A Level Playing Field
for APIs:
Good for the patient?
Chris Oldenhof
DSM, The Netherlands
President of CEFIC’s Active Pharmaceutical Ingredients Committee (APIC)
Board Member of CEFIC’s European Fine Chemicals Group (EFCG)
PDA / EMEA Joint Conference
European GMP: Current Issues and Future Developments
Budapest, 20-21 February 2008
Content of Presentation










Some Principles & Definitions
Where our APIs are coming from
Europe & Asia: The Differences
“Rogue APIs”
The CPhI Trade Fair
Compliant APIs vs. “Rogue APIs”
Who gets the money?
Inspections, Audits, QPs & Actions
The Big LPF Picture
The Solution
Advice from a regulator
in 2004:
“When you speak to regulators
never use words such as
business, money, finance etc.:
They are allergic to that because
to them only patient safety
matters”…
….however….
What to do when aspects of
“business, money &
finance” are having an
important impact on patient
safety?
PRINCIPLES & DEFINITIONS

Counterfeit medicines are any brand
(or generic) medicines and active pharmaceutical
ingredients (APIs) that are deliberately and
fraudulently mislabelled by unauthorised parties
with respect to source and/or composition and/or
therapeutic quality (EFPIA, June 2005)*

Counterfeit APIs are active pharmaceutical
ingredients for which source and / or quality are
falsely represented on the label, on the Certificate of
Analysis or otherwise (APIC, 2005)

Rogue APIs: APIs that are Counterfeit or
Severely Non-Compliant
(C. Oldenhof, 20 February 2008)
*See: http://www.efpia.org/content/default.asp?PageID=263&DocID=1359
PRINCIPLES & DEFINITIONS

A medicinal product that contains a
Counterfeit API is a Counterfeit Medicine.
It may harm the patient.

A medicinal product that contains a severely
GMP- and/or Regulatory non-compliant API is
a severely non-compliant medicine.
It may harm the patient

Counterfeit APIs are normally severely noncompliant but severely
non-compliant APIs are not
always counterfeits
Origin of APIs for Europe

Until the 1990s more than 80% (volume) of
APIs for the EU were manufactured in Europe

Today the majority is manufactured in Asia,
notably in China and India
Does that make a big difference?
The Differences in API Manufacture
Europe
Asia
- Decades of US FDA GMP inspections
- Most API producers by now have been
FDA and/or EU inspected
- Industry: driving force behind ICH/Q7A
- Most producers Q7 & RA compliant
- No (long) US FDA tradition
- Very few API producers have been
FDA- or EU inspected
- Q7 = new & alien standard
- At most 1% of 10,000
producers Q7 & RA compliant
- No special reputation for counterfeiting - Well-known for domestic
activities
counterfeiting & exportation of
counterfeits
- Few Rogue API manufacturers
- In China: Out of + 3,000 API
manufacturers + 2,000 are
Rogue API manufacturers.
We don’t know how many out of
+ 10,000 Indian pharmaceutical
manufacturers are Rogue API
manufacturers.
Conclusion:
It looks like it could make a VERY big difference…
*See e.g.: http://www.gmp-compliance.com/daten/download/Chodankar.pdf and
http://www.burrillandco.com/pdfs/06Q3_ChinaQuarterly_final.pdf
More about Rogue API
Manufacturers in China

1,000 “pharmaceutical” API manufacturers licensed by SFDA
(Comply with Chinese GMP & have been inspected, though when
the SFDA was under proven corrupt leadership)

Over 2,000 “chemical” API manufacturers not licensed and never
inspected by SFDA: illegal operations

Use of these Rogue APIs for producing medicines for the Chinese
home market is illegal / prohibited

These > 2,000 companies do normally not apply GMP and have no
affinity to regulatory compliance

The outlet for these - extremely
low-priced - Rogue APIs: The large
domestic counterfeit medicines
market and… Exportation !
See e.g.: Presentation by Dr. Sun Yueping / CHNMED,
10th European API Conference, Warsaw, 24-26 October 2007:
“The situation on GMP- and regulatory compliance for APIs
manufactured in China”
Sectors of the API market
1.
2.
3.
4.
Captive API manufacture
1:1 API Toll Manufacture
Direct sourcing from API
manufacturers in the “open
market”
API sourcing through traders
and brokers
Where are the exported Rogue APIs going?

Exported to customers worldwide; Very low prices attract many
traders and brokers, also European ones

Part of the orders are placed for blank labels (or relabeled /
repacked in Europe): Rogue APIs becoming Counterfeit APIs

Estimation: Also large quantities of Rogue APIs entering the EU
increasingly already included within finished dosage forms

No exact “business statistics” available. “Best guess”:
More than 30% of all traded APIs coming into the EU
(e.g. Gentamicin fingerprinting: at least 33%) but some insiders
even mention figures in the 90% range

Traded APIs roughly estimated to be at least 40% of total EU
API volume (segment includes many older, large volume APIs)
CPhI Milano October 2007



“CPhI” = Largest API Trade Fair (+ CPhI China, India,
Japan, South America…)
Milano: Over 20,000 attendants
Overwhelming presence of Asian exhibitors
(Of + 1,500 booths: + 500 from China and + 200 from India)
New York Times 31/10/2007
on CPhI Milano*:

82 Chinese CPhI exhibitors even not authorized by
SFDA to manufacture APIs for the Chinese market !
Yet marketing their APIs in the EU.
A large Sinochem booth:
- Giant Chinese State-owned “Fortune Top 500”
Trading Company
- Blacklisted by NAFDAC Nigeria since 2004 for selling
fake / counterfeit drugs**
- Exported the DEG-contaminated glycerin that killed
88 children in Haiti
- Stonewalled US FDA when it tried to identify the
source of the contaminated glycerin

*See: http://www.nytimes.com/2007/10/31/world/asia/31chemical.html?_r=2&ref=business&oref=slogin&oref=slogin
and ** http://www.nafdacnigeria.org/blacklisted.html
New York Times of 31 October
and other info on CPhI 2007:

Also CNSC Fortune Way, who exported DEG labeled
as glycerin to Panama in 2006, killing several
hundreds of people, had its booth
in Milano

Other companies accused of or proven to be
involved in selling counterfeit medicines also held
booths e.g. Honor International Pharmtech & Hunan
Steroid while Orient Pacific International canceled
because its owner is in a Houston jail for selling
counterfeit medicines*
*See: http://www.usdoj.gov/usao/txs/releases/August%202007/070824-Xu.htm
Can Compliant APIs compete against
Rogue APIs?
Rogue APIs are not or hardly affected by EU
Regulations, therefore they:

Have lower manufacturing costs:
(PricewaterhouseCoopers / IBM Studies:
COC = 20-25% of site operating cost minus raw
materials*)

Have a cost advantage that increases with time
(because EU Regulations block many API process
improvements and other changes)
Conclusion: Compliant APIs cannot compete against
Rogue APIs => Many compliant companies are
exiting the API business, often step by step, product
by product
*See e.g.: http://efcg.cefic.org/isoFILES/publications/items/DOWNLOAD_13.pdf
So where does the money go?

Impact of lower-priced, unsafe APIs on prices
of final medicinal products is close to zero

So the patients do not even get the financial
benefits from consuming sub-standard
medicines

It only makes a big difference
at “API business level” ! So the
money goes to traders, brokers
and purchasing departments
Observations => Actions?
EDQM’s CEP API inspection results show:
Unsafe APIs are flooding into the EU during many
years before we find out “by coincidence” how
unsafe they really are:
Past few years: More than 20 Asian CEPs suspended
or withdrawn by EDQM vs. Zero in Europe
2007: Rapid Alert & Pharmacy level recall because of
potentially life-threatening penicillin crosscontamination in APIs from KDL Biotech / India (in
generic dosage forms coming into the EU from India)
=> Shouldn’t we instead pro-actively prevent that EU
citizens are being exposed to such health risks?
Note: API manufacturers holding DMFs (ASMFs) instead
of CEPs are even much less likely to be inspected at all
See:
http://www.info.doh.gov.uk/doh/embroadcast.nsf/fd1653b6e6be59d180256b7900507749/237bb415b113568680257306003660ef/$F
ILE/EL(07)A11Final.pdf
http://www.edqm.eu/site/News_amp_General_Information-164.html?PHPSESSID=c073e3cf8012aeee07518fc42314818c
But how about the Qualified Persons?
If we could fully rely for our safety on all the QPs
why then are there:



Such high estimations of Rogue
and Counterfeit APIs occurring
in EU medicines?
Cases such as the Rapid Alert
triggered by KDL Biotech’s APIs?
So many suspensions and withdrawals by EDQM of
Asian CEPs?
Were those QPs not aware or does
QP vs. Purchasing often end in 0 - 1?
USA take action…
December 2007 USA and China - after 7 months of
intensive negotiations - have signed an agreement:
China will prevent that Rogue APIs from “chemical”
manufacturers” will be shipped to the USA
See: http://www.nytimes.com/2007/12/12/business/worldbusiness/12safety.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1197889892-dUJAgPcWDmWsRw3lPJsFUg
Overview of all elements of the
non-level API playing field
Issues for Asian Markets:






- Discriminating Quality Regulations
- Astronomical Fees e.g. PDIF China
- Multi sampling & QC testing per batch
- Negative Lists
- Tariffs / Duties (vs. “Zero Tariff Agreement”)
Issues for the EU Market:
Non-compliance with & Non-enforcement of Pharma
API Regulations (including API Counterfeiting)
Issues for all Markets:



- Export Subsidies, Dumping, Export Taxes (upstream from API)
Plus the general “given” factors:
- Low wages
- Currency rates
The picture is symbolic for current patient safety, for
current quality of the older EU medicines and for
today’s compliant API manufacture
…. but where can we find that little red-haired girl?
How to achieve a Regulatory- &
GMP API Level Playing Field?
1.
2.
3.
4.
5.
6.
7.
8.
Enforcement
Enforcement
Enforcement
Enforcement
Enforcement
Enforcement
Enforcement
Enforcement
=> DETERRENCE !
This presentation was:

Not “Against China”

Not “Against India”

Not “Against Traders and Brokers”

Not “Against Authorities”

Not primarily aimed at defending EU API
industry’s business interests (but indeed,
that’s implicit)
This presentation was:

To defend the health of the patient

To defend compliant API manufacturers
wherever they are located

To help the Authorities reach their goals
regarding the safety of patients

Directed against Cheaters, Counterfeiters,
Criminals who unscrupulously make huge
profits by endangering the health of
defenseless, unsuspecting patients
Thank you for
your attention!