Increasing costs, high prices for raw ingredients and tremendous competition have forced many U.S. pharmaceutical and nutritional supplement companies to outsource significant elements of their business processes. Historically, what was traditionally a domestic industry is now global — one that relies on suppliers, contractors, manufacturers and researchers.
The need to reduce time-to-market, boost drug discovery and squeeze costs out of pharmaceutical and nutritional products have forced U.S. companies to look elsewhere for raw materials, active pharmaceutical ingredients (APIs) and manufacturing and packaging services. Over the past several decades, the sourcing of pharmaceutical products migrated first to Europe and then to Asia, namely India and China. Recently, the production of a variety of dosage forms, including capsules, tablets and injectables followed suit, migrating to India and China.
Cost reduction is not the only reason for the observed increase in outsourcing to Asia. In 2006, more than 90% of the major pharmaceutical revenue was obtained from drugs that were on the market for five years.1 The patents on many of these products are soon to expire, exposing up to $157 billion worth of sales to generic drugs.1 Fewer new drugs are being produced than ever before, even though twice as much money is being invested for drug development, probably as a result of the U.S. government’s purported over-regulation of these new chemical entities (NCE). This patent expiry “cliff” has driven companies to consider new ways to increase drug discovery efficiency and improve profit margins by reducing manufacturing and material expenses. The patent expiry issue has enticed foreign competition as well. In fact, government-sponsored financial incentive programs in China and India are in place to help offset the imposed FDA user fees required for submitting New Drug Applications (NDAs).
Outsourcing has its challenges, particularly regarding all matters concerning FDA Quality Assurance requirements (QA). Although not a focus here, regulatory issues are also a concern when considering outsourcing drug development and manufacturing. The regulatory landscape in China and India is uneven and unpredictable. Protection of intellectual property in some Asian countries is difficult and has yet to meet western standards.1
Quality assurance of pharmaceutical products and nutritional supplements is important in every phase of development and manufacturing. For outsourcing to be successful, there needs to be a supply of essential medicines of excellent quality, safety and efficacy. Absolute confidence in the quality of supply and service is critical. Quality assurance in pharmaceutical drug development (including nutritional products) and manufacturing includes all factors that influence the quality of a product.2 Proper QA must ensure that the products are of the highest quality required for their intended use. Similarly, QA incorporates all aspects of Good Manufacturing Practices (GMPs), Good Laboratory Practices (GLPs), Good Clinical Practices (GCPs), production and control of operations, use of correct starting and packaging materials and the incorporation of safe intermediates, bulk material and process controls such as testing, calibration and validation. The finished product must be correctly processed, checked, properly stored and handled. Any observed deviation must be reported, investigated and corrected. Quality evaluations must be conducted routinely to ensure continuous monitoring and improvement, and there must be a properly designed, implemented and routinely documented QA system. All parts of the QA system should be adequately staffed with competent personnel using suitable equipment and facilities to do the job.
Top Outsourcing Opportunities in Asia
According to an evaluation by PricewaterhouseCoopers LLP, China is the leading outsourcing destination followed closely by India.1 China and India are spearheading growth in the Asian pharmaceutical sector and this trend is expected to continue. Due to low prices, China is the top producer of raw materials and ingredients that are included in globally available drugs. In 2010, API sales exceeded $10 billion, increasing at an annual rate of 17.6%.1 The primary exports of Chinese API and bulk ingredients include antibiotics, vitamins, amino acids and other organic materials.1 For example, the attractiveness for API manufacturing in China has convinced AstraZeneca to increase their outsourcing investment in that country.
The company has a dedicated outsourcing center in Shanghai and will use this center to make purchases — saving 10% over the next few years.1 In 2010, AstraZeneca’s total purchases were valued at $100 million. While China continues to build their finished dosage form business, it still lags other Asian countries in this area of expertise. Presently, India is the leading dosage form exporter to the United States. Chinese finished drug exports are estimated to be about $700 million, including the work completed by contractors and generated by new patent holders.2
India is one of the largest and lowest cost producers of generic drugs globally.1,3 Finished generics supplied from India account for nearly 20% of the global generic marketplace.1 In 2010, finished product sales exceeded 6 billion, increasing at an annual rate of more than 10%.1 Therapeutic drugs, as opposed to nutritional products, have driven these sales.
These include antibiotics, anti-infectives, anti-inflammatory drugs, cardiovascular drugs, central nervous system drugs and anti-diabetic drugs. India also contributes expertise in the production of a variety of complex dosage forms. Recently, the priority of drug research has been refocused from the reverse engineering of generics to research involving NCEs.1
India has excellent technology, R&D, production facilities and clinical research centers. Conducting clinical trials represents a significant portion of drug development costs and is time consuming. The availability of a large number of potential study subjects has attracted pharmaceutical companies such as GlaxoSmithKline and Eli-Lilly to conduct clinical trials in India.3 Typically, it is 40-50% less expensive to conduct clinical trials in India compared to western countries. Patients also can be recruited in less than one-third the time than in the United States during similar patient recruitment activities.1