Where’s the Best Place to Manufacture Pharmaceuticals?
November 08, 2013
There are many criteria involved in choosing a suitable location for pharmaceutical manufacturing. At Talentmark, we find that clients have a number of factors in mind, several of which are perhaps not immediately apparent.
First, if the requirement is to manufacture licensed product, it becomes a priority to identify a country with strong patent protection such as Switzerland or Ireland. This choice is likely to be further supported by tax breaks and concessions against local investment. Yet for generic products with a reduced margin, low manufacturing costs become more important and China, India and Eastern Europe work well.
After the country has been selected, a number of other factors come into play. Talent is becoming an increasingly challenging dynamic of the decision making process.
Traditionally manufacturing sites were in more rural, hard to reach locations. At senior level, rural locations have often been viewed as a benefit – if the location is a ‘Destination’ with an engaging local culture and attractive landscape. In this case, companies tend to bring in talent at senior level and use effective training schemes to promote staff through to middle management. However, with increasingly complex technology being adopted in pharmaceutical manufacturing, the use of unskilled local manufacturing labour becomes increasingly challenging. This leads to a requirement for skilled middle management, who in turn need good schools and local amenities. In this situation, remote locations don’t always hold the right appeal.
As a result, future pharmaceutical manufacturing is likely to be characterised by less use of traditional, rural locations and more deployment of cluster/Science Park locations with important facilities close at hand.
In emerging markets there is a shortage of such sites due to regulatory issues around land ownership and the provision of adequate utility services. However, many governments offer incentives to aid construction and offset the costs of future taxation. This is usually in recognition of the significant investment that companies are making in an area, bringing revenue to the local community and contributing to the government’s tax revenues.
Distribution is also a key factor to consider in site selection. Proximity to raw materials has obvious benefits as well favourable shipping costs and taxes. A suitable distribution infrastructure is also important due to the cold chain requirement of many products.
In summation, there are a significant number of factors involved in choosing a location. When seeking to attract people, Talentmark has found that those situated in more isolated locations are finding talent acquisition increasingly challenging. With manufacturing technology ever evolving – and the need for the right people to manage the process – this will becoming an ever more significant factor in selecting a suitable site.