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OUTSOURCING INSIGHTS REPORT LIFESCIENCELEADER.COM MARCH 2015 16 If you want to learn more about the report, please go to niceinsight.com The overall offshoring trend hasn't slowed down a bit. T J L A D A G E MBiotech, Market Research Manager at That's Nice By TJ Ladage WHAT DOES 2015 HOLD FOR THE INDIAN CMO INDUSTRY? What Does 2015 Hold For The Indian CMO Industry? The last few years have been pretty rough for the Indian biopharmaceutical CMO industry. If 2013 wasn't enough, tougher unannounced surprise FDA inspections, warning letters, and import bans were carried on in 2014 and will continue in 2015. Some of the biggest names in the Indian CMO industry — Ranbaxy, Wockhardt, Sun Pharmaceutical, IPCA Labs, Dr. Reddy's, and others — have been hit with warning letters, import bans, and site shutdowns. To add to the misery, Europe has followed these steps and joined the FDA in banning manufacturing sites in India. f you ask the Americans, they will point out the lax nature of businesses in India, qual- ity concerns, safety lapses, and violations such as data manipulation. While if you ask the Indians, they would call it differences in culture and disregard to business practices in India. But as an Indian working in the U.S. and having experienced some of the work culture nuances in both countries, I tend to agree with both. The argument can go on, but the fact remains that both the Indian pharmaceutical industry and the U.S. pharmaceutical industry need each other. Forty percent of the generics and over-the- counter medications sold in the United States are imported from India. ( New York Times article, February 2014). And if India plans to export drugs to the U.S., they have to follow the rules and regulations set by the FDA for everyone. From the U.S. perspective, outsourcing to emerging markets, specifically India and China, is on the rise; the U.S. already relies on these two markets for the majority of its generics, APIs, excipients, etc. Both India and China, though termed "emerg- ing" markets, have matured enough to be major stakeholders in manufacturing and exporting of generics to the U.S. and Western markets. It is vital for the U.S. to make sure these emerging markets up their standards and get their act together to maintain market stability and keep the domestic generics pricing in check. And with rising healthcare costs, it makes correcting the above a priority for the United States. The overall offshoring trend hasn't slowed down a bit; in fact, the recently concluded Nice Insight 2014-15 annual CMO-CRO survey reveals a whopping 11 percent increase in respondents that are willing to offshore to emerging markets (70 percent in 2014 to 81 percent in 2015). The biggest jump was observed among "Specialty Pharmaceuticals," which increased from 61 percent to 83 percent in 12 months. Similar leaps were observed within Big Pharma (71 percent to 87 percent), Emerging Pharma (67 percent to 83 percent), and Biotech (70 percent to 83 percent). The smallest increase was observed among Emerging Biotech (86 percent to 89 percent), but of all the industry buyer groups, Emerging Biotech was the one willing to offshore the most to emerging markets. The small increase can also be attributed to the already high offshoring percentage in 2014. If we look at outsourcing by region, we can I