Contract Manufacturing In China

By Oliver Mueller & Clifford Mintz, PhD

The outsourcing of pharmaceutical manufacturing is growing most rapidly in Asia. Recently, PriceWaterhouseCoopers named China as the most attractive Asian country for outsourcing. At present, more than 100 drug manufacturing sites in China are manufacturing API or finished products for approved branded and generic drugs.

While China accounted for only $1.9 billion of the $31.9 billion global CMO revenues in 2011, Chinese CMOs have emerged as preferred outsourcing partners for many pharmaceutical companies for a variety of reasons. These include: 1) cost containment, 2) improvements in China’s infrastructure, 3) improved regulatory oversight and adherence to current good manufacturing practice (CGMP) standards, 4) better enforcement of intellectual property laws, and 5) a skilled Chinese workforce.

One of the main drivers of the emergence of the Chinese CMO industry is cost savings. Because China is a low labor wage country, pharmaceutical manufacturing costs can be reduced by as much as 40% or more. Also, lower capital and overhead costs (as compared with the US and Europe), tax advantages and an undervalued currency can translate into significant cost savings for companies that outsource manufacturing in China.