Since its introduction in January, the BIOSECURE Act has sent shockwaves through the pharmaceutical industry.
While the law does not propose an outright ban, the definition of prohibiting federal funding for “biotechnology equipment or services” from a “biotechnology company of interest” has raised concerns about the impact of the law on collaborations with Chinese companies in particular. In particular, the ban on purchasing equipment or contract services from Chinese companies such as WuXi AppTec and WuXi Biologics, using U.S. federal funds, has come into the spotlight. Many small and large pharmaceutical companies rely on federal grants, through the U.S. National Institutes of Health (NIH) and the U.S. Department of Defense, to fund their clinical programs.
The law also leaves room to include other yet-to-be-identified entities subject to the control of a “foreign adversary,” namely China, North Korea, Iran, Cuba and Russia.
In an exclusive interview with Pharmaceutical technologyAnshul Mangal, Chairman of Project Farma, a consulting firm specializing in manufacturing and engineering operations for complex biologics and novel therapies, talks about the impact of the BIOSECURE Act on pharmaceutical companies and outlines steps companies can take to mitigate its impact.
This interview has been edited for length and clarity..
Phalguni Deswal (PD): Based on the provisions of the BIOSECURE Act, are there any alternatives to using China-based contract development and manufacturing organizations (CDMOs)?
Anshul Mangal (morning): Pharmaceutical companies prefer Chinese CDMOs like WuXi because they are cost-effective and efficient. This is a major driver for dependence on these CDMOs. A recent survey by the U.S. trade association BIO found that 79% of 124 U.S. companies surveyed had at least one contract or product with a China-based or China-domiciled manufacturer. China’s CDMO industry has evolved to a point that no other country comes close to.
India offers an interesting alternative as the costs can be comparable to China. I have heard that Indian CDMOs such as Syngene International, Cipla and Aurobindo are getting more calls from US-based entities as potential alternatives to Chinese CDMOs. There are also US-based alternatives, particularly for cell and gene therapies, such as the Center for Breakthrough Medicines, Catalant and Lonza. However, companies need to be careful when switching CDMOs as the process is expensive, requires manpower and you may not get the same results.
The BIOSECURE Act has set a deadline of January 1, 2032 for U.S. biopharmaceutical companies to terminate their contracts with these Chinese companies. So we still have some time and it is possible to scale up over the eight-year period. But I have urged all of our clients to have backup plans and to think about your exit strategies. Companies need to figure out what the CDMO costs might be, both short-term and long-term, and at what point you want to structure alternative CDMOs.
Early planning can be beneficial as the Indian or other low cost CDMO markets may not have large capacity, but if you contract with them early they can scale up and provide a good low cost solution in the long run.
PD: The U.S. Congressional Budget Office (CBO) has said that the bill will not increase the federal debt because “the goods and services are substitutes for each other at a comparable cost.” Do you think alternatives to companies like WuXi can provide these services at a comparable cost?
BEN: It depends. For certain drugs, there may be other alternatives with similar costs. For other drugs, there may not be any alternatives with the same costs. I don’t think you’ll be able to find other comparable companies with the same cost level, especially if you look at the US or European CDMO market.
The CDMO services provided by the Chinese companies are offered at the lowest cost while offering good margins. If the American biotech companies switch to European or American CDMOs, it will increase the cost of drug development, at least in the short term. Although low cost markets like India can offer similar prices, it will take time for the Indian CDMO market to mature to what is currently offered in China.
PD: Does the BIOSECURE Act affect the drug approval process if companies compile data packages using data collected by Chinese CDMOs?
BEN: It may not affect the approval of the drug, depending on the stage of the drug development. Companies may have ample time to do business with a company like WuXi and get the drug approved if they are in late Phase II or Phase III development. Even Phase I therapies can be approved in the U.S. while using Chinese CDMOs to manufacture their products. So the law should not affect drug approvals in the U.S. in the short term.
In the long term, for example, if you are a company that wants to start a Phase I trial, four to five years from now, it would be foolish not to look at other CDMOs or to move manufacturing in-house. Because if you run into the deadline with your clinical trials that run until 2032, you may not be able to get your product made in China and you may face delays in approval.
Even if a company with a drug approved in the US uses WuXi for production, it must find alternative suppliers to ensure commercial supply of the drug.
PD: How can companies limit the impact of the BIOSECURE Act?
BEN: If a pharmaceutical company enters into a contract with a Chinese company, they need to make sure that they have termination rights and technology transfer provisions. They need to have multiple suppliers who can provide materials in the event that a Chinese company or foreign suppliers are placed on the list of biotech companies of concern under the BIOSECURE Act.
The same concerns apply to both large pharma players and small to mid-sized biotechs. A large pharma company may have the resources to incur higher costs for a European or US CDMO. They may also have the financial resources to build in-house manufacturing, rather than relying on a CDMO.
Small to mid-sized biotechs may not have as much flexibility or capital as a large pharmaceutical company with deeper pockets to invest in their manufacturing, so they will likely need to contract with a CDMO to ensure product supply.
Due to the BIOSECURE Act, the pharmaceutical industry is generally wary of Chinese CDMOs. Pharmaceutical companies are concerned that other Chinese companies will be added to the Act later. If a company is working with a Chinese CDMO, it would be in their best interest to ensure that they have identified other alternatives. A company should have an identified backup plan with a non-Chinese CDMO in case their Chinese CDMO is named in the Act for some reason in the future.
Additionally, companies should continue to monitor the law and talk to others in the field to see how they interpret it and understand the steps they are taking to protect themselves in the future. The law has bipartisan support and is quite mature now. So regardless of how the U.S. election turns out, the law is expected to pass in much the same form as it is now.
“Drug Development Costs Expected to Rise as BIOSECURE Act Gains Momentum” was originally authored and published by Pharmaceutical technologya brand of GlobalData.
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