The cost-effective benefits and research standards set to become international has added to the attraction of outsourcing R&D to India and China - two developing nations that are set to ease the ever-increasing cost pressures, shorter product life cycles and numerous regulatory challenges in the West.
With current estimations of bringing one new molecule into the market amounting to at least $800 million, pharmaceutical companies looking for effective solutions are turning their attention to outsourcing to low-cost, developing countries rather than persisting with expensive R&D efforts.
The cost is certain to rise in the future. The European Federation of Pharmaceutical Industries and Associations (EFPIA) recently estimated that, on an average out of 10,000 molecules developed in laboratories, only one or two will successfully pass all stages of drug development and be commercialised.
Current business strategies include forming alliances with local companies, contractual outsourcing arrangements and establishing local subsidiaries.
Underlining the growing appeal of these two regions, several European pharmaceutical/biotechnology companies are looking to expand their presence. At the start of last year, Switzerland's Roche set up an R&D centre in Shanghai in a move, which reflected the growing importance of the country as both a market for pharmaceutical products and a site for drug research.
Roche now intends making India one of its larger sourcing hubs for active ingredients and bulk intermediates. Novartis is investigating clinical trial opportunities in both countries while big pharmaceutical companies such as Eli Lilly, Pfizer and Roche have established their clinical trial programmes in India.
Indeed, these outsourcing activities in developing countries amount to 20 to 30 per cent of total global clinical trials. Access to specialised skills in both countries and work hours on a 24/7 basis underpins their competitive advantage. In addition, better management from the start reduces development risks.
"Contract research organisations (CROs) are a popular option and carry out medical and scientific studies on a contractual basis for multiple clients," said Himanshu Parmar, Frost & Sullivan's industry analyst.
"They provide part, or all of the processes of clinical research including clinical trial management, data management, statistical analysis, protocol design and final report development," he added.
The report pointed out that despite the benefits, there has been a relatively low level of utilisation of the opportunities in both countries due to various concerns with respect to quality and infrastructure.
Companies are worried about probable loss of control in processes and proprietary knowledge. The report recommended, proper management was needed to utilise complicated and long-distance collaborative third-party relationships. Delays can even happen due to regulatory hold-ups.
As a result, recent amendments to Schedule Y of Drugs and Cosmetics Rules of India, 1945, signify a progressive attitude on the part of the Indian Government, clarifying the environment for clinical research in the country.
It is the same case in China. Regular monitoring of clinical trials ensures good clinical practice (GCP)-compliant research centres established by the government. These steps will enable the two countries attain international standards in pharmaceutical research.
"Government commitment in India and China to improve access to high-quality healthcare is a bonus for R&D outsourcing," said Parmar.
"The regulatory environment in both countries is gradually changing in favour of clinical research," he added.
The report, written by Frost and Sullivan , said that for companies wishing to leverage the regulatory changes and high-quality research, alliance strategies and identifying regions of opportunity should be priorities.
"Embracing these changes through innovative strategies and flexible approaches will allow international pharmaceutical enterprises to capitalise on these new attractive propositions," said the report.
The report, entitled: "Pharmaceutical R&D outsourcing to India and China (B600-52)," is now available to buy from Frost and Sullivan.