India needs to create a new ambience to foster research and development (R&D ) which would not only help the country to compete with the western world in the pharma and biotechnology segments but would also help it to become a global R&D hub, aver industry experts.
The Indian companies have long been criticized for their low level of investment in R&D, both in India and other parts of the world. This fact has prevented them from becoming major players in global markets.
Compared to the vim and vigour exhibited by pharma and biotech companies in the western world, the Indian R&D initiatives fall far behind. For instance the research budget of world famous pharma giant Pfizer accounts more than the combined revenues of the entire Indian pharmaceutical industry. This is a testimony to the plight of the R&D segment in the Indian pharma industry. Except for leading Indian companies like Dr. Reddy’s Labs and Ranbaxy who are contributing to about 5-10 per cent of their revenues on R&D, not many are keen on R&D spend.
“India has excellent resources for building up R&D initiatives. Right from skilled human labour, to dedicated National institutes like IICT, CCMB, IITs, NIITs and other leading universities and academic institutes which all have great potential to enhance the R&D environ in the country. Only thing we need is, to strengthen the industry and academy linkage and sufficient funds flow, both from the government as well as from the private industry,” opined Dr. Appaji, Director General, Pharmexcil.
Particularly, India is lagging behind in the active pharmaceutical ingredients (API) manufacturing. APIs are the basic building blocks that are formulated into disease curing medicines. Despite the fact that it has the potential to manufacture its own APIs, the country is depending on China for APIs due to cost-related reasons. But the government should realize this will be fatal for the country in the long run and should take steps to strengthen R&D as well as the development of the bulk drug industry in India.
Though India has tremendous potential to build up its research capabilities and streamline its regulatory landscape, currently the Indian pharmaceutical industry is facing various challenges. Major among them are the regulatory issues for clinical trials, quality of APIs, patient issues and low R&D initiatives for fostering innovation.
Changes in the last few years
However during the past few years there has been lot of changes happening in the Indian pharma sector. Particularly the Indian government has realised the importance of R&D and had allocated comparatively better budget to encourage innovation and research in the newer areas.
Today the Indian pharmaceutical industry forms an important part of the life sciences sector and is expected to touch $ 35.9 billion by 2016. Over the years, the sector has attracted a huge outsourced research activity from global companies and FDI worth $ 11,958 million during April 2000 to September 2013.
The sector offers tremendous opportunities to the life sciences industry. The Department of Pharmaceuticals, Government of India has been providing the requisite support by way of world class infrastructure, internationally competitive manpower for R&D and venture fund for research in the public and private domain.
Recently the Federation of Indian Chambers of Commerce and Industry (Ficci) in partnership with Department of Pharmaceuticals have organized the 5th edition of The India Pharma Summit 2013-14 at World Trade Centre in Mumbai.
"Presently, US$ two million is being invested in R&D by the Indian pharmaceutical industry and the country has a capacity to become the global hub of R&D in the world. We have to create an ambience for research and need to streamline the landscape for clinical trials in India", Habil Khorakiwala, Chairman Ficci Life Sciences Council and Chairman of the Wockhardt Group said talking at the pharma summit.
Though India has long been considered as a third-world country that stumbles along by copying western products, aided by lax patent policies, today the situation is changing. Particularly the pharmaceuticals and biotechnology segment is in the forefront of the R&D scenario of the country.
R&D drives growth in pharma and biotech sectors
The innovative research and development in the pharma and biotechnology industry in India has been the real propellant of growth in the country. A few market leaders and the government’s push for the R&D has helped to fuel the growth of pharma sector. However this is not enough to compete with giants of the western world. There is a wide difference in the R&D spending of Indian companies when compared to the western companies. This disparity is too great to be explained by cost differentials, and it comes when advances in genomics have made research equipment more expensive than ever.
The drug discovery process can be further accelerated by pumping more number of qualified molecular biologists and bridging the gap between the academia and industry which is regarded crucial as in the case of western world.
Unlike in other countries, the difference between biotechnology and pharmaceuticals remains fairly defined in India. Bio-tech there still plays the role of pharma’s little sister, but holds promise for the future.
India accounted for two per cent of the $41 billion global biotech market and in 2003 was ranked third in the Asia-Pacific region and 11th in the world. In 2004-05, the Indian biotech industry saw its revenues grow 37 per cent to $1.1 billion.
The Indian biotech market is dominated by bio pharmaceuticals; 75 per cent of 2004–05 revenues came from bio-pharmaceuticals, which saw 30 per cent growth last year. Of the revenues from bio-pharmaceuticals, vaccines led the way, comprising 47 per cent of sales. Biologics and large-molecule drugs tend to be more expensive than small-molecule drugs, and India hopes to sweep the market in bio-generics and contract manufacturing as drugs go off patent and Indian companies upgrade their manufacturing capabilities.
Most companies in the biotech sector are small, with only two firms breaking $100 million in revenues. At the last count there were 265 firms registered in India, over 75 per cent of which were incorporated in the last five years. The newness of the companies explains the industry’s high consolidation in both physical and financial terms. Almost 50 per cent of all biotech companies are in or around Bangalore, and the top 10 companies capture 47 per cent of the market. The top five companies were home grown; Indian firms account for 62 per cent of the bio-pharma sector and 52 per cent of the industry as a whole.
The R&D in the pharmaceutical and biotechnology segment in India has huge potential. Particularly the contract manufacturing and outsourcing of research has come as an opportunity in disguise to boost the Indian R&D base. With changing business dynamics and with acquisitions and collaborations, the number of purely Indian pharma companies has dwindled. Indian pharma industry is mainly operated as well as controlled by dominant foreign companies having subsidiaries in India due to availability of cheap labour in India.
R&D in generics to get a boost
With patent cliff coming off, it has given a big boost for R&D sector particularly in the generic segment. Generic drug makers from India, the biggest overseas source of medicines sold in the US, have got more than 100 generic drug approvals from the American health regulator FDA in 2013. This has taken India’s share in the Original Abbreviated New Drug Application (ANDA) approvals to nearly 40 per cent in the US market so far in 2013, even as Indian companies are increasingly coming under the regulatory scanner here.
Since the beginning of 2013, the US Food and Drug Administration (FDA) have approved nearly 290 ANDAs allowing pharmaceutical firms to manufacture and sell generic drugs as a safe, effective and low-cost alternative to the Americans.
At least 110 of these approved applications are from the Indian companies, or entities owned or controlled by an Indian firm, the FDA data showed. These companies include entities belonging to Sun Pharma group, Lupin, Aurobindo Pharma, Zydus, Glenmark, Dr Reddy’s, Emcure, Wockhardt, Torrent, Claris, Alkem, Ipca, Cipla, Famy Care, Natco, Hetero and Alembic.
The US market is home to generic drug spending of about US$ 300 billion every year and India produces nearly 40 per cent of generic and over-the-counter products, while its share in the finished dosage medicine segment is about 10 per cent.
While the FDA has stepped up its efforts to ensure that only good quality medicines reach the American shores, the demand for generic drugs is surging under President Barack Obama’s healthcare programme. With over 150 FDA-approved plants, including facilities run by MNCs, India shipped pharmaceutical products worth over US$ 4 billion to the United States in 2012, clocking a growth of around 30 per cent from the previous year.
Indian companies have tapped the US market by focusing on opportunities in plain-vanilla generics segment. However, many continue to improve their product offerings and look at alternative avenues to generate higher margins.
These include difficult-to-make products having technological entry barriers, as also niche products that require dedicated facilities and clinical trials and are not economically viable for many generic players.
Lupin was the top Indian drug seller in the American market last year by prescriptions, followed by Dr Reddy’s, Cadila Healthcare and Aurobindo Pharma, according to data compiled by IMS Health.
As the market for generic drugs, which usually sell at a fraction of cost to the original drugs, grows bigger with an estimated US$ 100 billion worth medicines going off-patent over next five years, FDA has stepped up its inspections as well.
Biotech research, the next growth booster
Research opportunities in the biotechnology sector are expected to be the next growth booster in India. The biotechnology sector in India is expected to achieve revenue of US$ 11.6 billion by 2017, growing at a compound annual growth rate (CAGR) of 22 per cent, according to a recent report by Ernst & Young (E&Y). The key growth drivers of the US$ 4.3 billion industry include strong domestic demand for biotech products, growth in contract services; focus on research and development (R&D) initiatives and strong government support for the sector.
Revenue from biotech exports reached US$ 2.2 billion in FY13, accounting for more than half (51 per cent) of total industry revenues. During FY05 and FY13, revenue from exports increased at a CAGR of 25.1 per cent to US$ 2.2 billion from US$ 0.4 billion. Bio-pharma exports contribute revenue of about 64.5 per cent to total export revenues in the biotech industry; exports from this segment grew at 25 per cent to US$ 1.4 billion in FY13. The bio-informatics sector reported maximum growth (more than 33 per cent) in export revenues in FY13.
Growing investments
Growing investments both domestic and foreign along with outsourcing activities and exports are key drivers for growth in the biotech sector. Foreign direct investment (FDI) up to 100 per cent is permitted through the automatic route for manufacturers of drugs and pharmaceuticals.
According to data released by the Department of Industrial Policy and Promotion (DIPP), the drugs and pharmaceuticals sector has attracted FDI worth Rs 54,321.68 crore (US$ 8.15 billion) between April 2000 and June 2013.
Government initiatives
The Indian government’s increased focus on the biotechnology industry has enabled it to grow at a CAGR of approximately 20 per cent over the past decade. The biotechnology sector in India has reached an estimated size of Rs 20,441 crore (US$ 3.06 billion) in value over FY12, and is forecasted to reach Rs 55,300 crore (US$ 8.30 billion) by 2015.
However, given the availability of skilled manpower, improved infrastructure, and the presence of strong regional markets, analysts project that attaining an ambitious growth rate of approximately 30 per cent, taking the industry to a level of Rs 5,50,000 crore (US$ 82.57 billion) by 2025, is a possibility.