Western pharmaceutical companies have seized on India over the past five years as a testing ground for drugs – making the most of a huge population and loose regulations which help dramatically cut research costs for lucrative products to be sold in the West. The relationship is so exploitative that some believe it represents a new colonialism.

Since restrictions on drug trials were relaxed in 2005, the industry in India has swollen to the point where today more than 150,000 people are involved in at least 1,600 clinical trials, conducted on behalf of British, American and European firms including AstraZeneca, Pfizer, and Merck. There may be more.

While there is no official figure, some estimates suggest the industry may be worth as much as £189m. Regulators have struggled to keep pace with the explosion. Between 2007 and 2010, at least 1,730 people died in India while, or after, participating in such trials. Many of those people, often only eligible for the studies because they were ill, might have died anyway. Yet when there are complications, even those resulting in deaths, there is often a failure properly to investigate.

Campaigners say the industry is wide open to other abuses. While there is no doubt many crucial trials are carried out according to the appropriate guidelines, activists say a lack of oversight has led to numerous situations where poor, sometimes illiterate individuals, recruited from city slums or else tribal communities, are used in the trials without giving proper informed consent – that is, without fully understanding what they are signing up for. Alongside this, a new industry providing participants for these studies has been spawned and is making considerable profits.

Among some of the incidents confirmed by aninvestigation carried out by The Independent in the states of Madhya Pradesh, Andhra Pradesh, as well as in Delhi and London, were:

* The recruitment of hundreds of tribal girls without parental consent for an immunisation study sponsored by the Bill and Melinda Gates Foundation on the nod of the warden of their government hostel. Several girls subsequently died. The study was halted by the federal authorities.

* The use by drug companies of survivors of the world's worst poisonous gas disaster in Bhopal as "guinea pigs" in at least 11 trials without proper informed consent.

* The completion by doctors at a government hospital in Indore, in central India, of dozens of private trials that a police investigation found "violated the ethical guidelines". The doctors who conducted the trials decided that not one of 81 cases in which a participant suffered an adverse effect was linked to the treatment. New trials were stopped while the state government investigated. A whistle-blower was fired.

India is just one of many developing countries used by leading Western pharmaceutical companies, which spent £40bn in 2010 on research and development. Globally, it is estimated around 120,000 trials are taking place in 178 countries.

Companies can reduce their research costs by an estimated 60 per cent by outsourcing the work. China, Indonesia and Thailand are among the countries which have also seen the incidence of trials soar in recent years. A quarter of all clinical data submitted to European drug regulators to secure market approval for a new drug has been obtained from trials in low- and middle-income countries. Confidential data from drug companies suggests this has recently increased to closer to 50 per cent.

Campaigners say India is a particularly attractive location for researchers not simply because of the lax regulations but because of the size and genetic diversity of the 1.2 billion population and becuase of the variety of conditions to treat. Added to this, almost all doctors speak some English. The infrastructure for such trials, often in the form of government hospitals, is widely available.

The loosening of regulations did away with a measure that had been put in place for the protection of trial subjects. Previously, for a phase three trial of a drug (when it is given to a larger sample of individuals) to be carried out in India, that phase of the trial had already to be have been completed elsewhere. Now they can run concurrently.

A comprehensive picture of the situation regarding drug trials in India following the 2005 amendment to the Drugs and Cosmetics Act is not available because of a lack of transparency and because various agencies are involved in the monitoring of the situation. Instead, much of the information has been gathered by unpaid activists using the country's Right to Information Act.

Much of the data has been collated by Dr Chandra Gulhati, a retired physician who edits the Indian Monthly Index of Medical Specialties, and who pulls together information from across the country on trials going back more than a decade. In his office in Delhi, Dr Gulhati described how lack of oversight and vested interests had created an environment in which many leading institutions had been involved in trials that breached national and international guidelines.

Dr Gulhati said figures released by the authorities suggested around 1,730 people had died following their participation in trials between January 2007 and December 2010. Whether all of these died directly as a result of the trial is unclear; many of those who participated may already have been severely ill and would have died anyway. He claimed there was an absence of clarity because it was left primarily to the doctors overseeing the trial, the ethics committee and the drug companies themselves to determine whether there was a link.

Earlier this year India's Health Minister, Ghulam Nabi Azad, told parliament that a total of 10 foreign drug companies had made payments to the relatives of 22 individuals who had died during or following trials in 2010. The payments came to an average of just 238,000 rupees, or £3,000, for each individual. "Indians are being used by companies to make money selling expensive medicines in the West," claimed Dr Gulhati. "[They are] using illiterate and poor Indians who will never be able to afford these kinds of medicines."

The companies who made the compensation payments were: Pfizer, PPD, Bristol-Myers Squibb, Amgen, Bayer, Eli Lilly, Quintiles, Merck KGaA, Sanofi-Aventis and Wyeth, which is now part of Pfizer. When contacted, most of the companies declined to provide details of the compensation, other than to say the figure had been agreed in conjunction with a supposedly independent ethics committee and the Drug Controller General of India.

A spokeswoman for Eli Lilly also explained that payments totalling £6,340 had been made to the relatives of three individuals who died while participating in a trial of Pemetrexed, an anti-cancer drug. All three were in the advanced stages of cancer. "The causes of death were from known drug-related side effects which were already listed in the package insert," said Dr Anurita Majumdar, a medical adviser to the company. "These events do not lead to death in all patients but can get compounded in certain patients who have poor general condition and nutritional status." Ms Majumdar added: "We were not advised by regulators to stop the trials."

Drug companies insist they always adhere to regulations. In a statement, the Association of the British Pharmaceutical Industry said: "In order for a pharmaceutical company to gain a licence in the UK for a newly developed medicine, the clinical trials, wherever they took place, are subject to a high level of scrutiny by the UK regulatory authorities. It would be of no benefit to companies to conduct clinical trials that were not of the required standard, as any medicine would not gain a licence and not be made available to patients."

While the Indian media has often focused on deaths that have resulted from trials, campaigners say perhaps a bigger issue is the routine exploitation of those who participate in them – individuals who are often poor, ill-educated and unable to read and write.

Many participants said in interviews that they agreed to take part simply because of the recommendation of their doctor, who was very often the person conducting the trials. Since many of those selected to take part are from some of the very poorest communities, individuals have little possibility of redress.

Dr Anand Rai, a former doctor-turned-whistle-blower in the city of Indore, said many of the people recruited for trials at the city's Maharaja Yeshwantrao hospital were from the tribal community.

"There are ethical violations at every level," said Ms N Sarojini, director of the Sama resource group for women, which recently held a forum on clinical trials. "There is a lack of accountability, a lack of monitoring and regulation."

International guidelines have been formulated to protect the rights of trial subjects. They stipulate that the interests of the individual should take precedence over the good of science. Every drug company has policies which conform to these standards. In reality, say activists, these are not adhered to.

The swelling controversy in India has reached the point where the country's parliament was recently told by Brinda Karat, an MP who has called for investigations into abuses: "There is a gross violation of guidelines and laws concerning clinical trials in our country."

Campaigners say the lack of regulation is underscored by the situation regarding ethics committees, from which every institution carrying out a trial must receive approval. Such is the laxity in the guidelines that almost anyone can be part of such a body.

Dr Amar Jesani, editor of the Indian Journal of Medical Ethics, said he was asked to join such a committee at a reputable teaching hospital where there were more than 50 trials registered as ongoing. "There was no organised information about the trials or subjects. When I started going through the protocols so that I could properly assess the study question, the other members said it was the first time they had ever read the protocols," he said.

Indian government officials claim the system includes checks and balances which are being continually improved. In an interview, Dr Vishwa Katoch, director general of the Indian Council of Medical Research, said: "In the last 15 years there has been a remarkable improvement in the functioning of the ethics committees."

Case study: Sarita Kudumula, 13 - Parents only knew Sarita had been in a study after she died

No one told the parents of 13-year-old Sarita Kudumula that the teenager was involved in a medical study. They first they knew of it was after she collapsed and died, some days after receiving the injection. Discovered on the floor of a relative's home, the young girl was rushed first to the local clinic and then to the nearest hospital. By the time they got her there, she was already dead.

The teenager had been part of a study carried out in a remote part of the southern Indian state of Andhra Pradesh (AP) to test the feasibility of vaccinating large numbers of young women against the Human Papiloma Virus (HPV), which is sexually transmitted and is one of the causes of cervical cancer. The trial, administered in conjunction with the state government, was led by a US-based NGO, Path, which received millions of dollars from the Bill and Melinda Gates Foundation. Samples of an anti-cancer vaccine, Gardasil, produced by US company Merck, were provided free of charge. Officials wished to know whether the vaccine could be introduced as part of a national immunisation programme. Up to 74,000 women in India reportedly die from the disease every year.

It seems unlikely that Sarita died as a result of her participation in the study. No one knows exactly what led to her death or those of six others involved in the study in AP and the western state of Gujarat, where another drug, Cervarix, produced by GlaxoSmithKline, was used instead of Gardasil. Both Path and Merck insist that Gardasil is safe. A post-mortem carried out after the girl's death suggested she had committed suicide – a conclusion her parents refuse to accept. A subsequent investigation by the federal government – which suspended the trial after the deaths sparked controversy – concluded it was unlikely the girls had died as a result of having been given the vaccine.

In a sense, though, the cause of Sarita's death is besides the point. What is beyond dispute is that Sarita's father and mother, Nageshwara and Venkatama, and the parents of hundreds of other tribal girls, were not informed their daughters were taking part in a trial – something that is in breach of guidelines laid down by the Medical Research Council of India, which demands that those participating in trials give "informed consent". Sarita's family are adivasis, tribal communities who are among the most vulnerable in India, and Sarita attended a government school and hostel, located a few miles from her home. Only tribal girls attend.

"Nobody came to ask us for permission," said Sarita's father, a farmer, sitting outside his thatched hut in the village of Anjipakka, as he remembered his daughter, who died in January 2010. "She enjoyed the hostel. She was a bright student and took part in all the social activities. She was intelligent. She wanted to become a doctor."

When The Independent visited the pink-painted Government Girls' Ashram and High School in the nearby town of Bhadrachalam, the hostel warden confirmed that health officials had come to the hostel and outlined their plan to vaccinate 300 girls. He said that because it was a government project, he had been told he could authorise the trials without parental permission. "We did not show any forms or ask for the signatures of the girls or the parents," he said. The warden claimed the vaccination programme went off without a hitch.

While the government inquiry did not link the vaccine to the death of the girls or suggest there had been a "major violation of ethical norms", members of the enquiry panel were concerned that tribal girls had participated in the study without consent. "The most significant deficiency in the implementation of the trial was the obtaining of consent," said one finding.

Officials at Path's India office say the study was carried out after the vaccine was already licensed and was not strictly a clinical trial. "Among over 23,000 girls vaccinated [in AP and Gujarat] through the project, seven girls passed away, but the deaths occurred weeks or months following vaccination," said Tarun Vij, Path's country head. Regarding consent, he said: "The state government authorised the wardens to provide this consent for girls who were living at residential schools."

Spokesmen for the Gates foundation, Merck and GlaxoSmithKline all emphasised that the drugs involved in the studies are safe. A GlaxoSmithKline spokesman added that the trials were carried out according to the same standards wherever they were conducted in the world. On the issue of consent, Gates foundation spokesman Chris William said: "The implementing partner on the ground (the state of AP) made the decision to empower headmasters to provide consent for this licensed vaccine in some special circumstances. We haven't seen anything that would suggest that the decision should be second-guessed."

Case study: The Naik family - 'To us a doctor is like a god. We believe them'

Over four years, a close-knit team of senior physicians at the MY hospital in Indore secured and conducted dozens of prestigious trials with drug companies from around the world. They were paid about 50m rupees (£625,000). The doctors insist their work was carried out according to guidelines and an ethics committee oversaw what they did.

But to others, there were causes for concern. Funding for the study was given to the doctors involved and not the hospital. It was not clear that participants fully understood what they were volunteering for. And the only doctors to investigate 81 cases where patients had problems after trials were the same doctors who conducted them.

In the summer of 2010, the state government prevented the hospital from conducting new trials while it held an inquiry. A separate, non-criminal police investigation found doctors had "violated the ethical guidelines on a number of occasions" and that the "fundamental concept of informed consent was also overlooked".

Dr Anand Rai, a physician formerly employed at the hospital who turned whistleblower and was subsequently fired, says that in 81 serious adverse events (SAEs) following 60 trials involving up to 3,000 patients – including one case where a trial subject died – not one was listed as having been the result of a trial and not one person received compensation.

"To us, a doctor is like a god. We believe everything he says," said Ajay Naik, 28, whose baby son, Yatharth, developed white spots on his skin after a trial. "My wife was told a new multi-vaccine had come that costs 8-10,000 rupees and that it was available free of charge." They had no idea they were involved in a trial. "There was a two-page form in English. No one read out the details," he said.