Here’s an interview I did with Global Business Reports (GBR) for their upcoming (Oct. 2015) U.S. Pharma Industry Report. It originally appeared on GBR’s website.
Can you talk about your background and what led up to you form the Pharmaceutical and Biopharmaceutical Outsourcing Association?
Gil Roth (GR): My career in pharma began 16 years ago as the founding editor for Contract Pharma Magazine. It was during this time that the CMO/CDMO business model began to take off. During my time at Contract Pharma, I saw how the industry was maturing, but I also identified areas in which it could be pushed to evolve more, and in March of 2014 I left the magazine to found this trade association. One the questions I was asked most when I first started PBOA was, “Why had no one done this before?” The answer was that this industry was historically fractured with a number of varying business models within. I saw, though, that their common interests were more important than the differences in their business structures or dosage form offerings, and that united they would have a voice that would be listened to by regulators, legislators and other groups.
What are the principle benefits that companies will stand to gain through membership in this organization?
GR: Our main goal is to establish regulatory and legislative advocacy for the contract manufacturing industry. In addition to this we are able to collectively advance the general business interests of this industry. One of my personal goals is to offer a platform through which these different companies can communicate with one another.
What are your strategies for the expansion of this association now?
GR: Our first year was really spent recruiting our core members and building the association’s infrastructure. In 2015, people are starting to see the work we are doing and the tangible effects it is having. They read about the congressional meetings that we are having and the FDA workshop that we held in March. They see that there is something of merit to join, and coming out of Interphex there was considerably more interest from companies that had initially seemed tentative. In a sense, the PBOA is starting to sell itself. Within a year we hope to have doubled our membership.
How have you seen this CMO industry evolve in the 15 years that you have been a part of it?
GR: We saw a number of different business models take root over the years. Some had a growth strategy of acquiring pharma facilities that were going to be closed or spun out. The idea behind this was that a company buys the facility relatively inexpensively from a pharma company and establishes a trailing supply agreement for several years. New business is brought in, and when that initial supply agreement elapses, the facility can fund itself essentially. We have also seen a few periods of roll-ups, where there has been consolidation. In some instances, these roll-ups were geared towards achieving scale. In the first half of the last decade, it was about scaling up to get a large geographic and service footprint. Of late, the consolidation that has been taking place has been much more focused on technology plays and making sure a company has specific technologies that will add value to different clients’ drug development and manufacturing needs. The providers that were building scale now have that scale and nobody is buying into a commoditized area of the industry just to get a bigger footprint. They are looking to the higher value aspects of the industry and what clients are looking for.
Having mentioned consolidation, do you feel this is a trend that will continue or will outsourcing be the preferred route?
GR: Certainly for the smaller and emerging companies, outsourcing is very much the preferred route. The capital requirements for manufacturing are still so extensive, the timelines are long, and the risk is high. Larger companies continue to talk about rationalizing their networks as well as the number of vendors and CMOs that they work with.
With Obamacare out of its nascent stage, what impact has drug pricing had on the market for both generics and branded?
GR: Drug pricing is not my area of expertise, and it is not an area that the PBOA focuses on. In my opinion, the problem with the idea of controlling drug prices in the United States the way that European markets do is that U.S. drug prices and the revenue that companies make from this market largely fund the research and development (R&D) into new drugs that are then sold into other countries. With too much pressure on the price of drugs, there will be a point where R&D suffers. One thing to note is that, while our branded drug prices are higher than in other countries, our generics are much cheaper. All of these payer systems have trade-offs.
Looking ahead, what are the next big steps for the association?
GR: Within our operations, we want to make sure we are participating with FDA when the GDUFA is being negotiated for its next five-year period. We want to make sure that this industry is prepared for the serialization and track and trace regulations that are affecting the industry worldwide and will hit the United States in 2017. We want to help strengthen the industry, and in terms of the PBOA’s growth, we want to look at other areas of outsourcing and other geographies.
This interview was conducted as part of GBR’s research on the pharmaceuticals industry in the United States, which will be published in October 2015. To participate in this report, please contact Irina Negoita at email@example.com. This interview originally appeared on GBR’s website.
To learn more about the benefits of joining the PBOA, visit our Membership page.