Pharma Abandoning East, Returning West for CMOs say GPCM Delegates

01-Jul-2013 - Last updated on 02-Jul-2013 at 11:31 GMT

Rising CMO costs and lower quality in India and China lead to return to West

Pharma firms are returning to European and North American manufacturers as quality issues and rising costs have lost India and China some of its ‘Eastern promise,’ according to industry experts.

India, for example, was expected 8-10 years ago “to be the hub for contract manufacturing supply to Europe and North America and take major volumes out of Western contract manufacturers,” said ex-GlaxoSmithKline Director of External Supply, Jim Browne. However, he told delegates at last week’s Global Pharmaceutical Contract Manufacturing (GPCM) Event in London, UK, “that hasn’t happened.”

The appeal of the low-cost region led to an initial major drive in investment, he added, with many companies building facilities and bringing in consultants and specialists from Europe and North America, purely for export to back to those markets.

However, he continued, “there have been issues then of when the consultants have moved away” leading to a drop in standards and concerns regarding quality, as well as issues surrounding environment and health and safety.

The response, therefore from both big and small pharma is a return back West when selecting contract manufacturers. “We are bringing products back primarily due to the logistics, transportation, risk to products and tolerance to risk [from the CMO],” said Richard Fazackerley, Associate Director at Eisai, who warned “the consequences are failure of the product and brand.”

Head of Tech Transfer and Supply at Paladin Laboratories, Anthony Grenier, agreed that though India and China can be “a really cost-effective solution for companies to improve cost structure of the supply chain and market access,” Paladin has been forced to bring back three products to Europe in recent years.

“Essentially the reason for that was that [India] couldn’t achieve the cost savings once promised,” he said, as emerging markets are prone to fluctuating costs of goods, labour and energy, as well as costs related to managing the CMO and ensuring regulatory compliance.

Grenier also acknowledged a number of other factors tainting emerging market CMOs including: language barriers, time difference, communications (poor phone lines, for example), cultural differences and quality issues.

CMOs respond

A number of CMOs in attendance concurred they were seeing a move back to traditional markets.

Piramal – who has five units in India - spoke of customers who have had bad experiences in India in the past. “We find that mostly people in Europe like to work with a manufacturer in Europe,” said Business Development Manager Chris Williams, “but once people do work with India they are very keen to continue to do that.”

A representative from Indian-owned but Canada-based Jubilant HollisterStier added there was still a willingness for CMOs to invest in CMO capacity in India, whether for the local market or for export, though it requires partnership with a pharma company for this to develop.

India and China Importing from West?

Browne said: “There are many companies in India doing big volumes, very effectively and also many of the Big Pharma companies are using those facilities to manufacture products to be sold locally (Asia/Pacific).”

In China too, huge diversities in manufacturing quality has led to many manufacturers concentrating on local production, with standards, he said, which would be deemed unsuitable in the West.

However, in another reversal of direction, it was suggested by Lidia Strappaveccia, VP of Italian CMO Orofino Pharmaceuticals, that In both India and China a “number of people are becoming richer and they don’t want local products,” preferring instead European or US made drugs imported due to the stricter regulations and better quality products.