In today's newsletter we talk about the India pharma industry and why it's in focus.
So something strange has been happening of late. We’ve been making headlines in all the world’s top news publications and it’s probably not for reasons you’re guessing.
New York Times: As Coronavirus Disrupts Factories, India Curbs Exports of Key Drugs
BBC: Drug shortage fears as India limits exports
Bloomberg: India Restricts Exports of Common Drugs on Fear of Coronavirus Shortages
Bottom line: Everybody is panicking because India has decided to halt exports of key drugs. But before we delve into this issue any further, we need to talk about these so-called common drugs aka “generics”.
In 1989, Pfizer chemists (pharmaceutical giant) in East England were trying to synthesize a drug that they thought might treat high blood pressure and chest pain. The low priority project had pretty disappointing results initially and showed little to no promise. However, that all changed in 1993 when the same researchers were trying to study the effects of the drug on a group of Welsh Mineworkers. After yet another disappointing review, the researcher finally asked if the participants noted anything else they might want to report. One of the men put up his hand and said, “Well, I seemed to have more erections during the night than normal,” and everybody else kind of nodded and said, “So did we.” On that gloomy evening in South East England, the world had finally chanced upon Viagra, the miracle drug. It took another 4 years for the FDA (Food and Drug Administration, USA) to approve the magic pill, but at the end of it all Pfizer had in its hands what is often touted as a “blockbuster innovator drug.”
The point here is that success in the pharmaceutical industry is deeply intertwined with the research and development process that characterizes the pharmaceutical industry. It might take 5 years for you to develop a new drug and you might still need another 10 years to clinically test the product and gain approval from the regulatory agencies. This is an extremely capital intensive process and the only way to remunerate the investment of the pharma company is to protect the investment through patent protection.
Once the patent expires, however, copycats can market their own version of the drug. These copycat drugs are called “generics” and companies can replicate the manufacturing process with relative ease. And because of the relative simplicity involved in manufacturing these drugs, the industry also breeds intense competition.
And this is where we come in. We have sort of established ourselves as the go-to leaders when it comes to generics. In fact, we now account for over 24% of America’s medicine imports. But the fundamental question remains: How did we get here?
Well, the origins of India’s market leadership can be traced back to the independence era. Around 1947, Western Multinational Corporations controlled India’s Pharma Market. They held almost 99% of the patents, and our domestic drug prices were among the highest in the world.
But around 1970, the Government decided enough was enough. They tweaked India’s patent laws to protect only the manufacturing process used to make the drugs. However, you could copy the end product as long as you could find a way of reverse-engineering the stuff and use a different manufacturing process.
We did this till about 2005, when we were forced to switch back to product patents to comply with global standards. But by then, India had already developed extensive manufacturing capacities to manufacture generics and scores of foreign pharmaceutical companies wanted to do business with us. And since we were producing this stuff at low cost, we transformed into the export capital of the world.
However, ever since Coronavirus started making waves, the Indian pharma industry has been a bit tentative. Because despite our cost leadership, we are still dependant on china for the raw material (called Active Pharmaceutical Ingredient) and once the government sat down to see if we are well stocked on this front, they concluded that we had no alternate supplier for about 34 drugs. Meaning any disruption from the Chinese end could spell disaster. And so if we can’t supply these drugs to the domestic market, how dare we export it, right?
Well at least that’s the government's take and so we banned all exports of the 34 drugs in question recently and now you know why we made it to the front pages.