(Adam Gault/Getty Images)
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With low-cost production and a pool of scientific talent, Asia — specifically China and India — has risen in pharmaceutical
outsourcing and ingredient supply during the past several years. However, highprofile events concerning product quality and
manufacturing practices for select suppliers, as well as recent political turmoil in India, have placed increased attention
on the region. Key events were the importation of contaminated heparin supplied from a Chinese facility and incidents of melamine
in food and pet food products, and diethylene glycol in toothpaste from China.1–4 In September 2008, FDA issued warning letters and an import alert for products made at two facilities of Ranbaxy Laboratories
(India) for deviations in cGMP.5 Recent terrorist attacks in Mumbai, India's capital, have also raised security concerns.
Assessing Asia's role
Before considering these events, it is important to evaluate the fundamentals of pharmaceutical outsourcing to Asia. "Cost
has always been a driver of outsourcing decisions," says Mike Keech, Director of PricewaterhouseCoopers' (PwC) advisory services
group in the pharmaceutical and lifesciences sector. "But in today's market, cost is no longer the primary driver — it's just
an additional evaluation point. You have to balance cost with risk and market opportunity. Companies today, for example, are
balancing their outsourcing approach by trying to look at technology and intellectual property protection along with development
and manufacturing capacity capabilities."
To more fully understand these issues, PwC assessed 13 Asian countries based on cost, risk and market opportunity, and released
the results in October 2008. China and India ranked as the two most desirable outsourcing candidates among Big Pharma.6 Keech points out, however, that the buyer has become more sophisticated. How much longer China and India hold their top
positions remains to be seen. 
On the go...
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Other Asian countries are gaining a foothold as viable pharmaceutical outsourcing contenders. Korea and Taiwan are just a
few steps behind China and India, says Keech, and will soon be followed by Indonesia and Malaysia. Much farther down the list
of ideal outsourcing candidates is Thailand, which "looks interesting from a labour perspective and because of their world
class set of intellectual property laws," says Keech, but whose "interpretation and enforcement are far from ideal."
Rather than looking at cost per unit as a measure for a particular product, companies are now evaluating inbound transportation,
customclearance issues and additional testing requirements, explains Keech. As they start to look at this "total land-net
cost," he says, "companies may choose an outsourcing partner based on the product's stage in the life cycle and the company's
overall goals. Is the company simply striving to reduce costs at the end of a product's patent life, for example, or is it
looking for more flexible and modern manufacturing, and perhaps unique competencies "
Even though Western companies can still achieve 50–60% savings in manufacturing by outsourcing to Asia, the region "is not
as attractive as it used to be," says Keech. "One PwC client, for instance, used to go to Asia alone because it was cost-driven,
but given safety issues of late, they're looking at all different outsourcing candidates — particularly in Eastern Europe
— regardless of geography," says Keech.
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