When considering technology the advances in pharmaceutical sciences have been profound and Pfizer has embraced them. Biology and chemistry are changing as a result of high-powered computers, chemical information software tools and new database-searching algorithms. Technological advances in high-throughput screening hardware, combinatorial chemistry and information technology, in combination with high-value targets in the pharmaceutical industry, have created a cost- and time-efficient technology platform to screen a large number of compounds. With small research groups in biotechnology companies and academia as likely to establish priority and monopoly positions as large pharmaceutical companies, Pfizer knows the risks and the rewards. In addition, important insights into current and future changes in drug discovery and development are occasioned by successes in sequencing the human genome. Biological based drugs and targeted delivery approaches are two of the most anticipated revolutions in the business at this moment in time. Some recent developments are the development of spatial aggregation propensity for detecting protein aggregation (Trout, 2009, p1077), advances in drug-delivery technologies involving microencapsulation and nanocoatings, and tools to understand the risk of nanomaterials in drug-delivery systems (Li, 2009, p2554).
Ongoing improvement is crucial and research from MIT called the POPI study of 15 companies has been adapted with its best manufacturing practices for pharmaceutical manufacturing. The findings on manufacturing metrics (e.g. inventory and speed of production and manufacturing practices) demonstrated the strategic advantages of manufacturing to capture competitive advantages and for using existing and potential opportunities for cost savings. It led to innovative processes to move drugs through clinical trials and to speed up time to market by reducing the number of experiments required to determine the optimal manufacturing process. These changes are escalating in day to day operations. Pfizer is implementing a plan to transform its manufacturing organization into what the company terms a "vision-driven global supply chain network." That plan is part of Pfizer's overall strategy of refocusing and optimizing its patent protected portfolio, finding new opportunities for established products, growing in emerging markets, investing in complementary businesses, and instilling a culture of innovation and continuous improvement. Pfizer has embarked on a new manufacturing focus that features plant network optimization, increased outsourcing, and greater adoption of agile or lean manufacturing. Natale S. Ricciardi, president of Pfizer Global Manufacturing and senior vice-president of Pfizer referred to the importance of the Lean Six-Sigma mindset that Pfizer has adopted. This is fully aligned with other transformational strategies including sourcing, the transformation of the network, the adoption of new technologies, and the standardization of global business processes. Pfizer has completed various Six-Sigma projects with key vendors to address both quality improvements and efficiency opportunities with sophisticated analytics.
“The mission of Pfizer Global Manufacturing is to provide an innovative and powerful competitive advantage for Pfizer. To accomplish this, we have embraced several transformational strategies that will lead to a truly competitive global supply network with the right processes for 'make-or-buy' sourcing. This is a significant change from the traditional 'make-what-we sell' philosophy that had been in place historically as is typical in the industry and will require both operational and cultural change”: Riccardi (Van Arnm, 2008, p50). The cornerstone of the transformation has been an aggressive rationalization of the internal manufacturing network. This includes both active pharmaceutical ingredient and the finished product manufacturing drug substances. To date, the number of internal manufacturing sites has been reduced from just over 100 to 43.
A key part of subsequent increased outsourcing is that some of the facilities that were exited were engaged in a mutually beneficial strategic alliance with the new owners to provide an uninterrupted supply of the product. The role of central procurement has increased, specifically in the number of global category strategy managers engaged in sourcing APIs. As a larger percentage of APIs is outsourced, a broadening of the supply base and increased understanding of supplier capabilities are required. This transition has brought the need to increase resources and focus in the countries of China and India, which they have done by establishing a center of excellence team based in Singapore to work in those markets. These topics range from quality of product and services to practices, safety, regulatory compliance, reports, and metrics. Special considerations when working with suppliers in emerging markets are numerous. The first and foremost is product integrity and safety. Any potential supplier is evaluated on its ability to produce material in a manner that is fully compliant in all regulatory procedures. Other considerations when evaluating suppliers include the following: their ability to sustain supply in the long run; assurance of capacity and Pfizer’s ability to access additional capacity if needed; use of technology; research and development assets; continual improvement efforts; and cost competitiveness. This team works in concert with corporate strategy to optimize the internal plant network on the forefront of identifying opportunities and in planning. In a figure in World Pharmaceutical Frontiers, Nick Tryhall of Pfizer illustrated that off-shoring which he referred to as “low cost providers’ results in: 10% reduction in cost by component, 15% reduction in waste, a 35% expansion of alternative sites and a 40% reduction in oversights (emphasis mine).
"Drugs are usually developed with the criteria of how effective they'll be, and how well they'll bind to whatever target they're supposed to bind," said Bernhardt Trout, professor of chemical engineering at MIT, (Trout, 2009 p1073). "The problem is there are all of these issues down the line that were never taken into account." One of those issues is the possible elimination of the category of blockbuster drug which every major pharmaceutical company has dreamt of and made their fortunes upon in the last 40 years. With greater understanding of DNA, RNA and genomes, comes more specific drug expectations for individuals. No longer will “one size fit all”.
To apply even more pressure, the output of the industry's research and development efforts has slowed considerably, with only 26 Food and Drug Administration NCE (new chemical entity) approvals in 2008 - down from 40 in 1999. While the industry has historically relied on new product launches to drive growth and compensate for the loss of patent protection for existing products, IMS data indicate that adoption of new products in the United States has dwindled over the last decade. "We find as we look at launches done in 2008, the take-off curve is much lower, largely driven by the incremental controls imposed by stakeholders and payers.” (IMS, 2009).The change to more managed care and expert opinion in the choice of drugs for large groups of people has changed the playing field. Many of the innovations are prompted by regulatory bodies and others and, of course, by the industry itself.
An important initiative is taking shape at FDA's Center for Drug Evaluation and Research as officials seek to encourage manufacturers to apply modern process analytical technology to pharmaceutical production and quality control. The agency's goal is to reduce product quality problems while increasing the efficiency of manufacturing and quality assurance processes. CDER director Janet Woodcock believes that new technologies will permit manufacturers to shift from empirical to science-based standards for manufacturing process quality. According to Pfizer’s VP of Globalization, Industry and regulatory agencies around the world share responsibility for assuring the security of the pharmaceutical supply chain. The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized. Once a supplier is approved for use, ongoing quality oversight is critical to ensure that the standards continue to be met. In developed countries suppliers operate within sophisticated regulatory environments and typically adhere to internationally recognized standards. They generally have effective quality systems that provide a high degree of confidence in the supply chain. Companies in emerging markets operate in a developing regulatory environment and may have less effective quality systems. Pfizer may need to work with these suppliers to upgrade their systems and standards. Regulatory agencies in developing countries share in the responsibility to educate manufacturers and health authorities in emerging countries.
Recently public opinion of large pharmaceutical companies has them on par with tobacco companies. This is leading to greater pressure to create and enforce regulatory measures. The documented terrible history of leading pharmaceutical companies in scandals involving knowingly selling and profiting from defective medical products and drugs while reaping large profits along with perceived price gouging and inbred relationships between doctors and pharmaceutical companies has turned the public sympathies. There is also great suspicion and scrutiny of marketing practices and lobbying by pharmaceutical companies. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.
Europe moved to enact tighter regulations last year and in the USA Title VIII of the FDA amendments act was passed in 2007. In the United States, new pharmaceutical products must be approved by the Food and Drug Administration (FDA) as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following IND approval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. A fourth phase of post-approval surveillance is also required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Where pharmaceutics have been shown to cause side-effects, civil action has occurred, leading to large compensations. Recent controversies have involved Pfizer’s marketing practices, testing on ill informed human participants in Nigeria and Vioxx side effects. Pfizer endorses tort reform.
Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. Depending on a number of considerations, a company may apply for and be granted a patent for the drug, or the process of producing the drug, granting exclusivity rights typically for about 20 years. However, only after rigorous study and testing, which takes 10 to 15 years on average, will governmental authorities grant permission for the company to market and sell the drug. Patent protection enables the owner of the patent to recover the costs of research and development through high profit margins for the branded drug. When the patent protection for the drug expires, a generic drug is usually developed and sold by a competing company. The development and approval of generics is less expensive, allowing them to be sold at a lower price. Often the owner of the branded drug will introduce a generic version before the patent expires in order to get a head start in the generic market.
In many non-US western countries a 'fourth hurdle' of cost effectiveness analysis has developed. This focuses on the cost and efficacy is fundamental in many countries. In England NICE approval requires technologies be made available to the NHS, whilst similar arrangements exist in Scotland, Australia and Canada where the drug must pass the cost effectiveness test to be approved for government formularies. Treatments must represent 'value for money' and a net benefit to society. There is much speculation that a NICE style framework may be implemented in the USA to ensure Medicare and Medicaid spending is focused to maximize benefit to patients and not excessive profits for the pharmaceutical industry. In the UK the British National Formulary is the core guide for pharmacists and clinicians. In Canada there are provincial formularies that will cover the cost of a generic unless the advantages of the name brand product can be proven. Add to these considerations that IMS began by conducting a systematic, qualitative analysis of current conditions in eight key mature markets: the United States, Canada, Japan, the United Kingdom, France, Germany, Spain and Italy. In all of the markets- particularly the United States - the role of the physician has changed significantly. Although physicians are still heavily involved in the prescribing process, their decisions are subject to layers of control from a growing number of stakeholders.
Pfizer faces regulatory problems in another arena. According to the EPA, Pfizer is among the top ten companies in America with the most numerous emissions sources. A landfill and two wastewater lagoons in Ledyard, CT near the Pfizer plant in Groton, Connecticut, are a source of groundwater pollution in the area. According to the Connecticut Department of Environmental Protection (CT DEP), the Pfizer site is active under the CT DEP Site Remediation program.]In June 2002, a chemical explosion at the Groton plant injured seven people and caused the evacuation of over 100 homes in the surrounding area. Pfizer may be closing plants for reasons other than simple efficiency
The Geographic scope
Pfizer’s business is truly global and significant earnings and production happens overseas. 79% of pharmaceutical sales happen in the G7 counties but IMS calls the BRIC nations plus Mexico, South Korea, & Turkey the “Pharmerging markets” and this is where 27% of the world’s pharmaceutical growth is expected in the coming years. Pfizer has embraced manufacturing in emerging markets. Demonstrating the extent of the current downturn though, emerging markets are forecast to post a mild contraction of -.0.2% for 2009. The 3% growth expected in 2010 would be the worst performance since the recession of 2001. China is expected to post a +5.6% growth in GDP and that will be felt in pharmaceutical sales. Emerging Asia is expected to post a 3.5% growth but that will not include Singapore or Taiwan which are expected to decline. Latin America is expected to do very poorly. Central and Eastern Europe are expected to see shrinking sales. The Pharmerging nations expect recovery to be weak but steady. Egypt, Qatar and Iran expect modest growth.
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