A Level Playing Field for APIs Good for

A Level Playing Field for APIs: Good for the patient? Chris Oldenhof DSM, The Netherlands President of CEFIC’s Active Pharmaceutical Ingredients Committee (APIC) Board Member of CEFIC’s European Fine Chemicals Group (EFCG) PDA / EMEA Joint Conference European GMP: Current Issues and Future Developments Budapest, 20 -21 February 2008

Content of Presentation n n Some Principles & Definitions Where our APIs are coming from Europe & Asia: The Differences “Rogue APIs” The CPh. I Trade Fair Compliant APIs vs. “Rogue APIs” Who gets the money? Inspections, Audits, QPs & Actions The Big LPF Picture The Solution

Advice from a regulator in 2004: “When you speak to regulators never use words such as business, money, finance etc. : They are allergic to that because to them only patient safety matters”…

…. however…. What to do when aspects of “business, money & finance” are having an important impact on patient safety?

PRINCIPLES & DEFINITIONS n Counterfeit medicines are any brand (or generic) medicines and active pharmaceutical ingredients (APIs) that are deliberately and fraudulently mislabelled by unauthorised parties with respect to source and/or composition and/or therapeutic quality (EFPIA, June 2005)* n Counterfeit APIs are active pharmaceutical ingredients for which source and / or quality are falsely represented on the label, on the Certificate of Analysis or otherwise (APIC, 2005) n Rogue APIs: APIs that are Counterfeit or Severely Non-Compliant (C. Oldenhof, 20 February 2008) *See: http: //www. efpia. org/content/default. asp? Page. ID=263&Doc. ID=1359

PRINCIPLES & DEFINITIONS n A medicinal product that contains a Counterfeit API is a Counterfeit Medicine. It may harm the patient. n A medicinal product that contains a severely GMP- and/or Regulatory non-compliant API is a severely non-compliant medicine. It may harm the patient n Counterfeit APIs are normally severely noncompliant but severely non-compliant APIs are not always counterfeits

Origin of APIs for Europe n Until the 1990 s more than 80% (volume) of APIs for the EU were manufactured in Europe n Today the majority is manufactured in Asia, notably in China and India Does that make a big difference?

The Differences in API Manufacture Europe Asia - Decades of US FDA GMP inspections - Most API producers by now have been FDA and/or EU inspected - Industry: driving force behind ICH/Q 7 A - Most producers Q 7 & RA compliant - No (long) US FDA tradition - Very few API producers have been FDA- or EU inspected - Q 7 = new & alien standard - At most 1% of 10, 000 producers Q 7 & RA compliant - No special reputation for counterfeiting - Well-known for domestic activities counterfeiting & exportation of counterfeits - Few Rogue API manufacturers - In China: Out of + 3, 000 API manufacturers + 2, 000 are Rogue API manufacturers. We don’t know how many out of + 10, 000 Indian pharmaceutical manufacturers are Rogue API manufacturers. Conclusion: It looks like it could make a VERY big difference… *See e. g. : http: //www. gmp-compliance. com/daten/download/Chodankar. pdf and http: //www. burrillandco. com/pdfs/06 Q 3_China. Quarterly_final. pdf

More about Rogue API Manufacturers in China n 1, 000 “pharmaceutical” API manufacturers licensed by SFDA (Comply with Chinese GMP & have been inspected, though when the SFDA was under proven corrupt leadership) n Over 2, 000 “chemical” API manufacturers not licensed and never inspected by SFDA: illegal operations n Use of these Rogue APIs for producing medicines for the Chinese home market is illegal / prohibited n These > 2, 000 companies do normally not apply GMP and have no affinity to regulatory compliance n The outlet for these - extremely low-priced - Rogue APIs: The large domestic counterfeit medicines market and… Exportation ! See e. g. : Presentation by Dr. Sun Yueping / CHNMED, 10 th European API Conference, Warsaw, 24 -26 October 2007: “The situation on GMP- and regulatory compliance for APIs manufactured in China”

Sectors of the API market 1. 2. 3. 4. Captive API manufacture 1: 1 API Toll Manufacture Direct sourcing from API manufacturers in the “open market” API sourcing through traders and brokers

Where are the exported Rogue APIs going? n Exported to customers worldwide; Very low prices attract many traders and brokers, also European ones n Part of the orders are placed for blank labels (or relabeled / repacked in Europe): Rogue APIs becoming Counterfeit APIs n Estimation: Also large quantities of Rogue APIs entering the EU increasingly already included within finished dosage forms n No exact “business statistics” available. “Best guess”: More than 30% of all traded APIs coming into the EU (e. g. Gentamicin fingerprinting: at least 33%) but some insiders even mention figures in the 90% range n Traded APIs roughly estimated to be at least 40% of total EU API volume (segment includes many older, large volume APIs)

CPh. I Milano October 2007 n n n “CPh. I” = Largest API Trade Fair (+ CPh. I China, India, Japan, South America…) Milano: Over 20, 000 attendants Overwhelming presence of Asian exhibitors (Of + 1, 500 booths: + 500 from China and + 200 from India)

New York Times 31/10/2007 on CPh. I Milano*: n 82 Chinese CPh. I exhibitors even not authorized by SFDA to manufacture APIs for the Chinese market ! Yet marketing their APIs in the EU. n A large Sinochem booth: - Giant Chinese State-owned “Fortune Top 500” Trading Company - Blacklisted by NAFDAC Nigeria since 2004 for selling fake / counterfeit drugs** - Exported the DEG-contaminated glycerin that killed 88 children in Haiti - Stonewalled US FDA when it tried to identify the source of the contaminated glycerin *See: http: //www. nytimes. com/2007/10/31/world/asia/31 chemical. html? _r=2&ref=business&oref=slogin and ** http: //www. nafdacnigeria. org/blacklisted. html

New York Times of 31 October and other info on CPh. I 2007: n Also CNSC Fortune Way, who exported DEG labeled as glycerin to Panama in 2006, killing several hundreds of people, had its booth in Milano n Other companies accused of or proven to be involved in selling counterfeit medicines also held booths e. g. Honor International Pharmtech & Hunan Steroid while Orient Pacific International canceled because its owner is in a Houston jail for selling counterfeit medicines* *See: http: //www. usdoj. gov/usao/txs/releases/August%202007/070824 -Xu. htm

Can Compliant APIs compete against Rogue APIs? Rogue APIs are not or hardly affected by EU Regulations, therefore they: n Have lower manufacturing costs: (Pricewaterhouse. Coopers / IBM Studies: COC = 20 -25% of site operating cost minus raw materials*) n Have a cost advantage that increases with time (because EU Regulations block many API process improvements and other changes) Conclusion: Compliant APIs cannot compete against Rogue APIs => Many compliant companies are exiting the API business, often step by step, product by product *See e. g. : http: //efcg. cefic. org/iso. FILES/publications/items/DOWNLOAD_13. pdf e. g. :

So where does the money go? n Impact of lower-priced, unsafe APIs on prices of final medicinal products is close to zero n So the patients do not even get the financial benefits from consuming sub-standard medicines n It only makes a big difference at “API business level” ! So the money goes to traders, brokers and purchasing departments

Observations => Actions? EDQM’s CEP API inspection results show: Unsafe APIs are flooding into the EU during many years before we find out “by coincidence” how unsafe they really are: Past few years: More than 20 Asian CEPs suspended or withdrawn by EDQM vs. Zero in Europe 2007: Rapid Alert & Pharmacy level recall because of potentially life-threatening penicillin crosscontamination in APIs from KDL Biotech / India (in generic dosage forms coming into the EU from India) => Shouldn’t we instead pro-actively prevent that EU citizens are being exposed to such health risks? Note: API manufacturers holding DMFs (ASMFs) instead of CEPs are even much less likely to be inspected at all See: http: //www. info. doh. gov. uk/doh/embroadcast. nsf/fd 1653 b 6 e 6 be 59 d 180256 b 7900507749/237 bb 415 b 113568680257306003660 ef/$F ILE/EL(07)A 11 Final. pdf http: //www. edqm. eu/site/News_amp_General_Information-164. html? PHPSESSID=c 073 e 3 cf 8012 aeee 07518 fc 42314818 c

But how about the Qualified Persons? If we could fully rely for our safety on all the QPs why then are there: n n n Such high estimations of Rogue and Counterfeit APIs occurring in EU medicines? Cases such as the Rapid Alert triggered by KDL Biotech’s APIs? So many suspensions and withdrawals by EDQM of Asian CEPs? Were those QPs not aware or does QP vs. Purchasing often end in 0 - 1?

USA take action… December 2007 USA and China - after 7 months of intensive negotiations - have signed an agreement: China will prevent that Rogue APIs from “chemical” manufacturers” will be shipped to the USA See: http: //www. nytimes. com/2007/12/12/business/worldbusiness/12 safety. html? _r=1&adxnnl=1&oref=slogin&adxnnlx=1197889892 -d. UJAg. Pc. WDm. Ws. Rw 3 l. PJs. FUg

Overview of all elements of the non-level API playing field Issues for Asian Markets: n n n - Discriminating Quality Regulations - Astronomical Fees e. g. PDIF China - Multi sampling & QC testing per batch - Negative Lists - Tariffs / Duties (vs. “Zero Tariff Agreement”) Issues for the EU Market: Non-compliance with & Non-enforcement of Pharma API Regulations (including API Counterfeiting) Issues for all Markets: n n n - Export Subsidies, Dumping, Export Taxes (upstream from API) Plus the general “given” factors: - Low wages - Currency rates

The picture is symbolic for current patient safety, for current quality of the older EU medicines and for today’s compliant API manufacture …. but where can we find that little red-haired girl?

How to achieve a Regulatory- & GMP API Level Playing Field? 1. 2. 3. 4. 5. 6. 7. 8. Enforcement Enforcement => DETERRENCE !

This presentation was: n Not “Against China” n Not “Against India” n Not “Against Traders and Brokers” n Not “Against Authorities” n Not primarily aimed at defending EU API industry’s business interests (but indeed, that’s implicit)

This presentation was: n To defend the health of the patient n To defend compliant API manufacturers wherever they are located n To help the Authorities reach their goals regarding the safety of patients n Directed against Cheaters, Counterfeiters, Criminals who unscrupulously make huge profits by endangering the health of defenseless, unsuspecting patients

Thank you for your attention!