Stock
market fluctuations are too unreliable of an approach to assess an
entire industrial sector. Wild speculations apart, something tangible
needs to underpin any boom. While Indian Pharma doesn't have upcoming
blockbusters, several trends augur its healthy growth.
Indian Pharma: Essentially High Volume-Low Value Global Supplier Of Generics
The
world's 3rd largest pharmaceutical industry by volume (10% of global
production) but only 14th by value (1.5% of global value) suggests
Indian Pharma is a high-volume, low-value proposition (1).
A highly fragmented industry with ~10000 manufacturers, though only ~250 are large-scale, generics dominate Indian Pharma (2), contributing no less than 40% of the US generic drug import for example.
US FDA drug approvals reveal Indian Pharma doesn't have a strong presence in the US new
drug market. Of the 96 new drugs it approved in 2013, only 2 were from
Indian companies, Lupin's Suprax (active ingredient Cefuroxime) and
Alembic's extended release form of anti-depressant desvenlafaxine (3).
Thus, a boom can't be justified on hopes of extremely big paydays down
the road from expensive new blockbusters selling on drug markets like
the USA or the EU. That's simply not Indian Pharma's track record nor is
such a US-like process even likely in India, where the government
deliberately intervenes with powerful instruments like price controls and compulsory licenses.
Through the latter mechanism, if the Indian government deems an
originating firm’s listing price unaffordable, it can force them to
license their technology to a generic competitor, an extremely strong
countervailing force that, though seldom used, hangs like a Damocles
sword over the pricing decisions originator firms make when trying to
sell their products in India (2, 4),
a situation utterly unlike the rampant drug price gouging that's today
the norm in the US. This is why drugs in India are among the cheapest in
the world (2). Also why Indian Pharma depends on drug volume not price for its profits.
Indian Pharma: Nearing An Inevitable Fork In The Road, Will It Be Super Generics or Biosimilars Next
On
the plus side, Indian pharma has built up an enviable infrastructure,
with the largest number of US FDA compliant API (Active Pharmaceutical
Ingredient) manufacturing plants outside the US (>262), ~1400 WHO
GMP-approved plants and 252 European Directorate of Quality Medicines
(EDQM) approved plants (1).
This capacity has made Indian Pharma a global leader in generics,
supplying anti-HIV drugs widely across Africa, Asia, Latin America for
example.
Long specializing in generics, Indian
pharma faces a major fork in the road in terms of how to expand and
diversify in an extremely rapidly changing global pharma landscape. In
the ongoing Patent cliff,
i.e., patent expiration of blockbuster drugs coming off of patent since
2011 continuing through to 2019, bulk of the patent loss on traditional
pharmaceutical drugs has already occurred. Far fewer are expected after
2017. Thus the generics market can only remain a high volume-low value
proposition for Indian Pharma.
To gain value,
Indian Pharma has to climb the value chain. Developing new drugs all by
itself is an extremely costly proposition with very high regulatory
burden. New drug development never having been its expertise, options
that best leverage Indian Pharma's existing expertise and capability are
super generics and biosimilars.
Super Generics
represent an incremental innovation to Indian pharma's already
well-established generics capability. Though they entail greater
regulatory burden, Indian Pharma's making steady inroads into this space
(see below from 3, 5).
As generics are to patented drugs so Biosimilar are to biologics (6).
Indian Pharma is a relative newcomer in the biologics and biosimilars
arena. Making biosimilars, while much more arduous and expensive
compared to generics (see below from 7),
may yield greater long-term payoff in terms of expanding technological
capability which could serve as a launching pad for in-house new drug development down the road.
The ongoing Patent cliff on biologicals (3, see below from 7) is thus a net opportunity for Indian Pharma to enter the biosimilars sector.
Biocon
was one of the early entrants, getting approval for its biosimilar
CANMab, a remake of Roche's Trastuzumab (Herceptin), a breast cancer
drug (8).
Indian Pharma: Steadily Increasing Global Reach Through Mergers, Acquisitions & Joint Ventures
Joint
ventures offer a ready-made platform for global pharma to leverage
R&D capabilities of well-established Indian entities as Contract research organization (CRO), which helps to considerably reduce cost of new drug development.
In
the long-term, expansion of Indian CROs can also help Indian Pharma
gain the technological, managerial and regulatory know-how necessary for
new drug development, something they currently lack.
Indian
Pharma's also been steadily increasing its presence in other countries
through acquisitions. A 2016 study reported that 67 Indian companies
valued at >US $6 billion made 191 acquisitions across 33 countries
from 2000 to 2012 (see tables below from 9, 10).
Indian Pharma: Serious Teething Problems With Clinical Trials
Vast
genetic diversity, large 'treatment-naive' population, ~30% urban
dwellers with >67 million living in India's 6 largest cities alone
plus cost of conducting a clinical trial in India is < 50% of that in
the US, all these factors make India an attractive destination for
conducting clinical trials. However recent speed-bumps in the form of
serious lack of oversight in clinical trial recruitment and informed
consent processes (11, 12, 13)
have chilled Indian clinical trial activity. A lessons learned mind-set
on the part of global pharma and its local regulators and clinical
trial partners would help resume trial activity.
Indian
Pharma: Dwindling Opportunities For Contract Research For API (Active
Pharmaceutical Ingredient) Manufacturing For Europe & USA
Along with China, India leads in API manufacture (see below from 14).
In
their efforts to reduce manufacturing costs in Europe and USA, in
recent years their Big Pharma increasingly off-loaded API manufacturing
to cheaper sites located in places like India. This meant increased
scrutiny from foreign regulatory authorities like the US FDA. Indian
Pharma leads the pack in number of US FDA warning letters (15).
While these setbacks can be and indeed are being interpreted several
ways, a pragmatic interpretation would be to see them as a steep but
necessary learning curve for Indian Pharma to effectively compete in
supplying essential drugs to the US and the EU. Indian Pharma got here
by becoming an expert mass manufacturer of API. However, shoring up
manufacturing to meet their more stringent regulatory standards is
beneficial in the long-term as it improves Indian Pharma's QA/QC, data
integrity and compliance standards. High profile warning letters are
also beneficial in highlighting a glaring shortcoming in the Indian
Pharma regulatory landscape, namely long-standing, tremendous shortage
of well-trained and qualified drug inspectors (16, 17), something the Drug Controller General of India, G.N. Singh himself conceded in Jan 2014 is a situation that desperately needs improving (18).
'You cannot equate the Indian regulator with the US one. We are still evolving and it will take us at least 10 years to reach that level. We do not have resources and infrastructure equivalent to those of US FDA. We have a total staff of 650, compared with US FDA's 13,000. Look at the size of our manufacturing industry. The Indian industry is currently supplying generics to over 214 countries.Also, as a national regulator, the steps that we are taking are voluntary. Manufacturing compliance and quality assurance is a state subject.'
To add to Indian Pharma's woes,
- On 16th July, 2015, the European Commission directed all its member states to suspend national marketing authorization of 700 generic drugs tested and approved by GVK Biosciences (19).
- An early 2016 decision by the US government's made it mandatory for APIs to be manufactured locally for government procurement. According to Live Mint (20), currently ~88% (9 out of 10) of prescriptions dispensed in the US are for generics. India and China are the largest API suppliers to the US. Of the US $2 to 3 billion worth of API that India exports to the US, ~40% is for government purchase so this decision will definitely hit Indian Pharma exports and companies with holdings or subsidiaries in the US.
Thus, Indian Pharma outlook looks
bright if it leverages its proven generics expertise into expanding into
super generics and biosimilars. Becoming a preferred destination as a
clinical trials site and an essential cog in the drug supply chain to
the US and the EU, however, need more work in improving its compliance
and manufacturing to match their more rigorous standards.
Bibliography
3.
Suri, F. K., and A. Banerji. "Super Generics—First Step of Indian
Pharmaceutical Industry in the Innovative Space in US Market." Journal
of Health Management (2016): 0972063415625566.
4.
Duggan, Mark, Craig Garthwaite, and Aparajita Goyal. "The market
impacts of pharmaceutical product patents in developing countries:
Evidence from India." The American Economic Review 106.1 (2016): 99-135.
https://openknowledge.worldbank....
5.
Stegemann, Sven, et al. "Improved therapeutic entities derived from
known generics as an unexplored source of innovative drug products."
European Journal of Pharmaceutical Sciences 44.4 (2011): 447-454. https://www.researchgate.net/pro...
7. Daubenfeld, Thorsten, et al. "Practitioner’s Section." Journal of Business Chemistry 13.1 (2016): 33. http://www.businesschemistry.org...
8. The Hindu, Jan 18, 2014. Biocon launches cheaper breast cancer drug
9.
Trehan, A., Gaikwad, A. Indian Pharma Industry: Trends, Predictions and
Challenges. Asia-Pacific Biotech News, 2014: 18: 27-44. Asia Pacific Biotech News - PR NEWSWIRE
10.
Jayanthi, Bhargavi, S. N. V. Sivakumar, and Arunima Haldar.
"Cross-border Acquisitions and Host Country Determinants: Evidence from
Indian Pharmaceutical Companies." Global Business Review 17.3 (2016):
684-69.
14. CHEManager Europe, April 2012. Will API Manufacturing Move out of India and China? http://thomsonreuters.com/conten...
15. Business Standard, Aneesh Phadnis, May 5, 2016. Indian drug units violate most US pharma regulators' rules
16.
Kadam, Abhay B., et al. "Correcting India’s chronic shortage of drug
inspectors to ensure the production and distribution of safe,
high-quality medicines." (2016). http://www.allysonpollock.com/wp...
17. A report on fixing India's broken drug regulatory framework. Dinesh S. Thakur, Prashant Reddy T. June 4, 2016. http://spicyip.com/wp-content/up...
18. Business Standard, Sushmi Dey, Jan 30, 2014. If I follow US standards, I will have to shut almost all drug facilities: G N Singh
20. Live Mint, Reghu Balakrishnan, Shine Jacob, Feb 6, 2016. No major impact on API import ban in US
https://www.quora.com/Is-there-a-pharma-boom-going-on-in-India/answer/Tirumalai-Kamala
No comments:
Post a Comment