The burden of nitrosamine risk mitigation and the shift to continuous manufacturing are just a few of the US Pharma market trends that we discussed in a recent interview with Justin Murrell, Head of Sales, North America at DFE Pharma.
1) What are the current key market trends you identify for the North American market?
- Nitrosamines
From a quality perspective, pharmaceutical companies and formulators are really trying to grasp the nitrosamines topic. Currently, it's a standard, and guidance has been provided by worldwide health authorities and regulatory bodies. However, the responsibility of developing the methodology and integrating the levels into their own formulations and drug products falls on pharmaceutical companies. It also rests on excipients and API suppliers to furnish information regarding the nitrite and nitrate levels of the products they produce and send to drug companies.
The main issues are as follows: Firstly, how can we reach a consensus on consistent methods? Secondly, the technological aspect: Do we possess the equipment necessary for in-house testing, and if not, how can we obtain it? Thirdly, how do we calibrate and validate that equipment and those processes and integrate them into our current operations and existing drugs?
DFE Pharma is leading the way when it comes to addressing nitrosamines. We have already conducted an internal risk analysis on all our excipients to understand our own exposure to nitrites and nitrates when combined with numerous APIs. We have used the current standards to perform our own risk assessments, and what we have found is that our excipients have very low nitrite formation. Now, the question is how do we utilize this information with our customer base?
We are engaging in detailed and in-depth conversations with pharmaceutical companies regarding their drug products, that are at a higher risk of developing high nitrite and nitrosamine levels. We have already begun using our excipients in combination with their drugs to ensure that we contribute to reducing the overall nitrosamine levels in the final drug product.
DFE Pharma has taken great care in leveraging some of our products that have exceptionally low nitrite levels, such as our microcrystalline cellulose excipient grades, which we believe have considerably lower nitrite levels than those of other suppliers producing similar products. Having identified the low nitrate levels in our products, we are also at the forefront of developing a methodology to provide our customers with the assurance that the DFE Pharma excipient they are using is backed up by robust data.
- Impact of COVID on the supply chain
Another topic that we are observing in the market trends is how to recover from two years of dealing with the impact of Covid-19 on the supply chain. In North America, our customers are facing one of two challenges. First, some are grappling with an excess of high inventory levels as they tried to catch up with the supply chain disruptions. So, the question arises: How do they right-size their inventory after experiencing market scarcity with raw materials?
How do we plan for the inevitable or the unforeseeable? We are working closely with our customers to understand their specific needs and to develop unique solutions for each pharmaceutical customer we work with. We are pursuing two approaches: Firstly, we are mitigating risks by maintaining a substantial inventory in-house at our local New Jersey warehouse, offering our customers supply stability from our inventory levels and assuming the responsibility of storing local stock. Secondly, we are providing substantial forecast guarantees to our customers.
Our deep understanding of the supply chain process sets DFE Pharma apart. As an organization with a history spanning over a century, we possess extensive experience and an in-depth understanding of the supply chain from start to finish. Our robust Sales and Operations Planning (S&OP) process enables us to leverage our size and global warehousing capabilities effectively.
Secondly, when compared to our competitors, we offer in-house risk mitigation. Through multiple manufacturing sites, we can provide alternative sources for like-for-like materials within a single supplier, eliminating the need to seek external sources. Most other suppliers in the market can only offer one product type, so if a customer seeks to mitigate risks, they must turn to other suppliers. Our robust supply was put to test during the covid pandemic, when we were able to continue delivering our excipients unlike some other companies who faced serious issues.
Additionally, we provide guarantees for our forecasts, which is not very common in our industry. This means that we stand by the forecasts we receive from our customers and ensure that the materials align with their requirements and needs. However, this necessitates extensive communication and a deep understanding of our customers' activities and goals. Therefore, we invest the time to truly understand and align our strategies with them.
- Continuous manufacturing
Another significant topic in the pharmaceutical industry, especially within the OSD (Oral Solid Dosage) sector, is continuous manufacturing. We are exploring ways to enhance efficiency, expedite the delivery of medicines to those in need, and ensure the consistent and predictable production of essential OSD drugs. Continuous manufacturing represents the next step in elevating quality standards and achieving Six Sigma quality processes, particularly in the context of tablets.
DFE Pharma is at the forefront of continuous manufacturing. We operate semi to fully continuous processes within our own manufacturing facilities. We have closely collaborated with our customers and machine manufacturers to enhance equipment efficiency and tailor our excipients to suit their specific needs. Staying ahead of market trends and technological advancements is of paramount importance to us as we continue to provide excipients that support our customers' technological advancements.
We have already developed several grades of lactose for use in continuous processes. Our Innovation & Technical Solutions (ITS) team has dedicated numerous hours to coordinating with equipment manufacturers and top pharmaceutical customers who are already implementing continuous processes at their facilities. This underscores the unique collaboration we share with our customers, where we identify their needs and provide support based on our knowledge base. It's a mutual exchange, and effective communication is paramount.
The US and Europe lead the way in continuous manufacturing. Particularly in North America, there are numerous Contract Development and Manufacturing Organizations (CDMOs) that inherently prioritize continuous manufacturing. Furthermore, the US market is unique because it hosts some of the world's largest pharmaceutical producers and the largest CDMOs, all within the same region.
DFE Pharma maintains close connections with all these entities. Market leaders who are heavily investing in continuous manufacturing are prepared to go full-scale within a year or two in the upcoming years. We bridge the gap between the supplier, the CDMO, and the pharmaceutical companies because we have strategic relationships and the expertise they seek in these fields. I would say the US is at the forefront of investments in continuous manufacturing.
- Cost management
One of the most significant trends is how we manage our overall costs. Coming out of the Covid-19 pandemic, the landscape has changed. Before Covid-19, managing the cost structure in the US was relatively straightforward. Lower excipient prices and reduced input costs led to a decrease in the overall production value and cost structure, which, in turn, increased sales and profitability for pharmaceutical manufacturers.
However, during Covid-19, pricing alone was not sufficient. Suppliers with the lowest prices often struggled to supply due to cut corners in their supply chain, manufacturing processes, or upstream raw materials sourcing. DFE Pharma has been renowned for its highest quality and robust supply chain for many years, enabling us to offer our customers ways to manage and reduce costs by enhancing efficiency.
Many customers seized opportunities arising from their competitors' inability to receive materials or operate at full capacity due to material shortages. In contrast, customers served by DFE Pharma remained unaffected because of the stability and consistency of their supply, eliminating the need to seek alternative suppliers during times of need.
Furthermore, we successfully mitigated the impact of the energy crisis resulting from the Russian-Ukraine war for our customer base. DFE Pharma stayed ahead of the situation and shielded our customers from its effects. We continued to ship on time and in full throughout the pandemic and beyond, resulting in cost savings for our customers.
Looking at the alternative, even during the worst-case scenario of the pandemic, we managed to keep our production sites running and maintain a ready supply of raw materials from our warehouse or nearby.
This situation has influenced how we approach risk mitigation, specification setting, and supplier qualifications. We have observed an expedited qualification process when collaborating with quality-first companies that possess strong backward-integrated supply chains. By relying on suppliers with high-quality standards and regulatory capabilities, we can accelerate the qualification process while upholding the highest standards. DFE Pharma takes pride in supporting key players in the fight against Covid-19 and assisting our customers in navigating the challenges of cost structures.
- What do you think will be the scenario for this year and the next? There is talk about a potential recession and high inflation. So, how do you think that will play out?
The market remains volatile, and although we experienced a lull in late 2022 and early 2023, we anticipate ongoing uncertainty as we potentially enter an economic down swing, especially in the US. Given the interconnectedness of the global economy, events in one country have repercussions worldwide.
So, when the unknown does occur, it becomes crucial to turn to suppliers that can be trusted, those that have demonstrated stability and have robust business continuity policies in place. DFE Pharma has proven its reliability throughout the pandemic and even before that, establishing itself as a stable organization capable of ensuring a consistent supply for our customers. We are deeply committed to working closely with our loyal customers, safeguarding their supply chains and cost structures to help them navigate these challenging times and maintain their competitiveness.
We devote significant effort to forecasting and maintaining communication with our parent company to grasp current market dynamics and future plans. While we anticipate ongoing market volatility, DFE Pharma has taken proactive measures to ensure our competitiveness and uphold the quality our customers have come to expect.
In times of crisis, DFE Pharma has consistently proven itself as a reliable supplier—a steadfast vessel during storms. We have not only supported our core customer base but also welcomed new customers seeking our assistance. The quality of our materials speaks for itself, and the reliability of our supply chain and raw materials is matched only by the excellence of our dedicated team.
Ultimately, DFE Pharma remains a people-oriented organization. Each employee recognizes and cherishes their impact and contribution to the overall health market. It is a point of pride for every employee that one in three tablets is crafted using DFE Pharma's lactose. This fact is deeply understood and cherished by each member of our team.
As we progress and future-proof our business, we realize the critical importance of ESG for both DFE Pharma as a company and for our customers. We are collaborating closely with pharmaceutical companies to assist them in achieving their sustainability goals, while simultaneously ensuring that we meet our ambitious targets. This enables us to operate at the industry standards required not only today but also in the future.