An Unconventional Analysis:

Can the Wrath of Most Favored Nation Pricing ⁽¹⁾ be Avoided by Bringing Pharmaceutical Product & Process Development and Manufacturing Practices to 21^st Century?

I have shared my learnings and experiences in process development, technology innovation, manufacturing and business practices ^{(2, 3, 4, 5, 6)}. With the looming threat of lowering the selling prices of the brand drugs through EO 14297, in this post I am sharing what are some of the things companies need to considered to avoid its wrath. Forcing brand drug sale prices by 50% or so to match e.g. European prices will have a significant impact on the P&L of every brand pharma company. However, I perceive this an opportunity for the pharmaceutical companies to lower drug prices, enhance their profits through increased affordability. Effort will simultaneously improve manufacturing technologies and reduce their environmental impact. 

 

I am not suggesting to follow and/or do what I am sharing but let your imagination and creativity take you/us to create products and processes that are our best effort. Discussion is applicable to every chemical business (fine/specialty, coatings, their younger cousin Active pharmaceutical ingredients and their formulations).  Perspective presented is mine and is not influenced by any for profit and non-profit entity.

 

My review is based on cost analysis. Our understanding of costs can assist us to improve processes and methods to enhance profits. I am not challenging any methods but suggesting that as part of continuous improvement, review of the current methods and practices for every profit and cost center can lead us to improve profits. Every little improvement is worth the effort. Readers are welcome to share their thoughts. 

 

To avoid the wrath of Executive Order EO 14297 ⁽¹⁾ pharmaceutical companies will have to review their research and development, commercialization, manufacturing and business practices. I am sure that most companies, first blush, would say it cannot be done. However, unless an ongoing concerted effort is made, the current and upcoming US Government administrations can force change of the current practices and they may not be to our liking. Litigations will ensue.  

 

US Drug Prices vs. Rest of the World:

 

For that last number of years there has been a conversation about the high brand drug prices in the United States compared to other developed and underdeveloped countries. The explanation given by the pharma companies is that price for each brand drug are the highest in their effort to recover the product development costs ($1-2 billion). Everyone has bought this explanation and believe it to be true. However, no independent body/person, has been given a verifiable explanation/justification for these costs. Prices in other developed counties are lower as their healthcare systems have been able to negotiate the sale prices. Prices in developing countries are low just for sheer volume of drugs needed. They pay for the fixed costs and keep the factories operating. Law of economics tell us that no company runs a charity and no one is going to sell their products at a loss unless we all missed the explanation/s.  

 

Proposed EO 14297, if enforced, would influence the balance sheet of every brand pharma company. In Table 1 company “X’’’s real drug, not identified, is analyzed. At this writing the world population is about 8.2 Billion ⁽⁷⁾. US population (347 million ⁽⁸⁾), is slightly less than 5% of the global population. It is interesting, just for numbers sake, to compare the sales of this hypothetical drug in USA vs. rest of the World. Numbers are estimates but are close to the numbers for a real drug. Anyone can do a similar analysis for any drug. 

 

Numbers in Table 1 tell us a story. It is logical to conclude that if the Company “X” is selling the drug at an average sale price of $0.75 per tablet in other countries and is not losing any money. This prices is less than ten percent of the US selling price. Prices ⁽⁹⁾ in other countries range from $3.00 to $0.55 per day for the 5 mg tablet. If the company has a 50% margin (this includes local pharmacist’s profits), the lowest factory cost could be ~ $0.18 per 5 mg. (based on my manufacturing and costing experience) tablet which includes the API and inert excipients. With this being the case, US selling price in a mutually subsidized healthcare system is alarmingly high. 

 

	United States	Global	Total
Population	347,000,000	8,200,000,000	8,547,000,000
Percent using (assumption)	0.42	0.42
Tablets per yr.	531,951,000	12,570,600,000	13,102,551,000
Average Price /tablet, $	9.83	0.75
Revenue, $/yr.	5,229,078,330	9,427,9500,000	14,657,028,330
Tablet, mg	5	5
API needed Kilo/year, kg	2,700	62,853	65,553

 

Table 1: Sales of a Real (unidentified) Drug ⁽⁹⁾

 

Table 1 shows the amount of API is needed to satisfy US needs vs. rest of the world. USA population’s API needs are less than 10% of the global population’s needs. Even if it was 10%, still the API volume is small. Drug for US needs can be produced at a single site. API for US demand could be imported and formulated. However, the API for rest of the world is being produced outside US and its formulation taking place at one or more sites outside USA. Without the global market, US selling price of the drugs will be higher than the current prices. 

 

Pharma companies need rest of the world market to absorb the fixed costs and maximize their profits. Claim that US brand pharma bear the cost of new drug may be right but in reality rest of the world bears significant portion of the ongoing costs and that is not well understood and/or recognized. We have to acknowledge that the US sales volume is not large enough and the sales to other countries contribute to each line item of the balance sheet and maximize every company’s profits. In other words they contribute to keep Pharma companies in business. US alone cannot be in business of inventing new drugs. Simply it is a “mutual appreciation society”.  

 

Pharma companies suggest that to develop a new drug it can take up to TWO billion dollars. These numbers to me are a hearsay as I have not been able to verify these by an “independent” entity. If EO 14297 ⁽¹⁾ is implemented i.e. reduce the selling price for this drug by 50% in USA, it can wipe out significant funding for the discovery of a “NEW DRUG”. To recoup the loss would mean that pharma will have to look at each line item of its balance sheet i.e. how to conserve. This means business model change. 

 

Pharma: What to look for?

 

Pharma companies, if EO 14297 ⁽¹⁾ is implemented most likely will have to reconfigure their business model. Every “t” and every “i” will have to be meticulously crossed and dotted for marketing, sales, product and process development, and manufacturing. It is time to shed 50+ years old business model. It needs to change as the WORLD has changed.   

 

Marketing and sales expense along with every line item will have to be reviewed. My speculation is that if a new drug for a disease is more effective than any existing drug, it will sell by word of mouth. Advertising might have to be minimized and that will be a line item savings. Let the best drugs sell based on the efficacy and performance rather than force feeding what majority of the customers do not understand. 

 

Most likely Research and Development would have to be treated as a profit center instead of a cost center. This would require each company to review their product discovery, processes development and manufacturing methods to lower their costs. “Village”^{(2, 3, 4, 5, 6)}, unlike the current tradition, would have to be involved from inception of every product development as there will be no opportunities to re-invent and optimize the drug’s manufacturing processes after the product enters clinical trials and is commercial. Effort to re-invent the manufacturing process for a brand drug i.e. under patent would be expensive as the regulators most likely would ask to reconfirm its efficacy and characteristics. 

If the above is implemented pharma landscape will change from inception. My expectation is that complete command of the product and process will reduce the regulatory approval time and lead to longer NDA “in-patent” time meaning instead of patent expiring in approximate 10-12 years might get additional 4-5 years of patent life. This could compensate lost revenue due to EO 14297’s inclusion.

 

I don’t know how many chemists and chemical engineers associated with any pharmaceutical product, process development and manufacturing are familiar with the cost analysis but it would be enlightening and of great value if the VILLAGE ^{(2, 3, 4, 5, 6)} gets involved in the product development from the start of product discovery. It is expected that some of the village members would be able to share the value of “what if” of the product development, process stoichiometry and manufacturing before a sample is submitted for clinical trials. An optimized process before it is scaled up for rigorous testing does not take time. This information can and should be used to optimize the process and minimize its environmental ill-effects. (references).

 

My conjecture is that inclusion of EO 14297 ⁽¹⁾ on pharmaceutical landscape will be beneficial to the overall pharma landscape and could reduce drug shortages and lower prices. It is best if the pharma companies took the reins and saddled the horse. Government intervention should be the last resort. Direct marketing is another option. Besides pharma companies the biggest obstacle will be the US private sector, Pharmacy Benefit Managers (PBMs) who along with their influencers will make sure EO 14297 ⁽¹⁾ it is not implemented ⁽¹²⁾. 

 

Girish Malhotra, PE

 

EPCOT International     

1.  EO 149297: Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients  

2. Malhotra, Girish: Chemical Process Simplification: Improving Productivity and Sustainability, John Wiley & Sons, February 2011 
3. Malhotra, Girish: Chapter 4 “Simplified Process Development and Commercialization” in “ Quality by Design-Putting Theory into Practice” co-published by Parenteral Drug Association and DHI Publishing© February 2011
4. Malhotra, Girish: Research Report: Strategies for Improving Batch or Creating Continuous Active Pharmaceutical Ingredient (API) Manufacturing Processes, March 2017
5. Malhotra, Girish: Active Pharmaceutical Ingredient Manufacturing: Nondestructive Creation De Gruyter April 2022

6.   Malhotra, Girish: Profitability through Simplicity

7.   Current World Population https://www.worldometers.info/world-population/

8.   United States Population (live https://www.worldometers.info/world-population/us-population

9.   Pharmacy Checker.com  https://www.pharmacychecker.com/

10. Malhotra, Girish: Active Pharmaceutical Ingredient Manufacturing (API) and Formulation Drive to NET ZERO (Carbon Neutral)? Profitability through Simplicity, April 29, 2021

11.  Malhotra, Girish: NET ZERO for Active Pharmaceutical Ingredient & Fine/Specialty Chemicals: Nondestructive Creation, Profitability through Simplicity, November 7, 2024

12.  Malhotra, Girish: Implementing Executive Orders on Domestic Production of Critical Medicines and Achieve Most Favored Nation Pricing, Profitability through Simplicity, June 11, 2025

An Outlier Plan to Bring Pharmaceutical Manufacturing to USA in One Year

The following comment on my recent post “Remedy of US’s Drug Supply Chain Shortages and Domestic Production of Generic and Brand Drugs ⁽¹⁾ has led to the development of this post.  

"Excellent Article! I agree with every thought within it, and would add that once a firm is approved, Medicare, Medicaid and Veterans Administration should be obligated to buy from a domestic, US manufacturer. This would provide a ready market to tap into. 

Your references too cover the other necessary incentives: 1) Tax free enterprise zones located throughout the US, 2) a preferential priority approval process for domestic Manufacturers of 90 days, and 3) a direct manufacturer to patient sale process without middle men and a transparent price and commission with and without insurance. ------ Dr. Albinus Marian D’Sa

 

For the last ten plus years most of the conversation has been about the brand drugs. There has been discussion about the nonavailability or high prices of the generic drugs due to tariffs and other political causes but no one has talked about or proposed any pathway to remediate the situation. I have outlined a US Government sponsored “Tender Program” that would make the basis to bring generic pharmaceutical manufacturing home. It is my belief is that its success will address drug cost and shortage issues and it could be expanded to other healthcare needs. 

 

Most will without reviewing the plan will say that the title in itself is outlandish to say the least and non-achievable. However, the reality discussed can very different. Unless we review and discuss the objective along with the pathway of what we have to accomplish nothing will happen. We in USA have what it takes to get things done and lower generic drug prices by directly serving the needs of Medicaid, Medicare and Veterans Administration patients. Suggesting “it cannot be done” is not an option. It even could force patients to ration their necessary medicines over food ⁽²⁾. Anyone who thinks it cannot be done should not be reading any further. Perspective presented here is not influenced by any “for profit and/or nonprofit” organization. 

 

I would call the task “ask not what your country can do for you - ask what you can do for your country-JFK” moment. A gemish of “can do” chemists, chemical engineers, logistics wizards along with participation of “can do” legislators, bureaucrats and technocrats would be needed. What is presented here has not been “thunked, thoughted out and discussed” in detail with masses but is based on our teachings, experiences, outlier thinking and accomplishments. 

 

We have had number of Presidential Executive Orders, conversations and testimonies (too many to reference) to reduce/eliminate shortages but there has been no progress. Due to lack of any progress to produce most drugs in USA ^(3,4,5), a different “outlier” pathway is proposed. Many could say this proposal is ridiculous, not doable and fraught with pitfalls. May be it is, but in absence of any viable suggestion/attempt, this or something similar needs to be reviewed or considered. It will need every bit of help from the folks who are experts in walking through the regulatory, legislative and vested interest maze. “Can’t be done folks” are not needed. If the task was easy it would have been done long time ago. It might sound that I am repeating myself and I am, but the point is that in our NATIONAL INTEREST we need to do something that most outliers do. We have been challenged and succeeded to every contest if we want to.       

 

Plan:

 

USA government will ask any global company or companies for tender bids (proposal) with experience in the manufacture of active pharmaceutical ingredients (API) and their formulations to start producing the top ten generic drugs, Table 1 ⁽⁶⁾ in ONE year using their manufacturing facility or facilities based in USA. Once approved they have to have operate the viable facility/is for the next five years. If for any reason a company decides to stop/withdraw during the term, they would be barred from the US market for the next five years. There will be no drug tiers for any the generic drugs ^(7).

 

These tender will have to meet requirements of the US Government processes. As I don’t know many of the US government tender process details, people familiar will have to participate and make sure things are organized for smooth execution. 

 

Companies need to bid to supply the listed drugs (Table 1) to the Medicare, Medicaid and Veteran’s Administration of the United States of America. US Government will guarantee this patient base. Government will also facilitate establishment of the facilities.

At least two companies will have to bid for each product. This will prevent price gouging. Qualification basis would be their product quality of the last two years. Company can bid for multiple drugs. Companies will have to follow US Federal Trade Commission guidelines.

US Government will work with State governments and US Legislators for the establishment of such facilities (3, 4, 5).

FDA has to make sure that it is asking every company necessary information so that their submission is complete and there is no missing information to assure approval. FDA will review and grant abbreviated new drug applications ANDAs in 90 days (8, 9, 10). In addition the produced products will be approved under FDA’s SLEP program (11).

 

Table 1: Tender offering by US Government

 

1)     Tender winning company/s will set up manufacturing facility in US to produce the active pharmaceutical ingredient (API) and its formulations. Companies and FDA will have to work hand and glove for all of the approvals. It is critical that companies start selling their approved products as soon as they have all of the necessary approvals and can produce the drug. Finished tablet sales produced in US have to be happen in the first year. For the success of tender based manufacturing it is critical that company start earning their desired return on their investment from the first year. They should be able to achieve higher margins than they are currently being achieved by all of the middle men involved in the distribution of generic drugs (12, 13, 14). US government has to assure that all of the necessary timelines to produce the drugs are met. FDA approvals on timely basis are critical (3, 4, 5). 2)     Each tender company will have to become a US based entity governed by US Corporate Laws. 3)     US Government will guarantee each company the necessary land, utilities, environmental permits. Each company working with US FDA will have to invest in US facility and demonstrate that all what is necessary to produce the designated/approved quality product is operational. Product quality will be randomly checked. Any non-compliance or deviation from the agreed/established standard would be a disqualification and could lead to closure of the manufacturing facility. All incurring losses will be companies responsibility.  4)     Each tender will be valid for five years and depending on company’s product quality performance could be renewed for the next five years. If during the term of tender product quality does not meet the established standard, company would be barred to produce and sell any product in USA.

1)     Key raw materials needed for the API and their formulations will be sourced from the US based manufacturing companies. US government will have to support the involved infrastructure companies.  Pharmaceutical manufacturing companies will have to develop, design and commercialize processes that would not live “square plug in a round hole” (1), a 60+ years old practice. There are manufacturing methods (12, 13, 14) they could consider. Chemists and chemical engineers are taught the fundamentals, may need to brush up and think differently.

 

Table 2: Company Responsibilities

 

I am sure there are many other “i’s” that need to be dotted and many “t’s” that need to be crossed if such a route is endorsed by US Congress, population at large and different pharmaceutical vested interests. US Government will have to convince companies to venture out this “delicate” path and it is not going to be easy. 

 

This route suggested here is and will be a major perturbation for US healthcare industry. Many with vested interests will make every effort through their legislators and influencers to make sure this pathway is obliterated before it sees light of the day. If any alternate path was easy it would have been adopted years ago. Let’s see who are the “brave hearts”. 

Direct sales to Medicare, Medicaid and VA patients (estimated to be about 55 million) will be of great value to the tender wining company/s. My conjecture is that the manufacturing companies will have higher profits compared to their current selling prices to PBMs and their allies. This will be a big win for free competition.  

 

Using the top 10 drugs ⁽⁶⁾ and their common dose one can calculate their annual API (active pharmaceutical ingredient) and the needed formulations. This is a good place to start.  

 

Rank	Drug Name	Prescriptions (2022)	Total Patients  (2022)	Prescriptions/ Patient/year	Milligram /Dose	Kilos /year (approx.)
1	Atorvastatin	114,509,814	26,640,141	4.29	10	97,000
2	Levothyroxine	98,970640	20,225,373	4.89	0.1	738
3	Metformin	92,591,486	20,122,987	4.6	500	3,672,445
4	Lisinopril	88,597,361	19,816,361	4.47	10	72,300
5	Amlodipine	69,786,684	16,699,810	4.17	5	30,500
6	Metoprolol	66,413,692	15,007,908	4.42	25	137,000
7	Albuterol	61,948,347	17,902,020	3.46	-	-
8	Omeprazole	56,300,064	13,879,629	4.05	20	101,000
9	Losartan	54,815,411	12,690,563	4.31	50	231,600
10	Gabapentin	49,961,066	10,571,700	4.7	10	38,600

 

Table 3: Prescriptions and patients per year ⁽⁶⁾

 

Manufacturing Technologies:

 

Numbers in Table 1 may not be of interest to many chemists and chemical engineers to determine the total active pharmaceutical ingredient (API) for each drug and number of finished tablets per drug. Village ^(12,13,14) has to decide on type of manufacturing process (batch or continuous) and the formulation facility needed for each product to satisfy US annual needs. It is expected that the “Village” has the expertise. Creativity and imagination can lead to very innovative manufacturing processes ^{(12, 13, 14)}.

 

Based on the chemistry, a quick review of the kilos needed for each of the drug in Table 1, astute members of the village can decide on needed type of manufacturing facility. Based on my experience, some of the APIs can be produced using a continuous process ^{(12, 13, 14, 15,16)}. It is my belief that the manufacturing processes for metoprolol and losartan can be simplified also. Albuterol is a liquid and not included. Levothyroxine dosage is in micro grams and can be campaigned in a properly designed equipment. Knowledge, experience, creativity and imagination of every village ^{(12,13, 14)} member will be put to test. All of the necessary manufacturing equipment is available in USA. Formulations would definitely need continuous processes. Technology and equipment exist but due to tradition has been used for batch processes. Value of continuous processes has been described and enumerated many time over in every chemical engineering books ^{(12,13, 14)}. Chemists and chemical engineers have to lead the process development, design and commercialization effort. They can work with equipment vendors to select the process equipment, technology and methodology.   

 

US Government (Legislators) along with Food and Drug Administration, Federal Trade Commission and local governments play an active role in my suggestion/proposal ⁽³⁾. Another piece of the puzzle that has to fit in hand and glove will be the manufacturing API methods and their formulations. We have to divide them in two paths. Each is easy if looked at separately. Sequential API manufacture and their formulation at single site once thought through works well.  

 

Of the ten formulated drugs I have reviewed chemistry of four of the actives. Each can be commercially produced using continuous processes ^{(12, 13, 14, 15,16)}. Their investment and environmental footprints will be smaller than the current methods. I have not reviewed their raw materials but should be readily available in USA. Other drugs can also be similarly produced continuously and their chemistries might need a review and some process development. Tender based manufacturing with improved FDA approval practices present a unique opportunity to produce the needed drugs at a breakneck speed if USA wants to produce the drugs and supply to the patients in the three groups mentioned above. 

 

What has been suggested/proposed above is a herculean task and is not easy. Significant effort would be required from legislators, regulators, litigators and benefactors (pharmaceutical companies) and a unified effort would be needed. This would be a case of “do or do not and there is no try -- Yoda”. To protect health of USA population against political blackmail resulting in high drug costs, such an effort is necessary. 

 

I believe that to produce and sell generic drugs under the US Government tender offer program is an excellent opportunity to revolutionize pharmaceutical manufacturing processes and technologies for ages to come. 

 

Challenges:

 

We should not forget that the adoption of this and/or any proposed plan would be a challenge to many participants of the current system i.e. how they conduct their business. We all know that we are set in our ways and do not want to change. However, in US’s national interest the proposed change is necessary. There are “TORS” who stand out.  They are LegislatORS, RegulatORS. LitigaTORS and “K StreetORS” who have led to the creation of the current system. Instead they would have to put national interest ahead of their personal  interest. 

 

Hurdles will also come pharmacy benefit managers and the supply chainers, I call them distribuTORS. US Congress will have prevent them so that they do not kill this effort. We have to remember their profits will be impacted. Every effort will be made to obliterate any thought of success of this effort. 

 

US legislators most likely would have to change the current regulations that are in the books for the approval of abbreviated new drug applications (ANDA). Regulators will have to change the information that has to be submitted by the companies for the approval of the ANDA applications. Companies submitting ANDA applications would have to learn and submit the necessary information so that ANDA can be approved as quickly as possible in less that 90 days ⁽¹⁾.

In summary for the winning tender system to work the and company to produce drugs in USA and success each of the following has to happen. 

 

1.     Every time line has to be met by the bid winning companies. 

2.     FDA has the systems in place to approve ANDAs in 90 days. 

3.     All of the necessary environmental , construction approvals, for the manufacturing site/s are met on a timely basis. 

4.     Legislators work in the interest of USA based patients rather than the current middle men (TORS). 

5.     Federal and state laws be in place to enable Medicare, Medicaid and Veterans Administration to purchase drugs for domestic supply in preference to foreign manufacturers.

6.     Laws have to be in place to prevent middle men (like Pharmaceutical Business Managers), insurance companies and other “TORS” from gaming the current system and minimizing profits of the manufacturers.

 

Above is an attempt and I would request/suggest readers to chime in and take this or similar plan to their legislators for further consideration and approval. Unless we the people demand meaningful changes in the current ways, nothing is going to change. 

 

Girish Malhotra, PE

 

EPCOT International 

 

References:

 

1.     Malhotra, Girish: Remedy of US’s Drug Supply Chain Shortages and Domestic Production of Generic and Brand Drugs, Profitability through Simplicity, April 15, 2025

2.     Malhotra, Girish: Drug Prices: Food vs. Medicine - A Difficult Choice for Some, Profitability through Simplicity, June 16, 2011 

3.     Malhotra, Girish: US’s Self Sufficiency for Generic Drugs: A Supply Dilemma and Potential Solutions, Profitability through Simplicity, March 31, 2022

4.     Malhotra, Girish: ONE PAGE Road Map to Reduce Drug Shortages, Assure Quality and Improve Affordability, Profitability through Simplicity December 6, 2019

5.     Malhotra, Girish: Roadmap to Reduce Drug Shortages and Bring Pharma Manufacturing Home (US), Profitability through Simplicity, October 30, 2023

6.     The Top 50 Drugs Prescribed in the United States

7.     Understanding Drug Tiers  October 22, 2023

8.     Malhotra, Girish: What Is Needed for a Regulatory Approval of NDA/ANDA Filings in 90 Days? Profitability through Simplicity, October 24, 2018

9.     Malhotra, Girish: ONE PAGE Road Map to Reduce Drug Shortages, Assure Quality and Improve Affordability, Profitability through Simplicity, December 6, 2019  

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

11.  Expiration Dating Extension

12.  Malhotra, Girish: Active Pharmaceutical Ingredient Manufacturing: Nondestructive Creation De Gruyter May 2022 

13.  Malhotra, Girish: Chemical Process Simplification: Improving Productivity and Sustainability John Wiley & Sons, February 2011

14.  Malhotra, Girish: Chapter 4  “Simplified Process Development and Commercialization” in “ Quality by Design-Putting Theory into Practice” co-published by Parenteral Drug Association and DHI Publishing February 2011

15. Malhotra, Girish: Considerations to Simplify Organic Molecule (API) Manufacturing Processes: My perspective, Profitability through Simplicity, April 20, 2019  
16. Malhotra, Girish: Alphabet Shuffle: Moving From QbA to QbD - An Example of Continuous Processing, Pharmaceutical Processing, February 2009 pg. 12-13