Drug sales in India were $4.7 billion (€3.6 billion) in 2004 and have grown at a 20 per cent compound annual growth rate since 2000. India is the 4th largest drug market by volume, but only 13th largest by value.
Goldman Sachs (GS) Global Investment Report cites this growth as the reason why several Indian drug companies have revised their core strategies and target generic opportunities overseas. Aided by India's cost advantage (one-fifth of western costs) this has resulted in a surge of Abbreviated New Drug Applications (ANDA) being filed from India.
Currently, Indian companies enjoy a decisive 'cost advantage' over western drug firms. Estimated Indian drug costs range from one-fifth to two-fifths of western costs.
As a consequence, there has been a surge of ANDAs being filed by Indian companies (a quarter of all US ANDAs filed in 2004 compared with only five in 1997). GS estimate products totalling around $35-40 billion (€27-30.5 billion) in innovator sales are being targeted by India's generic industry at present.
Several of the Indian drug majors view their revenues from generics as a means to finance their longer-term ambitions of becoming research-driven international drug firms. Indian pharmaceutical companies are beginning to invest in R&D and we are witnessing the emergence of a portfolio of NCEs in India.
In 2004, India's 10 largest drug firms spent over $170 million on R&D, a figure that is expected to exceed $200 million by 2006. One of India's largest pharmaceutical drug companies Ranbaxy, has spent a cumulative $166 million on R&D since the beginning of its research efforts in 1994 and expects to spend 10 per cent of sales on R&D going forward.
While the overall trend appears promising, only two thirds of Indian research is currently directed towards API and formulation work and only a third of Indian research expenditure is dedicated to new chemical entities. In addition, 80 per cent of Indian NCE research is focused on 'prior art' and 'analogue' research.
GS believe that while 'novel' NCE research is likely to increase, Indian drug companies are expected to learn that drug discovery is a lengthy process characterised by a greater degree of failure than success.
GS acknowledged that some of the front runners were internalising this, made evident from notable failures in drug development (DR Reddy's and Ranbaxy are unlikely to see a new product launch this decade, despite beginning their efforts in 1993 and 1994 respectively.
The report concluded that many Indian companies have recognised that later stage clinical trials are too expensive to conduct independently and there is likely to be a proliferation of research partnerships between Indian and western drug firms such as those with Novartis (Dr.Reddy's, Torrent), Novo Nordisk (Dr. Reddy's), GlaxoSmithKline (Ranbaxy) and Schwarz (Ranbaxy).
Western pharmaceutical companies have increasingly focused on the country, allocating a considerable portion of time and costs in establishing a base there as well as bringing out a number of drugs.
After being absent from the Indian pharmaceutical market for 18 years, Merck & Co recently applied for approval from the Indian to set up a wholly owned subsidiary. The company said it plans to invest $15m over five years and will import and produce drugs for sale in the Indian market, as well as source raw materials and pursue R&D efforts.
Eli Lilly plans to introduce its erectile dysfunction drug Cialis (tadalafil) in India later this year and will follow up with its new type 2 diabetes treatment exenatide. It also plans to quadruple spending on research to $8m now that patent rules are in force, according to local press reports.
And GlaxoSmithKline says it will introduce one drug a year from 2007. While the UK company has already partnered with Ranbaxy, it is now in talks with other local drug enterprises for other potential investments that would give the firm an edge.
Pfizer has also said it plans to update its product line in India, and Novartis also intends to introduce new cardiovascular and cancer drugs now that the patent bill is passed.