By: Ryan Fields – Sr. Vice President of Regulatory Services – Two Labs
We know that the cell and gene therapy market is growing. In Q1 of this year, a report was released stating that the market is projected to reach $25 billion by 2027 and acknowledging that with more than 1,000 clinical trials already performed, the area is showing great promise.
But with great promise, comes a great need for logistical support. With the supply chain being more complex, many manufacturers find themselves overwhelmed trying to line up the appropriate state licensing. With the manufacturer sitting in the middle of a back-and-forth supply chain, the licensing strategy won't be as straightforward as with a traditional drug, if you could even call that straightforward to start with.
Cell and gene drugs are often personalized therapies, have a shorter shelf life, and often are not physically distributed by a specialty distributor or pharmacy, even if a specialty distributor or pharmacy is playing an order-to-cash role. Instead, they come straight from the self-manufacturer or a CMO and go through a more specialized supply chain to get directly to the patient at the site of care.
The main question that sits at the center of the most common licensing questions and obstacles for cell and gene strategies is how to license a product that is often never touched by the parties that need to hold the license? Assuming they are using a CMO, virtual manufacturers like the clients I work with will never touch the product, and their 3PL or specialty distributor may also never touch the product, but this doesn’t waive their licensing requirements.
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Two Common Mistakes
The biggest mistake that manufacturers make is that they assume that since a specialty distributor is playing an order-to-cash role, they themselves don’t need to hold a license in the state where the drug is going, because the specialty distributor has a license that will cover the product. But with cell and gene therapies, both the manufacturer and the distributor may need to hold more licenses - potentially in every state where the product is sold - even though they’re not the ones actually shipping or distributing.
Incorrectly assuming they don’t need a license is one mistake; another is not knowing which type of license(s) they will need. The process for each state is different because they each have different licensing regulations and structures, so depending on the client’s situation and the state at hand, they could either need a manufacturer license or a distributor license. It will also differ on your channel route, whether or not the client is using a 3PL or a specialty carrier, which a lot of cell and gene therapy manufacturers opt for.
Question of Ownership
The personalization of cell and gene therapies is what drives the more complex supply chain because in most cases the product is made from a patient-specific sample. So if John Doe needs this therapy, provides blood or a biopsy that is then shipped to a CMO or manufacturer and combined with the manufacturer’s therapeutic gene or cell, it becomes a treatment that only John Doe can use. So does John own the product? Or does the virtual manufacturer, or the CMO, or the channel partner since they are the ones who shipped it across state lines? And when the site of care takes possession to administer the new product back to John, do they own it when they accept it at their door?
This concept of ownership is not unique to cell and gene products; it’s always an issue when a prescription drug is being shipped across state lines. But the ownership issue is certainly nuanced because of the personalization and small amount of product being handled. So the strategy often starts with the question of ownership and what role each party is playing, and then the ensuing supply chain will dictate the state licensing strategy.
Where is the Starting Line?
If the question of ownership is at the center of the state licensing strategy development, the catalyst needs to be the realization that a product will ship across the state lines, which is true in virtually every product launch. In other words, state licensing should always be factored into the launch strategy. As soon as a drug crosses a state line, you need a license to proceed.
The answer to that first question is a simple ‘yes we are shipping across state lines,’ and then it gets a little more complicated to determine which parties involved need to hold what license. And there are no straightforward answers that can be listed out neatly, but here is an example of how it could play out.
A 3PL handling a product is shipping from Tennessee to New Jersey, so this 3PL will need a wholesaler or 3PL license. But the Board of Pharmacy (BOP) in New Jersey might point out that the 3PL was shipping at the instruction of the virtual manufacturer, so the manufacturer also needs a distributor license. But the virtual manufacturer is using a CMO, which means that the virtual manufacturer instead (or also) needs a virtual manufacturer license, and the CMO needs the actual manufacturer’s license.
Be Prepared to Educate Boards of Pharmacy
It’s not a straightforward situation, and even further complicated that many boards of pharmacy are unfamiliar with the nuances of cell and gene therapy supply chains and manufacturing themselves. This means that the manufacturer should be prepared to educate the BOP on their process, and since there is likely no precedent, the licensing requirements might be at the discretion of the BOP rather than written in existing regulatory documents.
A manufacturer could present their product and include in their application that there is no package label because the product only exists as a therapeutic cell or gene - not a drug - until it’s combined with the patient’s sample. So it’s possible for a BOP to initially object to something as common as the beginning therapeutic cell of a CAR T therapy, even though a CAR T therapy is a prescription medicine.
What’s at Risk?
Aside from the time required to educate a BOP if they are unfamiliar with cell and gene therapies and the supply chain necessary to ship, there is precious time at stake if the licensing strategy isn’t well-thought-out from the very beginning.
There are three key milestones in a typical licensing timeline. First, there’s the residential state license, which (second) is used to apply for licenses in every other state, and (third) then used to get onboarded with the necessary channel partners: specialty distributors, specialty pharmacies, etc.
The worst-case scenario is that you get to the point of FDA approval, and you’re in the process of onboarding with the channel partners. Those partners could ask to see 47 wholesaler licenses, but the manufacturer might only have 36 virtual licenses because they fell victim to the two main obstacles of incorrectly assuming they didn’t need licenses plus not knowing which types of licenses they need. At this point, channel partners can refuse to onboard, leaving the manufacturer to start from scratch which could delay the launch by another 12 months, which means they’ll have to report back to investors that revenues will be delayed for another year.
Another scenario is that a manufacturer receives their residential state license, presents it to the other 46 states, and half of them ask why they are registered as a virtual manufacturer in California when they are technically a self-manufacturer according to their rules. Then you have to start over with California, which can take another 4 months.
There are several small checkpoints in between these large milestones where an uninformed licensing strategy can - and will - backfire, but these worst-case scenarios go to show the importance of doing the research and communication with BOP’s ahead of time to save precious time from being spent on a re-do later on.
Takeaway for Emerging Manufacturers
When the cost is high, the territory is new, and the workload immense, my advice is to not go the DIY route. Learning - especially for the first time - how each state approaches licensing for a typical drug is a big task, let alone when the product is a cell and gene therapy and the rules are even less clearly outlined. It requires the collaboration of experts who have established lines of communication with the BOPs in each state.
It’s easy for a manufacturer to think that since they are playing a traditional role in the supply chain, they only need the matching type of license to proceed. But if the supply chain is different anywhere down the line, there is usually an impact on the type of license. So regardless of if a manufacturer only views themself as a manufacturer. If the state of New Jersey looks at their application and thinks they are instead functioning as a wholesaler, they now need a wholesaler license.
The basic best practices for putting together a state licensing strategy for a cell and gene therapy don’t sway too terribly far from the process for a typical drug. For cell and gene, it’s about figuring out how each state views your activity when the ownership of the product changes hands, and when the product itself changes throughout the supply chain process.
About the Author
Ryan Fields is the Senior Vice President of Regulatory Services at Two Labs, where he has supported more than 150 product launches with his commercial expertise. Prior to joining Two Labs, Ryan held various commercial leadership roles at Cardinal Health and Abbott Labs.
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