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China Ranks High in Pharmaceutical Outsourcing

By: Patricia Van Arnum

Large pharmaceutical companies rank China as the best location for outsourcing in Asia, followed by India, Korea and Taiwan, respectively, according to a recent PricewaterhouseCoopers index. The index evaluates Asian countries according to cost, risk, and market opportunity for the pharmaceutical industry. The report suggests outsourcing to Asia is moving up the value chain, as low-cost production is eclipsed by a broad range of factors, including market potential and research and development (R&D) capacity as the drivers of growth.

“Within five to ten years, we will be moving from ‘made in China’ to ‘discovered in China,'” said one pharmaceutical industry executive interviewed for the report. “Pharmaceutical companies need to make sure they are refining their strategies to make the most of the opportunities presented in Asian countries,” said Michael Keech, director of the global pharmaceutical and life-sciences industry group at PricewaterhouseCoopers. “China and India will continue to spearhead growth in the Asian pharmaceutical sector, but, alongside those countries, Singapore will maintain its position as a center 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. The companies that will be most successful at making pharma outsourcing and location decisions will be those that are most adept at managing and mixing a range of contractual relationships and partnerships across a number of different locations.”

According to the report, pharmaceutical companies in the United States and other developed countries are facing challenges that are constraining revenue growth and have a resulting need to look for new ways to boost drug-discovery potential, reduce time to market, and minimize costs. For example, only nine of the 18 new treatments launched in the US in 2006 came from the laboratories of the 13 companies that comprise Big Pharma.

The report highlights three significant developments that are shaping Asian pharmaceutical outsourcing:
•The trend toward high-end innovation. Intellectual property (IP) concerns have previously inhibited this trend in the pharmaceutical industry, but increasingly such concerns are being overcome and major moves are being made by large pharmaceutical companies to increase 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 underway and registered on the website Clinicaltrials.gov and a cumulative total of 870 completed or ongoing trials compared with 737 clinical trials in India. Cost has been a critical factor in this expansion. For example, clinical trials are estimated to be up to 50% cheaper in India compared with the US.

• A scaling up of pharmaceutical manufacturing in Asia. An increased commitment to international standards, Asian contract manufacturing organizations (CMOs) are securing more outsourcing orders from large pharmaceutical companies. In India, for example, there are more than 100 US Food and Drug Administration-approved pharmaceutical facilities, the largest number in any country outside the US, according to the report.

The report shows that China and India, followed by Korea and Taiwan, provide several benefits for the pharmaceutical industry, including a pool of educated and qualified scientists, IP law reform, and market growth. These trends are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement.

Although significant risks remain, there is 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 with 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 labor market. India, for example, is already finding it difficult to recruit in certain areas such as clinical research personnel.

The Real China Strategy

There’s a lot of talk these days about India and China as potential markets and as sources for cheap manufacturing and R&D. But the real potential of these countries is far more interesting: As China and India (and Brazil, Russia, and Korea) learn to create new products, they’re going to do it at price points that make sense for their own domestic markets—which means substantially lower than US or European prices. The drugs they create may not measure up to the standards of approval in the developed world, but those standards, these days at least, have more to do with politics and preferences than they do with a practical risk/benefit ratio.

Let the emerging market come up with low-cost must-have medicines, though, and we’ll see how long the US fights to keep them out. A handful of sucessful medicines from India and China could end up doing a remarkable amount to transform the US drug industry and US drug regulation.

I finally met a pharm exec who’s pursuing that insight as a way to build his company, when Abe Abuchowski, founder and COO of Prolong Pharmaceuticals, stopped by to visit not long ago. You’ve probably heard Abe’s name already. He’s the biotech pioneer who developed the technique of attaching polyethylene glycol (PEG) to protein-based drugs. PEGylation, the subject of Abuchowski’s thesis at Rutgers back in 1971, proved to be an effective way to reduce the immunogenecity of biotech drugs and to increase the amount of time they remained in the body, and it’s gone on to become one of the field’s gold-standard technologies.

Abuchowski himself went on to found Enzon (starting with just half a dozen people in 1983), which he developed into a fuly integrated company. “We had to,” he says. “At the time you couldn’t just hire services like toxicology.” Enzon’s pegylation technology led to several important products, including Adagen (pegylated adenosine deaminase, for severe combined immune deficiency disease, just the fifth biotech product to win FDA approval), Oncospar (pegaspargase for certain cancers), and the blockbuster PegIntron (pegylated interferon A, for Hepatitis C, developed with Schering Plough and approved in 2001).

With PegIntron, Enzon was profitable, but it turned away from pegylation, leaving the field to Nektar. (The company announced earlier this week that it was considering divesting itself of its biotech business.) Abuchowski, meanwhile, had left in 1996, spending more than a decade as a stay-at-home dad and part-time consultant. He never lost the entrepreneurial urge, though, and in 2005 launched Prolong. (The name refers in part to the way that pegylation prolongs the time a protein spends in the body.)

The new company’s strategy is to develop patented, second-generation biotech products in India and China, using Prolong’s expertise in pegylation (which Abuchowski says is not part of the Indian/Chinese biotech arsenal) and to partner with companies able to manufacture at low cost.

Low-hanging fruit is the name of his game. Within the past month or so, Prolong announced a partnership with Zydus Cadila, one of India’s 30,000 biotechs, to produce a pegylated erythropoietin (an anti-anemia drug in the same class as Amgen’s Epogen and J&J’s Procri) and another deal is in the works in India for a pegylated granulocyte colony-stimulating factor (GCSF) drug, similar to Amgen’s Neupogen. When last I spoke with Abuchowski, he was just back from China, where he formed a tentative agreement with a biotech company over one, or possibly two, products.

“All the modern technology we have here they are copying,” says Abuchoswki. “All the first generation of biotech products are being made there and brought into the marketplace. The benefit is that they are starting with scientific knowledge that is mature rather than developing that knowledge from scratch. They have the benefit of waiting for 20 years, then building the most modern facilities with the cheapest labor and developing these products at the lowest cost possible. There are an unbelievable nmber of biotech companies, and being able to link up with a company like ours will allow them to differentiate themselves from the others in the ferocious competition that goes on there.”

Expect an announcement soon. In the meantime, more news from Prolong:
The company has just received a grant from the National Heart Lung and Blood Institute to supply Prolong’s developmental blood replacement product (which, not surprisingly, is based on pegylated hemoglobin) for researchers in such areas as combat surgery.

“It’s exciting to us because it changes the dynamic of the company,” says Abuchowski. “Instead of raising money to test our product, we can sell it to the research community while still working on it as a product, and make a little money on it. And researchers will find new uses for it. We hope that various branches of the military will want to buy it for their own application.”

Source: PharmExec Blog

FDA goes to China

The FDA today opened an office in China’s capital city Bejing to help monitor imports to the United States. The office is the first FDA office beyond the borders of the U.S. It’s part of the agency’s new global safety strategy, as companies increasingly move operations offshore with plans to import products back to the U.S. In addition, Chinese quality officials will set up a station in the U.S.

While concerns about infant formula, food and toothpaste have brought headline-grabbing attention to Chinese imports, problems with pharmaceuticals, including contaminated blood thinners, are a major concern as well.

The vice health minister and head of China’s food and drug administration, Shao Mingli, said that the FDA presence in China will provide “a very clear signal to the whole world.” U.S. Health and Human Services Secretary Mike Leavitt said that this marks a new strategy to “build safety into products at every step of the way,” rather than just monitoring it upon importation at U.S. boarders.

The two countries will work cooperatively to detect contamination. Together, they will require greater corporate responsibility and increase data and information sharing.

The FDA will soon open two more offices in the Chinese cities of Shanghai and Guangzhou, as well as offices in Europe, India and Latin America. The new China offices will oversee regulation, policy, food, medicines and medical devices.

Novo plots $400M Chinese plant

In another confirmation of pharma’s eastward gaze, Novo Nordisk is plowing $400 million into a new factory for diabetes treatments. The plant will produce insulin-based meds for China and other Asian markets. It will be Novo Nordisk’s biggest-ever investment outside its home country of Denmark.

As you know, Big Pharma has been pinning new hopes on emerging markets like those in Asia. Growth in the U.S. is slowing, of course, so drugmakers are looking to the developing world as one source of new revenues. GlaxoSmithKline is looking to beef up its operations in China and India, for instance, and Merck’s Indian subsidiary is staffing up in anticipation of a series of new product launches there.

Though China’s economic engine looks to be shifting to a lower gear as well, its healthcare markets are still underserved. As Lars Rebien Sorensen, Novo’s CEO, told the Financial Times, “For over a decade we have realized that the diabetes market in China would grow quickly and nothing in the recent financial crisis has really changed that.”

Sanofi to expand in China

France’s Sanofi-Aventis announced it will expand its research and development functionality in Shanghai, China. In a new partnership with the Shanghai Institutes for Biological Sciences, the company will work on drug discovery in the areas of cancer, diabetes and neurological disease, and will put a new biometrics facility in Beijing. The facility in Shanghai has been there since June of 2005 and functions in the full spectrum of drug discovery.

The new facility in Beijing, which it hopes will be in full operation by year’s end, will be more specialized, handling specifically data management, study design and statistical analysis.

“A comprehensive development program for vaccines is already on-going in China and we are looking forward to its expansion in the near future,” said Dr. Michel DeWilde, Senior Vice President, Sanofi Pasteur R&D.

Pharma’s new favorite outsourcing spot: China

Quality-control fears notwithstanding, China has knocked India off the catbird seat as pharma’s favorite spot for outsourcing. According to a new report from PriceWaterhouse Coopers, China beats every other Asian country as an investment and contracting destination, followed by India, Korea and Taiwan. The countries all were evaluated by cost, risk, and market opportunities.

And it’s not just low-cost production that’s luring pharma to Asia, either. The report found that the region is growing in stature as a source for innovation and discovery. Plus, local markets are burgeoning, giving pharma the potential for lots of new emerging-market sales.

The various countries have different strengths, with China and India the primary drivers of pharma growth in the region. Singapore, on the other hand, is considered more of an R&D specialist, while Korea and Taiwan are emerging as competitors for pharma investment and business. What’s contributing the the region’s magnetism? Greater attention to intellectual property protections, for one. Cheaper clinical trials, of course. And an explosion of growth in certified contract manufacturers. In India, for example, there are more than 100 FDA-approved pharma plants, the largest number in any country outside the U.S.

Industry Voices: Creating a center of excellence in China

Stephanie Wells is the Senior Vice President of the U.S.-based CRO Charles Rivers Laboratories.

With its impressive pool of native scientific talent, large population with unique therapeutic needs, rapidly growing economy, and rising interest in Western products and services, China is emerging as a powerhouse in the life sciences industry. However, in the past year a series of product contamination incidents have beset China’s manufacturing industry, emphasizing how vital it is to establish Good Laboratory Practice (GLP) so that China’s potential as a quality pharmaceutical producer can be fully realized. As China continues to evolve as a center of R&D innovation, providing GLP-compliant preclinical services is critical to fostering this culture, as well as to helping academia, scientific societies, and biopharmaceutical organizations accelerate their drug development programs.

To accomplish this goal, it is critical to make a strategic investment in local resources and staff to support these drug development programs. A critical component of this investment is the transfer of expertise and western lessons learned to Chinese talent, including high standards of research, safety, humane care, and good laboratory practices. The goal is not to have a Chinese facility that is staffed and operated from the west, but to create an autonomous operation that meets the same regulatory and quality standards as its Western counterparts.

Creating a Culture of Compliance

The most important aspect of successfully replicating GLP procedures in a new location is to rigorously train the people responsible for carrying out the procedures. It is at this fundamental level that quality can be most easily compromised. In other words, personnel can make or break a GLP facility.

To guarantee the quality of the knowledge and actions of personnel, the staff needs to be well trained. This is accomplished by either training them at other GLP-compliant facilities before placement at a China facility or transferring key management positions from those GLP-compliant facilities to China to train and oversee staff on-site. Ideally, a combination of these plans should be implemented to achieve effective training.

After establishing a base of highly-trained staff members, the GLP standard must be maintained. From the start, the goal of all training should be to create and sustain a culture of compliance, where compliance is not a goal to be reached daily, but the normal state of affairs in which any deviation is immediately evident and quickly corrected. This is maintained through orientation and refresher training, as well as quality assurance initiatives.

An Assurance of Quality

When setting up a facility in a different country, the amount of regulatory complexity that is involved increases significantly. Achieving these new quality standards in addition to meeting domestic GLP standards while in a foreign environment takes both prior planning and continual oversight.

Much like the aforementioned training, which in itself is an important component for quality assurance, engagement and importation of key quality assurance personnel is essential to the success of any such offshoring venture, and not just after the facility has opened. Quality assurance starts in the planning stages, with detailed validation plans drawn up by experts in the field. Validation plans should include facility construction, standard operating procedure implementation, and staff training. Throughout the planning stage and all the way through to implementation, it is vital to involve international experts in addition to imported quality assurance personnel, in conjunction with local experts in Chinese regulations and processes.

Finally, a Quality Assurance unit should be instituted and empowered to monitor compliance once the site is functioning. Quality audits should be conducted frequently, and continued process improvements should be developed and implemented wherever possible to more efficiently meet GLP standards.

An Integration of Local Resources

Although the above two steps involve the importation of a considerable amount of skill and resources, it is also essential that local resources are engaged and incorporated. In fact, eventually a company should come to rely on the resources available locally.

The main reason for importing resources at first is one of trust. The suppliers and vendors that a company normally relies on for support have already been vetted and have proven over time to be dependable. However, for fiscal and geographical reasons, that same pipeline of resources might be impractical or impossible to use on the opposite side of the world. As a result, relying on domestic suppliers as a long-term strategy is untenable.

Fortunately, China has a great deal to offer with respect to local expertise. In addition to knowledge of local regulations and the prodigious scientific talent of the country, there are plenty of high-quality suppliers and vendors available. However, these local resources need to be subjected to the same quality control scrutiny to which the domestic pipeline is subjected. In fact, by importing resources from domestic sources at first, a company can buy itself the time it needs to properly examine and establish local China suppliers and vendors for GLP-compliance.

Conclusion

To achieve a culture of compliance, effective quality assurance procedures, and the successful integration of dependable local resources, it takes an immense amount of planning before the first brick is laid in a new China venture. To reiterate, the goal is to create a preclinical center of excellence in China and an offshore partner for multinational and local biopharmaceutical companies. By definition, such a goal is best achieved by leveraging domestic experience and importation in the early stages to ensure quality standards are established and replicated. If the appropriate blend of domestic expertise, western compliance processes, and oversight are linked with proper utilization of local resources, an efficient GLP-compliant facility can be established and maintained. Once created and maintained, this will go a long way toward delivering the enormous potential that China offers in helping the pharmaceutical and biotechnology industries enhance development of more effective therapies, both in China and the rest of the world. – Stephanie Wells