Key issues facing Pharma and Biotech companies

Key issues facing Pharma and Biotech companies in India

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Introduction

Over the last decade both the pharmaceutical and biotechnology companies have entered a period where they have become confronted by a variety of complex issues affecting their operational efficiency and profitability. It has now become generally acknowledged that the current business models have now become both economically unsustainable and operationally unsuited to act quickly enough to produce the types of innovative treatments that will be demanded by global markets. The key issues and challenges (as depicted in Figure 1) that are currently being confronted by the pharmaceutical and biotechnology industry have been identified as:

Generic competition

All research based pharmaceutical and biotechnology companies are affected by and having to overcome the issues relating to the expiry of the patents protecting their major products and the emergence of generic competition. This ranges from traditional “blockbuster” products whose patents have already expired e.g. Eli Lilly’s Prozac to products that will be losing patent protection between 2010 and 2013. This includes Pfizer's Lipitor, the world's number one selling brand, Sanofi-Aventis/Bristol-Myers Squibb's (BMS) Plavix, the best selling platelet aggregation inhibitor, and Novartis's anti-hypertensive Diovan.

Intellectual property protection

The core principle of most pharmaceutical and biotechnology companies is their innovative research-driven approach to the discovery or invention of genuinely new drugs. As the biotechnology/pharmaceutical industry continues to develop it has become increasingly aware that there is a need to protect the intellectual property associated with the discoveries that have been made and will continue to be made. The principle methods by which companies and individuals are able to protect intellectual property are patent, copyright, trademark, and trade secrets such as sales revenues and proprietary market share data.

Patent law, one of the most important intellectual property rights for pharmaceutical and biotechnology companies, attempts to strike a balance between creating incentives to innovate, on the one hand, and promoting the free exchange of ideas, on the other. That balance is achieved by giving the patent owner a right to exclude others from making, using, selling, or offering for sale, the patented invention.

Most pharmaceutical or biotechnology companies regard intellectual Property (IP) as one of their most valuable resources, and its protection is a key to that company’s future success. Recent challenges over patents for HIV drugs has reminded the industry that progress is still needed in balancing the opposing forces of innovation through protection of IP rights, versus the provision of affordable drugs for the developing world.

Pharmaceuticals companies constantly face the challenge of creating value through the exploitation of IP rights, but avoiding considerable reputational harm. This situation was well illustrated in South Africa during the late 1990s when the balance between IP protection and the urgent needs of patients were not aligned. Since then, companies have become more aware of the potential damage that can be caused by too strict an interpretation of IP rights.

In relatively strong emerging markets such as China and India though, additional issues prevail. Multinational pharmaceuticals companies require and expect IP rights to be strictly enforced in countries where there are countless local manufacturers with the ability to produce cheap counterfeit copies of patented drugs, which often find their way back to western markets. At the same time, the implementation and enforcement of IP laws in India and China is improving. Combined with the ability to leverage lower cost expertise, on the whole, these countries are still very much an opportunity rather than a threat. Nevertheless, companies need to be aware of and able to manage the considerable risks of doing business there.

Managing regulatory compliance

Both the pharmaceutical and biotechnology companies are finding it increasingly difficult to navigate their way through the complexities of disparate regulatory requirements by individual countries. As a result pharmaceutical and biotechnology companies are required to develop practical and effective solutions for meeting the challenges of integrating governance, risk and compliance on a global level.

For example despite the best efforts by the respective regulatory agencies from the United States, Europe, and Japan (FDA, EMEA and MHLW) there are significant differences in each agency's requirements for new drug application (NDA) submissions. This requires that companies closely monitor all three agencies for changing rules and requirements, particularly concerning the information that must be included as part of the submission and the need for local partners. For small biotechnology companies, submitting multiple new drug applications while simultaneously seeking to expand business overseas can be an overwhelming task to handle alone.

Although FDA, EMEA, and MHLW applications now follow a similar format, each authority requires the inclusion of different types of data. FDA, for example, requires extensive information about facilities and validation processes, in addition to clinical trial data, to be included in an NDA. EMEA asks for less validation data, relying instead on inspections to gather this information.

Despite the best efforts by the regulatory agencies from the United States, Europe, and Japan to harmonize global regulatory requirements (International Conference on Harmonization of Technical Requirements for the Registration of Pharmaceuticals for Human Use (ICH)) there is a considerable lack of understanding about a particular regulatory agency's requirements for processes or facilities. This can lead to excessive delays in market authorization resulting, which in turn can affect the market potential of a new and novel product opportunity in a highly competitive market.

Cost containment and government funding restrictions

As the cost of providing healthcare spirals governments and payors across the seven major markets are implementing a series of cost-cutting measures in an effort to combat these escalating healthcare costs. This in turn puts increasing pressure on pharmaceutical and biotechnology companies as they seek to maintain their return on investment (ROI). For companies that develop a truly innovative drug with proven improvements in safety and efficacy can still, after careful evaluation of the market, demand premium prices and secure an excellent return on investment. On the other hand the reality is that with such breakthrough products being few and far between, even the most innovative pharmaceuticals companies are learning to live in a more cost-conscious environment, with margins under continuous pressure.

Obtaining and maintaining competitive advantage

As pharmaceutical and biotechnology companies struggle to maintain dwindling drug pipelines they are being forced into reinventing the standard paradigm by creating and establishing a variety of partnering arrangements such as strategic alliances and joint ventures with small, innovative biotech companies as a source for new products. These strategic alliances and joint venture agreements are usually in the form of licensing or co-marketing/co-promotional agreements.

As well as developing a system for creating new and innovative products for unmet medical needs the creation of partnering agreements helps to spread the financial risk associated with the high research and development (R&D) costs. In addition the advantage to the licensors is that it reduces the risks associated with manufacturing, providing services and establishing distribution channels whilst for the licensees and co-promoters/co-marketers it helps to broaden the product portfolio.

However there are a number of critical issues associated with the creation of strategic alliances and joint ventures. These include the problems relating to a partner’s inability to effectively monitor royalty payments and to manage the legal, accounting/finance as well as controlling the regulatory requirements within the partnership agreement. In addition there are frequently considerable concerns relating to intellectual property/financial trust, confidentiality constraints and reduced flow of critical information between the alliance or joint venture partners.

Recruitment and retention of a skilled workforce

The pharmaceutical and biotechnology industries are highly specialized industries whose knowledge base is used for the discovery and development of life-changing drugs and therapies. The individuals who work in these industries always have been one of the most important resources for any pharmaceutical or biotechnology company.

The concern is that the market providing this knowledge base is becoming more and more competitive as the traditional labor markets are providing fewer new people with the right qualifications and experience; and companies are still trying to recruit people with ever-more-specialized knowledge. To overcome this issue many companies outsource their recruitment functions to specialized recruitment agencies that provide search and recruitment expertise, which helps add to the expertise and knowledge base within a particular company. This allows the pharmaceutical and biotechnology company to focus on their area of expertise while partnering with a work solutions company that delivers staffing strategies in a cost effective and efficient manner. In addition, given the inherent peaks and valleys in the drug discovery process, this provides pharmaceutical companies the flexibility in utilizing the resource when necessary thus reducing their exposure to be being overstaffed during down cycles in production.

Improvement to R&D productivity

It is an essential requirement for both pharmaceutical and biotechnology companies to reduce the time taken in bringing new and innovative drugs to market to ensure maximum return on investment and as a means of capitalizing market potential during the limited period of patent protection. In more recent time the strategies used to reduce the time to R&D phase in drug development has been the use of improved operational and management processes and the use of advanced technology. Technologies such as high throughput screening, combinatorial chemistry and genomics are at the forefront of transformational approaches intended to surmount a fundamental challenge facing the industry.

The issues involved in effectively carrying out research and development are complex and transcend science. The regulatory environment is a key component that essentially affects every stage of the process. For example, clinical development activities not performed in compliance with good clinical practices (GCP) expose a company to risks that include delays in approval, wasted investments, litigation and settlement costs due to product liability, and reputational harm.

High risks and costs associated with drug development

Escalating costs of clinical trials

Although the pre-tax cost of developing a new drug varies considerably depending on the therapy or the developing company the total cost is huge. According the latest figures from J. A. DiMasi and H. G. Grabowski and the Tufts Center for the Study of Drug Development the fully capitalized cost to develop a new drug, including post-approval R&D, had been estimated at $138m in 1975 (as indicated in Figure 2). This had further increased dramatically to $318m in 1987, $802m in the year 2001 and had increased to $897m by the year 2003. By the year 2007 this figure had increased to a staggering $1.3bn and a senior executive at one of the leading pharmaceutical companies quoted an industry consensus of $1.4bn as the R&D cost of a new molecular entity in 2008.

According to an analysis performed by EvaluatePharma® that included 250 global pharmaceutical companies, the global pharmaceutical and biotechnology industry spent nearly $90bn on pharmaceutical-related R&D in 2005, up roughly 56 percent from 2001. A similar analysis carried out on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA) in 2007 the total expenditure on R&D carried out by American owned biotechnology companies alone amounted to $58.8bn. The prediction is that R&D spending amongst the big pharmaceutical companies will increase by at least 7% per year between the years 2008 and 2011.

A study conducted by Goldman Sachs carried out in 2007 as illustrated in Figure 3 concluded that the proportion of expenditure as a percentage of total R&D expenditure remained fairly constant throughout the period between 2004 and estimates for 2008 and 2009. Similarly Figure 4 shows the annual expenditure on R&D by the biotechnology industry.

In addition according to Tufts Center for the Study for Drug Development (CSDD) the overall R&D costs associated with the development of new drugs the average cost of clinical trials has also risen dramatically. The increased costs of clinical trials is partly due to the increase in Phase II studies and the initiation of more trials with smaller patient numbers to better target specific populations and test efficacy.

On average total R&D costs now represent nearly 60% of total development costs, compared to just over 32% in the 1980s. Current estimates on spending on clinical trials in the United States alone amounted to nearly $24bn in 2005. This figure increased to about $25.6bn by 2006 and is expected to increase to $32.1bn by 2011 representing an annual growth rate of 4.6%, as shown in Figure 5.

Global increase in the number of clinical trials conducted

As of early 2008 it has been estimated that a total of over 50,600 clinical trials were being carried out globally. This represented a 1.7% increase of the total number of clinical trials that were conducted in 2006/2007. A number of individual countries have been reporting an increase in the number of clinical trials being initiated. For example the Japanese reported a dramatic increase in clinical trials between 2006 and 2007. The stimulus for this has been the initiation of a 5-Year Activation Plan (2007-2011) developed by the Japanese Ministry of Health, Labor and Welfare (HMLW) where there has been emphasis placed on the networking of core hospitals capable of conducting advanced global trials. Ten national centers and 30 hub hospitals have been designated and are strengthened to possess better environments for trials in terms of doctors’ incentives, infrastructure and IT systems. At such hospitals, the subjects will be given ample information on the trials and incentives including the prospect of advanced therapies.

Similarly the number of global clinical trials initiated in Central and Eastern Europe more than tripled from 2002 through 2007. Although the entire CEE region has less than half the population of either India or China, it had more than twice the number of global trials initiated in 2007 as the entire Asia-Pacific region.

Longer R&D timelines

Typically it can take anywhere between 10 to 15 years to bring a new medicine from the laboratory to the pharmacy shelf. In the 1960s, the average development time to approval from the onset of drug discovery (first synthesis of a drug candidate for initial laboratory screening) was about 8.1 years. In the 1970s, the average time was 11 years, in the 1980s it was 14.2 years, and in the early 1990s, it had grown to about 14.9 years. Analysis of data prepared by the Centre of Medical Research (CMR) have estimated there is an annual increase of between 8 to 10% in median duration period for the period between the year 2000 and the year 2003.

Discovery timelines

The timelines during the first part of the drug development i.e. discovery research is difficult to measure as the starting point varies from one company to another. Pharmaceutical companies tend to group and name portions of this process in various ways (for example, exploratory research, chemical synthesis, target identification and validation, lead optimization). Certain discovery timelines have actually seen a decrease over the last half-decade while other timelines have remained flat or slightly increased.

Phase I timelines

The length of time taken to complete Phase I has not increased at a consistent rate between 1997 to 2005. As a result it is difficult to predict with any certainty what the future trend will be.

Phase II timelines

Phase II timelines, however, have increased significantly by nearly 70% over the past few years. The longer development timelines in Phase II being the result of the interaction of a number of factors, including:

• A shift in the Phase II design strategy;
• Increased competition for patients;
• Movement through internal stage gates.
• Cost implications for study design decisions;

A shift in the Phase II design strategy: This new strategy requires that each Phase II program design includes more studies, running sequentially, with fewer clinical questions per study.

Cost implications for study design decisions: The operational feasibility of a trial is considered during program planning along with scientific and regulatory design requirements. When these requirements and operational implications are out of balance, development teams run the risk of greater timeline delays and, subsequently, spending increases. There are a number of trial specifications that, if not properly evaluated, can lead to costly ramifications for the study teams, including:

• Inclusion/exclusion criteria and standards used to determine whether a person may be allowed to participate in a clinical trial;
• Geographic location of the trial site;
• Qualification and selection of investigators/site coordinators.

Increased competition for patients: When a particular trial site of geographic region is constantly used for clinical trials it becomes increasingly difficult to enroll patients within the clinical trial timelines. This occurs as a result of both the limited number of patients with a specific condition and that other companies may be competing for the same patients as they are working on developing a drug for the same indication.

Movement through internal stage gates: This refers to increased time required to move through the internal stage gates i.e. the ability of the R&D teams to process the data generated from the clinical trial. This includes:

• Real-time data analysis on drug candidates is rarely conclusive;
• New research/findings are surfacing on an ongoing basis, whether on the specific drug candidate, competitor drug information (from clinical trials or on the market) or interactions with concomitant medicines;
• Many additional variables need to be taken into account at each decision-making stage gate (for example, patient need and market value).

Phase III timelines

The time taken to complete Phase III and the regulatory agency reviews have remained almost the same over the last 10 years and its unlikely that this situation will change dramatically over the next 10 years.

Increased attrition rates during R&D

The pharmaceutical and biotechnology industry is unique in that the decision to terminate many R&D projects are based on scientific reasons such as lack efficacy or safety which manifest themselves only in the later stages of clinical development. Due to the dramatic increase in the average R&D costs per new drug approval, any failure of a newly developed drug during R&D results in significant costs to the company.

Although the statistics vary depending on the company and the disease the attrition rates in the pharmaceutical and biotechnology industries are very high particularly at the late stages of development process. Typically for every 5,000 to 10,000 drug candidates beginning the discovery research stage, only about 2.5% to 5% enter the preclinical phase. Further high levels of attrition are experienced in the preclinical stage of development such that only 0.1% of molecules screened in drug discovery entering Phase I. The attrition rates in Phase II are also very high and may be as high as 75%. As Dr. Steven Paul head of research at Eli Lilly, stated

“Right now there are some companies where the probability that a drug that enters Phase II will actually get to Phase III is only about 25%,”(Dr. Steven Paul, Eli Lilly)

Dr Paul has attributed the high Phase II attrition rates to the pursuit of developing new molecular entities for challenging unmet medical conditions with highly complicated biomolecular mechanisms as well as improved R&D program designs providing improved go/no-go decisions prior to entering Phase III clinical trials.

One of the major objectives of both the pharmaceutical and biotechnology industries has been to curb these high attrition rates using:

• New technologies to reduce late-stage development failures and contain rising costs;
• An increased level of global R&D outsourcing to speed development and reduce costs;
• More coordination between US and European regulators.

Clinical trial study design and planning

The importance of clinical trial design and planning cannot be overemphasized. Leaving critical decisions until after the clinical trial has begun or until after patient enrolment has been started can seriously affect the outcome of the trial.

Clinical trial study design

The first stage in the planning of a clinical trial is to identify the scientific questions, which need to be asked and determine the objectives of the trial. This is normally the responsibility of the study principal investigator either alone or with the clinical trial team or sub-investigators. Once the objectives have been determined it is necessary to determine whether the trial is feasible or not. Statisticians working with the PI need to prepare the statistical design of the trial and determine the sample size. At this point it is normally necessary to determine whether there are sufficient patient resources to provide sufficient data in a reasonable amount of time. It is also worth reviewing previous trials in the same patient population and review previous recruitment rates in a given population. If there are insufficient numbers at one site then it would be necessary to recruit other sites making it a multicentre trial. One the feasibility study has been completed then the study protocol is developed.

Clinical trial study protocol

The clinical trial protocol (CTP) is a document that describes the objective(s), design, methodology, statistical considerations, and organization of a clinical trial. The protocol should be complete, clear and consistent and made available to all participating personnel at clinical trial sites before the trial begins. The protocol should contain sufficient details about the trial to ensure that there is uniformity in the selection and treatment of patients entered on the trial.

Clinical trial sponsors

The sponsor is the organization that takes the lead in confirming there are proper arrangements for the initiation, management and monitoring and financing of a study. Normally, the sponsor will be one of the organizations taking the lead for particular aspects of the arrangements for the study. It may be the chief investigator’s employing organization, or the lead organization providing health or community care, or the main funder. For any research study the sponsor must be satisfied that clear agreements are reached, documented and carried out, providing for proper initiation, management and monitoring and financing.

The sponsor is responsible for ensuring before a study begins that arrangements are in place for the research team to access resources and support to deliver the research as proposed and that arrangements are in place allocating responsibilities for the management, monitoring and reporting of research. They are also responsible for ensuring there is agreement on appropriate arrangements to record, report and review significant developments as the research proceeds, particularly those which put the safety of individuals at risk and to improve modifications to the design.

Identifying and recruiting patients

Achieving clinical trial research participant enrolment is clearly essential to conducting a successful trial. Adequate enrolment provides a base for projected participant retention, resulting in evaluative patient data. Without sufficient patient retention from the time of study initiation to closeout, the number of remaining participants may prove to be too small a pool from which to derive conclusive proving or disproving the goal of the clinical trial sponsor. Obtaining final evaluative data is dependent on successful patient retention. Patients cannot be retained without an initial pool of enrolled volunteers. This initial pool of screened, then enrolled participants depends on designing a successful patient recruitment strategy.

Role of CROs

The services provided by Contract Research Organizations (CROs) include: product development, formulation and manufacturing; clinical trial management (preclinical through Phase IV); clinical, medical and safety monitoring; preclinical, toxicology. In addition they provide clinical laboratory services for processing trial samples; data management, biostatistics and medical writing services for preparation of a FDA New Drug Application (NDA), Abbreviated New Drug Application (ANDA), or Biologics License Application (BLA); regulatory affairs support; and many other complementary services.

CROs range from large, international full service organizations to small, niche specialty groups and can offer their clients the experience of moving a new drug or device from its conception to marketing approval without the drug sponsor having to maintain a staff for these services.

Information technology and new technology platforms

This is a vast subject and one, which warrants a separate report. Suffice to say information technology (IT) has become an integral part of clinical trials because of the need for accuracy, speed, confidentiality and usability of the data collected through the trials. Such IT-based clinical trials solutions help sponsors of clinical trials manage all aspects of clinical study planning, data management, preparation, performance, and reporting. It had been predicted that simplified integration and improved collaboration would drive electronic data capture (EDC) vendors to develop broader eClinical trial (eCT) platforms to give sponsors shorter, less costly trials, and give investigators easier ways to execute and manage them.

Although this change process did not occur as quickly as anticipated the recent introduction of the US FDA critical path initiative, the emergence of interoperability standards, and proliferation of Web-based architectures have made the value of eCT more tangible and accessible to trial sponsors and investigators.

Drivers of development

Advantages associated with EDC

EDC systems provide cleaner data through the use of online validation checks and every entry or change to data is recorded, providing a full audit trail. Queries are generated immediately and can (in theory) be rectified while the patient is still with the investigator. This reduces the number of subsequent data clarifications needed, in particular the issues of missing or illegible data common to paper-based collection.

Another advantage of electronic systems is that they allow greater flexibility with study design. Electronic case report forms (e-CRFs) can be modified easily following a protocol amendment, in the knowledge that sites will always be working with the current version. With real-time access to data, performance and quality issues at site can be identified and managed far more quickly than with a traditional trial design where data is only collected at the six to eight-weekly monitoring visits. Errors identified at one site can be notified rapidly to all sites before the same mistake is repeated through multiple sites and CRFs, while recruitment rates can be checked on a daily basis and appropriate back-up measures deployed.

There were however a number of recognizable concerns and challenges associated with the implementation of EDCs. These included the system performance, user acceptability, ease of use, regulatory compliance, security, availability of vendor support and the cost.

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