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EC's surprise inspections

The EC has been knocking on the doors of pharmaceutical companies to conduct surprise inspections; the agency will be looking specifically for signs of anticompetitive behaviour in the form of restrictive business practices or abuse of a dominant market position.

Read more at: pharmtech.com/antitrust

Improved growth forecast

After forecasting a grim fate for pharma earlier this year in terms of 2009 growth (just 2.5–3.6%), IMS has announced a happier forecast for 2010; the research firm expects the global pharma market to grow 4–6% to reach more than $825 billion.

Read more at: pharmtech.com/growth

Pharma's R&D trends

Earlier this year, the 2009 Edition of the CMR International Pharmaceutical R&D Factbook was released. Pharmaceutical Technology Europe spoke to the Commercial Development Manager at CMR International, Thomson Reuters, to find out some of the key trends that have been witnessed.

Read the exclusive interview at: pharmtech.com/reuters

The profit of counterfeits

The European Fine Chemicals Group (EFCG) has revealed some disturbing facts regarding counterfeit APIs; an estimated 20–30% of off-patent medicines in EU pharmacies are falsified at API level. At a press conference, Guy Villax, a member of the EFCG Board and CEO of Hovione (Portugal), explained that: "Falsified medicines is a business more profitable than heroin, and in most countries it is not legislated as a crime."

Read more at: pharmtech.com/EFCG

H1N1 vaccine approvals

The EMEA has granted marketing authorization to three vaccines against H1N1 influenza. The products concerned are Celvapan (Baxter), Pandemrix (GSK) and Forcetria (Novartis). The approvals follow the positive recommendations from the EMEA's Committee for Medicinal Products for Human Use and the EC has said that sufficient vaccines should now be available before the start of the flu season.

www.emea.europa.eu

Back to basics for pharma

Many UK pharma companies are turning to basic business skills training to help them emerge from the recession stronger than before. In particular, pharma companies are looking to leadership skills and IT skills to keep their businesses running smoothly.

Read more at: pharmtech.com/basics

Space-age drug detection

Researchers at a UK University have combined crime research and spaceage technology to create a new method of detecting counterfeit pharmaceuticals. The lowcost technique detects differences in the characteristics of light reflected from printed packaging and does not require the manufacturer to undertake any special measures.

An exclusive interview regarding this technology can be read at: pharmtech.com/detection

Pfizer–Wyeth united

Following the completion of the $68billion acquisition of Wyeth by Pfizer, the new combined company has begun operations. Pfizer has also outlined its executive leadership team and organizational structures for commercial operations and R&D.

Read more at: pharmtech.com/united

Pharma's troubles are deep-rooted

The recession may have hit many players in the pharma industry, but a report from Capgemini believes that the current economic climate has brought an "unexpected respite" by highlighting the importance of cost reduction. However, the report has also revealed that the industry's problems are rooted much deeper than the recession.

Nathan Blaney/Getty Images

Cost containment is not a new topic; for years the industry has discussed the need for consolidation of sales force staff and manufacturing sites. "The recession is just the latest of a series of influences necessitating better ongoing cost control," according to Capgemini's Vision and Reality Report 2009.

Other factors encouraging a tightening of finances include lack of innovation, the advent of patent expiries, and pressures from the government and third-party payers for cheaper drugs. "All these trends mean that the life science industry's drive to reduce its cost base is much more than just a fad," said the report. It also added that cost control is one of the most viable ways of improving profitability.

Compared with other industries, the pharma industry is weathering the downturn pretty well, and those that have cash to spare are benefiting from cheap mergers and acquisitions. However, the reduced spending of governments and health insurance companies has decreased pharma revenues and accelerated the move to generics. Additionally, many pharma companies have been affected by financial difficulties faced by suppliers and distributors. As a result, pharma needs to contain costs if only to have cash available for absorbing bad debts, bailing out suppliers or acquiring competitors.

But of course, the recession is not the only issue driving cost containment. One of pharma's biggest problems is patent expiries and competition from generics. According to the report: "approximately $100 billion of pharmaceutical sales could be lost between 2007 and 2011 as a result of patent expiry and competition from generics". The problem is further exacerbated by a lack of innovation; approvals have declined significantly in recent years and new products are not coming onto the market fast enough to replace those going off patent. Additionally, the cost-starved environment has affected funding for R&D and greater regulatory scrutiny has also impacted the industry. The report explained: "additional regulatory requirements will unavoidably increase development costs, forcing companies to look for savings in other areas".

As these problems are related to industry trends, Capgemini believes that they "can be expected to remain relevant long after the upturn".

So, if these problems won't go away once economic recovery gathers momentum, what is the solution? According to the report, most firms are waiting for the "next innovation cycle" and very few are seeking to completely change their business model, which may be what is required to adapt to the new business landscape. "If we do not seek to transform ourselves now, by the time the next innovation cycle arrives it may be too late," said the report. One of the biggest challenges for companies will be avoiding a 'growth at any cost' mentality. The report recommends maintaining a focus on cost control, and building and maintaining a common organizational culture, which may be challenging with the increasing M&A activity.

Today's cost pressures are here to stay and lasting changed will need to be implemented to control costs and adapt to the new business environment. "The companies that succeed will be those that identify the transformational journey early and then ruthlessly drive its implementation," said the report. "For the pharmaceutical industry in particular, failure to do so may mean that when the markets recover, the pharmaceutical index reverts to underperforming the global index because other boats can ride faster with the incoming tide."

www.capgemini.com

Value of outsourcing must be measured

If management cannot quantify the financial contribution of outsourcing to their business, what are they basing future outsourcing decisions on? This is the question Pharmaceutical Technology Europe (PTE) put to Matt Havens, Director of Europe for Cognizant's Business Consulting Group following the unsettling results of a major research report they conducted with Warwick Business School, investigating Csuite attitudes to outsourcing.

In the previous issue (October) of PTE, we reported that less than half of CIOs and CFOs in Europe have tried to calculate the impact of outsourcing to their business. If this is the case, then on what basis are they making outsourcing decisions? According to the recent research, 78% of survey respondents who cut back on outsourcing last year did so because of 'unclear value for money', yet they had no real evidence to support their decision. "Senior executives appear to be making outsourcing decisions based upon short-term cost cutting with little consideration for the longer term financial benefits," Havens told PTE. He added: "While achieving the predicted cost savings is a crucial part of outsourcing, the payback shouldn't stop here. By properly measuring the return on outsourcing (ROO) over the short and longer term, companies can reduce expenditures and apply cost saving to initiatives that drive ongoing process improvement, business innovation and transformation."

So, what is the best practice for assessing the value of outsourcing in the pharma industry? To properly measure outsourcing's impact, Havens believes that businesses require a form of ROO methodology that captures benefits along three dimensions:

• Innovation (the basis of future benefits, valued financially).

• Process optimization (quantified and valued with time).

• Total cost of ownership (reflected in IT budgets and IT accountability).

"Value along all three of these dimensions should be addressed as part of the planning process and tracked through the life of the initiative. This should enable both the client and the vendor to see the business value and cost advantages from the deal, understand the operational conditions and best practices that lead to long-term success, and ensure they are fully realizing the operational and financial benefits of outsourcing initiatives to most effectively compete against leading companies in their industry," said Havens.

"The evolution of an outsourcing project can, and should, in many cases, begin with cutting operational costs through labour arbitrage. With time, it should gain operational flexibility, adding and subtracting third-party resources as needed to deliver additional cost savings. As financial performance improves, the cost savings can be reinvested into strategic initiatives that enable even greater operational efficiency and support future growth initiatives," Havens added.

He summarized: "Companies must, therefore, work with an outsourcing partner who understands how to create and measure the most value from each project, and help you communicate that value internally."

www.cognizant.com

www.wbs.ac.uk

www.quantifyingoutsourcingbenefits.com

Exclusive: change presents an opportunity for new partnerships

Reactions to the turbulent times facing the pharmaceutical and biotech industries can be seen on a daily basis. In particular, we are seeing fewer fully integrated companies and a sharp rise in the number of partnership formations.

A meeting was recently held in Lindau, Germany to discuss the changing face of pharma and biotech, and how companies can best prepare to face the challenges ahead. Hosted by Vetter, a number of experts presented on some of the most pertinent issues affecting the industry, including: changes in the regulatory environment for drug products; the multiple challenges associated with supply chain management; and effective management of and collaboration with CMOs.

To read more, please go to: pharmtech.com/partnerships