Do Western Pharmaceutical Manufacturers Need to Up Their Game?

It’s no secret that pharmaceutical manufacturing has been on the rise in the East, with both China and India emerging as major manufacturing hubs.

This growth has been largely motivated by cost, as it’s far cheaper to manufacture in Eastern countries than it is in Europe or the US. Other factors have also influenced this trend, including speed of manufacturing and the ability to increase capacity without facing stumbling blocks like regulations and red tape.

As a result, many Western organisations have decided to outsource their manufacturing to the East. With manufacturing giants like Dr Reddy’s Laboratories, Piramal, Samsung Biologics and Wuxi already based there; it’s become a major pharmaceutical manufacturing region.

Contrary to many conversations I had at Chemspec 2019, I do not believe that the East poses a threat to the West in terms of market share. I agree this is the most Eastern facing market that we’ve ever seen, but the situation is far too complex to simply say that the East is the ‘new home’ of pharmaceutical manufacturing.

Instead, the increasing competition from the East means that manufacturers in the West must up their game – especially now that the quality of drugs in the East is improving thanks to more stringent regulations.

I see three key areas that Western organisations should try to ‘up their game’: pricing, quality and innovation.

Arguably for too long, the West has been seemingly unopposed in the market, leading to inflated prices. Thanks to pressure from the East – where lower manufacturing costs mean lower prices - Western organisations will be forced to make their prices more competitive.

One way the Western market could avoid a cut on pricing is to offer higher quality drugs. Due to more strict regulations, Western manufacturers have traditionally produced the best drugs. With the Western market well-positioned to further this gap in quality, investing in quality could provide an excellent solution. After all, this market does prioritise quality over price.

Innovation will also be hugely important. Traditionally, Eastern manufacturers have mainly produced generics - 90% of drugs produced in China are generics. However, there has been a conscious effort to move away from this trend. For example, the Chinese government are introducing numerous reforms to encourage innovation and increase the production of New Chemical Entities (NCEs).

“The fear of potential innovation in the East will drive innovation in the West.”

Already we’ve seen NCEs produced at an increasing rate in the West with innovative patentable products now/soon to be on the market. This is only the beginning, with competition hotting-up between manufacturers in the two opposing regions.

It’s all very exciting stuff. Pressure from the East is creating a market that boasts higher quality, more innovation and more competitive pricing than ever before. This will motivate market growth with more players to emerge and even more growth in other regions like Japan likely.

This is having a fascinating impact on the search for talent. Companies are beginning to realise that, as competition hots up, great people become more important and harder to source. Attracting and retaining talent in this market has become more crucial than ever before.