Tufts Study Uncovers The Economic Advantage Of Single-Source Drug Development And Manufacturing

Historically, large, established companies had their own internal end-to-end solution to see a project from development to proof-of-concept (POC). As portfolios diversified, this solution was no longer internally effective given costs and need for varied skills. As a result, the CDMO industry was established to offer a solution that provides expertise across therapeutic areas and formulations. As the CDMO industry was formed, it met a need along the development to commercialization process. CDMOs are now integrating and providing end to-end-solutions. Integrated solutions offer a single-source solution, in which the sponsor partners with a single CDMO to create and deliver an integrated outsourcing approach that promises potential time and cost savings.

With healthcare costs continuing to rise, it is critical to assess the economics of both outsourcing models and ensure the one you select provides the most efficient path to commercialization. This was the purpose of a recent study by the Tufts Center for the Study of Drug Development (CSDD), which compared cycle times and development economics between multi- and single-source CDMO models.  Rebecca Holland New, EVP, Business Management and Enterprise-Wide Operations at Patheon, a part of Thermo Fisher Scientific, which sponsored the study, explained the company’s reason for having its model evaluated by a third party. “As we track industry trends, we see the cost of drug development increasing, with sales per asset decreasing at a faster rate. It is critical for us to understand the economic benefits for our clients under a streamlined, single-vendor outsourcing model,” says Holland New. “Our internal research projected we could cut between 8 and 20 weeks off our clients’ drug development timelines. It was important we validated the concept with a third party who could look at our data and provide a more precise measure based on risk, net present value, and total net gain.”

While there are many studies that debate the total cost of drug development,^1-3 the Tufts study sought a better understanding of which model offered the most accelerated time-to-market for its clients. By focusing on time as a primary value driver, a sponsor can lower the overall cost of bringing its drug to market, and more importantly, achieve the speed-to-market patients both want and need.

A closer look: multi-source approach versus single-source solution

According to Tufts, the research team looked at data from five single-source outsourced development and clinical trial manufacturing projects: three biologics (monoclonal antibodies) and two small molecule chemical entities. It also took into consideration the benchmark results on biopharmaceutical R&D costs and net returns for new biopharmaceutical approvals. Because vendor fees can differ by model, the sponsor fees used in the comparison were based on what the cost of each individual manufacturing process would be, depending on whether they were incurred under single- or two-source contracting (one CDMO for drug substance and one for drug product).

For model comparisons, the following assumptions were made (as gleaned from the study):

• single-source or multi-source contracting is applied across a diversified portfolio of investigational molecules for a given clinical phase;
• reductions in the length of the contracted manufacturing processes translate to initiation of a clinical phase sooner than it otherwise would by the reduction in the amount of time needed to manufacture supplies for clinical testing, but the lengths of the clinical testing phases once initiated remained the same;
• net cash flows after approval remain the same, but they begin earlier according to the reductions in development phase lengths resulting from a different sourcing model.

Upon comparison, Tufts concluded a single-source solution can shorten a drug development timeline by an average of 14 weeks less than a multi-source solution, with manufacturers pursuing a small molecule drug (in Phase 1) saving up to 19 weeks. Holland New explains this can be achieved by, among other factors, cutting out the time needed to make decisions about— and with—multiple vendors. “The Tufts study shows there is a time factor involved to evaluate, audit, and/or qualify vendors and then to negotiate processes and rates with each provider,” she says. “Single-source allows you to skip the time it takes to make those decisions and instead allows the precious resource of employees within your company to focus on the strategic elements. This is as opposed to getting into multiple discussions around which vendors to select and what each one’s responsibilities will be.”  

With a faster drug development timeline, single-source CDMO contracting can provide substantial financial gains to drug sponsors when applied to a portfolio of investigational drugs. On average, gains from reduced preapproval development costs and increased net revenues after tax were estimated to be approximately $21 million and $24 million, respectively, for a total gain of approximately $45 million. The management fees of a single-source solution were 1 to 4 percent higher than those of a multi-source solution. However, these fees are small in comparison to development cost reductions and revenue gains from faster times to market and may be offset by lower sponsor management and legal costs. Any gains from single-source contracting depend positively on the extent to which the development process can be shortened for later clinical testing phases.

Holland New says that, while the savings associated with the single-source solution are higher than Patheon originally anticipated, the value of an end-to-end solution is something the company always understood. This is why the Patheon OneSource^TM program is tailored for a seamless coordination between drug substance and drug product manufacturing. “When we launched Patheon OneSource^TM two years ago, we knew that streamlining drug substance and drug product would bring obvious efficiency advantages, but we wanted to deliver more than that to clients. We architected the role of the single point-of-contact for the client across the entire Patheon network,” she explains. “Then, we added a customized scientific molecule team and project managers for drug substance and drug product.  We can’t measure the economic returns of proactive problem solving, but it’s something that we do for our clients every day.”

Conclusion

The pressure of being first to market is compounded by the risks of drug development. Manufacturers invest a considerable amount of resources into a product knowing only about 12 percent of drug candidates are approved by the FDA after Phase 1 testing.⁴ They must be able to beat their competitors to market through an efficient execution of the drug development process. Holland New says a single-source solution can play a vital role in meeting these goals. “A single-source CDMO offers small and emerging companies an end-to-end solution with in-house resources that can determine, in real time, how it can scale up and ultimately launch your product. Also, by reducing tech transfers, there is no knowledge lost along the way and you can optimize drug substance and drug product early through one formulation and elimination of duplicate testing.” She continues, “The most important driving factor in our industry should be the health of the patient, which is why getting drugs to them faster is a crucial element of what we do.”

Choosing an outsourcing model that provides a market advantage over your competitors is critical, and the Tufts study shows the benefits a single-source solution can offer. It is imperative to select a partner that can also provide the highest level of quality, right-first-time (RFT), and customer satisfaction. It is these qualities that will successfully guide your product through this high-stakes race to market and deliver on the industry’s commitment to improving patient health.

1. Tufts CSDD, Cost to Develop and Win Marketing Approval for a New Drug is $2.6 Billion — http://csdd.tufts.edu/news/complete_story/pr_tufts_csdd_2014_cost_study
2. Deloitte, 2017 global life sciences outlook— https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-2017-life-sciences-outlook.pdf
3. The JAMA Network, Research and Development Spending to Bring a Single Cancer Drug to Market and Revenues After Approval — https://jamanetwork.com/journals/jamainternalmedicine/article-abstract/2653012
4. PhRMA, 2015 Profile, Biopharmaceutical Research Industry —http://www.phrma.org/sites/default/files/pdf/2015_phrma_profile.pdf