Revolutionary change is occurring in the pharmaceutical industry. The old model of discovering and delivering pharmaceuticals is under attack. The rising cost of medicines, the reduced productivity and the increased regulatory requirements have driven companies to seek alternative means. Significant efforts to reduce operating expenses, to share in the risks/costs of failure and to provide reasonable returns to investors are leading to the destruction of the industry as we have known it. This “Pharmageddon” isn’t going to happen sometime in the future – we are currently in its midst.
The industry must respond by developing a win-win-win approach that allows investors, pharma companies and their suppliers to collaborate to continue to deliver life-saving and life-improving medicines to patients in need and to share in fair and reasonable profits. Otherwise, a time will come when new life-saving and life-improving medicines will no longer be developed.
Destruction on the Horizon
Revolutionary changes are occurring in the pharmaceutical industry. The public perception of drug companies has reached an all-time low. And it’s not just concerns about drug pricing. Drug manufacturers, distributors and pharmacies are also under scrutiny due to the escalating opioid crisis. States are suing drug companies based on the costs associated with responding to this serious health issue.
In addition to these challenges of public perception, the industry is struggling to contend with the impact that the loss of patents, the reduction in R&D productivity, the increased regulatory oversight and the rapidly rising cost of developing a new drug are having. All of these reasons have driven the industry to revolutionary change in all sectors to overcome these market dynamics. This has caused the realization that Pharmageddon isn’t coming at an abstract date — it is here. Although it may seem dramatic, if no actions are taken to change this current landscape, the pharmaceutical industry is at risk of destruction — meaning that we will no longer have the ability to develop and produce life-saving medicines. When the next pandemic occurs, hundreds of millions of people could die because the needed new medicines and innovations will not be available to treat them.
The Need for Responsibility
As professionals, it is our responsibility to stand up and face these current pressures. We must address the concerns of the public — and eliminate financial and economic waste so that we can deliver medicines at fair prices. As an industry, we need to conduct business in a fair and transparent manner so that we can charge reasonable prices and still make fair returns for investors and everyone in the industry.
Though it may be difficult to accept, that means that some manufacturing and R&D facilities must be closed. The industry has not really tackled this problem previously because it is very difficult to do. Closing facilities creates job losses and infrastructure rationalization, which are strongly opposed by governments that often push hard for implementation delays. Moving drug production is also costly, and risky for the supply chain. Change requires a review of regulatory dossiers, which once opened up can be reevaluated entirely. There is a potential risk that additional work will need to be done, potentially threatening a product’s survival in the marketplace.
A Win-Win-Win Solution
Partnerships amongst all of the players must be created, in which everyone invests together to deliver valuable life-saving and life-improving medicines to patients at fair and reasonable prices. In spite of pricing concessions, pharma companies and suppliers will still be able to make a reasonable profit and investors will be able to make a reasonable return. We must all work together to get the current system — which is a system out of control — into control to establish a long-term win-win-win approach, in which everyone has a vested interest and from which all parties can assure a sustainable, profitable growth business.
If the industry is to survive Pharmageddon, we need to create a mindset of generating value across the entire supply chain — we can no longer think that winning must occur at another’s expense.
Need for Greater Efficiency
What CDMOs Can Do
The greatest opportunities exist for CDMOs who seek to become true partners with their customers. CDMOs must understand the cost pressures facing the industry and recognize what they can do to play a role in improving customers’ cost structures by finding new ways to drive efficiencies, providing security of supply, enhancing regulatory compliance and building long-term confidence by delivering on commitments to customers.
The consolidation occurring in the industry is not only fundamental to its success but will lead to an entirely new industry structure where CDMOs, as a part of a strategic partnership, deliver technical expertise and support to their customers to assist in drug development, offer new technologies and deliver more efficient and cost-effective manufacturing support.
Taking Action at Avara
Forming long-term strategic partnerships with our customers is an equally important component of our strategy. We want to help our customers succeed by providing security of supply and meeting regulatory compliance requirements at a fair price. We commit to certain guaranteed long-term benefits to our customers as a means of sharing the leverage that we realize from increased volumes or improved efficiencies.
As an integrated supplier of API and drug product services, Avara also helps simplify the supply chain. We reduce the number of handoffs needed to get a drug from development to commercialization and into the hands of patients. Avara brings a wealth of process and industry knowledge and expertise in supply chain management, process and formulation development, commercialization, product launch and technical transfer to bear on customer projects, facilitating the rapid, cost-effective development of advanced medicines. As a result, our customers receive significant benefits.
The foundation of Avara is accelerating the delivery of drugs to the marketplace while facilitating the changes that must happen in the industry. Those changes can only happen if there is a mutual understanding and participation by all in the market, including contract service providers and their customers.