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On September 12, President Joe Biden signed an executive order to launch a National Biotechnology and Biomanufacturing, noting the United States relies too heavily on foreign materials and foreign bioproduction. Off-shoring of critical industries threatens US ability to access materials like important chemicals and active pharmaceutical ingredients.

Consider the prescriptions you or your loved ones need for high blood pressure, infections or other ailments. Chances are, no manufacturing source exists in the United States for critical generic drugs or their active ingredients.

In fact, in 2021 the White House sounded the alarm about vulnerabilities in the pharmaceutical supply chain that has led to shortages of critical medicines the Food and Drug Administration deems “essential.” A White House report proclaimed, “The disappearance of domestic production of essential antibiotics impairs our ability to counter threats ranging from pandemics to bio-terrorism, as emphasized by the FDA’s analysis of supply chains for active pharmaceutical ingredients.”

The problem? It seemed that insufficient US manufacturing capacity due to offshoring was largely to blame. But new research from the Center for Analytics and Business Insights, at Olin Business School at Washington University, finds the US does, indeed, have the capacity to make the nation’s most essential and critical drugs—yet most of the capacity is sitting idle.

Report fills key data gap

The CABI report fills a crucial gap in available industry data: “US Generic Pharmaceutical Manufacturer Available Capacity Research Survey.”

Sardella

“We addressed of a significant blind spot, which was the understanding of available capacity in the United States to build supply chain resiliency,” said Anthony Sardella, author of the CABI report, senior research advisor for CABI and Olin adjunct lecturer.

“Our results were quite surprising. Fifty percent of available capacity is not utilized,” he said. “The number was stunning.”

On September 14, the Biden administration revealed it will invest more $2 billion into biotech and biomanufacturing efforts, with $1 billion from the Department of Defense for manufacturing infrastructure in the US.

30 billion more doses possible

Last year, the generic pharmaceutical industry made headlines when it announced the closure of several U.S. manufacturing plants. Why? In part because of lower offshore operating costs and labor rates, intense pricing pressure and steadily growing dependence on offshore sources for raw materials.

“How do we account for this incongruency?” Sardella asks. He and his team surveyed 37 U.S. generic pharmaceutical manufacturing sites. They found the sites are producing at just half of their production capacity annually, with an aggregate excess capacity of nearly 50%. In fact, only two of the 37 manufacturing sites are producing at full capacity.

If the sites got up and running, nearly 30 billion additional doses of essential and critical medicines could be produced in the US without incurring the expense of building new manufacturing plants and shorten the time to make generic medicines available from domestic sources, according to the report.

In a nutshell, the report recommends the following:

  • Repurpose idle sites to enable manufacturing to address shortages, increase supply-chain resiliency and build supplies within 24-36 months.
  • Continue current federal funding efforts for advanced manufacturing technologies to reduce production costs, create new workforce opportunities and increase the economic sustainability of US drug manufacturing.

Research aims to foster national policy

Sardella, who focused his research on issues at the intersection of business, government and society, will present the results of the paper on October 4 to the National Press Club in Washington, DC, to provide support for policy considerations and initiatives to strengthen US drug manufacturing sustainability.

The next step for CABI is its new paper, in progress, about how to model funding initiatives that de-risks the adoption of new, advanced manufacturing technologies, such as continuous-flow chemistry, to boost production.

CABI has been researching the drug shortage issue over the past couple of years. Learn more:




In the United States, no manufacturing source exists for more than 80% of the active ingredients in medicines the US Food and Drug Administration deems essential for public health, according to a new study from the Center for Analytics and Business Insights (CABI) at Olin Business School.

“This creates an incredible vulnerability to our public health care system, our health care security,” said Anthony Sardella, an adjunct professor at Olin and senior research advisor at CABI. He conducted the study using proprietary data from across the industry.

Anthony Sardella

Essential medicines include antibiotics, antivirals, blood pressure pills, steroids and many others.

“We have a national security issue related to being able to maintain our public health,” Sardella said, because the US is so reliant on foreign production of active pharmaceutical ingredients (APIs).

“The US Active Pharmaceutical Infrastructure: The Current State and Considerations to Increase US Healthcare Security” focuses on generic medications, which represent more than 80% of US prescriptions.

‘A fragile system’

APIs are the necessary components of medicines that provide patients with the drug therapy they need. The compounds are made into dosages of tablets, solutions and creams.

A June 2021 White House report on supply chain resiliency referenced an epidemic of national drug shortages occurring even before COVID and the pandemic, but “COVID really drew attention to the fragility of our pharmaceutical supply chain,” Sardella said.

The crisis highlighted US reliance on long, complex supply chains and drug shortages in the US. “We really have a fragile system.”

The first of its kind, the study relied on industrywide data from Clarivate, a data and benchmarking company in the healthcare industry that has developed a dataset—Cortellis Generics Intelligence—that provides insights across the sector.

“The data is staggering, as is the implication to our health security,” Sardella said.

Sources of COVID-19, Antivirals, Antibiotics and Top 100 Medicines in the United States. Cortellis Generics Intelligence, formerly known as Newport. Copyright Clarivate 2021

A ‘race to the bottom’

His analysis shows the following:

  • The majority of large-scale manufacturing sites of APIs are in India and China, while less than 5% of such sites are in the US. (In COVID times, both China and India have threatened to cut off or restrict shipments to the US.)
  • Of 52 COVID-related medicines, 75% had no US source of API.
  • Of the top 100 generic medicines consumed in the US, 83% had no US source of API.
  • Of the 47 most-prescribed antivirals, 97% had no US source of API.
  • Of the 111 most-prescribed antibiotics, 92% have no US source of API.

One cause for our weakness in API manufacturing is the “race to the bottom” on pricing against global players, Sardella said. Foreign manufacturers have structural advantages including greater government subsidies, lower costs and fewer regulatory burdens.

He said solutions to protect US healthcare security must address the risk by creating a critical mass of domestic manufacturing infrastructure to protect domestic interests; a level playing field for global competition; and sustainable domestic markets for American manufacturers.

“Tony’s outstanding research shows the impact of being both values-based and data-driven,” said Michael Wall, professor of practice in marketing and entrepreneurship and CABI’s co-director. “This principle is core to Olin and to CABI.”

The new study follows a previous one aimed at understanding the business, societal and governmental environment of the pharmaceutical supply chain. Sardella and Paolo De Bona, a consultant and formerly a staff scientist at WashU’s School of Medicine, conducted an extensive review of academic research, media reports and public policy statements to discern the causes of chronic pharmaceutical shortages in the United States and develop policy solutions to address them.

The work has gained the attention of policymakers in Washington, DC, and compelled the pair to join with the Brookings Institution in hosting a public forum on the subject

About the Center for Analytics and Business Insights: CABI serves as a  conduit between business, academia and the broader community, helping leaders better leverage analytics and technology to make a positive and principled difference in organizations, communities and society at large.




Pharmaceutical and biotechnology companies topped the 2021 RQ Top 50 list of the most innovative U.S. companies. The annual ranking identifies the smartest R&D spenders – those companies that both spend big (at least $100 million in R&D) and provide the greatest returns to shareholders from that investment.

Notably absent from the list were the three most attention-grabbing pharmaceutical and biotechnology companies of the year – Pfizer, Moderna and Johnson & Johnson.

Anne Marie Knott

That’s because the RQ50 is not like other innovation rankings. Developed by Anne Marie Knott, the Robert and Barbara Frick Professor in Business at Washington University’s Olin Business School, RQ (research quotient) measures R&D productivity in theoretical models linking R&D investment to revenue growth and market value – precisely the outcomes executives and investors care about, Knott said.

“RQ essentially measures how smart companies are. Just as high IQ individuals solve more problems per minute, high RQ companies solve more technical problems per dollar,” Knott said.

“While most of the market still thinks R&D spending is the best gauge of companies’ innovativeness, it’s not. It’s quality not quantity of R&D spending that matters.”

The proof is in the numbers: The RQ50 portfolio historically outperforms the S&P 500, despite the fact that the two portfolios bear the same level of risk (beta), Knott said.

What does it take to make the RQ50?

The 2021 RQ50 represents a broad swath of the economy. The biggest representation comes from pharmaceutical and biotechnological companies, which comprise nine of the top 50, or 18%. Makers of semiconductors make up 14% of the list followed by computer programming at 10%. By contrast, 28% of the RQ50 are the only firms in their industry to make the cut.  

“So it’s not the case these firms are all riding the same wave of opportunity,” Knott said. “The RQ50 firms are standouts in their respective industries.”

Now in its eighth year, the RQ50 ranking is fairly stable: 66% of firms from the 2020 ranking appear again in 2021. According to Knott, that’s because firm capability changes slowly.

Of the 50 companies who made this year’s ranking, six have made the RQ Top 50 all eight years since CNBC published the initial RQ50 in 2014. These standouts include Hasbro, Lam Research, Netflix, NewMarket, Synaptics and Xilinx. 

New to the list

Seventeen companies are new to the RQ50 list. How did they make it?

  • Alarm.com, FMC, Guidewire Software, Match Group, NortonLifeLock and Qualcomm were close last year, but ascended this year.
  • Abiomed, Church & Dwight Co. and MaxLinear crossed the $100 million R&D threshold in FY2020.
  • Cara Therapeutics – No. 2 on the list – was excluded last year because its R&D exceeded revenues.
  • Prior to FY2020, Acacia Communications, Blueprint Medicines, Corcept Therapeutics, Hewlett Packard Enterprise, Lumentum Holdings, Square and Xperi Holdings hadn’t been publicly traded and conducting R&D for enough years to form their RQ.

Who dropped out?

In order for 17 firms to ascend, another 17 had to drop out. What happened to them?

  • AMAG Pharmaceuticals and The Meet Group were acquired.
  • Retrophin rebranded itself and now trades under a different name.
  • Halozyme Therapeutics and Ironwood Pharmaceuticals dropped out because their R&D spending fell below the $100M threshold for inclusion.
  • Arena Pharmaceuticals, Enanta Pharmaceuticals, Lexicon Pharmaceuticals and PTC Therapeutics no longer have revenues that exceed their R&D, a criterion for inclusion. 
  • Allison Transmission, Dow, Intuitive Surgical, FireEye, Sirius XM, Take-Two Interactive, United Therapeutics and Veeva Systems failed to maintain RQs sufficient to keep them in the top 50.

COVID-19’s effect on innovation

While the COVID-19 pandemic shut down manufacturing lines and disrupted global supply chains, research and development – at least so far – appears to have continued its upward trend. During FY2020, which for some ended in June 2020 and for others not until May 2021, R&D spending in absolute dollars increased by 6%. During this same time period, revenues fell on average 10%, making the R&D investment even more significant.

“In most cases, firms committed to their FY2020 R&D spending before the pandemic. So it’s still too early to measure the pandemic’s full impact on firm R&D investment,” Knott said.

“However, I’m cautiously optimistic that firms will continue to prioritize R&D because if there’s anything the pandemic has taught us, it’s the importance of innovation.”




Suppose the epidemic of opioids plaguing the United States could be stopped at the source? Suppose 21st century technologies such as data mining, artificial intelligence and machine learning could flag risky drug shipments before they land in the hands of at-risk populations?

How could it be done? And what changes in local, state and federal policy would be required to curb the problem and sharpen the response from experts in law enforcement, public health and industry?

These questions form the heart of a new initiative between WashU Olin Business School and the Brookings Institution. Broadly speaking, the Olin Brookings Commission is a three-year initiative designed to recruit a dream-team of policy experts and scholars each year who will deeply analyze a single major policy issue and issue policy recommendations.

Made possible by a $750,000 grant from The Bellwether Foundation Inc., each commission will be charged with tackling topics affecting the quality of life for people in St. Louis and across the country. Each year’s panel will issue practical and realistic recommendations informing business strategy and public policy.

“We are pleased to provide multiyear support for the Olin Brookings Commission,” said Ginger Smith, president of The Bellwether Foundation. “Funding an initiative that deepens the partnership between Olin and Brookings, two leaders in their industries, is where we believe we can make an impact.”

The focus of our first commission

Our first commission convenes this month. This first six-member commission—in partnership with Olin’s Center for Analytics and Business Insights—will demonstrate how new technologies can curb opioid trafficking and potentially more than 100 other equally destructive examples of illicit trafficking.

At the same time, the commission will evaluate existing policy obstacles and reveal opportunities where policy changes can enable industry and government to implement a real-time detection and alert system across industry and government agencies.

“The initiative is very compelling. It leverages new advances in artificial intelligence and machine learning to proactively detect suspicious opioid orders before they are shipped,” said Anthony Sardella, chair of the first commission and founder of data insight firm evolve24. “This effort holds the promise to save lives, enhance public health and protect our vulnerable populations.”

An initial phase of the opioid research project involves mining a relatively new database from the US Drug Enforcement Agency: the Automated Reports and Consolidated Ordering System. CABI co-directors Seethu Seetharaman and Michael Wall, along with Tony (who also serves as CABI’s senior research advisor), will lead the data analysis portion of the project.

“I am excited that CABI is involved in such a high-stakes national policy-related initiative in terms of showcasing the analytics talent resident in Washington University in St. Louis,” Seethu said. “This could not fit more perfectly with the values-based, data-driven mission of Olin.”

Another key component of the Olin Brookings Commission is involvement from students, who will serve as “commission fellows” in research and logistical support for each project. Olin PhD marketing student Annie Shi will collaborate with Tony, Michael and Seethu and together, they will be co-authors on all publications that arise from this initiative.

Meanwhile, I’m pleased to announce that our first commission includes heavy hitters from the pharmaceutical industry, academia, law enforcement and advocacy organizations focused on drug policy. Find the list of commission members at the bottom of this column.

A signature program?

The Bellwether grant makes possible a long-held vision of mine, an extraordinary opportunity to further leverage and expand Olin’s powerful relationship with Brookings, while also convening thought leaders who can provide guidance and direction on “megatrends” in global business and public policy.

We envision that each commission’s report—targeting the White House, regional and national government policymakers and the media—would coincide with the springtime Olin MBA capstone experience with Brookings. That is our timeline for a report on the opioid project.

Commission members will convene in a series of virtual meetings—at least while the pandemic continues raging—over the course of this year.

In addition to recommendations influencing business practice and public policy, the initiative is structured to provide insightful, well-researched contributions to industry about societal megatrends, inform and influence the direction of future research and increase students’ knowledge about the confluence of business and public policy.

I’m confident that the Olin Brookings Commission can become one of Olin’s signature programs, further cementing our commitment to improving life in St. Louis—and changing the world, for good.

Members of commission No. 1, opioid trafficking

  • Anthony Sardella, founder, evolve24; faculty member, WashU Olin Business School. Commission chair.
  • The Hon. Mary Bono, board member, Community Anti-Drug Coalitions of America, former US representative.
  • Dr. Ann Marie Dale, assistant professor of medicine and occupational therapy, Washington University School of Medicine
  • Van Ingram, executive director, Kentucky Office of Drug Control
  • Gina Papush, global chief data and analytics officer, Cigna.
  • Darrell M. West, vice president and director, Governance Studies; senior fellow, Center for Technology Innovation, Brookings



Dr. Ezekiel J. Emanuel presenting his keynote address at Olin

Some disagreed on the way to fix rising prescription drug costs. Others differed on the priority non-medical social interventions should receive in the healthcare system. Others didn’t see eye-to-eye on the medical efficacy of expensive proton beam therapy in treating cancer.

But one theme drew universal agreement in Olin Business School’s healthcare symposium, a Calhoun Lecture Series event held on January 23: The US healthcare system is broken, bloated and bound for change.

The morning-long symposium drew a standing-room-only crowd of students, alumni, local industry leaders and faculty that spilled from Emerson Auditorium into Frick Forum to hear two panel discussions, plus a keynote address from industry rock star Dr. Ezekiel J. Emanuel, whose credentials extend from private sector medicine to government policy and into medical academia at the University of Pennsylvania.

Emanuel launched his talk by noting that US spending on healthcare—$3.5 trillion in 2017—was greater than the total GDP of several major global powers, including the United Kingdom. Then he shared the “single most depressing slide about American healthcare,” graphing healthcare spending from numerous developed countries against the life expectancy of their residents.

“We are spending a huge amount of money and not getting any return on it,” Emanuel told the audience, showing how the United States has “fallen off the curve” against countries such as Japan, Switzerland and Australia, who spend considerably less on healthcare, while their residents live much longer.

Still optimistic about change

The problem, Emanuel said, is a chronic case of wasted spending on unnecessary procedures, inefficient care and “pricing failures” that reward providers for the wrong outcomes. Yet through it all, he said, “I’m wildly optimistic about the American healthcare system. And the reason is California wine.”

Mary Jo Gorman, board member Curavi Health, moderated a panel with Mike Kaplan, founder Altos Health; Blake Marggraff, CEO Epharmix; and Michael Kinch, associate vice chancellor at WashU.

Mary Jo Gorman, board member at Curavi Health, moderated a panel with Mike Kaplan, founder of Altos Health; Blake Marggraff, CEO of Epharmix; and Michael Kinch, associate vice chancellor at WashU.

He referred to the 1976 “Judgment of Paris,” a first-ever blind taste test in which California vintners shocked the wine world by prevailing over French wines. The lesson: US innovators can do anything they set out to do.

“Every country is looking to the United States for innovation in financing and innovation in care,” Emanuel said. He cited four areas of focus that would move the industry in the right direction.

  • Value-based payment or bundled payments. Rather than the existing “fee-for-service” model, bundled payments would put patients and insurers on the hook for a “unit of care”—e.g., a hip replacement—with the costs integrated and later divvied up among individual providers. The model would incentivize providers to better coordinate care and cut unnecessary costs.
  • Deinstitutionalization and shifting care. Years ago, Emanuel said, the United States saw about 171 hospitalizations for every 1,000 patients. That’s down to about 103 in 2017. “We’ve shifted a lot of our care and we’re going to shift more of it out of the hospital,” he said, and those changes include the trend toward “minute-clinics” in drug stores and the reduced reliance on physicians in favor of nurse practitioners, physician assistants and virtual medicine.
  • Chronic disease management. Eighty-six cents of every dollar spent in healthcare is spent on on chronic disease management. Emanuel cited the example of Texas’ Rio Grande Valley, where half the population is afflicted with diabetes. The community has developed specialty clinics and aggressive outreach to the community. “The key to care management is active outreach—not waiting for them to show up sick.”
  • Behavioral health integration. “We have been isolating psychiatry ‘over there.’ Records are different. Billing is different. Bad, bad mistake,” Emanuel said. “You can bring down healthcare costs by treating co-morbid depression and anxiety” that accompanies many physical disorders.

Other interventions

After Emanuel’s talk, the audience heard from two separate panels, the first looking at “disruption in treatment” and the second focusing on “innovation in delivery methods” for healthcare. Below are a selection of moments from the program.

On the social impacts to health. Blake Marggraff, CEO of Epharmix, spoke about an incident involving a review of patients suffering from chronic respiratory disease. “There were some conversations that turned from, ‘Are you breathing OK?’ to ‘Sure, yes, but I’m also having trouble paying my rent this month.'”

Bart Hamilton, Olin's Robert Brookings Smith Distinguished Professor of Economics, Management & Entrepreneurship, moderated a panel with Mike Long, CEO, Lumeris; Steve Miller, CMO, Express Scripts; and Sandra Van Trease, group president, BJC Healthcare.

Bart Hamilton, Olin’s Robert Brookings Smith Distinguished Professor of Economics, Management & Entrepreneurship, moderated a panel with Mike Long, CEO, Lumeris; Steve Miller, CMO, Express Scripts; and Sandra Van Trease, group president, BJC HealthCare.

On technology and the need to better engage with individual patients. Mike Kaplan, founder of Altos Health, spoke of working with a “company that developed software allowing physicians to reach out individually to patients. The patients were engaging in this conversation with the physician and we were able to catch things earlier—lack of return to functional status, pain issues, infections.”

On drug prices. Emanuel said government regulation was the only solution. Steve Miller, chief medical officer at Express Scripts, said it could come to that, but there are intermediate steps that could allow the market to work. “Americans will try everything before they’ll try the right thing,” he said. “I’m a big believer in market-based solutions to drug pricing. The science is spectacular; the question is, is America willing to pay these prices.”

WashU’s Michael Kinch was a bit more blunt: “The pharmaceutical industry is the most efficiently self-immolating industry I’ve ever seen,” said Kinch, associate vice chancellor and director of the Center for Research Innovation in Business at the Institute for Public Health.

On spending: “America doesn’t have a money problem, it has a waste problem,” Miller said. “Healthcare is a tax on every single product in the country. When it’s 18 percent of GDP, everything is being taxed…America wants personalized care at public health prices.”

On access to healthcare: “Only about 50 percent of Americans have a primary care physician with whom they work,” said Sandra Van Trease, group president, BJC HealthCare. “Many receive care via phone—so developing trust happens differently. Being consumer-centric in how we create access is key.”

Mike Long, CEO of Lumeris, threw down the challenge for the next generation of business school students and medical professionals. “We have such a tremendously flawed system,” he said. “I’m hoping young people commit themselves to working in healthcare because they’re mad as hell and aren’t going to take it anymore.”

Pictured above: Dr. Ezekiel J. Emanuel presenting his keynote address at Olin’s healthcare symposium on January 23. He is vice provost for global initiatives, the Diane S. Levy and Robert M. Levy University Professor and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania.