A few years ago, Western drug makers would never have dreamt of putting their research dollars to work in India, a country associated with pirating medicines invented elsewhere.

Today, pharmaceutical executives are predicting a surge of investment to exploit a low-cost base of scientific talent.

India is coming in from the cold with the adoption of patent protection for medicines from next year, removing a key obstacle to investment that will help skew future R&D efforts firmly towards Asia.

Research by FT Corporate Solutions and law firm Linklaters, presented at a conference this week, found 82 per cent of senior executives and analysts expected a rise in Asian R&D investment over the next decade, with India leading the way.

The United States remains top of pile, tipped by 75 per cent of respondents as the leading region in the hunt for new medicines. But 14 per cent backed Asia as the dominant force within 10 years, ahead of Europe with just eight per cent.

Brian Tempest, chief executive of India's biggest pharmaceutical company, Ranbaxy Laboratories, is not surprised. He believes the $400 billion-a-year global drugs business is finally waking up to India's potential.

"There are lots of cost efficiencies in India... We vary between one-fifth and one-seventh of the costs in America," he told Reuters.

In some areas the advantage is even bigger. Pfizer, for example, calculates that it costs $800 a month to employ a chemist in India against $12,000 in the United States.

At a time when big pharmaceutical companies face "a classic margin squeeze" from rising costs and low prices, according to a recent comment by AstraZeneca chief executive Tom McKillop, the incentive to outsource to India is growingA year ago, GlaxoSmithKline struck a research collaboration deal with Ranbaxy designed to tap into India's considerable chemistry skills in the search for innovative medicines.
It is business model more Western firms are expected to follow.

"There are other companies that want to do similar deals with us but we don't want to let that take too big a percentage of our drug discovery activity," Tempest said.

For Ranbaxy and rivals such as Dr Reddy's Laboratories, which has done deals with both Novo Nordisk and Novartis AG, it is all part of a strategy to move up the value chain.
Indian firms are, simultaneously, moving fast to internationalise their generic drugs business.

In 2000, the United States accounted for just 14 per cent of Ranbaxy sales. Last year it had reached 43 per cent and by 2007 Ranbaxy wants the US to make up half of group sales, which are tipped by then to have doubled to $2 billion.

India may not have much time to make its transition to higher-value pharmaceutical programmes before China emerges as a new, powerful competitive force.

"We have a window of six or seven years. Ranbaxy is going to jump through it and become stronger - but then we will have to deal with the Chinese," Tempest said.

China is currently strong in producing pharmaceutical ingredients but is not a major supplier to world markets of finished products.

And research investment in the country has been held in check by concerns about China's poor reputation for defending intellectual property rights, as highlighted by this year's decision to overturn Pfizer's patent on anti-impotence drug Viagra