Shifting Supply Chain To Asia Will Require More Quality Control Vigilance - World Pharma Manufacturing Summit

SHANGHAI - As Big Pharma continues to shift API manufacturing and contract manufacturing to Asia, it must be vigilant in verifying quality even as regulatory agencies in the region enact more stringent guidelines, according to speakers at the World Pharma Manufacturing Summit in Shanghai.

Bayer AG, which views China as the company's second-most important market, has established Healthcare Strategy Sourcing Shanghai - a sourcing, compliance and supply chain evaluation center - to provide market intelligence and sourcing of material to global Bayer Healthcare, Dittmar Nerger, Bayer's head of healthcare strategic sourcing and compliance Far East, said March 14 during the summit.

Suppliers in China and East Asia are now supplying Bayer's more than 25 global sites, Nerger noted, adding: "China depends on the global market to sell; and the global market depends on China to supply."

By the end of 2012, Bayer will eliminate 4,500 jobs worldwide and create 2,500 new positions during the same period, mostly in emerging markets (Also see "Bayer Shifting Further To Emerging Markets Including China" - Scrip, 1 Dec, 2010.).

Save Cost Not Quality

China is shifting its regulatory system to ensure drug safety and quality with its newly revised good manufacturing practices guidelines; however, China's State FDA does not inspect exported goods, which means pharma companies have to audit their suppliers in China to ensure quality of bulk drugs shipped to their manufacturing sites.

China's expanded GMP guidelines include quality control tools such as risk management systems, corrective and preventive action reporting, supplier audits, an adverse drug event reporting system and more stringent sterilization requirements (Also see "China Releases New Drug GMPs; Domestic Consolidation Expected To Accelerate" - Scrip, 18 Feb, 2011.).

However, "supplier's GMP certification doesn't mean quality is OK," said Rory Budihandojo, director of quality systems and EHS audit at Boehringer Ingelheim GMBH's China office.

Budihandojo showed a fake GMP certification to conference attendees. He also noted that suppliers may rent a "shadow factory" to pass the audit and suggested auditors use GPS systems to locate manufacturing sites.

The risks to both drug manufacturers and patients are high. In a widely reported incident during 2007-2008, more than 140 patients died after receiving the blood thinner heparin, which was deliberatively adulterated in China and exported to the U.S. (Also see "U.S. Congressmen Call On FDA Commissioner To Press Investigation Into Adulterated Heparin During Upcoming Trip To China" - Scrip, 3 Aug, 2010.).

The heparin supply-chain incident was a wake up call to many in industry and the U.S. Congress. While U.S. FDA has identified the heparin contaminant as overly sulfated chondroitin sulfate and said it was economically motivated, the agency has not yet identified those responsible in China (Also see "U.S. Congressional Investigation Of Tainted Heparin Could Highlight Need For Import Safety Legislation - Or Not" - Scrip, 25 Feb, 2011.).

CMOs See Opportunities in Asia

As Big Pharma faces a daunting patent cliff on blockbuster drugs and pricing pressures globally, it is increasingly turning to emerging markets for future growth as well as to reduce manufacturing costs.

Generics could play a more important role in emerging markets, as innovative pharma ties up with generic players in high-growth economies and generics enjoy faster global growth, Jan Anne Schelling, DSM Anti-Infectives' China manufacturing director, told meeting attendees.

For example, last year DSM sold 50% of its anti-infectives business to Sinochem to get a foothold in China'a restricted anti-infectives market (Also see "DSM Forms 50-50 Joint Venture With Sinochem To Crack Into China's Restricted Anti-Infectives Market" - Scrip, 22 Dec, 2010.).

DSM is not the only global CMO seeking opportunities in Asia.

Swiss CMO Lonza Group Ltd. announced in January 2010 a strategic move toward Asia. It closed three sites in the U.S., Canada and the U.K. and moved small molecule production to its site in the Nansha district of Guangzhou, China, and plans to open more facilities in Asia.

"We started with this move when we started to build the Nansha sites in 2004-2005. ... That's when we said structurally we have to do this," Lonza CEO Stefan Borgas told investors during a recent earnings call (Also see "China's Contract Manufacturing Growth Tied To Losses In The West" - Scrip, 16 Mar, 2010.).

Lonza also established a production facility in Singapore to manufacture Avastin (bevacizumab) for Genentech Inc. Lonza divested the facility to Roche/Genentech in August 2009, noted John Machulski, Lonza's senior project director.

According to Machulski, Lonza also operates five manufacturing and R&D sites in China.

Specialty biotech SciClone Pharmaceuticals Inc., however, is taking a different tact, looking to sell products in China that it manufactures elsewhere. The Foster City, California, firm is banking on the power of branded generics for selling its branded flagship product Zadaxin (thymalfasin), for which API is manufactured by Lonza in Belgium and shipped to Hong Kong (Also see "Lost Patent Protection? Move To China, Says Specialty Biotech SciClone" - Scrip, 1 Feb, 2011.).

SciClone says that manufacturing its product in the West and selling it in China is a distinct advantage to local buyers because quality in China is in such question; however, with China's new GMP guidelines, the government is hoping that the gap will narrow in the next few years.

- Dai Jialing ([email protected])