Global drug giants rediscover India

Process patents regime, low costs are big draws.

Years after many multinational pharmaceutical companies virtually abandoned the Indian market because of the Foreign Exchange Regulation Act, a restrictive drug price control regime and the lack of product patent protection, several are heading for India.

The list includes the US-based Ivax Corporation, Israeli drug maker Taro Pharmaceuticals and the US-based Merck & Co, all of which are understood to be sounding drug industry lobbies here on either buying local drug companies, or setting up plants in India. Health equipment manufacturing companies like Australia's Uscom, too, are also leaping into India.

Germany's Hexal AG, which has set up a liaison office in Secunderabad, is now planning a full-fledged push into India. Gerhard Schaefer, director, business development, Hexal AG told Business Standard: "Hexal has decided to build a formulation plant in Bangalore and is in the process of acquiring land and completing other formalities. The products to be manufactured there, from 2006 onwards, will be exported to Hexal's subsidiaries in all parts of the world. Hexal will invest at least 10 million Euros in the Indian facility. The company has already entered to partnerships with several Indian companies."

Not to be outdone, multinationals like Roche, Bayer, Aventis and Chiron, which are already here, have decided to make India their regional hub for active pharmaceutical ingredients and supplies of bulk drugs, apart from outsourcing clinical research. Pfizer, for example, has almost doubled its R&D expenditure in India. Novartis, Astra Zeneca, Eli Lilly and GlaxoSmithKline, too, are understood to be making India a global hub for clinical research.

The renewed interest in the Indian market is prompted by the product patents regime that comes into force in January 2005 "" India now recognises only process patents "" and by low costs.

Says Utkarsh Palnitkar, partner at Ernst & Young, "Innovative pharmaceutical multinationals, pressured by patent expirations in 2005, the increasing cost of drug development and declining productivity in R&D, are feeling more confident about intellectual property rights protection in India and are scaling up their investments."