Mr K V Balasubramaniam, Managing Director, Indian Immunologicals, Hyderabad, India

Aug 2010: India is one of the leading "emerging market" economies which has witnessed significant economic growth and is now poised to do even better. The pharmaceutical market in India is vibrant with a strong global presence. The vaccine industry too looks equally vibrant and is placed among the leading ones in the developing world and the emerging markets.

However, till almost the end of the last century, the focus was on the low end pediatric vaccines. India entered in recombinant technologies in the mid 90s with indigenous production of the recombinant hepatitis vaccine. Thereafter, attempts to introduce newer vaccines followed the development course set by western manufacturers with glycoconjugate vaccines for Hib, meningitis and rotavirus.

The factors that led to these developments were largely commercial in nature. This is on account of the fact that in India, the Universal Immunization Programme of the government covered only six childhood diseases (recently from 2007, the seventh one—Hepatitis-B has been added). This meant that there was a large private market waiting to be tapped.

The success of Hepatitis-B in the private market also bolstered the efforts of manufacturers to look at new vaccines for the private market. With the advent of combination vaccines in the west in the early 90s and their wider acceptance, it was also logical for Indian manufacturers to introduce them in India in the private market. Thus, in the period from the mid nineties till 2010, a number of vaccine manufacturers embarked on both own development and research partnerships to bring newer vaccines and combination vaccines to the Indian market.

Challenges
However, the Indian vaccine industry, due to its evolving nature and by virtue of its presence in an imperfect emerging market, is faced with a number of challenges both at the micro unit level and at the macro level.

Market challenges
The domestic human vaccine market in India has high institutional salience – almost 50 percent - with the modest Universal Immunization Program (UIP) focusing on seven pediatric vaccines, still battling immunization coverage issues for these vaccines and thus not in a position to expand the vaccine list. As can be expected with institutional buyers, purchase decisions are primarily driven by cost consideration. The qualification criteria mainly relate to market standing and capacity to produce large quantities. The challenge here is to address demands of low price while accommodating an increased emphasis on cold chain monitors, effecting delivery of small consignments to a host of remote destinations and maneuvering the bureaucratic maze to collect payments in time.

Technology challenges
In the past, Indian manufacturers were playing catch up with their western peers and were led by the UNICEF opportunities. The opportunity canvas was large and technology to do this was within reach. Consequently, the focus on research was low. For instance, UNICEF does not procure the DTaP vaccine with acellular pertussis. As a result, Indian manufacturers did not feel the need to develop one and have, till date, not brought such a vaccine even to the private market in India.

The success of recombinant Hepatitis-B and the successful introduction of combination vaccines have led Indian vaccine manufacturers to embark on building own research and development programs to develop new recombinant vaccines and research into new technologies to address the need to develop vaccines for tropical
diseases.

Developing vaccines in India is really a question of access to new technology, since capabilities exist for low cost manufacture of both conventional and recombinant vaccines. As a case in point, in the development of combination vaccines which will come to the fore in the market, the issue is of the right technology for Hib conjugation. Likewise, the development of rotavirus vaccine requires choice of appropriate strains based on epidemiological data and carrying out sound pre-clinical and clinical studies.

The key challenges are in addressing research capabilities, identifying appropriate technologies and sourcing talent, which is scarce. What really hurts the industry is the raw new talent churned by educational institutions which will take several years to deliver. The recourse often attempted is research partnerships. However, the challenge here is building the right partnerships for product development. The partners chosen must have commitment to bring the final product at affordable cost, be committed to a long term development plan and commit manpower and resources for development.

A related issue is addressing the regulatory aspects, in particular the intellectual property rights (IPR) landscape. IPR on vaccines and essential drugs need to draw the line between IP protection and global social good. Although there is no empirical evidence so far that IPR has not stunted vaccine development in India, the feeling is that as the development process gets more complex and encounters "patent thickets", there will be slowdown of the development process, unless facilitated by sound IPR management support.

Manufacturing challenges
The large size of the Indian market offers scope for bringing higher scales of operations to enable low cost manufacture. Helping this has been the focus of Indian companies on the UNICEF and PAHO markets to bring in large volumes. Thus, manufacturing has hitherto been volume driven with focus on low costs.

The danger here is the risk of lower margins. With costs moving up, the rupee gaining strength and regulatory compliance costs going up, it will be difficult for Indian vaccine manufacturers to play the "high volume low cost" game. We must understand that vaccine manufacture is a high overhead, low variable cost driven manufacture. The challenge therefore is to keep manufacturing as lean and cost effective as possible, especially on overheads, fine tuning processes for better yields, adopting industry best practices, reduction of wastage in production and testing.

Regulatory challenges
On the regulatory side, there are a host of issues confronting the Indian vaccine industry. At the macro level, the issue is of a clear understanding of what would be the right vaccines to focus, given the inadequate disease burden data in our country. As a result, regulators are not in a position to provide the guide map to the industry. This is manifest in the ambivalence towards introduction of new vaccines even such as Hepatitis B, Hib etc., It is ironical that capacities developed to produce Hepatitis B vaccine has been laid to waste.

The other issue is the multiple set of regulations and regulators in operation in the country. Licensure of vaccines is the task of the Central Govt, but in the matters of licensing and inspection, the State is also involved and it is the State which finally grants the license. In the case of animal vaccines, in addition to the Ministry of Agriculture, the Indian Veterinary Research Institute is also consulted in the absence of clear guidelines and as a result, coordination issues and time delays in licensing are
rampant.

India is also grappling with the subject of ethical considerations and impact on environment in matters relating to bio-transformations and biotechnology. Inadequate guidelines on recombinant products with respect to establishing environmental safety are an issue. As recent example is the directive of the Regional Committee for Genetic Manipulation (RCGM), which oversees research and introduction of genetically engineered products, to researchers to avoid histadine tags and instead work on the pure protein itself.

In establishing safety and efficacy of vaccines, there is now growing complexity of clinical trials and there is need to carry trial in diverse demographical settings. It is also a requirement that clinical material be produced from the intended manufacturing site. These add up significantly to the costs of development.

We are also witnessing increasing complexity of Good Manufacturing Practices (GMP) requirements to be met, sometimes more than technically mandated, which the European manufacturers also do not face.

Needless to say, meeting these challenges require companies to set up efficient regulatory departments well versed in GCP, GMP, GLP etc., apart from an ability to liase well with regulators in a professional manner.

What still remains of concern in India is that of public liability, since patients and consumers are still not as well informed as consumers in the western markets about potential adverse events and their rights to remedies. Thus, vaccine companies still do not face the high risk of adverse market events. However, the situation is bound to change and vaccine companies would do well to insure themselves against the fall out of such adverse events.

Funding challenges
India, like most emerging markets has limited number of venture capital players to fund innovative research. Even the ones who operate have low appreciation of the long haul nature of vaccine research. They look to more established business models and are concerned about the bottom line of profits. This is also due to the long history of a successful generic product oriented business model in the pharmaceutical industry, which is a safer bet.

There is little private public partnership or even partnerships between industry and the academia for basic research. Thus, funding remains a major stumbling block to adequate vaccine research and the sound development of the industry.

As a result, entrepreneurs in the industry would do well to work out alliances with established players, should funding be a constraint.

Future forward
Indian vaccine manufacturers are now improving business competencies, focusing on affordability and the need to expand product offerings. There is significant market opportunity in the private retail market for vaccines for regional diseases and in the expansion of the limited product range. This however needs innovation ability to be developed and sustained in terms of the requisite scientific talent and the right research infrastructure, apart from funding the new investments.

Success will be for those who look at how to build their organizational capabilities, leverage the low cost infrastructure, proactively manage the regulatory landscape and develop a committed band of talented researchers and professional managers.