For a growing number of biopharmaceutical companies, the world is getting smaller. They are operating in smaller, more flexible facilities; servicing potentially smaller markets; and managing local products. Local manufacturers are looking for ways of doing standard processing less expensively without making changes that carry regulatory risk. Most of these facilities are vaccine manufacturing sites. The upsurge in localized diseases and need for global pandemic preparedness (especially under uncertain capacities) have countries such as Malaysia, India, China, and Brazil pushing for local production plants to supply vaccines and other drugs. Legislative and social changes such as US healthcare reform, worldwide recessions, and the push for increasing biosimilars are driving the need for greater manufacturing efficiency. To become more efficient in processing, localized manufacturers will need to become aware of the impact of social, legislative, and technology factors that are fueling this trend toward decentralized manufacturing.

Does Local Manufacturing Make Economic Sense?

Whether it makes economic sense to manufacture biopharmaceuticals in a smaller, emerging market depends heavily on production efficiency. Making a drug locally must be less expensive than importing finished products on the open market.

In a 2005 position paper, Warren Kaplan, assistant professor at Boston University's School of Public Health, and Richard Laing, medical officer for the World Health Organization, explain: “This sets up the inherent tension between a health policy directed to the access problem of making available low cost and quality-assured medicines and an industrial (primarily private sector) policy of optimizing profits and growth by promoting a local industry whose products may be more expensive than those on the international market” (1). The authors conclude that India and Brazil are examples of large countries with well-developed “indigenous” pharmaceutical industries and thus are capable of producing cheap, assured quality drugs.

An upstream scientist works with a 1,000-L single-use bioreactor at Laureate Pharma (Click to enlarge)

However, smaller countries with fewer resources and a weak industrial base are unlikely to be viable in the global pharmaceutical market. In fact the authors state that there are definitely regions where the local manufacture of drugs does not make economic sense and in some cases may restrict the access to high-quality medicines because producing in multiple countries “forgoes the economy of scale.”

Some companies are concerned that producing for a small market will be too expensive because of regulatory and quality overhead, the cost for ensuring product safety, and the cost for ensuring protection of intellectual property. Matthew K. Hudes, US managing principal of biotechnology at Deloitte Services LP, suggests that biopharmaceutical manufacturers learn from the electronics industry, which 20 years ago had many of the same concerns regarding intellectual property protection and manufacturing costs. “They viewed it as a long-term strategic commitment. It was always on the agenda to be global and be in those locations, and I think the same is true for life science companies. Governments want those drugs available for their population where it is appropriate.”

Localized manufacturers will need to keep a close eye on the changing market in various regions. “Everyone wants to know what's the next biotech hot spot or cluster,” says Hudes. “I really don't think that is relevant anymore because what we're seeing now is what we saw in the high tech and electronics industry about 20 years ago, which is specialization by region. If you take a look at the value chain of manufacturing of the whole life science business, I think you are going to see expertise built up in certain areas. So I think we are going to see certain capabilities in India, certain capabilities in China, and other areas such as Singapore.”

Although the pace of technology advancement has made it easier for companies to set up manufacturing in developing countries, there are still real-world costs of operations as well as local and global health policies and regulations to be addressed. “The biggest challenge is probably getting skilled labor,” says Michiel Ultee, vice president of process sciences at Laureat Pharma. “Biopharmaceutical skill level is higher than smaller molecules because it's more complex.”

Tom Ransohoff, vice president and senior consultant, at Bioprocess Technology Consultants, agrees, “Most of the costs of running a facility in this industry for most products are fixed, such as labor and energy. If you have a smaller market, your cost structure is not going to be as good as someone who is making a product globally, so there have to be other reasons that justify setting up manufacturing locally. For most of medicines, it doesn't make sense to have a lot of small facilities. Local manufacturing, however, is important for small volume products, products for only a local market, or just for clinical trials.”

One of the most important factors for an emerging market is building an a experience and expertise base, primarily through ensuring regulatory review. “You can build the best facility in the world and have the best science with that facility, but if you don't have regulatory review, it doesn't matter, you can't make a product there,” says Hudes.

WATCHING THE BIOSIMILARS MARKET



Slimming down costs means keeping up to date with changes in regional markets, including how a region may be influenced by the penetration of biosimilars is the market. Matthew Hudes of Deloitte Services offers his opinions and on key questions:

• What is “similar enough”? What clinical trials will be required, if any? How do you deal with immunogenicity, and what will be required for efficacy and safety? “A lot has not been prescribed in the legislation, it's going to be up to the FDA to define that pathway,” says Hudes.

• If you are going to have a cost of clinical trials and biologics manufacturing capability, what is really the economic impact going to be of an generic? Is it going to reduce the cost by 20% or 50%?

• Who is going to get into biosimilars? Large biopharma? Specialist companies in India or China? “Right now there is a lot of activity, but I think the economics will come into play because it's not cheap to create a good biologics capability and the regulatory aspects that go with it. It is truly a disruptive innovation. We don't know who is going to emerge, but it's going to be the one who has a real core expertise in biologics.”

• What are the legislative implications and their effect on innovation? “Some folks feel that the legislation didn't create an immediate pathway to product son the market. I think it's an important first step. We're going to see more legislative changes and practical changes as FDA starts to get into that area. My big concern is the unintended consequences, not only of legislation but also of the pathway that gets created. It would be very possible to disrupt or lose the US biopharmaceutical industry's global leadership if we don't watch carefully what we're doing. You can easily kill innovation if the wrong steps are taken in this area.”

• What are companies doing to stay profitable? “Two years ago, I asked one industry executive, ‘What is your strategy for dealing with the threat of biosimilars (this is a company that had a number of products that looked like they had some challenges)?’ His response was ‘We're going to innovate our way out of this.’”