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Pharma: Its all ‘custom’ made!

Nov 28, 2005

With the introduction of the product patent regime in India, the country is fast becoming an attractive hub for contract manufacturing and contract research. In this article, we take a look at why this business model is gaining importance in India and the potential of the same. Problems at the global level

  1. Escalating R&D costs: The costs involved in developing a drug right from discovery to launch has surged to a massive US$ 800 m to US$ 1 bn. This can be attributed to the fact that the US FDA has become more stringent in the approval of potential drug candidates, requiring companies to provide more data with regards to the safety and efficacy of potential drugs. It must be noted that the global pharma industry has been under fire in recent times owing to risks involved after the launch of drugs. Cases to be noted in particular are the withdrawal of Merck’s anti-arthritic drug ‘Vioxx’ due to the potential risk of heart attacks on use of the drug as well as various anti-depressant drugs of global companies on account of reports connecting the use of these drugs to an increase in the rate of suicides. A combination of these factors has led to an increase in the time taken to develop drugs resulting in fewer launches and mounting research costs.

  2. Mounting Government pressure: In the US and Europe, the aged population as a percentage of total population is on the rise and is expected to rise further by 2025 resulting in a strain in the healthcare budgets. To give a perspective, the ageing population of Europe (as a percentage of regional population) is expected to rise from the current 20% to around 26% by 2025. Similarly that of the US is expected to rise from the current 16% to around 25% by 2025 (Source: Ranbaxy presentation). As a result, governments are under pressure to reduce the healthcare costs.

  3. Patent expiry of drugs: An innovator company stands to lose significant revenues when its product’s patent expires and generic companies enter the market with drugs at a cheaper cost. As a result, with the inevitable rise in R&D costs on one hand and pressure to reduce costs on the other hand, the one viable option left for these innovator companies is to cut down significantly on manufacturing costs.

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