Indian companies now manufacture 85% of the active pharmaceutical ingredients (API) required by the country and account for 90% of the pharmaceutical exports. The Indian pharmaceutical sector has made the country self sufficient in almost all the 300 essential drugs through indigenous process technology.
The Indian pharmaceutical industry has emerged as a formidable player in the API and key intermediates market. India is now becoming a sourcing base for European and US generic companies. India offers a strong manufacturing base at competitive costs, supported by a well-developed engineering pool and an abundance of scientific talent.
With the global meltdown in profits, many international pharma companies are moving towards cost containment through contract manufacturing through cheap sources without compromising on the quality aspects. Indian companies positioning themselves as extended manufacturing and R&D support bases on very cost-effective and reasonable terms with their infrastructure being geared up for the global demand, set to make waves in the API markets internationally.
Today, China continues to be mostly a supplier of older, off-patent molecules, while Indian API manufacturers often focus on newer, still-patented molecules. As a result of the introduction of product patents in India in 2005, one may however see increased interest in older molecules by Indian API manufacturers, though the full impact of this change is difficult to determine at this time.
Several high-profile court-cases in 2004 and 2005, send out a view that Indian companies are competing globally with pharma giants in challenging their patents, which itself is good news, which one cannot ignore. The Indian challenge today clearly established the emergence of Indian companies on the global platform.
In the case of latanoprost, Pfizer's glaucoma treatment Xalatan, the District Court of New Jersey found in July 2004 that Par's ANDA infringed the innovator's patents.
In the olanzapine (Eli Lilly's anti-psychotic Zyprexa) case, a U.S. district judge decided in April 2005 that Ivax, Dr. Reddy's Laboratories and Teva failed to prove that Eli Lilly's patent should be struck down.
As it is evident at this juncture, finding new uses for patented molecules without patent infringement is gaining momentum. But the biggest players have recently met with setbacks along both the drug discovery and patent challenging routes.
There have been a string of adverse court verdicts, and decisions by licensees to not continue with the development of new candidate drugs. Recovering from these setbacks, the better Indian drug firms now follow multiple routes. They are licensing in patented products so as to keep their facilities going, and addressing the growing Indian market. They are also forging research alliances with global leaders for joint discovery.
Plus, as their string of global acquisitions indicates, they seek to become mid-sized generics players across all geographies. Whereas companies like Wockhardt, Shasun, Dr.Reddy's, Aurobindo, J.B.Chemicals, IndSwift Labs, Glenmark, Ranbaxy, Jubilant Organosys and Orchid are consistently pursuing the ANDA opportunity by giving a solid test to their capabilities to reach the global markets.
A number of the fast-growing "second wave" of Indian generic companies and API manufacturers have continued to forge alliances with generics in the US, with an increasing number of the Indians focusing on supplying the finished dosage form as opposed to just the active ingredient.
The rush of international acquisitions by the leading Indian pharmaceutical firms marks the latest phase in the Indian API scenario. Ranbaxy, has just completed a triad of acquisitions, the highlight being Romania's largest generics drug firm Terapia for US$ 324 million, prior to this the company had announced the acquisition of Allen SpA, the unbranded generics division of GlaxoSmithKline in Italy. Earlier this year, Dr Reddy's acquired Betapharm, the fourth largest German generics player, for euro 480 million (Rs 2,100 crore).
Indian and Chinese firms are now the least-cost producers of generic medicines. With patent pipelines thinning out and health care costs rising, the world's most efficient generics producers with the necessary regulatory approvals are stepping into an attractive corner of the market. Sooner or later, Indian companies with their aggressive strategies are set to emerge as the global players.
(The author is with Firstcall India Equity Advisors Pvt.Ltd, Mumbai)