India in demand

Emma Marris is a freelance science writer based in Washington DC. What's a company to do when it needs faster, cheaper new drugs and chemists are hard to find? Look for a source of bright graduates with low living costs, where legal changes have pushed firms to seek work, and you're there, says Emma Marris. The pharmaceutical industry is limping a bit, especially in the West. Some of its biggest-selling drugs have been brought down or impugned by scandal - painpersons linked to heart attacks, antidepressants blamed for increasing the risk of dissolution - and new drugs are oozing ever more slowly out of the pipeline. In response, many companies want to speed up drug discovery yet cut costs at the same time.

The way to meet these seemingly mutually exclusive goals may lie through global outsourcing. Other industries, such as finance and manufacturing, have been hiring workers in foreign countries for years, saving money on wages and benefits. In Britain and the United States, consumers have come to expect their customer-service calls to be answered by staff in India.

Some drug companies have relocated administrative tasks, including payroll and computer support, overseas. A report from management consultants A. T. Kearney, published at the end of last year, said that the top ten drug companies could save US$8 billion in ten years of outsourcing "general and administrative" tasks globally. Drug manufacturing, too, is increasingly being moved abroad.

A substantial number of companies are now also outsourcing hard science. Although early drug discovery is still mostly domestic, everything in the pipeline after that - from early development to clinical trials - can be farmed out. Companies are understandably cagey about discussing what parts of their operations they are outsourcing, and even what to call their far-reaching international workforce strategies (see 'Other arrangements'), but the trend is clear to industry observers (see box 1).

Growth industry: GVK Biosciences in Hyderabad plans to double its staff. GVK BIOSCIENCES "We are in the early part of the wave as far as outsourcing to India and China is concerned," says Nailesh Bhatt, chief executive of Proximare, a consulting company in Franklin Park, New Jersey, that helps drug companies to outsource. The impetus for technical outsourcing is a combination of cost-cutting and scientific supply and demand.

Chemistry provides a good illustration of India's attractions, in both economic and scientific terms. Bhatt estimates that the salary, overheads and benefits for one freshly minted American PhD come to an annual figure of $230,000. An Indian scientist would cost about a third of that.

Breaking the Bottleneck But the issue isn't just cost, says Sam Tetlow, a principal at Research Triangle Ventures, a North Carolina venture-capital firm. Tetlow interviewed 72 drug and biotech companies in the United States, Europe and Japan to find out about their outsourcing plans and experiences. "There are hardly any chemists in the world, and that's where the bottleneck is," he says. Meanwhile, 122,000 chemists and chemical engineers graduate in India each year, according to the Kearney report. In the West, there has been a consistent shortage of medicinal chemists over the past several years (see Nature424 594-596; 2003).

India is especially suited to fill this gap, thanks to international trade law. For years, Indian chemists were kept in demand by a lucrative trade in reverse-engineering popular drugs to make generics, says David Templeton, who represents the Indian company SIRO Clinpharm in the United States. That changed on 1 January, when India fully joined the Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS). This closed the legal loophole that allowed India to make generic versions of drugs still under Western patent protection. Now many of the Indian drug firms that used to make generics are turning to contract research and manufacturing.

First in line: India is increasingly the destination of choice for drug companies seeking to outsource elements of their operations. D. H. WELLS-CORBIS Many contract research organizations (CROs) work on the process of figuring out, step by step, what a drug does in a person's body in order to prove both that it is safe, and that it has some effect. Half of the companies that Tetlow talked to plan to outsource at least 80% of this work by 2008.

Another hot area is animal-model pharmacokinetics, using animal models of human disease to see how drugs metabolize within the body before they are tested in humans. Also popular is lead optimization, putting promising compounds through their paces to see if they are worth developing. These two processes weed out drugs that looked promising in screens or in animals but don't work in humans, preventing costly human trials that are doomed from the beginning.

Sanjay Reddy, chief executive of Hyderabad-based GVK Biosciences, stresses that the next challenge for Indian CROs is to stop promoting themselves in terms of cost savings and start stressing their value-adding expertise. His company serves seven of the biggest ten drug companies, he says, and specializes in medicinal chemistry, cheminformatics, bioinformatics and clinical research. He hopes to double the number of scientists working for him in the next year, and expand to cover discovery, preclinical, clinical and chemical development. "It's a very exciting time," he says.

At Dr Reddy's Laboratories in Hyderabad, Anji Reddy is prepared to adjust. "From generics to new drugs, from imitation to innovation, is a big leap but there is growing optimism that Indian companies have an opportunity in the R&D space," he says.