Home for the Holidays: Is Continuous Manufacturing the Key to Reshoring Drug Production?

December 22, 2020

Amid the chaos of the Covid-19 pandemic, governments across the globe began to worry about whether key medical goods would arrive to their shores on time. Considering the broader trend of rising nationalist politics around the world, it is no wonder that governments began looking inward when it came to questions of supply chain security and resiliency. As the logic of some goes, what better way to ensure that access to medical goods in a global health crisis continues uninterrupted than making sure that production happens within a country’s own borders? In the United States, medical supply chain security issues have shot to the top of the priority lists of legislators across the aisle, especially for one sector in particular: pharmaceuticals.

Concerned parties fear that foreign sourcing of pharmaceuticals and active pharmaceutical ingredients (APIs)—key inputs—create vulnerabilities during crises. In the United States, concerns about reliance on China for raw materials, APIs, and finished drugs have led some policymakers to propose measures aimed at reshoring pharmaceutical manufacturing. More responsible and effective proposals are aimed at moving production away from countries viewed as less reliable and into countries considered trusted partners. In conjunction with reshoring, investment in advanced manufacturing methods is also increasingly being considered as a solution to the security dilemma. One method, continuous manufacturing (CM), is widely seen as the gold standard of large-scale drug production and should undoubtedly be considered as part of any pharmaceutical manufacturing security solution.

While the merits and feasibility of reshoring or reorienting pharmaceutical production away from less trusted countries are subject to debate, if governments do intend to influence supply chains, they should do so by encouraging companies to adopt advanced manufacturing techniques, such as CM.

Q1: What is continuous manufacturing and how is it applied in the pharmaceutical sector?

A1: Overwhelmingly, pharmaceuticals are made using traditional batch manufacturing. This is a slow, cumbersome process that involves multiple steps with hold times between each one. The different steps may take place in different facilities around the globe, increasing wait times and risking the degradation of the materials involved. Conversely, CM is a production process that involves moving pharmaceutical components nonstop through the same facility. CM can be implemented for one or more steps in the drug manufacturing process or in an end-to-end facility that encompasses primary and secondary manufacturing—the entire drug manufacturing process. Primary manufacturing refers to the production of the API, while secondary manufacturing refers to the production of drugs in final dosage form.

The benefits to CM read like a laundry list. They include the potential for improved process quality, increased ability to respond to drug shortages and supply chain problems, a cheaper and faster route to scale up manufacturing, an economically viable route for personalized medicines, and significant long-term savings on manufacturing costs.

Unlike other industries, pharmaceutical companies have been slow to adopt CM. Currently, there are now six small-molecule pharmaceuticals made using CM, although they only partially employ the process. The first was Vertex’s Orkambi in 2015, a cystic fibrosis medication. One area that does use CM industry-wide is the upstream perfusion process for biologics (a step in biologics manufacturing that keeps cells in bioreactors longer while simultaneously removing cell waste products, allowing for more consistent processes and product quality), although the rest of these drugs are made using batch manufacturing.

However, with the pandemic upending the status quo across medical goods supply chains, CM is gaining more attention. For instance, U.S.-based pharmaceutical manufacturer Phlow Corporation received a $354 million contract from the Biomedical Advanced Research and Development Authority (BARDA) to manufacture essential medicines and API via “advanced production” means. For Phlow, this means employing CM in its drug production. It is the first U.S. effort made to establish a national stockpile of API. The contract includes an additional $458 million to be made available upon certification of long-term sustainability options.

Q2: What are the barriers to adopting CM?

A2: There are a few key sticking points that pharmaceutical companies have with switching to CM, but chief among them are the lack financial incentives for adopting the practice. Drug manufacturers claim that it simply does not make sense to invest in switching to CM for drugs that are currently under patent and are not produced in large quantities. For all other circumstances, the large investment needed to establish new facilities capable of CM is simply too high a price to pay. Switching to CM would drastically alter current supply chains, which could add initial costs as well.

An additional concern is that pharmaceuticals made using CM would face increased regulatory scrutiny. Manufacturers have spent significant time and resources making sure their products and manufacturing processes can pass regulatory muster in a quick timeframe. Switching to CM for an existing drug would require a new regulatory submission via a new drug application (NDA) or abbreviated NDA (ANDA) for generics for the new manufacturing process. Corporate thinking has been that this is a risky concept since this new manufacturing process has not yet received regulatory approval. Further, there is no global regulatory harmonization for CM, which could make it difficult for companies to roll products out globally. However, the Food and Drug Administration (FDA) has encouraged the process’ adoption and released a guide on quality considerations for CM.

A final obstacle to CM implementation is the technical challenge. Many pharmaceutical companies may already be capable of switching to CM for certain parts of the production chain, but few have end-to-end manufacturing strategies. Groups such as CONTINUUS Pharmaceuticals study “integrated continuous manufacturing” (ICM) which brings together primary and secondary manufacturing into one system, but the rest of the industry has yet to adopt similar research and development practices due to the lack of financial incentives. An ICM solution to drug production is a technical barrier yet to be fully climbed by most producers.

Q3: How can CM be used to reshore pharmaceutical manufacturing?

A3: The battle lines have been set. Some legislators want to reshore or at least alter the geography of pharmaceutical manufacturing, while the pharmaceutical industry is wary of such proposals, in part because the proper financial incentives do not currently exist. Efforts are already under way in Washington aimed at reshoring pharmaceutical manufacturing through traditional means and by supporting advanced manufacturing. Current initiatives in Congress include but are not limited to “Buy American” provisions for the strategic national stockpile, tax credits for the domestic manufacturing of domestic drug production, and codifying the FDA’s advanced manufacturing technologies program. Further, President Trump signed an Executive Order on August 6 instructing federal agencies to purchase essential medications and medical supplies from domestic manufacturers.

If pharmaceutical production reshoring via advanced manufacturing is to be pursued, it is most important to clear the financial hurdle. Tax and regulatory incentives remain the leading tools to address this issue and are what have led to the current pharmaceutical manufacturing hubs for API and finished dosage forms in Ireland, Singapore, and Puerto Rico. Ultimately, the core policy proposals that could increase the viability of reshoring include tax incentives, regulatory streamlining for CM, and volume guarantees in large orders, which fix supply needs and price commitments from government contracts and private organizations.

Bringing back standard batch pharmaceutical manufacturing to the United States is not the best way to ensure supply chain security and resiliency. In fact, it is not even the most efficient way to ensure drug production. A better path to pharmaceutical supply chain security is through advanced manufacturing. One of the largest benefits that CM can provide is its enhancements to supply chain security. More specifically, if a pharmaceutical firm were to establish an end-to-end ICM plant in the United States, this would drastically reduce reliance on foreign sourcing for these medicines and move production into one facility.

Of course, it will be impossible to completely eliminate all supply chain risks. The largest gap in the supply chains left uncovered following a CM-based reshoring strategy would be the sourcing of raw materials. These critical inputs are sourced from all around the world and will remain a bottleneck for drug production for years to come. To combat this resiliency issue, a whole-of-government approach is required to ensure continued access to the necessary raw materials in times of crisis. Long-term access plans should be formed with the Departments of Energy, Health and Human Services, and Commerce to ensure sustained access to the key inputs. However, moving all the other steps in drug production to one facility in the United States would be the most effective way to greatly reduce risks in all other areas of the supply chain.

Another issue of CM-based reshoring would be establishing a well-equipped workforce to run these new facilities. While CM is a much less labor-intensive practice than batch manufacturing, investments should be made in STEM education and worker training to ensure workforce adequacy.

If drug production reshoring is a policy priority of many in Washington, it should be done right. Embracing CM and other advanced manufacturing techniques such as 3D printing of pharmaceuticals is one way to advance that policy, along with providing incentives and investments via public-private partnerships to develop end-to-end continuous manufacturing facilities in the United States, and making advanced technology a condition or at least a priority of regulatory fast tracking and government procurement. The Phlow contract is a step in the right direction, but it does not go far enough to realizing the full potential of CM.

Q4: Is incentivizing CM as part of a policy to encourage reshoring or supply chain reorientation a good idea?

Q4: With the different considerations in play, it is difficult to get a clear answer. There is strong evidence that localizing supply chains domestically does not improve efficiency or resiliency and in fact makes production more susceptible to disruption. With that in mind, a policy that rationally reorients strategic supply chains—such as those for pharmaceuticals—toward trusted partners and encourages adoption of advanced manufacturing techniques like CM would improve supply chain security and resiliency. On the other hand, there are questions as to whether that security was ever truly in jeopardy and if these actions will spark backlash against U.S. medical industries. For all the fears of medical supply chains breaking down, they largely held up during this pandemic. It can reasonably be asserted that any failure to properly supply crucial goods in the early days of the pandemic was an issue of preparedness, not globalized supply chains. For many goods though, following initial delays and threats of factory shutdowns, items including ventilators and N95 masks were able to meet demand. The current race to vaccinate the world will also be a telling example of how well global supply chains will function during a crisis.

Looking beyond Covid-19, governments do not know what items the next global health emergency will require. Maintaining functioning and thriving trade relationships with key allies may be the most effective response plan. That, and a bolstered national stockpile. There are questions over whether Buy American provisions are compliant with the WTO Government Procurement Agreement, of which the United States is a signatory, or whether foreign governments may restrict their own government procurement markets in response, limiting revenue sources for U.S. companies. However, there is currently a balancing act going on in policy circles between maintaining these trade relationships and supply chains while ensuring security by reshoring manufacturing of critical medicines and medical goods. In these efforts, the FDA has identified a list of 227 drug and biological product essential medicines. A more surgical approach may be to focus on reshoring manufacturing for some of these items.

Regardless, a concerted effort could be made to legislate smarter, not harder, as the adage goes. Providing incentives to further develop end-to-end continuous manufacturing of pharmaceuticals may skirt these global trade concerns while injecting some long overdue life into this advanced manufacturing process. Then, if these initiatives are successful, the United States will be left with a more secure, cost-effective, and efficient drug production process.

Jack Caporal is a fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jacob Kopnick is an intern with the CSIS Scholl Chair in International Business.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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