India poised to become a strategic partner of choice in contract manufacturing
India is a fast growing custom manufacturing outsourcing destination with a growth rate of 43% that is thrice the global market rate driven by its ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities
India has been rated highest in terms of cost efficiency, technical competency and skilled manpower attractiveness as per the survey amongst India Puerto Rico, Ireland, China, Singapore, Eastern Europe.
67% respondents rate India as an excellent destination for cost efficiency in contract manufacturing on the back of low manufacturing costs, which are only 35-40% of the cost of manufacturing in the US.
In drug discovery and development services, India is emerging as a lucrative destination, growing at ~ 65%, i.e. more than three and half times the global growth rate driven by strong chemistry capabilities, skilled manpower and cost value proposition.
Mumbai, August 08, 2009: While there has been a slowdown in the global pharmaceutical markets, the emerging markets could drive the growth for global pharmaceutical market going forward.Emerging markets, which form 18% of the global pharmaceutical market outperformed developed markets in terms of growth with a 49% in 2009 with a CAGR of 12-13% during 2003-2008, whereas the CAGR growth for developed economies stayed around 6-8% for the same period,
A latest study by professional services firm Ernst & Young (EY) and the Organisation of Pharmaceutical Producers in India (OPPI) explores the changing paradigms of outsourcing of pharmaceutical services and showcases the trends leading to increasing outsourcing and an assessment of the capabilities and potential of the Indian outsourcing industry in light of the customer expectations for their outsourcing service providers. The Study will be released at OPPI Annual General Meeting in Mumbai later this week on 08 August,2009.
The report titled "Taking Wings-Coming of age of the Indian pharmaceutical outsourcing industry" features interactions with more than 50 respondents across 30 organizations including large and medium pharmaceutical companies across US, Europe and India; Indian suppliers and regulatory authorities.
According to Ajit Mahadevan, Partner - HealthSciences Practice, Ernst & Young, "India is perfectly positioned to be a preferred destination for global pharmaceutical companies to outsource R&D as well as manufacturing. With India offering significant cost-quality proposition in end-to-end research and development with potential savings of 61% as compared to US which is coupled with a strong supply of skilled manpower (scientists, QA/QC professionals etc) and capital efficiency we could see even more of the global pharma companies adopting different operating models such as captive off shoring, dedicated R&D unit in partnership, fee for services and collaboration/ JV for future growth within India."
Further, as part of this report , a survey was conducted to assess relative attractiveness in custom manufacturing outsourcing of six countries/geographies - India, China, Eastern Europe, Puerto Rico, Singapore and Ireland with 38 respondents across 17 Big pharma and medium pharma companies. These respondents were senior professionals from the manufacturing strategy & sourcing teams across Europe, US and Asia.
According to the report of the total global outsourcing, custom manufacturing (phase IIb to the off patent stage, including intermediates, API and formulations) contributes almost 65 % of pie of the USD 51 billion market in 2008. Within India the custom manufacturing is almost USD 1.1 billion and is growing at 43 % that is thrice the global custom manufacturing outsourcing growth rate.
This is driven by the India's ability to create a differentiating cost value proposition powered by its lower manufacturing costs, skilled manpower and strong technical capabilities. As per the survey conducted India was rated highest in terms of cost efficiency , technical competency and skilled manpower attractiveness amongst the 6 geographies whereas India needed to focus on improving
its EHS compliance , IP protection and infrastructure to assume the mantle of leadership for custom manufacturing services. From a technical capability attractiveness standpoint, India is ranked highest for global pharmaceutical production with 83% respondents rating it above average. Also with every year around 1.6 million graduates and 0.4 million post graduates qualifying in science courses, India is certainly an attractive destination from a skilled manpower perspective.
However India lacks a culture of innovation due to legacy issues such as low levels of funding, collaboration between industry, academia and educational infrastructure with India spending only 0.8% of its total GDP on research and innovation which is much lower as compared to developed countries such as US (2.8%), Japan (3.1%), Germany (2.5%) and France (2.2%).The Indian government has recognized this need and is building an environment conducive for research and innovation. There are number of initiatives planned / implemented to provide the much needed impetus to research and innovation in pharma & biotech space says the report.
Despite India's inherent advantage, India as an outsourcing market is approximately 3% of the global outsourcing market. The global pharmaceutical and biotech industry is yet to harvest the full potential of India's skilled talent pool, strong technical capabilities and cost value proposition. This can be attributed to the perception arising from its legacy of IP regime and its branded generic market image, which have in the past hampered global pharmaceutical companies from taking advantage of the value proposition offered. This mindset has been undergoing a sweeping change and India has set its sights on becoming the strategic partner of choice to the global pharmaceutical industry.
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