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Pharmas look at alternative means to cut costs

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CIOL Bureau
New Update

MUMBAI: The global pharmaceutical industry is seeing rapid advances in

processes and technologies and mounting cost pressures are forcing

companies to look at alternate means such as outsourcing to achieve

greater efficiency and productivity.

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In this highly competitive industry, it is vital that companies ensure the quick commercialization of new drugs by accelerating the time to market for their products.

As a result, pharmaceutical companies are increasingly looking to retain

their internal focus on research and development (R&D) and marketing while

outsourcing their manufacturing processes, thus fueling a growing demand

for the manufacturing capacities of contract manufacturing organizations

(CMOs).

New analysis from Frost & Sullivan, Global Pharmaceutical Contract Manufacturing Markets, reveals that revenues in this industry totalled $12.38 billion in 2004 and can reach $25.70 billion in 2011.

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CMOs are revamping their business model and providing more

value-added services such as development, logistics, packaging, and

marketing. By opting for such services, pharmaceutical companies are able

to reduce the number of supply chain participants and make optimum use of

their internal resources.

"CMOs have been building and acquiring state-of-the-art facilities that

rival those of pharmaceutical companies and are constantly upgrading them

to enable novel manufacturing processes," explains Frost & Sullivan

Research Analyst Barath Shankar S. "The anticipated influx of

biopharmaceuticals is likely to create a huge demand for specialized

manufacturing technologies that are not available with pharmaceutical and

biopharmaceutical companies."

However, the constant changes in regulatory requirements mean that

contract manufacturers are at a high degree of risk when investing in

manufacturing plants and technologies.

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CMOs will need to develop risk-sharing strategic partnerships, instead of engaging in providing one-off contract services. This would result in a shift to the "virtual pharma" model with pharmaceutical and biopharmaceutical companies concentrating primarily on R&D and marketing, thus freeing up internal resources and turning more competitive.

"Asian countries, especially India and China, are continuing to draw a

significant share of outsourced work from developed nations and the region

is expected to show strong growth owing to a large manufacturing capacity

and competitive cost proposition," says Shankar. "While solid

dosage forms continue to lead revenue contribution, liquid dosage forms

are likely to lose significant market share to injectables that mainly

include sterile products and biopharmaceuticals."

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