The economic recession- hit US markets hold huge potential for Indian generic makers as the country has no option but to rely on low cost developers to meet its growing healthcare demands and rising costs.
Even while Indian generic makers are making a mark in the US markets, of late some of them are facing resistance in the form of recalls for their export consignments which may have a negative impact for the Indian companies in the US. Moreover the recent verdict by Supreme Court of India not allowing Novartis to have patent rights for its blood cancer drug has further impacted the confidence of the US companies investing in India.
Though the SC’s verdict might have temporarily impacted the investors’ confidence, overall India hold huge potential for the US companies as the country has a large number of USFDA approved manufacturing sites and offers low cost R&D with huge English speaking talent pool in the world.
North America, particularly, United States of America (USA) is the most favourite pharmaceutical destination in the world. From Indian point of view, USA has always been on the top priority for exports of generic drugs.
The growth scenario of the global pharmaceutical industry is changing fast. Unlike in the past, the western world is losing its stronghold due to shedding of patent rights for their products. Markets in USA and EU are under serious pressure. The developing world and emerging nations among the third world countries are fast gearing up to capture the opportunity offered by the patent expiry regime of the present day.
Among the major global regions of the pharma sector, North America, Europe and Japan jointly account for 76 per cent of audited and unaudited drug sales; total sales reached US$955.5 billion in 2011. While the global markets witnessed a growth of 6.1 per cent, from 2007-2011, IMS Health Market Prognosis held in May 2012 forecast that global pharmaceutical growth is expected to dwindle between 3-6 per cent while the growth in North America may hover between 1-4 per cent by the year 2016. Between the years 2007-2011 North America had witnessed a growth of 3.5 per cent while this has come down to 1-2 per cent during 2012.
The impending policy changes and increasing use of generics in the key markets are expected to further dent the top and bottom line of global pharma majors. The industry is bracing itself for some fundamental changes in the marketplace and is looking at newer ways to drive growth. Further, higher R&D costs, a relatively dry pipeline for new drugs, increasing pressure from players and providers for reduced healthcare costs and a host of other factors are putting pressure on the global pharmaceutical companies.
Currently pharma companies are looking for new ways to boost drug discovery potential, reduce time to market and squeeze costs along the whole value chain. Moreover, the economic distress in the west has also forced many pharma companies to lookout for alternative destinations like India and China. Particularly India is preferred by many US based companies where in they have been outsourcing their processes and manufacturing activities to the Indian based companies as they provide them low cost and high quality facilities on par with the global standards.
“As the pharma markets are shifting from west to east, it’s high time that the emerging markets like India, China and other nations in Latin America adopt advanced technology and proven technical processes to avoid repeating of mistakes done by the traditional players. Apart from adopting advanced and proven technologies the industry in the emerging countries should also learn from the experience of western pharmas. The governments and the regulatory authorities too have a responsibility to streamline the regulations and IPR laws to make them compatible with the global trends as this will ensure more investments and enable better funding for R & D and innovator drug development activities,” said Adrian McKemey, Practice Leader, Product Development & Commercialization from Quintiles.
Apart from these E7 economies, many other emerging markets have been recognized as interesting destinations for the major global pharmaceutical players.
Unlike the developed world, where health systems provide a more uniform coverage level, the emerging pharmaceutical markets have wide regional health expenditure differences within them. Moreover, recent major developments and global recession have driven disparate rates of evolution in each of these countries. Unlike the pharmaceutical market of United States and Western Europe, the emerging markets are characterized by diverse therapeutic segments, different and complex regulatory law and a fragmented market.
Further, India’s epidemiological profile is changing, so demand is likely to increase for drugs for cardio-vascular problems, disorders of the central nervous system and other chronic diseases. Together these factors mean that India represents a promising potential market for global pharmaceutical manufacturers.
More than that, India has a growing pharmaceutical industry of its own. It is likely to become a competitor of global pharma in some key areas, and a potential partner in others. India has considerable manufacturing expertise; Indian companies are among the world leaders in the production of generics and vaccines. As both of these areas become more important, Indian producers are likely to play a large role on the world stage – and potentially partner with global pharma companies to market their wares outside India.
Research and Development is another segment which Indian companies are focusing on. Some of the leading local producers have now started conducting original research. Companies like AstraZeneca have collaborated with the Indian firms for doing research for its advanced drugs meant to cater the needs of TB patients in the country.
India has the world’s second biggest pool of English speakers and a strong system of higher education, so it should be well-positioned to serve as a source for research talent. A new patent regime provides better protection of intellectual property rights, although some issues remain.
Clinical trials can also be conducted here much more cost effectively than in many developed nations, and some local companies are beginning to develop the required expertise. All of these factors add up to a strong case for US companies to partner with Indian companies especially in the areas of R&D and clinical testing.
Further, healthcare has become one of the key priorities of the Indian Government and it has launched new policies and programmes to boost local access and affordability to quality healthcare. Having understood this, US pharma players cannot afford to ignore India.
Impact of SC verdict against Novartis
When the whole western world was looking to shift their businesses to low cost destinations like India, the recent SC verdict against Novartis for not granting patent rights for its cancer drug has received sharp criticisms from the US markets. Many US players and industry analysts feel that the verdict will hurt the sector’s innovation in India.
John Castellani, president and CEO of PhRMA, a leading pharmaceutical industry association based in Washington, DC views the latest development as yet another example of the deteriorating innovation environment in India. Describing the protection of intellectual property rights as fundamental to the discovery of medicines, he said, “It is critically important that India promote a policy environment that supports continued R&D of new medicines for the health of patients in India and worldwide.”
The US-India Business Council (USIBC) President Ron Somers feels that for India to attract investments in R&D it needs to encourage innovation and new discoveries so that more people will invest to bring out better drugs for treating deadly diseases of modern era. However, pharma sector observers say India is nowhere close to becoming an innovation powerhouse in this sector in the near future, and therefore the ruling is likely to help, not hurt, the Indian pharmaceutical industry for now.
Raghuram Selvaraju, managing director and head of Healthcare Equity Research at the New York-based Aegis Capital Corporation, said India’s home-grown pharma companies have not yet been as successful in developing new drugs as they have in copying other companies’ drugs. “The Indian Supreme Court rendered this decision on behalf of the Indian people,” adds Selvaraju.
While the true impact of the Supreme Court’s decision won’t be known immediately, the ruling has sharpened the divide between developed and developing countries over drug pricing, with several other conflicts pending. The USIBC referred to this concern among major pharmaceutical corporations, noting in its statement that, “The denial of the patent may now exclude from patentability many other significant inventions in the pharmaceuticals area".
Resistance to Indian generics in US
Of late the Indian drug makers are feeling a kind of resistance for their generic drugs from the USFDA as there have been growing cases of recall of few select batches of export consignments.
Recently drug maker Cadila Healthcare had recalled batches of its anti-depressant tablet medicine, venlafaxine hydrochloride, from the US market. “The drug was recalled in March after some pharmacists complained of an excessive amount of broken and chipped tablets in some batches,” quoted a company source.
According to FDA data, Indian companies have been facing frequent recalls over recent months. Some of the major domestic drug manufacturers such as Ranbaxy Laboratories, Glenmark Pharmaceuticals, Dr Reddy’s Laboratories and Sun Pharmaceutical Industries, have recalled their products from the US, the world’s largest drug market, in the past seven months.
In November last year, Ranbaxy had recalled its generic version of Lipitor from the US, after it suspected the presence of tiny glass particles in some of the batches. While the company recently restored supplies of the medicine for its US facility, it is yet to do so from its Mohali unit in India. More recently, Dr Reddy’s Labs and Glenmark had to recall some product from the US, after complaints.
While recalls are considered part of business in the pharmaceutical sector, experts say more frequent and serious recalls might create trouble for Indian companies in the US.