The western drug industry is also joining the outsourcing queue. Earlier this week, Pfizer, the drug giant announced it was looking to outsource 30% of its manufacturing, largely to Asia. Pfizer already outsources about 15% of its manufacturing.
Pfizer already said this year that it would shut down manufacturing sites in New York Neb and sell a third manufacturing site in Germany as part of a plan to cut its work force and save money.
Intense competition on price from makers of generic drugs, falling profitability and a quest to improve efficiency before patents expire on blockbuster drugs are driving pharmaceutical companies to rethink how they make and distribute medicines. The industry is waking up to outsourcing and contract manufacturing, observers say.
In the past few months,Astra Zeneca and GlaxoSmithKline have both announced plans to outsource more manufacturing. Look for other companies to follow suit in the months to come.
The U.S. market for outsourced pharmaceutical manufacturing is growing at the rate of 10 to 12% annually. Pharmaceutical companies will continue to fuel much of this growth as they outsource an increasing number of products and services. Biotechnology companies, which have almost doubled in number during the past five years, also contribute to this trend as they seek ways of bringing their products to market without making capital investments in their own manufacturing facilities.
Some fume, "This is what happens in government and low-price medicine. You want high paying jobs here and in Europe at the same time you demand your meds for free. You want long, arduous, expensive processes for testing, approval and post marketing to prove safety and efficacy. Then add on the high tax and regulatory environments which Hillary and others will only increase and this article makes perfect sense. If the government and others want high paying jobs here they'll have to extend patent protection, reform tort law and stop trying to control prices, not to mention lifting taxes and regulations. Business goes where it is loved not where it is chained and punished."
But supporters reel off benefits of outsourcing:
· Outsourcing reduce the overall costs by 30% to 35%
· Faster and cheaper to have discovery work outsourced, reduces drug development cost
· Reduces problems faced during the regulatory processes around the world
· Improve manufacturing efficiencies
· Reduce excess production capacity by divesting facilities
· Minimize investments in capital-intensive facilities
· Improve net earnings and cash flow;
· Divert resources to focus on other competencies like marketing
Outsourcing can allow pharma companies to establish consistency and efficiency across sprawling international networks of commercial, supply chain and manufacturing organizations. Outsourcing if managed and executed strategically has every potential to add value to the shareholder value and keep the investor community happy.
Incidentally India could stand to benefit in the process.
Presence of over 10,000 pharmaceutical companies and one fourth of it can provide contract manufacturing facilities to foreign pharmaceutical companies:
· Presence of around 25 Contract Research service (CRO) providers with excellent infrastructure and well trained and experienced staff to conduct clinical development activities
· India's well known software skills and English speaking scientist for bioinformatics
The second largest population in the world, a growing economy and rising income levels makes Indian market difficult to ignore, outsourcing enthusiasts say.