Puerto Rico

2020 Edition

Cover Story
A Story of Resilience

Wednesday, September 20th, 2017 is a day still fresh in every Puerto Rican’s mind. On this day, Hurricane Maria arrived in Puerto Rico, becoming the first Category 5 hurricane on record to strike the US territory. Despite the magnitude of the event and the disruption it caused to the energy, water, and telecommunications infrastructure, the supply of medical products from Puerto Rico was only minimally affected without any shortage reported.

Louis Haynes on 16.01.2020
Louis Haynes on 16.01.2020

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Giuseppe Allocca
Site Leader Vega Baja & Barceloneta Operations, Pfizer Global Supply, Puerto Rico
Manuel A. Laboy Rivera
Secretary, Department of Economic Development and Commerce Executive Director, Puerto Rico Industrial Development Company

“The natural disasters we experienced in 2017 were tragic but showed the commitment and resilience of the Puerto Rican workforce. Most companies resumed with their operations only one or two weeks after the hurricanes, while some never stopped producing at all,” proudly recalls Manuel A. Laboy Rivera, secretary of the Department of Economic Development and Commerce and executive director of Puerto Rico Industrial Development Company (PRIDCO).

Manufacturers could also count on the rapid response of suppliers and service providers that did not hesitate to spontaneously show up at their doorsteps. “Our team acted immediately after Maria, but because we lost all communication on the island, it was very difficult to get in touch with our customers,” emphasizes Gustavo Hermida, president of CIC Construction Group, a leading local construction firm. “As an example, we drove immediately to Amgen’s facility in Juncos, which had been affected. Our emergency plans allowed us to provide them all the construction services required for the facility to continue its production,” he adds.

“Our employees, suppliers, contractors and service providers were at the gate the day after the storm hit us and showed great dedication, passion and pride to aid the recovery,” concurs Giuseppe Allocca, Site Leader Vega Baja & Barceloneta Operations at Pfizer, whose two facilities in Puerto Rico supply 14 of the company’s iconic brands, with between 60 and 70 percent of the volume exported globally.

Moreover, the overall response of the pharmaceutical industry was outstanding, with companies working hard to support the local ecosystem. Iliette Frontera, VP of operations at Boston Scientific, recalls how “the corporate jet flew in twice per day, even when the airport was closed, bringing necessities ranging from water to baby formula. We opened a laundry service, temporary childcare services area and even a hair salon. We provided generators, fuel for cars, and medication for employees with chronic illnesses or diabetes. We also offered the option of non-taxable funds to employees to reconstruct their homes.”

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Carlos Rivera Vélez

President, Medical Devices Cluster, Puerto Rico

Time for an Upgrade

Hurricane Maria, although tragic, brought to light vulnerabilities and served as a wake-up call for the industry and government to make much-needed changes and upgrades. As Francisco Díaz-Massó, President of BLDM, the leading specialty contractor in Puerto Rico and the Caribbean, notes, “everybody thought that energy and water were the priorities, but we learned that it was actually telecommunication. Without communication, you cannot coordinate the other recoveries. Maria taught us that to build resiliency, we need to start with communications.” As a result, the industry has implemented satellite communication systems and network redundancies. On the public side, a lot of money has and is still being invested in laying fiber-optic cable underground.

In general, manufacturers, suppliers and service providers have worked both individually and collectively to update and coordinate their business continuity plans in all aspects. “While we were prepared, we have improved our redundancies in power generation, IT, and renewable energy among others, so we are well equipped for storms in the future. For instance, we have amended our communications system, now working with satellite telephones in cases of emergencies and also upgraded the construction of our headquarters. The improvements made for our own business continuity plans will help us to continue to provide the services our clients require, even after any type of natural disasters. We have also developed and signed agreements of Business Continuity Plans with some of our clients, so we are able to collaborate and provide continuity to their operations immediately after any type of emergency,” states CIC Construction Group’s Hermida.

“From Hurricane Maria, we learned the importance of approaching disasters as a collective entity, not only as a company, to ensure continuous services and product supply,” notes Boston Scientific’s Frontera. Carlos Rivera Vélez, president of Puerto Rico’s Medical Devices Cluster thinks this lesson has been firmly taken on board. “We now have an integrated emergency management and business continuity body, composed of the government, municipalities and private sector leaders that come together to act as needed,” he proclaims. “We are definitively more prepared to manage this type of once-in-a-century phenomena.”

José Sánchez, director reagent manufacturing and operations management at Becton Dickinson, agrees that the country and industry are now better prepared: “I think we are better than before. It was a life-changing experience and an eye opener for the business and Puerto Rico. We thought we had the best contingency plan in the world, but a contingency plan is only as good as the disaster that strikes. Hurricane Maria was the worst natural disaster in many generations. We are now more knowledgeable about what needs to be done before and after.”

gustavo-hermida
Gustavo Hermida
President, CIC Construction Group, Puerto Rico
José Sánchez
Director of Reagent Manufacturing / Operations Management, BD (Becton, Dickinson and Company), Puerto Rico
Wendy Perry
Executive managing director, Merck; & president, PIA

Leveraging Drone Technology to Support Relief Efforts

After Hurricane Maria, Merck partnered with AT&T, Direct Relief and Softbox on a program testing the potential of drones to deliver temperature-dependent medicines and vaccines to hard-to-reach locations. “During Hurricane Maria, we saw first-hand how people most at risk in disasters live in communities that are likely to be cut off from essential healthcare access due to the disruption of transportation and communications,” laments Wendy Perry, executive managing director of Merck Puerto Rico and president of the Pharmaceutical Industry Association (PIA). “Regrettably, many lives were lost because those vulnerable communities were unable to access services and life-saving medicines during the emergency and initial response period.”

She explains that “the drones were equipped with cold-chain delivery technology allowing for precise control of temperatures and utilized real-time, continuous temperature tracking designed to ensure safe and effective delivery. The flights were successful: the drones reached their destination while preserving the integrity of the medicines. However, there are regulatory challenges that still need to be addressed. Together with our partners and regulatory agencies, we are working to address these hurdles. In any case, this pilot represents a significant step forward in biopharmaceutical supply chain innovation and for humanitarian efforts around the world. If this technology helps to save even one life, it would have been worth it. We are extremely enthusiastic about this pilot.”

Jorge Luis Rodriguez
CEO, PACIV, Puerto Rico
A Benchmark Manufacturing Destination

The events of 2017 should not overshadow the fact that Puerto Rico remains one the most attractive life sciences manufacturing hubs on earth and represents a critical piece of the global supply of medicines and medical devices. Today, Puerto Rico produces more pharmaceuticals than any other US jurisdiction and is home to around 50 pharma manufacturing sites, with 11 of the top 20 global pharmaceutical companies present on the island. In the medical device field, 30 world-leading companies are manufacturing more than 2,500 types of devices across 70 plants, including critical life-sustaining products such as glucose monitors, cardiac pacemakers, and blood collection systems. This manufacturing footprint in pharmaceuticals and medtech is crucial to Puerto Rico’s overall economy, representing about 30 percent of GDP and two of its largest exports.

Jorge Luis Rodriguez, CEO of PACIV, is well positioned to speak about Puerto Rico’s standing as a manufacturing destination. His firm is a global leader in industrial automation solutions with operations in Puerto Rico, Indiana, and Ireland. “Executives consider three main KPIs when benchmarking locations across the globe: first, the conversion costs, which represent the combination of direct labor costs and manufacturing overhead costs necessary to convert raw materials into medicines. Second is market reliability, which measures orders placed and the response to the delivery dates. The third one has to do with regulatory findings and compliance. Puerto Rico excels in all of them, which speaks to our competitiveness.”

This assessment is shared by Rolando Torres, executive vice president of global manufacturing of contact lens manufacturer CooperVision. “Throughout my career I have been exposed to many global operations, both in our own facilities and those of vendors,” he asserts. “I have experience starting greenfield manufacturing plants in different countries, and managing plants in the United States, Costa Rica and different countries in Europe. From this experience, I can tell you, proudly but humbly, that Puerto Rico is truly a force to be reckoned with in medical device and pharma manufacturing. When you talk about sports cars, Italy or Germany come to mind. When you talk about gastronomy, wine and designer clothes, you think of France. When you talk about medical devices and pharmaceuticals, Puerto Rico is objectively among the best.”

Rolando Torres
Executive Vice President of Manufacturing, CooperVision, Puerto Rico
Carlos Rodríguez
President, Puerto Rico Manufacturers Association (PRMA)
Incentivizing Investment

Historically, pharmaceutical and medical device companies were attracted to Puerto Rico’s advantageous tax status under Section 936, a law enacted in 1976 granting US corporations a tax exemption from income originating from US territories. In 1996, President Clinton signed legislation that phased out section 936 over a ten-year period, leaving it to be fully repealed at the beginning of 2006. Without Section 936, Puerto Rican subsidiaries of US businesses were subject to the same worldwide corporate income tax as other foreign subsidiaries. After the repeal, successive governments have introduced their own sets of incentives to retain and attract investment.

Nevertheless, as Carlos Rodríguez, president of the Puerto Rico Manufacturers Association (PRMA), points out, “a key issue in the past for Puerto Rico was that governments failed to keep their word on incentives packages. A big task is to communicate the benefits of these incentives clearly to potential investors, while ensuring the validity of these, not only for months but for the number of years they are designed for. Companies expect incentives to be kept in place, regardless of which government is in place, as they calculate their return on investment based on existing incentives when coming on the island.”

A milestone was reached on July 1, 2019 with the enactment of Act 60, known as the Incentives Code of Puerto Rico, which codifies incentives granted for diverse purposes throughout decades with the aim to foster economic development more effectively. As part of the implementation process, the Office of Incentives to do Business in Puerto Rico has been created under the Department of Economic Development and Commerce. Moreover, an Incentives Concession Portal has also been created to centralize, standardize, and streamline the processes related to the application and approval of decrees, cash grants, tax credits, subsidies, and other incentives.

PRIDCO’s Manuel Laboy points out that, “For us it has been important to drive forward the new incentives code, known as Act 60 of 2019, to promote the retention and extension of our long-term private partners in the area of bioscience, while at the same time being fiscally responsible and transparent about the use of these incentives.”

[The] strong knowledge base in pharmaceutical operations here ... is continuously augmented by the capable science and engineering talent coming out of the local universities

Rayne Waller

The incentives are not limited to manufacturing. “We are also encouraging the use of tax credits to promote research and development on the island and give out cash grants for projects. Here, we are in competition with other sites worldwide, so the cash grants help us to bid for bringing these technologies or products to Puerto Rico. Most of the time our offer is the most competitive one and we can attract this investment to the island,” adds Laboy.

In addition to setting incentives in stone, the Puerto Rican government is also streamlining the permit process by implementing a reform in this area which has already been finalized. “As an example, German pharma company Sartorius requested a change of permit, from a use permit to a unified permit, which requires different transaction. They have filed their application and it was approved within one day, which is a great milestone, considering it this has been a permit for a very complex biopharmaceutical plant extension,” rejoices PRMA’s Rodríguez.

rayne-waller-amgen
Rayne Waller
VP Manufacturing, Amgen Manufacturing, Puerto Rico
Tapping the Talent

However, incentives are only one part of the equation. As Rodrick Miller, CEO of the recently-created Invest Puerto Rico agency, points out, “a lot of the conversation revolves around the aggressive tax incentives, which are some of the best that I have seen, but Puerto Rico is a lot more than incentives. We have good infrastructure, excellent universities and top-notch talent.”

While incentives can be replicated by other jurisdictions, Puerto Rico boasts one of the most skilled workforces in life sciences manufacturing in the world. CooperVision’s Rolando Torres explains that “when you deal with medical devices and pharma you need a very unique set of skills and technical capabilities. Talking about utilities and facilities, the knowledge of developing the right cleanrooms, with the right extraction, ventilation, utilities, backup systems, and USP purified water systems is not easy to find elsewhere but is easy to find in Puerto Rico. Regarding quality assurance and regulatory compliance, in Puerto Rico you find talent knowledgeable from premarket approval (PMA) submission, design transfer, validation, to quality control.”

Amgen’s Rayne Waller adds that this “strong knowledge base in pharmaceutical operations here in Puerto Rico is continuously augmented by the capable science and engineering talent coming out of the local universities. This capability, along with the local industry’s desire to continue to innovate and compete, makes Puerto Rico an attractive place to do business.”

“The level of excellence in pharmaceutical and biopharmaceutical manufacturing can truly be attributed to the top-notch talent developed at Puerto Rico high-class local universities,” confirms Victor Cruz, VP Manufacturing Puerto Rico and Brazil at Lilly, which manufactures more than ten products in its two Puerto Rican facilities. Cruz adds that “good manufacturing practices are entrenched in Puerto Rico’s DNA, thanks to over 50 years of manufacturing experience on the island. For example, Lilly’s PR1 facility was established 54 years ago, and we have the capabilities to manufacture any oral dosage type of products, including our new metastatic breast cancer treatment.”

Moreover, close collaboration between industry and academia ensures that the knowledge base and skills remain up-to-date and tailored to the needs of the industry. For instance, “Pfizer has graduate programs in cooperation with local universities that bring students to our sites and shows them different aspects of the manufacturing process through a rotational program,” explains Giuseppe Allocca.

These efforts are encouraged by the government. “We are active in the field of talent retention through our workforce development program, based on federal funding of around USD 200 million from the Workforce Innovation and Opportunity Act. Our goal is to use these incentives for on-the-job training and on-the-job learning, while also keeping universities up to date with the requirements of the industry,” says Manuel Laboy.

Rodrick Miller
CEO, & Gail Towers Nolan – Chief Strategy and Research Officer, Invest Puerto Rico
Carlos Ceinos
President, Principia
Ricardo Zayas
Executive Vice President of Operations, Romark, Puerto Rico
At Your Service

Last but not least, pharma and medical device manufacturers have access to a vast ecosystem of experienced suppliers and service providers at their fingertips. As Carlos Ceinos, president of Principia, a leading automation and technical services provider in Puerto Rico, points out, “companies like Principia play an important part of why the biopharmaceutical industry sees Puerto Rico as an attractive investment destination, since we are responsible for building the whole pharma ecosystem supporting large manufacturers. The government acknowledges this contribution through incentives that also benefit local players.”

This sentiment is echoed by pharmaceutical manufacturers themselves. Ricardo Zayas, executive vice president of operations of Romark, posits that “there is incredible talent in Puerto Rico, particularly in engineering, and many suppliers and services at your fingertips,” while Merck’s Wendy Perry adds that “there is a strong, robust ecosystem of suppliers of goods and services around the pharmaceutical industry throughout the island.”

“By building facilities for the world’s leading pharma companies in Puerto Rico and exceeding their expectations, we established a reputation, based on our quality, performance and safety,” says Gustavo Hermida, president of CIC Construction Group, which boasts more than 30 years of experience in building pharmaceutical plants.” Principia’s Ceinos concludes by saying that Puerto Rico is “the right place for companies that want to manufacture products for the world in a sustainable, competitive and quality-oriented manner.”

In a nutshell, as Carlos Ceinos of Principia summarizes, “Puerto Rico has a solid ecosystem with the required talent, knowledge and service providers present on the island to implement successful projects. Our island has a strong track record as a manufacturing hub, which has been recognized globally. We are the right place for companies that want to manufacture products for the world in a sustainable, competitive and quality-oriented manner.”

Tackling the Energy Issue

While Puerto Rico boasts attractive incentives and a solid ecosystem for pharmaceutical manufacturing, the high cost and unreliability of electricity remains a serious issue. Electricity is produced and distributed by the government-owned Puerto Rico Electric Power Authority (PREPA), which has recently negotiated a repayment plan with its creditors after filing for bankruptcy. Currently, the price of electricity is around 23 cents per kilowatt-hour, far above the US average of 12 cents per kilowatt-hour, and will rise under the debt restructuring plan.

However, the government is intent on fixing the situation. “The high costs of energy have been addressed through a new energy policy law, which will expedite the whole transformation of the energy sector on the island. We will move towards renewable energy and transition towards microgrids which tackle the shortcomings of the current system,” explains Manuel Laboy.

In the meantime, manufacturers are taking matters into their own hands by building in-house capabilities for electricity generation. “Nowadays, many pharmaceutical manufacturers are investing in energy projects to improve resiliency by decreasing their dependence on the grid while saving on their electrical bill,” observes Lisette Villavicencio, president of Villavicencio & Associates Construction, a local construction company. “Pharma companies are building their own combined heat and power (CHP) plants or solar farms. The more control they have on their utilities, the more control they have on the manufacturing process and their products,” confirms Francisco Díaz-Massó of BLDM.

Pfizer, for example, installed solar panels at its site in Vega Baja to increase the self-sufficiency of its operations, while in 2018, AstraZeneca subsidiary iPR Pharmaceuticals built the first cogeneration facility powered by liquefied natural gas (LNG). AbbVie recently installed a new cogeneration plant at his Barceloneta site, and CooperVision has launched a project to build a 24 MWh co-generation plant expected to start running in 2021.

Lisette Villavicencio
President, Villavicencio & Associates Construction, Puerto Rico

However, the most ambitious company in this area by far is medtech giant Medtronic, the largest life sciences company in Puerto Rico with four sites employing more than 5,000 people. “We have several projects in place looking for alternative energy sources. For example, we have a solar farm that generates around 40 percent of the energy needs for our Juncos campus. In our Villalba facility, we are partnering with the local government for a project in renewable energy, including solar and hydroelectric power generation. This project will help us build in redundancy and be better prepared as the location is located in-between the mountains,” relates Felix Negrón, VP of Puerto Rico Operations.

Becton Dickinson’s José Sánchez sums up the strengths and areas for improvement of Puerto Rico as a manufacturing hub thusly: “Our regulatory framework, being part of the US, is a clear advantage. Also, we have a stable system with universities and a public sector that is transforming to improve the competitiveness of Puerto Rico through incentive programs, and, of course, the geographical location of the island. We also have great natural resources with quality water. We can compete with any country in the world. The only downside at the moment is the electricity generation, distribution and cost.”

Felix Negrón
VP Puerto Rico Operations, Medtronic
Dante Castillo
Director of Operations, Sartorius Stedim Biotech Puerto Rico
A Stepping Stone to the US Market

In addition to historically present American heavyweights, over the past few years Puerto Rico has seen a new wave of small and mid-sized companies from Latin America, Asia and Europe setting up shop on the island as a first step to conquering the US market. “11 of the top 20 global pharma companies are already here and know the value Puerto Rico has to offer. Puerto Rico has done a good job of attracting large companies, and the small and mid-sized companies from the US, Latin America, Asia and Europe are where the big opportunities lie,” believes Rodrick Miller of Invest Puerto Rico.

Neolpharma, a Mexican generics company, is one of the early examples of this trend. It started operations in Puerto Rico in 2013 by acquiring a plant previously owned by Pfizer with a total investment of USD 75 million. In 2017, it announced a USD 35 million investment to expand manufacturing and packaging of its thyroid medication and the acquisition of laboratory equipment for research and development. As Marco Monrouzeau, GM and CFO of Neolpharma, notes, “while big branded pharma companies may be attracted to go elsewhere due to lower costs, this opens the door for small- and medium-sized companies to come to Puerto Rico for manufacturing and even for research.”

In 2016 PuraCap, a Chinese company specialized in the development and manufacture of prescription and OTC soft gelatin capsules, acquired Puerto-Rico based firm Blu Caribe, “in order to expand its manufacturing expertise beyond soft gelatin capsules to include oral tablet and capsule dosage forms for both the US and global markets,” explains David Fuster, plant manager of PuraCap Caribe. The Chinese newcomer actually expanded the facility with a USD 7.3 million investment in 2018.

Although not technically a newcomer, Sartorius Stedim is significantly expanding its footprint in Puerto Rico with the largest investment on the island post-Maria. The company produces filter membranes and single-use sterile bioprocess bags at its Yauco site. Dante Castillo, director of operations, explains that the expansion “includes the construction of a new complex of 330,000 square feet, at a cost of over USD 100 million, and an investment of around USD 30 million in machinery and equipment. The complex is comprised of three layers of production floors as well as a sizeable warehouse with the capacity for over 5,000 pallets.”

Castillo reveals that “the aim of the expansion is to make this facility the hub of Sartorius Stedim in America. The considerably higher production capacity gives us the necessary scope to supply our US customers with a wider range of products directly from the region and support our ambitious growth plans in America. This expansion is a key element in the group’s global vision to double revenue in the next five years.” Although Sartorius has traditionally been very careful to assure the manufacturing of membranes, the heart of the filtration business, due to the high technical expertise it involves, Sartorius “decided to continue growing membrane production on the island and supply all the filtration demand for the North American market due to the many advantages Puerto Rico offers as a highly conducive business environment, a favorable investment climate, skillful talents source, and a manufacturing location part of the US territory,” he states.

Marco Monrouzeau
General Manager and CFO, Neolpharma Puerto Rico
David Fuster
Plant Manager, PuraCap Caribe
Leading the Way in Manufacturing Innovation

Puerto Rico clearly stands out for the sheer number of companies manufacturing on the island and the fact that a significant share of several corporate behemoths’ production originates there. However, the territory is increasingly making a name for itself as a frontrunner in manufacturing innovation, with cutting-edge techniques and systems being deployed across the manufacturing process.

As an example, the PRMA’s Carlos Rodríguez highlights the fact that “the world’s first FDA product approval on a full continuous manufacturing process was granted here in Puerto Rico to Janssen. This shows that Puerto Rico is not only an expert in launching products but also has  significant expertise in technological innovation and research.” Moreover, the International Society for Pharmaceutical Engineering (ISPE) announced Lilly as the overall winner of the 2017 Facility of the Year Awards for the continuous direct compression manufacturing kits established at its PR1 facility in Puerto Rico. Giuseppe Allocca weighs in, noting that Pfizer Puerto Rico is “one of the leaders within our network when it comes to implementing new technologies in our manufacturing process.”

Victor Cruz of Lilly del Caribe is keen to keep his affiliate at the forefront of new cost- and time-saving technological trends. “We already see an increasing movement towards a paperless environment, with information being recorded digitally,” he outlines. “This enables our operators to focus on their core task of manufacturing medicine while the system gathers critical information and calculations for the batch records the operator has to do manually today. This transformation is a journey and we are currently in the process of installing a system, where all the information is centralized. We aim to have the approval for batches to be happening automatically, as the system has enough checks and balances to guarantee that the batch information is accurate. For an insulin-manufacturing facility like Lilly’s PR5, this is essential.”

Allocca points out that Pfizer is also firmly ensconced on the digital bandwagon. “We are looking to better implement the use of Big Data here at Pfizer in Puerto Rico,” he states. “The opportunities that come along with collecting and analyzing information in real-time are nearly endless and will give us a better process understanding and process control, which will allow us to continue to provide the best quality to our patients.”

Amgen’s Rayne Waller agrees. “The explosion in digital technology and the ability to adapt those technologies to our industry is the single most important trend that will impact us in the next five to ten years,” he proclaims. However, he warns against too enthusiastic an embrace of this new tech at the expense of existing facilities. “While many new manufacturing technologies bring increased yield and efficiency, it is not always necessary to build a new facility to implement these technologies, as our facilities can be retrofitted to provide the same increase in yield and output.” Waller concludes, “Key to implementing these new technologies is a strong process development (PD) team; we are very fortunate to have a world-class PD team and lab here in Juncos that allows us to continuously advance our process capabilities, improve quality, and increase throughput.”

In conclusion, as Carlos Ceinos of Principia predicts, “the industry will move fast towards smart factories and industrial internet of things.”

victor-cruz
Victor Cruz
VP Manufacturing Puerto Rico and Brazil, Lilly del Caribe
Marc Ayers
CEO, Romark Puerto Rico
Jorge Tirado
Managing Partner, CMA, Puerto Rico
Elizabeth Plaza
Founder and chairwoman, Pharma-Bio Serv.
Francisco Díaz-Massó
President, BLDM, Puerto Rico

Romark: The New Manufacturing Wave’s Poster Child

Headquartered in Tampa, Florida, Romark focuses on developing innovative treatments for infectious diseases and the latest newcomer to Puerto Rico. CEO Marc Ayers recounts how he came to the decision to establish the company’s first manufacturing plant of finished products on the US territory.

“We were at a point in the development of our company where we needed to be able to control the pharmaceutical manufacturing process,” he states. “We were looking for opportunities to be able to manufacture large quantities of products, and ideally to be able to do it ourselves. A friend explained the incredible economic development package being offered by PRIDCO to a Spanish company that was considering establishing operations on the island.

“However, what ultimately made the difference was the caliber of the talent and the quality of the infrastructure available here in pharmaceutical manufacturing,” continues Ayers. “Florida cannot yet compare to Boston, New Jersey, and the San Francisco Bay Area in pharmaceutical manufacturing and, as a result, it is difficult to find and attract talent. When we came to Puerto Rico, we were able to meet industry leaders and veterans interested in building something special together.”

“Establishing our manufacturing facility here helps us ensure business continuity, mitigate risks, and reduce costs. In addition to our manufacturing facility, we also acquired an analytical laboratory in Dorado. Together with our API facility in Belgium, we have the ability as a vertically integrated pharmaceutical company to develop new products and bring them to market,” he proclaims.

For the project, four local firms, each one and expert in its area, teamed up to provide a turnkey solution: Design (CMA), Engineering and Mechanical (BLDM), General Contractor (CIC Construction Group) and Project Management, Commissioning and Validation (Pharma-Bio Serv). Together, they designed, built and validated the new facility with Quality by Design as the end goal. “As the project moved along, the required documentation was developed to meet the FDA’s requirements. By integrating the validation process since day one, we were able to reduce time-to-market by about a year,” emphasizes Francisco Díaz-Massó of BLDM. “This project was centered around listening to the needs of the client. Based on that, we were able to develop the best strategy to reach the objectives in a timely manner,” adds Jorge Tirado, managing partner of CMA. “This is an unparalleled innovative approach to Technology Transfer, applying local knowledge with an integrated team of specialized firms to increase efficiencies and Quality,” stresses Elizabeth Plaza, founder & chairwoman of Pharma-Bio Serv.

Ayers invites other companies to follow Romark’s lead and establish manufacturing facilities on Puerto Rico. “Puerto Rico is an island of opportunity for companies seeking to mature to the product commercialization stage because talent is readily available,” he states. “People are highly educated, have unmatched experience in the industry and there is a quality-driven culture.” Elizabeth Plaza agrees: “Big pharma companies are consolidating and finding themselves with excess capacity. Although they still play a very important role in the Puerto Rican manufacturing landscape, we see great opportunities for small and medium-sized companies to come here and take advantage of the experience that multinationals have built.”

Lucy Crespo
CEO, Puerto Rico Science, Technology & Research Trust (PRSTRT)
Beyond Manufacturing: Becoming A Start-Up Hub

Although known primarily as a manufacturing hub, Puerto Rico is increasingly attempting to build a more holistic domestic life sciences ecosystem. Through state investments in research infrastructure, incentives and grants, the island hopes to increase the amount and quality of research being conducted on the island and foster the development of local biopharma start-ups able to commercialize it. PRMA’s Carlos Rodríguez explains that, “We have started to create an ecosystem for research, particularly driven forward by the Puerto Rico Science, Technology & Research Trust (PRSTRT) and its CEO Lucy Crespo.”

One of the PRSTRT’s major infrastructure projects is the Science City complex, which hosts state-of-the-art facilities for researchers, academics, investors and entrepreneurs and is located in a dense concentration of hospitals and universities. “Puerto Rico has the ambition to become a medical and life sciences hub in the region and has made significant investments towards this goal, such as the Comprehensive Cancer Center of the University of Puerto Rico (UPR) which opened its doors last year,” points out François Gilbert, general manager of Eli Lilly Puerto Rico.

While the Puerto Rican government recently enabled small local start-ups to make use of the same R&D tax incentives granted to larger US corporations, PRSTRT also provides direct research grants for projects at different stages of maturity through a multifold research grants program. “Puerto Rico’s first biotech, MBQ Pharma, is the poster child for the Advanced Research Grants Program, the goal of which is to provide proof-of-concept funding to advance locally developed science and technology projects to a point where they will be able to be further develop through alternate sources of funding,” rejoices Crespo.

MBQ’s CEO Frederico Goodsaid stresses that “for the first time in the history of the island, we have the opportunity to take intellectual property from a local university and use it for potential commercialization.” Goodsaid is keen to foreground the important role that PRSTRT has played in the company’s success. “The PRSTRT has created the structures required for the development of intellectual property and the growth of start-ups like ours,” he claims. “The progress we have achieved is remarkable, as the company only started to look for external investors in 2018 and now is almost ready to start phase one studies, due to very encouraging preclinical results,” enthuses Crespo.

Other research-based biopharma start-ups are also choosing to base themselves in Puerto Rico. David Foster, president of Isla Pharmaceuticals, which is developing a treatment for mosquito-borne illnesses, currently in clinical Phase II, states that “after finding the right technology, we decided that the right place to establish the company in the US would be here in Puerto Rico, due to the relevance of our program and the awareness for the diseases here.”

François Gilbert
General Manager, Eli Lilly Puerto Rico

For the first time in the history of the island, we have the opportunity to take intellectual property from a local university and use it for potential commercialization

Frederico Goodsaid
Federico Goodsaid
CEO, MBQ Pharma, Puerto Rico
Amarilys Silva-Boschetti
Executive Director & Director of Operations, Puerto Rico Consortium for Clinical Investigation (PRCCI)
Leobardo Hidalgo
General Manager, BMS Puerto Rico
A Growing Footprint in Clinical Trials

As well as attracting start-up firms, Puerto Rico is also attempting to position itself as a clinical research hub for multinational companies. “We have a long history of successfully implementing clinical research [in Puerto Rico] as many of our investigators have been trained in the US and have a wealth of clinical and research experience,” stresses Dr Amarilys Silva-Boschetti, executive director of the Puerto Rico Consortium for Clinical Investigation (PRCCI). “Puerto Rico has four accredited schools of medicine and is a US territory; hence processes and operations fall under FDA regulations,” she adds.

PRCCI’s director of operations and business development, Dr Miguel Vazquez-Padua continues: “There is a high population density on the island so access to clinical trial sites for patients is rather easy, while the special relationship that exists between investigators and patients in Puerto Rico probably explains our excellent recruitment and retention rates.” Silva-Boschetti concludes that “speed of execution is a crucial advantage of clinical trials in Puerto Rico and we have examples of pharmaceutical companies approaching our investigators to learn how we manage recruitment here.”

Big Pharma companies are increasingly cognizant of Puerto Rico’s clinical research attributes. “We are currently conducting 14 clinical trials in 45 sites around the island, in multiple therapeutic areas, including cardiology, HIV, women’s health, vaccines and oncology,” explains Merck’s Wendy Perry. “In this endeavor, we work closely with the different organizations driving clinical research on the island such as the PRSTRT, the PRCCI and the Comprehensive Cancer Center and individual investigators committed to strengthening the research ecosystem in PR,” she continues.

“The quality of the medical infrastructure and the presence of world-class experts create strong incentives to invest in clinical research. As a result, we have increased our clinical operations across all our therapeutic areas, Diabetes, Immunology, Oncology, Pain, and Neurodegenerative diseases, with 45 trials, 115 investigational sites, and 350 patients enrolled as of August 2019,” adds Eli Lilly’s Gilbert.

Another factor in Puerto Rico’s favor as a clinical trials destination is its demographics. Although the Hispanic population of the US is increasing in size, it remains underrepresented in clinical trials. As Guillermo Villarmarzo of HRP Labs, a local diagnostics lab, points out, “Puerto Rico is the perfect testbed for any studies aimed at researching the Hispanic population as the island has a huge research capacity and a well-trained medical community. Moreover, Puerto Rico offers many incentives that would allow us to make cost-effective diagnostics for industries all around the world.”

Multinational pharma companies too recognize the advantages of Puerto Rico as a clinical trials destination. “We have 19 ongoing clinical trials in seven sites on the island focused on hematology, oncology, anti-coagulation and psoriasis. We are convinced this is an area where we can make a significant difference from Puerto Rico, as the Hispanic population has been historically underrepresented in clinical trials, which not only limits the generalizability of results, but also the ability of Hispanic patients to access potentially life-saving innovations in development. Our aim is to continue to grow this presence,” says Leobardo Hidalgo, GM of BMS Puerto Rico.

“We recognize the need to increase the Latino population’s participation in clinical trials that could result in life-saving treatments. By maintaining a strong clinical footprint on the island, we ensure that the Latino population benefits from advances in public health and medicine, including personalized medicine,” agrees Perry of Merck.

Miguel Vazquez-Padua
Business Development, Puerto Rico Consortium for Clinical Investigation (PRCCI)
Guillermo Villarmarzo
In-House Legal Counselor, HRP Labs, Puerto Rico
An Attractive Domestic Market

In Puerto Rico, over 90 percent of people are medically insured, with Medicaid [a federal health insurance program for people with limited income and resources] covering about 45 percent of the island’s residents, the largest proportion anywhere in the US.

Medicare Advantage [a type of Medicare health plan, a federal health insurance program primarily for people over 65] is also better utilized in Puerto Rico than in the US as a whole with eight out of ten Medicare-eligible adults in Puerto Rico enrolled in the program. In addition, about one million people in Puerto Rico subscribe to a commercial insurance plan. Moreover, the quality of care in Puerto Rico rivals that on the US mainland thanks to highly knowledgeable, Board Certified and bilingual medical professionals as well as modern healthcare facilities that must comply with the same standards as in the United States and are evaluated by the Joint Commission.

These elements have contributed to making Puerto Rico an attractive pharmaceutical market, with many pharmaceutical companies choosing to set up a direct commercial presence on the island and manage their Caribbean operations from there. “Puerto Rico’s population is larger than at least ten states on the US mainland. Moreover, we have a developed and mature healthcare system, with commercial payers, Medicaid and Medicare, which makes it a key market for biopharma companies,” highlights Jose Viera-Colon, region director for Allergan, which has been managing its Caribbean operations from Puerto Rico since 1965.

“The market has grown at a double-digit pace in both our therapeutic and cosmetic franchises thanks to innovation and access in formularies, making our products affordable to patients, and Puerto Rico accounts for 80 percent of the revenue in the region,” adds Viera-Colon.

Jose Viera-Colon
Region Director Caribbean, Allergan
Iris Vincent
President, Prime Air Corp, Puerto Rico
Sascha Herzing
President & CEO, ETH Cargo, Puerto Rico

A Global Pharma Logistics Hub Too?

With both North and South America in close proximity, a central location in the Caribbean Sea, and a position as one of the largest pharma manufacturing hubs in the world, Puerto Rico is rightly being seen as a regional hub for healthcare logistics.

But some stakeholders believe it could be even more. “We are very active in the ‘Pharma Hub’ initiative, which is essentially a cargo transfer hub for air freight,” explains Iris Vincent, president of Prime Air Corp. “We are aiming to get this initiative approved by the US Department of Transportation, which would allow us to have cargo transfers done at the airports in Aguadilla and San Juan. This would create many new direct routes in and out of Puerto Rico and create spectacular logistics scenarios for manufacturers on the island.”

Vincent continues, “As an example, today there are non-stop flights from Portugal to Brazil, which have to carry a lot of fuel, restricting the amount of cargo they can carry. If the plane stopped in Puerto Rico, it would not have to carry as much fuel and could also drop off and pick up freight, which we could then ship to the US or the Caribbean. Additionally, South American jet fuel is not as clean as the jet fuel here in Puerto Rico, so by refilling here, it would work in favor of the airlines as it would lower their maintenance costs. More incentives, such as a free trade zone for fuel, which would further decrease the cost of fuel for the airlines, would help to create a huge air freight hub, positively impacting the island’s economy. The pharma industry is very involved in this initiative and both the PRMA and the PIA have endorsed it.”

Sascha Herzig, CEO of ETH Cargo, agrees: “We are a central node between Europe and the Americas, so it makes sense to be an air freight hub with international traffic loading and offloading here. Although airline options have grown in the past ten years, there are still not where they should be. If there were more options to transport products from ‘A’ to ‘B’, it would benefit the supply chain providers, the pharma manufacturers, and the airlines themselves. ‘B’ could be China, Japan, or India. Moreover, cargo from Europe en route to Chile, Peru, Brazil or Mexico should stop here, rather than going to Miami.”

Herzig concludes, “Right now, most cargo that leaves Puerto Rico goes first to Miami. If Puerto Rico had more options, the island would be more attractive and could sell a whole package to the life science industry: knowledge and skills, tax incentives and access to international air and ocean transportation.”

Healthcare only works when you do it preventively

Jim O’Drobinak
Healthcare: Under Pressure

However, the Puerto Rican healthcare system is facing tremendous challenges: chronic underfunding, an ageing population with rising healthcare needs, and migration of healthcare professionals.

Regarding funding, Puerto Rico only receives 60 cents on the dollar in Medicare Advantage and 40 cents in Medicaid compared to the US average. While Medicare Advantage is entirely federally funded, Medicaid has a significant local budget component and is, as a result, the most problematic. The situation is further exacerbated by the issue of Medicaid fraud. Solving these issues has become a key issue for Secretary of Health Dr Rafael Rodriguez. “My main priority was to find funding for Medicaid and instill credibility at the Senate. An anti-corruption mechanism supposed to be implemented in 2009 within the Medicaid program actually did not see the light of day until the Promesa Bill passed in 2016, which created the Financial Oversight and Management Board. The lack of anti-fraud mechanisms severely damaged our credibility and our ability to raise funds for the continuation of the program, which is vital for Puerto Rico. Hence the priority was to garner support from senators in Washington DC under the condition that we implement two programs: the Medicaid Management Information System (MMIS), which is now finished, and the Medicaid Fraud Control Unit (MFCU), which started already and will end in June of 2020,” documents Secretary Rodriguez.

“After Hurricane Maria, we received USD 4.8 billion in funding which provides 100 percent coverage for the Medicare program. Within that sum, USD 1.2 billion was under the care of the Secretary of Health of the United States, to be granted only if we complied with the measures implemented. The funding was received in full, and currently, Puerto Rico is ranked sixth in the nation in terms of compliance,” he explains.

The industry is trying to do its part to increase access to healthcare. As Wendy Perry of PIA notes, “while insurance coverage is not an issue in Puerto Rico, the problem which needs to be addressed is patients’ out-of-pocket spending. Depending on the patient’s plan, an out-of-pocket share will be set, either through a co-insurance or co-payment model, which is based on the wholesale acquisition cost (WAC) of the drug. Our aim is to pass on our discounts to the patients. This can only be achieved when manufacturing companies, distributors, pharmacists, health insurance plans and pharmacy benefit managers (PBMs) work together. At the same time, we are also encouraging the government to facilitate the discussions with insurance companies and PBMs, to ensure patients receive the benefit of discounts and rebates provided throughout the supply chain.”

While the overall population of Puerto Rico has decreased by 20 percent since 2009 to 3.1 million today, Hurricane Maria accelerated the emigration of young professionals. “The elderly and poor represent over 60 percent of Puerto Rico’s population and are people with more difficult and costly medical needs,” warns Jim O’Drobinak, CEO of MCS, one the largest providers of Medicare Advantage insurance in Puerto Rico. “They are not balanced out by young people who are healthy and productive. Furthermore, only 21,000 babies were born in Puerto Rico in 2018. This population mix puts tremendous pressure on the healthcare system,” he adds.

Rafael Rodriguez
Secretary of Health of Puerto Rico
Jim O’Drobinak
CEO, MCS, Puerto Rico

This phenomenon is even more keenly felt in the healthcare field, with the emigration of young medical professionals. To tackle the issue, the government has introduced incentives to retain physicians. “The Incentive Act covers more than 3,000 physicians which has helped to curb the migration by four percent. Hopefully, in time, we can broaden its scope so that it incorporates nurses, paramedics, anesthetists, and general practitioners,” declares Secretary Rodriguez.

The rapidly ageing population is leading to a rise in chronic diseases and soaring healthcare costs. To tackle the situation, health authorities and insurers are focusing on prevention and the social determinants of health. As Secretary Rodriguez explains, “the grants that Puerto Rico receives are going to prevention as this is the strategy that we think is the best way forward. If actions are made today, it will have a positive impact on the quality of life of the people in the next five to ten years.”

Rodriguez does, however, caution that “this alone is not enough. We need to create a better environment to improve the health of the people. Social determinants incorporate broader social markers like justice, civil rights, food, housing, and education, which all need to be improved to holistically better the health of the population.”

Jim O’Drobinak of MCS agrees with this strategy. “Healthcare only works when you do it preventively,” he states. “The good thing about Medicare Advantage is the Stars program, which does not exist in Medicaid or the commercial lines of healthcare, and incorporates many preventive components, including adherence to regular screenings and medical check-ups and tests to prevent any health complications or detect changes in members’ current health conditions early. Beyond regular screenings and medical check-ups, prevention also means living healthy lifestyles. You want people to be socially active, exercise, sleep well, and eat well. Through our Ruta al Bienestar program, we are organizing activities for older people to go out, be active and get educated, by partnering up with iconic local organizations like the YMCA, Salvation Army and other reputable grassroots organizations. We have embraced the social components of health.”

On the Up

Overall, the future looks bright for the healthcare and life sciences industry in Puerto Rico, with lessons learned and capacities improved post-Maria, a strong and increasingly innovative manufacturing base to build on, greater research capabilities, and a promising domestic market.

Wendy Perry thinks that the “industry will continue to grow and will remain a strong contributor to the Puerto Rican economy. We will continue to serve as a manufacturing hub, building the talent and capabilities that are needed to keep Puerto Rico on the forefront of biopharmaceutical manufacturing around the world. I see Puerto Rico attracting new investment, as we will become increasingly competitive.”

Perry does caution that “we need to acknowledge that more countries are venturing into the life sciences sector, so remaining competitive to retain current investments will also be a major part of Puerto Rico’s strategy.”

“Today is the time for our industry to thrive and our people and local stakeholders are committed to growing stronger and better,” proclaims INDUNIV’s Ivan Lugo. “We are dedicated to continuing collaboration with all stakeholders and developing our technical, managerial and leadership talent to ensure that Puerto Rico continues to be one the largest biopharmaceutical hubs in the world and that biopharma remains a key element of Puerto Rico’s economic development.”

Finally, Rodrick Miller of Invest Puerto Rico envisions Puerto Rico as “the hub of innovation and opportunity for the Americas.” In his opinion, “part of what makes Puerto Rico attractive as an innovation hub is that it is an island with close-knit communities. Everybody is connected. It is especially the case in the pharma industry since Puerto Rico has one of the world’s highest density rates of pharmaceutical manufacturers per square mile. Emerging companies can get access to industry leaders and decision-makers much easier than they can in other US hubs such as New York, Boston, Silicon Valley or San Diego.”

Miller continues, “Moreover, we are at a cost point that is a lot less than other markets, both from a business and a place of living perspective. Another reason is that geographically, we are uniquely positioned with easy access to North America, South America, Europe, and Africa. And we have a largely bilingual population. Whether someone is a talented person coming from Europe, the US or Latin America, Puerto Rico is an opportunity for them. Our next phase of growth is going to hinge upon a lot of young, innovative, entrepreneurial people coming here and seeing that Puerto Rico is a place where they can build a business and a life.”

ivan-lugo
Ivan Lugo
Executive Director, INDUNIV, Puerto Rico

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2020. Healthcare & Life Sciences Review was produced by Pharmaboardroom.

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