Global pharmaceutical manufacturing was worth nearly $50 billion dollars in 2004, and the $7.3 billion Indian and Chinese drug discovery outsourcing market has the potential to garner around 35%-40% of the outsourced market share, forecasts a new report from Frost & Sullivan.

Pharmaceutical companies from outside Asia are increasingly seeking to utilize the Indian and Chinese sectors, where they can obtain greater cost savings, better access to expertise, productivity gains, process improvements, variable costs, avoidance of capital outlays and opportunities to focus on specific niches, it says.

The two industries are gaining a global edge in producing a continual pipeline of drugs which are approved faster than those produced in western countries, while their governments have worked to attract outsourcing contracts through stringent regulations, mandatory Good Manufacturing Practice compliance and improved clinical trials legislation. However, the report warns, regulatory bodies must deal with currently ambiguities in regulatory issues and intellectual property rights legislation.

Both countries’ inadequate patent protection can discourage global pharmaceutical and chemical companies, especially those from the USA, which stand to lose $450 million every year due to piracy.

“The development of patentable products requires healthy investment in R&D and suitable confidentiality of results to develop a strong IP portfolio,” says Amarpreet Dhiman, EMEA drug discovery technologies team leader at Frost & Sullivan, adding: “to ensure that technological innovation is commercialized to its best potential, companies need to continuously work with domestic government officials and key opinion leaders in establishing and defining standards to comply with regulatory standards.”

“Government initiatives to diversify the industry’s drug discovery portfolio and develop infrastructure are expected to drive the growth rate of the drug discovery outsourcing market in India and China to reach $19.8 billion in 2011,” notes Dr Dhiman.

India and China must become World Trade Organization-compliant by meeting the International Conference on Harmonization guidelines and US Food and Drug Administration regulatory requirements. Standards such as Good Clinical Practices must be complied with, especially by contract research organization operations, to ensure long-term credibility.

The frantic pace of merger and acquisition activity, which slows down clinical trials and the decision-making process, is currently challenging CROs, some of which have revised their business strategies, finances and restructuring and cut costs to refocus on R&D, the report adds.