As seen in the August 2011 edition of Life Science Leader magazine.
By Paul Arhanic, Colin Vickers, and Chris Albani
Today’s global pharmaceutical industry faces multiple threats to profitability and growth — including the patent cliff and pressures from payers and governments to contain costs. To succeed in this complex environment, many pharma companies are globalizing their R&D. Not only are they entering new markets to drive fresh revenue growth, but they are also extending clinical development into emerging markets to bolster clinical trial recruitment and global patient access. Pharma executives eagerly await a future of regulatory harmonization — the establishment of one global filing standard — to support these goals.
Harmonization promises to benefit drug companies by allowing the use of common data and standards for regulatory filings, thus simplifying the filing process and accelerating approvals. This translates into lower costs and faster access to new markets for companies. Progress toward regulatory harmonization has been made in many countries including the United States, the European Union, and Japan through the efforts of the International Conference on Harmonization (ICH). However, several barriers have arisen that are preventing full regulatory harmonization across all countries, especially those in emerging markets.
Barriers To Full Harmonization
Many countries involved in regional harmonization initiatives lack the capabilities and resources needed to conduct a scientific and technical review of a full ICH data package. Consequently, before accepting a regulatory application, many countries still rely on proof of approval by a notable health authority, through, for example, the Certificate of Pharmaceutical Product (CPP). As a result, pharma companies often must still have a filing approved in one country before getting it approved in some others.
As countries enhance their regulatory capabilities and expertise, they tend to add their own local regulations, which diverge from ICH standards. As a result, pharma companies must contend with an expanding range of local regulatory requirements, which goes counter to the global harmonization for which they are hoping.
In addition, companies must manage a variety of approval processes and timelines for clinical trial and marketing applications. China provides perhaps the most extreme example of this, with clinical trial application approval timelines of nine to ten months not being unusual — timelines that companies need to factor in if they wish to include China in their global development plan. Moreover, China, along with other countries such as South Korea, Taiwan, Japan, and Russia, require local clinical data as part of their regulatory application. If collection of this data isn’t factored into global study planning, and therefore is generated via local studies after the completion of the global studies, companies could face significant delays to their approval timelines.
This regulatory divergence presents several challenges for global pharma firms. It expands the range of local regulatory requirements, forcing companies to manage a variety of approval processes and timelines for clinical trial and marketing applications. Companies must, to some extent, customize filing packages for each country in which they want to do business, and delays can result. Moreover, as countries build their regulatory capabilities, filing requirements and timelines continue to evolve — presenting a moving target for pharma companies.
This situation was not as worrisome when emerging-market countries constituted a small portion of the overall pharma market. But, with China and other developing markets poised to compose as much as 35% of the global market by 2015, pharma companies must carefully consider how to establish a leadership position in these markets.
Navigating Regulatory Divergence
To navigate regulatory divergence, pharma executives must develop fresh operating strategies if they hope to expand into new markets while managing R&D costs. We recommend the following strategies:
Factor local filing requirements into global development plans early. This is critical to ensuring that development programs efficiently meet global regulatory filing requirements. In addition, evaluate plans regularly to proactively manage regulatory changes around the world. This has become increasingly challenging as regulatory bodies in non-ICH countries mature and as local regulations (and their divergence from harmonized regulations) increase.
Time filing decisions based on medical and commercial need. For example, if certain types of cancer are more prevalent in some countries than others, push to file relevant cancer treatments in those countries first. Timing filing decisions in this way can help companies get products into markets where there is the greatest need and most relevance to local patient populations.
At headquarters and affiliate locations, strengthen regulatory capabilities needed to do business in non-ICH regions. These include the ability to liaise with local regulatory authorities at both a professional and a scientific level, a deep understanding of the local culture and how key stakeholders interact, and a solid understanding of the research and science behind the medicines the company is developing. The filing process is a formalized negotiation, and individuals with strong regulatory capabilities can negotiate intelligently with local authorities.
Strive for organizational alignment. Many existing pharma firms have a global footprint. However, their ability to handle the rapidly changing regulatory environment of non-ICH countries while managing the array of regulatory requirements across countries varies. As filing regulations change, these shifts affect more than just a company’s R&D organization or its regulatory affairs group. The sales and marketing functions are affected as well; for example, marketing forecasts must be altered, and new logistics challenges arise, including inventory management. In a pharma company that has aligned its many different functions, managers in all functions stay up to date on changes in the regulatory environment, identify potential impacts on their function, and develop strategies for managing the impacts.
Recognize that globalizing R&D involves tough tradeoffs. Having multiple local R&D organizations helps a pharma company establish a presence in new markets, stay current with regulatory changes, and gain opportunities for access to those markets. Also, setting up operations in low-cost countries has obvious financial benefits. However, operating multiple, far-flung R&D organizations also creates inefficiencies and redundancy, which are costly. Companies must strike a balance between these additional costs and the increased flexibility for filing in a timely manner that globalized R&D centers offer.
About The Authors
Chris Albani is a partner, and Paul Arhanic is a manager, both in the healthcare practice at global management consulting firm PRTM. Colin Vickers is vice president, head of new and emerging markets, global regulatory affairs at Eisai Ltd., UK.