Participants in the roundtable were: Steve Hagen, vice-president of pharmaceutical development and manufacturing at AMRI (Albany, NY); Tim Tyson, CEO of Aptuit (Greenwich, CT); David Andrews, sales director at Dishman USA, and Christian Dowdeswell, sales director at Dishman Europe, part of Dishman Pharmaceuticals and Chemicals (Ahmedabad, Gujarat, India); Abhijit Mukherjee, president and head of pharmaceutical services and active ingredients at Dr. Reddy's Laboratories (Hyderabad, Andhra Pradesh, India); N. Santhanam, chief operating officer of Piramal Healthcare (Mumbai, India); Terry Novak, president of North American operations and chief commercial officer at Patheon (Toronto); and Ed Roullard, vice-president of SAFC Supply Solutions, part of SAFC (St. Louis, MO).
Cost differentials between Western and Asian suppliersPharmTech» CMOs in Asia have generally been perceived as being able to offer lower costs compared with their counterparts in North America and Europe, but rising costs for labor, transportation, and energy have eroded some of this differential. What cost pressures have arisen in the market and what has been their effect on the competitive dynamics of outsourcing to Asia?
»Roullard (SAFC): Adam Smith's theory of the "invisible hand" is actively at work between the Western and Asia marketplaces. Costs have definitely increased in Asia, driven by many factors, the most significant being an increase in labor costs for chemists and engineers. Labor costs in Asia continue to be lower than those of Western suppliers, but the gap is closing due to shifting demand, competition for resources, and the spread of relative wealth as these economies develop. The existing differential has customers setting explicit strategies for utilization of Asian outsourcing partners for projects requiring commoditized capability. And, those in the West with common technologies, common quality, and common supply-chain capabilities are feeling the most competitive pressure. However, those companies that are able to provide unique technologies or provide supply-chain security for critical raw materials are able to differentiate to an extent that ensures, at worst, mid-term viability as a value-added supplier.