How big pharma might use manufacturing as a strategic marketing tool

In the good old days big pharma earned attractive returns by bringing differentiated, patent protected products to market, supporting them with robust sales and marketing programs, and making intelligent use of a variety of communications channels to physicians, and --for the last decade-- consumers.As pipelines dried up and the generic industry became more sophisticated and aggressive, big pharma adjusted its tactics. In product development it's turned to in-licensing, creating new formulations (especially extended release products), and combination products. Big pharma has combated generics in the courtroom, introduced "authorized generics" that cut into the profits of the initial generic supplier, and attempted to bundle multiple products into its contracts with payers.It's been a losing battle, though and new tools are needed. The current wave of cost cuts and acquisitions of smaller firms won't be decisive.It's unlikely that big pharma will succeed in reviving its pipelines anytime soon, but there are things the industry could try.  For example, if branded pharmaceutical companies can demonstrate better clinical results through medication adherence programs, they may be able to make the argument that they are selling a "solution" rather than a product. Instead of losing roughly 90 percent of their sales when generic competition begins, maybe they can cut it to 50 or 60 percent. That will make a huge difference --if pharma can pull it off. I haven't seen much indication yet that this strategy will be pursued in a serious way or that big pharma can execute.The recent Heparin scandal makes me think that there is another opportunity. That is, rather than shifting production to low-cost locations such as China, as big pharma seems to be doing, why not deploy a manufacturing network strategy that is deliberately more expensive but more assured? Only make products in Europe, North America, Japan, Singapore and their ilk, and don't accept any inputs from questionable sources.Then make the pedigree of the finished products and their components a significant part of the marketing/educational campaign to payers, pharmacists, and patients. Since the cost of goods sold for branded products is so low (typically 5-15 %), it won't matter so much if those costs rise. On the other hand, generic companies are really pressed to offer the lowest possible price and they need to shave costs wherever they can.Of course it would be unseemly to cast aspersions on competing products based on their manufacturing quality, but because of the publicity surrounding the Heparin recall and problems with Chinese products in general awareness is already high and the customer will make the connection.A Pharmaceutical Executive article about the Heparin recall sums up the current view on China:

"Greed is universal. But in China, it is especially dangerous because of the lack of regulations and enforcement," says Wang Fei-ling, an expert in Chinese policy at Georgia Institute of Technology. "That combination creates rampant corruption, which is the most serious problem China faces."

Pharma companies that can afford not to manufacture in China might be wise to keep that observation in mind. I believe there is a profitable niche available for products going off patent that want to compete on manufacturing quality and pedigree.