Back To The Lab

The absence of product patents in pharmaceuticals has served as a protectionist wall to Indian drug companies, many of whom have flourished since the past two decades by reverse-engineering western-made drugs. All that is about to change following the governments commitment to the World Trade Organisation (WTO) that it will allow product patents from 2005.

Even though the government has been unable to get a legislation through to meet its WTO commitment, the fact remains that this will have to be done sooner or later. In the meantime, Indian companies and multinationals have started preparing for a changed business environment in the future when intellectual property rights (IPR) will be one of the main considerations for drug marketing.

 

Multinational drug companies have suddenly accelerated patent applications in India. Since last year the number of drug process patent applications by Multinational drug companies has increased three times compared to only a modest increase of Indian companies patents.

According to data available with the Central Drug Research Institute (CDRI) which collates information about patents filed in the area of drugs and medicines, a total of 68 process patents were applied by 12 foreign companies upto January 1996. In comparison, Indian drug firms have only nine patents applications to their credit. The US $ two billion drug gaint, Eli Lilly tops the list with 15 applications. Janseen Pharmaceutical of Switzerland comes second with nine applications. Companies like Pfizer, Glaxo, Biogalm and Bohringer Mannenheim are among the others.

According to a CDRI scientist involved with collecting patent information, the sudden upsurge in drug process patenting could be in anticipation of the independent Drug Pricing Authority in the short run and the acceptance of product patents in the long run.

Smaller Indian firms, not equipped to take on independent drug discovery effort are scanning international drug patent files to produce and market off-patent drugs in India. According to Rajesh Jain, director (marketing) of Panacea Biotech, a Delhi-based firm, his company will prepare processes for the manufacture of drugs going off-patent by the year 2005 and release them in the Indian market. We do not need to copy patented drugs, only produce off-patent medicines, he says. Patented and off-patent drugs are in the ratio of 2:8 so there is a huge quantity of drugs whose copying will not constitute any offence, adds Jain.

On the other hand, larger Indian companies are taking the tie-up route to strengthen their research and development. Ranbaxy has tied up with Eli Lilly for bringing in new technology in drugs besides marketing expertise. Dabur India Limited has entered into a joint venture with Sepracor, USA, for setting up a joint-venture to manufacture a cancer treatment drug, Intaxel, under the brand name, Paclitaxel.

This is the first joint-venture of its kind where the Indian company is providing the basic ingredient while the foreign firm will provide technology to convert the base drug, Dab-10 into paclitaxel. According to a Dabur spokesman, the tie-up could lead to patentable drugs in future.

Cadilla Healthcare (CH), the Rs 300 crore Ahmedabad-based drug major, is firming up joint ventures in China, Australia and South Africa in the bulk drugs and formulations sector. The company is talking to several leading pharmaceutical companies in the three countries and has targetted products like antibiotics, steroids, anti-ulcerants, sugar substitutes, protein supplements and cosmetics. We are in an advanced stage of negotiations with potential partners and expect to firm up very soon, says CH vice-president J S Sastry. The tie-ups will be a means of producing and marketing patented and off-patent drugs in the three large markets, he adds.

Some multinationals like the $10 billion Pfizer, the US research-based drug major, are eyeing the strong Indian network of public sector laboratories and research capabilities of private companies to conduct some of their development work in India. This is the first time an international drug major is attempting to tap Indian expertise in basic chemical research.

The companys vice-president and head of its research wing, Dr George Milne, who was in India recently on a reconnaissance visit, says, Our company is planning for the future when intellectual properties in drugs would be protected i0n India. Pfizer has applied for a 100 per cent subsidiary only for research. This company may outsource parts of its work to Indian companies and laboratories.

The Ranbaxy-Croslands Laboratories merger is another example of the concern among large Indian companies to source research capabilities in anticipation of patents protection in India. Croslands had an excellent research record in basic chemical processes, which Ranbaxy will tap to strengthen its international presence in formulations.

According to Dr. A Venkateshwarlu, president, Dr. Reddys Research Foundation, a part of the Rs 200-crore Dr. Reddys group, The Indian pharma industry should make best use of the 10-year transition period before accepting patents in 2005. It should put in place a strong, basic research capability. Basic research, according to him, focuses on long-term perspectives and involves innovative pursuits for the discovery of new molecular entities as novel therapeutic agents. Virtually non-existent in the Indian pharma industry so far, basic research has been the major channel through which western pharma companies have achieved sustained growth and become multinationals, he adds.

While Indian companies have got into the research mindset, finding funds for it may not be easy in spite of the comparative cost figures being in their favour. According to Dr Venkateshwarlu, it costs $250 million to produce one drug in the west while the Indian rate is one-tenth. The cost covers the work that goes into screening 15,000 to 20,000 compounds, about 100 functions within and outside the laboratory, plus a timeframe of 10 to 15 years.

According to an estimate by market analyst, Lehman Brothers, in 1995, the average amount spent by the 15 largest Indian pharmaceutical companies on drug development was only Rs 50 million or less than two per cent of sales. This is drastically low compared to the western ethical (patented) drug manufacturers outlay for the same, which is 18 per cent of sales. Such low spendings does not even match the comparatively low drug development costs in India. Therefore, an infusion of foreign funds in drug research is recommended, but this will only come if there is a tight IPR regime.

A section of the Indian parliamentarians and the media have been clamouring that accepting IPRs in drugs would lead to a substantial hike in drug prices. But the industry does not seem to think so. Says Deb Bhadury, president of the Organisation of Pharmaceutical Producers of India, Our companies can find great opportunities to boost exports and the first step towards this is by establishing IPR. Some industry analysts predict a 10 to 20 per cent hike in the prices of high-value drugs. But these are at the top end of the market, and dont exceed 10 per cent. Over 90 per cent of drugs will be off-patent now and in the future, so there is no threat of their price rise.

Kira Glover, commercial counsellor, US embassy, New Delhi, lays out the advantages of India accepting IPR. Strong IPR regimes spur both foreign and indigenous investment in research and development. With increased resources focused on research, the local research establishment improves and rapidly becomes an in-country source of technology, thus increasing the global competitiveness of local industry, she says. The experience of the Italian and Japanese pharmaceutical industries, after their respective countries strengthened their IPR regimes support this, she points out, with both countries having a significant market share in the global pharmaceutical market.