Ernst & Young, the leading global professional services firm, has released "Progressions", its Global Pharmaceutical Report 2004" in Mumbai, at an event organised in association with the Organization of Pharmaceutical Producers of India (OPPI). "Progressions" is second in the series after "Partners With Vision", Ernst & Young's first Global Pharma Report released in 2003.

Value and Pricing, Innovation and Productivity and Compliance and Risk are the three core issues facing global pharma today, says Ernst & Young's latest report. "Progressions" represents the sequence of steps being taken by key stakeholders (pharma companies and distributors, regulators, policymakers and the public) in this constantly evolving business environment. This report provides diverse perspectives from industry luminaries in business, academia, government, and the clinical fields and intends to benefit the global pharma industry with enhanced dialogue between the different stakeholders.

The Report has identified India as an emerging hub for collaborative and outsourced R&D. Says Jairaj Purandare, chairman, Ernst & Young India, adding, "Several Indian pharma companies are now holding on to their own on the world stage. Our pool of trained chemists, excellent track record of innovation and US FDA approved manufacturing facilities enable local players to offer significant benefits in the drug development process."

According to the report, "many global companies are confronted by a value crisis as they try to sustain a business model based on high costs of manufacturing, R&D, marketing and sales, increasing regulatory scrutiny and reimbursement pressures. Countries that can combine lower cost manufacturing with adequate regulatory protection of intellectual property are well positioned to attract large pharmaceutical companies, India being a prime example." Approximately 30-50 per cent cost saving opportunity is possible in India, it adds.

"We are seeing a fundamental shift in Indian companies' approach from business-driven research to an increasing focus on research-driven business," says Utkarsh Palnitkar, Ernst & Young India's Healthsciences Industry leader. In the changing landscape Indian companies are adopting a combination of alternative business models to navigate competition and opportunity. These include a) Focusing on export led growth through subsidiaries or acquisitions in high margin regulated markets; b) Bolstering NCE research capabilities; c) Partnering across the value chain with multinationals through licensing, collaborative R&D or co-marketing arrangements; d) Contract research and manufacturing.

Explains Utkarsh, "Indian generic drug makers have been particularly successful in developing non infringing processes and some are also honing their understanding of patent regulations, which is enabling them to aggressively litigate and challenge patent claims and enjoy longer exclusivity periods." Indian pharma companies topped drug filings with USFDA for '03, having filed a total of 126 DMFs, accounting for 20 per cent of all drugs coming into the US market, higher than Spain, Italy, Israel, and China. Of the 108 Abbreviated New Drug Applications (ANDA) pending approval from the US FDA in February 2004, as many as 52 were patent challenges and nearly half of these were for first to file (180 day market exclusivity).

"The success of Indian pharmacos in the global generics mart has definitely caused several MNCs to take notice of India's prowess in process chemistry and feel inclined to advantage from it. Many MNCs have made India a hub for their bulk requirements and have outsourced manufacturing to local companies. Several of these supply agreements are for complex, difficult to make, under-patent molecules," he says.

Utkarsh further added, "The year's defining events reflected the emergence of an industry, which is poised for rapid growth, fuelled on one hand by the global ambitions of domestic players and driven on the other by the renewed interest of MNCs to make India their base for innovation-led cost competitiveness."

A spate of well-timed strategic overseas acquisitions in 2003 such as Ranbaxy's acquisition of RPG Aventis' French business, Wockhardt's acquisition of CP Pharmaceuticals, UK and Zydus Cadila's acquisition of Alpharma, France have catapulted these Indian companies into the global league.

2003 also witnessed acceleration on the front of inbound investments. Multinationals like Roche, Bayer, Aventis and Chiron have decided to make India their regional hub for APIs and bulk supplies. Clinical research outsourcing is perhaps seeing the fastest growth. Pfizer announced doubling of its R&D spend in India, bringing the cumulative investment on clinical research in India to around $13 million. It has increased the bio-statistical and clinical trial logistics services in India twenty-fold. Several others, including Novartis, Astra Zeneca, Eli Lilly and GSK have also committed to making India a global hub for their clinical research activities.

According to the report, the Indian Government has shown an unwavering commitment to implementing the Trade Related Aspects of Intellectual Property (TRIPS) under the World Trade Organization (WTO) mandated product patent regime. "As a signatory to TRIPS and WTO, we are changing our patent law to fulfill the commitment. Such moves will change the business environment, bringing in more R&D by both domestic and foreign firms," says Dr M K Bhan, secretary, Department of Biotechnology, Government of India, who spoke to Ernst & Young for this report.

Proactive government policies in recent times such as stiff regulations to deal with spurious drug manufacturers, mandatory GMP compliance starting 2005 and the proposed legislation to allow concurrent phase trials and are further adding to India 's shine.