PHARMAcr.JPGThe rise of China as an R&D centre for western pharmaceutical giants is a subject EngagingChina has touched on before — see this story. So, its nice to see Boston Consulting Group confirm the phenomenon.

The trend to offshore R&D to Asia — first India and most recently China — has to date taken place in an ad hoc fashion, says BCG.

After
testing the waters, western pharma firms are now committed to
strengthening their offshore R&D capabilities. But to do that they
must adopt a more integrated and deliberate strategy. John Wong,
chairman of BCG's Asia-Pacific region says:

The
wise path is one of planned engagement, defining a medium- to long-term
R&D offshoring vision that harmonises with the company's global
R&D strategy.”

Inevitably, BCG has a
“three-part framework” to help pharma industry decide on the right
strategy. Stripped of the consultant speak, the basic idea is that
firms should keep their options open to accommodate the shifts in
capabilities and availability of R&D in India and China. They
should also adopt a more systematic approach to managing risk in these
offshore locations.

India has traditionally been the favoured
Asian partner for western pharma companies. Indeed, Indian companies
have stolen march over Chinese companies in terms of joint ventures or
marketing alliances. But China is catching up fast and, indeed,
possibly overtaking India as the favoured location for new investment.
Even Indian companies are setting up base in China.

Finding it
tough to choose between India and China? BCG argues the two countries
require different business models. For example, outsourcing some of a
company's “excess” leads to India is a great way to quickly ease
bottlenecks and access a broad and reliable vendor base.

In
contrast, the best business model for China is probably that of the the
captive R&D centre, which helps ensure a stake in that country's
huge potential market in the longer term.

That was the strategy adopted by AstraZeneca, whose new Chinese “Innovation Centre” — see earlier story — seeks not only to buttress AZ's global R&D effort but also tap the domestic market.

According to some estimates, China's pharmaceutical market is on target to become the fifth largest in the world by 2010.

For much more data and projections, BusinessMonitor has published a $575 report on China's pharmaceuticals and healthcare market.

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