India as a global pharmaceutical outsourcing hub: Some key advantages and the areas of improvement.

All over the world, pharmaceutical research and development pipelines are gradually getting dried up. Lesser and lesser blockbuster drugs are now coming up from the ‘mind to the market’. Currently the average annual turnover of over 90% of patented drugs is around US $150 million each. At the same time regulatory requirements to obtain the marketing approval are becoming more and more stringent, spiralling the R&D costs of the innovator companies very significantly.
The name of the game:

In today’s perspective of the global pharmaceutical industry, ‘competitive efficiency’ in speed of implementation of various projects and optimizing costs of operations, can be easily considered as the ‘name of the game’.
Such competitive efficiency is as much essential for a relatively quick turnaround from ‘the mind to market’ of New Chemical Entities (NCEs) or New Molecular Entities (NMEs), to reducing manufacturing costs through various outsourcing opportunities and/or innovative application of technology and spreading geographical marketing operational network.

Towards this direction, ‘Business Process Outsourcing’ in R&D, manufacturing, clinical trials etc. is now gradually emerging as one of the most critical ways to achieve this important objective. It is expected that gradually outsourcing of specialized manufacturing like, biopharmaceutical and sterile manufacturing and specialized processes like, improvements in catalyst activity, will be gaining grounds.

India is emerging as a potential outsourcing hub:

India is fast emerging as a key player in the outsourcing business of the global companies, with its high quality facilities, world class services at a very competitive cost, in various areas of pharmaceutical business operations. India is not only a vibrant democracy, it has now a good Intellectual Property Rights (IPR) system in place and offers very significant cost advantages both in contract research and contract manufacturing space, as compared to many other countries.

Many Indian pharmaceutical companies are scaling up their capacities and investing in establishing more number of world class facilities. Currently India has over 100 pharmaceutical plants approved by the US foods and drugs administration. Incidentally this number is the largest outside the USA.

The key advantages:

India with its total pharmaceutical market size of around US $ 14 billion offers both value and cost arbitrage, which are as follows:

1. Familiarity with the regulatory environment and requirements of the developed markets

2. Extensive global operations in the generics business

3. World class facilities

4. Lower employee wages

5. Large number of young workforce

6. High capacity of skilled labour (350,000 engineers/year)

7. High quality of engineers, process chemists

8. Low communication barriers due to high levels of English

9. Speed of operation

10. Cost effective IT infrastructure, facilitating all key business processes

Contract research investment strategies of the global companies in India:

Most common investment strategy in the collaborative arrangement is risk-sharing outsourcing co-development of a NCE/NME. For example, Johnson & Johnson (J&J) signed an outsourcing agreement with Advenus Therapeutics of India in November 2008 with a contract value of US $ 247 million including milestone and royalty payments in the areas of inflammation and metabolic diseases. In this contract Advinus will be responsible for development upto ‘the proof of concept’ (Phase II a) and then J&J will take over till commercialization of the molecule.

Areas of improvements:

1. Biotech contract research as a whole

2. Economies of scale in manufacturing products like, recombinant proteins, small interfering Ribonucleic Acid (siRNAs), vaccines, antibodies etc.

3. Fully integrated service offerings in contract research and contract manufacturing

4. In genomics and proteomics research

5. Pre-clinical research

In all these important areas our neighbouring country China seems to score over India

Conclusion:

Availability of world class contract research and manufacturing facilities and the ability of the domestic pharmaceutical industry to deliver the agreed deliverables in a cost-efficient manner with desired operational speed, make India a potential contract research and manufacturing hub of the world.

India can expect to compete effectively in these areas with any other countries, including China, provided the improvement areas, as indicated above, are addressed with equal speed of action and with a missionary zeal.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

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