1. APIs – global business developments Gian Mario Baccalini EFCG Board Member, Chairman of EFCG Pharma Business Committee President & CEO, Euticals S.p.A., Italy EFCG Press Conference, 22° October 2013, CPhI Frankfurt

2. Features of the European API manufacturers High level of competence in fine chemistry Employ a range of skilled, qualified & experienced staff for:  Early assessment of market opportunities  All technical (incl. ESHQ) management requirements  Handling Intellectual Property Rights (e.g., patent issues)  Production compliance with Good Manufacturing Practices on the basis of inspections performed by Regulatory Authorities

3. Where do the European manufacturers stand?  APIs market is more and more a worldwide business, integrated in the supply chain  Manufacturers of APIs give more value to their production towards the dosage form  Companies increase their size  Manufacturers in new countries put more pressure on the market, for instance: Turkey, Eastern Europe, Middle East  Opportunities and challenges of selling APIs to BRICs countries As we are in a global market, we need to establish a global strategy

4. Some figures APIs:  Word market APIs: 37.0 billion US $  European APIs production: 14.0 billion US $  Italian market share APIs worldwide: 12% Activities of European manufacturing:  50% custom manufacturing  50% generic medicines

5. New Legislation affecting APIs Global Business Developments Europe: Falsified Medicines Directive (FMD), 2011/62/EU Came in to force on 2 nd July, 2013 USA: Generic Drug User Fee Act (GDUFA) Came into force on 1 st October, 2012

6. The Falsified Medicines Directive (FMD) 2011/62/EU All EU countries should have transposed the FMD into national rules of the FMD within 18/24 months from its publication in the Official Journal (1st July, 2011) As of 18° October, 23 of 28 Member States have transposed. 5 Member States face infringment proceedings from the European Commission. Some countries judge the Directive too strict and others too lenient (  a health risk for EU citizens!)

7. Present legislative situation  The current Directive covering human medicines does NOT ensure that the APIs used in EU comply with European GMP wherever they are made  Use of many non-EU API sites is dependent on industry self-evaluation and open to corrupt practices  Over 70% of all APIs sold in EU now come from non-EU sites  Now clear that the number of non-EU API sites is very much less than the EC had assumed (<1500 vs. 15,000-20,000)  Mandatory inspections of EU API sites are performed by EU Regulatory Authorities but there are no mandatory inspections of non-EU API sites

8. FMD situation at 18th October  23 Members States had transposed into national law - flexibility exists as it is a Directive not a Regulation (like REACH)  EU Equivalence listing countries: USA, Switzerland, Japan, Australia approved with others pending incl. Brazil, NZ, Singapore  8 Member States (SP, IT, IRL,UK, GE, RO, FR, GR) using 2° waiver (Art.46(b)4) using EU GMP inspections to avoid shortages  No reported shortages of critical raw materials medicines but may happen once EU stocks depleted  ~1500 non-EU sites identified in Top 18 countries exporting bulk APIs to the EU. Most are issuing Written Confirmations  China and India severely limited the number of sites allowed to export to the EU via Written Confirmations  Some Indian sites were reported to be non-compliant with EU GMPs and have been stopped by EU from exporting.

9. EFCG Proposals What needs to happen?  Stricter enforcement by EU authorities plus tough sanctions to punish offenders  Train inspectors to detect falsification and fraud  Consistent approach to transposition by Member States  APIs in imported finished/semifinished products are subject to the same rules as imported bulk APIs  Either change in the law to include mandatory inspections paid for by industry if needed (cf. GDUFA/USA)  Or arrange Mutual Recognition Agreements with those countries with EU GMP standards (with USA, as with Australia and Switzerland MRAs are «fully operational»)

10. Generic Drug User Fee Amendments GDUFA – FDA Progress Report - June 2013 Collected $255m year 1 user fees. Goal $299m Hired 165 new staff Helped industry self-identification which made accurate fee calculation possible Improved the quality of generic industry supply chain Reduced the backlog of pre-GDUFA applications & adjusted internal processes Established GDUFA Steering Committee to implement review programme enhancements Set out GDUFA FY14 Regulatory Research Priorities

11. Some learning curve but no major issues Timely and effective FDA communication tools Supportive education role from EFCG, SOCMA, GPhA Increased workload in regulatory departments to update DMFs for Completeness Assessment Training required across different departments GDUFA Implementation experience

12. 1. SAFETY  Level Playing Field  Equitable Oversight, Quality Standards, Compliance 2. ACCESS  Reduce the timelag – development to commercialisation 3. TRANSPARENCY  Improve direct communication with DMF reviewers  Regulatory Science involvement GDUFA Top benefits rated by API producers

13. EU-US Transatlantic Trade & Investment Partnership (TTIP) October 2012: EFCG, APIC & SOCMA filed a proposal with both the EU and US government negotiators on MRAs for GMP Inspections April 2013: EFCG, APIC & SOCMA presented their case in Washington DC along with all other pharma trade bodies Outcome: Agreement that all EU & US pharma trade bodies wanted the same thing – MRAs for GMP Inspections July 2013: EU Pharma trade bodies briefed DG Trade on their needs from TTIP ahead of 1st round of negotations in Washinton DC October 2013: 2nd round of negotiations cancelled due to US Shut Down.

14. EU-US Transatlantic Trade & Investment Partnership (TTIP) Letter to DG Sanco, EMA, DG Trade, 31° July, 2013 Subject: Call for the Pursuit of a Mutual Recognition Agreement on Good Manufacturing Practices (GMP) Inspections in the Context of an Ambitious and Comprehensive EU-US TTIP Negotiation “…..we wish to highlight one important recommendation that has been proposed by all of our organisations, namely completing a Mutual Recognition Agreement (MRA) on GMP Inspections. An MRA on GMP Inspections between the EU and US will have an immediate positive impact on the resources of the regulatory agencies, the European Medicines Agency (EMA), National Competent Authorities (NCAs) of the EU, the Food and Drug Administration (FDA), and on the industry. The resource savings for regulators should allow for the agencies to work together to identify high-risk sites in need of inspection, including in third countries, and to ensure resources are committed to addressing this need.”

15. Conclusions 1. FMD The implementation of mandatory inspections, via an MRA approach, is a relatively small price to pay to guarantee the quality of API meets the EU standard, irrespective of its global source, for the benefit of the health of the EU citizen and of the EU API manufacturing industry. 2. GDUFA Good progress toward agreed 5 year objective. 3. EU-US TIPP Progress is slower than expected but objective of MRAs for GMP Inspections remains our high priority.