Call it an example of unintended consequences: 

began publication in 2005, supply chain issues were relatively unrecognized, and poorly reported. Now, a just-released study sponsored by PhRMA, the industry’s trade association, is entitled The Pharmaceutical Supply Chain: Gross Drug Expenditures Realized by Stakeholders,* and goes on to say that 37% of brand manufacturer gross revenue is rebated back to PBMs, health plans and the government, or retained by other stakeholders in the biopharmaceutical supply chain. And that percentage has been rising over the past five or so years.

We’re not taking credit for discovering the pharma supply chain, and certainly not for the growth of non-pharma stakeholders’ revenue in that supply chain. And coming from PhRMA sponsorship, the study bears closer study than we can do here. Moreover, it’s one more piece of information in the ongoing dialogue (to be polite) between the industry, payers and their pharmacy benefit managers and the federal government—the latter two of which take more and more bites out of the medicine revenue pie (

This debate blew open publicly when Mylan, last fall, made the contention that raising the price of its EpiPen product from around $100 to $600 over the past several years was driven in part by PBMs demanding a bigger piece of the product’s revenue; the list price went up, but the revenue to Mylan stayed relatively flat (at least in the latter years of this trend). The argument didn’t sway much public criticism in Mylan’s favor, but it did serve to highlight the growing complexity—and dogfighting—in commercial trade practices within the supply chain.

“The study begs an important question: Are we doing enough to ensure the growing amount of rebates and discounts flow to the patient?” said Stephen J. Ubl, PhRMA CEO, in a statement.

“We always want more competition and bigger price concessions that can be passed back to our customers in the form of lower premiums and cost-sharing,” Mark Merritt, CEO of the PBM’s trade association, the Pharmaceutical Care Management Assn., in an interview** with 

From our perspective, it’s worth noting that a trend that many in the pharma industry (and nearly all commentators on the future of the industry) have been asserting for years: the consumerization of healthcare. It’s almost axiomatic that if pharma is engaging more directly with consumers, it’s going to need to do more than negotiate a price with wholesalers and distributors and wait for the revenue to pour in; it’s going to have to build (or hire, and pay for) the expertise to manage patient education programs, adherence programs, follow-up counseling and the like. It’s also paying for patient-reimbursement management services to deal with the complexities of prior authorization requirements, patient-assistance services and the like. All of this is accelerated as the nature of medicine changes from pills to specialty products with a growing list of ancillary services.

That topic—patient support—is the core subject matter of our next issue, our annual Hub Services report. Stay tuned.

http://www.thinkbrg.com/media/publication/863_Vandervelde_PhRMA-January-2017_WEB-FINAL.pdf

http://www.pharmaceuticalcommerce.com/?s=merritt

Articles

Hey, what’s this supply chain stuff?

The slim hope that the growing opioid addiction crisis could be controlled by restricting access to prescription opioids—the abuse of which has been the starting point for many addicts—is slipping away as illegally manufactured opioid pills (some of them counterfeit copies of legal pills) become more commonly available. The addition of fentanyl to these illegal pills—which attracts some addicts because of a “higher high”—has only compounded the problem, and is the main reason that opioid-related deaths (which include heroin) reached 33,091 in 2015, according to just-released CDC data. [1] The Drug Enforcement Administration (DEA) has not let up on policing of prescription drug abuse, but the crisis won’t be solved by that alone.

Two key changes have occurred in the drug-abuse recovery field over the past decade: federal law that mandates insurance coverage of addiction therapy; and a grudging acceptance by a larger part of the addiction therapy community that medication-assisted treatment (MAT) works.

Until very recently, most long-term addiction therapy was not funded through private health insurance carriers. Private plans were so reluctant to cover substance abuse therapy—an aversion that took the form of high deductibles, exclusions and severe limitations—that many treatment centers did not even bother accepting insurance at all. All of that changed with the passage of the Mental Health Parity and Addiction Equity Act (MHPAEA), often referred to simply as “the Parity Act,” which became law in 2008 but whose final rule did not go into effect until 2014. The Parity Act requires group health plans to cover mental health and substance abuse disorders on an “equal footing” with other medical and surgical benefits.

The Parity Act, in conjunction with several other government laws, programs and regulatory changes, not to mention evolving societal attitudes toward addiction in general, has had a sweeping impact on the substance abuse treatment industry, according to Kevin Taggart, a managing partner at Mertz Taggart, a healthcare M&A consulting firm based in Atlanta, GA.

“We’ve had several clients who were all private, out-of-pocket pay and had been in business for 10 or 15 years, and then the Parity Act came along and now they’re being funded mostly through out-of-network insurance reimbursement,” says Taggart. “It’s really driven their sales through the roof in a lot of cases.”

That this new reimbursement environment has emerged in the midst of a nationwide opioid addiction epidemic would seem to argue for a bullish position on pharmaceutical firms that manufacture drugs used in MAT. But getting such drugs to patients in need is proving more difficult than just funding them. Private practitioners have been slow to prescribe MAT therapies and the only other venues for receiving such treatment—methadone clinics—are few and far between in rural areas, or in inner-city neighborhoods, which present their own accessibility issues.

Fortunately, new drug distribution models are experimenting with ways to expand these proven treatment methodologies to those caught up in what is now being universally viewed as a national public health crisis.

Medications for the treatment of opioid use disorders include agonists like Dolophine and Methadose (methadone); partial agonists like Subutex, Suboxone and Zubsolv (all buprenorphine); and the antagonist Vivitrol (naltrexone). All of them pretty much have the same mechanism of action: they bind with opioid receptors in the same way as prescription painkillers and heroin but at a slower rate, while also leaving the body more gradually. This creates a “ceiling effect” on the highs and a “basement effect” on the lows.

Increasingly seen as an essential component of any opioid treatment plan, both for patients in withdrawal or to support long-term recovery, these drugs are gaining traction. “When administered in the context of an addiction treatment program, all effectively help maintain abstinence from other opioids, reduce use disorder related symptoms, and reduce the risk of infectious disease and crime,” Director of the National Institute on Drug Abuse (NIDA), Nora Volkow told a Congressional hearing in 2015. [2]

These medications can only be prescribed under highly regulated circumstances. By federal law, buprenorphine, which gained FDA approval in 2002, can be prescribed by private physicians only after completing an eight-hour training course and obtaining a waiver from DEA. At first, qualified doctors are limited to 30 patients. After a year, they may request federal permission to treat up to a maximum of 275 patients. As of June 2016, about 33,000 physicians have been approved to prescribe buprenorphine.

The other main venue for receiving MAT, methadone clinics, known in the business as opioid treatment providers (OTPs), are also highly regulated. There are approximately 14,000 OTPs operating in 48 states in the US, treating about 350,000 patients. Clinics tend to be concentrated in the country’s most heavily populated areas.

Few realize it but methadone clinics are not limited to dispensing methadone. They can dispense any of the various buprenorphine variations and furthermore are not subject to the patient caps that apply to private physician practices. Although OTPs seldom dispense buprenorphine, a few do. “We’ve got one client for sale that has 500 patients total and 450 are on Suboxone,” says Taggart. “We went in there earlier this year, and it really feels just like a doctor’s office. It’s in a medical building in a nice part of town.”

In addition to regulatory hurdles, MAT therapies also face lingering philosophical pushback from substance abuse programs opposed to any kind of chemical-based treatment whatsoever. Based on the 12-step program that serves as the foundation for Alcoholics Anonymous, the so-called Minnesota model embraced by some treatments requires absolute abstinence from any mood altering substances. Some residential facilities reportedly even deny patients fully caffeinated coffee. While almost no clinicians dispute that psychiatric counseling must be part of any treatment program, there is a growing awareness that patients with severe opioid addictions will benefit from MAT therapy. A widely cited 2015 study found that opioid agonist pharmacotherapy cut the risk of death by overdose among British patients by half when compared to psychological support alone. [3]

Vast, fragmented and lacking a single federal agency to oversee it, the substance abuse recovery industry is difficult to assess in terms of size. The National Assn. of Addiction Treatment Providers guesses there may be as many as 75,000 different treatment programs operating in the US. Of those, around 14,500 are brick-and-mortar behavioral health and substance abuse facilities, which generate an average of about $1 million annual revenue each. Among facilities, about 80% require patients to adhere to some form of the 12-step model that mandates a “spiritual” component to treatment. [4] However, more and more such programs are adding MAT to their therapies, as well. (For example, after years of opposition, the world famous Hazelden treatment system adopted MAT in 2012.)

About 81% of treatment facilities are outpatient, 26% are inpatient (“residential”), and 6% are hospital-based inpatient. Roughly 55% are structured as nonprofits and 32% are for-profit, with the remainder funded by state, federal, local or tribal entities. [5]

The reimbursement requirements mandated by the Parity Act have piqued the interest of for-profit and private equity concerns. Investment dollars are pouring in, M&As abound, and some are calling it a full-scale Wall Street “roll up play.” The Parity Act and its transformation of the industry will likely enhance quality, standardization and measurable outcomes, three characteristics significantly lacking in this unruly space, according to Mark Covall, president and CEO of the National Assn. of Psychiatric Health Systems, but it will take time: “In many ways what I’m describing is just starting to play itself out,” he notes. “It’s still in its early stages.”

Supporting the Parity Act are a slew of government sanctioned programs, initiatives, laws and regulations aimed at confronting the ongoing opioid epidemic. Congress, FDA and the Surgeon General all have pending efforts, adding to a climate which appears welcoming to the ongoing funding of MAT therapies.

The only possible exception here is the continued level of reimbursement for out-of-network residential treatment facilities. These tend to be high-end establishments located in warm weather states where patients can travel to escape the environments and people contributing to their substance abuse problems. The trouble is that they are expensive, sometimes charging double or triple what in-network facilities charge.

The payer backlash against such facilities is well under way and such programs cannot remain sustainable, according to a white paper published by the Braff Group, a Pittsburgh, PA-based consulting firm: “Despite the longevity it has enjoyed to date, the out-of-network model has always been perched precariously on the razor’s edge of sustainability,” the paper states. “If anything the added visibility of parity only raises awareness of this ‘only in America’ systematic disparity in payments.”[6]

The paper concludes that the gains of the Parity Act “will be disproportionally realized by the more mainstream (i.e., affordable) providers.”

But funding is the not the only issue at stake. Physicians appear to be reluctant to prescribe buprenorphine medications, perhaps feeling uneasy about the possibility of their waiting rooms filling up with drug addicts and the effect that might have on public perception of their practices.

Many critics blame the regulatory patient caps for unmet patient needs. But a recent NIDA study of physicians and addiction specialists certified to provide MAT therapies showed that many prescribers served only a small fraction of the maximum patients allowed by the law. More than 20% of DEA-approved doctors treated three or fewer patients; and fewer than 10% treated more than 75 patients, according to the study.

Many in the industry believe that new drug distribution models in which OTPs collaborate with buprenorphine prescribing practitioners to treat opioid-addicted patients could be feasible.

In a series of policy papers developed by the American Association for the Treatment of Opioid Dependence (AATOD) for the Substance Abuse and Mental Health Services Administration (SAMHSA), authors laid out a unique blueprint. [7] They describe how three states—Vermont, Rhode Island and Maryland— have implemented OTP Health Homes by taking advantage of the Affordable Care Act’s Medicaid Health Home option, which enables states to reimburse agencies for providing care coordination.

This model, called the “Hub and Spoke” model, capitalizes on the lack of patient caps confronting OTPs, and standardizes coordination with the patient’s physician. One author described Vermont’s program this way: “Specializing in the treatment of complex addiction, the regional centers (hubs) provide intensive treatment to patients and consultation support to medical providers (spokes) treating patients in the general practice community.” Such coordination would also provide opportunities to treat potential co-morbid psychiatric problems, the authors add.

However, the uncertain status of the ACA following the recent Presidential election casts a pall over enthusiasm for this model. Its reliance on the ACA’s expanded Medicaid provisions, which even before the election 16 states had already opted out of, would be particularly problematic for any nationwide effort.

There is no avoiding the fact that all currently approved MAT therapies contain opioid agents themselves. Although these drugs will not produce the same euphoria as heroin or painkillers, dependent users will take them over nothing. Despite precautions, buprenorphine medications rate among the nation’s most “diverted” prescription drugs (i.e., sold on the black market, boiled down and injected, exchanged for harder drugs, etc.).

Aware that four out of five opioid addicted patients acquired their habit after taking prescription painkillers, pharmaceutical manufacturers have in recent years developed a spate of abuse deterrent (AD) opioid painkillers, designed to be more difficult to crush, inject or take via intranasal ingestion. Six such AD painkillers have been approved by FDA, the latest being Pfizer’s Troxyca (oxycodone and naltrexone) approved in August 2016. Troxyca is an oxycodone pellet with a naltrexone core. If the medication is crushed, the naltrexone will counteract the opioid’s effect, according to the company.

However, the higher costs of AD painkillers have drawn protests from patients and payers. It is difficult to compete on price with traditional opioids, which have been generics for years.

Another possible way to prevent diversion is through drug secreting implants. In May 2016, FDA approved Probuphine, the first buprenorphine implant for the maintenance of opioid dependence. The implant is designed to provide a constant, low-level dose of buprenorphine for over a period of six months.

Of course, avoiding opioids in pain management altogether seems like a worthy clinical goal as well. Devices designed to treat pain without drugs continue to be an area of experimentation. For example, in October 2016, an observational study presented at the annual meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) found that non-invasive vagus nerve stimulation effectively treated patients suffering from medically unexplained pain symptoms.

As it has for decades, the development of a non-opioid, synthetic painkiller remains a paramount goal of pain relief research. Boehringer Ingelheim sold off three experimental pain compounds to Baltimore, MD-based Centrexion Therapeutics last year. Centrexion then announced that it would continue clinical trials on an injectable form of synthetic capsaicin (the active ingredient in chili peppers) for the treatment of pain.

In the meantime, clinicians and healthcare policymakers will work with the best tools available, and MAT is increasingly seen as part of that mix. “I don’t know how all of this is going to evolve,” concludes NAPHS President and CEO Covall, “but I do think there needs to be mechanisms to create more availability for MAT therapies. Because they are effective and do very well and we could save a lot of lives.”

Rudd RA, Seth P, David F, Scholl L. Increases in Drug and Opioid-Involved Overdose Deaths — United States, 2010–2015. MMWR Morb Mortal Wkly Rep 2016;65:1445–1452. DOI: 

http://dx.doi.org/10.15585/mmwr.mm655051e1

Mattick RP, Breen C, Kimber J, Davoli M. Buprenorphine maintenance versus placebo or methadone maintenance for opioid dependence. Cochrane Database Syst. Rev. 2, CD002207 (2014).

Pierce M, et al. Impact of treatment for opioid dependence on fatal drug-related poisoning: a national cohort study in England. Addiction. 2015; 111:298-308

Substance Abuse and Mental Health Services Administration, Center for Behavioral Health Statistics and Quality. Treatment Episode Data Set (TEDS): 2004-2014. National Admissions to Substance Abuse Treatment Services. BHSIS Series S-84, HHS Publication No. (SMA) 16-4986. Rockville, MD: Substance Abuse and Mental Health Services Administration, 2016.

Integration of Behavioral Health with Traditional Care is Driving Consolidation within the Industry. Published by Duff & Phelps. Accessed at duffandphelps.com.

Medication Assisted Treatment Deals Signal a Shift in Addictions M&A. Published the Braff Group. Accessed at thebraffgroup.com

Casper KL, Storti S, Walters V. Models of Integrated Patient Care Through OTPs and DATA 2000 Practices. Submitted by the American Association for the Treatment of Opioid Dependence in partial fulfillment of contract #HHSP233201400268P. February 22, 2016.

New technology to address abuse and pain treatment

There’s no little irony in the fact that opioid abuse of prescription pills is creating a market for deterrents to that abuse, or treatments like naloxone to resuscitate overdosed opioid abusers. The situation is so fraught that the Abuse Deterrent Coalition (

), a group of pharma companies, drug delivery companies and drug abuse public-interest groups, has issued an “Abuse Deterrent Formulation: Myths and Facts” position paper that starts with the myth, “There is no evidence that abuse deterrent formulations have a real world impact.” (In fact, multiple studies have shown just such an impact; the problem is, as prescription opioids become less desirable among addicts, those addicts are turning to heroin and street-level fentanyl.) Without abuse deterrent formulations, patients suffering chronic pain would have little recourse to treatment.

Grünenthal, the Aachen, Germany company that developed multiple forms of extended-release opioids, is also the developer of Intac, its proprietary technology for tamper resistance, currently in use in multiple commercial opioid formulations. Other abuse-deterrence developers include Inspiron Delivery Services, Acura Pharmaceuticals and Intellipharmaceutics International.

Abuse deterrence is just one of multiple R&D efforts underway to combat opioid abuse. The commercialization of naloxone, a drug that counters the respiratory effects of opioid overdose, is now widespread; FDA is considering methods to enable the drug to be marketed as an OTC product, and multiple states have modified their prescription-dispensing rules to allow patients or their caregivers to obtain the drug.

Last year, FDA approved Probuphine, an implantable form of buprenorphine developed by Braeburn Pharmaceuticals and Titan Pharmaceuticals, using the latter’s ProNeura drug delivery platform. The drug is supposed to provide patients a steady, maintenance dosage for up to six months as part of a therapy program.

Research has been going on for decades to find pain-relieving drugs that lack opioids’ addictive properties, but the results have been thin so far. A recent trend is to combine an opioid substance with an antagonist (such as naltrexone), or with a bioactive neurotransmitter involved in pain perception in the brain. Most recently, Grünenthal, working with an Italian pharma company, Abiogen Pharma, was granted a Breakthrough Therapy Designation for neridronic acid, a potential treatment for a rare-disease condition known as complex regional pain syndrome.

A researcher at the Scripps Research Institute, Kim Janda, and others completed a 2012 study of a heroin vaccine, said to combat heroin’s addictive attributes while simultaneously not affecting opioid receptors in the brain (thus, presumably, enabling the pain-relief aspects of an opioid), but the research has not progressed beyond animal studies.

Drug-based therapies for opioid dependency gain acceptance and reimbursement

Healthcare confronts opioid addiction

After long debate, FDA has moved ahead with two key components 

of how biosimilars are to be commercialized in the US. One, the Nonproprietary Naming of Biological Products, [1] addresses how biosimilar products from different manufacturers will be distinguished, and is a final guidance. The other, Considerations in Demonstrating Interchangeability, [2] adds depth to the longstanding goal of defining how biosimilar products can be substituted at the pharmacy level—which will have major implications for how easily payers will be able to replicate the situation with nonbiological generic products in driving down the costs of branded products. The interchangeability guidance is a draft document, subject to commentary until mid-March.

At first glance, the two guidances seem to be at cross-purposes: if a drug is interchangeable, who needs a distinguishing naming convention? But in fact, the regulatory framework for biosimilars allows for products that are not and will not be interchangeable. Different biosimilars might be introduced for different sets of indications (i.e., one drug treating multiple conditions); and some manufacturers’ biosimilars might be interchangeable, while others’ are not. FDA is applying the naming convention retrospectively, as well, so all existing biologics on the US market will eventually require the additional identification.

Following its proposed guidance issued last year, FDA is now setting a strict, “non-meaningful” naming convention. All biosimilars will have a four-letter extension added to the “core” name. Thus, a (made-up) product, “replicamab” (core name), will be designated as “replicamab-cznm” by the originator, and its biosimilar product will be “replicamab-hjxf.” Manufacturers are instructed to provide up to 10 suffixes for FDA to consider, but the suffixes must be (among other things) unique, devoid of meaning, not include abbreviations common to clinical practice (no “replicamab-stat”) or “look similar to or connote the name of the license holder.”

This last restriction revises FDA’s own interim naming of Zarxio, Sandoz’ version of filgrastim, which was designated as “filgrastim-sndz” to differentiate it from Amgen’s branded product, Neupogen (which is now going to have a nonproprietary name of filgrastim-jcwp; filgrastim-sndz will now be filgrastim-bflm). This goes against the wishes of, among others, the Alliance for Safe Biologic Medicines, which has surveyed both prescribers and physicians and found strong majorities who “responded that manufacturer-derived suffixes were easier to recognize and remember, easier to reorder, and that they held manufacturers accountable for their products.”

The American College of Rheumatology (ACR), for one, was out early among medical associations applauding FDA’s naming conventions. “The American College of Rheumatology has long advocated for explicit guidance about distinct names and suffixes for biosimilars in order to prevent inadvertent or inappropriate substitution, increase prescriber confidence and uptake of biosimilars, and ensure pharmacovigilance,” said Dr. Angus Worthing, MD, FACP, chair of the ACR’s Government Affairs Committee. “This is a welcomed step toward ensuring that biosimilars reach our patients as safely, transparently and efficiently as possible.” ACR also noted that “One of the practical implications of the naming guidance is that a pharmacist must ask the prescribing doctor for a new prescription before switching the patient from a reference biologic, or vice versa, if the biosimilar is not deemed to be interchangeable.”

Yet another complication is nonproprietary names that have two or more words in them; based on an adverse event that occurred in a clinical trial, FDA chose to add a three-letter prefix to the name, not a four-letter suffix (hereafter, both might be used). And, while there is general agreement on conventions for identifying the nonproprietary name of a biologic internationally (under the International Nonproprietary Name Program of the World Health Organization), WHO is using a “biological qualifier” format that would include varying letters and numbers as a suffix. Agreement internationally on these extensions is unlikely.

Getting physicians to write these suffixes, and ensuring that pharmacists and the rest of the supply chain follow the conventions, will be a challenge. FDA notes that pharmacovigilance systems in place at hospitals and elsewhere typically do not track products well even by existing systems, such as NDC numbers or billing codes. The complex convention is likely to make biosimilar brand names more important.

An idle speculation is to think about how the 

coming implementation of the Drug Supply Chain Security Act

 could have simplified all these conventions. If it were in place, a digital barcode would have identified product, manufacturer, NDC and lot number for each package in commercial distribution. Biosimilars could have been prescribed by brand name and the code would track manufacturer (and the possibility of interchangeability) automatically. But that presumes that the system is well-established among distributors, hospital systems and pharmacies, which is far from the case today.

Interchangeability and ‘residual uncertainty’

The interchangeability guidance is likely to create friction both among branded manufacturers (doing all they can to hold off biosimilar products) and biosimilar manufacturers (who seek the straightest path to approval). FDA adhered to the principle it first espoused in approving biosimilars, that it would work from “the totality of evidence” for each drug, rather than a by-the-numbers process for all.

Besides Sandoz’ Zarxio, there are three other biosimilars already approved in the US: Inflectra (infliximab-dyyb, from Pfizer and Celltrion); Erelzi (etanercept-szzs, from Sandoz) and Amjevita (adalimumab-atto, from Amgen). A couple dozen biosimilars are on the market in Europe, including cases where there are multiple vendors of the same biosimilar. The US market for biosimilars is years behind where it had been expected to be in the early 2010s.

The core component of interchangeability will be for the biosimilar manufacturer to perform “switching studies” in which trial patients will be on one drug, then the biosimilar, then back, with results assessed. Generally speaking (this is where medical scientists have and will be arguing), the biosimilar needs to demonstrate comparable immunogenic response and PK/PD (pharmacokinetic and pharmacodynamic) properties.

A recurring theme in the guidance is that biosimilar manufacturers should take steps to reduce “residual uncertainty” in the review process. Thus, a simple biologic structure with a “fingerprint-like analytic similarity” to the reference product would have less difficulty than one with a complex structure and little analytic similarity. Postmarketing data will be relevant in some cases. An important factor is that the switching study be conducted with the US-approved version of the reference product (which could restrict studies performed where biosimilars have already been approved outside the US).

Consideration also needs to be given to the presentation (mode of administration) of the drug; for example, a biosimilar delivered by injection from a vial will be difficult to compare to a drug delivered by an auto-injector.

Also of note, ACR foresees the advantage of distinct suffixes for both reference and biosimilar products, when interchangeability becomes a reality. “The ACR supports the FDA’s recommendation of distinct suffixes for both biosimilars and reference biologics, so as to prevent prescribers from perceiving that drugs with suffixes are less safe or effective,” said Dr. Worthing. “One of our top priorities is to ensure that more affordable treatments reach our patients as quickly as possible, so we applaud the FDA’s measured and thoughtful approach to addressing provider confidence concerns while also prioritizing the safety of our patients.”

http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-drugs-gen/documents/document/ucm459987.pdf

http://www.fda.gov/ucm/groups/fdagov-public/@fdagov-drugs-gen/documents/document/ucm537135.pdf

Interchangeability will require ‘switching studies’ and postmarketing surveillance

FDA issues guidances on biosimilarity naming, interchangeability

Almac Group, in partnership with a US biotech client

 and supported by Merz, a world leader in the design and fabrication of stickpack sachet machines, has developed a flexible pediatric dosage form consisting of minitablets filled into stickpacks using a robust manufacturing and filling process suitable for routine commercial manufacture.

As a consequence of the EU Paediatric Regulation (EC 1901/2006 and EC 1902/2006) and the US requirement for inclusion of Paediatric Investigation Plans (PIP) in all new Marketing Authorizations, the demand for quality-driven CMOs with relevant knowledge and experience in the development and commercialization of pediatric formulations is increasing. In recent years, there has been a notable shift away from the traditional route of administration for pediatric medicines, namely oral liquid formulations, to solid oral dose formulations such as granules and minitablets. In fact, recent clinical studies have demonstrated that for children, aged between six months and six years, minitablets provide equal, if not superior, acceptance rates when compared with sweet-tasting syrup formulations, similar to those that have been historically used for pediatric patient populations.

Almac has been developing, manufacturing and packaging solid oral dose products for more than 40 years and has previously commercialized several adult presentations for a market-leading US-headquartered client. Of particular importance to the client was Almac’s experience with delivery of both clinical and commercial solutions from one integrated site at Craigavon, Northern Ireland. Proven experience in the development of pediatric formulations was also a critical factor in placing the work with Almac.

Almac was tasked with developing an immediate release pediatric formulation to be packaged in a compliant, easy-to-use pack format. From the outset, the experienced client and Almac teams worked together to identify a target product profile and determine the best pack format for the product, one that would provide an economical commercial solution whilst also providing a high degree of fill accuracy in a consumer-friendly package. The solution that best fitted the client’s compliance and marketing needs was a “minitablet in stickpack” presentation.

“In both Europe and the US, unit dose packaging is becoming the format of choice for both pediatric and geriatric populations,” notes Brian Eastwood, head of business development (EU) for Almac’s Pharma Services. “The stickpack offers a versatile, unit dose packaging option, which can be used to pack multiple dosage forms (i.e., powders, granules, minitablets, liquids and creams). They offer a convenient, easy to administer solution for children (via sprinkling onto a solid or liquid food substrate) ensuring delivery of an accurate unit dose and thereby improving patient compliance.”

From previous experience, Almac’s formulators were aware of the challenges involved with the manufacture of minitablets. The surface area/weight ratio of minitablets is significantly higher than that of normal size tablets leading to higher ejection forces during compression, therefore, during development, higher levels of lubricant were added to the compression blend formulation to offset any negative “sticking” issues that could potentially arise. The tablet design was also critical to the success of the project and was influenced by the proposed downstream activities (i.e., filling into stickpacks). Shallow convex minitablets have better uniform density distribution throughout the core, which can lead to a more robust compressions process. However, the expert team also knew that deep convex minitablets roll more effectively, and therefore, are more suitable for tablet counting technologies commonly used by sachet filling and encapsulation machine providers.

Utilization of suitable compression equipment and tooling is also a key factor for successful delivery of minitablets. Multi-tip tooling is expensive so it is important that a reputable supplier with proven experience in multi-tip tooling design is chosen. Recessed dies are also advisable to protect punch tips. Effective control over the feedframe is critical as tablet ejection can be challenging. This requires an optimized setup, with precise adjustment of specially designed scraper blades being critical in limiting tablet jumping.

Similarly, the choice of sacheting machine is critical as this ultimately controls the unit dose being administered. With that in mind, Almac, in partnership with our client, identified the Merz SBL-50 as the stickpack machine most suitable for the project needs and for the future needs of Almac’s client base. This machine is a single-lane unit with a counting system that can operate at up to 80 cycles per minute.

The key to project success was Almac’s extensive experience with similar investment projects. Multiple visits to the Merz facility, in conjunction with multiple visits by Merz engineers to Almac’s site, ensured that all aspects of the equipment’s installation, qualification and ongoing processing were discussed and addressed. Open three-way communication between the client, Almac and Merz allowed for seamless transfer of ideas and knowledge, and ensured a stickpack solution suitable for the client’s needs was delivered on budget and within pre-agreed timelines.

Through the formulation and process development stage, Almac was able to design a minitablet with characteristics built upon an acceptable trade-off between robust compressibility and effective processibility during the downstream sachet filling operation. Utilizing Almac’s in-house Engineering team, Almac designed and fabricated a unique ejection blade with a cover to avoid tablet jump during the compression process. This, along with modification of ejection cams to optimize ejection height, resulted in a robust compression process suitable for commercial scale manufacture of the client’s product. For this project, 37 tip multi-tip punches were fabricated, allowing Almac to produce minitablets at rates up to 550,000 minitablets per hour.

As this project involved transitioning a development project through to commercial readiness, Almac assigned two dedicated, on-site project managers, one specializing in formulation and process development, the other with many years experience in technology transfer and ongoing management of commercial supplies. Single-site integration of development and commercialization resources, including technical, analytical, quality and project management, ensured scientific continuity and simplified effort, saving time and expense whilst reducing vendor management and mitigating risk to the overall project.

“Almac has experienced a significant increase in sachet enquiries over recent years, with projects ranging from high-volume, adult generic sachet products to low-volume, pediatric stickpack presentations,” concludes Eastwood. “Stickpack presentations also offer our clients the opportunity to develop and manufacture novel reformulations in aid of line extensions to their existing product portfolio. It is an area where we see potential for continued growth and one where Almac will continue to invest to meet the needs of our clients.”

From Almac’s perspective, the key factors in the success of this project were:

working with a CDMO with development and commercialization expertise in pediatric formulations

same-site development and production capability to ensure scientific continuity

early determination of target product profile and packaging format experienced project managers.

A manufacturer chooses Almac Group for commercializing minitablets in stickpacks

Pediatric drug-development generates innovation in packaging and formulation

Over the last few years, the pharmaceutical industry has faced a barrage of criticisms

 over the pricing of its prescription drugs in the United States. Public concern has generally been focused on two areas:

 new specialty drugs, such as for oncology and hepatitis.

 for particularly older, often already off-patent drugs, such as the frequently mentioned cases of Turing and Valeant.

Medical associations, media and politicians from both political parties have advocated more transparency around pricing and granting of authorization for price negotiation to the Centers for Medicare & Medicaid Services (CMS). In some cases, the high cost of drugs is directly affecting patients, who can’t afford their copayment as determined by health insurance companies. That is obviously a concern, which, certainly in combination with some excesses in pricing practices, is causing emotional responses and calls for government intervention. Finding acceptable solutions while maintaining a healthcare market that fosters innovation isn’t helped by the complexity of drug pricing.

It’s important for patients and for the industry that these issues are resolved. Hopefully, what we propose here can provide a contribution to some dearly needed real solutions.

Let’s be clear: Price increases as practiced by Turing’s Martin Shkreli for Daraprim are excessive and harmful to both patients and the industry. A valuable contrast to that stance can be found in Allergan CEO Brent Saunders and the “social contract with patients,” announced in September 2016. It includes the following commitments:

“We commit to these responsible pricing ideals for our branded therapeutics.

 in a way that is commensurate with, or lower than, the value they create.

 policy makers and payers to facilitate better access to our medicines.

 price gouging actions or predatory pricing.

 the practice of taking major price increases without corresponding cost increases as our products near patent expiration.

We commit to providing an aggregate view of the net impact of price on our business.”

Allergan’s social contract is a strong signal from an R&D-based drug company that it takes the issue seriously and that it believes that it has a societal responsibility to address it. It will be interesting to see whether other companies follow.

Some price increases for drugs that still have a valid patent have been criticized. We will get into those later. Many of the drugs under debate are off-patent drugs—that is, generically available products that would normally be inexpensive.

Most generic drugs cost pennies. For some drugs, particularly for very specific and rare patient conditions, the originator or subsequent acquirer of the brand ends up being the sole supplier even after patent expiration; limited market scale, manufacturing complexity and poor profitability make the commercial opportunity unattractive. While the large price increases may make it theoretically attractive for generics companies to re-launch a drug that has few or only one supplier left, in reality, this constitutes a risky investment of re-launch manufacturing capital. FDA backlogs in reviews of generic drug applications certainly add significantly to this problem.

In some cases, questionable distribution agreements have secured a form of market exclusivity for the manufacturer. Tightening regulatory rules to avoid exploitation of regulatory loopholes certainly seems justified. In the recent case of Mylan’s EpiPen, a combination of a recall of Sanofi’s competing Auvi-Q product, a delay in the approval of an EpiPen generic from Teva Pharmaceuticals and the niche character of the product category contribute to the issue.

Most initiatives to address excessive price increases involve transparency requirements. While intuitively helpful, transparency in itself is unlikely to address the issue. The fairness of a price is hard to calculate from the financials of one successful company, and even harder to subsequently try to control in an effective and responsible way. A much more reliable way is to ensure that there is a competitive, self-regulating market for investment in pharmaceutical innovation.

For off-patent drugs, there are a few options that come to mind in addressing excessive price increases:

Barriers and the cost of entry can impede active competition in otherwise well-functioning markets. Addressing these should be a first course of action in markets where competitiveness is impaired. One of the factors that drive this problem is the backlog in FDA reviews for generic drugs. It seems logical that the government would focus on fixing government agency problems, such as approval backlogs, first before it considers further interference with the market through pricing regulations. This may not entirely fix the issue, but it would be a good start.

Another way to address excessive price increases for off-patent drugs is to investigate why so many generics companies cease manufacturing them. This may reveal ways to maintain a competitive market with multiple manufacturers. Maintaining multiple supply options is a natural and highly effective way to avoid situations in which excessive price increases can occur.

The government also could ensure that distribution arrangements for multisource products can’t serve to circumvent market competition. Or FDA could accelerate the approval of additional generic suppliers to lower the cost of entry of multisource products. This would then increase the commercial risk of excessive price increases and therefore would create a natural protection against it.

 Incentivizing continued generic market presence or new generic entries:

 There could be government incentives to continue to manufacture important but financially unattractive drugs, or for new players to enter markets with few suppliers.

 Establishing government controls on price increases: 

Regulating price increases or setting a threshold price increase level over which sanctions (for example, reimportation) are triggered have also been suggested as solutions.

Elements of Option (1) can help to restore a competitive market in those cases where it now fails. They also avoid interfering with the largest sector of high-volume generics that’s functioning without any issues. Of course, regulating price increases is problematic. List and net prices are very different and will also differ from insurer to insurer, as a lot of active contracting and dealmaking take place between competitive private entities at various levels in the trade. Controlling list prices is meaningless and controlling net prices is practically impossible without destroying market competition in a generic market that’s generally functioning very well.

Moreover, any formal price increase cap that would trigger some government intervention may automatically become the default price increase for all drugs. Under this scenario, average prices across all generics could actually go up dramatically for some drug classes. This is exactly what happened in the Netherlands about 15 years ago, where a reimbursement limit, set to lower prices in a treatment category, resulted in dramatic cost increases for generics, as the lowest-priced product increased its price to the imposed limit in a previously competitive market.

Based on international experience, many pharmaceutical companies are concerned that government-instituted drug price controls never disappear. What’s more, since they often don’t reach the intended savings, they’re usually followed by more and more controls, thus further deteriorating the private market. Mechanisms that will restore a market for drugs for which the patent has expired are a great starting point.

US price increase discussions have been particularly emotional for off-patent drugs, such as Turing’s Daraprim. The arrogant responses of Turing’s former CEO Shkreli have seriously harmed the drug industry’s reputation. However, taking the Turings, Valeants and Mylans out of consideration, drug price increases for patented prescription drugs have also faced criticism. Some drugs in, for example, oncology and multiple sclerosis treatment have seen double-digit list price increases. Each situation may be different and needs to be judged on its own merits, but let’s examine this more closely.

What matters is net price, not list price. Managed care organizations (MCOs) and pharmacy benefit managers (PBMs) negotiate rebates or other discounts from manufacturers; better formulary placement or less-restrictive prescribing authorizations are one of the benefits manufacturers seek in this process. A recent analysis by IMS shows that prescription drug rebates in 2015 amounted to $115 billion over $425 billion in sales—that is, 27% of sales is paid back by drug companies to MCOs, PBMs and government agencies. As a result of rebate increases, net prices increased by only 2.8%.

Rebates are particularly high in therapy areas where individual drugs have a higher degree of similarity. As a result, rebate percentages are very different across drug companies, depending on the main therapy areas that they are operating in. For example, the diabetes and rheumatoid arthritis markets are highly competitive with many relatively similar options.

MCOs and particularly PBMs have gained substantial market power over the last five or so years. This is caused by a number of factors:

The top three PBMs (Express Scripts, CVS and recently merged OptumRx-Catamaran) handle 75% of all US prescriptions. If all recently announced mergers are completed, the top three MCOs (United, Aetna-Humana and Anthem-Cigna) will control close to 140 million lives. In any case, the level of consolidation is high, particularly for PBMs and in the Medicare Part D market.

PBMs in particular are increasingly using exclusion lists to negotiate high rebates with drug manufacturers. Initially in areas with multiple similar options (insulins, anti-TNFs, etc.), but more recently even with two options available (hepatitis C), PBMs have demanded high rebates to be even considered for reimbursement, rather than just differentiating the patient copay level as was customary previously.

Media and medical community criticism over drug pricing seems to have empowered payers to put tougher patient-access restrictions in place through such mechanisms as step edits, diagnostic testing requirements and prior authorizations. Particularly for PCSK9 drugs, initial access restrictions were extremely tough, putting physicians and patients through onerous qualification requirements.

As a result of the above, MCOs and PBMs have significantly increased market power, as criticism over drug cost helped them to justify coverage denial options. PBMs are often criticized for their focus on rebates, while it’s not clear how much of those monies are passed on as savings to health insurance companies or, ultimately, patients. Illustrating the magnitude of the issue, a year ago, Anthem initiated a lawsuit against Express Scripts, claiming $15 billion in damages for not passing on negotiated rebates from pharmaceutical companies.

PBMs actually implicitly encourage a combination of high list prices and significant rebates because it provides them with significant income streams. This is further illustrated by the fact that, as of January 2017, the two largest PBMs, Express Scripts and CVS, haven’t adopted Merck’s new hepatitis C drug, Zepatier (grazoprevir and elbasvir), on formulary despite its significantly lower list price in comparison with Gilead’s Sovaldi and AbbVie’s Viekira Pak.

Also, patients often aren’t benefiting from rebates because coinsurance rates for drugs usually are based on the list price rather than on the actual cost to the insurer. In early October 2016, a class action suit was filed against United Healthcare over charging copays to patients that exceed the cost to the insurer, thus turning what is supposed to be a patient benefit for paid insurance into an additional income stream. The suit cites an example of a patient paying a $50 copayment for a contraceptive that cost the pharmacy only $11.65. After fulfillment, the pharmacy is paying United Healthcare the extra “hidden additional premium” of $38.35 per their agreement.

The high cost of new oncology and other specialty drugs is a contentious issue for insurers, physicians and patients. Physicians are becoming more engaged in the debate, as they are struggling to help their patients in light of the increasingly high copayments that patients are exposed to. Following the introduction of Medicare Part D, MCOs have gradually introduced significant coinsurance rates (the percentage of cost as copayment) for their employer-sponsored plans. Patient shares of drug costs have thus gone up substantially over the last five or so years, irrespective of the underlying drug cost.

There are a lot of misperceptions over how a drug company sets a price for a new drug. Also, prices are usually publicly analyzed and scrutinized after the launch of a breakthrough innovation. Focusing on the financials of companies that have just launched a blockbuster drug will distort the picture if one doesn’t also consider all the other companies that just lost the race. A more fundamental explanation on the early-stage decisionmaking processes and the competitive and risky nature of the drug development business is crucial to creating a better understanding.

The financial structure of the pharmaceutical industry is highly complex due to various factors that are unique to the industry, such as:

 A complex “dinner for three” decision process

 between the prescriber, patient and payer: As distinct from most other consumer products, prescription drugs aren’t usually purchased in a direct buyer-seller transaction but rather through the three-party relationship of decisionmaker, consumer and payer. This creates distortions in market mechanisms, especially when the payer is a government. The generally lower prices for brand drugs in single-payer systems outside the US are commonly recognized as being subsidized by the higher prices paid inside the US.

: The Tufts Center for the Study of Drug Development estimates an average cost of $2.6 billion per newly approved prescription drug. 

 simply divided reported R&D cost over the number of approved new agents from 1997 to 2011 and showed numbers ranging from $3.5 billion per approved drug for Amgen to almost $12 billion for AstraZeneca. Arguments regarding the high cost of R&D in defense of drug pricing have never resonated well, and they probably never will if the public can’t be convinced that drug pricing is under reasonable control through free-market mechanisms.

With an effective patent life of about 10 years (perhaps a bit longer for biologics), drug companies have a limited time period to recoup investments and make a profit. Most drugs provide substantial benefits to patients many years beyond patent expiration, although at that stage of the life cycle, they come at merely nominal cost. Novartis’ Gleevec increased the five-year survival rate for patients with chronic myeloid leukemia (CML) from 35% to above 90%, an inarguable breakthrough. Now it’s off-patent, with prices falling. Patients with CML will benefit from this innovation for decades and decades until a cure is found.

The essence of the points above is that there is a competitive market for drug development in which a large number of biotechnology and pharmaceutical companies are participating. Therapy areas with a high unmet need attract investment as premium pricing can be obtained. Where companies offer innovative new treatments, patients are well served. The best of those innovations can have a clear drug budget impact, but over time, it will attract new investments and competition. Also, higher drug costs can sometimes be offset by lower medical cost over time. The new hepatitis C drugs are a clear example of this.

If only we have more problems like the ones caused by the hepatitis C oncology-immunology combination drugs, that would mean that we are well on our way toward solving some of the many very serious health problems that our society is facing. Each breakthrough will have some associated cost in a 10- to 15-year window, then it will literally serve for decades as an inexpensive and effective therapy.

Earlier, we discussed the issues in pharmaceutical pricing and price increases for innovative and multisource drugs. The issues have very different causes, but both cause significant public concern and need to be addressed. We propose the following:

1. Ensure a competitive market for multisource products.

Take measures to better address FDA review backlog for generic drug applications and create mechanisms to further accelerate approvals for off-patent drugs that have only a few US-approved manufacturers.

Investigate ways to sustain a competitive market for generic drugs for small patient populations and sufficient competition to drive cost down, while working to keep manufacturers from ceasing production.

Eliminate anti-competitive distribution arrangements that impede competition for multisource drugs.

2. Reform health insurance to put patients, rather than rebates, first.

Health insurance companies should make coverage decisions for new and existing drugs on the basis of the medical and patient needs while considering the impact on cost. PBMs are siloed and only responsible for drug cost (pharmacy benefits) and not for the much larger component of medical benefits. Irrespective of the medical improvements and medical cost offsets associated with these improvements, PBMs are incentivized to only adopt drugs on formulary that generate rebates or cut other drug cost. Long-term patient health, therefore, is easily compromised.

Drug coverage decisions should be made in the context of overall medical care rather than for a drug silo only. PBMs aren’t incentivized to work on long-term improvements to patient health outcomes because they are just concerned about short-term drug cost and margins over these drug purchases. PBMs should focus on, and be compensated for, handling administrative and logistical aspects of drug delivery while leaving medical trade-off decisions to integrated health plans. Patients, not rebates, should be the focus.

Medicare Advantage Plans should be prioritized over Medicare Part D options for the same reason. Medicare Advantage Plans offer a holistic medical perspective on patient needs with the appropriate trade-offs rather than making siloed drug coverage decisions that don’t put the treatment results front and center.

3. Encourage drug companies to show more restraint in price increases.

Brand drug companies should follow the example of Allergan and develop public policies with respect to net price increases. Doing so will allow the industry to be a more credible partner with the medical community, health insurance industry and Congress to address concerns over access to healthcare and the cost of care to individual patients.

4. Pursue payment models that reflect value.

In many cases, drug costs are incurred over a short period despite their long-term medical benefit. The new hepatitis C drugs are taken over a 12-week period, but they significantly impact the rest of a patient’s life. Some chemotherapies involve one to two years of treatment, then provide extended and improved lives for a number of years. New cell and gene therapies are single treatments that cure or provide improvements in a patient’s condition for many years. Particularly given the short-term focus of our health insurance industry, we need to think of better ways to match the time horizon of payment with the length of the health benefit provided. The drug and health insurance industries need to collaborate to seek some solutions. It will, however, require the government’s active participation, as many government-pricing rules, such as best price legislation, impair the implementation of new, more innovative payment models.

The healthcare dialogue in the US will have to reach beyond price increases, rebates and easy soundbites

to reach a resolution on some very complex issues. Hopefully, these thoughts can help to stimulate some much-needed dialogue.

Ed Schoonveld is a ZS Associates principal and global leader of the firm’s value and access solution area. As one of the world’s leading experts on pharmaceutical pricing and market access, Ed is the author of The Price of Global Health (second edition) and provides strategic consulting and research solutions to healthcare industry clients.

Bill Coyle is a ZS Associates principal and leader of the firm’s European region. He focuses on sales and marketing issues in the pharmaceutical and biotechnology industries. Bill’s areas of specialty include market access and pricing, key account management, commercial organization design, and sales effectiveness.

Howard Deutsch is a ZS Associates principal and global leader of the firm’s managed care strategy practice. He helped clients with a spectrum of sales force and marketing issues, with a particular focus on US managed-care and market access strategy.

US Drug Pricing Debate: Finding some dearly needed real solutions

In an earlier era in the US pharma industry, “supply chain” and “logistics” were an afterthought. Pharma companies maintained large warehouses; stocked lots of product; and basically pushed product out wherever it needed to be, ensuring that a prescription would always be filled whenever the scrip arrived at a pharmacy. For most of this century, however, supply chain management has been a function with increasing importance—and complexity. The days when products could be overstocked throughout the supply chain are mostly gone; the working capital tied up in inventory is too valuable to waste. Product now moves by an intricate network of channels—wholesalers, direct distribution, specialty pharmacies and more. Equally significantly, complex (and expensive) biologicals require close temperature monitoring, safe and secure transportation—and these functions need to be backed up by precise data management and reporting. The emergence of traceability mandates—tracking drug packages step by step through their distribution—will open a new era in life sciences supply chain management.

A key player in this 21st-century pharma supply chain is the third-party logistics (3PL) provider: Companies that take over (or supplement) the warehousing and transportation responsibilities for manufacturers. Generally speaking, 3PLs do not take ownership of product (as a wholesaler would), but act as the agent of the manufacturer, ensuring that products are stored and delivered in a cost-effective yet compliant manner. Most major wholesalers also act as 3PLs; and the well-known multinational logistics giants dominate life sciences 3PL services.

But within today’s complex pharma supply chains, there are opportunities for smaller 3PLs to play a vital role. Such is the case with MD Logistics, a firm with revenues approaching $100 million, headquartered in Plainfield, IN. Founded in 1996, it has grown from being a freight forwarder alone, to four locations and more than one million sq. ft. of warehouse capacity.

 sat down with Mark Sell, co-founder and CEO; here’s what he had to say.

MD Logistics (MDL) celebrated its 20th anniversary in 2016, but take us back to the early days. How did MDL get started, and has there been a focus on pharma all along?

My late business partner, Dave Kiebach, and I started MDL back in 1996. We were freight forwarders at the time, but both of us had experience with strategic pharmaceutical clients. It was through one of these clients that we got started in pharmaceutical distribution. We learned very early on that if you are transporting product for a client, they will inevitably ask you to perform more services, and that’s exactly what happened. So we opened a cGMP, pharmaceutical-grade warehouse. Our first building was 10,000 sq. ft., then we expanded into 40,000 sq. ft., then 80,000, then 300,000. We organically grew into a full-service 3PL company by responding to the requests and needs of our customers and the pharmaceutical industry. A big part of our early work was in managing sample distribution, which gave us experience in last-mile, PDMA-compliant delivery—something we still do.

In 2003, we started working with our first cold chain customer, taking us into the 2–8°C temperature range. Since then, we have continued to expand our warehousing and transportation service offerings, including frozen temperature ranges, along with additional service offerings to include secondary packaging, call center services, foreign trade zone and freight management services. Both organic and new business growth has contributed to increased revenues over the past number of years.

Today, we have four locations—three in Indiana and one in Reno, NV—and total warehousing capacity of more than one million sq. ft. Pharmaceutical distribution is about half of that capacity; the rest serves our retail and consumer goods customer base.

MDL also handles consumer and retail goods; is there a unifying theme here, or is the company being opportunistic in picking up other lines of business?

Since the inception of the company, we have always said we don’t need to be everything to everybody. We strategically target the retail and pharmaceutical industries because we have made them a specific focus over the past 20 years. We knew early on that they were distinctively different business verticals that should operate as such, but that we could also leverage knowledge, systems, processes and procedures across the two verticals.

The major differences between the two industries are their quality and compliance requirements. The pharma industry is highly regulated and quality is driven by patient safety requirements. The retail industry has very specific retail compliance requirements and quality is driven by consumer demands. Although quite different, we are able to leverage some of the knowledge and experience from our B2C distribution model within our retail business vertical to respond to the pharmaceutical industry trend towards a more direct-market deliverable.

In the past couple years, MDL has expanded both its dedicated cold-chain services, as well as pharma services generally. Other than simple growth, why has the company made these investments? How is your service offering changing?

When we opened our first temperature-controlled facility, the need was around controlled room temperature storage for pills and tablets. Biopharma was a new innovation at that time, but we didn’t have many inquiries for services beyond CRT storage and fulfillment. Since then, we have seen a growing opportunity for 2–8°C and frozen 3PL services, as cold as -40°C, and are proactively building to accommodate those market needs.

With new cellular therapies and the like coming to the market, logistics challenges change. A refrigerated (2–8°C) facility is not too difficult to build, but as you go below 0°C you need to think about other technologies such as ammonia or liquid nitrogen cooling, condensation control, and other factors. Manufacturers face this complexity themselves, and that’s why a shared-service offering where we can provide enough capacity to justify the larger capital investment becomes valuable.

In addition to the demand for multiple temperature storage and fulfillment configurations, we have seen a significant shift within the pharma industry, over the past 10–15 years, embracing more of a business process outsourced model, to include call center services, vendor managed inventory, order management, packaging and kitting.

As we have grown, our customers have continued to evaluate their supply chains and look for opportunities to optimize and become more efficient. More customers are demanding network optimization, which led to our expansion to the West Coast in 2011. When we expanded, we were mindful to ensure that all capabilities, systems, processes, integrations and quality controls were mirrored in our new facility. This ensures that our customers’ experience with us has the same integrity and professionalism, regardless of distribution location. For some clients, we are an optimal single source location for distribution, but for others, we are able to provide increased coverage, speed to market, and risk mitigation by positioning their product in both the Midwest and on the West Coast. As our customer demands change, we are always looking for opportunities to further build out our US geographical footprint.

MDL partners with another firm, SEKO Logistics, to handle international shipping. Is this inbound and outbound? How are the handoffs managed?

We founded MDL as freight forwarders, so it’s only natural that we remain a freight forwarding company today. While our service offerings have increased, we have always remained mindful of the importance, and value, in being able to offer our customers global freight forwarding services. In 2002, we formed a strategic partnership with SEKO Logistics. This partnership includes access to a global network comprised of more than 150 offices in 20 countries around the world. SEKO and MDL coupled together creates global supply chain integration, rounding out our service offerings from both an import and export perspective.

We have SEKO team members embedded within MDL operations, both in our Indianapolis and Reno locations. While SEKO and MDL are separate business units, SEKO personnel are on-site to liaise with MDL warehouse operations, offering a seamless supply chain service offering. Our SEKO team has broad expertise in air and ocean import/export services, customs brokerage services, and Foreign Trade Zone administration. Collectively, we have worked with SEKO to develop cold chain pharma shipping options to ensure speed, visibility and compliance.

Your multinational logistics competitors will say there’s an advantage to having one integrated logistics service worldwide; how do you address that concern?

The MDL and SEKO combination gives our customer base the best of both worlds. We are carrier agnostic; even though we have the capabilities of a freight forwarder, we don’t require customers to use our carriers or a specific transportation provider. We are able to remain neutral and customers are able to leverage their freight spend across the market to get the best possible price and service available. Additionally, we are extremely focused and capable, with excellent local market knowledge and regulatory compliance, coupled with a strategic freight-forwarding platform to facilitate global product movement.

One trend we have seen increasingly is that companies are looking for niche players, geographically, that excel at specific core competencies, rather than relying on a single global provider, as companies of that nature tend to have geographical gaps. Ten years ago, it was common to hear that a multinational pharma company wanted a multinational logistics partner of comparable scale, but I think that companies are backing off that philosophy. Now the emphasis is on finding the best partners in specific regions. This trend has been extremely beneficial to our growth.

How is MDL handling data and reporting requirements generally, and preparing for the traceability requirements of the Drug Supply Chain Security Act (DSCSA)?

Over the last six to seven years, we have made a substantial investment in upgrading our warehouse management system (WMS). From 2010 to 2014, we worked to migrate all of our customers over to the JDA RedPrairie WMS. This is a tier-one, validated WMS that is highly reputable within the pharmaceutical industry. It allows us to manage customer requirements across the warehouse floor, and provide visibility to key performance metrics and benchmarks. 90% of our warehouse activity is managed through an integration to our customers’ ERP systems, which includes business rules and procedures, and allows us to control compliance within operations.

As we looked to upgrade our WMS, serialization was top of mind. We have been managing serialized traceability for a number of years for our consumer electronics retail customers. As we operate the same JDA RedPrairie system across all our business verticals, we are able to utilize some of the logic that we already have in place within our retail environment and put that into play for our pharmaceutical customers. This has allowed us to develop a market competitive serialization solution for our pharmaceutical clients, ahead of the 2017 and 2023 DSCSA serialization mandates. This has been a huge advantage for both current and new customers in the life sciences industry.

Not only have we invested in systems and software, but we have also invested heavily in our internal IT team and resources. Our IT team is able to seamlessly perform complex integrations for customers. We firmly believe that a good serialization strategy starts with a strong customer integration. An integration will make or break the project, so it is of great importance to have buy-in from the customer and their IT team as well.

In addition to deploying a robust and high-tech WMS, we have heavily invested over the last five years in detailed training protocols, from the associate level to upper management. Our training program continues to be a top priority as our warehouse functions become more sophisticated and complex.

MDL includes packaging services in its slate of offerings. What do pharma companies typically call on you to do? Is there an advantage in having MD handle packaging, as opposed to a customer working directly with a contract packager?

As a licensed FDA repackager/relabeler, we are able to offer current customers secondary packaging, kitting, labeling and rework services. In our experience, we have learned that quite often when you are managing inventory for a customer, you will be asked to change the packaging in some way.

Pharmaceutical Commerce - January/February 2017

Hey, what’s this supply chain stuff?

Healthcare confronts opioid addiction

FDA issues guidances on biosimilarity naming, interchangeability

Pediatric drug-development generates innovation in packaging and formulation

US Drug Pricing Debate: Finding some dearly needed real solutions

A conversation with Mark Sell, MD Logistics

Getting to prescribers via the diagnostics route

Pharmaceutical Cargo Security Coalition (PCSC) sets expanded agenda

Commercial IT moves to the cloud

Consultant pharmacists and long-term care 101

HDA Specialty Distribution 2016 report

Streamlining pharma-HCP communications with a common identity standard

EY Firepower report: Big Pharma well-positioned for 2017 M&A activity

Elapsed time from discovery to launch remains ‘stubbornly long,’ says QuintilesIMS study

HHS issues a final rule on 340b policy details

For 15th straight year, nurses top Gallup poll of most trusted professions

Oops! ... FDA drug approvals slump badly in 2016

Medical associations, policy groups organize to fight counterfeit drugs and rogue online pharmacies

Senators wrap up Turing-Valeant hearings on price gouging

TraceLink survey sees a more complex, less-unified approach to DSCSA

Cold chain movement from the primary-distributor perspective