Pharma is Different!
This is one industry where basic research is still used to build competitive advantage. Notwithstanding the fact that pharma majors do not lag in business and IT-services outsourcing (with landmark deals such as the Pfizer-IBM IT deal and GlaxoSmithKline-Genpact F&A contract), much of their time and energy is invested in drug-discovery outsourcing, as the development of a new product offers a more strategic competitive advantage for them than making the regular processes more efficient — barring procurement and distribution. It is no surprise that most of the drug-discovery contracts are more focused on the intellectual capability of the service provider than the promised process efficiency, which is a major difference when compared with traditional outsourcing industries such as financial services, logistics, retail and telecom.
The second important differentiator in terms of challenges for the companies wanting to outsource, as well as for the service providers eyeing those contracts is the regulation that governs this industry. “The pharma industry is probably the most regulated industry after aviation,” says Dr. Surinder Kher, CEO, Jubilant Clinsys, a CRO based in Noida, near New Delhi, India. The regulation makes it difficult to outsource quickly. For example, in clinical trials where FDA has strict guidelines, in terms of processes, infrastructure and ethics, all these guidelines have to be adhered to by all the sites (usually clinics/hospitals) participating in the trials. Preparing a site for trial takes up considerable amount of time.
India R&D Process Capability Map
Pharma Offshoring is Not So Different
Just as the big Business-process Outsourcing (BPO) wave was kick-started by a few committed global corporations such as American Express, British Airways and GE that sold the India concept to the global business community, the first companies to start clinical trials in India were two of the biggest names in the global pharma industry — Eli Lilly and Pfizer. Eli Lilly expanded globally in 1995, and faced all the initial hurdles that the pioneers do. “The concept of clinical trials was completely new to India. One had to virtually train people on the ethics standards and set up ethics committees as people did not understand what they were,” says Dr. Vinod Mattoo, Medical Director, Eli Lilly.
Eli Lilly and Pfizer can be credited for starting the wave in India at a time when India had just promised that it would implement its drug-patent regime. They were soon followed by Siro Clinpharm and DiagnoSearch. These pure-play CROs were joined by separate divisions or companies created by Indian contract manufacturers and generics companies like Ranbaxy, Nicholas Piramal, Biocon and Dr. Reddy’s Lab. U.S. and Europe based CROs like Kendle, Pharm-Olam, PPD, Chiltern and Icon were the last to join. Only one major U.S. CRO came in as early as 1997 and has been looking at India quite strategically. American CRO Quintiles, has the same position in drug discovery-offshoring as Convergys in traditional BPO. Today, the clinical-research industry in India is dotted with more than 100 entities — captive centers of Eli Lilly, Pfizer, AstraZeneca, Novartis, GlaxoSmithKline and the like; numerous Indian CROs as well as the who’s who of global CROs.
