Tablets Capsules


Issue link:

Contents of this Issue


Page 54 of 55

When I began organizing CDMOs into a nonprofit trade association 3 years ago, I didn't expect that my short-form response to, "What do you do for a living?" would be, "I'm a lob- byist for the pharmaceutical industry." Sure, I enjoy the gasps that my reply elicits, but I'm quick to clarify what the CDMO sector does vis-à-vis the rest of pharma. I also didn't expect that the policy initiatives that the Pharma & Biopharma Outsourcing Association (PBOA) has proposed would bring me (and the industry) into closer contact with the FDA and Congress. Nonetheless, I now have a much deeper understanding of the industry, and there's a lot more under the surface that affects how CDMOs function within pharma, including what gets made where. A lot of people have been asking me how the election of Donald Trump will affect the CMO/CDMO sector. While my default response repeats William Goldman's famous saying about Hollywood—"Nobody knows anything"—my new perspec- tive enables me to take a stab at it. (I reserve the right to backtrack from any and all predictions.) First, some people have told me they're concerned about the fate of foreign-born scientists, formulators, and technicians. They fear that elec- tion season sentiment against illegal immigration may manifest itself in laws that make it more difficult for non-US scientists to get work visas here. One CDMO executive told me there could be a "trickle-up" effect: As the available talent pool dimin- ishes because of a bar on visas for sci- entists, in-house pharma companies might poach US staff from CDMOs or outbid them for prospective tal- ent. Such a trend could drain some expertise from CDMOs and create an advantage for CDMOs operating outside the USA. Another major concern stems from how, during his campaign, the president talked up economic protec- tionism, criticized globalization, pro- posed slapping high tariffs on com- panies that "move jobs overseas," and named and shamed automotive and aerospace companies in his tweets. Meanwhile, the Republicans, with a majority in Congress, are planning to revise the tax code in a way that could have a big impact on compa- nies with global supply chains. And if there's an industry that relies on global supply chains, it's pharma. The GOP's lead proposal calls for a border adjustment tax (BAT) and a reduction in the corporate tax rate, along with—probably—a tax holiday on earnings held overseas when they're repatriated. One version of the BAT calls for exempting US companies from paying tax on exported products while eliminating tax deductions for the products, ingredients, and services they import into the USA. Depending on whether and how a BAT is implemented—the devil is always in the details—it could upend the manufacturing base for solid dosage drug products, which are pre- dominantly made overseas. A tax hike on imported drug products could also increase costs throughout the healthcare system. How might that affect CDMOs and the overall manufacturing land- scape? It depends on the CDMO's business structure. A domestic CDMO likely doesn't import very much, since ingredients and other components tend to be supplied by the customer. But a BAT could wal- lop non-US CDMOs who have US clients if it increased their clients' costs drastically. The impetus for the BAT seems to be that bringing manufacturing jobs back to the USA will make America great again, but pharma's global sup- ply chain isn't simply a result of tax breaks or cheap labor in other regions. Nor does the USA have the infrastructure to handle all its pharma manufacturing domestically. The number of facilities that self- identify as non-US manufacturers of generic APIs is almost seven times higher than the number of domestic facilities. Could a combination of a BAT and punitive tariffs lead some generic drugmakers to source their APIs domestically? Sure, but there isn't enough capacity to absorb a wholesale "on-shoring" of the API industry. Moreover, switching API suppliers on all those generic drug applications (as well as branded ones) could lead to an FDA/tech-transfer bottleneck as sites undergo inspec- tion. While the ratio of domestic-to- overseas companies that self-identify as generic finished dosage form sites is less skewed—40 percent domestic and 60 percent non-US—it's unlikely we have the domestic manufacturing to increase it much. T&C Gil Roth is presi- dent of the Pharma & Biopharma Out- sourcing Associa- tion (PBOA). Tel. 201 788 7994. Website: PBOA is a nonprofit trade group that represents CMOs and CDMOs with the FDA, Congress, and other stakeholders. b a c k p a g e BAT signal

Articles in this issue

Links on this page

Archives of this issue

view archives of Tablets Capsules - TC0317