PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Global Reach
• a growing use of India by biotech firms for R&D and drug development functions; and
• growing generic drug and active pharmaceutical ingredient (API) markets, as global
products come off patent.
Reflecting these trends, Bay Area biotech companies are using Indian resources to develop computational
software and for contract-based trials and testing. The cost and value effectiveness of
doing these things in India is allowing smaller Bay Area biotech firms—which need to rely on
limited venture or other investment until products become commercially viable and obtain FDA
approval—to extend their funds and increase their chances of survival and eventual success.
Larger Bay Area biotechs are meanwhile deepening their R&D ties.
India’s pharmaceuticals industry has a history that predates IT. In the 1970s, to encourage Indian
companies to produce for the domestic market, Prime Minister Indira Gandhi’s government
changed patent law in way that conflicted with global patent standards. As the industry grew, so
did its outward orientation, with expanding exports to Asia and the Middle East. With its accession
to the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
in 2005, India formally recognized product patents. The change resolved the longstanding issue
of widespread patent infringement and required Indian companies to produce generics only
when drugs go off-patent.
This stimulated a surge in contract research work in India, as well as clinical trial activity by multinational
corporations who now had fewer concerns that intellectual property might be stolen.
The Indian clinical trials market is expected to reach $1 billion by 2010. Contract manufacturing,
estimated at $350 million in 2007, is also expected to reach $1 billion by 2010. In the future,
India’s biopharma companies will likely follow the course taken by their counterparts in information
technology—moving from outsourced contract work to full partnerships and increased
risk-taking with global partners.
Much of India’s drug production is for export. According to global data source Trade Information
Systems, Indian pharmaceutical exports for 2008 were estimated at $10 billion, up from $1.9 billion
in 1999. Supporting this production are eighty-five product active product ingredient (API) and
formulation plants in India, the largest number in any country outside the U.S., producing drugs on
a very large scale for the U.S. and other developed markets. While standards at these facilities are
uniformly high, the industry hit a speed bump in September 2008 when the FDA banned the sale
in the U.S. of products from two facilities operated by Ranbaxy Laboratories, based on deficiencies
in their manufacturing processes.
Building on this historic base in generics and adding research capacity, Indian companies are
starting to grow through acquisitions and strategic partnerships in Western markets. India’s advance
into drug development and discovery research is part of this global reach. According to
PwC, the key considerations behind the outsourcing decisions of multinational corporations are
lower-cost manufacturing, lower-cost research, cost-sharing, leveraging in-house with external
capacity, accessing expertise, and the ability to better focus on core internal strengths. The trend
is toward two-way partnerships, with Indian partners taking more responsibility. Today there are
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