Evaluating the Pieces of the Pharma Supply Chain - Pharmaceutical Technology

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Evaluating the Pieces of the Pharma Supply Chain
After a year of increased attention on the pharmaceutical supply chain in Asia, what will be the region's short- and long-term role? This article contains bonus online-exclusive material.

Pharmaceutical Technology
Volume 33, Issue 1

Rather than looking at the cost per unit as a measure for a particular product, companies are now evaluating inbound transportation, custom-clearance issues, and additional testing requirements, explains Keech. As they start to look at this "total land-net cost," he says, "companies may choose an outsourcing partner based on the product's stage in the life cycle and the company's overall goals. Is the company simply striving to reduce costs at the end of a product's patent life, for example, or is it looking for more flexible and modern manufacturing, and perhaps unique competencies?"

Even though Western companies can still have a 50–60% savings in manufacturing by outsourcing to Asia, the region "is not as attractive as it used to be," says Keech. "One PwC client, for instance, used to go to Asia alone because it was cost-driven, but given safety issues of late, they're looking at all different outsourcing candidates—especially in Eastern Europe—regardless of geography," says Keech.

Big Pharma's outsourcing to Asia

Figure 2: PricewaterhouseCoopers’ cost ranking of Asian territories.
A consensus among several pharmaceutical majors is that Asia will continue to play a part in their research, drug-development and sourcing activities, but as part of larger corporate goals for cost reduction, broadening use of external partners, and globalization. For example, like other pharmaceutical majors, Pfizer (New York) plans to increase its level of outsourcing as it rationalizes its manufacturing network. In its recent quarterly earnings report (ended Sept. 30, 2008), the company says it expects to increase its level of outsourced manufacturing from a current level of roughly 17% of its products on a cost basis to 30% during the next two to three years.

Different Interpretations of Quality
Pfizer, however, emphasizes that adherence to quality standards are a prerequisite for working with any supplier. "The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized," said Natale S. Riccardi, president of Pfizer Global Manufacturing and senior vice-president of Pfizer, in a recent interview with Pharmaceutical Technology (7). "A thorough review of the potential partners' quality systems, including verification that they have control over their own supply chain, must be completed to determine whether they are willing and able to meet the required standards. If they are not, access to the supply chain should be denied until they have demonstrated that the required standards are being applied. Once a supplier is approved for use, ongoing quality oversight is critical to ensure that the standards continue to be met. We have done that and in fact, have not approved suppliers that have not demonstrated sufficient progress."

As a larger percentage of active pharmaceutical ingredients (APIs) is outsourced, there is a resulting need to broaden the supply base and gain the knowledge and understanding of the capabilities of external suppliers. To that end, Pfizer established in 2006 a center of excellence team based in Singapore to work in markets in India and China. This team works in concert with the company's strategy to optimize its internal plant network and in planning transitional inventory coverage as external suppliers are qualified (7). For contract R&D, Pfizer also has relationships with contract research organizations in Asia, including WuXi PharmaTech (Shanghai), Chembiotek (Kolkata, India), and HD Biosciences (Shanghai) (8).

To strengthen its global API sourcing, AstraZeneca (London) opened a new sourcing center in China in early 2007, which is in addition to another sourcing center in Bangalore, India. These moves are part of other recent investment in Asia. In 2007, the company opened a $15-million process research and development center in Bangalore to complement its drugdiscovery programs there. The company also is investing $100 million for a new translational science research facility in Shanghai. As part of its supply-chain strategy, in November 2008, the company said it is further investing in its facility in Wuxi, China, to support its growth in Asia Pacific, to provide additional packing and formulation capabilities, and to make Wuxi its packing center for Asia Pacific. AstraZeneca established a manufacturing site in Wuxi in 2001 with an initial invesment of $134 millon and made an additional investment of $35 million in 2006.


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