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AstraZeneca to
Outsource Manufacturing

ROBIN PAGNAMENTA / The Times (UK) 17sep2007


“Manufacturing for AstraZeneca is not a core activity,” Mr Smith said. “AstraZeneca is about innovation and brand-building . . . There are lots of people and organisations that can manufacture better than we can.”


Mindfully.org note: This should give users of AstraZeneca products second thoughts about safety, as each step of removal from the end product brings increased probability of error. This is a bad direction for an already problematic industry. For AstraZeneca, it is seen as survival. For users, this should be seen as a sign that very different plans need to be made, such as stay healthy in the first place. Reliance on the health care industry is a sure path to ill health.

AstraZeneca, Britain’s second-largest pharmaceutical company, is planning to outsource all its drug manufacturing activities within ten years.

David Smith, AstraZeneca’s executive vice-president of operations, said that the company aimed to become a pure research, development and marketing organisation.

“Manufacturing for AstraZeneca is not a core activity,” Mr Smith said. “AstraZeneca is about innovation and brand-building . . . There are lots of people and organisations that can manufacture better than we can.”

Mr Smith, who is leading a restructuring drive designed to cut costs and improve profitability before the expiry of patents on key drugs, said that the priority would be to outsource all of AstraZeneca’s manufacturing of active pharmaceutical ingredients – the basic chemicals used to formulate conventional medicines.

He said that it would be possible to find significantly cheaper contract manufacturers, many of which would be in the Far East. “We are looking to access China and India in a much more meaningful way,” he said.

Later, the company would seek to strip out and outsource more sophisticated manufacturing and logistics activities.

Mr Smith said that the transformation would take several years to complete because of complex regulatory hurdles.

At present, AstraZeneca has 27 manufacturing sites in 19 countries. Since February, the company has said that it plans to shed a total of 7,600 jobs - or 11 per cent of its 66,000-strong global workforce, but Mr Smith indicated that this would be the start of an even more fundamental transformation of the business.

Looking to AstraZeneca’s ultimate aim, Mr Smith said: “We would own the IP [intellectual property], the research, branding and the quality and safety issues . . . but [everything else] would be outsourced. The idea is to take out as many stages as you can.”

The company is set to lose 38 per cent of its revenue over the next five years because of the expiry of patents on key drugs. They include Arimidex, a breast cancer drug with annual sales of $2.2 billion (£1.09 billion), whose patent ends in 2010; Seroquel, a schizophrenia drug with sales of $4.7 billion and patent expiry in 2011; and Symbicort, an asthma medicine with sales of $3.7 billion and a 2012 patent expiry.

The majority of cuts announced so far are in the group’s manufacturing and supply-chain operations. Astra-Zeneca’s research unit, which employs about 12,000 people, is expected to remain largely unscathed.

Mr Smith, who previously worked for Estée Lauder, the cosmetics group, and Timberland, the clothing group, said that he wanted to follow the example set years ago in the fashion, electronics and carmaking industries by shifting away from the traditional model of a vertically integrated pharmaceutical company controlling everything from research to manufacturing and logistics.

He said that the pharmaceutical sector had been among the most conservative global industries in its attitude towards manufacturing and the supply chain, in part because of a history of high profit margins and stringent industry regulation. “We are going to go through a model of outsourcing the back-end . . . we don’t see manufacturing as core,” he said.

Other big pharmaceutical companies, such as Pfizer, the huge American group, have also begun outsourcing manufacturing recently. The company, which is the world’s biggest drugmaker said last week that it was shedding 420 jobs at its British factory, at Sandwich, Kent, and that it would opt to outsource some functions.

source: 17sep2007

Drug Industry Slow to Embrace Outsourcing

ROBIN PAGNAMENTA / The Times (UK) 17sep2007


Makers of medicines may be at the cutting edge of science and technology, but, in its attitude towards manufacturing, it is hard to find an industry that has been more conservative than pharmaceuticals.

In consumer goods, carmaking, electronics and fashion, price competition forced companies decades ago to embrace radical changes to their production methods. In the drugs industry, high profit margins, strict regulation and a basic fear of running short of stocks of pills - driven, in part, by concerns about patient safety – have discouraged innovation. All the big global pharmaceutical companies control nearly everything themselves – from research to the production of active pharmaceutical ingredients and logistics – but this may be starting to change.

Intense competition on price from makers of generic drugs, falling profitability and a quest to improve efficiency before patents expire on blockbuster drugs are driving pharmaceutical companies to rethink how they make and distribute medicines. The industry is waking up to outsourcing and contract manufacturing.

source: 17sep2007

AstraZeneca to Cut 4,600 Jobs,
and Hints More Will Go

ROBIN PAGNAMENTA / The Times (UK) 27jul2007


AstraZeneca, Britain’s second-largest drugmaker, yesterday unveiled plans to shed a further 4,600 jobs as part of an extended cost-cutting drive aimed at restoring competitiveness in the face of a string of patent expiries on key drugs from 2010.

In February the company announced 3,000 job losses, bringing the total announced this year to 7,600 ? or 11 per cent of AstraZeneca’s 66,000-strong 2006 global workforce.

David Brennan, chief executive, said the cuts would slash $900 million (£438 million) from costs by 2010 through a radical reshaping of the business. He said the latest cuts would include 700 research jobs and thousands more across sales and marketing, regulatory affairs and IT. AstraZeneca recently signed a $1.4 billion seven-year IT outsourcing deal with IBM.

Mr Brennan hinted there could be more cuts to come. The restructure is linked to efforts to transform the firm from a conventional pharmaceuticals maker into a biotechnology specialist.

AstraZeneca said the changes would cost $1.6 billion to implement, and also announced a slide in second-quarter pretax profits, to $2 billion from $2.2 billion in the same period last year. The profits downturn was in part attributed to the costs of the restructuring and a $376 million charge associated with the $15.6 billion acquisition in May of the US biotechnology firm MedImmune. That deal was widely criticised as too expensive.

Sales rose 10 per cent to $7.3 billion during the quarter, driven by a 38 per cent surge in sales of Crestor, its blockbuster anti-cholesterol drug.

source: 17sep2007

AstraZeneca Faces Big Damages Payout

ROBIN PAGNAMENTA / The Times (UK) 23jun2007


AstraZeneca could be forced to pay out hundreds of millions of dollars in damages if a ruling by a court in Massachusetts that the company had overcharged for some drugs paid for by Medicare is followed across the United States.

A judge in Boston said that the Anglo-Swedish pharmaceutical giant, along with the American drug firms Schering-Plough and Bristol-Myers Squibb, had broken state laws by engaging in “unfair and deceptive trade practices”.

Steve Berman, a lawyer with the law firm Hagens Berman Sobol Shapiro, which led the class-action suit, said that it had focused on the “practice of inflating” the average wholesale prices that the companies reported for drugs such as Zoladex, a prostate and breast cancer drug produced by AstraZeneca.

Court documents said that AstraZeneca had “acted unfairly and deceptively by causing the publication of false and inflated average wholesale prices for Zoladex which grossly exceeded actual physician acquisition costs by as much as 169 per cent”.

It said that the companies involved had allowed drugs to be sold to physicians at a substantial discount to the official average wholesale price without the knowledge of buyers such as Medicare and Medic-aid.

Mr Berman said that the lawsuit, brought on behalf of Medicare beneficiaries, insurance companies and other third-party payers, was viewed as a test case and trials were planned for the rest of the United States.

Mr Berman estimated the damages against AstraZeneca in Massachusetts would total about $32 million (£16 billion), but nationwide could reach as high as $1 billion. The case was filed in 2001 and focuses on conduct dating back to the mid1990s.

A spokesman for AstraZeneca said that the company expected the ruling to be overturned on appeal. “AstraZeneca has competed responsibly with respect to pricing and marketing of drugs and we have acted at all times in accordance with the law,” he said.

The judge dismissed claims against another company, Johnson & Johnson.

— Goldshield Group is to pay £4 million to settle claims by the Department of Health after claims of an alleged conspiracy over the sale of warfarin, a blood thinning drug, to the National Health Service. The pharmaceutical company said that Ajit Patel, the chief executive, and Kirti Patel, the chief operating officer, had resigned to focus on the case with the Serious Fraud Office. Rakesh Patel, the finance director, has been appointed chief executive.

source: 17sep2007

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