SEA and India supplier search for pharmaceutical raw materials


Background: Tractus was engaged by a U.S based manufacturer of generic medication to find commercially viable raw materials (plant sources) to produce an active pharmaceutical ingredient across Asia. This request was made in reaction to robust year-on-year price increases in China, where the ingredient was primarily sourced at the time. Tractus was requested to identify either a more economic source for the ingredient or raw materials, which could potentially be processed by the company’s present Chinese supplier.

Project: The research encompassed the country of Vietnam which offers similar geography and climate conditions as China; India and Thailand, where there are strong herbal and general medicine pharmaceutical industries. Laos, Cambodia and Philippines which are close to these countries also might present potentials. Tractus commenced its search efforts by utilizing various information channels such as raw material traders, pharmaceutical companies, industrial associations, academic organizations and desktop research to gain industrial background information and to develop a list of stake holders to interview. After that, Tractus conducted in person as well as phone interviews with relevant traders, plant-based drug suppliers, Government officers and researchers.

The research and interview results concluded to exclude Laos, Cambodia and the Philippines for falling short in their capabilities to produce and supply the required medicinal plants. No supplier of the ingredient was found in Vietnam as the raw material plants were not available at a commercial scale. Thailand has several raw material resources, but was found not to offer economic benefits over the current Chinese supplier. India was confirmed as a potential source for raw materials from which the ingredient could be produced economically and at a sufficient scale.

In a second phase Tractus’ further research in India identified a company with the know-how and capabilities to produce the ingredient. The company had produced it in the past but due to competition from China and the lack of financial resources had gone out of business.

Solution: Tractus arranged visits for the American client and its Chinese partner to the Indian factory and was instrumental in reaching a cooperative agreement. After tough negotiations, a contract was signed between the three parties to ramp up the facility, securing the raw materials available in the market, and introduce the latest production flow and quality control mechanisms. As the financial situation of the Indian company was not very strong, Tractus supported the clients in drafting an agreement where they could secure a long term supply with a minimum investment. Due diligence by Tractus at the factory after six months of the contract execution showed that the US client had a renovated warehouse and production facility and the production was running smoothly. The US client managed to save annually US$ 2 million.

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