The global market for biosimilar drugs has been forecasted to be worth $2.445 billion this year, according to a new report by British market research specialist Visiongain. The growth represents a 20% increase from last year and accounts for approximately 2% of the overall biologics market. Moreover, the global biosimilars market is expected to experience a steady growth over the next 10 years, driven by worldwide launches of such products, particularly in the EU and US.
The report predicts that the biosimilar monoclonal antibodies (mAbs) and insulin submarkets will see the fastest growth, with these products making up 57% of the global biosimilars market by 2023. Last year itself, South Korean biotech firm Celltrion and Hospira, a US-based pharmaceutical company, submitted regulatory filings to the European Medicines Agency (EMA) seeking for approval of their biosimilar version of the mAb infliximab. Visiongain anticipates that these products will be launched in the EU in 2014.

The mAbs have the strongest R&D pipeline in the biologics market according to the report. In fact, we can expect to see a range of next-generation technologies pushing mAb therapeutics into newer areas such as solid tumours, cardiovascular and neurological disorders.

There is also major growth opportunity for biologics in the treatment of diabetes. New fusion proteins are set to join Novo Nordisk’s insulin degludec (Tresiba), which is a new-generation basal insulin with ultra-long duration of action of more than 42 hours, as well as other novel insulins on the market in the near future.
However, mAbs and insulins are not the only biosimilar submarkets projected to experience growth. Biosimilar erythropoietins and filgrastim products are already available in several developed markets, including the EU and Japan. Despite the limited revenues achieved with biosimilar erythropoietins and filgrastim products compared to their reference biologics, Visiongain believes that the launches of these biosimilar products in the US will drive further growth from 2014 onwards, as will the worldwide introduction of second-generation filgrastim (pegfilgrastim) and epoetin alpha (darbepoetin alpha) biosimilars.

Pharmaceutical industry analyst James Evans commented in a press statement, “Biologics were one, two and three in the top ten drugs of 2012. People talk about the biotech revolution, but biotech is now one of the dominant, established powers in the pharmaceutical industry.” He noted that all the main biotechs have either been acquired by Big Pharma or become major players in their own right.

Evans added that the next big shift would be when biosimilars begin to penetrate the market. “Once the EU’s new regulatory pathway for biosimilars has been established, we can expect the major markets to be inundated with biosimilars and biobetters. The entry barriers for bio-manufacturing and bio-processing have been greatly reduced, and even the suite of technologies that built the mAb market, from phage display to transgenic mice, are now off-patent and accessible to any company that’s interested. And biologics are going to become so prevalent that every major company will be interested in having a stake in that expanding market.”

Richard Lang, a pharmaceutical market analyst at Visiongain, said in another press release that many companies are interested in entering the biosimilars market and have invested in this field, given the simpler route of launching such drugs compared to developing novel biologics. Lang however pointed out that not all biosimilar development programs will be successful. “Biologics and biosimilars are large, complex molecules requiring long and expensive development and manufacturing. The recent release of development guidelines by regulatory agencies in markets worldwide will increase the success rate of biosimilar development.

However, commercializing biosimilars is as challenging as developing them. Companies will need to brand and market their biosimilars in a similar way to novel drugs, engaging key stakeholders such as doctors, health care payers and patients, to achieve high market penetration.”

Emerging markets, particularly China and India, have been leaders in biosimilars, accounting for the majority of global revenues for biosimilars in 2012, whereas the EU, US and Japan made up 20% of the market last year. But for the next 10 years, Visiongain predicts that the developed markets will see faster growth than the emerging markets, driven by patent expiries on blockbuster biologics during 2013 to 2017.

On a panel titled “Activist FDA: Transformation Agent,” Prevision Policy founder and former Pink Sheet editorial head Cole Werble relayed the tale of Acadia Pharmaceuticals, a San Diego-based company with a stage three compound (pimavanserin) targeting Parkinson’s disease-related psychosis.

A month ago, Acadia met with FDA to discuss the proper design of a new phase III trial intended to confirm the results of a previous, 17-month study that met its primary endpoints. A confirmation trial was needed, Acadia presumed, since the first phase III trial of pimavanserin, conducted in 2009 at half the dose of the successful trial, had failed. Acadia had already begun to enroll patients in the confirmation trial – which represented an $18 million commitment – when it met with FDA in April to get the agency’s blessing.

To Acadia’s surprise, FDA responded that the additional confirmation trial wouldn’t be necessary, based on the pivotal phase III trial already on the books, combined with supportive data from other studies on pimavanserin. As a result, Acadia scrapped plans to do another trial, and began preparing its NDA posthaste. But the company wasn’t hasty enough, and investors dialing in to a call about the FDA meeting balked at the company’s projected filing date – near the end of 2014. Why not file immediately, they wanted to know? Acadia executives’ refrain in response, was, “these things take time.” FDA had reversed the waiting game, making Acadia itself responsible for the delay in review and commercialization of a new product.

This is just one example, of course; it isn’t likely that a big pharma looking to introduce another DPP4 into the market for type 2 diabetes, for example, would be told not to worry about additional trials studying cardiovascular or pancreatic side effects. But the fact remains that FDA approved 39 NDAs in 2012 – the most since 1997 – and the agency launched yet another expedited regulatory pathway – breakthrough therapies – at the beginning of 2013. The breakthrough therapies designation is likely to shorten the timeline from discovery to commercial approval – for those drugs receiving the designation – to between three and five years, according to IMS estimates.

Rachel Sherman, associate director of medical policy and director of the Office of Medical Policy, CDER, FDA

The timeline from discovery to approval could be as short as 26 months, said Rachel Sherman, FDA’s associate director of medical policy at the Center for Drug Evaluation and Research (CDER). Sherman said her office had received – to date – 39 requests for breakthrough therapy status, of which 12 have been granted and 14 denied, with 11 pending and two withdrawn. She said the breakthrough therapies program is already “an enormous success.”

Joseph Herring, CEO at Covance, noted that pharmaceutical companies are often difficult to work with, from his perspective as the head of a CRO. “[Investigators] want a perfect trial that can’t be enrolled.” He wondered about the interplay companies have with FDA regarding trial design discussions. In response, Sherman advised more communication. “If what we say doesn’t make sense, ask us. Argue with us. We’re receptive to it.”

How does a company know whether it’s sufficiently engaged with FDA? “If your lead clinical person is on a first name basis with the [respective] lead reviewer at FDA, you’re in good shape,” said Sherman. “If you’re not, you’re not.” Sherman cited the Clinical Trials Transformation Initiative as another program aimed at “identifying and promoting practices that will increase the quality and efficiency of clinical trials.”

“The point of all our programs is better evidence generation…we lack evidence,” said Sherman. “The most expensive drug is the one given to the wrong patient, or given incorrectly.”

On the subject of biosimilar approvals, Sherman said FDA hasn’t received a single application yet, adding that the phrase “follow-on biologics” is dead. The requirements for biosimilars, according to Sherman, are that a biosimilar be “highly similar” to the original product, with “no clinically meaningful differences.” Sherman said that does not mean “interchangeability,” though, suggesting that a biosimilar could not be substituted for a brand biologic at the pharmacy, without specific doctor’s orders.

Comparing the current activist FDA with the activism the agency demonstrated during the HIV epidemic, Werble said that in addition to the breakthrough therapies designation, FDA has also launched the GAIN ACT, and its anti-infective exclusivity provision; has opened up FDA meetings to rare disease outside consultants, who advise companies on efficient FDA regulatory navigation; and has implemented PDUFA 5’s “patient-focused drug development meetings,” which solicit patient opinions around specific diseases.

Speaking on the “agency-wide impact of management attention and staff commitment” mustered during the HIV crisis 20 years ago, Werble said the pendulum has once again swung back toward FDA activism. “That commitment [to HIV] was infectious 20 years ago, and it’s occurring again,” said Werble. He also noted that a solid one-third of all drug applications submitted to FDA now come from small companies, a rejection of the thesis that only big pharma is properly equipped to navigate FDA’s regulatory structure.

The Rutgers Business School Annual Healthcare Symposium, convened on April 30, was presided over by Mahmud Hassan, director of the Blanche and Irwin Lerner Center of the Study of Pharmaceutical Management Issues, at Rutgers. John Castellani, president and CEO of PhRMA, and Seyed Mortazavi, president of IMS Health US operations, also gave presentations.

While provinces in Canada select drugs for reimbursement, the PMPRB establishes the economic benchmark value of medicines once they enter the market. The NPDUIS serves to add an extra layer of analysis to help the Board keep up with trends in where the private sector is investing its development dollars. “The purpose is partly general information, partly to inform payers of what’s coming up. In a few years, these will be the drugs facing review for reimbursement. So for public payers, it can be used as a planning tool, “explains Bernard Lachapelle, President of The JBL Group.

The NPDUIS takes clear aim at novel high cost targets. 37 of the 135 drugs screened in its report are biologics. This compares with no biologics reported in the last installment, in 2011. Biologics, as well as drugs in therapeutic categories with high utilization rates(such as cardiovascular) and areas where cost of medicines are particularly high ( i.e. cancer) were carefully scrutinized in comparison with other medicines, as these are all drugs that can significantly affect drug plans and drive costs.

Of seven drugs mentioned since the last report that have been granted marketing rights by Health Canada, five of them have retained prices within guidelines set by the PMPRB; the drug Pirfenidone is subject to investigation; and one drug had yet to be sold as of March. All the compounds considered in the NPDUIS review are at the later stage Phase III in clinical trials. Other criteria set by the reviewers include drugs that can be used to treat life-threatening conditions, rare diseases and other areas of unmet need, or if they could potentially change clinical practice in a therapeutic area, such as medicines with novel mechanisms of action or new indications. Above all, the drugs must demonstrate one of the following: improved efficacy versus existing drugs, impacts on patient health such as increased life-expectancy or quality of life; new or redefined outcomes; or an improved safety profile.

But while PMPRB and NPDUIS have managed to aggregate these promising late-phase drugs and define how they can change therapeutic landscapes within Canada, Lachapelle points out the report renders no judgment around the cost concerns of the country’s provinces, which ultimately boil down to the question: “What are the long-term budgetary impacts of the introduction of those drugs? All the report talks about is efficacy and safety, so beyond the regulatory standpoint people are left to draw their own conclusions.” The new report suggests the federal government has the expertise to help render some basic conclusions about where the provinces might efficiently spend tax dollars on medicines provided to the public through subsidized benefit programs.  Whether the provinces are interested in applying this expertise – and thus institutionalizing a bigger federal oversight role in drug spending – remains to be seen.

One man’s goof is another man’s growth, potentially.

A study funded by Becton Dickinson and Company (BD) and published last December in American Health & Drug Benefits found that adverse events associated with injectable medication error in the clinical setting increase US payer costs by anywhere from $2.7 to $5.1 billion a year. On average, that’s $600,000 in extra costs per hospital due to improper administration of injected drugs.

BD Rx – a recently formed subsidiary of BD – will oversee the production and regulatory approval of a new line of pre-filled generic syringes. The first drug in the BD Simplist product line is an antihistamine injection called diphenhydramine hydrochloride, or generic Benadryl. Mark Sebree, president of BD Rx, says the line will span categories including antiemetics, blood modulators, pain management drugs, anesthetics, and other categories. The BD Rx subsidiary has no plans to develop biosimilars or branded vaccines, says Sebree.

Pre-filled syringes in commonly-used dosages can help prevent medication errors since each syringe has its own barcode and label, says Sebree. “Because these products are pre-filled and pre-labeled, and because the vast majority of these drugs are actually administered at the bedside, the label travels all the way to the patient,” meaning physicians or nurses get a second look just before giving an injection. Pre-filled injections also eliminate “the possibility of transcription error,” or incorrect data entry, one of the leading causes of medication error, says Sebree.

“We’re entering a market that, by our assessment, is worth $1.2 billion…our products will target 50% to 70% of that market,” says Sebree, adding that several group purchasing organizations (GPOs) have already signed agreements with BD Rx to purchase the syringes. The BD Simplist line of pre-filled syringes will be priced slightly higher than traditional injections, but at the hospital level, “there doesn’t seem to be any level of surprise about the price we’re requesting for these products,” says Sebree.

BD Rx has filed six other generic pre-filled syringes with FDA, and expects to launch between 20 and 30 products in the next three or four years, says Sebree. The approval of generic Benadryl marks BD’s first foray into pharmaceutical manufacturing. The company’s bread and butter are medical supplies and devices. On an analyst call last week, BD CEO Vincent Forlenza said the company expects the BD Simplist line to generate “incremental revenues of about $100 to $200 million by the end of fiscal year 2017.” BD Rx is targeting only the US for now, but “will certainly evaluate other geographies” going forward, says Sebree.

Alderley Park, home to 2,900 jobs and 40 years of history in drug discovery, is known for its status as AZ’s central R&D hub, but not any longer, with more than 1,000 of the facility’s jobs shifted to a new, purpose-built facility in Cambridge. The closure is a blow to the parliamentary constituency represented by finance minister George Osborne, an area hit hard by the loss of the UK base in manufacturing.

AstraZeneca's Alderley Park facility

The company is also moving 300 of its R&D employees in the US from facilities in Wilmington, Delaware to a more updated Gaithesburg, Maryland location, where AZ can build on the biologics footprint of its 2007 acquisition of MedImmune.  In the process, the company will axe another 650 positions. In total, the net worldwide job cuts amount to ten percent of its 51,700 workforce, with 2,300 of the cuts in sales and admin positions, most of which are within the EU.

The cuts align with CEO Soriot’s push for more deal-making in an effort to replenish the company’s depleted drug portfolio. Analysts estimate AZ stands to lose six billion dollars in the next five years due to loss of patent protection for many of its branded drugs. Soriot also notes the company will spend less money on research for anti-infectives and neuroscience in favor of cancer, cardiovascular and metabolism disorders, respiratory and inflammatory diseases. To ensure that research remains close to the business AZ will also keep its business development function embedded in the R&D operation—a position at odds with the org charts in the other big pharma firms.

The recent shifts in R&D taking place across the industry show its growing desire to build a more symbiotic relationship with academic research institutions. Return on R&D investment has become less about simply producing new medicines but creating products that can me documented as addressing the standard of care. Companies are finding they have to spend more on early stage discovery to stay relevant. Dr. Ken Kaitin, Director of The Tufts University Center for the Study of Drug Development points out, “It’s tough to justify because this type of research occurs very upstream, and it’s a long time before companies see the fruits of that effort.” He continued, “By partnering or collaborating with academic institutions, teaching hospitals, and government agencies where this is already going on, big pharma companies can divest their efforts in that area and take advantage of some of the (hopefully) exciting and innovative research going on in the academic centers.” These coalitions ultimately benefit both the companies and institutions that partner with them, but as in AstraZeneca’s case and others, such shifts take a toll on workforce morale—a red flag in an industry that depends almost entirely on productive human capital.

Soriot discussed his strategic plan for the company during AZ’s Capital Markets Day on March 21 in NYC.

What’s your opinion? Will the cooperative relations forming between pharma and academia ultimately reap rewards?

Last Tuesday, the CDC reported that carbapenem-resistant Enterobacteriaceae (CRE) is spreading in inpatient medical institutions across the US, and called for enforcement precautions in these facilities to be implemented. UK Chief Medical Officer Sally Davies echoed such sentiments over the weekend by addressing antibiotic resistance as a worldwide problem needing urgent global action to fill the void in the antibiotic drug development gap. Methicillin-resistant Stapholococcus aureus, or MRSA, is highlighted as one such resistant organism wreaking havoc, causing more deaths annually in the US than HIV/AIDS.

Regulators, politicians and academics are working toward a solution to the antibiotic drug drought. Since it implemented the Generating Antibiotic Incentives Now (GAIN) Act last October, FDA has granted Qualified Infectious Disease Products (QIDP) status to a number of drugs, including most recently Cubist Pharmaceutical’s ceftolozane/tazobactam combination and Furiex Pharmaceutical’s avarofloxacin for their potential to combat particularly resistant pathogens, and also the latter’s ability to stifle a pathogen’s development of resistance. Under the GAIN Act, these new antibiotics gain certain developmental incentives, including priority review and Fast Track status, and, if approved by the FDA, a five-year extension of patent exclusivity on top of the Hatch-Waxman guarantees.

Beyond the GAIN act, there is a call to create an accelerated approval mechanism similar to that of orphan drugs. In 2012, the Infectious Disease Society of America (IDSA) proposed the Limited Population Antibacterial Drug (LPAD) pathway, with smaller, sleeker trial designs as a way of quickening the pace of antibiotic R&D and expediting the approval process. If implemented, LPAD would bring prices up on novel antibiotics, for the same reasons orphan drugs command a high price: to ensure manufacturers develop drugs for small populations in need of treatment, and reduce the cost burden associated with resistance, which exceeds costs of $26 billion in the US alone, according to IDSA. Higher prices for antibiotics would also promote careful use and safer prescribing practices among healthcare providers, to help prevent new drug resistance.

Steve Gilman, EVP of R&D and chief scientific officer of Cubist, explains: “If you’re providing a life-saving benefit that reduces length of hospital stay and cost, then you should have a pricing situation that fairly and equitably provides a return for the value created.” Also, smaller trial designs will allow drug companies to target patients with only the resistant infections as a way of demonstrating efficacy, while mitigating the risk of inducing resistance to the medicines being tested.

Last month, the FDA held a discussion panel in which it was brought up that LPAD has yet to establish meaningful clinical endpoints, and that the potential for these drugs to be used off-label is perhaps what caused this type of resistance in the first place. It was agreed that both considerations warrant further examination of the pathway. The IDSA points out that with effective stewardship programs, off-label use would be carefully scrutinized to ensure resistance is not developed. A recent Lancet Journal article discusses additional clinical trial designs as potential routes to expedited approval and access to antibacterial treatments.

Antibiotic resistance is also a global public health issue. The need for regulatory harmonization across markets is one that coincides with CMO Davies’ point that the effort to refill the antibiotic pipeline requires a global approach. However, if antibiotics are priced at a premium to spur development efforts from big pharma, drug-resistant infectious disease rates in poorer nations (case in point India, with its poor track record of easily accessible antibiotics, and where, coincidentally, MRSA rates are as high as 70% in certain regions) will continue to increase.

Moreover, financial incentives even within the US are shaky and few big pharma companies have expressed a renewed interest in antibiotic R&D. One of the latest examples is Roche’s Genentech partnering with RQx Pharmaceuticals to help fund their research efforts. The crux of the matter, as the Lancet article concludes, is that “we cannot force companies to do this work—rather, we need to persuade them to want to do it.”

Comment: What’s the best means of persuasion? Give your viewpoint.

In the usual political gamesmanship that accompanies government budget stalemates, the administration cancelled visitor tours of the White House and delayed access to national parks, blaming Congress for failing to deal with the budget impasse. Reductions in airport services threatened flight cancellations. The Centers for Disease Control and Prevention (CDC) predicted difficulties tracking and identifying outbreaks in infectious disease, and the Obama administration warned of reduced funds for childhood vaccines. The National Institutes of Health said its loss of $1.6 billion in funding (on its $31 billion budget) would translate into 2000 fewer research grants, diminishing prospects for new treatments for cancer and other serious diseases.

These and other reductions in government services really go into effect March 27, when employee furloughs without pay begin at many agencies. FDA officials say the agency can avoid reductions in staff, but that the impact will be felt on fewer field inspections and problems meeting application review time frames, scheduling meetings, developing new guidances and rules, and a host of agency functions.

A key issue is whether FDA can gain authorization to spend the new and increased user fees it has been collecting for the last six months. Congress needs to authorize the agency to collect the newly established and increased fees and to rule that sequestration should not apply to all the fees, but has been reluctant to do so. There is some $82 million in fees in question, which FDA desperately wants to tap.

Even more disastrous for the nation than sequestration is the prospect that Congress will let the current continuing budget resolution (CR) expire; if that occurs on March 27 it would end current funding for most government programs. Because Democrats and Republicans really don’t want to shut down the entire federal government, Senate and House leaders are working hard to at least extend the CR through September of this year.  Under the latest Senate budget proposal, the CR legislation also would provide additional funding in many areas for the rest of the 2013 fiscal year. Here, FDA benefits from Sen. Barbara Mikulski (D-MD) now chairing the Senate Appropriations Committee. She has engineered a 2013 budget plan with Republican support that provides $2.5 billion in funds for FDA for this year, including added resources for foreign inspections, food and drug safety and agency operations. With all its $1.8 billion in user fees, the agency would have $4.3 billion in funding, slightly more than for 2012.

The Senate plan also provides an extra $71 million for NIH, but that’s just a token in light of the $1.6 billion hit under sequestration. And no one expects sequestration cuts will be restored.

Key policymakers also are rolling out proposals for a compromise budget plan for 2014, due in April for the next fiscal year beginning Oct. 1, 2013. The latest Republican budget plan calls for transforming Medicare into a voucher program, cutting Medicaid and eliminating the Obama health reform program; at a minimum it cuts millions authorized for implementing insurance exchanges and other reform components. Those health proposals failed to gain public support last November and don’t carry much weight in the Senate. Yet Democrats will have to agree on serious reductions in outlays for entitlements and social programs to enact a workable spending program, and that will require strong presidential and congressional leadership. Every interest group – including research scientists and pharma companies – have been trooping up to Capitol Hill to beg for special treatment for their particularly vital programs, but there’s not much extra money lying around.

For guest blogger Tom Norton’s previous take on pharma and The Sequestration Transparency Act of 2011, click here.

A new report from Thomson Reuters, Building Bricks: Exploring The Global Research and Innovation Impact of Brazil, Russia, India, China, and South Korea, finds that while China is the leader overall in terms of investment and output, it does not necessarily produce quality research and offers significantly less pharmaceutical breakthroughs than, say, India, Russia or Brazil. These countries, as the report indicates, will serve to bring some disruptive changes to the mostly western-dominated drug industry between now and the end of the decade, as a result of the inroads these countries are making in earmarking more domestic resources to back innovative research. This has in turn spawned rising interest among other governments and outside investors. Everyone is trying to follow the same model.

The extensive statistical data base analyzed in the report shows that while China leads in published research papers across all industries, India, Russia, and Brazil in 2010 exceeded China in the number of filed patent applications in pharma. India’s patent applications in 2010 exceeded the global average in pharmaceuticals by a factor of 1.46, with Russia second with .73, Brazil at .69, and China behind, at close to the global average. South Korea produces less pharmaceutical patents than the global average by a ratio of about .27 per cent.

Brazil scored particularly well in patentability in the life sciences category, suggesting that it and other emerging countries will soon pose some real disruptive changes to the G7 countries’ traditional strength in pharmaceuticals. This could come in the form of more innovative manufacturing processes, where BRICK countries with sizable manufacturing bases are forced to deal with the issues of drug production more readily than established nations that develop medicines remotely from outsourced manufacturing sites in cheaper labor markets. Jonathan Adams, director of Research Evaluation for Thomson Reuters and a co-author of the report, points out that “Brazil is ‘the natural knowledge economy’, with a national  research portfolio skewed towards areas such as agrochemicals, biofuels, plant and animal sciences. Along with the largely untapped potential of the Amazon Basin, these make it an unconventional and interesting player in the pharmaceutical space.”

Overall, BRICK countries are stepping up investments in R&D to improve their competitiveness against Western Europe and the US, with South Korea as the clear winner.  In the past 6 years, it has spent over 3% of domestic GDP on R&D, higher than Germany, while China trails, on par with France or the UK.

China has had a notoriously bigger workforce in comparison with other markets, though there has been some drop off since economic growth began trailing off in 2008.  Growth in the other countries has been slow, if at all, pointing to the pinching of human capital by companies seeking to do more work with fewer employees. But with the BRICKs continuing to invest in higher education, this stalling in the growth of human capital rate will most likely be offset by the onset of more skilled labor forces led by all the investments in R&D programs.

On output measures alone,  China far surpassed all other BRICK players in churning out over 150,000 scientific research papers in 2011, an almost 600% increase since 2000. With runners-up India and South Korea not having reached a third of this figure, it’s easy to see why China is hailed as the production powerhouse of tomorrow. But the report also states that specific business segments in other countries, such as Russia’s immunology disease research base, have higher regulatory standards. Additionally, South Korea, while outnumbered by its Chinese neighbor in the number of patent filings, has shown its ability–according to external observers– to produce patents with a higher level of innovation. The question thus arises:  is quantity the match for quality?

Many of BRICKs’ choices of industry are based on the prioritization of R&D initiatives around the most pressing political and economic needs. For example, India’s focus on pharmaceuticals may be the result of heavy investment in drug manufacturing plants by contract research organizations [CRO], on behalf of big pharma.

That said, BRICK countries have grasped the concept that investment in R&D is a long term way to attract foreign interests to further bolster their emergence.  The report concludes that there is no longer any monopoly to preserve pharma’s predominantly western silo of innovation. Each country will be required to reevaluate its skill set and expertise offerings to keep pace with change.

Falsified and substandard medicines can be ineffective, promote drug resistance and even cause severe illness and death, said panel chairman Lawrence Gostin, Georgetown University Law Center professor and director of the WHO Collaborating Center on Public Health Law and Human Rights. The report [“Countering the Problem of Falsified and Substandard Drugs” available at www.nap.edu] urged regulators to adopt international practices on surveillance, regulation and enforcement, including technical quality standards developed by the International Conference on Harmonization.

Most important to pharma companies, the panel backed a mandatory U.S. electronic drug track-and-trace system able to identify products at the unit level through unique serial numbers. This approach is supported by the Food and Drug Administration – which requested the report — but considered too costly and complex by manufacturers, pharmacists and wholesalers.

The expert panel also proposed to strengthen supply chain tracking through tighter state regulation of drug wholesalers, including creation of a public database of distribution firms that have had licenses suspended or revoked. And the federal government would help low- and middle-income countries detect substandard products by identifying new sampling and analytical technologies through a central repository at the National Institute of Standards and  Technology (NIST).

Counterfeits separate

One strategy for building support for all these activities is the panel’s decision to drop the term “counterfeit” in describing substandard drugs that pose a public health risk. The aim is to narrow the use of “counterfeit” to refer to products that infringe on trademarks and intellectual property protections, but are not necessarily substandard or adulterated. Calling all poor quality drugs “counterfeit,” the report notes, is seen by advocates for generic and low-cost medicines as a way to use the campaign against “bad drugs” as a guise to enforce patent and trademark regulations.

Similarly, the report  defines more clearly “substandard,” “falsified” and “unregistered” drugs to provide a basis for regulatory agencies to target their legal and regulatory efforts.

The panel also calls for international development and financing agencies to support drug manufacturers in low-income countries that seek to upgrade facilities to meet good manufacturing practices. Such investment efforts would counter fake drug marketing by boosting local capacity for producing quality medicines.

Although an international treaty enforcing drug quality standards is the ultimate goal, publication of guidance on best practices as an interim step “is more realistic,” noted panel member Hans Hogerzeil, professor of global health at Groningen University in the Netherlands. The IOM panel also is asking the World Health Assembly to support its basic recommendations at its May 2013 annual meeting.

There’s some optimism that this report may spur FDA, manufacturers, distributors and pharmacists to reach agreement on an effective drug track-and-track system, an issue that has generated heated debate for more than a decade. Congressional action is needed to authorize mandatory tracking, as well as to require states to support a database on licensed drug wholesalers. Added resources for FDA to take on these tasks also is a real challenge.

While cost is an issue everywhere in implementing new regulatory and oversight programs, Gostin noted that limiting the use of substandard drugs would bring notable benefits in terms of lower hospital costs and fewer drug-resistant medicines. Adopting the panel’s recommendations, he said, is “a very good investment.”

President Obama seems undecided about whether protecting drug company profits is the same thing as funding research and innovation.

During his fifth State o the Union address, President Obama said he'd reduce taxpayer subsidies to prescription drug companies

He is not alone. As data firms, academics and other commentators have noted, many large pharmas spend more on advertising, for example, than on basic research. Biotech cycles a much larger percentage of its revenues back into development than big pharma does, but then many biotechs aren’t profitable until they strike a deal with a big pharma company. Does paying for rights to a late phase II or phase III drug candidate count as funding research and innovation?

In its clockwork statement on this year’s State of the Union address, PhRMA congratulated the President for recognizing “the enormous human and economic value of biomedical research, and the extraordinary importance of developing new medicines.” But the trade group was puzzled by the seemingly contradictory “proposals” made “in the same speech to impose punitive policies on the biopharmaceutical research sector, which invents new medicines.”

What punitive policies? Obama mentioned the biopharmaceutical industry only once by name during the address, when he said his administration would “reduce taxpayer subsidies to prescription drug companies.” Is that code for allowing Medicare to negotiate drug prices under Part D? Does it mean an end to the DTC advertising tax credit? Or was the phrase merely spoken with tongue and lip, without incisor?  If the last two years are any guide, it’s probably the latter. Billy Tauzin has been dragged through the mud in recent months for his $80 billion, 2009 deal with the White House during the healthcare reform debate. But so far, even now that parts of the deal entered the public record last summer, it’s not easy to identify any major reneging on the President’s part, so far.

“Every dollar we invested to map the human genome returned $140 to our economy,” President Obama said in the address. “Today, our scientists are mapping the human brain to unlock the answers to Alzheimer’s; developing drugs to regenerate damaged organs…now is not the time to gut these job-creating investments in science and innovation.”

But the Super Committee failed, Congress continues to drift “from one manufactured crisis to the next,” President Obama said, and the resulting sequestration plan will almost certainly take effect in March, said former chiefs of staffs Joshua Bolton (President George W. Bush) and John Podesta (President Clinton) during a talk at the BIO CEO conference this week in New York City; something both men could agree on. The automatic spending cuts, which will “devastate priorities like education, energy, and medical research,” President Obama said, are “a really bad idea.”

How bad will the alternative be, assuming the most severe elements of the spending cuts are averted by identifying more sensible, or at least more palatable trimmings in the quest for deficit reduction? In a push for infrastructure upgrades, President Obama singled out the CEO of Siemens America, Eric Spiegel, who was in the Capitol Building for the speech, calling Siemens “a company that brought hundreds of new jobs to North Carolina,” adding that Spiegel “said that if we upgrade our infrastructure, they’ll bring even more jobs.” Maybe some of those upgrades can be paid for with revenues generated from the new medical device excise tax.

Regardless of what President Obama thinks of the pharmaceutical industry, he knows the NIH alone can’t bring new, innovative products and devices to market. Policymakers will have to take a hard look at what funding for which scientists, and the organizations they work for, are most worth protecting for the public good, and what that protection looks like once the hatchet falls.