Exec Outlines Preparedness To Distribute COVID-19 Vaccine
BY ANJU GHANGURDE
A senior executive of Janssen’s supply chain leadership team outlines how the company handled activities in Asia Pacific at the height of the coronavirus outbreak, including ensuring continuous and rapid supplies of critical medicines in China. The company is also prepping against “multiple scenarios” to ensure global access for its potential COVID-19 vaccine.
If supply chain and logistics teams in pharma were traditionally seen as behind-the-scenes operations types, then the coronavirus pandemic has changed that dramatically, putting these functions front and center.
As global supply chain networks tottered during the early days of COVID-19, senior executives had to juggle multiple priorities while dealing with unprecedented disruptions. Keeping a cool head in such circumstances was crucial, said Chris Ewer, vice-president for Janssen Supply Chain (Asia Pacific).
With a key manufacturing plant and supply chain innovation hub in Xian, China, the executive had his task cut out. “In the early days, our challenge was to adjust forecast plans to accommodate the sudden surge in demand for medicines, while at the same time we had to manage our shrinking workforce,” Ewer, also a member of the Janssen World Wide Supply Chain Leadership Team, said in an interview with Scrip.
Part of the workforce in China couldn’t get back from their home towns post the lunar new year break in late January or then needed to be put on quarantine.
But Janssen swung into action to ensure the flow of supplies, backed by local government support. Ewer shared an example wherein, going by demand and production planning, the company had to restart a packaging line for one of its products in the week of 3 February to prevent an "out-of-stock situation”; Xian’s government directive was for the site to open on 10 February.
“We sent in our proposal to restart the packaging line and outlined the preventive measures that we would undertake. With their support, we were able to restart earlier and ensure our product was available for the customers and patients who needed it,” the executive said, outlining a range of preventive/safety measures that the firm implemented for employees.
These included temperature screenings before employees boarded the company bus and entered the site and ensuring that masks were worn throughout the site except at meal times - even that "facing one direction at lunch."
But as the coronavirus outbreak peaked, lockdowns posed significant challenges around moving products inter-province within China.
Products had to be shifted from one truck to another prior to entering a province and Ewer noted that the number of drivers “kept decreasing” given quarantine requirements when they left their home province. Commercial flights were also limited, posing challenges to bring imported products into the country.
“There were major logistics concerns for cross-province movements. Highways were congested due to the multiple checks, seaports were also bottle-necked due to lunar new year orders, and ground transport to move products from ports to the main lands were scarce,” Ewer said, referring to the situation on ground at the time.
But a cool head and some “creative solutions” to get products to patients paid off, while the Chinese government was “very supportive” and worked closely in tandem, advising the firm on the best way to ensure patient access to critical medicines.
For example, the company flew active pharmaceutical ingredients directly to Xian instead of passing through Shanghai and Beijing ports to minimize delays and also worked with the Xian high-tech zone to allocate one toll gate for incoming and outgoing trucks, carrying its products.
“And we worked with internal functions and supported by the government to expedite product testing and custom clearance for imported products to ensure access to medicine is continuous and critical medicines are delivered within 72 hours,” Ewer explained.
The team’s “patient-centric mindset” helped avoid supply constraints and the company could continuously meet the demands, despite all the challenges faced.
On how things stand currently, especially around demand and supply for air cargo and whether pharma has had to jostle for space with other industries, Ewer explained that working out distribution priorities quickly has been vital in the past nine months as the supply chain fractured.
The company had to buy up and secure freight routes, especially for some cold-chain products in the immunology and oncology segment that go via aircraft; the storage facilities have to be controlled at between 2 and 8 degrees Celsius.
He underscored the importance of continuing to “predict and simulate what’s needed” and logistics partners are now being informed several months in advance on slot requirements in their aircraft.
Ewer clarified that these partners are utilized consistently as part of the normal supply chain model “so many of our routes are already pre-booked long in advance and our strong ongoing relationships allow us to partner very closely in ensuring nothing gets missed.”
A long-timer with the Johnson & Johnson family of companies, Ewer asserted that Janssen’s global supply chain has performed “very well” during the pandemic and continues to service all parts of Asia-Pacific ensuring undisrupted supply of critical medicines to patients.
Janssen, he added, stays committed to its investment in new supply chain capabilities including advanced digital and AI platforms, designed to help improve its abilities to serve customers. Like many industries the pandemic is expected to help accelerate some of this work with improved forecasting, real-time supply chain visibility and customer connections.
Ewer is less direct on whether he envisages more permanent deglobalization of supply chains hereon, but like some other experts emphasizes the need to build resiliency through diversification to offset risks posed by factors such as natural disasters, political upheaval and disease outbreaks. (Also see "The Golden Winged Warbler And Creating Pharma Supply Chain Immunity" - Pink Sheet, 26 Oct, 2020.)
The current situation, he said, should serve as a powerful reminder that all supply chains must build in resiliency as a “core value.”
He added that protecting the resiliency of the supply chain is also about people. “We continuously grow our employees’ capabilities to ensure that we are meeting unique regulatory needs of the different markets. Our current diversification is what has allowed us to navigate this incredibly challenging pandemic without disruption to the patients and consumers we serve.”
The robustness of Janssen’s overall supply chain will likely be put to test in the days to come as the firm gears up to roll out its COVID-19 vaccine candidate, JNJ-78436735, if it’s cleared by regulators and things go according to plan.
Ewer explained that Janssen is “planning against multiple scenarios” in order to ensure global access, once the vaccine is approved and will leverage its current, “very extensive” transportation and warehouse capabilities, which it has on a global scale, including the Xian hub.
The company expects to use the same cold-chain technologies it uses today to transport treatments for cancer, immunological disorders and other medicines for its vaccine as well.
“Each pallet of our vaccine will include track-and-trace technologies that will give us real-time location, temperature and other information needed to maintain the quality and integrity of our vaccine. The unique sensor technology we use allows us to see our vaccines in transport in real-time, utilizing cutting-edge analytics,” Ewer explained.
He remains confident of the company’s existing channels to deliver its vaccine to customers, especially in view of the “small size” of the vials and the packaging configuration space requirements.
“We believe our current distribution channels include enough temperature-controlled trucks, containers and planes to deliver our vaccine to those in need around the world,” he asserted.
J&J recently initiated a second Phase III trial (ENSEMBLE 2) of JNJ-78436735, this time testing a two-dose regimen. The adenovirus-based vaccine is already being evaluated as a single-dose regimen in the Phase III ENSEMBLE study, which is enrolling up to 60,000 participants worldwide. (Also see "Coronavirus Update: CureVac's EU Vaccine Deal, J&J's New Vaccine Study, BioNTech/Fosun Get China Go-Ahead" - Scrip, 18 Nov, 2020.)
A paper by DHL, with analytical support from McKinsey & Company, has estimated that global coverage of COVID-19 vaccines for the next two years will need up to ~200,000 pallet shipments and ~15 million deliveries in cooling boxes, as well as ~15,000 flights across the various supply chain set-ups.
Industry Commits $700m Under First PLI Scheme
BY VIBHA RAVI
An new $2.1bn incentive scheme for formulations follows on from an earlier scheme for APIs in India. Experts weigh in on the likelihood of industry participation and whether this $3bn push will result in $41bn of incremental sales for the industry while strengthening supply chains in a post-COVID world.
It is not every day that a government rolls out a large fiscal stimulus. Yet supply disruptions due to COVID-19, the government’s ‘Make In India’ push and a realization of the country's dependence on China have prompted not one but two schemes by the Indian government with potential to boost India’s manufacturing capability.
Following a profit-linked incentive (PLI) scheme introduced in 2020 for production of certain critical raw materials like penicillin G, the Indian government on 3 March this year announced an INR150bn ($2.1bn) PLI scheme for makers of certain complex formulations, excipients, phytopharmaceuticals, capsules and even invitro diagnostic devices. Detailed guidelines are yet to emerge, but industry associations have welcomed the move, with a few experts expressing reservations about the minimum investment and sales criteria specified and skepticism over the possibility of groundbreaking R&D.
The scheme does align better with the thrust into complex generics and orphan drugs by Indian top players like Sun Pharmaceutical Industries Ltd., C#766:Dr. Reddy's Laboratories Ltd.], Aurobindo Pharma Limited, Cipla Limited, Lupin Limited, Torrent Pharmaceuticals Ltd., Alembic Pharmaceuticals Limited and Zydus Cadila.
As a result, unlike the first PLI scheme, which sought to create capacity in APIs that do not offer high margins, this scheme could see better uptake by such companies.
While the first INR69.4bn PLI scheme focused on reducing dependence on China, this scheme aims to strengthen the hands of Indian companies capable of expanding their global footprint and ascending the value chain.
Broader in scope, it also offers companies freedom in choosing focus areas unlike the earlier one which listed 41 active pharmaceutical ingredients (APIs), key starting materials (KSMs) and drug intermediates (DIs) that applicants could produce.
On 11 March, the government approved 14 applications under the first scheme, taking the total number of applications cleared to 33 and investment committed by the industry so far to nearly INR51bn. With companies like Aurobindo, Aarti Industries Limited, Hetero Drugs Ltd. and Macleods Pharmaceuticals Ltd. having got approvals, it is expected to ensure supply chain continuity with domestically available materials.
215 applications have been received for 36 of the 41 products, the ministry of chemicals and fertilizers said on 11 March. 19 applications with a committed investment of INR46bn have been approved for fermentation-based products and a few chemical synthesis-based products. However, no applications were received for neomycin, gentamycin, tetracycline, clindamycin and dicyandiamide.
During the height of the COVID-19 crisis, the pinch of a high dependence on China had prompted the Indian government to draw up a list of some critical APIs, KSMs and DIs in consultation with the industry.
After the scheme was notified, industry participants asked for concessions, some of which were granted. However, minimum investments specified under the scheme for low margin products were a dampener for the top Indian firms, with Aurobindo being an exception. The company made a strategic investment in Penicillin-G production given its large portfolio of antibiotics derived from it. 95 applications for certain products will be considered until 31 March, it added.
The PLI scheme divides the incentives under three groups (see table), reserving nearly 73% of the corpus or INR110bn for companies which have financial year 2019-20 global manufacturing revenue (GMR) equal to or more than INR50bn.
Note – All figures are in INR
With only roughly the top 10 companies falling in this bracket, each one could possibly be eligible to avail incentives to the tune of roughly INR10bn, said an industry expert. However, the notification states that incentives will be capped per participant, with the ceilings to be revealed in forthcoming guidelines.
The GMR requirement makes it clear the government is incentivizing players which have the potential to make large investments.
“It’s a very good scheme aimed at creating scale and the way the incentives have been designed with a focus on differentiated products, it creates an ecosystem to develop global champions from India,” said Sudarshan Jain, secretary general of Indian Pharmaceutical Alliance (IPA). IPA counts some of India’s largest firms among its members.
Ashok Madan, executive director at Indian Drug Manufacturers’ Association (IDMA), which has an equitable spread with over 1,000 industry members said the scheme will provide “a much bigger canvas to help the industry”. The government has given an assurance that micro, small and medium enterprises (MSMEs) will be given due share, he added.
However, guidelines will give a better understanding of details like what constitutes global manufacturing revenue (GMR) and which components of a company’s expenditure on such a project would be considered as investment.
For the first PLI scheme meant for APIs, KSMs and DIs, expenditure incurred on land required for the project was not considered as investment while research and development related capital expenditure and product development costs as well as new plant, machinery and equipment purchases were.
The government will have to tread lightly here by not leaving too many components out of the picture to prevent an intentional cost inflation by companies just to meet the minimum investment criteria.
Under the second PLI scheme, an investment of INR150bn, total incremental sales of around INR3tn and incremental exports of nearly INR2tn are estimated during six years from FY2023 to fiscal ’28.
20,000 direct and 80,000 indirect jobs are expected to be added as a result. However, given the way the scheme is structured, success will depend on whether the cream of the industry is ready to play ball. If it does, the cumulative quantitative and qualitative impact of the two schemes might give Indian industry the leg-up it has been looking for.
The second PLI scheme specifies three categories of drugs which will qualify makers for incentives. Category I includes special capsules like hydroxypropyl methylcellulose and pullulan which have a vegetarian or green source, biopharmaceuticals, complex generic drugs, patented drugs or those nearing patent expiry, cell-based or gene therapy drugs, orphan drugs, complex excipients, phytopharmaceuticals and other drugs as approved.
APIs, KSMs and DIs fall in the second category while Category III includes repurposed, autoimmune, oncology, anti-diabetes, anti-infective, cardiovascular, psychotropic and antiretroviral drugs. It also includes invitro diagnostic devices, other drugs as approved and drugs not manufactured in India. So far caps have not been placed on the proposed incentives under each head falling under a category.
An industry expert said the categories included are so wide-ranging that the government might find that incentives are spread too thin to make a meaningful impact. “Besides, established companies haven’t even entered segments like cell and gene therapies, so those are more like a moonshot. It’s not a bad idea to make a provision for the future but let’s face it – companies will invest where they see a better and quicker chance of success given that incentives are effectively for six years,” he added.
The duration of the scheme is from financial year 2020-21 to FY29. This includes the period for the processing of applications (FY21), optional gestation period of one year (FY22), incentive for six years and FY29 for disbursal of incentive for sales of FY28.
Opinion was divided on some of the conditions like a minimum investment requirement and minimum threshold sales specified in the scheme, with some experts terming them achievable and others finding them restrictive.
For the first year of production, participants need to achieve minimum threshold sales which will be specified by value for each group in the guidelines to follow. For subsequent years, a minimum 7% year-on-year growth will be required to avail incentives, which have been set out at 10% of incremental sales value for Category I and II products for first four years, 8% for the fifth year and 6% for the sixth year of production under the scheme.
This has been set at 5% of incremental sales value for Category III products for the first four years, 4% for the fifth year and 3% for sixth year of production.
“The government has taken a consultative approach to framing policies. The scheme is workable and industry talks are taking place right now. Companies will invest and focus on differentiated products and might adopt a combination of approaches from upgrading the product range to getting into a higher value, complex product,” said IPA’s Jain.
The minimum investment criterion of INR10bn over five years specified for large companies could be met given that they have substantial funds and if sales in a particular year don’t achieve 7% growth, “the earth won’t fall, they just won’t get the incentive”, said an expert.
Another disagreed. “How can you think of investing INR2bn per year for five years? Then, there is a requirement of 7% increase in sales every year. It doesn’t make sense given uncertainty in business. Surprisingly, there is no interest in using the 35-40% capacity lying idle at brownfield units,” he said. For the first PLI scheme, only 83 of over 3000 firms applied, he emphasized.
Whatever the case, the scheme’s success depends on enthusiastic participation by the industry. While previous governments have attempted support via bulk drugs parks for cheaper, common infrastructure support as well as tax breaks, the Bharatiya Janata Party-led government has introduced sales-linked incentives that make it easy for companies to pursue growth irrespective of location.
Whether this will prove to be the push that companies like Sun Pharmaceuticals and Aurobindo, currently ranked at 36 and 48 respectively in Scrip 100, need to break into the rarified space that top league companies like No.1 Pfizer Inc. occupy remains to be seen.