The Hindu Business Line : Balancing affordability, intellectual property

INDIAN drug makers woke up to opportunities ushered in by a new product patent regime in 2005. But as the day wore on, it just got more difficult. Litigation, pricing uncertainties and sheer competition forced domestic drug makers into a tight spot. Different companies reacted differently - some got active abroad, others scouted for consolidation attempts at home, and still others ramped up research.

Multinational drug companies kept a vigilant eye on how the Indian market evolves into the product patent regime. But the other eye, however, continued to actively watch opportunities in China and other East European countries.

P is for patents: It was in a sense the Y2K of the pharmaceutical sector. January 1, 2005 was like the Year 2000 bug for the sector that could upset the applecart if companies were unprepared.

In the midst of debate, India kept its promise with the WTO and brought in the Patents (Amendment) Act 2005. The Centre tried to allay fears that medicine prices would skyrocket beyond the reach of ordinary people.

Generic companies, often unceremoniously referred to as makers of copycat drugs, were now not allowed to make copies of new patented medicines. But the ground realities are still to reflect marked deviations in prices.

A product patent is still to be issued under the new patent regime and clarity is still to dawn on the definition of patentability or the royalty, for instance, that generic drug makers may have to pay innovator companies if a patented drug is copied. Novartis's blood cancer drug, Glivec, is still mired in patent-related litigation. With this being the situation, an actual assessment on the product patent regime may not be possible for another two years.

P is also for pricing: Mr Ram Vilas Paswan, Union Minister for Chemicals and Fertilisers, kept the pricing issue alive through the year. Too many committees looked at the pricing issue and there still remains uncertainty.

While the Minister's tirade against high trade margins that push up drug prices may have made consumers happy, there still are no clear pricing guidelines. The draft of the proposed new policy comprises drugs whose prices will be controlled, some whose prices will be monitored, and still others whose price will be capped at the average of the top three prices in a particular therapeutic category.

The draft has tried to address procurement and health insurance for families living below poverty line. But there is a huge need to strengthen the distribution network, from rural primary health centres to urban tertiary hospitals. As often parroted by drug companies, medicines account for only about 15 per cent of a patient's medical bill.

Emergency preparedness: Bird flu may not have been officially reported in India. But it certainly exposed the tricky situations India could face if confronted with a health emergency in the patent regime.

Cipla offered to make the generic version of Tamiflu, a bird flu drug marketed globally by Roche. But it was not without its patent twists and turns. Hetero notched one up for itself, by receiving a sub-licence from Roche, a first in the new patent regime.

Spate of acquisitions: The Indian drug company's appetite seems to be insatiable, with companies such as Matrix, Nicholas Piramal, Sun Pharma, Glenmark, and Hikal acquiring companies overseas.

More is expected from companies such as Ranbaxy, Wockhardt and Sun Pharma, for instance.

Besides proximity to the markets they operate in, size becomes critical to compete with other generic giants like Teva or Sandoz.

The last year has possibly seen more acquisitions by Indian companies than the last 50 years. However, a proposed mega-merger between Matrix and Strides came unstuck, even before it happened.

Exports and research: Exports have helped drug companies big and small to bolster bottomlines.

And though companies like Ranbaxy have faced intense pricing pressure in the US market, for instance, a host of medium drug companies continue to train their guns on this market.

Research is increasingly featuring in the local drug company's vocabulary, but patent litigations abroad did bleed some initiatives.

Ranbaxy was on the backfoot in the high-profile case regarding Pfizer's blockbuster Lipitor, for instance.

But Dr Reddy's cushioned its research and litigation expenses with some help from ICICI Venture.

Towards 2006: Pfizer launched impotence drug, Viagra, in India late this year. And the coming year promises more drugs from MNCs. But will they come in critical segments and will they be affordable?

Domestic drug companies will continue to face the same realities as 2005.

But possibly the most important role will be played by the Centre. It will have to strike a balance between keeping prices affordable and protecting intellectual property.