The Call of Asia

As Asia’s attractiveness as a centre for conducting clinical trials (CT) grows, so do the challenges. For both pharmaceutical companies or Sponsors, and the Contract Research Organizations (CROs) or Central Laborites (CL) keeping trials on track, on time and on budget are critical to their global competitiveness.

For the past decade, Asia has been the target market of pharmaceutical companies seeking to use the region’s huge population and ethnic diversity to test medicines affordably.

Although the US remains the main destination for CT, accounting for over two-thirds of total trials, Asia’s percentage is growing, as a result of two push factors.

Push and pull

Firstly, conducting trials in the west is increasingly expensive. Secondly, there is skepticism over trial involvement by western consumers and difficulties in finding the right kind of patients. Asia, on the other hand, has a large treatment-naive population.

Cost-control today is as vital to CT management as visibility and efficiency. A report revealed that US pharmaceutical and biotech industries spent nearly US$39 billion in R&D in 2004, led by Pfizer who invest over US$7 billion annually. On this scale, better cost-management equates to huge savings. For example, GlaxoSmithKline has saved over US$120 million by reducing CT supply overages since 2006.

While the push factors remain significant, what will generate industry growth in coming decades is the pull factor. As per capita GDP catches up with population growth, Asia becomes the fastest growing market for drug consumption. As a result, attracting CT features in the economic strategy of many countries in the region.

For example, the government of Singapore is planning to significantly increase the number of trials it conducts. It is promoting life sciences as one of the key pillars of its economy with an investment of almost US$350 million in infrastructure.

Located in the centre of Asia, Singapore is specifically targeting phase one trials and by 2015 hopes to double the number of studies that move into their laboratories rather then outside the region to historical global sites. Singapore is currently running 547 CT, making it the most popular country in southeast Asia.

At the other extreme, the world’s most populous country, China only accounted for two percent of the 46,977 human CT conducted around the world in February 2009. However China’s appeal as a research destination is destined to soar.

Improvements in its intellectual property and regulatory climate have pulled in more multinationals and the number of CT conducted jumped 25 percent between 2002 and 2004. China seems to be edging ahead of regional rival India in the competition for CT. Foreign R&D-based companies presently have approximately 250 trials in progress.

New drug development takes an estimated seven to 15 years, from conception to commercialisation at an average cost of between US$100 million to US$1 billion. So, every element of a CT process is critical and that includes logistics.

Of the four phases of a CT study, patients in the field are typically most heavily involved in phases three and four. During these three to five years, CT materials need to be safely and cost effectively transported to and from patients for the entire study period. In order to obtain data for regulatory approval prior to commercialisation, the visibility and transparency of the logistic chain is crucial to the success of the CT.

Research shows that the top 10 pharmaceutical manufacturers each spend approximately US$20 million on transportation per annum on their research or trial programs. A growing percentage of the US$20 million is being spent in Asia.

In 2009, DHL experienced a record number of shipments of healthcare products in Asia. Compared to 2008, shipments of finished pharmaceuticals, vaccines, medical equipment, devices and CT facilitated by DHL grew overall by seven per cent, a steady growth despite the economic downturn of 2008 and 2009 projections.

Cost advantage

A priority is controlling costs while maintaining the integrity of a trial over long periods. Leading companies like Roche and AstraZeneca already operate their own CT centers in China. Despite language barriers and CT approvals taking up to one year, low-cost labor represents an additional bonus.

Leading US CRO, Quintiles Transnational, announced in January 2008 that it was expanding its Global Central Laboratories and Clinical Development Services units in Beijing to accommodate growing business in China.

Government investment has also increased infrastructure to meet the needs of the healthcare industry. This increased investment in Singapore, China and India will support regional growth, and will help better manage transportation costs and higher costs associated with CT testing. With volumes increasing and regulatory compliance growing, demand for effective and cost-effective logistics within countries across Asia-Pacific and globally will soar.

Research suggests that the market size of transport-related trials services was at €1.3 billion (US$1.59 billion) in 2006 and will grow by an estimated rate of 10 percent to € 2.1 billion by 2011. CT are an important part of DHL’s global business today, with in excess of one million shipments.

DHL has offered CT services since early 2002. They combine DHL infrastructure with on-ground specialist partners. The services aim to offer clients a comprehensive yet compliant solution that has a significant savings component.

For the world’s leading pharmaceutical companies, key concerns are how to balance volume growth with increased compliance and escalating costs which remain logistically problematic and expensive.

Despite improving local and regional infrastructure and a plethora of local and international logistic companies, CT and medical service solutions can be fragmented, patchy and not cost-effective.

Global strategy

Tbhe best way to address the logistic issues involved in a longterm CT project is through a global CT solution that provides global, real time visibility across the whole supply chain, with a product code that allows standardised global processes, global invoicing and trained and dedicated staff to coordinate activities worldwide.

To achieve this, innovative solutions have to be found in four key CT logistic problem areas: operational, technology, packaging solutions, and regional warehousing.

Customer service agents need to understand the language and importance of the CT business. This is to instill confidence and react to escalated issues appropriately when dealing with trial investigators and / or clinics. Product code identification is crucial because it encompasses all global service standards for operations, escalations, specific handling requirements, and billing criteria between all parties involved in the trial.

Customers, partners and vendors need to be able to interface and access their shipments for better management and visibility. Investment to create an IT system that allows this CT service solution is fundamental to the long-term success of CT management in Asia.

Global visibility at a trial level is important for the chain of custody and an important element when dealing with the regulatory authorities like US FDA, when filing trial data prior to commercialisation. Logistics companies need to provide an unbroken chain and technology enables this. World class logistics CT solution providers have piloted with leading pharmaceutical companies, interfacing their IT systems to improve visibility and reporting systems.

While catering to a chain of control and visibility, logistics companies must understand the specialist packaging requirements of handling biological products and the needs of CT project managers to be able to provide effective solutions and results. As handling and delivery experts, logistics companies understand how to optimally pack materials for transit to protect the contents.

Customised solutions can provide temperature controlled packaging in varied shapes and sizes with delivery to investigators before the trial starts. Coolant materials from gels to dry ice need to be assessed for optimum performance during transportation and storage from pick-up to delivery.

With the rapid growth of life-sciences across Asia, the supply of specialist warehousing and warehouse services for CT and healthcare products is lagging behind demand.

As a result, logistics companies are filling the gaps, especially when in the transportation of temperature sensitive products requiring either controlled ambient or more stringent temperature monitoring.

Specialist logistics hubs or competency centers designed especially for CT and medical shipments are helping improve service, increase visibility and efficiency. They are designed to address the needs of the industry, providing pharmaceutical companies with a supply chain solution that offers warehouse management, transportation and a distribution services.

The solution supports cargo-tracking capability and ensures quality operations. Logistics companies are investing in CT hubs in China, Australia, India and Singapore. For example, DHL has funding allocated across the regional for additional investment into handling regulatory strands like Good Distribution Practice by year-end 2010.

With pharmaceutical companies focusing on R&D supply chains as areas for better financial compliance and control, lack of attention to transportation costs is not an option. Global logistics network providers who support and mirror global pharmaceutical company systems are seen as the preferred service providers over specialist courier companies.

They offer global systems and flexible services that can better manage costs. Flexibility of logistics services allow for customised and cost-effective solutions for priority and nonpriority deliveries.

Urgent samples are moved using an express network, while slower bulky shipments that are non-urgent items (such as standard trial folders) travel via airfreight or supply chain facilities to capitalise on both the inbound and outbound trial flows.

Value added services like labeling and/or postponement that increase cost-efficiency are look out for by cost-conscious and informed CT project managers.

As growth escalates and compliance and cost-effectiveness become top priorities in Asia, pharmaceutical companies and their CRO need logistics partners that understand their business today and can anticipate the challenges they will face in the future.

---------------------------------------------------------------------------------------

Readying for a New Decade

To succeed in Asia, it is important for pharmaceutical companies to have a wellmanaged clinical trial supply chain.

Sean Smith, Vice President, Clinical Supply Chain Fisher Clinical Services

After years of relentless change that has steadily driven up the stakes and challenges of clinical development, the pharmaceutical industry is heaving a collective sigh of relief in knowing that at least one element is unlikely to change in the decade ahead: its ability to rely on Asia as a preferred location for clinical trials.

With a population of four billion people, Asia is home to 60 percent of the global population and a huge untapped market for medicines. Meanwhile, the factors that prompted the migration of studies to cities like Shanghai and Mumbai have intensified.

It now takes US$900 million dollars and up to 16 years to shepherd a drug from laboratory to licensure, with nine out of 10 compounds failing to go the distance. Doubledigit growth in studies for biologic products is increasing development complexity and costs, which exceed those of the average small-molecule drug by about US$400 million. Meanwhile, a whopping 86 percent of studies fail to recruit patients on time, resulting in costly delays.

Under growing pressure to increase productivity and cut development costs, trial sponsors have embraced the myriad challenges of conducting clinical trials in Asia in exchange for the rewards of cost savings and rapid patient recruitment.

China and India, which ranked as the most attractive off-shore clinical sites in a 2006 survey, have come to dominate the clinical trial experience in Asia. The experiences, positive and negative, of study sponsors and clinical supply chain managers in these countries will undoubtedly inform plans for Asian clinical trials in the decade to come.

Leader of the pack

In a nation of 1.3 billion potential patients, government reluctance to accept foreign trial data in granting marketing approval for new drugs would be sufficient incentive for conducting incountry studies. Add ease of patient recruitment and the relatively low cost to conduct trials, and it’s easy to understand why China is likely to continue its reign as the top-ranked, Asian clinical trial location.

In the United States, where virtually nine out of 10 trials are delayed a year due to insufficient patient enrollment, physicians recruit a mere third of study subjects. By comparison, Chinese physicians enroll virtually all study patients at modest cost. The average investigator grant of US$1,000 for a cancer study, plus an additional US$2,000 to cover laboratory tests, make Chinese clinical trials among the most cost-effective in the world.

Benefits notwithstanding, there are hurdles to overcome in conducting clinical trials in China, the most formidable of which is bureaucracy. A complex web of national, regional and local government policies and regulations can trigger jurisdictional disputes over documentation. This may delay shipments of temperature-sensitive materials sitting on the tarmac and slow the start of trials, all of which must take place in state-run hospitals, by as much as a year.

While patient recruitment is inexpensive, logistics can be costly in Asia’s largest country, where infrastructure has failed to keep pace with economic growth. This is a special challenge for the growing number of trials involving high-value biologics, which must be shipped and stored in the cold chain at controlled temperatures. More than 25 percent of Fisher Clinical Services’ projects currently involve biologics, a proportion that is increasing steadily.

Other concerns involve ethics and safety, which have attracted widespread coverage by global news media.

At least for now, language remains another barrier in a country where Mandarin, the official language, is spoken amongst thousands of dialects. While the importance of Mandarin is expected to grow along with China’s clout, it’s worth noting that China has the world’s largest number of English language students.

Addressing challenges

• Understand the local and regulatory environment. Be aware of regulations, which can be a moving target. Navigating China’s regulatory environment efficiently saves time and resources, not to mention frustration.

• Minimise ethics and contamination concerns with professional supply chain management. It’s essential to have a high standard of control in dosage manufacture and packaging assembly, as well as thorough and complete documentation. Compliance with Good Distribution Practice (GDP) ensures that material integrity and efficiency are uncompromised. Work closely with clinical sites to ensure that storage locations are controlled and secure, especially with respect to temperature-controlled drugs.

• Use centralised and regional distribution centers. Doing so improves distribution and logistics efficiencies, limiting the times when trial drug must clear customs, which can be a time-consuming process. Careful local coordination of customs transit is another critical factor for successful supply chain management. Keep in mind that trial drug shipped from the United States or Europe takes time to arrive and additional time to be processed once it reaches China.

A close second

India, which has established a reputation as a global hub for clinical trials, is likely to continue to be the second leading Asian location for conducting global studies. According to one estimate, 15 percent of all global clinical patients will reside in India by 2011.

The reasons are threefold: time, people, and cost. India has a study start approval process of 12 weeks, which is appealingly short to study sponsors anxious to cut development time. Its population of 1.1 billion offers a large, treatment-naïve patient pool. The potential patients can be quickly recruited for studies of tropical diseases, as well as chronic conditions of the industrial world. Like China, conducting a clinical trial for a standard drug in India is a relative bargain; about 60 percent less than the US$150 million price tag to do so in the United States.

This is not to say that there aren’t shortcomings to conducting clinical trials in India. For example, intellectual property protection in India has lagged. Be that as it may, the 2005 signing by India of the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement provided some relief. It’s important to note, however, that the TRIPS agreement excludes patentability for derivatives of known substances, unless it can be shown that the efficacy is significantly greater than the original substance. Some study sponsors remain concerned about the lack of guaranteed protection.

Others express misgivings about trial safety and ethics in India, which have come under close scrutiny since the 2006 deaths of 49 infants during clinical trials conducted at the government-owned All-India Institute of Medical Sciences.

Logistics also require special attention in sprawling India, whose government has been struggling to improve its infrastructure by building more roads, generating more power, and overhauling congested ports and airports. Conditions mean logistics service providers have difficulty handling the volumes and diverse distribution networks pharmaceutical sponsors require. Surprisingly, the country’s IT infrastructure is still based on manual systems, so the risk of record-keeping errors is increased.

The steamy climate also increases the challenges to supply chain managers, particularly with regard to transporting and holding temperature-controlled materials in the cold chain.

Overcoming hurdles

• Consider an Asian clinical supply strategy. Packaging clinical trial materials in India offers genuine speed and cost advantages. In 2007, Fisher opened a full packaging facility in Ahmadabad, located within a Special Economic Zone (SEZ). SEZ are essentially import-restriction-free areas, thereby allowing free movement of goods. In essence, this means that clinical bulk drug can be received and packaged prior to completion of the study approval process, removing these activities from the critical path. Similarly, materials packaged in the SEZ can be exported to all other Asian countries with tax or export restrictions.

• Use current Good Manufacturing Practice-compliant facilities equipped with global inventory systems. Such facilities are capable of tracking material at motion and at rest.

• Employ best-in-breed IT. Move beyond phone/web support to incorporate next-generation technologies, including radio-frequency identification and global positioning system tracking devices.

• Meet labeling requirements. Labels must be written in English and are required to bear the drug name and strength, batch number, expiration date, protocol number, storage condition, and manufacturer’s address. They must also be clearly marked for clinical trial use only, and include cautionsand directions for use based upon the protocol.

• Know the documentation rulebook. Know exactly what documents are required for import license applications and for imports, since customs delays in India are commonplace. In addition, it’s critical to be aware of site or location-specific requirements. State import requirements differ in West Bengal, for example. Since these requirements evolve over time, it’s wise to stay tuned in to changes.

Future of Asian clinical trials

After years of laser-like focus on China and India, the number of clinical trials taking place in all of Asia continues to rise rapidly. Korea and the Philippines top the list of countries where trials are expected to increase most. In Japan, where recent regulatory changes significantly reduced barriers to clinical trials, such substantial growth prompted Fisher to open its newest facility in Tokyo Bay in early 2010.

The move into more challenging countries is certain to create complexity at all levels, including that of the clinical trial supply chain. Every country presents unique challenges to decipher, understand and ultimately address. Here are some considerations to keep in mind when planning the next decade of trials in Asia:

• Address the issue of overages. How to reduce product overages is a hot topic in these financially constrained times. Traditionally, trial materials have been packaged and labeled before being shipped to a specific country for use, but this reduces flexibility. At Fisher, supply chain managers are engaging the strategy of product postponement, or latestage customisation, as an alternative. It works this way: materials are packaged as required across all Fisher facilities and can be shipped in small lots to individual countries and trial sites, as they are needed. This permits supply chain managers to be highly responsive to needs, lower overages and can reduce cycle time to as little as five weeks. To deploy these services requires strong supply chain management, accurate forecasting tools and rigorous monitoring so managers will know in real time exactly where drug is and how it is being used.

• Know the language, spoken and unspoken. Knowing the language and understanding what is being communicated are essential, as there can be a difference. In some countries, such as China and Japan, a high level of cultural courtesy makes it impolite to say no, so being able to read between the lines to understand the meaning of what is being conveyed is essential.

• Be there with a local presence. To properly manage clinical trial supply chain in Asia requires being on the ground. Nothing substitutes for a brick-and-mortar local facility and a staff that speaks the language to manage the intricacies of customs clearances and stay on top of changing regulations.

• Keep in mind that all facilities are not created equal. A secure facility with high GMP standards removes the risk from the supply chain for study sponsors. Ideal facilities are those that are part of a global network capable of maintaining consistent standards of quality across all markets, developed and developing.

• Consider centralised distribution. Generally, a regionalised “hub” approach provides flexibility in shifting drug to support actual trial enrollment, rather than a more restrictive countryspecific approach. Some countries may benefit from a local drug repository to avoid potential delays with regulatory approvals. Here again, all depots are not created equal; prior validation of depot capabilities is critical, particularly for those that handle temperature-controlled materials.

• Enlist the “eyes” of electronic visibility. Electronic inventory systems enable clinical supply chain managers to know at all times where inventory is, both in motion and at rest, reducing risk of stockout.

• Choose couriers based on actual performance. Ground handling is a highly vulnerable point in the supply chain, particularly with respect to temperature-controlled materials. Use real, rather than published, performance metrics to select the right courier companies as a means of ensuring reliable, on-time delivery.

• Address clinical staff skill levels. At clinical sites, novice staff may be new to requirements for receiving and returning investigational drugs. Provide additional training, as necessary, to avoid problems down the road. Consider it an investment in the future.

• Finally, pay close attention to details. That’s where the devil lurks.

---------------------------------------------------------------------------------------

Pharmaceuticals, Animals and Law in China

This article outlines the laws for the use of laboratory animals and considers the legal implications for pharmaceutical production.

Zhong Zhuhua, Senior Associate, Gide Loyrette Nouel (Shanghai office)

In September 2009 the Chinese government released the Animal Protection Law (draft) for public opinion. The legislation is intended to deliver protection for pets, captive wildlife and laboratory animals. It also provides guidelines on how farm animals should be raised, transported and slaughtered.

The draft law is a significant step forward in animal welfare. Participants in China’s rapidly developing pharmaceutical industry will need to review their laboratory animal programmes and sourcing procedures for raw materials as a result.

According to Animal Protection Law (draft), animals are divided into five categories: farm, laboratory, companion, wild and others. Laboratory animals are defined in the PRC Regulations for the Administration of Affairs Concerning Laboratory Animals (effective 1988) as those which are to be used in scientific research, teaching, production, examination and verification and other scientific experiments

Animals kept by pharmaceutical companies for testing and research are covered by the regulations. In addition, animals which pharmaceutical companies feed and breed for antiserum and other raw materials are also regarded as laboratory animals under the 1988 regulations. In the Animal Protection Law (draft), the concept is further developed and includes the methods for feeding and breeding laboratory animals as part of definition.

The Ministry of Science and Technology (MOST) is in charge of laboratory animal programmes, in particular, the issuance of statutory licenses. However, it is not unusual for companies breeding or using laboratory animals to never register with MOST.

This is partly because the Ministry of Health grants the production license for medicine and medical devices without checking the license for laboratory animals and partly because MOST does not play an active role in addressing irregular laboratory animal programmes.

Statutory licenses

The use, including breeding, supplying and feeding, of laboratory animals by research facilities and companies are subject to various qualifications and to either a production or an experiment license.

The production license is designed for commercial enterprises engaged in genetic breeding, feeding and supplying laboratory animals and, in some provinces, also for producing feedstuff, cages and ancillary equipment in connection with the laboratory animals.

To obtain a production license, the facilities must reach the national standards, which are verified by a qualified agent and supported by a written report in most provinces. According to the Measures on License regarding Laboratory Animals (2001) companies must satisfy the following conditions:

• Animal breeds are from qualified sources and conform to national health standards;

• Inspection measures are sufficient to assure the quality of animals;

• Feedstuff and water conform to national standards or relevant needs;

• Staff employed are well trained;

• Comprehensive management rules have been established and implemented;

• The company is capable of testing the genetic and microbiological quality for its own animals or others upon entrustment by a third party.

The experiment license is designed for companies using animals in research, experiments and production of pharmaceutical products. Pharmaceutical companies collecting antiserum from their own animals or purchased animals must operate with the experiment license by virtue of PRC laws.

Like the production license, the experiment license also requires that the research facilities are in line with national standards and are supported by a written report issued by the qualified agent. According to the Measures on License regarding

Laboratory Animals (2001), the companies also have to satisfy the following conditions:

• Laboratory animals are sourced from licensed producers;

• Feedstuff and water conform to national standards or relevant needs;

• Staff employed are well trained to assure the production quality;

• Comprehensive management rules have been established and implemented.

Apart from the conditions provided for by the national regulations, the provincial authorities have also issued detailed rules explaining or supplementing the principles of the national regulations. For example, in regards to the experiment license, the MOST Shanghai Branch requires that an agreement with a qualified agent for the disposal of an animal body is in force. Therefore, before applying for licenses, it is recommended to check the local regulations and practices.

The production and experiment licenses are valid for five years after issuance and are renewable upon application and administrative approval. It is noteworthy that during the valid term of the license, the licensee must bring the license back to the MOST and pass its examination on yearly basis. Should the licensee fail the annual examination, the license will be cancelled immediately before expiry of its five-year term.

In the Animal Protection Law (draft), the transportation and trade of laboratory animals will be subject to statutory license. The structure of licensing in the draft appears to follow the model for the explanation of hazardous chemicals according to which the carrier of hazardous chemicals must obtain a special license in advance and transport via a given route.

As to the trader of hazardous chemicals, the authority will review the storage place and staff qualification before granting the license. Given the relatively low risk that laboratory animals pose to societies, it will be a surprise if the license requirement for the transportation and trade of laboratory is finally implemented.

Non-compliance

In practice, many companies forget to obtain the statutory licenses. Even in the Good Manufacturing Practices (GMP) audit, many accredited inspection agents do not inspect animal houses openly staged in a backyard or on top of a roof. As a result, some companies have been able to obtain GMP accreditation and a production license from the Ministry of Health, and start largescale production without some of the necessary production or experiment licenses.

However, it’s unlikely that these practices will continue. In the past, China has encountered a number of food safety scandals. For example, Sudan I, which is a red dye used for colouring solvents, was found in chilli sauces. More recently, melamine, a raw material for plastic manufacturing was found in formula milk and caused kidney stones in thousands of young children. Following these and other scandals the Chinese government vowed to crack down on food and drug safety non-compliance.

From 2007, pharmaceutical products which conform to the national standards are still regarded substandard if any component of, or raw material for, these products is nonconforming. Some pharmaceutical companies traditionally made biologicals from animals purchased from unlicensed suppliers or its own animals without obtaining the experiment licenses in advance.

Such biologicals are now deemed nonconforming products under the PRC Measures on License regarding Laboratory Animals (2001). Should such biologicals be used as raw materials for this production, all final products can be deemed as defective products regardless of the actual quality of the products.

Should the manufacturers knowingly use such biologicals, it can receive a fine up to 10 times of the value of goods concerned according to the Special Measures on Food and Drug Safety Administration issued in 2007 by the State Council. Should the final products sold be found defective, the manufacturer will face more severe penalties.

The principle above is also echoed in the Animal Protection Law (draft). The products made from an unlicensed animal programme are regarded substandard according to Article 92. In addition, a new administrative penalty is introduced. An administrative fine up to RMB 100,000 (US$14, 600) can be imposed on a company which breeds, feeds, transports, trades and uses for experimental purposes any laboratory animals without a license. Under the previous laws no such penalty exists and the authority can only revoke the license or stop the activities.

Import of biologicals

Due to the onerous procedures for obtaining licenses and the small quantities of biologicals often used, some pharmaceutical companies import from offshore affiliates, which are lawfully licensed to produce these materials in their countries. However, this may not be a viable solution for most companies as the import of biologicals is subject to prior approval by the Ministry of Health according to the PRC Administration Rules on Biologicals (1993).

The formal approval usually takes months or even years after the request is submitted. As the usage doses are usually small, some companies may find the onerous administrative procedure to be prohibitively time consuming and costly.

Some reckless manufacturers carry the biologicals to China in personal luggage without declaring them to the Customs. This method is extremely dangerous and the activities are perceived as “goods smuggling”. Customs authority can confiscate smuggled goods, articles and illegal income, and impose a fine up to RMB 1 million and, for criminal offence, a fine up to 500% of the evaded taxes, imprisonment and, if extraordinary, life imprisonment or capital punishment.

Therefore, business managers must carefully review their plans in regards to the use of biologicals. In particular, they must consider the amount to be used, the nature of the contemplated biologicals, the import restrictions and the time frame for approval. If it proves not to be commercially viable, other options must be explored.

Outsourcing

Pharmaceutical companies can also opt to use a domestic supplier for animals or even biologicals thus passing the licensing requirement onto the outsourcing company. However, the relationship with an outsourcing company must be handled very carefully in order to control costs and protect intellectual property rights.

For most biological companies, antigens and antibodies are the core technology of their products. In particular, a proprietary antigen may cost years of research and is the primary element determining the quality and differentiating the products in the market. To enable the supplier to produce required antiserum, the manufacturers may have no choice but to provide antigen used to immunise the laboratory animals.

In such cases, it would be prudent of the manufacturer to pay extra attention to their proprietary antigen. For example, the company could send the manager to supervise the immunisation process and ensure the proper storage and use of its proprietary antigen. The manufacturer should also monitor the immunised animals which carry the antigen in their body and generate antibody and the supply agreement should be carefully prepared so that the supplier will not embezzle the antigen and turn into a new competitor in the same market.

Apart from the protection of know-how, quality controls will also be challenging. For the ordered antiserum or antibody, no quality standard exists in most cases. Rejecting the delivery due to quality could lead to a dispute that cannot be settled by normal means. In addition, the quality of the raw materials can heavily rely on living conditions and diets of the animals.

Therefore, it is critical that the pharmaceutical company standardise its quality and practice codes and provides such codes to the suppliers as conditions for orders. It should also allocate reasonable resources to check daily operations. Otherwise the delivery could be unsatisfactory or even impossible after waiting for months after injection of antigen.

In addition, the outsourcing arrangement should avoid license borrowing. Under the PRC laws, the abovementioned experiment or production licenses are issued to the specified companies and should not be used by others. Sometimes, the companies are involved in the production process so intensively that the authority may perceive the pharmaceutical companies as de facto animal business operators.

For instance, some companies send staff on site for screening, feeding, immunising and checking the animals. They are even involve in collecting and sampling the animal blood, and are in charge of centrifugation and the production of antiserum. In doing so, the companies believe that the proprietary know-how is in the safe box.

However, such intensive involvement could be seen as license borrowing, in which the supplier provides the license to cover the operation of the other unlicensed company, which can put the existing license at stake and question the quality of animals and biologicals made.

Overall, the legal regime on laboratory animals remains limited in China. However, greater regional pressure for safe pharmaceutical production and the eventual promulgation of the Animal Protection Law means this situation will significantly change in the coming years. Pharmaceutical and research companies active in China should start to prepare now for compliance reviews of their laboratory animal programs and sourcing procedures for raw materials.