Pharma pops patent pill

The process development skills and low-cost manufacturing that made Indian pharma a 6-billion industry will be put to the test once the Wor...

The process development skills and low-cost manufacturing that made Indian pharma a 6-billion industry will be put to the test once the World Trade Organisation8217;s product patent regime is implemented in January 2005.

With domestic sales ticking along at a sedate 7 per cent, Indian firms are betting on the 40-billion global market for generics, or drugs that have gone off-patent in lucrative US and European markets. But there are fears that Indian firms 8212; which have been furiously buying overseas firms 8212; would find it tough to sustain sales and profit from generics once the new product patent regime is in place. These fears extend to chances of cheaper exports to developing countries.

But analysts still expect growth. 8216;8216;Indian pharma companies export around 30 per cent of their net production, once imports are accounted for. The good news is that this segment is growing fast: At 20-25 per cent annually and is expected to pick up further,8217;8217; says a FICCI sector analyst. The good news is also that a vast untapped opportunity still lies waiting in generics that will continue to go off-patent until 2008.

But there is a clutch of pharma companies 8212; like Ranbaxy and Dr Reddy8217;s Laboratories 8212; that are also increasing research 038; development R038;D spends to compete with global giants. Though rewards are promising, R038;D is expensive, lengthy and risky investment.

Vice chairman and managing director of Novartis India, Ranji Shahani, also president of the Organisation of Pharmaceutical Producers of India, says investment in new drug discovery is crucial post-2005. 8216;8216;We will be doing injustice to new generations if we do not respect new patents,8217;8217; he explains. Typically, firms are following a four-pronged approach to grow in the new environment: The big companies like Ranbaxy, DRL and Lupin are waiting to capture a larger share of off-patent drugs as well as forging new drug development strategies. The second option is to focus solely on marketing tie-ups, the third, to forge strategic relations for exclusivity rights and CRAM or Contract Research and Manufacturing for larger companies, apart from hunting for fresh export markets.

In all this, R038;D is an essential requirement. 8216;8216;R038;D spending is critical, though success depends largely on opportunities available for producing new drugs,8217;8217; says Khalil Ahmed, executive director, Santha Biotech. 8216;8216;Patent protection will allow export of drugs to India or production through a subsidiary, so it is one growth option that Indian firms are looking at,8217;8217; he adds.

Indian pharma companies8217; R038;D investments are 6 to 7 per cent of their turnover, as compared to around 18 per cent spent by big-ticket pharma MNCs. This trend could take a U-turn soon, says industry. 8216;8216;Any Indian company that aspires to have genuine global footprint will necessarily have to focus on innvoation, creating intelleuctual property, global presence in key markets and build a strong and sustainable R038;D base,8217;8217; says K Anji Reddy, chairman of Dr Reddy8217;s Lab.

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With a scalable labor force, India can produce drugs at 40 pc to 50 pc of the cost worldwide and has the skills to do so. Future growth, however, depends on players positioning themselves as global hubs for drugs manufacturing and R038;D.