How To Identify The Right Outsourcing Partner In Asia–Pacific

Published on: 

Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-09-01-2010, Volume 22, Issue 9

How to find the right partner in Asia–Pacific is a very complex question and there is no uniform answer.

How to find the right partner in Asia–Pacific is a very complex question and there is no uniform answer. Firstly, you need to answer some basic questions:

  • What is your strategic intent of offshoring? (e.g., cost saving, market access in Asia, being closer to Asian customers, tapping into Asian talent pools, etc.).
  • What is the nature of your business you want to offshore? (e.g., R&D, manufacturing, regulatory, finance support, IT, etc.). If it's R&D, then is it clinical R&D, medicinal chemistry, or chemical and pharmaceutical development?
  • What is your risk tolerance? For instance, is intellectual property an issue? Is there an operational risk or an investment risk involved?
  • In the case of investments related to offshoring, are you aiming for shortterm returns or not?

Answering these questions is a first step because it will determine what direction should head in. For example, for chemical and pharmaceutical development activities, India is supposedly the preferred spot for a variety of reasons, including the sufficient availability of GMP facilities (both R&D and manufacturing) and its experience in full product development. For manufacturing of an API based on fermentation, you may prefer to go to China, the advantages being its wealth of experience and lack of power interruptions. For backoffice support, you may decide on Singapore, which is attractive for Expats. Further, it is not as important to be close to customers for back office work as it is for manufacturing or R&D. None of this is set in stone, but they are some examples of preferences.

After being clear about the country, you need to decide on the specific location. For example, is proximity to any governmental offices important? What about logistics, such as infrastructure, proximity to airports, and the time difference? Would electrical power interruption be an issue?

Labour costs can also be a deciding factor, with costs varying greatly between hubs, such as Shanghai and Mumbai, compared with tier 2 or 3 locations. Languagebased communication also needs to be considered, particularly in China.

Finally, if you don't want to invest in an offshoring location then thoroughly check your potential Asian CRO/CMO. The important features are:

  • experience in dealing with Western companies
  • GMP compliance
  • how long have they been in the business you are interested in
  • has at least part of their management been trained in the West
  • status of their facilities
  • are there any tax incentives (taxfree zones, industrial parks etc.).

Identifying the right partner highly depends on a variety of aspects, but this is probably the most important decision you have to make with the biggest impact! The key is to deal with a local professional representative in Asia who knows the landscape, the culture, the language and the pharma industry, or to seek advice from a person in the West who is experienced in both pharmaceuticals and has Asian expertise.

Although many in the industry are concerned about counterfeit APIs in Asia, I'd point out that approximately 80% of the APIs supplied worldwide come from India and China,1 which offers good proof of the countries' capability and reliability. When it comes to generic drug products — manufactured illegally if the API is still subject to intellectual property laws —it is a different ball game. In China, the vast majority of local medicaments sold domestically are still generics.

In terms of avoiding potentially problematic Asian vendors or domestic pharmaceutical companies, however, it is probably best to screen their portfolio for instances of possible counterfeits.

Coping with long-distance locations

A general guideline to dealing with Asian partners should be "what works in North America and Western Europe may not work in Asia". Likewise, "what works in one Asian country does not work in another". This applies to both work-related subjects and crosscultural behaviour. The following discussion of differences between the Western world and China and India is based on general guidance; for more information you can look to books and papers written by experts or people who professionally deal with the subject of cross-cultural differences.

Generally, you will find that your Asian partner has a bold 'can do' mentality combined with ambition and an eagerness to learn. You may also call it a 'want to prove themselves' mentality. It's often impressive how hardworking most employees are, but on the flip side of the coin you sometimes observe the 'no problem' problem, such as underestimating the complexity and difficulty of certain problems or the time it takes to accomplish certain projects. In particular, with partners who haven't been exposed to collaboration with Western companies before, you may occasionally encounter a 'waitandsee' mentality and a habit that can be described as 'work not done + good excuse = work done'.

This eventually often leads (at least in the settlingin phase of a collaboration) to reduced turnover and efficiency. In India, you should bear in mind that most scientists — as welleducated as they may be — have a background in pharmaceutical generics only and it will take time for them to get used to new standards regarding the development of new molecules. The golden rules to be aware of are:

  • to hear # to understand
  • to understand # to agree
  • to agree # to execute
  • to execute # to make execution repeatable and sustainable.

There are also a couple of very concrete things it is advisable to do:

  • Training: don't just teach it, but show it — beforehand and on the job.
  • Adjust Indian/Chinese management structure to turnover, which is generally much higher than in the West.
  • Make provision for sufficient internal resources for control/coordination/training.
  • Try to predefine format, structure and expected content of any report to high detail.
  • Seed an Asian organisation with expatriates — at least for the start-up phase.
  • Care for personal involvement: work on personal relationships, and build trust to reduce cultural and hierarchical barriers.
  • Don't just rely on trust — proactive checks are very helpful.
  • Care for meticulous project planning/tracking.
  • Clearly define rules and regulations.
  • Be patient.

Most important is to adjust your communication style to ensure you are getting concrete answers to all your questions. Therefore it's good to remember: "I had six honest serving men — they taught me all I knew: their names were Where and What and When and Why and How and Who." (J. R Kipling, English author and poet born in India).

Apart from those general rules, you should also be aware of some specific issues in certain countries.


  • Interpreter often a must; language is a huge barrier
  • Chinese companies aren't responsive to direct enquiries
  • National law gets often interpreted locally
  • Be prepared to work with governmental offices a lot
  • Guanxi (having the right connections) is very importan
  • Localisation to run your own operation or to deal effectively with your partner is a must
  • No experience in developing new molecules
  • IP still an issue
  • War for talent in major areas such as Shanghai or Bejing
  • Job hopping is common
  • When Chinese refer to "FDA approved", they often mean the Chinese FDA — the SFDA; check in advance whether they are talking about their domestic authority or the US FDA.


  • Job hopping is common
  • Inefficiency caused by red tape
  • Still an extremely weak infrastructure with electrical power interruptions
  • Intellectual property laws are not as weak as in China.


In essence, auditing a supplier in Asia isn't different to doing the same in the West — both in terms of preparing the audit and conducting it. As mentioned previously, language will probably be a hurdle in China so having somebody with you who is fluent in Mandarin is a must. Likewise, when it comes to reviewing documents and SOPs etc., you must have an interpreter. Apart from that, in general having somebody with Asia experience included in the preparation and conduction of any audit will be extremely helpful.

The benefits of offshoring

The pharmaceutical industry started to offshore relatively late compared with other industries; however, pharma stands to benefit hugely because the value of offshoring lies not just in simple labour cost savings, but also in the faster development of new compounds, tapping into the Asian talent pool and penetrating huge new markets.

The reality of shrinking profit margins, drying pipelines, patent expirations, intense generic proliferation and increased R&D costs has made offshoring an attractive strategy, particularly for R&D activities. As well as conducting clinical trials and APIrelated activities such as chemical research offshore, an increasing number of western companies are also establishing full endtoend R&D activities in Asia. The business models applied are manifold, such as acquiring local companies, forming strategic partnerships and, increasingly, setting up wholly-owned R&D subsidiaries.

However, Western companies are also correct to be wary of offshoring sensitive and vital operations. There is low tolerance for error industrywide; simple mistakes can compromise results, or even harm patients, resulting in massive and expensive liability. On top of that, the cost of an unsuccessful partnership is more than just a financial issue because the company loses crucial time and opportunities that could have been used elsewhere. By outsourcing to a third party, there is also a loss of partial control as work passes from client to provider, and working across multiple languages and time zones can also introduce extra complexity. Poor communication can also lead to problems with quality and delays. Additionally, there may be problems with intellectual property, which I've already discussed in previous sections.

Nevertheless, given the objective constraints in the pharma industry, the globalising world and the importance of newly emerging markets, offshoring and expansion towards Asia is unavoidable. Realising the benefits of offshoring, however, will require more than just sustained investments and the development of management experience— endurance and adaptability to crosscultural differences will be crucial.

There is almost nobody left who hasn't realised that offshoring significant amounts of R&D, manufacturing and other core and non-core competencies is becoming an integral component of sustaining profit levels. Most major pharmaceutical companies already have pilot programmes in place or plans to offshore sizeable components of their operations.

Dr Frank Floether is an Independent Consultant.


1. H. Prinz and C. Schulz, Firmen, Pharm. Ind. 70(9) (2008).