Contract: Out?

By Gil Roth, Contract Pharma | March 6, 2013

Plus: Insurgents and hospital bills

I spent quite a bit of time working on this issue’s article about the Generic Drug User Fee Amendments (GDUFA) and how their Facility Fees may impact CMOs. During numerous interviews for the piece, the repeated refrain from CMOs was, “These fees are unfair! How did contract manufacturers get targeted like this?” You’ll have to read the article to find out how this may have happened; the process of reporting and writing the piece was eye-opening. Having been inside the pharma/biopharma contract services industry since 1999, I don’t think I’d realized how little it matters.

That isn’t to say that what CMOs, CROs, CDMOs, contract packagers and other providers do isn’t important. I mean that it doesn’t matter to most people, even those who you’d think would know better.

Recently, Janet Woodcock, head of FDA’s Center for Drug Evaluation Research, and Marta Wosinka, director of economics staff at CDER, published Economic and Technological Drivers of Generic Sterile Injectable Drug Shortages (bit.ly/ YUT1GL) in the journal Clinical Pharmacology & Therapeutics. In their effort to determine the reasons behind those shortages, they developed the thesis that quality has suffered in the generic sterile injectables space because the market doesn’t reward quality. Their solution? “FDA could support the buyers and payers in their purchase and reimbursement decisions by providing them with meaningful manufacturing quality metrics,” they wrote. Essentially, they proposed a sort of “scorecard” similar to restaurant grades to signal levels of quality, which would then allow payers to pay more for higher quality generic sterile injectables. (Maybe they could call it GMPlus™?)

I read the article pretty voraciously, figuring there would be an extensive section about the role of contract manufacturers in the matrix, since CMOs have played a critical role in this area (and the failure of one of them led to a number of major drug shortages). There is a section on “Contracting practices”; it comprises 225 words of the 4,500-word article and half of it covers contracts between generic companies and their buyers. The CMO-relevant passage tells us:

Not only are buyers unable to observe manufacturing quality, but firms that contract out manufacturing of their product often do not have the same level of insight into or oversight of the contract manufacturer’s quality systems as they would have into their own. Overcommitment on manufacturing capacity by a [CMO] can lead to an unsustainably high number of products on each line and substandard oversight of the process.

Got that? Two directors at CDER contend that using a CMO for sterile injectable generics will prohibit you from getting a picture of quality, and CMOs’ processes are probably substandard because  they take on too much work. This position helps avoid the question of whether quality problems at CMOs may arise from sponsors driving down prices to unsustainably low levels.

I hope they’re referring specifically to sterile injectable generics and not all CMO-produced drugs, but it’s not clear from that portion of their paper. I do worry that Dr. Woodcock and Ms. Wosinka believe that the role CMOs can play in alleviating critical drug shortages is by not manufacturing any.

Gil Roth
Editor • groth@rodmanmedia.com / twitter.com/contractpharma

What I’m Reading

Bitter Pill: Why Medical Bills Are Killing Us
Steven Brill, Time – http://ti.me/12bwSd0
Comment: Accent on the “ing” in “What I’m Reading”; I’m still working my way through this 26,000-word article about the high cost of healthcare. Because insurance companies won’t cover certain goods and services, hospitals come up with crazy pricing for other items to balance everything out. And consumers rarely notice because they’re “not really paying.”

The Insurgents: David Petraeus and the Plot to Change the American Way of War
Fred Kaplan – amzn.to/Y3ymAy
Comment: A fantastic history of the fall, rise and fall of counterinsurgency strategy in the U.S. Army, Mr. Kaplan’s book chronicles the post-Vietnam sclerosis in the military, the rise of the “Sosh” mafia from West Point, the small-scale, low intensity wars that followed the fall of the USSR, and the monumental folly of the Iraq war. Oh, and you’ll learn plenty about how Afghanistan is The Worst Place In The World to fight a war. You’ll be able to get plenty of lessons about institutional learning from this book.

Why don’t you tell us what you’re reading? Write us at groth@rodmanmedia.com, www.goodreads.com/groth, www.linkedin.com/groups?gid=1775433 or www.facebook.com/contractpharma — and the first respondent wins a prize!

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