Indian pharma industry to look beyond the generics market

The Indian pharmaceutical industry seems set to emerge from the confines of the generics market in which it has largely positioned itself and could soon become a major player on the global scene. A new report by KPMG International suggests that India now has the potential to become the region's hub for r&d, manufacturing and exporting.

Much of the impetus behind India's fresh challenge for a greater share of the global industry is driven by last year's introduction of product patents. For the previous 25 years, patents were granted only on processes - a decision which saw many multinational companies abandon the sub-continent but which resulted in India becoming a leading player in the market for generic medicines.

"The Indian pharma industry is currently worth US$6bn - in a global industry worth $650bn - but is growing at 10%, compared with the global industry rate of 7%," said Stephen Oxley, KPMG head of pharmaceuticals in the UK. "The generics business remains at the heart of everything India does well and so it should, considering that India accounts for 22% of the global generics market.

"Bearing in mind that $65bn of prescription medicines in Europe and the US are to lose their patents in 2007-08, India is ideally positioned to sweep up much of that new business. However, the opportunity now exists for India to become so much more than just a generics player.

"The expansion of India's patent system to cover products as well as processes has already started to bring the multinationals back into the fold. There was never much point in Indian manufacturers spending too much on R&D of their own when their new product discoveries could not be patent protected," Oxley pointed out. "Spending on r&d should now be ratcheted up - significantly and rapidly.

"With protection in place and with foreign investors eagerly eyeing up India's wealth of human resource and its massive domestic market, significant growth opportunities abound for Indian companies. However, as is so often the case with Indian industry, many other challenges must be addressed as a matter of some urgency if this is to be achieved."

Despite the recent improvements to the Indian market infrastructure, many people still talk about India but invest in China., the KPMG International report quotes one industry figure as saying. Much of this is attributed to shortcomings in the current Indian regulatory environment - unlike China, India still offers no data protection, for example - and domestic pricing issues. In fact, drug prices in the Indian domestic market are the lowest in the world. Further government legislation is expected on the latter point at the end of the year and the industry will be hoping that it continues the trend of reducing the number of price-controlled products.

The interaction between industry and government will be one of the keys in the coming years, the report suggests. The comparison with China is a fair one as the Chinese government's strong commitment to pro-industry policies has created a positive environment with a strong patent regime and data protection; admittedly with issues still remaining over how these are enforced.

The aims of the Indian industry - and of government - are ambitious but will require a strong pricing environment if the Indian people are to access the life-saving and innovative medicines they need. Industry leaders will have to work with government on issues of affordability to point out that price controls are limited in their ability to increase access to new and effective treatments.

"Everyone should by now know what India has to offer in terms of a massive, well educated, English speaking labour force. In pharma terms, it also boasts production costs that are 50% lower than in Western countries. Overall r&d costs and clinical trial expenses are one-eighth and one-tenth respectively of Western cost levels," Oxley continued.

"However attractive that is, though, it is still not enough. There is much to do in terms of addressing further regulatory and infrastructure challenges and the industry will have to work closely - and swiftly - with the government to address these issues.

"With the introduction of the product patent scheme, India now has a major opportunity to claim a seat at the top table of the global pharma industry and it should not let this opportunity pass it by."