NCPA - National Center for Policy Analysis


September 10, 2008

In the United States, specialized research outsourcing firms charge drug companies $250,000 and up for the full-time service of a Ph.D. chemist; however, with an Indian partner, the same work can be done for roughly one-fifth of the cost.  That is why U.S. drug giants are rushing to partner with Indian and Chinese companies.  But what Western companies really long for, is to replenish their drug development pipelines, says BusinessWeek.

It can cost as much as $100 million to nurture a potential drug from an idea to the point where it is tested in people.  But by conducting many experiments in low-cost Asia, the drug companies believe they can run more projects while keeping research and development budgets flat, says BusinessWeek.

Below are a few companies following this idea: 

  • Merck teamed up with its former Indian foe, generic drugmaker Ranbaxy, to develop antibiotics, and is working with India's Advinus on metabolic diseases such as diabetes.
  • Forest Labs is working with Jubilant and Aurigene to find novel treatments for obesity and other metabolic diseases.
  • Aurigene could get as much as $60 million if the deal yields a drug.
  • Eli Lilly's multiple Indian partnerships include two deals with Suven to study brain diseases and one with Piramal to develop drugs to treat metabolic diseases.
  • Johnson & Johnson and Aurigene are working on an undisclosed project.
  • Sanofi-Aventis teamed up with the Chinese Academy of Medical Sciences to study cancer treatments and plans to form more such partnerships in China this year.

Moreover, by outsourcing drug development, Western drugmakers, in effect, are front-loading failures through early-stage screening in India, says BusinessWeek.  Here you can get four failures for the price of one!  And killing projects at the testing phase is essential, because most of the cost to develop a drug -- a few hundred million dollars, typically -- comes later, during human clinical trials. 

Source: Pete Engardio and Arlene Weintraub, "Outsourcing the Drug Industry," BusinessWeek, September 15, 2008.


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