The focus of the Indian pharma companies is gradually shifting from process improvisation to drug discovery and R&D. Currently, several of the companies are setting up their own R&D facilities and are collaborating with the research laboratories like CDRI, IICT etc. for drug discovery, observes a recent study on the competitiveness of the Indian industry in the new product patent regime brought out by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Further, the pharmaceutical industry is exploring new business models like contract manufacturing, co-marketing alliance and contract research (drug discovery and clinical trials) to compete with international companies in the new patent regime.

Clinical trial is one area India is looking forward with much interest and plans to develop the country as a centre for international clinical trials. In 2002, the industry for clinical trials in India was $ 70 million. This market is growing at a rate of 20% per annum. According to experts, it will be an industry worth anywhere between $500 million to $1.5 billion by 2010. The global R&D spend is to the tune of $60 billion, of which the non-clinical segment accounts for $21bn and the clinical segment accounts for $39bn. In terms of Indian prices, this translates into $7bn (at 1/3rd of US/EU costs) and $7.8bn (at 1/5th of US/EU costs) respectively. This constitutes a total potential of $14.8bn for the Indian pharma companies. Recently the Government, through a notification amending Schedule Y of the Drugs and Cosmetics Act, allowed multi-centric phase II and III trials by MNCs. The firms will be able to carry out phase II and phase III trials here simultaneously with global trials. This is expected to increase the outsourced clinical trial activity in the country, notes the study.

Many global pharmaceutical majors are looking to outsource manufacturing from Indian companies, which enjoy much lower costs (both capital and recurring) than their western counterparts. Many Indian companies have made their plants cGMP compliant and India is also having the largest number of USFDA-approved plants outside USA. The study notes that while 61 plants of Indian companies are approved by the USFDA, it is 60 in Italy, and only 25 in Spain, 22 in China, 9 in Taiwan, 5 in Hungary and 7 in Israel. The Pharma companies are going for compliance with International regulatory agencies like US FDA, MCC etc. for their manufacturing facilities anticipating international orders.

Lupin Laboratories contract manufacturing agreement with Fujisawa of Japan for supplying Cefixime and with Apotex for supplying cefuroxime axetil and lisinopril (bulk), Nicholas Piramal's pacts with Allergan for bulk and formulations and with Advanced Medical Optics for Eye products, Wockhardt's deal with Ivax for supplying nizatidine(anti-ulcerant), Dishman Pharmaceuticals' deal with Solvay Pharmaceuticals for supplying eprosartan mesylate, IPCA Labs deal with Merck for bulk drugs and with Tillomed for atenelol and with Apotex for cefuroxime axetil, Orchid Chemicals & Pharmaceuticals deal with Apotex for cephalosporin and other injectables, Sun Pharma's deal with Eli Lilley for CVS Products, anti-infective drugs and Insulin, Kopran's deal with Synpac Pharmaceuticals for Penicillin G bulk drug, Cadila Healthcare's pact with Altana Pharma for intermediates for pantoprazole and with Boehringer Ingelheim for gastrointestinal and CVS products, Biocon's deal with Bristol Myers Squibb for supply of bulk drugs are some of the prominent deals happened in this field in the recent past.

Indian companies are proving to be better at developing APIs than their competitors from target markets and that too with non-infringing processes. Indian drugs are either entering in to strategic alliances with large generic companies in the world of off-patent molecules or entering in to contract manufacturing agreements with innovator companies for supplying complex under-patent molecules. Some of the companies like Dishman Pharma, Divis Labs and Matrix Labs have been undertaking contract jobs for MNCs in the US and Europe. Even Shasun Chemicals, Strides Arcolabs, Jubilant Organosys, Orchid Pharmaceuticals and many other large Indian companies started undertaking contract manufacturing of APIs as part of their additional revenue stream. Top MNCs like Pfizer, Merck, GSK, Sanofi Aventis, Novartis, Teva etc. are largely depending on Indian companies for many of their APIs and intermediates. The Boston Consulting Group estimated that the contract manufacturing market for global companies in India would touch $900 million by 2010. Industry estimates suggest that the Indian companies bagged manufacturing contracts worth $75 million in 2004.