Expert offers prescription for improving medicine production in Europe

For the first time in two years, CPhI Worldwide​ is bringing its agenda of sessions, exhibits, and other programming for pharmaceutical professionals to the real world. November 9-11, up to 30,000 attendees are expected at the event in Milan, Italy’s Fiera Milano; for professionals who aren’t ready for in-person travel, show organizers will offer on-demand content until November 19.

Adrian van den Hoven, director general of Medicines for Europe, is among the industry veterans on the roster; during his digital keynote European Regulatory Outlook, he will share a glimpse of what’s on the horizon for medicine production on the continent. He shared with Outsourcing-Pharma possible solutions to improve production, how the European Commission might encourage stepped-up investment in active pharmaceutical ingredient (API) production, and more.

OSP: ​What are your members' perspectives on the current ​pharmaceutical strategy for Europe?​

AV: Our members are really focused on the future strategy for pharmaceuticals in Europe since the EU only reviews this legislation about once every 20 years. And now is one of these very moments.

One of the impacts of COVID-19 has been the creation of strong demand for medicines and local manufacturing. So, we expect any future strategy to focus on issues such as security of supply and encouraging more resilient supply chains.

Linked to these, is the need to reform current market policies regarding generics. Many EU members have policies aimed at securing the lowest prices. However, this only serves to consolidate supply chains and increase risk. We believe the EU understands this, and we expect them to engage in dialogue with us to avoid potential problems in the future.

OSP: Do you anticipate a different approach for final product generics than the API element?​

AV: That's a good question since both are important to the EU, but what is clear from our data is that we still have substantial manufacturing of FDFs in the EU, including generics, although our previous dominance on APIs has slipped, with China and India becoming more important. So the Commission will be looking for ways to encourage more investment in API production as well as expanding FDF capacity.

However, that's tricky since the EU is not a country so it cannot mandate anything. It can only create incentives for companies to invest in what it thinks it needs. Of course, there is a big opportunity to do this with the €750 billion Recovery and Resilience Fund, set up post-COVID, although we feel it will need adapting to work as intended.”

OSP: How do you envisage the drive towards domestic supply chains affecting generics supply in Europe – and might this affect the market in the longer term?​

AV: This question is generating a lot of interest from politicians at the moment because, during COVID, extensive use was made of export restrictions on medicines and vaccines. As a result, regions with a strong manufacturing base fared much better.

We do not feel adopting a protectionist pathway would be a good policy. It would be far better to look at why Asian countries, like India and China, are more competitive and develop strategies to match them. If you look at the medicines needed in ICUs to treat COVID, Europe was in a good position. So, we have a strong base to build upon, we just need the right market framework and policy incentives to spur that into something bigger.

OSP: How do we go about modernizing manufacturing more quickly, and how can we incentivize this?​

AV: Continuous manufacturing is one area that is being looked at, but for it to be truly successful there needs to be predictability of demand. Whereas, in the EU, what you get is unpredictability. This means we need to create clearer market signals for generics manufacturers, but we are still a long way off on this. 

Part of the problem is that although the EU is a single market, from a regulatory point of view, it is actually 30 different markets in terms of demand. This makes it hard to identify where demand exists hence the EU is looking at digital tools to improve market visibility. This makes perfect sense since a recent European Commission study indicated that 9 out of 10 'stock outs' were localized to one member country.

Since no manufacturer produces drugs for just one country, this indicates that the shortage was down to poor planning leading to misallocation by the market, rather than an overall problem with supply. Greater visibility of demand would create opportunities for suppliers to step in quickly and plug these gaps.

Where the EU may intervene directly is on environmental impact. Although pharma has a much smaller impact than the other parts of the chemical industry with bigger volumes than us, there is a need to make production cleaner and greener. We expect there will be incentives to drive this forward, possibly in the form of grants from the Recovery Fund I mentioned earlier. 

Another route could be introducing green criteria into procurement. This already exists in some countries, such as Sweden, but it only covers some molecules so has very little impact at present, But, if it was scaled up across Europe, then it would become a driver for change.

OSP: In terms of generics, there have been comments in the past that there is no incentive for manufacturers to look at process improvements since the investment may not pay for itself. Could you offer your thoughts?​

AV: I wouldn't really agree with that. Originators often make a lot of process changes and then the generic companies can take a different process route to manufacture the product and get it approved. In the end, it will be the same product.

And then there's continuous investment by generics manufacturers once a drug has taken over the market. What I believe the generics industry continues to demonstrate is that you can use the process improvement to increase volume and speed of production.

I think the question right now is, “Can we create incentives in the market to move beyond efficiency in terms of cost of goods?​” E.g. Offering greater flexibility for security of supply in addition to our ability to produce efficiently to be less expensive.

We need to consider introducing some kind of redundancy or flexibility within the chain to ensure security of supply. This is a core discussion point at the moment. Something called 'structural dialogue' is happening right now between manufacturers, regulators, doctors, and NGOs to identify how we can make the supply chain more resilient.

I think the main problems are on the generics side, which is 70% of the volume of medicines. Every country in Europe has a policy of getting the lowest price generic.  However, this policy is an issue because, at some point for older drugs, the cost of goods may increase. For example, when we have to comply with some very expensive new regulation, like serialization to counter falsified medicines.  We have also seen a post-COVID surge in cost a lot of raw materials, energy.

Members are waiting to see if the Commission is going to introduce resilience/supply criteria into EU law, which will require procurers/purchasers to factor this into their purchasing. Whether they have the courage to change the law and make it a part of the policy is another thing altogether. We will see in the next few months.

OSP: Europe has been famous for biosimilar production; how do you see that developing in the next few years?​

AV: Right now we're seeing a large number of approvals and launches for some very high-value originator products, such as Mab-based therapies, that are being well accepted by physicians and patients, who see them as clinically equivalent products.

In that respect, there is a very high degree of competition in Europe.  But, there are also a few pockets where it's not working, but this has less to do with physicians and more to do with procurement or reimbursement systems that offer no incentives to use the biosimilars.

What we have seen is some countries moving towards more generic type policies to try and lower the prices of biosimilars in a similar way to generics. That's a challenge because of development costs of a biosimilar are so much higher than any generic. This kind of pressure will make it harder to put forward a sound business case for investing in a high-cost development if there will be a poor ROI.

What I am concerned about is the number of developments might diminish over time. Not the blockbuster-type deals, I think they will continue, but rather the middle range products that are still appealing, in terms of their cost, but may not be big enough to justify a biosimilar development. 

We shall see how the market develops, but that's one of our concerns and one that we bring to the authorities in the different member states by saying, “You may save a little bit here, but you may lose the competitive savings elsewhere. How do you find the balance​?”

OSP: What is your perspective on how increased vaccine demand will affect the biosimilars markets, bearing in mind lots of European contract manufactures have long-term supply deals.​

AV: COVID certainly shook up supply chains. This was felt first in demand ICU emergency sterile injectable products, where we had this massive surge in demand. The industry responded by stopping the production of certain other sterile products whose demand fell. That was only possible because the treatment for many other diseases shut down. This wasn’t very good for the patients who were affected by this change, but it did enable us to switch.

With vaccines, you had a similar phenomenon but partially for some biologic production as well as sterile fill/finish, and then the same issue occurred. The question now is, "How long will the demand for those vaccines continue​?" Certainly, for the near term, but whether it will continue into the medium term is harder to predict. 

Obviously, problems may well occur when the diagnosis and treatment of non-communicable diseases go back to normal. Remember - a lot of patients were left on the sidelines during COVID, and as these are brought back into the system there’s going to be a pent-up demand for their treatments.

So, I think the real issue is, do we have enough capacity for - let’s say emergency needs, such as vaccines and ICU emergency drugs, while at the same time being able to supply the normal market for non-communicable diseases? That’s quite challenging to answer because it’s difficult in Europe to gain visibility of where the market is going. We often find out a little bit too late when the market is shifting because buyers/procurers like hospitals or insurers are unable to do very simple demand forecasting.

OSP: Looking at the potential M&A environment, both in terms of European companies buying European companies and perhaps more international companies trying to get a base in Europe, do you have any perspectives on that?​

AV:​ When it comes to mergers and acquisitions, if you’re talking about an already well-established European company buying another well-established European company, that has common portfolios of products, that can be a big challenge because of EU competition law. The new consortium may be forced to divest a large part of its widened portfolio, making the merger far less attractive.

However, we are seeing a lot of interest from non-European headquartered companies who wish to buy into the European market. To be successful, they often make the decision to invest in manufacturing in Europe as well. That’s because there is a certain inherent value to having a manufacturing footprint in Europe.

This may not be financial to begin with since there’s no bonus for manufacturing in Europe, but what it does give them is scope for more rapid responses to changes in the market. As I said earlier, the European market is quite fast-changing so they may be able to seize opportunities to jump into emerging markets or step in if another manufacturer has an issue and take over some of their market share.  To work, this has to be done very, very quickly, and having that capacity in Europe is a prerequisite.

CPhI Worldwide 2021 is a hybrid event; the in-person component (expected to host up to 30,000 industry professionals with 1,400 exhibitors) takes place November 9-11 in Milan, and the digital content will be available until November 19. Read here to register or to see a list of sessions, events, and other features​.​