Big Pharma companies are now beginning to rely on China and India for advanced R&D as well as manufacturing and clinical trial work, but they regard India as the more mature venue for chemistry and drug discovery activities, according to a new US report.

The movement of R&D to their countries means that Indian and Chinese scientists are rapidly developing the ability to innovate and create their own intellectual property (IP). Several firms in these countries are performing advanced R&D and are moving into the highest-value segments of the pharmaceutical global value chain, says the study, which is sponsored by the Ewing Marion Kauffman Foundation. In 2006, 5.5% of all global pharmaceutical patent applications named one inventor or more located in India, and 8.4% named one or more located in China; in both cases, this is a fourfold increase from 1995.

“Globalization 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,” said Vivek Wadhwa of Duke University and Law School, who led the team of researchers conducting the study.

“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 United States benefits most when those discoveries are made by companies owned primarily by US citizens,” added Robert Litan, vice president of research and policy at the Kauffman Foundation.

Indian and Chinese companies are making strides in the most lucrative segments of global value chains, although Chinese firms appear to be more prevalent in the less profitable segments such as preclinical testing, animal experimentation and manufacturing, the researchers find. Also, domestic firms in both countries rarely have the capital or regulatory expertise to develop a drug beyond Phase II clinical trials, which means they need relationships with major multinational corporations to commercially develop their new IP.

As Indian drugmakers have more experience than Chinese firms in selling generic drugs that meet US Food and Drug Administration (FDA) standards, India is playing a more strategic role in early discovery, with companies such as Ranbaxy, Aurigene, Advinus, Nicholas Piramal and Jubilant having negotiated long-term deals with western drugmakers to discover and develop New Chemical Entities, the researchers add. It is also increasingly the case that Indian companies will share the financial risk in discovery as well as the potential financial rewards. While one Chinese company, Hutchison MediPharma, has formed a similar partnership with Eli Lilly, others are likely to follow suit as Chinese contract research organizations gain experience and western companies come to trust in China's ability to protect intellectual property, they forecast.

It is, however, still too early to tell whether China and India will become important sources of new drugs, the report cautions. In contrast to industries such as software and electronics, which have seen 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.

Nevertheless, early progress is promising. Several companies have reached significant development milestones with NCEs, and drugs from these partnerships are now going into clinical testing. As a result, the trend of R&D moving to both India and China is likely to gain further momentum, the researchers conclude.