Since 1970 up until 2005, Indian pharmaceutical industry used to be considered as the industry of ‘reverse engineering’ and that too with an underlying disparaging tone… and also as the industry of ‘copycat’ medicines’.
However, it will be absolutely unfair on my part to comment that only domestic Indian pharmaceutical companies launched ‘copycat’ versions of patented products in India and no multinational companies (MNCs) resorted to this practice, during this period.
Long before Indian Product Patent regime was put in place, in January 1, 2005, around 1998/99 Dr. Reddy’s Laboratories (DRL) entered into a bilateral agreement with Novo Nordisk and Ranbaxy with Bayer of Germany to out-license two New Chemical Entities (NCEs) and a New Drug Delivery System (NDDS), respectively for further development.
Opened the new vistas of opportunities:
These research initiatives opened the new vistas of opportunities for the Indian pharmaceutical industry in terms of R&D, in the pharmaceutical science. The above new developments also brought in a sense of determination within the research oriented domestic pharmaceutical players to enter into the big ticket game of the global pharmaceutical industry called ‘product discovery research’.
The jubilation of the industry having demonstrated its initial capability of taking a leap into forthcoming new paradigm of that time, received a set back momentarily when Novo Nordisk terminated the development of both the NCEs of DRL, after a couple of years, because of scientific reasons. However, DRL continued to move on to its chosen path, undeterred by the initial set back.
Need to focus on R&D and create world class ‘Intellectual Properties’:
In a letter addressed to the shareholders of DRL in one of its recent annual reports, the founder and the chairman of the company Dr. Anji Reddy expressed his following vision:
“Excelling in the basic business operations will be necessary, but not sufficient. To maintain a long-term presence in the global pharmaceuticals markets and to grow profitably will require companies to be even more focused on R&D and creation of successful IPR’s [intellectual property rights].”
After India signed the World Trade Organization (WTO) agreement, Indian pharmaceutical companies were quick to make out that the ball game of doing pharmaceutical business in the new IPR regime will be quite different. Having pharmaceutical product patents will indeed be important in future, for the domestic R&D based pharmaceutical companies.
The Past versus Present R&D models in India:
Domestic research based pharmaceutical companies did realize in the early days that a radical shift in their focus from ‘process research’ to ‘product discovery research’ may not be prudent or practical either.
Some of these companies initiated step-wise approach from mid 90’s to meet the challenge of change, come year 2005. During the transition period of 10 years as given by the WTO to India from 1995 to 2005, some domestic companies wanted to make full use of their past R&D model.
The past model:
Before the product patent regime, Indian pharmaceutical companies used to manufacture and market generic equivalents of the patented drugs at a fraction of the price of the originators, with non-infringing process technology in the Indian domestic market and also for export to the other non-regulated markets. During the WTO transition period of 10 years, they increased the pace of utilization of this model and launched as many ‘copycat’ versions of the new products as possible to boost up their sales and profit.
The present model for regulated markets:
Following two strategies are followed:
1. Indian companies doing generic business in the regulated markets like the USA submit
“Abbreviated New Drug Application” (ANDA) to the drug regulator for approvals of drugs,
which will go off patent within the next few years, so that the generic products could be launched
immediately after patent expiry.
2. Many other companies follow the second avenue, simultaneously, which is though risky but very
remunerative. In this case, the generic market entry takes place by challenging the patents of the
innovators.
It is believed that this model is being used by the Indian pharmaceutical companies, primarily to raise financial resources to get more engaged in their drug discovery initiatives or to generate wherewithal for collaborative or contract research initiatives.
For short term business growth and to raise fund for discovery research, their non-infringing process research initiatives have been proved to be quite useful. These R&D based Indian pharmaceutical companies; seem to understand very well that discovery of NCEs/NMEs or getting involved in this process will ultimately be ‘the name of the game’ to fuel longer term business growth of their respective organizations.
Contract Research (CR) in India:
Contract research is another business model within the overall R&D space, where a significant part of the investments come from the collaborators. CR business model currently explore the following two key options:
Intellectual Property Rights (IPR) for the discovery will go to the global collabolator and the
Indian CR organization will get an upfront or milestone payments.
Along with funding support to the CR organization, IPR is shared by both the companies
depending on the terms of agreement.
There could be many other terms/clauses in such CR agreements, which are not within the scope of this discussion.
Types of Contract Research (CR):
Frost & Sullivan in one of their studies on Indian R&D opportunities indicated following three models of contract research:
1. Joint research: Here two or more collaborators will work jointly
2. Collaborative research: In this type of research, scientists of different disciplines work together on a project e.g. Ranbaxy has recently entered into a collaborative research program with GlaxoSmithKline (GSK) or collaboration of Ranbaxy to develop an anti-malarial NCE Rbx 11160 with Medicines for Malaria Venture (MMV), Geneva.
3. Complete outsourcing: When an altogether different research organization is assigned a research project by another organization. Some Indian research based pharmaceutical companies have already got engaged in these types contract research activities. The market of contract research is expected to grow much faster in the near future.
India – an attractive contract research destination:
A global survey done by the Economist Intelligence Unit (EIU) couple of years ago on the preferred centres for overseas contract research, published as follows:
• 39% preference for China
• 28% preference for India
Attractiveness as preferred contract research center was based on the following criteria:
• A place where companies can tap into existing networks of scientific and technical expertise
• Has good links to academic research facilities
• Provides an environment where innovation is supported and easy to commercialize.
Many global pharmaceutical companies believe that China scores over India on the third point, as mentioned above.
Indian pharmaceutical companies have commenced targeting contract research opportunities:
Research based Indian pharmaceutical companies companies like, Piramal Healthcare, Ranbaxy, DRL, Zydus Cadilla, Glenmark etc are now actively targeting international companies for contract research in custom synthesis, medicinal chemistry and clinical studies.
A medium-sized pharma company Shasun Chemicals and Drugs has been reported to have defined its business as an “integrated research and manufacturing solutions provider”. Similarly Divi’s Laboratories, a pharmaceutical company of similar size has collaborated with global multinational companies for both custom synthesis and contract research projects.
Some international CROs, like Quintiles have its establishments in Ahmedabad, Bangalore and Mumbai with great expectations and a robust business model.
New contract research opportunities in Biopharmaceuticals:
Besides pure pharmaceutical companies, an emerging opportunity is seen within the biotech companies in India, which are mostly engaged in a contract model. Novartis has inked a three year deal with Synergene (Biocon) for various research projects primarily in the early stages of development in cardiovascular and oncology therapy areas.
Likewise, Reliance Life Sciences are involved in chemistry, biology and contract clinical research activities.
Another research process outsourcing company, Avesthagen is engaged in collaborative research in metabolics, proteomics, genomics and sequencing. The company shares the IPR with the collaborators.
Jubilant Biosys of India, which has already partnered in a drug development deal with Eli Lilly has recently entered into another research and development deal with AstraZeneca, estimated to be worth up to US$220 million. This research collaboration will be funded by AstraZeneca for five years and they will own the patent of any neuroscience molecule that will come out of this collaborative agreement.
Contract research – a lucrative business model:
A UBS Warburg study indicated that around 20% to 25% of R&D investments in the US go towards contract research. This percentage is expected to increase as the pressure to contain R&D expenses keeps mounting, especially in the US and EU.
Currently the cost of bringing an NCE/NME to market from its R&D stage is estimated to be around US$ 1.7 billion. Across the world efforts are being generated to bring down these mounting expenses towards R&D.
Many experts believe that cost of innovation in India will be almost half of what it will be in the US and EU. A report from Zinnov Management Consulting forecasts that towards outsourcing by the global pharmaceutical companies, India has the potential to earn about US$2.5 billion by 2012.
Conclusion:
Currently, within CR space India is globally considered as a more mature venue for chemistry related drug-discovery activities than China. However, in biotech space China is ahead of India. Probably, because of this reason, companies like, Divi’s Laboratories, Avesthagen, Ranbaxy, Synergene, Jubilant Biosys, Reliance Life Science, DRL, Zydus Cadilla, Glenmark and Piramal Healthcare could enter into long-term collaborative arrangements with Multinational Companies (MNC)to discover and develop New Chemical Entities (NCEs).
As I said earlier quoting Korn/Ferry that in the CR space China’s infrastructure is better than India, primarily due to firm commitment of the Chinese government to derive maximum benefits of the globalization process in the country.
Prudent policy reforms and other measures as expected from the new UPA Government will hopefully help bridging the gap between the Chinese and Indian pharmaceutical industry in the space of overall CR business including biotechnology, as Indian R&D based pharmaceutical companies will start realizing and encashing the potential of this important business model.
By Tapan Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.
