Establishing an API manufacturing base in China

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Establishing an API manufacturing base in China

INICIO/Noticias Farmacéuticas | Posted 21/01/2010 0 Post your comment

According to an analysis by Robert Kennedy, Manager of Industry Research for Thomson Reuters API Intelligence, as published in Scrip News of 9 December 2009, a striking number of Chinese companies are gearing up to supply pharmaceutical ingredients to the regulated markets of the west.

There are several benefits associated with establishing an active pharmaceutical ingredient (API) manufacturing base in China. These include gaining access to China's talented pool of scientists and engineers, good public infrastructure (especially in comparison to India) and a lower cost base relative to established markets like the US and Europe. China also serves as a strategic base for selling APIs in other emerging markets.

Intellectual property (IP) protection is improving. China is strengthening its commitment to upholding and enforcing IP rights and its laws and regulations are converging with international standards. Judicial enforcement of IP rights in China has seen the following improvements:

- the establishment of specialised IP panels within the civil court system;

- the qualifications of judges presiding over cases involving IP have improved;

- damage awards for IP violations have been occurring more frequently; and

- a few cases have resulted in the award of high damages, by Chinese standards, and this phenomenon is increasing year to year.

Of course, when building or buying an API manufacturing base in China the buyer needs to be cautious. For example, companies need to be aware of China's current environmental issues and its rapidly changing regulations.

In preparation for the 2008 Olympic Games, the Chinese government shut down a large number of factories in and around Beijing to improve air quality. With the implementation of more stringent environmental health and safety regulations, many of these closures will be permanent because facilities cannot conform to new waste-water treatment standards.

Prices of goods are increasing as Chinese manufacturers attempt to comply with environmental standards. Additionally, China is struggling internally with the rising cost of labour, inflation, fluctuation of the exchange rate and spending on coal, electricity, oil and water, further contributing to higher prices.

In China there is a need for ‘hand holding’ and close monitoring of manufacturing activities. US FDA approval of a facility does not necessarily mean consistent quality of its output. Employees must be given ongoing training to ensure adherence to standard operating procedures and GMP regulations. In addition, there is a high turnover of qualified and experienced quality assurance/quality control (QA/QC) staff, further increasing the need for and cost of compliance training and monitoring.

Although China has taken steps towards improving its IP protection, enforcement measures continue to be insufficient and the country continues to be a haven for counterfeiters and pirates. Fines and penalties for IP violations do not always provide adequate deterrence to infringers.

Lastly, doing business in China can be difficult due to the language barrier and cultural differences. Despite the fact that many Chinese are returning to China after spending years working abroad, it is difficult to find people who speak fluent English in all departments of a manufacturing site. (see also China API sourcing: the way forward, China is not the low-cost option in every category, Sourcing APIs from China, China's appeal of the Chinese API sourcing market and Can China retain its API sourcing appeal?)

Reference:

Robert Kennedy. Can China retain its API sourcing appeal? Scrip News. 2009 December 9/ 2010 Scrip 100.

Source: Scrip News