Blisters over bottles? That’s the trend in the pharmaceutical packaging arena. Representatives from several Contract Packaging Organizations (CPOs) we spoke to have remarked that the trend toward blister packaging continues to grow, especially in the wake of the FDA’s proposal for bar code regulations in March 2003.
Under the original FDA proposal, bar codes would be required on ethical drugs in hospitals and pharmacies, OTC drugs packaged for hospitals, and vaccines. The bar code would have to require at least the drug’s National Drug Code number, and its dosage form. There’s no word on whether the final version will also include lot number and expiration date, but some experts feel that the additional data won’t be mandatory. The FDA is currently reviewing responses to the proposal, and will issue a final regulation by the end of the year, with a three-year phase-in period.
In the March proposal, the agency noted, “[T]he bar code rule, once implemented, will result in a 50% increase in the interception of medication errors at the ‘dispensing and administration’ stages. This will result in 413,000 fewer adverse events over the next 20 years. Some hospitals that currently have bar code systems in place report even greater reductions in errors from bar code usage. Bar codes may also help prevent other types of medication errors, such as in prescribing and transcribing, because they will encourage health care organizations to adopt computerized systems for handling prescriptions.”
The savings to the healthcare system, according to the agency, would reach $41 billion during that 20-year span. In addition, the agency contended, “In the retail setting, pharmacists could use the bar codes, in conjunction with computerized prescription orders, to confirm that the right drug is being dispensed to the right patient. Pharmacies will benefit from standard codes that will be used by all prescription manufacturers . . . Drug manufacturers will benefit from uniform standards, rather than having to worry about conflicting requirements from different purchasers that would add to the cost of adopting bar coding. It is likely that, once the FDA standards are finalized, many manufacturers may quickly begin incorporating the bar codes on their products, even before the rule takes effect.”
In the short-term, hospitals and other groups are looking at a pretty sizeable investment for bar coding. The FDA has estimated that hospitals face as much as $7.2 billion in costs to reach compliance with the new rules, including as much as $1.0 billion on wireless scanner networking to enable nurses to remain connected with a database while dispensing drugs to patients.
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| Photo courtesy of DPT |
For CPOs, the writing is on the wall, in very thin lines: bar coding and blister packaging of unit doses are going to get a lot bigger as we approach 2006-7. “The pending bar code regulations will have an impact on the industry, due to the need to provide additional protection for the consumer,” said Bruce Pearson, vice president, pharmaceutical manufacturing, at Yamanouchi Pharma Technologies (YPT). “This regulation will necessitate buying additional equipment for established packaging lines.”
In fact, YPT recently added to its blister packaging capabilities. A new line was installed to support an upcoming NDA by a customer, but YPT built in additional capacity to run more products. The company now offers two bottle lines and two blister lines. “Contract Packaging is definitely a growing industry,” said Mr. Pearson. “There are many companies that are not willing to invest in the expansion of their own facilities; they feel that the long-term capital investment is not justified when they can go to a company that already has the facilities and equipment to perform the needed packaging.”
Growth From Within
There are other factors that can also contribute to the growth of the CPO business, but the key one is the growth of the Pharma industry itself. “We expect the growth rate of the Contract Packaging industry to be about 8-12% per year for the next five years. It should grow approximately 75% as quickly as the overall pharmaceutical industry,” said Robert Gettis, president of ProClinical, a Phoenixville, PA-based provider of clinical trial services, including packaging.
“From our perspective on the industry,” added Dr. Joseph Urban, ProClinical’s senior director, “we believe that pharmaceutical companies are looking for contractors to manage their supplies throughout the life cycle of clinical trials.”
ProClinical began in 1993 as a clinical packaging company, and has added analytical, formulation and other services to its offerings in the past decade. The company has been expanding its clinical packaging capabilities, while also engaging in small commercial packaging runs for several companies. Said Mr. Gettis, “In 2002, we formed a partnership with Graphic Packaging Corp. (GPC), where we licensed some of our child-resistant/senior-friendly blister packaging. GPC has the capability to provide blister cards, boxes and other packaging components in large, commercial volumes.”
One packaging executive remarked that Mr. Gettis’ growth projections may be too low. “In the next few years, we’ll see that outsourcing is growing faster than the Pharma industry in general, and I think Contract Packaging is going to be one of the leading markets,” said the industry source. “The inevitability of bar codes—and the blister packaging that must accompany them—is important, but natural growth has helped push some CPOs to new heights.”
The executive added, “CPOs are in a strong position right now. Drug makers are challenged to keep up with the various end-use markets, including hospitals, pharmacies and other customers. They all have different needs, requiring different kinds of packaging. In a sense, it’s reached a point where pharmacies need their own packaging personnel. Some CPOs are uniquely qualified to handle these functions, so it makes sense for many pharma companies to turn this part of the cycle over to them. The flexibility of the better CPOs affords opportunities that the Big Pharma companies, by the nature of their size, simply can’t undertake.”
The Downside
Not everyone is bullish about the CPO business. Said another industry source, “The past 24 months have been somewhat flat. We’ve seen little to no growth in the standard blister or bottle packaging industry. With the lack of significant launches from Big Pharma, there have been few opportunities for the contract industry. Opportunities from Big Pharma have been focused on mature products or overflow production as sponsors continue to optimize their plants.”
Everyone we spoke to contended that bottle filling had become a victim of overcapacity, or at least that demand for it has dropped off. “From the contacts we’ve made with potential customers, there appears to be no real overcapacity issue in the Contract Packaging industry,” said YPT’s Mr. Pearson. “It does appear, however, that there are more requests for blister packaging than for bottle packaging. I think this is a sign of the needs of the end user, though, and not necessarily due to overcapacity issues.”
DPT, a San Antonio, TX-based contract service provider that bought a packaging facility in Lakewood, NJ last year, is looking outside of standard packaging for growth opportunities. “Our feeling is that the areas with the highest potential for growth will be in the specialized packaging market,” said Paul Josephs, vice president of marketing. “These markets will include DEA-registered products and unique delivery systems, as opposed to standard blister/ bottle filling.”
Another driver for continued growth in the CPO market is the proliferation of generic releases. Last year, we documented how the incredible success of generic Prozac opened doors for CPOs. This year, more blockbuster drugs (though none as high profile as Prozac) are becoming generic. In the next year, we’ll see a possible generic Claritin, which will do battle with the OTC version of Schering-Plough’s drug, as well as its prescription successor, Clarinex.
“Generics are definitely a market that we’re pursuing,” said Mr. Josephs. “There’s real growth opportunity for packaging of generics. With the ongoing political environment and pressures,” including President Bush’s recent push for a law to limit generic challenges by innovator companies, “this is a market that deserves focus.”
Mr. Pearson concurred, adding, “Generic drugs have increased the need for CPOs. The volume of generics that need packaging, not only in the U.S., but worldwide, is increasing every year. With many high-volume drugs now coming off patent, the numbers are growing yearly, and this will increase the need for CPOs in the future.”
Generally, CPOs are optimistic. All of the companies we spoke with (even the ones that cited capacity gluts) discussed their ongoing plans for expansion or acquisitions to grow within the CPO industry. Technological improvements have added flexibility to CPOs’ offerings. “The level of expertise of the equipment vendors and the CPOs has improved the equipment that is available for use,” said Mr. Pearson, “while also enhancing the quality of operations and consistency of performance. The result has been higher reliability, increased speeds, and improved on-time delivery.”
Or, as another industry source put it, “When you get down to it, the drug makers have only the FDA and their internal QA staff to help them determine GMPs. CPOs have the FDA and the staffs of every one of their clients telling them how to do the job right. The best CPOs are receptive to the demands of their sponsors; that’s how they get to be the best.”
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