India today has the largest number of US Food & Drug Administration (FDA) approved drug manufacturing facilities outside the US. Indian companies were responsible for submitting nearly 21% (73 of 350) of all abbreviated new drug applications (ANDAs) to the FDA last year
The Indian patent act of 1970 amended on March 22, 2005 marks the end of a protected era and signals a new phase in the integration of India into the global pharmaceutical market, providing full patent protection to latest medicines, i.e., era of 'Product Patent' regime in India was unveiled. This puts a full stop of copying paten-ted drugs by means of reverse engineering and makes India, a part of glo-bal village. Hence, 'imitate' gives way to 'innovate'.
India today has the largest number of US Food & Drug Administration (FDA) approved drug manufacturing facilities outside the US. Indian companies were responsible for submitting nearly 21% (73 of 350) of all abbreviated new drug applications (ANDAs) to the FDA last year. This is expected to increase to about a third of the anticipated 500 ANDAs this year, according to a report by Credit Lyonnais Securities. In addition, Drug Master Files (DMFs) filed by Indian companies with the FDA is 126 higher than Spain, Italy, China and Israel put together. DMF has to be approved by FDA for a drug to enter the US market. According to a news from the White House (March, 2006), the US Food and Drug Administration has given approval to 13 generic antiretroviral drugs produced by Indian pharmaceutical companies.
Research & development (R&D) is a key to the strength of pharmaceutical industry especially in the product patent period. The global pharmaceutical industry spent $30.4 billion (2001) on R&D. The R&D expenditure (as a percentage of turnover) by the Indian Pharma industry is low (1.9%) when compared global giants. With transition into the new regime many Indian companies are mobilizing their resources war chest with an increase in their R&D budget. Government of India encouraged the R&D in pharmaceutical companies by extending 10 year tax holiday to this sector. Besides, planning commission has earmarked $34 million towards drug industry R&D promotion fund for the tenth plan.
The Indian generics market is witnessing rapid growth opening up immense opportunities for firms. This is further triggered by the fact that generics worth over $40 billion are going off patent in the coming few years which is close to 15% of the total prescription market of the US. India currently holds U.S. $6 billion of the $550 billion global pharmaceutical industry but its share is increasing at 10 % a year. When compared to 7 % annual growth for the world markets overall, this speaks of a very promising scenario.
The Indian pharma industry would grow at 11 per cent to touch Rs 60,000 crore in 2007-08 from Rs39,000 crore in 2003-04, when drugs worth US$65bn would go off patent. Pharmaceutical exports from India would grow at 18 per cent to touch volume of Rs 30,000 crore in 2007-08 from Rs15,500 crore during 2003-04, according to a study released aby Assocham.
As India now adheres to the TRIPS agreement and enacted the Patent Protection Act in 2005 to protect intellectual property, the domestic pharmaceutical companies will increasingly be looking to consolidate across the value chain by forming partnerships or merging with companies (Indian majors & MNCs) that have complementary strengths. India is emerging as a powerhouse of pharmaceutical R&D. Contract research; contract manufacturing and clinical trials are the areas in which the country can emerge as a major player in the global market.
The country now has R&D capacity second only to the US, at one-fifth of the cost. English speaking staff, who can work for a fifth of the salary of their counterparts in the US, their high caliber, easy scale up, data quality at parity with international standards, etc., Since the development cost in the country is much lower than the development cost in the advanced countries and the country has sound base, venturing development of new molecules is within our reach.
The Indian pharmaceutical and life sciences industries are now flushed with quality IT services & IT-driven things like enterprise resource planning (ERP), sales force automation, supply chain optimization, web-enabled customer and vendor management and customer relationship management tools for the same. All these made the US & the other Pharma industries in the west to look India as the hub for Pharma research.
India, which was not widely favored as a destination for pre-clinical studies earlier, will now grant patent safety to MNCs; allowing them to invest in Indian contract research organizations (CROs). Further, an increase in healthcare costs may prompt the entry of 'healthcare maintenance organizations (HMOs)' and customized healthcare management firms into India in the near future. It has been emphasized that "the new regime is expected to have an impact not only on the pharmaceutical market but also on the entire healthcare value chain."
The reverse flow of global pharmaceuticals into India has started. What they were waiting for was the enactment of legislation as stipulated by the WTO, replacing the existing process patent regime. In the recent days, a number of foreign drug companies and CROs had finalized their plans to enter India, though they had obtained clearances from the Foreign Investments Promotion Board much earlier. Japan's EiFai Pharma, Canada-based Apotex Corporation, Germany's Haxal AG & Ritopharma, Hungary's Gedeon Richter Ltd, the French company Galderma, the Dutch company Ferring Pharmaceuticals, US-based pharma firm, Sigma Aldrich, Ireland's ICON, US-based Covance, Europe's Clintec are few of them.
India emerges as a hub for global pharma outsourcing. The global custom manufacturing industry has been under operational pressure after a bout of capacity expansions and merger and acquisition activity. Leading firms have witnessed plant closures and lay offs driven by over capacity and stagnancy in new product approvals. In this segment, Indian firms offer a better cost and service proposition to clients. Another area of opportunity is the outsourcing of clinical trials. Here India offers a number of advantages like a larger availability of patients and lower costs of patients and medical personnel, which make outsourcing of this activity very attractive.
The drug discovery outsourcing market is estimated to be around $3.2 billion. It is expected to grow by 15-20 per cent per year and to touch almost $6 billion by 2007. Outsourcing accounts for more than 20 per cent of drug development expenditure, with pharma companies outsourcing almost 20-40 per cent of their development budgets. The top 10 players in this space currently account for approximately 30 per cent of the market or an estimated $837 million.
The new set of challenges stem from the deeper implications of the imminent product patent regime. Although India still has a long way to go before it is a dominant pharma industry figure, the potential is certainly there, and India is actively grabbing its chance to be the next big thing. The country has adequate resources in terms of manufacturing base, scientific manpower and facilities to manufacture as well as to undertake R&D on bulk drugs. India has shown her strength in finding alternative route of manufacturing existing bulk drugs. Industry can take this as a great opportunity to boost India's export market. Time has now reached to meet the challenge under the new patent regime.
(The author is chairman, Quest Life Sciences Pvt. Ltd., Chennai and a leading pharmaceutical conlsultant based in the US)