On account of the limbo in approval of clinical trials, the industry estimates a loss of around $150-200 million this year alone.
The Supreme Court will hear the matter on Monday, which will decide the future of 162 clinical trials related to new drugs (including new chemical entities) and new fixed dose combinations approved by the health ministry.
The government will try to assure the apex court that all possible precautions were taken when approving these trials.
The health ministry is betting on the Ranjit Roy Choudhury committee report, which includes proposals on high compensation for clinical trial patients, setting up of review committees and timeline for approval of trials to thwart any possible shutdown of the clinical trial industry by the apex court.
Earlier, the Supreme Court had expressed concerns about drug trials being permitted on humans without comprehensive rules to regulate the approval process.
According to health ministry sources, all the 162 trials were approved in accordance with the Choudhury committee proposals.
The government has, however, not granted a formal approval to those proposals.
The uncertainty is also delaying development of novel moleclues by pharma companies like Biocon which is awaiting regulatory clearance to conduct development trials on its new oral insulin drug, which the company believes will transform treatment for diabetes.
According to an executive from a top pharma firm, which also conducts clinical trials in India, any freeze could see more business moving to locations like Malaysia and Singapore.
Drug trials, which is the most critical process in new drug development, take around 5-6 years and account for a major chunk of the drug discovery spend of pharmaceutical MNCs.
The domestic clinical research organisation market fell from $485 million in 2011 when some 320 clinical trials were approved to $300 million last year when around 250 trials were given the government nod.
Contract research organisations (CROs) contend that the regulatory environment in India is leading to a disruption in clinical research.
Experts contend that if trials of new drugs are stopped, the country will not be able to manage its rising disease burden.
While it takes over 10-12 years to develop a new drug before it can be marketed, clinical development the most critical process in new drug development takes around 5-6 years.
"While overall, the intent and direction of the new initiatives is understandable in terms of securing patient safety and ensuring better governance of clinical trials in India, some of the recent announcements like the compensation guidelines in particular and delayed approvals have caused a disruption in clinical research, said Anil Raghavan, MD, Quintiles India, a leading global CRO.
The company recently closed its Hyderabad unit, which conducts phase I trials due to the challenging external business environment.
According to experts, while India has 16% of the worlds population and 20% of the global disease burden yet, less than 2% of global trials take place in the country despite its competitive cost base and a strong scientific talent pool.
China, a relatively late starter in the clinical trial area, has over 9% share of global trials.
Experts said an embargo on clinical trials will also have far reaching impact on patients fighting life threatening diseases is far reaching.
"For many thousands of patients, participation in a clinical trial can provide early access to new therapies including for debilitating and life-threatening conditions. For patients who have run out of other options, clinical trials are often the last option, said Suneela Thatte, president of Indian Society for Clinical Research.