Pharma 2020: The vision - which path will you take?

Summary of Key Findings

As threats to their profitability loom, multinational pharmaceutical companies (MPCs) should take a strategic look at increasing their R&D offshoring to China and India.

• The two countries offer a vast and inexpensive talent pool, fast-growing R&D capabilities and resources, and a huge, treatment-naïve patient population
• By tapping these resources, MPCs stand to gain greater flexibility in capacity and pipeline management, in addition to considerable cost savings
• Offshoring R&D today may also be the key to unlocking rich commercial rewards, especially in China
  

Despite general similarities, each country offers distinct advantages.

• The best near-term opportunities in both countries are chemistry-phase activities and clinical trials, although India has more complete service offerings in these areas
• Preclinical and biology activities represent medium- and long-term opportunities, respectively, with China outpacing India in innovative biology
• Government backing for biopharma R&D, although it has been increasing impressively in India recently, remains far more committed and generous in China
• India has a more extensive vendor base, a work force fluent in English, and generally better intellectual property (IP) protection
  

The most significant difference between China and India as offshoring destinations lies in their overall value propositions.

• India offers MPCs a fairly fast and long-lasting payoff by turbocharging their R&D productivity quickly and sustainably
• China invites MPCs to place a strategic bet on increasing their share of the burgeoning commercial market for pharmaceuticals in both the near and the longer term

Most R&D activities currently offshored to China and India have been initiated in an ad hoc and uncoordinated way. Future efforts should be more conscientiously managed, ultimately as part of an integrated engagement strategy.

• MPCs’ offshoring strategy should involve both countries in both the near and the longer term
• The preferred short-term option will tend to be India, where an ever-increasing selection of activities across the R&D value chain can be outsourced to local vendors
• For the longer term, China’s considerable commercial promise can best be exploited through captive R&D sites rather than through piecemeal outsourcing

A three-part framework would help biopharma executives craft their R&D strategies for Asia.

• Using different scenarios of how various external variables might play out, executives should develop a vision, shared by key stakeholders, of how the company’s offshoring efforts in China and India will proceed
• They should choose the optimal business model and migration path for the company’s offshoring effort
• They should carefully manage the execution of the offshoring strategy to ensure rigorous implementation

This Executive Summary is excerpted from the larger report Looking Eastward: Tapping China and India to Reinvigorate the Global Biopharmaceutical Industry, BCG Report, August 2006. This report is one in a series from The Boston Consulting Group examining ways to improve R&D productivity, and amplifies themes raised in two previous reports in the series: A Game Plan for China: Rising to the Productivity Challenge in Biopharma R&D (BCG Focus, December 2005) and Harnessing the Power of India: Rising to the Productivity Challenge in Biopharma R&D (BCG Focus, May 2006). All of these reports can be found at the BCG Web site at www.bcg.com/publications

If you wish to explore further the R&D opportunities in China and India and how best to take advantage of them, please contact one of the authors:

Vikram Bhalla
BCG Mumbai
+91 22 2283 7451
bhalla.vikram@bcg.com

Carol Liao
BCG Hong Kong
+852 2506 2111
liao.carol@bcg.com

Simon Goodall
BCG Los Angeles
+1 213 621 2772
goodall.simon@bcg.com

Kim Wagner
BCG New York
+1 212 446 2800
wagner.kim@bcg.com

Bart Janssens
BCG Mumbai
+91 22 2283 7451
janssens.bart@bcg.com

John Wong
BCG Hong Kong
+852 2506 2111
wong.john@bcg.com

Rachel Lee
BCG Shanghai
+86 21 6375 8618
lee.rachel@bcg.com