To outsource manufacturing to low-cost destinations like India, the Global multinational drug companies need. It has turned out to be a boon for a leading drug companies in India such Ranbaxy, Cipla, Dr. Reddy’s Laboraties and Aurobindo. The drug companies are now well poised to post in excess of 20 percent every year for the next five to 10 years. Most of the players who follow the different generic business models. It was growing organically at an above industry-average growth rate of 12 percent for the past five years. The equity investments are being discussed in the boardrooms of multinationals and Indian generic companies.
There are many reasons why India is emerging as an inviting destination for outsourcing drug production. The report by Ernst and young and the organization of Pharmaceutical Producers in India said that 80 percent of the 38 big and medium sized pharma companies across the world rated India higher than China, Eastern Europe, Puerto Rico, Singapore and Ireland.
Diminishing numbers of new drugs as against existing drugs going off-patient, high research and development costs and pressure to reduce healthcare costs are forcing Big Pharma to rope in strategic partners to contain manufacturing and drug development expenses, the India offers a significant cost-quality proposition in end-to-end research and development with a potential savings of over 60 percent as compared to the US coupled with a strong supply of skilled manpower and capital efficiency.
In the changing global drug manufacturing landscape, profitability in multinational drug companies is under pressure from patent expirations, pricing challenges and failing research and development productivity. The companies like Pfizer, GlaxoSmithKline, sanofiaventis, Astra Zeneca and Merck & Co are closing their manufacturing units in the developed world and moving production to low-cost destinations. In the recent deals companies like GSK-Dr Reddys Laboratories, Pfizer Aurobinso and Pfizer-Claris Life Sciences are perfect examples of how such deals become win-win situation for the partners.
They could see even more of global pharma companies adopting various operating models such as captive offshoring, dedicated research and development units in partnership, fee for services and collaboration or joint venture for future growth within India. India has close to 100 manufacturing facilities approved by the US Food and Drug Administration. The largest after the US about 40-50 new plants, in addition to the plants of the major Indian pharmaceutical companies that are commissioned in the past two-three years confirming to the quality standards suggested by the US FDA and the UK Medicines and Healthcare Regulatory Agency. The margins have shrunk from up to 200 percent four-five years earlier to just about 15-20 percent.
The second largest drug maker in the world entered into a similar alliance with Dr. Reddy’s Laboratories to access the current portfolio and future pipeline of more than 100 pharmaceuticals in the cardiovascular area, diabetes, oncology, gastroenterology and pain management. The products will be manufactured by Dr. Reddy’s and licensed and supplied by GSK in different countries in Africa, the West Asia, Asia Pacific and Latin America. The entry of the bigger players in outsourcing is good news. All the good news on contract manufacturing rankles that Indian companies have failed to make much headway in research and development outsourcing.
REFERENCE:
http://business.rediff.com/report/2009/aug/17/bpo-big-pharma-cos-join-outsourcing-queue.htm
