At Global Forum, Pharma Outsourcing Stakeholders Reveal Some Truths

By Louis Garguilo, Chief Editor, Outsourced Pharma

Dialectics: Discourse among those holding various points of view about a subject, who guided by reasoned arguments wish to establish the truth … or at least understand each other.

The aim was for rigorous polemics and standpoints on which to base sounder judgments about our industry. The stage was the Outsourced Pharma West (OPW) conference and exhibition, set in the well-adorned Hyatt Regency in San Francisco, November 10-11.

Some of the discussion swirled around such topics as big pharma’s full-scale incursion into China, perhaps for some unexpected reasons, and the contemplation of wringing “some risk” out of an India dependency.

Assembled were all forms of pharma and bio, service providers, and consultants from around the world. They came to have at it, as they say, but of course in a highly civilized manner (see dialectics above). The result was the initiation of an overdue, candid public (and much private) discussion of global pharma outsourcing industry topics.

My colleagues and I will cover more on the panel discussions in future articles. Here, we’ll handle the two international topics mentioned above, both gleaned from networking conversations at the conference.

Full-Scale In China, But The Reasoning Is Important

The world knows big pharma is entering China to win its share of what is believed will become the largest healthcare and drug market. Some of the reasons driving that strategy for entrée might not be so apparent.

While the emergence of Chinese service providers has greatly influenced pharmaceutical outsourcing, serving customers and partners globally, conversely, Chinese pharmaceutical companies have not made a discernable impact or played a role in the overall drug industry. Because of this and reasons we will get to momentarily, some big pharma companies feel forced to set up operations mostly on their own.

This differs, for example, from the concerted entry of pharma into the Japan market some 15 or more years ago. There, well-established, high-quality pharmaceutical companies could play the role of partner and guide to a different and difficult market. Interestingly, market differences in Japan are akin to those faced in China, from the sense of protective government regulatory and drug approval policy, cultural nuance and language barriers.

Even if there are at least some choices of Chinese pharma companies to work with, according to some sources, some in pharma might not yet feel confident utilizing Chinese-based partners. Is all this holding back investment, ambition and/or progress? Perhaps in some cases. But in others, it has actually led to pharma’s making full-scale moves into China. In effect, pharma is chasing the market even more aggressively, but based on some negative propositions.

The obvious one is the government dictate that new drugs be developed and manufactured domestically to get approval. The ones perhaps less obvious and discussed here are a lack of partners able to manage at a big-pharma level, and further, a concern for big-pharma quality standards and IP throughout the supply chain. One pharma executive I spoke with at OPW said, “After all, although the goal is to sell pharmaceutics in China, those medicines are still branded with our logo, and must meet every requirement from discovery to packaging and patient safety and protection that is met at every other global location and healthcare market for our company.”

For any industry, China presents a huge market that usually requires foreign companies enter a complicated web of connections and partners to gain traction and have any hope of success. But for some at big pharma, paraphrasing an old saying, they feel if you want something done right, do it yourself.

India Has The Numbers, But Still There is Quality To Consider

India, of whom I have written quite a bit about, and despite the awe-inspiring statistics it uses to reinforce its important position in the industry, needs to face up to some quality challenges. It might be the case of the few tainting the many, but OPW conversation indicates the more some sponsors are learning about the extent of problems, the more concern there is. The sentiment is exact to that directly above for China. Sponsors are saying, “We can’t have two standards, even within India. The drugs have our brands on them and patient safety is our responsibility throughout the supply chain.”

The statistics, then, bring on an added global importance. Here are two I’ve mentioned previously: over 500 Indian facilities are registered with US FDA, the highest number for any country outside the US; India accounted for 40% by volume of US generic drug imports in 2013. While writing this article, CPhI sent a summary of their soon-to-be-released India pharma market report. It says “around 220 countries are sourcing pharma products from India,” and that the top 20 of India’s pharmaceutical companies are expected to increase capital expenditure by 40 percent to over US$8.3 billion by 2017-18.

Therefore, scrutiny on quality in India is increasingly positive for the world and its healthcare consumers. The CPhI summary also states: “India is constantly looking to increasingly match high quality Western standards, whilst maintaining lower manufacturing costs, showcasing the Indian pharma markets unique position and providing an optimum investment platform for international companies.” India knows, then, to promote Western quality standards, and should meticulously address any areas where those standards lack. Here’s hoping a large part of that additional capital expenditure bolsters quality throughout the country.

Final Note

Speaking in terms of countries or regions, and not individual companies or market instances, can be problematic; stereotyping is never good. There is, though, as I have coined elsewhere, a Quadrilateral Outsourcing World Order. The reality is that the U.S., Europe, China and India all present their own set of attributes and influence on the pharmaceutical industry. In our case, we do benefit from working with and challenging each other regionally.

Perhaps it was best summed up by my colleague and veteran industry-watcher, Wayne Koberstein, executive editor at Life Science Leader. He ended the OPW conference in San Francisco with these comments:

“I have been a part of the pharmaceutical industry for years, but it still makes me proud and amazes me at just how internationally entwined and global an industry we are. We are role models in globalization and bringing people together, and all for the good of patients everywhere.”