It is difficult to have a service economy when you are moving to an end point in 20-30 years where you will make little outside of weapons, and movies. In the nearer term it is just of one of thousands of stories that explains the structural unemployment situation we have and why the country is now dependent on a bloated healthcare system, bloated government and house churning as its main "industries". Of course the former 2 are bleeding the country from the inside with debt since its mostly just transfer payment from the dying private sector to the pseudo and pure public sectors. But I digress! Go India.
- Below an ancient hilltop temple to Kali, the Hindu goddess associated with destruction and change, Sun Pharmaceutical Industries churns out generic versions of cancer drugs and epilepsy medications bound for the United States. Business is so brisk that Sun, with revenue of 41 billion rupees ($880 million) last year, predicts sales will grow 20 percent this year and is expanding its Halol factory.
- India's drug industry — on track to grow about 13 percent this year, to just over $24 billion — was once notorious for making cheap knockoffs of Western medicines and selling them in developing countries. But India, seasoned in the basics of medicine making, is now starting to take on a more mainstream role in the global drug industry, as a result of recent strengthening of patent law here and cost pressures on name-brand drug makers in the West.
- And while the Indian industry has had quality-control problems, it nonetheless benefits from growing wariness about the reliability of ingredients from that other historically low-cost drug provider — China. The United States is India’s top export customer for drugs.
- India is becoming a “base for manufacturing for the global market,” said Ajay G. Piramal, the chairman of Piramal Healthcare, a drug maker based in Mumbai. Eventually, in Mr. Piramal’s perhaps overly optimistic forecast, only the very first and very last steps of the business — molecular drug discovery and marketing — will be run by the West’s global drug giants. (good point, we'll still have marketing in the U.S. ... sales still needs to be done face to face. Hence there will always be a market for attractive young(er) ladies to sit in offices of doctors to upsell their drugs) It is not only Indian executives, though, who are bullish about the pharmaceuticals industry here. Analysts, research groups and consultants have been making similar predictions in recent months.
- Daiichi Sankyo of Japan helped kick off the foreign drug push into India in 2008 by buying a stake in Ranbaxy Laboratories, this country’s biggest drug maker. Last year, among other deals, GlaxoSmithKline formed a partnership with Dr. Reddy’s Laboratories; Pfizer tied up with Claris Lifesciences; Sanofi-Aventis took control of Shantha Biotechnics, and Bristol-Myers Squibb opened a research center in India with Biocon.
- “There is a lot of good talent at a much lower price in India,” said Jim Worrell, the chief executive of Pharma Services Network, a Charlotte, N.C.-based consulting firm that is organizing tours of Indian factories for Western pharmaceutical executives who are considering outsourcing some of their business. “What I see happening now is manufacturing and even packaging and even formulation are moving to India,” Mr. Worrell said.
- The shift to pharmaceuticals is part of a subtle, broader shift in the Indian economy. Moving beyond less sophisticated, outsourced services like telephone call centers, India has been advancing up the business value chain, particularly in law and medical diagnostics. Now it is showing a flair for manufacturing, particularly in goods demanding high-skill production and superlow prices.
- While China is the undisputed low-cost maker of a multitude of consumer goods, India may have a rare edge in the drug industry. India’s long tradition of generics has fostered a robust educational system here for pharmaceutical scientists, as well as longer experience dealing with Western regulators.
- The next opportunities for India could come at the more sophisticated end of the drug making spectrum, including research and development for the world’s drug giants and even development of proprietary medicines. (again, when they sent away the the manufacturing they said the high value jobs in R&D will never leave the U.S. - but frankly the global multinationals are doing what is best for their business... if they can get similar talent for far lower prices, there is no need to pay for U.S. wage structure) “We can crack the problem of patented drug discovery in India at a much lower cost” than in the West.
- At Piramal’s main laboratory in north Mumbai, about 300 scientists are researching new drugs aimed at inflammation, metabolic disorders and cancer. Mainly because of lower wages, if it costs big pharmaceutical companies “$1 billion to $1.5 billion to discover a new drug, we can do it in a tenth of the cost,” Mr. Piramal predicts.
- G. V. Prasad, chief executive of Dr. Reddy’s Laboratories, said that Indian drug makers had the “ability to handle product development on a massive scale at a low cost.” Dr. Reddy’s original diabetes drug has completed Phase 3 clinical trials — the last step before seeking Food and Drug Administration approval — the farthest of any of its peers.
- The F.D.A., in response to India’s growing influence, has opened two offices in this country — in Delhi in early 2009 and another in Mumbai in June of last year. When fully staffed, the offices will have between them a dozen full-time employees, including inspectors and technical specialists, which is comparable to the F.D.A.’s presence in China.
- Until recently, pharmaceuticals has been “an incredibly arrogant industry that has never outsourced,” said Sujay Shetty, an associate director with PricewaterhouseCoopers in Mumbai. But over the next several years, he predicts, “everything in the value chain will move to different parts of the world that are cheaper,” with India a major beneficiary.
I cannot stress, that without an explosion of innovation that creates tens of millions of U.S. jobs, we have serious STRUCTURAL unemployment that will not go away. It *is* different this time.