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The Shape of The Post-BV Market



The broader implications of Ben Venue exiting the CMO space



By L. Lee Karras



Published September 7, 2011
Related Searches: Manufacturing Sterile Biopharma CMO

After more than 70 years in business, Ben Venue is exiting the CMO business. It was probably a surprise to most, but to the executives at parent company Boehringer Ingelheim, it was the only choice. A company spokesman indicated that the move will enable the company to dedicate Ben Venue’s resources to its Cleveland, OH manufacturing site toward the Bedford Laboratories business. Bedford Labs sells mainly generic injectable products, many of which are oncology products. The list of products sold by Bedford contains many tried-and-tested cancer therapeutics such as vinblastine, daunorubicin and doxorubicin. The products Bedford sells are used in hospitals and by oncologists all over the country.


Clearly this move is a step by BI to 1) deal with the recent drug shortage issues facing the Bedford Labs business and 2) focus the company’s compliance improvement efforts. This decision comes at a time when drug shortages are near all-time highs. Through July 2011, there are 180 drugs on FDAs Drug Shortage List, according to the University of Utah’s Drug Information Service. Dissecting the current shortage list is a useful task.


The majority of these drugs are generic oncology products, and they are all centered around a small subset of companies (Hospira, APP, West-Ward, Teva, Bedford Labs). Further, 95% of the drugs currently listed are injectable products. Ben Venue manufactures several of the products on this list for Bedford Labs. The consumer may take some comfort in knowing that by exiting the CMO business, BI is taking a bold step and directly dealing with the shortage of Bedford Labs products. By refocusing BV’s operations, BI is attempting to ensure that the manufacturing capacity it has is allocated to Bedford’s products. Time will tell if the strategy works. In the meantime, many newer products Ben Venue makes as part of its CMO business, such as drugs for ovarian cancer, kidney cancer and multiple myeloma, will eventually need to find “new homes.” BI has indicated that the CMO phase-out will take place over the next several years, and that it is working with customers to find alternative manufacturing sites.


The Perfect Storm


Eliminating the third-party CMO business does simplify things for Boehringer Ingelheim. It may eventually also lead to a more robust supply of Bedford Labs generic products that are in short supply. Given that the regulatory scrutiny on sterile manufacturing is intense — and will only get more intense in the wake of an industry that has aging production assets in this area — BV’s exit does not exactly come as a surprise. If one looks at the timing of the company’s announcement, it coincides with a nagging list of compliance problems, the most recent being a warning letter and a partial ban from Health Canada. The compliance problems appear to be with the company’s manufacturing operations, which have been cited in the past by regulators from the U.S., EU and Canada. 


These issues can be a “kiss of death” for a CMO. The situations are different, but a recent parallel is Albany Molecular Research’s purchase of the sterile CMO business of Hyaluron in 2010. Soon after the acquisition was announced, the FDA issued a warning letter to the Hyaluron site. Short of a direct seizure of products produced, this is the most severe action the FDA can take. Thankfully, Hyaluron was not producing products that have a critical near-term impact on patient access. The same cannot be said for Ben Venue, which produces many of the newer first line cancer therapeutics as part of its CMO business.


Those who understand compliance in sterile drug product manufacturing know it’s the most scrutinized manufacturing operation in the pharma space. The controls, equipment and procedures required just to perform the basics are many times more costly and time consuming to implement compared to, say, oral solid dose manufacturing. This scrutiny, in the case of Ben Venue, also comes with added complexity. Many products produced at Ben Venue are aseptically lyophilized products and most of these products are cytostatics and/or cytotoxics, which require even more intense controls. These circumstances resulted in a “perfect storm” of sorts for Ben Venue. After all is said and done, one fact will still remain: Ben Venue will still need to deal with its compliance problems as part of its efforts to supply products to Bedford Labs.


The Implications


Ben Venue’s exit from the CMO space will clearly have an impact in both the marketplace and the healthcare sphere. For some, like competitors of Ben Venue’s CMO business, these will be positive. However, for the consumer — physician and patient — the impact will likely be negative, certainly in the short term. As one looks at the implications of this announcement against the backdrop of the kinds of products (mostly oncology therapeutics) that are affected, patients’ needs for these products (mostly patients with life-threatening diseases), the news may continue to be bad for some time. Table 1 examines some of the winners and losers and the implications as a result of Ben Venue exiting the CMO space.


The Future


In a recent article published by the New York Times regarding critical drug shortages, it was reported that the U.S. government is looking at an initiative whereby the government — yes, the same government that held the U.S. economy hostage during the debt ceiling debate — is seeking ways to form a national stockpile of critical drugs. The initiative seems to center around stockpiling active ingredients so that they could be shipped to pharmacies for aseptic compounding when needed. The article goes on to say that a group of oncologists have formed their own not-for-profit group that plans to stockpile these critical drugs. Further, the Generic Drug Industry is lobbying Congress to pass tax legislation providing incentives for generic companies to maintain a supply of necessary but low margin products.


Although I believe the initiatives have merit in terms of further exploration, the underlying facts still remain unchanged: consumers want cheaper drugs, they want them when they need them and they want and expect them to be made right. I believe it might possible to get two of the three. I’ll leave it up to the reader to determine which two. 

 

L. Lee Karras is founder and president of Pharmalogx LLC (www.pharmalogx.com) an advisory services company focused in the private equity, CMO, pharma and biotech areas. Mr. Karras has more than 20 years of experience in the pharma services industry, most recently serving as chief executive officer and president of AAIPharma Services. Before joining AAIPharma, he was responsible for the Baxter BioPharma Solutions business unit. He can be reached at lkarras@pharmalogx.com.



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