High costs associated with bringing a new drug to the market has led to Indian players shying away from drug discovery. Thus, R&D efforts currently majorly focus on reverse engineering and in process chemistry or in a few cases, out-licensing molecules to multinational companies at early stage of development.
At present, there are only few Indian companies including Piramal Life Sciences, Glenmark and Sun Pharma, which are engaged in new drug research. Consequently, there are only 70-80 molecules in pipeline from Indian players, of which more than two-thirds are still in early clinical phases. The high-risk high-return field of new drug research holds tremendous potential for Indian players.
Despite increased investment in R&D in recent years, even the leading companies such as Ranbaxy, Dr. Reddy’s Laboratories, etc spend approximately 5-10 per cent of their revenues on R&D. This is way behind what their western counterparts spend. This disparity is too great to be explained by cost differentials, and it comes when advances in genomics have made research equipment more expensive than ever.
It has been estimated that gross expenditure on R&D by India for 2012 was projected to be $ 41 billion in purchasing power parity terms, which works out to 0.8 per cent of GDP. This is low both in absolute terms and as a proportion of GDP compared to other countries. This is partly because the size of the R&D base and absorption capacity is not commensurate with requirements.
While lesser efforts are seen being made in new drug development space, significant efforts are made in generics space, which are defined as chemically-similar compounds or compounds with the same mechanism of action as an existing, approved chemical entity.
Critics of the pharma industry suggest that generics, also known as “me-too” drugs are only brought to market because their development is cheaper and less risky than drugs with a novel mechanism of action. However, one cannot ignore the cost benefits of market competition between similar drugs. In addition, it may take 10 or more years for a drug to go from discovery to FDA approval, and if a new clinical pathway is discovered, several companies will simultaneously develop a drug treatment within this pathway. This will lead to several similar drugs arriving on the market within a short period of time. This is why some suggest that much of the “me-too” drug phenomenon is actually a result of independent parallel research at rival companies.
On regulatory front, the pharmaceutical industry has been facing problems of huge CENVAT accumulation due to the inverted duty structure resulting in blockage of working capital and affecting competitiveness in international market. This issue needs to be addressed urgently. Considering the long-term benefits of R&D to the economy at large, all excisable goods used for R&D purposes should be exempted from excise duty as also import of all capital goods to boost R&D activities.
Pointers to remember –
- High costs associated with bringing a new drug to the market has led to Indian players shying away from drug discovery
- R&D efforts currently majorly focus on reverse engineering and in process chemistry or in a few cases, out-licensing molecules to multinational companies at early stage of development.
- Even the leading companies in the country spend approximately 5-10 per cent of their revenues on R&D, a number way behind what their western counterparts spend
- Significant efforts are made in R&D in generics space owing to rising demand, low cost and low risk
- Due to disconnect between academia & industry, pharma companies in India also lack the academic collaboration that is crucial to drug development
- Although there has been substantial increase in growth rates of patents filed in India, the share of patents filed for work through indigenous research is less than 20 per cent of the total
- It has been estimated that more than 300 MNCs have set up R&D centres in India