Dr John Hogan, who has held positions at both pharma giant Pfizer and excipient company Colorcon but recently retired, believes that one possible consequence of this is that the excipient industry will diversify into two groups, one focusing on high-tech excipients with greater functionality and high prices - developed in partnership with drug companies and in a manner akin to an active pharmaceutical ingredient - and a commodity sector.
The latter will be largely pharmaceutical divisions of companies whose main business is outside of the pharmaceutical sector. Their products will be those bulk excipients used today, and competition will be on price and service, with supplier agreements increasingly important. Customers will be from both the generic and research-based drug industry.
Speaking at the annual International Pharmaceutical Excipients Council (IPEC) Europe conference last week, Hogan pointed to various factors in the marketplace that will, according to his thesis, drive the $2.5 billion (€1.9bn) world excipients industry towards this split.
The first factor - something that he feels is occurring more by accident than judgment at present - is the development of pharmaceuticals without the need for excipients, with the exception of diluents to provide bulk. Work on identifying the best physical or crystalline form of an API is already doing away with the need for wet/dry binders and making APIs more compressible, and next in line could be lubricants, dissolution agents and disintegrants, Hogan suggested.
"The functionally focus will change from the excipient to the API in future years," he said in an interview.
A second problem facing the excipients industry is that on the whole, the current 1,200 or so excipients on the market fulfill the needs of the majority of finished pharmaceutical products. "There is no unmet need in immediate-release dosage forms for new excipients," said Hogan, although the big exception here is for modified-release dosage forms.
A contributing factor is that truly novel excipients take a long time to develop (three to seven years and at a cost of up to €30m), and there is no regulatory route to approval. Excipients firms can only get a new excipient approved as part of the marketing application of a finished product. This requires the collaboration of a pharmaceutical partner, which may be wary of taking a double gamble on the performance of its API and a novel excipient.
This is easier for some firms such as BASF and Merck that are in the position of having both pharma and excipient businesses, but it is often the case that the drug sector is wary of excipients - which are not entirely in its control - and are suspicious of quality after seeing batch to batch variability in factors such as particle size and flowability.
"If a pharmaceutical company sees a haze or cloudiness in its injectable product, it will tend to blame the excipient first," said Hogan.
Faced with pressure on its own margins, the research-based drug industry is seeking to cut costs wherever it can, and excipients have a commodity tag that make them an easy target. The generics sector has emerged as a good market for excipients, but the lower prices for generic medicines also mean that margins are often tighter, resulting in more pricing pressure on inactive ingredients.
That said, the generic sector does provide a good opportunity for excipients companies that can develop products with a greater degree of sophistication, according to Hogan. The reason? Competition in the marketplace for generics is making more of these companies invest in new dosage forms, particularly modified-release products, which lend a competitive edge. These may not be truly novel excipients, but perhaps products based on spray-dried mixtures with improved functional characteristics, he suggested.
"These factors mean that something has to give," said Hogan, and lend support to the idea that the excipients sector will diverge into two groups with different customers: research-based companies that can do a lot of the material science themselves and will partner on specialised products, and generics companies that will need to buy in sophistication for their products.
Meanwhile, the excipient industry also needs to find a way of partnering the pharmaceutical industry to meet the specialized needs of drugs derived from biologics.
Hogan stressed that he was not sounding a death knell for the sector. "The excipients industry is viable and will continue to be viable - but it must also be adaptable," he concluded.