[Ip-health] CS Monitor: India drug firms move from serving poor to competing for rich

[Alex Sugerman-Brozan]

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India poised for pharmaceutical boom

India is revamping its drug industry, hoping to duplicate success of IT
sector.

By Mark Sappenfield
<http://www.csmonitor.com/cgi-bin/encryptmail.pl?ID=CDE1F2EBA0D3E1F0F0E5
EEE6E9E5ECE4>  | Staff writer of The Christian Science Monitor

NEW DELHI

During a lifetime spent treating AIDS patients from Asia to the deepest
reaches of Africa, Chinkholal Thangsing has noticed something
extraordinary. Whenever patients learn that he is from India, their
response is almost universal.

"They say, 'Thank you very much. You saved our lives,' " he remarks.

Dr. Thangsing knows they are speaking not of him, but of his country.
For decades, India's drugmakers have been the pharmacy for the world's
destitute, finding ways to copy the best medicines at the lowest prices.
By some estimates, India's generic medicines treat half the AIDS
patients in the developing world.

Yet this picture has begun to change since India decided to comply with
global patent standards last year. Now as never before, Indian
pharmaceutical companies are looking to expand business in rich
countries, which, critics say, will come at the expense of the world's
poor. The intent is to follow the footsteps of India's
information-technology (IT) sector, which parlayed lower costs and
improved innovation into India's greatest modern success story.

The timing could be fortuitous. As the cost of healthcare rises
worldwide, Indian pharmaceuticals have positioned themselves to take
advantage. For instance, Indian drugmakers now have 75 plants approved
to make drugs for the American market - the most of any nation except
the United States itself. Also, like Indian IT a decade ago,
pharmaceuticals are on the cusp of an outsourcing trend that could
become a $3-billion-a-year industry by 2010.

"IT reached that threshold" as a global brand, says Ramesh Adige, a
spokesman for Indian drugmaker Ranbaxy. "The pharmaceutical industry is
right there."

Leaving behind the poor?

The concern, however, is that as the industry reaches for newfound
levels of prosperity, it will leave behind those poor who have long
depended on it.

The industry is trying its best to straddle the old and the new. Last
month, Ranbaxy and a second Indian pharmaceutical, Cipla, agreed to
provide half-price HIV drugs to the foundation of former President Bill
Clinton. The Clinton Foundation will distribute the medicines to 100,000
children in 62 countries.

The pact is further proof that India is still in many ways the premier
drug-provider for the developing world. "If you take the country as a
whole, there is probably none like it," says Sujay Shetty, an industry
analyst at PricewaterhouseCoopers. "No other country has that kind of
influence."

Yet maintaining that influence might be difficult. Until last year,
Indian pharmaceuticals were free to produce copies of patented drugs, so
long as they made the drugs in a different way.

Given India's low production costs and its scientists' skill at
"reverse-engineering," companies produced their own versions of patented
drugs at a fraction of the price. Famously in 2000, Indian drugmaker
Cipla unveiled new drugs for HIV patients that cut the annual price of
treatment from $11,000 to $400. Today, 1 in 3 AIDS patients in Africa
takes Cipla drugs.

India bows to patent pressure

The bounty of the third-world, however, was the bane of first-world
pharmaceutical companies. They were outraged by India's patent laws,
which protected only the engineering process, not the product itself. In
turn, they made India a pariah. At last bowing to this pressure, India
fully joined the global patent standards last year.

To some, this risks undermining India's responsibility to health in
developing countries. "These drugs will not be available at these
prices," says Amar Lulla, a managing director of Cipla, suggesting they
could be 30 to 50 times more expensive.

He acknowledges that his company loses some business opportunities under
the new patent regime, but he demurs that "it is no issue at all to
survive." To him, the question is: "How do you juxtapose the human right
to health with intellectual property?"

>From a purely economic standpoint, however, the change in the patent law
has been clearer, and - in many respects - more positive. For one,
foreign firms are no longer afraid to come here. In the past, they knew
that their patents would not be respected, so they stayed away. Now,
foreign pharmaceutical firms are entering the market to target India's
growing middle class, and they are considering outsourcing some
research, which could cut costs as much as 60 percent, by some
estimates.

At the same time, Indian companies are venturing abroad both to buy and
to sell. Earlier this year, Dr. Reddy's Laboratories bought German
drugmaker Betapharm for $570 million, gaining better access to the
European market. The hunger to compete abroad is also evident in the
number of applications filed by Indian companies to sell their medicines
abroad. Worldwide, 37 percent of the Drug Master Files submitted last
year came from India, the largest share of any country.

"The Indian pharmaceutical industry is fast becoming an integral part of
the global pharmaceutical market," writes Hitesh Gajaria, an industry
analyst at KPMG consultants, in an e-mail. "India's inherent strengths,
such as low development cost, skilled and efficient manpower, and easy
availability of raw materials, give it a competitive cost advantage."

At this point, India's great strength is still generic drugs. But
India's leading companies are now taking the unprecedented step of
investing hundreds of millions of dollars into research and design to
invent entirely new drugs. "We need to take that next step up," says Mr.
Adige of Ranbaxy.

For his part, AIDS physician Thangsing is not convinced.

Sitting behind his desk at his New Delhi clinic, outfitted in a faded
black sweatshirt, he does some quick math. Already, India has more
people diagnosed with AIDS than any other country in the world, and the
number is increasing. In five years, when forecasts suggest the needs
will be dire, India's new patent laws will be preventing its
pharmaceuticals from making generics from the most up-to-date
treatments.

He worries: "That's when the trouble will come."

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______________

Alex Sugerman-Brozan
Director for the Prescription Access Litigation (PAL) Project


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