Are CDMO’s Reducing Drug Development Costs?

Posted: November 18, 2019

API Manufacturing and Pharmaceutical Manufacturing

Recently Life Science Leader interviewed the author of the book, “Drugs, Money and Secret Handshakes,” about how prices of drugs are determined and who’s involved.  The author, Robin Feldman, is the Arthur J. Goldberg Distinguished Professor of Law at the University of California Hastings. She doesn’t mention CDMOs in the book but what she had to say in the interview resonated with me. 

In a system where pharmaceutical company CEOs are incentivized to raise drug prices in order to boost their company’s stock price, and middlemen jack up prices so they can get their cut, she talks about “The Lone Price Deflators”—the drug development and outsourcing industry, namely CDMOs. Yes, us. This article provides some insight based on that interview and our experience.

Who are the lone price deflators?

This is what Ms. Feldman says:

“I ask this in all seriousness: Are we the only component today in the meandering chain of events that is dedicated to reducing the price of drugs? CDMOs of all sizes and models, and at global locations, exist so biopharma companies can develop and manufacture drugs at reduced pricing.”

She gives these reasons for how CDMOs reduce drug costs:

  1. “The CDMO industry is competitive. There are no extraordinary pricing models. We operate on fee-for-service, FTEs, quantities of material delivered, the direct cost of raw materials, plant time.”
  2. “Our supply chains and delivery routes don’t delegate to intermediaries tacking on additional pricing that then feeds reciprocal (and agreed upon) price increases throughout the chain.”
  3. “CDMOs have added technology, expanded services, integrated, streamlined, undertaken lean and quality initiatives, all to be as profitable as possible by reducing costs for themselves and their biopharma customers.”

Additional ways Seqens North America cuts drug development costs

She’s right. In fact, the CDMO market came into being for the purpose of lowering development and production prices, which is why pharma companies outsource to us.

The rest of this article will focus more specifically on how Seqens North America lowers the high cost of drug development.

The #1 cost-cutting technique: put in more the effort up front

Everyone is always in a hurry to get projects done—ourselves included. However, spending more time in the lab at a cost of $7,500 a week to assure each process works before moving to the next step is far less costly than rushing to the GMP manufacturing plant and finding problems there. At a cost of $75,000 per week, it’s far more expensive to troubleshoot at this late stage than at earlier stages of development.  Verified R&D steps followed by scale-up is the only way to go for companies wanting to keep a lid on overall project costs.

Sponsors occasionally ask us to skip the scale-up step and move right into the GMP manufacturing plant to save time. That’s a terrible idea.  It can easily wind up costing significantly more, not less, and take more time, which sponsors often consider even worse.

Why? Unpleasant surprises sometimes crop up when scaling up. If caught early, processes can be reworked at a lower cost. It can save quite a bit.

Efficiencies that help lower the price of drugs

We have always made an effort to be more efficient at every step of drug substance development. For example, for certain projects in order to save R&D costs, we collaborate with a trusted partner in India that can do the work there at about half the cost of doing it here. However, in order to protect our sponsors’ IP—which we guard carefully–we have the lab in India do only the early product development, the non-GMP steps.  The higher value, more technically complex steps are done in our own labs.

It’s a win-win-win all around: the customer saves, we can keep to an aggressive timeline, and our partner in India gets a nice piece of business. We employ that model when appropriate to keep projects on track.

On the analytical front, we play to our strengths. Our core expertise is in process chemistry and chromatography.  Other functions we leave to the experts, outsourcing operations such as microbiological Nuclear Magnetic Resonance (NMR) and metals testing to those who have the equipment and can perform there tests most expeditiously.

On the other hand, when it comes to methods development, we found we have far more in-house expertise in developing the science than exists elsewhere.  It’s an area we focus on. We know our customers. We know FDA requirements. It’s what we do very well

We have also determined the key analytical processing steps that keep costs down, which we’ve written about previously.

Ongoing process improvements that fuel efficiencies

We are efficient but we grow more efficient every day.  How we improve as we create new chemistry is an ongoing internal process.  It’s always discussed at our weekly production meetings.  But we don’t just talk about it. We score every batch on three performance indicators: quality, yield and cycle time and we look for an average score of 90 or better on all three. A lower score triggers a review. Quality and yield usually pass with flying colors. If it’s cycle time that doesn’t score well, we get down to the bottom of why things took longer in the plant than anticipated. Was is the raw materials? Labor to run the process? A maintenance issue?  

Technology additions and upgrades

In the last few years we have added a great deal of new technology driven by projects and customer needs. We’re not afraid to make an investment as we’ve done with large-scale chromatography, or new filtration and purification equipment. Time is money, and if we can do something faster or more efficiently, we do it.

I am proud to realize Seqens North America—and the CDMO industry in general—is a part of the solution:  lowering the high price of drugs. It’s something we should talk more about.

About the Author

Ed Price CEO of PCI Synthesis
Ed is President & CEO of SEQENS North America (formerly PCI Synthesis). He serves as a co-chair of the New England CRO/CMO Council and sits on the Industrial Advisory Board for the Department of Chemical Engineering at UMass, Amherst. Ed is also a long standing member of the American Chemical Society and advises the Bulk Pharmaceutical Task Force of the Society of Chemical Manufacturer’s and Affiliates (SOCMA)...

Do you have questions? Talk to Ed.