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DewDiligence · 2011-05-20T06:28:33.0270000Z

India Wants to Be the World’s Pharmacy [See #msg-50436738, #msg-50022514, and #msg-61960541 for related stories.] http://www.ft.com/intl/cms/s/0/bc6489bc-80ef-11e0-8351-00144feabdc0.html ›By Amy Kazmin in New Delhi May 20, 2011 India’s commerce ministry is aiming to carve out a role for the nation as the world’s pharmacy. Once known for making low-cost copycat drugs for its price-sensitive domestic market, India’s pharmaceutical industry has emerged as a global force, supplying low-cost, quality off-patent medication. It increasingly sends drugs to western markets such as the US as well as to developing economies. India’s pharmaceutical exports grew robustly during the financial crisis and were estimated at $10.3bn in 2010-11, up more than 10 per cent on the previous year and nearly double the level of five years earlier, the commerce ministry says. But in a fragmented global generics market currently estimated at $85bn a year, India’s government, and its pharmaceutical companies, believe there is plenty of room to grow, especially as numerous blockbuster drug patents expire in the next few years. India aims to increase drug exports to $25bn by 2013-14, aided by pressure on fiscally strained developed countries to cut healthcare costs. “Developing countries are facing fiscal problems, and wherever public health is a major charge on the national exchequer, solutions will have to be found,” India’s commerce ministry wrote in a recent strategy paper. “An integral piece ... will be increasing reliance on high-quality generics, instead of patented or brand-name drugs. This is an opportunity we cannot miss.” Once focused mainly on the domestic market, Indian companies have become adept at filing applications to sell their low-cost generics in western markets – almost immediately after they go off patent, or by challenging the patent. New Delhi-based Ranbaxy, bought by Japan’s Daiichi Sankyo in 2008, expects to get six months of US sales exclusivity – a privileged granted to the first generics company successfully to challenge a drug patent – for its version of Pfizer’s blockbuster cholesterol-lowering drug Lipitor. Ranbaxy’s performance in the past year has benefited from six month exclusivity periods for generic versions of GlaxoSmithKline’s anti-herpes medicine Valtrex, and a generic version of Eisai’s Aricept for Alzheimer’s disease. “There is well-oiled machinery that cranks out these applications to sell drugs,” says an India-based investor in the pharmaceutical industry. India has more than 100 pharmaceutical manufacturing facilities approved by the US Federal Drug Administration – more than any country outside the US. Many of these companies have warehouses in Malta, where they ready generic supplies for shipment to the EU when drugs go off-patent there. Indian drug companies are also looking to emerging markets, such as Russia, Latin America and the Middle East. Bino Pathiparampil, an equity analyst with Mumbai-based India Infoline Capital, says: “They are making big gains [in such territories], although from a very low base.” Multinationals such as Merck, Abbott Laboratories, Sanofi-Aventis, and GlaxoSmithKline – once bitterly resentful of Indian copycats – now see the country as an increasingly important part of their global supply chain. Recently, India has seen a series of takeovers of locally owned drug companies by pharmaceutical companies. Multinationals are also forging manufacturing, sales, marketing and research tie-ups with local companies. One such is Merck’s partnership with Gujarat-based Sun Pharma to develop, make and sell branded generic drugs to emerging markets [#msg-61960541]. “Big pharma players are more open to work with emerging market players,” says Vasant Kumar, president of Scriplogix, a New York-based consultancy. “They need to keep costs under control, and emerging markets are becoming more important in their portfolio.” However, India has yet to establish itself as a base for innovative pharmaceutical research. Local research firms such as Jubilant, TCG, the Tata Group’s Advinus, and Dr Reddy’s Aurigene, are promoting themselves as partners to do contract work for big companies seeking to reduce costs. But the business is held back by concerns about intellectual property rights and companies’ reluctance to outsource such a crucial function. “Leakage is rampant,” says the industry investor, who adds that companies looking to outsource “don’t want to take a chance”. Some Indian companies say they have a few promising molecules in development. But research spending by most Indian drug companies is a pittance, the highest levels being between 5 and 10 per cent of sales – insignificant compared with large multinationals.‹