A. Nair is a freelance writer based in Mumbai, India.

A Nair

 The mood inside the Indian pharmaceutical market is one of unbridled optimism, rampant self-confidence, and can-do determination. With an economy that is growing nearly 12% annually, India overall is on an upward trajectory. High profitability and cash flow have left most drug companies in India in a comfortable economic position compared with other consumer-oriented companies such as fast-moving consumer goods firms such as Nestle and Unilever. And a sizeable minority of pharmaceutical firms believe the current financial crisis will give them an opportunity to increase their volume of mergers and acquisitions. Take Mumbai-based Sun Pharma, which reported a 135% jump to $102.7 million in second-quarter net profit. The firm said it was eyeing more acquisition possibilities, with the global financial crisis making valuation of generic drug companies more attractive. 

"We continue to look at opportunities," said Sun Pharma Chairman Dilip Shanghvi at a recent earnings call, without identifying any targets. The statement is surprising given that Sun Pharma has been trying to acquire Israel's Taro for $454 million for nearly a year; the agreement is still tied up in litigation. Sun Pharma sells the generic heartburn drug "Protonix" (pantoprazole) and cytoprotective agent "Ethyol" (amifostine) "at-risk" (i.e., the company challenges a patent and markets a drug, despite a pending court order) in the United States. The company's US generic drug sales soared by 195% to $122 million while international sales climbed 141% in the second quarter of FY 2009. The firm continues to sit on reserves of more than $30 million, which it raised through foreign currency convertible bonds. The company plans to use this nest egg to fund its acquisitions.   

Another cash-rich firm, Chennai-based bulk drug manufacturer Orchid Chemicals and Pharmaceuticals, is set to increase its stake in the drug discovery and development company Diakron (a privately-owned company based in Roseland, NJ) to 51% this quarter. In August, the company acquired around 43% control in Diakron after a $1.7-million investment. According to an Orchid spokesperson, the Indian company will now acquire a controlling interest with a total investment of $2 million.  

Custom research and manufacturing services (CRAMS) provider Jubilant Organosys (Noida, Uttar Pradesh) bought US-based HollisterStier Laboratories for $122.5 million last year in what at the time represented one of the largest overseas acquisitions by an Indian company in the CRAMS sector. That was swiftly followed by another record when it snapped up Canada's Draxis Health for $255 million.  

By avoiding cheap debt, domestic drug companies have put themselves in a strong position to capitalize on the current lack of funding. This shift in power could allow them to make acquisitions for less than what was previously possible.   

"Indian pharmaceutical companies are sitting on a war chest of at least $3 billion for overseas buys," says Citigroup Pharma Analyst Dipak Nishantkumar. "This is after they acquired companies worth almost $1 billion ... in early 2006 and late 2007," he added.  

Ranbaxy Laboratories (New Delhi) is a case in point. The company's chief executive, Malvinder Singh, says Ranbaxy has completed 18 overseas acquisitions in the past two years alone.  

"It's bargain hunting time," concurs Alakh Dalal, a research analyst at Religare Securities, an equity and securities firm in New-Delhi. "The cash-rich nature of most domestic firms puts them at a decided advantage when it comes to seeking growth through acquisitions, and also helps provide continued funding for research and development (R&D)."  

As Indian arms of multinational drug manufacturers brace themselves to tackle the tough economic environment facing their parent companies abroad, pink-slips are not yet the order of the day here, even though Pfizer (New York) has stated it would reduce its staff by about 10% globally. GlaxoSmithKline (GSK, London) announced a reduction of 850 R&D staff in the US and UK. And last week, Novartis (Basel) announced its decision to lay off 300 of its field force.  

Even though Novartis's field-force reduction has no connection to India, according to Vice-Chairman Ranjit Shahani, there is an overriding concern about cost and the pressure to outsource will only increase. GSK's India chief, Hasit Joshipura, said a clear picture would emerge only some months down the line. "It is not clear yet whether more research jobs will come to India or whether the credit squeeze would in fact reduce jobs being outsourced," he added.  

One company that may be signaling the road ahead is MSD Pharmaceuticals (Gurgaon, Haryana), a subsidiary of US-based Merck & Co. "We will be doubling our staff strength in India as part of our plans to consolidate our marketing network in the country," said MSD Managing Director Naveen A. Rao. 

Still, analyst reports suggest that Western drug manufacturers are ramping up their outsourcing of clinical research to India. Many companies, including Roche Holding (Basel), GSK, Sanofi-Aventis (Paris), Pfizer, and Eli Lilly (Indianapolis), have been subcontracting work to Indian businesses.  

Now, Johnson & Johnson (New Brunswick, NJ) is contracting discovery chemistry, discovery biology, chemical and analytical development services to Indian and Chinese research organizations. In October, Eli Lilly launched a joint venture with Jubilant to outsource more early-stage R&D processes to India. And in February, Danish biotech Novo Nordisk (Bagsvaerd) revealed plans to shift nearly a one-third of its global R&D activities to India within a three-year timeframe.  

According to Bain & Company's Ashish Singh, a Boston-based partner in the consulting firm's healthcare practice, notwithstanding the credit crunch, research and clinical development spending outsourced to India is expected to expand to $2 billion by 2010.  

But not all drug companies have weathered the storm with the same finesse. Some have lost millions of dollars in unwise investments. Hyderabad-based Dr. Reddy's Laboratories, for example, was forced to freeze all innovative R&D at its subsidiary Perlecan Pharma in October 2008. Perlecan was spunoff of Dr. Reddy's in 2005 to pursue the development of compounds. ICICI Venture Funds and Citigroup Venture Capital, which held a combined stake of 86% in the firm, backed the spinoff. By mid-2008, however, development on one of Perlecan's four main clinical compounds was discontinued. Both venture capitalists decided the company was too risky an investment and sold its stake back to Dr. Reddy's in July.   

Undoubtedly, the credit crisis and its aftershocks will continue for some time, but many Indian pharmaceutical companies seem to be in a position to withstand the pressure. While traditional and conservative pharmaceutical companies are hunkering down for the long haul, those with large cash reserves will be able to form strategic alliances with smaller firms, adding new compounds to their pipelines for less money than would have been the case a year ago.   

A. Nair is a freelance writer based in Mumbai.

Articles

While the world pulls itself out from one of the worst crises in decades, Indian pharmaceutical companies are trying to capitalize on falling company prices by increasing their takeovers.

Report From: India

Diagnosis and treatment of diseases may soon become less expensive in India, if the Indian government's proposal to become the country's sole purchaser of drugs and medical devices takes shape. Under new proposals to cut costs, the Indian government is considering monopoly purchases of generic drugs, medical devices, and patented drugs from small and medium enterprises, 

The government is also in the process of framing guidelines for compulsory price negotiation with drug companies for their new products—both patented medicines as well as medical devices—at the time of granting marketing approvals. The government has asked the National Pharmaceutical Pricing Authority (NPPA) to collect data on price, supply, and availability of all medical devices and patented drugs in the country. 

NPPA is part of the government established inter alia to fix and revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country under the Drugs (Prices Control) Order of 1995. The organization is also entrusted with the task of recovering amounts overcharged by drug manufacturers. 

Confirming the move toward monopoly, Debasis Panda, joint secretary of India's Ministry of Health and Family Welfare, says, "The government is mulling such a move as part of its effort toward achieving quality healthcare for all. In the next couple of months, the government will provide some regulations, especially for the medical devices sector that is literally growing in a haphazard manner." Panda added that the Health and Family Welfare Ministry is also working toward a switch from a control-type regime to a regulatory regime to cope with the new technologies and treatments that are now available. 

The data gathered by NPPA would provide the government with enough reference information to negotiate prices of medical devices and drugs accordingly. While this move would ensure that medical device makers price their brands reasonably, the goal is to benefit consumers who need devices such as stents, catheters, orthopaedic implants, and heart valves, by offering them at a lower price. 

The government's attempt to buy patented drugs, however, has rung alarm bells across the nation and with multinational corporations (MNCs) operating in India. "It is completely illogical. How can the government decide on the prices of patented drugs?" questions Ranjit Shahani, vice-chairman of Mumbai-based Novartis India. "The pharma MNC gravy-train might just go off-track in India, if the government persists with its move," he added.

Shahani recalls that the Indian government proposed to buy and sell generic-generic products last April to add to its national program to fight malaria and tuberculosis. "The government was keen to buy directly from drug manufacturers and then distribute it via its own channels," he said. "That was a voluntary purchase." Most drug companies such as those belonging to the Indian Drug Manufacturers Association, the Organization of Pharmaceutical Producers of India (OPPI), and the Indian Pharmaceutical Alliance (IPA), supported the move. 

However, the current monopoly idea, "to buy the whole lot, could well be the institution of compulsory licensing, under a new guise," says Shahani, stating that such action should not be considered. 

The government has asked drug companies and different associations to put forward its views on the subject. Several suggestions have been presented, but opposition to the proposal by multinationals is gaining momentum. Many contend that the buyout would lead to drug shortages and increased costs. OPPI, the apex industry body of multinational pharmaceutical companies, feels that the government's move, coupled with its failure to honor incremental innovation, could hinder long-term investments in the country's pharmaceutical industry. 

In addition, OPPI says that several of its member companies may reexamine proposed investments in India. Member firms include Pfizer (New York), Eli Lilly (Indianapolis), GlaxoSmithKline (London), Bristol-Myers Squibb (New York), Sanofi Aventis (Paris), Astra-Zeneca (London), Novartis (Switzerland), and Novo Nordisk (Bagsvaerd, Denmark), among others. 

Argues Naresh Trehan, president of the Indian Healthcare Federation, "India's healthcare sector is in a dynamic phase of growth, but the technology being provided must work toward providing affordable healthcare to all." Trehan, who has also been the past chairman of the Confederation of Indian Industry's national committee on healthcare, added, "It is imperative to accelerate growth through partnering and aligning with the key stakeholders including the healthcare service providers, medical technology industry and insurance providers.'" 

Paresh Johri, deputy secretary in India's Department of Chemicals and Petrochemicals, said an inter-ministerial committee has been set up to examine the Australian and Canadian models, where the government fixes the price. 

 "Given the fact that a consumer in India is not in a position to negotiate prices as happens in the US and most other developed countries, there has to be some method of pricing which reflects the interests of the consumer," says IPA's D.G. Shah. 

Gurdial Singh Sandhu, joint secretary in India's Department of Chemicals and Fertilizers, said several organizations have also recommended to the government that there should be differential pricing for medical devices used in the treatment of cardiac ailments in government hospitals so that less affluent people could afford treatment. 

Overall, India's proposal could be significant to the consumer as the cost of sophisticated medical devices adds substantially to already spiraling medical bills. Some surgical procedures are unaffordable to many patients due to the inflated cost of catheters and other devices. Some stents, particularly drugeluting ones, are priced at around Rs 1 lakh ($2133) and are clearly out of reach of the masses. 

Whether the government's purported move covers expensive medical devices, generic-generics and even patented drugs, only time will tell. The fact that there is no discussion between the government and trade bodies on distribution tactics, or on what price the drugs and devices would be bought and sold has cooled tempers, for the time being. Given that the government is still debating the various pros and cons of the matter, a final solution may not come any time soon. 

 "Decision-makers inevitably have different concerns, represent different constituencies, and seek different consequences. The resulting tug and pull, trade-offs, and negotiations take time," says Prashantamyan Nair, pharma analyst at Mumbai-based investment firm, Edelweiss Securities. ``In some cases, the choice might be obvious, a 'no brainer,' but more often than not, the choice is not so obvious. Most times, some sort of agreement is reached, often through a majority vote. That could happen anytime before the winter session of Parliament, this December.'' 

The Indian government may soon monopolize its pharmaceutical industry to cut costs and improve healthcare, but the move is sounding off alarm bells with the companies whose drug products are under review.

Report from: India

Differential pricing is making more than just an appearance in Asia's pharma markets these days.

It has been known to happen. Merck & Co. did it with "Stromectol" (ivermectin). Pfizer did it with "Diflucan" (fluconazole). Glaxo-

SmithKline (GSK) did it with its vaccines. Each of these drugmakers has adopted differential pricing in the pharmaceutical market. That is, they offer lower drug prices to developing countries but maintain normal prices elsewhere.  

(IMAGE: CHRISTIAN ZACHARIASEN/GETTY IMAGES)  

Initially the backbone of the pharmaceutical delivery system in the United States, differential pricing has now made an appearance in India, where the industry is ripe for change. Global pharmaceutical companies are launching medicines in India at prices as low as one-fifth of their developed-country prices. Daiichi Sankyo (Tokyo), Merck & Co (Whitehouse Station, NJ), Pfizer (New York), and GSK (London) are all adopting India-specific pricing. Several others are keen to follow. 

This so-called "peace offering" comes not because the Indian government is wielding the big stick of busting patents. Rather, the country's expanding middle class provides too tantalizing a carrot to be ignored. Consulting firm McKinsey & Company estimates that the value of the Indian pharmaceutical market will grow from $6.3 billion in 2005 to $20 billion in 2015. As growth slows in developed markets and drug companies battle the twin threats of generic drugs and price controls, differential pricing is proving to be a beacon of hope in the long, dark tunnel.  

The second largest Japanese pharmaceutical company, Daiichi Sankyo, is set to launch its hypertension drug, olmesartan medoxomil, in India at about one-fifth of its European price. Pfizer launched its patented antismoking medicine "Champix" (varenicline tartrate) at a considerable discount in India as well. People who want to quit smoking in India will pay Rs 9500 ($225) for a 12-week regimen, while their US counterparts have to shell out more than twice the amount, about $522. 

Similarly, New Delhi Gurgaon-based MSD Pharmaceuticals, the Indian subsidiary of Merck & Co., recently launched its once-a-day patented diabetes drug "Januvia" (sitagliptin) at Rs 43 ($1) per tablet, or about Rs 1,290 ($30) per month, which is one-fifth of its US price of $150 per month. Not to be outdone, GSK priced its recently launched anticancer drug "Tykerb" (lapatinib) in India at a 25% discount from global prices. 

What exactly is happening here? Although several global pharmaceutical companies have used differential pricing as a sales strategy in the past, offers to slash prices of anti-AIDS medicines for African countries or provide cheaper condoms and contraceptives to aid family planning in developing countries do not seem to fall into the same category. 

Many companies differentiate prices according to socioeconomic indicators to make drugs equally affordable to people with various incomes and to countries with varying disease rates. Ideally, this approach yields prices that are affordable to both low- and middle-income nations and maintains incentives for research and development. For global companies, the pricing policy serves public health by ensuring the greatest affordability of patented drugs while maximizing profits. 

"Daiichi Sankyo wants to sell olmesartan medoxomil in India at Rs 9 ($0.21) for a 200-mg tablet. The drug costs between $1 and $1.2 in Europe (Rs 42–50)," says a senior official from New Delhi-based Ranbaxy Laboratories. "The discounted drug is bound to reach a larger section of society here, which will pay for the [company's costs] in the long run," he explains. Incidentally, Daiichi Sankyo recently acquired Ranbaxy for $3.7 billion; the buyout has not affected the company's dual-pricing policy. 

Unsurprisingly, the change in pricing has everyone's attention. "Merck's is probably the first case of differential pricing implemented by Big Pharma in India," says Utkarsh Palnitkar, national sector leader for health sciences at Ernst & Young, in Hyderabad. "Other drug companies are adopting a wait-and-watch approach." 

For many, differential pricing is being touted as part corporate social responsibility and part hard-nosed economics. "Merck's tagline is 'Patients Come First,'" says Merck MSD's Naveen Rao. It is also a business strategy, however, as Merck aims to be among the top five drug companies in India by 2015. It is currently ranked 120, according to the market research firm ORG IMS. 

Although Merck is a well-chronicled example, GSK's Corporate Communication Officer Sunder Rajan says that differential pricing has applied to several products. "The function of price depends on how much the market can absorb. Pricing is technical and is based on local conditions," he adds. 

In a country such as India, dual pricing imposes a dual challenge. "We have two Indias within India," says Ranjit Shahani, CEO of Novartis India. "On one end, there are people who can afford world-class medication and prices, and on the other hand, there are many who can't afford one square meal a day. Drug firms have to recognize this basic difference. The challenge remains how they will continue to do business in India which, today, is a branded generic market," adds Shahani. 

Different pricing approaches can also prevent sensible collaboration. For example, Mumbai-based Cipla offered to sell its 3-in-1 anti-AIDS drug, "Viraday," which contains the active ingredients tenofovir disoproxil fumarate, emtricitabine, and efavirenz, at Rs 21,000 ($500) per year to Doctors without Borders. In India, the drug is priced at Rs 54,000 ($1285), thus restricting access to many AIDS patients. Cipla does, however, conduct a quarterly review of its prices for AIDS drugs and is expected to lower prices this month. 

There are other inherent flaws of dual pricing. Companies are aware of the danger that cheap drugs intended for the poorest individuals will be pilfered and sold at a profit to the urban middle classes or shipped overseas to rich countries. Not only can these illegal practices defeat the entire purpose of differential pricing but companies affirm they can damage profitability, introduce a risk of mislabeling (when goods are repackaged), and serve as an entry point for counterfeit drugs. 

India's developed and developing pockets pose a challenge as well. How does one divide markets within the same country and more importantly, how does one prevent price arbitrage within these markets? The question is a quagmire alright, but one which Big Pharma is clearly not willing to address for now, in its eagerness to get a larger slice of the market. 

A. Nair is a freelance writer based in Mumbai, India. 

Differential pricing is making more than just an appearance in Asia's pharma market these days.

India, a main source of inexpensive AIDS drugs, is in the midst of a patent quandary. Patent wrangles have become almost 

since the country passed the 2005 Patents Amendment Act. A New Delhi high court judgment, expected soon, has the potential to change the rules of the game. Similar to Switzerland's Novartis "Gleevec" battle, a new case promises to become the second test case in less than a year to tackle the way the Indian judiciary balance public health issues and patents owned by multinational pharmaceutical manufacturers. 

In a first, Mumbai-headquartered Cipla launched in January a generic version of a drug with the full knowledge that the original has been patented in India. The patented product is a lung cancer drug marketed by Switzerland's F. Hoffmann-La Roche under the brand name "Tarceva" (erlotinib). (Roche received an Indian patent for "Tarceva" in July 2007.) Roche India has claimed patent infringement and asked the New Delhi high court to restrain Cipla from selling its generic version. Cipla's generic, erlocip, costs $42 per tablet, versus $125 for the Roche version.  

Because the Indian patent law allows pre-grant as well as postgrant opposition, Roche's patent is not the only one being challenged. In the case of pregrant opposition, Torrent Pharmaceuticals (Ahmedabad) is opposing AstraZeneca's (United Kingdom) cholesterol reducer "Crestor" and Mumbai's Ajanta Pharma is opposing Eli Lilly's (Indiana) "Cialis." New Delhi's Ranbaxy Laboratories is challenging Pfizer's (New York) antifungal "Vfend." 

In postgrant opposition cases, Mumbai-based Wockhardt is objecting to Roche's patent on the Hepatitis C drug, "Pegasys." Meditab Specialities (Mumbai) has opposed the grant of a patent to the Gilead-Roche combination on its bird-flu drug "Oseltamivir" and Ranbaxy has challenged the decision to grant a patent for Roche's anti-infection drug "Valcyte" in India. 

The patent fight is not limited to multinationals. Domestic companies are also suing each other to gain access to a population of over 1 billion in India. Cipla and Hetero (Hyderabad), for example, have opposed Wockhardt's patent application on the antibacterial drug "Nadifloxacin." India's leading drug firms, Ranbaxy Laboratories and Cipla, are believed to have filed as many as 70 oppositions (Ranbaxy–55; Cipla–15), some against each other and some against other domestic companies.  

"Cipla's case for 'Erlotinib' is undoubtedly a legally risky move," says Ranga Iyer, president of the Organization of Pharmaceutical Producers of India, a body of multinational drug firms operating in the country. "Launching a generic version of a patent product is an  infringement of the patent and it amounts to violation of the country's law." 

Gopakumar Nair, a patent consultant based in Mumbai, holds a different view. "Erlotinib is a derivative of another known cancer drug, 'Gefitinib,'a pre-1995 invention of European drugmaker AstraZeneca. Since the Delhi patent office had denied a patent for this (AstraZeneca) drug, a patent for its derivative will not be strong, and the generic company can get the patent revoked through a post-grant opposition." 

Be that as it may, Cipla started a new trend in the HIV/AIDS drug market a few years ago by offering generic versions at one-tenth the cost of prevailing brand drug prices. Cipla contends that Roche's "original invention date does not justify the claim for patent," according to Amar Lulla, managing director of Cipla in an interview before the litigation case commenced.  

On its part, Roche is not ready to buckle. "If any company launches this product in India, it is an infringement of the patent and we will be forced to take necessary action immediately," Roche India managing director Girish Telang said before filing the patent infringement case.  

"The case in India is not about patient access," maintains Ranjit Shahani, vice-chairman of Novartis India. "Lost in this debate is that patents help patients by stimulating the long-term research and development efforts needed to develop breakthrough therapies like 'Gleevec.' Furthermore, India is seeking to expand its research-based pharmaceutical industry. This can only grow if patents are respected, allowing for collaborations with international companies and encouraging R&D investments." 

 Patent lawyers in Mumbai point out that the developments around "Tarceva" are assuming similar contours as Novartis' "Gleevec" case, with a steep price difference between "Gleevec" and its generic versions ($2600 versus $200). 

Although there are conflicting statistics on the number of patients suffering from chronic myeloid leukemia in India, who could benefit from "Gleevec" or its generic, approximately 9000 patients currently get free treatment under a program Novartis runs with the Max Foundation. But critics point out that global drug companies would rather give drugs away than reduce prices in one country, in order to protect rates in developed markets. 

After it lost out on the patent for "Gleevec," Novartis decided to abandon its plan to set up a research and development center in Hyderabad. Novartis CEO Daniel Vasella has said that he would move millions of dollars in planned investments from India to other locations, primarily China. Indian companies and medical experts though are unfazed. 

Comments D. G. Shah, secretary-general of the Indian Pharmaceutical Alliance (IPA), "Patent wrangles  have ensured more bargaining power for developing countries. Multinational drug companies have been compelled to cut prices, in some cases, by dramatic margins." 

 Adds Chan Park, senior technical and policy advisor at the Lawyers' Collective HIV/AIDS Unit, a New Delhi-based group that works to enhance access to treatment, "We know of no more effective means of reducing prices for drugs than robust generic competition." 

"Patent fights will encourage domestic pharmaceutical companies to strive for real innovation and not run after trivial changes, as has happened in the USA," declares IPA's Shah. "Ever-greening is famous in the West, which also has regimes supporting minor changes. The liberal patenting regime in the USA permits any trivial change to be patented, whereas the Indian law permits [this] only where there is incremental innovation. This is good for the progress of science and ensures balance between the interests of the consumer and the innovator."  

A. Nair discusses patent disputes in India.

The $6.3 billion Indian pharmaceutical industry is at a crossroad. Aiming to be the international home for quality drugs, which could in itself propel India's market to $20 billion by 2015 according to recent estimates, the generic hothouse is clearly moving beyond its earlier low-cost mindset. 

Indian drug manufacturers are focusing on gaining leadership in their core, low-cost generic drug businesses by improving operating efficiencies and investing in innovation. The Indian government is also creating the right investment climate for both multinational corporations (MNCs) and Indian companies by addressing key concerns about intellectual property protection. In 2005, the government adopted the Patents Amendment Act to make the country compliant with the World Trade Organization's TRIPS regulations, which ultimately improve parallel trade and bring quick regulatory clearances. 

Globally, India's drug industry ranks fourth in terms of volume (8% share of global sales) and 13th in value (1% share of global sales). The country produces 20–24% of the world's generic drugs (in terms of value) and is one of the top five active pharmaceutical ingredients producers (6.5% share), growing at 8–10% annually, according to a directive by India's Ministry of Commerce and Industry. 

A study by McKinsey & Company confirms the fresh demand in India for drugs and pharmaceutical products in the forthcoming years. "Sheer size of the Indian market is one aspect. What is important is the incremental growth," said Palash Mitra, one of the study's authors. With the market set to add $14 billion in demand by 2015, competition and the need for innovation in drug processes and marketing strategies will balloon, he added. 

The challenge will be different for large domestic companies, their smaller rivals, and MNCs, according to McKinsey. Large Indian companies will have to contend with aggressive attacks by smaller companies and the introduction of patented products by the major players, while the smaller companies will need to learn to manage size and complexity. In the past few years, larger drug companies have been growing at around 9% per year, an average growth rate as compared with other sectors, but smaller companies rose more rapidly, to the tune of 12%–14%. This growth has come at the cost of Big Pharma, which has been losing market share since 2000. The local industry has edged out MNCs whose 75% share of the market in 2000, fell to 35%. 

Echoing these sentiments, a 2007 Goldman Sachs report predicts that India will be the fifth largest pharmaceutical market in the world by 2020, with global sales of $43 billion. Factors helping the surge include a growing middle class segment with disposable incomes, and increasing incidences of lifestyle diseases such as diabetes and hypertension. The gradual shift in disease profile and adoption of patented products is also boosting demand. 

Consequently, a number of MNCs have entered the Indian market, and 16 of the 20 largest drug companies in the world already have a presence in India. In fact, drugs and pharmaceuticals make up the eighth largest foreign-direct-investment sector in India. 

The country is already home to some of the world's most prominent makers of generic drugs, including Dr Reddy's Laboratories (Hyderabad), Ranbaxy Laboratories (New Delhi), and Sun Pharma (Mumbai ), all of which compete with US-based companies such as Merck and Pfizer. Indian companies are also using acquisitions to increase their market muscle and geographical reach. 

"Indian generic companies have been particularly active in acquiring smaller foreign generic companies, especially in Europe and the US. They are potentially the most aggressive and are now able to get financial backing to contemplate the acquisition of significantly larger companies," says one industry analyst. Local players garnered a combined commitment of about $221 million from large private equity players in 2005, alone. 

The market does have its negatives though. McKinsey's Gautam Kumra says the Indian government needs to expand its healthcare infrastructure to rural hospitals and clinics. "Around 90% of the Indian population is uninsured and must pay out-of-pocket for pharmaceuticals and healthcare services. Helping to accelerate the growth of private insurers in India would drive up drug sales," he explains. 

Ashish Singh, managing director of Bain, a global business consulting firm, noted: "If Indian pharma is effective in shoring up its operating and cost structure, promoting innovation and gaining more regulatory credibility, the challenges both from mature markets and from developing countries like China should substantially lessen." 

At the same time, a Bain report states that although India continues to rise, it pales in comparison to China as a destination of choice for low-cost drug manufacturing. 

The overall facts, however, remain positive for India. Drug exports bring in more than $2 billion. There are 170 biotechnology companies in India involved in the development and manufacture of genomic drugs. Sequencing genes and delivering genomic information for Big Pharma is considered the next boom industry in India. And, Indian companies are getting more aggressive in expanding their global footprint. Mumbai-based firms Nicholas Piramal, Sun Pharma, Glenmark, Wockhardt, and Cipla have deals that span five continents—the surest signal of the growing global ambition of Indian pharma companies. 

The $6.3 billion Indian pharmaceutical industry is at a crossroad. Aiming to be the international home for quality drugs, which could in itself propel India's market to $20 billion by 2015 according to recent estimates, the generic hothouse is clearly moving beyond its earlier low-cost mindset.