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Print“This is a tide that is coming in. These things that are happening and the issues around production and quality and the issues around IP are slowing that tide, but it's not going to stop the tide. ”
The center of the global pharmaceutical industry is rapidly shifting from North America and Europe to Asia, according to a recent PriceWaterhouseCoopers survey of pharmaceutical executives. One big reason, of course, is that manufacturing in countries like India and China is on the rise.
But it's not just the region's lower manufacturing costs that pharma finds alluring. The industry is also increasingly interested in moving R&D and clinical trials to Asia. Further fueling the heading-east trend is the region's improving standard of living, which is helping turn these countries into major consumers of drugs as well as drug producers.
The Journal of Life Sciences' Daniel S. Levine recently spoke to PriceWaterhouseCoopers' Dan Bartholomew about the rise of Asia's pharmaceutical industry, the draw to multinational drug companies, and the barriers that remain to the sector there. Based in San Francisco, Bartholomew is the firm's senior managing director and practice leader for the West Coast life science practice. Edited experts of the conversation follow:
Q: You say Asia is poised to not only become the largest pharmaceutical market in the world, but that many territories in Asia are poised become "powerhouses of the industry." How far along are we in this global transformation and what's driving the shift in the center of gravity from North America and Europe to Asia?
A: We're just getting started down the road. If you look at the domestic marketplace within the Asian countries, there are a number of companies that are doing both traditional medicine, as well as what we would consider mainstream, contemporary, or modern medicine-type production. But there aren't emerging leaders yet in China, et cetera. There are in India obviously, Ranbaxy and others, but there aren't any real emerging leaders that are driving that market at this point. From a point of view of multinationals coming over, there are many facilities being built and many facilities being bought. That's still developing.
Q: What's really driving that, though. Is it cost? Growth of markets?
A: Part of it is cost. It's much less costly from a lot of different perspectives to do your manufacturing, R&D, and clinical trials in Asia-Pac. There's friendliness from a government perspective and tax incentives. Essentially, a lot of our resident- or headquartered-companies are being wooed over to Asia-Pac. And if you look at their domestic marketplace, it is essentially untapped. There are multiple dimensions to that. The first is that there is simply not a lot of buying going on of mainstream or contemporary modern medicines within Asia-Pac and there's a huge untapped population that could benefit from the use of the drugs. On the other side there is still a lot of use still of traditional medicine.
Q: And when you say traditional medicine, you mean what?
A: In America, we have a tendency to think we have Tylenol or ibuprofen. In China, they will think we have Tylenol, or ibuprofen, or ginseng, or whatever it is that they would use as an analgesic. I would call it traditional medicine. That's just as prevalent as what we would call mainstream pharmaceuticals. There is a cultural shift that has to take place to really take advantage of that population, but there is an untapped population there.
Q: Coupled with that, there is increasing wealth in these countries. How key is that in making the region a more attractive place for not only manufacturing and research but also for sales?
A: It's certainly a factor. All of these factors are related. I don't think any one of them is the leading factor. Like many other things in the world, if it were simple, it would have been solved a long time ago.
Q: When I think of what I've seen multinationals doing in Asia, the focus has been on manufacturing. But there's increasing interest in research and development and clinical trials. Where are the biggest opportunities and what's it going to take for that promise to be realized?
A: The primary thing that would keep our executives up at night would be intellectual property and the protection of that. One of the driving factors is getting the intellectual property issues resolved in a way that our leaders and executives can feel comfortable moving significant IP over.
Q: Your report comes just as there has been news out of India that Novartis has lost its patent protection case. Do you think this will hurt companies' willingness to go in there?
A: This is a tide that is coming in. These things that are happening and the issues around production and quality and the issues around IP are slowing that tide, but it's not going to stop the tide. If I use near-shore or I do on-shore manufacturing to do active ingredient manufacturing, I'm going to have a production specialist I send over there and I'm going to have a regular call with them and I'm going to make sure they are producing to quality.
But if I'm outsourced to another major manufacture to the United States or Canada, I have much less management to do. However, if I'm going to do it in China, or I'm going to do it in Singapore, or I'm going to do it in India, I'm probably going to put a management team in place. And I'm probably going to have processes I'm going to need to put in place. And I'm going to have policies around these things. And I'm going to have extra vigilance I put in place. It's not a question of whether or not it's going to happen, but a question of in what structure it's going to happen.
But if I'm outsourced to another major manufacture to the United States or Canada, I have much less management to do. However, if I'm going to do it in China, or I'm going to do it in Singapore, or I'm going to do it in India, I'm probably going to put a management team in place. And I'm probably going to have processes I'm going to need to put in place. And I'm going to have policies around these things. And I'm going to have extra vigilance I put in place. It's not a question of whether or not it's going to happen, but a question of in what structure it's going to happen.
Q: There's a tendency to think of Asia as a monolith, but from market to market, we are talking about very different situations. Who do you think the most significant players are going to be?
A: I definitely think China and I definitely think India—I realize I'm shooting in a barrel because everybody is going to say that.
Q: Well, do they have different strengths? Are they going to play differently in the markets?
A: I think China and India will play alike. I think Singapore is gearing itself more towards being the R&D epicenter. We can't discount Singapore, but it will be a different functional area.
Q: China and India are top of mind when talking about Asia, but what are the countries that aren't on people's radar that will emerge as important pharmaceutical centers?
A: We've asked the same question. Our study focused on the major markets that we all know. I've certainly seen more activity in Taiwan than I've expected, but I can't really speak to that because it wasn't covered in our survey.
Q: How much do you think the multinational pharmaceuticals interest in Asian countries is being driven by the economic benefits these areas promise versus their interest in getting a foothold in these markets?
A: For now, they are looking more at the cost advantages, but they also have their eye on those markets once the economic model makes sense for more market share in those areas. Everyone is a little cautious about that.
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