Recipes for Success in India and China
Finding the right partner in Asia–Pacific is a very complex business and there is no uniform answer. Firstly, you need to tackle some basic questions:
Answering these questions will determine what direction you should be heading in. For example, for pharmaceutical development activities, India is the preferred spot for a variety of reasons. For manufacturing of an API based on fermentation, you may prefer to go to China, with its wealth of experience and lack of power interruptions. And for back office support, you may decide on Singapore, which is attractive for expats. Further, it is not as important to be close to customers for back office work as it is for manufacturing or R&D.
Once you've decided on a country, you need a the specific location. For example, is proximity to any governmental offices important? What about logistics, such as infrastructure, proximity to airports, and the time difference? Would electrical power interruption be an issue? Labour costs can also be a deciding factor, with costs varying greatly between hubs, such as Shanghai and Mumbai, compared with tier 2 or 3 locations. Language-based communication also needs to be considered, particularly in China. Finally, if you don’t want to invest in an offshoring location then thoroughly check your potential Asian CRO/CMO.
The important features are: • experience in dealing with western companies.• GMP compliance.
Although many in the industry are concerned about counterfeit APIs in Asia, it’s worth remembering that approximately 80% of the APIs supplied worldwide come from India and China,1 which offers good evidence of the countries’ capability and reliability. When it comes to generic drug products — manufactured illegally if the API is still subject to intellectual property laws —it is a different ball game. In China, the vast majority of local medicaments sold domestically are still generics. In terms of avoiding potentially problematic Asian vendors or domestic pharmaceutical companies, however, it is probably best to screen their portfolio for instances of possible counterfeits.
Coping with long-distance locations
The following discussion of differences between the western world and China and India is based on general guidance; for more information you can look to books and papers written by experts or people who professionally deal with the subject of cross-cultural differences. Generally, you will find that your Asian partner has a bold ‘can do’ mentality combined with ambition and an eagerness to learn. You may also call it a ‘want to prove themselves’ mentality. It’s often impressive how hard-working most employees are, but on the flip side of the coin you sometimes observe the ‘no problem’ problem, such as underestimating the complexity and difficulty of certain problems or the time it takes to accomplish certain projects. In particular, with partners who haven’t been exposed to collaboration with western companies before, you may occasionally encounter a ‘wait and see’ mentality and a habit that can be described as ‘work not done + good excuse = work done.’ This often leads (at least in the settling-in phase of a collaboration) to reduced turnover and efficiency.
In India, you should bear in mind that most scientists — as well educated as they may be — have a background in pharmaceutical generics only and it will take time for them to get used to new standards regarding the development of new molecules. The golden rules to be aware of are: • to hear to understand• to understand to agree• to agree to execute• to make execution repeatable and sustainable.
There are also a couple of very concrete things it is advisable to do:
Most important is to adjust your communication style to ensure you are getting concrete answers to all your questions.As well as those general rules, you should also be aware of some specific issues in certain countries.
The reality of shrinking profit margins, drying pipelines, patent expirations, intense generic proliferation and increased R&D costs has made offshoring an attractive strategy, particularly for R&D activities. As well as conducting clinical trials and API-related activities such as chemical research offshore, an increasing number of western companies are also establishing full end-to-end R&D activities in Asia. The business models applied are manifold, such as acquiring local companies, forming strategic partnerships and, increasingly, setting up wholly-owned R&D subsidiaries.
However, western companies are also right to be wary of offshoring sensitive and vital operations. There is low tolerance for error industry-wide; simple mistakes can compromise results, or even harm patients, resulting in massive and expensive liability. On top of that, the cost of an unsuccessful partnership is more than just a financial issue because the company loses crucial time and opportunities that could have been used elsewhere.
By outsourcing to a third party, there is also a loss of partial control as work passes from client to provider, and working across multiple languages and time zones can also introduce extra complexity. Poor communication can also lead to problems with quality and delays. Nevertheless, given the objective constraints in the pharma industry, the globalizing world and the importance of newly emerging markets, offshoring and expansion towards Asia is unavoidable. Realizing its benefits, however, will require more than just sustained investments and the development of management experience; endurance and adaptability to cross-cultural differences will be crucial.
Supply Chain Strategy: Managing risk and opportunity in a changing global landscape