Concerned with rising R&D costs, many U.S. bio/pharma companies are considering Asian countries, such as India and China, for the development of their Active Pharmaceutical Ingredients (APIs) and pharma products, in the hope of getting a good deal, thanks to low-cost production facilities and cheap labor.
On a cost perspective, there’s no doubt Asian manufacturers may be able to save companies 30-to-60-percent off the costs of manufacturing in the U.S. Yet, while offshoring may make sense for some industries and certain biotech projects, there are pitfalls and caveats that U.S. companies should closely consider before committing to working with a team based outside the country.
Apparently many U.S. companies have come to realize those challenges, since several years ago it was predicted that eventually all chemical manufacturing would take place in either India or China. Yet, API manufacturing still takes place domestically, and the U.S. business is continuing to grow, outpacing that of Asia Pacific.
GDUFA Changes Everything
The key challenge for working with offshore manufacturers is the closer scrutiny they are receiving from the U.S. government. For many years the facilities of manufacturers in India and China developing APIs for sale in the U.S. were not inspected. But the advent of stricter inspection policies generated by the Generic Drug User Fee Amendments (GDUFA) increased the FDA’s ability to fully inspect offshore facilities more closely to ensure that they are strictly following Good Manufacturing Practices (GMP), as well as Western standards.
This closer scrutiny can often result in failed inspections and subsequently banned imports. Companies outsourcing their projects to offshore manu-facturers need to know that while they can save manufacturing costs when inspections go right, failed inspections can mean that they need to begin projects all over again - doubling or tripling their costs and losing valuable time-to-commercialization.
Logistical and Cultural Barriers
Another issue has been the difference in time zones, language and cultural barriers. Most API projects are complicated, with lots of moving parts and regulatory activity. This type of complexity requires a close partnership and regular, open dialogue between a sponsor and its Contract Manufacturing Organization (CMO). Working around the communication challenges can make regular meetings and activity reporting difficult; India and China are 10.5 and 13 hours, respectively, ahead of Boston – and that means it can take more than a day to be able to connect the sponsor in the U.S. with the team located actually halfway around the world.
Likewise, the communication, open rapport and team problem solving so essential to drug development can be challenging because of language barriers. Ensuring complete transparency, with immediate updates as soon as problems arise, can be impacted by time-zone, cultural and language differences. Many a sponsoring company has driven or flown to its CMO’s site to deal directly with complex issues. A flight to India, which can take more than 17 hours, makes that next to impossible to do quickly.
So for projects that involve a great deal of complex technical discovery work, it might not be the best course to choose a CMO outside of the country when communication, knowledge exchange and collaboration is of the utmost importance.
The Challenge of Litigation
Another issue that has caught many a sponsoring company off-guard is the issue of litigation in foreign countries. If any issues arise regarding intellectual property (IP), litigation needs can be extremely challenging when addressing them from abroad. This is particularly true given that the laws in other countries do not necessarily provide the same IP protections as in the U.S.
Related to this, before working with any CMO in Asian countries, it is often helpful to work with a respected broker or agent on the ground who can advocate for you when needed.
Despite the challenges, offshoring CMO work to Asian CMOs, can work when it involves later stages of chemical manufacturing, which don’t require the same level of constant communication and management.
Below are four key questions you should be asking before entering into any offshore partnership:
- What is your project management structure? Inquire about the CMO’s reporting structure, how often they hold regular meetings with their sponsors, what their communication process may be for when problems arise, and if they have a dedicated project manager available at all times. Most importantly, ask to speak to the project manager, as well as a customer reference to hear first-hand.
- What level of redundancies do you have in place? It’s a given that in chemical manufacturing, problems can and will arise. Ask the CMO if they have a Plan B for when issues arise, and what types of redundancies they have put in place to ensure that small problems don’t cause major disruptions.
- How many U.S. companies do you work with? This question will give you a good idea of how experienced the company is in terms of navigating FDA guidelines and policies, as well as how they are able to assimilate the U.S. business culture and time-zone barriers.
- Can I speak with your customers? Speaking with customers is probably the most important thing you can do to vet a CMO partner, whether in the U.S. or offshore, but don’t settle for the company’s customer poster child. Ask to speak to a customer that ran into problems so you can hear how the CMO was able to overcome them.
There’s no question that these days, it can be expensive to manufacture new APIs. Companies need to examine how they can manufacture safe and effective drugs efficiently and cost effectively. In some cases, turning to Asian-based CMOs can be the answer, but they need to determine when the risks can outweigh the benefits and choose wisely.
Ed Price is President of PCI Synthesis (www.pcisynthesis.com), a pharmaceutical development CMO based in Newburyport, MA and the largest small molecule drug substance manufacturer in New England. PCI Synthesis is also a commercial manufacturer of NCEs, generic active pharmaceutical ingredients (APIs), and other specialty chemical products for the medical device industry. As a CMO, PCI Synthesis provides emerging and mid-sized pharmaceutical companies access to the expertise needed to develop and manufacture complex small molecules