This perspective was also presented at CPhI 2020 Festival of Pharma held in Europe October 05-16 2020. It's link is:
There is a saying that thundering clouds seldom rain. Does this apply to pharmaceutical manufacturing coming back to USA, especially for the generic and essential drugs is anyone’s wild guess? But it seems that this proverb could become a fact.
In this perspective, an attempt is made to outline what has happened in the last ten years of drug shortages, high prices and the ongoing rumble of ‘bring manufacturing home’. Perspective presented in my own and devoid of any financial relationship with any profit or non-profit making entity.
The faint, but increasing rumble of the last few years to bring manufacturing home and improve affordability has picked up again with the arrival of COVID-19.
A Presidential executive order (1) was issued on August 6, 2020. Per this Executive Order, the FDA is now tasked with enlightening us on a pathway and plans to remedy the drug shortage and bring pharma manufacturing home to the US. Yet this design forces me to recap on the futile efforts that have been made by earlier US administrations (2) and the FDA (3, 4, 5), which have not resulted in any meaningful change. The regulator has been proposing, for some time now, that the use of advanced technologies (6) will also reduce shortages. But companies should be the ones selecting and evaluating technology rather than a regulatory body, which has no commercial experience. Thus, the possibility of something meaningful coming from the August 2020 Executive Order (1), if we use results of earlier attempts as a benchmark (2, 3, 4, 5), are going to be minimal to none.
The primary underlying reason for shortages and high prices are PROFITS. Yes, profits are a necessity for any company to be in business. But my conjecture is that the pharmacy benefit managers (7) (PBMs) have total control of US drug supply chain and they prevent any meaningful competition. Remarkably – perhaps outrageously – as a result of their massive turnovers they make up four of the top ten Fortune 500 companies (8). To give an idea of what we are dealing with. A company as large, influential and groundbreaking in its supply chain innovation as Amazon has tried and failed to break the PBM juggernaut - twice. Their 1999 investment in drugstore.com failed to disrupt the prescription drug business (9), and Amazon’s second attempt buying PillPack (10) has not yet made a visible impact.
PBMs negotiate buying and selling prices to maximize their profits. They are uninterested in a manufacturers or seller’s profits, instead PBMs push the manufacturers to sell at the lowest price. If the manufacturers cannot make their desirable profit they don’t make the product and shortages result. This suggests, at least to me, patients exist in the PBM supply chain just as a medium to make profit.
Another puzzle is “Formulary Lists” (11). They complicate the landscape. Why are they needed and what value do they have especially when FDA has approved a drug and checked its efficacy? Drugs should be available to the patient and if it is higher priced, then competition will readdress their availability. So the addition of drug on the Formulary list to me suggests it is effectively used by the PBMs as a bargaining tool to drive their purchasing price down and improve their own profits. Once this happens there are no checks and balances on the selling price. Since US population pays a co-pay amount, it is fascinating that no one in US prescriptively – excuse the pun – knows the real price of drugs.
What would it take to bring pharma manufacturing home?
Reviewing the timelines outlined in the recent Executive Order (1) very high and precise expectations are laid out. However, my own perspective is that FDA does not have enough experienced manpower to assess manufacturing, technologies needed, supply chain, economics, process development, design and commercial needs. Unless a very capable team with proven expertise is assembled, their feet are held to the fire and a concerted effort is made, it is possible the Essential Drug Shortage conversation may be repeated again after two or five years. This team could work under FDA’s umbrella, but vested interest influence has to be avoided. The reason for this is that after multiple attempts the United States has made no visible progress (2, 3, 4, 5, 6), and no one wants to take responsibility for drug shortages, quality or high prices (11).
My conjecture is that PBMs do not want manufacturing to come home, as profits remain a major stumbling block. If drugs are manufactured in US, PBMs and supply chain conglomerates will have to raise their prices to retain profits. This means the patient’s prices will go up, making drugs unaffordable. To counter this price hike, there will be legislative pressure and a tug of war will ensue, which could result in higher shortages, quite contrary to the very goal of reducing shortages.
The WTO and TRIPS agreements (13) in 2006 essentially changed the landscape completely. It is well known that most of the active pharmaceutical ingredients (API) and their formulations are now produced outside USA. China and India produce the majority of the APIs used for the generic drugs used in US. In addition, most the raw materials that are needed for the API manufacturing have also moved overseas. Companies from China and India capitalized and fulfilled the developed country pharma needs. PBMs profited from low-priced drugs supplies. These facts are not only important, but critical. We in the United States have ignored and failed even with repeated warning signs and suggested proposals to pay attention (14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24).
Obstacles that need to be overcome:
Like with any task that needs to be improved, one has to understand the landscape and obstacle creators. On the US pharma landscape PBMs (pharmacy benefit managers) are the middlemen between drug manufacturer and the pharmacies (7). In US, except for about 8.5%, the population (employer or government provided and individual) is covered by some kind of healthcare insurance. About ~92% of the population is covered by mutually subsidized healthcare system and no one knows the exact price of drugs. But we do know that prices in the United States are substantially higher than rest of the world (15) and are continually rising (25, 26) – but despite this we see ongoing shortages. COVID-19 amongst its waves of effects has exposed vulnerabilities of the US drug supply chain. A Presidential Executive order is asking now to remedy the situation, but the question that needs addressing is: “do the people entrusted with the job cohesively understand and are capable of doing what all is needed”.
My conjecture is that FDA personnel do not have the expertise to identify the candidates, the right manufacturing technologies, processing equipment, sites, process economics, environmental compliance, raw material supply chain. They are regulations experts. Thus, the expectations of the Executive Order (1) will most likely not be met. Another obstacle will be compliance with FDA’s cGMP regulations and its arcane outdated rules and regulations that are over ten years old. Maybe it is an opportunity to update the filing and review processes which could reduce approval process and ensue competition (23, 24).
It is expected that by bringing pharma manufacturing home generic drug prices will be lower and reduce/eliminate shortages. On the contrary PBMs in order to retain their profits will need to raise their selling prices. This is due to higher US operating costs. But this could be countered with better methods and technologies, yet even in this case the likelihood of lower costs being passed on to patients is low. Most likely shortages and prices will go up and this will be counter the very purpose of the Executive order.
An argument could be also made that US should produce the raw materials for the API and excipients and it is a valid argument. However, the economies of scale, for companies in the United States, do not exist to be able to really rely on domestic market sales. Thus, dependence on imported raw materials like imported APIs and excipients will be still be there, it has after all rightly or wrongly moved overseas for a reason.
The good news about financial incentives (23), improved generic drug applications submission, and faster approval process (27) is that they would bring pharmaceutical manufacturing home. But for streamlining and implementation it could take as much as five years or more. And, the US is at a strategic disadvantage. Many of the vested interest groups and that includes PBMs, legislators, regulators, pharma lobbyists – which includes pharma companies and consultants – could or will attempt to impede the process of bringing pharma manufacturing (API and/or finished dosage form) home. If any of the pharma manufacturing has been brought home by 2023-2024 or earlier, it will be a significant achievement, but all or more of the following has to happen first.
Task force team:
A team that has proven expertise of chemistry, process engineering, economics, supply chain, regulations (environment and drug manufacturing) and construction of green field or revamping brown field operations is needed. Basically, we need to explore creating plants (existing or grass root) from scratch with efficiencies as their core drivers with NO interference from the vested interests.
· Products have to be defined and their processes tested in laboratory. Process simplification might require selection of appropriate equipment. Parameters and methods that will produce quality products from the get and all the time will have to be tested, approved and used.
· Raw materials that will be used have to be sourced and tested. Buyer/supplier relationships will have to established.
· Sites and the equipment will have to be modified if necessary and tested.
· FDA, once it has approved the manufacturing methods, processes and product quality, needs to minimize its interference.
For the pharmaceutical manufacturing to come back to USA, the current landscape has to be revised and overhauled. The following needs to be considered.
· US Congress and the Legislator has to create four or five pharmaceutical manufacturing hubs (call it economic hubs) evenly distributed around the country where the pharma companies will have financial tax incentives for a limited time (e.g. ten years) to produce the drugs needed by the US population. API and formulation excipients will be US produced (24). These companies cannot be subsidiary of any foreign entity.
· Companies located in these pharmaceutical hubs would be able to sell and distribute the drugs directly to patients (14). Current PBMs can participate in the drug distribution but their selling prices would be available to patients so they can make a choice.
· FDA regulations and approval processes will have to be revamped (28,29) so that the necessary approvals instead of the current generic drug approval time of 36-48 months from filing date has to be done in 90 days. This will be give companies participating in the manufacturing hubs incentive to get to the market quickly and brew competition on quality and price. Such a revamp will reduce regulatory costs. There will be very high resistance from many vested groups for such change.
· Since the drugs are approved by the FDA, every approved drug has to be available to patients. Thus, the need for different formularies has to evaluated. They could be considered hinderance to free competition.
· Companies instead of receiving 483 citations for cGMP variances would be barred from producing and selling less than quality drug for four years (20). Currently PBMs and their supply chain partners have never been held accountable for the less than quality drugs that get distributed. They have to be held accountable (20).
· FDA and equipment vendors and manufacturers should refrain from suggesting which technology and how to use them. It should be the responsibility of the manufacturing company to select the best and most economic technology for the product. FDA as stated above also has to revamp its processes so that manufacturing companies have incentive to use the best technologies and manufacturing processes as long as the drug performance is not compromised.
· Establishment of a governing body that is independent of the FDA, which samples drugs sold in the US market and tests them for quality. They will have the oversight for continued manufacturing if companies meet established product quality. Companies would be publicly recognized for continued product quality.
· Along with the above any company exporting pharmaceuticals into the United States will have to comply with US environmental, health and safety or equivalent standards. Laws similar (30) to US laws could be set under World Trade Organization or a similar trade body.
All of the above calls for a re-configuration of the current landscape. There will be significant resistance but the right team will make the plan to “Make drugs in USA” very feasible and plausible. It is national security and strategic need. Task at hand is not easy. If it was, we would not be discussing this. This can be achieved in the next five years if a concerted effort and plans are established.
Girish Malhotra, PE
2. Executive Order 13588 -- Reducing Prescription Drug Shortages October 31, 2011, Accessed August 31, 2020
3. Agency Drug Shortages Task Force, https://www.fda.gov/drugs/drug-shortages/agency-drug-shortages-task-force, Accessed September 1, 2020
4. Woodcock, Dr. Janet: To Help Reduce Drug Shortages, We Need Manufacturers to Sell Quality — Not Just Medicine, October 24, 2019 Accessed November 6, 2019
6. FDA is Advancing New Efforts to Address Drug Shortages, https://www.fda.gov/news-events/fda-voices/fda-advancing-new-efforts-address-drug-shortages, November 11, 2018 Accessed
7. What Is A Pharmacy Benefit Manager (PBM) and how does a PBM impact the pharmacy benefits ecosystem? TRUVERIS, August 15, 2017, Accessed August 31, 2020
8. Fortune 500 List 2020, https://fortune.com/fortune500/ Accesses August 31, 2020
9. Ross, Casey: Amazon failed to disrupt the prescription drug business with Drugstore.com. Could a second try succeed? StatNews.com, April 26, 2018, Accessed August 31, 2020
10. Malhotra, Girish: Amazon PillPack Marriage can Alleviate Drug Shortages and May be Lower Drug Prices, Profitability through Simplicity, July 5, 2018, Accessed August 31, 2020
11. Formulary List, https://www.canopyhealth.com/en/members/articles/what-is-a-formulary.html, January 8, 2019, Accessed September 3, 2020
12. Malhotra, Girish: Drug Shortages, Quality and Prices: Who is Responsible?, Profitability through Simplicity, November 6, 2019, Accessed August 31, 2020
13. Abbott, F. M. The WTO Medicines Decision: World Pharmaceutical Trade and the Protection of Public Health, American Journal of International Law, February 2017, Accessed August 31, 2020
14. Malhotra, Girish: Improving Drug Affordability for the United States Populous through Alternate Business Models, Profitability through Simplicity, May 4, 2018, Accessed August 31, 2020
15. Malhotra, Girish: Identifying the Root Causes of Drug Shortages and Finding An Enduring Solution, Profitability through Simplicity, December 7, 2018, Accessed August 31, 2020
16. Malhotra, Girish: Opportunities to Lower Drug Prices and Improve Affordability: From Creation (Manufacturing) to Consumption (Patient), Profitability through Simplicity, March 19, 2018, Accessed August 31, 2020
17. 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 August 31, 2020
18. Malhotra, Girish: Impact of Regulations, Manufacturing and Pharmaceutical Supply Chain (PBMs) on Drug Shortages and Affordability Part 2, Profitability through Simplicity, April 3, 2019, Accessed August 31, 2020
19. Malhotra, Girish: Drug Shortages, Quality and Prices: Who is Responsible? Profitability through Simplicity, November 6, 2019 Accessed August 31, 2020
20. Malhotra, Girish: ONE PAGE Road Map to Reduce Drug Shortages, Assure Quality and Improve Affordability, Profitability through Simplicity December 6, 2019 Accessed August 31, 2020
21. Malhotra, Girish: Long Term Drug Quality Supplies for US, FDA and A New Reality, Profitability through Simplicity, April 3, 2020 Accessed August 31, 2020
22. Malhotra, Girish: Health and National Security Issues for the USA and Is The United States of America Prepared, Profitability through Simplicity, May 8, 2020 Accessed August 31, 2020
23. Malhotra, Girish: Euphoria to Bring Pharma Manufacturing Home to United States its Reality and Challenges, Profitability through Simplicity, May 23, 2020 Accessed August 31, 2020
24. Malhotra, Girish: Bring Pharmaceutical Manufacturing Back to USA: Additional Thoughts and Recap, Profitability through Simplicity, May 29, 2020 Accessed August 31, 2020
25. Snoga, J. L. et.al. Containing Drug-Costs, US Pharm. 2019;44(6)(Generic Drugs suppl.):32-35 Accessed August 31, 2020
26. What’s happening to generic drug prices? 46Brooklyn Research, March 24 2020 Accessed August 31, 2020
27. Malhotra, Girish: Simplified Roadmap for ANDA/NDA Submission and Approval will change Pharma Landscape, Profitability through Simplicity, November 25, 2018, Accessed August 31, 2020
28. Malhotra, Girish: What Is Needed for a Regulatory Approval of NDA/ANDA Filings in 90 Days? Profitability through Simplicity, October 24, 2018
29. Malhotra, Girish: Strategies to Increase Generic Drug Competition and Bring Manufacturing to The United States of America, Profitability through Simplicity, March 16, 2020
30. Malhotra, Girish: Can Uniform Safety, Health and Effluent and Manufacturing Standards Create Process Technology Innovation and Competition in Pharmaceuticals? Profitability through Simplicity, January 10, 2017