Any type of growth whether political, economic or industrial is bound to have its own set of problems. Pharma sector is also not immune to the problems of its fast paced growth on the export front. Though the Indian pharmaceutical industry had made tremendous progress, achieving an enviable growth rate of 20 per cent over the last decade, it had to face a number of problems mainly due to the strong lobbying of multinational companies who have launched a virtual war against Indian generic exports.
The Commerce and Industry Minister Anand Sharma himself had pointed out that the growing exports of Indian manufactured drugs to African countries had started "causing concern" among multinational companies that had in turn started malicious campaigns against Indian generic medicines.
Further the after-effects of recession, volatile exchange rates, stringent regulatory norms, cost-cutting measures in several countries, patent litigations and the US healthcare reforms which gives extensive protection against generic versions of pricey biotech medicines, may also put pressure on operations in highly regulated markets. Most notable is the setback for generic versions of biotech drugs, also known as biosimilars or follow-on biologics. The Senate Bill provides for a 12-year period of exclusivity for brand-name drugs before a biosimilar can be approved.
Though the exports to the US and Europe of major Indian companies improved smartly during 2008-09, the same trend is not likely to continue in the current year. For example exports by Ranbaxy, Sun Pharmaceutical, Glenmark Pharmaceutical in the US and Dr Reddy's in Europe declined during the first few months of the current year.
Liquidity problems including the fluctuating dollar had also contributed to drop in export revenues. Large-scale generic formulations by China is also posing a problem now according to some industry observers.
Despite the numerous challenges it face, overall the pharmaceutical industry is optimistic of the export prospects in the coming years. As there will be a rising pressure to reduce health costs worldwide, producers of cheaper generic drugs would perform well, according to some industry experts. In countries like the US, old and retired people are increasingly going in for generics. Outsourcing will also gain momentum as global innovators look to prune costs which means that those companies focusing on custom manufacturing will stand to benefit.
Thus, from a long-term perspective, the prospects of the pharma sector are strong. However in order to further boost the exports, problems have to be sorted out expeditiously, the industry experts add.
According to a study conducted by Federation of Indian Chambers of Commerce and Industry (Ficci) earlier in the year, India's pharma export to the US was severely hit by increasing competition from other emerging markets like China, Israel and Korea, Indian exports of pharmaceutical products to the US fell almost 40 per cent in the five months between October 2008 and the end of February 2009.
Exports of pharmaceutical products from India have been facing steady competition in the US market from its Asian peers such as China and South Korea as well from Israel. In fact Indian pharma companies are increasingly losing their relative share to firms from these emerging economies.
"In pharmaceuticals, exports from China, Israel and South Korea [to the US] moved up by 27 to 41 per cent as compared with a significant decline of 37 per cent in India's exports to the US," the Ficci research report had stated.
Similarly export figures available from the Pharmaceutical Exports Promotion Council (Pharmexcil)had pointed out that out of the 25 importing countries analysed by the council, exports to almost 18 countries has shown a decline during January 2009 as compared to the exports achieved in January 2008.
Problems for the Indian pharmaceutical companies started first with the competition from the generic companies of the US and Europe .This was followed by the US FDA action against Ranbaxy for not maintaining quality norms in its two approved manufacturing facilities in India after the the regulating agency found a number of violations in Good Manufacturing Practice. The US FDA imposed a ban on the import of 31 drugs of Ranbaxy in September last year. Since then, imports of pharmaceuticals from India came under stringent scrutiny by the US and European regulatory authorities.
According to N.R. Munjal, President, IDMA, some of the steps required to counter the MNC strategy of blocking Indian exports to African and Latin American countries as follows :
■ The commercial attaché of local embassy's should be fully engaged in the process of new patents being granted or rules adopted, which are favouring MNC and not favouring the developing economy and timely representation moved through the diplomatic channels .
■ Regular bilateral dialogues followed by agreement for accessibility of markets with an open trade model be signed between these countries and India.
■ Regular roadshows to be held in these countries promoted and arranged by Pharmexcil / IDMA/ IPA and supported by Department of Pharmaceuticals, Govt. of India.
■ Local Indian generic exporters to these countries must be motivated and encouraged to go in for joint ventures and also set up independent manufacturing plants in these countries.
■ Exim Bank should be told to increase activity in these countries and provide exporters with a line of credit to promote exports.
■ Regular meeting / brain storming sessions should be held between Indian regulators / target countries regulators and Indian exporters on various quality / trade issue, hindering exports.
■ More & more regulators from these countries should be invited to India on various platforms /quality seminars conducted by various pharma associations in India. Encourage these delegates to visit manufacturing sites of exporters of generic pharmaceuticals.
■ Focus country scheme should be launched in order to facilitate exporters to increase exports of generics to these countries.
■ All -out efforts should be made to promote' Brand India' image abroad by all Govt. and export promotion agencies taking along various trade association like Ficci, IDMA, IPA, CII, FIFO, Pharmexcil etc.
According to the Director of J.B.Chemicals & Pharmaceuticalss Ltd,DB Mody, since MNCs have adopted a multi-pronged strategy to counter the strong Indian competition in the developing countries which are major markets for our medicines (formulations),Government help is critical to protect our genuine legal rights and interests in international trade.
Under the WTO's TRIPS agreement India and most of the developing nations have been granted protection against " pre-1995 "inventions" product patents. Product patents in medicines have been made eligible only from January 1, 2005. This 10 year pipe line protection has been a critical factor in the growth of Indian pharma Industry.
MNCs are forcing African countries like Kenya and Uganda to "honour" product patent on the pretext of patents existing "anywhere in the world" even when the specific patents have not been registered in the importing countries.
This is nothing but back door imposition of "Product Patents" in clear violation of the WTO's TRIPS agreement which has been universally accepted.
European countries which are major transit points for shipment of Indian exports to LAC (Latin American Countries), are resorting to confiscation of cargoes, both APIs and Formulations from India and other developing countries to LAC even for products covered under the pipeline protection under TRIPS regime. This is a blatant violation of the rules of International Trade which permit free movement of legitimate goods between the importer and exporter countries.
Ministry of Commerce deserves compliments for having launched a strong protest with such European countries to desist from such illegal seizures of cargo meant for countries protected by the WTO TRIPS agreements. Govt. of India must escalate this protest at all possible bilateral and multi-lateral fora to ensure smooth transit of such export consignments.
The formulations are mainly exported to developing countries or under -developed countries, where product patents (of pre-1995 inventions) are not legally eligible. Developed countries must not connive with MNCs to block exports of genuine "generic" formulations from India and other developing countries.
The definition of "Counterfeit drugs" is being debated at WHO. The Indian pharmaceutical industry has taken stand that the definition should not allow misinterpretation so as to include generic drugs as counterfeit. There is a need to clearly differentiate between the real counterfeit drugs and legitimate generic drugs. The clarification on classification of defects also play a vital role in this.
According to him , the Govt. of India must escalate its active protest on all these issues at all possible bilateral and multi-lateral fora to ensure smooth export of genuine generic products .
Only the force of Government to Government intervention will halt the underhand tactics being adopted by MNCs in clear violations of bilateral and multi-lateral trade protocols governing the IPR issues.
"Many poor developing countries, which cannot afford high cost patented medicines and who are unable to maintain elaborate IPR infrastructure, also look forward to India to protect their interests and enable them to provide low cost medicines to their suffering citizens", he adds.
According to D G Shah. Secretary General. Indian Pharmaceutical Alliance (IPA), "as some foreign companies aided by EU and some multilateral agencies are creating non-tariff barriers to exports of medicines from India with a view to protect their business and the pharmaceutical industry in Europe,the industry and the government will have to work in tandem to foil these attempts. It could be a dialogue with the EU through its member states to dismantle these barriers in the interest of ensuring access to medicines and protecting public health. It could be challenging certain EU regulations violating TRIPS Agreement. It could be retaliatory measures that would create pressure on the individual member states to remove these barriers. It could be a new initiative of south-south co-operation among India, Brazil and South Africa (IBSA) to open a new trade route (BOM-JO'BURG-RIO) not only for pharmaceuticals but for all trade among them and divert business away from European Airlines to IBSA Airlines. The industry will have to shed inhibitions and work with the government".
The Pharmexcil is also working on a project to promote exports of medicines to the top 10 export destinations of Indian drug companies.
The council is formulating a document covering various action plans for building brand for Indian pharma products and firms in these countries and will submit the request for project implementation to the Department of Pharmaceuticals in three to four months, said Smithesh Shah, chairman, Pharmexcil recently . The Council is expecting a large fund from the central government for the brand building exercise, he added.
"The top 10 countries contributes almost 50 per cent of exports business to Indian pharma companies. We have to focus our efforts to these nations to optimise business. We are in the process of formulating a model to explore the export potential to these countries, especially for brand building," informed Shah. He has also requested the Department of Pharmaceuticals to support the effort.
The growth of Indian pharma industry in international market would be in tandem with the changes happening globally. The western market which is more less stuck with the innovator products erstwhile is a lucrative market for the Indian generics at present. The Indian players have already established their strength in the semi-regulated markets like Africa.
The regulated markets, especially the United States and Europe are opening up a huge opportunity worth billions of dollars market as a number of block buster patented products - many of them first-line therapies-worth around $80 billion products are expected to go off patent within 2012-2013.
Many of these products has already gone off-patent and a number of Indian generic majors has already filed applications for product approval or commenced marketing generic equivalents in these nations.
Indian companies are becoming increasingly active in the US market. In the years 2002, 2003 and 2004, the FDA approved 21, 26 and 25 ANDAs respectively for Indian pharmaceutical companies and their US subsidiaries. In 2005, the number increased to 52 and has increased year-on-year to reach 134 in 2008. In the first quarter of 2009, Indian companies had achieved 50 ANDA approvals, showing the increase in pace.
Speaking at a symposium on 'Indian Pharmaceutical Industry: Future Perspective' at Indian Pharmaceutical Congress , Dr Tarun Patel, vice-president of Ranbaxy Research Laboratories, said "With highly talented manpower and cost advantage, Indian generic drug manufacturers are well positioned to seize the opportunities arising out of patent expires."
With cost advantage and highly skilled manpower on their side, the Indian pharma industry is poised to grow further. If spending on new drug discovery was increased to the desired level, domestic firms could corner major share of the global generic market in the coming years,feel many experts in the industry.
Here it would be worthwhile to recall the words of Srikant Jena , Minister of State for Chemicals and Fertilisers at the recent pharma summit in Mumbai ."By all accounts , India is set to be one of the top five global pharmaceutical innovators by 2020", he said and added "the Department of Pharmaceuticals has a clear vision - to enable the Indian drug industry to play a leading role in the global market, besides ensuring drugs at reasonable prices for domestic usage".