Global Biopharmaceutical Industry: Myth or Reality
Clinical Research Associate Program
Kriger Research Center
Summary / Abstract
The myth or reality of a global biopharmaceutical industry cannot be simply decided by looking at its markets alone. The industry and its various organizations as well as governmental agencies play important roles in determining the structure and business activities of the industry world wide. The biopharmaceutical industry is unique in that all its activities from research and development, manufacturing and marketing are strictly regulated by governments. The ICH, International Committee for Harmonization, with its entire decision making members from U.S., EU and Japan are dictating the direction of development. Similarly, research and development are done mainly in these regions. However, with R&D routes shifting from traditional chemical synthesis methods to biological based and offering targeted therapy, smaller companies as well as developing countries are able to participate in a much larger scale. Shifts towards generic drugs to reduce health care cost as well as patent expirations have increased opportunities for more players in the industry. Therefore, each aspect of the industry; R&D and manufacturing, marketing and regulations must be viewed individually with respect to participation and impact to provide a clearer perspective of the biopharmaceutical industry as a global industry.
Global Biopharmaceutical Industry â?” Myth or Reality?
Global biopharmaceutical industry â?” what do we really mean by it? What does it mean to be global? The Oxford dictionary (Advanced Genie version) describes global as â?ocovering or affecting the whole worldâ? . Globalization is a much used term to describe the current affairs of the world and this phenomenon has affected all of us. Some definitions of globalization are as follow:
1. The increasing economic, cultural, demographic, political, and environmental interdependence of different places around the world. 1
2. A set of processes leading to the integration of economic, cultural, political and social systems across geographical boundaries. 2
3. Generalized expansion of international economic activity which include increased international trade, growth of international investment (foreign investment) and international migration, and increased creation of technology among countries. Globalization is the increasing world-wide integration of markets for goods, services, labour and capital. 3
Globalization holds different meaning for different peoples, cultures, societies and economies. We will examine the current state of the biopharmaceutical industry through various aspects of its operation, its impact and determine if its fits a global industry.
The pharmaceutical industry exits in some form or other in almost every country in the world. The early days of the industry is characterized by the production of traditional remedies extracted from plants and other natural sources. The advances made in chemistry and medicines have shifted the perspective and approach to more scientific means of producing medicine. These traditional medicinal establishments still exist today and in some instances may have seen some kind of renaissance in popularity due to the rising cost of modern medicines and their side effects. Some of the side effects brought about by these medicines are sometimes as harmful or more than the ailment that they are intended to treat. We will restrict the discussion of the global biopharmaceutical industry based on modern scientific based methods of producing medicines.
The activities of the biopharmaceutical industry as a whole can be divided into its various components. The industry can be essentially divided into research and development, clinical trails, production, markets and regulations. The pharmaceutical industryâ?Ts products can be divided into two major categories; prescription based drugs and over the counter drugs. Within these two categories you also have the branded items and the generic ones.
The biopharmaceutical industry is a highly regulated industry with strict requirements and controls from the development, production, licensing and marketing of a product. Individual countries have different sets of laws and regulations governing these processes based on the experiences and natural development of the industry within their borders. Selling a new drug in another country often requires complete reassessment and re-evaluation of the development and production aspects in order to meet local requirements. Cost and time delays were the natural obstacles of marketing into different countries but more importantly crucial life saving drugs were inaccessible or severely delayed due to regulatory differences.
The International Committee for Harmonization is the first and currently the only multinational effort to work together to set and achieve some common goals. The origin and purpose of the organization is detailed in the excerpt below extracted from their website.
ICH is a joint initiative involving both regulators and industry as equal partners in the scientific and technical discussions of the testing procedures which are required to ensure and assess the safety, quality and efficacy of medicines.
The focus of ICH has been on the technical requirements for medicinal products containing new drugs. The vast majority of those new drugs and medicines are developed in Western Europe, Japan and the United States of America and therefore, when ICH was established, it was agreed that its scope would be confined to registration in those three regions.
The membership of the ICH is made up of organization from the USA, European Community and Japan. There are a few observers comprising of Health Canada, WHO and European Free Trade Area. The three main parties are represented by six members from the industry and regulatory bodies. The participating members are the FDA, PhRMA, EU, EFPIA, MHLW and JPMA. 4
The FDA (US Food and Drug Administration) is the premier regulatory body and the largest single regulatory agency in the world responsible for the approval of all medicinal products in the USA. It is responsible for establishing guidelines, regulations and enforcing them for drugs, biologicals, medical devices, cosmetics and radiological products. The U.S. industry is represented by PhRMA (Pharmaceutical Research and Manufacturers of America) made up of sixty-seven research based pharmaceutical companies that are involved in the discovery, development and manufacture of prescription medicines. There are also twenty-four research affiliates that conduct biological research in the development of drugs and vaccines.
The European component of the ICH is represented by the European Commission that is made up of 25 member countries. Technical and scientific support for ICH activities on behalf og the European Union is affected through the Committee for Medicinal Products of Human Use (CHMP) of the European Medical Agency (EMEA). The commercial and industrial interests of the EU pharmaceutical companies are represented by the European Federation of Pharmaceutical Industries and Associations (EFPIA). The organization is made up of experts and country coordinators from Member Associations, of 44 leading pharmaceutical companies involved in research, development and manufacturing of medicinal products in Europe.
Japan is the only Asian country to have direct representation in the ICH. The regulatory and technical aspects are represented by the Ministry of Health, Labour and Welfare (MHLW) and the Pharmaceuticals and Medical Devices Agency (PMDA), respectively. The Japan Pharmaceutical Manufacturers Association (JPMA) represents the Japanese pharmaceutical industryâ?Ts interest in the ICH. JPMA is made up of 75 research-based pharmaceutical companies operating in Japan of which 17.3% are direct foreign investment companies and the rest are made up of indigenous and or joint venture companies. 5
Canada is the only other country that has its own representative in the ICH in the capacity of an observer. Other observers are the World Health Organization (WHO) and The European Free Trade Area represented by Swissmedic based in Switzerland. The other notable organization involved in the ICH is the International Federation of Pharmaceutical Associations (IFPMA) that runs the ICH secretariat. The IPMA is made up of 56 member countries throughout the world representing the pharmaceutical industry from individual nations. 4
The make up of the ICH lends itself to be lopsided in decision making processes as its representation is only from selected countries and region. However, it can be argued that ethical, quality and safe drug development processes are universal goals and values that are common to all. The efforts of ICH are beginning to bear fruits as about half of the FDAâ?Ts inspections are in Europe and 18 are from Asia. Therefore, the intended purpose of the ICH has been effectively applied to areas beyond its original intended locations. However, there are still issues being brought forward by the FDA concerning the applicability of a new drug development to the U.S. population and the definition of qualified investigators. These are legitimate concerns and warrant consideration but the ultimate decision should be based on technical considerations and not political or market influences. The manner which this can be achieved effectively is not only through internal reviews but also extended dialogue with counterparts outside the ICH circle. Increasing direct participation in the ICH from countries in Eastern Europe (non EU members), Asia and Australia should be given due consideration as these regions have proven themselves to be efficient and professional in conducting clinical trials. Their participation will be like a self policing process to encourage stricter controls and better adherence to regulations and standards set by the ICH. 6
It is important for regulatory bodies to work closely with the industry such that regulatory requirements are achievable and adhered to. However, controlling bodies should be as independent as possible in determining the appropriate regulations. The same approach should be adopted within a country and on a global scale. Studies have shown that in the U.S. the biopharmaceutical industry is the single most influential industry in shaping policy decision in Washington. About 60% of the lobbyists on Capitol Hill work to ensure that the interests of the pharmaceutical companies are protected in every major piece of legislation. The regulatory component of the industry should be as immune to such influences as possible on a global scale to create a fair and effective regulatory environment. 7
Despite the concentration of the pharmaceutical market mainly in Europe, USA and Japan, many of the big biopharmaceutical companies have manufacturing facilities overseas mainly in developing countries. This is mainly to take advantage of the low cost of labour, less stringent environmental controls as well as less capital investment in setting up equivalent facilities. There have been studies to show that the average wages for a worker in an API plant in Europe is about 10 times more than that in China or India. Furthermore, the cost of setting up a manufacturing plant complying with international regulatory requirements is only about 25 to 30 percent that in
Europe in developing countries. Therefore, it is not surprising that China and India are ranked first and third in the world in production of active pharmaceutical ingredients for generic pharmaceuticals. The more phenomenal aspect of the industry in these to countries is the yearly increase in API sales. India has a yearly increase in sales of 19.3% while for China it is at 17.6% annually. Meanwhile, Italy, currently the second largest API producer in terms of sales at USD$ 3.2 billion is projected to stagnate and will achieve only about USD$ 3.3 billion by year 2010. In contrast, the API sales in China and India will have increased to USD$ 9.9 billion and USD$ 4.8 billion respectively, if the current rates of yearly increases are maintained. 8
For example; Pfizer currently the biggest biopharmaceutical firm in the world has 79 operation sites including manufacturing in 33 countries. AstraZeneca ranked 6th in year 2004 has various manufacturing facilities in Japan, U.S., United Kingdom and India. The same scenario will apply for almost all of the big pharmaceutical companies. The wide distribution is a result of direct investments as well as through mergers and acquisitions. Many of these overseas plants are manufacturing certain components of the drug which is then shipped back to the parent country for final production.
The savings gained by locating production and manufacturing facilities may or may not have benefited the health care system or the consumer. Certainly there has not been any reduction in drug cost but instead there are increases every year. However, it is undeniable that the production component of the biopharmaceutical industry has significant socio-economic impact on a global scale. Wherever production facilities are setup, jobs are created and significant knowledge and know-how are transferred to the local population. Business and service opportunities that are necessary in supporting such facilities will be taken up by the locals resulting in a positive contribution to the economy.