Drug Shortages, Quality and Prices: Who is Responsible?

Recently US FDA ^{(1, 2)} presented its perspective on how to reduce drug shortages and potential solutions. Without a clear road map and a game plan, that is acceptable to all and could be followed to resolve the issues nothing will change and/or happen. In the coming time a very lively discussion/debate about who is responsible and will participate to alleviate shortages will happen. My conjecture is that good bit of finger pointing ‘who is responsible’ will result and not much will happen. All said and done someone has to take the responsibility and must be held responsible for less than agreed quality product, shortages and ever-increasing prices of generics. FDA, Drug producers and the distributors which includes PBMs (Pharmacy Benefit Managers) should be part of the discussion. There is no two ways about it. I have presented my thoughts about the roadmap. There is no financial or any other obligation with any educational/commercial or regulatory body. 

In the drug hemisphere there are two drug classifications (Brand and Generic) and they must be dealt separately. In the process of getting drugs from either classification to the patient there is a common element and its impact on discussion of quality, availability and prices is totally ignored. This element is distribution chain aka PBMs and also includes insurance companies, the whole distribution chain. 

Behavior of PBMs and allies is seldom discussed. They are treated as the savior in healthcare but a deeper analysis suggests that they are significant part of the problem for quality, availability and pricing especially for generic drugs. Their contribution is seldom acknowledged, but if discussed, is generally ignored ^{(3,4,5, 6, 7, 8, 9)} by most. Drug innovation is not compromised in this conversation.  

Brand vs. Generic Drugs: 

Brand drugs are produced by limited number of companies but generics are produced by many ⁽⁶⁾. It is easy to address manufacturing, distribution and quality issues for the brand drugs. Brand companies do everything possible to avoid poor quality and availability issues as the bad publicity can be lethal. They are very powerful companies, who invent and commercialize new drugs and make sure that there are no issues of any kind. 

Influencers in Drug Business: 

Concepts ^(1,2) to reduce shortage are proposed but, in my estimation, they will not resolve the issues at hand. FDA’s effort is lots of talk and no meaningful results. Alternates to latest recommendations, discussed later, should be considered. Some alternates have also been proposed ^{(10, 11,12, 13, 14)} and should be reviewed.

     FDA. ----> Drug Producer [API manufacturer + Formulator ----> PBM + Drug Distributor -----> Patient

                                   Figure 1: Parties involved in drug business

Figure 1 reiterates who all is involved in the drug business (no pun intended). In the current system FDA, for sales in the United States, makes sure brand and generic quality drugs are approved, manufactured and distributed. Drug producers must make sure that they produce and sell ONLY approved repeat quality drugs day in and day out and follow USFDA guidelines. Drug distributor is the intermediary who assures quality drugs are bought and sold to the patients.  

In the current business model “drug distributor, includes PBMs” buy and sell drugs and is a for profit intermediary. They presume they are selling quality drugs. This may or may not be true. In the current system PBMs are not held accountable for sale of less than quality drugs. They should be held accountable. Drug distributors, as discussed later, can be a major cause of the drug shortages and less than quality products. 

Every drug distributor, like any seller, is in the business to sell quality products and maximize their profits. Based on my experience, I would negotiate purchase prices with the manufacturer/supplier to maximize my profits. Sellers, in turn to stay in business, must improve their business practices to maintain their profit margins. Margin retention can come from economies of scale and/or improved processes/technologies or taking short cuts. 

Taking short cuts can result in less than quality product and if not caught by the buyer, is the easiest way to retain profits. These in Pharma’s API manufacturing and their formulations can come from less than efficient processes ⁽³⁾, lax process controls and management. These are known facts. In manufacturing, taking shortcuts can result in losing track of the process and if the quality suffers no one would know where the problem occurred and cannot be corrected. Financial losses can result. 

FDA’s inspections in pharma manufacturing are data capture based. If short cuts have been taken they are covered up by falsification of data. Companies, who can manage data, can get away with less than quality product being shipped. However, if caught the worst scenario would be a 483 citation or their continuance. Lack of FDA’s stern action and not being held accountable on a continuing basis leads to complacency. Examples of citations are available at FDA site. 

It is expected that every manufacturer of API and their formulations has absolute command of their processes and produces quality products using cGMP practices. Lack of data integrity is a clear suggestion that processes are out of control. Inspections by walking around can tell an experienced inspector general management philosophy of companies. They can see signs of management’s practices with respect to quality. 

PBMs putting pressure, as discussed above, on API manufacturer and formulators to lower their selling price can result in selling less than quality product. If companies cannot achieve their margins they can stop production and it can lead to shortages. Irony is that no PBM is held accountable for product quality or the shortages. Blame is put squarely on the manufacturers. Under the current scenario PBMs reap huge profits ^{(12, 13, 14)} with no expense or blame. Unless PBMs and drug manufacturing companies are not collectively held responsible for quality, affordability and shortages, world would be still discussing these issues in 2030. 

Excellence comes from within. However, in the current scenario, due to PBM pressures to lower selling prices, pharma manufacturing companies are also forced to be minimalistic in innovation and excellence. Sometimes excellence can be forced by external threat as discussed later. It may be just the incentive manufacturing companies need.

FDA’s New Proposal for Drug Quality and Shortages ^{(1, 2)}:

FDA’s ANDA/NDA drug approval is considered getting the toughest “seal of approval”. If companies have this approval then why is FDA suggesting purchasers (PBMs and others) do not recognize its “seal of approval”. If FDA is suggesting that the approved sites do not have mature quality system then “is FDA suggesting that the current cGMP practices and the ANDA/NDA approval processes are a failure as they do not weed out marginal producers?” These remarks raise a question “why do we need FDA?” 

If FDA is suggesting that patients should abandon proven drugs that work in favor of higher priced marginally better drugs, question needs to asked who is paying for the drugs. what have the companies done to improve their processes to improve their profits. Disparity between sales prices between illustrated drugs ^{(4, 8)} suggest that many drugs can be imported. It seems that no one has benchmarked sales prices of drugs in different countries.  

It seems that PBMs role in drug shortages, quality and prices is not recognize or understood. They, as explained above, are BIG part of the quality and shortage problem. 

My conjecture is that FDA’s recommendation to incentivize and rate manufacturers is not going to solve quality or shortage issues. Companies, as explained above, will still be under PBM price negotiation pressures and even after incentives, quality and shortage issues would still be there. If external incentives to manufacturing companies is considered, it will be essentially subsidizing profit-making companies. It would be interesting to see how and why patients and tax payers will participate in such an adventure. Legislators, who, in our legalized corrupt system (lobbying) could care less about shortages and prices, will have an issue to talk about with their constituents.  

With respect to ranking or rating manufacturers ^{(1, 2)}, it is an audacious and ambitious task which could take more than five years to fully implement. Does FDA have the finances, resources and expertise to create such a system? If legislative help is going to be needed, my speculation is that various vested interests will do everything possible to mute such a system if their profits are impacted. 

If the ranking system idea comes to pass and if FDA is designated to develop such a system many questions need to be addressed. For such a rating system to be created, question would be, who would be rating the companies. If it is FDA, it would have to develop rating criterion for the sites. Many at FDA would have to be very familiar with manufacturing of API and their formulations. System would have to address every possible scenario to assure quality. For the ranking to be applicable across the board every “t” will have to be crossed and every “I” will have to be dotted. I am not sure FDA has staff with experience in process design, development and hands on manufacturing to establish and pinpoint the road map for ranking of manufacturing companies. 

FDA’s proposed ranking system would be similar to developing a manufacturing process. Development of ranking system would require testing as the system as it is developed. I am not sure FDA is capable of developing a Quality by Design (QbD) process as it has not been practicing it for the ANDA approval process. 

While the ranking system is being developed, shortage and quality issues will continue. We cannot afford them.  

In our mutually subsidized healthcare system prices at different levels are extremely well camouflaged. Most of this report is difficult to understand as there is no explanation of what is being analyzed. Figures in this report are just numbers gymnastics. Basically, reality is being not addressed but an impression is given that the authors know how they can solve drug shortage issues. I hate to say it but it is very obvious that authors have no understanding of the role PBMs and what happens to prices between the drug manufacturer and patient ⁽⁸⁾. It would have been nice if they had given a real case explanation to illustrate issues. 

I don’t believe if the involved do understand what all it would take to translate their suggestions into reality. Practicality of the suggestions made have not been considered. 

Alternate process:

Since FDA’s “Drug Shortage: Root Causes and Potential Solutions” ^{(1, 2)} will take time (as much as 5-10 years or more) to come to fruition, there are alternates that can be implemented very quickly. Pieces parts exist. Some will have to be added. Reconfiguration and tweaking of the existing landscape will be needed.  

Alternate plan would involve management of influence of suppliers (PBMs and associates) and manufacturers of drugs. Since drug distributors and manufacturers due to reasons mentioned above influence quality, cGMP, prices and shortages, it would be best if all the parties involved are held accountable for quality and shortages. 

Alternate plan is a two-step approach. For the first step, involving manufacturers, most of the methods and practices are in place. Implementation of such a plan would be quick, easy and effective. Second step will involve PBMs and distributors. We can expect challenges and resistance. They can be overcome if everyone lives up to their responsibilities. 

My hypothesis is that drug manufacturers have not taken FDA’s 483 issuance seriously. They have taken 483 issuances as “medal of honor ⁽⁹⁾” and considered them as part of the process with minimal or no financial consequences. It is time that issuance of 483s be treated differently. 

Going forward drug manufacturing companies have to deposit refundable $200,000.00 per 483 per site as soon as they receive a citation. If corrective actions are not completed in a verified time and sustained, company would not only loose the deposit but would also be forbidden to supply products to the US market for the following four years. Financial loss would be incentive enough for the companies to be on top of their manufacturing and quality game. No variances would be entertained.

It is expected that if drug manufacturer is barred from supplying to the US market, PBMs and associates will suffer loose source of drug supply and it would mean financial loss. To prevent such incidents to happen they would be forced to get involved with manufacturers about quality of products. PBMs and associates so far have been unscathed by quality, price and shortage issues. Drug distribution has been a cash cow of all involved. 

An attempt to demystify PBMs and their associates “profit black box” has been made ⁽⁸⁾. It is time they should also be held responsible for having a relationship with questionable drug manufacturers in the form of distributing tainted/adulterated less than quality medicines and shortages. There would be tremendous political pressure to exclude PBMs and associates being corralled in with less than quality manufacturers but it is time and necessary. 

If PBMs and manufacturers shrug the responsibility for less than quality on products that are recalled or found out of compliance on random checking by FDA, they should be held financially responsible through a refundable deposit of up to $500,000.00 per incident. Refund would be issued after quality is guaranteed. This will assure that products being sold meet FDA’s quality expectations. 

Drug manufacturers, PBMs and their associates might consider suggested proposals to be cumbersome and financially strict but the current system is designed for the benefit of manufacturers and suppliers and has no regulatory accountability. Patients are the sacrifice for the financial gain of suppliers and manufacturers. Accountability is necessary as we are dealing with human life. If profits are important but so is human life. Thinking outlined above will be questioned and challenged. Anyone questioning this should think about lack of quality drugs and shortages. A plausible compromise can be achieved if we put our thoughts to it. 

It is possible that drug prices might temporarily go up but my conjecture is that if a 90-day ANDA approval time/process ^{(15,16,17,18)} is implemented additional companies would step in to fill shortages in minimal time. Competition through economies of scale, technology, quality and cost would be good for the total landscape. Competition should level or bring down the prices.  

As discussed earlier, no one would admit but price reduction pressures are significant for the manufacturers and result in drug shortages and quality issues. 

I believe that Drug Formulary is discrimination of drugs and another way to keep competition away. Why is a formulary necessary when only FDA approved drugs can be sold in the United States? If it is for price and drug efficacy then shouldn’t the patient and their physicians decide which drug and price level suits patient’s needs. 

Success of a plan proposed by Amazon, Berkshire Hathaway and JPMorgan ⁽¹⁹⁾ could have a significant impact on the drug pricing, shortage and quality landscape, if successful. Another plan, Generic Alliance ⁽²⁰⁾ a generic drug distribution conglomerate, could market directly by mail to patients. Safeguards would be necessary. Since it would by-pass PBMs, they could present a challenge to the 76% monopoly of the three largest PBMs ⁽²¹⁾. They are not hurting for profits as they are ranked in the top 10 Fortune 500 companies ⁽²²⁾ in the United States. Success at startup internet pharmacy, Truepill ⁽²³⁾, would be a needed “creative destruction” event. 

Vested interests will prevent consideration of any alternate option. In our mutually subsidized healthcare system profits are more important than patients. This latent consideration is based on patients will die sooner or later. With such thinking imbedded our thoughts, proposed changes may be difficult and a long-drawn-out process, if it happens. FDA’s drug shortage plans, if enacted, will amount to delays of several years. We need alternates and NOW. 

Girish Malhotra, PE

EPCOT International 

1. Woodcock, Dr. Janet: To Help Reduce Drug Shortages, We Need Manufacturers to Sell Quality — Not Just Medicine, FDA, October 24, 2019
2. Report | Drug Shortages: Root Causes and Potential Solutions, October 29, 2019
3. Malhotra, Girish: May Day May Day: Can Someone Help and Lower Drug Prices?, Profitability through Simplicity, May 1, 2015
4. Malhotra, Girish: Opportunities to Lower Drug Prices and Improve Affordability: From Creation (Manufacturing) to Consumption(Patient), Profitability through Simplicity, March 9, 2018
5. Malhotra, Girish: Impact of Regulations, Drug Manufacturing and Pharma Supply Chain (PBMs and Allies) in Drug Shortages and Affordability Part 1, Profitability through Simplicity, March 9, 2019
6. Malhotra, Girish: Impact of Regulations, Drug Manufacturing and Pharma Supply Chain (PBMs and Allies) in Drug Shortages and Affordability Part 2, Profitability through Simplicity, April 3, 2019
7. Malhotra, Girish: Opportunities for Generic Pharma to Clear the Quality Stigma, Profitability through Simplicity, May 23, 2019
8. Malhotra, Girish: Systematic Demystification of Drug Price Mystique and the Needed Creative Destruction, Profitability through Simplicity, October 2, 2019 
9. Malhotra, Girish: Are USFDA 483 Citations a "Medal of Honor" or “Rite of Passage” to Disgrace for the Pharma companies? Profitability through Simplicity, October 16, 2019
10. Malhotra, Girish: Identifying the Root Causes of Drug Shortages and Finding An Enduring Solution, Profitability through Simplicity, December 7, 2018 
11. Malhotra, Girish: Pharmaceutical Quality: Concepts, Misconceptions, Realities and Remedies, Profitability through Simplicity, CPhI 2019 Annual Report, November 4, 2019
12. Malhotra, Girish: Systematic Demystification of Drug Price Mystique and the Needed Creative Destruction, Profitability through Simplicity, October 2, 2019
13. Herman, Bob: The data showing drug pricing games, Axios, August 1, 2018 Accessed October 30, 2019
14. Pitts, Peter, J. PBMs are hogging our Drug Discounts, Fortune, August 28, 2018 Accessed October 30, 2019 
15.  Malhotra, Girish: What Is Needed for a Regulatory Approval of NDA/ANDA Filings in 90 Days? Profitability through Simplicity, October 24, 2018
16.  Malhotra, Girish: ANDA (Abbreviated New Drug Application) / NDA (New Drug Applications) Filing Simplification: Road Maps are a Must, Profitability through Simplicity, May 11, 2017
17. Malhotra, Girish: Simplified Roadmap for ANDA/NDA Submission and Approval will change Pharma Landscape, Profitability through Simplicity, November 25, 2018
18. Malhotra, Girish: Can the Review and Approval Process for ANDA at USFDA be Reduced from Ten Months to Three Months? Profitability through Simplicity, March 25, 2017
19. Malhotra, Girish: Could Amazon (A), Berkshire Hathaway (B) and J.P. Morgan Chase (M) be the Anti Ballistic Missile (ABM) needed to Control/Curb Rising Healthcare Costs? Profitability through Simplicity, February 9, 2018
20. Malhotra, Girish: Improving Drug Affordability for the United States Populous through Alternate Business Models, Profitability through Simplicity, May 4, 2018
21. CVS, Express Scripts, and the Evolution of the PBM Business Model, May 29, 2019, Accessed November 5, 2019
22. Fortune 500
23. Feldman, Amy: Dose Of Digital Disruption To The $400 Billion Pharmacy Industry, Forbes, November 1, 2019, Accessed November 6, 2019

Pharmaceutical Quality: Concepts, Misconceptions, Realities and Remedies

THIS ARTICLE/POST IS PART OF THE CPhI 2019 ANNUAL REPORT @ FRANKFURT, Germany.

Pharmaceutical quality, especially for generic drugs, has been and is going through its cyclical ups and downs. Discussion heats up and then goes dormant until the next major quality issue appears. One would expect that every pharma manufacturer (API and their formulator) will be on their toes and prevent regulators from issuing 483 or equivalent citations and news reporters from writing about out of compliance issues. Unfortunately, oversights at companies keep occurring and are the press are forced to report this. 

There are many cases, but a few have been highlighted from Heparin ^{(1, 2, 3)}, Ranbaxy 2005 ^{(4, 5)} and most recently Valsartan ⁽⁶⁾. We all know there are multiple other incidents and negativity rears its ugly head. Delays and lethargy of regulators compromises public health ^{(7, 8)}. Pharma companies, it seems, are immune to every controversy. This leads sometimes to the feeling that their cheer is higher revenue and higher profits rather than higher and more consistent quality. Any negativity is considered par for the course and will come to pass with time. Their thinking “less than quality happens” and “patients die eventually so why worry” should not be a normal demeanor. Quality is good for the companies but if their product/s deviate out of desired specification range, unless caught, are seldom admitted, admitted after the fact, or with reluctance.

Quality of a pharma product generally follow Sine curve ⁽⁹⁾ with specification amplitude being between the upper and lower control limits. Developed countries set the limits for their drugs. It is necessary that companies adhere to these limits. Since these limits are tighter than the developing countries, many question tougher standards. Manufacturing would be greatly simplified there was one standard across the board. 

Figure 1: Product Quality Range

Product quality to most of us reflects a company’s integrity, intelligence, knowledge and ability to manufacture products that are the best in their class. The irony is cost to achieve first time quality is very low or nothing if done right the first time ⁽¹⁰⁾. Properly designed and executed manufacturing processes are supposed to deliver quality products. Recurrence of quality issues (deviation from established specifications, lack of data integrity and cGMP practices) especially in pharma have a common theme. They are reflection of shortfall in company’s integrity, management, knowledge and manufacturing practices. Every oversight can result in an issue. 

It is critical that we understand pharma’s manufacturing landscape as it effects product quality. Every company knows what is needed but the ultimate question is “do they produce repeat quality product that meets established specs using cGMP practices?” 

In drug manufacturing there are two components (API or formulations) and their sequential execution is necessary to produce a dose. Before we discuss manufacturing process preferences, it is helpful if we understand what is a batch and/or a continuous process. This review could be considered unnecessary by some but they have quality implications. They are elaborated. It is always good to re-visit the established definitions for different processes. There is no financial relationship with any company. 

Financial Model: 

Companies have to follow criterion that gives them acceptable financial return. It is also applicable to Pharma’s older cousin fine/specialty chemicals. However, Pharma’s profitability criterion, my conjecture, is based on how to maximize profits irrespective of the processes used. I believe that their criterion of maximizing revenue and profits is based on exploiting the emotional need of humans to extend life. Lack of affordable drugs for masses have forced companies to increase revenue and profits through year over year price increases. Pharma has not explored increased profitability through continued process improvements and my conjecture is that the regulators are the obstacle in this process. Cipla ⁽¹¹⁾ did dent the established model some. In the long run it was a blip. Companies from the developed countries have made sure such perturbation does not happen again ⁽¹²⁾.

Again, pharma’s profit model is based on tradition of capitalizing on a financial opportunity rather than based on manufacturing excellence, my conjecture. The current practice may have been derived from initial limited and dire need for the brand drug. Once the drug is widely sold, tradition of multiple manufacturing sites (inefficient processes) similar to when the drug had limited distribution has continued. It seems value of alternate or efficient processes has not been explored. As explained later too many API producers and formulators could also be part of the current quality variations and problems. 

Process Selection:

It is necessary to understand the manufacturing process selection methodology. Reaction chemistry, formulation recipe, product demand and overall economics dictate process (batch or continuous) selection. This is not a new revelation. Selection processes in the chemical and petrochemical industry have been discussed and taught in chemical engineering curriculums as early as 1926 (too many references to cite). In the current pharma business model batch or continuous manufacturing should influence revenues and profits but they do not because the process selection criterion is not based on economics or technology. It is based on exploitation of patient emotions and need to please shareholders. 

Batch Process:

There is an established definition for batch process ⁽¹³⁾. Figure 2 is a simple schematic. It is noteworthy that in such processes it is critical and necessary to have storage space/tanks/vessels where the intermediate products are held before the next processing step. 

Figure 2: Schematic of a Batch Process :- INTERMEDIATES HELD FOR FURTHER PROCESSING

Batch processes are stop and go and many different processes and products can be fitted in the same equipment ⁽¹⁴⁾. They provide flexibility. Invariably intermediate products are tested to assure process is working as planned. If a processing step does not produce the desired quality product such intermediate holding tanks or other tanks can be used to rework the intermediate to produce specification product. One way or the other this practice increases product cost either through intermediate inventory related costs or re-work or disposal. Cash flow is impacted. All added costs are passed on to the customers. 

Continuous Process:

Continuous processes have an established definition ⁽¹⁵⁾. Figure 3 is a generic schematic of a continuous process. There are two distinct differences between a batch and continuous process. In continuous processes flow of materials does not stop during the operating year [24x7x50=8,400 hours] except for the necessary downtime for maintenance or planned shutdown etc. which generally is as short as possible for economic gain. Each selected process is based on the reaction or formulation chemistry/method and financial justification. In addition, each process is designed to produce a single product or an exactly similar product. There is no intermediate product hold tank/space any place in any continuous process. This is the most critical aspect of the process. Since the process is producing product every operating second, its quality cannot deviate outside the upper and lower quality limits at any instant. Feedback control loops that are well established and practiced maintain quality regimentation. Since the process is time independent, in-line testing gives instant image of the process. Deviation outside the control limits (Figure 2) means product is not meeting specs and will result in significant financial losses. Batch processes are a stop and go operation. 

Figure 3: Schematic of a Continuous Process :- NO INTERMEDIATE PRODUCT HOLD

Figure 4 is a schematic of a real continuous process. It operated about 7,500 hours per year producing same fine/specialty chemical. Again, we have to recognize that chemistries of API are similar to their older cousins fine/specialty chemicals. Only differentiation is API have disease curing value whereas fine/specialty chemicals don’t. 

In Figure 4 process chemicals A, B and C are introduced at predefined rate based on demand in a pipe flow reactor, reacted and continuously pumped to Reactors 1 & 2 where chemical D is introduced and reacted to produce the product. Chemicals A, B, C, D, Solvent and the catalyst are fed in to the system 24x7x50 hours per year. Stoichiometry was precisely controlled using existing process controllers. Product was withdrawn from the reaction system continuously. This process is one example of many continuous processes that have been commercial since early seventies. Thus, continuous processing/manufacturing is not a new technology but is being touted by many as NEW (FDA and others who are equipment suppliers rather than actual practitioners). 

Figure 4: A Continuous Flow Process Schematic

Batch Vs. Continuous Process:

It is necessary to understand why batch processes are the preferred processes for the manufacture of APIs and their formulations. Pharma, it seems, due to its own volition has never considered alternate manufacturing technologies. It is sad, but it seems it is due to its sustained profitability even in quality by analysis regimentation. 

Selected process, their method of execution and equipment do influence product quality unless an effort is made to have an exact replica or dedicated equipment. Even then, there can be a batch to batch variation at the same company. Understanding of equipment, raw materials and execution method influence quality. Judicious review of product demand is necessary. 

Improved quality is being touted from continuous process vs. batch processes. That is true if there is such a process for the manufacture of APIs and their formulations which would produce the same product about 7,500 hours per year. However, volume is needed to have a steady run from the same equipment. If the process is stop and go, it is no different from any batch process. In addition, significant understanding chemistry, component interaction and execution control is needed. This can present formidable and different challenges for API manufacturing and their formulations. If all was easy continuous manufacturing especially for formulations would have been adopted in pharma manufacturing 60+ years ago.

Brand drugs, due to their high prices, have limited demand for the API and its formulation. As the demand increases, additional API and formulation sites are used to meet the increasing demand ⁽⁷⁾. Once a drug becomes generic, many companies enter the landscape (Table 2). Each uses a batch process even if there is a high demand. This is discussed later. Tradition prevails. e.g. Johnson & Johnson’s McNeil lab when it re-did its Tylenol formulation plant, it chose batch production when it, due to its high product demand, could have easily used continuous process ⁽¹⁶⁾. 

Drug dose and product demand determine API and formulation needs ⁽¹⁷⁾. Table 1 illustrates API and tablets needed to satisfy the needs of 50 million patients per year. If principles of economics and chemical engineering were applied, most likely needed API (dose 1 milligram) could be produced in a single plant. Formulation of this API could also be done at a single plant requiring multiple parallel formulation lines operating year-round. For 50 milligram dose a single plant using a continuous process would suffice the global API need. However, in reality multiple plants are used to produce the API and their formulations. This is an extremely important fact as quality from each (API and their formulations) facility can vary even if every plant was an exact replica of each other. This is due to myriad factors (people, raw materials, equipment and even execution). 

Patients	Milligrams	#/yr.	API, Kilo/year	Tablets/yr.
50,000,000	1	365	18,250	18,250,000,000
50,000,000	50	365	912,500	18,250,000,000

Table 1: Theoretical API and Formulation needs 

Table 2 is an illustration of reality for some of the widely used selected drugs. Process economics should dictate process selection but that is not the reality. Fundamentals of engineering and economics are not applied for manufacturing selection guidance. It is interesting to note that Pfizer produced 200 tons of Atorvastatin API at three sites ⁽⁸⁾ but now it is being produced at 44 ⁽¹⁷⁾ sites and is being formulated at over 800 sites (different companies). Every product will not be exactly the same. We can all draw our own conclusions about batch to batch and site to site quality variations. Another interesting fact we have to recognize that FDA or another regulatory body does not have adequate manpower to do even risk-based inspections just for these six drugs, my conjecture. 

Based on number of sites ⁽¹⁷⁾ (Table 2) that are being used to produce the API and their formulations any experienced engineer/entrepreneur could conjecture that accepted principles of process selection are not being used API production and their formulations. Only explanation for large number of sites clearly suggests that the involved companies producing the API and their formulations are quite profitable even when they do not have the most economic processes. They will also have quality variability. One way to assure profits is taking short cuts whatever they might be. Marginal quality might be easier and cheaper to achieve than to comply with USFDA quality requirements. As long as quality is close enough, the product can be shipped to many countries. It is my conjecture that such practices can overflow to the developed country shipments. 

Drug	Number of API Sites	Number of FDF Sites
Ciprofloxacin	22	536
Atorvastatin Calcium	44	865
Omeprazole	87	768
Modafinil	29	70
Metformin HCl	77	752
Metoprolol	41	338
Total	300	3,329

Table 2: Number of sites for APIs and Formulations 

Again, rationale for so many API and formulation producers is “PROFITS”. Reverse calculations illustrate the profit math. Ciprofloxacin, an excellent in-demand antibiotic is used as an illustration. Table 3 is quick back of the envelope analysis. Series of articles⁽¹⁸⁾ further illustrate the point. It is interesting to note that Ciprofloxacin API used to sell the drug in India indicates API price of about $16.40 per kilo. Export price ranges between $26.00--$46.00 per kilo ⁽¹⁹⁾, a significant incentive and margin at API seller level which prompts many to produce this and other APIs. As indicated earlier these API producers most likely do not have economic processes and quality is tested in rather than built in with high probability of significant quality deviations. No one should be surprised if there are multiple quality levels of the same product at the same site. 

Ciprofloxacin, 500 mg tablet	Rupees/tablet	$/tablet, exchange rate Rs. 69/$
	Selling price in India
Selling price in India is used to reverse calculate API cost	3.75	0.054
API reverse calculated cost 85% is used as profit margin, seller margin, formulation profit margin and costs	0.56	0.0082 [=$16.4/Kg.]
		US selling prices (20) vary from $0.28 to $4.77

Table 3: Reverse Calculation Illustration

Given the current profits landscape many companies will enter to fill the need. As stated earlier to assure profits, it is very likely that shortcuts will be taken and quality could be compromised. Many companies believe that about 80% of the population does not need drugs of USFDA standards. Their thinking is 98% is good enough then why 100% (USFDA standard) is needed. Such thinking is reflection of company’s integrity and ethics. Such thinking prevails in companies who do not have total command of their operations and will sooner than later be cited by regulators. 

Pharma companies have not explored increased profitability through continued process improvements and my conjecture is that the developed country regulations are the obstacle in this process. Too many filings are needed to comply with current regulations. Companies might not have the time to improve processes also. Thus, continuous process improvement effort is minimal at best. 

Possible Solution:

Ethical practices, integrity and quality products are expected from companies. Every company that produces health related products e.g. drugs, has to make sure that the products meet established quality specifications and follow cGMP practices ⁽²¹⁾. Data integrity must be paramount as well. Companies have to have complete command of their operations. Their ethics and integrity of companies are at stake when they produce any drug. If they cannot comply with such expectations, my conjecture is that they should need not be in this business. They have to ask themselves the question “would they or their next of kin consume the products they produce?” It is imperative that for quality they live by “Do or Do Not, There is no Try---Yoda”. It is incomprehensible when companies operate outside the specification limits they had committed and agreed to in the first place. 

Companies very well know that non-compliance with USFDA regulations will have negative consequences besides bad publicity. They will have to spend monies for remediation. Doing things right the first time has minimal financial costs but somehow, they miss this important fact. 

With USFDA being short staffed, my speculation is that even the “risk-based inspections” might not be sufficient to catch less than quality/cGMP producers. Some companies have and will figure out the system and take advantage thereby jeopardizing safety and the health of many. If that is the case, it may be necessary to change the prevailing regulatory landscape. 

Under the current regulations producing companies are given an opportunity to correct their non-compliance. Companies could be abusing this privilege. Repeat offence companies ^{(7, 22)} are still in business. Ranbaxy stayed in business for many years ⁽⁸⁾. Pharma lobby’s behavior, siding with less than quality manufacturers, should be considered shameful and unethical. 

FDA needs to change the rules of the game. It seems FDA/regulators are afraid of ensuing shortages that could result. Repeated non-compliance to FDA’s requirements and guidelines should be a cause to forbid shipments to the United States. It is my conjecture that API manufacturers and their formulators in China and India have taken advantage of lack of sufficient producers in the developed countries and some might have “take it or leave it” posturing. Developed country regulators have to take a tougher stance ⁽⁸⁾. With many API producers ⁽¹⁷⁾of the same product, it is very likely that that each has an inefficient and the cheapest process with harmful impurities. Formulators and PBMs in order to maximize their profits are most likely purchasing the lowest cost API and formulations and might not be totally aware of the impurities and their consequences ⁽²²⁾. 

Combination of polite and drastic pathways need to be used by the regulators to convince manufacturers to abide by the current regulations and quality standards. Companies could be given single site exemption with the stipulation that they deposit $200,000 (refundable) after the first deviation from FDA’s expectations. Second offence on the same site should be the cause for forfeiture of the deposit and the company should be barred from exporting their product to the United States. I call this “one strike and you are out as in the game of cricket” a simple and clear strategy. 

FDA has taken bold and drastic steps to withdraw ANDA approvals in the past but they have not been publicized much ^{(23,24,25,26)}. Recently FDA withdrew ANDAs approvals for Apotex ⁽²⁷⁾, essentially stopping their exports to the US market. USFDA should withdraw ANDAs from the companies if they have not produced the product at the declared site for more than one year ⁽²⁸⁾. They has no clue about if approved ANDAs are being produced. Basically, FDA has had a big stick it has not used properly. Maybe it is time to use it as often as possible. There could be some shortages, but they could become an opportunity for others. 

Companies, who have considered FDA to be lax, need to wake up and produce quality products. Their business future could be in jeopardy. Thoughts discussed above could be part of the going forward strategy. If promulgated, pharma companies that comply with USFDA standards will benefit from higher profits that will come from better technologies that will be the result of consolidation, economies of scale and competition. Regulators should facilitate “continuous improvements”. It is imperative that companies don’t abuse the trust and privilege. 

Going Forward:

Pharma landscape needs to be reviewed and changed to assure quality drugs from the get go. I believe regulators themselves are reluctant to adopt “continuous improvement” in their own operations which they expect companies to practice. They need to practice what they preach ⁽²⁸⁾. FDA instead of preaching QbD (quality by design) needs to practice it. It relies of QbA (quality by analysis).

Current ANDA filing process is complex as most of the application involve multiple reviews and submissions taking as much as three years ⁽²⁹⁾. FDA’s ANDA approval process should be such that any application filed by its own personnel should be approved by a fellow reviewer on the first review in 90 days ^{(30, 31)}. If it cannot be, that suggests that the ANDA filing and approval process needs to be simplified and perfected. Complexity of the current process is confirmed by the recent Government Accountability Office (GAO) Report ⁽²⁹⁾. Since certain drugs are given an expedited approval ⁽³²⁾, it suggests possibilities of 90-day approval is possible, if an effort is made.

ANDA applications that can be reviewed and approved in 90 days will demand that companies filing such applications have a complete command of every facet of the manufacturing, product quality, labeling and whatever else is needed by USFDA. Many will say “this cannot be accomplished”. Such conjecture is unfathomable from successors of a generation that can send a human to the moon and bring him back. 

FY	APPROVALS	WITHDRAWN
FY 2013	440	107
FY 2014	409	179
FY 2015	492	170
FY 2016	651	248
FY 2017	763	214
FY 2018	781	606
FY 2019 (May 2019)	814	295
TOTALS	4,350	1,819

    Table 4: ANDA Approvals and Withdrawn

Table 4 from US FDA (CDER and OGD) ⁽³³⁾ illustrates ANDA approvals and withdrawals. A clarification on withdrawals (are these withdrawals by FDA only or companies only or a combination?) has been sought. My conjecture is that most of the withdrawals are by the company initiated. These numbers are not publicized. It is also interesting to note that number of ANDA approvals per fiscal year (Table 4) are significantly higher than the numbers published ^{(31, 34)}. GAO ⁽³¹⁾ report suggests about 80 ANDAs are approved per year. Why not have 160 ANDA approvals per year? Such numbers are not out of the realm of reality if FDA can simplify the ANDA filing and approval process. It will take effort. There will be significant internal resistance. 

Approval of a product and its manufacturing process is equivalent to a binding contract between two parties (manufacturing company and FDA). If a company does not live up to its contract, FDA should exercise its power to withdraw the ANDAs. USFDA has a stealth weapon, withdrawing approved ANDAs, but has been reluctant to use it. Recently they have used it ⁽²⁷⁾ and publicized it. It is an indication of wall handwriting to the companies to get their act together if they want to be player in the developed country markets. No one, including the legislators, should be surprised that ANDA withdrawal could become frequent to stop less than quality drugs being offered to the populous. EMA and other regulators have similar options. ANDA withdrawals could lead to temporary shortages but could be an opportunity also. 

US FDA should also refrain from telling/suggesting companies types of manufacturing processes (batch or continuous) companies need or practice. Regulators should focus on making sure companies have robust and repeatable manufacturing processes through continuous improvements. They, as suggested earlier, should facilitate the filing and approval process ⁽³¹⁾. Companies justify every investment and are responsible for their product and its quality. If they don’t know what is necessary to produce quality products and are reluctant to follow FDA guidelines that are necessary to export products to the regulated markets, they should not be in the business. Only best of the best should produce drugs. 

Possibility of companies losing their profitable markets will force them to stay on top of the product quality through economies of scale and better manufacturing technologies. If they succeed their revenues and profits will improve. In light of regulators withdrawing ANDAs or potentially imposing fines for repeat violations, companies have to re-look at their operations and technologies. Some might have to consider “does it pay them to be in the business”. 

Companies have choices to make but supplying drugs that do not meet established quality and regulatory standards should not be the choice. 

Girish Malhotra, PE

EPCOT International

1.     Heparin Scare: Deaths from Tainted Blood-Thinner Spur Race for Safe Replacement, Scientific American, November 2008 Accessed June 24, 2019 

2.     Chinese Heparin Contamination Questions Return With New FDA Warning Letter, Regulatory Focus, 

3.     Baxter recalling sub-potent heparin, FiercePharma, June 23, 2015, Accessed June 3, 2019

4.     US FDA blocks imports from Ranbaxy for poor quality, The Economic Times, September 17, 2008 Accessed June 20, 2019

5.     USFDA pulls 27 ANDA for drugs made at banned Ranbaxy plants August 12, 2012, Accessed June 20, 2019

6.     Search List of Recalled Angiotensin II Receptor Blockers (ARBs) including Valsartan, Losartan and Irbesartan, USFDA, June 18, 2019 Accessed June 24, 2019

7.     Apotex Research Private Limited, Warning Letter 320-18-69, USFDA, Accessed June 3, 2019

8.     Bottle of Lies, Katherine Eban, Accessed May 31, 2019 

9.     Sine Curve, Merriam-Webster, Accessed June 24, 2019

10.  Cost of Quality, Industry Week, June 19, 1995 Accessed June 20, 2019 

11.  Indian Company Offers to Supply AIDS Drugs at Low Cost in Africa, The New York Times, February 7, 2001, Accessed June 2, 2019

12.  Gilead to license Sovaldi to Indian generics drug firms, Livemint, Accessed July 8, 2019 

13.  Batch Production, http://bit.ly/31dzpo3, http://bit.ly/31UiV4k  Accessed June 10, 2019 

14.  Malhotra, Girish: Square Plug In A Round Hole: Does This Scenario Exist in Pharmaceuticals? Profitability through Simplicity,August 10, 2010

15.  Continuous Production, Accessed June 24, 2019

16.  'Shocking' conditions at Tylenol plant, CNN Money, May 14, 2010

17.  Malhotra, Girish: Opportunities for Generic Pharma to Clear the Quality Stigma, Profitability through Simplicity, May 23, 2019 

18.  Malhotra, Girish: Profitability through Simplicity Accessed June 26, 2019

19.  https://www.zauba.com/export-ciprofloxacin-hcl-hs-code.html Accessed June 27, 2019

20.  Malhotra, Girish: Opportunities to Lower Drug Prices and Improve Affordability: From Creation (Manufacturing) to Consumption (Patient), Profitability through Simplicity, March 9, 2018

21.  Data Integrity and Compliance With Drug cGMP, FDA, December 2018, 1Accessed July 10, 2019 

22.  FDA announces voluntary recall of several medicines containing valsartan following detection of an impurity, July 13, 2018, accessed August 10, 2019

23.  Strides Pharma Receives FDA Warning Letter and Defers 10 ANDAs, in-PharmaTechnologists.com, July 2, 2019, Accessed July 9, 2019 

24.  FDA WITHDRAWS ANDA APPROVALS FOR ABLE LABS Accessed July 17, 2019

25.  Court Prohibits Marketing of Prescription Versions of OTC Drug Accessed July 17, 2019

26.  FDA  is withdrawing approval of abbreviated new drug application (ANDA) 061579 Accessed July 17, 2019

27.  Apotex, Inc.; Withdrawal of Approval of 31 Abbreviated New Drug Applications, govinfo.gov, July 10, 2019, Accessed July 10, 2019

28.  Malhotra, Girish: Impact of Regulations, Drug Manufacturing and Pharma Supply Chain (PBMs and allies) in Drug Shortages and Affordability Part 1, Profitability through Simplicity, March 8, 2019 Accessed July 10, 2019

29.  GENERIC DRUG APPLICATIONS, Government Accountability Office, August 10, 2019 

30.  Malhotra, Girish: Can the Review and Approval Process for ANDA at USFDA be Reduced from Ten Months to Three Months?,Profitability through Simplicity, March 25, 2017

31.  Malhotra, Girish: Simplified Roadmap for ANDA/NDA Submission and Approval will change Pharma Landscape, Profitability through Simplicity, November 25, 2018

32.  Fast Track, Breakthrough Therapy, Accelerated Approval, Priority Review, FDA, Accessed August 29, 2019

33.  Correspondence from Ms. Mary Dempsey, Associate Director for Regulatory Affairs, Office of Generic Drugs, USFDA, July 29, 2019, [Activities Report of the Generic Drugs Program (FY 2019) Monthly Performance | FDA]

34.  First Generic (ANDA) Drug Approvals, FDA, August 16, 2019, Accessed August 16, 2019