Indian Talent, Global Content
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Indian Talent, Global Content |
November 2008: What's in the breeze |
Growth of R&D in Indian Pharmaceutical Companies
India acknowledged Intellectual property rights by embracing the patent regimen and then enforced it from January 1st, 2005. Since then, a new wave of progress has swept the country. Post 2005, pharmaceutical and medical biotechnology companies experienced some very critical changes, and since then, the only real differentiator has been innovation. With the acknowledgement of the intellectual property rights there was an uprising in the almost 20,000 strong fragmented industry of the ‘90s change as it would mean the reinvention of the entire sector, where replication would have to give way to innovation. Earlier they had thrived with little or no need to have a robust new product pipe lines, as only process patents were recognized in India. Lack of product patents motivated Indian companies to be become masters of re-engineering. It was this fact that made India a preferred destination for outsourced manufacture. India dominates the Active Pharmaceutical Ingredient (API) market and it is said that one in two APIs is procured from India. The business model of API manufacturers is largely price driven and their competitiveness questionable due to a 30% annual increase in operational costs, increased wages, appreciating rupee and spiraling logistic cost. Outsourced research is also on the rise and here again the industry has to grapple with lack of trained labour, attrition and increasing operational expenditure. Although Indian companies will and should cash in on the outsource bonanza, innovation is clearly the only long-term solution. At the moment, Indian companies neither have manpower capability to go from molecule to market nor do they have deep pockets that would keep them afloat over at least 12 year period (the average time needed for commercializing a patented molecule). The mid-cap companies find unique ways and means to enter the US market without R&D or infringement. Introducing high-value patented products is out of the question. Despite these obstacles, a few large companies have made efforts to build intellectual property. In the 2007-08, Ranbaxy filed 208 patents while CIPLA filed 53. It is beneficial for Indian companies to enter the new drug discovery zone as the cost of developing a new molecule in India is 1/5 of the American cost. It is to capitalize on this price advantage, pharmaceutical companies in India have significantly increased their R&D spend. This used to typically be 7% of sales but has now significant rise to 10-15%. However, this is still only a fraction of what their American and European counterparts spend. This also makes the Indian pharmaceutical companies minnows in the field. Besides price, there are many other hurdles that the Indian pharmaceutical companies face in their path to discovery. For instance, DRR had to abandon development of drugs to treat diabetes and obesity after disappointing result in the early phase of clinical trials. Such inevitable bottlenecks often have a discouraging effect on market capitalization for the company. Nevertheless, Indian giants have come up with another and rather simple solution to this problem, by creating separate spin-off companies, solely dedicated to R&D which are divorced from their presently remunerative outsourced work. This was started by DRR and soon followed by Ranbaxy, Sun Pharma, Nicholas Piramal and Glenmark. The patents so far executed by Indian pharma/biotech companies are mostly derivative compounds where they seek to “ever green,” a molecule. Real discovery will take time and it is estimated that even the success met by companies like DRR will take another 6-7 years before they yield results. With one in every scientist abroad being Indian, there is no doubt that India has plenty of talent. For now harnessing this potential remains a distant reality for the companies trying to make a real mark on the pharmaceutical world. Chillibreeze's disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article.
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