Health

The Indian Pharma Industry - Where to Next?

Alex pointed me to a recent working paper on the Indian pharma industry: The Sectoral System of Innovation of Indian Pharmaceutical Industry by the CDS. Since the Indian patent laws were revised to become TRIPS complaint in 2005, there has been much speculation on how the industry would progress. This paper has some important clues.

Before I proceed, two general observations to compare Indian pharma with big pharma. The first point is the emphasis placed on manufacturing and process innovation in India. This is important because it is not something traditionally associated with the global pharmaceutical industry:

It is already seen above that India has demonstrated strong innovation capabilities in developing manufacturing processes, thanks to the old patent regime.

Second, the paper points out that most of the new drugs are developed by Government Research Institutions (GRIs). This is surprising given that the bulk of R&D investments are in the domestic industry. It appears then that Indian pharma may be similar to big pharma, which relies heavily on basic research conducted through public institutions such as the National Institute of Health (NIH).

According to Chaudhuri (2005), of the total pharmaceutical R&D expended in the country, nearly two thirds is contributed by the industry and the remaining by the GRIs primarily under the management of the Council of Scientific and Industrial Research (CSIR). Of the small number of new drugs that were developed by Indian inventors a lion’s share were the products of research done at the Central Drug Research Institute (CDRI).

To understand the trajectory of the Indian pharma industry, it is important to understand the implications of the new patent regulations on:

1. The Indian pharma industry, its growth and global competitiveness.
2. Indian society - that is, how does it impact affordability of medicines, and R&D in neglected diseases.

Prior to 2005 Indian policy allowed cheap generic medicines, but encouraged a focus on manufacturing rather than R&D of NCEs (New Chemical Entities). With the new regulations, this seems to be changing.

The firm-level analysis (Table 7) further confirms that even with in a short period of time the R&D expenditure of the firms under consideration have actually trebled although the research intensity for all the firms together have increased only slightly. However many of the leading firms have increased their research intensities thus prompting us to believe that the firms are responding to the challenges posed by a TRIPS compliant innovation regime.

Indian companies have been active patenting entities in the US as far as pharmaceutical technologies are concerned (Table 8 ). Pharmaceutical patents now (2000-2004 period) account for over 20 per cent of all patents granted to Indian inventors. An important finding is that the number of pharmaceutical patents granted to Indian inventors has actually increased significantly during the latter period. This means that the impending TRIPS compliance of India’s patent regime has actually made the Indian inventors more innovative.

Clearly, when measured in terms of patents and overall R&D the new TRIPS regime has forced Indian pharma to increase R&D and aggressively engage with the US and global patents system. It has also increased competitiveness encouraging consolidation within the industry, as well as collaboration with big pharma.

This leads to the second question, of the impact on India’s healthcare. Prices are likely to rise and R&D investment will increase. And while this R&D will generate financial return, it is not likely to be directed to the diseases that afflict us:

Since they do not have all the skills or the financial wherewithal required to engage in the entire process of drug development, they have adopted a strategy to develop new molecules and license out the molecules to the MNCs at early stages of clinical development. Consequent to this the Indian companies are effectively not targeting neglected diseases, but only those, which interest the MNCs.

Back in 2004, the new patent regulations had split the domestic industry into two camps - larger companies such as Ranbaxy favored stronger patent controls while smaller generics manufacturing firms called for loose TRIPS regulations. Both had vested interests in line with their competitive advantages; the larger firms invested more in R&D on NCEs and wanted to collaborate with MNCs, and smaller firms were stronger in manufacturing generics. In the lobbying that ensued the former camp seems to have won.

It, however, seems to have created an ironic situation where India has a developed world R&D infrastructure, but cannot pay for its own public health R&D priorities. Instead, private R&D will go towards treating the diseases of the rich. It is, therefore, important to revisit the policy framework such that public health is also taken into account.

This seems to be happening. In particular, the development of orphaned drugs and the creation of the Pharmaceutical Research and Development Support Fund. The fund, however, needs to be expanded (from Rs. 1.5 billion annually) for it to have a realistic impact. And to make it sustainable existing pharma sales and export taxes should be directed to this fund. As Indian pharma grows, this will make an increasing amount of funds available to neglected disease research.

Despite the meager resources of Indian pharma, the industry has positioned itself well to benefit from R&D outsourcing, collaborative R&D, and clinical trials. However, this expansion has come at the cost of public health concerns, as domestic private investments are directed where they provide greatest financial, but not social, return.

At stake is nothing less than the social model of Indian pharma. There is a clear tradeoff between global competitiveness of the domestic industry and public health concerns. The present industry trajectory risks mimicking big pharma and following the Milton Friedman view that the ’social responsibility of business is to increase profits’. This may be acceptable in the developed world, where the social beneficiaries overlap the financial beneficiaries. In India, however, the same does not apply. It, therefore, requires a measured public policy response that addresses the growth prospects of Indian pharma, but also gives due importance to the ethical necessity of treating the sick.

© 2006 The Discomfort Zone.