Jane Wan is a freelance writer based in Singapore.

Jane Wan

On July 1, India's new Drug Pricing Control Order (DPCO) 2013 replaced the 1995 version. Under this new regime, the National Pharmaceutical Pricing Policy 2012 will regulate prices of 348 drugs covered under the National List of Essential Medicines (NLEM) 2011 compared with 74 drugs in the former list. Adopting the market-based price mechanism, the policy is based on the simple average price for all brands with a market share above 1% in their segment. 

According to industry sources, the new drug-pricing policy will affect two thirds of the Indian pharmaceutical industry. Consumers, on the other hand, will benefit greatly. Tapan Ray, director general of the Organization of Pharmaceutical Producers of India (OPPI), said in an interview with 

"Ceiling prices will now be based on approximately 91% of the pharmaceutical market by value, resulting in more than 20% price reduction in 60% of the NLEM. The prices of some drugs will fall by up to 70%." According to Ray, DPCO 2013 will "achieve the objectives of the government in ensuring essential medicines are available to those who need them most by managing prices in the retail market and balancing industry growth on a longer-term perspective."  

Pharma industry players brace for challenges as India’s new drug-pricing policy kicks in full gear. (DMITRY RUKHLENKO/GETTY IMAGES)			

While consumers could potentially benefit from price cuts, it may not necessarily lead to easy medicines access, which is based on patients' socioeconomic strata, Amit Backliwal, general manager of IMS Health, South Asia, told 

. The effect will not be as pronounced for those in the upper strata who can afford the pre-2013 DPCO prices; whereas, patients who are on the other end of the spectrum will continue to be unable to afford the medicines even after the revision. Only the middle-income groups will reap maximum benefits from the changes of the new drug-pricing policy.  

With the new policy in force, IMS Health estimates that the erosion in overall market revenue will be approximately $290 million on an annual basis, which is a 2.2% drop of the entire market. Inevitably, the policy will affect profit margins and sales of medicines. Sujay Shetty, executive director and India pharma life sciences leader of PricewaterhouseCoopers, comments, "As NLEM drugs account for nearly 60% of the market, value erosion of the pharmaceutical market would be anywhere between 2% to 5% of the current pharmaceutical market. However, the extent of effect will vary from company to company depending on their current product portfolio and exposure to NLEM. This short-term effect will last between 12 to 18 months. In the long term, companies will devise suitable strategies to overcome this impact."  

Multinational companies (MNCs) will be greatly affected by the new pricing regime. For example, Centrum Broking, a financial-solutions provider based in India, projected that the profit margins of GlaxoSmithKline and Novartis could drop between 2% to 7% under DPCO 2013. On the other hand, Indian companies such as Sun Pharma and Dr. Reddy's Laboratories would be less affected due to their focus on export market. 

Backliwal says, "The bigger pharma companies will likely take the brunt of the revenue erosion but they will also be more able to balance the drop in profits with higher volumes due to greater market reach and brand value. The major impact will be felt by mid-level pharma companies who will need to draw up new strategies and look beyond the price-differential advantage that they currently leverage to grow sales. Also, companies with brands under the older DPCO 1995 regime will be now able to take annual price increases and make up for the losses (to some extent) from their portfolio, which will fall under the newer regulation."  

Shetty adds, "Companies may carefully examine their current portfolio for the exposure to NLEM and level of diversification and realign to negate the effect of the new policy. They can look at ramping up chronic portfolio to reduce their dependence on acute therapies, which have been growing at a slower pace. Enhanced focus on over-the-counter products, vaccines, and biosimilars would start gaining importance in overall business strategies. Companies will look at in-licensing initiatives, comarketing, and alliances with MNCs over the long run." 

Despite this, foreign companies are not likely to move away from India given its promising market. With a 12.5% (± 4.0%) estimated compound annual growth rate over the next few years, India is the second fastest growing country among the emerging markets, ranked only behind China.  

The Indian market is driven by rising incomes, macroeconomic expansion, and increasing access to medicines, supported by a range of government policies and programs. Revenue may be eroded as a result of DPCO 2013, but Big Pharma's greater challenge is to obtain and enforce intellectual-property protection rights. Compulsory licensing, patentability, patent enforcement, regulatory approval, and data exclusivity are issues that they will need to grapple with. 

The revised drug-pricing policy will encourage small- and medium-size domestic players to invest in R&D. It will also help some small players achieve price parity in certain niche segments. Locally discovered and developed drugs are eligible to avoid price control for five years. Drugs developed using indigenous R&D and granted patent under Indian law can seek exemption from price control from the commercial production date in the country. 

Articles

Industry players brace themselves to face challenges as India's new drug-pricing policy kicks in full gear.

Report from India

HUNG CHEI/FLICKR/GETTY IMAGESTaiwan is now a step closer to its goal to "promote the administration and education of pharmaceutical regulation" with the establishment of a new Center for Pharmaceutical Regulatory Science in the country by the National Cheng Kung University (NCKU). The center aims to promote pharmaceutical education and cultivate personnel training for pharmaceutical administration. Its mission also includes conducting research on pharmaceutical regulation and promoting international collaboration efforts, says Professor Yea-Huei Kao Yang, director of the center and professor of the Institute of Clinical Pharmacy and Pharmaceutical Sciences at NCKU. 

Taiwan's regulatory system is comparable to that in America and Western Europe. In 2007, a health-technology assessment system was introduced for the pricing and reimbursement of new drugs. Taiwan also established its Food and Drug Administration (FDA) in January 2010 with a clear objective to establish a regulatory environment with drug-review mechanisms of international standards to run pharmaceutical affairs. Looking ahead to 2014, the agency commits to implementing the Pharmaceutical Inspection Convention Scheme (PIC/S) to help improve the quality of local medicines and upgrade production facilities to enable quicker penetration of its medicines into foreign markets. 			

"The setting up of a center for pharmaceutical regulatory science in Taiwan's NCKU, perhaps the first such center in Asia Pacific, mirrors the increasing importance that regulatory science is gaining among the regulatory agencies globally," says William Lee, senior director and head of regulatory strategy of the strategic drug development Asia unit at Quintiles. 

Kao adds, "Its establishment is significant because it paves a clearer direction for Taiwan's pharmaceutical and healthcare industry as a whole. Overall, western and local industry players are positive in regard to this new center and believe that NCKU is taking a first step toward improving the pharmaceutical and healthcare landscape in Taiwan. The center, through its project base case studies with school professors, industry physicians, and related experts, aims to open up the communication between regulators and consumers. By its goal for transparent pharmaceutical management, the quality standard in the industry and the accessibility of information would positively improve." 

According to Geeta Dhanoa, Frost and Sullivan's associate director of healthcare practice for Asia Pacific, "the preparation of the whitepaper on food and drug policy and nonprescription medicines management policy is the priority for the center, which will serve as a national platform for the government, the academia, and the industry to integrate the resources and talents." However, these initiatives are in the initial stage and the effect will be seen after the formalization of the new drug-pricing policy and reimbursement scheme. Hopefully, they would receive positive response from industry players to eliminate the regulatory hurdles so that drug registration can be improved, and to provide a conducive environment for the market participants to grow, says Dhanoa. 

The initiatives are expected to benefit industry players. "It is expected that the approved pharmaceutical products are safer, following safety and ethical norms," Dhanoa explains. The center would also ensure that approvals for products are obtained more quickly or are manufactured in such a way as to decrease potential patient and safety problems. 

"In a competitive environment, it is crucial for pharmaceutical products to reach the market in a short span of time. Hence, the regulatory center is expected to explore the shortest route and timeframe to put these products on the market, and support the lifecycle management of the products. This will prove to be advantageous for start-up and local firms in Taiwan," says Dhanoa.  

In addition, the approval process for new drug and generic-drug manufacturing and marketing applications would include a review of the manufacturer's compliance with GMP as set by Taiwan's FDA. Based on standard operating procedures and guidelines, the regulatory center would determine whether the firm has the necessary facilities, equipment, and skills to manufacture the new drug for which it has applied for approval. Decisions regarding compliance with regulations are likely to be based on inspection of the facilities and sample analyses, which are expected to affect foreign firms entering the market. 

The impact of the center's establishment can be viewed from both short- and long-term perspectives according to Lee. From a short-term perspective, one can expect an increase in cooperation and communication in academic research on pharmaceutical regulation that would promote collaboration between local regulatory agencies as well as foreign regulatory agencies and academic institutions. Such exchanges could result in a convergence of approaches to pharmaceutical regulations. Additionally, the Taiwan pharmaceutical industry could potentially see a shift in regulatory agencies taking a more science-based approach to the assessment of safety, efficacy, quality, and performance of regulated products.  

Looking forward, this development may well position the Taiwanese regulatory agency as a forward-looking agency, particularly in North Asia. "As a platform to promote regulatory science within the pharmaceutical industry, the center would show the local region as well as the surrounding regions its aim to improve the overall efficiency of the industry. The movement would promote regulatory science through local and regional collaboration," Kao says. 

The Taiwanese government engages in regulatory science in a move to boost its pharmaceutical sector.

Report from Taiwan

Giorgio Fochesato/Getty ImagesThailand’s biotechnology sector was given a boost when the drafting committee for the National Social and Economic Development Plan No. 11 decided to include it as part of the national plan for 2012 to 2016. The initiative received strong support from researchers, scholars, and related sectors considering the slow development of the biotech sector in Thailand, and also because such technology development will contribute to the country’s economic growth.

Thailand's forte is in agriculture and food biotech followed by medical technology, says Hannah Nawi, associate director for healthcare of Frost and Sullivan. Seventy percent of R&D expenditure is being channeled to agricultural biotechnology. According to Nawi, the average export of agricultural and food products is valued at -23 billion. 

The development of the biotech sector has, however, been slow in Thailand compared to Singapore and Malaysia. Last November, Malaysia attracted a total of $4.2 billion in biotech investment, exceeding the -2.9-billion target for its Phase ll plan under the National Biotechnology Policy. Phase II focuses on biotechnology sub-sectors including drug discovery, new product development, technology acquisition, and licensing. Malaysia has consequently raised its 2015 investment target to US-8.5 billion. Singapore’s biomedical sector, on the other hand, is already accounting for 5% of its economy. In 2010 alone, the country generated -7.5 billion compared to Thailand’s -167 million. 

"Thailand’s biotechnology sector is hampered by the lack of scientific professionals, technological skills, and government support, although it appears that there is a strategic framework in place. Moreover, the key downside risk to biotechnology investment is the long incubation period. The risk of failure is high and investors’ confidence is typically tied to the probability of success," commented Cher Boon Piang, analyst of Business Monitor International (Asia). Nevertheless, the current outlook has not discouraged the Thai government from increasing its support and involvement in the sector. 

Over the years, agencies such as Thailand Board of Investment (BOI) and National Center for Genetic Engineering and Biotechnology (BIOTEC) have been playing a proactive role in developing Thailand’s biotech sector. When BOI started promoting biotechnology in 2007, it came up with an eight-year corporate tax exemption and tariffs waiver on imported machinery. It also granted incentives to projects. In 2008, eight new projects worth -9 million received the thumbs-up for such benefits.

BIOTEC, on the other hand, channelled approximately -$21 million to R&D activities in 2011. It collaborated with Novartis on a project to investigate the potential use of microorganisms and natural compounds as sources of new medicines to treat diseases such as cancer and tropical illnesses. Besides that, it assisted the Thai-based environmental and research company, Hi-Grimm, to launch KEEEN in 2010. KEEEN is an environmentally friendly bioremediation agent that uses microorganisms to eliminate hydrocarbons, fats, grease, and organic substances from contaminated areas. Hi-Grimm is currently producing and commercializing the final product.

Thailand is also building up its talent base, which is necessary for the sector’s growth. On a yearly basis, it is producing 800 to 900 undergraduates pursuing a biotech degree, 300 to 400 individuals with Master’s degrees, and 50 with doctorates across its 24 universities. Key statistics from BIOTEC show that of the 570 workers employed in the biotech sector, 539 are graduates, or postgraduates, and 472 are R&D scientific staffs. From a business perspective, Thailand has approximately 200 biotech companies in operation to date and the doors are opened for multinational companies to acquire or license Thai-based technologies. The Thailand Science Park, a world-class facility, houses more than 1600 full-time researchers. Its attractive features include long-term land leases for construction and ready-made wet laboratories for rent. 

In February 2012, the Thai minister of public health expressed support for the Government Pharmaceutical Organization who is in the process of building a manufacturing facility for biotech and non-biotech products. Helen Featherstone, general manager of IMS Health Thailand, says: “In my opinion, Thailand’s biotech sector will only start to develop within the next 10 years. Since the supply of these products will remain within the country’s perimeters, foreign companies are likely to continue importing biotech products from other countries. On the other hand, local players are facing issues including governmental policy changes, increases in minimum wage, and pressure on pricing.” 

All is not lost for Thailand’s biotech sector, although it is not likely to compete with Singapore and Malaysia given its current developmental stage. Cher says, “Thailand should find some niche sub-sectors to invest in. It has seen some success in microbial-based research so far and should look further into it given the high burden of tropical diseases in the country and its neighboring ones including Myanmar, Cambodia, and Vietnam.” 

Nawi adds, “Further development of the medical biotech sector lies in the country’s competitive edge as a provider of clinical trials. Thailand offers fast patient enrollment with lower dropout rates, higher patient concentration per trial site, and a less expensive workforce to conduct the trials. It also has a well-developed hospital system to conduct the trials. Looking forward, we are likely to see interesting changes and developments in the coming years. But the government has to ensure that conductive policies and regulations are implemented to support the potential growth of the country.” 

—Jane Wan is a freelance writer based in Singapore. 

Under Thailand’s first National Biotechnology Policy Framework (2004 to 2009), 90 new companies were formed, bringing the number of biotech companies to an estimated total of 170.

Thailand has succeeded in producing the world’s first commercial biosensor for avian influenza.

Currently, it is in the process of producing its first indigenous drug to treat malaria. If successful, it will be a breakthrough development that puts Thailand on the world map. 

Thailand is regarded as a prime “pharmerging market” due to the potential of its biotech sector.

The large population and academic/healthcare infrastructure make the country an ideal provider of clinical trials.

The Thai government is ramping up efforts to promote and develop the biotechnology sector in a bid to enhance its global competitiveness.

Report from Thailand

In October 2012, India's Central Drugs Standard Control Organization (CDSCO) released its official guidelines on good distribution practices (GDP) for biological products (1). This move was timely, considering that India's biologics industry is becoming a key player in the global biopharmaceutical market. 

Currently, the country's biopharmaceutical industry is valued at $2 billion a year with 20 companies producing biosimilars and 50 products available in the domestic market, according to a report by ABLE-PwC (Association of Biotechnology Led Enterprises-PricewaterhouseCoopers), published in 2010 (2). Factors such as a rise in demand, lower costs, availability of skilled talent base, higher purchasing power, and a growing population contributed to the development of biologics manufacturing in India. Many companies, in fact, have jumped on the biologics bandwagon. In January 2012, California-based Spectrum Pharmaceuticals joined hands with Viropro to develop a follow-on version of Roche and Biogen Idec's rituximab. Pfizer also finalized a deal with Bangalore-based Biocon to commercialize four insulin products in October 2010.  

In a bid to ensure quality and standards, the GDP guidelines for biological products request that all parties "assist in ensuring the quality and identity of the biological products during all aspects of the distribution process." Anjan Sen, director of Deloitte Touche Tohmatsu India, said, "Clearly, this calls for collaboration and cooperation among multitude of bodies (including pharmaceutical companies and logistics providers) to ensure that the quality of biopharmaceutical products is not compromised. It also aims to pave a way for the creation of an effective and robust distribution channel that will drive the growth of the sector." 

Sen added, "These guidelines will open up new business opportunities for logistics providers to specialize in biopharmaceutical supply chain and tap growing industry needs. Additionally, they will have to invest time in training employees and maintaining quality checks. Pharmaceutical companies, on the other hand, will have to deploy additional resources to monitor the supply chain and maintain quality standards. They will also have to take additional steps to prevent counterfeiting."  

Emphasis is also placed on temperature control during biologics distribution whereby validated temperature control systems must be in place to ensure ideal transport conditions. Temperature control is particularly sensitive in the case of complex-molecule biologics that are manufactured through complex microbial cultures. It is imperative for biopharmaceutical companies to invest in their supply chains and processes to ensure proper quality and efficacy of these products. 

Many local companies possess little knowledge of the cold-chain market and the required temperature for shipping of drugs. However, due to the rise in exports of vaccines in recent years, India's cold-chain market is picking up. Globalization processes and the entry of multinational companies (MNCs) on Indian soil have also sped up market growth. As a result, domestic companies are now gaining awareness of the cold-chain market.  

Dealing with temperature-sensitive pharmaceutical items is particularly challenging in India because of its hot climate and accessibility to remote areas. Therefore, pharmaceutical companies have to source for logistics providers who possess state-of-the-art cold-chain processes. For example, FedEx has a cold-chain air solution that combines temperature-controlled shipping and a compliant audit trail of packages. 

Inevitably, the GDP guidelines will have significant impact on business approaches and operations of all key stakeholders. Srinath Manda, program manager of transportation and logistics practice at Frost and Sullivan, said, "Pharmaceutical companies have to come up with standardized processes and infrastructure across their supply chain that may not be possible if unorganized logistics providers are employed in transportation and storage activities as the latter lack resources to build complex cold-chain infrastructure. Hence, pharmaceutical companies would need to increasingly employ organized logistics service providers with cold-chain capabilities." He further added, "In addition, they have to ensure that the same standard practices are employed throughout their distribution channel participants to the retail delivery of their goods as this would reduce the scope for pilferage and adulteration of products within the supply chain. Logistics providers will also be encouraged to build standardized and nationwide cold-chain networks eligible to serve the industry. They will also see the need to improve their capabilities and raise performance standards to meet the safe handling of products as defined in the guidelines." 

On the whole, the pharmaceutical industry is expected to become more quality conscious, according to Vikas Anand, chief operating officer of DHL Supply Chain. However, the implementation of these guidelines is challenging, and regulators will have to ensure that key stakeholders are collaborating and conforming to requisite standards. 

—Jane Wan is a freelance writer based in Singapore.

1.   CDSCO website, "Guidelines on Good Distribution Practices for Biological Products," www.cdsco.nic.in, accessed Jan. 4, 2013.  

2. ABLE-PwC report, "The Vision 2020 BioPharma Strategy," 

www.ableindia.in/admin/attachments/reports/reports17_Vision%202020%20Bio%20Pharma%20Strategy%20Report.pdf

Quality assurance of biological products is central to India's good distribution practices guidelines.

Four domestic companies filed a suit against the Ministry of Health and Welfare of South Korea claiming that the recent price cuts made by the ministry have affected their businesses. On April 1, 2012, drug prices were reduced by an average 17% and cuts affected the prices of 6506 drugs across the board. The first cut, announced in 2011, decreases the price of off-patented drugs 30%, with the price of the first generic drug set at 60% of the price of the off-patented drug. Originally, prices of off-patented drugs decrease by 20%, while the first generic version is set at 68% of the off-patented drug. The second cut reduces the price of drugs due to illegal rebates. The combination of the two cuts means that certain drugs will undergo double-price reduction and the final price rate can be up to 53.55%. 

Pharmaceutical companies are crying foul because these cuts would have a direct impact on their business profits even though the agency claimed that this move would ensure market sustainability and eradicate the problem of illicit rebates.  In fact, a Sinhan Investment & Securities source has indicated that the majority of companies experienced a 20% fall in profits since the policy took effect. 

 In response to their declining fortunes, some companies have opted to increase prices of their over-the-counter (OTC) drugs while others have boosted their R&D expenditure. Domestic companies such as Dong-A Pharmaceutical and LG Life Sciences have committed 22% and 19%, of net sales on R&D, respectively.  

Cher Boon Piang, an analyst for Asia Pacific Pharmaceutical and Healthcare of Business Monitor International (Asia), says, "Given the price cuts, companies may withdraw drugs that are not profitable. Local companies may even move away from generics. There is also a shift towards biosmiliars that opens opportunity for companies." In October 2011, Dong-A Pharmaceutical joined hands with Tokyo-based Meiji Seika Pharma to build a biosimiliar plant in Songdo. Recently, local companies Yuhan Corp and Teregen ETEX are collaborating to commercialize the provision of individual genome services. 

The recent US-Korea free-trade agreement (FTA) has also crippled domestic players as it contains provisions protecting the intellectual property rights of original drug developers. For instance, the Korean agency has to inform original manufacturers if there are companies looking to produce generic versions. Companies are denied market approval if an objection is posed by original drug manufacturers and when the claimed patent exists. It is also mandatory for the generic manufacturer to provide safety and efficacy information to ensure that the generic version does not infringe on the original one.  

Perhaps a gradual price cut would have helped in alleviating pressures faced by industry players in South Korea. Cher says, "In general, companies face[d] both financial and time issues when two price cuts were introduced in 2011. If price reduction is gradual and made known to companies in a timeframe that prepares them for such reduction, these companies can draft and implement strategies to minimize the impact of price reduction. Moreover, it is easier to have short-term solutions against gradual price cuts compared to a larger one-off reduction." 

Cher points out that price cuts cannot be the only solution to contain rising government expenditures and it is also unfair to shift the burden onto companies.  Instead, the government should look into ways to cut expenditure by subsidizing only the necessary and/or increase premiums. These strategies may create a negative impression, but they are essential if a country is not doing well economically. In addition, the burden of healthcare costs should rest on individuals instead, he adds. 

Clearly, the objectives of the government and the pharmaceutical industry players differ greatly. On one hand, the government seeks to lower healthcare costs. On the other hand, industry players are looking for ways to maximize profits. Asked if a balance can be struck between both parties, Cher says,  "The level of compromise is dependent on the attractiveness of the market. Typically, an attractive market allows the government to push through its policies as companies are willing to forgo higher profit margins in exchange for sustainable growth over a time period." 

The South Korean market is characterized by its aging population and an affluent population. Growth potential is limited as it has evolved to a developed market, and industry players expect it to have established regulations. Therefore, it makes sense that industry players are pre-alerted of any policies in the government's agenda. For example, industry players were informed in 2010 of the price disclosure policy to take effect in 2012. In Japan, industry players understand that it is the usual practice that price cuts occur once every two years. 

Despite its fragmented market and the price-cut setback, South Korea is ranked among the world's top 12 with $8 billion annual sales.  Cher adds, "In the long run, it has the necessary ingredients to continue with its successful pharmaceutical industry, strong support for innovation, the willingness of the private sector to explore these innovative technologies and the demographic profile also supports increased drug usage. The conflict between the government and industry will definitely arise again in the future, but we believe the two parties will reach a compromise. " 

—Jane Wan is a freelance writer based in Singapore

Domestic companies are changing their business models in response to recent drug price cuts.

Report from South Korea

Swiss-based Novartis is taking India to court in a bid to seek patent protection of its leukaemia drug, Glivec (known as Gleevec in US). Novartis first applied for the patent in 2006 but was denied. In similar instances, Swiss-based Roche's anticancer drug Tarceva and US-based Gilead Sciences' HIV medicine Viread have failed to secure patent protection in India. 

Looking back, patent laws in India have come a long way. India's patent history began in 1856 with Act VI, which encouraged innovations and sharing of creations between inventors. Based on the British Patent Law of 1852, Act VI was in effect for 30 years. When the British amended the laws in 1800s, India followed suit. In 1911, the Indian Patents and Design Acts came into effect  whereby a Controller was installed to manage patent-related issues. When India gained independence from Great Britian, the Patent Act of 1970 was introduced to spur innovation and economic growth.  It abolished the product patent system based on the "Ayyangar Committee Report, 1959," which examined the factors influencing the high prices of the drugs and pharmaceuticals in India. The Patent Act has been revised three times since then and made compliant with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement in 2005.  

India has since enforced a set of strict patent laws, and foreign players are facing obstacles in the review process, patent tracking, and pregrant and postgrant opposition, says Ajaykumar Sharma, associate director, pharma and biotech, healthcare practice of Frost and Sullivan (South Asia and Middle East). The interpretation of different sections of the Patent Act of 2005 and review of application remain the biggest challenge. This challenge is increased by the lack of trained manpower that further delays the review process. The Indian Patent Office, additionally, does not have an efficient database system to facilitate searchable full text databases of all patents and applications. Foreign players continue to face an increase in pregrant and postgrant opposition by generic-drug companies. Litigation and infringement cases usually take longer to resolve.    

India has enforced stricter patent laws compared to other countries such as South Africa. For a drug to be patentable in India, the invention has to be novel (i.e., new to the industry), inventive, and industrially applicable. In contrast, weak patent standards and the absence of a patent agency in South Africa have resulted in the granting of a high number of patents yearly. In 2008 alone, South Africa issued a total of 2442 patents.  

The Indian patent agency has set a higher bar for patent approval that is frustrating pharmaceutical manufacturers who are deeply concerned over the agency's standpoint of intellectual property in the country. In Novartis' case, the company is challenging the efficacy clause stated in Section 3(d) of the Indian Patent Law. However, the Indian agency views its decision as a move to curb the "evergreening" practice, whereby a drug is tweaked slightly in a bid to extend patent protection. Specifically, the Novartis patent application was denied on the grounds that the drug lacks innovation because it is considered a salt formulation of the drug and not a new drug altogether.  

If Novartis gets its way with the patent, the decision could result in a flood of new patent applications and possibly threaten patients' access to essential drugs tagged at affordable prices. More significantly, it may upset India's position as a generic-drug manufacturer and role to provide affordable drugs to other developing countries.  

The Indian Patent Law has also made provisions for the Controller of Patents to issue compulsory licenses to deal with extreme or emergency situations. Recently, it  gave approval to Natco Pharma to produce the generic version of Nexavar.  As a result, Natco is able to price the drug at $158 for a 120-tablet package.  

Despite the concerted efforts to provide low-cost drugs, the problem of poor medical access is still prevalent in the country. To date, a significant number of infants (aged 12 to 23 months) have yet to be fully vaccinated against six major childhood diseases (tuberculosis, diphtheria, pertussis, tetanus, polio and measles) even though the Indian government has made these primary vaccination programs free across the country. Tapan J. Ray, director–general of the Organization of Pharmaceutical Producers of India, an association of R&D pharmaceutical companies in India, says: "Only a short focus on the rejuvenation of the fragile healthcare delivery system, healthcare financing, and rapid development of healthcare infrastructure by the government or public private partnership will address the access issue." 

It is also impractical to envisage that the granting of compulsory license will resolve the issue of access to patented medicines on a long-term basis. Granting of these licenses should only be done after exhausting all access improvement measures, Ray says. 

Sharma adds, "Compulsory license should not be a benchmark for possible future decisions taken by the government. But I foresee a need and evolution of a new business model that will reach out to the masses by foreign players. This can take place possibly in the forms of differential price launches, patient assistance programs, or state medical purchase policies." 

Asked whether it is possible to strike a balance between maximizing profits and providing patient access to drugs, Sharma comments that this can be achieved through differential pricing. For example, GlaxoSmithKline's Ventolin asthma inhaler is priced at the lowest level possible for the lowest-income patients, Flixotide at a lower discount for those with higher incomes, and Diskus priced highest for citizens with the highest incomes. Roche is working on details to offer discounted versions of two cancer drugs, Herceptin and MabThera, in India by early next year.  

Given the current restricted parameters, foreign companies should start looking for innovative engagement models to operate on Indian soil, Sharma says. In fact, mergers and acquisitions have taken place between foreign and Indian firms. In 2010, Illinois-based Abbott Laboratories' acquisition of Mumbai-based Piramal Healthcare for $3.7 billion has brought its market share in India to approximately 7%, and the company is expecting revenues to grow an estimated 20% a year to more than $2.5 billion by 2020, propelling the company to the leading position in the Indian market. In January 2011, Bayer Healthcare has inked a joint venture agreement with Mumbai-based Zydus Cadila in a bid to enhance its presence in India. 

Foreign firms struggle against stricter patent laws, but all is not lost.