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CHAPTER 5

5.0 Findings and Discussion

Research reveals that India has grown from strength to strength in

U.S. bulk drug market. As on 24 October 2011, India stands first in terms

of number of DMF filings and number of companies (18.39%) filing on

Indian facilities with 34.85% of all DMFs with U.S.FDA for 26·71%

molecules. The DMFs filed by India are almost double the number of DMFs

filed by U.S. local firms (15.62%) with U.S. ranking second in the list of top

10 countries that filed maximum number of DMFs with U.S.FDA.

The country experienced a rapid growth in its DMF filings during the

last 10 years, especially so between the six years from 2004 to 2010.

Nearly, 84.36% of all the current active DMFs have been filed during the

last 10 years with more than two-third of them during the last 6 years

alone. Over 18% of the companies having DMFs with U.S.FDA, are on

Indian facilities. Eight of the top 10 companies that filed DMFs, are from

India.

This high number of filings not only creates a competitive situation, as

formulation product manufacturers can ‘shop’ around in India but also would

act as an encouraging factor to start formulation facilities as DMF material

would be readily available.

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It was further observed that the foreign companies account for nearly

38% of all the companies having DMFs on Indian facilities. Especially

during 2009 there was large number of filings by foreign companies on

Indian facilities. This indicates that India has emerged as global destination

for contract manufacturing in bulk drugs.

The secret behind this aggressive filing of DMFs by Indian

pharmaceutical firms is to capture the impending opportunity awaited in

generics in the upcoming years for both bulk drugs and formulation

segments of the global Pharmaceutical market.

India is strong in DMFs of Anti hypertensive, Anti HIV, Anti diabetic,

GI Tract, Anti viral, Anti infective, etc. However, it has to make a mark in

fermentation products, controlled substances and steroids.

Of the total, active ANDAs, as on 28 December 2010, 91% are

prescription products while 4% are OTC and the remaining are tentative

approvals. India accounts for 12.24% of all product approvals and is

second to USA which has a share of 53.61% of all approvals in that

country. Also only 27 Indian companies hold these ANDAs compared with

211 companies from USA. It has products for 35.4% of all molecules and

accounts for 11.32% and 9.23% in prescription ANDAs and OTC approvals

respectively. Currently, it accounts for 15.47% of the prescription and OTC

generic products (ANDA approvals excluding biologicals, OTC, discontinued

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and tentative approvals). Country’s prescription generic approvals have

grown exponentially during the last 10 years. From mere 64 products in

2000, their number increased to 402 in 2006 and to 1533 in the year 2010.

Analysis reveals that, Aurobindo Pharma which is previously known

as bulk drug manufacturing stands first in number of product approvals

followed by Dr. Reddy’s, Zydus Group, Sun Pharma and Wockhardt.

India has highest number of approvals in U.S.FDA CNS category,

cardiovascular, anti infectives and GI tract. It is comparatively stronger in

number of approvals in Anti retrovirals, Anti microbials, CVS, anti-

diabetics, CNS and dermatologicals. However, it is poor in corticosteriods,

anti cancer and diagnostics, Biotechnology products including fermentation

products, complex chemistry, advanced dosage formulations and specialty

formulations. Out of total 753 molecules having prescription ANDAs, India

is present only in 14% of the molecules. It is observed that, in several other

molecules having more than 20 prescription approvals such as Diltiazem

HCL, Gentamicin Sulfate, Amitriptyline HCL, Lorazepam, Clonazepam,

Diazepam, Acyclovir, Fentanyl, Benazepril HCL & Hydrochlorothiazide

combination, Morphine, Theophyline, Meperidine HCl etc., India does not

have any approvals.

In U.S., Oncologics is top therapy by value occupying US$22.3bn. of

the market respectively.91 Respiratory agents, Lipid Regulators are the

other top therapies in 2010. However, Attention Deficit Hyperactivity

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Disorder (ADHD), HIV antivirals and Angiotensin II blockers tops the list in

growing therapies. India therefore needs to strengthen itself in the above

areas.

From the patent expiries of top 50 innovator molecules by sales, it is

observed that patents of several block buster molecules whose sales are

between US$723mn. to US$12.73bn. are expiring in the five years between

2011 to 2015. Atorvastatin, Montelukast Sodium, Esomeprazole

Magnesium, etc. are among the top molecules whose patents are expiring.

The opportunity from these top 50 molecules alone is valued at

US$63.85bn. even if their sales are assumed to remain same as in 2009.

Of this 80% market value will erode after patent expiry which implies the

market or generics is valued at US$12.77bn. Generic companies can

potentially capture 20-30% of this market estimated at US$2.55-3.83bn.

This will be additional market which India can capture.

Data available from 1996 to 2011 reveals that India has received very

few warning letters, eighteen in number. India in spite of being a top filer in

U.S. market relative to its number of approvals compared with other

countries indicating strong compliance capability of the country.

Four Indian companies viz., Ranbaxy, Sun, Dr. Reddy’s and Lupin

find place among the top 10 challengers. Trends in patent challenges by

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Indian companies indicate growing skills in patents domain and confidence

in Indian companies.

India’s total exports of drugs, pharmaceutical and fine chemicals in

the year 2010-11 stood at approx. US$10,393·54mn. Formulations exports

including biologicals occupy approx. 37% of the country’s exports followed

by bulk drugs, intermediates & excipients with a share of 24%, fine

chemicals 28% and Herbals at 6%. Medical & diagnostic equipment,

Medical devices and surgicals are estimated at 4% respectively.

Majority of the imports of India are fine chemicals with a share of

69% followed by bulk drugs, intermediates & excipients at 21%, Medical &

diagnostic equipment, surgical and diagnostic reagents at 14%,

formulations along with biological at 9% and Herbal at 1%. Currently India

exports to some 201 countries/territories of the world whereas it imports

from 139 countries/territories during 2010-11.

Analysis of India’s exports to USA based on statistics provided by

U.S. Government indicates that the country’s bulk drug exports have

started growing during the last 15 years. However, the exports crossed

US$100mn. marked only since 2001. During the five years from 2006 to

2010 the country’s exports have increased nearly four times in line with

growth in number of DMFs. During 2010, it exported over 3.8% of

formulation and bulk drugs to USA making it 12th largest country behind

Singapore, Italy and Japan. However, India is 10th largest formulation

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exporting country with a share of 4.66% and 18th largest bulk drug

exporting country.

From the multiple regression analysis of India’s DMF filings and

formulation product registrations it was found that there is a significantly

positive correlation with import of pharmaceutical product to USA from

India. These predictor variables explain nearly 98.78% of the variance in

pharmaceutical imports of USA from India. The regression model therefore

predicts that India’s pharmaceutical exports to USA are most likely to

reach US$9.07bn. assuming moderate or most expected growth rates of

DMF filings and ANDA registrations are at 20% and 30% respectively.

Under pessimistic or optimistic situations the exports may vary and range

from US$7.45 – 13.14bn. India’s pharmaceutical exports to USA would be

expected to continually grow during the five year period from 2011 to 2015

and would increase four fold in favorable market conditions or at the least

increase by more than double in pessimistic market conditions.

Considering the growing number of approvals granted to India in

biological products, corticosteroids, etc., it is likely to make a name for

itself for export of products in these categories to USA in the coming years.

Factors such as India’s presence in large number of countries with growing

populations, large installed capacities, and patent cliff, etc. would auger

well in sustaining the country as a prominent pharmaceutical exporter in

the near future.

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India currently has strong presence in generics in USA and has

presence in all most all developing countries and LDCs with growing

populations that demand less expensive generics. The expanding

population in developing countries implies that Indian pharmaceutical

business will continue to remain focused on volumes. India with its large

installed capacities, high number of product registrations, low

manufacturing costs, high technological skills, etc., is favorably disposed to

tap this opportunity. The rapid expansion of registrations in major markets

such as USA and ensuing patent cliff would add to the number of newer

molecules that would be produced in the country. These factors would

continue to fuel the growth of Indian Pharmaceutical industry in the

coming years.

Growing imports of bulk drugs and intermediates, biotechnology,

complex chemistry, product innovation, drug discovery, etc. into India on

the other hand indicate potential threat to bulk drug industry and export

potential may be threatened severely due to this. Overcoming these

weaknesses can result in unleashing India as true challenger not only in

USA but also globally.

At the same time India has to overcome several challenges facing it to

reach its full potential. In formulations, the country has to upgrade itself

into next orbit through incremental research like changes in dosage form,

composition, route of administration, new formulation and combination of

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individual approved molecules, etc..92 It is well known that commodity

generics have low barriers of entry and low margins of profits due to

competitive pricing while specialty and super generic drugs have higher

margins.93 The country needs to strengthen itself in development and

production of complex molecules, specialty generics and advanced dosage

forms (value added products).

Secondly, biopharmaceuticals is an emerging segment in global

healthcare industry. The global biotech sales increased by 12·5% while

pharmaceutical sales increased by 6·4% in the year 2007. Several of the

most successful and pioneering drugs of this decade are biologics.94 For

example, Rituximab, Adalimumab, Bevacizumab, Etanercept and

Infliximab and have more than US$3.10bn. in annual sales globally.94

Research based on patent database ‘Dialogpro’, it is observed that several

biologicals such as Neupogen, Novolin, Protropin, Activase, Epogen,

Nutropin, Avonex, Humulin, etc., have already expired creating space in

biogenerics. It is estimated that by 2012, nearly half of all newly approved

products by U.S.FDA will be biopharmaceuticals. Currently there are

around 150 biopharmaceutical drugs in the world.95 The sales of

biologicals are estimated to touch around US$227bn. by 2015.96

Biopharmaceuticals have high technology focus and offer higher profit

margins. The pharmaceutical industry situation can dramatically change in

industry landscape through large number of technologically focused

biotech companies with customized manufacturing.

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India has very little presence in the world markets in biologics and

the country depends on Chinese imports for many of the biotechnology and

fermentation based products. On the other hand China has been

strategically developing in biotechnology segment and is well advanced in

molecular biology, gene therapy, genomics and proteomics research.97

Finally, India has just embarked on drug discovery. India’s first

indigenously-developed NCE that has entered into Phase III clinical trial is

Balaglitazone developed by Dr. Reddy’s Laboratories. However, the current

balance sheets of the domestic companies do not permit the investments

required for drug discovery projects in any significant way. Further, India

has made a simple beginning through alternate path ways of drug

approvals in USA such as 505(b)(2), international acquisitions, etc. The

country requires consolidation of its industry to progress into drug

discovery.

The emergence of firms in developing countries and their

transformation into multinationals has been one of the distinctive

phenomenon in the globalization of pharmaceutical companies during the

last two decades. This is an opportune time for Indian pharmaceutical

firms to diversify their exports to exploit niche or specialty generics in

international markets. The future for India’s pharmaceuticals industry lies

in flexibility, speed & supply chain strengths. Neither innovation nor

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generics but only ‘compelling total offer’ would put the country among the

very top.

CHAPTER 6

6.0 CONCLUSIONS AND RECOMMENDATIONS

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CONCLUSIONS

Research reveals that India has emerged as strong competitor in US

generic markets as well as Bulk drug markets. India’s strength in product

registrations (both API and formulation) with U.S.FDA is clearly visible from

the significant increase in number of bulk drug registrations and

formulation approvals. Furthermore the country’s proven R & D

capabilities are understood due to the large number of U.S.FDA compliant

facilities outside U.S. in India. India ranks first in countries and companies

filing type II DMFs with U.S.FDA and second in terms of molecules. In

Formulation product approvals, India is second next to U.S. in generic drug

approvals granted by U.S.FDA and number of companies filing these

ANDAs. India accounts for one third of all DMFs and 30% of all ANDA

approvals granted by U.S.FDA.

The country’s share in DMF and ANDA registrations during the

past 5 years clearly demonstrates it aggressive ambition. There are over

1000 molecules that provide great opportunity for India to expand its

presence in U.S. pharmaceutical market. Indian generic companies can

potentially capture the golden opportunity of approximately US$2.55-

3.83bn. arising from the patent expiries of several block buster molecules

in the upcoming years.

Analysis of the past 21 years (1990 to 2010) India’s pharmaceutical

export data (bulk drugs and formulation) to U.S. revealed that bulk drug

exports to U.S. would continue to grow at a CAGR of 20% and formulation

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exports at 30% in the next five year period (2011 to 2015). India’s exports

to U.S. may reach U.S. $13.14bn., by 2015 under favorable market

conditions or at the least U.S. $7.45bn. Under pessimistic market

conditions. High level of imports to U.S. from India is a sign of quality

indicator. Product innovation, biogenerics, alternate regulatory pathways

such as 505(b)(2), complex chemistry, clinical trials, contract research, etc.,

hold the key for future.

RECOMMENDATIONS

• Government in cooperation with the Private sector should

understand the market scenario issues pertaining to IPR, cGMP, legal

CROs/CMOs capability compliances and diffusion of talent pool as they are

limited to top companies only.

• Product development in the area of Biopharmaceuticals results in

high profits and low competition.Product innovation, Biogenerics, alternate

regulatory(registration)pathways such as 505(b)(2), complex chemistry,

clinical trials, contract research, nanotechnology are the key areas to

focus.

• Indian companies should practice paragraph IV challenge as a core

business strategy in order to take advantage of the exclusive marketing

rights for 180 days.

• Any outsourcing for the purpose of R&D should be eligible for

deductions under R&D expenditure.

• Investment in quality should be treated on par with R&D in terms of

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import duties and weighted deduction is a step in rejuvenating Indian

quality environment.

• Talent gaps in niche R & D and specialized skills like Patent

Attorneys,Market Research

Analysts,Pharmacologists,Biologists,Epidemiologists,Toxicologists,Medical

device specialists, CRAs, Biostatistician and PIs need to be closed by

setting up of knowledge centers collaboratively with DST,DBT and

premier institutes like NIPER,CCMB,IICT,IIMs,IITs and Pharmexcil.

• Supply chain of medicines at affordable price in domestic market is

at great threat.

• Strengthen and protect the interests of Domestic market y framing

guidelines by govt. of India by monitoring Foreign acquisitions and

Mergers.

• Transformation of technology driven pharmaceutical industry into

market research based industry.

• Feasibility in obtaining funds from Banking sector.

• Significant impact on Health,Wealth and Lives of Global population

and in particular Indian too in coming years.

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Appendix I – Analysis of Molecule wise Patent & Exclusivity Expiry

Confidential

Appendix – II: Region-wise share of India’s Exports of Drugs,Pharmaceuticals & Fine chemicals

(figs. in USD mn.)

Confidential