Western Pharma Companies "Insource" from Asia to Reduce Risks

October 8, 2008

To reduce the risks involved in outsourcing pharmaceutical operations to Asia, many Western firms are increasingly taking an “insourcing” approach, a new report says.

To reduce the risks involved in outsourcing pharmaceutical operations to Asia, many Western firms are increasingly taking an “insourcing” approach, a new report says.

Defining insourcing as “capturing the benefits of an Asian location through an in-house investment,” the report from PriceWaterhouseCoopers (PWC, New York, NY) says this approach is becoming more common. As a result, companies are more willing to outsource higher-value activities such as drug discovery, because they are confident that they can protect their intellectual property.

Recent examples of such direct investment include AstraZeneca’s tuberculosis research center in Bangalore, India, and GlaxoSmithKline’s neuroscience research center in Shanghai, China.

“Market growth and opportunities to access innovation are beginning to overshadow cost as the reason for having a presence in Asia,” said Mike Keech, director of the global pharmaceutical and life sciences industry group at PWC. Benefits such as IP law reform and the availability of educated and qualified scientists, Keech continues, are now outweighing factors-such as uncertain IP protections and regulatory frameworks-that had previously inhibited development.

Asia is too important for pharmaceutical companies to ignore, Keech says, but companies should not race into the region without a clear plan and understanding of the complexities of the markets.  

“Pharmaceutical companies need to take the time to think strategically about how and why and where they want to be in Asia,” he said. “ Significant shifts are taking place with regard to the drivers of growth across the region that can influence decisions about how to approach a market and where to locate operations.”

The report, “The Changing Dynamics of Pharma Outsourcing in Asia: Are You Readjusting Your Sights?” was issued by PriceWaterhouseCoopers on October 2.

The full report is available for download from the PWC web site