The pharma outsourcing industry, both the custom manufacturing and contract research, are poised to grow thrice the global market rate in near future with more global pharmaceutical companies opting strategic partnership with Indian companies when compared to other emerging pharma markets, according to a study.

The study, 'Taking Wings-Coming of age of the Indian pharmaceutical outsourcing industry', released by the leading professional services firm Ernst & Young (E&Y) and the Organisation of Pharmaceutical Producers of India (OPPI) states that the custom manufacturing outsourcing in India is growing at a rate of 43 per cent that is thrice the global market. The growth is driven by the Indian companies' ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities.

In a survey conducted to assess relative attractiveness in custom manufacturing outsourcing of six countries - India, China, Eastern Europe, Puerto Rico, Singapore and Ireland with 38 respondents across 17 big and medium pharma companies, 67 per cent of respondents rated India as an excellent destination for cost efficiency in manufacturing outsourcing. India is offering manufacturing services with cost around 35-40 per cent of the cost of manufacturing in the US.

Ajit Mahadevan, partner - Healthsciences practice, E&Y said, "With India offering significant cost-quality proposition in end-to-end research and development with potential savings of 61 per cent as compared to US which is coupled with a strong supply of skilled manpower (scientists, QA/QC professionals etc) and capital efficiency we could see even more of the global pharma companies adopting different operating models such as captive off shoring, dedicated R&D unit in partnership, fee for services and collaboration/ JV for future growth within India."

The total global outsourcing, custom manufacturing (phase-IIb to the off patent stage, including intermediates, API and formulations) contributes almost 65 per cent of pie of the USD 51 billion market in 2008. Within India the custom manufacturing is almost USD 1.1 billion and is growing at 43 per cent, asserts the report.

As per the survey, India is rated highest in terms of cost efficiency, technical competency and skilled manpower attractiveness amongst the six geographies. The country is ranked highest for global pharmaceutical production in terms of technical capability attractiveness view. Almost 83 per cent of the respondents rated India above average on technical capability. With 1.6 million graduates and 0.4 million post graduates qualifying in science course every year, India is an attractive destination from a skilled manpower perspective.

India is also emerging as an attractive destination for drug discovery and development services, growing at 65 per cent rate, which is more than three and half times the global growth rate driven by strong chemistry capabilities, skilled manpower and cost value proposition, says the study.

However, the country needs to focus on improving Intellectual Property (IP) protection, infrastructure capacities and environmental, health and safety (EHS) compliance to grab the potential in custom manufacturing, opines the study.

At present, India lacks a culture of innovation due to legacy issues such as low levels of funding, collaboration between industry, academia and educational infrastructure with India spending only 0.8 per cent of its total Gross Domestic Production on research and innovation. This is much lower when compared to the research and innovation spending of developed countries such as US (2.8 per cent), Japan (3.1 per cent), Germany (2.5 per cent) and France (2.2 per cent).

Further, the country is yet to tap its inherent advantage in outsourcing, whereas India currently has a share of meagre three percent of the global outsourcing market. The global pharmaceutical and biotech industry is yet to harvest the full potential of India's skilled talent pool, strong technical capabilities and cost value proposition, due to the uncertainty in IP regime and its image of generic market. The mindset of global pharma in this regard has been undergoing a sweeping change in recent past, which will benefit India in future, the study says.