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44 May 2015 Tablets & Capsules Every week or two, another mer - ger or acquisition—either between pharma companies or their suppli- ers—is in the news. Last year saw a surge in deals, some driven by tax benefits and others by a new strat- egy. The attempt of Pfizer to acquire AstraZeneca and of AbbVie to buy Shire foundered only because the USA tightened its tax code. That rewrite also shifted the M&A game, and companies are now pursuing new and more narrow therapeutic areas because they offer more opportunity to dominate a particular disease and maximize ROI. As mergers continue, in-house R&D will shrink and many compa- nies are tightening their focus and invoking the term "measurable results." Many are also divesting in- house manufacturing, and only a handful of drug or biopharma prod- ucts are made solely within a com- pany's vertical infrastructure. It's now common to outsource the APIs, product manufacture, and packaging. That's good for contract manufactur- ers, which are growing, but the com- bination of more M&A and outsourc- ing doesn't bode well for innovation. Worldwide, pharma companies are flush with cash, much of it kept overseas to avoid US taxes. But the cash isn't idle. It's invested in promis- ing discoveries, offshore manufactur- ing, and foreign-based clinical trials and development. That reduces investment in R&D here and dimin- ishes our industrial infrastructure. As a result, the remnants of our domes- tic companies are now sales and mar- keting units. Discovery and innova- tion are left to others. Perhaps Valeant's business strategy is the new model: Focus on acquisitions that expand the portfolio and avoid the need for research. Generic manufacturers are not immune to this change, and many of them have been acquired and consol- idated into companies based in the USA, Israel, India, and China. While many generics bear the name of a marquee domestic company, all the manufacturing and packaging were done overseas. Contract manufacturers grow The rise of new and larger con- tract manufacturers is another trend. The acquisition of Anderson Brecon by Packaging Coordinators (PCI) is one example. The big contract man- ufacturers (PCI, Sharp, Patheon, Catalent, etc.) offer not only packag- ing, but also API manufacturing, clin- ical trial support, and compounding. The result, I predict, will be less innovation in pharma, fewer new packages, and supply chains that are more susceptible to problems. Yet innovation in both drug dis- covery and packaging is sorely needed to address the chronic ail- ments of aging populations in the USA, Europe, and Japan. Too many drugs are still delivered in packages developed 75 years ago, and those are difficult for aged patients to use and don't allow physicians to moni- tor their patients' progress over extended periods. Smart packaging—which has yet to reach the mainstream—offers new opportunities to improve treatment outcomes. How much better would healthcare be if pharma packaging enriched communication between the patient, pharmacist, and physi- cian? Adherence-promoting packag- ing—pouches or blisters that hold multiple drugs and describe the dis- pensing regimen, for example—is available, but hasn't been adopted. Has M&A activity caused companies to shift their focus from the patient and clinical outcomes to revenue optimization and internal efficiency? The new drugs targeting specific therapeutic areas, such as hepatitis C, require an extended course of treat- ment. But these new treatments will likely be packaged using old tech- nologies, just as the treatments for Crohn's disease, HIV, and other major ailments are. A good deal of the packaging technology used today is 10 to 15 years old. Forthcoming treatments for fibrotic diseases, can- cers, and other afflictions should use innovative packaging to improve delivery, adherence, and outcomes. In fact, we need to break the out- dated packaging mold, but I see no evidence that anything new is in development. Sadly, I foresee an extended period of only incremental improvement in packaging and drug delivery. T&C [Editor's note: To comment on the Back Page, visit www.tabletscapsules. com.] Edward J. Bauer, author of The Pharmaceutical Packaging Handbook, held global responsibility for packaging at Abbott (Ross Products Divi- sion), Wyeth, and Bausch and Lomb before he retired in 2011. Today, he con- sults in association with Packaging and Technology Integrated Solutions, Havi Global Solutions, 3500 Lacey Road, Suite 600, Downers Grove, IL 60515. Tel. 269 806 4566. Website: www.ptisglobal.com. His article, "Packaging's contribution to patient adherence and cost containment," appeared in the May 2014 issue. b a c k p a g e The impact of M&A on innovation