Never mind Heparin or tainted toothpaste, toys or dog food. Big pharma now ranks China as the best location for outsourcing in Asia, followed by India, Korea and Taiwan, respectively, according to a new PricewaterhouseCoopers index, which evaluates Asian countries according to cost, risk and market opportunity for drugmakers. (Here is the full report).

You may not be surprised to hear Asia is emerging not just as a drug manufacturing powerhouse but a rival as a leading source of drug discovery and innovation. Both clinical trial activity and investments are accelerating, according to the consulting firm, which suggests Asia outsourcing is moving up the so-called value chain, as low-cost production is eclipsed by market potential and R&D capacity. So all those scientists let go by Glaxo, for instance, can find work if they’re willing to relocate?

“Within five to ten years, we will be moving from ‘made in China’ to ‘discovered in China’” said one pharmaceutical industry executive interviewed for the report, which highlights three significant developments that are shaping Asian pharmaceutical outsourcing:

1 - The trend towards high-end innovation: Intellectual property concerns have previously inhibited this trend in pharma but, increasingly, such concerns are being overcome and major moves are being made by drugmakers to increase their drug discovery investment in Asia;

2 - Rapid expansion of clinical trials in Asia: The volume of clinical trials being conducted in countries outside of Europe, North America and Japan has been growing rapidly in recent years with Asian countries leading much of the growth. China has overtaken India as one of the fastest-growing locations. By June 2008, China had 428 clinical trials registered on the website Clinicaltrials.gov as under way and a cumulative total of 870 completed or ongoing trials compared with 737 in India. Cost has been a critical factor in this expansion. For example, clinical trials are estimated to be up to 50 percent cheaper in India compared to the US;

3 - A scaling up of manufacturing in Asia: With an increased commitment to international standards, Asian contract manufacturing organizations (CMOs) are securing more outsourcing orders from big pharmaceutical companies. In India, for example, there are more than 100 FDA-approved pharmaceutical facilities – the largest number in any country outside the US. Of course, Chinese officials say there are committed, but actions speak louder than words.