As getting approvals for clinical trials gets tedious and time consuming with the New Drug Advisory Committee (NDAC) taking charge, clinical research organisations (CROs) have taken a hit in overall profitability.While some are turning to south-east Asian geographies to offset the losses incurred in India, others are increasing focus on data-management services. Industry insiders say the business growth has already started shrinking by 20-30 per cent compared to last year.
The CRO industry is also likely to witness huge lay offs in the coming months.
The Drug Controller General of India (DCGI) has retracted from its role of approving drug trials in the country and has yielded the responsibility to a 10-member committee the NDAC since last year. While the initiative was aimed at streamlining the approval process of clinical trials and making it more robust and transparent, in reality the process of approval has come to a standstill. According to data from the DCGI, new drug approvals dropped by 56.25 per cent during 2011 to 98 from 224 in 2010. And this year, so far the NDAC has approved only nine drugs. "While safety issues are very important indeed, the complex process and delays have virtually put the entire process of approvals on hold. This is bad news for the future of the CRO industry, as well as for the future of research and development (R&D) in India. If we want to develop drugs as per our need, we need to encourage R&D", said Apurva Shah, group managing director, Veeda Clinical Research.
He admitted that business growth has indeed started shrinking and as the overall profitability is hit, it would precipitate down to salary cuts and manpower lay offs. "Almost 40-60 per cent of the total cost in the clinical research industry is manpower cost. The industry is likely to see increased lay offs in the coming months as the business growth slows down", Shah added. Anil Raghavan, managing director, Quintiles India, a global CRO major present in India, said, "Compared to 2011, drug approval timelines in the initial part of 2012 reduced significantly. If there was a decline in the number of approvals, it is because the process has become more rigorous. What is disturbing, however, is that over the last few months, the NDAC process has come to a halt. We are in a situation today where there is a paralysis of sorts in the approval process to the extent that even routine applications have been impacted."
The industry says that what is of greater concern is the regulatory uncertainty with regard to the conduct of clinical trials in the country which, in turn, is affecting the growth of the industry. Another concern is the impact of a slowdown of the clinical research industry on biopharma innovation. Discouraged by the sluggishness in clinical trial approvals in the country, some CROs are looking to increase focus on other geographies. Veeda has recently set up a phase one unit in Malaysia. "We were invited by the health ministry of the country to set up a unit there, and it is already functional. Five to six studies are already lined up", Shah told Business Standard. Lambda Therapeutic Research Ltd too has opened its first center in Thailand on request from the Thai government. Kiran Marthak, head global clinical development of Lambda, confirmed the move and said that company would also train manpower in Thailand.
Talking about the cost-competitiveness of India vis-a-vis the south east Asian economies, Shah of Veeda said, "Time is money in this industry. If things do not work out within the stipulated time, the costs go up significantly. In that way, while India is indeed a cheaper destination to conduct clinical trials compared to many countries, on a case-to-case basis, costs here in India at times catch up with US or European Union (EU) levels."
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Companies like Quintiles, which have expertise in peri-clinical services, will now focus on these segments to drive revenue for them. "While 30 per cent of our revenues in India is from clinical trials, 70 per cent is from data-related services, processing biomarkers, etc and this part of our business continues to see significant growth", Raghavan said adding that his company is excited about opportunities in the data-driven or peri-clinical services space.
Although India has 15 per cent of the world's population and 20 per cent of the global disease burden, less than two per cent of global clinical trials take place in India.