Generic drug opportunities extend far beyond the EU, says James Burt. The executive vice-president, Europe & MENA, at Accord Healthcare talks to Neil Trainis

 

“I wanted to be a banker actually. That was the original plan,” James Burt says casually. It comes as something of a surprise. After all, the executive vice-president, Europe & MENA (Middle East and North Africa) at Accord Healthcare appears to have science coursing through his veins.

Deep in the Paddington offices of the one the fastest growing generic drug companies in the UK, there is much to ponder. Generic drug prices, Brexit’s impact on the availability of medicines to patients, Accord’s standing as a significant player in the pharmaceutical industry. James starts at the beginning.

“I come from a very scientific, competitive family. I have two brothers. They both ended up in pharmaceuticals one way or another. One is a GP, the other is a venture capitalist in the sector. Growing up, we were always arguing about science.

“I went to university and studied chemical engineering and did a PhD in biochemical engineering which is quite relevant to biosimilars and things like that. That was what I was learning to make. I was poverty-stricken at the end of my PhD and tried medical repping. I was never intending to do that and got stuck in it. It was meant to be a stop-gap.

“I joined quite a small company and that influenced me quite a lot. I joined a tiny Australian company called Faulding Pharmaceuticals back in about 2000. They were among the first to launch generic chemotherapy. That got me into generic oncology and they were pretty much the first movers in that area 20-odd years ago.

“That influenced me quite a lot in how you can improve products, how important it is to get cost-effective cancer treatments. After about five years of that I got asked to join an entrepreneurial Icelandic company called Actavis and set up their hospital generic division worldwide and did for five, six years.

“It went very well but got slightly caught up in the credit crunch in 2008. My then boss moved across to Intas (Pharmaceuticals), our parent company, and said ‘come and serve the European generic company’ and that was the start of the Accord journey in Europe. We’re only 10 years old in Europe but we’re already in the top 10 players in the space. It has been a pretty rapid rise.”

That is no exaggeration. Accord’s ascent has caught the eye. Last year Intas, based in the Indian state of Gujarat, acquired Actavis’s UK and Ireland businesses for £603 million. The deal brought Accord’s aim of becoming the largest supplier of generic medicines in those countries within reach. A glance at the company’s website reveals it provides products in over 35 European countries. At the heart of Accord’s rise has been James.

Yet the next few months are sure to increase anxiety as the public continues to wonder if access to medicines in the UK will become more difficult post-Brexit. The headline writers have been busy. James is philosophical.

“I’m a glass half-full sort of guy and I’m fairly sanguine about the situation. Where there is a potential disruption, it is around the (route) into the UK of major ports if there’s a no-deal scenario.

“That should be fairly transitory to be honest. It is interesting the sort of stockpiling numbers that people are talking about. It’s a few weeks, it’s four weeks, it’s six weeks, it’s not ‘expect issues for an extended period.’

“What I would refer people to is there are no tariffs in pharmaceuticals. People don’t realise this. So, under a worst-case scenario, you’ve got WTO (World Trade Organisation) rules. Pharmaceuticals are largely exempt from tariffs, so you’re not going to see trade barriers between the UK and Europe in the event of a no-deal Brexit.

“There’s some logistical issues in the sense in that where we are currently in the single market, any drug manufactured outside of that has to be retested on entry and released by a qualified person.

“Where we’re not clear is whether UK testing would be sufficient for European markets after a no deal Brexit but what the UK government have already said is anything tested in Europe would be good enough for the UK. So, one side has already unequivocally said that we will allow that testing regime, we’ll recognise it. Hopefully Europe will do the same for the UK.

“The final strand of planning is around the regulatory affairs around getting the marketing authorisations partitioned off from the European system. But if you saw the Chequers white paper, they were talking about an amendment to effectively try to harmonise still with the European approach.

“There’s clearly still work to do. It’s cost us some money but we’re well advanced in that planning. I don’t see major disruptions. You could potentially see problems if the sterling falls further.

“I’m of the opinion that a lot of the Fxs have got it baked in for a fairly difficult deal but if the sterling falls further, you will see the price concession issue flaring up again in the sense that people will start to not service the UK.”

There have been concerns that when the UK leaves the European Union, over 400 drug molecules centrally approved in Europe will no longer be available for distribution to patients in the UK post-Brexit.

Richard Freudenberg, the chief executive of the European Association of Euro-Pharmaceutical Companies, added to a sense of trepidation this year when he warned a significant number of drugs will be inaccessible in Britain from midnight March 29 unless the Medicines and Healthcare products Regulatory Agency (MHRA) registers those products for use in the UK.

“I’m more optimistic than that,” James says. “There’s typically three common routes to get a regulatory approval on a product in Europe. There’s the national approach which is rare and is more the old drugs, there’s what’s called the decentralised procedure where one of the national agencies takes the lead and the concerning other member states fall into line with their assessment and recognise that product locally at the appropriate time in the approval process.

“And finally you’ve centralised procedures where the European Medicines Agency (EMA) do the access. The vast majority of our portfolio is in either the first or the second type. What’s come out of those is a national approval. You have a very clear national approval, so even if we pull out of Europe, that drug is approved.

“There is a little bit of complexity where the UK is the reference member state, you have to be assigned to the remnant in Europe one of the countries, one of the agencies to be a reference member state.

“But (basically), you’ve got a local approval. The slightly more complex set are these centrally-approved products but again you’ve got still got a piece of paper saying that drug is absolutely fine in the UK. What we’re just having to do is convert that UK dimension of a centralised procedure to a UK national approval and that work is under way now.

“To be honest, the regulatory agencies are well aware of this, from our perspective, being quite proactive in helping close that bureaucracy out. I really don’t see a problem with people in the UK, the MHRA continuing to recognise a drug that was recognised prior to Brexit because nothing has changed. It’s just the paperwork.”

James reveals Accord have started stockpiling drugs following the government’s insistence that pharmaceutical companies stock six weeks’ of additional medicines in preparation for a no-deal scenario. He is asked if six weeks is enough given the UK might face a catastrophic shortage post-Brexit.

“What’s it got to cover? I can understand a certain amount of congestion around customs issues and ports. We’re somewhat ring-fenced with UK production. Most of the production from, say, Barnstaple (Accord’s manufacturing site) goes to the UK, so it’s not like it’s got to go out to Europe. We make it in the UK for the UK. So I don’t really see a massive customer issue there.

“The other significant component for the UK that we make is out in India. At the end of the day, India is not part of the single market, does not have a free trade agreement with Europe.

“We’ve been functioning in that regard for the entire time I’ve been running this company, so nothing changes between the UK relationship and India. So I’m struggling to see where the potential catastrophe can occur. It’s basically business as usual.”

In September last year the PSNC described generic shortages as “catastrophic.” It said a supply shortage and pricing of a “large number of products” was having a “catastrophic impact” on contractors’ cash flow.

“The whole idea of a concessionary pricing scheme is to encourage re-entry where people have stepped out. What happened with the concessions, it’s very interesting how much they’ve fallen since that period,” James suggests.

“They’ve done their job in many ways. Referring back to 2017 and maybe the early part of 2018, we’re not hearing the same level of catastrophe being talked about right now because it seems to have calmed down from what I can see.”

A National Audit Office report this year said the price of some generics greatly increased in 2017-18 and identified a range of supply-related factors that may have been behind the rises.

“It would be a personal opinion. It comes down to supply and demand. Rightly or wrongly, the UK has got one of the most cost-effective access to generic medicines in the world,” he says.

“In some cases, in the way the scheme is set up, can be a disadvantage in the sense that where shortages can present, the UK is almost at the bottom of the queue. Capacity would be steered towards a return.

“In some places the UK market has got so competitive that people are starting to step out and there’s certainly some of those products where people decided at short notice they were no longer prepared to take the losses they were making on a particular product.

“It’s worth noticing that something like 20% of our portfolio we often sell at loss. We recognise the commitment we’ve made to give community pharmacy the biggest basket of products in the UK but not all of those make money.

“Fx was another big change. If you look at what happened immediately prior to that period, it was the Brexit referendum and the pound had a very significant Fx depreciation. Where you’re operating in very skinny margins, suddenly if the effective sale price has gone down 15, 20% because the sterling has fallen, that makes the economics very difficult.

“A lot of people pulled back. You’re seeing a lot of the big competitors now rationalising their portfolio, taking up many, many products, because quite frankly the UK is not that attractive.”

The report uncovered an unprecedented rise in the number of requests from pharmacies for concessionary prices which went from less than 150 a month prior to May 2017 to 3,000 in November 2017.

“Concessionary prices are there to cover additional costs and stimulate quick re-entry. You have very good price competition in the UK, prices fall to a very low level, someone pulls out, there isn’t the stock in the marketplace. If you’ve got limited capacity how do you get that stock to come over? And that’s where the concessionary price idea comes from.

“That stimulates a rush to get product back into the UK two or three or four players bring in and the concession goes away because there’s competition. People can often see this is in a discreet, isolated period, they’re not seeing the overall scheme which has stimulated a re-entry and access to medicine.

“People tend to forget about the very cheap and effective prices they are paying for the vast majority of medicines. The media like to focus on the few temporary aberrations. It’s the way the UK system is set up and it is a fairly unusual system.

“We certainly recognise some of the challenges with community pharmacy in the way the Department of Health and the government manage the pharmacy budget and manipulate that. What I would say is that it’s particularly challenging on our side of the equation.”
James says the investments Accord are making should be taken into consideration when talk turns to price concessions.

“A key one for us is the Falsified Medicines Directive. That’s necessitated on every single one of our packing lines, the inclusion of printers and the IT systems to allow serialisation, then the database upload.

“There’s a huge investment, that’s a cost, to be able to do mass serialisation. At the end of the day we have to fund that. And it’s tens of millions to fund that.

“Some of the Brexit planning, ultimately we’ve got a big investment in regulatory affairs, having to separate off our marketing authorisations from the European Medicines Agency plus changes to our goods flow and how we re-test products on entry into Europe. You add all that in, that’s extra costs on our side.

“We’re making dramatic investments in the UK. We took on a site that had been closed down in (Fawdon) Newcastle about two and-a-half years ago. We’ve invested over £25 million in restating that site and there’s more to come. We acquired a big distribution centre in Didcot in Oxfordshire. We’ve already committed to over £25 million in investment in that site.

“On top of that we’ve had the £600 million acquisition of Actavis in predominantly securing the Barnstaple production site, one of the biggest UK production sites.”

He insists he is “100%” certain the UK has a future as a science, R&D and manufacturing base post-Brexit even in the event of a no-deal.

“We’re investing heavily in our R&D capability in the UK. At the Fawdon site, we’re putting in hundreds of scientists up there to, in part, do some of the tests but also to do new product development. In India, we invest 6% of our revenues in R&D, around our company we’ve got something like a thousand research scientists looking at new developments.

“The UK is still the sixth biggest economy in the world at the end of the day. I’m pretty sure people are still going to want to sell their drugs. Given the 66 million people in the UK, there’s still going to be an appetite for drug makers and drug discoverers to make sure people can access those products.

“And if you look at our science base and biotech base, quite frankly on the biotech base, it’s recognised as the strongest in Europe. People don’t understand the component of our economy that is based on domestic versus export.

“Around 70% of our economy is based on in-house consumption, 30% is based on exports. Of the 30%, around 55% is to non-EU. So you’re only talking about 15% of our economy actually rests on EU export.

“The vast majority of countries in the world we don’t have a free trade deal with, we don’t have one with the US or China or India. Even in the worst-case scenario we’re doing more trade with those markets outside the EU than we are with the EU.

“I think there’s a certain amount of sky falling in when you start to break down the facts to that. Forty percent of the world’s drugs are produced in India and of the Indian drugs, 40% are produced in Gujarat which is where we happen to have most of our manufacturing assets.

“You’ve got 16% of the world’s drugs produced in one corner of India and that’s not going to change with Brexit.”


The company behind Accord Healthcare
Intas Pharmaceuticals, through its wholly owned subsidiary Accord Healthcare, completed the acquisition of Actavis UK & Actavis Ireland from Teva Pharmaceutical Industries for an enterprise value of £603 million.
The deal saw Accord strengthen its footprint in the UK and Ireland retail market to become a leading player in the industry at European level and Intas become a top 20 generic player globally.
Intas is the fourth largest corporate in the Indian chronic pharma market with a market share of 5.32%. It also has a presence in the cardiovascular system, diabetology, gynaecology, infertility, respiratory care, gastroenterology, pain management and other therapeutic areas.

James’ CV
• December 2012-present; Executive vice-president EMENA, Accord Healthcare.
• October 2010-December 2012; Vice-president hospital business, Accord Healthcare.
• August 2009-October 2010; Vice-president hospital business, Actavis.
• September 2008-August 2009; Director of commercial operations WE, Actavis.
• 2003-2006; BD manager, Mayne Pharma.
• 1997-2001; PhD, chemical engineering, University of Birmingham.
• Follows Northampton Saints rugby club and de-stresses by playing golf.

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