Therapeutic Dose: Troubles with Outsourcing?

June 2, 2009
Maybe you’re just too “far out” and should look closer to home.

Recently, a dear Canadian friend was lamenting the fact that the Canadian dollar has tanked. You’re lucky, I told him. The Mexican peso has really tanked. As of late April, it was worth about U.S.$0.075, a 41% drop since last August.

About the time of this conversation, I read the news from Asia: a thousand pharmaceutical products were removed from the shelves in South Korea because of asbestos in the talc used to manufacture them. The source of the talc? China. Where else? When you add that to the heparin contamination, melamine in dog food and milk, and lead in toys over the past couple of years, a pattern emerges.

Speaking of patterns, what do the names Sony, Samsung, Toyota, Cardinal Health, Honeywell, Gulfstream, Goodrich, Emerson, Delphi, Cummins, Johnson Controls, Whirlpool, GE, Kodak, Ford, Carrier, TRW, and a number of other major companies have in common? According to a recent BusinessWeek article, they are doing quite well in Mexico, thank you very much.[pullquote] The citizens under this democratically elected government are hard-working, better educated than in many other outsourcing sites, and with the latest exchange rate, low-cost workers.

While NAFTA was roundly criticized after passage (after big business abandoned Mexico and the people had to head north to find jobs, but that is for another story), it could turn out to be a boon to the U.S. pharma industry. With our next-door neighbor being this attractive (and so many of us speaking Spanish), many of the hair-tearing problems of outsourcing—supervision by FDA, cost of transport, speed of delivery, and, last but not least, quality of product—may be obviated with a change of venue: The Mexican government (as seen in the current drug war) is willing to work with DEA, so why not FDA?

There are more rules and a Western tradition in Mexico, so bringing the supply source up to code will be faster and easier than in a country with a long tradition of thumbing its nose at U.S. patents and trademarks. One added benefit could even be some relief in the undocumented workers problem: with jobs back home in Mexico, many Mexicans who came here trying to make a living may well go to where they were born and have a chance of supporting their families.

As far as outsourcing itself goes, we have a long tradition here. When I started at Ciba in 1970, my first position was as a Package Materials Test Scientist. Fancy name for testing these new-fangled (do we have “old-fangled” or even just plain “fangled” devices?) things called plastic containers. What we wound up doing was outsourcing the blister packaging to small companies that had the machines to do the job, after we determined they were compliant with what came to be called GMPs.

Since we (pharma) never made our own talc, lactose, etc., etc., etc., we have been outsourcing since the beginning. The only difference was distance. As trucks and highways became better, we bought our supplies from farther and farther away, based largely on cost. Buying from China and India is merely a logical extension of this policy. What we forgot is that the FDA, like delicate flowers and many fruits, doesn’t travel well. From RWR (the great communicator) through W (the, er, uh, sort of English speaker), the budget and headcount for FDA has dwindled, while the demands on the Agency continue to grow.

Let me put this in simple terms. Good workers mean good, clean product; cooperative government means GMP rules followed; proximity from U.S. equals lower transportation fees, and shorter trips for FDA inspectors to inspect Mexican sites. Do we possibly have another Puerto Rico here? Seems like that worked out pretty darn good for pharma, didn’t it? (Not to mention all the Spanish-speaking Puerto Rican pharmacists, chemists, and process engineers available to train Mexican personnel!).

I may be a simple country chemist, but this looking to Mexico for outsourcing strikes me as a no-brainer, even for our obstreperous pharma managers to wrap their brains around. No place is perfect, and each country has its share of issues. But Mexico may be the answer to some of our problems. Besides, have you ever tried to get a good Tequila Sunrise in Beijing?

About the Author

Emil W. Ciurczak | Contributing Editor