Contract Manufacturing in India and China Backed by Government Policies

Contract Manufacturing Organizations (CMO) will reap the rewards as pharmaceutical production becomes increasingly globalized, according to a new report by business intelligence experts GBI Research.



The new report* anticipates that the global CMO market will grow steadily due to the increased outsourcing of pharmaceutical production by Western pharmaceutical manufacturers to Asian countries. The availability of adequate numbers of current good manufacturing practices and compliant manufacturing sites in Asia make India and China popular outsourcing destinations of choice for CMOs.

India and China represent the fastest-growing countries in the CMO services sector having witnessed drastic changes in their government and regulatory policies that encourage pharmaceutical outsourcing in order to increase business and attract foreign clients. For example, in 2005, the Indian Biotechnology Policy issued simplified procedures for regulatory clearance and exemptions from import duties and service taxes, encouraging foreign investments within the country.

In China, the State Food and Drug Administration (SFDA) has clearly stated contract manufacturing as a long-term goal for the country's economic growth. In early 2001, Article 13 of the new edition of the “Drug Administration Law” was issued, legalizing pharmaceutical contract manufacturing in China. In August 2003, the SFDA clarified, in the trial version of the “Regulations on Processing Drug for Export”, that Chinese drug manufacturers may conduct contract manufacturing for a pharmaceutical company outside China.

Furthermore, the introduction of the new patent regime in India during January 2005 encouraged multinational pharmaceutical companies looking to outsource their manufacturing of branded drugs with the protection of Intellectual Property Rights (IPRs). The amendment of the Schedule Y article allows parallel phase clinical trials to be conducted along with reductions in custom duties for clinical trial samples being imported. However, GBI Research analysis suggests that many Eastern Europe countries may offer superior IPR protection compared to their Asian counterparts, which lack an effective enforcement framework and witness more instances of IPR violation.

The global CMO market was valued at $26 billion in 2010. Driven by increases in the sourcing of biologics and generic manufacturing, the market is forecast to reach approximate revenues of $59.9 billion by 2018.
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