The globalization of pharmaceutical R&D is coping with the increasingly complex technical, regulatory and compliance requirements necessitate developing radically new approaches to enhance and sustain R&D productivity.
Outsourcing is often defined as the delegation of non-core operations or jobs from internal production with in a business to an external entity (such as sub-contractor) that specializes in that operation. Outsourcing is a business decision that is often made to lower costs or focus on competencies. The pressure to reduce costs and increase productivity has been a strong driving force for the growth of the biopharma outsourcing sector. The increasing market and R&D costs are forcing the industry to evaluate outsourcing as a cost reducing option. Cost effectiveness is the leading reason companies initially choose to outsource, but it is certainly not the only important function served. Speed, flexibility, expertise, innovation and efficiency are all important drives in the decision to outsource.
Some estimate that there are currently over 1,400 organizations involved in the clinical research, including pharmaceutical and biotechnology in-house clinical research, site management organizations (SMOs), academic medical centers, private research sites, and contract research organizations (CROs).
Outsourcing enables biopharma companies to focus on their core capabilities. The biopharma industry utilizes a combination of outsourcing models from outsourcing aspects of drug discovery research, the clinical trial process or development and manufacturing process. Applying external skills and expertise directly when and where they are required avoids dependence on fixed resources. This flexibility reduces the need to reallocate or recruit additional personnel with a corresponding reduction in overhead costs. The early stage requirements for services can be categorized by phases as follows:
*Target validation with access to targets and target information critical.
*Lead identification inclu-ding access to chemically diverse libraries.
*Lead optimization with medical chemistry and lead optimization services key to Ensuring that successful leads enter the clinical phase.
On the growth path
In 2002, pharmaceutical sales were US$4.5 billion, growing at 8-9% per year. However, the pharmaceutical market in India is small when seen in relationship to its population, a fact reflected in the per capita pharmaceutical expenditure in this country - about US$4.50 per person per year in 2002.
The mix of pharmaceutical consumption is skewed towards anti-infectives and vaccines, with medications for 'lifestyle' chronic diseases comprising a smaller (25% in 2002), but fast growing, segment in the industry.
The biggest sales in the domestic pharmaceutical industry are in the antibiotics market. While drugs for lifestyle diseases and chronic conditions comprise a smaller proportion of sales, they are the fastest growing area of medications.
Outsourcing opportunities in IndiaContract R&D
*Intermediates, commodity chemicals, specialty chemicals, fine chemicals.
*Bulk active synthesis / bulk biologics.
*Formulation, manufacturing-excipients, formulation oral solids, formulation steriles, formulation inhalers.
*International clinical trials.
*Technical services.
*Turn key projects.
*Plant machinery and pharmaceutical equipment.
*Primary packaging materials/secondary packaging.
*Bioinformatics, biostatistics, software development.
*Herbals and neutraceuticals development.
From the economic point of view the following points has to be considered:
*Strong R&D capabilities, stemming from the largest generic drugs exporting industry in the world.
*Existing backwards engineering expertise is now being re-directed toward innovation, with generic companies moving into novel drug discovery.
*World class IT industry reflected in skills in bioinformatics.
*R&D costs 1/8 of western countries
*Manufacturing costs 1/5 to 2/5 of western countries
*Clinical trials development 50-60% lower than in western countries
The Indian biotech sector is growing at 37.42 per cent and inched closer to US$ 1.5 billion in revenues during 2005-06. The bio-pharma segment still dominates this sector with US$ 1 billion in revenues.
The average growth rate of 9 per cent per year, the pharmaceutical industry in India is well set for rapid expansion. As a result of the expansion, the Indian pharmaceutical and healthcare market is undergoing a spurt of growth in its coverage, services, and spending in the public and private sectors. The healthcare market has opened a window of opportunities in the medical device field and has boosted clinical trials in India. Many multinational companies have penetrated into India with an aim to market drugs and conduct clinical trials.
Advantages to shifting some proportion of bio-pharmaceutical R&D to India:
*Alleviating bottlenecks in the R&D pipeline - Conducting R&D in India can ease backlogs and capacity shortages particularly in labor intensive phases of early stage chemistry and of data management during clinical study.
*Reducing R&D costs - Established Indian vendors pay wages that are typically less than 1/3rd and may be as little as 1/5th of those paid by their counterparts in US, Europe and Japan.
*Accelerating clinical trails - India's population provides MPCs with an ideal patient base for drug studies.
Clinical research market size:
Centerwatch estimated the size of the Indian Clinical Trail market in 2002 to be in the range of $30 - $35 million US. The estimated number of GLP trained investigators was 200 - 250. Center watch has predicted that by 2010, the industry will spend approx US $250 - $300 million US on clinical trails in India. McKinsey estimates this number to be much higher in the range of $1 to $1.5 billion US. A US $10billion industry today, Indian pharma will grow to US $25 billion by 2010.
The preferences of most of the major sponsoring companies involved with outsourcing activities are not to share intellectual property rights with their outsourcing partners, however, this trend is bound to change in the near future, if these partnering companies start participating in adding value to the project as well.
Indian companies' role in this direction will play a crucial role in addressing the increasing global competitions. Conventional project-wise outsourcing, project by project, is based on increasingly getting converted into long-term reliable partnering in order to achieve consistency and achieving value for money for the partnering companies as well as the competing CRO and CMOs. The industry is valued at approximately $100 million, with an annual growth rate of approximately 40% to 50%.
(The authors are lecturers with KLES's College of Pharmacy, Hubli)