USTR pushes for drug data exclusivity [India]

The thorny issue of providing data exclusivity to pharma MNCs has come under limelight. The United States Trade Representative (USTR) seems to be lobbying hard with the health ministry for data exclusivity, which if allowed, will adversely affect domestic pharma companies that are making generic versions of patented drugs. Data exclusivity, if implemented, will stop or delay marketing approval of many generic drugs as the domestic pharma companies will not be able to rely on the clinical data which has been submitted by MNCs to the drug regulator, when they seek approval.

The Indian health ministry has not been in favour of granting data exclusivity to pharma MNCs, which effectively offers monopoly to the developer of a new drug even without a patent, restricting cheaper generic versions for several years. While one round of negotiations have been held earlier this year between USTR representatives and health ministry officials, the issue is expected to come up again soon, sources said. "The focus (of USTR) has shifted to the health ministry which is being urged to take a decision on the issue," sources said. For USTR, a change in the ministry's view is important before WHO-established Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG) meets in Geneva this month, to negotiate an action plan for R&D that prioritizes the health needs of developing countries. Data exclusivity can be introduced through an amendment in the Drugs and Cosmetics Act, which is under the purview of the health ministry. The health ministry had then suggested data protection and not data exclusivity, which is compliant with TRIPs. Data protection prevents disclosure of clinical test data to competitors, but allows the drug regulator to use it for granting approval to generic companies. On the other hand, if data exclusivity proposal is accepted, the regulator cannot use the clinical test data submitted by an innovator company, to give marketing approval, which are developing cheaper generic versions.

Says Indian Pharmaceutical Alliance secretary general DG Shah: "India is not obliged to grant data exclusivity under TRIPS. Protecting the originators data against 'unfair commercial use' is agreed by all sections of the industry. So why are attempts being made to get it (data exclusivity) back?" Developing countries along with the WHO, feel that the draft action plan being negotiated in Geneva should focus on a global strategy on health and innovation, and intellectual property should be managed in a pro-public health manner. Intellectual property rights should not become an obstacle to access low cost generic medicines public health groups say.

US patent reform to benefit Indian firms [India]

Indian pharmaceutical firms, which make most of their revenues and profits from the manufacture of off-patent, or generic, drugs, are set to play a larger role in the US, the world’s biggest drug market.

That is, if a US plan to reform patent laws by including provisions for what is called post-grant opposition to patents and limiting avenues for extending patent protection for medicine companies becomes law.

The immediate impact of the law change will be to ease challenges on drug patents and also lower legal costs in such challenges.

The changes anticipated in the Patent Reforms Act, which has already been passed by the US House of Representatives in February, would allow opposing a patent after its grant in the US, as is possible in countries such as the UK, Germany and India, along with a general tightening of patentability rules in the US.

It would also, to a large extent, halt the tactics of research-based drug giants in the US to include all possible claims in the patent application by modifying it several times during the life of a patent through what is known as “ever-greening”.

With the reforms, the US patent office sought to limit the number of times to two that a patent applicant can file “continuations” of patents. Currently, there is no limit on the number of times that a patent holder can keep updating its patent claims through such filings. The draft law is now under consideration of the US Senate.

The patent reforms in the US are aimed at eliminating frivolous patents as also invalidating several existing patents that have received such protection through “continuation” filings based on simple modifications. This would help generic players to enter the market with more products as the legal expenses will go down.

Patent experts said that the reforms that the US has initiated are an attempt to harmonize its patent law with the rest of the world, which follows a comparatively higher threshold for patentability.

The new rules, for instance, will replace the current US system that grants patents to applicant who can prove “first-to-invent” status with a “first-to-file” regime in force in others countries.
With the provision of post-grant opposition, generics companies will get a new opportunity to argue against the unsubstantiated claims made by the patent holder without going to court of law or infringing the patent—both expensive options.

J&J gets patent for ARV drug Etravirine [India]

US major Johnson and Johnson (J&J) has been granted a patent for its anti retroviral drug (ARV) Etravirine in India—the second anti-ARV drug to be patented in India. Pfizer, the world’s largest drug maker, received a patent for Maravoric last year, which made it the country’s first patented ARV drug. The drug got the US Food & Drug Administration’s (FDA) approval in January 2008. J&J received the Indian patent from the Mumbai patent office recently.

The drug already has a US patent and is used in combination with anti-HIV drugs to treat patients who develop resistance to multiple HIV drug medication. The drug is marketed by Tibotec Pharmaceuticals, a subsidiary of Johnson & Johnson, under the brand name Intelence. It is not immediately known the kind of impact J&J’s approval will have in India which has 3 million HIV patients in the country. Experts say that the drug could help prolong the use of a particular drug in a patient.

However, being a new drug its efficacy and relevance in developing countries like India is yet to be tested. NGOs and patient groups are studying the possible impact of the patent before deciding whether to file a post patent opposition against the drug. Interestingly, industry sources claimed out that J&J may use the approval not only to target the Indian market but also as a tool to stop any Indian generic competitor from manufacturing cheap copies of the drug and exporting it globally. Similarly, a patent in India will also make J&J case much stronger when it seeks patent in other developing countries. Since India became Trade-Related Aspects of Intellectual Property Rights (TRIPS) compliant in 1995, manufacturers can patent their products in India and enjoy a monopoly over marketing that product for 20 years. Global pharma companies have been aggressively filing patent applications across the country and some of them have been successful in getting patent protection in the country. However, patient groups and NGOs have been strongly opposing many application saying that the drugs are not new products but mere innovations.

Patents: The Master Key

The metamorphosis of Indian pharma is not new. From the changing patent regime, being a 'copycat' to innovator, it has tailored itself to cope with global trends. In the bargain it has grown by leaps and bounds, not just within domestic boundaries but across geographies. These companies have begun to leave more pronounced global footprints with many cross-border deals. What future strategies will they implement to grow these footprints in the US and Europe?

Locked 'in'/Behind the scenes

Intellectual property (IP) protection is becoming an important component of global trade. As countries are looking to enter the global market place they are recognising the need to revamp their IP laws to attract multinational companies to participate in their economies. This has certainly been true in India where in 2005 intellectual property laws were implemented protecting product patents; prior to that India only recognised process patents. Before the introduction of this new legislation, Indian pharmaceutical companies were free to legally reverse engineer products obtained from branded manufacturers and sell them within India and other markets with lax patents laws. This new development means that Indian companies will no longer be able to depend on revenues generated from selling copied versions of these branded drugs. "As India's patent regime is applicable to patents after 2005, it is possible for registration of an international product (still under patent, patented before 1995) with studies of bio-equivalence in India. In the EU and US, registration is possible only for products off patent", explains Surjit Aurora, Vice President Marketing, WinMedicare.

The changing dynamics of the regulated markets like the US and EU have presented a number of opportunities for Indian pharma industry to capitalise on. Some of the major concerns facing the global pharma industry are higher healthcare costs, competition from generics, patent expiries of blockbuster drugs, drying R&D pipelines and increasing R&D costs. These translate into a significant growth opportunity for Indian pharma industry, in the form of exports of generics to regulated markets and contract manufacturing/ research for global pharma companies. The Indian pharma industry is therefore exposed to a host of new opportunities and risks.

What are Indian companies looking for?

There are various reasons for Indian companies stepping in the regulated markets. Firstly, CARE research believes that the growth of the Indian pharma companies in the domestic market will get restricted with MNCs introducing newer patented drugs in the country. Under this scenario, growth for formulation companies is likely to come from the generics opportunity in regulated markets and geographic expansion in semi/non regulated markets. The generics market is currently valued at $60 billion with unbranded generics constituting two-thirds of that at approximately $38 billion. The US and Canada make up more than half ( approximately 54 percent) of the revenue for the generics market exceeding the sales of continents of Latin America and the EU. The value of drugs going off-patent in regulated markets is estimated at $ 70-80 billion during the next five years and this represents a huge opportunity for Indian pharma companies to establish their presence in these markets.

"Indian players operate mostly in the generic generics and branded generics segment. The generic generics segment is the one that is legally defined in the regulated markets," informs Utkarsh Palnitkar, Partner-Transaction Advisory Services, Leader-Business Advisory Services, Ernst & Young. This essentially means that the product must be sold on the basis of its molecule and not as a brand.

From a patent challenger to a preferred authorised generic

Many Indian companies have been able to gain generic market share by aggressively challenging patents, and this is a good strategy in the short term. But moving forward, this strategy is risky and ultimately an unsustainable business model. To be profitable in the generic space in the long term, experts believe that working with branded manufacturers to become an authorised generic is a more sustainable strategy. When Indian companies can take advantage of the opportunities of the regulated markets in the areas of cardiovascular, anti-diabetics, OTC, health and nutritional supplements, anti infectives etc, pricing pressure in the regulated markets, high litigation expenses and counter strategies followed by innovator companies are factors that could dampen the growth of Indian companies pursuing the generic opportunity.

The Indian 'key'

India pharma companies are rapidly ramping up their presence in the global pharma space through the inorganic route, and are increasing their horizons beyond domestic boundaries. They are adopting inorganic growth strategies rather than setting up their own manufacturing facilities and distribution networks to hasten their presence in newer markets and consolidate their market share. "Furthermore, with distribution concentrated in few large players in each geography, entry strategies are limited to distribution alliances or outright acquisitions," adds Palnitkar. Alliances have been followed by establishment of subsidiaries as is seen in the case of Dr Reddy's acquisition of Betapharm and Ranbaxy's acquisition of Terapia. The prime strategy behind cross border acquisitions is entering new markets, besides strengthening the value chain, improving the competitive position, expanding the product portfolio, building expertise in new therapeutic areas, and acquiring assets. The Indian players are focusing on other markets and just not relying on one or two prime markets. For instance, the primary objective of Ranbaxy's acquisition of Be Tabs, a leading generics player in South Africa, was to enter the high growth South African market. Dr Reddy's acquired Betapharm, to catapult itself into a significant position in Germany. There has also been a recent trend of pharma companies acquiring front-end pharma marketing companies to strengthen their distribution network.

Set backs

Indian companies have primarily succeeded in acquiring many companies in Europe, whereas significant acquisitions in the US still remain a distant dream, primarily due to very high valuations. "Possibly the cost of acquisition is lower in EU. These companies also operate in the US and have ANDA filings for products going off patent. Cost of entry is lower in EU than in the US," adds Aurora.

Also the attractiveness of the US market has suffered some setback in recent periods, especially for the large generics targeting exclusivity. There is concern, that authorised generics, will take away the shine off 'first-to-file' strategies of generic players, who anticipated windfall gains through the 180-day marketing exclusivity period. Conceding this point, Aurora says, "There is significant price erosion when innovator companies launch authorised generics. This may affect your prices by as much as 50 percent." But players feel that this is not a new thing. Price erosion and products going off-patent does not creep in overnight. It has happened in the past and companies have factored the same in their projections. Other reasons include legal challenges by patent holders delaying and increasing the cost of launch; amongst others have severely impacted the exclusivity-related profits that generic players seek. The Indian pharma companies like Ranbaxy, Dr Reddy's, Wockhardt, Cipla, Nicholas Piramal and Lupin have been doing extremely well in developed markets. Over the years, they have changed their strategies and invested large funds in R&D, set up large numbers of FDA-approved plants and consolidated marketing activity. The companies have their strategies to leverage opportunities and appropriate values existing in formulations, bulk drugs, generics, Novel Drug Delivery Systems, New Chemical Entities, Biotechnology etc. "The industry has thrived so far on reverse engineering skills exploiting the lack of process patent in the country. This has resulted in the Indian pharma players offering their products at some of the lowest prices in the world," remarks Palnitkar. The quality of the products is reflected in the fact that India has the highest number of manufacturing plants approved by US FDA, which is next only to that in the US. The setbacks relate to regulatory requirements and price controls, especially in Europe and increasingly in US. Pharma being a highly regulated field with complex pathways, different geographies have different regulatory guidelines. "Another example is Japan, which has closed its doors to pharma dosage imports. In addition, post Vioxx withdrawal, USFDA has tightened safety and efficacy requirements for generics leading to costly overruns, informs Palnitkar.

What's next

"There is no quick cure. Indian companies have to go through the route mandated to reach the end consumers," feels Palnitkar. It has been found that companies avoid price-controlled markets, and are less likely to introduce products in additional markets after entering a price-controlled country. In the case of EU, launches are further delayed following legalisation of parallel imports. The silver lining is that all regulated markets are looking at increasing generics usage in the healthcare system as a means to counter massive healthcare budget deficits. Indian companies are very optimistic over their plans for regulated markets such as the US and EU. They are following the route of mergers and acquisitions to make inroads in the foreign markets. They need to consolidate further in different parts of the world to become trans-national players. Indian companies will have to rise above the statement of Micheal Porter (1990), that most multinational firms are just national firms with international operations. They shall certainly be at an advantage, as their strong national identities will give them a competitive advantage in global markets.