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Excipients Outlook Beyond 2019: Pharmaceutical Industry Trends to Watch

HomenewsExcipients Outlook Beyond 2019: Pharmaceutical Industry Trends to Watch
Excipients Outlook Beyond 2019: Pharmaceutical Industry Trends to Watch
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Over the last decade or so, the global pharmaceutical landscape has undergone important changes in the way products are manufactured, distributed and regulated. We’ve witnessed changes in technology, improvements in supply chain as well as the increasing participation of data science and analytics, which have all prompted pharmaceutical manufacturers to modernize and become more efficient through cost and portfolio optimization.

Nonetheless the sector continues to face commercial pressure to deliver above average shareholder value, manage innovation risk and navigate the tightrope of regulatory, public and political interests, not helped by recent medicine shortages and high product costs.

We review four of the most significant developments in the pharmaceutical industry that will have a direct impact on the excipients sector in 2019 and beyond:

1. Global Raw Material Shortages

For sometime now, there has been an ongoing shortage of medicines globally, mainly generics and some over the counter products. These shortages are thought to have been exacerbated by rising global demand, the rising cost of ingredients, tightening regulations and the widespread closure of chemical plants in China, many of which were producing starting materials and intermediates that are so critical to the entire value chain.

Although different governments around the world have been taking steps to address the problem (for example, the USFDA The FDA has been taking steps to address the shortfall),shortages still persist and will likely continue going forward.

In this conceptually ‘sellers market’ excipient distributors and manufacturers will be forgiven for wanting to milk the situation given the demand – supply disequilibrium. We would caution against this strategy and argue instead that they focus on working cooperatively with their customers to understand their needs and keep ahead of changing demand to maintain optimal supplier performance.

2. Industry Competitiveness and Consolidation

A number of major structural changes have been taking place in the pharmaceutical industry over the last decade or so. On one hand, we have witnessed alliances, mergers and acquisitions between multinational companies, which have resulted into a smaller number of large global players. On another, new companies have entered the fray, many as biopharmaceuticals firms focusing on contract R&D, contract manufacturing or manufacturers and marketers of own NCEs, generics or both. These changes have been motivated by shifts in innovation process and the increase in R&D and marketing costs relative to market growth.

As a result, companies have been under pressure to reduce costs in order to remain competitiveness. Firms have sought to achieve these efficiencies by rationalizing manufacturing operations, streamlining raw materials supply network and working with select suppliers to control COGS throughout product development and life cycle.

These developments are putting many distributors in fortuitous positions of potentially losing millions of dollars of business as accounts close and others are taken back to manufacturers. For those not caught up in this storm, the solution is to continually demonstrate customer value propositions that go beyond a product-centric logic. This will start with understanding customer needs and influencing customers’ desire for value, quantify and communicate the value of their solutions, and developing a value-based pricing model that best captures some of the value offered.

3. Digital Transformation and Industry 4.0

Digital transformation can mean different things to different industries, however the most transformative impact comes when cloud computing, the Internet of Things, Data and Analytics, and artificial intelligence converge to open up fundamental performance improvements.

Many pharmaceutical companies increasingly realise that digital and Industry 4.0 are central to their continued success and competitiveness. Investment in automation technologies has been on the up as firms seek productivity gains and cost efficiencies.

Cloud and mobile computing, sensors, and next-generation data analytics are opening up a new wave of automation across all business processes; helping reshape operations through more streamlined, automated work flows with few handovers and end-to-end, real-time transparency on progress, costs, and business value. This is opening up new frontiers in efficiency, responsiveness, and agility across processes, whether in the back office, the supply chain, R&D, or commercial.

Finally, 2019 has also seen the strengthening of digital distribution platforms, such as UlProspector, Knowde, Alibaba and Amazon, that are aiming to link directly with end-users, potentially bypassing distributors.

Suffice to say that excipient manufacturers and distributors that fail to leverage these technologies will likely find themselves falling behind their competitors in the efficiency stakes. Companies that take the initiative early stand to gain the biggest competitive advantage, ensuring they can operate with greater agility, cost-efficiency and compliance.

4. Continuous Manufacturing

Batch manufacturing has been the customary approach to manufacturing in the pharmaceutical industry for well over half a century. Batch manufacturing relies on having standardized processes backed with rigorous statistical testing to ensure batch-to-batch uniformity.

Automated batch processing – in which multiple batch operations are linked via automatic transfer – and continuous, single-pot manufacturing, are expected to grow exponentially over the coming years as regulatory support, economic benefits and technological advances become more manifest.

This represents a major shift that will inevitably introduce key changes to the way pharmaceutical products are made: lower costs, faster production, higher quality and greater speed to market. From a supplier perspective, automated batch processing and continuous manufacturing will have a material impact on the suppliers of excipients, therefore necessitating a recalibration of existing supply chain capabilities and skills, as well as an understanding of production technology needs and regulatory knowledge.

Final thoughts

The year 2019 is already shaping up to be an exciting year for the excipients sector. The pace of external change currently being experienced by the pharmaceutical industry is not expected to slow down in the foreseeable future. The challenge for many firms is to adjust the mindsets and increase their willingness to change and adapt. The status quo is not an option.

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