A Response From India

By Louis Garguilo, Chief Editor, Outsourced Pharma

A recent article I wrote for Outsourced Pharma on challenges for the Indian outsourcing industry struck a chord with some readers and elicited some high notes. The “music” came from readers in India as well as other countries, and thankfully was upbeat and progressive for the most part.

Some of the responses reminded this columnist of parts of a book titled “Rivals,” [1] which was published in 2008 by Bill Emmott. Within the book is a discourse on the Indian economy and its relationship (rivalry) with China. More about the book in a moment.

To sum up the sentiment from readers in India regarding the current topic and article, this one sentence speaks volumes: “India’s low cost is becoming a problem for the whole country.”

Think about that: A competitive advantage stunting the progress of a nation? Actually, this is not new to the history of commerce. Countries gain entrée to (or create new services for) established industries elsewhere by way of lower raw material costs, abundant and less expensive manpower, and reduced production costs. This subsequently brings more scrutiny from outside (sponsors and regulatory bodies) as the country grows in global importance. At the same time scrutiny grows from the inside as more firms participate in the domestic industry, and as new levels of prosperity and a new way of approaching business…if not life in general…becomes a part of the national dialogue.

Several examples can illustrate this point. In our industry we have already seen readjustments from the other big nation player, China, as a result of this cycle. An example from outside our industry, although perhaps not fully analogous but keeping us in the East, are Japan and Korea. Years ago, for a variety of internal and external reasons, the Japanese moved away from focusing production on the least expensive cars. (Have you seen the price of a Lexus recently?) Korea is doing the same thing in that industry nowadays. (Take a look at the quality and price tag on Hyndai’s Equus.)

On second thought, perhaps this car industry analogy, with two countries located in the East and taking aim at providing product and services to Western-based affluent country markets, is an interesting parallel. How do suppliers elevate the level of their products? Hyundai was able to up-sell and go up-market in a relatively short period of time. How did they do it? Quality upgrades for one thing. How can this market progression occur for the Indian CRO/CMO industries? Do pharma sponsors want to see this – after all, lower cost environments are what they are looking for, right?

A Matter of Pride

Pride in manufacturing and the desire to gain a reputation for reliable goods and customer service can grow in individuals and a country collectively. In the pharmaceutical industry, sponsors should by necessity stress and build quality into product production, in-process analytical testing, and systems integration that inform the workmanship of individual engineers, analysts and scientists. This inside-outside force for the positive is at work in India now, and is overdue. Although still unsteady at times, it is taking solid strides forward. The pressure, direction and momentum cannot let up.

Our initial column suggested that in fact the pharmaceutical sponsors – including generics-focused organizations – can lend a hand to India in overcoming some of its challenges. So might the increasing Western/Japanese investors in the region. For example, more sustained product and plant optimization and training could better ensure quality is built into and comes out of the manufacturing process. Pride in plant, product and one’s own professionalism go a long way. To date, lower-cost labor has been a key utilization and selling point for pharma to outsource to India (and China, and Eastern Europe). To move to the next step in provider reliability, partnered approaches to management and training should continue to be increased. If the strategy is to put more lower-cost manpower on manufacturing challenges, improvement to quality systems will remain stunted.

The Role of FDA and Other Agencies

The stricter line and increased oversight by the FDA is a unanimous positive development in the eyes of our responders from India. Yet here the national pride discussed above says, “What the FDA is doing is correct (we might add belated), but this oversight and correction should have been instituted by our own Indian regulators. It is regrettable agencies from the outside are the necessary catalyst to quality and modernization more than our own (government) regulators.”

And perhaps not to be unexpected, some of our Indian-based responders wondered why all the attention was on India when the competition in China might deserve at least an equal look regarding some of the challenges of the day in pharma outsourcing. As is well known and written in this publication before, these two regions are rivals that provide pharma with similar and at the same time differentiated opportunities in outsourcing.

A related subject also bringing China into the discussion was raised in response to our article. Intellectual Property (IP) rights, for example Novartis’ challenge with upholding Glivac, may also play into how India continues to develop in the CRO/CMO/CRAMS segment of the pharmaceutical industry. No matter which way you stand on this matter, the point here is that India, not China, is the area receiving the spotlight on IP in 2014.

Rivals

These comparisons to China spurred a return to the book “Rivals” by Bill Emmott. He points out that China historically has had manufacturing as the largest percentage contributor to the national economy, while the opposite is true of India, where the services industry had traditionally led the economy. It was not until recently that manufacturing has surpassed services output in this 67-year old country. (And by the way, the particular service sector that India is famous for became known collectively as “the outsourcing industry;” although it was focused on information technology (IT), the global influence on all kinds of outsourcing should not be underestimated.)

However, here is the most salient point in “Rivals” vis-à-vis our current discussion on regional competition: “It is more relevant and realistic to look at India on its own terms.” Pharmaceutical sponsors and the Indian CRO/CMO/CRAM industries themselves should heed this point. The constant internal and external comparisons of China and India end up hampering the latter. The focus needs to be specific to India as a country and its challenges, and so too the solutions need to be specific. These countries are neither on some common pathway nor moving at a uniform pace.

In the end, provider rivalry (i.e., competition) is good for global pharmaceutical sponsors; in a perfect world it keeps costs down, and drives productivity and innovation. And India does well to continue to catch up quality and management systems to steadier standards of those in the West, with welcome help from around the globe. But most times the best competition comes from within, the self-competition of individuals and a nation wanting to put the focus on quality. Finally here, other recent news suggests that manufacturers around the world could use more of the same as well.

As always, thank you to those who provided comments and opinions on this discussion, particularly those of you involved in the industry in India. I look forward to continuing to hear from you.