The Eastside story
The Asian chrysalis is all set to metamorphasise. India too is all set to play a major role in the transformation. Nandini Patwardhan finds out in conversation with Daara Patel, Secretary General, Indian Drug Manufacturers Association (IDMA).
What prospects do Asian pharma markets offer?
The pharmaceutical industry in the Asia Pacific region is booming, especially in China and India. There is significant investment from foreign pharmaceutical companies throughout the region. And, domestic manufacturers are also going through an expansion
phase to keep pace with increased demand. Business opportunities in Asian pharmaceutical markets are very different today from what they were a few years ago. The traditional tiger economies, characterised by economic growth, free market environment, developed industry and investment in health and health infrastructure have had a long haul back from the financial instability and economic downturn in the 1990s.
Where does India stand in the Asian pharma market?
India is well positioned to take advantage of increased demand in affordable medicines and the growth in the domestic industry is already very well documented. India has a strong core competency in producing high quality and affordable medicines as well as active pharmaceutical ingredients to supply overseas markets.
The pharmaceutical industry is currently under significant pressure to reduce overall costs as well as to ensure regulatory compliance and drug safety. This trend is worldwide. They are looking at increased productivity from the laboratory and to this end, reduced cost per analysis while still maintaining compliance with regulatory requirements. We see continued growth in the Asian pharmaceutical sector. Going forward, this size is likely to exceed that of Europe and the US within the next few decades. Asia, led by Japan and India, will also start developing a robust pipeline of novel drugs that address the needs of both Asia and the rest of the developed world such as US and Europe. Various countries in Asia will undeniably face a multitude of challenges as they develop their industries. However, given their traditional resourcefulness and determination, it is beyond doubt that Asia's place within the global pharmaceutical industry over the next few decades will grow in rapid prominence.
How can Indian pharma companies capitalise on the Asian opportunity?
Asia's impact on the global biotechnology and pharmaceutical industry is accelerating. From quality supply of API's to discovery of new chemical entities (NCE's), this sector is finally coming of age. The challenge, of course, lies in whether the Asian chrysalis will metamorphasise profitably through innovation or will choose the less risky pathway to grow beyond generics through contract manu-facturing and other services, to make its presence felt worldwide.
Drug discovery may be feasible but, just like the US-based small cap biotechnology companies, Asian companies will have to look for partners to help bring any successful innovation to market. This realisation has already spurred acquisitions, alliances between the Asian and global pharmaceuticals in R&D, and outsourcing of services and clinical trials.
What is the key to the success of Asian pharmacos?
The key to the success of Asian pharmaceutical companies is their ability to retain their cost advantage while matching the quality standards of the West. But lower costs cannot be enough. Availability of skilled manpower and a favourable regulatory environment that assures compliance with global norms are the other two legs underpinning success. With a growing skill set and capacity in contract research (from combinatorial chemistry to high throughput screening, assay development and validation to clinical trials) and contract manufacturing, Asian companies are increasingly becoming preferred partners for Western bio-pharmaceutical companies seeking to bring their products to the market in a timely and cost-effective manner. India already boasts of more USFDA GMP approved API facilities than any other nation other than US.
In their domestic markets, Indian and Chinese companies are successfully serving countries with high GDP growth (89 percent) and large populations (1 billion plus people each) while selling drugs at prices that would give most pharmaceutical executives a coronary. Yet, Indian companies are still able to churn out operating margins often comparable to those of Western-branded pharmaceutical companies. Obviously, Asian managers are changing the very business model that has defined success for Western companies during the past century.
What challenges await Asian pharma companies?
When it comes to innovation driven by new science, the challenge for the Asian companies is clear—how do you transform yourself from a company that successfully copied someone else's innovative product cost effectively into a true innovator? Continuing to do what now amounts to a commodity business has been a good springboard, but only successful R&D can turn this nice but modest base into a sustainable global presence over the long haul. One has to remember that Asian firms are not only competing with their more developed counterparts in the US and Europe, but also with each other, especially in their bread and butter generic business. Chinese API manufacturers, for example are just coming in on their own, and will likely pressure the Indian companies pricing options even further.
Researchers in Korea, Singapore and India are capitalising on opportunities in stem cell research and therapeutic cloning, and some of their discoveries may even provide some breakthrough leads needed for developing practical applications from the new science. These new science anchored frontiers offer scientists from Asia a niche other than going down well-trodden paths with the objective of creating research powerhouses of their own. While innovation is essential for sustainable long-term success, the next generic frontier offers robust growth prospects.
How will segments like biogenerics reward companies in the future?
Asian firms can be expected to own as strong a foothold in biosimilars or biogenerics, as they have with small molecule generics. Since biologic manufacturing is more capital and skill intensive than chemical synthesis, many potential entrants may be deterred, allowing biosimilar companies to escape the dramatic price erosions common in the small molecule generics segment. Thus biosimilars, like innovative drugs, can be an opportunity for Asian companies to transform themselves. Many of the top 15 Indian pharma companies have been working toward such a valuation for atleast a decade, with Ranbaxy knocking at the doors to enter the top 50 globally.
What strategy should companies look at adopting in the coming years to survive in Asian markets?
All the leading MNC's and their Indian counterparts have identified co-option, denoting collaboration and competition at the same time, whereby companies collaborate in identifying best practices and sharing the various steps in drug discovery, to competing on generics. Co-option has increasingly been adopted as a model for sustaining growth momentum. This adoption has happened on the back of cross-border acquisitions, licensing (both in-licensing and out-licensing agreements) and by becoming preferred outsourcing partners of multinational pharma companies. This has made Indian pharma companies redefine the global pharma value chain by building collaborative networks and has resulted in increasing visibility of growth.
Has IDMA opted for tie-ups with similar associations in Asian countries?
There have been no activities undertaken by IDMA in any Asian country, although IDMA does have a tie-up with the Korean Pharmaceutical Manufacturers Association (KPMA). It is aimed to create a strong affiliation by establishing modalities of sharing information and working jointly on the common objectives to ensure a more prominent representation as well as better accomplishments for their members in the global pharmaceutical sector.