CRAMS pertains to outsourcing services/products from low-cost providers with world-class standards, in line with international regulatory norms like the USFDA, Australian-TGA, UKMCA, and EMEA.

It has become a strategic imperative for global pharma companies to make India an integral part of their manufacturing value chain to maintain lean cost structures and combat intense competition in the global generics industry.

Pharmaceutical multinationals have traditionally been outsourcing intermediates, API's and formulations. They are increasingly focusing on realigning their manufacturing activities in order to concentrate on core activities such as R&D and brand building - thereby reinforcing the potential for cost savings through contract manufacturing.

The pharmaceutical companies like Dishman, Divi's Labs, Shasun have focused low cost manufacturing, intervening at a crucial point of the value-chain from where they have managed to evolve into providing high-end, complex manufacturing services to MNC clients like Solvay, AstraZeneca, Merck, Glaxo SmithKline and Eli Lilly.

Whereas companies like Nicholas Piramal, Cadila Healthcare, Orchid Chemicals and Pharmaceuticals have gained a strong foothold in the CRAMS arena utilising excess manufacturing capacities. They have moved into providing drug discovery, custom chemical synthesis services and the like.

There are companies like Veeda Clinical Research, iGATE Clinical Research International, SIRO Clinpharm, Neeman Medical International, HCL Systems, Cognizant Manipal Acunova, ClinInvent that provide services for Phase I-IV Trials, IT support for intensive data management, high throughput screening at early discovery stages.

Indian contract research service providers have untapped potential in services like bioinformatics, medicinal chemistry and regulatory filings can be offered, which form the ground for new drug discovery or contract research. This segment under CRAMS is dynamic and still evolving into a well-established offering.

The Indian cost advantage extends well beyond low labour costs and ensures that the cost reduction process is a continuous process. The factors that drive India's cost advantage include:

Capital efficiency

Indian companies are able to reduce the upfront capital cost of setting up a project by as much as 25-50 percent due to access to locally fabricated equipment and high-quality local technology or engineering skills. Indian companies have been able to establish USFDA standard plants at approximately 50 percent lower capital costs as compared to US or Europe based manufacturing units.

Lower filing costs

Generic filings require complex technical and legal documentation, which takes about eight quarters. The cost of filing DMFs and ANDAs is at least 50-60 percent lower for Indian companies as compared to their US or European counterparts.

Process engineering

The highly competitive local market and lack of pricing power force Indian companies to work on the molecule even after a product is launched. This often results in gains in the form of improved yields and more cost-effective manufacturing processes. The customer and supplier generally share such benefits in a pre- determined ratio, thus providing the benefit of continuous cost reduction.

Manpower cost advantage

India has a huge talent pool of skilled scientists, available at a fraction of the cost in developed countries like the US. Labour costs in India are around a seventh of the levels in developed countries and offer an obvious cost advantage.

At the same time, existing global CRAMS players are facing adverse business conditions, on account of increasing regulatory compliances on environmental issues and competition from low cost countries.

Pharma multinationals are also increasingly using India as a base for exports not only to the immediate neighboring markets, but also to other markets around the world such as Japan, South Africa, Latin America and Europe. Further, they are also exploiting India's competencies in the field of Information Technology and its strong and low cost IT skill sets; by setting up centers for their global clinical data management functions in India.

Growth drivers for CRAMs

At present, the global manufacturing outsourcing opportunity is estimated at US$20 billion and is expected to reach US$31 billion by 2010. The contract manufacturing market in India is expected to reach US$ 900 million by 2010.

Contract Research
Contract Research offers significant opportunity to the Indian pharma industry, which is becoming a global R&D hot-spot for innovator pharma companies. The global contract research opportunity is expected to reach US$24 billion by 2010.

The model of R&D investment by India is shifting from crore-process research to new drug development and novel drug delivery systems (NDDS). For instance, Ranbaxy has out-listed its NDDS to Bayer for the development of Cipro XR formulation.

Clinical Research

At present, a majority of clinical trials conducted in India are for Phase II and Phase III. The government is in the process of considering the recommendation of the Drug Technical Advisory Board (DTAB) to allow Phase I clinical trials for the drugs discovered abroad. If this happens, then it will enable the Indian CRAMS industry to provide a wide range of drug discovery services. ASSOCHAM estimates that the clinical trial market in India will be US$ 1 billion by 2010.

Government Support

On the regulatory front, the government is also trying to promote the growth of this industry by providing a tax exemption on all services carried out by the contract research and clinical trials industry. This step is likely to further boost clinical trial outsourcing to India.

The major trends that are expected in the future include:

Mergers and acquisitions in the industry
New product launches by MNCs and Indian companies
In-licensing of patented products by Indian companies to launch them in the Indian market and
Increase in the number of contract research organizations.

Globally, drugs worth $70 billion would be going off patent by 2011 and Indian companies providing contract-manufacturing services are expected to garner approximately 30-40 percent of this opportunity. The improvement in IT and telephony are key enablers of this trend, as is the recognition of Good Clinical Practices (GCPs) and Good Laboratory Practice Standards (GLPs).