Drug firms court MNCs for tieups

Eli Lilly, GSK get marketing alliance proposals.

For over three decades, many Indian pharmaceutical companies had cocked a snook at the top names in the industry.

But now these Indian companies have begun courting the big firms to market their products in India. Leading foreign firms like GlaxoSmithKline (GSK) and Eli Lilly have been inundated with such requests.

"We have been approached by a large number of Indian firms and are in talks with half a dozen. I have forwarded many cases to Indianapolis (the Eli Lilly headquarters) and 2-3 teams are expected to visit India in the coming months," said Eli Lilly India Managing Director Rajiv Gulati. Eli Lilly has appointed two full-time employees to co-ordinate business in India.

GSK, too, has received such offers. "We already have a strong marketing network in India. But we are taking note of these offers for future reference," GSK India Managing Director S Kalyana Sundaram told Business Standard.

According to industry experts, there are about a dozen Indian companies with strong marketing networks and well-trained teams of medical representatives that can be looked at favourably by overseas pharmaceutical companies for alliances under an agreement called in-licensing.

Such an agreement allows Indian companies to market patented drugs produced by overseas companies. In return, the foreign partner gets a cut from the drug's turnover in India.

Already, a handful of Indian companies have got into such in-licensing agreements. Ranbaxy Laboratories has several agreements, including those with Atrix Laboratories and KS Biomedics. Nicholas Piramal India has about half a dozen agreements under its belt and is aiming for more.

Not so long ago, Indian and overseas pharmaceutical companies were at daggers drawn as patents laws in India allowed companies to produce any drug using a non-infringing process.

As a result, the market share of multinational pharmaceutical companies fell from 85 per cent in 1971, when product patents were abolished in the country, to 26 per cent in 2004.

But, with the country reverting to the product patents regime from January 1, Indian companies can no longer come out with clones of drugs patented after 1995.

At the same time, no Indian company has the financial wherewithal to discover and develop a new molecule as the exercise can cost up to $1 billion. This makes in-licensing a cost-effective and time-saving option.

Big drug firms get the marketing call "Indian companies will have to start partnering with overseas firms to create intellectual property on a risk-reward partnership basis," Ranbaxy President Malvinder Singh said.

Such an arrangement also works out to the advantage of smaller overseas pharmaceutical companies with proprietary products.

"For the bulk of mid-sized and small companies, it is not viable to enter the Indian market on their own, considering that they have small product portfolios, manpower hassles and marketing costs. Tying up with Indian companies is the only feasible option," Harinder S Sikka, Senior President, Corporate Affairs, NPIL said.

However, Gulati of Eli Lilly said the growth might be restricted to retail products where a strong marketing network was required, with companies preferring to market specialised products such as cancer drugs on their own.

"But there could be co-promotion where two molecules are competing with each other," he added.