Will more pharmaceutical manufacturers offshore in Mexico in 2014?

Pharmaceutical manufacturing in Mexico is likely to see an increase in activity over the coming months as companies operating out of Puerto Rico seek a more accommodating business climate. According to FiercePharmaManufacturing, the government tax breaks that had made Puerto Rico a thriving center for companies in the pharmaceutical industry haven't been renewed. As a result, many companies, including Abbott Laboratories most recently, have left the island to find an offshoring location that will help them remain competitive.

Tax incentives aren't there anymore
Abbott spokesman Scott Stoffel confirmed with The Associated Press the manufacturing facility in Barceloneta will be closed by the middle of 2015. However, this is the smallest of the various manufacturing locations Abbott operates on the island, according to Mayor of Barceloneta Wanda Soler. This news came on the heels of announcements last year made by drug giants Pfizer and Merck, which have also planned to reduce manufacturing in Puerto Rico. Although the recession has abated a bit in the U.S., The AP reported Puerto Rico has yet to recover from the economic downturn and continues to see an unemployment rate around 15 percent. Since 2000, pharmaceutical companies have reduced staffing levels by 9,000 workers. Antonio Medina, executive director of Puerto Rico's Industrial Development Company explained the economy has become far too dependent on one type of manufacturing, which has left it vulnerable to regulatory shifts.

Rapid distribution a key asset
On the other hand, U.S.-based Easton Pharmaceuticals has expanded its manufacturing in Mexico. In collaboration with BMV Medica, Easton has a preliminary agreement established with manufacturers in Mexico under the guidance of the U.S. Food and Drug Administration. According to a press release, the companies are close to reaching a final agreement that includes pricing and other aspects of producing and distributing pharmaceuticals. Once the contract is finalized, customers in Mexico and other consumer markets could see marketing and ads for new products by May 2014. This means manufacturing could begin as soon as February.

This partnership reflects one of the many advantages of manufacturing in Mexico. The proximity between U.S. and Mexican partners enables companies to prototype, manufacture and distribute products and components at a much faster rate than in other international offshoring locations. The supply chain is far more efficient through cross-border trade and existing trade agreements make cooperation between enterprises cost-effective.

Consumers can rest assured
At the same time, having the FDA involved in manufacturing pharmaceuticals also lends greater confidence to the project.

"This is a premium manufacturer, with a successful audit already having been performed by the United States FDA, ensuring a high-quality product will be available all over North America and other parts of the world," explained BMV Medica representative Ms. Mendoza Vazquez.

By nearshoring in Mexico, international drug companies have several advantages over manufacturing in alternative locations. The expertise and high quality standards of manufacturing partners in both Mexico and the U.S. combine to create a more attractive business environment.