MANUFACTURING IN THE
PHARMACEUTICAL VALUE CHAIN
Prof. Charles L. Cooney
Department of Chemical Engineering
Program on the Pharmaceutical Industry
Drug Development Lectures
Nov 21, 2013
1
THE STATE OF THE PHARMACEUTICAL
INDUSTRY
Where is it going in 2014?
•  Sales ~$1 trillion and growing at <4%
•  R & D ~ 15% of sales - an increasingly virtual
infrastructure
•  Marketing - pricing/advertising/e-commerce
•  Development - increasing expectations,
complexity in clinical trials, low productivity
•  Structure - consolidation, partnerships and
outsourcing
2
CHARACTERISTICS OF
PHARMACEUTICAL MARKETS
•  Concentrated~ 85% of market in 15 countries
•  Focused - 4 therapeutic areas dominate market
CV, GI, CNS, anti-infectives
•  Fragmented –  Largest product (Lipitor) is ~ 5 % of market
–  Largest company (Pfizer) is ~$50 billion
–  Top 10 companies have one third of market
•  Technically diverse - research strategy and
production methods
There is a high cost of complexity
3
Global Sales
•  ~$900 billion and growing at <5%
–  US growth at 1-2% to ~$300 billion
–  Top 5 EU (France, Germany, Spain, Italy, UK)
3-4% to ~$200 billion
–  Japan 3-4% to ~$85 billion
–  Pharmamerging at 14-15% to >$100 billion
4
TODAY
HEALTH CARE COST
PRICING PRESSURES
5
We Have a Problem
•  Pressure on Pricing
–  Increased use of generics
–  Introduction of biosimilars
–  Therapeutic substitution
–  Demand for global access
–  Political and social activism
•  Increased cost
–  Increased regulation
–  Smaller markets
–  Market and supply chain complexity
–  Security and integrity of supply chain
October 14, 2004
2004 Copyright Massachusetts
Institute of Technology
6
Risk = Probability X Impact
Institute of Technology
Courtesy of US forest Service on Wikimedia Commons. Public domain.
7
Typical P&L
Big Pharma*
Generic
Manufacturers**
•  COGS are a very significant portion of Generic’s P&L
•  COGS for Big Pharma are significant in absolute dollar terms
*Source:
Annual reports of major 15
pharmaceutical companies
**Source: Teva’s 2004 annual report
8
PHARMACEUTICAL
INDUSTRY STRUCTURE
Value Chain Organization
Fully Integrated Producer of Drug Product
API
Manufacture
API
Manufacture
Formulation
& Finishing
Formulation
& Finishing
Generic Producer of API
9
Packaging
Packaging
Generic Producer
of Drug Product
9
SUPPLY CHAIN IN PHARMACEUTICAL
MANUFACTURING
10
SUPPLY CHAIN IN PHARMACEUTICAL
MANUFACTURING
11
SUPPLY CHAIN DYNAMICS
12
Secondary Drug Distribution
Uncontrolled
Foreign
Sources
Retail
Manufacturer
Secondary
Distributor
Major
Distributor
Secondary
Distributor
Retail
Retail
Retail
In practice, we must embrace &
manage risk
Courtesy of Felicity and Phillip on Wikimedia Commons. License CC BY.
14
MIT OpenCourseWare
http://ocw.mit.edu
15.136J / 7.547J / 10.547J / ESD.691J / HST.920J / BCMP 230 Principles and Practice of Drug Development
Fall 2013
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