An investigation of alliances between western life-science therapeutic and Indian firms

Abstract

Large pharmaceutical companies (Multinational Pharmaceutical Companies or MPCs) have struggled in recent years with the rapidly accelerating costs of drug-discovery research and development. These costs continue to rise while resulting in fewer drug leads. Several industries have realized significant cost savings by outsourcing operations to countries with low-cost labor like India and China. Several factors have traditionally kept MPCs from moving high value, patent-sensitive discovery operations to India despite these drastically lower labor costs. However recent improvements in the Indian patent system in response to WTO compliance have stimulated an increase in both domestic investment in innovative research and in deal making within the life science industry. Nonetheless, there are few systematic analyses of the quantity of deal making between international and domestic Indian firms. Based on our analysis, we conclude that MPCs are establishing alliances at a greater rate than Biotechnology-based firms. In addition, we find that the improvements in patent law have created the structures necessary to stimulate innovation-based life science companies to establish relationships with Indian firms that put their most important types of intellectual property at risk.