Two Decades ago “with low capital, material and labour costs, and high quality Western standards it seemed that India was destined to capture a considerable volume of contract manufacturing from European and North American contractors,” Jim Browne, director of JTB Consulting and former director external supply at GlaxoSmithKline told Outsourcing-Pharma.com.
But while “there were many initial successes,” he continued, “the full potential of this transition has never been fully realised and some production has even returned to European and North American contractors.”
Escalating wages and raw material prices, along with shipping and logistic costs have closed the gap on the perceived cost benefits, he said, whilst problems with intellectual property (IP) stemming from the rapid transition of senior staff between fast growing local companies are also making the country less attractive to Western drugmakers.
The third factor pushing manufacturing back West are quality concerns, Browne added. Though a number of high quality EU and US FDA approved export only pharmaceutical plants were constructed in the 2000s, “quality issues began to subsequently appear in operating procedures, standards and maintenance.”
Sponsors turning their backs?
These issues have materialised in a number of recent high profile regulatory findings - notably US import bans from products made at Wockhardt and Ranbaxy facilities – adding to a push away from India.
Quality concerns were echoed by Brad Carlson, VP of Marketing and Sales at CMO Aenova, who told us he had experienced colleagues and customers turning their back on India due to the increasing regulatory concern.
“You start to see some of those customers moving back and saying the supply chain coming from India and China is really not the reliable supply chain they are looking for,” he said at the recent Interphex meeting in New York.
Though sponsors were reluctant to talk openly on this subject, Richard Fazackerley – Associate Director at Eisai – told delegates at the Global Pharmaceutical Contract Manufacturing (GPCM) Conference last year his firm was bringing products back due in part to quality, as “the consequences are failure of the product and brand.”
However, a former employee of a multinational drug firm, who asked to remain anonymous, told us though the company’s “regulatory groups were uncomfortable about the GxP status of the facilities,” and put off by the “limited precedence of US or European drug agency inspections,” in their experience contracting firms to make materials for drug candidates for preclinical studies (non-GMP) they “always found the quality high, communication good and the price low.”
Indian CMO opportunities
Outsourcing-Pharma.com also spoke with Indian contract manufacturer Kemwell Biopharma, which said though quality concerns are a hot topic in conversations with customers, the company has the opportunity to “stand apart from the crowd,” reporting a 25 percent growth in orders last year
Regarding recent Warning Letters and Consent Decrees in India, Managing Director Anurag Bagaria told us “the number of such incidents is alarming and obviously the Indian pharma industry has to address this in a timely manner.”
However, “these issues are not prevalent in India alone as the FDA and other regulators are tightening and raising the GMP bar worldwide,” he added. “I hope our customers will differentiate between the various service providers and make case-to-case decisions as they do in other parts of the world.”
As for the IP issue cited by Browne, Bagaria said: “At Kemwell specifically, we are taking many proactive steps to maintain IP protection such as IT controls, background checks of employees, training to sensitize employees on the importance of IP, CDAs with employees.”
Furthermore, Bagaria told us whilst there are problems with Indian IP regulations and the industry must work with the Government to improve this, such rules do not affect contract manufacturing for Western firms.
“The IP that a sponsor shares with their CDMO partner in India continues to be protected by Indian law and cannot be licensed to the competitors of the sponsors by the government or any other body.”