Growth and discovery are eclipsing cost in a rapidly changing Asia pharma industry, PwC reports

Mumbai, 17 September, 2008 – A new index from PricewaterhouseCoopers confirms China and India’s position as the leading outsourcing locations for the pharmaceutical industry but highlights how the nature of such outsourcing is changing dramatically. The index, in a report titled “The changing dynamics of pharma outsourcing in Asia: are you readjusting your sights?” ranks Asian countries according to cost, risk and market opportunity.

The report finds that footprint growth, market opportunity and, increasingly, drug development potential are now rivalling the traditional factor of cost as key drivers for location decisions. The report highlights three significant developments that are shaping pharmaceutical outsourcing in Asia:

• The trend towards high end innovation – Intellectual property (IP) concerns have previously inhibited this trend in pharma but, increasingly, such concerns are being overcome and major moves are being made by big pharma companies to step up 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 registered on the website as under way and a cumulative total of 870 completed or ongoing trials compared with 737 in India.
• A scaling up of pharma manufacturing in Asia – With an increased commitment to international standards, Asian CMOs are securing more outsourcing orders from big pharmaceutical companies. In India, for example, there are more than 100 FDA-approved pharmaceutical facilities – the largest number in any country outside the US.

The report shows that China and India, followed by Korea and Taiwan, are now delivering an environment for the pharmaceutical industry where benefits such as the pool of educated and qualified scientists, intellectual property (IP) law reform and market growth are outweighing factors that had previously inhibited development, principally uncertain regulatory frameworks and enforcement.

Significant risks remain but the report observes a growing convergence with international regulatory standards. However, the report’s authors point out that such convergence is also being felt in labour markets with the result that traditionally wide wage differentials, compared to 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 labour market. India, for example, is already finding it difficult to recruit in certain areas such as clinical research personnel.

Sujay Shetty, associate director in Pharma practice of PricewaterhouseCoopers, says, “We are seeing pharma outsourcing moving up the value chain in Asia. China and India will continue to spearhead growth in the Asian pharmaceutical sector. Manufacturing will continue to move to India in APIs & formulations. There will be further momentum in the clinical trials market with the recent announcement to relax Phase 0 and Phase I trials in India. However, the infrastructure framework and legislation needs to be in place so that the quality and reputation is not affected”.

”The current trends are likely to accelerate with significant implications for pharmaceutical company decisions,” he adds. “Companies need to make sure they are readjusting their sights and making the most of the opportunities presented in Asian countries. The pharmaceutical business model is moving away from a fully integrated company structure towards a future where companies use a wide range of outsourcing, partnership initiatives and other contractual and relationship arrangements to create networks of collaboration and discovery. The companies that will be most successful will be those that are most adept at managing and mixing a range of contractual relationships and partnerships across a number of different locations. There will be no ‘one size fits all’ approach. Companies need to make the most of the strengths of different locations and opportunities for different parts of the value chain.”

ENDS About PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group
The report was developed by PricewaterhouseCoopers’ Pharmaceutical and Life Sciences Industry Group. The PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (www.pwc.com/pharma) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering solutions to a wide range of strategic, financial and operational issues. The firm has also developed industry-specific services in the areas of regulatory compliance, IT and financial effectiveness, and performance improvement. The Pharmaceutical and Life Sciences Industry Group is part of PricewaterhouseCoopers’ larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.

As well as the index, the report includes a country by country review. It covers:

The hot spot countries: China, India and Singapore;
Themature markets: Japan and Australia
Other Asian countries: Korea, Taiwan, Malaysia, Thailand, Indonesia and Philippines.

About PricewaterhouseCoopers, India:

PricewaterhouseCoopers Pvt. Ltd. (www.pwc.com/India) provides industry - focused tax and advisory services to build public trust and enhance value for its clients and their stakeholders. PwC professionals work collaboratively using connected thinking to develop fresh perspectives and practical advice. Complementing our depth of industry expertise and breadth of skills is our sound knowledge of the local business environment in India. PricewaterhouseCoopers is committed to working with our clients to deliver the solutions that help them take on the challenges of the ever-changing business environment.PwC has offices in Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune.