"Desde mi punto de vista –y esto puede ser algo profético y paradójico a la vez– Estados Unidos está mucho peor que América Latina. Porque Estados Unidos tiene una solución, pero en mi opinión, es una mala solución, tanto para ellos como para el mundo en general. En cambio, en América Latina no hay soluciones, sólo problemas; pero por más doloroso que sea, es mejor tener problemas que tener una mala solución para el futuro de la historia."

Ignácio Ellacuría

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domingo, 22 de abril de 2012

Future of Indian pharma lies beyond generics

Future of Indian pharma lies beyond generics

Ajay Dsouza

The Indian pharmaceutical industry's emergence on the global landscape as a strong generics player was due, in no small measure, to the Indian Patents Act, 1970, which allowed only process patents in pharmaceutical products. This was aimed at keeping the cost of medicines at affordable levels by enabling domestic pharma players to build technical expertise in reverse engineering of existing medicines by modifying the manufacturing process and, thus, become efficient producers of generic drugs.

Although India shifted to the product patent regime in 2005, the capabilities developed during the past two decades became a competitive advantage for the Indian pharma industry in the 1990s, when the rising healthcare costs in many developed countries forced them to seek the cheaper generic drug option. Thus, the Indian pharma industry was able to exploit the enormous generic opportunity that was spawned.

The share of Indian pharma companies in the total pie of approvals for generic drugs (called abbreviated new drug applications (ANDA) approvals in the U.S.) has risen steadily. In 2011 itself, more than a third of the ANDA approvals were by Indian firms. As a consequence, formulation exports from India, essentially generic drugs, have grown at 21 per cent compounded annual growth rate (CAGR) between 2005-06 and 2010-11. With about $150 billion worth of drugs set to lose patent exclusivity between 2010 and 2015, Crisil Research expects the growth momentum in exports to continue over the next five years, with exports growing at 14-16 per cent CAGR.

In the near-term, the generic opportunity will continue to lure more companies. And, with competition intensifying, generic drugs will see greater price erosion.

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.

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.

For sustaining growth, Indian drug-makers will, therefore, be forced to look at newer avenues such as entering niche segments, building relationships with global pharma for joint research and development and widening distribution networks through marketing alliances. Other potential thrust areas include bio-pharmaceuticals, contract research and manufacturing, and new drug research.

The Indian bio-pharmaceutical industry is in its emerging stage and is sized at about $1.4 billion as of 2010-11. However, Indian bio-pharmaceutical players largely market vaccines and are yet to make inroads into U.S. and Europe. With the looming patent expiry of many bio-pharmaceutical products globally, Indian firms will look to build capabilities to capitalise on the opportunity that will arise.

The low cost of manufacturing renders India as an attractive destination for contract research, and the availability of a large patient pool makes it appealing for clinical trials, which contributes the most, in terms of revenue, to the contract research segment. An increased presence in contract research will also help them build expertise to move up the value chain and engage in new drug development.

Indian industry's R&D capabilities currently lie in reverse engineering drugs and in process chemistry. With limited experience and high costs associated with bringing a drug to the market, Indian players have traditionally shied away from drug discovery, or in a few cases, out-licensed molecules to multinational companies at early stage of development.

At present, only a handful of Indian companies (leading the pack are: Piramal Life Sciences, Glenmark and Sun Pharma) are engaged in new drug research; consequently, there are only 70-80 molecules in the pipeline from Indian players, of which more than two-thirds are still in early clinical phases. Amid slower growth in the generics space, large Indian players will look to enhance their focus in this area. The high-risk high-return field of new drug research holds tremendous potential for Indian players.

The author is Director, Crisil Research, a division of Crisil. Feedback to msamar@crisil.com

Keywords: Indian pharmaceutical industry


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