The Premier Provider of Effective Business Software Solutions National Presence, Local Touch 1.800.4.BLYTHE www.blytheco.com I White Paper Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness Prepared exclusively for Sage by Cambashi, Inc. www.cambashi.com
Table of Contents The Mad Dash to Capture Emerging Market Opportunities... 3 A New Landscape for Regulatory Compliance... 4 Leveraging Regulatory Compliance for Global Competitiveness... 6 Proactive Compliance... 7 Cambashi Inc. Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness paper #U2995g. This publication is protected by United States copyright laws and international treaties, and is copyrighted by Cambashi Inc. This document may not be reproduced, distributed, or posted on a website by anyone except the sponsor Sage Software, Inc. without prior written consent of Cambashi Inc. Unauthorized reproduction of this publication or any portion of it may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of the publisher. The information in this report is from a wide variety of sources that represent the best information available to Cambashi Inc. This report includes our interpretation of information in the public domain or released by responsible officers in relevant organisations. Some information is from sources we cannot verify. We survey judgment samples, and results are not statistically significant unless so stated. Cambashi Inc. cannot guarantee that the report is accurate or complete. Information changes with time. The analysis, opinions, and estimates in this report reflect our judgments as of writing but are subject to change without notice. Cambashi Inc. shall not be liable for any loss or injury resulting from use of this information. All trademarks are the property of their respective owners. Cambashi Inc. may have a consulting relationship with a company being reported on. It is not an offer to sell or a solicitation of an offer to buy any securities. Cambashi Inc., its staff, their families, and associates may or may not have a position in or with respect to any securities mentioned herein. Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 2
The Premier Provider of Effective Business Software Solutions National Presence, Local Touch 1.800.4.BLYTHE www.blytheco.com The Mad Dash to Capture Emerging Market Opportunities The writing is on the wall for the biotechnology and pharmaceutical industry: New markets matter. As blockbuster patents expire in the next five years, there are not enough new products in the pipeline to make up for those lost revenues. This could cripple the industry were it not for the emerging growth regions outside the developed U.S., European, and Japanese markets, where most pharmaceutical commercialization has been focused to date. According to IMS Health, developed markets will only grow 3-6% through 2014, while emerging markets will grow about 14-17%, as shown in Figure 1. China alone, which is the largest growth market, is expected to see pharmaceutical sales increases of 20% or more on an annual basis. Sales in India are also growing rapidly at about 16%, which is fueled by generics. There are 17 emerging markets (see Figure 2) that offer enormous opportunities. Their populations are aging and require therapeutic treatments, and their middle class increasingly has disposable income to purchase treatments not covered by their healthcare system. As enticing as the opportunities are, few pharmaceutical companies have a solid foothold in these markets. IMS estimates that even the top 15 companies by revenue collectively get no more than 10 percent of their sales from these growth regions. Abbott, Eli Lilly, GlaxoSmithKline (GSK), Merck, Novartis, Pfizer, and Sanofi-Aventis have begun to acquire local companies, develop local alliances, or invest in local R&D. Yet the industry has been slow to recognize the opportunity. If they don t act fast, as IMS has strongly urged, even the world biopharm leaders will lose out to local companies with established brands that are eager to benefit from their regions changing economies. This urgency is driving a flurry of new deals in many of the 17 regions highlighted by IMS. Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 3
There are also challenges to global expansion, which companies need to take into consideration. o Compliance complexity: Each country has its own regulatory bodies and requirements. o Competitors: Each emerging country has its own domestic brands, and knowing how to differentiate and price against those is critical. o New cultures: How pharmaceuticals are sold and marketed, packaging preferences, where they are dispensed, and how companies are reimbursed may vary by country. o Pricing and margin pressure: Healthcare in many of these regions is run by the government or nonprofit institutions that will not pay the pricing premiums now attained in the U.S. or even in Europe. Lower prices mean lower margins, and that doesn t account for the high costs of brand promotion and marketing that will be required for a new market. Large players such as GSK report about half their normal margins in these new emerging markets. A New Landscape for Regulatory Compliance Every country has its own regulators and approach to regulating life science companies (see Figure 3). Some are more established than others, and the most established (such as the U.S. s FDA, EU s EMA, and UK s MHRA) frequently issue new guidelines. This is challenging enough when targeting a few countries, and will become far more difficult with each new country added to the base. The International Conference on Harmonization (ICH) is working to create broader standards for R&D and manufacturing regulations to help resolve some of these issues. The ICH is made up of representatives from regulatory agencies, drug companies, and other industry members from multiple countries. Together, they are working toward common regulatory requirements, and the first demonstration of this collaboration is the electronic Common Technical Document (ectd), which a number of companies are now using for submissions in the U.S., Europe, and Japan. Another result is the ICH Q10, which specifies the effective quality system guidelines for the pharmaceutical product lifecycle. Yet harmonization is a long way off from a singular set of regulations. Once harmonized, there will likely always be some differences between the various agency and country regulations. A new state-level law in the U.S. offers a good example. The Product Policy Institute and the National Association of Counties have joined forces to create legislation that puts the Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 4
responsibility for addressing proper disposal of unwanted medicines by consumers on the producer s shoulders. This would fall outside the FDA and harmonized regulations. So companies must stay up to date and comply with all the requirements in all the countries and locales they target. What is regulated varies. To ensure drug safety, efficacy, and quality, most agencies focus on some version of current good clinical, laboratory, and manufacturing practices (cgcp, cglp, and cgmp). In the U.S., the FDA also oversees promotional advertising, payments made to physicians, patient communication, and off-label drug promotions after product launch. Since 2002, the FDA has updated its cgmp regulations, introduced the Risk Evaluation and Mitigation Strategies (REM) legislation to ensure the right patients are getting the right drugs, and is taking a more active interest in foreign clinical trial oversight. The agency is also starting to put more teeth behind its regulations by stepping up enforcement and increasing its scrutiny of data integrity, unapproved drugs, and global operations (see Figure 4). And it isn t just doing that in the U.S. The FDA now has offices in India and China to inspect plants in these highgrowth regions. Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 5
The way life science companies have traditionally addressed compliance is by focusing on documentation and only recently in an electronic format. As a result, they have institutionalized compliance practices built upon paper-driven processes, and many of these haven t changed even in departments that now use document management systems. Even in the largest companies, many operations still rely on paper to document their activities. This documentdriven approach to compliance is subject to errors, inefficiencies, and sloppy processes. Paper processes are outdated and expose companies to great risk and unnecessary costs. At a time when enforcement is stronger and companies are going global, more companies are discovering they need to look at compliance differently. Instead of compliance for compliance s sake, the new thinking is that compliance can be the mechanism to document and prove the effectiveness of a streamlined business approach. These companies focus on a business model that can deliver scalable, cost-effective global competitive advantage. Leveraging Regulatory Compliance for Global Competitiveness The new FDA cgmps and ICH Q10 guidelines are well suited to this new thinking. Both of these introduced a systems approach to embedding quality and compliance into good business practices. These will benefit biopharm s bottom and top lines by cutting production, quality, and compliance costs while increasing product reliability, time-to-market, and inventory turns. This should lead to improved margins despite price cutting to compete in emerging markets. Q10 compiles existing country-specific GMP regulations and international standard ISO concepts into a pharmaceutical quality system or framework updating prior Q8 and Q9 guidelines. This framework spans the entire drug or biotech product lifecycle, from development into manufacturing and out to end-of-life discontinuation. The four key elements of the system are shown in Figure 5. It is basically a continuous improvement approach, with monitoring, change management, reviews, and corrective and preventive actions. Q10 relies on: o Knowledge management, which is a systematic approach to acquiring, analyzing, storing and disseminating information related to products, processes, and components 1 across the lifecycle. o Quality risk management, which is used to proactively identify and control the potential for quality risks across the lifecycle. o Key performance indicators to monitor the effectiveness of the system and drive continuous improvement. So being more systematic, proactive, and understanding and improving performance is clearly sound business. Other benefits of implementing Q10 involve breaking down organization silos and facilitating cross-functional communication, a companywide data repository, and management involvement. In April 2009, the FDA sanctioned the use of Q10, encouraging companies to adopt the quality management system for the many elements not covered in the 2002 updated cgmp. Q10 also backs up these revised cgmps, which specifically address the systematic regulation of product quality through Process Analytical Technology (PAT) and Quality by Design (QbD). Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 6
Proactive Compliance Some companies are moving forward aggressively to improve and take on this proactive approach to compliance as the FDA and ICH Guidelines recommend. In its 2009 study, PharmaManufacturing.com found a growing divide between those companies (large and small) that are adopting the FDA s cgmp guidance for PAT and QbD and those that are lagging behind. About half are adopting PAT and another 20 percent of companies planning a PAT project, while a third have no plans at all. About half are also getting serious about adopting QbD, while the other half has no intentions to address it any time soon. Why should you be in the group that is adopting these? In short, they can improve your business results. Process Analytical Technology for in-process control is a means to lower the cost of quality, reduce product cycle times by speeding release, and reduce the environmental impact of production activities. Quality by Design focuses on increasing quality assurance and reducing risk while allowing an envelope in which production can achieve continuous improvement goals without revalidating. QbD is an efficient and flexible model for producing cost-effective, highly reliable, regulatory-compliant drugs across a global supply chain and product lifecycle. To fully implement PAT, QbD, and Q10, companies need integrated information systems. These systems must provide the ability to access data across the product lifecycle and supply chain and transform that data into knowledge, process optimization, and proactive decision making. Today, the industry is also divided between companies that still operate with a lot of paper and those that are becoming more fully automated and cross-functionally integrated. Information integration is still a great challenge for the vast majority of companies that have data spread across the organization in diverse databases and IT platforms. While no single system can handle all of these needs, the backbone for information integration is usually the business software. Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 7
The Premier Provider of Effective Business Software Solutions National Presence, Local Touch 1.800.4.BLYTHE www.blytheco.com Enterprise resource planning (ERP) and its affiliated capabilities allow companies to manage the explosion of information that occurs with globalization and to more easily keep up as regulations change. These systems become the system of record for products, materials, suppliers, and customers, plus all of the transactions in inbound and outbound orders. ERP can also plan and manage production and distribution activities. The best systems include business intelligence to analyze where things are going well to replicate that success as well as to pinpoint areas that need attention. This is the foundation of being proactive. Being proactive in the pharmaceutical and biotechnology businesses requires proactive compliance. Historic ways of working were reactive and high risk. Today, the regulatory agencies and organizations working to harmonize global regulations have developed systems that are in the best interest of the public and the industry. Those companies first to adopt their latest guidelines will gain a more efficient, flexible, faster, and cost-effective business model that can give them a competitive advantage in emerging markets. The opportunity today is to leverage the regulations to attain leading-edge business processes and performance rather than see regulations as a requirement for compliance. 1 FDA Guidance for Industry Q8, Q9, and Q10 Questions and Answers; www.fda.gov/downloads/drugs/.../guidances/ucm073517.pdf Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 8
About Sage North America Sage North America is part of The Sage Group plc, a leading global supplier of business management software and services. Sage North America employs 4,000 people and supports 3.1 million small and midsized business customers. The Sage Group plc, formed in 1981, was floated on the London Stock Exchange in 1989 and now employs 13,100 people and supports 6.2 million customers worldwide. For more information, please visit the website at www.sagenorthamerica.com. About Cambashi Cambashi, based in Cambridge UK and Cummaquid, MA, USA, provides independent research and analysis on the business benefits of using IT in value-adding industries. Cambashi delivers the latest global market data, plus perspectives on the changing state of technology and current business issues in manufacturing, process, distribution, energy, utilities, and construction industries. Our consulting analysts partner with each client to solve difficult problems, clarify decisions, articulate value, and craft a unique path to market rewards. www.cambashi.com Proactive Regulatory Compliance for Biopharmaceutical Global Competitiveness 9
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