Known as the “World Pharmacy”, India produces one-fifth of the global generic drugs, and the pharmaceutical industry has become one of the three pillars of the country’s economy. As a developing country, can India not sell generic drugs to developed countries like Europe and America withh their demanding import threshold? Its experience in leapfrogging can be used (by China) for reference.
Indian generic drugs has once again become a hot topic in the international pharmaceutical industry. On July 27, 2015, the European Commission confirmed that EU countries terminated the sales of 700 kinds of Indian generic drugs, and an angry Government of India canceled the ongoing bilateral free trade negotiations with EU in August.
An EU (European Medicines Agency) decision last year found that the Indian company GVK’s biological data to be fraudulent. The company is India’s largest contract research organization, and has commissioned a number of pharmaceutical companies to conduct bioequivalence tests
This is just one battle that the European and American pharmaceutical industries and regulatory agencies fight against the strong Indian generic drug industry, and the latter has repeatedly won in many of the previous fierce battles.
Going by the name “World Pharmacy”, India had about 550 pharmaceutical factories that have received the U.S. Food and Drug Administration (FDA) certification as recognised pharmaceutical companies in 2014, and nearly 200 drugs selected in the procurement catalog of the WHO. Wth production at one fifth of global generic drugs, the pharmaceutical industry is one of the three pillars of the country’s economy.
To protect the pharmaceutical industry, India has imposed strict controls on drug imports, set high tariffs, and a maximum threshold limit for foreign investment. So far, the Indian generic industry is more than a decade advanced than China, and this gap is widening.
President of India Pharmaceutical Manufacturers Association, SV Veerramani, said during his visit to China last year that the annual output value of the Indian pharmaceutical industry was 30 billion US dollars, and therapeutic drugs for diabetes, cardiovascular diseases and psychiatric disorders were growing rapidly. Indian pharmaceutical exports were 15 billion US dollars, and 11 billion US dollars worth preparation products were exported to Europe, America and other developed markets.
Can a developing country not sell generic drugs to developed countries like Europe and America with a demanding import threshold ?
一手严控，一手扶持 Strict Control on One Hand and Support on the Other
Over the past 15 years, Indian pharmaceutical preparations have made rapid development. Its generic drugs occupy most of the middle and low-end market. This is attributable to the Indian government’s determined effort in the 1970s to reduce drug prices, and foster an independent, indigenous pharmaceutical industry.
Indian pharma has had twists and turns historically. Multinational pharmaceutical companies once controlled 80% -90% of the Indian pharmaceutical market, and 99% of the proprietary were in the hands of these companies. Up until the 1960s, Indian drug prices ranked high in the global pharmaceutical market.
To enable Indians to obtain affordable drugs, the Indian Government first abolished food, drug and chemical patents, and restricted the stock held by multinational enterprises in Indian pharmaceutical companies. It also imposed controls on prices of certain drug preparations and active pharmaceutical ingredients. These policies made the foreign pharmaceutical companies give up the Indian market, and local companies quickly took over the vacant market. By 1990, Indian drug preparation had achieved self-sufficiency, and active pharmaceutical ingredients near self-sufficiency.
The Indian government abolished the patent protection law of the British colonial period, and promulgated a new “Patent Law” in 1970, which did not recognize the international patents on compounds, and allowed Indian generic pharmaceutical companies to produce patented drugs so long as the production process was different from that of the pharmaceutical factories holding patents. That fostered expertise in reverse pharmaceutical engineering.
Previously, GlaxoSmithKline, Novartis, Bayer and other internationally renowned pharmaceutical companies had set up factories in India. After the new “Patent Law” was enacted, all the foreign pharmaceutical companies that lost living space withdrew from India, and a large number of local staff joined the Indian pharmaceutical companies, which objectively promoted development of the Indian pharmaceutical industry.
Vice President of the China Pharmaceutical Quality Management Association, Sun Xinsheng, recalled that, during the 1980s when he studied in the University of Houston for Doctor of Pharmacy, most of his classmates were Indians, and the majority of these students stayed in the US after graduation, engaged in product development in American pharmaceutical companies, or in the drug enforcement agency FDA.
After India’s new “Patent Law” was promulgated, a large number of Indians who worked in the United States returned to India and joined local pharmaceutical companies. This laid a solid foundation for the talent pool for the Indian pharmaceutical industry, research and development of generic drugs, industry regulation and supervision upgrades and participation in international competition.
The personnel costs of Indian pharmaceutical companies are just one seventh that of U.S. companies, which is one of the reasons that Indian pharmaceutical costs are 30% -40% lower than those in Europe and America. Research on the Indian Industrial Union shows that the cost of developing a new drug in India is about 100 million -200 million US dollars, as compared to 500-900 million in the US.
同时，政府降低了行业进入门槛，几千家中小企业迅速蜂拥而至，抢食市场大饼。印度政府成立了五家国企，其中包括联合国协助成立的印度斯坦抗生素有限公司（The Hindustan Antibiotic Ltd），以及借助前苏联之力的印度制药有限公司（IDPL）。
Meanwhile, the government lowered entry barriers in the industry, and thousands of small and medium enterprises quickly flocked to snatch a piece of the market pie. The Indian government set up five state-owned enterprises, including the Hindustan Antibiotic Ltd, which was established with the support of the UN, and the Indian Drugs and Pharmaceuticals Limited (IDPL) on teh strength of the former Soviet Union.
在印度政府的协作下，1961年IDPL成立了5家制药厂，3家子公司，本以生产抗生素、合成药和手术器械为主,后来企业所在地印度南部城市海得拉 巴（Hyderabad）意外发展成聚落，现在该地至少有200多家中型药企，其中三分之一的老板都曾在IDPL就职过。被欧盟质疑的GVK生物公司也在 海得拉巴。
In collaboration with the Government of India, IDPL established five pharmaceutical factories and 3 subsidiaries in 1961, originally mainly engaged in production of antibiotics, synthetic drugs and surgical instruments. Later the city of Hyderabad in southern India, where the enterprise was located, developed into a settlement unexpectedly. Now there are at least over 200 medium-sized pharmaceutical companies in this area, one third of these entrepreneurs having worked in IDPL. The GVK biotech company which was challenged by the EU is also located in Hyderabad.
直到2005年，印度加入世界贸易组织，才恢复药品专利。据联合国大学（United Nations University）的研究显示，在35年市场保护期间，印度本土制药公司从1970年的2257家快速增加到2005年的2万家。
Not until 2005, when India joined the WTO, were the drug patents resumed. According to a study of the United Nations University, during the 35 years of market protection, the number of Indian pharmaceutical companies increased rapidly from 2257 in 1970 to 20,000 in 2005.
India Industrial Union research data shows that the top 250 local enterprises controlled 70% of the Indian market, 40% of it by the top 10.
At the same time, coordination of policy resulted in the market share of foreign pharmaceutical companies in India falling below 20% by 2005.
借力FDA Leveraging FDA
In the generics industry, India has always been a good student of the United States.
India upgraded the country’s pharmaceutical industry with reference to the US generics access and regulatory standards. Now 97% of the Indian local pharmaceuticals are second or third generation drugs without protection of patents. India has also referred to FDA drug regulatory mechanisms, absorbing the US pharmaceutical industry practices, with a view to promoting its own generic drug companies, strengthening their R&D and upgrading the preparation process.
美国国际贸易委员会（U.S. International Trade Commission）对印度制药业研究后认为，印度制药业的竞争力，除了会说英语的低成本研发人才外，大量FDA认证的工厂也起到关键作用。
After the U.S. International Trade Commission studied the Indian pharmaceutical industry, it believed that competitiveness of the Indian pharmaceutical industry also played a key role , in addition to the factors of English-speaking personnel, low-cost R&D and abundance of FDA-approved facilities.
Since the 1980s, Indian pharmaceutical companies realised that the domestic market was too small, and started to take the initiative to expand to the US. In 1984 Cipla became the first pharmaceutical company certified by FDA; after that the entire industry followed in its footsteps.
At that time, there was not one foreign enterprise entering China, and the concept of market supervision and drug research and development was introduced very late.
Price Waterhouse Coopers China industry analyst Shetty (Sujay Shetty) told the reporter of “Finance” that now the FDA-approved pharmaceutical factories already have deep understanding of FDA standards, and a lot of companies are making further investment so as to maintain their position as market leaders.
As a result of the adoption of the FDA’s regulatory model, the Indian pharmaceutical regulatory supervision department also exercises very strict supervision and quality control of the domestic pharmaceutical companies, so as to ensure that the Indian drugs can be exported to Europe and the United States.
Today, India’s Dr. Reddys Laboratories, Sun Pharmaceutical, Ranbaxy Laboratories, Rubin Pharmaceuticals, Glen Mark Pharmaceutical and Aurobindo Pharma are all international pharmaceutical companies, with a degree of internationalization equivalent to that of the well-known pharmaceutical companies in the United States.
Until the Indian government revised the “Patent Law” again in 2005, this brought a lot of R&D and manufacturing orders to pharmaceutical companies. In order to reduce costs and increase revenues, multinational pharmaceutical companies outsourced a huge amount of manufacturing, clinical research, and packaging, labeling etc to the India pharmaceutical enterprises that had been granted the FDA certificationb over the last decade.
In 2005 alone, the turnover of the Indian contract manufacturers and research institutions increased by 40%, compared to 2004.
It can be said that, with the FDA model and the help of a number of multinational pharmaceutical companies in India, India positioned itself in an important niche in the pharmaceutical product chain, as a manufacturing center for complete preparations.
面临大考 Facing the Final Examination
Although the Indian pharmaceutical industry supplies a huge amount of generics globally, it still has to face trouble and criticism from the US and Europe.
Unlike China’s pharmaceutical industry spread (more than 4,000 enterprises), India’s pharmaceutical industry has achieved a relatively high degree of industrial concentration. Competition continued to intensify after 2005, and Indian pharmaceutical enterprises entered the stage of mergers and integration. In 2010, among 10 subsidiaries of IDPL, five were forced to shut down, three entered a loss making situation.
FDA对药品生产标准控制也更趋严厉，在频繁地、不间断的检查中，印度仿制药企暴露出管理、道德和诚信问题，众多仿制药企业受到了警告。1996年 美国刚开始实行警告制度时，FDA共发出152封警告信；2012年上升到753封；2013年前十个月就发出了近600封，这其中相当一部分发给了印度 仿制药企业。
FDA’s control of drug production standards has become more severe with frequent on-site inspections, exposure of Indian generic pharmaceutical companies’ management, ethics and integrity issues, and warnings to many generic drug companies. In 1996, when the United States began doing so, FDA issued a total of 152 warning letters; in 2012 it rose to 753 letters; in the first ten months of 2013 it issued nearly 600 letters, a considerable number of which were sent to Indian generic drug enterprises.
The generic pharmaceutical companies being warned are mostly the ones that failed to strictly implement the Current Good Manufacturing Practices (CGMP), reflected in lack of hygiene in the equipment, missing production records, uuntrained staff (in prevailing CGMP) and such issues. The punishment is usually prohibition of the factory from export of manufactured drugs to the US until it clears the next inspection.
According to a report of the “Pharmaceutical Economics News”, 6 Indian pharmaceutical companies have been blacklisted by FDA up to now. So far, 39 Indian pharmaceutical manufacturing bases, which had been approved for export to the United States, have lost that certification due to regulatory problems.
In August, the altercation between India and the European Union originated from one report of the European Medicines Agency in May, which mentioned that one of every nine test subjects was found to be in violation in the field inspection in the GVK Biotech Company last year. Thus this report recommended suspension of GVK from participation in drug sales.
GVK Biotech Company was found to be falsifying electrocardiogram data. This was not a core aspect of the data required for the bioequivalence test. However, the EU felt that it failed to comply with industry norms, and that there was a more critical problem behind the false data: seriously flaws in GVK’s quality system.
The same thing happened in 2013, when the New Delhi based pharmaceutical factory, Ranbaxy Laboratories, was sued by the US Department of Justice for criminal offenses because of its having provided false data. It was sentenced to a fine of $500 million, after it pleaded guilty.
Due to a series of fraudulent incidents, the export growth rate of Indian drugs declined sharply from 12% -13% p.a. over the past several decades to 3% last year.
The multiple litigation against Indian generic pharmaceutical companies by European countries also showed that, there were a lot of data integrity issues of Indian pharmaceutical companies. Hiding failure results, performing non-formal analysis, deleting electronic data, disabling audit tracking in the electronic data collection system, making up training data, duplicated unqualified sample analysis until adoption, back testing past data, not publishing stability failure reports, etc., all these seem to be dark secrets of India’s pharmaceutical industry.
Senior corporate executives and company management were believed to have supported these practices explicitly or implicitly, and in some cases even encouraged them.
Industry sources and analysts believe that the unending cases of falsity reflect an Indian cultural issue — the attitude that “more or less” 80% target achievement was acceptable, something that is not permitted in Europe and America (that seek a norm of 100% achievement).
Shah (DG Shah), Secretary-General of Indian Pharmaceutical Alliance pointed out that, these cases reflected lack of training of their technical and supervisory staff by Indian pharmaceutical firms. They are now actively making amends on the manufacturing defect front, and on cooperation with FDA.
But he does not think that these pharmaceutical companies purposefully perpetrated fraud. On the contrary, the initiatives taken by the European countries also stemmed from anger against Indian courts for their rejection of multinational pharmaceutical enterprise’s patent bids.
The Indian generic drugs that had frequently won lawsuits against pharmaceutical companies in Europe previously, also tasted defeat in recent years.
In June 2013, the Indian multinational generic drug company, Sun Pharmaceuticals, and the Israeli Teva Pharmaceutical Company suffered a major setback in their generics business in the United States. Both companies were booked by the New Jersey court for violation of the Protonix drug patent of the U.S. Pfizer Inc, and were sentenced to indemnify Pfizer $550 million and $1.6 billion respectively.
The huge compensation severely weakened competitiveness of Sun Pharmaceuticals, and its acquisition of Sweden Meda Pharmaceuticals and negotiation with Israel’s Taro Pharmaceuticals had to be postponed.
Pfizer Inc’s pursuit of proceedings against Sun Pharmaceuticals is likely to be emulated by other similarly well endowed primary research enterprises. Indian generic drug companies may probably face more and more patent infringement litigation in the future.
Shetty opined that “after these incidents, we believe that in the long run, this industry in (India) will become stronger.” And analyzes that the current challenges facing the Indian pharmaceutical industry is to overcome the FDA standards test, increase innovation, continuously improve research and development skills, and develop new biomedical technologies.
According to Shetty’s observation, Indian pharmaceutical enterprises began cooperaion with Chinese pharmaceutical companies based on market considerations, and this trend can be expected to manifest itself more and more in the future.