Pharma: Outsourcing

Biologicals and, surprisingly, starting materials & ingredients both received 26% of the vote. The latter finding perhaps alludes to the growing awareness of critical quality attribute (CCA) concerns arising from adulterated or poor-quality starting materials. Alternatively, it may simply be a reflection of the desire to shorten supply chains so that pharma manufacturers are not dependent on bulk ingredients coming from China, which is often is the only source.

prices and increased supply chain security is an overall beneficial development.

What type of manufacturing is best suited to international sources? Following the recent spate of national attempts ( India, the US and the EU to name but a few) at reshoring of pharma manufacturing, particularly in the latter half of 2020, what has gone somewhat under the radar is the detail of which elements of the manufacturing process are best suited to national or international sourcing. In the CPhI survey, respondents were asked to select the product types that are best suited to being manufactured by international sources. ‘Generic APIs’ were selected as the most suitable, with 48% of respondents believing so. However, surprisingly, ‘Innovative APIs’ were the second most chosen by 30% of executives. It would be interesting to speak with respondents about the reasons behind the latter view, but we can perhaps speculate

that it is indicative of the international nature of CDMOs – which are often commissioned internationally for API development work. The overall implication here is that large- volume generic APIs, which still have sizable cost variances between markets, are unlikely to be reshored to more expensive domestic markets unless there is an underlaying supply chain security concern – such as for certain essential medicines. Yet, the much-publicised Phlow Corporation deal for essential medicines production in the United States (including APIs) does seem, thus far, an outlier, not the beginnings of a mass shift in approach . Manufacturing of innovative final dosage

forms was selected as the least suited for international sourcing, with only 17% of respondents believing so. Such a low percentage might reflect the growing desire of finished dosage manufacturing to become increasingly re-shored or at least dual- sourced from two different geographic regions.

Do you think pharma production/ manufacturing will increase or decrease in your country in the next five years? Encouragingly, the industry remains bullish in its outlook for the medium and longer term, with 65% of respondents believing that pharma production and manufacturing will increase in their country. Executives cited increased ‘exports’ as the primary growth driver followed by a ‘growing domestic market’. A further 14% of respondents deemed that the level of production and manufacturing in their respective countries will remain the same, with just 7% of respondents believing that manufacturing will decrease.

Monetary policy implications The downside implications of looser monetary policy in most nations are yet to be fully felt by international markets, with a majority of advanced economies held up by unprecedented levels of government stimulus. Pharma undoubtedly has been the major beneficiary of investment throughout the pandemic and overall the global industry should benefit from a lasting post-COVID legacy. However, as debt burdens increase, undoubtedly there has to be marginal and growth downsides for pharma manufacturers as economies seek to reduce deficits in the medium term. That said, the survey suggests that the industry remains bullish that it will remain well funded and its production base will continue to grow. The collective view is that, of the major industrial sectors, pharma will strongly outperform all others in the medium term.

Overall, has COVID-19 increased the business outlook for the pharma industry in 2021?

The majority of our respondents – a substantial 61% – believe that COVID-19 has improved the business outlook of the pharmaceutical sector overall for 2021 and beyond. This undoubtedly reflects the expanding global demand for the existing COVID treatments, coupled with the impending vaccine production now needed to meet the tens of billions of dose demand.

Issue 2 • March/April 2021 25

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