Robert Fee
Managing Editor

Clinical trials outsourced to India could cost up to 60% less than those conducted in the US. So why aren’t all companies jumping on this?

Picture yourself working at a life science company—admittedly, not a large stretch of the imagination for readers of Drug Discovery & Development. Your company is close to clinical trials on a promising new drug, and options are being discussed. For a US-based company, the first option is to partner with a hospital, perhaps even something local. But increasing numbers of companies have begun to look overseas to conduct clinical trials—particularly to India.

To understand why, you have to put yourself in the in the CFO’s shoes. For every 10,000 chemical compounds under development, just one will be approved for sale. That single compound could take up to 15 years to develop. And when it hits that market, the patent owners have just five years of exclusivity before generic drug makers are allowed to produce a cheaper version. In those five years, a drug developer must make enough profit to recover costs of developing the marketable drug plus all of the drugs that failed to make it to market. This paints a bleak picture considering it could take amounts reaching ten figures to get the drug out. Clinical trials account for much of that price. But what if you could cut that cost in half?

You can. The price for a clinical trial conducted in India can run 50% to 60% less than one conducted in the US, where the average trial per patient costs $5,404 for phase I, $6,538 for phase II, and $7,635 for phase III. Running trials in India could potentially save your company hundreds of millions of dollars. An attractive proposition, right?

“As recruiting , enrolling, and randomizing patients in the US becomes increasingly time-consuming, large portions of clinical work will continue to be outsourced overseas,” says John Hess, research team leader, Cutting Edge Information, Research Triangle Park, N.C. “India provides an economical location, an abundant patient population, and a large pool of physicians and nurses who speak English—all of which make the country a very attractive outsourcing opportunity.”

Why outsource?
Cost, obviously, remains a concern for any company, but it can cause particularly high anxiety for life science companies watching the bottom line. When you are dealing with billion dollar development costs, every bit of saving counts, especially in later clincial trials and postmarket stages.

A report entitled Phase IV Clinical Trials: Post-Marketing Study Management Structure, Strategy & Benchmarks, released by Cutting Edge Information confirms this trend.

About two-thirds of all new drug applications approved in the US conduct a phase IV trial. Of the companies surveyed in this report, 44% of small companies and 40% of mid-sized companies have the required internal infrastructure to support phase IV management. As a result, 68% of small companies and 80% of mid-sized companies outsource their total phase IV workload. The phase IV research market is said to be worth $12 billion and is currently growing at an estimated 23% each year.

Why India?
The Indian government, sensing the potential to grab a large share of the pie for this multi-billion dollar industry, welcomes the business.

India is now the number two preferred destination of choice for overseas outsourcing of clinical trials—falling behind China—according to the A.T. Kearney report, Fishing for Opportunities.While the number of trials conducted overseas still pales in comparison to the United States, the ingredients are there for a huge boom.

A second report by Cutting Edge Information shows outsourcing clinical operations to India can indeed save compared with clinical trials conducted in the US. The report, Clinical Operations: Accelerating Trials, Allocating Resources and Measuring Performance, also points to India’s large, diverse, and largely unmedicated population as factors that can both accelerate the process of conducting a clinical trial and provide clean results.

India offers a huge population to work with and an emerging market that every life science company wants a piece of. Indian scientists are held to high standards, and clinical trial data originating from the country are highly regarded. English is the primary language for education and research, leading to potentially strong and seamless integration with Western companies.

The Indian government is aware of its burgeoning position in the industry and is offering incentives to promote local pharmaceutical companies and attract foreign firms. For example, companies that conduct in-house R&D receive a tax exemption on all profits. India plans to create an independent drug regulatory authority similar to the US Food and Drug Administration to provide more rigorous and consistent drug regulations. Eventually, India hopes to establish a reciprocal agreement with the US so when one country approves a drug, the other will also clear it.
In the fall of 2003, India removed several regulatory hurdles to performing clinical trials, and in 2005 it adopted more stringent patent processes resembling those of the US.

More recent incentives include a tax exemption on all services carried out by its contract research and clinical trials industry—representing an average savings of 12.24%, according to India’s budget finance minister, Palaniappan Chidambaram.

The incentives have coaxed more than one company to India: GlaxoSmithKline conducted several trials in 2004, and Pfizer doubled its clinical research investment in India to roughly $13 million, with plans to invest another $30 million over the next five years. This may be a fraction of Pfizer’s total global R&D of $8 billion, but the interest indicates a growing optimism for this market.

The situation is, however, far from perfect. Intellectual property protection, despite recent advances, has been weak. There are potential bureaucratic and infrastructural headaches, and companies are required to coordinate their efforts with local physicians and hospitals and to perform toxicology tests between phases II and III, which can cause delays of six months.

This article was published in Drug Discovery & Development magazine: Vol. 10, No. 3, March, 2007, pp. 28-29.