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U.S. Pharma Market Trends

By Kristin Brooks, Contract Pharma | April 8, 2016

CPhI Report sees return of generic and API manufacturing to U.S. market

CPhI, part of UBM EMEA’s Pharma portfolio, recently released findings from a review of the U.S. pharmaceutical manufacturing market which includes research from approximately 70 influential U.S. companies and organizations.
 
According to the report, the U.S. pharma industry and domestic manufacturers are showing increased confidence of renewed growth and even the return of some lower cost manufacturing work that has, in previous years, been outsourced overseas. This turnaround is being driven by quality concerns in some Asian markets and a shift in the drug development pipeline towards difficult to formulate drugs and biosimilars.
 
Key highlights of the report state that: International manufacturers and CMOs are now looking to acquire U.S. sites; small volume specialist and orphan drugs R&D pipeline is causing manufacturing sector to re-evaluate and invest in assets; and companies are looking to add specialist capabilities and technologies, such as high-potent and biologic facilities.  
 
Chris Kilbee, group director Pharma at UBM EMEA discusses the drivers for the return to domestic markets for generic and API manufacturing, as well as the growth of specialized service areas and capabilities in the U.S. market. –KB
 
Contract Pharma: What are some of the drivers for the return to domestic markets for manufacturing previously outsourced overseas?
 
Chris Kilbee: Rising manufacturing costs in Asia combined with a desire for increased control over the drug supply line (from the FDA and general consumer) are driving the production of generics back in the direction of the U.S., as well as “near-shore” production sites (Mexico and Canada). These combine the advantages of lower cost production coupled with regulatory rigor and tightly controlled supply chains.
 
CP: What’s driving international players to get a domestic manufacturing foothold in the U.S. market? What are some of the major acquisitions we’ve seen thus far? 
 
CK: The U.S. pharma market is the largest in the world and continues to grow. With the recent trend of domestication for pharma manufacturing in the U.S., there has never been a more pressing time for international players to find a place in the market. The barriers to get into the U.S. market are getting higher and the market believes its important to get a foothold in the U.S. sooner, rather than later.
 
There have been a number of smaller acquisitions. In fact, the majority of companies within the U.S. market (either domestic or international in origin) has recently made acquisitions or plan to in the next year, according to the report. The current trend is for larger companies to purchase smaller companies with specialist technologies in order to gain assets that they were unable to develop themselves, more specifically sterile and biologic capabilities. Some recent examples include Indian companies Cipla, Lupin and Piramal, with Takeda and Teva also having made significant investments in the U.S.
 
CP: What factors are driving the trend towards API sourcing within the U.S.?
 
CK: API production in the U.S. seems to be a surprising major growth area. The turnaround in API production to the U.S. is primarily driven by concerns in the overseas supply chain and domestic tax breaks. This is presenting a serious opportunity to some of the global firms with low cost overseas facilities.
 
CP: What outsourced service areas are seeing the most growth in the U.S. market?
 
CK: Biologics production is obviously increasing as the development pipeline has seen more of these product classes emerge. However, we’re also seeing strong growth across combination products, HPAPIs, ADCs, oncology and in new types of formulation technologies that increase bioavailability and biosolubility.
 
CP: What specialized capabilities will drive the future market?
 
CK: Serialization is obviously a technology that everyone is going to need to integrate capabilities following the passing of the Drug Supply Chain Security Act. But beyond this we are clearly seeing a trend towards two types of products: high volume generics and niche products with formulation challenges. Naturally the market is trying to prepare for the new types of products emerging by acquiring technologies that will enable them to commercialize the next wave of drugs in the pipeline. Finally, we are also starting to see continuous processing increasingly being used by manufacturers—which is a real welcome development, and one that we predicted in our CPhI annual reports over the last couple of years.

CP: How has GDUFA (Generic Drug User Fee Amendment) impacted smaller generic firms? What can we expect from this sector going forward?
 
CK: It’s going to be a real challenge for some of the smaller generics firms or CMOs that only manufacture a very limited number of generics. The natural conclusion of which will probably see some further acquisitions or partnerships so that companies can have economies of scale. Currently domestic benefits of GDUFA are strongest for large and medium-sized companies.