This is an excerpt of my thoughts on a case study given to us at office. Hope ita nice read for all the "pharma news" starved ppl
The Indian Pharmaceutical companies should focus their strengths on new drug discovery Research
Over the years India has gone from strength to strength in establishing itself as a pharmaceutical powerhouse. Statistics show that the top ten pharma companies as well as the top ten biotechnology companies have since achieved credible mass and are in a position to make substantial investments that is a necessity for setting up facilities for new drug development. As on 2004 the top 10-pharma companies had total revenues to the tune of $ 4 billion while the top biotech companies had revenues of $0.5 billion.
A closer look at the exports graph gives a clear indication as to what the need of the hour is? Over a period of 5 years pharmaceutical exports have grown at a cumulative rate of just 4%. To sustain any industry it is very important to have original, indigenous products. If companies do not take the effort to discover new drugs and molecules then they would always remain at the vagaries of the US and European pharma companies.
A revenue stream of attacking drugs, which will go off patent, should not be totally ruled out. This is because in the years that these drugs were under patent new technologies and molecules have been discovered which now allow companies to manufacture the same drug at faster and lower rates. There is also a huge readymade market for these kinds of cheap drugs in Asia, Eastern Europe, Africa and South America. These cost sensitive regions have been deprived of the benefits of many drugs due to their high costs.
However since the process of manufacturing low cost generic drugs demands companies to heavily depend on may factors like reapplication of patent by the original company, country specific patents, lawsuits, delays etc the risk associated with such a business model is huge and the whole process is time consuming. Hence though companies can have some portion of their business as manufacturing low cost generic drudges but the ultimate aim should be to discover new drugs and molecules.
India as a country has the following characteristics
Strengths
Skilled workforce with proviciency in IT and biotechnology
Cheap wages
A matured pharmaceutical market where the companies have the required expertise and experience.
A diverse flora, fauna and ethnicity offering a numerous genetic pool.
Weaknesses
· Too much dependence on generic drugs
· Lack of initiative by Indian companies to discover new drugs
· Dependence on decisions given by patent tribunals. Many a times due to intense competition a company has to invest on machinery and people before the actual patent
expires. If for some reason the product does not get held up the Pharma companies incur heavy losses.
Threats
· Competition from countries like China which too offer similar incentives to pharma MNC’s
IndiaÂ’s pharma revolution took a giant leap in the 90Â’s when Indian companies started exporting drugs to different countries. This was followed by the new patent regime and increase in the brand equity of Indian pharma companies. Manufacturing Bio generics was of special interest to Indian companies since this business required low capital and with several bumper drugs slated to go off patent companies did not want to miss any action. IndiaÂ’s skilled and cheap labor was also a deciding factor. Currently the bio generics market in India is close to Rs 1,357 crores and this is slated to increase to Rs 1,864.3 crores by the year 2007.
Many Indian companies have come out with generic versions of high demand drugs. Due to advancement in technology and processes the new drugs discovered are much cheaper than their earlier versions. The cost sensitive developing nations like Asia, Africa, South America and Eastern Europe, which have lenient clinical regulatory systems offer a huge untapped market for the Indian generics companies. A closer look at the Indian biotech sector also reveals 16 companies, which have revenues of more than Rs 50crores. Hence due to presence of scale, skill and a ready market I agree with the authorÂ’s opinion of India emerging as a generic hub.
