I made a couple of trips to India during the end of last year and early this year. The first one was with Jim Miller, president of PharmSource, an industry expert on pharma outsourcing and an accurate barometer of developing trends in global outsourcing. The second visit was with Dr. David Lyon of Bend Research Inc., a CMC-based R&D company based in Bend, OR.

These trips highlighted the growing importance of India on a global pharma scene. I must say that India has long enjoyed a reputation as a destination for IT and business process outsourcing, but now the country is emerging as a major center for cutting-edge R&D projects for global multinational pharma companies (as well as for India-based pharma firms). There also seems to be a growing trend in conducting global clinical trials in India by the global large pharma companies. 

What forces are shaping these trends? What are the factors driving global R&D toward Asia, especially to India, and what are the opportunities and challenges of contract research and the human capital challenge that India faces? From the point of view of India getting into core contract R&D areas such as drug discovery and development, I do believe that the time is right, for a number of reasons. Contract pharma R&D involves true, high level coordination between the pharma sponsor and contractor. The contractor must have the necessary credibility, capabilities, and capacities at the right costs for the sponsor. These “4 Cs of Outsourcing” are quite well known and are understood these days to equilibrate the tensions among Speed, Quality and Costs. To begin with, India’s contract pharma companies have mastered and proven the art of global delivery and of working together with customers in complex outsourced projects. Most of the senior management individuals of these companies are U.S. trained — both in terms of education and pharma experience — and understand the needs very well.

These talented and experienced staff who have been involved with R&D either in parent companies in the U.S./EU or captive multinational companies in India ready, willing and eager to go to work. Also some of the fundamental research that is happening in Indian academic institutes and universities is now much closer to cutting-edge industry practices. There has been growing interaction between industry and academia/academic research institutions. I tend to believe that high-end technologies with facilitate integration of the local economy with the global market.

I also contend that India is still a ‘reasonable cost’ geography, not quite a ‘low cost country’ (LCC), by the original definition. This designation still allows an R&D sponsor to get more ROI on its outsourcing dollar (or Euro, or GBP, etc.) and adapt to the new era of R&D cuts in spending. According to former Pfizer Global R&D President Dr. John LaMattina’s recent ‘Comment’ article (Nature Reviews Drug Discovery.10, 559-560(August 2011)), there has been a trend in drastic R&D spend cuts. Recent statistics show that companies are investing as little as 11% of their annual revenues, compared to past industry norms in the range of 16% to 20% of top-line revenues. These cuts will surely impact R&D productivity going forward.

According to Dr. LaMattina, “[A]t a time when our understanding of the basis of diseases continues to increase substantially, the ability to exploit this information in the private sector is being compromised. It is hard to envision that R&D output, as measured by new drug approvals, will improve in the coming years based on this reduced investment.” With this being the case, if we can bring in 30% to 40% savings through R&D outsourcing at the appropriate geographies, we should at least be able to reap some of the benefits and improve R&D productivity. During 2007, Dr. LaMattina and I visited India and had a chance to see many contract R&D institutions there firsthand. We also had a chance to discuss these R&D matters with India’s president, Mrs. Pratibha Patil, who expressed her compassion for the patients who are waiting for novel therapies. She also expressed a high degree of passion for pharma R&D and the innovations that western large pharma companies have brought to the table in the recent past.

In conclusion, I believe that continued pharma mergers and acquisitions will only bring a further squeeze on R&D spend and budgets. More ‘cost-effective’ and ‘efficient’ ways of outsourcing R&D globally would enable companies to do more for less and improve output and R&D productivity. 

Makarand (Mak) Jawadekar most recently served as Director, Portfolio Management and Performance at Pfizer Global R&D, until February 2010, when he opted for an early retirement after 28 years at Pfizer Inc. He currently serves on several companies’ advisory boards and also consults with bio/pharmaceutical companies for global outreach in emerging market regions. He can be reached at [email protected].