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    Features

    API Supply Chain Strategy

    How to risk-proof your API supply chain for a successful 505(b)(2) filing.

    API Supply Chain Strategy
    API Supply Chain Strategy
    Figure 1. Total number of 505(b)(2) approvals issued in the USA, as reported in the GlobalData Intelligence Center (Source: GlobalData)
    API Supply Chain Strategy
    Figure 2. Total number of warning letters issued against drug establishments in the U.S., as recorded in the FDA’s Data Dashboard (filters applied: Warning Letters, Drugs, United States). (Source: FDA, Compliance Data Dashboard)
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    Shailesh Vengurlekar and Hamilton J. Lenox, LGM Pharma09.16.19
    About 1.1 million people live with HIV in the US.1 Their weakened immune systems make them especially vulnerable to Pneumocystis pneumonia (PCP), an opportunistic infection that causes fever and chest pain. Mercifully, cases of AIDS-related PCP have declined steeply since the 1980s. The story of that decline includes a significant footnote with an unusual name: 505(b)(2).

    That’s the accelerated regulatory pathway that developers used to fast-track approval of Pentamidine, a medication originally indicated for sleeping sickness before its reformulation into an aerosolized dosage form to treat and prevent PCP. Therein lies the core strength of a 505(b)(2) filing: it invites developers to modify an existing drug, giving it a new purpose without having to reproduce years of pre-existing safety and efficacy studies. On the 505(b)(2) pathway, drug companies can move a product from development to FDA approval in as few as 30 months—a great improvement over the sluggish timelines typical of more traditional approval pathways.

    Drawn by the appeal of lower costs and improved velocity, more drug companies are choosing the 505(b)(2) approval pathway today than ever before (see Figure 1).


    Figure 1. Total number of 505(b)(2) approvals issued in the USA, as reported in the GlobalData Intelligence Center. (Source: GlobalData)

    Fast does not equal easy, though. To succeed on the 505(b)(2) pathway, drug companies must navigate enormous complexity. Much of that complexity comes from pressure to source the hard-to-find active pharmaceutical ingredients (APIs) needed to support novel reformulations. Developers must try to find a manufacturer who will meet their API demand, then handle importation under intense regulatory scrutiny. This isn’t easy to accomplish, even for developers with well-established sourcing and procurement teams. Smaller developers without such in-house capabilities have an even greater challenge ahead.

    Overcoming those challenges requires a keen understanding of API procurement. By obsessing over every detail of each phase, or by partnering with an expert who will do the obsessing for you, you’ll be better prepared to navigate the logistical and regulatory complexity ahead as you prepare for a successful 505(b)(2) drug development process.

    The challenges of API sourcing
    Is it better to pay a premium for a large-scale, well-established API manufacturer, or to trust a lesser-known entity offering an API supply at a lower cost?
    The answer isn’t simple. Many large-scale manufacturers have the infrastructure to supply your hard-to-find APIs, but your company may not be large enough to hold their attention. If you do get a response, they may not be willing to accommodate the low volume you require. Trying to negotiate with these titans of the manufacturing world can feel, to a new drug developer, like standing at the foot of a mountain with no way up.

    An API manufacturer with a comparatively modest operation might seem more approachable. You make a few phone calls, and pretty soon you find a manufacturer who can supply your startup quantity—say, 50 kilograms a batch—on your timeline. So you sign along the dotted line, part with a substantial sum of money, and return your focus to your research (at last!), satisfied that your API procurement problem is solved.

    Except it’s not. What happens if your API manufacturer is a fraud, claiming the identity of a certified establishment? Or what if your APIs languish at the border, the result of improperly completed importation paperwork? Or what if your API supplier doesn’t have a valid U.S. Drug Master File (DMF) you can reference in your regulatory filing? Or what if those APIs make it all the way to your doorstep, only to be out of specification by the time you receive them? The consequences would be catastrophic. Stalled production. Lost investment. Worst of all: the risk of a compliance action taken against your company, shredding your reputation.

    That last risk is formidable, and very real. Regulators around the world have dramatically expanded their reach. The European Commission’s 2013 update to its Guidelines on Good Distribution Practice emphasizes global traceability as a key factor in preserving quality, saying that it aims to “ensure control of the distribution chain and consequently maintain the quality and the integrity of medicinal products.”2 At the same time, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA), giving the FDA enhanced abilities to enforce trackability and product verification standards. And just last year, the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) announced that supply chain integrity would be a priority in its five-year corporate plan.

    What do these new and updated guidelines tell us? Regulators are widening their field of view, searching for signs of poor quality not only within a drug company’s own systems, but across the entire chain of custody. This increased regulatory oversight has led to an alarming uptick in compliance actions. Just look at the number of warning letters issued by the FDA against US drug establishments over the last ten years (see Figure 2).


    Figure 2. Total number of warning letters issued against drug establishments in the U.S., as recorded in the FDA's Data Dashboard (filters applied: Warning Letters, Drugs, United States). (Source: FDA, Compliance Data Dashboard)

    Remember these numbers when you’re about to sign an agreement with an API manufacturer. How well do you really know them? Are you absolutely assured of the quality of their systems, the integrity of their products, and their capacity to meet the constantly shifting and increasingly global regulatory standards according to which your own success (or failure) will be determined?

    If these questions give you pause, here’s what to do next.

    How to minimize API supply chain risks
    Taking time out to manage the logistics of a global chain of custody can feel a lot like hauling an extra weight in a neck and neck footrace. It’s difficult, it takes time, and its mismanagement could cost you your spot on the podium.

    The key is to hold yourself and your API manufacturers to a standard that exceeds even the highest regulatory expectations. In other words, don’t just comply. Be a compliance over-achiever, demonstrating integrity and quality at every stage and in every part of the process.

    When it comes to your API manufacturer, this process has three stages: Pre-qualification, Negotiation, and Communication.

    Pre-qualification: How to assess quality
    Develop a questionnaire that goes (far) beyond the obvious. When questioning an API manufacturer, many drug companies make the mistake of focusing almost exclusively on the manufacturing process itself. Quality issues don’t often originate there. Instead, they originate in the Quality Management Systems (QMS) that support the manufacturing process. You need to ask the right questions in order to reveal how those systems work—or how they don’t.

    Ask about the standard operating procedures (SOPs) that govern cleaning and sterilization, for example. Ask about environmental monitoring and clean room/gowning procedures. Ask about raw material testing and supplier qualification procedures, change control management, product labeling, storage, and transportation. Ask to review staff training programs and procedures for handling customer complaints, deviations, and investigations. Look into their data integrity standards, including their record of software validations and back-ups. Request access to their DMF for your API. If they can’t provide it, ask if they have approved DMFs that are referenced in other regulatory submissions to ensure they successfully can support a DMF for your API.

    By examining these and other adjacent systems, you’ll begin to develop a sense of each manufacturer’s integrity and commitment to quality far beyond the manufacturing process itself.

    Do substantial research. It’s important to ask potential manufacturers for documentation that reveals their QMS, but that doesn’t go far enough to protect yourself from fraudulent representation.

    To do that, you need to substantiate your manufacturers’ claims by conducting your own independent research. Dig through databases like EudraGMP (maintained by the European Medicines Agency) and the FDA’s online resources, looking for red flags (warning letters, import alerts, product recalls, etcetera) as well as signs of sustained compliance, such as certificates of Good Manufacturing Practice (GMP). Only by cross-referencing a manufacturer’s own documentation with these third-party sources will you arrive at a confident picture of your potential manufacturer.

    Conduct an on-site qualification audit. There’s no substitute for assessing quality at the source. In-person inspections eliminate the possibility of fraud or subterfuge and create opportunities for honest and lasting supplier relationships, leading to more fruitful negotiations down the road. They’re simply a good, if not essential, step in the pre-qualifying process. 

    Use your on-site audit to validate the self-reported details that your manufacturer provided via your questionnaire. Look for signs that they are properly controlling quality systems including their production environment, their staff training, and their protocol for maintaining data integrity. Although it’s an expensive and time-consuming activity to take on, seeing a facility first-hand is the only way to ensure that your manufacturer operates just as they’ve described on paper.

    Negotiation: How to protect your future needs
    Discuss your scale-up requirements. Once you’re confident in the quality systems and procedures inside your potential manufacturer’s facility, you need to understand whether or not they can grow alongside you. This is critical.

    As we’ve established, lesser-known API manufacturers are often more willing than their larger counterparts to produce low-volume APIs for drug developers in the early stages of R&D. With this benefit comes a potential consequence: as you progress towards commercialization, it’s possible to outgrow your API manufacturer’s capacity. What happens when you need to scale your batch size from 50 kilograms to 250 kilograms, and your manufacturer can’t scale with you? You either accept the higher costs and longer lead-times required for multiple smaller-scale batches, or you’re shunted to the beginning of this whole painstaking search, jeopardizing your timelines and your budget.

    To avoid this, open a dialogue with your potential manufacturers early in the evaluation and selection process. Ask about spare capacity, average capacity utilization, future expansion plans, etcetera. Can they fulfill orders through every one of your anticipated project phases, particularly if those phases move quickly on the accelerated 505(b)(2) pathway? Can they move and scale as smoothly as you’ll need them to? To avoid a painful bottleneck, discuss these questions before sealing the deal.

    Establish a quality agreement and a service/supply agreement. Every good relationship is governed by a good document. Employees and employers have contracts. Homeowners and banks have mortgage papers. Drug companies and manufacturers have formal agreements—or they should, if they’re interested in managing risk and ensuring good outcomes.

    A strong quality agreement lays the groundwork for quality assessments by defining roles and responsibilities, and by establishing the frequency and format of communications between you and your manufacturer. What quality-related documents will you expect to receive, and how frequently? How often will you return to your manufacturer for on-site audits? Codifying answers to these questions in the quality agreement will ensure that both you and your manufacturer remain vigilant, proactively eliminating mistakes and deviations before they put your project in danger.

    The service/supply agreement complements your quality agreement by outlining the terms of your business arrangement. If preventing expensive errors is the main object of the quality agreement, then preventing expensive misunderstandings is the main object of this one. Use it to define your work orders, establish pricing thresholds, and forecast your expected year-over-year demand. This is where you formalize those scale-up discussions from the previous step, laying out your expected requirements in detail and attaching costs to each phase of growth.

    The payoff of a good service/supply agreement is improved clarity, which you can maintain by updating your forecasts on a regular, predetermined schedule. Perhaps demand for your product surges, and your manufacturer needs to add a dedicated production line to keep up. Or, conversely, a competitor plunders your market share and you need to reduce your annual API order by half. Using the terms defined in your supply/service agreement, you can discuss these shifting needs while there’s still time to co-develop a proactive strategy.

    This is the stuff that strong relationships are made of, and strong relationships, in the brisk and unpredictable world of API procurement, are often your best defense against failure.

    Communication: How to ensure ongoing manufacturer commitment
    Meet with your manufacturer regularly. These regular meetings, whose frequency will depend on your project’s timeline and the nature of your API needs, are defined in your service/supply agreement and should become a core tenet of your strategy for quality control and assurance.

    For example, your agreement might require a bi-weekly meeting conducted virtually, during which you expect to review out of specification (OOS) results, details of any investigations and deviations, corrective actions taken, timing and logistics for API shipments, and upcoming project demands. These regular meetings may involve analyzing the quality of an intermediate as well, giving you the opportunity to spot a potential deviation before it puts your product at risk.

    All of these details should be carried out as mutually agreed in your service/supply agreement in order to foster transparency and responsible risk management practices between you and your manufacturer.

    Bottom line: For the ultimate risk-proof plan, trust an expert
    The 505(b)(2) pathway is as risky as it is fast. Chief among those risks is the problem of sourcing good-quality, hard-to-find APIs from a manufacturing world noisy with promises, not all of them reliable. This article gives you some key advice to help you navigate these risks, but the best advice is yet to come:
    Don’t do it alone. 

    It’s true that partnering with an API sourcing and procurement specialist incurs upfront costs. That’s enough to deter many drug companies facing enormous financial pressure. Fair point. Many can (and do) find success through a DIY approach to supply chain management by following the steps described in this article.

    Many others don’t, though. Avoiding the upfront costs of partnering with a specialist is, in many cases, not an avoidance at all—it’s simply a delay. Those costs will circle back, often many times higher. They’ll take the form of logistical obstructions, poor API quality, deferral of commercial launch, or a compliance action against your company. This is a doomsday scenario, and it might not happen to you—but “it might not” carries an oppressive weight in a world as consequential as that of drug development. “It might not” is very close to “it might.” Far too close for comfort.

    The right sourcing and procurement specialist has already completed the work described above. They have a pre-qualified list of API manufacturers. They know where to find the ones that can meet your supply chain needs, and how to negotiate the best deal for you. They are expert navigators of global regulatory requirements, and will help ensure a smooth journey from concept to regulatory approval. They know how to turn “it might not happen to you” into “it absolutely won’t,” giving you the means to take advantage of the 505(b)(2) regulatory pathway without succumbing to any of its risks. 

    References
    1. https://www.hiv.gov/hiv-basics/overview/data-and-trends/statistics
    2. https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2013:343:0001:0014:EN:PDF
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