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Innovation – The next frontier

Alok Ghosh, Ex-President - Global Technical Operations, Lupin, underscores the importance of creating a conducive environment to foster innovation in India’s life sciences sector to ensure its continuous progress

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The USFDA recently issued a guideline titled Product Launch Notification under Section 506I. The guideline instructs companies to let the USFDA know if a product is not launched even after 180 days of getting approval. USFDA felt the need to issue this guideline on product launch since data shows that only about 40 per cent of generic products are getting launched after USFDA approval within a year. This means about 60 per cent of products are not getting launched after USFDA approval even after a year. The data also shows that even after five years about 30 per cent of products are not getting launched. Pharma companies spend a lot of money on the development, bio studies, filing of product and pay GDUFA fees. Then, why are the products are not launched even after approval? The answer is that there are way too many competitors marketing the same product thereby reducing the scope of marketing or the cost of the product is prohibitive to selling the product at a competitive price.

Essentially two developments have happened in the last couple of years:

  1. The USFDA stepped up approval of products by introducing GDUFA and inducted a lot of new inspectors/reviewers to clear the backlogs of approval. From a backlog of more than 36 months once, one can expect approval of new product now in 12-14 months if the quality of filing and data is acceptable. This helped in more generic products getting approval, throwing the US market into intense competition.
  2. The market consolidated in the US and from about 10-12 buyers, today about 90 per cent of buying are controlled effectively by three buyers only, namely – Red Oak, Walgreen- Boots Alliance & McKesson. This means the buyers have now very high bargaining power bringing price pressure on marketed products. It is now a win-win situation for both, the government and consumers in the US.

Indian companies used to earn relatively better margins in the US as compared to the domestic market where there is traditionally price control by the government. This is one of the major reasons why, despite high investment and regulatory hurdles, Indian companies have consistently filed products with the USFDA to market products in the US market. Most of the top Indian companies today earn anywhere between 35 to 45 per cent of their revenue from the US market. So, any southward price correction in the US market is going to impact the bottom-line of Indian companies.

At one time, companies competed to file the maximum number of products in the US market. They used to declare in their annual report the total number of ANDAs filed assuring investors about the possibility of steady income from the world’s biggest pharma market. This has changed completely now. Instead, companies are now actively changing their product portfolio with limited product filing and focusing on difficult-to-make products commonly called complex generics and speciality products. All the companies are thinking alike and are avoiding filing typical vanilla generics. As the scope of filing blockbuster, first-to-file products have substantially reduced, eliminating the chance of exclusive marketing for six months, complex generics and speciality products are becoming the mantra for all companies. But, while this strategy can work for some time it cannot be a solution for the long term.

While complex generics are again copies of branded products, speciality pharma products are classified as high cost, high complexity with some amount of innovation built in. The entire strategy of moving the product portfolio towards complex generics and speciality pharma products is to avoid competition or compete with very limited competitors. Even the emerging area of biosimilars, where most companies are trying to move, will not secure companies from competition and reduce price pressure.

Innovation will be the answer for Indian companies to grow in future. While Indian companies in the last couple of decades have made remarkable progress in manufacturing generic pharma products, none of the companies have really contributed much to the area of innovation. Frankly, we have failed to develop an ecosystem for innovation in India.

INSEAD business school in their Global Innovation Index (GII), July 2019 report of the 10 most innovative countries in the world, named only two Asian countries in the list – Singapore at eighth and Israel at 10th. The theme of the GI index was – Creating Healthy Lives -The Future of Medical Innovation. The list is heavily populated by European countries, with Switzerland at the top. The US is placed in the third position. India is listed at the 52nd spot amongst 129 countries reviewed in 132 parameters. Even other Asian countries like Vietnam (42nd) and Thailand (43rd) figured at a higher position than India. Our arch competitor China is placed at 14th position signifying how China is repositioning itself from the World’s Factory to the world’s top innovative country.

What makes a country innovative? 

In his book titled The Politics of Innovation by Mark Zachary Taylor, a Georgia Tech professor discusses what makes a country innovative. Political and cultural wisdom does not always make the country innovative. There are vast differences in the way the innovative countries are run. Because of these differences, it is hard to pinpoint what makes these countries innovative. Overall, innovation is a goal most countries strive to achieve and according to Taylor, this is not achievable without govt. actively bring stakeholders together, providing them with networking resources to become more innovative. So, the government must play a major role to drive the country towards the path of innovation. This drive creates an ecosystem and encouraged to create innovative solutions.

Essentially, we need to fix the following –

  1. The government must remove all unnecessary hurdles of license/permits so that innovative minds do not get distracted and become busy to comply with statutory rules. India probably is the only country where you need a license to carry out research.
  2. Easy access to capital would be essential to start any innovative work. The government can create a corpus to help or private investors come forward.
  3. Building human capital would be a prime requisite. Build world-class universities and research institutes. Unfortunately, our best educational institutes today do not figure in the world’s top 200.
  4. Encourage industry-academia collaboration. Some of the best innovation has come out from research labs of educational institutes.
  5. Create enabling infrastructure. An ecosystem is extremely important to sustain innovation. This is the reason biotech start-ups have come up in Boston or tech start-ups in Palo Alto.

The IMF projected the Indian economy to become third in ranking after China and the US in 2030. That dream can only be fulfilled if India focusses more on Innovation. Today, the Government of India’s clarion call of ‘Atmanirbhar’ or self-reliant India is only possible if innovation becomes one of the centre themes of planning. Otherwise, it will remain as a slogan only.

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