Updated on 13 June 2013
Ms Mridula Anand, visiting scholar, Center for Leadership Innovation and Change, Indian School of Business, India
Faced with many uncertainties after the introduction of a series of reforms from the 1990s, both Indian and foreign firms have closely followed the growth of the pharmaceutical industry. Looking at modest health reforms, a large untapped market coupled with increased spending on healthcare and a subtle change in disease patterns, business leaders, policy makers and consumers have evinced keen interest at the emerging Indian market potential.
The Indian pharmaceutical industry has had its share of significant policy changes that reflect its growth trajectory. With the introduction of only process patents in the 70s, India had over a period of time developed enviable manufacturing and distribution strengths with lower operational costs. There has been much excitement about the change to a product patent regime with an anticipation of multinational firms eyeing Indian firms for not just their manufacturing capabilities but also their R&D capabilities for improved product life cycle management. This would mean an increase in collaborative partnerships. However, is this really happening?
Indian firms face multiple challenges, including the element of newness to proprietary R&D, prohibitive costs to bring a drug into the market and negotiating regulatory checkpoints along the way. To most, this vertical integration of R&D is economically unrealistic. However, a few firms such as Connexios Life Sciences (Bangalore) and Glenmark Pharmaceuticals (Mumbai) have focused on proprietary R&D and not on contract research. Similarly Piramal Life Sciences (Mumbai) had augmented their pipeline with research deals with Merck and Eli Lily.
However, the predominant strength and focus has been downstream capabilities. The hope with the patent changes was an increased focus on building indigenous R&D capability while answering multinational concerns. While patenting by Indian firms has per se increased, it is worth noting that the number of product patent filings vis-a-vis foreign firms has not drastically changed (848 by MNCs to 28 by Indian firms from 2005-2009).
From the point of view of multinationals, the new patent regime has promised patent protection but these firms face both a severe challenge in downstream capabilities that are critical to reach far and wide and from generics that pose a serious threat of erosion of sales revenues. Given the growing market opportunity in India, reachability of affordable drugs would be a key business driver.