Pharma outsourcing can work in China - executive

29 October 2008 20:07  [Source: ICIS news]

NEW BRUNSWICK, New Jersey (ICIS news)--Pharmaceutical companies can still establish good supply-chain relationships with Chinese suppliers, despite the quality scares plaguing the market, an industry executive said on Wednesday.

“I see no reason not to do business in China at all,” said Brian James, director of strategic development at Rondaxe Pharma. James was talking at the Drug Chemical & Associated Technologies Association’s (DCAT’s) strategic-sourcing summit in New Brunswick, New Jersey.

China is known as a low-cost but risky partner for sourcing fine chemicals and pharmaceuticals. However, with careful preparation and due diligence, risks can be minimised. A Chinese-based partnership can still be developed, James said.

Benefits in China include well-educated technical senior-level personnel, a large, inexpensive labour pool and a tremendous supply of raw materials from a resource-rich country. In addition, Chinese suppliers, including active pharmaceutical ingredient (API) and intermediate manufacturers, have a strong desire to become respected partners, rather than just a vendor, and have a willingness to work toward their customers’ goals.

Risks include inadequate quality assurance and control, which is partially driven by decreased client support and lack of government oversight. Another risk is a perceived lack of intellectual property (IP) protection.

“There’s a belief that China disregards World Trade Organization (WTO) patent laws. There is also a high turnover rate in Chinese companies, which puts IP at risk,” James said.

Further, some companies are too quick to cut corners in order to increase profits, and that poses a health and safety hazard in addition to compromising the quality of the product.

Societal differences and language limitations also feed into misunderstandings and miscommunication that can further aggravate the supply-chain relationship and erode confidence.

One obstruction is the cultural attitude where Chinese companies try to fix mistakes on their own first, rather than raise the problem for collective evaluation with its partners. In contrast, Western companies would rather be alerted right away to any problems in the manufacturing and supply process.

James outlined strategies that can be used to address various risks that often arise from culture clash.

“Involve any of your own employees who are fluent in Mandarin in communications with Chinese suppliers. Or hire your own translator when you are in China," he said. "Don’t rely on the supplier’s interpreters."

He added: "Try to work with agents or others who have a dedicated presence in China. Nothing beats having your own people, people you can trust, on the ground and on site there.”  

To determine and adhere to quality, audits are necessary, he said.

“Include a review of standard operating procedures [SOPs], and it’s important to tour the facility to see that they are adhering to their SOPs. Check for yourself that their equipment and machinery are being calibrated regularly,” James said.

He recommended sponsoring an audit early on in the relationship because Chinese suppliers generally do not want to front the cost of an audit, which can be expensive to perform. He also recommended an independent, third-party audit after the initial relationship has started, which can be cheaper.

“Think ‘partner’, not ‘vendor’. Draw on their desire to be your partner and show that you’re willing to work with them to deal with these problems," James said.

"Start slowly, build confidence in your supply chain, critically evaluate their vendor qualifications and procedures and be wary of cost cutting practices,” he said.

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By: Feliza Mirasol
+1 713 525 2653

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