By Louis Garguilo, Chief Editor, Outsourced Pharma
Like many readers, I was encouraged to learn about the business plan of Civica Rx (Civica) — detailed in our July issue of Life Science Leader. And perhaps, like others, that positive feeling was tempered with a measure of skepticism on whether this organization and its business plan can, in fact, alleviate the wild price swings and crippling generic-drug shortages that routinely inflict pain on healthcare systems, individual hospitals, and most of all, patients.
For me, questioning originates with whether Civica can persuade CDMOs to produce these generics at requisite quantities, requested timelines, and of course, reasonable prices. So, while we dealt with the generics market and Civica’s proposed solution in our July article, here we take up the pivotal CDMO component of the plan. Will they — can they — manufacture as Civica envisions?
WHY MANUFACTURE GENERICS — AND FOR YOU?
Contracting for CDMO capacity, within your required timing and at the sought-after pricing, can be challenging for any biopharma organization. What would cause them to work with Civica to supply common, typically low-margin generics to hospitals, instead of dedicating resources to customers like growing biotechs, or even Pfizer?
Civica’s President & CEO, Martin VanTrieste, tackles this question head-on. “There are advantages and disadvantages for CDMOs, like with any customer. Larger drug companies bring more purchasing power and weight to the contract negotiations than a Civica or smaller-drug sponsors. We won’t have that power even with the first 14 products we’ve promised for 2019. On the other hand, where we have an advantage — and we’re experiencing this every day — is the allure of working with Civica, a nonprofit trying to solve the societal problem of chronic shortages and price fluctuations no one has been able to solve. We’re doing this in the best interest of patients in the U.S. We have no shareholders or equity investors. I don’t even take a salary. This creates a ‘halo effect’ over the Civica brand and mission. We bring that to the table with CDMOs. They like sharing the goodwill Civica is creating.”
In today’s environment of expanded “corporate responsibilities,” I’ll give VanTrieste the benefit of the doubt on the halo effect. Still, offhand, I don’t know a business development professional at a CDMO who’d bring a “halo deal” to his management. Van- Trieste responds to that: “Clearly, CDMOs won’t take the work solely for that reason. They also realize we help them sell more products to other types of customers. CDMOs are expanded beyond the traditional, ‘We-make-product-for-drug-companies.’ They offer various services to a widening range of customers, including health systems. Working with Civica helps them gain a reputation and contacts for selling more products to others.”
If this is the case, I imagine the corporate top of CDMOs would need to be involved early in discussions with Civica: Is this a CEO-level discussion from the get-go?
“In most cases, we are dealing with the CEO to start,” confirms VanTrieste. “One of the best ways to measure a company’s culture is by listening to how the CEO visualizes the organization. From our perspective, the most important part of due diligence is to evaluate their culture. Is it compatible with ours? Of course for them, because ours is a different kind of pitch, the CEO needs to understand the opportunity. Usually a CDMO is selling services to you. In this case, we’re selling a concept to them, as well. So we have to start, like you said, at the top of the house. When we get into the details, we work with their business development people, scientists, engineers, quality units, etc.” During all discussions, Civica exhibits its willingness to negotiate “fair-market pricing,” and the realization the company is competing for precious capacity.
"I've had someone say point-blank: 'There's a crazy idea! No way you are going to be successful."
Martin VanTrieste, President & CEO, Civica Rx
WHAT AND WHERE?
Civica has initially committed to directly supplying — from CDMO to point-of-use — 14 generic drugs often in short or sporadic supply, to its more than two dozen member organizations, including the Mayo Clinic and Intermountain Healthcare. The company announced that vancomycin hydrochloride and daptomycin, two antibiotics that fight drug-resistant bugs, will be the first available. Xellia Pharmaceuticals will manufacture these drugs (more on this below).
For Civica and any CDMO it selects, three critical points are manifest in the commitment and model.
First, a promise these drugs will remain in ample, sustained supply for years to come. Civica will build in manufacturing redundancy, safety stock, and other measures to ensure this promise is kept. Second, drug prices will be reasonable and stable; in fact, for members purchasing all 14 products, Civica promises between a 35 and 50 percent overall price reduction, as compared to what these organizations pay suppliers now (when the products are actually available). Third is a component of the first two, something many inside and outside the biopharma industry have cried out for. As VanTrieste said in part one: “We will be transparent on country of origin, including on where the API is made; not only do you know the country, you’ll know the manufacturing location down to the specific plant of manufacture.” That transparency includes the costs paid for materials and products. Every member organization receives the same pricing.
Initially, because its products will not require larger- scale capacity, Civica will seek “right-sized partners.” Along with size and the corporate culture VanTrieste stresses above, they will evaluate regulatory and long-term supply history, quality audits, safety records, and financials at each CDMO. “If that all checks out, then sometimes we’ll get down to a dosage form to drive a final decision. For example, if you’re working on a lyophilized product or on controlled substances — especially schedule II compounds — partner and location are dictated substantially by the types and dosage forms.”
Notably, Civica will strive to hire U.S.-domestic CDMOs, particularly because one of its partners is the United States Veterans Administration, which has U.S.- sourced-first regulations. When asked, VanTrieste says he believes “for now, between the U.S. and some help in Europe,” there are enough potential CDMOs to supply all Civica generic products. That first CDMO deal with Xellia reflects this. Copenhagen, Denmark-headquartered Xellia Pharmaceuticals will manufacture “to-be-determined volume production through existing processes across facilities in its supply chain, primarily Copenhagen and eventually Ohio, pending necessary regulatory approvals.” Xellia says it is expanding its overall manufacturing and sales capabilities within the U.S.
One CDMO down … more to come?
THE EXTENDED RECEPTION
I ask VanTrieste for an honest assessment of how other suppliers have responded to his mission, model, and negotiations, since discussions began in autumn of 2018. As he has been throughout our discussions, VanTrieste is as open as the supply chains he’s trying to bring to market.
“There’s a wide range of how potential CDMOs view Civica, how they interpret what we are doing, and how they analyze IF this could work for them,” he replies. “We’ve had some that are just overwhelmingly supportive, while we’ve had others say, ‘We like what you’re doing. If we can fit you into our business model, we would love to work with you. We’ll see.’ Then there are those that have sort of laughed at us. I’ve had someone say point-blank: ‘There’s a crazy idea! No way you are going to be successful.’”
Should Civica, in fact, prove that last cohort of disbelievers wrong, any early derisive laughs will be replaced by smiles of gratitude on others across healthcare systems, hospitals, and patients. In my book, this is what leadership looks like. And it’s rewarding to see CDMOs in the U.S. and elsewhere as key components of this free-market solution.