[Ip-health] End of the Debate on Generic Quality: AstraZeneca to Outsource Manufacturing

[robert weissman]

Over the last several years, Big Pharma and its allies have with
increasing frequency sought to undermine confidence in the quality of
generic pharmaceuticals.

The brand-name industry and its allies have claimed that generic quality
is unsound and the World Health Organization Prequalification program
undependable.

And, of course, quality concerns are very serious matters -- about both
branded and generic medicines.

But as it has been framed by Big Pharma and its allies, the policy
controversy should now come to an end.

That's because of the increasing trend by the brand-name companies to
outsource manufacturing of their pills -- typically to the same Indian
and Chinese firms that are competing in generic markets.

This fact should also put an end to the ridiculous proposition that
national patent and related intellectual property standards affect where
companies producing for global markets locate their manufacturing
facilities (or choose to have their products manufactured). Pharma may
be unhappy with elements of patent protection in India or China, but the
companies are happy to have their drugs made there.

All this is brought to mind by today's announcement from AstraZeneca
that it plans to outsource *all* of its manufacturing over the next decade.

--
Robert Weissman
Essential Action


http://business.timesonline.co.uk/tol/business/industry_sectors/health/arti=
cle2468741.ece

 From The Times
September 17, 2007
AstraZeneca to outsource manufacturing
Robin Pagnamenta

AstraZeneca, Britain=92s second-largest pharmaceutical company, is
planning to outsource all its drug manufacturing activities within ten
years.

David Smith, AstraZeneca=92s executive vice-president of operations, said
that the company aimed to become a pure research, development and
marketing organisation.

=93Manufacturing for AstraZeneca is not a core activity,=94 Mr Smith said.
=93AstraZeneca is about innovation and brand-building . . . There are lots
of people and organisations that can manufacture better than we can.=94

Mr Smith, who is leading a restructuring drive designed to cut costs and
improve profitability before the expiry of patents on key drugs, said
that the priority would be to outsource all of AstraZeneca=92s
manufacturing of active pharmaceutical ingredients =96 the basic chemicals
used to formulate conventional medicines.

He said that it would be possible to find significantly cheaper contract
manufacturers, many of which would be in the Far East. =93We are looking
to access China and India in a much more meaningful way,=94 he said.

Later, the company would seek to strip out and outsource more
sophisticated manufacturing and logistics activities.

Mr Smith said that the transformation would take several years to
complete because of complex regulatory hurdles.

At present, AstraZeneca has 27 manufacturing sites in 19 countries.
Since February, the company has said that it plans to shed a total of
7,600 jobs - or 11 per cent of its 66,000-strong global workforce, but
Mr Smith indicated that this would be the start of an even more
fundamental transformation of the business.

Looking to AstraZeneca=92s ultimate aim, Mr Smith said: =93We would own the
IP [intellectual property], the research, branding and the quality and
safety issues . . . but [everything else] would be outsourced. The idea
is to take out as many stages as you can.=94

The company is set to lose 38 per cent of its revenue over the next five
years because of the expiry of patents on key drugs. They include
Arimidex, a breast cancer drug with annual sales of $2.2 billion (=A31.09
billion), whose patent ends in 2010; Seroquel, a schizophrenia drug with
sales of $4.7 billion and patent expiry in 2011; and Symbicort, an
asthma medicine with sales of $3.7 billion and a 2012 patent expiry.

The majority of cuts announced so far are in the group=92s manufacturing
and supply-chain operations. Astra-Zeneca=92s research unit, which employs
about 12,000 people, is expected to remain largely unscathed.

Mr Smith, who previously worked for Est=E9e Lauder, the cosmetics group,
and Timberland, the clothing group, said that he wanted to follow the
example set years ago in the fashion, electronics and carmaking
industries by shifting away from the traditional model of a vertically
integrated pharmaceutical company controlling everything from research
to manufacturing and logistics.

He said that the pharmaceutical sector had been among the most
conservative global industries in its attitude towards manufacturing and
the supply chain, in part because of a history of high profit margins
and stringent industry regulation. =93We are going to go through a model
of outsourcing the back-end . . . we don=92t see manufacturing as core,=94
he said.

Other big pharmaceutical companies, such as Pfizer, the huge American
group, have also begun outsourcing manufacturing recently. The company,
which is the world=92s biggest drugmaker said last week that it was
shedding 420 jobs at its British factory, at Sandwich, Kent, and that it
would opt to outsource some functions.