August 11, 2010

The Parliamentary standing committee on Health and Family Welfare led by Rajya Sabha MP Amar Singh has asked the Union Ministry of Health to take up the issue of major Indian pharma companies being taken over by the multinational pharma companies with the Ministry of Chemicals & Fertilizers without any delay to come up with policy options to ensure that major Indian pharma companies remain in Indian hands.

Expressing concern over the recent developments in which some of the major pharma companies have been taken over by the MNCs, the 31-member parliamentary panel said that these developments would result in MNCs gaining market supremacy and essential medicines are bound to become costlier.

The committee, in its 45th report on 'issues relating to availability of generic, generic-branded and branded medicines, their formulation and therapeutic efficacy and effectiveness', noted that "Another pertinent issue that attracted the attention of the Committee was a news-item dated May 31, 2010 published in the Hindustan Times which highlights the following issues: 61 drugs worth over $ 80 billion are going off patent of the US Patent and Trademark Office between 2011 and 2013 making it possible for domestic pharma companies in India to produce cheaper versions of off patent drugs".

"However, promoters of some of the Indian pharma companies like Piramal Healthcare, Ranbaxy, Shanta Biotech and Dabur Pharma have already sold their controlling shares to US, Japanese and German MNCs. Many other drug manufacturers are reportedly interested in similar disinvestment. These developments would result in MNCs gaining market supremacy and essential medicines are bound to become costlier. The Committee would appreciate if the Ministry of Health and Family Welfare takes up this issue with the Ministry of Chemicals and Fertilizers without any delay to come up with policy options to ensure that major Indian pharma companies remain in Indian hands".

The report which was presented to the Rajya Sabha on August 4, 2010.

August 2, 2010

The Commerce Ministry has assured grant of more subsidies to the small and medium pharmaceutical units through the cluster development route if 10 or more existing units could form clusters in any regions in the country.

The ministry will take steps to ensure funds to the already Schedule M-compliant units for further upgradations. Ministry will also channelise funds for schemes such as joint laboratory, common ETP, warehousing, gensets etc. The ministry has conveyed it to the leaders of the industry and asked them to mobilise the units on these lines to gain maximum support from the government through the existing schemes.

Under the 11th Plan, the government has given special consideration to the micro, small, medium enterprises by extending financial assistance to the existing clusters to make the units globally competitive. Besides higher financial assistance, the government is also placing consultants for giving guidance to the clusters having minimum 10 units. The pharma companies have also been asked to make use of this by forming clusters, sources said.

The "Small Industry Cluster Development Programme (SICDP)" has been re-named as Micro & Small Enterprises Cluster Development Programme (MSE-CDP). The Scheme of Integrated Infrastructural Development (lID) has been subsumed under MSE-CDP, with all its existing features and funding pattern upto Rs 2 crore i.e. 40 per cent of the project cost not exceeding Rs 5 crore per centre. The assistance is also be available for setting up of new clusters/industrial estates.

The Commerce Ministry has also recast the Industrial Infrastructure Upgradation Scheme (IIUS) recently with a total possible allocation upto Rs 70.54 crore, including the central grant of Rs 58.20 crore for a cluster. Under the project, 'in principle' approval is granted for the upgradation of waste water system, common effluent treatment plant and strengthening and widening of road. A pharmaceuticals & allied industries cluster, has thus been approved at Baddi-Barotiwala in district Solan, Himachal Pradesh.

A Central grant upto 75 per cent subject to maximum Rs 60 crore is provided under this scheme, whereas remaining 25 per cent is financed by other stakeholders of the respective cluster with a minimum industry contribution of 15 per cent of total project cost. So far Rs 929 crore has been released to 32 projects in the country. However, only one pharma cluster could make use of it so far.

July 19, 2010

Some of the world’s biggest blockbuster drugs are due to topple off the patent cliff — that is, lose their patent protection — over the next four years and Indian drug makers have already put their strategies in place to make big bucks from generic knock-offs.

It is estimated that drugs that notched up sales worth $80-90 billion in 2009 are expected to lose their patent protection cover by 2014, flinging the gates wide open to a burst of generic products where first mover advantage is critical to success.

Industry analysts believe that this will be one of the most lucrative phases for Indian pharmaceutical companies which account for just under 9 per cent of the $35-billion US market for generic drugs.

Pfizer’s Lipitor a cholesterol-busting drug is the biggest drug that is going off patent in 2011 and Ranbaxy has already secured approval from the US Federal Drug Administration (FDA) to be among the first to launch a generic version.

Analysts believe the Indian industry can seize the opportunities that are welling up in the US as they have built the right competencies.

Besides the benefits from patent expiries, President Barrack Obama’s impending healthcare reforms in the US will also help ratchet up sales of Indian generic drugs in the world’s biggest market for pharmaceutical products.

Dr Reddy’s Laboratories Ltd (DRL), which ranks among the top 10 generic companies in the US, is of the opinion that the patent cliff will be a major catalyst for the growth of generic pharmaceutical companies.

DRL has already got its gameplan in place. In 2009, it filed 12 Abbreviated New Drug Applications (ANDAs) of which six are Para IV filings. In its latest annual report, the company says that the patent cliff is set to erode $78 billion in global branded sales from drugs facing patent expiry over 2010-14. This is in addition to another $32 billion expected to come from continued erosion from already expired brands.

An ANDA is an application for a generic drug, while a Para IV filing is made when the applicant believes its product does not infringe on the innovator’s patents. Such applications could result in a marketing exclusivity period for the generic drug if it comes in the first-to-file category. Indian pharmaceutical companies roughly account for around 30 per cent of the ANDAs filed in the US.

Adds Praful Bohra, senior research analyst at Jaypee Capital Services: “The next four to five years will perhaps be the best time that the Indian pharmaceutical sector could face. Since drugs worth $80 billion will go off-patent, it will be exciting times for the domestic industry.”

Although there are concerns that the tough competition in the generics segment and the resulting price erosion could cap the gains for domestic pharmaceutical companies, Bino Pathiparampil and Ankit Jain of IIFL said in a recent report that drugs with about $96 billion in cumulative annual sales, accounting for almost 40 per cent of the total US pharma market in 2009, will go off-patent over the next five years.

Assuming an average price erosion of 60 per cent and an average of five-month market exclusivity for first-to-file players, the market size of such “one-off opportunities” itself works out to about $19 billion.

Pathiparampil and Jain further indicate that there will be a huge market also for those who are not among the first-to-file.

“Further, beyond the period of market exclusivity for selected players, the market will open up for the gamut of generics companies. Competition will intensify and prices will collapse. Even if we assume 90 per cent price erosion, the market for these new generics would be worth annual sales of some $10 billion,” they add.

They reckon that Indian players will corner a much larger share of the market for new generics compared with their current share of 9 per cent. “Thus, we expect Indian players to expand their overall market share significantly over the next 4 to 5 years,” said Pathiparampil and Jain.

As for the challenges that the industry could face, a senior official from a leading domestic pharma company cautioned that though there could be good revenue upsides from the large number of drugs going off-patent, much will depend on the competition from other generic players. The presence of a large number of generic players for the same drug could limit the revenue upsides, she added.

 After a brief lull caused by the slowdown, the US has once again emerged as El Dorado for Indian drug makers.