Report Predicts Growth for Outsourcing to India

India accounts for approximately 3% of the global outsourcing market, which indicates a significant opportunity for growth, according to a report published in early August by Ernst and Young and the Organization of Pharmaceutical Producers of India. The report, titled “Taking Wings: Coming of Age of the Indian Pharmaceutical Outsourcing Industry,” says that the global pharmaceutical and biotechnology industries have not taken full advantage of India’s capabilities because of the country’s intellectual-property regime and its “branded-generic market image.” In response, India is attempting to change the global industry’s perceptions by building infrastructure, instilling a culture of quality, and acquiring newer technology capabilities such as biologics, cytotoxics, and lyophilization for custom manufacturing.

In 2008, the global pharmaceutical market grew at its slowest rate of the decade, and growth is expected to slow further, according to the report. Reasons for the slowdown include decreased research and development productivity, the global financial crisis, increasing generic competition, and a dearth of blockbusters. As a result, outsourcing is now a “strategic imperative,” according to the report. Companies are now outsourcing core functions such as development and manufacturing, and outsourcing activities are shifting to attractive Asian emerging markets such as India.

India’s custom-manufacturing market is growing at a rate of 43%, which is three times the global market rate. Low manufacturing costs, skilled manpower, and technical capabilities have contributed to this growth, the report says. Growth in the North American and European markets is expected to slow down, but the growth of emerging markets is predicted to be 11–14% from 2008 to 2013, according to the report. This growth will benefit Indian providers of outsourced pharmaceutical services.

In a survey conducted for the report, India ranked highest among six countries for cost-efficiency attractiveness. Its technical abilities such as expertise in active pharmaceutical ingredients and formulation are highly regarded. In addition, 67% of respondents rated India “above average” on project-management attractiveness and response-time attractiveness.

To strengthen India’s position in the pharmaceutical-manufacturing outsourcing market, the country’s government has taken or is planning to take initiatives such as streamlining manufacturing- and export-license approvals and establishing memoranda of understanding with organizations such as the US Food and Drug Administration and the European Medicines Agency. The government also plans to invest in infrastructure support such as building temperature-controlled areas, the report says.

India is emerging as a hot spot for drug-discovery and development services as well. The market for these services is growing at a rate of roughly 65%, which is more than three and half times the global growth rate, according to the report. India’s strong chemistry capabilities, skilled manpower, and cost-value proposition have contributed to this growth.

The report also notes that the Indian pharmaceutical industry “lacks a culture of innovation.” The country spends much less on research than do countries such as the US, Japan, and Germany. Lower transfer of knowledge and people between industry and academia and a lack of interdisciplinary education have also hampered innovation in India.

Recognizing the need to foster research and innovation, the Indian government is spending money on public–private partnerships; promoting collaboration between industry, academia, and government; setting up seven national institutes of pharmaceutical education and research; and encouraging Indian pharmaceutical companies to pursue drug discovery and research, according to the report.

See related PharmTech articles:

Global Outsourcing: A Roundtable of Contract Manufacturers (PharmTech Outsourcing Resources supplement)

East Meets West in Contract Biologics Manufacturing (Sourcing and Management newsletter)

Evaluating the Pieces of the Pharma Supply Chain (online exclusive)