The Offshoring of Engineering Facts, Unknowns, and Potential Implications (2008) / Chapter Skim
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Offshoring in the Pharmaceutical Industry--Mridula Pore, Yu Pu, Lakshman Pernenkil, and Charles L. Cooney
Offshoring in the Pharmaceutical Industry--Mridula Pore, Yu Pu, Lakshman Pernenkil, and Charles L. Cooney
Pages 103-124
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From page 103... ...
new products. Increasing costs along the pharmaceutical value chain and an industry-wide decline in R&D productivity has placed considerable pressure on the industry to INTRODUCTION explore options for improving performance by reducing cost, Competitive advantage in the pharmaceutical industry increasing research productivity, and extending market pen first requires excellence in translating basic research and etration.
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From page 104... ...
At the same time, Cooney Figure 1 expertise, they are the areas of focus in this ing and science the patents of many drug products are expiring, opening the paper. Because the industry is highly integrated throughout market to competition from manufacturers of generic ver- the value chain, these activities include engineering, such as sions.
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From page 105... ...
under contract with an outside supplier." [8] International According to the AT Kearney Offshore Location Attracoutsourcing is indeed one possible business model for a tiveness Index survey in 2004, India and China are currently FIGURE 3 Framework of analysis.
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From page 106... ...
FIGURE 4 Offshoring business models. Cooney Figure 4 the two most popular offshoring locations for a broad range OFFSHORING IN PHARMACEUTICAL of industry sectors because of their cost advantages and RESEARCH AND DEVELOPMENT their depth and breadth of offshoring experience and people Overall, offshoring of R&D in pharmaceuticals is not very skills.
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From page 107... ...
[1] Starting with comparatively high-volume, ing in R&D in China because of the widespread prevalence low-value work, offshoring related to drug discovery has there of generic brands and counterfeit drugs, inadequate IP moved up the value chain to services ranging from preclini protection, and Chinese consumers' inability and unwillingcal chemistry to large clinical trials.
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Prior China on compounds from traditional Chinese medicines as to 2001, 40 percent of Chinese medical enterprises had co- a basis for drug discovery. Novartis has announced its intenoperative projects with foreign firms.
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[19] Most common service offerings Less common service offerings Emerging service offerings Research–Biology Research–Chemistry Clinical development Preclinical Target Target Compound Screening Lead development Phases I–IV identification validation generation optimization Key Genetic research Functional Analog preparation Compound Pharmacology Clinical management Assay execution activities genomics synthesis and • Building • Safety • Protocol design Proteomics blocks SAR evaluation technologies • Efficacy • Patient recruitment • Protein Protein HTS and UHTS • Reference • Trial management and expression and biochemistry Medicinal compounds PKDM monitoring purification Assay chemistry • Protein structural Disease models development • Bioanalysis • Central lab Synthesis analysis Cell-based • In vitro ADME • Report writing Genetically • Focus library • Protein-to-protein models for • In vivo ADME modified mice • Combinatorial efficacy Data management interaction chemistry Toxicology • Clinical data Bioimaging • Natural management Chemoinformatics • General compound • Reproductive • Biostatistics extraction Bioinformatics • Genotoxicology Drug design • Immunotoxicology Regulatory Expression profiling • Drug registration • Computer • Carcinogenicity aided • Regulatory consulting Basic molecular • Structural Animal model for biology technologies based efficacy • Gene sequencing • DNA and RNA Structural preparation chemistry • mRNA library • NMR • X-ray crystallography Analytical chemistry FIGURE 7 Various opportunities along the value chain.
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In addition, Western pharmaceuticals and diagnostics In India, clinical trials cost as little as 40 percent of are increasingly believed to be more effective than domestic those conducted in Western countries.
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makes it easier and faster to enroll by foreign firms. patients in clinical trials.
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encourage MNPCs to pursue only fragmented work offshore In addition, the number of global trials is increasing by 10 and not to work across the entire value chain. percent per year.
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, and the vantage. Patent protection for these products has expired Chinese Venture Capital Association (CVCA)
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The rise of the Indian pharmaceutical industry, with ex Thus the concept of generics does not apply to biological pertise in reverse engineering and patent challenging, could products as it does to chemical drugs. Biological therapeuhave a significant impact on the global generics market.
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Ernst and ucts in the market are reflective of the growing number of Young predict that in the future Indian companies will fall people who can afford more therapies and are demanding into one of three categories: world-class treatment. Thus opportunities abound for pharmaceutical companies to expand their operations.
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Although life insurance has been available for some time, The concept of a SEZ is modeled on earlier, highly sucprivate health insurance schemes are just appearing. One cessful initiatives by the Chinese government to increase example is a Prudential-ICICI product that covers serious FDI.
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From page 117... ...
[54] According to the president of Beijing Kevin King Management Consulting Company Ltd., "In a rather long period of Wage Inflation time, copying foreign drugs after their patent protection is over, or, for some drug makers, seeking legal loopholes in the Labor costs are a major source of cost advantage in patents of foreign drugs to legally produce generic medicines pharmaceutical manufacturing.
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From page 118... ...
[5] these service jobs are actually relocated offshore in the next Foreign firms must use domestic distributors, but, be- 30 years, the resulting job turnover would be around 225,000 cause they are not exclusive agents, the distributors simply jobs per year, or 1 to 2 percent of the 16 million jobs created take orders for hospitals and retailers but do not promote every year in the U.S.
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From page 119... ...
Industry paid to local workers, profits earned by local outsourc The study by the McKinsey Global Institute shows that, ing providers and their suppliers, and taxes collected far from being a zero-sum game, offshoring is a game of from second- and third-tier suppliers to the outsourcing mutual economic gain.
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From page 120... ...
Thus many major Indian companies are pursuing acqui- Major European pharmaceutical companies, such as sitions of companies that manufacture generic products for Novartis and GSK, have shifted their R&D centers and
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of generics 2006, www.drreddys.com, and bulk pharmaceutical ingredients accessed March 2007 Meridian Healthcare 2002 Marketing and distribution Pharmabiz.com, April 20, Ltd (UK) 2006, www.drreddys.com, accessed March 2007 Betapharma 2006 Generic drug manufacturer The Guardian, February 6, (Germany)
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This report addresses location-specific factors related to Offshoring of pharmaceutical manufacturing provides offshoring that make them attractive destinations (the pull) MNPCs with cost advantages because of the reduced cost for offshoring for specific parts of the overall value chain.
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Boston, Mass.: Boston Consulting Group. Available online at Although offshoring in the pharmaceutical industry is http://www.bcg.com/publications/files/Looking_Eastward_Aug06.pdf.
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Available online at http://www. Venture Capital Association.
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