The study, sponsored by the Ewing Marion Kauffman Foundation, says Merck & Co, Eli Lilly and Johnson & Johnson are among big pharma companies that have started down the globalisation route. In The globalization of innovation: Pharmaceuticals. Can India and China Cure the Global Pharmaceutical Market?, Kauffman reports that Indian and Chinese scientists are rapidly developing the ability to innovate and create their own intellectual property as a result of the movement of R&D to their countries. Several firms in these countries are performing advanced R&D and are moving into the highest-value segments of the pharmaceutical global value chain, the report suggests. An analysis of patent applications provides a clear example of the trend. In 2006, 5.5 per cent of all global pharmaceutical patent applications named one inventor or more located in India, with 8.4 per cent naming one or more located in China. This represents a fourfold increase over 1995. "Globalisation is happening faster than people think. Having India and China conduct such sophisticated research and participate in drug discovery was unimaginable even five years ago," according to Vivek Wadhwa of Duke University who led the team of researchers conducting the study. The report notes a number of interesting and differentiating features of India and China with regards to R&D capabilities. For example. Indian and Chinese companies are both making strides in the most lucrative segments of global value chains. In less lucrative segments, such as preclinical testing, animal experimentation and manufacturing, Chinese firms appear to be more prevalent. Meanwhile, a number of Indian and Chinese firms are developing their own proprietary drug products, but in general they lack the ability to advance a drug through the entire clinical trial process and market them worldwide, so are seeking out licensing deals with multinationals. "Domestic Indian and Chinese firms rarely have the capital and the regulatory expertise to develop a drug beyond Phase II clinical trials," notes Kauffman. According to the study, because Indian drug companies have the most experience in selling generic drugs that meet FDA standards, India is playing a more strategic role in early discovery. Companies such as Ranbaxy, Aurigene, Advinus, Nicholas Piramal and Jubilant have negotiated long-term deals with Western pharmaceutical companies to discover and develop new chemical entities. Robert Litan, vice president of Research and Policy at the Kauffman Foundation, said: "Having more countries like India and China develop treatments for diseases is good for the world and will help reduce the overall costs of health care. But the US benefits most when those discoveries are made by companies owned primarily by US citizens." In a growing number of cases, the Indian companies share the financial risk in discovery as well as the potential financial rewards. One Chinese company, Hutchison MediPharma, has formed a similar partnership with Eli Lilly. Others are likely to follow suit as Chinese contract research organisations gain experience and Western companies come to trust in China's ability to protect intellectual property. However, "it is too early to tell whether China and India will become important sources of new drugs," says Kauffman. In contrast to industries such as software and electronics, in which there has been substantial growth in offshore R&D, the pharmaceutical industry takes many years for a new product to emerge from R&D and regulatory approval. Most of the new risk-sharing arrangements date from 2005, so it could be another decade before there are concrete results. The report also gives some intriguing examples of the cost-savings that can accrue from employing CROs in India and China. For example, Dr. Reddy's Laboratories can conduct preclinical trials for 40 to 60 per cent less than the cost of comparable activities in the US, while Aurigene can conduct chemistry work for a quarter of the cost, it says. In the US, it adds, tissue collection can cost as much as $2,000 per sample. In China, this can be accomplished for around $300 per sample.
