Harbingers of Change - Pharmaceutical Executive


Harbingers of Change
What to watch—and watch out for—in the bottom half of '07

Pharmaceutical Executive

2. Open for Business

TRIPS Improves India's Attractiveness

Historians may not have been as startled as the rest of us by Goldman Sachs' projection that India will emerge as the world's second-largest economy (after China) before 2050. India had the world's largest economy in the first and 11th centuries, and as late as 1700 was responsible for 24.4 percent of the world's GDP. What is behind this renewed economic clout? One leading factor is India's adoption of intellectual-property protections consistent with industrialized nations.

The Harbinger By embracing the Trade-Related Aspects of Intellectual Property Rights (TRIPS) treaty, India has begun creating a more stable business environment for innovative pharmaceutical companies by eliminating knockoffs of patented products. Last year, 19 new molecular entities (NMEs) launched in India. Indian pharma companies introduced 58 corresponding brands, or an average of three brands per NME. This compares with 29 NMEs and 125 brands in 2004—roughly four brands per molecule. The improvement may seem modest, but factor in the number of copy products based on molecules first launched before 2006, and the trend is more impressive: The number of brands launched in 2006 was one-third less than the 2004 total.

The Change India is officially "open for business." Global companies can now introduce products with greater confidence that their intellectual property will be protected. And with this, India is taking its place as a "PHARMerging" market, along with Brazil, Russia, China, Mexico, and Turkey. The country's pharmaceutical marketplace is expected to average 13 to 16 percent top-line growth between 2005 and 2010. Total sales are likely to reach $22 to $25 billion by 2015, with 15 to 20 percent of the total representing patent-protected products.

The Implications If India can eliminate copy products, it will almost certainly reduce the number of Indian pharma companies, rationalizing the supply chain and encouraging multinational companies to play a fuller role. These multinationals must realize, though, that competition will be steep. India's own pharma industry will be increasingly focused on R&D. R&D spending among the top 10 Indian companies is 7 to 8 percent of top-line sales, compared with 3 to 5 percent for the industry as a whole.

The aspirations of larger Indian companies, however, are diverging from those of the great majority of smaller ones. Larger companies, with better access to cash from investment bankers and private equity, are likely to play a more active role in the global arena in 2007 and beyond. If the domestic market begins to resemble the more orderly markets of Europe, Japan, and North America, these companies could develop sufficient critical mass to compete effectively with existing global players.

Now that intellectual property protection and other government initiatives are supporting pharmaceutical growth, the Indian market will become the next frontier for multinational companies. And just as surely, Indian manufacturers will present multifaceted competition.

3. Titans Wave the White Flag

Global Companies Attempt To Overhaul the R&D Model

In Greek mythology, the Titans were powerful deities whose heroic adventures explained the origins of the world. They were not invincible, however, and after a 10-year war, they finally admitted defeat. For at least as long, the Titans of the global research-based pharmaceutical industry have struggled to sustain their growth using the R&D model that propelled them to prosperity. It seems that, finally, some have admitted defeat and are trying something new.

The Harbinger In March, FDA's Critical Path Institute debuted the Predictive Safety Testing Consortium, through which eight global drug giants will share details of the laboratory tests each uses in "precompetitive" stages of research. They will test one another's methods for reproducibility, looking for and validating biomarkers to help determine how patients will respond to a drug. The results will be used by FDA to identify which safety tests should play a role in drug development.


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Harbingers of Change

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