The Indian pharmaceutical industry is one of the world’s largest. In 2002, pharmaceutical sales were US$4.5 billion, growing at 8–9% per year, and expected to rise to US$5.5 billion in 2004. The biggest sales in the domestic pharmaceutical industry are in the antibiotics market (see figure 1 for the other leading therapeutic categories). Drugs for lifestyle diseases and chronic conditions are the fastest growing area of medications.

The Indian regulatory environment
The Indian pharmaceutical industry has focused on manufacturing since inception, and has been regulated by policies that placed priority on the provision of life-saving, essential drugs to a very poor population. These included abolishing the ‘product patent’ regime and providing incentives to domestic manufacturers to manufacture patented medications.

The administration is working towards a market-friendly stance that included amending its patent laws to bring them in compliance with the Trade Related Aspects of Intellectual Property Rights (TRIPs) provisions, by recognizing product patents in pharmaceuticals from January 2005.

Figure 1 Top therapeutic segments in the Indian market

Implications for the pharmaceutical industry
The main impact of the changing regime would be that the drugs introduced after 2005 will have product patent protection in India. Indian companies are adopting a combination of the following alternative business models to navigate competition and opportunity:

• collaborative research and development
• licensing of innovations

Collaborative research and development: In this regard, India is a country that has a huge potential for conducting effective and economical research and development activities and clinical trials, primarily because of the following reasons:

• availability of a skilled and competent workforce • availability of diverse ethnic and genetic population
• familiarity with Western medical facilities
• competency in the English language
• world-class medical infrastructure
• cost effectiveness.

Licensing of innovations: With the advent of the new patent provisions, the Indian pharmaceutical companies will not be able to produce, and market, generic versions of previously patented drugs. Therefore, it becomes essential for the Indian pharmaceutical industry to focus their business now on innovation, instead of generic drug manufacturing. Hence, over the last few years, the Indian pharmaceutical companies have been actively involved in the area of research and development either independently or as a contract research partner of a foreign company.

Collaborative R&D opportunities in India
Focusing on R&D and innovation is allowing Indian pharmaceutical companies to move further up the value chain, and thereby increase their value proposition and profitability.

Global pharmaceutical and biotechnology companies are beginning to see the potential of India’s R&D resources, and are exploring alternative engagement models to effectively collaborate with Indian entities and add value to their internal R&D efforts.

At a broad level, global companies can access Indian R&D under two wide-ranging models:

• Licensing or purchasing rights to innovative products or IP (product strategy).
• Contracting specific research services from India (services strategy).

Accordingly, Indian companies have adopted congruent business models, that focus on innovation and IP for licensing (product strategy), or being a pure services provider, leveraging India’s high-quality, low-cost workforce to bring value to global customers (services strategy).

Product strategy: As would be expected, Indian pharmaceutical companies took their first tentative steps into the world of research by following a risk-averse strategy. This meant that pharmaceutical companies selected areas of focus that met four criteria:

• relatively lower investment requirements
• relatively shorter time to commercialization or partnering
• relatively lower risk of failure
• leveraging current strengths in formulations and chemistry.

Domestic pharmaceutical companies are the front-runners in NCE and NDDS research. Their entry into drug discovery and development research was spurred by the perceived threat of a product patent regime on their domestic generic business. However, over time, it became clear that Indian companies could potentially have a competitive advantage, and one that could elevate them from manufacturing companies to higher-value integrated pharmaceutical companies.

One key research area was the development of NDDS for many leading pharmaceuticals. This involved using process chemistry and formulation sciences to make novel dosage forms of existing medications, which provided more patient utility than current forms, and could also be patent-protected, increasing the effective patent life of a product (one of many ‘evergreening’ techniques used by global pharmaceutical companies to extend patent protection).

Given the high-costs of bringing a new drug to the market, most Indian drug-discovery companies have actively pursued a partnering strategy for their molecules and novel formulations. Typically, companies partner products after preclinical or early clinical development.

Service strategy: By using their rapidly developing R&D skills with their advantages in cost effectiveness, India companies are well placed to provide services to the domestic and global pharmaceutical and biotechnology industry.

India’s well-established competencies in computer science and software, as well as a large pool of trained professionals in life sciences, form the bedrock for a flourishing bioinformatics industry in India. However, the lack of experience in building and selling software tools and products (most Indian companies have hitherto focused on the delivery of software services), has been a hindrance in the successful growth of product-based bioinformatics companies. Meanwhile, bioinformatics companies focused on services provision have flourished in India. The services offered range from manual curation of literature to analysis of protein structure images (obtained through X-ray crystallography).

Drug discovery services include both chemistry and biology services. Indian pharmaceutical companies have well established skills in process chemistry and synthetic organic chemistry. India also offers a large pool of trained chemistry and molecular biology professionals who are available to provide high-end discovery services to customers at a fraction of the cost of similarly trained professionals in the US or Western Europe. Some Indian companies have taken advantage of this to enter into the contract drug discovery space.

Pharmaceutical companies have been outsourcing all or parts of the clinical development process to specialized CROs for many years now. However, companies have only recently started exploring the possibility of conducting clinical trials outside their traditional markets. Companies have been increasingly forced to look overseas for conducting clinical trials. Indian clinical trial companies offer strict adherence to GCP guidelines, double-blinded data collection and management, and sophisticated data analytic services.

In conclusion
India is becoming an increasingly attractive destination for R&D activities in the pharmaceutical industry. A variety of factors, from changing IP and patent laws, via favorable cost/skill ratios, to the past success of outsourcing in the IT fields, have converged to create a compelling business opportunity for Indian companies in pharmaceutical R&D. Global pharmaceutical companies can leverage this opportunity by developing an ‘India Strategy’ to enhance and complement their existing R&D efforts.

A well-executed strategy for collaborative R&D with Indian companies can bring significant benefit to global pharmaceutical companies. Certain issues like data and IP security, performance metrics, and quality standards, should be addressed and evaluated upfront to ensure a successful relationship. Global pharmaceutical companies can learn from the experiences of their peers in other industries (e.g. financial, consumer, software, etc.) to develop a successful strategy for working with Indian research providers.

This article is based on the report ‘India: The emerging R&D collaborative opportunity’. To order a copy of the report, or to get more information visit the Pharmalicensing website Amit Sadana (President) and Siraj Dhanani (CEO) are the founders of PharmARC, a global sales and marketing consulting organization serving the pharmaceutical industry. PharmARC offers consulting services in four broad areas: business intelligence and analysis; revenue forecasting and product valuation; sales force effectiveness analysis; and quantitative/statistical marketing analytics. PharmARC is headquartered in Bangalore, India, with European headquarters in Geneva, Switzerland.

Details at http://pharmalicensing.com/company/dispcompany/9285

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