Inflation, declining FDA drug approvals will pose challenges for pharma CMOs in 2023: GlobalData

Pharma manufacturers will be challenged by the effects of high inflation and declining FDA drug approvals in 2023. Pharmaceutical companies have a high tendency to outsource the finished dose manufacture of new molecular entities (NME). A sharp decrease in FDA approvals of the most innovative drugs in 2022 will directly reduce commercial-scale production contracts in 2023 for larger contract manufacturing organisations (CMOs), says GlobalData.

GlobalData’s latest report, ‘New Drug Approvals and Their Contract Manufacture – 2023 Edition,’ reveals that the FDA’s NME approvals declined substantially in 2022, causing overall New Drug Application (NDA) approvals to drop, which meant fewer commercial-scale production contracts for the most innovative products. However, GlobalData’s analysis of the FDA’s drug approvals over the last decade found that 2022 was a record year for cell and gene therapy approvals. Approvals of five regenerative medicines made 2022 the most successful year ever for these medicines – following on from the strong performance in 2021.

Adam Bradbury, Pharma Analyst at GlobalData, comments, “The decline in drug approvals in 2022 may be a sign of increased reluctance by the FDA to authorize innovative drugs, caused by the fallout from the agency’s accelerated approval of Biogen’s Aduhelm for Alzheimer’s disease in June 2021. The FDA granted this approval despite there being little to no evidence of clinical benefit. This event caused controversy and added to pre-existing claims that the FDA approval process may not be as rigorous as it was in the past.”

In recent years, COVID-19 vaccine drives have allowed economies and societies to safely reopen during the pandemic. However, new challenges such as rising inflation will bring uncertainty to the ongoing global recovery in 2023.

Bradbury continues, “The pharma industry faces challenges from increasing cost pressures, shrinking consumer spending power, staff shortages, and geopolitical tensions. CMOs will need to find ways to remain competitive in these difficult conditions, while maintaining quality and compliance. High inflation will also impact supply chains and R&D activities and challenge their feasibility.”

Key opinion leaders (KOLs) quoted in the report highlighted that regulations brought into force to tackle inflation, such as the US Inflation Reduction Act could stifle innovation in the pharma industry.

Biologic NME approvals rarely outnumber small molecule equivalents, but that occurred in 2022. It remains to be seen if this will become more of a longstanding trend; with biologics now forming most of the current global drug pipeline, this is also increasingly likely to be the case in the future.

Bradbury concludes, “Biologics are favored by many pharma sponsors due to less potential competition. They are expensive to develop, require specialist manufacturing capabilities, are more difficult to duplicate than small molecules, and tend to be sold at high prices. An increasing number of CMOs will have to invest in acquiring biologic production capabilities if biologics continue to be the majority of innovative approvals.”