.India is the 4th largest economy of the world in terms of Purchasing Power Parity with only USA, China and Japan ahead of it and Germany occupying the fifth place.
.The GDP crossed $720 billion with a growth of 1.8 per cent. For the past three successive years, inflation has been contained at 5 per cent and below
Global generic opportunity
.US $ 60 billion drugs coming off patent in USA in next 5 years
.Healthcare costs are ballooning
.Pressure from government, consumers and insurance companies to reduce costs
.Over 50% of total prescriptions in 2004 in USA are generic
.Hatch Waxman Amendment 1984 and Greater Access to Affordable Pharmaceuticals Act 2002 (GAAP) will accelerate Generic entry
.Authorised generics - New challeng
Generic opportunity for India
.Highest number of US FDA approved manufacturing facilities outside USA
.Well Trained Scientific and
.Technical Manpower
.Cost Competitiveness
.Over 400 APIs (active .pharmaceutical ingredients)
.Out of total DMFs filed with .US FDA in 1st Qtr 2006, 35% from India.
India is a vast country, indeed it is a sub-continent with over 1.2 billion population. Politically, India has a Federal set up with a Union Government ruling the country from New Delhi as its capital. There are 29 states which are ruled by autonomous governments elected by the people and 6 Union Territories. Geographically, some of the states or even some of the cities are larger than countries in the Europe.
According to the World Bank Report of July 2005, India is the 4th largest economy of the world in terms of Purchasing Power Parity with only USA, China and Japan ahead of it and Germany occupying the fifth place.
The Gross Domestic Pro-duct has crossed $720 billion with a growth of 1.8 per cent. For the past three successive years, inflation has been contained at 5 per cent and below. The Foreign Exchange Reserve has touched a healthy 150 billion US dollars. If exports are any indicators of the health of a nation, it has touched US $100 billion and USA remains the largest trading partner. The imports hover around US $140 billion. The services sector contributes a healthy 53 per cent to the national GDP. Industrial sector contributes to 24 per cent of GDP with agricultural sector contributing 23 per cent which is a reverse of trend after 16 years of the liberalization of the economy.
Disease burden
India shares 16 percent of the worldwide population, 18 per cent of the world wide mortality and 20 per cent of morbidity. However, India's spend on public health is barely 2 per cent of worldwide GDP and 1 per cent of world healthcare investment.
The birth rate has come down to 25 per 1000 population compared to 40 per thousand in 1950s and death rate has been reduced to 8 per thousand people as against 24 people per thousand. Thanks to a robust pharmaceutical industry and healthcare, the life expectancy has gone up from a mere 36 years in 1950s to over 65 years of age and infant mortality rate has also been reduced to 60 per thousand from an alarming 146 per thousand in the 50s.
Health infrastructure
India has the cheapest medicines among other Asian nations. Out of a hundred rupees spent on a patient, only Rs.15 is spent on medicines as compared to the cost of hospita-
lization (Rs.17), transport of patient (Rs.20), doctor's fee (Rs. 9) etc. A whooping 24 per cent of the expen-ses goes into diagnostic investigations and pathological tests.
India has a long way to go in building up a reasonably good healthcare infrastructure for its 1.2 billion people. There are 0.6 doctors per 1000 population with 0.84 hospital beds and 17,300 hospitals that are situated mainly in cities and towns, which mean a long distance of travel for a farmer to reach a reasonably good hospital for proper treatment.
The ground reality is, out of the over one billion people, only 35% of the Indian population can have access to medicines. And those 350 mn people are largely clustered around urban centres where health care facilities exist. The pharma industry has to work with government to ensure that access levels are maintained and further improved in the post-patent era.
Drugs costs the lowest in India. But the accessibility is still a problem. Concerted efforts are needed to make essential drugs available in rural areas where 60% of the population lives. And what has patent got to do with this as over 95% of the essential drugs are off patent? Pharma industry, the civil society and the government have to come together to take up this challenge. Government's own statistics says, 65% of population have no access to essential drugs and there is the added problem of counterfeit drugs.
Industry scenario
India's pharma industry is fully geared to meet the challenges of the healthcare needs of the country going by the current scenario. The domestic sales is US $ 6.8 billion and growing at the rate of 8.6 per cent. The exports stands at US $ 4.4 billion, growth 18.6 per cent and imports US $ 1.1 billion, growing by 10 per cent. Cardiovascular, anti-diabetics, CNS are the fastest growing segments. The total R&D spend is around US $ 270 million (4% of sales). GlaxoSmithKline is the no.1 company with sales at US $ 293 million, and a market share of 5.7 per cent.
The Indian pharma industry ranks fourth in volume and fourteenth in value terms. However the industry is highly fragmented with over 10,000 manufacturing units. Only about a300 units are in large and medium sectors. 80% of the drugs are in the prescription market (but most drugs can be bought without prescription). India manufactures over 400 APIs (active pharmaceutical ingredients) and over 60,000 formulators in 60 therapeutic categories. India is beingincreasingly recognized as a reliable source of quality medicines at affordable prices.
Strengths and opportunities
The strength of the industry is that it has a huge market with an ever growing middle class in the urban and semi-urban areas that has an increased capacity to spend for better healthcare. There is healthy cost competitiveness. There is an enormous well-trained technical and scientific manpower ready to be engaged in a fast growing healthcare industry.
Opportunities for generics, R&D based companies and MNCs are many. Underdeveloped market in certain segments like diabetes is open to develop. IPR protection promised under the product patent regime introduced in January 2005 has raised lot of expectations but yet to be seen how effectively it is implemented.
Outsourcing in all areas such as research, new drug development, clinical trials, manufacturing and marketing is happening in a major way leading to consolidation. Joint ventures, mergers and acquisitions, buyouts are happening all around. Yet, low per capita expenditure on healthcare is hardly encouraging. The new national health policy that is under finalization promises to raise the government expenditure for public health from 0.6 per cent of GDP to 2 per cent. Even more serious concern should be the low access to medicines. Half of the populations who live in rural areas do not have easy access to life saving medicines or even essential drugs. Investment in R& D by the Indian pharma majors is just about four per cent of sales. New drug development and investment in research still comes from MNCs. For FDI to happen, India needs to win the confidence of the foreign companies about IPR protection, patent law implementation and data protection. Patent administration infrastructure is slow to catch up with fast growing needs. There is still a paucity of qualified patent examiners, patent lawyers and better-informed patent judges.
New pharmaceutical policy
A Task Force set up under the chairmanship of Dr Pronab Sen, principal advisor, Planning Commission, has submitted its final report.
Debranding of brand drugs is one of the major recommendations by the committee which will not go well with the industry and is impractical. A basket of 354 essential medicines as part of the National List for Essential Medicines (NLEM) has been drawn up for price control criteria and price monitoring on remaining drugs. Mandatory price negotiation for newly patented products is being considered. The price negotiation system is to be carried out by an expert committee or National Pharmaceutical Pricing Authority (NPPA). The industry is opposed to increasing price control and representations have been submitted for a price monitoring mechanism as an alternative.
The setting up of a Settlement Commission has been suggested for resolving old overcharging cases (DPEA). Access programmes for HIV/ anti-Cancer drugs through public-private-participation (PPP) and strengthening of regulatory body (National Drug Administration) are some of the other recommendations in the draft national pharmaceuticals policy. The draft policy was circulated among all stakeholders for comments and suggestions. The government is in the process of finalizing the National Pharmaceuticals Policy 2006 and Drugs (Price Control) Order DPCO.
Patent Law
Although Patent Act 2005 was aimed at meeting India's obligations towards WTO and TRIPS agreements, it has disappointed many of the research-based pharma companies, both domestic and foreign. Narrowing down of patentabilitycriteria, widening of the Compulsory Licensing provisions, a three pronged opposition: pre-grant, post-grant and revocation, parallel imports, working of patent are some of the key disappointments.
Further, more than 300 drugs are under price control. Price Control biased against branded drugs is unfortunate. The industry has been advocating a price regulatory mechanism than price controls. Counterfeit drugs menace is wide spread and a stringent legislation still remains a promise.
Immediate future
McKinsey future projection of the industry is to achieve a size of US$ 25 billion by 2010. Already the indicators are very positive towards McKinsey projections. The boom that is expected is mainly through outsourcing. Many block busters are slated for patent expiry in the next 5 years which is estimated to be worth US $60 bn. The Indian pharma majors are already gearing up for this bonanza that is waiting to be exploited.
The manufacturing costs for formulations would be half of what it is in the developed world, due to lower costs of inputs. MNCs may make their Indian manufacturing facilities "centres of excellence" for supplying to other countries.
Partnering for developing NCEs by outsourcing to India offers tremendous cost advantage without sacrificing on quality. The R & D productivity is also on the decline with US FDA approving only 31 new drugs in the year 2003. Cost containment has therefore become a key agenda for the future. One way of resolving this issue is to get a New Chemical Entity (NCE) to market.
Clinical Trials: Major outsourcing activity
Multinationals can outsource a lot of R&D and clinical activity to India which will lead to lowering their costs. Conducting trials in India will offer 3 benefits. Firstly, cost of such trials in India is almost half of that of US and other developed countries. Secondly, India has abundance of genetically diverse patient pool who is "drug naive" -- not taken other drugs for their condition in the past. And thirdly, we have many qualified doctors with expertise to conduct and supervise clinical trials according to Good Clinical Practice (GCP) a globally recognized standard. Apart from clinical trials there is significant outsourcing opportunity for contract manufactu-ring, custom synthesis, biostatistics, bioinforma-tics, technical services, etc.
Data Protection: Need for a positive approach
However, to realize the full potential of the booming trend and widening opportunities data protection is needed so that follower companies do not use originator's data for unfair commercial use.
If India were to compete with China in foreign direct investment and in the business of outsourcing as the preferred destination, it has to grant data protection at least for a period of 5 years. China has granted a 6-year data protection and Japan offers 7-years data exclusivity. The Europe and USA offer 10 years and 5 years of data protection respectively.
The cost of conducting drug discovery in India is approximately half of what it would be in the US and the cost of drug development is 1/5th to 1/3rd. To capitalize on the trend of India becoming the "research hub" for the interna-tional pharmaceutical industry, we need TRIPS compliant intellectual property protection and a business-friendly regu-latory environment where innovation and research are encouraged.
Multinational companies when launching their potential molecules in India would like to partner with Indian companies through co-marketing / co-promotion deals to get a better coverage and penetration of their target market.
Some multinationals are shedding their old products and either selling them outright to Indian companies or licensing them out. Similarly large Indian companies are out licensing their research products to MNCs.
Positive trends
Before the product patent era, there was a definite divide between the business objectives of MNCs large Indian companies. But with the implementation of TRIPS compliant IPR laws the large Indian companies have realized that it opens a big window of opportunity for them as well. They can now develop their NCEs, and then patent the molecules and market all over the world.
The biopharmaceuticals market is also evolving very fast and the Indian market is flooded with biogenerics like erthropoeotein, filgrastim, tPA, interferons, human insulin, vaccines etc. In fact India is likely to emerge as one of the largest producers of vaccines in the world in few years time.
Indian economy is now showing a strong GDP growth of 7 to 8%. To sustain this growth and become globally competitive, there is no better way than to honour IPR where knowledge based industries like pharmaceuticals will flourish.
(The author is president of Organization of Pharmaceutical Producers India (OPPI) and vice-chairman & managing director of Novartis India.)
Courtesy: Healthcare & dustry Information Centre