In your interest.
Online Personal Finance Magazine
No beating about the bush.
The Indian government has loaded the pharmaceutical industry with fiscal sops and other goodies over the years to prop up its growth. Particularly, the largesse given to it to strengthen its research and development (R&D) base to compete in the world market seems to have yielded nothing. It is disappointing that the pharma industry spent as much as Rs15,000 crore on R&D during the past five years without producing a single new molecule. In sharp contrast, the US drug industry spends $55 billion on more than 450 drugs every year to come out with 26 new molecules. A McKinsey report says that Indian drug industry’s R&D costs are 85% lower than the US—thanks to cheaper talent—yet it has not come out with a single new molecule.
The Indian drug industry like the IT sector is knowledge-based and can grow exponentially as it has a vast pool of talent. During the past few years, the drug industry has made a transition from depending on reverse engineering—low knowledge based drugs—to R&D-based drugs aided by high knowledge ingredient. The industry has also realised that talent could attribute substantially to success in R&D.
In fact, a few drug companies such as Ranbaxy, Dr Reddy’s Laboratories, Biocon and Sun Pharmaceutical started research in 1993-94. But it was only during the last five-six years that investment in R&D received major impetus. During 2004-2009, pharma companies have spent $3 billion (Rs15,000 crore) on R&D. These companies spend around 7% to 8% of their sales turnover on R&D now, up from around less than half percent before 2000. Yet this looks miniscule in comparison to US or European companies which spend around 20% of their turnover on R&D. Yet Indian drug companies have not come out with a new molecule. More than 70 molecules have entered phase I of trials but only four-five molecules have entered phase III. Ajay Piramal, chairman, Nicholas Piramal says, “My dream is to develop one drug.” Piramal knows that drug development is very expensive in India, yet economical in comparison to the US. He says, “In the US, it costs around $800 million but in India it should not be more than $100 million.” The question then is: why in India have we not been able to develop a single drug out of $3 billion investment in R&D?
Ranbaxy has invested Rs 2,500 crore and Dr Reddy’s Laboratories Rs 2,000 crore in R&D efforts. Cipla, Cadila, Lupin and Sun have spent Rs 800 crore plus each in R&D. Another 12 companies have spent over Rs 200 crore each in R&D. Piramal, a late entrant in drug discovery with seven years experience, hopes to make a breakthrough in 2010-2011. Nothing hopeful has come from Ranbaxy, Dr Reddy’s, Biocon and Sun Pharma—all companies with over 15 years of R&D experience. The reason is simple. A major part of R&D expenditure has gone to reverse engineering, generics, contract research, clinical research and little to new molecule research. In the US, 80% of R&D expenditure goes to molecule research. That is why the US has high productivity in the entire chain of the molecule development cycle.
Low productivity, inefficient clinical research, low study curve and low learning curve, inadequate networking, long-term finance unavailability, low innovation and testing facilities, lack of trained investigators, no advancement in instrumentation, lack of stringent quality in CGMP (Current Good Manufacturing Services) practices, limited shared infrastructure, unfocussed approach, regulatory failures in phase III and many more reasons are behind the Indian pharmaceutical industry’s failure to produce new molecules. Many companies have separated their R&D divisions for reasons of core research and long-term finance availability as well as accounting jugglery.
“The productivity of the Indian scientist is very low,” says Jai Hiremath, chairman of Hikal Limited. India does not have a scientist credited with a single molecule discovery. Transforming the screening of 10,000 chemicals to one molecule is a complex process as is seen from failures in all stages such as screening, discovery of chemicals, lead development, pre-evaluation, phase I, phase II, phase III and phase IV studies in drug discovery.
Then there is no adequate understanding of complex diseases, that is why developing cures for such illnesses is therefore extremely difficult. For example, there are six blockbuster molecules based on the statin family like lovastatin, simvastatins, pravastatins, atorvastatins, rosuvastatins and fluvastatin molecules. Each of them lowers cholesterol but has side effects. Atorvastatins have been one of the highest selling drugs (called Lipitor) with a market size of $15 billion each year. Different statin molecules have been discovered by various global companies but no Indian company has discovered any molecule in the statin family. The same is the case with hypertension (blood pressure control) drugs. No Indian company has been able to discover any molecule in the sartan family (valsartan, losartan, irbesartan, candesartan, telmisartan, olmesartan) of molecules. Plainly speaking, we have to put together our strategy in a focused manner if we need success in new molecules.
“Continuous improvement is very important, whether it is expanding the use of electronic data capture to reduce errors and improve efficiency, or going global to find the trained investigators and the numbers of patients needed in a timely manner,” says Dr Ferzaan N Engineer, CEO, Quintiles Research (India) Private Ltd. Glenn Saldanha, CEO & MD of Glenmark says, “India has to create a culture for research, else it will be difficult for Indian companies to attain true success in discovery research.”
—Dhruv Rathi [email protected]