INDIAN PHARMA : RAISING BAROMETER OF SUCCESS BEYOND GENERICS
4. Challanges for generic drug makers
Pharmaceutical companies have managed their business in much the same way for decades. Indian pharma companies so far concentrated on marketing generic versions of drugs and no money was spent on basic Research and Development (R&D). Thus, Indian pharma companies have no experience of developing a new molecule. Further Indian pharma companies are not considered financially strong as it takes almost US $ 1 billion to develop and market a drug to US $ 6 billion according to various estimates. Considering this fact, it may be difficult for an Indian company to come up with a new molecule. The possible challenges such as:
(a) Generic v/s authorized generic-
Indian companies are facing Generic competition from “Authorized Generics” in the developed markets. Authorized Generics are the generic version of patented molecule marketed by the patent holder itself once the patent on the molecules expire.
(b) Price control -
Price controls are broadly cited as the most critical challenge that companies face in the Indian market. India is one of the most price-controlled markets in the world, as under the DPCO, prices and margins are monitored carefully. The DPCO is being supervised by the NPPA. However, 90% of drugs are currently outside of any price controls in India, but the industry believes that there is enough competition for the prices to be modulated by the market itself.Thus lack of enough return on investment (ROI) due to DPCO is ascribed as one of the reasons Indian companies were unable to invest heavily in R&D.
(c) Rising Competition-
About $150 billion worth of drugs will set to off- patent in US, Japan and Europe exclusivity between 2010 and 2015. In the near-term, the generic opportunity will continue to lure more companies. And, with competition intensifying, generic drugs will see greater price erosion.
(d) Increasing development costs–
Along with higher competition, the global generic market is set to face another hurdle in the longer term. Already, R&D productivity of large global pharmaceutical players (innovators) has slowed considerably over the past few years. R&D productivity, a function of cost of new drug development and returns from those new drugs, is of critical importance as global players invest heavily in R&D (about 20 per cent of revenues). First, the average cost of developing a new drug has more than doubled in the past five years to $1.5 billion. Second, R&D activities by global players have resulted in only a handful of new molecules.
Figure 4: list of 2010 FDA New Drug Approvals
(e) Reducing drug approvals
Further, returns from these few novel drugs have not reached the scale seen in the previous decade. Unlike highly successful launches in the past, such as Lipitor, most patented drugs launched over the five years have not been able to garner sales in excess of $1 billion. The slowing down of new drug launches will mean that the generic opportunity set to open up in the next decade (post 2020) is likely to be significantly lower.
5. Coping Strategies - the next level of growth:
Pharmaceutical companies have managed their business in much the same way for decades. But significant changes in government regulations, market conditions, and technology will force the industry to look for new business models and practices. Companies that don't adapt face an uncertain and unsettling future.
The suggested model is a three-tiered approach with
(a) First tier for research-based Indian pharmaceutical industry
(b) Second tier with the generic industry targetingmaximum usageof TRIPS flexibilities as made available through the new patent
(c) Third tier is for approaching new emerging markets
(a) The first tier:the Indian research-basedcompanies
1. Shifting the R & D research model
It is disappointing that the pharma industry spent as much as Rs15000 crore on R&D during the past five years without producing a single new molecule. In sharp contrast, the US drug industry spends $55 billion on more than 450 drugs every year to come out with 26 new molecules. Nothing hopeful has come from Ranbaxy, Dr Reddy’s, Biocon and Sun Pharma—all companies with over 15 years of R&D experience. A major part of R&D expenditure has gone to reverse engineering, generics, contract research, clinical research and little to new molecule research. In the US, 80% of R&D expenditure goes to molecule research. That is why the US has high productivity in the entire chain of the molecule development cycle.
2. Develop India’s strength in vaccine production. Shift towards prevention
India is the one of the largest producers of measles, DPT (diphtheria, pertusis and tetanus) and BCG (bacille calmetteguérin) vaccines in the world. It produces about 40-70% of the WHO demand for DPT and BCG, and almost 90% of the demand for measles. Indian vaccines are produced and exported to 150 countries worldwide. Vaccine producer in India -
· The Serum Institute of India, todevelop vaccines against the lateststrain of H1N1.
· Panacea Biotec for supplying polio vaccines throughout the world.
· Global Alliance for Vaccines and Immunization (GAVI) to develop, manufacture and sell meningitis vaccines.
· Shantha Biotechnics was taken over by Sanofi Pasteur (the vaccine division of Sanofi-Aventis) and was awarded a contract by the United Nation (UN) to supply pentavalent vaccines worth US$340 million over the period 2010-12.
Figure 5: Factors driving the vaccine market forward
Globally, the vaccines sector is growing rapidly; there are now 245 pure vaccines and 11 combination vaccines in clinical development, and some industry experts estimate that the market could be worth as much as US$42 billion. It will also boost demand for vaccines. This could ultimately generate new business opportunities for Indian Pharmacompanies.Shantha Biotechnics was taken over by Sanofi Pasteur (the vaccine division of Sanofi-Aventis) and was awarded a contract by the United Nation (UN) to supply pentavalent vaccines worth US$340 million over the period 2010-12.
Figure 6 : Vaccine new industry trends
3. Develop India’s skills in bio-technology based drug production.
India's share of global biotech is just two to three per cent. The global biotech market is estimated at $300 billion and the size of the Indian biotech industry as of 2010 was about $3 billion. However, due to several advantages, it is expected to increase to 25 per cent by 2025. Biotech segment broadly comprises of bio-generics, bio-pharma, and contract research (CRAMS), bio-agriculture, bio-industrial and bio-informatics. Bio-pharma sector contributes about 60 per cent of total revenues. With the initiatives taken by the government, Indian Biotechnology is poised for a tremendous growth.
• Trained manpower and knowledge base
• Good network of research laboratories
• Rich Biodiversity
• Well developed base industries (e.g.: pharmaceuticals, seeds)
• Access to intellectual resources of NRIs in this area.
• Extensive clinical trials and research - access to vast & diverse disease populations
• Bio-diversity - human gene pools offer an exciting opportunity for genomic studies.
Figure 7: In 2016 out of Top 10, 8 will be Biologic product
4. Licensing Agreements
It is difficult to imagine Indian companies coming out with totally new molecule in near future due to prohibitive cost of developing a new molecule. But companies can enter licensing agreements with Multinational pharma companies for development of molecule. Indian companies can garner royalties out of these licensing agreements. Indian companies can either opt for Out-licensing of molecules for royalty payments or they can In-license some promising molecules. Thus, In-licensing and Out-licensing of potential and promising molecules is a lucrative option. Some Indian companies have already entered into these licensing agreements. Licensing agreements can be arrived at early stage of product development or at a later stage of development of molecule depending on the potential of molecule.
(b) The second tier: It would be to strengthen India’s generic industries. The following options might be considered:
1. Go for strategic deals on joint ventures with multinational companies (MNC).
Pharmaceutical MNCs are desperately trying to reduce the cost of research and are looking for developing country partners. “Manufacturing in low-cost countries such as India is a must, while growing markets can extend the profitable sales life of products for years after they have faded in US or Europe”. Indian generic manufacturers can undertake contract research and expand its generic hub.
2. Capitalise blockbuster patented drugs that are scheduled to go off patent
Global Generic Market at $231b in 2017Because of patent expirations of blockbuster drugs, Indian firms is expected to actively participate in the production of generic version of these products. Indian companies are also ready with generic version of biotech drugs. Therefore, India will be able to maintain a large basket of affordable generics.
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