Editor’s note: This article first appeared in India’s Financial Express
India needs to address the regulatory and legal roadblocks that are holding back biotech innovation
Under the leadership of Narenda Modi, the Indian government has shown it understands the need to develop the country’s innovative life sciences sector.
The government is due to announce a major reform of intellectual property laws, which it sees as crucial for developing modern, high tech industries. Meanwhile, the “Make in India” campaign and last government budget created a number of tax incentives and R&D initiatives aimed at increasing private and public sector research investment.
Such reforms are overdue. India’s generic drug manufacturing industry constitutes a healthy 10% of the volume of the global pharmaceutical industry, but only 1.4% of the value.
If the sector is to help propel India towards the next stage of economic development, it needs to be generating much more value: and that means creating medicines instead of just manufacturing copies of those invented elsewhere.
Consider that the US pharmaceutical industry, largely comprised of innovative, R&D-focused companies, generates a direct output of USD461,000 per employee, compared to the USD149,000 average for other sectors. In Europe, the pharmaceutical industry contributed an international trade surplus of USD54bn. It is no wonder western governments view these industries as major economic assets.
If Indian pharma is to help propel the country towards the next stage of economic development, it needs to be generating much more value: and that means creating medicines instead of just manufacturing copies of those invented elsewhere.
There is no reason why India cannot grow its own innovative biopharmaceutical sector. It has a well-developed scientific base, with a large number of highly skilled researchers and scientists. It is one of the six most bio-diverse countries and its 8,000km coastline has a wealth of marine organisms that could provide fertile territory for drug research.
The country’s relatively liberal regulatory regime makes it a promising location for stem cell research, cell engineering and cell-based therapeutic R&D. Meanwhile, its well-established strengths in information technology area means it is emerging as a leader in the use of computer science, statistics and mathematics to analyse and interpret biological data – crucial for modern biotech research.
While the Indian pharmaceutical industry is still dominated by manufacturing of drugs invented by (mainly foreign) companies, things are starting to change.
India is now becoming a serious player in vaccine innovation, for instance, with Hyderbad’s Bharat Biotech’s innovative H1N1 influenza and rotavirus vaccines and the two anti-malaria vaccines under joint development between Ranbaxy and Bharat Biotech.
Domestic companies also promise much in active therapeutic proteins, protein and antibody production and fabrication of diagnostic protein chips.
Patients are also benefiting from changes in the Indian industry. Bangalore’s Biocon is close to releasing an insulin product that can be consumed orally. If successful, it could spell the end of the daily injections regime for around 387m people with diabetes worldwide, including 67 million in India.
While these are early signs of success, the industry has a long way to travel. While its “R&D intensity” (the amount it invests in R&D as a % of sales) has been rising for several years and now stands at 6%, it is well short of the 20% typical of Western pharma companies.
Indian innovators need to integrate more deeply into the global economy
India spends just 1 percent of its GDP on research and development, with up to 80 percent of that money coming from government. By contrast, about 75 percent of research funds in wealthy countries come from the private sector.
In addition to the reforms proposed by the Modi government, India’s overall innovation ecosystem needs work.
In highly innovative countries, the academic and private sectors collaborate constantly in their research, each leveraging the advantages of the other. While there is some collaboration in India, the two worlds remain largely isolated from each other. Simple rule changes in this area could bring the two closer together.
India spends just 1 percent of its GDP on research and development, with up to 80 percent of that money coming from government. By contrast, about 75 percent of research funds in wealthy countries come from the private sector.
Another challenge is to provide a domestic market for local innovations. Other innovative countries tend to cover new drugs and technologies in their healthcare systems, for instance, which also improves the quality of care and health outcomes. Health insurance in India – where it exists – generally only covers older, less effective medicines making it difficult for R&D companies to get a foothold in the market.
These failings aside, one way to accelerate the transformation of Indian pharma manufacturers into R&D companies is for them to enter into international alliances with multinational companies. Such cross border alliances import skills, finance and knowledge which are not always locally available, giving Indian companies a shortcut to upgrading their ability to conduct R&D.
This is already happening on a modest scale, most recently Sun Pharma’s Frebruary tie-up with AstraZeneca to promote and distribute its new anti-diabetes drug in emerging markets. But more tie-ups are needed to give Indian pharma a skills boost and bring new technologies into the country.
One thing foreign investors need in this sector is certainty over their intellectual property rights, which need to be clearly defined and readily enforceable. Despite the government’s focus on this area, recent Indian court decisions around patentability and compulsory licenses make potential investors nervous, and could put a brake on the sector’s development.
“If India can successfully tackle the gaps in infrastructure and challenges in policy and funding, the country has a huge potential to become the leading global innovation hub for biotech,” according to Kiran Mazumdar-Shaw, chairman of Bangalore-based biotech company Biocon.
The opportunity is there: it is up to Indian policymakers to grab it.
By Philip Stevens and Nilanjan Banik
