Singapore, Sept 18, 2008: A new index from PricewaterhouseCoopers confirms China and India’s position as the leading outsourcing locations for the pharmaceutical industry but highlights how the nature of such outsourcing is changing dramatically. The index, in a report titled “The changing dynamics of pharma outsourcing in Asia: are you readjusting your sights? ranks Asian countries according to cost, risk and market opportunity.

 

The report finds that footprint growth, market opportunity and, increasingly, drug development potential are now rivaling the traditional factor of cost as key drivers for location decisions. The report highlights three significant developments that are shaping pharmaceutical outsourcing in Asia:

 

The trend towards high-end innovation - intellectual property (IP) concerns have previously inhibited this trend in pharma but, increasingly, such concerns are being overcome and major moves are being made by big pharma companies to step up their drug discovery investment in Asia. 

 

Rapid expansion of clinical trials in Asia - the volume of clinical trials being conducted in countries outside of Europe, North America and Japan has been growing rapidly in recent years with Asian countries leading much of the growth. China has overtaken India as one of the fastest-growing locations. By June 2008, China had 428 clinical trials registered on the website as under way and a cumulative total of 870 completed or ongoing trials compared with 737 in India.  

 

A scaling up of pharma manufacturing in Asia – with an increased commitment to international standards, Asian CMOs are securing more outsourcing orders from big pharmaceutical companies. In India, for example, there are more than 100 FDA-approved pharmaceutical facilities – the largest number in any country outside the US.

 

The report shows that China and India, followed by Korea and Taiwan, are now delivering an environment for the pharmaceutical industry where benefits such as the pool of educated and qualified scientists, intellectual property (IP) law reform and market growth are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement.

 

Significant risks remain but the report observes a growing convergence with international regulatory standards. However, the report’s authors point out that such convergence is also being felt in labor markets with the result that traditionally wide wage differentials, compared to developed country locations, are narrowing.  Such convergence will continue to shrink the cost gap, prompted in part by the need for Asian countries to compete for ‘high end’ skills in an international labour market.  India, for example, is already finding it difficult to recruit in certain areas such as clinical research personnel.

 

Ms Beatrijs Van Liedekerke, Associate Director, PricewaterhouseCoopers Advisory, Beijing, said, “We are seeing pharma outsourcing moving up the value chain in Asia. China and India will continue to spearhead growth in the Asian pharmaceutical sector but, alongside them, Singapore will maintain its position as a centre for research and innovation. While the trio of India, China and Singapore are proving to be the ‘hotspots’ of the Asian pharmaceutical sector, other countries, notably Korea and Taiwan, are also going to be increasingly significant.”

 

Mr Abhijit Ghosh, Pharmaceutical/Healthcare Leader at PwC Singapore, said, “Pharmaceutical companies are now actively moving away from a totally integrated structure and considering outsourcing and partnership initiatives with competent parties to achieve overall efficiency and commercial synergies. Obviously, they need to readjust their sights to make the most of the opportunities provided by the Asian countries.  By considering the strength and opportunities of different locations, companies will be able to develop an efficient value chain to support the future needs of not only their stakeholder but also of the patients, regulators and payers.”

 

According to the report, Singapore is suited for complex and technology intensive manufacturing.  Among the hot spot territories, it has access to the best technology and funding for outsourcing high-technology intensive products.  Apart from this, the Singapore market also has extremely well regulated IP protection and enforcement regime, and is considered one of the best among all Asian territories in terms of regulatory compliance.  Along with Australia, Singapore has consistently topped the rankings as the top Asian territory for IP protection and enforcement.  Compared to China and India, Singapore offers the shortest time to gain approval to start clinical trials.  The average regulatory approval period is four weeks followed by an additional four to six weeks for site-level IRB/ethics committee (EC) approval.  This short timescale makes Singapore an even more attractive destination for clinical trials in Asia.

 

Besides having the necessary operations and regulatory infrastructure, Singapore also has an attractive tax regime.  It provides a host of incentives to the pharma manufacturing companies and R&D organizations.