Beating global competition

How to sustain a viable pharma industry in the face of global competition was the topic at the recent UK ISPE meeting in Stratford. Susan Birks reports on future issues and past successes.

Will Europe lose its pharmaceutical industry to developing countries, such as India and China, or does it have something unique to offer? This was the question posed at the 25th anniversary conference for the UK chapter of the International Society for Pharmaceutical Engineering (ISPE), held in Stratford-upon-Avon in November.It is a burning issue for the whole European pharmaceutical sector, not just the UK - a fact reflected in the make-up of the audience, with many delegates hailing from mainland Europe.

Global competition is a growing challenge. While less-developed countries are attracting more new manufacturing capacity due to their low cost base and tax incentives, the UK and other European countries face an increasing regulatory burden, which hinders their ability to compete on equal terms. To make matters more difficult, the very nature of the industry is changing, with a larger number of generic and biological products stealing the march on conventional pharmaceutical blockbusters. Companies that do not adapt to this changing market will quickly get left behind.

Dr Richard Barker, director general of the Association of the British Pharmaceutical Industry (ABPI), conceded that the UK industry has a battle on its hands. The balance of payment for pharmaceuticals in 2004 was more than £3.6bn, but had declined 14% in the first half of 2005, he said. Looking further ahead the outlook grows bleaker; the very best that the industry could expect was to hold today's position; at worst it could see a negative balance of payments as soon as 2007, said Barker.

The regulatory and tax burdens faced by UK companies are two issues being tackled by the ABPI, but individual companies also need to lobby government hard if the sector is to be heard, he stressed.

William Powlett-Smith, a partner in Ernst & Young, contrasted the rise and growing success of the biotech sector with that of traditional pharmaceuticals. Despite all the regulatory difficulties and lack of investment on this side of the Atlantic, the UK biotech sector has developed a considerable product pipeline and saw 36 FDA approvals, compared with only 15 from the pharma sector, in 2004.

He suggested that the biotech sector is succeeding precisely because it does not focus on blockbusters. Traditional pharmaceuticals with wide targets and limited patent protection are easy to manufacture and thus easy to copy, Powlett-Smith said. The advantage of biotech products, on the other hand, is that there is better control over the intellectual property (IP); they are more complex products aimed at a smaller audience and they require fewer samples in trials, so are cheaper to test.

future alliances

The problem is that, whereas the pharma sector is relatively cash-rich but with little in the pipeline, the biotech sector has many innovative products but needs both cash and resources to get them to market. As a consequence, many biotech-pharma alliances are being forged, said Powlett-Smith; Novartis in particular was singled out for its many recent biotech acquisitions.

He said the US is likely to continue to dominate the future biotech sector it has an estimated 360 products in phase II development but, 'if [Europe] forges the right global alliances, Europe's strength in science will ensure it stays at the table'.

innovation

To keep what biotech and pharma business there are within the UK, companies need to ensure they are at the cutting edge. Genzyme's director of facilities and engineering, Ian Thorne, said that performance, innovation and reliability were all strengths that made the UK a good manufacturing base.

He said that for Genzyme the UK remains an important manufacturing location as the company is close to its customer base and has direct control over product quality and its supply chain, meaning that it can be responsive to the changing needs of patients and control costs. In addition, the UK does not present the IP problems faced in some other countries.

But Thorne was also emphatic that innovation to improve processes and productivity is crucial to UK business sustainability. He cited the development at Haverhill of a solvent-free process of producing the super adsorbent polymer hydrogel Sevelamer HCI (used an API in Renagel) as an example. The company is in the process of moving from a batch process, using large amounts of solvents, to a solvent-free continuous process that will enable it to ramp up production while reducing environmental impact.

business skills

While the UK has a strong heritage in such technological innovation, it often flounders when it comes to commercialising new technology. Professor Russell Smith, founder of Business Boffins, a consultancy for new science-based start-ups, said the UK needed better entrepreneurial skills and business management to translate blue sky research into profitable businesses.

Four presentations from UK companies on successful new technology, industrial processes and lean manufacturing (see panel right) highlighted the strength of UK innovation and engineering, and could give a glimmer of hope to the country's manufacturing base.

But it was clear from the speakers that today's market demands a growing number of sku's (stock-keeping units) and smaller runs, meaning the industry needs to introduce greater flexibility and leaner manufacturing techniques. If it is to meet the competition from lower cost rivals it also needs more continuous rather processing, rather than batch, and more process analysis to reduce waste and hold-ups.

Key facts on the UK pharma industry

The balance of payment for pharmaceuticals in 2004 was more than £3.6bn. MHRA lists 317 manufacturer's authorisations for human medicines - of those, 50 are major sites:
- 20% are involved in primary manufacture
- 60% are involved in secondary manufacture
- 20% are mixed sites
72,000 people are directly employed in the pharma and biopharma sector, but the industry indirectly supports 6-8 times that.