Remedy of US’s Drug Supply Chain Shortages and Domestic Production of Generic and Brand Drugs

USA is the largest consumer of Brand and Generic drugs. Discussion here is centered around generics as they are the largest volume (84%) ⁽¹⁾ to serve the needs of US population but is very applicable to brand drugs also. Most of the US drugs are imported. Threat of US not having sufficient supply of these drugs has been there and is real. It has been talked about and discussed for quite some time. Conversations and congressional hearings ⁽²⁾ have been held. Projects ^{(3, 4, 5)} have been initiated by HHS (BARDA) and others to alleviate problem/s have no meaningful results and the problems still prevail. From my perspective all these attempts have been a charade. There is nothing meaningful on the horizon. With potential of tariffs on drugs, US needs to wake up and remedy the situation before it is too late. 

                                                               

National Academy of Sciences ⁽⁶⁾ in its most meaningless report even suggested that US should build foreign alliances to curb shortages ⁽⁷⁾. For national security reasons these recommendations ⁽⁶⁾ should have been questioned. Different US presidents have issued executive orders as far back as 2011 ^{(8, 9)} and nothing meaningful has resulted to reduce shortages or attain self-sufficiency. To bring pharma manufacturing home revamp of pharma’s business model, discussed later, along with US’s creativity and imagination is needed. This is critical. Since the industry is profitable need to change has never been a consideration. 

 

Why US has not made any progress in brining pharma manufacturing home when it can send man to the moon and bring him back. Pharma, my conjecture, has not addressed issue and/or may be does not understand the real root cause of the problem even after repeated discussions and attempts. Perspective presented is my own and is not influenced by any for profit and/or not for profit organization.  

 

Pharma companies are stuck in the current business mode (Figures 1 & 2) since middle of the last century. This is due to what I label as “equipment centricity ⁽¹⁰⁾” (Figure 1) rather than “process centricity ⁽¹¹⁾”. Since pharma has been profitable it considers itself invincible and no need to change its operating and business model has been on their radar. Figure 2 is the result of Figure1. 

Pharma’s “equipment centricity ⁽¹⁰⁾” i.e. fitting different chemistries in the same equipment has forced companies to follow stringent drug safety regulations and prescribed cGMP regimen. Downside has been low asset utilization ⁽¹²⁾. All the related costs become part of the product cost. It also has the highest hydrocarbon emissions per kilo of product ⁽¹³⁾. All of the related costs are passed on to the patients. Since the customer pays for the added costs, need for “process centricity ^{(11 )}” has not been a consideration.

With the prospect of tariffs on pharmaceuticals unless immediate steps are taken US population could suffer immensely. If US is really serious about bringing generic and brand drug manufacturing home, it has to emulate an effort like going to moon and/or create a consortium that has no outside political and regulatory meddling. Alternate business and operating model, not a rocket science, has to be adopted. Pharma manufacturing has to move from “equipment centricity ⁽¹⁰⁾” to “process centricity ⁽¹¹⁾”. If it does not this discussion will continue. 

 

Why Equipment Centricity:  

 

Why has the pharmaceutical industry dwelled on and is content with “equipment centricity”? The answer is simple. Since inception ^{(14, 15, 16)} manufacture of active pharmaceutical ingredients (API) and their formulations can be accomplished by modifying the processes to fit in the available existing equipment. This minimized new capital investment. With this pathway it accepts rigorous drug safety regulations and less than optimum use of processing equipment ⁽¹²⁾. “Equipment centricity ⁽¹⁰⁾” related costs are born by the patients.  

 

Process Centricity ⁽¹¹⁾:

 

This is not a new concept for the chemists and chemical engineers. It is pure and simple application of fundamentals of chemistry, chemical reaction engineering, processing and economics taught in our business, science and engineering curriculums ^{(14, 15, 16)} to create an excellent process. It is widely used in the fine/specialty chemical industry, older cousin of pharma. It is ironic that every reaction chemistry tells us how the “process centricity ^{(11 )}” works and how it can be exploited. Even then pharma lives in its old tradition of fitting a square plug in a round hole “equipment centricity ⁽¹⁰⁾” (Figure 1). 

 

By overlooking “process centricity ⁽¹¹⁾” especially in active pharmaceutical ingredient (API), pharma is not involving the “village” ^{(14, 15, 16)}from product inception. As a result it misses out on applying nuances of mutual and social behavior of chemicals, Sociochemicology ^{(14, 15, 16, 17)}, to create excellent processes. Some might consider this combination to be difficult. It is not. We are taught everything we need to know but have not fully capitalized on their value. We have the knowledge, creativity and imagination to accomplish the impossible. 

 

Path Forward:

 

If US wants to bring pharma manufacturing home, companies will have to internalize move from “equipment centricity” ⁽¹⁰⁾ to “process centricity” ⁽¹¹⁾. My estimate at least 180 days working 24/7 hours might be needed for each product provided it has the needed processing equipment, infrastructure, available raw materials, approved site and process. It is very possible that US might not have properly trained manpower for such task. 

 

In order for US to bring pharma manufacturing every “t” will have to be crossed and every “i’ will have be dotted. Brand and/or generics cannot be manufactured tomorrow in any available equipment . It will take time as the process and the facilities have to be approved. Processes to manufacture products just cannot be fitted in any available equipment. On top of it US does not have much of any raw materials needed for the drugs. Processing methods, equipment centric or process centric, have to be tested. Drug efficacy has to be tested. All of the above issues have to be dealt with and addressed. 

 

Companies interested in reducing/alleviating drug shortages and bringing pharma manufacturing to USA should be carrying the baton from product identification, process development, their commercialization and distribution. They have to transition from “equipment centricity” ⁽¹⁰⁾ to “process centricity” ⁽¹¹⁾ based model for the API and their formulations. Village ^{(14, 15, 16)} would have to be involved. This can happen by as stated earlier by capitalizing on mutual social behavior of chemicals ^{(14, 15, 16, 17)}, proper unit operations ⁽¹⁸⁾ and incorporating “process centricity” ⁽¹¹⁾. It will be able to accommodate variable volumes to meet patient needs in a properly designed plant. 

 

Simply said pharma’s marriage and addiction to “equipment centricity” ⁽¹⁰⁾ has been insurmountable and inseparable as significantly less effort is needed to commercialize a product. Had the chemical/pharmaceutical industry been “process centric” ⁽¹¹⁾ things would have been different. It would have had the agility to produce many different products with minimal investment. It is possible that the industry would not have gone “offshore” as USA would have led the manufacturing technology knowledge curve.   

 

CDMOs (contract development and manufacturing organization) and equipment suppliers will resist the suggested shift to “process centricity” ⁽¹¹⁾ based manufacturing. For their success they will have to support “process centricity ⁽¹¹⁾. Since CDMOs rely on “equipment centricity” ⁽¹⁰⁾ there should not be any surprise if US based CDMOs move overseas. It is time for pharma to consider alternate business model if it wants to bring pharma manufacturing to the largest market, USA. 

 

FDA will have to reconfigure itself and its approval processes for NDA (new drug application) and ANDA (abbreviated new drug application) by reducing their approval times to 90 days ⁽¹⁹⁾. Environmental and other regulatory approval times will have to be reworked. Every “K Street” ⁽²⁰⁾ residents would be an influencer. Legislators will have to participate in bringing manufacturing home by creating a FOUR STATE model and rejuvenating “Puerto Rico” ^(21,22) type model. It will be an added opportunity to bring jobs home. 

 

Companies (pharma and Pharmacy Benefit Managers (PBMs) will have to guarantee product quality and would have to accept sever penalties for any and every deviation ⁽¹⁹⁾. Companies will have to have total complete knowledge and command of the production and distribution process. Since every NDA and ANDA drug is FDA approved drug tiers ⁽²³⁾ have to go. They artificially raise prices. Direct sales to patients have to be allowed. Price, quality and drug efficacy based competition is the best way to reduce shortages. 

 

Unlike the past efforts that have resulted in nothing a collective thought through effort needs to be made. There will be resistance from every vested interest. 

 

Recent announcements by Eli Lilly ⁽²⁴⁾ $27 Billion, Johnson & Johnson ⁽²⁵⁾ $55 billion, Novo Novartis ⁽²⁶⁾ $23 billion are “equipment centric” ⁽¹⁰⁾ projects for their brand products. These are not going to be commercial at least for the next 4-5 years and will not produce products to fill tariff related immediate needs. Once patents for their drugs expire these investments could become the “white elephants” of no value looking for home.   

  

Simply said pharma’s marriage and addiction to “equipment centricity” ⁽¹⁰⁾ that has been inseparable and insurmountable needs to change. My conjecture is that “process centricity” ⁽¹¹⁾ effort will be a  “win-win” situation for the companies and a BIG win for the patients. Task is going to be challenging. US has never shrugged from any challenge. Let us be brave and get going.  

 

Girish Malhotra, PE

EPCOT International 

 

References:

1.     U.S. Pharmaceutical Statistics

2.     Woodcock, Dr. Janet: SECURING THE U.S. DRUG SUPPLY CHAIN: OVERSIGHT OF FDA’S FOREIGN INSPECTION PROGRAM December 10, 2019 

3.     Phlow Corporation Pharmaceutical Technology July 16, 2020

4.     DOD Awards $69.3 Million Contract to CONTINUUS Pharmaceuticals to Develop US-based Continuous Manufacturing Capability for Critical Medicines   January 15, 2021

5.     API Innovation Center  

6.     BUILDING RESILIENCE into the Nation’s MEDICAL PRODUCT SUPPLY CHAINS National Academies of Sciences, Engineering, and Medicine, 2022

7.     Malhotra, Girish: Has US lost its Business Acumen, Creativity and Imagination for its Healthcare Needs? Profitability through Simplicity, June 6, 2022

8.     EO 13588 Reducing Prescription Drug Shortages October 31, 2011

9.     EO 13944 Combating Public Health Emergencies and Strengthening National Security by Ensuring Essential Medicines August 6, 2020

10.   Equipment centric https://images.app.goo.gl/Qi2UZKqu4qHdLWvu6

11.   Malhotra, Girish: Process Centricity is the Key to Quality by Design, Profitability through Simplicity April 6, 2010

12.   Schrader, Ulf: McKinsey & Co. Operations can launch blockbuster in pharma, February 16, 2021

13.   Sheldon R.A. The E factor 25 years on: the rise of green chemistry and sustainability, Green Chemistry

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

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

16.   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

17.   Malhotra, Girish: Sociochemicology, May 30, 2013

McCabe W. L & Smith J. M. Unit Operations of Chemical Engineering McGraw-Hill Book Company Second Edition 1967

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

20.   K Street

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

22.   MacEwan, Arthur: The Effect of 936 May 2016  

23.   Understanding Drug Tiers Accessed October 22, 2023 

24.   Eli Lilly  April 14, 2025 

25.   Johnson and Johnson April 14, 2025

26.    Novartis April 14, 2025

 

Past, Present and Future in Pharmaceuticals

Tea leaves about the pharmaceutical industry have been written ^(1,2), read and will continue to be written. They let us imagine, suggest us of possibilities and opportunities. We just have to decipher the maze, strive and to get there to write our own tea leaves that could be used by others to learn and innovate. It is not difficult.

Recently I was asked the following questions by American Pharmaceutical Review. Excerpts will be published and posted soon.  

1.    Looking back over the last 20 years what have been some of the most significant industry developments/trends in the following categories:

§  New classes of drugs: Some of these are improvements and others are innovations.

·      Asthma

·      Cholesterol

·      Diabetes

·      HIV/AIDS

·      HCV

·      Cancer/orphan disease cures

Drugs in each of the categories have helped and improved life. However, their affordability for the masses due to high prices is becoming increasingly limited.

§  Regulatory initiatives

FDA has issued guidelines that I believe have created more stress when it comes to manufacturing technology innovation. They have not created platform/s to simplify existing manufacturing operations and introduce better technologies. In addition, FDA has not tried to simplify filing process and reduce approval times.  

Examples are FDA’s suggestion are adoption of QbD ^(3,4)and continuous manufacturing ⁽⁵⁾for the manufacture of Active Pharmaceutical Ingredients (APIs) and their formulations. It is necessary to mention that the fundamentals of chemical engineering that have been outlined in McGraw Hill Chemical Engineering Series ⁽⁶⁾and earlier versions going to early fifties have been practiced in the manufacture of chemicals, pharmaceuticals being a subset. They detail the fundamentals that are the building block of every chemical manufacturing process, have been practiced since inception, but are being labeled as the new “coming” ^(3,4) necessary for quality products.    

Mere suggestion to incorporate QbD is indirectly telling companies that companies have short comings in their process design and don’t employ the right talent. However, one should know that without incorporation of design fundamentals repeatable quality product cannot be produced. If the companies do not build their manufacturing on this basis, they will continue to fail on cGMP practices. There will be continuing data integrity issues. In the recent years we have seen these through increasing 483 issuances ⁽⁷⁾. FDA might have to take stricter stance to curb such excursions. I just have to ask ourselves did we fail to practice what has been penned and taught by our elite educationalists. 

FDA is suggesting adoption of continuous manufacturing when it does not understand the fundamental established definition of “continuous manufacturing” that has existed and has been practiced for over 100 years. What is FDA’s definition and is it established? There is not response from FDA on this subject ⁽⁸⁾. Is FDA’s definition established by personnel who have developed, designed, commercialized and managed continuous manufacturing of APIs and formulations? It seems FDA is promoting CM as “fool’s gold”. CM can work for API (active pharmaceutical ingredients) if there is product volume demand to operate 8,760 hours per year. It is real for certain formulations that meet demand requirements outlined above. If CM’s value is not understood and applied properly, industry on the whole will end up spending billions with most likely no return. Spent monies can only be recovered via higher priced drugs. 

Continuous improvement is an ongoing exercise at every organization. FDA has been preaching it but has it practiced on its own practices. Case in point is that FDA had not done much to simplify drug or approval of manufacturing processes. A recent proposal to bring the time to eight to ten months has been suggested. Even that has issues. My question is why not complete the whole task in three months. Benefits will be tremendous i.e. lower costs and selling prices and competition. Pharma needs these. Only best of the best will survive.

§  New manufacturing technologies

     Manufacturing technology innovation comes from the companies that produce products. In the last 20 years very little of new manufacturing technologies and for that matter continuous improvements, my conjecture, has taken place on the pharma landscape that are able to lower brand and generic manufacturing costs and selling prices. I believe regulations, extended approval procedures and time are the cause. I also believe that caution within the companies, regulators will take too long to approve improvements and better technologies, are also a reason for lack of any innovation within the companies.

I believe there is more following of FDA guidances/suggestions rather than companies taking internal initiatives that will improve product quality, profitability and drug affordability. A latent reason for all this could be high profitability with existing less than efficient processes and methods.

Industry has to take the lead on manufacturing technologies. Current global pharma and that includes regulatory landscape will need significant change to get there ⁽⁹⁾.

§  Industry globalization

Hatch-Waxman Act ⁽¹⁰⁾and WTO ⁽¹¹⁾changed global pharma landscape.

When nearing patent expiration not much effort through efficient processes, which could slow down or prevent generic entry, has been made by the brand companies to retain manufacture of drugs in the developed countries. As a result most of the generic drugs are being manufactured and supplied by the India and China. Selling prices of the generics are lower compared to the brand drugs. Hatch-Waxman and WTO helped. However, the selling prices of the same generic drugs are significantly, by magnitude, lower in the developing countries compared to the developed country prices. This price differential is raising many questions about loss of intellectual property, an unfair question. Main reason for the high prices is exorbitant price hikes by the supply chain participants ^(12,13)especially in the United States to facilitate drug distribution. 

2.   Is the current state of industry what you imagined it might be 20 years ago? What do you see as some positive industry developments and what do you think the industry can do better?

     Not really. 

     Industry seems to have lost its mojo in developing breakthrough therapies for mass needs. It has produced marginally better drugs that it can sell at much higher prices to keep its revenues and profits growing. High prices have helped revenue and profit growth. With waning growth, industry has focused on cancer therapies, where it has made significant advances, and on orphan drugs. Demand especially for cancer drugs is significant. However, industry has to figure out how to make these drugs affordable. Big question is “Can the industry sustain its current business model?”

Companies selling brand drugs in the developing countries at significantly lower prices are causing consternation in the developed countries. There are too many examples to enumerate. That gives the perception in the developed countries is that the developing countries are stealing intellectual property. Reality is very different. Since the brand pharma cannot sell the drugs at the developed country prices, they sell the same drugs at significantly lower prices to recoup some of their fixed expenses. Since the major suffering population could be in the developing countries, it would be beneficial if the brand companies used  ‘economies of scale’ to sell the drugs all over at lower prices and amortized their investment over a longer period. This could be considered an alternate business model. 

My conjecture is that the develop new drugs and high price strategy has worked well and might work for few more years for about 17% of the global population. Brand pharma have catered minimally to the remaining 83% that population that also needs drugs but at affordable prices. Addressing needs of such a big population mass ⁽¹⁴⁾could give pharma companies significantly higher total revenue and profits compared to the current business model. It would require a model change. Industry may be forced to consider it if the fast pace growth of yester years stalls.

Industry and the regulators have to figure out how to reduce drug development and approval time and costs. Question we need to ask and address is that are we over analyzing the drug development and their commercial processes and as a result delaying new drug introduction at affordable costs. Industry needs to consider 7.2 billion population as the market rather than 1.2 billion. It should be obvious that the revenue from 7.2 billion would be much bigger number. Are the companies missing on simple laws of economics?

My concern for the long-term is that with the focus staying on block buster biologics and bio pharma and not many small molecule-based drugs that are affordable, the expertise to develop and commercialize such molecules is going to be lost. This could have long-term impact on job creation in the developed countries. 

3.    Looking ahead what does the industry needs to do to address growing concerns over cost, time to market, government/regulatory scrutiny, and quality/safety of products? 

Reduction in time to market is essential for the long-term viability of brand pharmaceutical companies. Regulators have to facilitate the process. This would require a major revamp in the workings of the regulators especially USFDA. Every year gain in the life of brand drug will have a significant impact on P&L statement of every company. Revamp would require a major re-do at the regulators and it would/might require a legislative interference. If they don’t, as discussed later, “creative destructors ^(15,16)” will change the current model.

Early in 2018 a new initiative to has been launched by Amazon, Berkshire Hathaway and JPMorgan ⁽¹²⁾to lower drug costs to their employees. If they are successful and they should be, it is going to be a major perturbation to make/improve drug affordability in the developed countries.

Global quality and safety of drugs is paramount. First time Issuance of 483 citation could be taken as a reflection of oversight or not crossing every “t” and dotting every “i” in their manufacturing process. However, repeated 483’s at the same company should be taken as a ground for deliberate negligence and considered for shutting the operation. Only financial hurt will prevent repeated offences.

FDA has initiated a process to reduce the approval time needed for approval to 8-10 months. However, it is still long and needs to be reduced to three months. Reduction to three months would be an incentive for the company to get to the market sooner. To achieve such a reduction in time FDA will have to create templates and facilitate applicants. There could be internal resistance within FDA and other regulators. My conjecture is companies will like this as profits are a good incentive to achieve goals.

Companies will have to comply with every FDA requirement and have to have fool proof compliance regimen. If they do not, FDA should stop manufacturing at the site. Inspection and approval time could be extended beyond three months. Reducing time to three months will be an internal challenge at FDA. 

Totally different thinking will have to implemented.

Companies have to do an internal introspection of their own practices so that they do not suffer the wrath of 483s. Every step of the manufacturing process they have to have an absolute command. One may think that this is difficult. It is difficult only if one has command of the processes. They have to think that if a manufacturer is expecting quality, they should deliver the same, no less. 

Girish Malhotra, PE

EPCOT International

1.     Malhotra, Girish: Reading the Tea Leaves: Predictions for Pharma's Future, Profitability through Simplicity, January 18, 2016 Accessed September 1, 2018

2.     Malhotra, Girish: Pharmaceutical Manufacturing Technology Innovation: Does Reading the Tea Leaves Matter? Profitability through Simplicity, December 22, 2017 Accessed September 1, 2018

3.    Hussain, Ajaz, Pharmaceutical Quality by Design: Improving Emphasis on Manufacturing Science in the 21^stCentury, Pharmaceutical Manufacturing, August 5, 2004 Accessed August 28, 2018

4.    Yu, Lawrence, Pharmaceutical Quality by Design: Product and Process Development, Understanding and Control, Pharmaceutical Research,April 2008, Volume 25, Issue 4, pp 781–791 Accessed August 26, 2018

5.     Kopcha Michael, Ph.D., R.Ph., “Continuous Manufacturing” – Common Guiding Principles Can Help Ensure Progress, September 11, 2017, FDA Voice, Accessed August 28, 2018

6.     McGraw Hill Chemical Engineering SeriesAccessed August 24, 2018

7.     Unger, Barbara: An Analysis of 2017 Warning Letters on Data Integrity, Pharmaceutical Online, May 18, 2018 Accessed August 25, 2018

8.     Drug Making Email exchange with Dr. Janet Woodcock, FDA July 13, 2016

9.     Malhotra, Girish: Pharma’s future is putting innovations in the hands of innovators, CPhI Parma Insights, August 23, 2018 Accessed August 26, 2018

10.  Hatch- Waxman Act, Very Well Health, May 31, 2018 Accessed August 29, 2018

11.  TRIPS and pharmaceutical patents, September 2006, WTO.org, Accessed August 29, 2018 

12.  Sood, N; Shih, T; Van Nuys, K; Goldman, D; The Flow of Money Through the Pharmaceutical Distribution System, June 14, 2017
 http://healthpolicy.usc.edu/Flow_of_Money_Through_the_Pharmaceutical_Distribution_System.aspx, Accessed March 1, 2018

13.  Malhotra, Girish: Opportunities to Lower Drug Prices and Improve Affordability: From Creation (Manufacturing) to Consumption (Patient), Profitability through Simplicity, March 9, 2018 Accessed August 29, 2018

14.  Malhotra, Girish: An Alternate Look at the Pharmaceutical World and Drug Affordability, CPhI Annual Industry Report 2017, pgs 36-41 

15.  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 Accessed August 21, 2018

16.  Malhotra, Girish: Amazon PillPack Marriage can Alleviate Drug Shortages and May be Lower Drug Prices, Profitability through Simplicity, July 5, 2018 Accessed August 21, 2018