Product Management and Operational Business Management
Colin Reed has over 20 years of experience in the packaging industry. He has held various leadership roles in Product Management and Operational Business Management and successfully led the integration of the Pharma Packaging businesses of Alcan, VAW and Pechiney. From 2010 to 2018, Colin also led the global Marketing and Strategy for Amcor’s Healthcare business, focusing on product portfolio development and business growth, with a continued focus on growth in Asia-Pacific.
Section 1: Materials and Supply Chain
1.1. What are the main categories of pharmaceutical packaging?
In terms of the overall pharmaceutical packaging market and my specialty is flexible packaging, it would be lip blister packs. This would be either plastic blister packs, which are low barriers to high barrier or aluminum blister packs, which are very high barrier. Then you have sachets, laminates that usually contain aluminum in the pharmaceutical world or mostly for things like creams and gels, but occasionally for solid doses as well.
Then you have similar types of packs, but it’s variations around inhalable packaging or inhalable dosage forms, which tend to also be on the flexible side, similar to cold form as aluminum blisters and things like transdermal patches. More and more, you’re seeing the non-oral dosage forms growing as a preference. So transdermal patches would be wrapped or packed in a high area sachet. They’re the sort of prime, flexible forms and then on the other side you have bottles. Bottles are much more common in the US, typically plastic bottles. Vials and syringes typically come in glass, but more and more you’re seeing plastics used for products like prefilled syringes.
1.2. Where do you see the biggest opportunities for emerging materials?
In the world of solid dose, so if you consider how pharmaceuticals are taken by patients, probably 75 to 80% are solid dose tablets or liquids that you swallow. The majority of those are tablets, capsules, which are sold in a mixture of bottles and blister packs. There’s not really a shift here, the problem with pharmaceuticals is that one of the big challenges when we talk about innovation is it’s very highly regulated and a highly risk averse industry. While innovation is often looked for, it’s also dampened with the need to not take any risks.
Therefore, innovation and changes can take a long time to implement because they go through a lot of testing procedures. There is a sort of shift where the market is different according to geography. Europe, Asia and Latin America are primarily flexibles markets as most drugs are packed in blisters and sachets. Whereas the US and North America is a bottles market and 80% of solid doses are taken in bottles.
What you’re seeing and it’s driven really partially by cost and partially by child resistance and patient compliance is that there is a slight shift from bottles to blisters in the US because bottles tend to come in packs of 50 to 100 or even higher, which can be very risky from a child protection point of view. Blisters for smaller doses, usually below about 20 doses, are preferred and child resistant medications have increased. Therefore, there is a move towards blister packs in the US because blisters already exist across the rest of the world.
What you are seeing is as innovation in drug development changes, there is a move towards biologics and vaccines, and a growth in non-flexibles, such as prefilled syringes which are growing very fast simply because new drugs are being launched more predominantly as vaccines or as biologicals. They can’t really be taken in a solid dose. There is an increase in the use of syringes and prefilled syringes, of which prefilled syringes tend to be plastics like COC and polyolefins.
Now, the other trend that does impact material usage is sustainability. The majority of blisters are in PVC, or they contain PVC, which is not a sustainable material. It is, however, very cheap and easy to produce in abundance. There is a little bit of pressure in the industry to move from PVC to a more recyclable, sustainable material, which might be PET or PP, but again, the cost and the regulatory implications are such that it’s a very slow process. I don’t see really a significant shift in the next 10 to 20 years.
1.3. What new regulatory pressures are being placed on manufacturers?
There are not really any significant changes in the regulations. That’s actually more on the medical device side where it’s tightening up. The challenge is if you have a tablet inside a plastic blister, for example, the active ingredient in that tablet is going to be touching the plastic off the blister. So there has to be guarantees that the plastic contains nothing that could leach into the tablet and could harm a person.
If that plastic contains certain substances, there has to be tests done to prove that there’s a minimum amount of chemical content that leaches from the plastic into the tablet. That means that certain plastic or certain chemicals are banned in functional packaging. PVC used in pharmaceuticals, has to contain none of those, and it has to be demonstrated.
That means that the production of the PVC is different to PVC that’s used in industrial or technical applications. It’s more expensive because there’s certain additives and stabilizers, that they’re not allowed to use. It is a much more rigorously controlled process. The other side is the tablet itself could potentially leak its active ingredient into the plastic. That has to be proven as well, that there’s no change to the active or level of active ingredient in the tablet over time. So, you have these stability tests that demonstrate potentially 6 months, 12 months in worst cases, if the tablet is still in its original form, and it’s not been impacted by the packaging over a period of time.
Every time you change the packaging, you have to redo tests, which means potentially for every single dosage format of a product that’s on the market. If you change the primary packaging, you might be undergoing a 12 month or longer process. It’s potentially half a million dollars for every single dosage and if you’ve got typically 10 different formats of a drug in a different dosage, you might be looking at several million dollars just to change the packaging of a drug.
That may happen for so many different reasons. It might be discontinuation of plastics or certain suppliers. They’re the regulations that the pharmaceutical company has to prove and file with the FDA and that their product is not being impacted negatively by the packaging and that it is secure. They’re very expensive and time-consuming tests.
1.4 What unique supply chain challenges have emerged following COVID-19?
In terms of the packaging supply chain itself, not really. With regards to materials, there is a fairly broad supply of the basic materials. The majority of flexible packaging is produced in China, India, or Europe, and there’s not really been any suppliers for the domestic usage of the packaging. You don’t really have a huge amount of packaging materials that are supplied, produced in China for European usage or Indian usage, it tends to stay within the region. In fact, the biggest suppliers are Europeans and they tend to export into Asia. Now what there has been, and that has impacted the packaging world, is that there’s been a big change in the supply chain of the drugs themselves.
The world is dependent largely on chemicals and APIs produced in China. That supply chain has been disrupted massively as China effectively shut down for several months, and there was a massive shortage in getting the APIs out of China. India is a large supplier to the global generic drug industry. Around 30% of India’s drugs are exported, particularly in the US, which is quite dependent on Indian generic drugs. India produces 70% of its own APIs, but it gets the chemicals from China. India has not been able to get its raw material suppliers. It’s therefore not been able to export plus they’ve put temporary export bans onto Indian products. India prioritized the supply to their own people first. So basically a lot of the generic drugs have been significantly in short supply across Europe and the US so what’s happened is where those drugs would have been packed in India, and some in China, with domestic packaging, that drug production has actually moved to the US and Europe.
The US has had to produce its own drugs because they can’t rely on Indian suppliers and the same to the generic suppliers in Europe. That means they’ve also had to look at using European or US packaging for their materials. That’s effectively created a great boost for the European and US packaging suppliers and they have been very full because their domestic demand or regional demand has increased and that’s effectively created a shortage simply because short term, they can’t increase their output by 30 to 50% without it causing some sort of shortage in the supply. They’ve basically been overrun simply because suppliers out of Asia have been off the basic drugs and therefore packaging demand out of Asia has been disrupted.
Now that’s talking to the European producers, they’re coping, if there’s been a real shortage, it’s simply because some of the basic antibiotics and painkillers, hormone treatments that they’re produced in China and India, and they’ve not been able to export those to the rest of the world so they have the shortages in drugs that patients have experienced. In terms of packaging, you’ve actually seen a short-term increase in the packaging demand in Europe and the US simply because of the breakdown in the supply chain out of Asia.
1.5 What long-term impact(s) will COVID-19 have on pharmaceutical packaging if any?
I think there will be a longer-term impact, but I don’t think it will be significant. I think it will settle down to a level of normality. However, what I think will happen is because China has traditionally focused itself on producing the base chemicals and APIs and less on the formulations, drugs packed in China have been for domestic usage.
I think you’ll see that China will look to move up the supply chain and up the value chain and start to produce their own formulations for export and want to become a bigger player in the higher value, drug production for global markets. I think that would have to be something because they’ve obviously not been able to export the base chemicals and have taken a big hit. I think you’ll see them trying to sort of take some of the control back from India in terms of API and formulation production to start to compete with India.
I think India is in this sort of complicated position where they’re in the middle, they’re dependent on China, but also competing with China and they will have to rethink their position. By reconsidering I mean in terms of are they just the generic suppliers of the world or do they start actually investing in drug R&D and put more high value drugs into the market to become a much more central player.
I think the US and Europe have realized how dependent they are on the Asian supply and so I think there will be a slight increase in domestic production in those countries. I think that will be a relatively small amount simply because the cost differences are huge for producing tablets in the US versus India. It’s probably a factor of two or three times the cost. Simply, the companies won’t be able to afford it so I think they will look to try to produce some more drugs domestically and become less dependent on India and China. I think that will be a relatively small impact, so I think you’ll see some shift between China and India. You might see a small shift reciting some of the formulation production that’s in India to move into Europe and the US, but I think it will be a relatively small shift.
Section 2: Smart Packaging and Future Landscape
2.1. What constitutes “smart” packaging in this context?
It’s a massive topic in the pharma world around patient adherence. One of the biggest costs of the pharmaceutical industry is the fact that patients don’t take their drugs properly. That means that they’re not cured of whatever their problem is, and they have to go back to spend and receive more drugs. The companies don’t really know how effective their products are as a lot of drugs just get thrown down the toilet or disposed of. There’s a massive wastage and the industry generally is really working hard at trying to improve compliance. The only way of doing that is being able to set up communication between the patient and the pack. There have been attempts to put traces into the drugs themselves, and there are in some small cases like clinical trial situations, they’ll put traces into the drugs so that they can track them through the human body, but that’s very expensive.
2.2. How can packaging improve patient engagement?
What you’re seeing is a lot of developments, both by the pharmaceutical companies and the packaging suppliers to find a way of communicating the fact that the patient has taken his drug and communicating that back to whoever needs to know it, for example reminding the patient they need to take a drug, communicating back to the pharmacy that the drugs pack is nearly finished and there needs to be a re-prescription or to the doctor or the healthcare professionals that they are taking their drugs properly. It is using that data to identify how people respond and the way people are looking at that is to put some sort of communication device on the pack. Now there’s a number of ways of doing that. There are passive devices such as serialization track and trace. They’re not really smart and that means that you can scan an image if you use your phone to communicate various information and combine that with user data. That’s a sort of passive approach that is potentially short term useful. You’ve also got educational aspects so you can put information onto the pack in a digital format that maybe triggers a video on how the patients should take their drugs properly. Here, it’s about informing and educating the patient. That’s the next level of smartness, if you like that you can actually inform the patient in a much more novel way of how to make sure they do take their drugs, but in order to have proper smart packaging, you need to actually put electronics onto the pack.
There’s quite a lot of work going on to make printed electronics affordable. Really that’s the work that’s being done that I think is likely to be the long-term way forward. It’s around having a device where you’ve effectively have some sort of intelligence in the pack itself, a chip, that can proactively communicate with the user, preliminary through the smartphone, and sends a reminder to say, you need to take a drug that when the pack is broken. It could also send a signal that says, that particular tablet has at least been taken out of the pack, whether you can follow that through the queue, prove that the person has actually taken it is going to be a bigger challenge; but you can go quite a long way in ensuring that the patient is actually taking the drug out of the pack.
I think that’s where the work is being done. Then obviously having an app on your smartphone to make it user friendly, to improve the education and the communication are also things that are being looked at. There are things like augmented reality, QR codes and dynamic QR codes whereby you can have uniquely printed content per pack. A pack is uniquely identifiable and potentially even a single blister on a pack is uniquely identifiable and so that sort of development is also ongoing. Technology is pushing these innovations forward and I think it’s specifically in the area of patient adherence, making sure that patients take their drugs as accurately as possible. To an extent there’s, serialization track and trace and anti-counterfeit benefits that come out of that. However, the main driver is how can you stop wastage and make sure patients take their drugs properly.
2.3. How do you see the competitive landscape changing in the next 1-2, 3-5 years?
This is a tricky question because as I mentioned, it’s a very slow moving, risk averse industry. What that means is that new competitors coming in, find it very difficult. The barriers to entry are quite high and it is expensive to break in and establish your reputation. You’ve got some fairly big players, so in the foil flexible world you’ve got Amcor and Constantia as head and shoulders above everybody else, in terms of size and capabilities. On the plastic side, you’ve got Klockner Pentaplast and Perlen as the two largest. You do have emerging supplies out of Asia, but I think the growth in Asia at the moment is so fast that they don’t have any real interest in breaking out of Asia into being global suppliers. However, that may change.
I think the world of the materials is not going to change significantly, unless somebody has an innovation that can provide a high barrier coating that’s equivalent to an aluminum level of barrier but on a plastic film. If then an innovation that can coat plastic and improve the sustainability without impacting the barrier and the shelf life of the drug is created, then I think there’s a potential disruptive element in that. In terms of the suppliers today, the ones I mentioned are really the ones that are best positioned and the only question, the unknown, is whether an Asian supplier is going to have the capability and is there a desire in Europe and in the US to use Asian suppliers for packaging; is there an unmet need perhaps.
The question I have at the moment is I don’t see an unmet need for Asian suppliers to break into Europe or the US. I don’t see massive changes to the landscape in this respect. I do think some of the smaller players will find it increasingly difficult to stay afloat, and either they just have to accept that they are happy with their 2 or 3% share and being a family run business that might be enough for them.
Alternatively, you might start to see some of those companies combining. You might see some of the smaller second and third tier producers combining to create bigger units and therefore be more effective in terms of scale of economy. That’s the only change I really see as the big ones are just too big to be able to buy anyone else. They already have too much share and they’ll end up just falling across competition limitations. Overall, I don’t really see huge changes from the producer’s perspective. I do see a consolidation potential on the smaller players. Whether the printers or just the small converters, and I see potential to consolidate in Asia. I think Asia is a pretty fragmented place. I think they might see that if someone has the interest, you might see one of the big Japanese companies coming along to swallow up some of the smaller Asian companies to create a bigger conglomerate that becomes a powerful regional player. This could then potentially move onto the global stage.