Contract research and manufacturing services (CRAMS) is the recent buzzword in the Indian pharmaceutical industry and represents a scaleable opportunity. Contract manufacturing comprises manufacturing intermediates and active pharmaceutical ingredients (APIs) for new chemical entities (NCEs) and the generic segment. In light of the new product patent regime, domestic pharmaceutical companies are increasingly capitalising on outsourcing opportunities in manufacturing, clinical trails and customised chemistry services.
Many Indian companies are attempting to enter this new space and competition is extremely high in this fast growing segment of the industry, which is expected to grow at a rate of 10-12 per cent in future. With rising international competition, global pharma companies are seeking to reduce their production and research costs. Indian companies, with their strong chemistry skills and low costs offer these kind of advantages The recent trend observed in the industry is long term relationship between the Indian pharma companies and the MNCs, leading to a preferred vendor status for Indian companies. With MNCs looking towards India as a major outsourcing partner, there is big chance for growth in this segment of the business.
The major factors that have lead the global pharma companies to outsource are:
■ The high R&D costs globally and many drugs going off-patent forcing MNCs to increase their product pipelines and reduce the overall time-to-market
■ An ageing population in the US straining the healthcare budgets almost everywhere. Most European & US companies are thus looking for cheaper generics and lower cost drugs
■ With new drug development becoming difficult, pharma companies can't sustain large R&D spend, unless new blockbusters are developed cheaper. Pharmaceutical outsourcing ranges from a one-time supply to a partnering agreement. An innovator would look for a partner who can be a one-stop shop for its various requirements. Companies having a presence across the entire CRAMS i.e from the drug discovery to manufacturing would become preferred vendors.
India's CRAMS strength
■ India's inherent strengths in this segment, including low cost research, trained and experienced scientists and regulations which are aligned with those in the west and increased credibility and visibility, help the country grab a higher share of the global outsourcing pie.
■ The country has the largest number of US FDA and cGMP compliant approved plants outside US and has six times the number of trained chemists as the US
■ Familiarity with the regulatory and quality issues, strong process chemistry skills and low cost manufacturing
■ Familiarity in preparing US and European registration documentation
■ Manufacturers able to develop robust processes for making pre-clinical and clinical supplies in the kilo-lab or pilot plant, develop and validate analytical methods to support the range of activities from the lab to the plant and to support regulatory filings, conduct stability studies to support manufacturing processes
■ Produces a wide variety of bulk actives manufactured efficiently with the necessary DMFs (Drug Master files) and also the finished dosage plants approved by the Medicines control council (MCC) of South Africa, the Medicines control agency (MCA) of UK and the Food and drug administration (US FDA)
■ India's cost of manufacturing is 30-40% lower compared to the western countries and the labour cost is 1/7th of that in US
■ India offers a definite cost advantage to the Global pharma manufacturers i.e. In India it will cost only about $100-200mn (Rs 450-900 crore) to develop a new drug compared to US $500-900mn (Rs 2250-4050 crore), so a lot of basic research is expected to be shifted to the country
■ Apart from relatively low cost development of the molecule and skilled manpower easy availability of Raw materials at competitive prices is also a key advantage factor
■ The cost of conducting phase I trials in India is 50% lower than the $20mn required in the US and 60% lower than the $50mn required for the phase II study
■ There are about 20,000 manufacturing units operating in the pharmaceutical industry. Of these 80% are into contract manufacturing
■ Many drug firms have upgraded their facilities to international standards and a couple of them are in the process of doing so looking at the growing potential in the CRAMS segment.
■ Indian manufacturers also adhere to the IPR (Intellectual property rights), have the required infrastructure of process research labs, scale up, pilot plant etc and also compliance with cGMP, which are the key criteria for qualifying to be a partner for contract research
■ Margins in this segment are also good with operating margins of over 25% achievable, which can be maintained over a period of time. Margins are likely to improve as the clients start a comfortable relationship with the partner
■ Unique advantage in terms of information technology and software expertise
■ Indian manufacturers have the track record of providing quality products at reasonable costs making India the most cost-effective location for manufacturing in the world
Some of the key players in the Indian contract research segment are Nicholas Piramal India Limited, Dishman Pharmaceuticals, Shasun Chemicals and Drugs and Jubilant Organosys.
The future is bright for this fast growing and one of the key segments of the pharmaceutical industry. The CRAMS trend has been well recognized across the globe as a prime mover in cutting cost and degenerating efficiency. The trend is most likely to continue in the Indian pharmaceutical industry as most of the US and the European companies intend to focus on core activities of research and marketing. Indian companies definitely have an edge over their Global counterparts and are in an advantageous position to exploit this enormous opportunity as they possess low cost, high quality and high capacity manufacturing set up and competencies well supported by the required documentation and the evolving regulatory environment.
(Courtesy: CII)