There has also been a change in the way these companies operate. About a third of the compounds they use now originate from outside the company, a figure that was previously close to zero.
"Within a few years, this could be as high as 70%," says Julian Remnant, director of life sciences for Deloitte. "They are finding the best science is coming from external laboratories."
In parallel, there is a huge push to look at the cost base of R&D. Pharma want these costs to be predictable, something that is hard to achieve when the research is carried out internally. Outsourcing, in contrast, can be done at a fixed cost.
Currently, blood products in China are totally divided into 9 categories from the type of product which is less than the developed countries. Besides, only several manufacturers can produce all the types at the same time. In recent years, the size of the market developed with an annual growth rate of 15%-20%. In 2007, the scale of China blood product market broke through 6 billion RMB Yuan mainly because of the annual growth of the human serum albumin market which takes 80% of China blood market. However, the demands of China blood product market can’t be well satisfied all along. An important reason is the short collection of the plasma raw materials caused by the policy factors. Domestic blood product manufacturers are small-scale enterprises basically, which has holdups including funds, technology, raw materials, and so on. Compared to the global blood product market, China has a very small proportion. However with the sustained economic development and the enormous population, China market has tremendous potential.
Changing processes
Alongside this trend, the pharmaceutical industry is also in a state of flux as it shifts its base from chemical molecule-based products to biological ones, bringing with it different manufacturing techniques, a lot more clinical trials and an increase in costs that an industry already facing pressure to reduce prices is finding hard to sustain.
"There is a huge push to look at the cost base of R&D. Pharma want these costs to be predictable, hard to achieve when research is carried out internally."
This combination has led some companies to look at the option of outsourcing key functions to more cost-effective parts of the world, notably India, Southeast Asia and Latin America.
"The processes for biological trials are a lot more stringent," says Swetha Shantikumar, an analyst with Frost & Sullivan. "A lot more data needs to be gathered, and the costs of this are high in Europe or the USA. Yet there is cheaper manpower and similar facilities in some of the emerging markets."
On top of this, many common drugs will soon be reaching the end of their 20-year patent protection, and companies are hoping to jump in on this and start manufacturing them cheaply, a task that may prove too expensive in western countries. Add to that a desire for cheaper generic drugs and it is clear why some companies have looked to outsourcing.
"Healthcare costs are hitting the roof," says Shantikumar. "They want more generic drugs cheaper, so there is more pressure to outsource."
Patient pools
The governments of China and India are aware of this and are setting up facilities that are compliant to western standards to attract western drug companies, while the government in Brazil is setting up similar infrastructure so it too can get a share of the pie.
"India has the advantage that the gene pool of patients is very similar to the West, so clinical trial results will be similar," says Shantikumar. "This makes the approval process quicker."
The patient profile in some of these countries is wider than in the West, which can be an advantage for clinical trials. For example, China has a massive population and, particularly in rural areas, a lower standard of healthcare. This results in a large number of ill people and thus a ready audience for clinical trials.
It's a process that also benefits the Chinese people as the government is keen to set up more rural hospitals. Setting up combined facilities that can carry out clinical trials and act as local hospitals is seen as a way to let the West partly fund their creation.
"The financial crisis in the West has led to a lot of people heading back to their own countries."
"Western companies want to participate in the growth in healthcare in these markets," says Remnant. "There is also a lot of scientific talent in these markets."
The cost per patient for conducting clinical trials in these countries is significantly less than in the West. It is also seen as a long-term investment to be in growing markets for healthcare. Having facilities in these countries makes it easier for launching and selling products to their markets and in some cases regulations insist that the trials of drugs have to be carried out locally for the drug to be made available.
Developing countries are also able to capitalise on what is becoming known as the brain gain. Over the years, many of their top scientists and medical staff have been lured away from these countries by the higher earning potential of the West. Setting up research laboratories and more medical facilities on home soil is encouraging some to return to their countries.
"They are coming back and bringing knowledge with them," says Shantikumar. "Also, the financial crisis in the West has led to a lot of people heading back to their own countries."
IP and compliance
One big drawback for international companies, notably China, has been IP protection. Counterfeiting of almost every product has been a major problem in many Southeast Asian countries and has put off international companies from investing in these areas. But the situation is improving and the Chinese government in particular is making big strides to tackle this issue.
"The government wants to improve the situation so foreigners will be comfortable in investing," says Shantikumar. "Previously, there were a lot of security issues. The Indian IP system is stronger than China's but both are trying to improve."
"China has a massive population and a lower standard of healthcare. This results in a ready audience for clinical trials."
India has a language advantage over China when it comes to attracting western companies because far more of its population speak English.
A disadvantage for all these emerging outsourcing locations is that physicians are not as familiar with the clinical trial process as they are in the West, but that situation is improving.
"There are also disadvantages because of lax regulations," says Aparna Krishnan, senior research analyst at IHS Global Insight. "If they work with local industry, there is a danger of supplies being contaminated because standards are not adopted. This is the main worry. It makes more sense for them to set up their own facilities so they can maintain standards."
Remnant agrees: "There are quality issues. The level of compliance is not as high as in the West."
Alongside this trend, the pharmaceutical industry is also in a state of flux as it shifts its base from chemical molecule-based products to biological ones, bringing with it different manufacturing techniques, a lot more clinical trials and an increase in costs that an industry already facing pressure to reduce prices is finding hard to sustain.
"There is a huge push to look at the cost base of R&D. Pharma want these costs to be predictable, hard to achieve when research is carried out internally."
This combination has led some companies to look at the option of outsourcing key functions to more cost-effective parts of the world, notably India, Southeast Asia and Latin America.
"The processes for biological trials are a lot more stringent," says Swetha Shantikumar, an analyst with Frost & Sullivan. "A lot more data needs to be gathered, and the costs of this are high in Europe or the USA. Yet there is cheaper manpower and similar facilities in some of the emerging markets."
On top of this, many common drugs will soon be reaching the end of their 20-year patent protection, and companies are hoping to jump in on this and start manufacturing them cheaply, a task that may prove too expensive in western countries. Add to that a desire for cheaper generic drugs and it is clear why some companies have looked to outsourcing.
"Healthcare costs are hitting the roof," says Shantikumar. "They want more generic drugs cheaper, so there is more pressure to outsource."
Patient pools
The governments of China and India are aware of this and are setting up facilities that are compliant to western standards to attract western drug companies, while the government in Brazil is setting up similar infrastructure so it too can get a share of the pie.
"India has the advantage that the gene pool of patients is very similar to the West, so clinical trial results will be similar," says Shantikumar. "This makes the approval process quicker."
The patient profile in some of these countries is wider than in the West, which can be an advantage for clinical trials. For example, China has a massive population and, particularly in rural areas, a lower standard of healthcare. This results in a large number of ill people and thus a ready audience for clinical trials.
It's a process that also benefits the Chinese people as the government is keen to set up more rural hospitals. Setting up combined facilities that can carry out clinical trials and act as local hospitals is seen as a way to let the West partly fund their creation.
"The financial crisis in the West has led to a lot of people heading back to their own countries."
"Western companies want to participate in the growth in healthcare in these markets," says Remnant. "There is also a lot of scientific talent in these markets."
The cost per patient for conducting clinical trials in these countries is significantly less than in the West. It is also seen as a long-term investment to be in growing markets for healthcare. Having facilities in these countries makes it easier for launching and selling products to their markets and in some cases regulations insist that the trials of drugs have to be carried out locally for the drug to be made available.
Developing countries are also able to capitalise on what is becoming known as the brain gain. Over the years, many of their top scientists and medical staff have been lured away from these countries by the higher earning potential of the West. Setting up research laboratories and more medical facilities on home soil is encouraging some to return to their countries.
"They are coming back and bringing knowledge with them," says Shantikumar. "Also, the financial crisis in the West has led to a lot of people heading back to their own countries."
IP and compliance
One big drawback for international companies, notably China, has been IP protection. Counterfeiting of almost every product has been a major problem in many Southeast Asian countries and has put off international companies from investing in these areas. But the situation is improving and the Chinese government in particular is making big strides to tackle this issue.
"The government wants to improve the situation so foreigners will be comfortable in investing," says Shantikumar. "Previously, there were a lot of security issues. The Indian IP system is stronger than China's but both are trying to improve."
"China has a massive population and a lower standard of healthcare. This results in a ready audience for clinical trials."
India has a language advantage over China when it comes to attracting western companies because far more of its population speak English.
A disadvantage for all these emerging outsourcing locations is that physicians are not as familiar with the clinical trial process as they are in the West, but that situation is improving.
"There are also disadvantages because of lax regulations," says Aparna Krishnan, senior research analyst at IHS Global Insight. "If they work with local industry, there is a danger of supplies being contaminated because standards are not adopted. This is the main worry. It makes more sense for them to set up their own facilities so they can maintain standards."
Remnant agrees: "There are quality issues. The level of compliance is not as high as in the West."
No comments:
Post a Comment