India - A Cure For Pharma Outsourcing Woes?
Dalal Street Investment Journal|22 April, 2024
Eroom's Law, the grim corollary to Moore's Law, paints a concerning picture for the pharmaceutical industry.
India - A Cure For Pharma Outsourcing Woes?

Drug discovery is becoming a labyrinth - increasingly expensive and time-consuming despite technological advancements. The inflation adjusted cost of developing a new drug roughly doubles every nine years. In order to highlight the contrast with the exponential advancements of other forms of technology such as transistors over time, the name given to the observation is Moore's Law spelled backwards.

Dr. Jack Scannell's now famous observation highlights a harsh reality. Creating a novel pharmaceutical drug today demands a staggering investment, often surpassing USD 1 billion, and spans a decade or more. This financial burden stems from several factors: the substantial capital outlay essential for establishing and managing extensive and diverse manufacturing facilities and the intricate research and development expertise necessary for cultivating a broad product range. These significant capital requirements and associated challenges present formidable obstacles for pharmaceutical enterprises.

Consequently, innovation is stifled, leading to delays in delivering life-saving treatments to patients. Even traditional pharmaceutical powerhouses are grappling with the strain, finding it arduous to sustain their research and development pipelines. Indian pharmaceutical companies encounter additional hurdles such as pricing pressure and heterogeneous regulatory compliance requirements across international markets. Compliance costs increase due to varying approval processes and timelines globally, and staying abreast of regulatory changes.

The dynamic Indian market demands adaptability, with multinational companies outsourcing to comply with regulatory policies. Indian firms are also shifting towards asset-light models, focusing on core competencies. This is where India's contract development and manufacturing organisations (CDMOs) step in, offering a potential remedy.

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