“Don’t Touch My Bags If You Please, Mr. Customs Man”


Xconomy Seattle — 

Imagine the following scenario for a minute: A middle-aged man books a round trip ticket from San Francisco to Shanghai. His reservation indicates this will be a short trip; he is going to be in China less than one full day. Upon arrival at the airport in Shanghai, the immigration control officer asks him “What has brought you to China?” The man looks sickly, is sweating profusely, and appears much older than the 54 years indicated on his passport. Knowing this question was going to be asked, he has been carefully thinking over his answer during the 14-hour flight. “I’m here to buy drugs,” he confesses.

At this point, you’re probably thinking he’ll be marched off to some dank prison cell, never to be heard from again. You would be wrong. Instead, he’s told, “Welcome to China!” and after clearing customs, he heads to a large medical institute located on the Bund by the Huangpu River. Here, he will get his first injection of the generic biologic drug that has led him to this ancient land, along with a yearlong supply to take (actually, smuggle) back home.

Why would someone travel 6,200 miles to buy drugs when they are available here in the U.S.? For the same reason people now are traveling to India, Thailand, or South Africa for heart surgery, hip replacement, or some cosmetic procedure – affordability. They have no (or limited) insurance coverage, and the costs of their treatment are significantly less in other countries. An estimated 750,000 Americans went overseas to have medical procedures done in 2007, according to Wikipedia, saving the recipients a great deal of money and costing the U.S. health industry billions in lost revenue. The cost of the surgery overseas can be one-tenth the cost of having the surgery done in the U.S., even factoring in the travel expense. Similarly, biologics can be every bit as expensive as heart surgery or hip replacement. Treatments for rheumatoid arthritis, cancer, hemophilia, or rare enzyme deficiencies can cost tens of thousands, even hundreds of thousands of dollars a year.

As I’ve discussed in a previous Xconomy piece, generic versions of biologic drugs are not currently for sale in the U.S. Even worse for patients who would benefit from these, regulatory authorities are still in the process of formulating a pathway that would allow the approval of generic biologics. So what’s the likelihood of my scenario above coming to pass? Will shopping overseas for biologics come to resemble the trend of traveling for cut-priced surgery? Here are the key factors involved:

Insurance—For the sake of our discussion, this is a non-issue. If your insurance covered your biologics, then you wouldn’t be leaving the country in the first place to purchase these drugs overseas.

Availability—Just because a biologic is available in the U.S. doesn’t mean that you are going to be able to buy a version of it overseas. Foreign manufacturers, like American ones, will likely choose to make drugs based on their potential profitability as well as whether or not they have patent … Next Page »

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Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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2 responses to ““Don’t Touch My Bags If You Please, Mr. Customs Man””

  1. steve s says:

    I would like to hear Dr Lyman’s opinion on the future of outsourced development and manufacturing of biologics to China, Singapore, Korea and India. Big pharma is already building manufacturing and R&D in China and several Biotech companies are planning the same. Nektar has a major R&D site in India. Medicinal chemistry work at CMO, CRO and company owned facilities are largely accomplished overseas. Today, most if not all small molecule generic drugs are manufactured in China and legally imported to the US for testing, formulation, and distribution. That’s why Walmart can offer generic small molecule drugs for $4 per month. What happens 10 years from now to US based R&D and manufacturing of biologics when China and India have mature regulatory systems, huge biologic CMO capacity, and Big Biotech owned manufacturing sites? Can Amgen afford to not manufacture in China?

  2. Steve, I delayed answering your question to give others a chance to chime in. The trends are clear that the production of biologics overseas is growing rapidly. There are a number of companies in countries such as India and China that are already manufacturing generic biologic versions (biosimilars) of epo, G-CSF, GM-CSF, insulin, growth hormone, and others for their own markets. At present there are strong barriers that keep these molecules from being exported to some countries, such as the US, although they are being exported to other countries around the world. There are a number of political, organizational, intellectual property, and manufacturing issues that will need to be resolved before we see large scale production of biologics made overseas with the intent of selling them in the US. One of the primary factors will be that the US FDA will need to establish inspectors in these countries to sign off on the quality of the drugs made there. There will need to be a significant effort to scale up manufacturing expertise and approved supply chains in these countries, and to get local government approval as well. We will see Big Pharma respond to the financial threat of biosimilars by making their own generics to compete against their branded biologics. This is already happening with small molecules. In addition, there will be an increased emphasis on second generation biologics to extend patent protection i.e. drug franchises, as Amgen has done with Neupogen/Neulasta and Epogen/Aranesp. I will also predict that this outsourcing trend will not be without serious challenges, as Boeing has seen with their outsourcing program of the 787 Dreamliner. Producing products locally with a skilled, highly trained and experienced workforce will always have certain advantages over outsourcing to a foreign country, especially when problems arise and when you are trying to make a product for the first time.