Indian generic-drug makers once bedeviled Big Pharma; now they may be its best hope for success.
By Jason Overdorf
March 5, 2007 issue - India used to be big pharma's worst nightmare. Loose patent laws and a glut of talented scientists made that country the world capital for generics. As quickly as companies like GlaxoSmithKline, Merck, Novatis, Pfizer and others could develop innovative new drugs, nimble Indian companies could copy them—and sell them for a fraction of the price. The practice led to a tangle of litigation. But now, the legal battles are giving way to new partnerships.
Earlier this month, GlaxoSmithKline signed a groundbreaking deal to develop new drugs with India's Ranbaxy—the same company it is fighting over a copycat herpes treatment. In January, Eli Lilly began working with Mumbai-based Nicholas Piramal on a number of new drugs. Several similar partnerships are in the works, and they aren't just outsourcing deals. Rather than simply sending bits and pieces of lab work over to India, the Big Pharma companies are increasingly giving their Indian counterparts the rights to develop specific drug targets, and to share in the profits. Industry sources estimate that there are 500 new drugs in development on the Subcontinent today.
The end result could be the first-ever Indian "blockbuster" drug.
The new friendships reflect two separate changes in the pharmaceutical industry. First and most important is the drying up of Big Pharma's pipeline. Western companies have historically depended on sales of "blockbuster" drugs (mass treatments for big ailments like cancer or heart diseases, which typically generate more than $1 billion in annual sales). But the low-hanging fruit has been picked, and the cost of discovering big new drugs has increased from an average of $100 million in the '80s to more than $800 million today, even as the output of novel drugs has fallen. Meanwhile, many existing blockbusters are due to go off patent this year.
That will certainly open up new copycat targets for drug makers in India. But at the same time, there's been a recent tightening of patent laws there. This second shift is pushing scientists toward more profitable original research. Indian firms believe they can make new drugs much more cheaply than Big Pharma—the head of Nicholas Piramal believes the first Indian blockbuster will be made for less than $50 million.
That's the lure for companies like Lilly and Glaxo, which have huge libraries of molecules that have shown promise—more than they can possibly investigate themselves with today's cost constraints. By licensing them out to Indian firms that are starting their own R&D from scratch, Big Pharma gets to keep the lion's share of the profits with virtually no capital outlay. But the Indian partners aren't just cheap, they're skilled. Thanks to the intense focus on science education and extensive experience in reverse-engineering generics, Indian firms are now "at least as good in chemistry" as Western players, says Daniel Vasella, head of Swiss drug giant Novartis.
So what's the most likely candidate for first-ever Indian blockbuster? A tongue-twisting compound known as balaglitazone, which helps the body to produce insulin more efficiently, and may be used to treat diabetes. It takes the partnership between India and the West a step further than a simple alliance between two companies. First developed by an Indian company called Dr. Reddy's (which got the idea from a Japanese firm), it was then licensed out to Denmark's Novo Nordisk, a big pharmaceutical specializing in insulin. After a couple of failed efforts, Novo lost patience, and the patent went back to Dr. Reddy's. The Indian firm then picked up where the Danes left off, and is now tag-teaming with another European firm to bring the drug to market. It is already in Phase III trials, the final large-scale test on humans that is one of the last hurdles before public sale. It's a stage only one in 5,000 drugs reach.
If balaglitazone goes the distance, it will profit European and Indian drug makers. But it will also offer new hope for diabetes sufferers, more of whom live in India than anywhere else in the world. It may be that the rise of emerging-market drug makers will also mean better treatments for diseases that strike hardest in developing countries.
With Silvia Spring in London
© 2007 Newsweek, Inc.