Planning a Successful API Procurement Strategy

Editor’s note: A version of this article was published in Pharmaceutical Technology Europe’s APIs, Excipients, and Manufacturing  Supplement.

For more information, please visit Lianhe Aigen.

The age of “blockbuster” medicine, when the market was ruled by multibillion-dollar drug manufacturers producing a small number of products in large quantities, has begun to expire. With its decline comes a new, more complex marketplace that favours generic drugs over branded giants, personalized therapies over one-size-fits-all medicine, and novel formulations and drug delivery systems over traditional approaches.

The result is an increasingly diverse and more complex industry. Small- and mid-sized drug development companies are vying to offer differentiated and innovative drug products in a crowded market. Such innovation requires increasingly specialized and hard-to-find APIs. Small, lean companies that specialize in pharmaceutical development, not supply chain logistics, often struggle to source unique ingredients from manufacturers around the world under aggressive timelines and in quantities suitable for each stage of development.

Intensifying regulatory pressure adds to these challenges. Previously, regulatory authorities focused primarily on the purity and integrity of the drug product itself; today’s health authorities have extended their reach to incorporate a product’s entire chain of custody. In the United Kingdom, the Medicines and Healthcare products Regulatory Agency recently prioritized supply chain integrity in its five-year corporate plan (1). The European Commission’s November update to its Guidelines on Good Distribution Practice of Medicinal Practice for Human Use also reflects a drive toward global traceability. Also in November , the US Congress enacted the Drug Supply Chain Security Act, giving the US Food and Drug Administration (FDA) enhanced abilities to enforce elevated trackability and product verification standards.

These guidelines demonstrate how regulators have extended oversight over the entire supply chain, leading to a higher incidence of compliance actions. The number of warning letters issued in the United States more than doubled between and (Figure 1).

Drug companies grappling with the challenges of API procurement must not only manage their own quality systems, but also must ensure the quality of their supply chain, including elements outside of their control. An API manufacturer with poor infrastructure or improperly applied standard operating procedures (SOPs) can introduce consequences for the entire drug development process, putting developers at risk for regulatory sanctions. Collectively, these challenges risk knocking even the most visionary drug development companies to the sidelines, struggling with API quality, logistical issues, or the complications of regulatory approval.

By understanding the challenges involved in sourcing hard-to-find APIs, developing transparent and scalable manufacturer relationships either independently or with support from a qualified expert, and maintaining end-to-end regulatory approval, drug developers can avoid unforeseen quality, logistical, and regulatory roadblocks.

Looking for a niche API in a haystack

The 505(b)(2) accelerated drug approval pathway was enacted in the Hatch-Waxman Amendments of the US Federal Food, Drug, and Cosmetic Act to encourage innovation in the development of new formulations, indications, or delivery systems for existing active ingredients. Under the pathway, drug companies can use safety and efficacy information for APIs from studies of previously approved agents, allowing them to stretch the value of existing clinical knowledge and unlock novel drug applications.

Today’s startup culture-enabled by modern technology and a surge in expired patents and exclusivity agreements-is behind an increase in 505(b)(2) applications (Figure 2). This competitive move toward innovation provides consumers with more treatment options; however, drug companies pursuing the 505(b)(2) pathway may have difficulty finding small batches of hard-to-find ingredients for research activities.

Many large, established API manufacturers do not offer the modest quantities that 505(b)(2) innovator companies need to sustain R&D programmes. A less-established manufacturer may not have the infrastructure or expertise to produce an unfamiliar compound; developing that infrastructure takes capital that API manufacturers may not be willing or able to devote to a 505(b)(2) project, especially for a modest batch size.

Securing a hard-to-find API in a low volume requires an understanding of the current API manufacturing landscape. Subscription databases that track API-manufacturer capabilities and meetings at trade shows with API manufacturers may be cost-prohibitive for small players without in-house procurement capabilities.

Scaling up supplier support

A small drug company may be able to find a manufacturer to supply a small quantity-say 50 kg-of a niche API for efficacy and safety testing. After that testing is complete and the formulation has proven successful, the drug company must contact the API manufacturer for a larger order-perhaps 750 kg-to prepare for commercialization. The original batch size of 50 kg is too small; running 15 batches of that size would take too long and cost too much. A request to increase volume to five batches of 150 kg may not be readily met.

Companies that pre-qualified the API manufacturer by discussing scale-up requirements early on are in a good position. The manufacturer has bought into the expected growth curve and has the spare capacity to fulfill orders through every developmental phase.

Those companies are in the minority. Due to competitive pressures, many companies focus on testing and shepherding their product through R&D. Few are aware of the proper questions to ask when negotiating future capacity with a manufacturer, which often results in unpleasant late-stage discoveries: the API manufacturer doesn’t have the capacity to scale, or they do but only with additional instrumentation and validation. Suddenly, the whole project is at risk. 

Finding the right partner to match the phase of development and grow with the developing drug is crucial and can be difficult, without specific expertise.

You cannot afford non-compliance. Period.

While a drug in development has unique API, batch size, and financial requirements, all companies face similar challenges with regulatory oversight and identifying compliant API manufacturers. Assuming a manufacturer is competent because it has a customer list can lead to a false sense of compliance.

For more API Pharma Serviceinformation, please contact us. We will provide professional answers.

Even more reassuring is a facility with a certificate of good manufacturing practice (GMP), which drug companies can research using databases such as the European Medicines Agency’s EudraGMP or FDA’s Inspection Classification Database Search.

Having customers-or holding a certification-should not be a threshold of quality assurance. Have those customers filed complaints? Is the certification out of date? Is the manufacturer fraudulently claiming the identity of a certified establishment? A regulator’s inspection report is no guarantee of compliance; it’s not a promise. It’s just one of many factors to consider when developing a potential vendor’s risk profile.

The other factors require more digging to uncover. This difficult task makes it tempting for a small company to believe that an aging GMP certificate guarantees compliance. Sometimes it does, but when it doesn’t, the consequences can be catastrophic. The API could be snarled in importation paperwork, sustain damage from improperly controlled temperatures, or be out of specification when it arrives, rendering it unusable. These outcomes could lead to stalled production, expired patents, lost investment, and a shredded reputation. Such doomsday scenarios are rare; however, digging-or due diligence-can eliminate the possibility of catastrophe.

It’s likely not possible to visit every potential manufacturer; digging comes down to asking the right questions early and from afar. What SOPs are in place to ensure proper cleaning and sterilization in the facility? How are temperature specifications determined and controlled? How are products labelled? How are they transported and stored? How are rodents and other pests eliminated? How are staff trained and evaluated? How are deviations and complaints handled? What software is used and is it validated? How are data backed up and how often?

These questions are not about the manufacturing process per se, but rather about the ancillary systems that support it. These systems make up a manufacturer’s holistic quality management protocol, and together paint a picture of that manufacturer’s integrity. The best way to ensure that a product will arrive a high-quality, compliant compound with a transparent chain of custody is to do this digging or hire an expert to do it. The cost may pinch at first, but better the discomfort of a pinch today than the knock-out punch of catastrophe later.

Proceed with caution

It’s hard to move fast in the drug development space, even on the 505(b)(2) pathway. Pre-qualifying a manufacturer for a specialized, low-volume API supply can slow down the process. Moving APIs from another global location to a facility takes domain expertise, experience with regulatory protocols, and access to the right players at the right time. Regulators will inspect every node in the chain of custody; drug companies must know that chain well and trust it completely.

Drug companies with large in-house sourcing and procurement teams can perform these functions internally. Smaller companies-operating without such a team-should follow this piece of advice: find a way to become, to hire, or to partner with a supply chain expert.

Becoming a supply chain expert will require time, which must be siphoned away from the original purpose of developing a novel drug therapy. Hiring an internal sourcing team is a good option, if that bandwidth is available. For most companies, partnering with an API procurement and supply chain expert is the most cost-effective route, particularly if that expert has a strong quality assurance programme and incorporates on-site audits as part of its assessment criteria. These are specialists that understand regulations and have strong manufacturer relationships around the globe, which means small companies can negotiate like big ones, and those new to regulatory scrutiny are assured of continuous compliance.

Whatever the chosen approach, the key is to obsess over every detail throughout the supply chain, leaving nothing to chance, and taking no manufacturer’s assurance of competence or integrity at face value. Don’t gamble the success of an innovative new drug on a suspect supply chain; trust API procurement to those with the expertise to manage it.

References

1. Medicines and Healthcare products Regulatory Agency, Corporate Plan – (April 24, ).
2. FDA, Compliance Data Dashboard, accessed Aug. 15,  .
3. GlobalData, Intelligence Center, globaldata.com.

About the Authors

Selwyn Lustman is senior vice-president global sourcing and procurement; Lina Cogan is senior director of global sourcing and procurement; and Hamilton J. Lenox is senior vice-president, business development, all with LGM Pharma.

Article Details

Pharmaceutical Technology
Supplement: APIs, Excipients, and Manufacturing
October
Pages: s34–s36

Citation

When referring to this article, please cite it as 

S. Lustman, L. Cogan, and H. J. Lenox , “Planning a Successful API Procurement Strategy," Pharmaceutical Technology APIs, Excipients, and Manufacturing Supplement (October ).

About 1.1 million people live with HIV in the US.1 Their weakened immune systems make them especially vulnerable to Pneumocystis pneumonia (PCP), an opportunistic infection that causes fever and chest pain. Mercifully, cases of AIDS-related PCP have declined steeply since the s. The story of that decline includes a significant footnote with an unusual name: 505(b)(2).

That’s the accelerated regulatory pathway that developers used to fast-track approval of Pentamidine, a medication originally indicated for sleeping sickness before its reformulation into an aerosolized dosage form to treat and prevent PCP. Therein lies the core strength of a 505(b)(2) filing: it invites developers to modify an existing drug, giving it a new purpose without having to reproduce years of pre-existing safety and efficacy studies. On the 505(b)(2) pathway, drug companies can move a product from development to FDA approval in as few as 30 months—a great improvement over the sluggish timelines typical of more traditional approval pathways.

Drawn by the appeal of lower costs and improved velocity, more drug companies are choosing the 505(b)(2) approval pathway today than ever before (see Figure 1).

If you want to learn more, please visit our website Small Molecules Pharma Service.

Fast does not equal easy, though. To succeed on the 505(b)(2) pathway, drug companies must navigate enormous complexity. Much of that complexity comes from pressure to source the hard-to-find active pharmaceutical ingredients (APIs) needed to support novel reformulations. Developers must try to find a manufacturer who will meet their API demand, then handle importation under intense regulatory scrutiny. This isn’t easy to accomplish, even for developers with well-established sourcing and procurement teams. Smaller developers without such in-house capabilities have an even greater challenge ahead.

Overcoming those challenges requires a keen understanding of API procurement. By obsessing over every detail of each phase, or by partnering with an expert who will do the obsessing for you, you’ll be better prepared to navigate the logistical and regulatory complexity ahead as you prepare for a successful 505(b)(2) drug development process.

The challenges of API sourcing

Is it better to pay a premium for a large-scale, well-established API manufacturer, or to trust a lesser-known entity offering an API supply at a lower cost?
The answer isn’t simple. Many large-scale manufacturers have the infrastructure to supply your hard-to-find APIs, but your company may not be large enough to hold their attention. If you do get a response, they may not be willing to accommodate the low volume you require. Trying to negotiate with these titans of the manufacturing world can feel, to a new drug developer, like standing at the foot of a mountain with no way up.

An API manufacturer with a comparatively modest operation might seem more approachable. You make a few calls, and pretty soon you find a manufacturer who can supply your startup quantity—say, 50 kilograms a batch—on your timeline. So you sign along the dotted line, part with a substantial sum of money, and return your focus to your research (at last!), satisfied that your API procurement problem is solved.

Except it’s not. What happens if your API manufacturer is a fraud, claiming the identity of a certified establishment? Or what if your APIs languish at the border, the result of improperly completed importation paperwork? Or what if your API supplier doesn’t have a valid U.S. Drug Master File (DMF) you can reference in your regulatory filing? Or what if those APIs make it all the way to your doorstep, only to be out of specification by the time you receive them? The consequences would be catastrophic. Stalled production. Lost investment. Worst of all: the risk of a compliance action taken against your company, shredding your reputation.

That last risk is formidable, and very real. Regulators around the world have dramatically expanded their reach. The European Commission’s update to its Guidelines on Good Distribution Practice emphasizes global traceability as a key factor in preserving quality, saying that it aims to “ensure control of the distribution chain and consequently maintain the quality and the integrity of medicinal products.”2 At the same time, the U.S. Congress enacted the Drug Supply Chain Security Act (DSCSA), giving the FDA enhanced abilities to enforce trackability and product verification standards. And just last year, the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) announced that supply chain integrity would be a priority in its five-year corporate plan.

What do these new and updated guidelines tell us? Regulators are widening their field of view, searching for signs of poor quality not only within a drug company’s own systems, but across the entire chain of custody. This increased regulatory oversight has led to an alarming uptick in compliance actions. Just look at the number of warning letters issued by the FDA against US drug establishments over the last ten years (see Figure 2).


Remember these numbers when you’re about to sign an agreement with an API manufacturer. How well do you really know them? Are you absolutely assured of the quality of their systems, the integrity of their products, and their capacity to meet the constantly shifting and increasingly global regulatory standards according to which your own success (or failure) will be determined?

If these questions give you pause, here’s what to do next.

How to minimize API supply chain risks

Taking time out to manage the logistics of a global chain of custody can feel a lot like hauling an extra weight in a neck and neck footrace. It’s difficult, it takes time, and its mismanagement could cost you your spot on the podium.

The key is to hold yourself and your API manufacturers to a standard that exceeds even the highest regulatory expectations. In other words, don’t just comply. Be a compliance over-achiever, demonstrating integrity and quality at every stage and in every part of the process.

When it comes to your API manufacturer, this process has three stages: Pre-qualification, Negotiation, and Communication.

Pre-qualification: How to assess quality

Develop a questionnaire that goes (far) beyond the obvious. When questioning an API manufacturer, many drug companies make the mistake of focusing almost exclusively on the manufacturing process itself. Quality issues don’t often originate there. Instead, they originate in the Quality Management Systems (QMS) that support the manufacturing process. You need to ask the right questions in order to reveal how those systems work—or how they don’t.

Ask about the standard operating procedures (SOPs) that govern cleaning and sterilization, for example. Ask about environmental monitoring and clean room/gowning procedures. Ask about raw material testing and supplier qualification procedures, change control management, product labeling, storage, and transportation. Ask to review staff training programs and procedures for handling customer complaints, deviations, and investigations. Look into their data integrity standards, including their record of software validations and back-ups. Request access to their DMF for your API. If they can’t provide it, ask if they have approved DMFs that are referenced in other regulatory submissions to ensure they successfully can support a DMF for your API.

By examining these and other adjacent systems, you’ll begin to develop a sense of each manufacturer’s integrity and commitment to quality far beyond the manufacturing process itself.

Do substantial research. It’s important to ask potential manufacturers for documentation that reveals their QMS, but that doesn’t go far enough to protect yourself from fraudulent representation.

To do that, you need to substantiate your manufacturers’ claims by conducting your own independent research. Dig through databases like EudraGMP (maintained by the European Medicines Agency) and the FDA’s online resources, looking for red flags (warning letters, import alerts, product recalls, etcetera) as well as signs of sustained compliance, such as certificates of Good Manufacturing Practice (GMP). Only by cross-referencing a manufacturer’s own documentation with these third-party sources will you arrive at a confident picture of your potential manufacturer.

Conduct an on-site qualification audit. There’s no substitute for assessing quality at the source. In-person inspections eliminate the possibility of fraud or subterfuge and create opportunities for honest and lasting supplier relationships, leading to more fruitful negotiations down the road. They’re simply a good, if not essential, step in the pre-qualifying process. 

Use your on-site audit to validate the self-reported details that your manufacturer provided via your questionnaire. Look for signs that they are properly controlling quality systems including their production environment, their staff training, and their protocol for maintaining data integrity. Although it’s an expensive and time-consuming activity to take on, seeing a facility first-hand is the only way to ensure that your manufacturer operates just as they’ve described on paper.

Negotiation: How to protect your future needs

Discuss your scale-up requirements. Once you’re confident in the quality systems and procedures inside your potential manufacturer’s facility, you need to understand whether or not they can grow alongside you. This is critical.

As we’ve established, lesser-known API manufacturers are often more willing than their larger counterparts to produce low-volume APIs for drug developers in the early stages of R&D. With this benefit comes a potential consequence: as you progress towards commercialization, it’s possible to outgrow your API manufacturer’s capacity. What happens when you need to scale your batch size from 50 kilograms to 250 kilograms, and your manufacturer can’t scale with you? You either accept the higher costs and longer lead-times required for multiple smaller-scale batches, or you’re shunted to the beginning of this whole painstaking search, jeopardizing your timelines and your budget.

To avoid this, open a dialogue with your potential manufacturers early in the evaluation and selection process. Ask about spare capacity, average capacity utilization, future expansion plans, etcetera. Can they fulfill orders through every one of your anticipated project phases, particularly if those phases move quickly on the accelerated 505(b)(2) pathway? Can they move and scale as smoothly as you’ll need them to? To avoid a painful bottleneck, discuss these questions before sealing the deal.

Establish a quality agreement and a service/supply agreement. Every good relationship is governed by a good document. Employees and employers have contracts. Homeowners and banks have mortgage papers. Drug companies and manufacturers have formal agreements—or they should, if they’re interested in managing risk and ensuring good outcomes.

A strong quality agreement lays the groundwork for quality assessments by defining roles and responsibilities, and by establishing the frequency and format of communications between you and your manufacturer. What quality-related documents will you expect to receive, and how frequently? How often will you return to your manufacturer for on-site audits? Codifying answers to these questions in the quality agreement will ensure that both you and your manufacturer remain vigilant, proactively eliminating mistakes and deviations before they put your project in danger.

The service/supply agreement complements your quality agreement by outlining the terms of your business arrangement. If preventing expensive errors is the main object of the quality agreement, then preventing expensive misunderstandings is the main object of this one. Use it to define your work orders, establish pricing thresholds, and forecast your expected year-over-year demand. This is where you formalize those scale-up discussions from the previous step, laying out your expected requirements in detail and attaching costs to each phase of growth.

The payoff of a good service/supply agreement is improved clarity, which you can maintain by updating your forecasts on a regular, predetermined schedule. Perhaps demand for your product surges, and your manufacturer needs to add a dedicated production line to keep up. Or, conversely, a competitor plunders your market share and you need to reduce your annual API order by half. Using the terms defined in your supply/service agreement, you can discuss these shifting needs while there’s still time to co-develop a proactive strategy.

This is the stuff that strong relationships are made of, and strong relationships, in the brisk and unpredictable world of API procurement, are often your best defense against failure.

Communication: How to ensure ongoing manufacturer commitment

Meet with your manufacturer regularly. These regular meetings, whose frequency will depend on your project’s timeline and the nature of your API needs, are defined in your service/supply agreement and should become a core tenet of your strategy for quality control and assurance.

For example, your agreement might require a bi-weekly meeting conducted virtually, during which you expect to review out of specification (OOS) results, details of any investigations and deviations, corrective actions taken, timing and logistics for API shipments, and upcoming project demands. These regular meetings may involve analyzing the quality of an intermediate as well, giving you the opportunity to spot a potential deviation before it puts your product at risk.

All of these details should be carried out as mutually agreed in your service/supply agreement in order to foster transparency and responsible risk management practices between you and your manufacturer.

Bottom line: For the ultimate risk-proof plan, trust an expert

The 505(b)(2) pathway is as risky as it is fast. Chief among those risks is the problem of sourcing good-quality, hard-to-find APIs from a manufacturing world noisy with promises, not all of them reliable. This article gives you some key advice to help you navigate these risks, but the best advice is yet to come:
Don’t do it alone. 

It’s true that partnering with an API sourcing and procurement specialist incurs upfront costs. That’s enough to deter many drug companies facing enormous financial pressure. Fair point. Many can (and do) find success through a DIY approach to supply chain management by following the steps described in this article.

Many others don’t, though. Avoiding the upfront costs of partnering with a specialist is, in many cases, not an avoidance at all—it’s simply a delay. Those costs will circle back, often many times higher. They’ll take the form of logistical obstructions, poor API quality, deferral of commercial launch, or a compliance action against your company. This is a doomsday scenario, and it might not happen to you—but “it might not” carries an oppressive weight in a world as consequential as that of drug development. “It might not” is very close to “it might.” Far too close for comfort.

The right sourcing and procurement specialist has already completed the work described above. They have a pre-qualified list of API manufacturers. They know where to find the ones that can meet your supply chain needs, and how to negotiate the best deal for you. They are expert navigators of global regulatory requirements, and will help ensure a smooth journey from concept to regulatory approval. They know how to turn “it might not happen to you” into “it absolutely won’t,” giving you the means to take advantage of the 505(b)(2) regulatory pathway without succumbing to any of its risks. 

References