November 08, 2004

Beyond the Back Office

Virgina Postrel writes about another kind of outsourcing to India
Here's a win-win development that's ripe for demogogic denunciation: Pharmaceutical companies are moving drug testing to India, where well-educated doctors are plentiful and costs are low. Moving tests to India promises to speed drug development while building yet another relatively high-value industry for the still-poor country. Atul Sathe reports for the Financial Express from Mumbai:

Pharma outsourcing to India has the potential to pick up due to several distinct factors. In US, the time to get the drug to market has increased from 7.5 years in 1970s to 12.5 years in 1990s. This is less by as much as 30-40% if done in India. Moreover, administrative costs incurred by pharma companies in India are 30-50% lower than those in the West.

AT Kearney Inc vice-president & managing director, Andrea Bierce attributes the attractiveness of India as an outsourcing destination to various aspects. "India has a huge pool of talented doctors. 20,000 new doctors graduate every year in India. There is also a distinct wage arbitrage in India. The regulatory requirements in this country are not as strict as those in US." said Ms Bierce. Lower R&D costs is another major advantage.

However, the regulatory issue is considered to be a little controversial. Pharma companies may find India attractive for activities like clinical trials because of the presence of many diseases. But the industry and the government need to work in tandem to balance the interests of the people and the outsourcing opportunities available.