THE INDIAN PHARMA STORY

“The Indian pharmaceutical industry, with a market value of $42 billion in 2021, ranks 14th globally in terms of value and 3rd in terms of volume. As a major player in the generics market, the industry is often referred to as the “Pharmacy of the world,” Dr Satish Reddy.

As per the audited figures for 2021, the Indian pharmaceutical industry ranks 14th in the world in terms of value. However, when it comes to volume, it is globally number three.

As per the Indian Economic Survey 2021, in the next decade, the domestic market is expected to grow three times, and by 2024 the market value is likely to reach $ 65 billion and touch almost 120 to 130 billion by 2030. Last year India exported drugs worth $2.196 billion, far below its potential.

It is very strong in genetics at this point in time, making India self-sufficient in meeting the medicinal needs of its population. It also has an impressive presence abroad, with one out of three generics in the U.S. coming from an Indian company. In the UK, one out of four is from an Indian company.

In terms of vaccine production, especially COVID, 60 per cent of the global production comes from India.

Going Back In History

The most defining moment for the industry was the year 1970 when Prime Minister Indira Gandhi passed a law that only recognised process packets, not product patents. Prior to 1970, multinationals dominated the scene. The large pharma companies, if they sold a pill at $ 1 in the U.S., it was sold in India for the equivalent in Rupees, making drugs beyond the reach of a large number of the population. The implication of the new law was that anything discovered overseas could be launched in India if done by a different process than that patented.

However, true innovation on a large scale has yet to begin. Earlier, there was little in terms of support for the industry and in academic institutions, the focus was not on original drug discovery and little academician-industry collaboration. Therefore, India was not ripe for innovation in terms of social drug discovery. Compared to other global hubs of drug innovation, India needs to catch up in infrastructure which inhibits the unleashing of its potential.

This sparked entrepreneurs like Dr Reddy, who started the company, Dr Reddy’s Laboratories. Being a scientist from the public sector enterprise Indian Drugs and Pharmaceutical Ltd (IDPL) and working with Russian scientists collaborating in drug manufacturing in India, Dr Reddy’s group translated lab-scale processes into commercial manufacturing. In the beginning, it was mostly penicillin and a few antibiotics.

The industry got a boost from domestic investors as the original group of scientists had little money to grow the business. The industry initially started as a manufacturer of active pharmaceutical ingredients (API). The new patent laws also permitted the launch of new products, and in those early days, patent drugs like ibuprofen were at the forefront, using different processes that were more cost-effective.

The initial lot of scientist-entrepreneurs then tentatively started venturing into new products and starting new companies to manufacture APIs like sulfamethoxazole etc. In the decade 1990-2000, India was one of the largest API manufacturers in the world. With strong chemistry skills, India started producing various classes of API like sulfur metals etc.

Encouraged by the growth in the industry, many new companies were founded (Devi’s Lab 1990, Mankind Pharma Limited 1995 etc.). These pioneers were mostly scientists themselves, now taking on the role of entrepreneurs in a field that showed great promise. This was the period when faced with depleting foreign reserves, India had no option but to reform its economy and liberalise. Not surprisingly, the new companies in the pharma industry got an opportunity to explore the global markets making the U.S. and the USSR their biggest markets. The industry, therefore, had been given a great boost first by the amendment in the patent laws followed by liberalisation.

While India had been a mem ber of the GATT since 1948, it joined the WTO I in 1995. The WTO Doha Declara tion on the TRIPS Agreement and Public Health, agreed upon by WTO members in 2001, helped to frame the health policy context of the intellectual property system.

It stressed the need for the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to be part of the wider national and international action to address public health problems afflicting developing countries and least-developed countries. Indian pharma companies were in a position to be new patent law compliant by 2005, making their drugs available for competition in the international market. Also, the increasing use of generic pharmaceuticals by the chain of U.S. Veteran Administration catering to the retired military community gave a boost to the market.

Another factor was the 1984 Drug Price Competition and Patent Term Restoration Act, commonly referred to as the Hatch-Waxman Act (named after Congressman Henry Waxman and Senator Orin Hatch), which gave rise to a strong generic drug industry. The Hatch-Waxman Act provided a rapid way of the generic drug approval process by permitting generic drug manufacturers to file an Abbreviated New Drug Application (ANDA). The Abbreviated New Drug Application

(ANDA) allowed approval of generic drug products by a shorter and less expensive route than for innovator drugs. Before Hatch-Waxman, only 35 per cent of innovator drugs faced generic competition after the expiry of patents; now, almost all innovator drugs faced such competition. Today the situation is that the large genetics companies in the U.S. are based on large volumes coming from India.

The Innovation Park

Encouraged by the new TRIPPs regime, many Indian pharma companies like Dr Reddy’s decided to try their luck in original drug discovery. Such a move at the time was called delusionary (as labelled by the respected magazine The Economist) because it was globally doubted how Indian pharma companies, capable of only copying drugs or re-engineering them, could come out with original patents.

But the doubters were proved wrong with Indian companies coming out with their patents. Dr Reddy’s licensed its first molecule as early as 1997 by doing pioneering work in the field of data zones. But licensing was not the end of it as the company also had to find buyers willing to invest in the new product. Slowly the licenses were recognised abroad, allowing for revenues that could be re-invested in new innovations and improved the valuation of Indian companies overseas. At times, the stock market was not very helpful and punished the pharma companies drastically.

Today Indian companies are following a totally different model, with Dr Reddy’s Laboratories alone having about 70 projects in the licencing pipeline in collaboration with big biotech companies like Exilixis, which will go all the way to clinical trials etc. Today, big Indian pharma companies have the financial means to pursue this kind of cutting-edge research.

However, true innovation on a large scale has yet to begin. Earlier, there was little in terms of support for the industry and in academic institutions, the focus was not on original drug discovery and there was little academician-industry collaboration. Therefore, India was not ripe for innovation in terms of social drug discovery. Compared to other global hubs of drug innovation, India needs to catch up in infrastructure which inhibits the unleashing of its potential.

The Way Ahead

India should quickly reach that point when the pharma industry has the right kind of ecosystem- the location of academic institutions and the pharma industry, close collaboration between the two, government support, and infrastructure. Many policy changes are required, and things did move a bit thanks to COVID when the Indian pharma industry was seen in a positive light due to the vaccine supply and therapeutics on which even the U.S. was dependent. There are positive signs that the Government is planning to come out with regulations that will facilitate drug discovery.A key move could be a research-linked incentive scheme that will encourage the pharma industry and others to increase the percentage spent on R&D.

The regulatory environment also needs an overhaul-though it is a state subject; there are central regulatory authorities also. This system has been abused, and the industry is partly to be blamed for this. Legislative changes are required to put the house in order. In addition, the regulatory system must have capabilities like the Medicines and Healthcare Products Regulatory Agency (MHRA) of UK, which employs some of the most qualified personnel, many from within the industry who understand it well and keep going back and forth between the regulator and the industry.

The industry will always be ahead of the regulator, and the regulator must do the catching up. With gene therapy coming up in a big way, the regulator has much catching up to do.

The approval process is a shambles. Many trials must be carried out outside India, like phase one clinical trials, because the up process in India is uncertain with no specific timeframe. Doing trials abroad is expensive and adds to the development cost, and this curbs innovation and adds to the long-drawn-out process.

Another issue is the academic industry collaboration. Indian needs something like the Bayh-Dole Act to incentivise collaborative research. The Bayh-Dole Act, formerly the Patent and Trademark Act Amendments, is a U.S. federal law enacted in 1980 that enables universities, non-profit research institutions and small businesses to own, patent and commercialise inventions developed under federally funded research programs within their organisations. The act ultimately has motivated more and more universities to become actively involved in the transfer of technology from the lab to the market. On its part, the Government could consider setting up Centres of Excellence in academic and research institutions to allow the industry to engage much more closely.

Another critical component, largely missing in India, is funding; today, it is a question of a leap of faith and a certain amount of risk-taking! The industry looks at venture capital (VC) funding to rescue it. Sadly, this system does not thrive in India because the VC would like to risk their money later in the research, whereas money is critical in the earlier stages. Alternatively, they ask the Government to pitch in with 1/3 of the funds, as it happens in Israel.

China too has been having a lot of success in incentivising VCs to invest in the pharma industry by giving sovereign guarantees, which allowed many Chinese start-ups to make it into the big league. Benevolent institutions like Bill and Melinda Gates Foundation are playing a role but can form only a tiny part of the scale of investment needed.

By addressing these challenges, the Indian pharmaceutical in dustry can continue to evolve, play a sig nificant role in global innovation, and con tribute to the devel opment of life-saving drugs for people world wide.