Outsourcing of clinical research and manufacturing services has been projected as a significant revenue source for the Indian pharmaceutical industry in the coming years with an overall hike in manufacturing costs of pharmaceutical industry in the US and Europe. Rising costs of manufacturing and R&D in the developed world, thus, turned out to be a major opportunity for the Indian companies to maximize their profits at a time when they started facing a steady drop in their profits on account of shrinking margins from generic exports and domestic sales during the last two years. With the emphasis on contract manufacturing for top international companies, there has been a steady rise in the number of US FDA approved manufacturing facilities in the country. Almost all the large and medium scale pharmaceutical companies in the country spent huge sums of money to upgrade their production facilities to conform to the standards laid by the US FDA, UK MHRA, TGA of Australia, etc. Thus, there are nearly 100 manufacturing facilities in India today which are approved by the international drug authorities. In the case of clinical research too, substantial quantum of business has already come to India to take advantage of lower costs of subjects and medical practitioners. There are over 80 clinical research organizations operating in the country conducting more than 150 trials of various new drugs.

Like India, China also emerged as an outsourcing destination for a number of large pharmaceutical companies based in the US and Europe during last three to four years. Major international companies like Pfizer, Merck, GSK, etc. regularly outsource their APIs from Chinese drug manufacturers. The recent Heparin controversy has, however, placed the entire manufacturing outsourcing activities of the US and European based companies under a cloud. Several countries around the world have recalled heparin products after finding that they contained the contaminated heparin sourced from a supplier in China. That event, in turn, brought a lot of pressure on the US FDA to strictly regulate the inflow of APIs and formulations originating from China and India, two main outsourcing destinations of the US based companies. The Synthetic Organic Chemical Manufacturers Association and the European Fine Chemicals Group are now demanding that drug regulators need to regularly carry out inspections of foreign manufacturing facilities. It is found that the US FDA and the European Agency for the Evaluation of Medicinal Products do not regularly inspect all foreign facilities supplying APIs to their countries. In fact, many foreign facilities have not been inspected at all even though 75 to 80 per cent of all APIs used by EU and US drug manufacturers are imported, mainly from India and China, according to EFCG and SOCMA. A US senator has already asked the US FDA for a probe into outsourcing of pharmaceuticals. The US administration has even made a request for increased funding of the US FDA to ensure import safety of drugs. These actions, although triggered by the inadequacies of the Chinese manufacturers, are bound to affect the Indian pharmaceutical companies doing contract jobs for overseas companies. It is in the interest of Indian pharma companies that they should be increasingly vigilant about their manufacturing operations in future to not to lose their business in the tough times ahead.