The increase in global outsourcing has raised more than a few red flags on the legislative front. Pending bills on the issue will undoubtably attract close scrutiny in Congress this year. Concern has been voiced over the safety of off-shore manufacturing, as well as on its impact on domestic employment.
Country-of-origin labeling for pharmaceutical ingredients is addressed in the proposed US Food and Drug Administration Globalization Act, and in a bill sponsored by Sen. Sherrod Brown (D-Ohio). As Anastasia Thrift reports in a recent blog, Brown’s bill calls for labeling that lists the origin of active and excipient ingredients in descending order based on the quantity in the finished dose. FDA, meanwhile, has just issued draft guidance on good importer practices (see Daphne Allen’s blog of Jan. 15).
Edward Goldman, senior vice president, Foster Miller, recently shared with PMPN the following perspective on shifting trends for medical device manufacturing in China.
Mr. Goldman’s text:
Overall, we are seeing many manufacturing operations return to the United States from China. There are several reasons for this trend, with the first, and possibly the most impactful, being economic factors. The exchange rate between the American dollar and the Chinese Yuan has become less favorable for U.S. companies. Although many material and labor costs in China are still far less expensive compared with those in America, the rising price of oil has narrowed the playing field. In addition, given the lengthy supply chain when manufacturing in China, speed to market has also become a concern. Field warranty costs and chargebacks can be a major cost, greatly reducing the apparent savings.
Economics aside, quality is a major issue for American brands, especially for medical device companies. With recent news of lead paint in toys, tainted pet food, and toxic baby formula, confidence in Chinese regulations has fallen. Consumers are increasingly aware of country of origin, and overwhelmingly trust that products made in America are of the highest standards. Medical products and devices, especially those that are inserted in the body, must be of the highest quality or companies fear sacrificing reputations built over many years. Even if a company uses strict FDA regulators to verify the quality of its Chinese manufacturing facilities, end-users might have a negative perception toward products with “Made in China” labels.
Protection of intellectual property also plays a huge role in the trend toward the shift of manufacturing from China to the U.S. While Chinese IP laws have grown stronger in recent years, they are not enforced nearly as stringently as they are in the United States. Over time this will change and progress has already been made in this area by the Chinese government.
Overall, as the U.S. dollar becomes less expensive relative to other countries and quality issues continue to plague China, certain (medium to low volume, high quality requirement) manufacturing operations have returned, and will continue to return to American soil.