The disparity between costs and benefits would be particularly marked if the policy chosen to strengthen the existing quality regime for pharmaceutical excipients were new legislation or guidelines on GMP, rather than industry self-regulation or a risk-management system, consultants from Europe Economics found in their report for the Commission's Enterprise and Industry directorate. The policy option that would make most sense for patients and other stakeholders was maintenance of the status quo, the report said. "There is no indication that a continuation of present policies would present a major risk to patients, so the preferred option should impose least costs on excipient suppliers and users," it commented. As Europe Economics pointed out, this is despite the insistence of the European Association of Chemical Distributors (FECC) that the exclusion of excipient distribution and storage from mandatory requirements for GMP and good distribution practice (GDP) poses a quality/safety threat. The European Fine Chemicals Group (EFCG) has also called for mandatory GMP to level the playing field among manufacturers of pharmaceutical excipients and bring the sector into line with other aspects of the pharmaceutical production process. These objections aside, maintaining the status quo is not even a viable option within the current regulatory framework. The consultation with, on the one hand, manufacturers, importers and distributors of excipients and, on the other, pharmaceutical manufacturers (i.e., excipient users) that provided the basis for the impact assessment report sprang from the European Commission's obligation under the amended pharmaceutical directive 2001/83/EC to come up with new legislation for a specified list of excipients. "In order to preserve the status quo, this requirement would need to be removed through amending legislation," Europe Economics observed. Speaking on behalf of the International Pharmaceutical Excipients Council (IPEC), which represents more than 70 excipient suppliers and users in Europe, Iain Moore, product and quality assurance manager for Croda Europe, said the Council was "reviewing the detailed analysis from Europe Economics and intends to issue a position paper on the topic shortly to suggest an alternative way forward". The spectre of mandatory GMP has been looming over the excipients industry for several years, amid concerns about the risks of contamination with viruses or transmissible spongiform encephalopathy (TSE) through some excipient materials or a repeat of incidents in Haiti, Panama and Bangladesh where substitution of the excipient glycerol by counterfeiters had lethal consequences. In the Panamanian case, which resulted in some 100 fatal poisonings in 2006, a Chinese factory was found to have exported diethylene glycol labelled as the more expensive glycerol. One context for the move to introduce mandatory GMP in the EU sector has been the growing presence of imported excipients from countries such as China and India. It is also low-cost competition from Asia that has intensified competitive pressure in a market where margins are being squeezed by increasing commoditisation. There have been fears that more stringent GMP requirements could represent a disproportionate cost burden for excipient manufacturers whose business is largely concerned with non-pharmaceutical applications. This has prompted warnings that some manufacturers could exit the marketplace, although that was not among the findings of the Europe Economics report. Even under the most expensive policy options, i.e., legislation or guidelines, it appeared that most respondents in the manufacturers/distributors survey "believe that they would not cease production and/or distribution of the relevant excipient, indicating that production would still be a profitable activity even after expected policy impacts on cost and supply", the report stated. The same applied to excipient users, nearly 38 per cent of which "noted the possibility of a reformulation of their final products as a result of the policy, but very few respondents believe the excipient or the medical product would cease to be produced". One adverse effect the report does foresee, though, is that tighter regulation may make European manufacturers less competitive. In turn, Europe Economics noted, there is a possibility that "in the future, more European manufacturers of pharmaceuticals may obtain supplies from outside the EU/EAA if these are less expensive, although in theory imports should pass quality standards. If imports do not in fact reach the same standards as EU products, then an unintended consequence of new regulation might be perverse reduction in average standards." The purpose of the industry surveys launched by the Directorate-General Enterprise and Industry in March 2007 was to take soundings on possible approaches to the Commission's mandate under Article 46f of Directive 2001/83/EC, as amended by Directive 2004/27/EC in the EU's wide-ranging review of its pharmaceutical legislation. Article 46f obliges pharmaceutical companies to "use as starting materials only active substances which have been manufactured in accordance with the detailed guidelines on good manufacturing practice for starting materials". It goes on to say that the "point shall also be applicable to certain excipients, the list of which as well as the specific conditions of application shall be established by an EC Directive adopted by the Commission in accordance with the procedure referred to in Article 121(2)". Early consultation on the way forward for excipients found little support in industry for a Directive including a detailed list of excipients, Europe Economics observed. Following consultation with regulators and industry, a risk-based approach was used to identify four categories of potentially high-risk excipients as well as two specific substances "known to have caused problems in the past" (glycerol and propylene glycol). The industry surveys focused on these two substances and the four high-risk categories, namely: - excipients prepared from materials derived from a TSE-relevant animal species (excluding lactose); - excipients derived from human or animal material with potential for viral contamination risk; - excipients claimed to be sterile (or sold as sterile) and used without further sterilisation; and - excipients which, due to their nature, origin or manufacturing process are at significant risk of endotoxin/pyrogen contamination and which are used in products required to be endotoxin/pyrogen controlled (e.g., parenteral products). In the early phase of consultation, a number of industries called for GMP standards in the pharmaceutical excipients segment to be based entirely on a risk-based model. As Europe Economics pointed out, though, "such an approach is currently not covered by the legal provisions in Directive 2001/82/EC, as amended". It was, however, included in the policy options for the impact assessment, as were three other options that were either beyond the scope of Directive 2001/83/EC or would necessitate a revision of the Directive: maintenance of the status quo; specific technical guidelines on GMP for certain excipients, either as stand-alone guidelines or in addition to a Commission Directive; or self-regulation by industry. The only policy option that was fully in line with the existing provisions in Directive 2001/83/EC was legislation on the basis of the GMP requirements, as defined in the draft "specific conditions of the application of the principles and guidelines of GMP for certain excipients" published by the Enterprise and Industry directorate in December 2006. "In the light of strong views expressed both by regulators and industry, it was felt that discarding any policy options which are currently outside the legal framework would be too narrow and disregard the concerns raised so far," Europe Economics commented. The impact assessment looked at a range of cost effects associated with each of these scenarios, such as one-off costs and ongoing administrative costs, as well as the knock-on effects on production, supply, excipient prices, final drug prices, etc. On the benefit side, it posited four scenarios ranging from the most optimistic (nobody affected by the new policies) to the worst-case scenario (avoidance of 300 deaths in the EU/EAA from a fault in excipients). Inbetween came scenarios in which, respectively, 50 and 100 people would be affected if new policies were not in place. The consultants then applied the values for a statistical life suggested in the European Commission's Impact Assessment guidelines - i.e., the median value of preventing a fatality was €1 million, while upper and lower limits were set at €2.5 million and €0.65 million per annum respectively. The most optimistic scenario was "closest to what is believed to be the actual experience under existing policies within the EU", the report pointed out. As far as anyone is aware, "there have been no reported cases of fatalities in the EU/EAA as a result of faulty excipients", it said. "There have been some incidents in other parts of the world (e.g., Panama and Haiti), and some reports in the EU of allergic reactions (non-fatal), but it can be concluded that the maximum potential benefit to be obtained from improved regulation is small." In terms of costs alone, both the manufacturer and the user surveys found the risk-management and the self-regulation options to be the least burdensome, with substantial cost differences between these scenarios and the prospect of guidelines and, in particular, legislation. The differences were especially marked in the manufacturer survey, with a cost increase of less than 7 per cent in all categories associated with the risk-management option and a 25-30 per cent increase foreseen if legislation were introduced. On the user side, the annual increase in costs for excipients was expected to be higher under a guideline policy (+21 per cent) than under legislation (+20 per cent). The reason may be that under guidance principles "users could face a greater responsibility to audit the excipient manufacturers/distributors than if legiskation were passed that directly applied to excipients, placing most of the responsibility and cost burden of quality control on the excipient manufacturers/distributors directly", the report suggested,. When estimated price increases under the various policy options were compared with potential benefits based on the aforementioned statistical life values, the price rises were found to be far in advance of the benefits. Taking the median value for a statistical life, for example, the potential benefits ranged from €0.0 (nobody affected) to €1.5m per annum. But the expected price increases were anything between €3m per annum (for final drugs manufactured using excipients under a self-regulation policy) to €30.5m (for excipients as estimated by users under new legislation). To illustrate the difference between, say, the legislation and the risk-management scenarios, the expected price increase under the former was €26.5m per annum for manufacturers/importers, €30.5m for users and €5.5m for finished medicines. The corresponding estimates under the risk-management option were €8m, €9m and €3m. According to Croda's Moore, who is on the GMP Committee for IPEC-Europe, the impact assessment does not necessarily represent an industry-wide view as feedback was only requested from the small proportion of users and suppliers whose excipients were perceived as being high-risk. He also noted that a high proportion of the survey respondents were already adhering voluntarily to one or more quality control procedures for the specified excipients, while many were following the GMP guide for pharmaceutical excipients published by IPEC and the Pharmaceutical Quality Group (PQG) in early 2006. As the report noted, the standards most frequently cited by respondents were ISO 9000/ISO 9001, the IPEC/PQG guidelines and EU GMP guidelines for active substances. "Therefore, although it is not compulsory, there already is a quality control system in the EU," it said.