Outsourcing has come under the US scanner once again, this time for drug manufacturing. The US Food & Drug Administration (FDA) has been asked by a US senator to probe into outsourcing of pharmaceutical ingredients.
The senator has claimed that drugmakers are taking advantage of lower safety standards in countries like China and India. The senator has also asked Pfizer, the world's largest drugmaker, for details of its outsourcing to countries without the same drug safety standards as the US.
Senator Sherrod Brown, in a letter to the FDA's Center for Drug Evaluation & Research director Janet Woodcock, referred to her testimony to the Senate Committee on Health, Education, Labor & Pensions (HELP) where she had said that drug companies outsource because of "different governmental regulations in different parts of the world", "lower, less stringent standards in some parts of the world", and lower labour costs in developing countries.
The senator has asked Dr Woodcock for details of the volume of outsourced drug ingredients, the added costs of regulating outsourced ingredients, and the 'bearer' of those costs. He has also asked for measures to hold companies accountable for outsourcing. In a separate letter to Pfizer's vice-president of quality, EHS and agility, Gerald Migliaccio, Mr Brown asked about the drugmaker's annual savings through outsourcing and a list of instances where Pfizer has outsourced manufacturing due to lack of technical expertise.
As the blockbuster drug pipeline dries up globally, pharma companies are looking at various cost-cutting measures like outsourcing manufacturing and research work to low-cost destinations such as India and China. Pfizer outsources 17% of its pharma manufacturing, and plans to increase it to as much as 30%.
"Most global companies such as Pfizer, GSK, Merck (US), Eli Lilly and Novartis, among others, outsource their manufacturing to several Indian companies," says PricewaterhouseCoopers pharmaceutical and life sciences associate director Sujay Shetty. Most of the outsourced work relates to active pharmaceutical ingredients, the basic chemical of the drug. Most companies either outsource directly or through sub-contracts by their Indian arms. Sources say Pfizer may have about 30 sub-contract arrangements with Indian API manufacturers such as Aurobindo, Emcure and Hikal.
India has the largest number of USFDA-approved manufacturing plants outside the US. There have been concerns in the US that USFDA does not inspect its offshore approved plants as much as it does in the US. Given the increasing number of such plants in India that manufacture drugs for the US market, USFDA plans to set up a monitoring office in the country.