{"id":26468,"date":"2017-11-15T22:27:36","date_gmt":"2017-11-16T03:27:36","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/"},"modified":"2017-11-15T22:27:36","modified_gmt":"2017-11-16T03:27:36","slug":"patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/","title":{"rendered":"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing"},"content":{"rendered":"

Economic nationalism affects pharmaceuticals<\/strong><\/h2>\n

Economic nationalism has experienced a resurgence in the U.S., with Republicans lambasting domestic companies that have outsourced their manufacturing to other countries.\u00a0 In January of this year, President Trump extended this critique to pharmaceutical companies, which in his view are \u201cdisastrous\u2026they supply our drugs, but they don\u2019t make them here\u201d [1].\u00a0 While the current political climate is uncertain, the administration could pursue a number of measures to encourage domestic pharmaceutical manufacturing, such as high import tariffs on pharmaceutical products or a border adjustment tax.<\/p>\n

 <\/p>\n

Domestic manufacturing: a challenge and an opportunity<\/strong><\/h2>\n

Manufacturing a therapeutic drug begins with production of the active pharmaceutical ingredient (API), i.e. the molecule that has a direct therapeutic effect, and requires additional formulation and packaging, such as the capsule of a pill or the syringe containing insulin. \u00a080% of APIs are produced overseas and 40% of therapeutics are manufactured overseas in their entirety [2].\u00a0 Indeed, pharmaceutical products imported to the U.S. had an estimated market value of $86bn in 2015 [3].<\/p>\n

Overseas manufacturing allows pharmaceutical companies to produce drugs at a much lower COGS than domestic manufacturing, given lower labor costs and more favorable tax policies [4].\u00a0 For this reason, most pharmaceutical companies\u2019 manufacturing facilities are located outside of the U.S.\u00a0 This reflects a significant CapEx investment, which would be difficult to move back to U.S. territory quickly and affordably [4].\u00a0 Thus, any pressure to manufacture domestically would require a tremendous shift in pharmaceutical companies\u2019 supply chains.<\/p>\n

However, for the group of domestic companies that specialize in manufacturing drugs for other organizations, known as contract manufacturing organizations (CMOs), this could pose a multibillion-dollar new business opportunity.\u00a0 These companies could capitalize on the inability of pharmaceutical companies to cheaply and quickly transition to U.S. manufacturing by contracting to produce their products.<\/p>\n

Thus, if new regulations or political pressures encourage a shift to domestic pharmaceutical production, contract manufacturing organizations could realize a significant opportunity.\u00a0 However, not all CMOs will benefit equally, as many have limited excess capacity [5].\u00a0 Let us examine the example of one CMO that has been preparing to capitalize on increased domestic manufacturing demand: Patheon, a North Carolina-based subsidiary of Thermo Fisher Scientific.<\/p>\n

 <\/p>\n

Patheon poised to benefit<\/em><\/strong><\/h2>\n

Patheon has been taking steps to position themselves to benefit from pressure to manufacture pharmaceuticals domestically.\u00a0 The company recently acquired several manufacturing plants in North and South Carolina, providing excess capacity that could support new domestic production projects as demand for domestic production grows.\u00a0 Most critically, one recent acquisition in South Carolina includes API manufacturing capability.\u00a0 Since the vast majority of APIs are imported to the U.S. and there is limited domestic production capacity, Patheon should be positioned to earn business and scale quickly.\u00a0 Moreover, many of their raw material inputs, such as drug capsules and vials, are sourced domestically, so they will have an advantage in providing a fully domestic supply chain [6].<\/p>\n

Additionally, Patheon was acquired by Thermo Fisher, a large life sciences product development company, in mid-2017, which creates a promising platform for future growth to take advantage of increasing demand [7].\u00a0 By going forward with their planned integration of Patheon\u2019s manufacturing capabilities with Thermo Fisher\u2019s early-stage bioproduction capabilities, the combined company will be able to provide an end-to-end manufacturing offering, from early science to commercial-scale production, positioning them well to compete for domestic business.<\/p>\n

 <\/p>\n

The path ahead for Patheon<\/em><\/strong><\/h2>\n

To take full advantage of the opportunity, Patheon should continue building to support future growth in demand driven by a nationalist push for domestic manufacturing.\u00a0 First, Patheon should ensure it is able to provide an economical supply chain solution where all components are domestically sourced.\u00a0 If there were to be a shift towards tariffs on imported components, Patheon would then be better positioned to provide a lower-cost, domestically-produced solution.\u00a0 Second, Patheon should more actively seek to articulate the benefits of domestic production to potential customers, to ensure early customers and gain customer trust as the domestic manufacturing renaissance begins.\u00a0 Finally, Patheon should seek ways to generate medium-term cost reductions in the domestic production process, such as investing in automation to reduce labor costs.\u00a0 That way, even if regulations are ultimately not imposed on internationally manufactured pharmaceuticals, Patheon will still be able to effectively sell its domestic production capacity.<\/p>\n

Even with these moves, challenges still remain for Patheon and other companies seeking to take advantage of this opportunity.\u00a0 Does Patheon have sufficient capacity to scale up to meet demand?\u00a0 How would demand vary across different types of pharmaceutical products (e.g., chemically-synthesized small molecules vs. larger proteins), and how does expected demand match up to Patheon\u2019s capacity?\u00a0 And there remains perhaps the ultimate question: will any restrictions on international pharmaceutical manufacturing actually materialize, or will they simply remain a nationalist rallying cry?<\/p>\n

 <\/p>\n

(Word count: 791)<\/p>\n

 <\/p>\n

[1] Webb, Jonathan.\u00a0 \u201cTrump\u2019s Next Supply Chain Target: Big Pharma.\u201d\u00a0 Forbes<\/em>.\u00a0 January 11, 2017. \u00a0https:\/\/www.forbes.com\/sites\/jwebb\/2017\/01\/11\/trumps-next-supply-chain-target-big-pharma\/#349ae6a8ed06<\/p>\n

[2] Aylor, Ben.\u00a0 \u201cWill pharma manufacturing come back to the US?\u201d\u00a0 Boston Consulting Group white paper.\u00a0 https:\/\/www.bcg.com\/publications\/2017\/biopharmaceuticals-biopharma-operations-will-biopharma-manufacturing-return-to-the-us.aspx, accessed November 2017.<\/p>\n

[3] Lo, Chris.\u00a0 \u201cIs US drug manufacturing homeward bound?\u201d\u00a0 Pharmaceutical Technology, March 5, 2017.\u00a0 http:\/\/www.pharmaceutical-technology.com\/features\/featureis-us-drug-manufacturing-homeward-bound-5743166\/, accessed November 2017.<\/p>\n

[4] Miller, Jim.\u00a0 \u201cWill pharma manufacturing move back to the US?\u201d\u00a0 Pharm Source (blog), March 2017, http:\/\/www.pharmsource.com\/will-pharma-manufacturing-move-back-to-the-us\/, accessed November 2017.<\/p>\n

[5] Stanton, Dan.\u00a0 \u201cPatheon well placed if Trump succeeds in bringing manufacturing home, analyst.\u201d\u00a0 Outsourcing Pharma, February 2, 2017.\u00a0 https:\/\/www.outsourcing-pharma.com\/Article\/2017\/02\/02\/Patheon-well-placed-if-Trump-succeeds-in-bringing-manufacturing-home, accessed November 2017.<\/p>\n

[6] Keown, Alex.\u00a0 \u201cThis can be Patheon\u2019s fate in Trump\u2019s call for increased drug production.\u201d\u00a0 Biospace, February 6, 2017.\u00a0 https:\/\/www.biospace.com\/article\/this-can-be-patheon-s-fate-in-b-trump-s-b-call-for-increased-drug-production-\/, accessed November 2017.<\/p>\n

[7] Thermo Fisher. \u201cThermo Fisher Scientific to acquire Patheon, a leading contract development and manufacturing organization.\u201d press release, May 15, 2017.\u00a0 Thermo Fisher Scientific website, http:\/\/ir.thermofisher.com\/investors\/news-and-events\/news-releases\/news-release-details\/2017\/Thermo-Fisher-Scientific-to-Acquire-Patheon-a-Leading-Contract-Development-and-Manufacturing-Organization-CDMO\/default.aspx, accessed November 2017.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Increasing pressure for domestic pharmaceutical production could require a shift away from overseas manufacturing. This creates an opportunity for contract manufacturing organizations like Patheon to provide domestic production services.<\/p>\n","protected":false},"author":9773,"featured_media":26469,"comment_status":"open","ping_status":"closed","template":"","categories":[4113,222],"class_list":["post-26468","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-contract-manufacturing-organizations","category-pharmaceuticals","hck-taxonomy-organization-patheon","hck-taxonomy-industry-pharmaceutical","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nPatheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Increasing pressure for domestic pharmaceutical production could require a shift away from overseas manufacturing. This creates an opportunity for contract manufacturing organizations like Patheon to provide domestic production services.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/drew-hays-206414-683x1024.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"683\" \/>\n\t<meta property=\"og:image:height\" content=\"1024\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/\",\"name\":\"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/drew-hays-206414.jpg\",\"datePublished\":\"2017-11-16T03:27:36+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/drew-hays-206414.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/drew-hays-206414.jpg\",\"width\":3238,\"height\":4857},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/","og_locale":"en_US","og_type":"article","og_title":"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management","og_description":"Increasing pressure for domestic pharmaceutical production could require a shift away from overseas manufacturing. This creates an opportunity for contract manufacturing organizations like Patheon to provide domestic production services.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/","og_site_name":"Technology and Operations Management","og_image":[{"width":683,"height":1024,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/drew-hays-206414-683x1024.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/","name":"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/drew-hays-206414.jpg","datePublished":"2017-11-16T03:27:36+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/drew-hays-206414.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/drew-hays-206414.jpg","width":3238,"height":4857},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/patheons-path-to-growth-economic-nationalism-and-pharmaceutical-manufacturing\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"Patheon\u2019s Path to Growth: Economic Nationalism and Pharmaceutical Manufacturing"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26468","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/9773"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=26468"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/26468\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/26469"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=26468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=26468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}