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The new patent regime is challenging the Indian biopharm industry to transition from generics to novel products.
With the Patent Amendment Act of 2005, India approved the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, enforced by the World Trade Organization (WTO) on all its member countries.1 In the patent amendment act, India implemented product patent protection for pharmaceutical and biopharmaceutical products, because article 27.1 of the TRIPs agreement requires product patent protection for pharmaceutical products.2
Before the 2005 Patent Act, the Indian Patent Act of 1970 had allowed the pharmaceutical industry to use reverse engineering to manufacture products patented in other countries, including recombinant protein products.3 The new law, however, prohibits Indian companies from making, selling, or importing any products patented after 2005 without the consent of the patent holder.
Thus, the new intellectual property regime (IPR) presents challenges for the Indian biopharmaceutical industry to transition from its focus on process innovation and generic manufacture to novel product innovation.
The average cost of drug development has increased over the years, and the cost and time required are even higher for biopharmaceuticals. Because the Indian biopharmaceutical industry does not have the monetary resources to develop novel drugs, it requires financial support or collaboration with other companies. In this context, partnership with foreign companies is probably the best option for Indian companies to take the next step forward on the path of novel drug innovation. Now that India has a patent protection scheme in place, international companies can collaborate with Indian companies without any fear of losing their intellectual property. But factors beyond intellectual property protection influence foreign companies interested in collaborating with Indian companies. In this article, we assess India's attractiveness to foreign companies, using an analysis of the strengths, weaknesses, opportunities, and threats (SWOT) of India's business climate generally and of its biopharmaceutical industry climate in particular. This analysis can help predict whether India's biopharmaceutical industry is likely to make a successful transition to an innovation model in the near future.
Factors that Affect Foreign Investment
In general, biopharmaceutical companies outsource drug development work either because of a lack of internal resources, a determination that outsourcing is cheaper than doing the work internally, or to improve competitiveness by gaining access to advanced technologies without having to develop them internally. Outsourcing to foreign countries is usually done to reduce costs by gaining access to skilled human resources at a lower cost.4 But when considering such international outsourcing, firms evaluate not only the capabilities and costs of an individual firm, but also a number of factors related to the overall business climate in the country in which the potential outsourcing partner is located. The following parameters are normally considered when evaluating the countries with which to collaborate:5
These factors can be analyzed for the Indian market by conducting a SWOT analysis.
Three factors—the people, environment, and infrastructure—are critical for a healthy environment for business collaboration, particularly in the biopharmaceutical sector.
Skilled workforce: The biopharmaceutical industry requires a pool of highly skilled scientists. Currently, India has a talent pool of 15,000 scientists in the biotech sector.7 This pool has been developed over the past two decades, mainly as a result of the active support of Indian government's Department of Biotechnology (DBT).
India's population of 400 million—which is the second-largest English speaking population worldwide, after the US—includes 3 million science graduates, 700,000 postgraduates and 15,000 PhDs in the sciences. China, another major player in this segment, produces about 50,000 graduates annually from technical schools, but many Chinese scientists do not speak English, and many of those who do, migrate to other countries.6
Overall, India's English-speaking workforce rates high in qualifications, capabilities, quality of work, and work ethics. In a recent survey by KPMG done in a report titled IT enabled services in India—A focus on competitiveness, that compared three aspects of "people factors"—skills, costs, and institutions—India outran competitors such as Singapore, Hong Kong, China, the Philippines, Mexico, Ireland, Australia, and Holland.7
Infrastructure: According to KPMG's ranking of five countries—India, China, the Philippines, Ireland, and Mexico—based on three infrastructure factors (telecommunications, property, and transportation), India ranks the lowest in all three categories. In spite of its low overall ranking for infrastructure, however, India has more than 800 pharmaceutical manufacturing facilities that comply with the World Heath Organization's (WHO) good manufacturing practices (GMPs) and more than 70 pharmaceutical and biopharmaceutical plants that have been approved by the US FDA.8 Half of these are plants that manufacture active pharmaceutical ingredients (APIs) for the traditional pharmaceutical sector and the rest are finished dose formulation and bulk drugs. In addition, the number of Indian facilities that do not meet GMP standards is likely to decline in the future. Schedule M of the Indian Drugs and Cosmetics Act of 1940 and Rule 1945 were revised in July 2005 to require the Indian pharmaceutical and biopharmaceutical industry to comply with international GMP standards. As a result of these increased requirements, consolidation is likely in the industry as organizations unable to meet the new requirements are taken over by companies with more expertise.
Environmental factors: According to the KPMG report, in terms of environmental factors (divided into fiscal, political and regulatory, and institutions), India ranks higher than China and the Philippines. With respect to the fiscal subfactor, however, India is on par with China. Also, India does not rank as high as the Philippines, Ireland, and Mexico with respect to the political and regulatory environment, and ranks equally with the Philippines but not as high as China, Ireland, or Mexico with respect to institutions.
The central and state governments of India are actively supporting the outsourcing industry by implementing favorable policies. One example is through bilateral collaboration programs that the DBT has formed with more than 20 countries.9 During the 9th Five-Year Plan, India signed bilateral collaborations with countries including US, Sri Lanka, Sweden, UK, Germany, Myanmar, Belarus, Russia, and Switzerland, and formed multilateral collaborations with SAARC and ASEAN. The activities covered in these collaborations include joint research and development projects, human resource development, joint workshops, and academia–industry interaction.
The Indian government has also taken several important steps recently to promote the biopharmaceutical sector in particular. First, it has established the Mashelkar Committee Task Force to streamline the regulation of biopharmaceuticals.10 The task force also streamlines the regulatory process for the approval of all recombinant DNA products. It specifies the timelines for various approvals by the regulatory committees-RCGM approval for pre-clinical animal studies: 45 days; Drug Controller General of India (DCGI) approval for human clinical trials protocol: 45 days; DCGI examination of clinical trial data and response: 90 days; and concurrent DCGI and Genetic Engineering Approval Committee (GEAC) decisions: 45 days.
Another important highlight of the report is that it has recommended the constitution of a Standing Technical Advisory Committee on Biotechnology Regulation under the chairmanship of an eminent scientist to redress and look into the various regulatory aspects and make issue-based recommendations on case-by-case basis before any deviation from the regulatory mechanism.
Mashelkar Committee Task Force Report was released in August 2005 and its recommendations were implemented on April 1, 2006. According to the report, approximately 90% of the organisms used by biotech companies, which are from category I and II, and recombinant pharmaceutical products derived from living modified organisms (LMOs) will now be regulated by the GEAC. According to the Mashelkar Committee Report, LMOs are defined as only those organisms modified by r-DNA techniques through human interventions where the end product is a living modified organism. The regulatory objective of GEAC should be confined to regulation of proposals, which involve the large-scale use of LMOs from environmental angle.
Evaluation of the product safety, efficacy, clinical trials, market authorization, and postmarket surveillance is the mandate of the DCGI. The product in which the end product is a LMO has the potential for propagating or replicating in the environment and, therefore, needs a higher level of regulation as compared to products derived from LMOs in which the end product is not a LMO. Further more, the magnitude and probability of environmental risk depends on the extent of use of LMOs in the R&D and production units. In case of imports, this risk is not there especially in cases of import of therapeutic proteins in finished form. Because the report of the Mashelkar committee declares that approximately 90% of the organisms used by biotech companies are from risk categories I and II, they are out of the purview of GEAC; the approval of GEAC is required only for organisms falling under the risk groups III and IV.
Another initiative of the government is its biotech strategy policy, which is now on the table in the parliament.11 According to the biotech strategy policy guidelines, DBT will act to facilitate a single-window clearance mechanism for establishing biotechnology plants. Large animal testing facilities with good laboratory practices (GLP) are central for testing candidate vaccines and biotherapeutics. Testing facilities will be created for genetically modified organisms and LMOs. Genetically modified organisms (GMOs) are organisms in which the genetic material (DNA) has been altered in a way that does not occur naturally by mating or natural recombination. This technology is known as modern biotechnology or genetic engineering or recombinant DNA technology. It allows selected individual genes to be transferred from one organism into another to give new traits to the recipient.
The government has also framed policies for the promotion of biotech parks. The DBT will promote and support at least 10 biotech parks by 2010. The biotech companies located in these biotech parks will receive concessions such as a tax holiday under Chapter U/S 10B of the 1961 Income Tax Act and duty-free importation of equipment and instruments.
The Indian government is also facilitating the growth of the biopharmaceutical sector by promoting biotechnology clusters where there is close proximity of industry, academic institutions, and research laboratories.
Several states also have undertaken significant initiatives to develop bioclusters, incubators, and centers of biotech excellence that include policies to pave biotech growth and fiscal incentives like tax holidays, capital subsidies and energy concessions, and support for biotech parks that provide access to telecommunications, bandwidth, power, and other infrastructure required for smoother operations.
In 2000, the Andhra Pradesh (AP) state government set up the Genome Valley to host almost all the major players in the field of biotechnology. It declared an area of approximately 600 sq. kms. as the Genome Valley. The AP government aimed at providing high quality infrastructure at a reasonable cost with integrated services to biotech manufacturing units by setting up a series of Biotech Parks. One of them is India Knowledge Park (IKP); this was made in partnership with Indian Credit and Investment Corporation of India (ICICI) Bank. IKP has been leasing out and ready-to-use modular laboratory units. IKP has also been providing a range of infrastructure and administrative support services to create a congenial stress-free environment.
The Tamil Nadu Government is planning to set up biotechnology enterprise zones to use the bio-resources available with the state. The Maharashtra government also has been promoting biotech parks and R&D centers. The Karnataka government has formulated a biotechnology policy for the promotion of the biotechnology industry. It is setting up an Institute of Bioinformatics and Applied Biotechnology (IBAB) in partnership with ICICI this year. IBAB has been conducting courses and training programs in bioinformatics and biotechnology. It has also been promoting the incubation of new startups in the biotech industry, and conducting research and development in the field of bioinformatics and other related areas.
Figure 1. Biopharmaceutical segments percentage sales: 2004â2005
Industry Associations and Institutions
There are several associations, such as the Association of Biotech-led Enterprises (ABLE), the Confederation of Indian Industries (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), Biospectrum, and the All India Biotech Association (AIBA), that actively represent the interests of the biotechnology industry. These associations have been instrumental in bringing about changes in regulations to strengthen the biopharmaceutical market.
Strength of Local Companies
Overall, the Indian biopharmaceutical industry comprises 350 biopharmaceutical companies, of which 50% are involved in product development, 20% are involved in clinical development, 15% provide research services, and 5% focus on platform technologies. Companies such as Biocon, Serum Institute, Bharat Biotech, Shantha Biotech, and Panaceam, (Table 1), are some of the key players in the Indian biopharmaceutical sector.
Table 1. Indian biopharmaceutical companies and their performance
The Indian biopharmaceutical sector registered record sales of $1.45 billion from 2006–2007, showing 26.87% growth over the previous fiscal year. Biotechnology investment, both in R&D and infrastructure, surpassed $51.04 million in 2006–2007, a 38% increase over the previous fiscal year. According to the 2007 Biospectrum-ABLE Survey, the biopharmaceutical sector is export-driven, and about 70% of India's biopharmaceutical exports are small-molecule active pharmaceutical ingredients. The Indian market is witnessing a considerable growth in recombinant products. In 2003–2004, DBT estimated the domestic market for recombinant therapeutics at about $94.19 million. This sector represents about 3.2% of the total pharmaceutical market in India and 1.6% of the world market of recombinant therapeutics. There were 50 branded biotech drugs developed in India in 2006–2007, and this figure could increase to 100 by 2010.
In particular, India is emerging as major player in the vaccines business. In 2005–2006, vaccine sales accounted for more than 38% of India's total biopharmaceutical sector of $1,094.88 billion.6 In 2005–2006, India's vaccines business was estimated at $400 million (Figure 1). Indian companies like Serum institute, Shantha Biotech, Bharat Biotech, Indian immunological, Biocon, have established capacities for manufacturing recombinant therapeutics and vaccines.
Currently, local Indian companies have the expertise to develop and manufacture several recombinant biotech products sold on the domestic market. The recombinant DNA pharmaceuticals approved for marketing in India include insulin, GM-CSF, G-CSF, interferon alpha, interferon gamma, interleukin, blood factor VIII, streptokinase, HBsAg vaccine, human growth hormone, tPA, erythropoietin, follicle stimulating hormone, and human protein C. The recombinant DNA pharmaceuticals approved for manufacturing in India are HBsAg vaccine, erythropoietin, G-CSF, interferon alpha, and insulin.
Table 2. Manufacturers and marketers of biopharmaceutical drugs in India
In addition to vaccines, India's capabilities to manufacture recombinant protein products have also grown. Companies like Shantha Biotech, Bharat Biotech, Wockhardt, and Biocon manufacture recombinant products such as vaccines, human insulin, and erythropoietin as generic products for the domestic and export market.
With the IPR now in place in India opportunities exist to support investment in production facilities based on licensing and other forms of cross border relationships for all therapeutic products. Indeed, Indian biopharmaceutical companies are also signing more and more collaboration agreements with foreign companies (Table 3).
Table 3. Foreign collaborations between Indian and foreign biopharmaceutical companies in 2006
Research and Development Strength
India's strength in biotechnology R&D has increased in recent years, in part as a result of the government's rising budgetary allocation for the sector, which has increased from $10.1 million in 1988 to $80.875 million in 2005. The areas of high competence in R&D in the biotechnology sector include bioprocess engineering, gene manipulation of microbes and animal cells, downstream processing and isolated methods, extraction and isolation of animal products, stem cell biology, bioinformatics, proteomics, and genomics.12
Despite the progress in the sector, the Indian biopharmaceutical industry also has several weaknesses and faces many threats. These include infrastructure constraints, multiple regulators, irregularity in clinical trials, and low government funding.
As mentioned earlier, one area in which other countries have an advantage over India is infrastructure, specifically property and transportation systems. The availability of telecommunications facilities and the cost of these services have traditionally been areas in which India has not performed well. High property rates, stamp duties on land purchase, and the restriction of foreign investment in property in India have been additional hurdles faced by foreign investors. It should be noted, however, that the quality of India's infrastructure has been improving. In particular, the liberalization of the telecommunications sector has resulted in several competing players, which has lowered the cost of telecommunication services and allowed cheap Internet.
The biggest hurdle the Indian biopharmaceutical industry faces is the chain of multiple agencies that companies must deal with. Moreover, current laws prohibit companies from conducting clinical trials in India on drugs discovered abroad and then licensed to an Indian company. Also, there is lack of clear guidelines from the agencies about what is required for clinical trials as well as other aspects. It generally takes approximately 16 to 36 months in India from applicant filing to launching a drug in the market. This delay is because of constraints like lack of trained people in the regulatory agencies , infrastructure, and resources.
Irregularity in Clinical Trials
The attractiveness of a country for clinical trials depends on various factors, one of the most critical of which is speed and the quality of data. Speed is affected by factors including the time it takes to obtain regulatory approvals, the Ethics Committee (EC) approval, and patient recruitment and retention. The Ethics committee grants approval to conduct genetic research involving humans and to provide genetic services which are within certain ethical principles and procedures in order to minimize harm, and to maximize benefits, to those human beings who may participate in such research. Ethics policies have been formulated to harmonize with Ethical Guidelines for Biomedical Research on Human Subjects developed by the Indian Council of Medical Research in 2000. The committee covers the areas of basic research, genetics, genomics, and education and legal aspects. Data quality, on the other hand, is largely influenced by the culture of following good clinical practices (GCP), ethics, documentation, and record keeping. Though the doctors have excellent skills and patient coverage, their lack of experience in conducting trials according to GCPs is undeniable. Furthermore, it is unclear whether Indian laws permit an international company to carry out a Phase 1 trial in India concurrent to trials conducted abroad. Currently, the general practice is to allow sponsors to repeat Phase 1 trials in India after submission of Phase 1 data generated outside India Phase 2, 3, and 4 trials can be carried out concurrently with other global trials for that drug.
Low Government Funding
In terms of government funding, the government of India spends 1% of its gross domestic product (GDP) on health sector research, whereas the US government spends 7–9% ($17.9 billion) of its GDP on biotech research and development each year. Funding by the Indian government in this sector also is low in comparison with other developing countries. Although initiatives are being taken to enhance the investment but they are scattered and sporadic. As India still lacks established institutions such as the primary funding agency for the R&D. Approximately 52% of US R&D expenditure is borne by the government. Although India has launched the Small Business Innovation Research Initiative (SBIRI) scheme through DBT to support small and medium size enterprises through grants and loans. The scheme will support pre-proof of concept, early stage innovative research, and provide mentorship. This is on the line of Small Business Innovation Research (SBIR) grants of US to fund small business development of biomedical discoveries. India also lacks an Act like Bayh Dole Act United states in which institutions receives US research grants own the intellectual property generated from such research. Local ownership fosters entrepreneurship as well as a strong incentive for university-industry research collaborations.
The discovery, research, and development of drugs are becoming increasingly challenging and expensive world-over. India offers multinational drug companies a competitive edge by providing a low cost base in research, clinical development, and manufacturing.
With the advent of the product patent regime by the Indian Patent Amendment Act 2005, Indian companies are now attempting to reinvent themselves as innovators by building patenting capabilities and pursuing discovery-led research strategies. Because the Indian biopharmaceutical industry lacks the resources to make this transition on its own, it will need to do this in collaboration with foreign companies. Fortunately, the arrival of a stronger intellectual property regime also makes the industry more attractive for multinationals to collaborate. This change will provide a greater incentive for original drug discovery and development in India, which will eventually create opportunities for Indian companies to develop new competencies through collaborative research and global alliances.
To attract foreign collaborations, however, there are certain key issues that need to be addressed in India including human resource development, instilling patent culture, infrastructure development, and the simplification of regulations covering research, product approval, and intellectual property.
The initiatives taken by the government to promote the biotech sector are appreciable, and these steps may have a productive effect if they are implemented efficiently. Once these milestones are achieved, then the time is not far when the Indian biopharmaceutical industry will become a novel drug industry by practicing a collaborative model.
Rakhi Rashmi is research scholar at Jawaharlal Nehru University, New Delhi, +91 9810674596, firstname.lastname@example.org
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