The pressure has been seen in two ways—some key elements of cost have risen in Asia while European and US manufacturers have
taken steps to make their businesses more cost effective. Some Asian companies have been slow to appreciate this, however.
The costs of investment in Asian countries remain significantly lower, and this will continue to drive the dynamics of outsourcing
Roundtable participants: a snapshot of company capabilities and positioning
While costs in Asia have been rising at a faster rate than in the West, the differential in costs is still very large due
to the abundant technical pool available in the emerging countries. The cost of FTEs (full-time equivalents) for chemistry
or formulation work continues to be approximately 50–60% of the costs encountered in the West and is likely to remain at those
levels for at least the next five to seven years.
The challenge to Asian companies in competitiveness is often not from cost-per-hour, but productivity due to tools, techniques,
and drug-development approaches. A large number of scientists of Indian/Chinese origin from the West are now returning to
their homeland and helping train the larger scientific population in these techniques. The access to state-of-the-art equipment
is also helping making step improvements in productivity, but there is still a ways to go.
On the horizon...
Current economic conditions have driven down the cost of energy and raw materials from their peak in 2008. In a tighter market,
such as we have experienced in the last few quarters, there is more of a willingness on the part of suppliers to negotiate
the price of raw materials. If we continue to reduce the cost of raw materials while maintaining strict quality standards,
we can provide the customer with the assurance that less expensive does not mean lower quality. Hiring and retaining a qualified
workforce is also a priority. Customers have expressed a concern about the level of internal resources required to manage
an outsourced project at some of the Asia-based companies with which they have worked. This utilization of internal resources
adds to the true project cost. [We feel] using a US-based point of contact, if necessary, and solid project-management skills
provides an optimum interface for reducing the need for a customer to dedicate internal resources. Managing a project across
multiple locations requires us to recognize potential issues, including cultural barriers, time-zone differences, and potentially
logistical issues, but [we] strive to make the experience feel like it is all being done under one roof.
India's impressive technical and scientific talent and resources are paramount to any perceived or actual cost differentials
available in that market. Certainly the industry—like all industries—is facing additional cost pressures in the current economic
environment. However, cost pressures are inherent in drug development in any economy, and drug developers should be seeking
outsourcing partners that understand their program, challenges and objectives, and who will be able to work strategically
with them to advance their drug-development programs in an integrated network and deliver results on time, regardless of geographic