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Pharmaceutical Research Development in India – Looking Up?
a report by
Shoibal Mukherjee
Senior Medical Director, Pfizer Ltd
The 1970s saw a major dilution in the intellectual
property (IP) law, making it possible for local
companies to copy and sell patented molecules in
India. The business opportunity at hand led to
research efforts in chemical process and formulation
development. Companies that were set up to exploit
the prospects opened up by the change in law began
to develop strong competencies in ‘reverse
engineering’ and, by the mid 1980s, had matured
sufficiently to be able to export to poorly regulated
foreign markets such as the USSR. Schedule Y, a
new addendum to the Drugs and Cosmetics Rules,
was introduced in 1987, which made it necessary for
new drug applicants to conduct a simple, 100-
patient, open, non-comparative study in Indian
subjects before permission to market the product
could be granted. Generic applicants had to prove
bioequivalence with the original applicant’s
formulation. These changes led to some familiarity
with the clinical trial process among a section of
practicing physicians, and pharmaceutical companies
began to employ staff that would manage clinical
research activities as part of the product registration
process. Some entrepreneurs set up bio-
pharmaceutics laboratories to cater to demand for
bioequivalence studies sponsored by generic
manufacturers for local submission. Research
laboratories in state-run academic institutions used
this opportunity to utilise idle analytical equipment,
train research students and obtain funding that
would partly compensate for the lack of adequate
government support or augment available funding.
In the meantime, changes were happening
elsewhere in the world that would have a future
bearing on pharmaceutical research in India. The
International Conference on Harmonization (ICH)
established in 1990, opened the floodgates to
globalisation of pharmaceutical research and
development (R&D) by standardising regulatory
requirements and laying the foundations for the
acceptance of foreign clinical data across 85% of the
world’s pharmaceutical markets. At the same time,
negotiations at the Uruguay Round of General
Agreement on Trade and Tariffs (GATT) led to the
multilateral agreement on Trade-related Aspects of
Intellectual Property Rights (TRIPS) that would
BUSINESS BRIEFING: FUTURE DRUG DISCOVERY 2006
World Outlook
end the regime of unrestricted appropriation of Shoibal Mukherjee has been Senior
Medical Director for Pfizer Ltd in
internationally patented IP in India. Large generic Mumbai, India, since 1997. During
companies in the country had foreseen this this period he has had the
inevitable development and some of them were very opportunity to witness first-hand
the rapid growth of pharmaceutical
fast off the block, putting into action strategies to research and development (R&D) in
develop a new business model to replace the existing India and has been actively
involved in helping shape regulatory
one with over-reliance on a lack of IP protection in
policy, contributing in particular to
the domestic market. The short-term plan was to the framing of regulations for
generate revenues by entering the legitimate clinical research. He is a member
of the teaching faculty for several
generics market in the US and Europe. The long- external training and academic
term ambition was to compete with global programmes and is the author of
pharmaceutical majors in the high-risk, high-return several research papers, scientific
reviews and media articles, having
sweepstakes of drug discovery and development. written and spoken extensively on
That is how the first R&D laboratories were topics related to pharmaceutical
research and intellectual property.
established in Gurgaon and Hyderabad. At the same Dr Mukherjee joined Pfizer in 1990
time, multinationals were contemplating the need to having started his career with
diversify the research base. Pfizer set up a modest Alembic Chemical Works at
Vadodara, India. He has a post-
clinical research unit in Mumbai in 1995. Lilly did doctoral degree in clinical
the same in Gurgaon a little later. The success of pharmacology and post-graduate
and graduate degrees in
these units in conducting studies at a considerable pharmacology and medicine.
cost advantage with high rates of patient
recruitment, and quality that was at least on a par
with global standards, triggered the growth of the
contract research organisation (CRO) industry in
the country. Quintiles started operations from
Ahmedabad in 1998 and a host of local outfits began
operations around the turn of the century – many of
them diversifying from existing clinical biopharm-
aceutics businesses. From 2000 to 2005, the number
of clinical CROs operating from India grew to over
30; equally divided between those that are local
units of international organisations and those that are
owned and operated from within the country.
Over the past few years, entrepreneurs in India have
developed capabilities across a wide spectrum of the
pharmaceutical R&D value chain, from genomics,
custom synthesis, physical and chemical
characterisation of molecules, in vitro studies and
animal toxicology, to biopharmaceutics, execution of
phase 2 and phase 3 studies, data operations and
statistics. While considerable capacities are now
available in clinical development operations,
capacities in discovery and non-clinical development,
though growing at a rapid pace, are still small. First-
in-man studies are currently restricted in India
through regulation, while early discovery work is 73
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World Outlook
limited to a handful of local companies. Data
operations and biometrics, on the other hand, have
grown considerably, with an estimated 1,500 people
currently involved in this work in the country.
The largest capital investments in research have, of
course, been those made by the larger local
companies. In addition to Ranbaxy’s research centre
in Gurgaon, the National Capital Region of Delhi
also hosts the Dabur research centre working on
developing new chemical entities (NCEs) in
oncology. Ahmedabad, Gujarat, has the Torrent and
Zydus research centres, and Sun’s SPARK research
centre is located in Vadodara, which is also in Gujarat.
The Piramals’ Quest Institute of Life Sciences is
located in the Mumbai suburbs and Glenmark’s
research unit is in New Mumbai. The Emcure and
Wockhardt research centres, in Pune and
Aurangabad, respectively, are also in Maharashtra.
Hyderabad and Bangalore are other centres of
corporate biopharmaceutical research in the south of
Prospects for global CROs operating in India are bright.
Labour cost arbitrage earnings can ... provide US and
European clients substantial cost savings from outsourcing.
the country, with the Reddy’s and Shanta
Biotechnics units around the former, and Biocon, the
country’s leading biotechnology company, operating
from the latter. AstraZeneca is the only multinational
big pharma company that currently has a captive basic
research capability in the country, situated in
Bangalore. It is estimated that each of these research
units has absorbed capital investments in the region of
US$10 to US$20 million. Discovery research groups
are the main protagonists within these centres,
but most have facilities for pharmaceutical
formulation development, animal toxicology and
clinical development.
Companies with commercial interest in the
manufacture and sale of pharmaceuticals are not the
only investors in research laboratories. A number of
such facilities have, in the last few years, been set up
by entities involved in other pursuits. The New York-
based Chatterjee Group (TCG), with diverse interests
from real estate to petrochemicals and the
international stock markets, established Chembiotek (a
basic sciences laboratory located in Salt Lake, Kolkata)
providing drug discovery-related capabilities to
international clients. TCG’s other bioscience ventures
74 in India include ClinInvent, a clinical research CRO
BUSINESS BRIEFING: FUTURE DRUG DISCOVERY 2006
headquartered in Mumbai, and The Centre for
Genomic Applications (TCGA) in Delhi, set up in
collaboration with the government-run Institute of
Genomics and Integrative Biology, providing contract
facilities in gene sequencing, genotyping, protein
sequencing and finger-printing, primer design,
synthesis and expression profiling. Another diversified
group that has invested in bioscientific research is the
GVK group, better known for its infrastructure
projects. GVK Biosciences is based at the ICICI
Knowledge Park near Hyderabad. The Tatas, among
the oldest and most diversified of all industrial groups
in India, runs the Rallis Research Centre outside
Bangalore, providing contract services in pre-clinical
toxicology and animal experimentation as an offshoot
of in-house capabilities developed to service the large
agrochemicals business that Rallis represents. Other
advanced facilities set up by individual scientists with a
background of work in the public sector research
laboratories, include Avra, a drug discovery group,
and two contract animal toxicology laboratories, the
Indian Institute of Toxicology and Intox, both in the
vicinity of Pune, near Mumbai. Some local
pharmaceutical companies have also established
independent contract research units in the discovery
and early chemical development space. These include
Biocon with Syngene and Dr Reddy’s with Aurigene,
both based in Bangalore. Numerous smaller
companies have carved out a space in formulations
development, stability testing and analytical
development. These include Medreich Laboratories
near Bangalore, Rubicon in Mumbai and Natco in
Hyderabad among many others. Unique in this
context is Bilcare, based near Pune, which has
leveraged its business of manufacturing of
pharmaceutical packaging materials to develop niche
expertise in pharmaceutical packaging R&D.
The clinical research space has also witnessed
extraordinary proliferation of companies and contract
research units in recent years. Some of these, like
Vimta Laboratories and Lambda Therapeutics have
grown from origins in the bioavailability/
bioequivalence business supporting a thriving
generics industry at home and growing through
foreign currency earnings from international clients.
Others were set up with a specific business plan to
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Pharmaceutical Research Development in India – Looking Up?
leverage the country’s medical expertise and
comparative advantages in patient availability and
cost of medical care. Neeman Medical is an example
of the latter, as are ClinWorld, ClinInvent, ClinRx,
PharmaIntel and Synchron, among others. Part of
the reason for the mushrooming of local CRO
groups is the low level of fixed investment needed to
start a clinical research services operation. Easy
migration of professionals from the medical
departments of multinational subsidiaries to man the
CRO industry has further helped the process. Many
local CRO units are smaller side-businesses of
established pharmaceutical or bioscience companies –
Wellquest, established by Nicholas Piramal, ACT
established by the promoters of Suven
Pharmaceuticals, Clinigene promoted by Biocon and
Reliance Research Services flying the Reliance
Industries flag. Indian CROs offer a wide range of
clinical development services, from expertise in
bioavailability and bioequivalence studies to clinical
trial management and monitoring, data operations,
reporting and regulatory support for local and
international Abbreviated New Drug Application
(ANDA) submissions. Some, like Catalyst Clinical
Services, also run fee-based distance or on-site
education programmes in clinical research. The rapid
proliferation of these units has created intense
competition in this space and there is the distinct
possibility of a shakeout in the near future, with
weaker outfits having to close down, and more
established units succumbing to buy-out bids from
international players even as new entrants continue
to pour in. However, for the time being these units
are managing to keep afloat and are indeed doing
well with local and international alliances.
The interest of international CROs in setting up
operating units in India is continuing to peak. At the
last count, over a dozen well-known names had
acquired the ‘India-leveraged’ tag. Quintiles began
operations in Ahmedabad in 1997 and later set up
offices in Mumbai and Bangalore, maintaining a lead
over rivals with a four- to five-year head start. Others
that followed include ClinTec, Covance, Pharm-
Olam, Pharmanet, Omnicare, PPD, Icon, Chiltern
and Kendle. International CROs have often used
alliances with local CRO outfits as an entry strategy,
but have soon realised the importance of having an
independent presence in the market. For companies
such as iGate Clinical Research International and
KARD Scientific, India is central to the business
strategy, with clinical operations limited to the one
country, while projects and assignments are obtained
through business development activities run from
offices in the US. Almost all players have leveraged
India beyond clinical operations, offering data
management services, statistics and reporting as key
capabilities, and sometimes venturing into specialised
services such as a central laboratory or an
BUSINESS BRIEFING: FUTURE DRUG DISCOVERY 2006
electrocardiogram (ECG) interpretation service.
Setting up a clinical research and data management
operation in India has been a smooth experience
universally. While local knowledge and experience is
important, there is more than enough talent available
within the Indian pharmaceutical and IT industries
to allow rapid start-up and sustain a high quality of
clinical and data operations, respectively. Indeed, the
data management end of the business has stolen a
march over clinical management and monitoring,
with large information technology (IT) and back-
office processing offshore (BPO) service providers
such as Accenture and Cognizant taking centre-stage
with major off-shoring alliances, with Wyeth and
Pfizer taking total pharmaceutical industry data
management, programming, statistics and reporting
headcount in India to over a thousand. Prospects for
global CROs operating in India are bright. Labour
cost arbitrage earnings can be anywhere between
100% and 200% of total cost and still manage to
provide US and European clients substantial cost
savings from outsourcing.
While the low cost of operations in India is definitely
alluring to a pharmaceutical industry struggling to
improve R&D productivity, it cannot be the sole
criterion driving high-tech research investments across
the world. The question of what else has been
attracting global pharmaceutical research to India, now
arises. The answer to this question is not the market –
India accounts for no more that 1.5% of global
pharmaceutical sales and the margins are even lower,
given the fact that, for a variety of reasons, India has
the lowest pharmaceutical prices in the world. Neither
does the tax regime or government policy have
anything to do with answering this question –
notwithstanding recent initiatives taken by both
federal and state governments to encourage foreign
and domestic investment in pharmaceutical and
biotechnology research. India’s lure as an R&D hub is
partly explained by the AT Kearney 2004 Offshore
Attractiveness Index, reconfirmed by The Economist
Intelligence Unit (EIU) Offshoring Rankings 2005.
The AT Kearney Index gives India an attractiveness
score of 7.1 with China the nearest competitor at 5.6.
Malaysia, the Czech Republic, Singapore and the
Philippines follow in close succession. India scores on
People Availability and Financial Structure (read
costs). The EIU ranking also places India first with a
total score of 7.76. China, the Czech Republic,
Singapore and Poland follow with scores ranging
between 7.34 and 7.24. The EIU ranking gives high
weightage to labour skills and costs. India scores 7.78
on labour skills and availability, second only to the US
at a score of 8.4. Contrary to popular belief, India’s
score for labour costs at 9.69 is just about sufficient to
keep pace with a host of other attractive offshoring
destinations – being slightly lower than China, the
Philippines, Ukraine, Vietnam, Indonesia, Nigeria, 75
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World Outlook
Pakistan, Ecuador and Azerbaijan. The prevalence of
the English language as a medium for transactions in
higher education and healthcare certainly helps, but
what has become apparent to those who have
ventured into research activities in India is that the
quality of work is usually higher than what can be
achieved at most other locations. India gets the lowest
scores on proximity to major client markets and on
infrastructure, but geographical location on the other
side of the world from the US can often be an
advantage and tele-infrastructure is actually quite
adequate. The lack of a potent driver on the
commercial side of the business is something that will
continue in deciding whether India is a suitable target
for R&D investments. Future capacity constraints is
also a cause of worry for those watching the growth of
global pharmaceutical R&D in India.
Nonetheless, the number of global pharmaceutical
majors that have a research presence in India is
growing. While Astra has been operating a modest
research laboratory in Bangalore since the 1970s,
AstraZeneca inaugurated a major facility for
research on tuberculosis in 2003 and followed it up
with expansion on the pharmaceutical development
side in 2004. Pfizer started clinical research
operations in 1995 and added a biometrics unit in
1998 and a formulation development group for its
veterinary division in 2004. Currently, Lilly,
Sanofi-Aventis, Novartis and GlaxoSmithKline
(GSK) all have a direct clinical research presence in
India and Novartis and GSK also have their own
biometrics units. Wyeth’s global data operations are
sourced through an independent entity managed by
Accenture at Bangalore.
Collaborations between the Indian pharmaceutical
sector and global pharmaceutical majors in the
form of licensing and development deals or more
general co-operation in R&D can be seen to be
developing. Dr Reddy’s has been the most active
so far, having licensed two anti-diabetic
compounds (DRF 2593 and DRF 2725) to Novo
Nordisk and one (DRF 4158) to Novartis between
1997 and 2001. Although none of those
compounds survived the rigours of the drug
development process, the partners are said to be
working on new compounds of mutual interest.
More recently, new drug candidates have been
licensed out by Ranbaxy, Torrent and Glenmark.
Ranbaxy’s uroselective α-blocker RBX 2258 was
licensed to Shwarz Pharma AG in 2002 while
Torrent sold first right of refusal for an advanced
glycosylation end (AGE) breaker compound being
developed primarily for hypertension to Novartis
in 2004 and, most recently, Glenmark licensed a
PDE-4 compound for asthma and COPD to Forest
Labs. The size of these deals has been in the range
76 of up to US$50 million in potential milestone
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payments, although Forest is said to have agreed to
nearly four times that amount for the PDE-4
compound. Up-front payments have ranged from
as little as US$500,000 to approximately US$10
million. Almost all deals have included the
possibility of royalty payments besides
co-promotion or exclusive rights in India and the
developing world for the Indian company. The
only India-developed product that has reached
global markets to date is Cipro XR, a once-daily
oral sustained release formulation of ciprofloxacin
that Ranbaxy licensed to Bayer for royalty
payments in 1999 and the latter launched in the US
in January 2003.
Important regulatory changes now under way will
definitely further improve the climate for R&D.
The patents ordinance and its hoped-for ratification
by parliament will engender better sentiment for
multinational investments and, through improved
prospects for commercial success with patented
products, will help multinational corporations justify
such investments to their stakeholders. An
atmosphere of greater trust and transparency will
open the door wider for collaboration and licensing
deals. The continuing trend of liberalisation of the
economy and deregulation in all spheres of
commercial activity will further eliminate
bureaucratic hurdles, allowing full ownership of
research entities and flexibility of the operating
model. Improvements in the quality of
pharmaceutical regulation exemplified by the recent
revisions to the Drugs and Cosmetics Rules will lead
to fewer ambiguities and help foster greater
regulatory support for research and faster clearances
of projects. While the trend towards this utopian
future is clear, federal initiatives in that general
direction still have a long way to go.
In the meantime, state governments are forging
ahead in competitive spirit. Biotechnology is widely
seen as the next IT-like miracle sector. In a bid to
capitalise on resources and attract biotechnology-
driven research and industry, several state
governments have now published their own Biotech
Policy. The scope is wider than merely
pharmaceuticals. While Maharashtra, Gujrat, Andhra
Pradesh and Karnataka have fairly large
pharmaceutical industry establishments and interests,
Punjab, in the north, is more interested in food and
agriculture, Kerala and Chhattisgarh in documenting,
preserving and profiting from their biodiversity and
coastal regions expect to be able to encourage
research in marine biology. Dairy and veterinary
science and herbal research are also expected to
benefit from the thrust into biotechnology. In order
to drive biotechnology-led economic growth, these
states are providing infrastructure support and fiscal
incentives and putting in place human resource
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Pharmaceutical Research Development in India – Looking Up?
development initiatives and support systems besides
simplifying rules and regulations.
In the wake of these initiatives, several large real
estate developers have begun to invest in technology
and knowledge parks. A large tract of land north of
Hyderabad in the south-central part of the country is
now being called the Genome Valley where the
ICICI Knowledge Park and the Shapoorji Pallonji
Biotechnology Park are located. Near Pune, TCG
has begun work on another estate and plans are in
various phases of implementation in Karnataka,
Chennai, Kolkata and Lucknow. Companies wishing
to invest in these locations get duty and registration
charge waivers, rebates on the cost of land that is
incremental to the number of jobs created and
productivity-focused labour law concessions. Added
to the existing deductions available on capital and
revenue expenditures and provisions for duty-free
import of research equipment and consumables,
these incentives make for some very attractive
investment propositions. The facilities that are being
set up range from single large buildings to 50–200-
With IP protection, continuing improvements in the business
and regulatory environment and better research and urban
infrastructure, it is not difficult to envision a vibrant future
for pharmaceuticals and biotechnology in India.
acre townships with a clustering of education centres,
research equipment and service vendors, captive or
dual-feed utilities, information services including
libraries and connectivity to virtual information
networks, pooled high-end instrumentation, wet
laboratories and access to super-computing facilities.
Flexibility in meeting the needs of clients makes
these facilities attractive to small and medium-sized
start-ups as well as large stand-alone research centres.
In the background of these developments, industry-
watchers are upbeat about the future of
pharmaceutical R&D in the next few years. With
further consolidation of strengths in process and
formulation development and rapid growth of
research services, export earning in the pharmaceutical
and biotechnology sectors is expected to exceed
domestic sales of pharmaceutical goods and research
services within the next year or two. The first true
breakthrough in domestic research initiatives is
expected within the next five years with the first out-
licensed product reaching international retail markets.
The greatest growth in the near-term is likely to occur
BUSINESS BRIEFING: FUTURE DRUG DISCOVERY 2006
in the non-clinical contract research segment with
40% to 50% annual growth being sustainable for
several years. The clinical research segment might see
some consolidation and will probably grow at a
somewhat slower pace due to short-term capacity
constraints, although growth in data operations may
well compensate for some of the inertia. There is a
mood of expectancy regarding significant foreign
direct investment in R&D facilities but the outcome
will depend heavily on government and public
attitude towards the protection of IP.
The question of whether the India advantage and the
consequent pharmaceutical R&D bubble is sustainable
now arises. While some expect wage and cost
differentials to narrow and capacities to become
saturated in a 5–10 year timeframe, others argue that
as long as supply outstrips demand, India will remain
highly cost-competitive. With only 25% of Indians
currently completing secondary education and less
than one-third of the population having adequate
access to healthcare, there is no denying that the scope
for increase in numbers on the supply side is
enormous, provided stated intentions of the federal
government to make major improvements in public
spending on education and healthcare go beyond
rhetoric. English language abilities of the workforce
can only increase if one was to use current trends. The
Mumbai municipal corporation recently announced
the establishment of 50 new secondary schools; all of
them English medium, bowing to demand from
working class parents who want an English education
for their children. In the short-term, current
investments in biotechnology parks, research facilities
and technical education will boost capacities and
patient availability for recruitment in clinical trials
should increase with increasing awareness of clinical
research among patients, media and the medical
community and increasing participation of private
sector hospitals in clinical research. With IP protection
making India a worthwhile market for innovative new
products, continuing improvements in the business
and regulatory environment and better research and
urban infrastructure, it is not difficult to envision a
vibrant and happening future for pharmaceuticals and
biotechnology in the country. ■ 77