Being Indian

Every country is different in terms of the socio-cultural, economic and regulatory environments as well as healthcare needs. To survive, MNCs need to tweak their global strategies to suit the conditions prevailing in the respective countries. Sushmi Dey explores the strategies adopted by global pharma majors in India.

The pharmaceutical industry is one of the most successful industries that India has built since independence. It is characterised by significant performance in R&D, manufacturing and regional diffusion. Whatever the features are, India has been able to attract a number of MNCs. The reasons why India is luring might be manifold. "The Indian market is diverse with unique disease patterns. There is a shift towards lifestyle diseases in urban areas, but the rural and semi-urban areas continue to still have disease profiles like infectious diseases and malnutrition. These patterns when combined with varying degrees of healthcare penetration and specialisation provide opportunities to explore different business models," explains Kewal Handa Managing Director, Pfizer. On the other side of the coin, India has, in its darker kitty a number of issues like counterfiets, price control and drug policies, which make India a difficult proposition.

Low price points, tough competition from domestic companies, drug policies and personnel problems are also features of the Indian pharma industry that have persuaded global MNCs to dwell on interesting business models. "Complex and time consuming regulatory procedures, lack of effective patent protection, complete lack of data protection, non-conducive environment to research, immense pressure on prices and lack of tangible or lopsided tax incentives and sops are certain obstacles that MNCs are facing in India," says Vinod Mattoo, Chief Scientific Officer of Eli Lilly India.

India calling

Industry experts opine that country specific strategies are often a result of the business and political environment existing in those countries and the initiatives undertaken by the government. Implementation of different policies by the Indian government before and after independence protected the nascent pharmaceutical industry and encouraged its gradual growth.

Liberalisation in the nineties has propelled massive changes in the Indian pharmaceutical scenario. The pre-liberalisation era was characterised by lack of competition and a presence of well known multinational pharmaceutical companies. However, the 1970s Patents Act pushed Indian firms on the path of reverse engineering and spurred the sector's growth. But it was only in the nineties, after the Indian economy opened, that India witnessed the emergence of strong domestic companies armed with research focus, manufacturing capabilities and marketing strategies.

This had a major impact on the two vital Indian policies related to the pharma industry—drug policy and price control policy, which in turn affected the MNCs in the country at that time. "In the post-liberalisation era, global MNCs were pushed to think on how they can bring in growth in the Indian industry. They cannot just think of selling branded generics," asserts Paresh Vaish, Vice-President and Director, Boston Consulting Group.

Ever since inception, several policies ranging from patents, foreign exchange regulations, price controls, industry licensing and many other institutional factors like organisation of research and development in the public and private sectors have affected the industry to a great extent. And the process still continues. However, in addition to liberalisation and the policy issues, there are other factors, which have impacted the strategy decisions of various PMCs in India. "The government is cognisant of the bottlenecks and is reforming the regulatory scenario," explains Vaish. In addition to the above, there are a host of other unsolved issues that have made the pharmaceutical multinationals (PMCs) to develop India-specific strategies.

The price control

Of all the government policies that have affected MNCs the most, drug price control order ranks as one of the biggest liabilities on part of India. The draft of the new drug policy that proposes to bring 354 drugs under price control has expectedly raised debates among industry representatives and the government. Experts believe that cost based system to tighten the government's direct control over the drug prices can harm the Indian pharmaceutical business, which is now, at a crucial juncture. Price control is the biggest near-term risk that threatens to undermine PMCs, if not the industry as a whole. According to Vaish, the government wants to lower the prices in order to increase the affordability of medicines to the masses. "Amongst the many challenges that pharmaceutical companies face, price control is more of a retrograde step and will pose challenges if its scope is expanded. There are other serious health issues that must be dealt with in order to have affordable and accessible healthcare," comments Handa.

"The current ongoing policy uncertainty makes it difficult for companies to finalise their business and marketing strategies. Patentability and data exclusivity are important aspects of the law which if clearly defined and aligned to international standards, will attract investment and encourage product innovation, safety and efficacy," he adds.

Competition

Indian pharmacos are steadily gaining ground in the pharma arena and reaching international standards. These companies which are acclimatised to the Indian condition are posing tough competition to their PMC counterparts. Indian pharmacos like Ranbaxy, Dr Reddy's laboratories and Cipla amonngst others, are going places making India a tougher ground. However, most of the MNCs view this as a favourable situation. "We welcome some of the moves of Indian MNCs including augmenting their own R&D as that would change the research landscape of India," reveals Mattoo.

In addition to companies, which compete, there are other perils that eat into a PMC’s sales and profits, like the counterfeits. Indian industry is highly characterised by counterfeit drugs and the modus operandi of spurious drugs manufacturers in the country is affecting the PMCs’ business in the country. Though there are many ways to counter counterfeits, they come with cost and logistical implications, making the survival of MNCs arduous.

Though analysts suggest that the government has been reasonably successful in curbing the practice of spurious drugs, little has been done to crackdown the offenders. Since a number of MNCs produce blockbuster drugs, they are the ones who bear the brunt of the spurious drugs. This situation might encourage MNCs to stop manufacturing these drugs.

Data exclusivity: the battle continues

Data exclusivity (DE) provides protection to a company's tests and clinical trial data for a period of time. This data may not be relied upon by another company to obtain marketing authorisation of the same drug. Most of the multinational companies support DE in India with a view that it should not lead to evergreening of patents. The time duration for DE varies from five years in USA, six years in China and upto ten years in EU members. PMCs argue that more product introductions, R&D and clinical trial businesses will come to the country only if DE norms are in place. "India can earn billions of dollars through clinical trials and researches only if the data exclusivity policy is in place," asserts Z H Charna, Director of OPPI.

However, the domestic sector has different views on the proposal. There are apprehensions that DE might lead to monopoly in the drug industry and will harm the accessibility and affordability of drugs with cheaper prices. Some pharma companies are also arguing that the data is required to demonstrate safety, quality and efficacy of innovative drugs to regulatory authorities.

Compensatory liability model

The DE debate has now paved way for the birth of the ‘compensatory liability model’. Till date, this model has been implemented only in the agrochemical sector. According to this model, the drug inventor would get royalty from the second applicant for the use of his data.

The model has raised many issues regarding the royalty payments. Apart from the transaction costs involved, there are also issues related to market and cost differentiation between countries.

The compensatory liability model is again a subject to controversy as most PMCs don't accept it. For instance, there is no consensus on whether the royalty should be calculated based on the originator's possible market in the country where the second application is filed or on the global market value.

"Domestic pharma companies who are opposing the DE move are acting opportunist and are also trying to brain wash the government. They just want to continue copying the molecule for longer periods of time. Any association or organisation would want such laws which would benefit those members who have reached a certain level of discovery," says Charna.

Focus India

As more policy and social changes trigger changes in Indian markets, PMCs have to keep on hunting for newer methods to stay afloat in the Indian business. "There are several strategies that will give pharmaceutical business a boost in India. These include launch of global products (patented or otherwise), partnering with key healthcare players such as hospitals and expansion into rural and semi-urban markets," asserts Handa.

One of the survival strategies for PMCs is 'innovation'. Global majors have always been path breakers in bringing forth new treatments and research.

Apart from pushing growth in India, PMCs should slowly develop newer molecules and at the same time become price sensitive. "We are going full steam ahead with our strategy of introducing innovative, best-in-class and often, first-in-class molecules for the unmet medical need of the Indian populace. We are also keenly exploring targeted therapies specific drugs for specific patients," said Mattoo commenting on the strategies of Eli Lilly.

The strategies adopted by PMCs can also include a combination of alliances not just with other companies or healthcare providers, but also with NGOs and the government to educate the Indian consumer on various aspects like checking for authenticity of a drug, or on a particular disease segment.

There is no dearth to the tactics that can be implemented by PMCs to survive and capture any market. However, these need to be tweaked to suit the circumstances prevailing in the countries they are in. Like they say, when in India, do as the Indians do.

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