INDIA'S pharmaceutical industry is preparing to launch an assault on the sector's traditional hi-tech manufacturing hubs such as Ireland. Indian companies are to attempt to take advantage of leading drug companies' desire to cut costs amid the continuing global downturn.

Although India is a well-established low-cost manufacturing base for the industry, the Organisation of Pharmaceutical Producers of India (OPPI) recently declared it had now "set its sights on becoming the strategic partner of choice to the global pharmaceutical industry".

It is now hoping to persuade leading companies such as Pfizer, AstraZeneca and GlaxoSmithKline to outsource large chunks of their production to Indian plants. If successful, the OPPI's initiatives could have a devastating impact on Ireland's pharmaceutical industry, which would be similar to the effect that low-cost competition has had on its technology industry.

The OPPI has already surveyed industry executives about the business climate in what it regards as India's main rivals, Ireland, Singapore, Puerto Rico, China and Eastern European countries, with a view to drawing up a strategy to win business from them. The survey, which was conducted by consultants Ernst & Young, has identified cost competitiveness as Ireland's key weakness. Over 50% of the executives surveyed rated Ireland's cost competitiveness as "below average" or "poor".

The India government is now attempting to negate Ireland's corporation tax advantages by setting up special economic zones, where pharmaceutical manufacturers receive five-year tax holidays and have a permanent exemption from customs duties and service charges.

A spokesman for the Irish Pharmaceutical Healthcare Association (IPHA) said Irish plants were unable to compete with Indian ones on cost grounds, due to high labour costs and local authority service charges: "Indian firms are a threat and we've been trying to move the companies here always from bulk manufacturing into areas such as process development, which are higher value activities. We need to reach a situation where all stages of drug development take place in Ireland."