Czech Republic and Poland attractive locations for pharma.

According to analysis carried out by PMR and described in the recent report, "Pharmaceutical Contract Manufacturing and API Sourcing in Central and Eastern Europe," the most attractive countries in the region for finding partners for contract manufacturing and API sourcing are the Czech Republic and Poland. One of the main advantages of the CEE (Central and Eastern Europe) region as a whole, above China and India--which pose a serious competitive threat--is the much lower level of counterfeiting, which will be minimized by impending EU legislation.

The drying up of R&D pipelines, over-investment in previous decades, regulatory hurdles, which delay new approvals, and the losing of patent protection on many of their blockbuster products, have forced manufacturers to sell their production plants and reduce their workforces. As a consequence--made worse by the global financial crisis--big pharma companies are tapping into the global contract manufacturing market more and more, including the CEE area.

Countries Tried and Tested

The pharmaceutical industry in the Czech Republic is one of the most developed of the CEE countries. There are many companies that specialize in API sourcing and contract manufacturing. The biotechnology industry is developing rapidly and providing a platform for specialization. There are also many companies focusing on the manufacture of dietary supplements under contract.

Pharmaceutical companies looking for sourcing and contract manufacturing opportunities may also benefit from the Polish pharmaceutical industry, where they can find companies with a long tradition of producing natural pharmaceutical raw materials, along with products based on biotech methods and chemically manufactured API and finished dosage forms. Other advantages of the country's economy include the prominent role of science and highly ethical corporate behaviour. Both the Czech Republic and Poland are members of the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (jointly referred to as the PIC/S), which guarantees a high level of implementation of the internationally recognized GMP rules.

API Competitive Edge Lost

The more prohibitive operating costs of the GMP-compliant off-patent API production--in general, some 25% of site operating costs--as well as a dramatic increase in other industry-related regulations, has made European API manufacturers increasingly uncompetitive, in terms of the costs of API production, during the last 20-30 years. As a result, many European API producers have been squeezed out by competition from Asia. The situation has been exacerbated by the fact that, in many cases, EU regulations have not kept pace with dramatic changes in the marketplace. The lack of proper oversight, control and inspection of, for example, importers of API from Asia, has encouraged the non-compliant and illegal trading of such substances in Europe.

At present, one of the main advantages of companies based in the CEE region--particularly those that are members of the EU, given the considerable competitive threat posed by China and India--is the much lower level of counterfeiting. This is complemented by their cultural and geographical proximity to Western companies, combined with labour costs, which are still lower than those of Western countries.

EU Finds Solution to Counterfeit API

Methods of producing counterfeit drugs have become increasingly sophisticated. For example, some 10-20 years ago, most counterfeit drugs did not contain any APIs. Now, although there are many counterfeit APIs, another trend has appeared: an increasing number of counterfeit drugs have real APIs. It is estimated that there are some 5000 rogue APIs manufacturers in China, and about 3000 of them are not even Chinese GMP compliant. The European countries in which counterfeit drugs are most widespread are Russia and Ukraine.

In December 2008, a number of amendments to Directive 2001/83/EC were proposed. Certain changes also pertain to API; their main objective being to make medicines on the European market safer by imposing stricter requirements on APIs imported from third countries. First, manufacturers of medicinal products will be obliged to audit all companies that manufacture the API they use. In addition, various proposed measures will ensure that imported APIs have been manufactured in accordance with rules that establish safety standards, matching those in the EU.

Member states will also have to improve inspections. This concerns, in particular, those countries in which the level of public health protection--in terms of the regulatory framework, control and supervision--does not match the EU. All in all, we believe that the regulations will increase the competitiveness of EU-based companies, in terms of quality, and will compel some manufacturers to switch to EU API suppliers more frequently, to simplify supply chains.

More information

Monika Stefanczyk

Head Pharmaceutical Market Analyst

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