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

1st April 2013

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 US$50billion in 2004, and India and China have the potential to garner around 35 to 40percent of the outsourced market share.

The US$7.3billion 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 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 US$450million 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.

Dr Amarpreet Dhiman, EMEA Drug Discovery Technologies Team Leader at Frost & Sullivan, says: “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 US$19.8billion in 2011.”

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 US Federal Drug Authority.





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