Pharmaceutical Industry Using East For Outsourcing

A variety of issues facing pharmaceutical manufacturers are causing them to look to the East for "third party relationships through a combination of licensing, collaboration and outsourcing deals" according to Datamonitor, a New York-based database analysis firm.

One of the toughest issues is low R&D productivity, with the number of New Molecular Entities approved in the U.S. falling to the lowest levels seen over the past two decades, despite companies making the highest ever levels of investment in R&D, according to Datamonitor.

"The 'network pharma' model relies on four key types of relationships, in-licensing, out-licensing, collaborations and outsourcing, to carry out a variety of functions across the business using a network of partners," said Datamonitor pharmaceutical markets analyst Romita Das.

"Over the past four years, the licensing dependence (as measured by the proportion of ethical sales derived from in-licensed products) of the leading 55 pharmaceutical companies has risen from 20.7% in 2002 to 24.4% in 2005. The growth in licensing dependence for these companies is expected to rise further, accounting for 28.7% of ethical sales by 2010," Das added.

Another concern when viewing outsourcing is the issue of intellectual protection. However, Das pointed out that recently both India and China have both recently revised their IP legislation, bringing it in-line with international standards as part of their requirements as a World Trade Organization member, Das said. "This has provided an opportunity for companies to take advantage of their low cost base, and for companies to further integrate global outsourcing of core functions into their business model and realize greater value."

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