Contract manufacturing and research services (CRAMS ) is the new buzzword in the Indian pharma industry as it is turning out to be the biggest money spinner for the industry as the economic distress have led Big Pharma to adopt cost-cutting measures and have forced them to go in for outsourcing.
Presently India and China are the most preferred CRO destinations in Asia and are likely to witness substantial growth in CRO as the rising global R&D expenditure, decrease in R&D allocation and increasing research outsourcing would drive growth for the Indian CRAMS industry. There is no doubt that CRAMS would become another outsourcing story which is set to make it big in the coming years, according to a spokesperson of Dr. Reddy’s Laboratories.
Though the overall macroeconomic environment for the Indian CRAMS business remain favourable, contract manufacturing for international pharma companies will dominate the segment’s earnings in the near to medium term, according to Fitch Ratings Agency.
The CAGR over last three years for CRAMS in India is 47 per cent but is still only five per cent of the global CRAMS business. The shift of pharma manufacturing would hasten in the coming years. Many Indian pharmaceutical companies have already announced alliances and agreements with MNCs for contract manufacturing and research, said Subodh Priolkar, regional managing director, Colorcon Asia Private Ltd.
The factors which could make India, a pharma powerhouse are the low cost manufacture of quality products and an effective supply chain. It would be a welcome situation if the major issues facing the Indian pharma industry could also be addressed. For e.g. products need to be manufactured at economy of scale. Proactive support is needed from the government in policies and speedy execution at all levels to bring in the desired competitive edge. This would provide cost advantage at the domestic as well as at the international markets, said Dr. S. Shrinivasan, Vice President, Medreich Ltd.
Leading companies in the space are Jubilant Lifesciences, Flamingo, Strides Arcolab, Medreich, Kemwell, Shilpa Medicare, Raptakos Brett, Dishman, Indoco Remedies Ltd., Piramal Healthcare Ltd, Biocon Ltd, Cipla, Anthem Biosciences Pvt. Ltd, , JB Chemcials & pharmaceuticals Ltd., Cadila Healthcare, Hikal Ltd, Symphony Pharma, MSN Laboratories Ltd. Hyderabad-based Dr. Reddy’s Labs Sai Adventium Divi Labs, Shashun Pharma, Suven Lifesciences Cheminova Remedies, North India based Calyx Chemicals & Pharmaceuticals, Bafna Pharma, Akums Drugs & Pharmaceuticals at Haridwar, Uttarakhand, Wanbury Limited, Nectar Lifesciences Ltd and Wockhardt Ltd.
Key advantages for India
India is poised to be a key destination for Big Pharma companies to outsource activities owing to . its inherent advantages such as high quality, low cost manufacturing and cheap availability of knowledge resources. The main reason for the spurt in outsourcing is due to the fact that Big Pharma now wants to perform only core activities like R&D and marketing.
The country’s large pool of qualified English speaking people and large hospitals and highest number of USFDA approved plants pegged at over 180 facilities are driving the business. Now the non- core activities like chemical syntheses, clinical trials and manufacturing are being outsourced as these activities can be performed in a much more cost-effective way with quality standards from countries like India and China. In some other cases some part of the process has to be outsourced since everything cannot be performed in-house. Thus the varying needs of the Big Pharma have led to the blossoming of the CRAMS industry, said Dr. Reddy’s Laboratories.
“The major outsourcing happens at two stages in the drug making process which covers developmental stage and manufacturing stage. Based on this, CRAMS have been broadly divided into two activities namely Custom Research and Custom Manufacturing.
Currently innovators outsource 55 per cent of the CMO (contract manufacturing organization) activity particularly in active pharmaceutical ingredient (API) manufacturing. Otherwise, the outsourcing of high -end services like clinical trial organizations (CTO) and drug discovery CROs are at lower side with just 35 per cent and 25 per cent of the total pie being outsourced. The share of spending in CTO and CRO are much higher compared to CMOP in the pharmaceutical life cycle. CTO and CRO phase accounts for 62 per cent and 26 percent of the entire drug development spending, said the spokesperson from Dr. Reddy’s Laboratories.
Market size and volume of growth
The global contract research activity which covers contract research and clinical trials is $47 billion with a growth rate of 16 per cent in 2011. It grew from $25 billion in 2007. Of the total contract research organization market size, contract research accounts for a mere 19 per cent and the balance is dominated by clinical trial services. In the case of contract manufacture, the market size is $38.89 billion and India’s share is 3.8 billion in 2010.
India's SWOT advantage
Making a strengths weaknesses and threats (SWOT) analysis of Indian companies, it can be seen that the key strengths are better regulatory skills and intellectual property regime, strong chemistry skills, high quality telecom and Information technology infrastructure and a one-stop shop for innovators.
The visible threats are poor transportation infrastructure, moderate supply chain besides IPR issues, low-cost Chinese CRAMS industry and long gestation periods. Any failure to execute contracts by one company would affect the entire industry and risk of delay at the innovators end.
According to Dr. Ganesh Sambasivam, co-founder and Chief Scientific Officer, Anthem Biosciences Pvt. Ltd, scientists and bio-technologists from the developed world are now being viewed as potential source of experience and expertise by China and India in the business of contract research. The growing interest towards developing countries by the western world is primarily because China and India have made efforts to strengthen their patent laws.
An explosive growth is being witnessed among contract research organizations (CROs) in India and China. But a visible trend is that the research personnel who worked in the US and EU are now becoming employees of CROs in China. Either they are commuting or relocating to China. However this development is more prevalent in China than in India, he added.
It is critical that the industry realized the need to cash in on the opportunity of becoming the major and preferred destination for pharma outsourcing. The ‘soft requirements/ skills’ include adhering to timelines , ensuring transparency, avoiding over commitments, detailed planning, maintain high level of confidentiality and build value system at all levels to ensure that India is the Pharma House for CRAMS, said Madhusudan V, Global Operations, Banner Pharmacaps, USA.