The year 2016 has been an eventful year for the global pharmaceutical industry and its stakeholders . In terms of global turnover, the pharmaceuticals sales value crossed US $ one trillion. While the compounded annual growth rate (CAGR) over the last few years has been around 6.5 per cent, that in the developed economies such as North America, Europe, Japan and Australia were much lower than those in the emerging markets of the developing countries. At the current rate of growth, assuming the continued inflow of new drugs at the current rate, the pharmaceutical market is expected to reach US$ 1.4 trillion by 2020.
Generics markets are growing faster than branded products of innovator companies. While in 2015 its share was 27 per cent of the total market in value terms, it is expected to grow to 36 per cent by 2017. The growth in generics market is further aided by loss of patent protection for many blockbuster drugs during the coming three years. Already patents on 11 high selling biologicals will expire by 2017 and biosimilars are waiting to be introduced to replace the branded versions.
Traditional pharmaceutical companies in the US and Europe have given way to a number of companies which capitalised on their innovative biological drugs. In prescription sales of drugs , Gilead overtook Pfizer as the top company with $21.6 billion while others, Johnson and Johnson, Roche, Allergan, Amgen, Merck and Novartis followed. Due to increasing pressure from the industry and even patients, the top regulatory agency in the world, the US FDA accelerated the new drug approval process resulting in the largest number (56) of new drugs approved in a single year in 2015, more than in any year during the last one decade.
Spending on discovery research saw a decline in 2015 over the previous year by 2.8 per cent. Due to increasing costs of research and development, this essential activity is increasingly witnessing diminishing returns to the investors. With a number of blockbuster drugs losing their patent exclusivity and generics replacing them , margins are progressively being eroded. To ensure profitability, increased costs are loaded on drug prices making them unaffordable to large sections of population..
In spite of such a confused and uncertain scenario faced by the industry during the last few years primarily by the research based large pharma companies, demand on containing drug prices is gathering momentum not only triggered by politicians and activists , but also by the patients. The publicity around the pricing ($84,000 per treatment) by Gilead for Sovaldi the first ever drug for Hepatitis C has led to major criticisms against the industry in genera,l ascribing and questioning its motive to maximise profits and increase share holder value with little regard to issues of affordability for the paying patients. In some ways, in spite of many major contributions made by the top pharma companies , the overall image of the industry is perhaps at an all time low.
Evolving trends in R&D
The current business model which has been responsible for the industry’s present standing as a major contributor to healthcare is no longer economically viable or operationally suitable to provide all the needed services. That model is primarily based on strong R&D and innovation leading to new drugs which then are made available to meet the global market needs. The key pre-requisite for success of this model is the ability to recover the massive investments in R&D through the patent system which gives the innovator the exclusive rights to be a monopoly supplier to the market for a period of twenty years from the date of filing of the patent application. The success of this model is dependent on the speed with which the innovation cycle moves and the costs of discovery and development of new drugs.
Over the years, the costs of new drug discovery and development R&D have escalated considerably and present estimates are that every new drug that reaches the market costs not less than $ 2.5 billion. Even though the exclusivity though the patent system is available effectively for up to 10 to 12 years, in actual practice there is no guarantee that the drug will remain in the market that long since unexpected side reactions, competition from newer and better products and the emergence of alternative therapies can considerably affect the life of the drug in the market place. The reasons for the high and ever-increasing costs of R&D are 1) low productivity and poor success rate due to the need for setting higher standards of safety and efficacy of new drugs 2) stricter regulatory systems 3) poor understanding of disease processes, infective organisms and transmission vectors and 4) higher costs of pre-clinical and clinical experiments and others. The financial bottom line of R & D based pharma companies is purely dependent on the number of patent protected drugs in their portfolio.
Impact of biotechnology in new drug discovery and development
Modern biotechnology based drugs are only two decades old largely triggered by the deciphering of the structure of DNA and much later of the human genome as well as the genomes of a large number of infective organisms and vectors. Recombinant technology and the production of monoclonal antibodies have revolutionized the advent of biologicals as therapeutics, diagnostics and prophylactics. The percentage of biologicals approved for marketing or are in the pipeline of development has been increasing in recent years.
While biotech drugs are largely based either on functional proteins identified using tools of modern genomics and proteomics and on specific humanized monoclonal antibodies and are highly specific in their activity, they suffer from the problem of not being useful to all populations. In other words they lead to personalized medicines rather than medicines for the masses. In addition they are unaffordable to the majority of patients who need them. Yet another issue is the approval of biogenerics. Establishing equivalence with a marketed biotech drug and its generic counterpart is a complex process . That is why, even though over a half dozen biotech drugs have gone off patents, starting with human insulin , very few bio-generics have been approved for marketing.
History of R&D in Indian pharma sector
The history of the Indian pharmaceuticals industry is hardly six decades old. At the time of independence, India was heavily dependent on imports of drugs in the finished form. During that time eight of the top 10 pharmaceutical marketing companies were subsidiaries of multinational corporations. Within a decade after independence, a number of companies predominantly in the public sector such as Indian Drugs and Pharmaceuticals Ltd, Hindustan Antibiotics Ltd, Bengal Immunity Ltd and , Bengal Chemicals Ltd were set up. With assistance from some of the leading international companies, the Sarabhai group set up their units in Gujarat followed by Alembic and a few others in the private sector. During the late sixties and early seventies a large number of Indian entrepreneurs, notably Bhai Mohan Singh ( Ranbaxy) A.V. Mody (Unichem ) and K.A. Hamied (CIPLA ) pioneered into this sector and made rapid strides .
The next generation saw the establishment of Cadilla , Lupin, Unique and many others . The dramatic growth of the Indian sector was facilitated by the regulatory controls such as the Foreign Exchange Regulation Act (FERA) which restricted the growth of multinational corporations and the legislation on patents which disallowed product patents and curtailed the validity of patents to unrealistic levels making the whole IPR system redundant in the context of pharmaceuticals.
The Indian Patents Act 1970 gave a tremendous fillip to the Indian sector which in a short period capitalised on the freedom granted to it for manufacturing patented products and marketing them in India. That freedom and the accompanying economic benefits made all the leading companies invest in process technology development indigenously, taking the Indian industry to a position of leadership in the manufacture of practically all chemical based Active Pharmaceutical Ingredients (APIs).
At the same time, a few of the multinational companies set up basic Research Centres for discovery of new chemical entities largely to supplement their global efforts in drug research. Thus CIBA (Switzerland), Hoechst (Germany), Boots (UK) and SKF (US) set up modest scale R&D centres in Bombay and Bangalore. Apart from these private MNC sector units, the only other private sector unit was that of Sarabhai which had its drug discovery centre in Baroda. Both IDPL (Hyderabad) and HAL (Pune) had their own in house research departments.
Out of the efforts of HAL, came an antifungal polyene antibiotic Hamycin from the laboratories of Dr Thirumalachari. Prior to that, the only new drug discovered in India was in 1922 of Urea Stibamine by Upendra Bramachari, a clinician working in a medical college in Calcutta, for the treatment of Kala Azar (Leishmaniasis ).
A major thrust for establishing research facilities in the pharmaceutical sector came with the establishment of the Central Drug Research Institute in Lucknow inaugurated by the then Prime Minister of India, Jawaharlal Nehru in 1951.
Out of the research efforts of all these laboratories in the public and private sectors a number of products completed pre-clinical and clinical evaluation, but only a few have been marketed and that too only in India.They are Sintamil (antidepressant) and Satranidazole (anti-amoebic both CIBA-Geigy), Ormeloxifene (Contraception, DUB, Mastalgia), Gugulip (Hypolipidemic), Baccosides (Nootropic), Artether (antimalarial) all from CDRI, Risorine (antitubercular) from IIM, Jammu, Synriam (antimalarial) from Ranbaxy. None of them attained any position of strength in the respective therapeutic areas
Perhaps the MNC sector which set up R&D centres in India in the sixties and seventies with all good intentions of conducting globally competitive research which would have benefited India and other markets, were well ahead of the times prevailing in India at that time. Much has changed over time with the liberalisation of the system of governance in 1991 and later. The FERA regulations restricting foreign holdings in Indian companies have been considerably relaxed, the licencing and control regime which restricted growth have mostly disappeared, the new globally harmonised patent system consistent with TRIPS and the mandates under the World Trade Organisation have been implemented and Government regulations on investments by and operations of industry have been liberalised and made investor friendly.
Considering the changing landscape and the opportunities they offer, 15 of the largest Indian pharma companies have set up in-house research centres with investments of 4 to 12 per cent of annual turnover on R&D. And these companies are all in the top league with annual sales ranging from Rs 2,500 crores to Rs 10,000 crores. They are all members of a new organisation called the Indian Pharmaceutical Alliance (IPA).
These companies together with another 10 leading ones, all in the Indian sector, spent over Rs 9,000 crores in 2015 up from Rs 7,200 crores in 2014 . Even though a major share of this is spent on development of generics and for meeting regulatory requirements with US FDA and other agencies for filing Abbreviated New Drug Applications and Drug Master Files, sizeable amounts are spent by the majority of companies such as Dr Reddy’s, Ranbaxy, Sun Pharma, Glenmark, Lupin, Aurobindo, Biocon and others on new drug research or generic versions of marketed drugs. A number of candidate molecules have completed pre-clinical studies and are in various stages of clinical evaluation in India and abroad.
Need for R&D on discovery of new drugs
The relevance of continuing R&D activities including the needed investments in the drug field in India, in the future has to be measured against the past efforts by private and private sector R&D institutions. Most of them suffered due inadequate finance, infrastructure and lack of R&D management skills. Indian scientists and institutions have been weak in translational research, to convert research results to marketable products. Scientific skills and innovation strengths of Indian researchers are adequate and available. In fact around 10 per cent of all research positions in the US pharmaceutical companies are manned and managed by Indian scientists.
The first priority is to ensure that the new breed of biologicals which are already dominating the therapeutic arena, particularly for diseases of a chronic nature, such as those of the cardiovascular system, metabolic disorders, central nervous system disorders, cancer and immune disorders are made available to the needy at affordable prices. Patents on a number of major drugs in that category are expiring and it will be desirable to invest in research for developing generic versions and biologicals. Even those under patent protection can be produced in India through effective operation of the licensing approach.
From the Indian perspective, several diseases are still uncontrolled, let alone eradicated. Lack of satisfactory treatment of MDR and XDR TB, Resistant cases of Falciparum malaria, Leishmaniasis, appropriate vaccines and drugs for periodic epidemics of Dengue, Chiken gunea, Leptospirosis, Swine and Avian Flu etc pose heavy burden of morbidity and mortality on large numbers of populations. Remedies for age- related diseases and chronic ailments are also begging for solutions. Indian research capabilities should be directed towards meeting medical needs rather than purely market needs.
Now that India occupies a predominant position in the global generics market , it is imperative that the top industrial houses move into the R&D space with clear cut objectives of discovering and developing new drugs for diseases for which no drugs are available or those available are not sufficiently effective and safe. Indian researchers will also do well to look at Indian traditional systems of medicines and their products and scientifically validate their usefulness as an effective complementary system of medicine. India can provide a leadership to develop drugs for meeting the medical needs of developing countries where 75 per cent of the world’s population resides.
(The author is a senior research scientist and industry expert based in Chennai)