The use of contract research and manufacturing organization has been a common practice in pharmaceutical industry and in the last decade or so has been completely globalise itself in its approach with the involvement of more and more companies from Asia participating to get a pie of this estimated US $ 33 bn market growing consistently in double digits for the past five year or so. The areas of partnering has also grown beyond the borders from just API (active pharmaceutical intermediates) manufacturing to API development, dosage form development & manufacturing to clinical research development and now into areas like packaging and basic research as well.

A pharmaceutical company looks for outsourcing or partnering with CRO for preclinical development where lead identification (libraries of new compounds) and optimisation plays a role, specialised screening and drug discovery process itself also is now getting outsourced by many pharmaceutical companies. This is especially valid for biotech firms, who often finds beneficial to partner with CRO rather than building own capabilities. All areas of R&D from the time a company identifies a lead that mediates a human disease process to the GLP-regulated research to file IND (investigational new drug application) & then to cGMP regulated development to carry out clinical trials to file NDA (new drug application) gets outsourced including the major pharmaceutical companies for various reasons even if some of these major pharma companies have huge in-house capabilities. Contract research (CRO) and contract manufacturing organisations CMO) are also therefore gearing up to focus in areas of their expertise to bring in more value to their clients and beat the growing competitions.

The increasing demand of more new chemical entities (NCEs) and the pressure of reducing the cost of development are the two major factors for companies looking at outsourcing and partnering as the one of the best option for survival today. Opportunities in the area of contract manufacturing are relatively older and pressure on healthcare costs has been playing a significant role to increase opportunities in this sector. Other major reason can be attributed to increasing patent challenges, product differentiation cases & the pressure to reach market faster. Drug substances as well as dosage forms development and manufacturing are major areas of partnering and all major pharmaceuticals have already established a large network of these CRO and CMOs all over the world for these purpose.

The emergence of CROs and CMOs have occurred mainly because of late stage drug development needs of the pharmaceutical industry and grown subsequently to fill the need for earlier stages of drug development, providing specialised services with innovative proprietary technologies specially in the areas of potential drug target (gene/protein) identification, high throughput screening, cGMP synthesis and scale up, services in profiling of impurity, specialised analytical chemistry techniques.

After a sponsor company decides to outsource or partner with CRO or CMOs, the parent company still is required to spend considerable amount of effort to identify and select the appropriate CRO depending upon various important needs of the project. Preparing study design, determining which CRO would be the potential contractor, soliciting and negotiating cost and other important factors necessary for the success of the project, evaluation, site visit, legal requirements and final approval and then monitoring and reviewing etc. This takes enormous effort and needs resources on the part of the sponsoring companies also. Success and failure of a project also depends on a team dedicated by the sponsor for outsourcing of their activities.

Reasons for growth of contract research/manufacturing in India

Many factors have been attributed to the growth of contract research and manufacturing in India depending on the nature of activities of these organisations. Lack of many industries to participate in the complete chain of pharmaceutical developments like MNC is probably the reason the area of contract research and manufacturing activities predominantly looked at a good opportunity to grow business with the major pharmaceutical companies apart from the opportunities emerging from increasing global outsourcing market.

The reason prompting the growth of companies operating in the contract research and manufacturing, popularly known as CRAM space are the following:

Increasing number of skilled and good students in the areas of basic science, biotechnology, computational science, statistics and engineering in universities in India and abroad; Increasing number of skilled Indian workforce in strategic positions in pharmaceutical research in multinationals all over the world; Success of IT in India and growing global dominance; A general perception of the people about India as a place of with many skilled and educated workforce (backed by a good and cheap higher educational network); Success of Indian generic companies against all the prevailing competitions specially in the area of process chemistry; Growing amount of knowledge base amongst the researchers in intellectual property rights, cGMP/GLP guidelines, standard operating procedures acceptable to international authorities; Availability of increasing number of cGMP compliant manufacturing facilities with approval from FDA and other similar agencies. India ranks only second to the US in the number of global drug master filings every year; Growing exposures and adaptation of international working procedures, operating systems, availability of state-of-the-art infrastructures; Last but not the least, available modules of relatively cost effective outsourcing opportunities.

Scenario after 2005 and beyond

Mushrooming of contract research organisation in 2005 and beyond will be somewhat affected by the following, which also throws light on the shortcomings of India as major CRO hub unless addressed properly and adequately are the following:

Increasing lower cost differential & increasing salary structures in this area; Increasing difficulties of sourcing experienced people in comparison to the growing need of such people; Growing competitions from other Asian and East European countries competing for similar opportunities; Emerging of major corporate groups with deep pockets shying away small competitors; Opening of research labs by the multinational themselves acting as internal CROs like GE research centre at Bangalore; Conflicting business plans, i.e. generic companies getting into outsourcing service provider to its competitors.

Though the competitions amongst the custom synthesis and manufacturing companies are primarily based on cost, capacity, quality, and timing of production for the compound or molecule being considered, the factors such as long term relationships and proven track records, regulatory capabilities for DMF filing, past experience with FDA and other similar agencies etc. also plays an important role.

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. By providing proprietary novel enabling technology support to the outsourced projects that are crucial to the needs of drug discovery and development today, these CRAM space companies can soon be able to access revenues from the sponsor companies by participating in joint ownership in the form of royalties, milestone payments and enhanced service fees.

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. For these types of alliances to be successful, the outsourcing service providers also are getting involved in upgrading their skills and enhancing their technological capabilities. From simple outsourcing, the trend to slowly move towards building partnerships and alliances is being observed, where free flow of information exchange and active involvement is also feasible. Pharmaceutical companies soon will not just be expecting the outsourcing companies to apply newer innovative technologies to their projects and provide cutting-edge solutions to their overall problems in order to build long-term and lasting relationship. On a similar fashion the service providers are slowly gearing up to become solution provider, one stop centres etc and are putting considerable investments to enhance their capabilities and getting involved with in-house proprietary technology developments and developing niche, innovative areas of expertise to merge ahead with the emerging competitions rather than providing cost advantages alone.

With the starting of new patent regime with the beginning of 2005 and interesting changes happening in the global pharmaceutical sector, emergence of virtual pharmaceutical companies, drying up of the pipeline of blockbusters, CRO and CMOs of India are certainly poised for an interesting time in coming years.

The author is chief scientific officer, Shasun Chemicals and Drugs Limited, Chennai.