But Phlow admits he fell short of the two-year deadline, casting doubt on four-year goals. The company’s slow progress underscores how many new and sometimes untested companies won contracts in the chaotic early days of Covid — and the extent to which two years later the federal government, now under Biden, is still paying for products and services that have yet to come to fruition.. It also underscores how the lure of a safer, less expensive supply chain can be an almost irresistible reward for U.S. health officials willing to work with enterprising CEOs who say they can do it.
Phlow fulfilled some parts of the contract. BARDA tasked the company and its partners to immediately identify a list of essential drugs that are at risk of shortages, as well as to develop capacities and increase the active ingredients of these drugs in the country. The company and its partners confirm they have provided more than 2 million doses of essential drugs used to treat Covid-19 patients to the US Strategic Stockpile, although Phlow declined to comment on which drugs those were, citing the terms of its contract.
But the company has provided very limited information about its main goal, which is to develop pharmaceuticals that are continuously available. “I’m just scratching my head. what are you doing Seriously, what are you doing?’ said Tony Quinones, chief executive officer of Bright Path Laboratories Inc., a biotech company that uses artificial intelligence with continuous manufacturing to make pharmaceuticals.
Phlow and BARDA both said they were pleased with the pace of progress on the contract to date. “We are very pleased with the execution and great progress today in several [active pharmaceutical ingredient] program from the development to the production phase,” Dan Heckman, Phlow’s chief business officer, told POLITICO, but declined to comment on when specific milestones would be reached.
He added that the company plans to open two drug ingredient manufacturing plants in the U.S. within the next six to 18 months — much later than the original contract timelines. When asked about the delays, Hackman cited supply chain difficulties exacerbated by the ongoing pandemic.
From the start, industry experts were skeptical that Phlow would be able to meet the lofty goals of the contract. No commercial company in the US manufactures drugs using end-to-end advanced manufacturing.
“They weren’t even a company, and they were given money,” said Carol Nacey, co-founder and chief executive officer of Sequella, a Maryland-based company that develops antibiotics through continuous manufacturing.
Lawmakers’ attention was drawn to questions about the circumstances of several companies that received BARDA contracts in the early days of the pandemic, including Phlow, and their lack of experience, prompting an ongoing congressional investigation.
By focusing on Phlow, a well-connected startup with no manufacturing experience, experts worry that the US government may have missed an opportunity to fund better-known companies that could bring pharmaceutical manufacturing back to the US more quickly.
“Here’s this one [company] absorbs a lot of oxygen in the room. You hope they’re successful because what matters is what they have to do,” Quiñones said. But, he added, due to his lack of experience so far, he is skeptical that Phlow will be able to deliver on its promises.
A broad search led to a specific company
Phlow has been awarded a federal contract in response to a broad notice from the agency (BAA) regarding ways to optimize the US pharmaceutical supply chain. “Phlow was chosen for a number of reasons, including the team of experts they assembled and the fact that they were the only organization out of over 300 companies that BARDA met with that could provide this essential service,” said representative of BARDA.
As their name suggests, dietary supplements are intentionally vague, allowing the federal government to receive and evaluate proposals that address the problems in different ways, said Stephen Schooner, a professor at George Washington University School of Law. BAAs, unlike requests for proposals, can often lead to unsolicited offers to an agency that are not publicized and do not allow competition between companies, he added.
Phlow’s leadership met with members of the Trump administration in the fall of 2019, facilitated by Rosemary Gibson, senior health advisor at the Hastings Center, a nonprofit bioethics think tank. Gibson now sits on Phlow’s board of directors. In addition, Peter Navarro, a White House trade adviser under former President Donald Trump, who wanted to replace Chinese generic drug makers with American companies, helped to push treaty through, POLITICS reported earlier. Neither Navarro nor Gibson responded to follow-up questions.
The company’s ties to the Trump administration are the subject of an investigation by the House of Representatives subcommittee on the coronavirus crisis. “We are concerned that … White House officials may have exerted inappropriate pressure on federal agencies to award contracts to certain companies,” Democratic members of the subcommittee said. wrote in March 2021 in a letter to the Minister of Health and Social Services, Xavier Becerra.
“Evidence uncovered by the Elections Subcommittee raises questions about whether White House officials, including Mr. Navarro, exercised undue influence over the awarding of contracts to [personal protective equipment] and medical supplies to be handled by career procurement personnel,” the letter continued.
Return of domestic production of medicines
The problem federal officials hired Phlow to address is a tangible health threat: Covid-19 has highlighted the fragility of the generic drug supply chain. Factories around the world that made ingredients or finished drugs temporarily shut their doors as the virus raged, leading to shortages, including in the United States. This shortage has attracted the attention of health officials and the White House, who have sought to find ways to quickly produce drugs domestically to avoid future shortages.
Currently, most generic drugs or their ingredients are manufactured overseas, where labor costs are lower and environmental regulations are more lenient. Manufacturers mix the ingredients for drugs in large vats called batches, just like making a soup. It is difficult for manufacturers to control the quality of drugs produced in this way; if internal testing reveals that part of the finished product is unacceptable, the entire batch must be discarded. This is less reliable and can lead to a lot of waste.
Continuous manufacturing of pharmaceuticals is one form of advanced manufacturing, a buzzword that has attracted a lot of attention from the White House in recent years. Unlike serial production, continuous production involves the production of drugs on a conveyor belt on a smaller scale.
That means manufacturers can monitor product quality in real time, leading to increased efficiency, less waste and fewer errors, said Fernando Muzio, a chemical engineer and biochemist at Rutgers University who specializes in continuous pharmaceutical manufacturing. Collectively, these improvements in manufacturing technology significantly reduce manufacturing costs—enough to potentially make these drugs domestically again.
The problem with continuous manufacturing, however, is that it’s essentially a new way to make existing drugs, meaning millions of dollars in research, development, facility construction, and regulatory adjustments required by the Food and Drug Administration. While academic laboratories have achieved end-to-end continuous drug manufacturing, no company in the US manufactures a drug from start to finish using continuous manufacturing
What has Phlow done so far?
Hackman noted that outside of the government contract, Phlow has taken other steps to address drug shortages in the US. The company has established a contract manufacturing division to advise other pharmaceutical companies on various best practices.
In 2021, under the Biden administration, BARDA approved Phlow to join a group of companies working with the US government as a contract development and manufacturing organization. HHS also honored the company with the Small and Low-Insurance Business Administration Small Business Prime Contractor of the Year Award.
Phlow founded the Children’s Hospital Coalition, a group of 20 institutions across the United States. Coalition members and Phlow representatives meet several times a month to discuss hospitals’ drug needs. Marshall Samar, a pediatrician specializing in rare diseases at Children’s National Medical Center in Washington, D.C., a member of the coalition, serves on Phlow’s board of directors.
This year, the company entered into a private label agreement with Fresenius Kabi, a German-headquartered pharmaceutical company that specializes in injectable drugs. Fresenius Kabi has US facilities that stock four drugs that are often in short supply at children’s hospitals and label the products Phlow. Phlow then sells those drugs to members of the Children’s Hospital Coalition at a price that is “competitive in the broader market,” according to Hackman, and meets the hospitals’ demand for those products.
Hackman would not comment on where Fresenius Kabi gets the active ingredients for these drugs. In previous conversations with POLITICO, Eric Edwards, Phlow’s co-founder and CEO, confirmed that these active ingredients “mostly” come from overseas. Fresenius Kabi declined to comment.
Phlow, meanwhile, shed light on the subcontracting he did from the original BARDA agreement. Phlow gave Civica Rx, a nonprofit maker of generic drugs, $100 million to help build a manufacturing facility in Petersburg, Virginia, where the final form of the drug will be made. A Civica representative said the plant is scheduled to open in 2024.
Phlow also announced agreements with Medicines for All, a nonprofit research group headquartered at Virginia Commonwealth University, and with AMPAC Fine Chemicals, a contract manufacturing organization that produces active drug ingredients for a number of companies. Heckman said those companies will be responsible for the research and development of continuous production and the expansion process, respectively.
Both Medicines for All and AMPAC were listed as subcontractors in Phlow’s original contract with BARDA. A spokesperson for AMPAC would not comment on the dollar amount received from Phlow for the contract, but Medicines for All was awarded the nearly $13 million contract.
Martin VanTriest, an advisor to Civica Rx and a member of its board, and Frank Gupton, executive director of Medicines for All and co-founder of Phlow, both serve on Phlow’s board of directors.
Still, some experts are frustrated that they don’t know more about Phlow’s plans to meet its contractual obligations. Schooner noted that there is no reason for the parties to remain secretive about this matter. “Why shouldn’t this information be public?” he said.
Those focused on continuous production are frustrated that the money BARDA awarded Phlow has yet to yield results, meaning the country remains vulnerable to shocks in the pharmaceutical supply chain.
“Science is a group process,” Nacey said. “There was a BARDA band [existing continuous manufacturing companies] together as a whole… I think they would make a lot of progress.”