Pharmaceutical plant engineering is a lucrative market, but there are a number of pitfalls. Engineering service providers have to balance the needs of large corporations and small SMEs, and they also need to enhance their regulatory and manufacturing process expertise. The trends that are driving pharmaceutical plant engineering and the developments that will affect plant owners, contractors and suppliers will be a major topic of discussion at ACHEMA 2009 in Frankfurt am Main, Germany. About 4,000 exhibitors and 180,000 visitors from around 100 countries will present their latest products and services and share information at the event which will be held on 11-15 May. The worldwide pharmaceutical market is very lucrative for pharmaceutical producers and also for equipment suppliers, service providers and consultants. The world pharmaceutical market more than doubled in size between 1998 and 2006. Global production of pharmaceutical products rose to 351 billion euros in 2006 compared to 136 billion euros 16 years earlier. The increase in production volumes was particularly impressive in Europe in recent years, rising from 63 billion euros in 1990 to 190 billion euros in 2007. France (2006 production volume: 34.4 billion euros), England (24.8 billion euros) and Germany (23.7 billion euros) are the predominant pharmaceutical producers in Europe. The US, however, is the world market leader with a 39.3 % share of world production, followed by Europe and Japan.
To satisfy demand, a number of capital projects have been initiated and completed worldwide, creating what appears to be the ideal growth market for companies that specialize in the design and delivery of pharmaceutical plants and equipment.
Attempts by European governments to introduce legislative and healthcare reform which is aimed at containing expenditure on pharmaceutical products are only having a limited effect on producers. Health insurers only pay for somewhat more than half of the pharmaceutical products that are sold, and exports have become the driving force in the industry.
The export quota for German producers is now 56 %. The largest pharmaceutical market is North America: The US and Canada accounted for 45.9 % of worldwide pharmaceutical sales in 2007 (712 billion US-$). The figure for Europe was 31.3 %.
However, in contrast to enormous growth in the chemical and power generation plant engineering industries during the boom years, the big winners in the pharmaceutical sectors were suppliers of specialized equipment. Engineering service providers and contractors continue to face stiff competition for projects worldwide.
Events on the Emerald Isle are one reason for the competitive nature of the market. Government subsidies at the end of the 1990s and the beginning of the new millennium helped Ireland to become the world’s sixth largest pharmaceutical producer within the space of a few years. Production volumes reached 14.9 billion euros in 2006. In the wake of these developments, highly capable engineering service providers based on the Anglo-Saxon model were set up. When government funding came to an end, the suppliers increased their focus on continental Europe.
There is also another significant difference compared to the chemical plant design & construction market. The customer base ranges from multinational corporations, which have in-house production operations, to family-managed SMEs (particularly in Germany) and specialist contract manufacturers. The products and manufacturing techniques can also vary considerably, ranging from conventional pharmaceutical active ingredients to biopharmaceuticals. The demands are equally complex, including conceptual design, basic and detailed engineering, project management and contractual terms and conditions. In general, the following demanding requirements differentiate plant engineering projects in the pharmaceutical sector from industries such as chemicals:
• tight schedule (time to market)
• conformance with applicable GMP (Good Manufacturing Practice) guidelines
• equipment quality monitoring
Plant engineering projects in the pharmaceutical industry are usually based on a triangular relationship between the plant owner (the customer), an engineering partner (e.g. general engineering services or general contractor) and equipment suppliers. In the chemical industry, the projects are conducted for the most part by EPCs (Engineering, Procurement, Construction), but pharmaceutical plant owners normally play a much more active role in the planning and procurement process.
Projects goals differ considerably between the chemical and pharmaceutical industries. The project partners normally agree on the schedule, product quality and output in the chemical industry, and these items are used as acceptance criteria. In the pharmaceutical industry, the plant owner is responsible for quality and production volumes. The processes are often not dedicated to a single product. Active ingredients are often synthesized on lines that produce multiple products.
Few opportunities for consolidation
Specialized engineering service providers have evolved over the years, which have adapted to the structure and requirements of the industry. However, consolidation in the engineering services sector has taken place in recent years in response to more stringent regulatory requirements (e.g. by the U.S. Food and Drug Administration FDA) and increasing schedule and cost pressures as well as the demand for globally active service providers. And the pressure has not subsided. In the wake of the recent boom, chemical plant engineering service providers have been able to exercise greater influence on contractual terms and conditions, but competition in the pharmaceutical plant engineering sector remains intense.
”Most customers still have a strong preference for lump-sum pricing agreements or pricing on actual expense with upper cost limit on their projects,” explained Ralf Roepenack, Managing Director of the engineering firm NNE Pharmaplan. In addition to fixed pricing, customers also try to impose penalties for schedule overruns or even when project team members are replaced. “Trust plays a crucial role in the pharmaceutical industry, and penalties can even be imposed for changes in key personnel,” said Robert Schwarz, Managing Director of VTU Engineering. I
t is essential for engineering service providers to carefully scrutinize RFQs as part of their risk management program. “If the customer sends out requests for lump-sum bids, then the system/plant description will have to be very detailed,” emphasizes another planner. Current project incentive models indicate that the situation has improved significantly for engineering service providers. A bonus may be offered on projects that are completed within budget and ahead of schedule.
Fast track projects are becoming the norm
Time pressure generally becomes extreme when an original pharmaceutical product moves into the marketing phase. “Fast Track” project management helps cut down time to market. A number of decisions relating to the production process are made up front in contrast to the conventional methodology where a number of changes are made during the implementation phase. The fast-track approach can save a lot of time.
Plant owners who take the fast track approach have to be prepared to accept some degree of risk. Orders for subsystems with long lead times have to be placed before the process is finalized. Fast track also has an effect on system configuration. As many parts as possible must be prefabricated. Subsystems are produced as skids and modules. In contrast to the chemical industry where individual solutions are regarded as a competitive advantage, there is a trend towards standardization in the pharmaceutical industry. “It often happens that similar plants in a corporation generate very detailed individual requirements profiles. Given the incessant increase in cost pressure and the need for regulatory compliance, we are forced to standardize parts”, said Dr. Bernhard Luy, Managing Director of the pharmaceutical engineering company Glatt.
Very lengthy specifications and contracts are a constant source of irritation. A 1,500 page specification for a fermenter is just one example of extreme attention to detail. Yet the hope remains that plant-level standards will become less important in the future and the industry will rediscover the advantage of pragmatic specifications on increasing cost pressure.
A number of suppliers which have to deal with very lengthy specifications and RFQs do not share this optimism. Christian Stark from Christ, which specializes in ultra-pure water treatment systems, claims that “both contractors and plant owners are contributing to the proliferation of specifications. Customers for the most part used to accept our proposals, but engineering firms now often generate their own standards.” The problem for specialist suppliers is that they are often reluctant to draw attention to incorrect RFQ documentation or specifications which do not reflect the current state of technology for fear of being excluded from the evaluation process.
Increasing focus on cost in the pharmaceutical industry
Increasing cost awareness on the part of customers will have an effect not only on the project but also on production. It will not necessarily reduce the willingness to invest in technology, but it will focus attention on production costs. And there, technology is decisive. However, a troublesome problem always arises when you try to optimize a process in the pharmaceutical industry. The original process flow and production methods have been validated. The process has to be re-qualified and re-validated when changes are made. Many customers are unwilling to invest the effort. This is where the expertise of specialist engineering firms can help. Consultants need to have a thorough understanding of GMP, so that they are able to assess whether a change can be introduced without affecting the approval and GMP status of a production line or product.
A change in concept and parametric release
Parametric release reflects a new fundamental approach to quality assurance, replacing quality control on the end product. It represents a major paradigm shift in the pharmaceutical industry, affecting engineering and the entire pharmaceutical process. “As batch sizes continue to decrease in the pharmaceutical industry, the proportion of overall production costs, which are directly related to quality control, continues to increase,” explained Werner Zesch from international management consultants Arthur D. Little.
The FDA’s PAT (Process Analytical Technology) initiative has stimulated the debate. Quality assessment must ensure that a pharmaceutical product conforms to the approved release specification. Parametric release based on successful qualification, process validation and improved process control combined with suitable monitoring is acceptable as long as the quality of the product is guaranteed. This approach will lead to increased use of automation and analytical systems, and organizational changes also will be necessary (e.g. the complete release process).
The search for operational excellence
In the future, engineering service providers and equipment suppliers will have to address another trend in the pharmaceutical industry. Customers are striving for operational excellence which will help them reduce costs and ensure product quality. A reduction in throughput times is one element of this strategy. It gives producers greater flexibility to react to market needs. “With a continuous production flow similar to what you see in the automotive industry, you can significantly reduce throughput times compared to conventional ‘campaign’ production,” claimed Dr. Frank Stieneker, Director of the Pharmaceutical Process Technology Workikng Group (APV). As a result, modular design will become an increasingly common feature of system architecture.
Biopharma: Disposables reduce cleaning effort
Cost pressure is not the only factor driving change in engineering and technology. New classes of active ingredients are also having a noticeable effect. New system designs are needed to meet growing market demand for biopharmaceuticals (world market in 2006: 58.5 billion euros), because cleaning following the fermentation process is currently creating production bottlenecks. Dr. Hermann Allgaier, Managing Director of the pharmaceutical firm Merckle Biotec, is convinced that in the future these processes will run to an increasing extent in disposables. The production systems, from the reactor to the purification filter, are thrown away rather than cleaned after they are used. Compared to a stainless steel system, the amount of cleaning and cleaning validation effort is drastically reduced. It also takes less time to construct these systems, because scale-up is much simpler. “The approach can substantially reduce the amount of basic and detailed engineering effort,” explained Hermann Allgaier.
Summary: Owners, contractors and suppliers will have to work more closely together in the future. Owners will need to take a holistic approach and be willing to optimize their existing process. Producers will also have to be prepared to accept greater project risk, especially when the schedule is very tight. Contractors will face some very big challenges. They will be expected to provide specialist expertise, and they will have to retain qualified personnel. They will also need to balance the differing needs of SMEs and global corporations which are part of their customer base. At ACHEMA 2009 will be a lot of possibilities to gather information on the newest developments in pharma plant engineering and to discuss the trends that will affect plant owners, contractors and suppliers. Both, the congress program and the exhibition, offer various opportunities on this issue. For instance, there are nearly 50 lectures on processes and apparatus for pharmaceutical production at the congress whereof about a third deals with the production of biopharmaceuticals.