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

Thu Sep 20 05:38:01 2007

Rob is absolutely right. But this is hardly news, except for the fact that
they are outsourcing all their product. For as long as I have been working
in this area--almost three decades, generics have been  manufacturing a
large part of the patent sector (and, in some cases vice versa--that is,
many patent companies have decided it is more profitable to continue their
patent pharmaceuticals after the patent expires, but market the same drug
themselves as its generic!).

Mickey Davis

> 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/ar=
ticle2468741.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 lot=
s
> 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 chemical=
s
> 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 t=
he
> 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 employ=
s
> 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.
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Mickey Davis
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