A target market for pharmaceutical companies

The Indian pharmaceutical market is the 15th largest individual market by sales and the fourth by volume of product. With domestic drug sales of nearly $5 billion (€3.7 billion), the acceptance of patent laws and the rise of contract manufacturing, Indian pharma companies have experienced high market growth and developed a considerable service industry. NGP asked Marcel Velterop, VP Sales & Business Development Europe at Dr. Reddy’s CPS, how the Indian pharma industry facilitates Western innovators in achieving their development, manufacturing and global marketing objectives.

NGP. How has the Indian pharmaceutical market evolved over recent years?
MV. The biggest event has been the implementation of the new patent law as of 2005, which has focused India far more on the innovation side rather than only the generic side.  Also, partly as a result of that, there has been a strong emergence of pharmaceutical services from India in addition to generic development in the past.

A third aspect is that, compared to five or 10 years ago, when the Indian pharmaceutical market itself was largely ignored or nonexistent for Western companies, given the economic development of India we see an emerging group of society that has access to medicines. So India as a target market for pharmaceutical companies also outside India is becoming more attractive.

NGP. Why is the Indian pharma industry an attractive service partner, especially for Western innovators?
MV. The single most attractive aspect, initially, is the cost difference between India and the West. That’s a widely-debated topic. However, if you dig a little bit deeper into that, then quite a significant impact is the cost of an asset buildup, and to summarise that, if you do any investments for an API or dosage facility in the West, whether it’s the US or Europe, you compare that with India, then typically you are at 35 to 50 percent of Western costing for similar quality requirements, compliance, safety, health, environmental, etc.

This means that you can build twice the amount of capacity for the same amount of money in India compared to a Western setup, and if you then add the lower operational costs, that, of course, makes for an attractive scenario.

That has been the traditional approach. The newer analysis of India as an attractive service partner for Western innovators is simply the relative abundance of scientifically-trained personnel, engineering, production staff, etc. If you compare that to demographic trends in, certainly, Western Europe and, to some extent, the US, then technology, engineering and chemistry has attracted fewer people in the West in the past ten years, and there is a relative abundance of available and necessary talent in India.

Finally, India can offer an element of speed to its services which is very difficult to match from a western perspective. CMC development and lately even clinical trials can be accelerated relative to traditional service models.

NGP. How can the Indian pharma and services industry facilitate Western pharma companies in achieving their business objectives?
MV. Clearly, the pressure that the Western or European pharma industry finds itself in in terms of cost containment, but also the necessity to accelerate speed of development of new medicines, the famous or infamous $1 billion and eight- or ten-year development time, that has to be addressed to make medicines affordable for the West. And, certainly, India can play a significant role in addressing both the manufacturing cost, the development cost, but also, to some extent, reducing the development time cycle by accelerating availability of both API as well as dosage form.

The model in India is is that there are a range of companies with ability to really take a development from medicinal chemistry scale almost to full commercial validation. What does that do? It actually avoids the lengthy technical transfers that you often find in the Western development phase where an innovator company starts with a small company. As the scale increases, it goes to a cGMP operation. Then it goes to commercial, and again, it has to transfer to company No. 3. Something similar can be found in dosage form. And so, specifically the smaller and the mid-size pharmaceutical innovator companies in Europe benefit by avoiding tech transfer and start development with a company who can support them throughout the development phase.

NGP. Do you think this is an equally attractive market for big as well as emerging and biotech companies?
MV. It is equally attractive, but probably with different emphasis. Clearly, big pharma is much better organised to pick and choose from the specific capabilities that they’re interested in. And they would focus on the attractive cost of assets and manufacturing, including the cost of labor as well as the abundance of labor.

For small and emerging pharma, they would probably be able to benefit even more than big pharma, because they don’t have the burden of in-house conflicts of interests. They would benefit from the full range provided, of course, they have the managerial ability to handle a project in India and they select the proper partner with the proper fit.

NGP. Analysts believe that the Indian pharmaceutical market is entering a pivotal period of change. Where do you see the challenges ahead?
MV. The pivotal period of change is two-fold. It’s first converting from largely generic-focused pharma environment to becoming an innovative-focused environment. Secondly, the pharma market itself is growing in India, and they need to come up with and improve access to healthcare for its one billion population. That is probably the more attractive change, and if you model the Indian development along the Chinese development, then, India is poised to show strong growth certainly.

The Chinese market has shown incredible growth locally, and there is no reason why similar growth patterns in India should not be seen in the next five, perhaps ten years. 
That clearly is a significant change.  The other one is the fact that Western companies can use the existing patent laws, licence products for the Indian markets, use local partners and make use of that market. Otherwise, it’s more difficult to access from outside.

So it’s two-fold. It’s market opportunity in India itself that was not there five or ten years ago, and secondly, short term, it significantly reduces potential lead time and development, and, certainly, developmental costs and asset costs for pharmaceutical manufacturing and development.

NGP. And where do you see the biggest potential?
MV. That requires a new and different view on the total lifecycle of a pharmaceutical. You can broadly identify three phases. It’s the development phase which has specific speed requirements. The patented life phase of an NDA and then finally post-expiration, the generic lifecycle.

What is available in India, which is a significant potential, is to make use of existing Indian generic capability to help innovator companies in the lifecycle management of their products.

NGP. That’s a very broad and general statement.
MV. If you drill it down specifically, then it could go so far as authorized generic deals that you have seen in the press. Dr. Reddy has published a few of them with GSK and Merck.

So, innovator companies that face expiration of their patents can look to Indian pharma companies to help them develop either extension products by changing dosage forms or preempting generics by starting authorizing generic or making use of existing generic companies and maintaining the product in the portfolio longer than they could otherwise do on their own. If you take that into account, that is a rather novel approach which few Western companies can offer.

The availability of generic development skills in India can be made to use for Western innovators facing expiration of their products as well. That aspect is not yet fully recognised, and there’s certainly opportunity for companies to explore that as quite a few companies would be willing to entertain specific arrangements that would be mutually beneficial.

NGP. Where will you concentrate your efforts in the future?
MV. Dr. Reddy is a relatively broad company with a known strategy of development and innovation. For our business unit CPS, we will continue to expand our service to innovator companies in the West, and that covers both the API development and manufacturing as well as the dosage forms, and offering the late phase management options to Western innovators. The final part is presenting Dr. Reddy as an attractive local marketing partner for the Indian and Asian geography.