DRUG DELIVERY: FUNDAMENTALS AND APPLICATIONS

This chapter examines drug delivery from a market and marketing perspective. It deals mainly with the end market for drug delivery prescription-only medicines (POMs). The market for over-the-counter (OTC) medicines will not be discussed in detail, but differences between it and the prescription market will be highlighted. The chapter also touches on business-to-business marketing that has been traditionally carried out by specialist drug delivery companies, which offer their technologies for licensing to other companies.

With respect to the end market for POMs, the following will be discussed:

• The characteristics of the global market for pharmaceuticals, its segmentation, and how it differs from that of consumer goods

• The drug delivery market—variations in the way it is defined, its size, and other characteristics

• The need for drug delivery products within the global pharmaceutical market and how they benefit patients, doctors, and other stakeholders

• The role of drug delivery in product development, product life-cycle management, and defending branded medicines against generic competition

• The trends within the global pharmaceutical market and how they impact on the development of drug delivery products

• The factors that make a successful product

With respect to business-to-business marketing, the following questions will be considered:

• How do companies market drug delivery technologies and drug delivery products for licensing to other companies?

• How do pharmaceutical and biotech companies evaluate these technologies and products?

For the purpose of this chapter, drug delivery products are further subdivided into two separate areas (Bossart 2005):

• Drug delivery–enabled products: These are products containing drugs that could not be developed by a particular route without the use of drug delivery technology, e.g., protein delivery to the lungs and formulations for silencing RNA.

• Drug delivery–enhanced products: These are products containing drugs that can be delivered by a particular route, but drug delivery technology has been used to improve their delivery characteristics, e.g., sustained-release formulations for the oral route.

For the convenience of the reader, a list of marketing and other terms used in this chapter has been included in Appendix 22.A. The defined terms are marked in italics the first time they are used in the text.

22.2 CHARACTERISTICS OF THE GLOBAL MARKET FOR PHARMACEUTICALS

22.2.1 MARKET SIZE AND GROWTH

According to IMS Health data, global spending on medicines was $1069 billion in 2015 and this figure is estimated to grow to between $1.4 trillion and $1.43 trillion in 2020, with an overall compound annual growth rate (CAGR) in the range 4%–7% (Aitken and Kleinrock, 2015).*

As shown in Figure 22.1, the United States is currently the largest market for pharmaceuticals, followed by the combined top five European markets (Germany, Italy, United Kingdom, France, and Spain) (Atkin and Kleinrock, 2015). However, many of these established markets are stagnating or growing slowly, for reasons that will be discussed in Section 22.6. In recent years, most rapid market growth is observed in countries like China and India whose economies have been growing rapidly, with the result that both governments and individuals are able to spend more on health care.

22.2.2 SEGMENTATION

All markets can be broken down into segments with the same characteristics or customer profile. The customers within these segments are therefore likely to have the same needs and preferences. Companies use segmentation to characterize markets and identify gaps within them. Products/services can then be developed to meet the needs of particular segments. The products/services are then advertised, promoted, distributed, and sold through channels best suited to the needs of the target segment. For example, in the 1990s, low-cost airlines revolutionized short-haul air travel in Europe when they identified a need for cheap no-frills flights within the target geographical segment, which they sold via the Internet.

FIGURE 22.1 Global spending on medicines per country/region. Percentages calculated based on wholesaler prices. Wholesaler prices may not include discounts and rebates. Developed markets: United States, Japan, the top five European markets (Germany, France, Italy, Spain, United Kingdom), Canada, and South Korea. Emerging pharma markets countries: China, Brazil, India, Russia, Algeria, Argentina, Bangladesh, Chile, Colombia, Egypt, Indonesia, Kazakhstan, Mexico, Nigeria, Pakistan, Philippines, Poland, South Africa, Saudi Arabia, Turkey, and Vietnam. (Data from Atkin, M. and Kleinrock, M., Global Medicines Use in 2020 Outlook and Implications. IMS Institute for Healthcare Informatics, Parsippany, NJ, 2015, accessed February 14, 2016, www.imshealth.com/en/thought-leadership/ims-institute/reports/global-medicines-use-in-2020.)

Like any other market, the global pharmaceutical market can be segmented in different ways. From a marketing perspective, there are two overarching segments: POMs and OTC products, based on different legal and regulatory requirements and the restrictions they place on marketing, sale, and supply. However, these are two very broad areas and the pharmaceutical market is typically divided into segments and subsegments based on one or more additional criteria. Examples of the way the pharmaceutical market can be segmented and subsegmented are shown in Table 22.1.

Some markets can be defined as niche. These are small, defined markets with very specific unmet needs. There are often additional barriers, e.g., technological or high investment, to entry into these markets. The size and special requirements of these markets make them unattractive to most companies, which means firms that target them face little or no competition and can charge premium prices for their products. Niche markets include those for the so-called orphan drugs for the treatment of rare diseases and conditions (see Section 22.6.5).

Segmentation is also used to identify subsegments within the “customers” of pharmaceutical companies, i.e., physicians, wholesalers, pharmacies, payers, and for OTC medicines and, where direct-to-consumer (DTC) advertising is allowed, patients. This segmentation is used to tailor promotional activities to these subsegments and/or develop specific deals.

TABLE 22.1
Examples of Segmentation within the Pharmaceutical Market

Segmentation	Subsegments	Possible Further Segmentation
Legal class of medicine, e.g., prescription only or OTC	Some medicines are pharmacy only, while others can be also sold in nonpharmacies.	NA
Therapeutic area, e.g., diabetes	Specific disease/condition, e.g., type 1 and type 2 diabetes. Unsurprisingly, this is the most common form of segmentation, but a medicine may have a number of indications, and these may be in different therapeutic areas. Sometimes a company will choose to focus on one indication or therapeutic area or create different brand strategies for different indications.	Mechanism of action, e.g., proton pump inhibitors and H₂ receptor antagonists. Length of action, e.g., basal and mealtime insulin. First-line therapy, second-line therapy, etc., medicines can be split into first- or second- or third-line therapy based on the conditions of their product license or based on clinical or formulary guidelines, e.g., NICE guidelines on type 2 diabetes (NICE 2012). Certain cancer drugs are only licensed when used in combination with others and/or if treatment with other products has failed.
Geography—most products developed for sale globally	Large markets, e.g., United States, Europe, Japan. Geographical regions where particular diseases/conditions are more prevalent than in others.	Individual countries with specific local needs.
Route of administration or formulation type	Parenteral, oral, pulmonary controlled-release or immediate-release solid dosage form.	Injections for self-administration or hospital use.
Location of treatment	Hospital only, out-patient clinic, medical practice in the community with self-administration at home.	Specialist hospital centers/clinics, e.g., oncology products. Some companies focus their product portfolio on such centers.
Age of patient, life stage, and lifestyle	Pediatric medicine, older people (easy-to-swallow formulations), pregnancy, menopause.	Vitamins and mineral supplements are very often targeted at very specific age groups and lifestyles.
Genetics/the presence or absence of biological markers/metabolic differences	This type of segmentation is not common but is set to increase due to the greater understanding of disease at a genetic and cellular level. Probably the best known example is the use of Herceptin^® to treat a subset of breast cancer patients whose tumor is human epidermal growth factor receptor 2-positive.	NA
Abbreviation: NICE, National Institute for Health and Care Excellence.

22.2.3 DIFFERENCES BETWEEN THE PHARMACEUTICAL MARKET AND CONSUMER MARKETS

As with consumer goods, the marketing of pharmaceutical products can be discussed with respect to product, price, place, and promotion, otherwise known as the 4Ps of marketing or marketing mix. However, there are a significant number of differences between marketing pharmaceutical products and consumer goods and also between the marketing of prescription-only and OTC medicines (see Table 22.2 for a comparison). These differences are discussed under the following headings:

22.2.3.1 Stakeholders

The stakeholders in the prescription pharmaceuticals market are shown in Box 22.1.

The number of stakeholders in the prescription pharmaceuticals market tends to be greater than in typical consumer markets, and their influence is differently distributed. There are a number of reasons for this. First, for prescribed medicines, a third-party payer typically covers all or part of the retail cost of the medicine. The patient is usually only charged a fixed amount per product (copayment or prescription fee) or a percentage of the price of the medicine (coinsurance). These payers are state-funded health-care bodies or programs, e.g., UK National Health Service (NHS) or the U.S. health-care program, Medicaid, and medical insurance companies dealing in cover for prescription medicines. In this market, the patient depends principally on the doctor to select the appropriate medicine based on medical knowledge, and it is only with OTC products that the patient chooses the product, with or without the advice of a pharmacist. However, with the advent of increased information on the Internet with respect to diseases and their treatment, patients and carers globally are becoming more informed and are more likely to discuss treatment options with their doctor.

TABLE 22.2
Differences between Pharmaceuticals and Consumer Goods

Pharmaceuticals	Consumer Goods
Highly regulated.	Less regulation and, at most, manufacturers have only to ensure that their products are safe, comply with the law, and are “fit for purpose.”
Long period of development.	Development period varies with product but typically is a lot shorter than for pharmaceuticals.
Product development affected by clinical, technological, and scientific advances.	Product development affected by technological advances and fashion.
The development of new medicines (nongenerics) results in new intellectual property.	Generation of new intellectual property is only possible for certain products.
Stakeholders—many and influential.	Number of stakeholders varies with product and supply channel but, in general, around four (the manufacturer, wholesaler, retailer, and customer).
Access to medicines is restricted in the case of prescription medicines, which require a doctor to authorize supply. In many countries, there are also restrictions on the sale/supply of OTC medicines.	Access to consumer goods is typically only limited by the customers’ ability to pay. In certain cases, they are limited based on age, e.g., alcohol and cigarettes.
In most countries, the direct advertising of POMs to consumers is banned.	Goods advertised directly to customers through magazines, newspaper, TV, radio, Internet, etc.
The patient pays the retail price of OTC products. However, in many countries, patients typically pay only a fixed fee or copayment per product or a percentage of the cost for prescription medicines.	The customer pays the retail price of the product. This can vary depending on the supplier, e.g., Internet, independent shop, large retail chain.
Number and size of purchasers of medicines (hospitals, pharmacy chains, wholesalers, independent pharmacies) varies with the health-care system. Internet sales of prescription medicines are officially restricted to registered online pharmacies in some countries, while in others, Internet sales are forbidden.	Numerous purchasers, Internet sales are unrestricted.
Number and size of third-party payers—varies with the health-care system.	Not applicable.
Pricing and reimbursement: Pricing is typically decided by manufacturers and reimbursement by third-party payers. Pricing depends on the factors listed in Section 22.2.3.5.	Price set by the producer/seller and depends on the factors listed in Section 22.2.3.5.

BOX 22.1 STAKEHOLDERS IN THE PRESCRIPTION PHARMACEUTICAL MARKET

Governments, EU, and WHO

State insurance systems, e.g., NHS

Private insurance companies

Doctors and dentists

Pharmacists and health-care staff

Patients, carers, and advocacy groups

Pharmaceutical industry

Wholesalers

Regulatory authorities

Other stakeholders in the market include governments, regulatory bodies, the European Union (EU), the World Health Organization (WHO), patient advocacy groups, wholesalers, and, of course, the pharmaceutical industry itself (research-based companies and generic firms). Political stakeholders, such as governments, the EU and the WHO, are influential, as the maintenance of good health and the effective treatment, management, and prevention of disease are critical factors to both individuals and society as a whole. At a national level, the availability and affordability of effective and safe medicinal products are issues that concern politicians and voters alike.

It is therefore not surprising that the development, licensing, manufacture, analysis, distribution, sale, supply, and marketing of pharmaceuticals are the subject of strict regulatory control and that the pricing and affordability of medicines are increasingly the cause of political debate and government control through policies impacting on reimbursement (see Section 22.2.3.5). Of course, governments want to control spiraling public health-care spending while providing quality health services. In doing so, they must balance budget control with the need to “reward” the pharmaceutical industry for the development of new innovative medicines, and the fact that in many countries, the pharmaceutical industry is a major employer and significant contributor to gross domestic product (GDP).

22.2.3.2 Product

Pharmaceuticals differ from consumer goods in that they must receive marketing authorization prior to their launch onto a particular market. In order to receive this authorization, companies must demonstrate that their products have efficacy, are safe, and meet the appropriate quality standards throughout their shelf life. Importantly, the benefits of taking the medicine must outweigh the risks. Developing a new therapeutic entity and gaining market authorization takes on average 12–13 years from the first synthesis of active substance (EFPIA 2013). In 2012, the average cost of this process was estimated to be $1506 million in 2011 dollars (Mestre-Ferrandiz et al. 2012). This figure includes the cost of drugs, which failed in the development (for every 10,000 molecules at the discovery stage, only 1–2 will reach the market), and the cost of capital.

The length of time taken and investment required to develop pharmaceuticals is therefore much higher than typical consumer products. It also means that there is a much shorter time to recoup development costs and obtain a return on investment before patents protecting the active molecule expire and generic versions enter the market. In order to compensate partially for the time lost during regulatory review of the first application, certain countries and regions, e.g., United States and the EU, allow companies a period of additional patent protection for new molecular entities (NMEs). The rules on patent-term extension (US and EU) are listed elsewhere (35 U.S. Code 156; Europa 2009a).

22.2.3.3 Place

The sale and/or supply of POMs to patients requires physician preapproval in the form of a valid prescription, and the dispensing of medicines is mainly restricted to pharmacies (hospital and retail). In some countries, doctors are also allowed to fill prescriptions especially if the number of pharmacies is limited. Most pharmacies are retail. However, mail-order pharmacy is well established in the United States and Canada, but in some other countries, it is in its infancy or is forbidden.

For prescription-only drugs, the requirement for a prescription and the limitations on the place of sale make the pharmaceutical market very different from that of consumer goods. For example, it is not possible to buy direct from pharmaceutical wholesalers.

Restrictions on the place of sale and supply of OTC medicines vary from country to country. For example, in countries such as Germany and Austria, sales of OTC medicines are mainly restricted to registered pharmacies, while in others like the United Kingdom and Ireland, some OTC medicines can be sold in nonpharmacy outlets, e.g., supermarkets, but the purchase of others is limited to pharmacies.

22.2.3.4 Promotion

Another factor differentiating the pharmaceutical market from that of consumer goods is the regulatory and industry code of practice controls placed on the promotion of medicines (Rollins and Perri 2014).

Advertising of POMs to the general public (commonly known as direct-to-consumer [DTC] advertising) is currently banned in all countries around the world with the notable exceptions of the United States and New Zealand. Therefore, in most countries, pharmaceutical companies target their promotional efforts at physicians. This has been traditionally carried out through scientific presentations and posters at conferences, through sponsored continuing professional development for physicians, and by teams of sales representatives who “detail” the doctors on the benefits and risks of the product and provide them with free samples. In the age of the Internet, social media, and smartphone applications, new technology is being used to promote pharmaceuticals to doctors and, where permissible, also to patients. Another effective way of marketing pharmaceuticals are disease awareness campaigns, in which no specific product is mentioned, but the common symptoms, the importance of early diagnosis, and treatment are highlighted, and people experiencing these symptoms are advised to consult a physician. These campaigns are important as they promote discussion of the disease and its treatment, facilitate timely diagnosis, and, together with other promotional efforts, such as physician detailing, impact on sales. They also, to an extent, circumvent the ban on direct advertising of prescription medicines to patients. For example, in Austria, there have been disease awareness campaigns on chronic obstructive pulmonary disease and various vaccines on television despite the direct advertising of prescription medicines being forbidden.

The controls on the promotion of medicines, whether they require a prescription or not, are stricter than for consumer goods. TV, radio, print, or Internet advertisements for prescription (where allowed) and OTC medicines must make the patient aware of both the risks and the benefits and/or inform them where they can access this information. In addition, all claims made during detailing or any form of advertising or promotion must be backed up by data and be in line with the regulatory-approved product information, and firms cannot actively promote use of the medicine for nonlicensed indications (the so-called “off-label” use). DTC advertising in the United States is checked and monitored by the FDA’s Office of Prescription Drug Promotion (FDA 2014b).

TV commercials account for most of the company spending on DTC advertising, but recently there has been an increase in the use of the Internet. In the United States, pharmaceutical company spending on DTC advertising reached a peak of over $5.4 billion in 2006 (quoted in Ventola [2011]) as a result of heavy TV promotion of small-molecule blockbuster drugs prescribed by community doctors. Since then, spending has declined due to former blockbuster drugs going off-patent and losing market share to generics, which are not advertised. In addition, a significant proportion of medicines approved over the last 10 years have been for diseases with small patient populations and/or otherwise fall into the Specialty Pharma segment (typically prescribed in hospital/specialist clinics) making DTC advertising less relevant. Despite this, spending has recently started to rise and in 2014, $4.5 billion was spent (excluding digital advertising) on DTC adverts, an increase of almost 21% on 2013 (Dobrow, 2015). The use of DTC advertising is still controversial. For a full discussion of the pros and cons of DTC advertising, the reader is referred to reviews by Rollins and Perri (2014), Donohue et al. (2007), and Ventola (2011).

In recent years, as a result of several scandals, the promotional practices of pharmaceutical companies have come under increased scrutiny by regulatory bodies and the media. In the United States, this has resulted in regulatory changes and a tightening of the voluntary code of practice of the Pharmaceutical Research and Manufacturers of America (PhRMA 2008), a body representing the research-based pharmaceutical industry. Despite the restrictions on the promotion of medicines, pharmaceutical companies still have to position their product within a market segment and develop a brand and brand image. A full discussion of branding and the development of brand awareness and loyalty, and how companies carry out product positioning and launch and promote product adoption, can be found in the reviews by Rollins and Perri (2014) and Landsman et al. (2014).

22.2.3.5 Price

For consumer goods, price is a critical component of the marketing mix and in the positioning of a product within a market. For example, higher prices are often associated with products of better quality and added value. Prices for many consumer goods can be said to be elastic in that as their price increases, demand falls. Prices are also affected by the cost of developing, manufacturing, and selling the product, including indirect fixed costs such as rent for facilities. The greater the cost of developing, manufacturing, and selling the product, the higher the price, as companies at the very least have to cover their costs. The company’s business strategy with respect to a particular product is a further factor. This may change during the product’s life cycle, e.g., special offers to entice consumers to buy a newly launched product and/or to gain market share, a pricing strategy that maximizes profit for well-established products facing little competition. Other factors that affect the price include the size and characteristics of the target market segment, e.g., budget or luxury goods; the relative advantages of the product compared with its competitors; the number of products competing within a target market and how differentiated the products are from each other; the type of marketing or distribution channel, e.g., independent shop versus Internet; and the relative bargaining power of purchasers and suppliers, e.g., large purchasers have the power to negotiate better prices and terms and conditions. The prices of OTC medicines sold directly to patients obey these rules to a greater extent than POMs. This is because the patient is the sole payer.

The pricing of prescribed medicines is complicated by the fact that the majority of medicines in many countries are not paid for in full by patients, but through a process of reimbursement by third-party payers. Third-party payers include governments (in the case of state-funded health-care systems/programs), private health insurance companies offering cover for prescription medicines, and pharmacy benefit managers (companies who manage the drug claims, and benefits aspects, of health-care insurance plans).

The pricing and reimbursement of POMs is variable and complex, as reimbursement policies and market conditions vary from country to country (Europa 2013; Rollins and Perri 2014). However, a number of general points regarding pricing policies can be made. Typically, the pharmaceutical company sets the price of the medicine, but third-party payers influence it through various cost-control mechanisms. The company’s pricing strategy depends on whether the product is a patented originator product, an originator product that is off-patent or about to go off-patent or a generic. The price of an originator product will also depend on the stage of its life cycle, while those for generic products tend to be purely market driven. When pricing an originator medicine, companies need to consider development and manufacturing costs (e.g., biopharmaceuticals cost more to produce than small-molecule drugs), the innovativeness of the product, its key selling points and its advantages over existing therapies (including nondrug options), and the level of competition in the same therapeutic area. Pricing of innovative medicines is, in general, inelastic, i.e., a price increase does not influence market demand. However, the degree of price elasticity depends on the extent of competition (other molecular entities and/or generics) within the therapeutic segment, and the ability of a company to set a particular price may be limited by the pricing of other products already on the market. Geography also impacts on the prices that pharmaceutical companies can charge, due to local market conditions and differences in the rules and regulations affecting reimbursement. Price differentials between countries can result in the importing of medicines from countries where the price is low, a practice known as parallel importing. Where this exists, it creates competition and a downward pressure on prices in the importing country despite the owner of the originator product being the same in both countries. Pricing can also vary depending on the customer, with hospitals or other large customers being able to negotiate a lower price than smaller ones. Pricing decisions will be influenced by whether the medicine is for one-off, short-term, or chronic therapy and the frequency of administration. The place of administration—community, general hospital, or specialist center—can also affect price, with products administered predominately in specialist centers being typically able to command a higher price than those used in general practice. Pricing of drug therapies is increasingly becoming the subject of political and public debate. Two recent examples are the price of Sovaldi, a game-changing therapy for the treatment of hepatitis C but which costs $84,000 for the 12-week course making it unaffordable for many patients and its use in programs like Medicaid severely restricted (Palmer, 2015). Another example is Daraprim, a treatment for toxoplasmosis encephalitis, originally developed over 60 years ago whose price was increased by over 5000% after it was acquired by Turing Pharmaceuticals (Thielman, 2015).

For medicines containing NMEs, companies only have a limited time period to recoup product development costs and make a profit before patents expire and market protection is lost. After this, generic versions of the product can enter the market and impact adversely on the originator’s market share. Pricing by manufacturers must balance this against the willingness of payers and patients to bear the costs of the medication, the need for access to affordable medicine, the price of competing products, and internal factors such as production capabilities and business targets for revenue and profit. Sometimes a higher price can be justified if pharmacoeconomic analysis shows that the medicine reduces the overall cost of therapy, e.g., shorter period of treatment, or enables community care as opposed to hospital treatment. The success of such a strategy depends on whether the payer is focused on the cost of the medicine or the total cost of treatment and the amount the patient has to contribute. If out-of-pocket expenses are too high, patients may simply decide not to have their prescriptions dispensed or demand cheaper therapy.

Product sales of patented proprietary medicines are highly dependent on the product being approved for use, and reimbursement, by third-party payers. Countries and organizations within countries have different methods of determining whether a product can be reimbursed, to which extent the costs will be refunded, and the circumstances under which the product can be used. In countries with extensive public health-care systems, e.g., United Kingdom, Germany, and Austria, reimbursement decisions are taken principally at a national level. For example, the UK’s advisory body, the National Institute for Health and Care Excellence (NICE) issued guidance in 2006 advising against the use of inhalable insulin (except under special circumstances), on the grounds that the benefits of avoiding injections did not justify the higher cost of the new product; the product (Exubera) was later withdrawn by Pfizer due to poor sales. In others, e.g., United States, where there is more extensive use of private medicine, decisions on reimbursement are made at an individual third-party payer level, and these may differ between health-care insurance plans and between private and state-funded schemes such as U.S. Medicaid. Ways that the use of prescription medicines can be controlled by third-party payers include inclusion/exclusion of products in drug formularies or preferred drug lists, the placing of medicines into different tiers based on the extent of reimbursement and required patient contribution, restrictions on the use of the medicine, and/or the requirement that the prescribing of certain medicines must be preapproved by third-party payers. Such restrictions tend to affect new and expensive medicines more than cheaper and well-established products even if the latter are still protected by patents. Whenever possible, pharmaceutical companies negotiate with the responsible authorities for state-funded health care, employer, and private prescription insurance benefits, in order to agree prices/rebates and conditions, which minimize restrictions on the use of their products and maximize sales. For some state-funded systems, for example, Medicaid rebates are mandatory. However, it is important to note that prices for reimbursement purposes are often different than the actual amounts paid by the wholesaler, hospital, or pharmacy as a result of discounts and rebates.

In recent years, health technology assessment (HTA) (Sorenson et al. 2008; Arnold 2009) has been increasingly used to assess the cost and benefit of new medicines compared with existing treatments, prior to recommendations being made on their use and reimbursement. Countries like Germany have taken the pharmacoeconomic argument one step further and introduced a system of value-based pricing, in which newly approved products containing a new therapeutic entity or a new combination of actives can be priced higher than competing therapies based on the added benefit they bring to patients (AMNOG 2010). The price of products deemed to be without added benefit are based on comparative therapies. Both HTA and value-based pricing have resulted in pharmaceutical companies having to present the pharmacoeconomic case for their products and in some cases modify their pricing strategies through patient access schemes in order to ensure that their products will be used in a particular market. For examples of such arrangements for the NHS in England and Wales, see the NICE website (NICE 2014).

22.3 DRUG DELIVERY MARKET

The drug delivery market is a subset of the pharmaceutical market and shares almost all of the characteristics described for the main market in Section 22.2. However, in some respects, the market for drug delivery products is slightly different, and certain drivers, constraints, and trends within the main market have a specific effect on the demand for improved delivery of pharmaceuticals. These will be discussed in this section and later sections.

22.3.1 MARKET DEFINITION AND SIZE

The exact definition of a drug delivery product is open to interpretation. From a formulation viewpoint, a drug delivery product can be described as one that has been deliberately designed to modify or localize the release and/or distribution of a therapeutic entity and/or improve its bioavailability in a manner that could not be achieved if it were formulated as an immediate-release solid dosage form, a simple solution, suspension, cream, or ointment. For this reason, the term “drug delivery” has been traditionally associated with the use of formulation technologies to enhance or enable delivery of therapeutic molecules and, in particular, the use of polymers, lipids, or specialized excipients such as cyclodextrins and permeation enhancers. Therefore, the term has been associated with dosage forms, such as sustained-release tablets, implants, nanoparticles, liposomes, and technologies which enhance the solubility or permeability of drugs. Similarly specialized formulation and device combinations such as dry powder inhalers, iontophoretic patches, and ocular inserts would typically be classed as drug delivery products.

However, drug delivery can also be enabled or enhanced by chemical modification of the pharmacological entity, e.g., PEGylation of a protein or by the use of specialized devices. In particular, in the rapidly growing area of biopharmaceuticals, around 14% CAGR is forecast between 2014–2020 to reach a global market size of $1.671 billion (Mordor Intelligence, 2015), such options are most often the only way that delivery can be improved. Differences in the type of products included in the analysis of the drug delivery market are part of the reason why estimations of this market can vary considerably, as illustrated by the data in Table 22.3.

TABLE 22.3
Examples of Drug Delivery Market Size Estimates in Recently Issued Commercial Reports

Estimate of Drug Delivery Market	Time Frame	Report
Global market	2015–2020	Markets and Markets (2015)
$1048.1 billion in 2015 estimated to reach $1504.7 billion by 2020 giving a CAGR of 7.5% from 2015 to 2020
Global market	2013–2018	BCC Research (2014)
$181.9 billion in 2013 with the market estimated to reach $212.8 billion in 2018 resulting in a CAGR of 3.2%
U.S. market	2014–2019	Freedonia (2015)
$187 billion in 2014 increasing to $251 billion in 2019 giving a CAGR of 6.1%

However, differences in the type of product included in the analyses are not the only reason for varying estimates (Market Size 2014). Market research is not an exact science, especially on a global basis. Variations in market estimates can occur due to factors such as difficulties sourcing certain data, differences in market research methodology, the exact time period evaluated, and the need to make assumptions. Despite this, all of the recent data point to the global drug delivery market being worth at least $182 billion and having a growth rate similar to that of the total market for prescription pharmaceuticals.

22.3.2 DRUG DELIVERY MARKET SEGMENTATION

The drug delivery market is typically segmented by therapeutic area, geography, and/or route of administration. With respect to therapeutic area, drug delivery products are commonly used for relief of pain (sustained and breakthrough pain relief—multiple formulation types), in the central nervous system (sustained-release, orodispersible formulations, and depot injections), for type 2 diabetes (sustained-release depot injections [Bydureon^®]) and fatty acid-peptide conjugate [Victoza^®]), for prostate cancer (sustained-release depot injections), and in cardiovascular segments (sustained-release oral dosage forms). The treatment of asthma and other respiratory diseases is almost totally reliant on the use of inhaler technology, while drug delivery devices such as pens and autoinjectors have simplified the lives of type 1 diabetes sufferers.

With the exception of prostate cancer, oncology traditionally was a segment where the focus of innovation was on the active therapeutic and not on delivery. However, this has begun to change in recent years with the development of PEGylated biopharmaceuticals, liposomal products, antibody–drug conjugates, targeted nanoparticle systems, and subcutaneous injection formulations of biopharmaceuticals that previously could only be administered intravenously, e.g., Herceptin^®. This trend is set to continue with the overall growth in the anticancer segment (see Section 22.6.5 for further details). North America (United States and Canada) is currently the largest market for drug delivery products (40%–50% of the global drug delivery market), followed by Europe (25%–35%) and then Asia/Pacific, with Asian markets showing the most growth (Freedonia 2015; Challener 2014). Table 22.4 shows how the drug delivery is typically segmented by route of administration and drug delivery technology.

TABLE 22.4
Typical Segmentation and Subsegmentation

Route	Technology Subsegment	Comments
Oral	Controlled release: Matrix and reservoir systems, multiparticulates (coated pellets/nonpareils in a capsule), osmotic systems, orodispersible, taste masking, and others	The oral segment is the largest of all, with around 40%–50% of the market. Unsurprisingly, controlled-release formulations represent the largest subsegment. It has been estimated that the U.S. oral drug delivery market will grow from $107 billion in 2014 to $130.4 billion in 2019 (CAGR 4%) (Freedonia, 2015). However, future growth in this segment is likely to be impacted by the loss of patent protection for some highly successful controlled-release formulations, e.g., Seroquel^® XR in 2017, and the increase in biopharmaceuticals both as a percentage of the total number of approved therapeutic entities and the total pharmaceutical sales.
Injectable	Pen injectors Autoinjectors Needle-free Depot injections Encapsulated delivery systems	There is often considerable variation in how the injectable market is defined with some market analyses including monoclonal antibody products in the definition. However, in all cases, this segment is growing rapidly for the reasons given in Section 22.6.5.
Pulmonary	Metered-dose inhalers Dry powder inhalers Nebulizers	Pulmonary delivery is third largest segment in the drug delivery market. It represents typically around 10%–15% of the drug delivery market.
Transdermal	Passive transdermal Active transdermal, e.g., iontophoresis	This segment is fairly small. Expansion is limited by the low numbers of drugs that can be delivered across the skin.
Nasal	Inhalers Sprays	Currently, this route of administration is mainly limited to local action except a few notable exceptions, e.g., flu vaccine, calcitonin, and fentanyl.
Implants	Drug-eluting stents Implantable infusion pumps Intravitreal implants Contraceptive implants Brachytherapy seeds	Small segment whose growth is driven by stents and intravitreal implants.
Topical Ophthalmic Transmucosal	Semisolid formulations plus others Eyedrops Ointments Inserts Buccal and sublingual Rectal and vaginal	These are small segments concerned mainly with local therapy, with the exception of buccal and sublingual. Transmucosal delivery is typically cited as the smallest of all drug delivery segments, but there has been considerable growth in the use of the buccal route in recent years due to advances in buccal tablet and film technology.

22.4 NEED FOR DRUG DELIVERY PRODUCTS 22.4.1 TYPES OF NEED

22.4.1 TYPES OF NEED

In general, products and services are conceived, developed, and launched to satisfy identified customer needs or wants that are not met by those currently on the market. In this respect, the market for pharmaceutical products is no different from any other. Market needs can be divided into three groups: real and clearly identified, latent, or perceived, as shown in Table 22.5.

TABLE 22.5
Different Types of Marketing Needs^a

Real and Clearly Identified	Latent	Perceived
Patients, doctors, and companies recognize there is a need for a treatment or an improvement in therapy, e.g., an effective treatment for Alzheimer’s disease.	Patients/doctors are not actively conscious of the need, but when questioned about or offered the product, they immediately see its advantages. For example, buccal films that can be administered without water.	A perceived need for a pharmaceutical product is mostly associated with OTC medicines although it can arise as a result of direct-to-consumer advertising of prescription medicines. In this case, the product may not be necessary for health, e.g., the purchase of vitamin and nutrient supplements by healthy nonpregnant adults.
^a Depending on the circumstances, drug delivery products meet one or more of these types of needs.

22.4.2 HOW DRUG DELIVERY PRODUCTS MEET MARKET AND STAKEHOLDER NEEDS

Drug delivery products meet market needs in a number of ways. These needs can be viewed from the standpoint of the main stakeholders involved in health care. Patients, doctors, and other healthcare professionals want products that are more efficacious, safer, and more convenient to use than those already on the market. Doctors in particular desire a broad palette of therapeutic options so that they can tailor therapy to the needs of individual patents. In addition, patients want products with a pleasant taste, which are nongritty and are easy to swallow. Reductions in dosing frequency and improved ease of administration or taste are often accompanied by an improvement in adherence to the medication regimen, which, in turn, has a knock-on effect on therapeutic effectiveness. The same can be said for medicines with an improved side-effect profile either over the original product or others in the same therapeutic class. The price of the new therapy is also important for OTC and POM products in cases where patients have to make a large copayment, or a contribution, which is a percentage of the total price.

Payers want therapies with greater effectiveness and safety or that aid adherence to therapy, as this should reduce the total time of treatment and reduce the likelihood of adverse effects. Nonadherence with chronic medication is currently thought to be around 50% and this costs the U.S. health-care system alone between $100 billion and $289 billion annually (Viswanathan et al. 2012). Unsurprisingly, the issue of nonadherence is of importance to payers, and although the reasons for it are multifactorial, it has been repeatedly shown that simplifying the dosage regimen facilitates compliance with therapy (Laliberté et al. 2013; Medic et al. 2013). Payers also want medications that can be self-administered or administered in an out-patient setting, to reduce the need to treat patients in hospital, which is very expensive. Often drug delivery approaches are required to develop such formulations.

Despite the potential benefits of drug delivery–enabled and drug delivery–enhanced medicines, it should be remembered that payers are principally focused on the cost effectiveness of medicines compared with therapeutic alternatives already on the market, including generics. The cost-effectiveness of a new drug delivery product may be relatively easy to demonstrate if its use results in an overall reduction in the cost of care, e.g., a change from in-patient to out-patient treatment or a reduction in drug waste. Benefits, such as better therapeutic outcomes as a result of increased patient compliance, can be difficult to prove for a new product, as in the real world, other factors affect adherence to therapy including the level of patient out-of-pocket expenses (see Section 22.6.9 for further comments).

Companies that develop pharmaceutical products need to develop products that will sell well, capture market share, allow them to recoup their development costs, make a profit, and satisfy shareholders. Research-based pharmaceutical companies, drug delivery companies, and generic companies use drug delivery technologies to achieve these goals. In the case of drug delivery companies (firms whose principal business is the development and exploitation of in-house delivery systems), the products are mainly developed on behalf of clients. The importance of drug delivery technology to the pharmaceutical industry is discussed next.

22.5 ROLE OF DRUG DELIVERY IN PRODUCT DEVELOPMENT AND PRODUCT LIFE-CYCLE MANAGEMENT

Drug delivery technology is primarily used to develop second-generation formulations for product life-cycle management purposes, but it is also used increasingly during the development of new compounds. Creating products that benefit or add value to patients and other stakeholders makes good financial sense, and a significant number of drug delivery products have become blockbusters, with annual sales in excess of $1 billion (for examples, see Table 22.6).

22.5.1 IMPROVED EFFICACY AND COMPLIANCE AND REDUCED ADVERSE EFFECTS

The overriding goal of early development is to initiate animal, toxicology, and later clinical testing as soon as possible, in order to get an initial readout on a new therapeutic entity’s safety and pharmacokinetics. Typically, pharmaceutical scientists employ as simple formulations as possible (solutions, suspensions) in order to achieve sufficient drug exposure during early development. Even in later clinical stages, companies tend to develop simple immediate-release formulations (tablets/capsules or injections) in order not to add complexity to the development process. More sophisticated formulations and drug delivery approaches are often only used for these “first-generation” formulations if necessary, e.g., to achieve adequate bioavailability and/or stability of the compound.

TABLE 22.6
Examples of Top-Selling Drug Delivery Products

Product	Active	Technology	2015^a ($ Million)	2014 Sales^a ($ Million)
Seroquel^® XR	Quetiapine	Controlled-release tablet	1,025	1,224
Sandostatin^®SC/LARb	Octreotide	PLGA microparticle depot injection	1,630	1,650
Symbicort^®	Budesonide and formoterol	Inhaler	3,394	3,801
MabThera^®/Rituxan^®	Rituxima^b	Human hyaluronidase enzyme in subcutanous injections	5,640^b^,^c	5,603^b^,^c
Herceptin^®b,c	Trastuzumab		6,538^b^,^c (Swiss francs)	6,275^b^,^c (Swiss francs)
Neulasta^®	Pegfilgrastim	PEG conjugate On-body injector enables delivery 1 day after chemotherapy	4,715	4,596
Invega Sustenna^®/Xeplion^®/Invega Trinza^®	Paliperidone palmitate	Nanocrystal^® Technology to improve solubility of insoluble ester	1,830	1,588
Victoza^®	Liraglutide	Lipid conjugate in pen injector	18,027 (Danish kroner)	13,426 (Danish kroner)
Seretide/Advair	Fluticasone propionate and salmeterol xinafoate	Inhaler	3,681 (Sterling)	4,229 (Sterling)
^a Sales figures from company reports. In US$ unless otherwise stated. ^b Sales figures include both standard formulations and drug delivery product. ^c Subcutaneous injections at the time of writing this article were available only in some markets but proving popular as they decrease the time for injection to around 5 minutes and are less invasive.

The number of compounds in pharmaceutical companies’ pipelines with suboptimal absorption, distribution, metabolism, and excretion (ADME) properties has risen in recent decades. This is, in part, due to the increased use of combinatorial chemistry and high throughput screening in drug discovery. These techniques tend to identify highly potent lead compounds, but such leads also often have poor aqueous solubility (Biopharmaceutics Classification System [BCS] Class 2 and 4 drugs; see also Chapter 3). Depending on the dose, simple formulations of such compounds may not result in sufficient bioavailability, and solubility-enhancing technologies are therefore required to achieve this.

Another factor increasing the number of therapeutic entities with suboptimal ADME properties is the fact that biopharmaceutical and peptide drugs now occupy a larger proportion of company pipelines than in the past. Many protein and peptide drugs have short half-lives in vivo and drug delivery technologies such as PEGylation or microparticle-based depot injections are necessary to reduce the frequency of injection, decrease administration costs, and improve convenience (see also Chapter 6).

There is continuing interest in the delivery of therapeutic entities via noninvasive routes. This is driven by the general unpopularity of injections, the rise in the incidence of diabetes, the number of peptide drugs in development, the desire to reduce or eliminate first-pass metabolism, and an improved understanding of how to overcome the epithelial barriers presented by noninvasive routes for molecules with a MW of 6000 or less. The systemic bioavailability of most compounds is poor via routes such as nasal, buccal, transdermal, or pulmonary, and drug delivery technology is required to enable or facilitate delivery.

A long-standing goal of drug delivery is to target drugs to specific cells, tissues, and organs where they can exert their action and keep them away from those where they would cause side effects. For parenteral delivery, targeting can either be (1) passive, i.e., reliant on the ability of colloidal nanosystems with the correct particle size and surface properties to accumulate in, or avoid, certain tissues, or (2) active, due to the presence of ligands, which bind to cell surface receptors on the target cells. Such targeting can be used for both therapeutic and diagnostic purposes. Due to the complexity of developing such systems, very few products have reached the market so far. Examples include liposomal formulations of daunorubicin and doxorubicin, paclitaxel albumin–bound nanoparticles, and radiolabeled monoclonal antibodies. However, this may be set to change with a number of antibody drug conjugates (ADCs) in the late clinical development. At the time of writing this chapter, only two such ADCs were on the market, Adcetris^® (brentuximab vedotin) and Kadcyla^® (trastuzumab emtansine).

22.5.2 PRODUCT DIFFERENTIATION AND HOW TO INCREASE MARKET SHARE

Product differentiation is important in crowded markets. As a rule of thumb, the first product on the market in a segment has the best chance of capturing and maintaining the largest market share, providing it can overcome initial resistance to its use due to physician/patient unfamiliarity. Products entering the market later and particular “me-too” members of the same therapeutic class must position themselves against the first-to-market product. Unless these products have superior efficacy, safety, and/or convenience, then this can be an uphill struggle, although the extent to which they are disadvantaged depends on a number of factors, such as the time between their launch and that of the first product, promotional efforts, and pricing (Schulze and Ringel 2013).

Analysis of the factors affecting the market success of Specialty Pharma products showed that an improved side-effect profile and/or an increase in convenience are powerful motivators for doctors to prescribe either a “me-too” drug in the same class (Gudiksen et al. 2008) or a new formulation of a previously marketed drug.

In some cases, the development of a second-generation drug delivery–enhanced or drug delivery–enabled product, which is clinically superior or provides distinct advantages, can result in product sales that outstrip that of the original formulation and promote wider use of the therapeutic compound. Examples of this include (1) the transdermal patch formulation of rivastigmine (Exelon^®), which offers reduced side effects, improved convenience, and carer satisfaction, compared with oral formulations of the same drug (Darreh-Shori and Jelic 2010; Adler et al. 2014), and (2) Pegasys^®, which offers increased efficacy in hepatitis C, reduced side effects, and improved convenience over the non-PEGylated version (Rasenack et al. 2003; FDA 2013).

22.5.3 FOR LIFE-CYCLE MANAGEMENT PURPOSES TO EXTEND THE TIME OVER WHICH A PARTICULAR BRAND OF MEDICINE REMAINS PROFITABLE

Companies have always developed new formulations and dosage forms as part of product life-cycle management. However, the application of drug delivery, e.g., controlled-release technologies, allows the development of products with clear competitive and clinical advantages over the original product and provides a defense against other competitors already in, or entering, the market. This defense comes in the form of new intellectual property and, in some cases, exclusivity on the clinical data generated to support the market authorization of the drug delivery product. Generic companies therefore cannot immediately make direct copies of these new formulations/dosage forms even if the drug is off-patent. They must wait until the period of exclusivity (if applicable) is over, and the patents have expired or have been proven to be invalid or not infringed by the generic company’s product. For research-based companies, which develop new therapeutic options, the strategy typically involves getting as many patients transferred to the newly improved product prior to the approval of the first generic copy of the original formulation.

22.5.4 TO ENABLE THE DRUG TO BE USED FOR NEW INDICATIONS

Sometimes new formulations of already approved drugs are required in order to allow these drugs to be used for new indications. For example, the short-acting opiate drug, fentanyl, was initially marketed as a short-term painkiller for use during surgical procedures. However, the approval of a transdermal patch formulation, Duragesic^®, in 1990 expanded its use to chronic pain control. More recently, numerous noninvasive fentanyl formulations indicated for breakthrough cancer pain have reached the market. The development of such products creates new markets for the drug, results in new IP and, in some cases, exclusivity for the clinical data used to support the market authorization of the new indication.

22.5.5 TO ENABLE USE IN SPECIALIST POPULATIONS OR TO FACILITATE PRESCRIPTION TO OTC SWITCHES

All patients want easy-to-swallow and pleasant-tasting medicines, inhalers that are easy to use, and injection devices that cause minimal pain and distress. However, these aspects are particularly important in pediatric populations and to a certain extent in elderly people. For example, developers of liquid, dispersible, and orodispersible formulations often employ taste-masking technologies, e.g., polymeric-coated drug particles that work together with the vehicle to disguise an API’s bitter taste.

In the OTC market, competition is fierce. Branded products must offer additional advantages and perceived higher quality to cheaper generic alternatives, in order to justify their higher price. Formulation approaches that improve taste and convenience (especially those that remove the need to take the dosage form with water) and accelerate onset of action are popular with patients.

22.5.6 TO CREATE AND EXPLOIT INTELLECTUAL PROPERTY AND OTHER BARRIERS TO MARKET ENTRY BY COMPETITORS (ESPECIALLY GENERICS)

There are three main ways that pharmaceutical originator products can achieve market exclusivity: The first way is via patents and associated patent-term extensions (e.g., United States) or supplementary protection certificates (e.g., EU). The second is a result of receiving marketing authorization from a regulatory authority. The third type of barrier relates to technical and investment barriers that are associated with very innovative and complex delivery systems. These three mechanisms are now considered in turn.

22.5.6.1 Patents

The development of drug delivery–enabled or drug delivery–enhanced products leads to new patents and patent applications that competitors must challenge or work around in order to develop and commercialize a product with similar advantages. However, formulation patents do not provide as strong protection as those for new therapeutic entities, as it is often possible for competitors to create a product with similar benefits by using a different formulation approach. The strength of a product’s patent position depends on a number of factors including the uniqueness of the drug delivery technology used, whether it itself is patented and has a strong patent position, the claims granted by patent offices, and the skill of the patent lawyers and scientists involved in drafting and defending the patents.

Although a number of factors affect the actual length of patent protection, the term of a patent generally runs from the date the patent is granted, to 20 years from the date on which the first application was filed. Since the development and regulatory approval process for pharmaceuticals is so lengthy, companies obtaining market authorization for originator products in many countries are eligible for extensions to patent protection, called patent term extensions in the United States and supplementary protection certificates in the EU. The rules governing these extensions vary, but in general, the United States and EU allow a maximum of 5 years additional IP protection (one patent and first authorization of drug) (Ellery and Hansen 2012). Limited additional patent protection may also be granted for approval of use of medicines in pediatric populations.

22.5.6.2 Market Exclusivity

Companies can receive certain market exclusivity rights for their products after regulatory approval. Different rules on exclusivity apply to new chemical entities and certain hormones, biologics, and those designated as orphan drugs. Typically, exclusivity is also granted, albeit for a shorter period, if a company obtains regulatory approval for new indications and/or pediatric use of a previously approved therapeutic. A detailed description of the rules and regulations pertaining to market exclusivity are found in the further reading list (FDA 1999; Small Business Assistance 2010; Ellery and Hansen 2012; European Commission 2013; Frias 2013).

In the United States, companies are rewarded with new drug product exclusivity for new products containing previously approved active moieties whose marketing authorization was dependent on the results of new clinical investigations (not just bioavailability/bioequivalence studies). Such products can be approved through the FDA’s 505(b)(2) new drug application (NDA) route (FDA 1999; Small Business Assistance 2010) provided that the drug is not protected by patents or exclusivity. Under this regulatory route, the applicant (often a small specialist or generic company) must provide full reports of safety and effectiveness studies, but at least some of the supporting data comes from studies not conducted by or for the applicant (e.g., preclinical and clinical studies that supported the U.S. marketing authorization of the reference product). Formulations/dosage forms approved by this route differ from those submitted as an abbreviated new drug application (ANDA) in that they are not a duplicate, or essentially a duplicate, of an approved originator reference product (FDA 1999; Small Business Assistance 2010).

For successful 505(b)(2) submissions for new formulations/dosage forms, the period of new drug product exclusivity is 3 years if new clinical studies were essential for approval, although other types of exclusivity may apply, e.g., pediatric. The 3-year new product exclusivity prevents approval of ANDA or other 505(b)(2) applications for the same conditions of approval. However, it does not prevent approval of 505(b)(2) applications for other formulations or dosage forms of the same active moiety, if the conditions of approval are different, e.g., different indications or generics of the originator product. It also does not protect against a duplicate product coming onto the market if it has been the subject of a full NDA submission (505(b)(1)) (Small Business Assistance 2010). The previous discussion refers to small-molecule drugs and noncomplex biologics approved through the NDA pathway. Complex biologics approved through a biologics license application in the United States are entitled to 12 years of market exclusivity; legislation on biosimilars has only been introduced (FDA 2014a) in recent years. To date the FDA has approved only one biosimilar product, Zarxio^™, a biosimilar to Amgen’s Neupogen^® (filgrastim) (FDA 2015). For biologics there is no additional exclusivity awarded for new indications, dosage forms, routes of administration, delivery systems etc., if the biopharmaceutical has not been structurally altered to improve purity, safety or potency (FDA 2014d).

The FDA also takes into account if there are patents in force protecting a product or its use before granting approval or in some cases allowing dossier submission. Applicants submitting NDAs (505(b)(1) or 505(b)(2)) are required to list any patents protecting their products and their use in their applications. These patents, their expiry data, and any U.S. exclusivity associated with the product are listed in the FDA publication “Approved Drug Products with Therapeutic Equivalence Evaluations” commonly known as the Orange Book.

In addition, as with ANDAs, the 505(b)(2) applicant must provide information on any unexpired exclusivity and all U.S. patents associated with the referenced approved active moiety, as given in the Orange Book. They have to make certifications, e.g., that all relevant patents have expired or, in the case of nonexpired patents, that these are not valid or not infringed (Paragraph IV Patent Certification). If protection still exists, approval and under certain circumstances filing will be delayed. Unsurprisingly, Paragraph IV Patent Certification is typically a trigger for patent infringement litigation by the originator company.

Therefore, in the United States, there are two mechanisms (patents and new product exclusivity) by which new formulations and dosage forms can be protected from generic competition, provided they required new clinical studies to support their approval. In Europe, the first time a therapeutic entity (drug or biological) is approved, the product benefits from an 8-year data exclusivity period during which competitors cannot submit a dossier referencing data used to support market authorization of the reference product. This is followed by 2 years of market protection during which competitors can submit dossiers for regulatory review and approval but cannot launch the product (European Commission 2013; Frias 2013). Market protection can be extended by a further year if marketing authorization for a new indication is obtained and certain conditions are met. This is generous in comparison with the new drug product exclusivity granted to new chemical entities entering the U.S. market (only 5 years). There is also provision for 1 year of data exclusivity for a new indication for a well-established product and a 1 year for a change of legal status to OTC if significant preclinical or clinical studies were necessary to support authorization (applies to study data only) (European Commission 2013; Frias 2013). Different data exclusivity rules apply to orphan drugs.

However, in the EU, the start of market protection begins with the first authorization of a therapeutic entity, and subsequent approval of different dosage forms, strengths, etc., does not affect it except in limited cases, e.g., where it is required for a new indication (European Commission 2013; Frias 2013). However, new formulations, strengths, and dosage forms are developed and licensed within the EU, some as so-called hybrid products (an EU-authorized medicinal product is used as a reference product but new clinical data are required to obtain approval). The development of these typically results in additional patent protection, which, in turn, facilitates market protection.

22.5.6.3 Technical and Investment Barriers

Other barriers are created when the delivery system is complex and difficult to formulate. Examples of such delivery products include microparticle-based implants, liposomes, and nanoparticles for parenteral use. The use of these technologies is restricted to drugs with specific delivery or compliance issues, which treat serious, and very often chronic, conditions. The products arising from such development typically provide distinct advantages and solve serious delivery issues. As a result, they often dominate markets with high profit margins. For competitors, such complex formulations represent a technological and investment barrier as their development requires specialist expertise and equipment and additional analytical capabilities compared with traditional dosage forms such as tablets. In addition, there is often very little regulatory guidance or experience with these types of products, particularly those involving intravenous colloidal systems (see also Chapter 21).

22.5.7 TO BOLSTER PIPELINES AND DECREASE RISK

New products containing already approved actives can be developed faster than those containing new therapeutic moieties and for considerably less investment (time and investment depends on the need for, and extent of, new clinical data required). They also carry less risk than new therapeutic moieties, as the clinical effectiveness of the active is known and, if developed by an originator company, will benefit from existing brand recognition.

A significant proportion of line extensions incorporate drug delivery technology to add advantages to the second-generation product. However, originator companies are not the only ones who exploit drug delivery technology to help fill their pipeline and balance risk. A significant number of companies focus their activity on developing drug delivery–enabled or drug delivery–enhanced products that can be approved through the FDA’s 505(b)(2) pipeline. These are often small companies, but also generic giants such as Teva employ such tactics (see Section 22.8.1 for further details).

22.6 TRENDS WITHIN THE PHARMA MARKET AND THEIR IMPACT ON THE DEVELOPMENT OF DRUG DELIVERY PRODUCTS

22.6.1 INCREASING DELIVERY CHALLENGES

The number of poorly soluble compounds in drug development pipelines has increased over the years for the reasons given in Section 22.5.1 (see also Chapter 3). This, of course, impacts on the need for technologies to enhance the solubility of these compounds. Several technologies for improving aqueous solubility via the oral route exist, and the state of technology development could be described as fairly mature with several commercially viable technologies being available. However, there is a technology gap for poor solubility via the parenteral route as restrictions on the excipients considered safe for injection and issues with reprecipitation of drug following administration limit the current formulation options.

Silencing RNA and gene therapy development are currently hampered by delivery issues. Delivery technologies for these types of therapeutics exist, but they are far from ideal, and the area is one of active research (see also Chapter 16). Delivery system development in this area is set to continue and will increase dramatically if siRNA candidates currently in development fulfill their therapeutic promise.

Other trends within the marketplace include a sharp rise in the percentage of new product approvals for biopharmaceuticals and peptide drugs. According to IMS data, biopharmaceuticals were responsible for 18% of the global pharmaceutical prescription market in 2012 with insulin and monoclonal antibodies being responsible for the majority of sales (Rickwood et al. 2013) and this figure is set to grow.

Formulation-type approaches for improving delivery are often not suitable for very large molecules such as recombinant proteins and monoclonal antibodies due to instability, release, and/or cost of goods issues. In these cases, chemical conjugation approaches (e.g., PEGylation) are used to reduce dosing frequency, and delivery devices (pens and autoinjectors) are employed to make administration more convenient. One exception to this is the use of recombinant human hyaluronidase (Halozyme Therapeutics) to break down hyaluronan in the extracellular space and improve the delivery of large molecules via the subcutaneous route. The use of this technology has allowed the development of subcutaneous injections of antibodies that previously could only be administered intravenously (see Table 22.6). Other exceptions include a once-weekly injection of somatropin (Somatropin Biopartners), which has been approved in Europe, and several formulations of insulin and growth hormone for delivery via noninvasive routes, which are in clinical development.

Peptide drugs are unstable in gastrointestinal fluids and plasma and have poor membrane permeability. They therefore have short half-lives in body fluids and poor bioavailability when delivered by noninvasive routes. However, compared to proteins, they represent a more reasonable challenge for commercial drug delivery product development in terms of stability within microparticle systems, percentage absorbed in the presence of permeation enhancers, and lower drug substance manufacturing costs. A number of highly successful peptide drug delivery products have already been marketed for example, Victoza^®, Zoladex^®, and Sandostatin^®. The growing pipeline for peptide drugs (mainly for the treatment of cancer and neuropeptides) therefore represents an opportunity for the development of drug delivery–enabled and drug delivery–enhanced products.

22.6.2 USE OF DEVICES TO IMPROVE CONVENIENCE AND SAFETY

The rise in the number of large biopharmaceuticals on the market and increasing levels of diabetes have had a significant impact on the size of the current and potential market for injection devices with increased ease of use, reduced pain, and more controlled delivery. As discussed in Section 22.6.1, large and fragile molecules such as proteins and monoclonal antibodies do not lend themselves to commercial development as polymer-based sustained-release depots or noninvasive dosage forms. Until technical challenges are solved, pharmaceutical developers will continue to focus on the use of prefilled syringes, pens, and autoinjectors to provide patients and physicians with greater convenience and reduced risk of contamination while device companies continue to develop and commercialize more sophisticated products. There is also an increase in the number and sophistication of complex drug–device combinations with ongoing improvements in the design of pulmonary inhalers and nasal delivery devices. Iontophoretic patches reentered the U.S. market with the launch of Zecuity^® (sumatriptan iontophoretic transdermal system) in 2015, however postmarketing reports of burning and scarring in patients have led to a recent voluntary product withdrawal.

22.6.3 CHANGING DEMOGRAPHICS

According to WHO data, the number of people aged 60 years and older has doubled since 1980 and is forecast to reach 2 billion by 2050. This coupled with falling birth rates, especially in developed countries, means that by 2050 it is projected that globally the percentage of children less than 15 years of age will equal that of adults over 65. An increase in the elderly population will not only affect wealthy countries but also low-to-middle income ones. For example, it is estimated that Chile, China, and Iran will have a greater proportion of older people than the United States.

Changing demographics will have a dramatic impact on health-care needs and costs. Diseases associated with age such as cancer, osteoporosis, and Parkinson’s and Alzheimer’s disease will increase, as will the need for effective and affordable treatment of pain and rheumatic conditions. At the same time, there will be proportionally fewer people of working age paying taxes to cover the higher public expenditure on health care. Both will put enormous pressure on state-funded health care and pricing and reimbursement policies. Medicines that are easy to swallow and administer will become more important, because aging, and some of the diseases associated with it, increases the incidence of dysphagia and results in a reduction in motor and sensory skills. In addition, many older people have multiple health issues resulting in complex medication regimens and a higher risk of adverse reactions.

Changing demographics represents an opportunity and a threat to drug delivery. The opportunities arise from the new products that can be developed to meet the needs of an aging population, e.g., oral films, taste-masked liquids, effective but noninvasive delivery to the eye, targeted diagnostics, and treatments for cancer. In developing such systems for use in older populations, companies need to consider changes in physiology that may impact on drug absorption and pharmacokinetics and the fact “old” people are a diverse group both in terms of age and extent of fitness. The threat comes from control of pricing and reimbursement and the willingness of payers to recognize the value of drug delivery–enabled and drug delivery–enhanced products and reimburse them appropriately.

22.6.4 INCREASING LEVELS OF OBESITY AND SEDENTARY LIFESTYLES

Rising levels of obesity and sedentary lifestyles in both developed and emerging markets have been accompanied by an increased incidence of metabolic syndrome, type 2 diabetes, and heart disease. Since these conditions often need treatment with multiple drugs, there are opportunities to simplify therapy and improve compliance through application of drug delivery. For example, Amylin used Alkermes’ PLGA microparticle technology to develop Bydureon^®, a sustained-release subcutaneous depot injection containing the glucagon-like peptide-1 receptor agonist, exenatide, which enables an injection frequency of 7 days, compared with twice daily for the conventional injection.

22.6.5 FOCUS ON CANCER THERAPIES, SPECIALIST AREAS, AND NICHE MARKETS

Oncology is by far the largest therapeutic segment in the pharmaceutical market (see Table 22.7), followed by treatments for antidiabetics. In recent years, there has been a focus on the development of cancer treatments and other medicines for specialist areas in which a premium price can be charged. At the same time, there has been a move away from the search for potential blockbuster drugs (prescribed in general practice to large patient populations).

The drivers for this change can be divided into three groups: commercial, technical, and regulatory. Commercial and technical drivers include the steadily rising cost of drug development, the high rate of failure in drug development pipelines, and the dramatic erosion of market share through generic competition when drugs lose their market exclusivity. Focusing on smaller specialized markets with significant unmet needs means that companies can concentrate their development efforts on conditions for which there are no, or few, satisfactory therapies. In such segments, successful products can make a clinical and commercial impact and there is less competition. In addition, new therapies for areas such as oncology are more likely to be given priority for review by regulatory authorities and, since they are administered by specialists, require a smaller sales force for their promotion than that required for a medication prescribed by community doctors.

Often the drugs used in specialized markets are biological products. To date, they have not suffered from generic competition to the same extent as small-molecule drugs, for the reasons described in Section 22.6.7.

Regulatory incentives promoting the development of specialist treatment include the orphan drug regulations and regulatory fast tracking and assistance for clinically superior new therapies for serious conditions (FDA 2014c). The former exist in a number of countries, and, although the definition of an orphan drug varies, all offer incentives to the development and commercialization of medicines for rare and mostly chronic diseases and conditions.

The increased focus on specialist markets opens up opportunities for drug delivery products within markets, in which effective products can command a premium price. For example, there is an urgent need for the improved targeting of many cancer drugs so that they reach the target cancer cells without causing nontarget side effects. However, tumor structure, composition, and biochemistry are complex and, together with the ability of cancer cells to become resistant to therapy, leads to huge technical challenges in trying to achieve targeting. Liposomes, nanoparticles, and drug–antibody conjugates are approaches currently being pursued (see also Chapter 5). In addition, drug delivery technology is used extensively to improve chronic and breakthrough pain therapy and most recently to prevent the abuse of prescription narcotics.

TABLE 22.7
Global Sales Based on Therapeutic Classes

	Ranking	2014 Sales ($ Million)	2014 Growth (% $ LC)	2013 Sales ($ Million)
Oncology	1	74,449	12.2	67,486
Antidiabetics	2	63,573	18.0	54,850
Pain	3	59,786	6.5	57,625
Antihypertensives, single agent and combination	4	47,537	–1.2	49,648
Antibacterials	5	40,272	0.8	40,823
Respiratory agents	6	39,570	5.6	37,985
Mental health	7	39,134	0.6	39,533
Autoimmune diseases	8	35,906	17.5	30,952
Lipid regulators	9	28,412	0.2	28,947
Dermatologics	10	28,223	9.5	26,561
Anticoagulants	11	26,619	12.5	24,198
GI products	12	25,135	9.9	23,667
Antiulcerants	13	24,811	–1.1	25,650
HIV antivirals	14	22,678	10.9	20,615
Other cardiovascular	15	22,625	9.3	21,277
Nervous system disorders	16	22,106	11.7	20,191
Other CNS	17	19,652	5.5	19,036
Viral hepatitis	18	18,079	212.6	5,941
Kanpo, Chinese medicines	19	16,054	9.5	14,662
Vaccines (pure, combined, and others)	20	15,116	8.4	14,265

Sources:	IMS Health Midas Data 2014; IMS Health Topline Data, http://www.imshealth.com/en/about-us/news/top-linemarket-data, accessed March 20, 2016.
Notes:	Sales and rank are in U.S. dollars with quarterly exchange rates; $LC, growth is in constant $ to normalize for exchange rate fluctuations. Sales cover direct and indirect pharmaceutical channel wholesaler and manufacturers. The figures above include prescription and certain over-the-counter data and represent manufacturer prices.

22.6.6 EMERGENCE OF PERSONALIZED MEDICINE

Personalized medicine is a potential game changer in pharmaceutical development and drug delivery. The segmentation of markets based on diagnostic results will enable patients to receive optimal therapy, but it further increases specialization and therefore will raise medication costs. At present, its use is mainly limited to certain monoclonal antibodies, which were developed in tandem with a diagnostic test. With the emergence of personalized medicine, the opportunities for advanced drug delivery approaches increase, in order to enable the delivery of therapeutics and diagnostics to the target cells. However, the development of personalized medicine, and the use of drug delivery to enable it, may be limited by pressure to control burgeoning health-care bills. For example, in April 2014, the NICE deemed the high cost of the antibody–drug conjugate, trastuzumab emtansine, “unaffordable” and did not recommend its funding by NHS budgets (NICE 2015).

22.6.7 INCREASING GENERIC COMPETITION AND WEAK DEVELOPMENT PIPELINES

In the last few years, a number of blockbuster small-molecule drugs have lost patent protection in key markets and started to face competition from generics. In the United States, typically the first company to file an ANDA containing a Paragraph IV certification for a generic copy of a medicine is entitled to 180-day market exclusivity (FDA, 2016). In Europe, the first-to-file generic does not receive any form of market protection. However, in both cases, price erosion occurs rapidly especially once there is more than one generic on the market (Simoens 2012; Rollins and Perri 2014). With payers becoming ever more cost-conscious, physicians are encouraged to prescribe generics and in many cases pharmacists are obliged or permitted to substitute a generic for a prescribed prescription medicine. It is estimated that in the United States, generics account for 90% of the sales volume of off-patent medicines with originator products losing about 80% of their sales within the first year. For example, in 2012, Lipitor, Pfizer’s blockbuster statin, lost 59% of its worldwide sales and 81% of its U.S. sales due to generic competition (Pfizer 2012; Sheppard 2014).

To date, generic competition has had little impact on sales of biopharmaceuticals despite biosimilar legislation being in place in the EU since 2004. Biosimilars currently only account for 1% of the biologics market (Rickwood et al. 2013). This is due to a number of factors. First, until the passing of the Patient Protection and Affordable Care Act in 2010, there was no biosimilar legislation in the United States meaning that the world’s largest pharmaceutical market was closed to such products. Second, a biosimilar can never be an exact copy of the originator product due to the molecular complexity of proteins and monoclonal antibodies. Biosimilar regulations therefore demand that certain preclinical, clinical, and immunogenicity studies are carried out to prove the biosimilarity of the new product to the comparator. Thus, the development of biosimilars is more costly and time-consuming than that of generic copies of small-molecule drugs, which can reference all preclinical and clinical data carried out on the originator product.

At the same time, development pipelines of many pharmaceutical companies have been drying up leading to a flurry of merger, acquisition, and in-licensing activity. This is due to the technical difficulties in discovering new drugs for many diseases that offer real therapeutic advantages compared with current treatments, and also the high attrition rates within development pipelines. The combination of the loss or imminent loss of patent protection, with fewer potential blockbusters in development to replace them, has led many companies to focus on new formulations and drug delivery–enhanced products as a defense against the generics and to manage product life cycle. In addition, drug delivery–enhanced products can be developed more cheaply and rapidly as there is no discovery stage and fewer clinical trials are required for them to gain marketing authorization.

22.6.8 INCREASED REGULATIONS AND REGULATORY SCRUTINY

The demands placed on pharmaceutical companies by regulatory authorities continue to increase. However, in recent years, a number of incentives for the development of particular medicines have been introduced. These include orphan drug regulations, increased regulatory fast tracking for innovative therapies, and the pediatric medicine regulations. The orphan drug and pediatric drug regulations give companies increased market protection for their products. The orphan drug regulations pertain to drugs that have been officially designated as orphan according to the regulations of individual regulatory authorities due to the low number of patients suffering from a serious disease or condition. These drugs are often biologics, but drug delivery products also benefit from them. For example, Abraxane^® (paclitaxel albumin–bound particles for injectable suspension) has currently an orphan drug status in the United States for the treatment of stages IIb–IV melanoma and pancreatic cancer.

Pediatric regulations, which have been introduced in a number of countries, are designed to promote the clinical testing of medicines in children and therefore increase the need for appropriate formulations for younger patients. This, in turn, creates a demand for taste-masking technologies and easily swallowed dosage forms.

22.6.9 HEALTH-CARE COST CONTROL

The cost of health care is rising dramatically due to increased longevity and the greater prevalence of diseases associated with old age. This is coupled with soaring rates of type 2 diabetes and the rise in the number of medicines produced by biotechnology, the latter being significantly more expensive than small-molecule medicines.

In order to contain costs, many payers have adopted different strategies for controlling pharmaceutical budgets. This is mainly carried out by control of reimbursement. These include gating mechanisms to new drug access, reference pricing, value-based pricing, formularies and preferred product lists, and the use of HTAs to determine if a drug is a cost-effective use of resources and should be publically funded. To date, such strategies have been more prevalent in state-funded systems; however, they are also used by private medical insurance. This trend is set to continue as the impact of the U.S. Patient Protection and Affordable Care Act 2010 takes full effect. This law is designed to increase the number of people with health insurance, make health care more affordable for individuals, and provide the government with better value for money.

Controls on reimbursement mean that expensive therapies or those priced higher than competitors may not be reimbursed, or only under restricted circumstances, unless they have very clear effectiveness and/or safety advantages. For example, reference has already been made earlier to the inhaled insulin product Exubera^®, which was only allowed to be prescribed on the UK NHS under very limited circumstances, as it was significantly more expensive than treatment with injected insulin but offered no effectiveness and/or safety benefits.

The key selling point of many drug delivery products is increased convenience and this can benefit patients in a number of ways, e.g., improved adherence. However, although a number of studies point to reduced dosing frequency and pill burden facilitating compliance with therapy, it is often difficult to demonstrate this for a particular product within clinical studies. The lack of robust data on the benefits of the improved convenience makes it difficult to justify a price premium for a product. The pharmacoeconomic case for a higher price is easier to argue for a novel delivery product that enables self-administration of the medication or reduces the number of physician visits, or time spent in hospital, and therefore reduces the overall cost of treatment. However, in many cases the new enhanced product will be priced based on the first generation product so that it is not higher for payers with the benefit of the new product to the company being market share expansion/maintenance through increased differentiation from competitor products (pricing of second generation life cycle products discussed in Ellery and Hansen [2012]).

Despite the comments earlier, the “add-on value” placed on increased convenience by a specific HTA organization may depend on the scope of the HTA (broad or narrow), the data/evidence and pharmacoeconomic justification presented by the pharmaceutical company, and if the opinion of outside parties, such as patient advocacy groups and independent experts, are taken into account. For example, one area of increasing importance to HTA is the impact of therapy on carers.

Among patients, cost (in the form of the amount they have to copay for the medicine) has a major effect on their willingness to pay for reduced dosing. For example, in one survey of U.S. patients with type 2 diabetes, patients with a high pill burden (≥5 tablets/day or more than once/day), i.e., high medication costs, were less willing to pay more for improvements in dosing convenience, than those with a lower pill burden. However, both groups of patients were willing to pay higher copayments for more efficacious medicines (Hauber et al. 2013).

As payers, due to financial constraints, become even more influential in prescribing decisions and physicians more aware of the cost of medication, product price together with effectiveness and safety data will determine prescribing and reimbursement decisions, and the use of HTA will continue to grow. This will impact on the prices that pharmaceutical companies can charge for their products, as they will have to prove new formulations and dosage forms are just as, or more, cost-effective than the competition. This is already the case in a number of countries, for example, the UK and Germany.

22.6.10 EMERGENCE OF NEW PHARMA MARKETS

The so-called pharmerging markets like China, Turkey, India, Mexico, and Indonesia are growing economically, and spending on pharmaceuticals will increase from $26 billion in 2012 to $30–$50 billion in 2017 according to IMS predictions (Rickwood et al. 2013). With more money to spend on health care and the emergence of a wealthy professional class who are likely to place greater value on convenient dosage forms, pharmaceutical markets in these countries will continue to grow in the future. For example, it is estimated that global usage of medicine will increase by one third by 2020 over 2005 figures (Atkin and Kleinrock, 2015). However, in these markets, nonoriginal brands, generic, traditional and OTC medicines occupy a greater market share than in so-called developed markets and there is overall less money to pay for innovative medicines. This is likely to limit the use of drug delivery products in these countries.

22.7 WHAT MAKES A SUCCESSFUL DRUG DELIVERY PRODUCT?

Table 22.6 shows examples of successful drug delivery–enabled or drug delivery–enhanced products that had worldwide annual sales in excess of $1 billion in 2015. Other examples of successful drug delivery products in the past and present include the following:

• Oral route: Procardia XL^® (once-daily nifedipine tablet), Effexor^® XR (once-daily venla-faxine HCl), OxyContin^® (twice-daily oxycodone), Wellbutrin^® XL (once-daily bupropion)

• Injectables: Lupron Depot^® (leuprolide depot injection)

• Transdermal route: Duragesic^® (fentanyl patch)

• Inhalation: Spirva^® (tiotropium bromide)

Product success can never be guaranteed and is influenced by a number of factors. However, based on previous successful and less than successful products, a number of key attributes can be identified and are described here.

22.7.1 PREVIOUS SUCCESS OF THE ACTIVE THERAPEUTIC MOIETY

Drug delivery technology rarely impacts on the efficacy of a therapeutic compound. So unless the technology enables a product that can be used for a new indication, or dramatically alters the dose that can be administered, e.g., as in the case of paclitaxel when formulated as Abraxane^® (paclitaxel albumin–bound particles), the efficacy of the original and drug delivery product remains the same. In addition, the active is associated with a brand name and this may influence physician and patient attitudes to any second-generation formulation of the same therapeutic. This means that companies typically invest in improved formulations of actives whose first-generation products were commercially successful.

The exception is when drug delivery technology can address some of the previous barriers to success e.g. reduce side effects, result in new indications, or otherwise give a product a clear competitive advantage. An example of a drug whose sales were boosted by a second-generation dosage form is rivastigmine (Exelon^®). It was first developed for oral administration and then as a transdermal patch for the treatment of Alzheimer’s disease. This was because the controlled transdermal delivery of the drug reduced the incidence of side effects compared to the oral dosage forms, and enabled carers to check visually for compliance with therapy (Darreh-Shori and Jelic 2010; Adler et al. 2014).

22.7.2 EQUIVALENT OR IMPROVED EFFICACY AND SAFETY TO THE IMMEDIATE-RELEASE FORMULATION

Efficacy and side effects are more important to patients and doctors than increased convenience. If a drug delivery product is less efficacious than the original product or if it results in increased side effects, then even if it is approved, it is unlikely to be commercially successful if it reaches the market. Nutropin^® Depot was a PLGA microparticle depot injection containing the growth hormone somatotropin. It enabled once or bimonthly dosing of this hormone, which is normally administered daily (FDA 2004). However, children using this product did not grow as fast or to the same extent as those dosed with the standard injection. It also resulted in an increased level of injection-site reactions. This, and other factors, resulted in its withdrawal from the market for commercial reasons.

The delivery system also has to be pharmaceutically stable and drug release consistent and reliable. Ionsys^®, a fentanyl iontophoretic transdermal system for patient-controlled analgesia, was approved in both Europe and United States in 2006. It was withdrawn from the European market due to device stability problems and never launched on the U.S. market (Europa 2009c).

Neupro^® (rotigotine transdermal system) was approved by the European Medicines Agency (EMA) in 2006 and the FDA in 2007 for the treatment of Parkinson’s disease. Reports of rotigotine precipitation on the outside of the patches appeared shortly afterward. Based on stability data at 5°C and dissolution data, the EMA allowed the product to remain on the market provided storage conditions were changed to refrigerated and other conditions were met (Europa 2009b). The FDA, however, requested that the product be reformulated. Neupro^® reentered the U.S. market in 2012 and had global sales of €182 million in 2013. However, the loss of the sales from the United States for around 4 years was a major setback for the brand.

22.7.3 NO ADDITIONAL CONTRAINDICATIONS OR RESTRICTIONS COMPARED WITH COMPETING PRODUCTS

Drug delivery product should be suitable for administration to as wide a patient population as possible, unless it has been specifically designed for a target subsegment. This was an issue for Exubera^®. It was designed to compete with rapid-acting insulin, but its use was contraindicated in patients who smoked or had lung disease. In addition, its use was only allowed if patients had satisfactory lung function test results, and this test had to be repeated annually.

22.7.4 PRODUCT MEETS MARKET NEEDS

Successful products meet market needs by solving clinical problems. Microparticle-based depot injections of gonadotropin-releasing hormone agonists such as goserelin (Zoladex^®) and leuprolide (Lupron^®) and antipsychotic drugs such as risperidone (Risperdal^® Consta^®) are highly successful products. In the case of leuprolide and goserelin, the depots remove the need for daily injections on a chronic basis, while in the case of Risperdal^® Consta^®, which is indicated for schizophrenia and bipolar disease, it ensures compliance in a patient population whose adherence to therapy is often poor. Controlled-release tablets such as Procardia^® XL (nifedipine) and Toprol^® XL (metoprolol) enable once-daily dosing of chronic medication indicated for hypertension and angina. In the case of hypertension, patients may have no symptoms and therefore may be less likely to be compliant with therapy. Once-daily dosing compared with three times (in the case of nifedipine immediate release) therefore simplifies therapy and aids adherence.

On the other hand, Exubera^®, the first inhaled insulin product to reach the market, only partially addressed patient needs. Injections are never popular and patients always state that they would prefer to take medications orally or via other noninvasive routes. Exubera^® removed the need for diabetics to inject prandial insulin. It also removed the requirement to store the insulin refrigerated as the spray-dried insulin powder was stable at room temperature. However, patients still had to inject basal insulin; they had to learn to use the device; dose conversion was complicated by the fact that the insulin dose was in milligrams and not in the usual international units; and the inhaler was large and could not be used discreetly (something that is important to diabetics) (Heinemann 2008). Exubera^® was withdrawn from the market after sales of only $12 million.

22.7.5 ALIGNMENT OF PRODUCT PRICE AND BENEFITS

The benefits of a drug delivery product in terms of effectiveness, safety, and convenience of administration have to be in line with its price. Products based on sophisticated delivery systems are usually only developed for diseases and conditions whose treatment can demand a premium price and when there are significant issues with delivery. As health-care cost containment increases, there will be further focus on the cost of medication in terms of total cost and relative cost compared with other therapies and a need to demonstrate value for money. In reimbursement systems that are influenced by HTA, demonstrating the cost-effectiveness of a product is key to obtaining a recommendation that the product be reimbursed.

HTA typically focuses on effectiveness, safety, and cost of treatment and not on convenience per se although it is taken into account to a certain extent. The ability of a company to justify a price for their drug delivery–enabled or drug delivery–enhanced product may depend on a number of factors:

• The difference between the cost of therapy with the drug delivery product and other competitors, including other formulations developed by the originator. For example, in 2006, Clarosip^®, a novel formulation of taste-masked clarithromycin granules in a drinking straw, was not recommended for use in NHS Scotland; the HTA assessment found that it was more expensive than other clarithromycin products, but it had no proven effect on compliance (Scottish Medicines 2014). Similarly, use of Exubera^® was not recommended for public funding (except in a very limited group of patients) because of its premium price compared to injectable soluble insulin.

• The delivery problem solved by the product and if this improves effectiveness and/or safety.

• If an increase in compliance/adherence can be adequately demonstrated.

• The characteristics of the disease or condition and the patient population, e.g., specific formulations for pediatric patients or orphan diseases.

• If the drug delivery product removes the need for treatment in hospital or otherwise reduces the total cost of therapy. Subcutaneous Herceptin^® was recently approved for use in NHS England because it reduces the time patients need to be in hospital and is less invasive than the formulation administered by intravenous infusion. Hence, it enables service redesign to take account of the reduced pharmacy and clinic time (NHS England 2013).

22.7.6 COST OF GOODS

Cost of goods manufactured is a term used to describe the cost of manufacturing a product. It includes raw material costs and direct labor costs. It therefore is affected by the cost of the drug, the excipients, the length and complexity of the production process, and the batch size. Sophisticated delivery systems such as parenteral microparticle or nanoparticle products naturally have a higher cost of goods than a controlled-release tablet or capsule and therefore are only suitable for markets in which a premium price can be demanded.

For peptides, proteins, and monoclonal antibodies, the cost of the active therapeutic moiety is considerable. This is an issue for drug delivery products being developed for biological products. The delivery of peptides and proteins by noninvasive routes results in relatively low bioavailability even after the system has been optimized, e.g., the bioavailability of Exubera^® was around 10%. This means that a considerably higher dose is required compared with injection with an associated increase in cost of goods (Heinemann 2008). Other cost of goods issues potentially affecting delivery systems include loss of drug during loading of colloidal delivery systems, the use of expensive excipients, complex production methodology, a greater degree of analytical testing and characterization than standard formulations, and small batch size.

22.7.7 PATENT PROTECTION AND UNIQUENESS OF DELIVERY TECHNOLOGY

Patent protection of the drug delivery product is a vital barrier to competitors entering the market. Ideally, the product should be protected by product-associated patents plus those covering the underlying technology. Once the drug delivery product is off-patent, then direct generic copies can be made. However, such products can face competition in advance of patent expiry if the drug itself is no longer patented and a competitor circumvents the patent using a different formulation or delivery approach. For example, two patented prolonged-release versions of a highly successful drug may coexist on the market, if they were developed using different controlled-release technology and the patents on both do not infringe each other. There are currently various different formulations of fentanyl on the market for the treatment of breakthrough cancer pain via noninvasive routes that all compete with each other.

A greater degree of protection for the drug delivery product is achieved if the technology is unique or complex, e.g., Seretide/Advair Diskus^®, the delivery issue is technically challenging to solve, and it requires high investment and specific expertise to develop and manufacture the product. Even then if the market is large enough, there will be financial motivation for competitors to try to overcome the barriers. For example, several depot injections of gonadotropin-releasing hormone agonists have been launched on the U.S. market. However, the Lupron^® Depot was still the leading hormone therapy for the palliative treatment of advanced prostate cancer in the United States and achieved global sales of $800 million in 2012 (Abbvie company report). This is despite being first approved in 1989.

One particular successful life-cycle management strategy was adopted by Abbott Laboratories in defense of its fenofibrate franchise in the United States. It employed a combination of improved formulations of this poorly soluble drug, obtaining additional indications for the drug, clever drafting of patent claims, and legal action against generic companies for patent infringement (this delays ANDA approval by the FDA for up to 30 months). By using solubility-enhancing technology, Abbott was able to alter the dose required on two separate occasions and remove the need to take the drug with food. In addition, the third reformulation contained fenofibric acid and not the ester. Generic companies then had difficulty copying the originator product as the dose and formulation kept changing. Those that reached the market could not be directly substituted for the branded product due to dose differences. Abbott was so successful that it itself was the subject of various court actions for abusing its market position to hinder competition. As a result, the company had to pay over $300 million in court settlements (Downing et al. 2012).

22.7.8 SUCCESSFUL PRODUCT LAUNCH AND MARKETING OF DRUG DELIVERY PRODUCTS

Product launch and the months preceding and following it are critical for the future success of any product including new medicines (Rollins and Perri 2014). Prelaunch in the market has to be thoroughly researched, the marketing strategy and tactics agreed, the product correctly positioned, and all four elements of the marketing mix decided upon; the advertising material must be prepared including medicine-specific websites and TV and radio commercials (where allowed), the sales force trained, and doctors, wholesalers, pharmacists, and the press briefed; launch stocks need to be available. If sales are not according to plan, then steps must be rapidly taken to correct this. The power of marketing cannot be overemphasized; however, the growing influence of payers in prescribing decisions means that a convincing pharmacoeconomic justification for a new medicine is critical.

22.8 BUSINESS-TO-BUSINESS MARKETING OF DRUG DELIVERY TECHNOLOGIES

22.8.1 DEVELOPERS, USERS, AND SELLERS OF DRUG DELIVERY TECHNOLOGY

Back in the 1980s and early 1990s, the term drug delivery was mainly associated with specialist companies, e.g., Alza, Elan, Eurand, Jago (later acquired by SkyePharma), and Biovail. These companies concentrated mainly on developing delivery technologies and using these technologies to create controlled-release dosage forms of drugs (typically for oral or transdermal administration) on behalf of clients. Research-orientated pharma formulated products to achieve adequate bioavailability and some of these products were drug delivery enabled or enhanced; however, its focus was not specifically on drug delivery technology development. Research-based pharma was the client of the drug delivery specialist, and in general, drug delivery companies did not develop and market their own products. Today, the situation is far more complex with a variety of players developing and exploiting delivery technology. As discussed in Section 22.3.1, the rise in the number of biopharmaceuticals has broadened the term drug delivery to include chemical conjugation approaches, delivery devices, and other approaches. The list below shows the type of firms developing drug delivery technologies and products to support their own product pipeline and/or to offer them to other firms through licensing, development, (sometimes manufacturing), and commercialization agreements or service contracts.

Big Pharma/Big Biotech. They develop, or acquire through merger and acquisition activity, drug delivery technologies that they use in the development of their own products. The development of devices is not usually part of their expertise with a few exceptions, e.g., Baxter. They also collaborate with drug delivery companies if in-house expertise is lacking and, if the product development is seen as strategic to future success, buy shares in these firms. Such collaborations are common for complex delivery systems such as microparticle-based depot injections or transdermal patches. Some companies, e.g., GlaxoSmithKline, AstraZeneca, and Boehringer Ingelheim, are experts in the field of pulmonary delivery.

Small- to medium-sized pharma. They develop their own products but are focused on a few therapeutic areas (examples include Grünenthal and UCB Pharma). They may have drug delivery technologies developed in-house or have acquired them to assist in the development of their own compounds. They may also collaborate with drug delivery companies and Big Pharma. Grünethal, for example, focuses on pain therapeutics and has developed its own tamper-resistant abuse-deterrent technology and controlled-release and transdermal patch products.

Specialty Pharma, i.e., companies focusing principally on products that are prescribed by clinical specialists (as opposed to community doctors) for particular diseases and conditions. Since many of these treatments are administered by injection, there is a focus on the use of devices to ease administration. These devices are typically not developed in-house. However, Specialty Pharma also encompasses postsurgical and cancer pain therapy, antitumor medicines, and siRNA. It therefore includes microparticle-based depot injections, liposomal-entrapped anticancers, Abraxane^®, antibody–drug conjugates, and silencing RNA delivery systems

Drug delivery companies. These are companies whose main business is developing drug delivery technologies, which they can license to other companies for use with their drugs. The traditional drug delivery business model of developing drug delivery technologies, and then using them to develop products for third parties in return for up-front payments, development and manufacturing fees, milestone payments for pre-agreed goals, and royalties on commercial sales, has changed over the years. Most companies now also develop their own products (e.g., Alkermes, SkyePharma) and either launch them onto the market or more commonly out-license them in late clinical development when higher royalty levels can be demanded. They may also concentrate their efforts on a particular therapeutic area.

Generic companies, especially those specializing in difficult-to-formulate generics, e.g., Teva and Sandoz (the generic division of Novartis). Teva, in particular, has a product pipeline filled with drug delivery–enabled or drug delivery–enhanced products partially as a result of its “new therapeutic entity” strategy (http://www.tevapharm.com). This strategy involves developing new products containing known drugs and getting them approved in the United States through the 505(b)(2) pathway.

Contract development and manufacturing organizations. A number of these offer drug delivery technology as part of their services, e.g., Catalent and Patheon. Some of these technologies are offered on a fee-for-service basis.

22.8.2 TRENDS WITH IN THE DRUG DELIVERY BUSINESS-TO-BUSINESS MARKET

Various trends can be observed within the drug delivery business-to-business market, which are described here.

22.8.2.1 Continuing Decline of the Traditional Drug Delivery Company Business Model

The “pure” drug delivery business model (i.e., the focus is on proprietary technology development and developing products for third parties) has a number of inherent disadvantages:

1. First, the company can only access drug through clients or if it is commercially available. This limits its activities to client projects and off-patent compounds that can be sourced at a suitable grade (cGMP for clinical studies).

2. Clients are only willing to pay license fees and royalties for technologies that offer significant technical and market advantages over others available commercially and that have significant patent protection and remaining patent term. The expertise of the drug delivery company is therefore in competition with in-house and service providers’ capabilities. This is particularly the case since formulation patents are, in general, easier to circumvent than those for active therapeutic moieties.

3. Drug delivery companies, in common with all service providers, are not involved in strategic decisions about the products they develop. Such decisions include client project priorities and the level of the marketing effort put into promoting a commercialized project. These decisions affect if and when a product reaches the market and the extent of sales and, hence, royalties.

The drawbacks of the drug delivery company business model were recognized early on with Alza being one of the first to develop its own products. Two early successful products developed by drug delivery companies and then licensed later on to Big Pharma include (1) Concerta^® (methylphenidate extended release), which was developed by Alza and licensed to Johnson & Johnson, and (2) Wellbutrin^® XL (bupropion), which was developed by Biovail and licensed to GlaxoSmithKline. Other examples include Alkermes development of Vivitrol^® (naltrexone for extended-release injectable suspension), which it initially licensed to Cephalon and then took the product itself to market.

Advancing a product to, and through, Phase 3 trials requires considerable resource both in terms of finance and internal expertise, which is a heavy burden for drug delivery companies. Taking a product to the market takes a whole other set of skills and resources and usually requires partnering with other companies. Obtaining the level of investment required is often a stumbling block for many companies. The reward is being able to maximize value from the product, e.g., in terms of royalty or profit levels. The focus on own product development has led to companies previously associated with drug delivery now to describe themselves as biopharmaceutical firms (e.g., Alkermes, Halozyme) or Specialty Pharma (Flamel) in order to underline their business strategy.

22.8.2.2 Increasing Number of Biopharmaceuticals in Company Pipelines as Opposed to Small Molecules

As explained in Section 22.6.1, formulation drug delivery technologies are mainly suited to improving the delivery of small-molecule drugs and some peptides. Strategies for improving delivery of biopharmaceuticals are largely through modification of the active substance itself or via devices. This in effect reduces the potential market for formulation technologies but increases the one for novel devices or drug–device combinations. It also creates interest in companies that have technologies capable of delivering peptides and proteins by noninvasive routes or enable the slow release and/or subcutaneous delivery of larger biopharmaceuticals.

22.8.2.3 Increase in the Number of Other Service Providers Providing Drug Delivery as Part of Their Offering

There has been a rise in the number and extent to which other service providers offer drug delivery and specialized formulation expertise as part of their service offering. This has been due to an increase in demand overall for outsourcing and the increase in the number of small-molecule compounds with poor solubility issues. Some contract manufacturers such as Catalent have long been associated with drug delivery, e.g., as a result of their softgel and orodispersible expertise, while others such as Patheon have been actively promoting their know-how in this area, e.g., their SoluPath Flex^™ package. Capsugel, originally a manufacturer of hard gelatin capsules, has been steadily broadening its delivery options and acquired Encap (liquid- and semisolid-filled hard gelatin capsules) and Bend Research (spray-dried powder solutions for poorly soluble compounds).

Competition is fierce in the world of outsourcing. Contract manufacturers use drug delivery capabilities to differentiate their early service offering, capture clients for their other services, and encourage long-standing business relationships. Excipient and capsule manufacturers boost sales of their main products by acquiring/developing drug delivery expertise or specific products for that particular market, e.g., the previously mentioned Capsugel acquisitions, BASF’s SoluPlus^® polymers, and Evonik’s purchase of Surmodics pharmaceutical assets (drug delivery and PLGA polymers).

22.8.2.4 Use of Drug Delivery by Generic Companies

Some of the biggest users of drug delivery technology are generic companies that use it not only to directly copy existing formulations but also create new ones with competitive advantages that can be registered in the United States via the 505(b)(2) route. As previously mentioned, this can result in a 3-year new drug product exclusivity if clinical trials were essential to product approval. Such formulations are also likely to result in new intellectual property. In addition to Teva, Sandoz, Dr. Reddy’s Laboratories (acquired OctoPlus in 2013), and Mylan also have considerable drug delivery expertise in-house. In addition, large generic companies often have API manufacturing facilities giving them easy access to supplies of drug substance at an early stage, something that most drug delivery companies do not have.

22.8.2.5 Once Novel Proprietary Technologies Become Part of the Standard Formulation Toolbox

A common delivery issue drives research in both Big Pharma and drug delivery companies, e.g., poor aqueous solubility of pipeline compounds. One company develops, patents, and commercializes a breakthrough technology, e.g., Elan’s NanoCrystal^® technology. Other approaches to solving the same problem are close behind. The success of these depends on the advantages/disadvantages they present, compared with the breakthrough technology, or if they serve a particular niche in the market. Gradually, the market becomes more and more crowded with competing technologies, and large companies acquire the expertise either through acquisition or in-house development. Later, the patents on the novel technology start running out and they are no longer so commercially valuable to their owners, although products manufactured using them may continue to be blockbusters. Eventually, the technology becomes part and parcel of the standard formulation toolbox. An example of this process is the history of the use of enteric coating. The exception is for highly specialist dosage forms, e.g., there are only a handful of companies with passive transdermal capabilities. Table 22.8 shows where certain formulation and chemical solutions to drug delivery issues sit on the technology maturity continuum (in the author’s opinion).

TABLE 22.8
Drug Delivery Technology Maturity Continuum

Emerging technologies	Early	Crossing the BBB barrier
		RNAi delivery Nose-2-brain delivery Cell encapsulation technology
	Late	Active transdermal Peptide conformation stability Permeability enhancement Protein delivery via nonparenteral routes Intravitreal drug delivery
Products, but still evolving	Early	Drug–antibody conjugates PEGylation Liposomes/nanoparticles
	Late	Buccal delivery Nasal delivery Solubility enhancement Implants/depot injections Powders for inhalation Bilayer tablets CR liquids
Mature technology		Passive transdermal Sustained-release tablets and capsules Taste masking
Abbreviation: BBB, blood–brain barrier.

22.8.2.6 Mergers, Acquisitions, Joint Ventures, and Spin-Outs

Like the rest of the pharmaceutical industry, drug delivery specialty companies have been the subject of merger, takeover, and spin-out activity. Of the six companies mentioned at the start of Section 22.8.1, only SkyePharma is still a stand-alone company. Alza was independent, then part owned by CibaGeigy, then independent once more, and finally taken over by Johnson & Johnson in 2001. Drug delivery products developed by Alza are still key assets within the J&J portfolio. However, much of the delivery technology assets were spun off and formed the basis of companies like Zosano Pharma.

The Elan Corporation merged with Athena Neurosciences in 1996. In the years that followed, the drug delivery business concentrated on oral administration and used joint ventures (JVs) with other delivery specialists to codevelop potential next-generation technologies and spread risk. Some of these JV partners such as NanoSystems and the Liposome Company were later bought out by Elan. However, the JV strategy was to be the company’s undoing when questions were raised about its accounting practices. The drug delivery business later became a separate division of the company and was bought by Alkermes in 2010. Another example is Biovail, which was acquired by Valeant Pharmaceuticals in 2010 and Eurand became the drug delivery division of Aptalis Pharma in 2011, which was itself taken over by Forest Laboratories in 2014. In 2015, the drug delivery business of Aptalis was divested following Actavis plc’s takeover of Forest and renamed Adare Pharmaceuticals.

Merger, acquisition, and spin-out activity in the field of drug delivery continues as larger companies buy out the smaller specialists and either run them as separate service divisions or integrate their assets within the larger organization and divest those that do not fit with the business strategy. JV formation is much less popular than previously although specialist companies with complementary skills still collaborate. New delivery specialists arrive on the market all the time, but they are more likely to use services to fund their own product development and call themselves biopharmaceutical or Specialty Pharma firms.

22.8.3 MARKET FOR DRUG DELIVERY TECHNOLOGIES

22.8.3.1 Current Status

When reading through Section 22.8.2, it could be construed that the drug delivery technology market is not in a healthy state, but this could not be further from the truth. Big Pharma always played a leading role in the creation of drug delivery products either through in-house development or investment in specialist firms. In contrast to earlier times, a number of service providers and generic companies see drug delivery technology as key to their commercial strategy.

It is true that certain oral formulation technologies have matured, but a significant number of unmet needs exist including improved solubility solutions for drugs administered intravenously, noninvasive options for peptides and proteins, efficient targeting, and intracellular uptake of molecules while avoiding their lysosomal breakdown. In addition, there are a number of evolving technologies in need of optimization, e.g., polymer conjugation to peptides and proteins. With the return of iontophoresis products onto the market, and the continuing interest in painless injections and microneedle technology, the area of drug–device combinations looks like an area of significant technological progress and commercial success in the future. Table 22.9 shows examples of companies which exploit drug delivery technology and expertise (research-based Big Pharma examples have been excluded).

22.8.3.2 Marketing a Technology

Companies offering drug delivery technology to third parties need to market it to their potential clients. They do this in a number of ways. For example, they conduct the necessary development, animal, and Phase 1 clinical studies to prove that their technology is robust and stable and works in humans. These studies are conducted using readily available model drugs for the type of delivery challenges they are hoping to overcome, e.g., fenofibrate for certain solubility-enhancing technologies. They later carry out such studies with client compounds in the course of limited-term feasibility studies. They also protect their technology through patents on different aspects of the technology itself and its use with as wide a variety of types of molecule as possible, as well as specific patents on products developed using it. Companies advertise their technology through scientific publications, talks, and posters at conferences, articles in industry magazines, their website, and press releases. They can also present their technology and its benefits to technology scouts and/or the relevant business development personnel within companies that could be potential clients.

22.8.3.3 How Pharmaceutical and Biotech Companies Evaluate Technologies and Products

Figure 22.2 shows the reasons why potential clients (e.g., small and big pharma) in-license drug delivery technology.

TABLE 22.9
Companies Using Drug Delivery to Drive Their Business

Company Name	Commercial Type/Strategy^a	Examples of Technologies
3M Drug Delivery Systems	Drug delivery division of a global conglomerate with considerable device expertise/contract development and manufacturer of specialized dosage forms.	Inhalation, nasal, transdermal, oral, and topical dosage forms including microneedles.
Alkermes	A global biopharmaceutical company focused on CNS disorders/contract services.	Long-acting depot injection, Medifusion^™, extends circulation time of biologics, solubility enhancement, oral controlled release.
Catalent	Global contract developer and manufacturer.	Softgel, oral fast-dissolving dosage forms, inhalation, oral controlled release, injections.
Capsugel	Originally a hard capsule manufacturer with dosage-form support. It has widened its delivery offering through acquisitions.	Abuse-deterrent, colonic dosage form design, spray drying for solubility enhancement, and liquid-filled and semisolid-filled capsules.
Flamel Technologies	A specialty pharmaceutical company whose roots are in drug delivery.	Oral controlled release—solid and liquid, anti-abuse formulations, hydrogel depot injections.
Hovione	API manufacturer, specialist in the field of inhalation and particle design.	Proprietary inhalers, particle engineering.
LTS Lohmann Therapie-Systeme	Contract developer and manufacturer of transdermal and oral thin-film dosage forms. Part owned by Novartis.	Transdermal, oral-cavity thin films.
Nektar Therapeutics	A clinical-stage biopharmaceutical company that exploits its PEGylation and polymer conjugate technology platforms.	Small molecule, prodrug, large molecule, and antibody fragment conjugates.
OctoPlus	Now a subsidiary of Dr. Reddy’s Laboratories. It focuses on the formulation of injectables.	Microparticle technologies, liposomes and lipids, complex injectable formulations.
SkyePharma Teva Pharmaceutical Industries	Drug delivery company. Global generics company with OTC and Specialty Pharma products.	Oral controlled release and inhalation expertise. Oral controlled release, inhalation, buccal delivery, abuse deterrent opioids, and other delivery systems used to produce products for its strategy to fill its pipeline with improved formulations of already approved products.
^a Based on description of company or strategy on website.

As previously stated, companies do not wish to pay for drug delivery technology licenses or share their revenue in the form of royalties if they have suitable in-house technology or can access it as part of a contract manufacturer’s services. The technology must therefore be patented (to prevent it being copied) and be unique or offer significant advantages over other similar technologies. Companies are also often interested in licensing in a specific drug delivery product developed by a drug delivery provider that it is in late clinical development. Products licensed in after Phase 2 or Phase 3 are associated with fewer development and regulatory risks, and the time to reach the market is shorter.

In evaluating these technologies or drug delivery products, the potential client will consider a number of different points including, for example, the delivery challenge solved by the technology and the type of molecules for which it is suited. This will include the likelihood that the technology will work for their compound. The strengths, weaknesses, opportunities, and threats associated with the technology or drug delivery product will be evaluated and compared with competing technologies/products. The technical, preclinical, toxicology, clinical, and stability data package will also be considered, for the technology or specific drug delivery product, and what clinical stage it has reached. Other considerations include which other products have been or are being developed using the technology and the current status of development, the strength of the patent protection and length of patent life (drug delivery technology and/or drug delivery product), current scale and ease of scale-up, and the regulatory pathway for the product under development. Regulatory considerations increase if the technology contains one or more novel (new) excipients. The FDA defines a new excipient as one that is not fully qualified by existing safety data with respect to the currently proposed level of exposure, duration of exposure, or route of administration. In such cases, additional toxicology data are required by the regulatory authorities (FDA 2005) and this increases both development costs and risks.

FIGURE 22.2 Why do third parties in-license drug delivery technology?

A further issue is the potential cost of goods, including arrangements for clinical and commercial manufacturing. For example, does the drug delivery technology provider have suitable manufacturing facilities or do they use contract manufacturers? Is the technology so specialized that it requires the drug delivery technology provider’s manufacturing expertise, or can it be transferred to the client site? The reputation, financial stability, expertise, and capabilities of the drug delivery provider are important considerations, including their analytical, regulatory, and project management skills. In the case of innovative technologies being developed by small companies, Big Pharma/Biotech may even invest in the company. Other considerations include the fit between the needs of the potential partner and what the drug delivery technology provider is offering. This may also include an assessment if the client and provider can work together successfully, of the financial expectations of the drug delivery provider, and of how they fit with those of the potential client.

Companies and drug delivery technology providers typically sign a short development agreement, which allows the company’s compound to be assessed in combination with the technology. If this is successful, the client may decide to sign further agreements including licensing of the technology.

22.8.3.4 Drug Delivery Deals

According to the Global Formulation Report (Vitaro and Kararli, 2015) there were 325 deals involving drug delivery and formulation in 2014, 58 of which were for technologies and 168 were for products (deals and acquisitions). The number of technology deals was down from 113 in 2013 and 128 in 2012, while the number of product deals was similar in 2014 and 2013 at 146 and 158 respectively, a sharp rise from the figure of 43 in 2012. These figures may point to less risk-taking on the part of potential licensees who are less willing to invest in developing products from scratch with delivery technologies but are willing to license in promising products based on them. Examples of drug delivery deals carried out in Q1 2016 are listed in Table 22.10. The sample selected again highlights the growing importance of devices in drug delivery and also the search for ways to improve the targeting of cancer drugs.

TABLE 22.10
Examples of Drug Delivery Deals Signed in Q1 2016

Companies	Technology Involved
Insulet Corporation/Eli Lilly and Company	Insulet’s pump technology. A development agreement to develop a new version of Insulet’s OmniPod tubeless insulin delivery system, specifically designed to deliver Lilly’s Humalog 200 units/mL.
Grünenthal Group/Patheon	Patheon selected as Grünenthal’s preferred development partner for its products made using Grunenthal’s abuse deterrent formulation technology INTAC.
Bind/Synergy Pharmaceuticals	Research collaboration to develop a product based on ACCURINS^®, Bind’s targeted nanomedicine platform, incorporating Synergy’s proprietary uroguanylin analogs for GI cancer.
Unilife/Amgen	Wearable device for the delivery of large molecules at home that are normally administered intravenously.
Cosmo/Ferring	CORTIMENT^® MXX, budesonide in an oral tablet containing Cosmo’s MMX^® multi-matrix technology which is designed to result in the prolonged release and better distribution of drugs in the colon.
Capsugel/Pulmatrix	The companies will collaborate to develop novel inhaled medicines using Pulmatrix’s iSPERSE dry powder technology and Capsugel’s spray-drying technology.
Flamel Technologies/FSC Pediatrics	Flamel acquired FSC Pediatrics, a company with two drug delivery products and a medical device in the pediatrics market.

22.9 CONCLUDING REMARKS

This chapter reviewed the key characteristics and trends in the market for drug delivery products and discussed the factors associated with product commercial success. It also touched on the business-to-business marketing of drug delivery technologies and products. It is clear that drug delivery–enabled or drug delivery–enhanced products can bring clinical benefits to patients and their carers and financial rewards to the companies that develop and take them to market. However, like all other pharmaceuticals, these products will come under increasing price pressure due to cost-containment measures by third-party payers. Companies will have to increasingly demonstrate the cost-effectiveness of their therapies including those involving drug delivery technology, in order to ensure that their products will be reimbursed by third-party payers.

22.A APPENDIX: MARKETING, BUSINESS, AND OTHER TERMINOLOGY DEFINITIONS

Bargaining power of purchasers: The bargaining power of purchasers increases with their size and the quantities of product(s) they purchase from suppliers. It also is higher when there are too many suppliers compared with the number of purchasers in a particular market. In addition, it rises when individual purchasers band together to negotiate lower prices and/or better terms and conditions from suppliers.

Bargaining power of suppliers: The bargaining power of suppliers is high when their goods are unique or clearly differentiated from the competition and cannot be easily substituted. It also increases when the number of suppliers is limited and there is high demand for a product. Other factors that increase supplier-negotiating power include control of the product distribution channels or the bundling of the product sales with associated value-added services or when the cost of changing suppliers is high.

BCS: A regulatory-approved system of classifying drugs based on their aqueous solubility and membrane permeability.

Class 1 high permeability, high solubility; Class 2 high permeability, low solubility; Class 3 low permeability, high solubility; Class 4 low permeability, low solubility (http://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ucm128219.htm).

Brands, branding, and brand image: Medicines are branded using a proprietary name for the product. The company logo and packaging facilitate branding; however, the need for the latter to look professional and to protect the product means that for medicines, there is less room for distinctive design than with consumer goods. All originator medicines (patented or off-patent), many OTC and even some generic products have brand names. Branding results in a name that is linked to a set of product attributes and a market position through advertising and promotion to create a brand image. Brand name and positive image promotes product adoption and prescriptions/sales and facilitates product differentiation from competitors.

Brand awareness and loyalty: Branding awareness is the extent to which a brand is associated correctly with a particular product by potential customers. Raising awareness is the goal of promotional efforts during and after product launch. Brand loyalty in the form of repeat prescriptions/sales is the desired result and for OTC products is often exploited to facilitate introduction of new products within the “brand family”

CAGR: The year-over-year growth rate (in this case of a market) over a defined period of time.

Cost of capital: The opportunity cost of funds used for financing a business. The rate of return investors could have earned, if they had put their money in an alternative investment and not in drug development.

Data exclusivity: Period of protection for an originator product during which the EMA will not accept a competitor’s marketing dossier referencing data used to support market authorization of the reference (originator) product. Data exclusivity can pertain to an entire dossier or to specific preclinical and clinical studies.

Detailing: This is promotion of pharmaceutical products by sales representatives through visits to physicians. The purpose of these visits is to disseminate information on the product, educate the doctor, raise product awareness, and encourage prescribing of the product.

Effectiveness versus efficacy: There is a subtle difference between a product’s efficacy (its clinical effect in a randomized double-blinded clinical trial, i.e., under almost ideal conditions) and its effectiveness (its clinical effect in the real world). Payers in particular are interested in comparing product effectiveness with therapeutic alternatives, and therefore, for the purpose of this article, the term effectiveness is used when discussing the needs of payers.

GDP: GDP is the market value of all final goods and services produced within a country in a fiscal year excluding net income from abroad.

HTA: Health Technology Assessment is a way of assessing the ways science and technology are used in health care and disease prevention. Diagnostic and treatment methods, medical equipment, pharmaceuticals, rehabilitation, and prevention methods and also organizational and support systems used to deliver health care are examples of health technologies. (Definition: http://ec.europa.eu/health/technology_assessment/policy, accessed on January 7, 2013).

Hybrid product: An EMA term for nonoriginator (generic) products, which reference studies carried out on an EU-approved originator product but do not meet all the criteria for a generic medicinal product and require the applicant to carry out certain new clinical studies.

Marketing or distribution channel: Marketing or distribution channels are the ways that goods and services are advertised, promoted, distributed, sold, or otherwise reach consumers from the producer/supplier.

Marketing mix or four Ps of marketing: The strategic manipulation of product, price, place, and promotion to meet the needs of a target group of customers and, hence, optimize income.

Market share: The total sales of a product in a particular market or market segment expressed as a percentage of total sales in that market/segment.

New drug product exclusivity: FDA definition—A 5-year period of exclusivity is granted to new drug applications for products containing active moieties never previously approved by FDA either alone or in combination. No. 505(b)(2) application or ANDA may be submitted during the 5-year exclusivity period except that such applications may be submitted after 4 years if they contain a certification of patent invalidity or non-infringement. A 3-year period of exclusivity is granted for a drug product that contains an active moiety that has been previously approved, when the application contains reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the sponsor that were essential to approval of the application.

Paragraph IV Patent Certification: A competitor (generic) drug company submitting either an ANDA or a 505(b)(2) application can choose one of the four certifications with respect to the patents listed in the FDA’s Orange Book for the reference (originator) product used in their dossier. A Paragraph IV Patent Certification states that any unexpired patents relating to the reference product are either noninfringed by the competitor’s product or are invalid.

Payer: The person or third-party organization that pays for the medicine. In many countries, third-party payers cover all or part of the retail cost of the medicine. Examples are the state-funded NHS in the United Kingdom and private medical insurance companies providing insurance cover for medicines.

Pharmacoeconomics: Pharmacoeconomics is a branch of economics that uses cost–benefit, cost-effectiveness, cost-minimization, cost-of-illness, and cost–utility analyses to compare pharmaceutical products and treatment strategies (as defined in Arenas-Guzman et al. [2005]).

Pharmacy benefit manager: A company that administers prescription drug claims and benefits of health-care insurance plans, e.g., Express Scripts in the United States. Services include processing of claims from pharmacies, contracting with pharmacies, formulary development, and oversight, and negotiating with pharmaceutical manufacturers.

Product adoption: Often described as a five-stage process that starts with the customer first learning about the product and ends with them either becoming regular purchasers or deciding not to buy. In the case of POMs, adoption results in regular prescribing, and pharmaceutical companies often target doctors identified to be “early adopters” during product launch and in the period afterward.

Product differentiation: The factors (real or perceived) that make a product different from its competitors and are desirable to potential customers. For pharmaceuticals, product differentiation is often achieved by promoting the positive aspects of the product (e.g., reduced side effects or fast action) and/or strategic use of the marketing mix.

Product life-cycle management: The management of the product life cycle (development, market introduction, growth, maturity, and decline) to maximize profit by alteration of the marketing mix to suit the life-cycle stage. Pharmaceutical companies use a number of strategies to manage product life cycle including the development of line extensions, approval of the drug for new indications and, if possible, obtaining approval for the OTC use of the medicine. Drug delivery technologies facilitate life-cycle management by enabling the development of new products with therapeutic advantages.

Product portfolio: The products marketed by a company and/or in its development pipeline.

Product positioning: Deliberate placing of a product within a market through strategic use of the marketing mix so that its advantages over competitors are clearly highlighted.

Reimbursement: The money paid by state-funded health-care systems or insurance companies/pharmacy benefit managers to pharmacies to compensate them for medicines dispensed on prescription. The amount reimbursed for a medicine and the amount that the patient has to contribute to its cost varies from country to country and even between different organizations and health-care insurance plans within the same country, e.g., in the United States.

Retail cost of medicine: The retail cost is the price of the dispensed prescription medicine in the pharmacy. It includes the cost of the medicine and wholesaler and pharmacy markups and may include government taxes. Typically, only a part is paid by the patient and the rest by a third-party payer.

Segment and segmentation: Most markets can be divided into segments and subsegments based on the specific needs or particular characteristics of a subset of potential customers within that market.

Value-based pricing: The pricing of a product based on its estimated or perceived value to customers and/or stakeholders as opposed to its development and production costs.

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* Market size is calculated in general based on wholesaler invoice prices using variable exchange rates, while CAGR is based on constant exchange rates.