MUMBAI Aug 29 Indian drugmakers are fleeing a
regulatory morass at home and moving some research and
development to Europe and the United States as try to boost
margins by producing high-value drugs.
India's $15 billion a year pharma industry, the world's
largest source of cheap generics, is already reeling from a
string of drug recalls and quality control issues which have
called into question the regulator's oversight.
Now, companies like Piramal Enterprises Ltd, Sun
Pharmaceutical Industries Ltd and Lupin Ltd
are investing millions of dollars and placing their future
growth in foreign regulators' hands, as they seek to add more
complex drugs to their product lines.
"We have lost what is called the India advantage," said
Swati Piramal, vice-chair of Mumbai-based Piramal Enterprises
which last year moved some clinical trials for new drugs abroad.
"The India advantage was saying we can research
molecules...and finish the clinical trials and the cost would be
one-tenth of the West," she said.
"Now, we have to acquire small groups of highly specialised
people who can work on a particular type of product and know
exactly how to do it. That's the new alternative - to really
invest in R&D abroad," she added.
Indian drugmakers rely on cheap generics for the bulk of
their revenue, but like their global peers, they are focusing
more on niche markets such as ophthalmology and oral
contraceptives, and difficult-to-make products such as inhalers
and injectables in a bid to achieve higher profit margins.
Some companies are also making copies of bio-drugs called
biosimilars, the latest trend in the global pharma industry
which requires intensive R&D and a regulator with experience in
handling such sophisticated medicines.
Like its peers, Piramal does not disclose how much it spends
on R&D abroad. Industry research firm CRISIL, however, forecast
R&D spending by India's top 20 pharma firms to rise to about 6.5
percent of total revenue by 2018 from about 5.8 percent now.
Company executives say the higher cost of moving abroad will
be partly offset by the ability to bring high-value drugs to
their main markets in the United States and Europe more quickly:
it takes nearly a year to get clinical trials approved in India
compared to about 28 days in the United States.
These high-value drugs hold so much potential that companies
are willing to put up with long delays before they can launch
them at home, a fast-growing market for more expensive
medicines, as India's regulator only allows drugs that have been
tested locally to be sold there.
Drugmakers say they are frustrated by the lack of concrete
regulations for clinical trials two years after the Supreme
Court halted 162 studies citing unethical practices. G.N. Singh,
the Drug Controller General of India said the regulator was
working on hiring more staff and simplifying the process for
clinical trials. He did not elaborate.
Analysts also partially blame weak regulatory oversight for
the import bans imposed by the U.S. Food and Drug Administration
on Indian drugmakers in the past year.
In addition to a smoother regulatory process, drugmakers say
moving R&D abroad allows them ready access to a pool of trained
talent and better infrastructure, which is lacking in India.
"Investing in research abroad is specific to companies that
want to grow in certain areas for which the best talent and
regulatory expertise is available abroad," said Shakti
Chakraborty, group president at Lupin.
So far, Indian drugmakers have looked to Europe and the
United States as they expand their R&D.
Lupin is setting up two R&D plants in the United States for
an undisclosed amount while rival Cipla Ltd has said
it would invest 100 million pounds ($166 million) in Britain for
research and clinical trials to develop drugs for respiratory
and oncology-related diseases.
Sun Pharma, India's largest drugmaker by sales, last month
said it had acquired U.S.-based Pharmalucence for an undisclosed
amount to bolster research capabilities and an executive at Dr
Reddy's Laboratories Ltd also said the company was
looking for acquisitions abroad in R&D.
Developed Asian economies such as Singapore and South Korea
are also emerging as potential R&D destinations for Indian
companies, industry groups and analysts say.
"For Indian companies to set up R&D abroad is expensive, but
it is necessary, because otherwise their ability to grow within
the country is going to be limited," said Kavita Patel, a fellow
in the Engelberg Center for Healthcare Reform at the
Washington-based think tank Brookings Institution.
($1 = 0.6026 British pound)
(Additional reporting by Tripti Kalro in BANGALORE; Editing by
Sumeet Chatterjee and Miral Fahmy)