages and Higher Prices

In the recent years we have seen increasing drug shortages and higher prices ⁽¹⁾. There has to be a solution. Recent personal conversations ^(2,3) about the issue reinforced my thinking about a potential solution that I would like to share in this post. It could be a start of a conversation and we collectively could develop mechanisms that could control persistent drug shortages and higher prices. Many different solutions ^(4,5), too many to reference, have been suggested but they are accessible through search.

Modified elements of Orange Book ⁽⁶⁾ and Food and Drug Administration Safety and Innovation Act [FDASIA] ⁽⁷⁾ can be used to reduce drug shortages and lower high prices.  

Orange Book lists companies producing each drug. Once a company associated with a drug is included in the Orange Book, the drug becomes evergreen for the company. Under FDASIA ⁽⁸⁾ company is obligated to inform the regulatory body of its intent to discontinue or have an interruption in the supply of a drug.  

Companies have six months ⁽⁷⁾ to inform regulatory bodies about discontinuations and interruptions. In the case of interruptions six months might not be sufficient time to assure supply from alternate suppliers and shortages can happen. Interruption to me point to supply chain issues. They are correctable if companies make an effort to assure proper raw material and equipment availability for the drug. If diligent effort is not made to assure raw materials and equipment availability delays will continue. Under such circumstances regulatory bodies, healthcare systems and patients have no recourse but make do with whatever they can. Such situations can result in loss of life. They also become an opportunity for the price gougers who can produce the needed drug.

One potential solution could be to have companies submit to the regulatory bodies their expected production plan for the life saving drugs. Companies are not going to like this but it would cajole companies to improve their operations. Mutual cooperation would be beneficial for all. Life saving drug definition could be a contentious issue.

If companies cannot correct the supply chain issues there is another consideration and that would be “company looses its evergreen production and marketing status for the drug in question after an agreed time e.g. 6 or 12 months after the first incidence”. Companies would have to make an effort to prevent loss of their drug evergreen status. Delisting of companies would be published.

In addition, if the company loosing its evergreen right wants to regain its production and marketing privileges, they would have to re-apply for regulatory approval. This will force companies to manage their operations efficiently. My thinking is that companies would have to make an effort to retain their evergreen right for a drug.

Companies looking for opportunities could use the interruption, short supply and discontinuation list to enter the market. Such list would also provide existing suppliers an opportunity to increase their production volume through use of better manufacturing technologies and increase their patient base and profits.

Companies are not going to like “delisting of their evergreen status”. I can conjecture opposition to the proposal but the regulatory bodies need to take an aggressive action for the issue (shortages and blatant price increases) at hand. Unless forceful benefit/loss become part of the FDASIA, my concern is that shortages and price hikes would continue. If we want to make a reduce incidents of drug shortages and astronomical price increases, we need to be bold.   

Girish Malhotra, PE

EPCOT International

1.  Generic Drug Price Gouging Has Physicians Raising Red Flags, http://www.science20.com/news_articles/generic_drug_price_gouging_has_physicians_raising_red_flags-164875 accessed April 10, 2016
2. Dr.  Janet Woodcock, M.D., Director, Center for Drug Evaluation and Research, US Food and Drug Administration, April 10, 2016
3. Dr. Albinus D’Sa, Special Assistant to the Office of Process and Facilities, Center for Drug Evaluation and Research, US Food and Drug Administration, April 11, 2016
4. The FDA can single-handedly reduce drug price-gouging. Why is it waiting? http://www.latimes.com/business/hiltzik/la-fi-mh-the-fda-can-single-handedly-stop-20160105-column.html accessed April 10, 201
5. Greene, Jeremy A, MD, PhD, Role of the FDA in Affordability of Off-Patent Pharmaceuticals, JAMA, pg. 461-462, February 2, 2016 
6. Orange Book 2016, accessed April 9, 2016
7. Food and Drug Administration Safety and Innovation Act, accessed April 9, 2016
8. Food and Drug Administration Safety and Innovation Act, Title X-Drug Shortages pg 107-109 accessed April 11, 2016

Reading the Tea Leaves: Predictions for Pharma's Future

The following was posted on January 15, 2014 on www.pharmaEvolution.com now defunct. 

Based on what has transpired in the last two years, I am writing an update that will be published in few days. I thought an old post would be a good preamble for the future. 

Wednesday, January 15, 2014

The human race has one significant weakness. We all want to know what the future holds for us, and we want to know now -- hence the popularity of fortune-telling and such "fields" as astrology. In our desire to predict tomorrow, however, we often forget simple cause and effect. What we do today helps determine what happens tomorrow. For instance, every new developed and approved drug, in efficacy and in price, directly impacts company and industry profits.

Despite ongoing product-quality issues, drug companies have been profitable. However, this picture is about to change. Some say that it has already begun to change. Clearly, what we do today will shape pharma's future.

Here are my predictions for the industry over the next five to fifteen years. How do they compare with yours? As you'll note, I see the status quo prevailing in some cases, forcing change to come from unexpected places, such as regulatory agencies or outside forces. But what do you think?

1. Pharma companies will have to figure out how to reach the world's masses, rather than small patient populations, if they are to succeed in the long term.

2. On average, the industry's success rate of development and commercialization, for both small molecule and biotech drugs, will not change much from its current level. “Eroom’s Law” still limits pharma's destiny.

3. High drug pricing soon will be frowned upon and discouraged by PBMs (pharmacy benefit managers) and hospitals.

4. Instead of becoming “process-centric,” pharma will stay “regulation-centric.” Process-centricity, if adopted, would allow companies to exceed regulatory requirements, which could also avoid many issues that have created public relations and financial headaches. Current regulatory guidelines and requirements discourage change. Since changing an existing process requires approval, it is still perceived to be a long and expensive step, and something to be avoided.

5. Industry will hedge in adopting many of the internal changes (manufacturing methods, technology, and supply-chain improvements) that could improve profitability and move from the current quality by analysis/aggravation to a quality by design approach. Again, this is due to regulatory constraints. Short patent lives for the ethical (brand) drugs will impede innovation in manufacturing technologies. At the same time, most generics manufacturers have been in business too short a time for their managers to grasp the value of better technologies and methods.

6. Since current or higher level of profits can be achieved with the current inefficient practices, industry leadership does not see any value in improving its product development, business, and technology practices. External forces will drive change.

7. With not much forthcoming from the industry to improve its manufacturing and business practices, regulatory bodies will enact regulations that will force the industry to adopt better practices. This tug of war will continue, unless the industry takes the lead.

8. Continuous formulation processes could be a reality in the next five years for new drugs.

9. Continuous API manufacturing is possible, but it will require a different economic and manufacturing model.

A shift is taking place in the global pharmaceutical businesses, whether we like it or not, and is being brought on by generics manufacturers based in developing countries. Pharmaceutical companies will have to take radical measures to retain or increase their revenue streams and profits.

A shift to a new model from the current model in new drug discovery, development, manufacturing technologies, supply chain, conservation, and sustainability requires an “unreasonable man” as described by George Bernard Shaw. ("The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.")

Significant innovation is feasible in manufacturing and its support functions. For it to happen, though, the pharmaceutical industry will have to move its focus from “regulation-centricity” to “process-centricity.” The industry still appears unwilling to take the steps required for change.

The world and its inhabitants would clearly benefit from better and higher availability of lower cost drugs, while companies would be able to improve their profits from the current levels. I view this as a win-win situation. What do you think?

Girish Malhotra, PE

EPCOT International