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Drug
headache for India
By Indrajit
Basu
KOLKATA - A creeping feeling of
uncertainty, a bit of nervousness, a dash of
excitement. This is the Indian drugs and
pharmaceuticals industry as the country returns to
a new product patent protection regime after a gap
of three decades to comply with the Trade Related
Intellectual Property Rights (TRIPS) agreement of
the World Trade Organization that India signed in
1994.
Under this agreement, India is
committed to adopt a product patent for food and
medicines from 2005 that, from the drugs
industry's perspective, will not only allow
multinational drug makers to launch new products
and manufacture them exclusively in India, but
will also force local players to withdraw drug
clones from the market.
For the country's
$5-billion-plus drug industry - which consists of
24,000 large and small drug makers, about 500,000
chemists and 1-billion-plus population - January
marks the beginning of momentous times that could
change the face of the drug industry in this
country. While local drug makers face the
challenge of the multinationals (MNCs) and a
paradigm shift in mindset from selling cheap copy
drugs to high-value products, the apprehension
that prices of many critical drugs will shoot up
looms large for the man on the street.
For
over three decades, beginning from the 1970s,
India only had process patent laws that local drug
companies used to their advantage for any drug
discovered elsewhere in the world. An Indian drug
company for instance could develop any drug as
long as it found a new process to make it, and
over the years, as local scientists became masters
in process technologies, every major blockbuster
drug in the world ended up in at least 10 copycat
avatars in India. The local industry gave this
practice a fancy name - "reverse engineering" -
but to the global drug industry, it was plain and
simple copying.
Consequently, even as MNC
drug companies couldn't sell their original
research products for fear of getting copied in
absence of patent laws and also because their
cloned products were - and still are - sold at
prices five to 20 times cheaper than in the global
markets, local drug makers made a killing for
years. The share of MNC drug makers in Indian
markets dwindled from 85% in 1971 to 26% in 2004.
Indian drugs companies even managed to compete
with original drugs in places like Africa, where
there was no product patent regime.
The
party is over
From this year, for all
drugs patented after 1995, reverse engineering has
to stop. "Domestic industry will only survive if
their business model evolves from imitation to
innovation and they can show proprietary products
in their portfolios," says Malvinder Singh,
president of Ranbaxy Laboratories, India's largest
local drug maker.
But the biggest
challenge for local drug makers does not come as
much from the launch of cutting-edge MNC products
as from the fact that the industry is up against
the might of the MNCs' research prowess. "Local
drug makers will have to undergo adjustments like
increasing research and development outlays,
creation of own intellectual properties (IPR) and
simultaneously respect the IPRs of other
companies," says Shyam Bhartia of Jubilant
Organosys, a local drug maker. "Indian companies
will also have to be truly international in their
approach and functioning. There is need to bring
in operational improvements to acquire world-class
manufacturing facilities." Others say that
marketing will also be a different ball game from
now on as domestic companies will have to acquire
new skills to operate globally.
Most MNCs
and the WTO feel that the biggest positive
consequence of a new patent regime on a country
like India is the fact that its people will now
have easy access to cutting-edge drugs. However,
there are apprehensions about price and drug
availability in the new regime. "The new regime
rules out the availability of low-cost medicines,"
says Rajinder Sachar, a former High Court judge
and an industry expert, while D G Shah of Indian
Pharma Alliance fears, "Since patented drugs would
be sold exclusively by patent holders, it may
affect availability. Hundreds of smaller companies
made these drugs and ensured their availability
across the country." It was to deflate the high
prices of medicines and make them available across
the country that Indira Gandhi - Indian prime
minister who was assassinated in 1984 - did away
with the product patent regime in 1971.
MNCs, however, counter that such fears are
exaggerated. "From 2005, the number of new drugs
receiving patent protection will only be a handful
since only those invented after 1995 can get a
patent in India," says S Ramakrishna, director of
Pfizer, India. "As it takes over eight to 12 years
to test and develop a new drug, there will only be
a trickle of new drugs after January 2005 - and
these are drugs largely unknown to us today. It
is, therefore, entirely false and alarmist to
claim that thousands of existing drugs will get
patented and prices of medicines will shoot up.
Nothing of that sort will happen." Moreover,
according to Commerce Minister Kamal Nath, the
emergency clauses in the TRIPS agreement empower a
government to acquire a patent to meet
emergencies. "The Drug Price Control Order, which
determines the prices of key drugs, is still in
place. With such provisions, the fear of price
rise is misplaced," says Nath.
Whether
price hike fears are misplaced or not remains to
be seen, but the new regime definitely offers
quite a few opportunities for local drug
companies. The change in patent laws is expected
to create an atmosphere where global
pharmaceutical companies will feel more
comfortable in offering new products to Indian
markets, and this in turn, hope optimists, will
ensure that MNCs outsource these products from
India.
"India offers a competitive
advantage in outsourcing due to the abundance of
scientific and technical manpower, a large and
diverse patient pool for conducting clinical
trials and technical capability of producing
active pharmaceutical ingredients as well as
finished dosage forms," says Ranjit Shahani of
Novartis. "All these services will be highly cost
competitive and they offer several opportunities
to small as well as mid-sized pharmaceutical
companies." Already local companies such as
Matrix, Shasun Chemicals, Nicholas and Zydus
Cadila are doing brisk business in providing
services like clinical trials, R&D, custom
synthesis, bio-informatics, bio-statistics, shelf
life studies and the like to MNCs, including Eli
Lilly, Aventis, Allergen and Glaxo Smithkline.
"In biotechnology, too, there are
significant opportunities and India is acquiring
skills in developing and producing products based
on monoclonal antibodies and recombinant DNA,"
says a Yes Bank white paper. Additionally, "There
will be intense competition within the therapeutic
segments and the MNCs. The industry will see
consolidation, alliances and mergers and also
increased genericization," says Ranbaxy's
Malvinder Singh.
Nevertheless, the moot
question is, will drug MNCs make a beeline for
India? After all, the country accounts for less
than 2% of the global drug market and more
importantly, with a fourth of the country's
population living under a dollar a day, not many
would be in a position to pay MNC prices. There is
of course the option of launching at cheaper price
points, but that, as many MNCs have seen from
their past experiences, could be hugely
controversial.
Meanwhile, it appears that
local drugs makers are in no hurry to withdraw
their cloned products; at least just yet. They say
that under the new patent law, the procedure for
processing applications and granting patents is
unclear, and until India actually starts granting
drug patents, they will continue selling clones.
"Local generic companies are free to manufacture
their products until a MNC company is granted
patents in India," said Indian Drug Manufacturers
Association's S K Arya. "And that process will
take at least a year to start taking effect."
While the drug industry believes that there are
not more than 5,000 patent applications, the
Ministry of Commerce had announced there were
12,000 pending.
Indrajit Basu is
a Kolkata-based equity-analyst-turned-journalist
with more than 12 years of experience in
business/finance and technology journalism.
Besides writing for Asia Times Online, he writes
for US-based publications, as well as IT
companies.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
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