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Indian pharma industry to look beyond the generics market
Industries06/12/2006. Source: KPMG.
 India is set to become a regional hub for R&D, manufacturing and exporting, says KPMG. Multi-national companies are returning, but they believe considerable regulatory and infrastructure challenges remain.
The Indian pharmaceutical industry seems set to emerge from the confines of the generics market in which it has largely positioned itself and could soon become a major player on the global scene.
A report launched today by KPMG International suggests that India now has the potential to become the region’s hub for Research & Development (R&D), manufacturing and exporting.
Much of the impetus behind India’s fresh challenge for a greater share of the global industry is driven by last year’s introduction of product patents. For the previous 25 years, patents were only granted on processes – a decision which saw many multi-national companies (MNCs) abandon the sub-continent but which resulted in India becoming a leading player in the market for generic medicines.
Commenting on the report’s findings, Stephen Oxley, KPMG Head of Pharmaceuticals in the UK, said: “The Indian pharma industry is currently worth US$6 billion – in a global industry worth US$650 billion – but is growing at ten percent, compared to the global industry rate of seven percent. The generics business remains at the heart of everything India does well and so it should, considering that India accounts for 22 percent of the global generics market. Bearing in mind that US$65 billion of prescription medicines in Europe and the U.S. are to lose their patents in 2007-08, India is ideally positioned to sweep up much of that new business. However, the opportunity now exists for India to become so much more than just a generics player.”
“The expansion of India’s patent system to cover products as well as processes has already started to bring the MNCs back into the fold. There was never much point in Indian manufacturers spending too much on R&D of their own when their new product discoveries could not be patent protected. R&D spending should now be ratcheted up – significantly and rapidly. With protection in place and with foreign investors eagerly eyeing up India’s wealth of human resource and its massive domestic market, significant growth opportunities abound for Indian companies. However, as is so often the case with Indian industry, many other challenges must be addressed as a matter of some urgency if this is to be achieved.”
Within the KPMG International report, one industry figure states that, despite the recent improvements to the Indian market infrastructure, many people still “talk about India but invest in China”.
Much of this is attributed to shortcomings in the current Indian regulatory environment - India still offers no data protection for example whereas China does - and domestic pricing issues. In fact, drug prices in the Indian domestic market are the lowest in the world. Further government legislation is expected on the latter point at the end of the year and the industry will be hoping that it continues the trend of reducing the number of price-controlled products.
The interaction between industry and government will be one of the keys in the coming years. The comparison with China is a fair one as the Chinese government’s strong commitment to pro-industry policies has created a positive environment with a strong patent regime and data protection; admittedly with issues still remaining over how these are enforced.
The aims of the Indian industry – and of government – are ambitious but will require a strong pricing environment if the Indian people are to access the life-saving and innovative medicines they need. Industry leaders will have to work with government on issues of affordability to point out that price controls are limited in their ability to increase access to new and effective treatments.
Stephen Oxley continued: “Everyone should by now know what India has to offer – to all industries – in terms of a massive, well educated, English speaking labor force. In pharma terms, it also boasts production costs which are 50 percent lower than in Western countries. Overall R&D costs and clinical trial expenses are one-eighth and one-tenth respectively of Western cost levels. However attractive that is though, it is still not enough. There is much to do in terms of addressing further regulatory and infrastructure challenges and the industry will have to work closely – and swiftly – with the government to address these issues. With the introduction of the product patent scheme, India now has a major opportunity to claim a seat at the top table of the global pharma industry and it should not let this opportunity pass it by.”
KPMG is the global network of professional services firms who provide audit, tax and advisory services. KPMG LLP operates from 22 offices across the UK with 9,000 partners and staff. KPMG recorded a UK fee income of £1,066 million in the year ended September 2004. KPMG LLP, a UK limited liability partnership, is the UK member firm of KPMG International, a Swiss cooperative.
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