Indian Pharma Sector: Evolving to Innovation

The enactment of the Indian Patents Act of 1970, implemented in 1972, provided an open platform to the Indian pharmaceutical industry to adopt process patents to manufacture active pharmaceutical ingredients (APIs) and formulations without fear of infringement of product patents. This resulted in a phenomenal growth in the number of pharmaceutical manufacturing units, from 2257 in 1970, to 5156 in 1980, 16,000 in 1990, and more than 23,000 in 2005. This was accompanied by a steep increase in investment from Rs. 2.25 billion (approx. $250 million US) in 1973, to Rs. 45 billion (approx. $1 billion US) in 2002–03. The prices of the most advanced drugs dropped significantly in India, leading the Indian pharma sector to become more competitive while remaining extremely cost effective in the global market.

These advantages, however, came with the major drawback of not recognizing the importance of new drug discovery in the Indian pharmaceutical sector, thus creating the conditions for a lack of scientific knowledge, personnel, and processes required for successful new drug discovery. However, significant contributions from the Indian pharmaceutical industry, which include the most innovative manufacturing units, developing the most cost-effective processes, and exceptional medicinal chemistry knowledge, have been recognized globally. India's becoming a signatory to the World Trade Organization (WTO) in 1995, and the recent implementation of product patents, have brought about a paradigm shift from process to product innovation and have compelled major Indian pharmaceutical industries to invest in new drug discovery.

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Discovering new drugs: an Indian scenario

The first new drug discovery center in India was started by Ciba-Geigy in the early seventies, followed by Hoechst, Boots, and AstraZeneca. Ciba-Geigy and Boots decided to close their R&D ventures, while the Indian company Nicholas Piramal acquired Hoechst's center. Presently, AstraZeneca is the only multinational corporation (MNC) that has drug discovery operations in India. It is essential to recognize that these operations were initiated when Astra was an independent company and were supported jointly by the Indian Government to conduct research on tuberculosis It is also interesting to analyze why, despite implementation of product patent law, multinational companies have not invested into drug discovery in India.

A survey conducted by the Department of Science and Technology in 2002 suggested that the R&D activities of MNC subsidiaries are minimal in India and mainly directed towards formulation development or troubleshooting. This is demonstrated by the fact that R&D expenditure by Indian Pharmaceutical companies stands at 2.6%, which is three and a half times more than MNC R&D, which is low and static at 0.74%. Initially, the cost of drug discovery in India, which is one-tenth of the cost of discovery in the West, was expected to be a major attracting factor for MNCs to establish their R&D efforts in India. This has not been the case, as there are multiple factors responsible for deterring MNCs from initiating drug discovery in India.

MNCs are not yet confident in India's Intellectual Property Rights (IPR) and are closely watching unfolding scenarios to see if their investments in R&D are going to be protected. The cost factor is no more the sole attractive attribute, as subsequent studies have proven that only the research component of discovery, which is about 20% of the total cost, may be lower in India while the development component will be the same as elsewhere in the Western world. This is mainly because, as of today, there is no toxicological center in India recognized by the Organization for Economic Cooperation and Development (OECD), and global regulatory authorities can only accept data originated from these centers. There are few preclinical clinical research organizations (CROs) whose facilities are recognized by specific members of OECD countries. Even Indian drug discovery companies have to outsource their regulatory toxicity component outside India. The situation existing today is a result of earlier regulations by the Committee for the Purpose of Control and Supervision of Experiments on Animals (CPCSEA), which is nonscientifically tilted toward animal welfare. The existing preclinical CROs are mainly generating data for submission to the Drug Controller General of India, and even though they are following OECD guidelines, they have not established credentials accepted by regulatory authorities of developed countries. Indian pharmaceutical companies involved in new drug discovery have adopted a model whereby potential drug candidates coming out of their discovery efforts are out-licensed to MNCs for further development. They are therefore compelled to rely on an OECD-recognized preclinical CRO and the US Food and Drug Administration.

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As mentioned earlier, the implementation of product patent law has brought about investment in new drug discovery among the most modern Indian pharmaceutical companies. Initially, Ranbaxy and Dr. Reddy were the first companies to initiate discovery programs in the early nineties. They had significant success in terms of out-licensing a couple of molecules to MNCs. Unfortunately, none of these molecules could strike market success due to a variety of reasons. Subsequently, Wockhardt, Zydus-Cadila, Glenmark, Lupin, Orchid, and Torrent have also invested in discovery research to follow an out-licensing strategy. The most noticeable success has so far been achieved by Glenmark, who out-licensed its asthma molecule to Forrest Laboratories in the US and its diabetes molecule to E. Merck.

In addition to the private pharmaceutical companies, there are institutes under the umbrella of the Council of Scientific and Industrial Research (CSIR) and the Indian Council of Medical Research, and government-funded organizations also involved in new drug discovery from natural resources. The Central Drug Research Institute and Lucknow-based CSIR Laboratories are the oldest institutes carrying out plant-based research for the last fifty years. Very few success stories were written, and they were primarily restricted to India. Yet, the significant result of the intensive Indian discovery efforts have made both government-run and privately owned pharmaceutical companies major contributors toward global patent filings, as demonstrated by the 56 patent filings filed between 1995 and 1999, compared with 246 patent fillings during 2000– 2004. However, despite recording more filings, Indian firms still spend a very small percentage on R&D expenditure, with an average of 2% compared with foreign firms' R&D expenses of 18%.

The fact that a major part of pharmaceutical manufacturing in India is for generic products does not truly reflect the innovation as based on R&D investments and patent filings. The R&D expenses encompass all components of development costs, such as preclinical toxicity, formulation development, and clinical trials for generic molecules destined for the Indian market and therefore do not clearly define the cost of discovery or development of new chemical entities.

There have been a growing number of contract research organizations in India in the recent years. There is also a major shift from chemistry-oriented contract research to biological screening-based support and chemistry-based lead optimization. Presently, India is a preferred destination for chemical activities like custom synthesis, contract manufacturing, and clinical research because of a huge heterogeneous and treatment-naEFve patient population coupled with cost efficiency.

Destiny to new drug discovery

The growing realization of limited products available for market as a result of product patent law has compelled futuristic Indian pharmaceutical companies to a paradigm shift from reverse engineering to new drug discovery. The government of India also has encouraged innovation by providing fiscal incentives to R&D companies. In the recently presented budget, the benefit of 150% weighted deduction on R&D expenditure was extended up to 2015. Additionally, according to recommendations made by the Committee for Pharmaceutical Research and Development's Dr. R.A. Mashelkar, weighted deduction of 200% will be given to any company, if they meet the following specified norms: a) Investment of 3% of annual sales or Rs.500 million (approx $1.2 million US) per annum (average of last 3 years), or whichever is higher, is spent on research; b) 200 scientists employed at least for the period of one year; d) filed 10 patents resulting from research conducted in India; and d) the manufacturing facility is approved by two reputed regulatory agencies. Furthermore, the Department of Science and Technology has devised a number of schemes to encourage discovery research in the country. However, domestic companies are yet to invest in new drug discovery because of financial limitations and risk of failure.

The research environment will definitely take positive course in due time, as urgency to innovate to remain an active player has been mandated by Indian pharma, and as dedicated facilities exclusively for new drug discovery have been created. There is already a trend of "reverse brain drain" conducive to a research environment and IPR protection and fiscal benefits offered by India's government to facilitate the discovery of new drugs within the country. There is still a need to evolve novel biology and chemistry, as almost all of discovery research is analogizing or patent bursting.

The future of new drug discovery in India is destined to witness a favorable shift in due course, with MNCs opting for alliances and joint ventures with innovative Indian firms taking advantage of scientific talents, cost and time efficiency, government policies, and a heterogeneous patient pool. Indian companies, which offer comprehensive integrated infrastructure from discovery to development, will be most favored.

Dr. Aftab lakdawala is an expert on setting up laboratories geared toward new drug discovery. He was responsible for setting up Glenmark and Wockhardt's facilities and now works with Avaant Pharmaceuticals.