Gil Roth, president of the Pharma & Biopharma Outsourcing Association, recently published a piece at Contract Pharma on the challenges and opportunities facing CMOs/CDMOs.
The hot button issues he described pretty much lined up with what I would put in a list of 2018 trends in the API space to watch – rising global protectionism, ongoing industry consolidation and regulatory issues among them. I would also add product differentiation to the list, as it is one of the strategies CMOs/CDMOs are leveraging to address some of the pressures raised by those other trends.
These are issues that often intersect and coincide, and have political overtones. Let’s face it, 2017 represented a political sea change – from the U.S. to Europe and beyond, and for many corporations the world feels like it has become a little bit less predictable.
While Roth’s article focuses on the U.S. market, it also applies more globally. (Brexit hasn’t been a shining beacon for global trade policy.)
First Things First: I’m Echoing Gil Roth on the Value of Predictions
Gil Roth is careful to note what may now become a standard disclaimer across prediction & trend-writing land – and I’m going to agree with him:
“My crystal ball is C-R-A-C-K-E-D, and my backup Magic 8-Ball’s answer to everything is, ‘Reply hazy. Try again later.’”
With that said, here are some of the trends Roth mentions that will bear watching as 2018 progresses.
No one really knows what the impact of increased protectionism will mean for global supply chains – and pharma has become – if nothing else – a truly global supply chain. According to the news, protectionist policies are on the rise – but how it will impact an already global industry is unknown. While there have been rumblings in Washington D.C., nothing has (yet) played out policy-wise. Roth notes in his article:
“A massive influx of pharma dollars could cause those big companies to alter their supply networks…but I think it’s more likely that the money goes to share buybacks, dividends, and acquisitions of U.S.-based targets.”
Here I again agree with Roth – 2017 saw some deals that were ‘consolidation’ at heart, while others were better considered the creation opportunities with untapped potential. Whatever the motivator, industry consolidation is no short-term trend – it has become a preferred growth strategy. There are no signs of it abating, and 2018 will likely continue to deliver news on the pharma M&A front. Some will be done to control costs across the drug lifecycle or increase capacities, while others will aim to expand offerings & market segments.
I typically note that quality issues will be front of center when I sit down to write a predictions-style list, and invariably it is a key focus of industry. Quality always is, or should be. In 2018 though, ‘quality’ will be synonymous with ‘regulatory.’ Over the last few years we’ve seen a marked increase in global regulatory enforcement, and that will likely continue. Global standards are rising, and in some cases regulatory framework synergies are making compliance more universal. It is interesting that global regulatory standards – while increasingly complex – are also working towards a goal of broader universality just as attitudes towards globalism more generally are shifting.
Roth, in his article, points out the impact of GDUFA and the changing regime at the FDA as two things to watch for in 2018.
- Product/Service Differentiation
Product differentiation is well underway already. Manufacturing capabilities up-and-down the supply chain – from green chemistry, high potency or alternate route scouting for drug APIs up through novel delivery and packaging solutions – are already delivering differentiated capabilities & products.This has led to increasing specialization – and a 30+ year trend in its own right. In the article, Roth mentions that “CDMOs talk more about expanding their current facilities, adding services and building more integrated suites of services.”
These are some of the issues that will occupy our attention in 2018 – and surely there are many more.
Read Gil Roth’s piece at Contract Pharma on the challenges and opportunities facing CMOs/CDMOs.