The Indian Pharma Industry

Published Date: 02 Nov 2017

"The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent."

`Richard Gerster

Indian pharmaceutical industry is mounting up the value chain. From being a pure reverse engineering industry focused on the domestic market, the industry is moving towards basic research driven, export oriented global presence, providing wide range of value added quality products and services, innovation, product life cycle management and enlarging their market reach. The old and mature categories like anti-infective, vitamins, and analgesics are de-growing while; new lifestyle categories like Cardiovascular, Central Nervous System (CNS), and Anti-Diabetic are expanding at double-digit growth rates. The Indian companies are putting their act together to tap the generic drugs markets in the regulated high margin markets of both developed and developing countries. On one hand the US market remains to be the most lucrative market for the Indian companies led by its market size and the intensity of blockbuster drugs going off patent and on the other size countries like Africa, Saudi Arabia and Russia are gaining huge importance due to their emergent markets. Indian companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping the generic market at various parts of the world.

Emerging Trend

The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical research, contract research, manufacturing and innovation opportunities. This path can lead the Indian pharmaceutical industry to huge success endeavors.

TABLE 2: SWOT Analysis of the Indian Pharma Industry in Emerging Markets

STRENGHTS

(a) Strong Low cost manufacturing sector

(b) Significant breadth and depth of product

expertise

(c) Low cost of growing Human resources in the Pharma sector

WEAKNESSES

(a) High emphasis on generics both for domestic and international markets where filing and approval of ANDAs and DMFs have left little room for R&D on drugs development

(b) Inadequate R&D Infrastructure

(c) Poor Industry‐Academia linkage

(d) Lack of required high‐end product development capable human resources

(e)Lack of time driven regulatory infrastructure (f) Poor SME base for high‐end manufacture

OPPORTUNITIES

(a) Global opportunity for increasing Generics and bio‐generics market both in developed and emerging countries due to pressure on

budgetary limitations of these countries as well as emergent patent cliff due to off-patenting

of major high‐value drugs

(b) Low cost good skill destination for contract

research and manufacturing and resultant opportunities in drug discovery as well as

clinical trials

(c) High growth of domestic market attracting multi‐nationals both for brown field and green field investments in production and capacity building

THREATS

(a) Ever‐greening strategy of MNCs for denying and limiting the patent cliff opportunities with debatable recourse to TRIPs and FTAs

(b) Increasingly stringent regulatory and non‐tariff barriers to generics markets in developed countries

(c) Increased competition for generics and bio‐generics production in terms of high capacity

and production costs

(d) High‐entry barriers to enable market share in development of new drugs

The Key Success Factors of the Indian Pharmaceutical Industry

1. Creation of an internal improvement structure with goals being clearly identified and deployed.

2. Facilitating creation of internal champions and leaders at various levels, through a defined structure of ownership and empowerment.

3. Strong focus on problem solving ability at shop-floor.

4. Sustained focus towards identification and elimination of wastes and any abnormalities.

5. Ability to challenge existing paradigms and a strong drive to overcome existing paradigms and evolve new ways of working.

6. Creation of cross-functional process based structure to overcome operational silos.

7. Sustained leadership focus through reviews at various levels and forums.

8. Celebrating success and sharing the rewards through an objective and well defined criteria.

9. Creation of an environment that allows participation of masses in improvement initiatives.

10. Training and development — technical skills, problem solving skills and soft skills.

Emerging Market Entry—Keys to Success

The Entry Strategies of the Indian Pharmaceutical Industry in Africa, CIS & the Middle-East

Competitive advantages of the Indian pharmaceutical industry also critically hinges upon the types of global strategies adopted by its firms. Internationalization strategy that tends to complement and upgrade the technological strength of Indian pharmaceutical companies can be very crucial for sustaining and enhancing their competitive position in the world market. For many companies large and small, entering new, complex markets can be daunting. An emerging market entry plan should create clarity as to the role emerging markets will play in your broader corporate strategy. The ultimate aim is to create long-term value, and profitability.

This raises primarily a few questions:-

I. How will you enter?

Entry barriers can vary greatly from market to market and region to region in larger national markets. Typical issues needed to overcome might include a lack of infrastructure, which can create challenges in areas like product distribution and supply chain management. Go it alone, striking out on your own can provide a high degree of control over brand presentation, quality, local business practices, and intellectual property. It also means that the company alone captures all of the upside from market success. However, it will also likely take longer to establish a local market position, and your company’s probable lack of local market knowledge could lead to expensive mistakes. Finding a partner Partnering with a local player has the potential to create a "win-win" situation, enabling the market entrant to capitalize on the partner’s current presence and local market knowledge to establish operations, build market share and rapidly overcome local obstacles. Such an alliance could also provide a less capital-hungry way to enter the market, since the potential exists for sharing a partner’s already established retail and/or wholesale footprint. However, a foreign company might have to contend with a local partner whose strategic interests could at some point diverge from its own, along with longer times to make decisions, which also reflects potentially different priorities. Furthermore, the loss of control increases the risk of brand damage even as the partner is sharing in any profits, thus reducing returns and lowering the potential value that the foreign company could realize in the event of a market exit.

Acquire, on the one hand, buying an established player in an emerging market provides a foreign company with a ready-made local position that it can fully integrate into its global operations over time. The opportunity often arises to add value to such an acquisition by making use of the parent company’s global skills, assets, and access to capital. And having a local asset can help to "ease the way" in the event that a market exit is required. On the other hand, arriving at a reliable valuation is difficult, considering that prices in many markets are on the rise, and dealing with family-owned business structures can be complex and time consuming. Potential entrants must be very clear about what they are buying into and lock in value through retention payments or other means such as distribution and supply contracts. The choice of which route to take should reflect a company’s goals and priorities, the size of the market opportunity, the state of local market development, and the specific nature of any entry barriers. In order to help determine the best entry strategy, each company should ask itself the following questions:

1. How well do we understand this market? Do we "know what we don’t know"?

2. Do we have the skills and patience to pursue a "go-it-alone" strategy? What are the implications if we fail?

3. Are there local companies with whom we could partner? Do we understand their goals, priorities and decision making process? What is our track record in similar partnerships elsewhere and what have we learned from them?

4. What can we learn from the experiences of other foreign companies entering this market?

5. What risks do we run of losing control of our brand, product and service quality, or intellectual property in this market, and how can we minimize these risks?

6. Are there attractive acquisition targets available? What is our track record in mergers and acquisitions and what have we learned from these experiences?

As a resolution to all the questions the following strategies has been devised: -

HOME COUNTRY PRODUCTION

Pros

Higher manufacturing and labor standards

High intellectual property right protections

No language barrier

Easier to identify reputable manufacturers

Quicker turnaround and quicker shipping

More accessible for face-to-face and on-site meetings

Domestic market appeal of "Made in Africa" stamp

Cons

Much higher manufacturing costs

Unavailability of resources

There are two specific ways to tap the overseas market basing operations in the home country.

Direct Export – Herein the manufacturer is the protagonist. He and his company are solely responsible for both manufacturing and exporting of the Products along with Sales & Marketing and other additive functionalities.

Here the both risk and return is the maximum and there is more expertise, and control by the manufacturing company.

Indirect Export

Foreign Tourists - The simplest and the most cost effective form of exports. It happens when foreign visitors / officials working in India purchases from the stores for themselves or on behalf of the parent offices abroad thereby adding to the foreign exchange earning of the country.

It can also happen through tie – ups with the several foreign branch offices or agencies located in India.

Export Houses - The most important among them are the export/merchant houses with play active role in promoting exports to foreign locations. Here the manufacturers entrusts the job of selling the products abroad to specialist agencies - The Export Houses.

Export houses consist of Exporting managers, Export agents and confirming houses. 

Advantages:-

All three are local middlemen

They have experience in the foreign markets

Has political & economic connections

Merchants & Agents have specialist skills for counter trade

Manufacture does not bear the overhead cost of exporting

Disadvantages:-

The producers has little or no control over his market

The Goodwill created is the merchants and not the producers

The contract is short term

Agents push those products that sell and can neglect others

manufacturer loose control if he relies too much on them

Merchants and agents are best suited by short term contracts

The export revenue now contributes almost half of the total revenue for the top three pharmaceutical majors: Dr Reddy’s, Ranbaxy and Cipla.

"India is expected to double pharmaceutical exports in the next two years, with the Pharmaceutical Export Promotion Council (Pharmexcil) eyeing overseas sales worth Rs. 1,22,500 crore ($25 billion) by the end of 2013-14. The figure stood at around $10 billion in 2010-11. To achieve this ambitious target, exports would need to grow at a compounded annual growth rate (CAGR) of around 34%, which is much above the 15% growth rate in the last five years.

"Countries such as Japan and China and regions such as North Africa, West Asia and Latin America offer immense potential for Indian exporters," said a pharma analyst at a global consultancy. "High healthcare expenditure and rising population make these countries a lucrative market for Indian drug exporters."…@HT News

Consortium Approach - A restricted number of manufacturers producing the same product unite and export on a cooperative basis. Here the export management function is accomplished for a number of firms at the same time. Thus, there happens a closer cooperation & control as compared to merchant exporters or the export houses. Export orders are procured on a jointly and distributed amongst the constituent units. The individual units are permitted to use their own letterheads and brand name. This arrangement confers more bargaining power on the consortium since the parties coming together can bargain over a position of strength. As in the case of exporting through export house, there is a possibility of saving in unit freight on account of consolidated shipment. Under-cutting is reduced to a great extent and all economies of scale associated with joint operation can be reaped.

The greatest disadvantage of consortium approach is that for this approach to succeed there should be perfect understanding among the members and each one should put in his best. As is well-known, cooperation can succeed only to the extent the individual members want it to succeed. Misunderstanding may arise over main issues and the presence of unscrupulous members is enough to spoil the business or the entire consortium.

Foreign Manufacturing

Pros

High cost of shipping of product to the export market;

Tariffs and non-tariff restrictions in the importing country;

Nationalist feelings in the country concerned not favoring import products;

Large size of the country, particularly regional groupings justifying establishment of manufacturing facilities in that country/region;

Greater scope to be in constant touch with the changing requirements of the foreign customer which is particularly true of fashion goods;

Lower production costs due to availability of cheaper/plentiful factor(s) of productions and

Advantages of acquiring an existing foreign product with all his facilities

Cons

Lower perceived quality (although this is changing)

Lower/different manufacturing and labor standards

Low intellectual property protection

Culture & Language barrier

Difficulty in verifying manufacturer and visiting on-site

Longer shipping time

Customs/import process

Foreign manufacturing can take one or more of the following forms:

Assembly

CRAM (Contract Research & Manufacturing)

Licensing

Joint Venture and

Wholly-owned foreign production (100% ownership)

Assembly - Assembly refers very specifically to the physical integration of component parts. In a slightly different way, the pharmaceutical industry may also be considered to be engaged in assembly though here the ingredients are "mixed" and not "assembled". For assembly, the firm may have its own arrangements abroad or leave it to a local party to assemble the product. A company may go for this sort of arrangement either to avoid high transportation cost of the final product or to take advantage of the cheap labor available in the export market or to get over the high tariff and non-tariff restriction.

Contract Research

Two major concerns (though independent but have links to each other) for many big pharmaceutical firms in the recent years are:

a) Many blockbuster drugs are going off–patent in the coming years putting pressure on top pharmaceutical companies to undertake greater level of R&D activities to keep-up the growth of both top-line and bottom-line;

b) Increasing timeline of drug discovery and development, prolonged regulation-mandated testing, complex review processes, rapidly escalating R&D expenditures and competition are compelling pharmaceutical companies to outsource various R&D related activities. Many studies have pointed out that developing a new medicine is a long and costly process, while the chances of success are very low. Statistics show that only 1 out of 5000 compounds tested eventually reaches the consumers, and only 3 out of 10 drugs that reach the market would earn enough money to recover the cost incurred on R&D. Thus, many top ranking pharmaceutical firms are increasingly facing the pressure to bring out new products into the market while endeavoring to reduce cost for R&D. It is estimated that globally, on an average, 20% of R&D is sourced outside the company either on a contract basis or on an investment basis. This trend provides possibilities of outsourcing the R&D work to low cost destinations like China and India. Contract research includes drug discovery and pre-clinical as well as clinical research. Clinical trials are used to determine whether a new drug or treatment is safe and effective. Globally the market size of contract research was around US$ 10 billion in 2005 and is expected to exceed US$ 20 billion by 2009. The contract research business in India is valued at US$ 100 - 120 million. India has certain advantages in this regard, which include:

_A well-developed pharmaceutical industry with manufacturing base

_ Low R&D cost

_ Availability of qualified scientific man power

_ Large patient population base for clinical trials

All these parameters have made India an attractive destination for many big pharmaceutical companies to source out their R&D activities, particularly clinical trials. Besides, being a member of WTO, India has moved towards TRIPS compliance, and clinical trials conducted in India are no longer confined to evaluating new medicine for their own market. For e.g., GSK and Ranbaxy have entered into an arrangement for drug discovery and clinical development, covering a wide range of therapeutic areas. According to the deal, Ranbaxy will identify potential drugs and develop them in initial stages, while GSK will take care of the later stages of clinical trials. Aurigene Technologies Ltd, a subsidiary of Dr. Reddy’s Lab has announced two separate tie-ups to discover potential drugs; one with a US company, Forest Laboratories Holdings Ltd, to develop novel small molecule drug candidate for obesity and metabolic disorder, and the other one with Merck Serono International S.A to work on identifying small molecule drugs to treat autoimmune diseases. Government of India is also taking some initiatives to encourage contract R&D by setting up infrastructure for pre-clinical research for vaccine and drug development in the country. The Indian Council of Medical research (ICMR) is setting up two such large facilities, one in Mumbai and the other in Hyderabad. Besides, the Government has also reduced the time taken for regulatory clearances to conduct clinical studies in India.

Contract Manufacturing

With the increasing pressure on the margins, major pharmaceutical companies are outsourcing their manufacturing activities (along with R&D activities) to low cost destinations like India and China. It has been estimated that almost 30% of the global manufacturing activities are outsourced in the pharmaceutical sector. Out of the total manufacturing activities outsourced, more than two-thirds are related to outsourcing of primary manufacturing (APIs, intermediates) and the remaining one-third is related to outsourcing of secondary manufacturing in dosage form. It is estimated that the cost of setting up of a FDA approved manufacturing plant in India is almost half of the cost to be incurred in USA. Labor cost in India is cheaper by 20% to 30%, as compared to developed countries. Initial capital expenditure is also much lower in India as compared to other developed countries. India has the largest number of US-FDA approved manufacturing plants, outside USA. Automatic approval of FDI up to 100% in this sector has encouraged the outsourcing trend further. All these factors have encouraged many large producers from developed countries to outsource manufacturing of pharmaceuticals to Indian producers.

Contract manufacturing may include manufacturing of Active Pharmaceutical Ingredients (APIs) for New Chemical Entities (NCEs) or generics. Indian pharmaceutical firms are engaged in the contract manufacturing of patented drugs, custom synthesis and scale-ups, specialized generics, old generics and old molecules. Nicholas Piramal has entered into contact manufacturing in 2003, investing close to US$ 200 million in this segment. Additional investment is envisaged in the coming years towards creating additional capacity for the contract manufacturing business.

The company has already announced six contracts and expects contract manufacturing to account for 50% of total revenue. GlaxoSmithKline has outsourced contract manufacturing of API to Indian pharmaceutical companies like Disham Pharma, Shasun Chemicals, Matrix Laboratories and Divi’s Laboratories.

Licensing

Lowest-cost option to expand market reach, but carries a high brand risk and limits the potential to exploit local market opportunities. Though the current trend is more on out-licensing, yet there is increasing licensing activities, both in-licensing and out-licensing, with large pharmaceutical companies licensing out their later stage R&D activities, particularly clinical trials. Licensing deals are increasingly being used to increase product portfolio, supplement research effort and strategically enter new markets.

Companies in Africa are increasingly interested in license technology to modernize their factories.

Licensing is an arrangement wherein the licenser gives something of value to the licensee in return for certain performance and payments from the licensee. The licenser may agree to give one or more of the following:

Patent Right

Trade Mark Rights

Copy Rights

Know-how

In return, the licensee usually promises

(a) To produce the licensor’s products covered by the rights;

(b) To market these products in the assigned territory; and

(c) To pay the licenser some amount related to the sales volume of such products. It may be noted that the licensee markets the products of the licenser in addition to producing it, whereas contract manufacturing covers only manufacturing.

Joint Venture

Joint Ventures are very much like licensing arrangements, but in the former the international firm has, normally, equity participation and management voice in the local firm.

Wholly-Owned Foreign Production - Wholly-owned foreign production involves greatest commitment to a foreign market. More than complete ownership, it gives complete control over all the activities of the firm.

There are two ways in which one can acquire 100% ownership in a foreign country:-

(a) Acquiring an existing foreign production unit, and

(b) Developing one’s own facilities from scratch.

Acquisition: Acquiring a foreign company with all its resources is a much quicker way to enter a market than developing one’s own facilities. Acquisition means getting qualified management personnel and labor, gaining instant local knowledge and contract with the local market and government and, most of all, removing a potential competitor from the scene. Horizontal acquisition is what we call it.

When Is Acquisition Appropriate?

Developed market for corporate control

Acquirer has high "absorptive" capacity

High synergy

Establishment of a New Facility: A firm normally builds up its own facilities from scratch where:-

(a) It does not find a national producer willing to sell out or the national government does not allow it and

(b) There are no local firms having the requisite standard of facilities. Establishment of its own set up helps the firm to incorporate the latest technology and equipment and avoids the problems of trying to change the traditional practices of the local firm. It is also known as the Green Field Entry.

Advantages of wholly owned operations are:

100% ownership means 100% profit

Greater experience in international operations;

No scope for conflict of interest with any local party; and

Complete control leading to better integration of various national organizations into a synergistic international system.

Disadvantages of wholly owned operations are:

They are costly in terms of capital and management resources;

They may result in negative public relations;

There always is the possibility of expropriation by the host government; and

Lack of involvement of a national partner who might act as a bridge between the international firm and the country concerned.

II. How will you build a profitable position?

Once the leadership of your company has chosen a market and agreed on an entry strategy, the focus should then be put on how to create a defensible position that has the potential to satisfy your long-term objectives.

III. How will emerging market activities fit into your global business model?

Because emerging markets typically require different approaches, processes and governance policies compared to more developed markets, organizations usually cannot simply replicate a standard operating model within an emerging market or across multiple ones. Each new market therefore has the potential to add significant amounts of complexity to a company’s global operating model.

What is so unique about entry in the Pharma Landscape???

IPR – When the American, & European pharmaceutical companies are busy filling the "Evergreen" patents, in India out of approx. 23,500 pharmaceutical companies only ten are rich enough to have original research in international level. Hence IPR in Pharmaceuticals in India is severe point of concern since liberalization.

Intellectual Property Rights (IPRs) have been defined as "ideas, inventions and creative an expression on which there is a public willingness to bestow the status of property (David 1993)." IPRs provide certain exclusive rights to the creators of the IP, to enable them reap commercial benefits from their creative efforts or reputation. The purpose of IPR legislation is to protect against the unauthorized imitation, copying or deceptive usage of identifying marks.

Types of IPR

Since inception, only patent, trademarks, and industrial designs were protected under ‘Industrial Property’, but now the term ‘Intellectual Property’ has a much wider meaning. IPR enhances technology advancement in the following ways:

a) Provides a mechanism of handling infringement, piracy, and unauthorized use.

b) Provides a set of information to the general public since all forms of IP are published except the trade secrets.

IP protection can be sought for a variety of intellectual efforts including

(i)Patents

(ii)Industrial designs:- features of any shape, configuration, surface pattern, composition of lines and colors applied to an article whether 2-D, e.g., textile, or 3-D, e.g., pens

(iii)Trademarks relate to any mark, name or logo under which trade is conducted for any product or service and by which the manufacturer or the service provider is identified. Trademarks can be bought, sold, and licensed. Trademark has no existence apart from the goodwill of the product or service it symbolizes

(iv)Copyright relates to expression of ideas in material form and includes literary, musical, dramatic, artistic, cinematography work, audio tapes, and computer software.

(v)Geographical indications are indications, which identify as good as originating in the territory of a country or a region or locality in that territory where a given quality, reputation, or other characteristic of the goods is essentially attributable to its geographical origin.

A patent is awarded for an invention, which satisfies the criteria of global novelty, non-obviousness, and industrial or commercial application. Patents can be granted for products and processes. As per the Indian Patent Act 1970, the term of a patent was 14 years from the date of filing except for processes for preparing drugs and food items for which the term was 7 years from the date of the filing or 5 years from the date of the patent, whichever is earlier. No product patents were granted for drugs and food items.

A copyright generated in a member country of the Berne Convention is automatically protected in all the member countries, without any need for registration. India is a signatory to the Berne Convention and has a very good copyright legislation comparable to that of any country. However, the copyright will not be automatically available in countries that are not the members of the Berne Convention. Therefore, copyright may not be considered a territorial right in the strict sense. Like any other property IPR can be transferred, sold, or gifted.

Role of Undisclosed Information in Intellectual Property

Protection of undisclosed information is least known to players of IPR and also least talked about, although it is perhaps the most important form of protection for industries, R&D institutions and other agencies dealing with IPR. Undisclosed information, generally known as trade secret or confidential information, includes formula, pattern, compilation, program, device, method, technique, or process. Protection of undisclosed information or trade secret is not really new to humanity; at every stage of development people have evolved methods to keep important information secret, commonly by restricting the knowledge to their family members. Laws relating to all forms of IPR are at different stages of implementation in India, but there is no separate and exclusive law for protecting undisclosed information/trade secret or confidential information.

Pressures of globalization or internationalization were not intense during 1950s to 1980s, and many countries, including India, were able to manage without practicing a strong system of IPR. Globalization driven by chemical, pharmaceutical, electronic, and IT industries has resulted into large investment in R&D. This process is characterized by shortening of product cycle, time and high risk of reverse engineering by competitors. Industries came to realize that trade secrets were not adequate to guard a technology. It was difficult to reap the benefits of innovations unless uniform laws and rules of patents, trademarks, copyright, etc. existed. That is how IPR became an important constituent of the World Trade Organization (WTO).

Patent Cooperation Treaty

The patent cooperation treaty (PCT) is a multifaceted treaty which came into action in 1978. PCT empowered an inventor of the member country contracting state of PCT can concurrently obtain precedence for the invention in all or any of the member countries, without having to file a separate application in the countries of interest, by terming them in the PCT application. All activities related to PCT are coordinated by the world intellectual property organization (WIPO), Geneva.

To protect invention in the other countries, it is required to submit an autonomous patent application in each country of interest; in cases, within a stipulated time to obtain priority in those countries. This results in huge investments, within a short duration, to cover costs for filing, translation, attorney charges, etc. Also, due to the short time available for making the decision on whether to file a patent application in a country or not, may not be well instituted.

Inventors of PCT of the contracting states on the other hand can concurrently attain precedence for their inventions without the need to file separate application in the countries of interest; thereby, saving the preliminary investments towards filing fees, translation, etc. Also, the system provides much longer time for filing patent application in the associate countries.

Under Paris convention the time available for securing priority in other countries is 12 months from the date of filing. As per PCT, the time available could be as minimum 20 & maximum 31 months. Moreover, an inventor is also benefited by the search report set under the PCT system to be sure that the claimed invention is novel. The inventor could also opt for initial examination before filing in other countries to be more sure about the patentability of the invention.

Intellectual Property in Pharmaceutical Industries Management

More than any other technological area, drugs and pharmaceuticals match the description of globalization and need to have a strong IP system most closely. Knowing that the cost of introducing a new drug into the market may cost a company anywhere between $ 300 million to $1000 million along with all the associated risks at the developmental stage, no company will like to risk its IP becoming a public property without adequate returns. Creating, obtaining, protecting, and managing IP must become a corporate activity in the same manner as the raising of resources and funds. The knowledge revolution, which we are sure to witness, will demand a special pedestal for IP and treatment in the overall decision-making process.

Competition in the global pharmaceutical industry is driven by scientific knowledge rather than manufacturing know-how and a company's success will be largely dependent on its R&D efforts. Therefore, investments in R&D in the drug industry are very high as a percentage of total sales; reports suggest that it could be as much as 15% of the sale. One of the key issues in this industry is the management of innovative risks while one strives to gain a competitive advantage over rival organizations. There is high cost attached to the risk of failure in pharmaceutical R&D with the development of potential medicines that are unable to meet the stringent safety standards, being terminated, sometimes after many years of investment. For those medicines that do clear development hurdles, it takes about 8-10 years from the date when the compound was first synthesized. As product patents emerge as the main tools for protecting IP, the drug companies will have to shift their focus of R&D from development of new processes for producing known drugs towards development of a new drug molecule and new chemical entity (NCE). During the 1980s, after a period of successfully treating many diseases of short-term duration, the R&D focus shifted to long duration (chronic) diseases. While looking for the global market, one has to ensure that requirements different regulatory authorities must be satisfied.[18]

It is understood that the documents to be submitted to regulatory authorities have almost tripled in the last ten years. In addition, regulatory authorities now take much longer to approve a new drug. Consequently, the period of patent protection is reduced, resulting in the need of putting in extra efforts to earn enough profits. The situation may be more severe in the case of drugs developed through the biotechnology route especially those involving utilization of genes. It is likely that the industrialized world would soon start canvassing for longer protection for drugs. It is also possible that many governments would exercise more and more price control to meet public goals. This would on one hand emphasize the need for reduced cost of drug development, production, and marketing, and on the other hand, necessitate planning for lower profit margins so as to recover costs over a longer period. It is thus obvious that the drug industry has to wade through many conflicting requirements. Many different strategies have been evolved during the last 10 to 15 years for cost containment and trade advantage. Some of these are out sourcing of R&D activity, forming R&D partnerships and establishing strategic alliances.

Nature of Pharmaceutical Industry

The race to unlock the secrets of human genome has produced an explosion of scientific knowledge and spurred the development of new technologies that are altering the economics of drug development. Biopharmaceuticals are likely to enjoy a special place and the ultimate goal will be to have personalized medicines, as everyone will have their own genome mapped and stored in a chip. Doctors will look at the information in the chip(s) and prescribe accordingly. The important IP issue associated would be the protection of such databases of personal information. Biotechnologically developed drugs will find more and more entry into the market. The protection procedure for such drug will be a little different from those conventional drugs, which are not biotechnologically developed. Microbial strains used for developing a drug or vaccine needs to be specified in the patent document. If the strain is already known and reported in the literature usually consulted by scientists, then the situation is simple. However, many new strains are discovered and developed continuously and these are deposited with International depository authorities under the Budapest Treaty. While doing a novelty search, the databases of these depositories should also be consulted. Companies do not usually go for publishing their work, but it is good to make it a practice not to disclose the invention through publications or seminars until a patent application has been filed.

While dealing with microbiological inventions, it is essential to deposit the strain in one of the recognized depositories who would give a registration number to the strain which should be quoted in the patent specification. This obviates the need of describing a life form on paper. Depositing a strain also costs money, but this is not much if one is not dealing with, for example cell lines. Further, for inventions involving genes, gene expression, DNA, and RNA, the sequences also have to be described in the patent specification as has been seen in the past. The alliances could be for many different objectives such as for sharing R&D expertise and facilities, utilizing marketing networks and sharing production facilities. While entering into an R&D alliance, it is always advisable to enter into a formal agreement covering issues like ownership of IP in different countries, sharing of costs of obtaining and maintaining IP and revenue accruing from it, methods of keeping trade secrets, accounting for IP of each company before the alliance and IP created during the project but not addressed in the plan, dispute settlements. It must be remembered that an alliance would be favorable if the IP portfolio is stronger than that of concerned partner. There could be many other elements of this agreement. Many drug companies will soon use the services of academic institutions, private R&D agencies, R&D institutions under government in India and abroad by way of contract research. All the above aspects mentioned above will be useful. Special attention will have to be paid towards maintaining confidentiality of research.

The current state of the pharmaceutical industry indicates that IPR are being unjustifiably strengthened and abused at the expense of competition and consumer welfare. The lack of risk and innovation on the part of the drug industry underscores the inequity that is occurring at the expense of public good. It is an unfairness that cannot be cured by legislative reform alone. While congressional efforts to close loopholes in current statutes, along with new legislation to curtail additionally unfavorable business practices of the pharmaceutical industry, may provide some mitigation, antitrust law must appropriately step in. While antitrust laws have appropriately scrutinized certain business practices employed by the pharmaceutical industry, such as mergers and acquisitions and agreements not to compete, there are several other practices that need to be addressed. The grant of patents on minor elements of an old drug, reformulations of old drugs to secure new patents, and the use of advertising and brand name development to increase the barriers for generic market entrants are all areas in which antitrust law can help stabilize the balance between rewarding innovation and preserving competition.

Traditional medicine dealing with natural botanical products is an important part of human health care in many developing countries and also in developed countries, increasing their commercial value. The world market for such medicines has reached US $ 60 billion, with annual growth rates of between 5% and 15%. Although purely traditional knowledge based medicines do not qualify for patent, people often claim so. Researchers or companies may also claim IPR over biological resources and/or traditional knowledge, after slightly modifying them. The fast growth of patent applications related to herbal medicine shows this trend clearly. The patent applications in the field of natural products, traditional herbal medicine and herbal medicinal products are dealt with own IPR policies of each country as food, pharmaceutical and cosmetics purview, whichever appropriate. Medicinal plants and related plant products are important targets of patent claims since they have become of great interest to the global organized herbal drug and cosmetic industries.

Some Special Aspects of Drug Patent Specification

Writing patent specification is a highly professional skill, which is acquired over a period of time and needs a good combination of scientific, technological, and legal knowledge. Claims in any patent specification constitute the soul of the patent over which legal proprietary is sought. Discovery of a new property in a known material is not patentable. If one can put the property to a practical use one has made an invention which may be patentable. A discovery that a known substance is able to withstand mechanical shock would not be patentable but a railway sleeper made from the material could well be patented. A substance may not be new but has been found to have a new property. It may be possible to patent it in combination with some other known substances if in combination they exhibit some new result. The reason is that no one has earlier used that combination for producing an insecticide or fertilizer or drug. It is quite possible that an inventor has created a new molecule but its precise structure is not known. In such a case, description of the substance along with its properties and the method of producing the same will play an important role.

Combination of known substances into useful products may be a subject matter of a patent if the substances have some working relationship when combined together. In this case, no chemical reaction takes place. It confers only a limited protection. Any use by others of individual parts of the combination is beyond the scope of the patent. For example, a patent on aqua regia will not prohibit any one from mixing the two acids in different proportions and obtaining new patents. Methods of treatment for humans and animals are not patentable in most of the countries (one exception is USA) as they are not considered capable of industrial application. In case of new pharmaceutical use of a known substance, one should be careful in writing claims as the claim should not give an impression of a method of treatment. Most of the applications relate to drugs and pharmaceuticals including herbal drugs. A limited number of applications relate to engineering, electronics, and chemicals. About 62% of the applications are related to drugs and pharmaceuticals.

Pharmacy is a field which orients as a life saving sector, performing needs with better focus and approach in the coming era. Hence at the same time the protection for IPRs seems to be considerably weak specifically in pharma sector in India. At this junction we can see both face i.e. pre-IPR scenario and post-IPR scenario to advance beyond being primarily an outsourcing arm to global pharmaceutical industry; Indian companies need to develop their own "upstream" R&D relationships.

CONCLUSION

In conclusion, it might be said that there is no one best way to enter fore in markets. Expansion, innovation and competition will continue to accelerate in emerging markets, luring more companies into entering the developing world. Firms with global ambitions who want to realize the promise of emerging markets should craft a strategy designed to execute in response to the critical success factors unique for each target market, provide for flexibility amid market transitions, and position them for long-term success. A firm, intending to enter foreign markets, should analyze carefully its strength and weaknesses and the opportunities and conditions in each market before deciding about the type of entry. It should take the initiative on its own. Whatever the firm does, it should always follow a flexible policy ready to change with changes in environment.