[Ip-health] Ranbaxy's takeover by Daiichi -- some facts to better understand the trend

[amit sen]

Here is some data and allied facts, for a better understanding of the takeo=
ver of Ranbaxy by Daiichi.
=C2=A0
Exports constitute almost 40% of the total production of pharmaceuticals in=
 India.
India=E2=80=99s pharmaceutical exports were estimated at $3.5bn in 2004-200=
5, of which finished drugs contribute nearly 55% and the rest 45%=C2=A0were=
=C2=A0from raw materials. Export revenue now contributes almost half of the=
 total revenue for the top 3 pharma majors: Dr Reddy=E2=80=99s, Ranbaxy and=
 Cipla.
=C2=A0
Following is the data for exports by countries (finished drugs only for the=
 top 10 export destinations). For now, I have been able to get hold of data=
 till 2002-2003, but the figures are fairly representative of the present s=
ituation.
=C2=A0
Country=C2=A0=C2=A0=C2=A0=C2=A0 2000-1=C2=A0=C2=A0=C2=A0=C2=A0    2001-2=C2=
=A0=C2=A0=C2=A0=C2=A0 2002-3=C2=A0 % of total
                                             (2002-3)

USA =C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 56.3=C2=A0=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A0=C2=A0 135.8=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 250.6=C2=
=A0=C2=A0=C2=A0  18.9%
Russia =C2=A0=C2=A0=C2=A0  100.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=
=C2=A0=C2=A092.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 99.2=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A0 7.5%
Nigeria =C2=A0=C2=A0=C2=A0=C2=A0 73.9=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A073.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A071.3=
=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 5.4%
U K=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 23.2=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A029.5=C2=A0=C2=A0=C2=A0=C2=A0=C2=
=A0=C2=A0=C2=A0=C2=A051.9=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 3.9%
Germany =C2=A0    36.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=
=A036.9=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A045.0=C2=A0=C2=A0=C2=
=A0=C2=A0=C2=A0 3.4%
Brazil =C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 18.6=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=
=A0=C2=A0=C2=A0=C2=A036.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A041=
.4=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 3.1%
Srilanka=C2=A0=C2=A0=C2=A0  33.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=
=C2=A0 28.4=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A040.4=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A0 3.0%
China =C2=A0=C2=A0=C2=A0=C2=A0=C2=A0  18.1=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=
=A0=C2=A0=C2=A0 21.7=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A035.7=C2=
=A0=C2=A0=C2=A0=C2=A0=C2=A0 2.7%
Vietnam =C2=A0    33.6=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 33.8=
=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A035.4=C2=A0=C2=A0=C2=A0=C2=
=A0=C2=A0 2.7%
Nepal =C2=A0=C2=A0=C2=A0=C2=A0   28.4=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=
=C2=A0=C2=A0=C2=A030.4=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0=C2=A032.5=
=C2=A0=C2=A0=C2=A0=C2=A0=C2=A0 2.5%

Figures in US$ million
Source: Directorate General of Commercial Intelligence and Statistics (DGCI=
&S), Ministry of Commerce, Government of India

The Ranbaxy takeover has major implications for issues related to access. W=
hat the data I cite above also implies, is that contrary to the view that I=
ndian exports service needs of developing countries, actually a bulk of Ind=
ian exports now go to developed country markets. This needs to be taken not=
e of, because it will also inform corporate strategies of Indian companies =
in the future.

The takeover may well be representative of a trend that we would see in the=
 coming years. Many of us have been anticipating such a shift in the archit=
ecture of the Indian pharma sector for a while. There are diverse factors t=
hat are responsible. That the Indian generic industry became the fourth lar=
gest producer of medicines (by volume -- accounting for 8% of global drug p=
roduction) did not happen by accident. It was a function of support provide=
d by the Indian Government to the domestic industry since the 1970s. Such s=
upport have been reversed since the introduction of neoliberal reforms in t=
he early 1990s. The amendment of the Indian Patents Act in 2005 to make it =
TRIPS compliant, is the final act of reversal of support that the Indian in=
dustry enjoyed.

Over a period, thus, there ha been a shift in the strategy of large Indian =
Cos. from being manufacturing entities, to being traders. Most large Indian=
 Cos. noy get the drugs manufactured in small domestic companies or import =
(China being a major supplier). Thus the import content of Indian medicine =
manufacture has gradually gone up. this does not show up in Import Export f=
igures, because import of finished drugs is still low. But import of APIs, =
intermediates, raw materials have gradually increased.

What the Ranbaxy takeover also shows is that top Indian Cos. do not find ma=
nufacturing to be lucrative enough. Ranbaxy's announcement is illustrative =
of this: that they wish to diversify into financial services (read speculat=
ion in financial markets and real estate) and medical services (read medica=
l tourism).

It is unlikely that this trend will reverse without Govt. intervention -- s=
omething that seems virtually ruled out in the present climate of economic =
liberalisation in India.

Amit Sen Gupta
Peoples Health Movement (India)/
National Working Group on Patent Laws (India)
D-158, LGF, Saket, New Delhi - 110 017