The US President Barack Obama comment on ending the tax breaks for corporations that ship jobs overseas has been widely interpreted to be against outsourcing, but it cannot hardly have any impact on India's contract research and manufacturing services (CRAMS), stated a section of industry experts directly working for these markets.

According to Dr Shoibal Mukherjee, senior vice president - Clinical Development, GVK Biosciences Private Limited, this issue has been widely misconstrued and misunderstood.

"While it is interesting to note that there are no tax breaks available for outsourcing, what is there instead is a tax break for US firms on profits earned from operations in foreign countries, to the extent of taxes paid in the country where the profits are earned, so as to avoid double taxation. If such tax breaks are withdrawn, the profits earned by US companies in foreign countries will become subject to double taxation at the time of repatriation. Consequently, American companies will avoid repatriating profits as long as possible, and will instead be led to reinvesting the profits abroad. In the long run they may think of closing down operations abroad if there is no hope of bringing home much profit," said Dr Mukherjee.

"However, all this has little to do with outsourcing. When an American company outsources work to an Indian CRO, the company does not earn any direct profits by doing so. If the profitability of the company improves, it is profitability in the US that goes up, not profit from overseas operations. Therefore, any change in the taxation rules for tax on foreign profits will not affect award of contracts to Indian contract research organizations. However, in the long term such changes in taxation policy could affect the decision of American companies to open and operate subsidiaries in foreign countries, including India," pointed out Dr Mukherjee.

Dr Rashmi Barbhaiya, CEO and managing director, Advinus Therapeutics stated that international companies cannot ignore Indian pharma capability and will need to only further scale up outsourcing from the country. The present slowdown has impacted revenues. But US will have to outsource jobs from high quality and economical locations which includes India. This is because we can offer significant cost reduction and time line deliverables in research which includes drug development and advanced pre-clinical assignments, clinical trials besides manufacture he added. .

Even if president Obama is opposed to shipping of jobs to curb the rising unemployment rates, the Indian advantage cost cannot be ignored. There is a huge benefit to offload manufacture, research, development and clinical trials because we have both the expertise and economies-of-scale which will only benefit the US companies, said Kaushik S Desai, CEO, Global Pharmatech which undertakes contract manufacturing of sterile dosage forms.