Singapore, Feb 12, 2010: The issues facing Asian CMOs have existed ever since the early days of contract manufacturing. While a small number of CMOs have recognized the need and have followed through by addressing these issues the majority continue to ignore them with little ramification due to a buoyant demand for their services. At the forefront of these issues is the poor level of quality assurance and control measures employed by Asian CMOs.

The instances of inferior quality drug products coming out of Asia are countless and while many incidents have been proven to be cases of deliberate adulteration this can still be attributed to poor quality practices. The ability to comply with international regulatory standards continues to evade many Asian CMOs. This issue will become more significant as an increasing number of sponsor pharmaceutical companies look to outsource production of drugs for sale in western markets.

Two of the driving forces behind the phenomenal growth of the Asian CMO market have been the lower cost of production as compared to the west and access to potentially enormous markets due to population size. While labor costs in Asia are comparatively low. The exploding Consumer Price Index (CPI) in China and India will invariably drive up the cost of living and in turn the average wage. Furthermore, these countries have had a history in engaging in environmentally and in many cases morally unethical and unsafe practices in the workplace. This has helped to keep costs down but these practices cannot continue for long.

The other attraction to Asian CMOs has been the access they provide to Asian populations. The advances in international trading practices have weakened the barriers of entry to new geographical market. The need to produce locally in order to access local populations is no longer a foregone conclusion.

The changing face of pharmaceutical outsourcing is one of the major challenges CMOs need to tackle to ensure their survival in the coming years. As sponsor companies look to slash their costs they are focusing on core competencies and looking for outsourcing providers who offer a wider range of services. The provision of turnkey services not only covering the manufacture of products but also extending to drug development activities or after market service activities will become more prominent in the future. In addition, the growth in biopharmaceuticals will force CMOs to manufacture large molecule products which can be far more challenging than traditional chemical drug manufacture.

CMOs have to be much smarter if they want to replicate the success of small molecule outsoursing. Remaining competitive over the longterm will require significant increases in efficiency and planning on the part of Asian CMOs.

(Synertec Asia is an engineering and technical services consultancy working with the life science industries in Malaysia and Singapore)