GLOBAL PHARMA LOOKS TO INDIA: PROSPECTS FOR GROWTH - PHARMACEUTICALS AND LIFE SCIENCES - PWC
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Pharmaceuticals and Life Sciences Global pharma looks to India: Prospects for growth
Table of contents Introduction 03 Background 04 A fast growing economy An expanding pharmaceutical market Government-provided healthcare improving, but private healthcare dominates Domestic market overview 09 Background Consolidation underway, despite challenges Contract manufacturing Vaccines Over the counter market holds significant potential Reaching the untapped rural market Growing Research & Development 15 Overview Clinical trials Biotech and biosimilars on track for growth Other growth areas 20 Bioinformatics Stem cell research Medical devices Global Pharma’s evolving business models and options in India 23 Background Export-oriented business (Contract Research and Manufacturing Services) Licensing Franchising Joint ventures Wholly-owned subsidiaries Practical concerns 27 Infrastructure Tax environment Counterfeiting Intellectual property Conclusion 30 Related reading: Pharma 2020 31 References 32 Acronyms 38
Introduction
The pharmaceutical industry’s main promise, either as places with untapped Indian companies have also started
markets are under serious pressure. demand for effective drugs or as entering into the realm of R&D; some of
North America, Europe and Japan jointly suitable areas for conducting research the leading local producers have now
account for 82% of audited and and development (R&D) and/or clinical started conducting original research.
unaudited drug sales; total sales trials. In this paper we shall examine the India has the world’s second biggest
reached US$773 billion in 2008, opportunities available in India. pool of English speakers and a strong
according to IMS Health. Annual growth system of higher education, so it should
in the European Union (EU) has slowed India’s population is growing rapidly, as be well-positioned to serve as a source
to 5.8%, and sales are increasing at an is its economy – creating a large middle for research talent. A new patent regime
even more sluggish rate in Japan (2.1%) class with the resources to afford provides better protection of intellectual
and North America (1.4%).1 Impending Western medicines. Further, India’s property rights, although some issues
policy changes, promoting the use of epidemiological profile is changing, so remain. Clinical trials can also be
generics in these key markets are demand is likely to increase for drugs conducted here much more cost-
expected to further dent the top- and for cardio-vascular problems, disorders effectively than in many developed
bottom-line of global pharma majors. of the central nervous system and other nations, and some local companies are
The industry is bracing itself for some chronic diseases. Together these factors beginning to develop the required
fundamental changes in the mean that India represents a promising expertise. All of these factors add up to
marketplace and is looking at newer potential market for global a strong case for partnering with Indian
ways to drive growth. pharmaceutical manufacturers. companies around R&D, including
clinical testing.
Further, higher R&D costs, a relatively More than that, India has a growing
dry pipeline for new drugs, increasing pharmaceutical industry of its own. It is Further, healthcare has become one of
pressure from payers and providers for likely to become a competitor of global the key priorities of the Indian
reduced healthcare costs and a host of pharma in some key areas, and a Government and it has launched new
other factors are putting pressure on the potential partner in others. India has policies and programmes to boost
global pharmaceutical companies. considerable manufacturing expertise; local access and affordability to
Pharma companies are looking for new Indian companies are among the world quality healthcare.
ways to boost drug discovery potential, leaders in the production of generics
reduce time to market and squeeze and vaccines. As both of these areas Global players in the pharma industry
costs along the whole value chain. become more important, Indian cannot afford to ignore India. The
producers are likely to take a large role country, many predict, will be the most
How can industry leaders best face on the world stage – and potentially populous in the world by 2050. India will
these challenges? Analysis by partner with global pharma companies make its mark as a growing market,
PricewaterhouseCoopers (PwC) shows to market their wares outside of India. potential competitor or partner in
that several regions offer considerable manufacturing and R&D, and as a
location for clinical trials.
Global pharma looks to India: Prospects for growth 3
Background A fast growing economy Figure 1: India is forecast to grow by at least 5% a year for the next 41 years The Indian economy is worth about US$1,243 billion and rapidly getting bigger.2 Real GDP growth reached 9% in the year to March 2008.3 The rate of increase has since slowed down due to the global financial crisis; in the year to March 2009, growth eased to 6.7%.4 Even so, most forecasters believe that India will continue to show robust growth over the long-term; a survey of professional forecasters performed for the Reserve Bank of India (RBI) anticipates growth improving to 6% in the year ending March 2010,5 and expects robust growth of 7.8% p.a for Source: BRICs and Beyond, Goldman Sachs, November 2007. the next ten years.6 Previous forecasts such as those of Goldman Sachs suggest that India will be the only emerging economy to maintain such an Figure 2: India is shifting from agriculture to services outstanding pace over the longer term, i.e. to 2050 (see Figure 1).7 Two factors underlie this favourable outlook: India’s demographic profile and a robust services sector. India’s population is currently just over 1.1 billion and projected to rise to 1.6 billion by 2050 – a 45.5% increase that will see it outstrip China as the world’s most populous state.8 India has also utilised its strengths in IT to become a major offshore business services provider, in marked contrast with most of Asia, which has relied on manufacturing for its recent growth. As a result, services Source: Reserve Bank of India Annual Reports. now account for 64.5% of India’s GDP (see Figure 2).9 While a strong services sector heralds well for continued economic prosperity, it also suggests why India looks to be important for research and development as well as drug manufacture; the country’s experience delivering on outsourcing opportunities in other knowledge-critical areas such as IT should serve it well in its bid to offer such services in pharma, biotech and related areas. 4 PricewaterhouseCoopers
An expanding pharmaceuticals drugs by virtue of the Drugs Price
market Control Order (DPCO), supervised by
the National Pharmaceutical Pricing
India’s pharmaceuticals industry looks
set for a solid long-term growth. It
Authority (NPPA). The 347 price-
controlled drugs included in 1979 were
The bottom line:
already ranks fourteenth in the global reduced to 143 in 1987.16 At present, 74 Increased buying
league table, with sales of almost bulk drugs are covered under the
US$19 billion in March 2009.10 However, DPCO.17 The Government’s draft power and
PwC estimates that it will rise to pharmaceutical policy in 2006 sought to
approximately US$50 billion by 2020 – expand the scope of essential drugs epidemiological
a 163% in the space of eleven years.11
Indeed, in our report, Pharma 2020:
and evoked a sharp reaction from the
industry. They argued that it would
changes should
The vision, we anticipate that India will
be one of the industry’s top 10 markets
adversely affect R&D activities in India,
as companies would stay away from
spur dramatic
by 2020. investing in new drugs. To date, no growth in sales
further action on the proposed policy
This growth will be driven by the changes have been taken and it volumes, but India
expanding economy and increasing per currently looks unlikely that the DPCO
capita GDP. In 2008, India’s middle will be expanded. remains a price-
class constituted 13% of the
population, according to the National The Indian Government’s Department of
sensitive market.
Council of Applied Economic Pharmaceuticals has also initiated
Research.12 While this remains a fairly operations for a peoples’ medicines
small proportion of the total population, shop, called ‘Jan Aushadhi,’ in various
it represents a substantial increase from locations. These shops sell generic
a mere 3% in 1995.13 If the economy medicines at much cheaper rates
continues to grow faster than those of than the price of corresponding
the developed world and the literacy branded medicines.18
rate keeps rising, around a third of the
population (34%) is expected to join the Some multinational pharma companies
middle class in the near future.14 While are already taking measures to reach a
these consumers still earn substantially larger patient population by reducing
less than their US or European drug prices and increasing affordability.
counterparts, they are rapidly acquiring One example: Merck & Co. has
the buying power necessary to afford launched differential pricing through
modern healthcare, particularly if Januvia, its anti-diabetic drug, which is
purchasing power parity is considered. priced at approximately US$1 per dose
One source estimates that at least 60 in India – a fifth of its price in the US.19
million Indians – a market as big as the Indian companies like Biocon have also
UK – can already afford to buy Western followed a similar pricing strategy.
medicines.15 Aggressive pricing Biocon has launched its monoclonal
strategies will be necessary, however, to antibody BIOMAb EGFR at one-fourth
make in-roads into India’s price- of its price in the global markets.20
sensitive market.
It’s also likely that India will require
India’s federal Government currently different types of drugs in the future.
mandates price controls on essential Like almost every other emerging
drugs, however, these are under review. economy, India is experiencing
Price controls are carried out on certain epidemiological changes. Thanks to
Global pharma looks to India: Prospects for growth 5
greater affluence and better hygiene, companies. It currently represents about
India’s insulin dependence the population is ageing; by 2028, an 8% of the global drugs market by
estimated 199 million Indians will be 60 volume and only around 1% by value,23
The number of Indians with or older, up from about 91 million in but the Indian consumer’s rapidly
diabetes is projected to reach 2008.21 Besides that, it has the largest increasing purchasing power and the
73.5 million in 2025. The direct pool of diabetic patients, for example, country’s changing epidemiological
and indirect costs of treating with more than 41 million people profile could jointly improve its price/
such patients are currently about suffering from the disease (see sidebar volume mix.
US$420 per person per year. If on India’s insulin dependence).22 The
these costs remained the same
pattern of demand for medicines is In order to get drugs to consumers at
as they are now, India’s total
bill for diabetes would be about shifting accordingly. In 2001, anti- the right price, though, improvements to
US$30 billion by 2025. But as infective and gastrointestinal drugs and local supply chains will need to take
its economic wealth grows and vitamins accounted for 50% of the place. One source estimates that
standards of care improve, domestic market. By 2012, they are logistics comprise 45-55% of the costs
treatment costs are likely to rise. expected to account for just 36%. in the Indian pharmaceutical supply
The US spends an average Conversely, drugs for cardio-vascular chain from factory to shelf.24 India has
US$10,844 per year on each problems, disorders of the central historically had a pharma supply chain
patient with diabetes. If India’s nervous system and other chronic with a number of stops between the
per capita expenditure rose to diseases will account for 64% of initial production and final consumer.
just one-tenth of this level, the total sales, up from 50% in 2001 The arrival of Goods and Services Tax
total cost of treating all patients (see Figure 3). (GST) may prove to be a strong
with diabetes would be US$79.7 incentive for greater streamlining, as
billion by 2025. The value of
These factors help to explain why India such middle men could potentially add
prophylaxis in India alone would
thus be substantial; preventing is expected to be among the top substantially to the final cost of
10% of the population from markets for many pharmaceutical medications in a price-sensitive market.
developing diabetes would save
nearly US$8 billion a year. Figure 3: India’s therapeutic needs are changing
Source: PricewaterhouseCoopers, 100%
Pharma 2020: The vision
9% Pain/Analgesics,
20% 21% Gynaeclogical &
10% Dermatology
80%
12% 9% 9% Respiratory
11% 11% Gastrointestinal
14%
60%
9% 8% Vitamins/Minerals
24%
18% 17% Anti-infectives
40%
5% 6% Neuro/CNS
5%
8% 10% 10% Cardiovascular
20%
3% 5% Antidiabetic
4%
15% 13% 13% Others
0%
2001-02 2006-07 2011-12
Source: ORGIMS Data, Crisil Research, Pharmaceuticals: Review Indian formulation market (2008)
6 PricewaterhouseCoopers
Further, the consolidation of the pharma workers without access to hospitals or
industry and emergence of pharma retail pharmacies (see Table 1).26 Many of
chains are likely to lead to more the poor rely exclusively on alternative
concentration in the supply chain. The forms of treatment such as Ayurvedic The bottom line:
increasing requirements posed by some
formulations like biologics, which
medicine27, Unani28 and Acupuncture.
India’s healthcare
require advanced expertise such as the
ability to maintain the cold chain and
The Indian Government has made the
provision of healthcare as one of its
system is
avoid shocks during the distribution
process, will also play a role. Inventory Table 1: India healthcare facilities
struggling to
reduction and the reduction of order
Doctors 60 per 100,000 people29
meet the needs
cycle time will be key objectives for
companies looking to optimise their Nurses 80 per 100,000 people30 of its vast
Pharmacies 367,000 (urban),
supply chains in order to offer their
drugs at affordable prices.25 183,000 (rural)31 population, but
Hospitals 30,000 (67% public, government
Government-provided 23% private)32
healthcare improving, but Hospital 1.7 million
programmes and
private healthcare dominates beds (one per 1,000 people)33 reforms in the
Health 171,687 (including
The Indian Government is currently
in the throes of a much needed
centers 145,272 sub-centres health insurance
with basic facilities)34
programme to reform the health care industry should
system. After years of under-funding, Sources: World Health Organisation (2008)
most public health facilities provide only Modern Pharmaceuticals (December 2008);
Health System in India: Opportunities and
improve the
basic care. Moreover, three quarters of
medical facilities are located in urban
Challenges for Improvement (July 2005)
Expresspharmaonline.com (2007); and situation.
World Health Organisation (2007).
areas, leaving the majority of rural
Global pharma looks to India: Prospects for growth 7
key priorities. It launched a new policy 2010-11 also allocated US$ 2,920 who do have some insurance, the to build more hospitals, boost local million under the National Rural Health main provider is the Government-run access to healthcare and improve Mission (NRHM), an increase of 15% General Insurance Company (GIC), the quality of medical training, and over the previous year.40 along with its four subsidiaries, but promised to increase public expenditure private insurance is on the rise. The on healthcare to 2-3% of GDP, up from However, critics suggest that the health insurance market in India has a current low of 1%.35 The 2008-09 authorities are doing too little too undergone liberalisation in recent years. Union Budget highlighted a five year late, and those who can afford it have Further, the Insurance Regulatory tax holiday for setting up hospitals turned to the private sector instead. In and Development Authority (IRDA) anywhere in India, especially in tier-2 2008, fee-charging private companies eliminated tariffs on general insurance and tier-3 towns.36 The Government accounted for 80% of India’s US$48.6 as of January 1, 2007, and sales have further allocated US$51 million for a billion expenditure on healthcare, been going up accordingly. In 2007-08, new health insurance scheme to provide while central and local Government almost US$1.2 billion worth of medical a health cover of US$745 for every accounted for only around 20%. Private insurance policies were sold in India – worker (including his/her family) in the firms are now thought to provide about up from US$160 million in 2001-02.42 unorganised sector falling below 80% of all outpatient care and as much But widespread use of health insurance poverty line (BPL),37 which was as 55% of all in-patient care.41 could take many years, not least increased to US$76 million in 2009-10 because the insurance companies lack budget.38 The recent budget (2010-11) Some costs for care may be covered the data they require to assess health extended the coverage to another 20% by the insurance industry in the future, risks accurately and the only products of the Indian population covered by the although the current lack of general they sell work on an indemnity basis NREGA (National Rural employment coverage remains a challenge. In 2007, – that is, they reimburse the patient Guarantee Act) programme, who have only 11% of the population had any after he or she has paid the healthcare worked for more than 15 days during form of health insurance coverage. provider’s bill, making such policies the preceding financial year.39 Budget For the small percentage of Indians less attractive. 8 PricewaterhouseCoopers
Domestic market overview
Background 2005 (see Intellectual Property Rights
on page 29), so market strategies are
India’s domestic pharmaceutical changing and some generics
industry was worth around US$11 billion producers are looking further afield The bottom line:
in March 2009 and PwC estimates it
will rise to approximately US$30 billion
for new markets.
2008 saw M&A
by 2020.43 The domestic market is very
fragmented; more than 10,000 firms
India’s manufacturing clout has made it
a massive threat to established generics
in the pharma
collectively control about 70% of the firms – India now produces more
than 20% of the world’s generics.46
sector in India
market.44 Many of the local players
are generics producers specialising Moreover, around US$70 billion worth more than
in anti-infectives. In 1972, the federal of drugs are expected to go off patent
Government passed a law allowing local in the US over the next three years, double against
producers to manufacture drugs that
were still under patent, as long as they
and India is well-positioned to take
a substantial share of the resulting the previous
used different processes.45 The lack
of a patent system that conformed to
new generics markets.47 Indian
companies today account for 35% of
year, despite
international standards helped spawn the Abbreviated New Drug Application
(ANDA) approvals granted by the US
the challenges
a domestic industry that excelled in
reverse engineering novel drugs and Food and Drug Administration (FDA) posed by the
launching copycat versions at home and until February 2009.48 India’s generic
in other emerging markets. Wholesale houses are now entering into strategic global recession.
marketing of generic versions of drugs alliances with global pharma companies
patented since 1995 and still under to strengthen their generic portfolio
patent has not been permitted since and jointly market these drugs globally,
Global pharma looks to India: Prospects for growth 9
for example Pfizer has entered into largest active pharmaceutical ingredient was second among industry sectors in
alliances with Aurobindo and Claris to (API) manufacturers globally. terms of deal value at US$5.57 billion,
market their drugs in offshore markets. marginally below the Telecommunication
Similarly, GlaxoSmithKline (GSK) has Cipla is another company with sector which had total transactions worth
acquired exclusive rights for Dr. Reddy’s revenues of over US$1.1 billion, 56% US$5.78 billion in 2008. In the same year,
Laboratories’ (DRL) pipeline of over 100 of which come from outside India.51 India’s largest pharma company, Ranbaxy
generics for sale in emerging markets. It is one of the largest manufacturers Laboratories, was acquired by Japan’s
In addition to partnering with global of antiretroviral drugs in the World.52 Daiichi Sankyo. This was a landmark
pharma, some Indian companies are In 2007, an Avesta-Cipla joint deal in the Indian pharma history, where
also setting up their own marketing venture acquired Siegfried Biologics, Ranbaxy’s promoters relinquished
subsidiaries abroad. a Switzerland based company, to their entire stake to the acquirers. The
manufacture US FDA and European transaction paved the way for other
India’s pharmaceutical exports totalled Medicines Agency (EMEA) compliant promoters to consider whether they are
around US$8 billion in 2009 and PwC biopharmaceuticals for the global better served growing their businesses
estimates they will rise to approximately markets.53 Meanwhile, Lupin is the independently or by realigning with other
US$20 billion by 2020.49 Over the biggest producer of Lisinopril, an API partners who may be able to help them
past several years companies such used in the treatment of hypertension.54 to take their businesses to the next level
as DRL, Cipla and Lupin have grown Lupin’s acquisition of Multicare of growth.
internationally in their own right as well. Pharmaceuticals of Philippines has
Other Indian pharma companies like propelled it into position as a top In 2008, the world went through a credit
Glenmark Pharma, Orchid and Aurobindo generics player in the Phillipines.55 crunch, followed by a prolonged global
also have wholly owned subsidiaries in The deal represented Lupin’s sixth economic downturn in the last quarter of
different parts of the globe. acquisition since 2008. 2008 and throughout 2009, both of which
have also had a negative impact on the
DRL has grown from a small firm into Consolidation underway, despite Indian pharma industry. The impact of
an international business with annual the downturn, coupled with volatility in
challenges
sales of more than US$1.4 billion, the Rupee, depleted the financial
about 84% of them outside India.50 The position of several Indian pharma
company’s acquisition of Germany’s The Indian pharma industry as a whole is companies, especially those which had
Betapharm positioned it as one of the moving on a consolidation path. The year substantial foreign borrowings on their
largest generics companies in the world; 2008 saw 57 mergers and acquisitions,56 balance sheets.
it is currently one of the largest suppliers a 128% increase over the previous year.57
of drugs to the US. It is also one of the Total investment in pharmaceutical, Sustaining acquisition heavy structures
healthcare and biotechnology sectors became increasingly difficult in 2008.
10 PricewaterhouseCoopersSome Indian companies which made Further, in 2009 another landmark deal
significant acquisitions were now finding was announced, with sanofi-aventis
it difficult to integrate their foreign acquiring controlling stakes in the
acquisitions with the Indian operations leading Indian vaccine manufacturer The bottom line:
due to severe pricing pressures.
Legislative reforms imposed in
Shanta Biotech.
2008 saw M&A
acquisitions’ home markets also had an
impact. Further, some companies
Elsewhere we discuss some of the
strategies that Indian companies
in the pharma
booked losses on foreign currency
convertible bonds (FCCBs), negatively
employed to stay afloat during the crisis,
including greater focus on leveraging
sector in India
impacting overall profitability. their strengths in newer structures like more than
Contract Research & Manufacturing
Nonetheless, investor confidence has Services (CRAMS), biotech & clinical double against
remained fairly stable and deals continue
despite challenges. The average deal size
trials, and increasing penetration in
rural markets. the previous
in 2008 was around US$15.34 million,
20% higher than US$12.82 million in
year, despite
Contract manufacturing
2007. The pharma sector had 57 deals,
of which 17 deals were domestic. There
the challenges
Contract manufacturing is a strong
were a total of 22 pharma private equity segment of the domestic market. Indian posed by the
(PE) deals worth US$337.41 million.
Private equity players and investment
firms have several advantages over their
Western rivals. The expertise gained in
global recession.
funds played an active role in the deal manufacturing generics through reverse-
market. Some of the investments were engineering has helped some companies
those of Citi Venture and Everest Capital streamline the process for getting
of about US$23.6 million in Nectar manufacturing up and running. Costs are
Lifesciences.58 Similarly, Kotak Private very competitive; indeed, they are only
Equity Group, an arm of Kotak Mahindra two-fifths of those involved in setting
Bank, invested about US$10 million up and running a new manufacturing
in Intas Biopharmaceuticals.59 Gujarat facility in the West.61 They can operate
Biotech Venture Fund invested US$12.7 on significantly lower margins, given
million in Century Pharmaceuticals and their low development and labour costs.
SME Growth Fund invested US$7 million Currently their key area of strength in
in Centaur Group.60
Global pharma looks to India: Prospects for growth 11outsourcing is the manufacture of APIs. expected as patents expire over the next
Some Indian pharma companies could five years.65
probably benefit significantly by moving
The bottom line: towards specialty APIs in the future. Some Indian manufacturers are also now
Indian pharma The Indian contract manufacturing
incorporating Lean Manufacturing and
Six Sigma principles to help them boost
companies have segment was worth around US$605
million in 2008 and is expected to reach
operational efficiency and further improve
quality, while facilitating compliance.66
solid expertise around US$916 million in 2010.62 The
US FDA has already approved over Vaccines
in contract 100 manufacturing sites – more than
in any country except the US (see
manufacturing Figure 4).63 Among six offices that the
Vaccines are another prominent area
of growth. India is one of the largest
and recent US FDA has overseas, two are located
in India, in Delhi and Mumbai.64 All
vaccine producers in the world, with
many new vaccines set to be launched
scrutiny around domestic producers are also obliged to
comply with India’s Good Manufacturing
in the next five years. The vaccines
segment was around US$780 million in
quality issues is Practices, under Schedule M of the
March 2008, growing at a compounded
Drugs and Cosmetics Act, 1940.
driving significant annual growth rate (CAGR) of 15%.67
India currently exports vaccines to
Indian manufacturers are currently facing
improvement in some scrutiny around quality issues. In
about 150 countries. It also meets
around 40-70% of the World Health
manufacturing 2009, the US FDA took action against a
few Indian companies after conducting a
Organisation (WHO) demand for the
DPT (diphtheria, pertussis or whooping
standards. series of inspections and issuing warning
letters against these drug makers.
cough, and tetanus) and the BCG
(bacille calmette-guérin) vaccine against
tuberculosis, and almost 90% of its
While such sanctions clearly pose
demand for the measles vaccine.68
significant challenges, some analysts
The Serum Institute of India, founded
see an opportunity as well. Indian
in 1966, is a leading player which
companies are aggressively improving
produces and supplies low-cost, life-
their manufacturing standards in
saving vaccines for children and adults.
response, and are therefore likely to
The Institute is also the world’s largest
be better positioned to take advantage
producer of measles and DPT vaccines.
of the upsurge in generics production
Figure 4: India has more US FDA-approved manufacturing plants than any country
except the US
Source: Crisil Research, Bulk drug exports to scale up in the regulated markets (December 2008) for India;
ICICI Securities, Indian Pharma Sector: Sector Update (December 2008) for Italy, China, Spain, Taiwan, Israel
and Hungary.
12 PricewaterhouseCoopersIt has been commissioned by the WHO prescription drugs (or OTC drugs). OTC
to develop vaccines against the latest proprietary drugs are also regulated by
strain of H1N1. An estimated two out the Drugs and Cosmetics Act and the
of every three immunised children in Drugs and Cosmetics Rules. However, The bottom line:
the world have received a vaccine
manufactured by the Serum Institute.69
as they do not require a drug license
they can be sold by non-chemists, so OTC sales
As the risk of global pandemics
grows, so do potential markets for
sales channels are more extensive. As
discussed, much of India’s population
are on the
new vaccines. relies on self-medication, and the increase, offering
purchasing power of the middle class
OTC market holds significant is growing. These trends should drive opportunities
growth in cough and cold formulations,
potential
gastrointestinals, analgesics, and to achieve high
Globally, over-the-counter (OTC) drug
dermatologicals. Only a few OTC
active ingredients, e.g. acetylsalicylic volumes and
sales have been increasing in recent
years. This trend is driven in part by
acid and ephedrine and its salts, fall
under the current DPCO price control.
enhance pharma
aggressive efforts of global pharma
companies to leverage the brand equity
Counterfeits of popular OTC drugs are brands in India.
however a major issue.
that major products have attained
during the patent period. Other major Indian consumers are also placing more
winners in the OTC category include emphasis on prevention and wellness,
products where patients continue to buy which should contribute to continued
particular remedies following an initial increases in sales of OTC vitamins
doctor’s prescription. and minerals. The market is already
growing strongly. Profitable OTC drugs
OTC drugs may have even stronger for some of India’s largest pharma
potential in India. An increasing number companies include artificial sweeteners,
of Indians are already dipping into their emergency contraceptive pills and
own pockets to buy OTC drugs. The nutritional supplements.
OTC market was worth about US$1.8
billion in 2009 and is expected to grow The popularity of Ayurvedic therapies
at 18% a year to reach about US$3 should also contribute to the sales of
billion in 2012.70 The Government is related OTC formulations. Some of
now considering plans to expand the the leading OTC brands in India are
list of drugs which can be sold outside registered as ‘Ayurvedic Medicines’
pharmacies, since many common because of their plant-based natural
household remedies are more difficult active ingredients. There are no price
to obtain in India than in other controls on ‘Ayurvedic Medicines’.
developing countries. An expansion of
the list would substantially increase Some global pharma companies are
the potential market opportunity in already launching OTC products in India
this segment. or buying OTC products. Novartis India
launched Calcium Sandoz as an OTC
Although the term ‘OTC’ has no legal supplement in 2000 and has now come
recognition, all the drugs that are not out with Otrivin nasal drops in a spray
included in the list of ‘prescription form.71 Pfizer has launched Listerine,
only drugs’ are considered as non- Benadryl, Caladryl and Benylin in India,
Global pharma looks to India: Prospects for growth 13which were later sold to Johnson and more lucrative and will continue to
Johnson.72 In the future, India may represent a focus for the industry,
also serve as a manufacturing location the untapped potential of Indian rural
The bottom line: for OTC products destined for other markets is now seen as the next volume
While urban markets. In August 2009, US-based
OTC manufacturer Perrigo announced
driver. Rising income levels leading
to more affordability, improving health
markets will the purchase of 85% of Indian contract
manufacturer Vedants. The company
infrastructure, and increasing incidence
of lifestyle diseases along with the use
remain the focus plans to shift some of its current of health insurance are fuelling the
production from facilities in Israel and growth in rural areas.
in the near-term, Germany to India by 2011.
Indian companies are devising a
getting treatment India’s regulatory framework permits number of strategies to increase rural
out to the 70% advertising for OTC products, and
consumers can buy them without a
penetration. For instance, Lupin has
a strong brand franchise in the anti-
of the population doctor’s prescription. However, a wider
distribution network will also boost the
infective, pain management, and
gastrointestinal segments – these three
residing outside growth of such products. Currently areas account for 40% of domestic
about half of OTC sales come from formulations sales. The company
of these areas chemists, while grocery stores and has a dedicated rural field force of
general stores account for over a third more than 300 people and is rapidly
represents the of the sales.73 Pharma companies are expanding it. Piramal Healthcare has
next volume also targeting post offices to sell OTC
drugs in rural India. This move could
also announced a new initiative to target
the mass market, focused on general
driver. substantially increase the access of
OTC drugs, especially in areas where
practitioners, to cater to rural markets.
Piramal plans to employ a field-force of
there are no pharmacies. approximately 800 people.
Reaching the untapped rural Companies looking to access rural
markets face many hurdles, including
market
lack of communication, language
barriers, high penetration of spurious
Although urbanisation continues, drugs, lack of adequate infrastructure,
around 70% of India’s population still such as marketing and distribution
resides in rural areas. As already noted, channels for niche therapeutic
the population residing in villages has segments in particular, poor storage
significantly reduced access to quality facilities, and insufficient sales
treatment and medicines. Many pharma personnel deployment. Global pharma
companies are thinking beyond larger companies eyeing rural markets will
cities and targeting rural sectors. need to forge alliances and partnerships
While urban markets are currently to overcome these obstacles.
14 PricewaterhouseCoopersGrowing Research
& Development
Overview However India offers limited capabilities has formed an alliance with Eli Lilly. By
in preclinical and complex Biology selling developing and licensing rights
PwC estimates that India’s 10 largest research. Preclinical capabilities in for the US, Japan and Western Europe,
drug firms spent US$480 million on R&D India are limited to clinical trials in but retaining rights within emerging
in 2008. The bulk of this investment rodents and dogs, with almost none markets, some Indian pharmaceutical
went towards developing new for primates. The capabilities mostly companies are able to gain immediate
formulations, however R&D in the Indian reside with Indian pharmaceutical revenues, while retaining future access
pharmaceuticals industry is changing. companies, developed through in- to India’s growing domestic market.
The new patent regime means house R&D programmes – Government
companies need to be more innovative, involvement in this area is minimal. A number of Indian pharma companies
rather than relying solely on reverse- Some Government institutes do offer have spun off their R&D divisions
engineering existing formulations. The basic biology services, but the level of into separate units in order to scale
reliance on anti-infectives is also likely innovation generated by such facilities up resources and to attract focused
to lessen. As already noted, as the is fairly modest. Multinationals will investments. DRL started the trend
illnesses of affluence and age increase, need to partly/completely own or in R&D spin-offs in 2005. Piramal Life
the demand for many other types of share technology with available Indian Sciences, Piramal Healthcare’s R&D
pharmaceuticals will rise, and Indian Contract Research Organisations division, was recently demerged from
pharma companies need to begin (CROs) in order to achieve innovative the latter. Sun Pharma Advanced
transforming their portfolios accordingly. results. The Indian contract research Research and Ranbaxy Life Science
segment was estimated at around Research have also been demerged
India has widely acknowledged US$485 million in 2008 and is expected from their parent companies Sun
chemistry skills. Several leading to reach around US$1 billion in 2010.74 Pharma and Ranbaxy respectively.
domestic producers have begun to Some spin offs have faced difficulties
conduct original research into new Despite Indian pharma companies’ stemming from uncertain resources
chemical entities and novel drug growing expertise in later stages of and declining PE interest in research.
delivery systems. Amongst others, the R&D process, many of the drug Several companies are now seeking a
Ranbaxy has commenced phase-III candidates initially formulated in India collaborative approach towards drug
clinical trials for its new anti-malarial are likely to be further developed by discovery, in order to mitigate the
combination drug. Other companies are Western drug makers, because few risk associated with failure of a
looking to shift to clinical areas with a Indian companies can afford the high drug molecule.
growth opportunity, such as diabetes costs and failure rates associated
(see sidebar on India’s insulin with pushing a drug right through India’s R&D base is still small, but it has
dependence on page 6). Piramal Life the pipeline. Several Indian firms several advantages that should serve
Sciences has initiated phase-I trials of have already entered into research it well in the future. Some 70 million
a new experimental drug for diabetes- partnerships with multinationals; DRL people speak English75 – more than in
metabolic syndrome in Canada. DRL is and Torrent have joined forces with any other country except the US – and
conducting phase–III trials for its Type II Novartis, for example, while Ranbaxy it has an excellent tertiary education
diabetes drug. Other areas of innovation has formed alliances with GSK and system; every year, it turns out about
are also being explored; Biocon has 7 Schwarz Pharmaceuticals. Glenmark 115,000 scientists with Master’s
and Wockhardt has 10 new chemical has formed an alliance with Napo degrees, and 12,000 with PhDs.76 Many
entities in their R&D pipelines. Pharmaceuticals and Piramal Healthcare of these scientists have traditionally
Global pharma looks to India: Prospects for growth 15gone abroad, but companies like successes in the global software and few India pharma companies for testing
Ranbaxy are now actively trying to IT services market. In this respect, new drugs without getting patients’
lure them back with the prospect of India offers one of the very few consent or for violating protocol.
opportunities for original research. examples of an emerging economy However, during the past few years
Salaries are also very much lower than that has managed to attract Foreign a number of big contract research
they are in North America or Western Direct Investment (FDI) in the area organisations have set up businesses
Europe. Wage costs within the Indian of high-tech software development, in India, including Quintiles, Omnicare,
pharmaceutical industry are about one- while successfully inserting itself as PharmaNet and Pharm-Olam. Most
third of those in developed countries.77 a competitive presence in the very of the multinationals, Novo Nordisk,
heart of Silicon Valley. Biotech, another sanofi-aventis, Novartis and GSK
To achieve its potential and convert knowledge-based sector, is now among them, have likewise started
these opportunities into global experiencing a similar boom. Drawing running clinical trials here – and some,
success stories, the Indian pharma on the success of IT enterprise parks, such as Pfizer and Eli Lilly, have been
industry requires the support and the Government also inaugurated the conducting tests locally for a while.
collaboration of all stakeholders, first phase of its first biotech-IT park
including the Government, academia – Bangalore Helix in June 2007. The In January 2005, the federal
and financial investors. Collaboration project is part of efforts to position Government amended Schedule Y
will be essential; but to date only a few India as a global hub for bioinformatics of the Drugs and Cosmetics Act to
Indian pharmaceutical companies have and biotech. make the rules on clinical trials more
partnered with academic institutes consistent with international practice.79
to carry out basic research.78 Such Clinical Trials The Health Ministry is planning to add
cooperations can help accelerate a new Schedule Y-1 to the Drugs and
the research process in some areas. Cosmetic Rules 1945 to further improve
India’s developing research skills are
Partnering with academia can also the situation.80 Early stage testing of
matched by its growing involvement in
help develop the sophisticated skills molecules discovered outside India is
clinical testing. The country historically
needed for high-level research. still restricted, but multinationals can
lacked the expertise to perform clinical
Pharma players who can leverage the now conduct trials where, previously,
trials because most companies only
research capability of academic and they could only conduct trials in any
tested different processes for producing
Government institutes, through mutually particular phase after completing the
copycat versions of Western products
beneficial collaborative models, will gain same phase of testing elsewhere.81
and the rules were quite lenient. Several
significant competitive advantage.
drug makers have also been caught
At present, though, the industry still
behaving unethically or even illegally.
Amongst emerging economies, India lacks a strong regulatory framework.
The Supreme Court and Drug Controller
has the unique advantage of its recent Good Laboratory Practices (GLP)
General of India (DCGI) have criticised a
certification remains a voluntary
16 PricewaterhouseCoopersprocess, although most Indian pharma to boost the Indian clinical trials market.
companies dealing with international Expectations are already high; some
clients or exporting to foreign regulated observers expect the market could
markets look to attain such certification. reach US$2 billion annually by 2012, up The bottom line:
The National Good Laboratory Practice
Compliance Monitoring Authority was
from just US$300 million in 2008.86
The strong anticipated growth reflects Insufficient
established under the Department
of Science and Technology in April
some of the attractions India holds
for this market. According to a study
regulatory
2002. While this was undoubtedly a
step in the right direction, there are
by Rabo India Finance, a subsidiary
of the Netherlands based Rabo Bank,
oversight is
still only about 33 GLP inspectors82 the huge patient population offers vast currently a barrier,
and about 12 GLP certified labs in the genetic diversity, making the country
country.83 In addition, the ruling on “an ideal site for clinical trials.” Further, however India’s
whether a trial design violates ethical
principles is left to individual local ethics
many people are “treatment-naïve” and
relatively easy to access. The United many advantages
committees. There is no central register
of Ethical Committee decisions. Better
Nations reports that around 30% of the
population lives in urban areas;87 and
- overall costs
infrastructure for regulation, ethics
review and monitoring is required.84
over 67 million people live in India’s six
biggest cities alone (see Table 2).
are only 50%
of comparable
Registration of new clinical trials is now
mandatory on the Indian council of
Table 2: Urban India US-based
Population
medical research's (ICMR) web based
clinical trials registry. The government (Data in ‘000) programmes
plans to make inspection of clinical trial
sites an ongoing activity by increasing
City 2005 2010
- should spur
Bangalore 6,465 7,229
the number of inspectors, training them
for site inspection and developing
Kolkata (Calcutta) 14,282 15,577 dramatic growth
a checklist for audits. Further, the Chennai (Madras) 6,918 7,559 in clinical testing
government is also working on a Delhi 15,053 17,015
proposal to register CRO’s in India.85 Hyderabad 6,117 6,761 in the next 2-5
This type of more rigorous regulatory
Mumbai (Bombay) 18,202 20,072 years.
Source: United Nations, World Urbanization Prospects
oversight, together with increasing (2007)
interest from foreign firms, should help
Global pharma looks to India: Prospects for growth 17The ratio of doctors to patients – at service tax. Table 3: India’s top 10 biotech firms
60 per 100,000 people – is also
Revenues
relatively high, although the quality Biotech and biosimilars on track (US$ million)
of medical training is not as good as
for growth Company 2008–09
it is in some other emerging nations.
Serum Institute of India 242.12
The country’s 289 medical colleges
are over subscribed and the emphasis India is home to a small biotechnology Biocon 198.29
is on quantity rather than quality.88 industry, based largely in Karnataka, Panacea Biotec 129.79
These problems are compounded by with other clusters of activity in West
Rasi Seeds 81.63
lack of experience. India has only 500 Bengal, Maharashtra, Andhra Pradesh,
Hyderabad, Kerala and Ahmedabad. In Nuziveedu Seeds 79.11
to 1,000 investigators in the country
2008-09, the sector generated sales of Novo Nordisk 71.72
as compared to 50,000 in the United
States, suggesting that most companies US$2.64 billion93 representing a CAGR Siro Clinpharm 60.86
would need to make a major investment of 26%, but both the federal and state Novozymes South Asia 54.34
in training during study start-ups.89 Governments have been actively
Shantha Biotech 53.68
promoting biotech research initiatives
and are targeting revenues of US$5 Jubilant 52.60
Some Indian pharma companies are
already developing a reputation for billion by 2010 -11.94 The leading Source: Biospectrum – ABLE, 2009 95
a nimble, rapid approach to clinical domestic players include Serum
testing that looks to streamline the Institute of India, which focuses on research and development. The
clinical trial process and bring new immuno-biologicals and vaccines; DBT has also drafted the National
drugs to market faster. For example, Biocon, which concentrates on Biotechnology Regulatory Act in order
Glenmark now routinely looks to recombinant DNA technologies, to set up the National Biotechnology
incorporate “proof of mechanism” into bioprocesses, fermentation-based Regulatory Authority (NBRA). The NBRA
every phase–I study.90 Most pharma small molecules and enzymes; and is expected to be an autonomous body
companies save this step for phase–II. Panacea Biotec, which specialises in formed specifically to regulate the
novel drug delivery techniques and biotechnology segment and reduce
But the most obvious benefit of pharmacogenomics (see Table 3). regulatory overlap.96
conducting clinical trials in India is the
potential for cost savings. Clinical trials Several initiatives have been launched Further funding support from the
account for over 40% of the costs of by the Government to give impetus Government will be critical in ensuring
developing a new drug.91 In terms of to the thriving biotech industry. The continued growth in the biotech
cost efficiency, India offers substantial Biotechnology Industry Partnership industry. The Government can play a
advantages – the cost of conducting Programme (BIPP) has been launched vital role in funding incubation and early
a trial here is lower by 50% than in the by the Department of Biotechnology stage ventures.
United States.92 The federal Government (DBT) to support high-end
is alive to the strength of this argument. biotechnology research programmes A growing biotech industry should
Drugs and materials imported for clinical capable of generating globally help India to gain a share of the global
trials are exempt from customs duties. recognised intellectual property. It opportunity currently emerging around
Clinical trials also remain exempt from specifically focuses on transformational biosimilars. The biosimilars market is
18 PricewaterhouseCooperslikely to grow by around US$2 billion glaritus. DRL has already launched
by 2014, to reach a total of US$19.4 filgrastim and rituximab in emerging
billion, following key patent expiration markets and has a pipeline of 10
for epoetin alpha, filgrastim, interferon biogenerics in various stages.104 The bottom line:
beta 1a, interferon alpha, human growth
hormone (hGH), and insulin-glargine.97 The challenge for the development of India’s developing
This represents a CARG of 89.1% from
2009 to 2014. All told, around US$25
biosimilars arises from the fact that
biologics are more complex than small
biotech industry
billion worth of biologics are expected
to go off patent by 2016.98 These
molecules and chemically synthesised
drugs; therefore their replica are – in
and cost
patent expirations open the route for contrast to ‘traditional’ small-molecule advantages
biosimilars, the equivalent of generics generics – ‘similar’ but not identical to
for biologics. the original drug. Consequently, the should drive
Indian biotech companies are slowly
registration of biosimilars requires more
data than is required for generics, and significant
building capabilities in development
and manufacturing of biosimilars. Intas
manufacturers have to demonstrate
efficacy and safety in pre-clinical
growth in local
Biopharmaceuticals is now developing
a biosimilar of a protein used to treat
and clinical studies. This makes the
registration of biosimilars a costly and
development of
the side effect of cancer therapy, time-consuming process, and lessens biosimilars for the
for example.99 Biocon has initiated the chances of a successful launch.
registration of its human recombinant Developing biosimilars is costlier than global market.
insulin with the European regulatory developing chemical based generics,
agency, EMEA and intends to launch it requires a greater capital investment
by 2011.100 Reliance Life Sciences has and operating costs of manufacturing
launched three biosimilars—ReliPoietin are higher. These factors mean that
(Erythropoietin), ReliGrast (GCSF), developing biosimilars represents a
and ReliFeron (Interferon Alpha 2b) in higher risk area of R&D.
the domestic market in 2008 and is
currently conducting clinical studies Pharma companies need to balance
for erythropoetin and granulocyte the risks and rewards when considering
colony stimulating factor (GCSF) in whether to enter the biosimilars
Europe.101 Wockhardt has launched market. The decision to enter the
its recombinant erythropoietin, Wepox market should only be made based on
and insulin, Wosulin in the domestic a clearly defined long-term biosimilar
market102 and is conducting clinical strategy, including development and
trials in the US for Wosulin.103 It has built manufacturing capabilities, marketing,
capacities in erythropoetin, hepatitis pricing and regulatory expertise. India’s
vaccine, recombinant insulin and insulin cost advantages in many of these areas
Global pharma looks to India: Prospects for growth 19Other growth areas
could help it gain a stronghold globally companies are integrating bioinformatics
in this growing market. services into a complete portfolio of
Bioinformatics in India research capabilities.
The bottom line: India is now actively targeting the
India’s existing The modern process for drug discovery
and testing now generates very large
bioinformatics market, with the
construction of its first biotech-IT park
knowledge quantities of data through computer in Bangalore, at a total cost of about
US$87 million.106 The first phase of the
modeling and simulations, genetic
capital in IT sequencing, and other data-intensive park has been completed and a tender for
processes. Further, as we noted in Pharma the development for phase–II is expected
provides a natural 2020: The vision, pharma companies are soon from the local state Government.
Several Indian companies, including the
base for the under increasing pressure to document
the efficacy of their products; tracking Bangalore based Strand Genomics and
development of patient outcomes represents a further
source of large quantities of data. In order
Ocimum Biosolutions, have already made
forays into the bioinformatics industry.
bioinformatics to facilitate the storage, management, Recently, Ocimum was granted a patent
for its method and system to manage
retrieval and analysis of this large pool
research and of data, a new subsector of the IT sector and query gene expression data based
has emerged – bioinformatics. Tools have on quality.107
operations. been developed which can help lower
cost, improve efficiency, and streamline The Institute of Bioinformatics has also
the process of documenting a drug’s developed a comprehensive database
efficacy throughout development until of all known human proteins and their
launch and beyond. characteristics, and the Centre for
DNA Fingerprinting and Diagnostics in
India’s strength in the IT sector and its Hyderabad along with Sun Microsystems
growing pharmaceutical sector are driving has operationalised a Centre of
growth of this emerging area. Revenues Excellence focusing primarily on medical
for the Indian bioinformatics industry bioinformatics.108 Some global pharma
were around US$48 million as of March companies are already drawing on the
2009. It is an export driven segment with emerging resources. Tata Consultancy
earnings of around US$37 million from Services has signed a deal with GSK
overseas. Domestic revenues contribute to set up a support centre in Mumbai
around US$11 million.105 Some companies for the company’s global drug
provide only specialised bioinformatics development programme. Biocon has
services; in other cases, local life sciences taken its tie-up with Bistol-Myers Squibb
20 PricewaterhouseCoopersfurther by setting up a dedicated the National Centre for Cell Sciences in
research facility, through its subsidiary Pune and the National Brain Research
Syngene International. Centre near Delhi, are investigating the
Stem cell research
use of stem cells to regenerate nerve, The bottom line:
heart and adult muscle cells, and repair
damaged bone tissue. The L.V. Prasad India has made
Stem cells are seen by many as a
powerful tool for improving the research
Eye Institute has also treated blindness
using stem cells derived from the eye.
considerable
and development process in the pharma
industry. Stem cells are being used to While the Indian Government is strongly
progress in stem
develop some types of direct therapeutic
applications; they are also becoming
promoting biotech generally, concrete cell research
Government funding for stem cell
increasingly important as a tool to test research in India still lags far behind and is well-
potential drug toxicity. that provided in other countries such
as the US. There are also no laws positioned to
India has already made considerable
progress in this area. India’s entry into
per se governing stem cell research,
although there are specific guidelines
leverage growing
stem cell research has progressed
from a few institutions to currently
which classify stem cell use into three
categories: permissive, restricted,
capabilities in this
over 40 institutions and hospitals
involved in stem cell research.109 In
and prohibited. The Indian Council of area.
Medical Research is currently drawing
2008, Stempeutics, a leading stem up plans for a national stem cell
cell company, launched its second initiative to promote clinical applications
stem cell laboratory on the Manipal of stem cell research in ophthalmology,
University campus for advanced stem cardiology and spinal cord repair,
cell research in human embryonic stem and build links between scientists
cells.110 Further activities followed in and doctors. India’s ex-president Dr.
2009 – one example is a joint venture A.P.J. Abdul Kalam had also identified
formed by StemCyte in India with Apollo stem cell research as one of the
Hospitals and Cadila Pharmaceuticals areas on which the country should
to provide stem cell therapies.111 Several focus its efforts.
major research institutes, such as the
National Centre for Biological Sciences Given India’s growing presence in
in Bangalore, the Centre for Cellular biotech, drug discovery, and clinical
and Molecular Biology in Hyderabad, testing, the country may be well
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