CLINICAL RESEARCH: IT is being seen as an important tool to cut down a drug’s time and cost to market (Pic by Sanjit Kundu)

Last week, Japan’s fourth largest drug maker Eisai — which chose Accenture’s Bangalore centre — joined a growing number of American and European drug companies outsourcing this function to IT services players. Incidentally, Accenture set the ball rolling in 2003 when it entered a 10-year contract with American drug maker Wyeth to manage its global clinical data management operations, probably the first time Big Pharma looked outside its comfort zone for this function. Fellow US drug maker Eli Lilly and UK’s GlaxoSmithKline have also awarded long-term contracts to Mumbai’s TCS, and Cognizant is a vendor to Pfizer, the world’s No. 1 pharma company. “This is definitely a trend,” says Vasudeo Ginde, managing director of Mumbai CRO iGate Clinical Research. “More may follow.”

IT services companies inherently have some advantages, says Rena Ahuja, industry analyst for healthcare practice at consultancy Frost & Sullivan in Mumbai. Not least of them is the ability to move large groups of people — in the hundreds — in and out of trial projects at short notice. Trials of a single drug run over several years, but may be canned mid-way because of unacceptable side-effects or the lack of desired efficacy. So while companies have to hire large teams to enter and process trials data, they may suddenly find themselves without much to do. An IT company can move programmers out of the pharma project and into other high-volume projects in, say, banking and insurance, and vice-versa. This keeps them in a state of readiness to take on long-term projects quickly. “When it comes to economies of scale, an IT company does better than a CRO,” she says.

There is also the question of technology. For large pharmaceutical companies struggling with rising drug development costs, and fewer drug approvals, IT is being seen as an important tool to cut down a drug’s time and cost to market. For instance, electronic data capture —where trials data is recorded and stored electronically saving on paper and other costs — is being preferred over the traditional paper-based form of data capture. And who better than an IT company to look to for solutions. “Technology is one reason why IT companies could be scoring,” says Gautam Daftary, chairman of Indian CRO Siro, which manages a 200-seater near Mumbai for Pfizer, and is now upgrading its own tech infrastructure with the help of US software giant Oracle.

And, of course, all IT companies have the India advantage of lower costs, and larger talent pools than in the West.

CROs are not about to cede ground, though. In 2005, North Carolina’s Quintiles, the world’s largest CRO, moved to centralise its data management operations in Bangalore to leverage the India advantage, and get closer to a country where it has been managing trials for the better part of a decade. The company is also investing heavily in in-house technology platforms. Quintiles’ India CEO Ferzaan Engineer says that its Indian data centre is growing rapidly, getting ready to add a large project by the end of the year. “We are still very successful at winning large data management deals,” he says. “We are still the partners of choice.”

There is a large untapped market out there, says iGate’s Ginde. He points to small and medium-sized companies — including research start-ups built around just one or two products — that have fewer projects to offshore but want a one-stop shop and personalised attention. Ginde, who services such customers, has bet that the IT companies will not drill that deep since that segment may not translate into large volumes or longer-term projects, metrics that play to their strengths.

But with the advent of more IT companies, that too may be under threat. Late movers such as HCL are looking beyond Big Pharma for two reasons. One, almost all of these are already working with other vendors. And two, small and mid-sized companies have had better luck putting new drugs into trials than Big Pharma. “We cannot afford to ignore the mid-tier,” says Chamaria.

There are no doubt several in the CRO business who believe that when the chips are down, domain expertise is what will provide the edge against the IT upstarts. CROs, after all, are the ones inside the hospitals getting the trials done. “We have expertise spread all over the world that we are able to bring to bear in any situation,” says Engineer. “It makes us a safer choice.” Companies that work with both believe that while each has its core competence – technology for one, domain expertise for the other – beyond a point, it is execution that decides who they go back to. “Who to give business to is decided by specific selection criteria or metrics,” says Chandrashekhar Potkar, director (medical and regulatory affairs) at Pfizer’s Mumbai affiliate which works with Siro and Cognizant. “It is decided by execution capabilities.”

Indeed, the general view appears to be that in a rapidly-growing market there is space for the two to co-exist, even for partnerships. Last year, HCL and Hyderabad CRO GVK Biosciences tied up to bid jointly for projects, and have won a few. Chamaria calls this a win-win situation. “I don’t see the market shifting completely either way,” he says. “There is space in it for both.”

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(Businessworld Issue 25 Feb-3 March 2008)