Drug discovery companies turn to low-cost Asian countries to evade stringent regulations

The Indian and Chinese drug discovery outsourcing market is riding a crest with companies from outside Asia increasingly seeking to outsource drug discovery to these countries for greater cost savings. Other major factors driving this shift to Indian and Chinese companies are the better access to expertise, productivity gains, process improvements, variable costs, avoidance of capital outlays and opportunities for companies to focus on specific niches.

With competition in the global market escalating, multinational companies are aggressively seeking innovative strategies such as outsourcing production. Global pharmaceutical manufacturing was worth nearly $50 billion in 2004, and India and China have the potential to garner around 35 to 40 per cent of the outsourced market share.

The $7.3 billion Indian and Chinese drug outsourcing discovery market is evolving, with both gaining an edge in the global arena by producing a continual pipeline of drugs, which are approved faster than those produced in western countries. Both countries are uniquely positioned to manage and deal with the pressures to enhance clients’ profitability, increase shareholder value and utilise the potential of new drug discovery technologies.

The Governments of these countries have also proactively worked to attract outsourcing contracts through stringent regulations, mandatory good manufacturing practice (GMP) compliance and improved legislations for clinical trials. However, regulatory bodies will have to sort out the ambiguities in regulatory issues and legislation of intellectual property (IP) rights to lure a greater number of international pharmaceutical companies.

Both countries have inadequate patent protection, which can discourage global pharmaceutical and chemical companies, especially those from the United States, which stand to lose $450 million every year due to piracy. It is vital to maintain a sustainable balance sheet during various production phases such as pre-clinical discovery, screening and process development since the majority of revenues are derived from successful licensing and regulatory approval.

“The development of patentable products requires healthy investment in R&D and suitable confidentiality of results to develop a strong IP portfolio,” says Dr. Amarpreet Dhiman, EMEA Drug Discovery Technologies Team Leader at Frost & Sullivan. “To ensure that technological innovation is commercialised to its best potential, companies need to continuously work with domestic government officials and key opinion leaders in establishing and defining standards to comply with regulatory standards.”

“Governments' initiatives to diversify the industry’s drug discovery portfolio and develop infrastructure are expected to drive the growth rate of the drug discovery outsourcing market in India and China to reach $19.8 billion in 2011,” notes Dr. Dhiman.

Both India and China have to become World Trade Organisation (WTO)-compliant by meeting the numerous drug regulatory standards issued by the International Conference on Harmonisation guidelines and the U.S. Federal Drug Authority. The standards such as good clinical practices (GCP) have to be complied with – especially in the case of contract research organisation (CRO) operations – to ensure long-term credibility.

The frantic pace of merger and acquisition activity, which slows down clinical trials and the decision-making process, is currently challenging the CROs. Some CROs have revised their business strategies, finances, restructuring and cut costs to refocus on R&D in drug development.

New methodologies can facilitate radical improvements in efficiency, contributing to enhanced quality data and higher speed at a fraction of the cost by dislodging traditional practices and processes.

The outsourcing trend received a huge boost due to the recent economic slowdown, when companies sought external pipelines and products to deal with the intense pressure of drug discovery. In such a scenario, outsourcing presented new ways to save money, leverage technology and ensure revenue growth.


The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of News Medical.
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