Blueprint for 2019

Pharma leaders and experts share their views on the trends and aspects which will shape the sector’s machines, methodologies, processes, and workforce

Pharma Trends in 2019: The rise of outsourcing

Vivek Sharma, CEO, Piramal Pharma Solutions (PPS), predicts that outsourcing will be a central cog in the future pharma supply chain as it evolves from a transactional need to a strategic function

As pharma companies lever external capabilities to drive growth, outsourcing has now become a key component of the drug development and drug manufacturing supply chains. As customers demand scale, reach, and breadth in capabilities, Contract Development and Manufacturing Organisations (CDMOs) have begun to consolidate, to obtain both, proximity to clients and the end markets, through a network of global sites. This extended footprint has also allowed CDMOs to become full-service providers that offer end-to-end capabilities.

By establishing strategic partnerships with CDMOs, both large and small companies can now focus on their core competencies, lever external capacity and specialised expertise with no capital investment, control costs, while rapidly accelerating programmes towards commercialisation. These partnerships help mitigate the risk and costs associated with drug development, by extending the runway for the capital invested. With new drug approvals on the rise – the FDA approved 50 NMEs by November 2018, second only to 53 NME approvals in 1996 – signalling a robust clinical development pipeline, these external collaborations provide the bandwidth needed to drive these approvals to successful launch.

On the other side, by developing these preferred relationships, CDMOs are now migrating from a ‘vendor-customer’ model to a ‘partnership’ model, one that can be both sustainable and rewarding. CDMOs now are providing platform solutions that can assist customers in taking programmes from Concept (discovery) to Commercial launch. As the future needs of pharma companies evolve into personalised medicine, niche therapies, fast track programmes, and novel delivery systems, CDMOs are now investing in these future needs on the strength of these strategic partnerships. Other areas of collaboration include CDMOs taking over the manufacturing of late life cycle commercial products, by levering their superior scale and cost structure, allowing pharma companies to increase profitability while allocating their internal  capacity to newer, higher-value drugs.

The comparison between small molecules and biologics is also an on-going discussion in the industry. A lot is happening in the biopharma market with the advent of cell and gene therapies. As compared to small molecules, biologics offer high margins and long term value to the companies. Manufacturing of biologics is a complex process and a multi-discipline activity. Therefore, most big pharma companies have invested in biologic manufacturing facilities to manufacture their biologic drugs in-house. This helps them retain full control over the supply chain and quality of the product while ensuring security of supply.

CDMOs are, in some cases, unable to fulfil requirements that demand flexibility and small volumes for biologic molecules. Therefore, one evolving trend is for pharma companies to virtualise their small molecule portfolio while retaining large molecule manufacturing in house.  Small molecules continue to dominate the FDA approvals as almost 70 per cent of NMEs being approved over the last five years are small molecules. We expect that the small molecule outsourcing trend will continue to strengthen in the coming years as companies continue to streamline their manufacturing footprint.

In line with the focus on biologics, Antibody Drug Conjugates (ADCs) are now in the news again with the recent wave of third generation ADCs that are site specific and are homogenously conjugated. This has led to an increase in the clinical trial of ADCs with almost 600+ clinical trials on going worldwide. With close to 17 drugs, that are either approved, or are in late stages of clinical development, the ADCs therapeutics market is anticipated to grow at a CAGR to 19.4 per cent between 2017 and 2030 with an estimated value of $8 billion in next five years. The global market for antibody drug conjugates is expected to be driven by the advancement in medical technology, rising incidence of cancer, and an increasing demand for biologic therapies. Unlike conventional chemotherapies that also damage normal tissue, ADCs target only cancer cells and hence the majority of the antibody drug conjugates under development are for oncological indications propelled by the availability of monoclonal antibodies targeting different types of cancer. Some market players are also looking outside the oncology domain to develop antibody drug conjugates, though such drugs are limited in number and are in the preclinical stage of development.

An ADC manufacturing/fill finish facility is a substantial investment, which is why most ADCs are manufactured at CMOs. Most smaller companies, and even some larger companies, do not have enough of a pipeline to justify the level of facility investment needed for ADCs and/or cannot keep the facility fully utilised. In addition, the supply chain for manufacturing ADCs is complex, including linker/toxin manufacture, antibody manufacture, conjugation/QC/stability testing, and fill finish. As a result, most pharma companies have opted to outsource the manufacturing of their ADCs with approximately 70 per cent of all ADC manufacturing activities conducted by CMOs.

In summary, we expect outsourcing to be a central cog in the future pharma supply chain. It has become a ‘must have’ from a ‘nice to have’ as pharma firms seek to extend their capital runway, while focusing on their core competencies. Consequently, Outsourcing has evolved from a transactional need to a strategic function.  Working with a limited number of supplier-partners helps firms optimise costs and management time, while ensuring that these partners focus on investing capital to meet their future needs.  We at Piramal continue to invest in the future requirements of our customers, and now offer a customised suite of integrated solutions that can drive programs from Concept to Commercialisation. Our range of offerings, breadth of capabilities, geographical reach, and integrated network of sites has propelled us to become the ‘Partner of Choice’ for several pharma and biotech companies. We expect these trends to continue as the industry focuses on developing breakthrough medicines, rapidly and cost effectively, for the one person we are all focussed on the patient.

Future of pharma innovations and R&D in India

Dr Anwar Daud, Managing Director, ZIM Laboratories, gives an insight about the innovation trends to look out for in 2019 in the pharma sector

Innovation is the key to success for any business. Innovation and research in various business sectors is driven by factors specific to the business. In pharma, currently innovation is driven by following three factors:Firstly, competition in the generic market has become ferocious with the entry of many players, both, big and small. In the US, about 50 per cent of the market is controlled by three major retail companies and therefore they increase pressure on pharma companies to lower their prices. In developed countries, healthcare is provided through insurance companies and these companies are not ready to pay for premium for products without any tangible clinical benefits. In short, everybody is looking for affordable healthcare. So, pharma companies are required to direct their research efforts to develop the products that addresses unmet medical needs and provide them at affordable cost in order to sustain with high profits.

Secondly, in many of the otherwise lucrative markets for Indian pharma companies, government policies are changing to encourage local manufacturing and to promote generics products. This is causing massive disruption in the business. Pharma companies either need to set up their manufacturing plants in such markets or are required to bring highly innovative products with high technology barriers in order to survive through such government policies.

Thirdly, availability of pharma products on e-commerce platforms has shifted decision making power to patient from physician and supply chain push. Social media is additionally altering psyche of consumer through awareness campaigns and subtle promotional messages. In such scenario, only truly innovative products will sustain and grow. The crux of discussion is innovation is indispensable. Trends of innovation among global pharma companies

Biologicals

Biologicals and gene therapy based drugs are large molecules that constitute effective mode of treatment for complex diseases like cancer, HIV, arthritis, psoriasis or Crohn’s disease etc. The first approved biological drug was biosynthetic human insulin in 1982. After that there was a long period before any new biological was approved. Overall, EMA has authorised more number of biologicals since 2006 than US FDA. In US recently the number of approved biologicals is increasing to about 25-35 per cent of the total approved drugs. Research in biologicals require a specific skills that are different from those required for small molecules. Therefore, number of global players in this category is limited.

New/additional indications

Use of existing drugs for new or additional indications is explored as a cost effective method for innovation and increasing lifecycle of a product. Since all such drugs have tested safety profile, therefore, the review process is also shorter. This option also provides patent protection in some cases. To quote examples, Amantadine, originally an antiviral drug was later approved for the treatment of Parkinson’s disease, Montelukast, an established anti-asthmatic is being explored for its use in Alzheimer’s patients and Tadalafil an ED drug is also approved for treatment of benign prostatic hyperplasia.

New route of delivery

Establishing new route of delivery for existing molecules brings about significant clinical benefits and provides an edge over the competitors. Generally, injectables are converted to nasal/buccal/sublingual formulations as non-invasive means of delivery or oral products are designed to be delivered by nasal/ buccal/ sublingual routes. Such products overcome some serious limitations of the existing products like poor bioavailability, slow onset of action, to get faster onset in case of emergency, reduction in dose etc. Zolmitriptan nasal spray, Midazolam nasal spray, Desmopressin sublingual tablets, diazepam buccal films are some of the examples in this category of innovation.

New dosage forms

Sometimes simply changing the dosage form brings significant incremental advantage to the product and extended patent protection. For example in the case of switch from Suboxone sublingual tablets to films resulted in reduced dose and better safety and in case of Cholecalciferol oral films it increases efficacy. Most of the times new dosage forms are developed to target special need patient population like paediatric and geriatric etc. These innovative features are received very well by both physicians and patients.

New technology for old products

Innovations are done to produce existing products with new technologies. These new technologies overcome limitations of existing products. Spritam orally disintegrating tablet is manufactured using 3D printing technology. The advantage of this technology is to prepare very fast dissolving tablets for high dose drugs. This is not possible with conventional lyophilisation or low compression processes. Another example is “Melt dose technology” that yields controlled release products with better bioavailability. With the help of this technology, poorly soluble drugs can be developed into extended release with predictable release profiles. Envarsus XR is based on this technology.

Innovation in packaging

Most of the innovations in this segment addresses the area of child resistance, senior friendliness, adherence, overuse/misuse etc. For some drug categories these issues are very serious therefore, such additional attributes to the package are absolute necessity and clinicians prefer them over the conventional products. There are products available in the market like blisters with child lock (ecoslide RX), unit dose pediatric products (Pedia Care), bottle caps that record the time between doses(RX Timer Cap) or sets the time for next dose and tablet dispensers with biometric facility (Zalviso).

New fixed dose combinations

Several fixed dose combinations are approved every year with the aim to reduce number of pills and increase compliance to treatment regimen. Ertugliflozin L-pyroglutamic acid/ Metformin hydrochloride; Aspirin/Omeprazole; Tezacaftor/ivacaftor are some of the recently approved combinations that established their efficacy in the clinical trials or could convince drug authorities for their utility.

Current trends and future of innovation in Indian pharma

Indian pharma industry holds a very strong position in the global pharma market since long time. With 304 ANDAs approvals in the year 2017, generic products are basic expertise of Indian pharma industry. The wave of price erosion of generic products has struck Indian pharma badly resulting in big loss of revenues. Many Indian pharma realised this in time and switched the gears to development of R&D based products. Having skills for development of generic products, developing niche and complex generics products is relatively easier for Indian pharma industry. Recently, there is increase in filings of complex generics by Indian pharma players. Table 1 summarises the area of pharma innovation and Indian companies focusing on these areas.

Indian companies have very strong future in developing products based on alternate route of delivery, new dosage forms, modified release profiles and fixed dose combinations. Some companies are working in the area of niche products and biologicals. Although, number of biotech companies is limited in India and currently these companies are focussing on development of off patent biologicals but, there is a huge scope of development in this sector. With very supportive Government policies, development of biotechnology parks and funding to novel ideas will strengthen the position of Indian pharma industry in the global biological market.

Top 10 Indian companies have filed about 45 complex generic products in 2017. These companies have very strong pipeline of complex products. Many medium and small R&D based companies are also working on focused R&D programs and offering their share of complex products to the global pharma market. Considering need of innovation, pharma companies are increasing their R&D spending and investing in systematic research based activities for development of innovative products. This will not only keep them ahead in the competition but also will set an example that timely change in the strategies is must to sustain and move ahead in the business.

Building human capital — 2019

Sumit Kumar, Vice President, NETAP asserts that pharma sector cannot achieve the expected growth if it doesn’t invest in building talent

Jonathan Haskel & Stain Westlake in their famous book called ‘Capitalism without Capital’ mentions about rise of phenomena in 21st century about investment by developed economies in intangible assets than in tangible assets for a long-term success. Countries, companies, investors and managers are exploring avenues to create intangible assets to grow their economies, businesses and portfolio. In 2004, Harvard Business Review came out with an influential paper stating that talent, capability and skills constitutes intangible assets and are far more valuable for an organisation than their tangible assets. Often, employees are considered as tangible assets as they can be seen in their physical form, but more than just the warm bodies, its actually their abilities, talent and skill that is an asset for an organisation. You can replace a talented employee by back filling the position; however the capability of that employee cannot be replaced. It needs to be created.
As economies are realising the value of human capital, pharma sector is exploring avenues to create such capabilities. Pharma sector is the sought after sector for employment. It currently employees about three million people and is expected to add over a million people in next four years. The fact that sector is backed by favourable regulatory amendments and economic improvement has put the sector on a fast growth trajectory. The sector is also witnessing adoption of technology in all aspects of business to bring in cost efficiency and productivity enhancement. As technology is overpowering the sector, the need for talent is also getting specific and specialised. Also, pharma retail which is predominantly unorganised is witnessing a paradigm shift as organised players are entering this segment and setting up pan India chain of pharmacies. With all this expected growth, sector which employs 2.6 million people currently is projected to go upto four million by 2022.

Pharma sector as a whole is witnessing a transformation and as the sector evolves it needs massive investments in human capital to cater to current needs and to prepare capabilities for tomorrow. While technology, regulatory reforms, foreign investments, etc. will support the growth, investment in human capital cannot be ignored. World over, pharma giants have invested in formal structured training to develop talent. Apprenticeships have been widely used by these giants for training as it gives on-the-job exposure which is best suited to create capabilities. It helps build cognitive skills which are essential at work place. In India, the trend of blended apprenticeship training is catching up which is a combination of on the job and off the job training programmes to create a productive work force. Customised curriculum is being curated as per the National Skill Qualification Framework to fit the organisation’s needs. Under blended apprenticeships, trainees can be groomed as per the needs of the organisation and the industry. Performing real work under on the job training makes the person proficient in the craft.

For talent creation, apprenticeships works best in long rung as it is a cost effective way to build a consistent supply chain of talent which supports future growth of the organisation. Employers are realising its benefits as it supports their overall growth strategy. Organisations are investing in blending learning which is more output focused resulting in productivity enhancement. As jobs are becoming complex and job roles more specialised, it’s the integration of different form of class rooms i.e. on the job, online, on site and on campus which makes the learning impactful and output productive. Technology is overpowering the learning form as well and is witnessing adoption by many organisations. Augmented reality, machine learning and web technology is being widely used for talent development and enhancement. The trend of blended learning is catching up for sure in last few years. There are has been an increment in of 60 per cent in apprentices’ addition by the sector and the number of employers doing apprenticeships has more than doubled. The trend which was started by the large enterprises in the sector is now catching up with smaller and medium ones as well due to its success. The growth rate looks impressive but in times to come it will settle to around 35-40 per cent. The potential is huge for the sector to skill people through blended apprenticeship program and create much larger pool of employable candidates. Since some of the skills acquired are traversal in nature, the output could be employed in any related industry and job roles. Hence, apprenticeships can over the concerns of unemployability of the youth of the country and bridge the skill deficit in the industry.

As employers are preparing capabilities through blended learning, retention of talent is a mammoth task for employers. Hence talent engagement becomes an essential part of human capital strategy. Many employers are trying innovative techniques to engage with their workforce by adding value to their livelihood. Sponsoring or subsidising higher education is one such initiative which is catching up. Usually such benefits are offered to the upper cadre of the workforce; apprentices and employees at bottom of the pyramid are devoid of such benefits. Offering higher education connectivity to this segment fulfils their education aspirations and enhances earning power. Offering such benefits enable employers a continuous engagement with their workforce that leads to better business returns.

Role of human capital cannot be ignored when counting the assets, be it at a country level or at an organisational level. The mark of a successful economy is its skilled manpower. Similarly, talent creation, upgradation and retention are essential for any organisation’s success. Pharma sector cannot achieve the expected growth if it doesn’t invest in building talent. The process of upskilling and reskilling needs to be continuously explored to create a consistent supply chain of talent.

A mixed landscape in 2019

Pushpa Vijayaraghavan, Director, Sathguru Management Consultants, predicts that pharma in 2019 will be a mixed landscape of transformational innovation, value chain shifts and tapered growth with continued pricing pressure

Most regional Indian new year celebrations include a sweet, sour and tangy dish to denote multiple facets of life as we step into another year with optimism and hope.  When viewed with a wider strategic lens, the pharma journey in 2018 and what we expect in 2019 couldn’t be more poignantly reflective of this reality and how multi-dimensional the evolving dynamic is:

Transformational promise of next-gen healthcare

As a generation, we have the privilege of witnessing the transformation of healthcare into next generation of possibilities. Cost of sequencing being reduced to a fraction of erstwhile levels has opened up wide possibilities for pharma and diagnostic companies as well as healthcare delivery overall, but the true clinical and commercial potential is yet to be realised.  2019 will continue to witness great strides in personalised care – use of genomics and proteomics to deliver therapeutic solutions with higher efficacy though more targeted care for stratified population subgroups. We will continue to revel in the potential of immuno-oncology and other high impact areas of science that now have high level of scientific and investment depth. Finally, we are most excited about the transformative potential of pipeline innovations in gene therapy and gene editing. While 2018 was the landmark year for approvals, 2019 will be the landmark year for market adoption, evolution of more sustainable pricing models, and strengthening of global pipeline in this controversial yet highest potential pursuit within the healthcare domain.

Reality of cost burden and changes in value chain

While we push the boundaries on therapeutic possibilities, we continue to grapple with the burden of healthcare costs across the world. This is resulting in multiple tectonic shifts – a significant reshaping of power across the value chain as well as intensifying pricing pressure across product categories. The generics segment will have continued stress from such pricing pressures and the ‘new normal’ pricing levels are here to stay. Competition levels of the post-GDUFA regime will continue and will rationalisation is at least couple of years away. Greater emphasis on value-based pricing is expected around the world. Pricing and negotiation power is likely to tilt with re-scripting of the value chain in the most important target markets. Greater integration across stakeholders is expected to continue and the momentum triggered by the active M&A landscape (CVS-Aetna, Cigna-Express Scripts, United Health-Avella, Amazon-Pillpack) is only expected to intensify. Information islands will shrink with such integration across care providing and paying entities paving the way for more optimised healthcare delivery costs but also higher negotiation power in the payor ecosystem.

India Pharma Inc: Looking beyond generics

As the crowned pharmacy of the world, the Indian pharma industry has been reeling under the global pricing pressure, especially in the US, the largest target market by value. Leading generics companies have concentrated portfolio expansion focus on a smaller set of relatively complex formulations. As Indian companies court success in such turbulent times, we expect them to have higher selectivity on portfolio products, deepen appetite for partnerships and prioritise agility in path to market.

Simultaneously, the gradual shift to specialty pharma will further evolve. Several Indian majors have laid the foundation by identifying therapeutic areas for strategic focus (ophthalmology, oncology, dermatology, CNS et al) and are actively scouting for partnership opportunities. We anticipate these diversification investments to get more aggressive in 2019 and be the primary M&A driver for larger Indian pharma companies. 2019 will witness portfolio development for US specialty business and will also have precursor commercial investments to build front end capability to detail products to clinicians. We foresee big ticket M&A activity being limited and opportunistic, and deal landscape shaped largely by portfolio expansion dovetailing growth aspirations.

Other key trends

While the complex generics and specialty strategy is executed in regulated markets, we foresee the same overall mantra of quality over quantity being applied even in the RoW markets. In this segment, we expect geographic consolidation and more intense quest for success in fewer markets. 2019 also holds promise of being the year when Indian formulation exports to China could take centre-stage as the latter has relaxed import duties on several high value oncology formulations.

The domestic market has high promise of growth and chronic segments will continue to the kingpin. Appetite for brand acquisitions will continue to be high and growth will be driven by both organic market expansion and portfolio expansion. As aggregated procurement programs such as the Amrit pharmacies are expanded to support Ayushman Bharat implementation, 2019 could even be the year when a viable solution for healthcare access in the Indian context could emerge and price control could gradually be rendered redundant.  The foundation of aggregated procurement model with direct bids from pharma companies could be the most significant change in the domestic turf pushing market boundaries and expanding access to care in a sustainable manner.

Lastly, we expect greater focus on operations rigor, quality, digitisation and data security across pharma companies focused on regulated markets. Business continuity risks associated with regulatory observations are the single largest threat still faced by industry; and significant management attention and investment is anticipated to be guided by the intent to better manage this risk. Health of the industry lies in the operational backbone and preventive focus will take centre-stage.