In the pink of health

The pharma industry's $4.8 billion export revenue in 2005-06 came from the sale of generic drugs in more than 200 countries.

The $60 billion global demand for generic (off patent) drugs is the market space from which the Indian pharmaceutical industry draws all its current strength.

Almost all its export revenue worth $4.8 billion in 2005-06 came from the sale of generic drugs in more than 200 countries.

With fewer new drugs coming to the market, and more patented drugs getting off patent, the business potential in the generic space is expected to grow to $300 billion in the next five years.

A generic or off-patent medicine is the one that is manufactured using a slightly different chemical composition of the original patented drug. It is equally effective in treating a disease, as it is the bio-equivalent of the innovator's drug, and costs a fraction of the price of its patented equivalent.

The low cost is due to the minimal expense incurred in developing a copy of the original drug. While the innovator company has to prove the efficacy and safety of the drug through several phases of clinical trials, a generic drug maker can come out with his drug by just proving that its therapeutic effect on the human body is the same as that of the patented drug.

Indian pharma companies started manufacturing generic drugs after an amendment in the Indian Patent Act about 40 years ago, to recognise process patents in the country. This enabled Indian companies to develop low-cost versions of patented products, exclusively marketed by multinational companies in other parts of the world.

Indian companies also began supplying these drugs to the third world countries where it was legally possible to sell such generic drugs. Domestic drug makers also developed the skills to get their products (whose patent rights had already expired) approved in highly regulated markets like the US and the UK.

The generic space in the US, the world's biggest pharmaceutical market, got a facelift after the US Congress enacted the Hatch-Waxman Act, which standardised US procedures for recognition of generic drugs in 1984.

The US attempt was aimed at reducing the healthcare spend by the public sector. The US also introduced a system of 180-day market exclusivity for the first applicant who gets the marketing approval for a generic drug. This made the generic drug space more attractive for companies like Ranbaxy and Dr Reddy's Laboratories.

The trend in favour of generic drugs for social healthcare spend is catching up in several developing countries, while developed countries like Germany, the UK and Japan are also encouraging the use of generic drugs instead of costly patented medicines.

Considering the fact that almost half of the global generic market lies in the US and the UK, the generic drug companies in India are getting more business from the two countries.

However, the fight for a larger share in the generic business is getting cut-throat. The thinning patent-protected drug basket and declining profits have made innovator drug companies fight tooth and nail to extend patent protection on their medicines through litigation.

Increased pricing pressures in major markets and growing competition among the generic drug players are also major hurdles facing drug companies.

Indian companies hope to overcome this problem through selective marketing, co-marketing and early introduction of products.

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SNIPPETS

Growing units
The freedom to make generic drugs has led to the proliferation of drug manufacturing units in the country. There are over 15,000 pharma companies manufacturing hundreds of different brands of a generic drug. The small and medium scale sector itself accounts for over 8,000 units.

As a result, the cost of drugs in India is the lowest in the world. In drug production, India stands fourth in terms of volume and 13th in terms of value of production.

Patent Act
The amendment of the Indian Patent Act in 2005 to re-introduce product patents in drugs and pharmaceuticals has paved the way for the product patent regime in the country.

In other words, the amendment has made sure that the Indian drug industry, known for its exclusive strengths in generic drug business, will not be able to produce copied versions of patented drugs anymore.

The generic drug business in India will be limited to the existing drug portfolio.

For newer drugs, it will have to wait for a patent expiry. Here comes the significance of patent challenges.

Indian companies are increasingly scanning patent applications filed by drug innovators (mostly foreign multinationals) for loopholes in their patent claim. Any rejection of patent means another opportunity for generic drugs.

What's in a name
The term "generic drugs" has little significance in the Indian context as all drugs manufactured by Indian companies are generic in nature.

The recent changes in the country's patent law, which introduced the product patent regime in the pharmaceutical sector after a long gap, would once again bring about a clear distinction between generic drugs and patented drugs.

A drug, that is to receive product patent protection in future will have market exclusivity in the country. The generics will have to wait till the validity of their patent expires.