Faiz Kermani

	The European Union Falsified Medicines Directive (FMD) (2011/62/EU) (1) was introduced in July 2011 to prevent falsified medicines from entering the legal supply chain and reaching patients. In early 2015, the British Embassy in Switzerland and United Kingdom Trade & Investment organized a workshop in Berne, Switzerland to bring together expert stakeholders, medicines authentication experts, and other leading professionals to provide a forum to communicate the impact of the FMD in Switzerland.
	
	Switzerland is not a member of the EU and is not likely to join in the foreseeable future; however, it has a unique position in Europe, with strong business links to the UK (2, 3). In Switzerland, economic and trade relations are governed by approximately 100 bilateral agreements (4). The EU and Switzerland closely monitor each other’s legislative developments to maintain harmonious relations. At present, the EU is Switzerland’s main trading partner, and likewise, Switzerland is one of the most important EU trading partners (4).

	Bilateral trade between the UK and Switzerland is worth more than £27.4 billion a year (2), and it continues to prosper, remarked Mr. David Moran, Her Britannic Majesty’s Ambassador to Switzerland and Liechtenstein, as he opened the workshop. Mr. Moran also highlighted the UK and Switzerland’s excellence in the life-sciences sector. The UK and Switzerland share a reputation as leaders in scientific innovation, and their vibrant pharmaceutical and biotech sectors have outperformed many other industrial sectors (3). Of the European pharmaceutical industry’s total €29 billion annual R&D investment, the UK accounts for 19% while Switzerland accounts for 17% (5).
	
	

A major threat to public health and safety


	Falsified medicines are counterfeit medicines that are passed off as real, authorized medicines (1). They may contain ingredients of low quality or in the wrong doses, be deliberately and fraudulently mislabelled with respect to their identity or source, have false packaging, or contain low levels of the active ingredients, or the wrong ingredients altogether (6). In recent years, falsifications have become increasingly more sophisticated, as criminals attempt to enter them into the legal supply chain. In 2011, 30 million counterfeit medicines were seized at EU borders (6).
	
	The serious health threat posed by falsified medicines led to the implementation of the FMD (see 

),
	which came into force on 1 Jan. 2013. In parallel, the Commission started work on a Delegated Act to ensure uniformity and standardization of key safety features required by the legislation (7). The adoption and subsequent publication of this Delegated Act sets off a three-year timeline for implementation at the EU member state level (7, 8). By 2018, the full requirements are envisaged to be implemented across the region. The FMD represents a major development for pharmaceutical manufacturers, wholesalers, and pharmacists across Europe. It will, however, also have an impact on national healthcare providers and regulators.

According to Heiner Sandmeier, deputy secretary general of Interpharma, the intact supply chain in Switzerland and the absence of parallel trade were important reasons for the relatively low number of falsified medicines in the country. Sandmeier stated that the country is taking several efforts to fight falsified medicines and that the research-based pharmaceutical industry is supporting the implementation of the FMD in Switzerland. The Swiss Anti-Counterfeiting and Piracy Platform is a non-profit association with 40 members from the public sector, private enterprises, and consumer organizations. Its high profile “Stop Piracy” educational and awareness public campaigns emphasize the criminal background behind such falsification operations. In addition, the Revision of Swiss Medicines Law includes new measures relating to these issues (Art. 86/87). The imitation and falsification of medicines is clearly outlined as a criminal offence. In addition, Switzerland signed the Medicrime Convention on 23 Oct. 2011, which is the Council of Europe convention on the counterfeiting of medical products and similar crimes involving threats to public health (9). Switzerland has considered ratification, and a report by the Federal Office of Public Health (FOPH) on a Draft Implementation Act is expected during the second half of 2015.

	Sandmeier went on to describe the European Stakeholder Model (ESM), a partnership of organizations involved in the pharmaceutical supply chain, and their work on a pan-European medicines verification system (10). In Switzerland, a working group of the Refdata Foundation has started a consultation on a joint stakeholder-run verification system on the basis of the ESM. The Foundation membership includes the key stakeholders in the Swiss healthcare system.
	
	

 Practical experiences of medicine verification and authentication


	Graham Smith, commercial director at Aegate, provided further details on the directive and its technical implications. Manufacturers will need to invest to meet new requirements. Smith estimated that 47% of the total cost of compliance to the FMD would relate to tamper-evidence measures, 37% to the implementation of serialization, and 16% to authentication costs (7). However, there will be long-term benefits for the industry, as these efforts to comply with the FMD will also create a digitized network connecting manufacturers, wholesalers, pharmacies, and patients. The FMD would effectively link 10 billion prescription medicine packs across Europe, 500 million people, 150,000 pharmacies, and 4,000 manufacturers (7).
	
	In a complementary presentation, David Brindley from Oxford University discussed other opportunities that might arise as a result of the new end-to-end medicine verification system. In particular, Brindley highlighted the potential benefits for improving patient adherence. Through better understanding of patient behaviour when taking their medicines coupled with harnessing appropriate elements of the system arising from the FMD, it should be possible to make improvements. For example, the system could represent a vehicle for messaging to both patients and pharmacists. He described a UK pilot programme that was being run in conjunction with Aegate, based on their medicine verification and authentication system. The aim of the programme included an independent evaluation of and efficient integration of the company’s system into existing pharmacy software.

	Smith then provided an in-depth, practical look at Aegate’s end-to-end service, highlighting the wealth of experience that had been gained by the company across Europe and also in the United States. To date, in Europe, the Aegate system has checked 3 billion medicine packs at 15,000 dispensing points, while maintaining a round trip response time to pharmacies of 250 milliseconds (7). To develop an efficient system suitable for different national markets, Smith stressed the importance of working closely with local stakeholders, which range from working with pharmacists to ensure integration with different software platforms to working with manufacturers to help them resolve serialization data-transfer issues. He pointed out the need for any system to be able to rule out anomalous and false-positive results, as well as protecting patients from genuine dangers. He cited an incident in Belgium, where 79 packs with the same unique identifier had been found by the Aegate system (7). An investigation quickly revealed that the issue was due to a manufacturer error, and Aegate was able to ensure pharmacists were reimbursed and the manufacturer avoided an expensive recall.
	
	


	Following the presentations, the attendees discussed their own experiences and expectations regarding medicine verification and authentication. One of the concerns was the delay by some stakeholders in preparing for the FMD. It was considered imperative for all parties to make the necessary investment so that appropriate measures can be put in place as soon as possible. Other topics discussed centred on the developments in Switzerland regarding the FMD in relation to the bilateral agreements with the EU. Swiss experts at the meeting confirmed that the details of the FMD were being closely examined at an official level and details on Switzerland’s approach would be forthcoming.
	
	The meeting highlighted the importance of a comprehensive strategy to deal with falsified medicines both at the European and international level. There was a sense of optimism that ongoing dialogue between different healthcare stakeholders would help minimize this serious threat to public health.

Doing business in Switzerland: Switzerland trade and export guide

95 Years: Where tradition inspires change

		Graham Smith, “Falsified Medicines Directive,” presentation at the Falsified Medicines Directive workshop, (Residence of Her Britannic Majesty’s Ambassador to Switzerland and Liechtenstein, 3006 Berne; 29 Jan. 

The Falsified Medicines Directive: time to get it right

Changes expected to legislation on falsified medicines


	Faiz Kermani, Basel Committee Member, British Swiss Chamber of Commerce.

 When referring to this article, please cite it as F. Kermani, “Evaluating the Impact of the Falsified Medicines Directive in Switzerland,” 

Articles

As the prevalence of falsified medicines continues to increase, Switzerland is taking measures to secure its supply chain such as the implementation of serialization.

Evaluating the Impact of the Falsified Medicines Directive in Switzerland

A new round of pharmaceutical industry mergers and acquisitions (M&As) are on the horizon, judging by the series of announcements and rumours circulating the media during the first half of the year (1, 2). It was suggested that in one week of April, the total value of various rumoured deals was of the order of US$100 billion, illustrating how cash-rich major pharmaceutical companies are (2). Many of the larger companies looking for deals are themselves the product of a series of M&As that took place over the past two decades. Critics have long argued that previous mergers have not made these companies more efficient, and that their failure to achieve the growth targets promised to investors is why they continue to seek tie ups with other companies possessing lucrative blockbuster products and promising drug pipelines (3-5). Nevertheless, companies believe that such deals can add value in the long run for their shareholders. In fact, judging by stock market performance, it would appear that the major companies are performing well financially (6).

There has been particular interest in Pfizer’s series of bids to acquire AstraZeneca, which were turned down and led to intervention by UK politicians seeking assurances over local jobs (1, 7). Rumours have also circulated that AbbVie or Amgen might be more suitable partners for AstraZeneca (8). Interestingly, AbbVie has made an offer for Shire, which has so far been rejected (9). Despite not being described as a merger or an acquisition, one significant deal was a swap of assets between GlaxoSmithKline and Novartis, where the two companies exchanged parts of their oncology and vaccine businesses and also launched a joint venture for certain products in the consumer healthcare sector (1).


Historically, the pharmaceutical industry has seen sequential waves of M&As. In 1985, the 10 largest pharmaceutical companies accounted for approximately 20% of worldwide sales (3). As consolidation began to occur within the industry, the top 10 companies were able to significantly expand their share of global sales and thus dominate the international market. This trend has continued to the present day. In 2012, the global share of the top 10 pharmaceutical companies reached 42% (10). 

In many cases, the main reason for pursuing a tie-up with another company has been to improve R&D productivity, although it does not always work. By combining R&D programmes, companies believe they will be in a better position to boost new drug output in diverse therapeutic areas. When GlaxoWellcome merged with SmithKline Beecham in 2000, one of the R&D advantages cited for the deal was SmithKline Beecham’s exciting genetics research programmes (11). For Swiss-based Roche, the 2009 merger with US Genentech enabled access to the Californian company’s strong biotech R&D programme. The post-merger company’s R&D programme was considered such a success, particularly in oncology, that it led to the closure of Roche’s former US research facilities in Nutley, New Jersey (12). More recently, the 2011 acquisition of Genzyme by Sanofi has enabled the company to benefit from the smaller firm’s rare diseases R&D pipeline (13).

For pharmaceutical companies evaluating M&As, the increasing costs to develop and launch new drugs is an ongoing concern. Between 1995 to 2000, the cost to successfully launch a new drug was estimated at US$1.1 billion, but by 2002, the associated costs rose to approximately US$1.7 billion (14). Increased spending on R&D, however, does not guarantee productivity given that attrition rates (i.e., failure to enter the next stage of the R&D process) are considerable. Worryingly, the failure rate for drugs in Phase III trials that have already shown promise in Phase II trials can be as high as 50% (15). Because high drug failure rates contribute substantially to R&D costs, only bigger companies can afford to invest in large portfolios, knowing that certain drugs will not make it through to approval. Pfizer, which has grown through a series of M&As over the past decade, was previously able to manage a US$9.4 billion R&D budget in 2010. However, its merger with Wyeth was believed to have significantly added to its research costs, and the company is now trying to scale back its R&D expenses to around US$7 billion (16). 

Another reason to pursue M&As is to increase revenues to help fund larger R&D programmes as well as to compensate for lost sales from products going off patent. Merging with a company that has a different portfolio of products can strengthen one’s presence in a particular therapeutic area or even help gain quick entry into a new therapeutic area. Furthermore, because the other company is likely to be already operating in such areas, a “ready-made” sales force may be available. When Pfizer merged with Pharmacia in 2002, a major attraction was the blockbuster drug Celebrex, but it also enabled the two companies to combine their strong cardiovascular portfolios (17). 


  As the pharmaceutical market expands internationally, companies have realised that carefully thought-out M&As can open up new geographical advantages. Sanofi is one company that has used mergers in this way. The company was founded in 1973 in France and grew steadily in Europe through the 1980s through acquisitions. In 1994, it acquired Sterling Winthrop, which enabled it to enter the US market (13). In 2004, Sanofi merged with Aventis, itself a top 10 company, which subsequently positioned the merged company as a significant global player (13).

Although the pharmaceutical markets of US, Europe and Japan still represent the majority of global sales, emerging markets are growing at a faster annual rate. It has been predicted that these markets will account for nearly a third of the global pharmaceutical market by 2016 (18); therefore, companies are looking to these markets to drive their long-term growth plans. Although mergers between large organisations can offer automatic presence in emerging markets, companies have also selected local players as part of a dedicated expansion strategy. Between 2008 and 2012, the proportion of major company deals in the emerging markets was approximately 20%, with a high number of targets being sought in Latin America, China and India (19). Acquiring a domestic company can give a larger company unique insight into the local market as well as specialised infrastructure.

 Sanofi has been making a series of targeted investments to expand its sales in Latin America. In 2009, it bought the Mexican company Laboratorios Kendrick for an undisclosed sum, and then followed up with a US$660-million acquisition of the Brazilian generics company Medley, and in 2012, bought the Colombian Genfar (20). As part of its strategy to become a leader in the Chinese vaccine market, in 2011, Novartis acquired a majority stake in the Chinese vaccines company Zhejiang Tianyuan. The Chinese firm was one of the largest privately held vaccines companies in the country (21). 

One proposed merger that will shape the Indian market is that between Sun Pharmaceutical Industries and Ranbaxy, but the deal was initially halted by the High Court of the southern state of Andhra Pradesh (22). Interestingly, Japan’s Daiichi Sankyo had previously acquired a 64% share of Ranbaxy but the deal proved to be a disappointment and so the company is keen to sell its share. Ranbaxy has been struggling in the US market due to manufacturing-related problems, which have led to action being taken by the FDA (22). Daiichi Sankyo’s acquisition of a majority stake in Ranbaxy illustrates the importance of the due diligence that outside companies must perform before buying a local company. Despite the serious challenges facing Ranbaxy, Sun Pharmaceutical appears to see potential from a domestic merger. Certainly, if it goes ahead, the merged company will dominate the Indian market. 


M&As are taking place all the time in the pharmaceutical sector. Over time, the industry has become increasingly consolidated but there is no sign that this trend will slow down. Such deals have been crucial to the success of the top 10 pharmaceutical companies as they continue to seek further targets to drive expansion. A particularly important factor for these M&A plans is expansion into emerging markets, which continue to represent highly promising areas for long-term growth.
  
  

, Pharma ‘blockbuster’ rumours swirl after Glaxo and Novartis deals,” Press Release, 22 Apr 2014.
  2. Bloomberg, 

,” accessed 1 Jul 2014. 
  3. P. Danzon et al., 

Mergers and Acquisitions Have Failed to Build Value for Pharma

Grading Pharma In 2013: 16 Drug Companies Ranked

,”  accessed 1 Jul 2014. 
  8. Bloomberg, “Amgen, AbbVie Seen as Possible AstraZeneca White Knights,” Press Release, 28 Apr 2014. 
  9. 

, “Shire fends off takeover bid from US rival AbbVie with growth plans,” Press Release, 23 Jun 2014. 
  10. W. Noor and M. Kleinrock, 

Glaxo Wellcome Agrees to Acquire SmithKline Beecham for $75.7 Billion

,” accessed 1 Jul 2014. 
  12. Reuters, “

Analysis: After Roche merger, biotech tail wags big pharma dog

,”  accessed 1 Jul 2014. 
  13. Sanofi, 

2 (4) 307-313 (2010). 
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Potential Impact On R&D Of A Pfizer Takeover Of AstraZeneca

Pfizer to Buy Pharmacia For $60 Billion in Stock

,” accessed 1 Jul 2014. 
  18. Booz & Co., “

,” accessed 1 Jul 2014. 
  19. Cepton, “

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  20. Sanofi, “Sanofi to Acquire Genfar S.A., a Leader in Pharmaceutical Medicines in Colombia,” Press Release, 12 Oct 2012. 
  21. Novartis, “Novartis completes acquisition of majority stake in Zhejiang Tianyuan expanding vaccines presence in China,” Press Release, 22 Mar 2011. 
  22. 

Indian Court Temporarily Halts Ranbaxy-Sun Pharmaceutical Merger


  Faiz Kermani is a freelance writer based in France. 

A review of how mergers and acquisitions have shaped the pharmaceutical industry landscape.

No Signs of a Slowdown in Mergers

The threat of antibiotic-resistant bacteria has long been recognised as a public health concern, but the dramatic growth of the problem has alarmed governments, healthcare organisations and the pharmaceutical industry (see 

). The latest regional data show that each year, approximately 125,000 deaths in the EU are caused by drug-resistant bacteria (1). Furthermore, infections due to multidrug-resistant bacteria in the EU result in extra annual healthcare costs of €1.5 billion, thereby putting additional strain on healthcare systems (1). In light of these figures, there is widespread acknowledgement that the antimicrobial resistance threat has been underestimated and that strong measures must be taken to rectify past mistakes in dealing with it. 

Table 1: Pan-European data on antibiotic resistance.

Source: Data from the European Centre for Disease Prevention and Control (1). 

One of the trends that unfortunately accompanied the rise in antimicrobial resistance was a steady decline in R&D for new antibiotics. One by one, the major pharmaceutical companies began to exit the antibiotic development field, due to lower perceived returns on investment, and switch to more commercially attractive therapeutic markets. In the absence of any incentives to continue investment in R&D for antibiotics, this pattern has continued to the present day (2). Since 2009, only two new antibiotics for antibacterial infections have been approved by the Food and Drug Administration (FDA) in the US (2). The contrast with previous eras for antibiotic development is striking. Between 1983 
and 1987, 16 systemic antibacterial agents were approved (3). At present, the majority of industrial R&D for antibiotics is being conducted by small and mid-sized companies, which have limited resources to bring new products to market. 

To improve the situation, new R&D models are being created that represent partnerships between different companies, academic institutions, regulators, patient groups and other interested stakeholders. These efforts have been backed by the European Federation of Pharmaceutical Industries and Associations (EFPIA), which has made novel antibiotic development a high priority area (4). Future R&D will again involve the major players in the pharmaceutical industry, but it will take considerable time for any efforts to translate into new clinically useful drugs.

In Europe, the Innovative Medicines Initiative (IMI) is the largest public-private initiative aimed at speeding up the development of new drugs. IMI serves as a neutral party and builds networks of industrial and academic experts for dedicated projects. Funding comes from the European Commission’s Seventh Framework Programme, which is matched mainly by contributions from EFPIA member pharmaceutical companies. 

Although it works across different therapeutic areas, much is expected from IMI regarding the development of new antibiotics to treat resistant infections (5). In 2013, €223.7 million was invested in the antimicrobial resistance program, with €114.7 million coming from EFPIA member companies (5). The COMBACTE project, focused on new ways of designing and implementing efficient clinical trials for novel antibiotics, is one element of this effort. COMBACTE is also part of the New Drugs for Bad Bugs (ND4BB) initiative, IMI’s wider program to target bottlenecks in the development and effective use of novel antibiotics (5, 6). Another part of the ND4BB initiative is ENABLE (European Gram Negative Antibacterial Engine), which involves more than 30 European universities and companies, led by GlaxoSmithKline and Uppsala University (6).


In response to this bleak outlook of antimicrobial resistance, policy and regulatory changes are being considered to encourage the development of new antibiotics by the pharmaceutical industry (7). European regulators and policy makers are increasing their collaborations with each other to create a more conductive R&D climate, as well as tackle existing antimicrobial resistance.

The European Medicines Agency (EMA) is participating in a number of initiatives, particularly international efforts, to limit the development of antibiotic resistance and envisions an important role for regulators in promoting the development of novel antibiotics (8). One high profile initiative is the Transatlantic Task Force on Antimicrobial Resistance (TATFAR), which aims to increase levels of communication, coordination and co-operation between the EU and the US on human and veterinary antimicrobials (9, 10). Its taskforce includes representation from the European Commission, the European Centre for Disease Prevention and Control (ECDC), EMA, FDA, the US Department of Health and Human Services and the National Institutes of Health (9, 10).

In 2012, the taskforce published its first report on the issues in this area and a list of recommendations to be monitored for progress. To ensure that the recommendations will result in concrete actions, TATFAR has requested an extension of its mandate for an additional two years (9, 10). Further monitoring of the recommendations will take place followed by a face-to-face meeting to review implementation of the recommendations and consider the next steps. Among the recommendations, TATFAR stated that policymakers should strongly consider the establishment of significant incentives to stimulate antibacterial drug development. However, this was an open recommendation and since no specific implementation from TATFAR’s side was required, it is unclear how the plan will be implemented and monitored. Nevertheless, prompted by the work of TATFAR, EMA and FDA have had discussions on the exchange of information on possible approaches to drug development for bacterial diseases where limited drugs are available (10). Both agencies are now working on guidelines in this area.

As a separate initiative, the European Commission held a one-day “Joint Conference on Antimicrobial Resistance: State of play of the five-year action plan” in December 2013 (11). The conference, which involved representatives from member states, international organisations, European stakeholders associations and third-world countries, served as a midterm review of the Commission’s own actions to combat the threats from antimicrobial resistance. Among its aims is a more effective EU regulatory framework to facilitate the authorisation of new antibacterial agents.

To further coordinate regional action, European Antibiotic Awareness Day, organised by the ECDC in collaboration with the European Commission, is being held annually on 18 November (1). This European-wide public health initiative provides information to both prescribers and the public in different countries and features the announcement of the latest pan-European data on antibiotic resistance (see 

). The European Antibiotic Awareness Day has received high profile support from EMA and EFPIA (1, 8). 


After years of complacency and inactivity regarding antibiotic resistance, the field of novel antibiotic development is receiving a welcome boost through initiatives involving numerous stakeholders. Although the commitment to rectify past mistakes is clearly evident, it will take considerable time to develop new antimicrobial drugs and bring them to market. This current state will be the real test whether the new R&D, regulatory and policy frameworks are fit for purpose. In addition, measures will need to be taken to ensure that the new antibiotics are reserved for situations where no alternatives exist and that other measures to control antimicrobial resistance are not overlooked.

Genetic Engineering and Biotechnology News, “

B. Spellman et al., Alliance for the Prudent Use of Antibiotics, “

New Antibiotic Development: Barriers and Opportunities in 2012

EFPIA contributes to IMI €223.7 million programme to tackle Antibiotic resistance

COMBACTE, Combatting Bacterial Resistance in Europe,

B3C Newswire, “€85 Million European Programme Targets Novel Antibiotics,” Press Release, 12 Feb 2014.   

Antibiotic Development and Market Failure: No Quick Fix

Transatlantic Taskforce on Antimicrobial Resistance - TATFAR

Update on the implementation of the recommendations made by TATFAR during the first year after the endorsement of its report

Joint Conference on Antimicrobial Resistance: State of play of the 5-year action plan

Faiz Kermani is a freelance writer based in France.   

With the rising threat of antibiotic resistance and a diminishing R&D pipeline for novel drugs, Europe must step up its game to address this growing problem.

Boosting New Antibiotic Drug Development in Europe

Medical progress is reliant on discovering and developing new medicines. The pharmaceutical industry remains the dominant force in bringing new medicines to patients due to its high investment in R&D. Furthermore, its position as a high-technology sector means that it is both an important contributor to the economy and an industrial employer.

The European pharmaceutical industry accounts for nearly 40% of the global industry’s R&D investment, with the United Kingdom and Switzerland being major centres for pharmaceutical companies (1). The success of the UK and Switzerland in enabling the pharmaceutical industry to thrive is shown by the fact that, together, these two countries account for more than a third of European R&D investment. 


The productivity of the pharmaceutical industry depends on its ability to discover new drugs and advance high-quality candidates into clinical development. At present, companies spend approximately 21% of their total R&D budget on drug discovery (1). The UK sector has a particularly enviable track record in this respect, with approximately seven of the top 100 medicines in use today having originated from research in the UK (2). This wealth of discovery expertise in the UK is not only present in the pharmaceutical industry but also in the CRO sector, which has grown to support companies in their drug-development activities.

The pharmaceutical industry is facing an increasing number of hurdles in bringing its drugs to market, such as higher R&D costs coupled with a high degree of attrition when developing products. In addition, the industry faces commercial pressures such as imminent patent expiries and reimbursement difficulties, not to mention the impact of the global economic downturn. Some of these pressures have persuaded companies to take extreme measures, such as closing down R&D sites. Between 2009 and 2011, for example, 14 R&D sites were closed in the European Union (3). In the UK, the 2009 to 2011 period caused a considerable shift in the industry landscape, with 19% of R&D sites closing down (3). 

Although companies are responding to the pressures by closing R&D sites, they still need to support their ongoing drug-development projects to maintain productivity. Consequently, there is increasing reliance on the CRO sector to provide the necessary expertise. As a result, the value of the outsourcing market is growing rapidly. Recently, it was predicted that the value of the global drug-discovery outsourcing market would reach $14.9 billion in 2014 (4). An alternative estimate puts the value of the global drug-discovery outsourcing market at nearly $25 billion by 2018 (5). 

Despite the difficult global economy, the drug-discovery CRO sector is expected to prosper. Over the next five years, it is predicted that close to half of the global drug-discovery research in the pharmaceutical industry will likely be carried out by third parties, such as CROs (5). It is, therefore, not surprising that new CROs are entering the market to deal with the increasing demand for drug-discovery services. Many are highly specialised in new, innovative technologies that the pharmaceutical industry has previously been hesitant to invest in or has been unsuccessful in capitalising upon. 


Given their existing positions as major centres for pharmaceutical R&D, UK and Switzerland share many common points with respect to drug discovery. In February 2014, UK Trade & Investment (UKTI) held two events in Switzerland entitled “Early stage drug discovery partnering with CROs from the UK” to highlight the available collaboration opportunities with UK companies in innovative drug discovery.

The UKTI events were held in Basel and Geneva to involve all types of drug-development organisations operating in Switzerland, ranging from the major multinationals to small start-ups and non-profit organisations. Representatives from five British CROs (Aurelia Bioscience, Charnwood Molecular, XenoGesis, Reach Separations and Source Bioscience) gave presentations on their companies’ offerings and then participated in a roundtable discussion on the future of outsourcing for drug discovery. As highlighted by UKTI, these companies represented the diversity and dynamism existing within the UK’s life-sciences sector (see 

Table 2: UK CROs that participated in the UKTI events

Supply   of biochemical and cell-based compound screening expertise.

Services include drug   discovery services (parallel library synthesis and design, lead   identification and optimisation), preparing key intermediates and multi gram   scale-up.

Specializes   in preclinical drug metabolism and pharmacokinetics (DMPK), quantitative   bioanalysis and expert interpretation

Wide range of   chromatography based services, from analysis and purification of chiral and   achiral compounds to bespoke hardware customization and installation.

International   diagnostic, and genetic analysis and stability storage business serving the   healthcare, life science research and pharma markets.

The participating CROs are based in Nottingham at BioCity, one of the UK’s leading bioscience incubators. BioCity Nottingham currently hosts more than 70 businesses working in the life-sciences sector, covering all stages of drug development as well as support activities, such as regulatory affairs and legal services. The CROs highlighted their experience of collaborating with international partners, including the Swiss pharmaceutical sector. The CROs also explained how they often collaborated with each other when working with clients to provide a broader range of integrated services covering different stages of drug development.

It is now widely accepted that the rising complexity of pharmaceutical R&D and its associated expense means that it is no longer possible for one organisation to cover all the necessary tasks for drug discovery in-house. Therefore, collaboration between multiple parties, particularly with CROs, has become an accepted option. Large pharmaceutical companies have outsourced many of their activities to CROs to better control their costs and manage resources, but also in the hope of finding innovative solutions to the research problems that they have been unable to resolve in-house. For smaller drug-development companies, outsourcing allows them a means to access specialist expertise that they do not possess and would be too expensive to maintain permanently in-house. 

Overall, there is a continuing need for companies to identify poor-quality compounds early in the discovery process to prevent progression to more expensive and advanced stages of testing (3). The European Federation of Pharmaceutical Industries and Associations (EFPIA) states that, on average, only one to two of every 10,000 substances synthesised successfully pass all stages of development to become a marketable medicine (1). In particular, the stage between the completion of preclinical research and the launch of clinical trials is a crucial period. It has even been referred to as “the valley of death” because so many projects fail during this time (6). Therefore, if CROs can show even a minor improvement in early-stage drug failure prediction, this will result in significant time and cost savings for their clients and thereby improve future business opportunities with their clients (3). 


As noted by presenters at the UKTI events, while many CROs were considered only as one-off service providers in the past, with cost being the deciding factor, today’s collaborations with the pharmaceutical industry are increasingly taking the form of partnerships. In many cases, CROs have established long-term relationships with their clients. This has meant that the practical lessons from one drug-discovery project can be applied to others, thereby, improving communication and facilitating innovation for the product pipeline. The shift towards greater partnerships between the two sets of parties has been helped by the fact that many personnel in the CRO sector previously worked in the pharmaceutical industry. 

There was great interest from those in the Swiss pharmaceutical sector in expanding their collaboration with CROs from the UK’s life-sciences sector. The presenters noted that some within the pharmaceutical sector still need to be convinced that CROs can provide them with value, namely through helping improve productivity, but stated that drug-discovery outsourcing was here to stay as evidenced by the rising market value for the sector.

The UKTI events highlighted how the international pharmaceutical industry is changing its approach to R&D and increasingly relying on outsourcing for drug discovery. Given their historic strengths in drug discovery and continuing investment in this field, the UK and Switzerland are ideal partners for future collaborations in discovering and developing new medicines.

XenoGesis: Discovery DMPK in the Rapidly Evolving R&D sector. Early stage drug discovery partnering with CROs from Nottingham, UK

,” presentation at UK Trade & Investment (Basel, Switzerland, 26 February 2014).  

The global drug discovery outsourcing market will reach $14.9BN in 2014

The New Trends of Global Drug Discovery Outsourcing 2013


Faiz Kermani is a freelance writer based in France. 

The international pharmaceutical industry is changing its approach to R&D and is increasingly relying on outsourcing for drug discovery.

Drug Discovery Partnerships between UK CROs and the Swiss Pharma Sector

The pharmaceutical supply chain is a high-value business, with all those involved constantly scrutinising how the chain operates and what implications it will have on commercial activities. As with all buyer/supplier relationships, there has always been some degree of conflict between European supply chain participants, but this has intensified since 2006.

Traditionally, manufacturers sold their products to wholesalers, who then competed among themselves to become the main suppliers to pharmacies. A more recent trend established in the UK, however, is for companies to use a directtopharmacy (DTP) model, where companies sell their products directly to pharmacies and appoint a limited number of logistic service providers (LSP) to deliver the medicines on their behalf. Pfizer implemented such a model in 2007 and a number of other pharma companies have also set up similar agreements in the UK.

A 2009 survey of pharmacists, however, revealed that 74% of respondents were unhappy with the UK DTP system.

  In general, these critics believe that the distribution system will deteriorate because of DTP.

  For instance, some pharmacists say Pfizer's DTP system has led to problems with accessing Pfizer drugs for customers, while others claim they have received letters restricting the number of drugs they can order. Pfizer has disputed these comments and denied placing any restrictions on order sizes, and, despite the criticisms, has renewed its DTP agreement for 2010.

With profits being limited by government costcontainment measures and expiring patents, many pharma companies believe that changing their distribution arrangements makes commercial sense. In addition, companies have become increasingly irritated by parallel trade and are determined to gain control over the supply chain, which DTP will enable.  

DTP has huge implications for those distributing pharmaceuticals and because of this, wholesalers in the UK have attempted to fight back and have placed their hopes in the British government to do so (wholesalers hoped that the government would support the notion that DTP was anticompetitive after earlier findings by the UK Office of Fair Trading showed that DTP could have some detrimental effects e.g., an increase in costs of medicines for the National Health Service). In May 2008, however, the UK government announced that there had been no change in the services offered to patients caused by Pfizer's DTP arrangement and that a decline in standards was unlikely in the foreseeable future. It ruled out taking any legal steps to prevent DTP, but did state that it would keep the matter under review.

  The pharma industry, on the other hand, seems confident that the major legal hurdles have been overcome as companies continue to take steps to modify their distribution arrangements in the UK. 

While some pharmaceutical companies have adopted the DTP model, others have decided to simply reduce the numbers of wholesalers they conduct business with.

  In April 2009, Bayer Schering Pharma announced it would be distributing some of its UK products under a new reduced wholesaler model. BristolMyers Squibb adopted a similar arrangement in August 2009; two distributors now supply most of the company's products, but a number of lines are only be available from BristolMyers Squibb directly. Some observers believe that this type of arrangement is much quicker to implement than the DTP model.

  Reducing the number of wholesalers also helps reduce internal costs for manufacturers and, by only dealing with a few wholesalers, may create more manageable business relationships.  

In the early days of DTP, associations representing wholesalers were at the heart of the battle to defend the traditional supply change system, but they have now started to back away from this position. This was the case for Groupement International de la Répartition Pharmaceutique (GIRP), which is the European Association of Pharmaceutical Full-line Wholesalers. GIRP sent a letter to the UK's Health Ministry suggesting that DTP arrangements might harm public health and was subsequently taken to court by Alliance Boots, an international distributor based in Switzerland that is involved in DTP arrangements. Eventually the two parties came to an understanding, with GIRP taking the position that specific contracts, signed by a particular member, would not be considered to be proper matters for action or opinion by the organisation.

  The adoption of a neutral position by trade organisations appears to remove a major obstacle for the future expansion of DTP. 

Following the developments in the UK, DTP models are now beginning to make their way into Poland. Since 2009, AstraZeneca has been the main driver in trying to introduce DTP into the Polish pharmaceutical market, and has selected Polska Grupa Farmaceutyczna, Torfarm and Farmacol to be its exclusive distribution partners. Up to seven other companies are also believed to be selecting distribution partners in Poland as part of DTP agreements.

  The changes are predicted to reshape the Polish wholesale market, which has already experienced a wave of consolidation, and further pressurise smaller wholesalers. According to media interviews with the President of AstraZeneca Poland, Jerzy Garlicki, the launch of a DTP scheme has been a success.

  He stated that more than 80% of Poland's 1300 pharmacies omitted wholesalers when buying at least one of the company's products during the first 2 months of the scheme. 

However, AstraZeneca's DTP model has run into opposition from Poland's Main Pharmaceutical Inspectorate, which states it may be breaking the country's Pharmaceutical Law and the Law on Health Benefits,

  which are designed to ensure access to pharmaceuticals and requires their delivery on equal terms to all parties in the distribution chain. In addition, in May 2009, Poland's Office of Competition and Consumer Protection summarised its findings concerning contracts between distributors and several major pharmaceutical companies including GlaxoSmithKline, SanofiAventis, Servier, Novartis, AstraZeneca, Novo Nordisk, Pfizer, Eli Lilly, Roche and Bayer. 

If DTP is to succeed then AstraZeneca will need to be prepared for legal battles with the authorities, in a similar manner to what happened in the UK. If DTP does manage to gain a foothold in Poland, however, then it is highly probable that pharma companies will attempt to introduce the model elsewhere in the EU. 

At present, European wholesalers have been unable to resist the moves by pharmaceutical companies to tighten their grip over distribution systems. One of the reasons for this is the inability of wholesalers to present a united front against the pharmaceutical industry. Essentially, for those wholesalers who become preferred partners for pharmaceutical companies, the new distribution models guarantee business and will help them dominate the wholesaling market. As such, these companies become less inclined to oppose the supply chain changes, leaving the resistance up to the companies who lost out.  

The establishment of new relationships with select wholesalers, however, will lead to a new type of distributor, formed through the consolidation of bigger wholesalers with DTP deals with major pharma companies, instead of lots of smaller wholesalers. As they gain power in these relationships and expand their portfolio of business interests across Europe and beyond, they may not let pharmaceutical companies have everything their own way. 

Partly in response to complaints from smaller wholesalers, there are also likely to be further official investigations into the merits of DTP models. As long as pharmaceutical companies can demonstrate that such moves improve distribution efficiency and do not result in visible increases in healthcare costs for European governments and anti-competitive practices, however, they will probably continue to take bolder steps in this direction.  

1. F. Kermani, The Future of Pharmaceutical Distribution in Europe (Urch Publishing, UK, 2010).  

2. "Other companies consider distribution shake-up" in 

3. Pharmaceutical Services Negotiating Committ, "Distribution of Medicines" (2009). 

4. D. Andalo, "Wholesale: ripples made by Pfizer" in 

5. Pfizer, The New Distribution Arrangement (2010). 

7. Dispensing Doctors Association, "Government Responds to OFT Medicines Distribution" (2008). 

8. Dispensing Doctors Association, "DTP & RWM Schemes updated again" (2010). 

9. Bristol-Myers Squibb Pharmaceuticals (BMS) announces change in distribution arrangements (Pharmaceutical Services Negotiating Committee, June 2009). 

10. Alliance Boots, "GIRP and Alliance Boots announce settlement agreement and withdrawal of claims" (2009). 

11. Business Monitor International, "AstraZeneca's DTP Scheme Shows Strong Uptake" (2009).

, "More pharma firms to adopt DTP in Poland" (2008). 

Many pharmaceutical companies in the UK have adopted a direct-to-pharmacy distribution model, which enables companies to more tightly control their supply chains.

Pharma Takes Control Of Distribution Chains

Bringing a new drug to market remains a costly and lengthy process, with current estimates suggesting that it takes approximately 15 years and as much as $1 billion to successfully develop a drug.

  Although huge amounts of money have been invested in drug development, particularly clinical trials, improvements in success rates have been inconsistent at best. A continuing problem is that clinical trials are unable to keep pace with the large number of new compounds emerging from discovery research and that the systems used for prioritising candidates remain unsatisfactory. Many investigational new drugs fail in clinical testing because they do not behave pharmacologically as predicted by preclinical studies.

  For example, efficacy failures may be caused by a low concentration of drug reaching the target for an inappropriate amount of time, whereas safety failures may be caused by an inappropriate concentration reaching the wrong target for too long a time period.

Failure during clinical development is an expensive burden to bear. According to information cited by the FDA, a novel compound entering Phase I trials has about an 8% chance of eventually reaching the market, with the success rate being even lower for those in the oncology field.

  The low success rate has been linked to the high number of new candidates exhibiting different mechanisms of action that need to be validated clinically, the lack of predictive preclinical models and problems relating to clinical trial design. Unfortunately, 75% of the costs of drug development are associated with compounds failing in the early stages of development.

Certain authors believe that improvements have been made in some areas of early clinical testing, particularly where drugs failed because of unanticipated differences in drug metabolism between laboratory animals and humans. For instance, in 1991 approximately 40% of the drugs entering Phase I trials failed because of such reasons,

  but by 2000 failure due to unexpected differences in drug metabolism had dropped to 10%. This was linked to the development of non-animal and computer modelling methods.

  Unfortunately, 40–60% of drug failures in Phase I are still associated with the inability of preclinical models to predict what happens when a drug enters humans.

A better understanding of the characteristics of candidates emerging from discovery is desirable before they enter Phase I trials. If attrition rates in Phase I can be improved, this will save valuable time and resources and have a positive impact on the efficiency of latter clinical development stages. This is particularly important for smaller companies whose financial future is at stake when embarking on a clinical programme. 

The interest in rethinking the way early clinical development is approached has led to the idea of exploratory or so-called Phase 0 trials. This concept has attracted the interest of pharmaceutical companies and regulatory bodies both in the US and Europe. 

Phase 0 trials represent early clinical studies that focus on the traditional gap between preclinical and clinical testing phases.

  As first-in-man trials they should involve a very limited number of healthy volunteers or patients. The participants would be exposed to the drug at a reduced level in comparison with traditional Phase I studies and for a very short duration.

  Phase 0 trials are not intended to have a therapeutic effect, but examine whether the drug has appropriate pharmacokinetics and pharmacodynamics to warrant further clinical investigation.

  As such, they will not replace traditional dose escalation, safety and tolerance studies. 

In 2004, the European Medicines Agency published a position paper examining the possibility of exploratory trials involving a single dose of a compound using microdose techniques.

  The agency defined a microdose as less than 1/100th of the dose calculated to yield a pharmacological effect of the test substance based on primary pharmacodynamic data obtained 

  and the FDA has also settled on this explanation of a microdose.

  Ultrasensitive analytical techniques, such as positron emission tomography and accelerated mass spectrometry will be required to guarantee that drug and/or metabolite concentrations can be determined at these extremely low doses.

  The European Medicines Agency also outlined that the total amount of test compound(s) were not to exceed 100 micrograms.

The position paper stated that an extended single-dose toxicity study in only one appropriate mammalian study would be considered appropriate for the microdose human trial to proceed if justified by comparative 

  Given the use of microdoses, the likelihood of clinically significant toxicity has been considered unlikely and this has led to the idea that the use of Phase 0 trials might mean reduced preclinical safety packages.

  The optimal scenario would be for such studies to reduce the preclinical work required and to reduce the time required to move to Phase I testing. Phase 0 trials would ideally make available data on the drug's characteristics in humans earlier than has typically been the case, thus providing senior managers with better information before making important decisions on a drug's future. 

The first specific feasibility study of the Phase 0 strategy, outlined by guidelines from the FDA, was conducted by the US National Cancer Institute.

  The drug investigated was ABT-888, which preclinical studies had suggested inhibited Poly (ADP-ribose) polymerase (PARPs), thereby inhibiting DNA repair and potentiating the cytotoxicity of DNA-damaging agents.

  The Phase 0 results for ABT-888 were considered to have been helpful when planning for Phase I and further clinical studies. For example, the feasibility of twice daily oral dosing as well as proof of mechanism were shown and information was also generated on a potential study biomarker.

Since the ABT-888 Phase 0 trial, other companies have embarked on similar types of studies; however, the results of these studies are not yet widely available. In addition, questions have been raised about the ethics of Phase 0 trials, since they are not designed to offer clinical benefit.

  This is particularly the case when it comes to oncology, since patients may be seriously ill. There may also be confusion from the subject about the goals of the trial since Phase 0 studies do not follow the traditional approach to clinical drug development. Some authors have suggested that volunteers may be incentivised to participate if Phase 0 trials are shown to reduce drug development time,

  but since few studies have been run it is not possible to verify this.  

Although a number of Phase 0 trials are being conducted by the pharmaceutical industry, some supporters of exploratory studies believe that many companies are still avoiding this approach out of fear. In 2007, Colin Garner, the CEO of the UK microdosing service firm Xceleron, criticised companies for relying on gut feeling when rejecting the idea of Phase 0 trials, rather than factual information.

  He explained that Xceleron had worked on 40 different molecules and generated Phase I data for 11 of them. Furthermore, he concluded that there was very good correlation between microdose pharmacokinetic and pharmacologic pharmacokinetic properties. According to the interview, Phase I trials typically cost between $5 million to $10 million whereas microdosing studies were in the order of $500000.  

Although Phase 0 is an additional cost on top of Phase 1, it can provide earlier information about a drug, which in turn will give pharma companies more confidence in the project and help them to be better prepared for future studies.  

There is a need for new approaches to evaluate promising new drug candidates in a manner that rules out failures as early as possible in the drug development process. Both the European Medicines Agency and FDA have published position papers exploring new ideas and technologies in the field of drug development, and the FDA also runs its Critical Path Initiative to deal with the increasing difficulty and unpredictability of product development.

  Both agencies have recognised that Phase 0 trials offer a promising approach to better understanding a new drug before it enters Phase I trials and beyond. However, many companies are awaiting formal recommendations from the agencies before using Phase 0 trials as part of their drug development strategy. 

is a freelance consultant and President of the Global Health Education Foundation, a 501 (c) (3), a non-profit charity that supports medical education and research projects in developing countries. He is a member of 

1. Association of Clinical Research Organizations, "Drug Development Process" (2009). 

5. Boston Consulting Group, "Rising to the productivity challenge: a strategic framework for Biopharma" (2004). 

6. Fund for the Replacement of Animals in Medical Experiments, FRAME UK, "Testing novel drugs in animals" (2010). 

7. European Medicines Agency, "Position paper on non-clinical safety studies to support clinical trials with a single microdose" (2004). 

9. Outsourcing Pharma, "More Phase 0 studies needed to sway 'conservative pharma'" (2007). 

10. FDA, "FDA's Critical Path Initiative" (2010). 

Phase 0 studies, though not widely accepted, could effectively bridge the gap between preclinical and Phase I studies, and reduce the number of drug failures owing to differences in drug behaviour between animals and humans.