Benchmarking best practices and performance as a potential ...

1 Benchmarking best practices and performance as a potential tool for increasing mutual trust Dr. Navjot Singh, Partner, McKinsey & Company, New York Office ICDRA Singapore 29 November 2010. CONFIDENTIAL AND PROPRIETARY. Any use of this material without specific permission of McKinsey & Company is strictly prohibited Introduction to McKinsey For over 75 years, McKinsey & Company's primary mission has been to help clients achieve substantial, lasting improvements in their performance . We aspire to help leading institutions, private and public, improve their strategies, organizations and operations. McKinsey's Healthcare Group serves clients around the world in the public, private and philanthropy arena.

2 Through our work we have built global expertise in multiple healthcare systems and local market situations. We have also worked with healthcare regulators across the world. We also often pursue research in critical areas where this research can have lasting impact on overall performance of our clients. McKinsey & Company | 1. Overview of presentation Increasing complexity and globalization calls for increased collaboration among regulators Prioritizing potential areas of collaboration Introducing Project RegEx McKinsey & Company | 2. The last decade has brought about tremendous change . Boom, bust and ? DAX 30 example Rise of many economies China example 12,000 China GDP. $ trillion 10,000. +16% 8,000.

3 6,000. 4,000. 0. 01-Jan-2000 01-Jan-2005 01-Jan-2010 1999 2009. Increased connectivity Record budget deficits and national debt India cell phone penetration UK budget deficit (per 100 people). 1999: $ billion surplus 2009: $ billion deficit 1999 2009. McKinsey & Company | 3. including fundamental changes to the healthcare landscape New diseases and epidemics Increasing burden of chronic diseases US obesity rate SARS Percent 30. Avian flu Swine flu 25. 20. 15. 1999 2009. Breakthroughs in research (somewhat ) High tech meets healthcare McKinsey & Company | 4. and to the pharma environment Consolidation Commercial arms race the end Declining R&D productivity Enhanced focus on drug safety Probability of success -30%.

4 1997- 2002- 2002 2007. McKinsey & Company | 5. Industry is responding with many initiatives R&D Example Reduce Focus on trial clinical complexity differentiation Enhance CER and focus on Optimize Risk compliance R&D total Benefit and quality spend tools Closer Fully scrutiny of leverage cost and IT spend Cross- speed Meta- disciplinary Improve R&D Analysis of asset deep productivity real world dives Increase data Improve variabilization Decision- of costs and Increase Making manage risk sharing spend Rethinking and Globalization performance minority Metrics stakes R&D. Prediction leadership Markets development McKinsey & Company | 6. Clinical trials are increasingly outsourced to CROs and global Contract research industry revenue Globalization of clinical trials US.

5 $ billions example Percent of subjects enrolled in clinical trials FY08 marketing applications for drugs and biologics received by FDA. Domestic +15% subjects 22. 78. Foreign subjects 2000 2010. SOURCE: CRO market outlook; Challenges to FDA's ability to monitor and inspect foreign clinical trials , OIG report, June McKinsey & Company | 7. 2010. Companies are seeking to build skills to enter the global biosimilars market Global biosimilar market is expected to grow rapidly over the next decade Other biologics Revenue forecast of biosimilars Monoclonal antibodies In $ billion CAGR. 2012-20. 35. 31 Percent 30. 25 +29% 21. 16. 20. 16. 15. 10. 10. 15 51. 5 4. 3 1 6. 0. 2012 2016 2020. SOURCE: Nature Biotechnology; McKinsey analysis McKinsey & Company | 8.

6 Supply chain has globalized with India and China as major exporters of pharmaceuticals to established markets Pharmaceutical imports have Significant shift in manufacturing increased substantially location to India and China US pharmaceutical imports, $ billions Country of origin of FDA DMFs 61. Rest of world 91. 8. Finished products 31. APIs and China intermediates India 3. 6. 2000 2007 2000 2009. SOURCE: Espicom; McKinsey analysis of Drug Master Files on FDA website McKinsey & Company | 9. Generic manufacturers and contract manufacturers have seen rapid growth in volumes over the past decade Contract manufacturing industry Global sales, CAGR, 1999-2008 revenue Percent $ billions 18. 13. Factor 2.

7 6 Asia Europe North Small Biologics Generics molecules America Originator 2001 2010. drugs SOURCE: Espicom; Evaluate; Datamonitor; Gx Bulletin; McKinsey analysis McKinsey & Company | 10. Overview of presentation Increasing complexity and globalization calls for increased collaboration among regulators Prioritizing potential areas of collaboration Introducing Project RegEx McKinsey & Company | 11. Key Questions 1 How best to work together? 2 In the context of ongoing initiatives, what should be the additional areas of focus? 3 What should be the priorities and how to drive rapidly in the short-term? McKinsey & Company | 12. 1 Several lessons can be drawn from private sector collaborations McKinsey & Company | 13.

8 1 Frequent reasons for failure Percent 100% = 149 alliances Overambitious took on too many goals at once Failure Unclear definition of and lack 33 for all of agreement upfront on level of partner commitment needed 51 for success Success for all Unwieldy governance structure due to high degree of complexity 16. among stakeholder relationships Underestimation of technical Mixed development requirements ( , time, skills). SOURCE: McKinsey McKinsey & Company | 14. 2 Options for enhancing regulatory cooperation in the globalized environment Expected impact Perspective Harmonization and Fully coordinated and Existing bodies are making mutual recognition streamlined standards and progress toward an effective.

9 Long activities term solution Third parties Extra capacity and flexibility Concerns over integrity and to foreign operations competency must be addressed Foreign offices Feet on the ground rapid Only the largest regulators access to local intelligence will have the resources and capabilities to build foreign infrastructure Partnerships and More coordinated and Partnerships and collaborations collaborations efficient use of resource and are invaluable and should be sharing of information increasingly pursued however not always easy Benchmarks and Immediate impact on perfor- Significant opportunity to best practices mance by sharing bench- complement ongoing efforts marks and best practices McKinsey & Company | 15.

10 2 Options for enhancing regulatory cooperation in the globalized environment Harmoni- zation/Mutual Recognition High Benchmarks Partnerships and Degree of and best prac- collaborations collaboration tice sharing Medium among regulators Third parties Low Foreign offices Immediate 3-5 years Long-Term Time to impact McKinsey & Company | 16. 2 There are several collaborations underway Existing Benchmarking Existing regulatory initiatives, , partnerships, , Assessment of Largest inter- the performance national collabo- of pre-market ration to share evaluation experience, best process practices and training for drug inspections Assessments of Collaboration between Medicines EMA, FDA and TGA. Regulatory on international GCP.