Could you give some background to the Pharma & Biopharma Outsourcing Association (PBOA), its main objectives, and how it realizes them?

PBOA was established in 2014 and is dedicated to representing Contract Manufacturing Organizations (CMOs) and Contract Development and Manufacturing Organizations (CDMOs). We have worked with the FDA to negotiate the second five-year iteration of the Generic Drug User Fee Authorization (GDUFA) and developed a new financial model that will be less burdensome for contract manufacturers. As part of that, we restructured the allocation of the Finished Dosage Form (FDF) facility fee under GDUFA.

This has been the major accomplishment for the PBOA to date. As a result of these undertakings, we have evolved as an association, and our membership has grown to about 25 companies, with several more planning to join in 2017. As we’ve grown to become the point of contact for the CMO/CDMO sector, we are working with groups such as PhRMA, Bio, GPHA and others to organize a concerted industry-wide response to FDA’s Quality Metrics initiative. We have also helped with serialization efforts to ensure that contract manufacturers are prepared for the big Drug Supply Chain Security Act (DSCSA) deadline in November 2017.

What are the positive changes heralded by GDUFA II?

For CMOs under GDUFA I, companies were paying an annual FDF facility fee regardless of whether there was an approved ANDA, simply if there was a pending generic drug application referencing a site. They were also paying the same flat fee as an in-house generic FDF facility, despite the differences between those two business models. By eliminating “fee-before-first-approval,” GDUFA II will permit CMOs to enter the space without putting a great financial burden on them years before they would ever see revenue from a generics client. We also included a CMO tier within the FDF facility fee structure so that facilities that do not produce an ANDA owned by their parent company pay one third of what a “non-CMO” facility would pay, and a reduction of the overall portion of GDUFA that will be covered by FDF facility fees, from 56% of the total budget down to 20%. These changes will positively affect the shape of the industry, while also lowering barriers for contract manufacturers to enter the generics space.

Growth rates for contract manufacturing have been much higher than that of the pharmaceutical and biopharmaceutical industries. Could you elaborate on this trend and the rapid growth of the industry?

Large pharmaceutical companies have grown better at outsourcing and now understand the advantages better. It has become a much more accepted business model and much more complementary to pharmaceutical supply chains. Another key growth driver includes the move years ago in which large-scale commercial contract manufacturers began to work on the development side. This is beneficial for a number of companies that can now acquire business in the early phases of a project and remain the preferred partner through to commercialization. This model has probably accounted for some of the growth in the CMO sector.

Another area of growth will be drug delivery technologies. One of the biggest problems within the industry on the innovator side is a lack of bioavailability. Some of our members are working on advanced technologies that will get these molecules into a better position. We empower innovation, even if we are not innovators ourselves.

What are some of the main advantages PBOA offers its members?

PBOA’s members get the direct access we have been building with the FDA, as well as first knowledge about draft guidance in the pipeline, expert analysis of legislative and regulatory trends, help getting their names out in the segments in which they operate, speaking opportunities at major industry events, access to member-only conferences and webinars, and input into our representation of the sector. We are also working to develop and proliferate best practices through the industry, and are building business solutions partnerships with vendors to the CMO/CDMO sector.

How will the drive to shift more manufacturing into the U.S. affect the contract manufacturing sector?

The Republican party has talked about a Border Adjustment Tax (BAT) as part of their broader tax reform concept, which would mean that domestic companies importing goods and services will no longer be able to deduct those costs from their tax base, while they would also not be charged tax on revenue coming from exports. If a CMO is based outside of the U.S. but is manufacturing for a customer based in the U.S., that would un-level the playing field financially. Even a domestic CMO manufacturing primarily for U.S. markets may see pressures if its clients are importing most of the ingredients that they deliver to the CMO for formulation.

The infrastructure simply does not exist to make everything in the U.S. – it is a globalized supply chain, and extremely complicated. The common perception is that outsourcing involves cheap offshoring, but this is not the case in the pharmaceutical industry. Pharmaceutical companies are simply not able to do certain things as efficiently or effectively as a CMO, and may not want to invest in niche technologies. Making sure that the administration and Congress understand the complexity of global supply chains is going to be very important for PBOA going forward.

What are the main priorities for PBOA and its members for 2017 and beyond?

As with every industry, we are currently in somewhat of a “wait and see” mode. The number one uncertainty remains industrial policy and tax reform in the U.S. and how that may impact the industry’s direction. PBOA is engaged in lobbying and educational efforts, making sure Congress can better understand the shape of the industry and why outsourcing is of value to the U.S. healthcare system.