The Indian pharmaceutical market is due for a paradigm shift on January 1st 2005, when the country falls into line with the World Trade Organisation's TRIPs (Trade-Related aspects of Intellectual Property rights) agreement, which provides for minimal patent protection. The new regime will close down the one opportunity that allowed most Indian drug manufacturers to flourish - reverse engineering.

The lack of patent protection in India stems from 1970, when the recognition of foreign drug patents was abolished. This enabled local companies to build their businesses largely on the manufacture and sale of drugs discovered by other firms, often launching copies in India before the originator had introduced them in leading global markets. To avoid patent litigation, many developed new production methods to avoid infringing process patents, which are valid (the only codecil of the 1970 legislation being that the originator's exact manufacturing process was not copied).

The Indian industry has long been unpopular with bodies such as PhRMA, which represents US brand pharmaceutical manufacturers. It believes US companies lose $1.7 billion in annual revenues because of the lack of intellectual property protection in India. As well as the loss of sales in India itself, the PhRMA says Indian manufacturers aggressively export their products to other countries with poor patent protection.

Moreover, their technical expertise has put Indian producers in pole position to launch their generics in more lucrative developed markets once the brand’s patents and/or exclusivity periods have expired - perhaps ironically, the adoption of TRIPs in their domestic market has encouraged companies like Ranbaxy, Dr Reddy’s and Cipla to turn to the US, where a number of blockbusters have still to go off-patent.

Changes ahead
As of 2005, however, all this will change, and some believe many of India’s 20,000+ drugmakers will not survive the process. But, the majors could actually benefit, as drug prices in the country may rise, and with 10 years to prepare for TRIPs, a number have embarked on survival strategies, including:

• mergers and acquisitions, both within India and overseas
• seeking new markets for their products, particularly in the dev
• licensing agreements, both in- and out-
• R&D of new chemical entities
• establishing themselves as specialty pharmaceutical companies
• applying drug delivery technology to reformulate old products
• working as third-party manufacturers and suppliers

EMRs cause a furore
One of the precursors to TRIPs has been the granting of EMRs (exclusive marketing rights). Applications for EMRs can be made for new drugs not in the public domain that receive marketing approval in India before the end of the 10-year transitional period in 2005, and usually provide a five-year exclusivity period; they will expire if a product patent is later granted.

After much delay, the first EMR was finally granted in October 2003, to Novartis for its chronic myeloid leukaemia drug Glivec (imatinib mesylate). Novartis applied for the EMR in 1998, and received marketing approval for Glivec (Gleevec) in India in 2001. By the time the EMR was granted, a number of Indian manufacturers had launched generic imatinib.

The domestic firms did not take the matter lying down. Drugmaker Natco and the IDMA (Indian Drug Manufacturers’ Association) claimed that Glivec’s patents were filed before 1995, invalidating its eligibility for EMR. Furthermore, the IDMA believes that even if the EMR is valid, the government should grant compulsory licences for generic copies on the grounds of public interest; a year’s therapy with Glivec costs around $27,000, compared with $2,700 for Natco’s Veenat imatinib product.

Novartis obtained an injunction from the High Court in Madras, restraining six domestic drugmakers from manufacturing imatinib, but not Natco; it also claimed "token" damages in the region of Rs1 million ($22,000). Four have cooperated and withdrawn imatinib, but a case in Chennai is ongoing, as are appeals against the Glivec EMR, and at least three generic versions of imatinib were still being sold as of September 2004.

Controller General loses job
One of the more extreme ramifications of the first EMR was the replacement of SN Maitu as Controller General of Patents and Trademarks on September 1st 2004. An official from the Ministry of Industry and Commerce stated: "There have been reports of irregularities in the official’s functioning. Apart from the EMR issue, which is sub judice, many allegations have cropped up on his trademark-related decisions also."

A month after Glivec’s EMR, Wockhardt was granted the second, for antibacterial cream Nadoxin (nadifloxacin). Wockhardt said the EMR was given for its patent application filed in 2002 for a "novel pharmaceutical composition" containing the antibacterial ingredient, which was originally developed by Otsuka. Wockhardt’s peers, however, argued that since the EMR provision is a transitional arrangement, it should only apply to NCEs patented after 1995 that would qualify for product patent protection.

The third EMR, for Lilly Icos' impotence product Cialis (tadalafil), was granted in September 2004. Again, a number of Indian firms had already launched tadalafil in India, and tried to stop the EMR. Lilly plans to launch Cialis in India in October 2004, and has said it is prepared to sue local manufacturers if they do not cease the marketing of their generic competitors. Lilly plans to charge Rs400 a tablet for Cialis, compared with Rs20 for the local copies.

Loopholes identified
A number of EMR applications have been rejected, including for:

• GlaxoSmithKline’s Avandia (rosiglitazone)
• Bayer’s Avelox (moxifloxacin)
• Roche’s Invirase (saquinavir)
• the drug delivery system covering Ranbaxy’s Cifran OD (once-daily ciprofloxacin)

Some of the manufacturers are challenging these decisions, with the verdict for Cifran OD, for example, apparently being at odds with the EMR granted for Nadoxin. GSK, meanwhile, has decided to launch Avandia in India anyway, in the first quarter of 2005; it believes the oral antidiabetic will still have huge potential in the country. Glenmark, Sun, Torrent etc. all market rosiglitazone products.

EMRs are pending for, amongst others: Schering-Plough’s PEG-Intron (alpha-interferon); AstraZeneca’s Iressa (geftinib) and Exanta (ximelagatran); and Bayer’s gatefloxacin.

The debate over the first EMRs has had one beneficial side-effect: loopholes in the process have been identified. In particular, the Patent Office had no communication with the Drug Controller General of India, which only checked quality - so the two bodies could send out conflicting approvals. There is also no specific system to handle patent disputes so, for example, the Madras and Chennai court decisions on Glivec’s EMR could clash. Still to be decided is what will happen to generics already on the market if the branded version is given exclusivity.

The future looks... uncertain
According to IMS Market Prognosis, the initial impact of TRIPs will be modest, not least as the Indian government is expected to do the minimum necessary to comply, and multinationals may keep their drug prices at the lower end of the global scale. Nevertheless, an intense debate is expected in the country, as the multinationals seek to have their products protected, while others will press for the continuing manufacture of, for example, cheap antiretrovirals.

If the patent (amendment) bill is approved, covering data exclusivity, the Indian Pharmaceutical Alliance claims that 15% of the products on the Indian market could be covered - worth Rs30 billion - that local firms will have to withdraw their drugs, and that multinationals could raise prices. The IPA wants variations such as metabolites and isomers excluded, and to have the rights to oppose patents pre-granting.

The Indian market has huge potential, but many multinationals have been cautious over their investments in the country due to the lack of IP protection. According to IMS MIDAS, as of June 2004 GSK ranked first in the Indian market, with Aventis and Pfizer the only other international firms in the top 10. Indeed, in October 2004 AstraZeneca CEO Sir Tom McKillop commented: "India's not there yet, not in the same category [as China or Mexico] because it is only about to recognise IP next year. And it will take some years... before there really is a sound base for a multinational company to develop and launch its new products in India with great success. But it will come in time and I'm confident India will become an important market."

Certainly, opportunities appear to exist on both sides. The Indian government is encouraging the use of the country as a base for biotechnology and running clinical trials - at a much reduced cost compared with the West. India also has the largest number of FDA-approved manufacturing plants outside the US, and a highly-skilled workforce, especially in areas like chemistry. Bayer, Forest, GSK and Schwarz all have R&D alliances with Indian firms. Once product patents are in place, multinationals should be much more willing to invest in the country directly, while exports, already worth $2 billion a year, could be boosted by local R&D to make the Indian industry a truly global player.

This article was written by Selena Class, Deputy Executive Editor of IMS Company Profiles.

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Relevant reports on this topic:
Global and regional sales information:

• Dr Reddy’s
• GSK
• Lilly
• Novartis
• Ranbaxy

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