Pharmaceutical Online – Big pharmaceutical companies now rank China as the best location for outsourcing in Asia, followed by India, Korea and Taiwan, respectively, according to a newly released PricewaterhouseCoopers index. The index evaluates Asian countries according to cost, risk and market opportunity for the pharmaceutical industry.

The index was published in a new PricewaterhouseCoopers report entitled “The Changing Dynamics of Pharma Outsourcing in Asia: Are You Readjusting Your Sights?” which found that Asia is emerging not just as a drug manufacturing powerhouse but a rival to the United States as a leading source of drug discovery and high-end innovation.

Both clinical trial activity and investments by pharmaceutical companies to expand presence in Asia are accelerating, and the report suggests Asia outsourcing is moving up the value chain, as low-cost production is eclipsed by a broad range of factors, including market potential and R&D capacity as the drivers of growth.

Outsourcing index – Ranking of Asian territories across all factors

(Scores are ‘normalised’ with the best ranking territory = 100. Thus, higher scores indicate lower costs, lower risks and greater market opportunity.)

“Within five to ten years, we will be moving from ‘made in China’ to ‘discovered in China’” said one pharmaceutical industry executive interviewed for the report.

“Pharmaceutical companies need to make sure they are refining their strategies to make the most of the opportunities presented in Asian countries,” said Michael Keech, director, PricewaterhouseCoopers global pharmaceutical and life sciences industry group.

“China and India will continue to spearhead growth in the Asian pharmaceutical sector, but, alongside those countries, Singapore will maintain its position as a center for research and innovation. While the trio of India, China and Singapore are proving to be the ‘hotspots’ of the Asian pharmaceutical sector, other countries, notably Korea and Taiwan, are also going to be increasingly significant. The companies that will be most successful at making pharma outsourcing and location decisions will be those that are most adept at managing and mixing a range of contractual relationships and partnerships across a number of different locations.”

According to the report, pharmaceutical companies in the United States and other developed countries are facing an array of challenges that are constraining revenue growth, thus driving their need to look for new ways to boost drug discovery potential, reduce time to market, and minimize costs. For example, only nine of the 18 new treatments launched in the United States in 2006 came from the laboratories of the 13 companies that comprise the big pharma universe.

The report highlights three significant developments that are shaping Asian pharmaceutical outsourcing:

• The trend towards high-end innovation — intellectual property (IP) concerns have previously inhibited this trend in pharma but, increasingly, such concerns are being overcome and major moves are being made by big pharmaceutical companies to increase their drug discovery investment in Asia.

• Rapid expansion of clinical trials in Asia — the volume of clinical trials being conducted in countries outside of Europe, North America and Japan has been growing rapidly in recent years with Asian countries leading much of the growth. China has overtaken India as one of the fastest-growing locations. By June 2008, China had 428 clinical trials registered on the website Clinicaltrials.gov as under way and a cumulative total of 870 completed or ongoing trials compared with 737 in India. Cost has been a critical factor in this expansion. For example, clinical trials are estimated to be up to 50 percent cheaper in India compared to the U.S.
• A scaling up of pharma manufacturing in Asia — with an increased commitment to international standards, Asian contract manufacturing organizations (CMOs) are securing more outsourcing orders from big pharmaceutical companies. In India, for example, there are more than 100 FDA-approved pharmaceutical facilities –the largest number in any country outside the U.S.

The report shows that China and India, followed by Korea and Taiwan, are now delivering a number of benefits for the pharmaceutical industry including a pool of educated and qualified scientists, intellectual property (IP) law reform and market growth. These trends are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement. Significant risks remain, but the report observes a growing convergence with international regulatory standards.

However, the report’s authors point out that such convergence is also being felt in labor markets, with the result that traditionally wide wage differentials, compared to developed country locations, are narrowing. Such convergence will continue to shrink the cost gap, prompted in part by the need for Asian countries to compete for ‘high-end’ skills in an international labor market. India, for example, is already finding it difficult to recruit in certain areas such as clinical research personnel.