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Inefficiency in Fine Chemicals Manufacture Set to Grow

3:15 AM MST | February 1, 2011 | By GIRISH MALHOTRA

The environment for contract manufacturers is shifting, particularly in Asia where competition is having an impact on efficiencies of scale for contract research and manufacturing services (CRAMS), says Girish Malhotra, president of consulting firm Epcot International (Pepper Pike, OH), and a veteran of the fine chemicals industry. Increasing numbers of CRAMS are competing to produce the same generic active pharmaceutical ingredient (API) molecule – this means that batch sizes are becoming smaller and economies of scale may be lost, Malhotra says. Global sales for a $3 billion/year pharmaceutical may only require a total of 1,800 kg of API. Between 18 manufacturers this amounts to just 100 kg of production for each company for each year. “They cannot have an efficient process,” Malhotra says.
 
The move from a single brand manufacturer to multiple generic manufacturers will increase markedly as a slew of branded drugs worth up to $100 billion/year are due to go off patent during the next few years. One such drug, Lipitor, is currently produced at one site by Pfizer but eventually up to eight companies could market the product. “If these companies produce their own API we would still see some reduction in price but their margins will be lower as they will have to absorb inefficiency costs, he says.
 
Many contract fine chemical manufacturers in the west are experiencing the same problem of small and relatively inefficient campaigns. Companies at times may be taking on whatever business they can get to fill their idle capacity, Malhotra says.
 
In another trend that may be undermining big pharma’s position, chemists working for leading generics firms in Asia are using information presented in API patents to develop alternate and simple processing routes. Big pharma is teaching the likes of Ranbaxy and Dr Reddy’s and others “what the prior art is,” Malhotra says. The implications are that generics firms will get around current patents more quickly than in the past. Information in patent files “is a gold mine for the likes of Ranbaxy and Reddy’s. Brand companies are teaching the future competition how to design and produce the product using simple chemistry methodology.” Brand companies through their patents are enabling generics firms to challenge their new molecule chemistries and invalidate their patents.
 
To cut costs and focus on the key issue of developing and marketing novel brand drugs big pharma companies are set to continue to outsource more of their manufacturing activities to contract manufacturers. “It will accelerate – this is the future,” Malhotra says.
 


Comments (1) for Inefficiency in Fine Chemicals Manufacture Set to Grow
1.
Isn't it a dichotomous situation that despite not having optimum scale of manufacturing , generic companies continue to compete . Also the fact is Ranbaxy is no more true "Indian Generic " company ,Will it make a difference ?
When few more Indian majors go the same way , how will the scenario be ? We will have to wait and watch.
Posted by Vivek Save on Sunday, February 6, 2011 @ 01:11 PM










 
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