India – Global pharmaceutical R&D powerhouse or contract research workshop?

India - Global pharmaceutical R&D powerhouse or contract research workshop? By Dr Matthew Howard In response to the ever-increasing costs of drug discovery and development, pharmaceutical industry leaders must constantly seek to increase productivity while simultaneously reducing costs and maintaining quality. Globalisation of drug discovery may provide such an opportunity, through the conduct of costly R&D activities in emergent economies at a fraction of the cost of the West. This report provides an overview of the current environment for pharmaceutical R&D activities in India, including the intellectual property regime, infrastructure, education and research and development, and seeks to challenge the perception of India as a ‘contract research workshop’. Although there are considerable challenges that must be overcome, by describing both what is possible today and presenting what has already been achieved by various global pharmaceutical companies, we advocate that India actually has the potential to become a significant global R&D powerhouse of the 21st century. In the past, entering the Indian pharmaceutical market was considered unviable by many global pharmaceutical companies for a number of reasons, including the lack of intellectual property protection, infrastructure hurdles and a restrictive regulatory environment. However, a recently strengthened Indian IP regime, initiation of regulatory and infrastructure reforms and a variety of fiscal incentives, indicate that the Indian environment is now moving in the right direction. In 2005, Indian law became compliant with the World Trade Organisation (WTO) Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement. As a result, product patents are now possible on chemical molecules for new drugs introduced after 2005. This clearly represents a significant step forward for both novel drug discovery as well as the sale of therapeutics in the Indian market. However it will present challenges, as well as opportunities, to the domestic industry which has thrived and grown on the manufacture of generics. In principle, the patent reforms should create a significantly more favourable environment for Western-headquartered pharmaceutical companies to co-operate with their Indian counterparts. However only time, and outcomes, will convince Western pharmaceutical companies that the protection is sufficient. As demonstrated in the case of Novartis’ Gleevec, where a patent recognised in the West still failed to be protected in India under the new regime (discussed in Case Study 1), the situation is not yet completely straightforward. A continuing criticism of the Indian patent regime is also the bureaucracy involved and long backlog of patent applications. Efforts are under way to improve matters, including setting up patent offices, personnel quality improvement and better use of digitisation, such as electronic filing (1). The tax situation in India is also changing; many potentially ‘pharmaceutical industry friendly’ policies have been introduced (2). A company conducting scientific R&D is now allowed a 100% tax deduction on profit for a period of 10 years. To promote direct investment in clinical development and data management, benefits such as exemption of import duty on clinical trial samples and exemption from service tax for a period of 10 years until 2015 have also been introduced. Global companies looking to invest in India should also consider the inter-state variations within the country. The Indian pharmaceutical industry itself is predominantly clustered around Mumbai, Hyderabad, Delhi and Bangalore (Figure 1). The state of Maharashtra, where Mumbai is located, contributes about 40% of the total turnover in the pharmaceuticals sector in India. It has 4,100 registered pharmaceutical manufacturers out of a country-wide total of around 20,000. Around one-third of the country’s bulk drugs are produced in and around Hyderabad in Andhra Pradesh. Infrastructure, however, continues to be an issue. In 2005 India only invested 3.6% GDP ($28 billion) on infrastructure (in contrast, China invested 9% GDP – $201 billion) (3). Measures have been taken to improve the availability and the quality of infrastructure, such as setting up independent regulators of the power and telecoms sectors, and the process of privatisation of Delhi and Mumbai airports has been initiated. Nevertheless, Montek Singh Ahluwalia, of India’s Planning Commission, has stated that India must spend an additional 2.5-3% of GDP annually on infrastructure if it is to sustain an economic growth of 8-9% (3). Education and research A successful academic network provides a steady stream of ideas, key opinion leaders, collaborative opportunities and potential recruits; lifeblood for developing a thriving pharmaceutical industry. There is considerable life science research being undertaken in India (Case Study 2, looking at stem cell research, explores one example). Research from around 1,400 Indian institutions has been published in journals throughout the world. Among the more well-known institutions are the All-India Institute for Medical Sciences (AIIMS), The Indian Institute of Science (IISc), The National Centre for Biological Sciences in Bangalore and National Centre for Biotechnology Education (NCBS). There has been significant investment into Indian science from the Indian Government as well as from external agencies. The Government funding of the Indian Department of Biotechnology (DBT) has risen from $15 million to more than $125 million a year. Funding has also come through from international sources such as the US National Institutes of Health, the Bill & Melinda Gates Foundation, the European Union and the Wellcome Trust. A particular focus has been to nurture industry-academia interaction. Nicholas Piramal, an Indian pharmaceutical company headquartered in Mumbai, has a fee-based agreement with the Institute of Genomics and Integrative Biology (IGIB) and this alliance has already resulted in two joint patents. Researchers at the Center for Biotechnology at Jawaharlal Nehru University in New Delhi, in collaboration with Panacea Biotech Ltd, have completed preclinical studies on a recombinant anthrax vaccine and will start Phase I trials shortly. Such partnering activity aids technology transfer and, through practices such as internships, provides much-needed, hands on experience for young scientists. India’s graduate population of scientists and researchers is growing, with nearly 2.5 million graduates added in 2004 alone (Figure 2 shows the 2004 graduate population). These numbers are comparable to China’s, which had more than two million students graduating from its universities in 2003. Despite the high number of graduates, there is a shortage of qualified clinical research professionals. Long term solutions are being sought, such as setting up new academic centres, institutes and clinical research studies in medical schools. The Mumbai based Institute of Clinical Research India (ICRI) has recently entered an academic alliance with Cranfield Health, part of UK-based Cranfield University, in order to offer an accredited MSc in Clinical Research that also offers the top 50 students from ICRI the opportunity to travel to the UK as well as industrial placement opportunities. Students who successfully complete the MSc course will be awarded a degree from Cranfield University. Drug discovery and development There is a growing level of discovery and preclinical development research being conducted in India, by both domestic Indian pharmaceutical companies as well as global companies using owned resources or through contract research organisations. Research activities undertaken in India cut across all steps of drug discovery, from target identification and validation, lead identification and optimisation, through to candidate development (Case Study 3 describes one example, the opportunity for toxicology studies). As shown by the examples in Table 1, early stage disease research activity is being conducted in India by both domestic and international pharmaceutical companies. In addition, a wide variety of services are being offered by Indian Contract Research Organisations (CROs). Research and development of novel drugs is an increasing area of interest for Indian pharmaceutical companies. R&D expenditure increased 40% from 2003/2004 to 2004/2005 (5). However, the absolute total, of $402 million, is still low by Western standards, as is the average R&D investment for most Indian pharmaceutical companies, at around 6% of net sales. (A Western pharmaceutical company typically invests over 10%.) Even though in some cases Indian companies have out-licensed drug candidates to global pharmaceutical companies (1), it seems probable that generic and contract work will remain the financial drivers of the Indian pharmaceutical industry for some time to come. To date, there has been a degree of collaboration between global pharmaceutical companies and those based in India. Merck India, for example, is active in early drug disease research through the Merck Development Centre (MDC), a new R&D unit set up at Taloja near Mumbai, with an investment of $3.9 million. India is fast emerging as a hub for contract and clinical research, with several of the world’s largest pharmaceutical companies conducting studies; however, challenges remain that must be overcome to ensure that India consolidates its position and continues to grow in this key area. Syngene, a subsidiary of Biocon India, serves six out of the top 10 major multinationals as clients of its contract chemistry and biology services (6). In an estimated $40 million deal, GVK Biosciences is setting up a discovery research and development centre for Wyeth Pharmaceuticals with a dedicated workforce of 150 scientists (7). Such India-based external resources, available for rapid deployment as appropriate, provide large pharmaceutical companies with development opportunities that may otherwise have been constrained by internal cost-issues. Currently 20-30% of the world’s clinical trials are being run in developing countries (8), and an increasing number are being conducted in India by domestic Indian pharmaceutical companies, Indian CROs and multinationals. Several factors have contributed to this growth. India has a highly heterogeneous and largely drug naïve patient population with both indigenous as well as an increasing prevalence of Western, ‘urban lifestyle’ diseases including heart ailments, asthma, cancer and diabetes (9). Patient recruitment into studies is rapid (although not without controversy, as discussed below); possibly a consequence of otherwise poor opportunities for healthcare (10). Cost is also a major driver, in the development of a novel drug candidate clinical trials alone account for a third of the total costs. It is therefore unsurprising that Western-headquartered pharmaceutical companies have sought to source these activities in India where costs stand at 50-60% of those in Western countries. Most studies being conducted in India are currently in Phase III. The Indian CRO market has grown from USD 1 billion in 1992 to more than USD 8 billion in 2002. Quintiles Spectral, SIRO-Clinpharm and Syngene are the three key independent CRO players, accounting for 71% of the market share (some activities of Indian CROs are shown in Figure 3). Approximately 60% of Western-headquartered pharmaceutical companies have outsourced some degree of clinical development to Indian CROs, However, to date only AstraZeneca, ALTANA (now Nycomed), Eli Lilly, Novartis and Pfizer have actually set-up their own clinical research divisions in India (it should be noted that Roche and Pfizer have set up their own Regulatory Affairs organisations to gain approval for clinical trials in India). The remaining companies utilise outsourcing relationships with independent clinical research organisations. Concerns relating to the Indian healthcare system, quality adherence and the ethical situation in India persist. The Indian healthcare system is highly fragmented and there is no centralised insurance system in place. Barring the small network of specialised public trust and medical college hospitals, the overall system falls short in its ability to conduct trials that meet international standards. Criticisms include overlooking inclusion and exclusion criteria to achieve unattainable recruitment times, poor data archival systems and an impending shortage of clinical research associates and principal investigators. The most frequently cited concern regarding the administration of clinical trials in India relate to informed consent and monitoring mechanisms. A majority of the subjects undergoing trials in India are either illiterate or semi-literate and informed consent is often taken without complete understanding of the risks and benefits. Institutional Ethics Committees (IECs) need to be empowered and made to understand their roles and responsibilities to address this. This is happening, but will take time to take effect. Implementation of and adherence to GCP remains a substantial challenge. The central government, together with the WHO, has undertaken a campaign to train regulatory personnel as well as private clinical investigators the details of good clinical practices (GCP). Despite these concerns, and in light of reforms such as the adoption of strengthened patent laws and the allowance of parallel multi-centric trials in India following an amendment to the Drugs and Cosmetics Act, some estimates suggest that by 2010 the Indian clinical trial market may be worth $1.5 billion, around 10% of the predicted total world market (11). The Indian pharmaceutical market The value of the Indian pharmaceutical market is projected to grow from $10 billion in 2005 to $100 billion by 2025. Globally, the Indian industry ranks fourth in terms of volume and 13th in terms of sales and it has been growing at 8-10% a year (12). The Indian pharmaceutical market has enormous growth potential with predictions of growth suggesting it may grow to about $100 billion by 2025 (1), driven by an increasingly large middle class population. his currently numbers around 300 million (of a population of more than one billion) and is estimated to be growing at 5% annually (13). As a result, demand for quality healthcare services has increased and the changing lifestyle has led to changes in disease patterns, for example increased demand for new medicines to combat lifestyle-related diseases. As described previously, the recent regulatory and much awaited patent law changes will also contribute towards the growth of the market. Seizing the opportunity Western pharmaceutical companies have taken a variety of approaches towards investing in India; these can serve as guides for other companies. Of the top 30 western-headquartered pharmaceutical companies, 18 are currently active in India. However, the approach differs between companies. Figure 4 examines the investment taken by some example companies (in this case Pfizer, AstraZeneca, Novartis and ALTANA (now Nycomed)) in terms of increasing complexity from data processing to discovery research. Pfizer has invested in limited directly- owned facilities in India (within the R&D space) with the exception of the clinical trial area, with investment in a clinical research unit of approximately 50 personnel co-ordinating clinical development, biometrics and regulatory affairs. This is in contrast to ALTANA (now Nycomed, also see Case Study 4), Novartis and AstraZeneca, all of whom have invested more substantially in owned facilities. In India, AstraZeneca has three divisions. The first, AstraZeneca Discovery Bangalore is part of the AstraZeneca R&D network mainly focused on tuberculosis research with an overall current and planned investment of more than $40 million. More than 100 scientists are presently employed at the site. The AstraZeneca Research Foundation supports education and technological innovation by organising seminars and symposia in India. Finally, AstraZeneca Pharma India Limited is the Marketing division of AstraZeneca India. It has interests in six therapeutic areas: cardiovascular, respiratory, maternal health care, oncology, infection and neuroscience, all supported by a cGMP compliant manufacturing unit. In addition to the outsourcing and off-shoring opportunities, collaborative R&D with Indian pharmaceutical companies and research institutions should be considered. As has been discussed, there is considerable ongoing medical research in India and numerous examples of collaboration between Indian pharmaceutical companies and academic institutions. Western pharmaceutical companies should actively expand the scope of their partnering activity to not only look at Indian pharmaceutical companies, but also to the Indian institutional network for licensing and codevelopment opportunities. A case in point is Evolva Biotech (Switzerland), which is setting up its own discovery programme at the Indian Institute of Chemical Technology (IICT), Hyderabad. Deal activity between Western-headquartered and Indian pharmaceutical companies is increasing. Approximately 50 deals have been struck, the majority from 2000-2005. Of these, only about a third have been with top 30 (by R&D spend) Western pharmaceutical companies. However, the larger Indian companies, such as Ranbaxy Ltd, have made several significant deals with major Western companies. Indian-Western partnering activity to date has focused on oncology, anti-infective, metabolism, inflammation and cardiovascular disease areas. In the future, drug discovery will be an integrated global activity with each step conducted where the value proposition is the strongest. As this paper has discussed, India now presents opportunities throughout the pharmaceutical value chain. However, Western-headquartered pharmaceutical companies frequently use this resource in a piecemeal fashion – ‘dipping-in’ to countries such as India at certain points in the drug discovery and development process when required. In some cases this is more in response to acute capacity issues rather than as part of a cohesive strategic approach. For example, Indian resources may be called upon when additional derivatives of a lead compound are needed and onshore chemistry resources are unavailable. While this is a perfectly valid activity, it is more in keeping with the view of India as a ‘workshop’ than as a partner. In the future, drug discovery and development will be a truly global process, with activities conducted where they make the most strategic and economic sense, co-ordinated within international company frameworks. This should improve efficiency and productivity and, crucially, deliver future therapeutics to patients in Western and developing markets more effectively – and we believe India has the potential to have a major role. About Kinapse Kinapse provides specialist services to life sciences R&D organisations, with specific expertise in: -R&D process and organisation design. -Resource planning and management. -Performance management including performance scorecards and benchmarking. -Change and programme management. -Product, Market and Company research and analysis. In addition, Kinapse provides a suite of specialist information processing services including, clinical trial publishing, clinical data analysis, regulatory licence maintenance and scientific communications. DDW --- This article originally featured in the DDW Spring 2007 Issue --- Dr Matthew Howard is a Manager at Kinapse Consulting and Specialist Information Processing Ltd, a position he assumed in November 2005. He works with global pharmaceutical companies in strategic and operational projects, including global operating model design, clinical development process optimisation, clinical trial data management and assessment of co-development opportunities with emerging economies. Prior to Kinapse, Matthew was a Research Project Manager for the Novartis Institute for Biomedical Research, Respiratory Disease Area, responsible for co-ordinating development of novel therapeutics through to proof of concept studies in man. Before joining Novartis he was Project Manager for deltaDOT, a biomolecule analysis company. Matthew holds a PhD in molecular and cellular biology from Imperial College London and a degree in Biochemistry from the University of Kent. He has published in the Journal of Biological Chemistry, the Biochemistry Journal and Osteoarthritis and Cartilage. E-mail: matthew.howard@kinapse.com References 1 Unveiling India’s Pharmaceutical Future. Ernst and Young Report 2005. 2 Competitiveness of the Indian Pharmaceutical Industry in the new product patent regime. FICCI Report March 2005. 3 www.economist.com/finance/displaystory.cfm?story_id7253183. Accessed Sept 2006. 4 Economic Times Intelligence Group and NASSCOM 2005. 5 www.biospectrumindia.com/content/shakers/104021201.asp. Feb 2004. 6 www.biocon.com/syngene_about_us_factsheet.asp. Accessed September 2006. 7 www.thehindubusinessline.com/2006/01/14/stories/2006011403320200.htm. Jan 2006. 8 Lamberti, MJ, Space, S, Gammbrill, S. Going global. Appl Clin Trials 2004;13:84-92. 9 www.indiainfoline.com/comp/fulf/mr01.html. 10 Borfitz, D. Lifting India’s barriers to clinical trials. Center Watch 2003;10(8):1-9. 11 www.biospectrumindia.com/archive/articledetail.asp?arid81785&modedisp. Biospectrum March 2006. 12 www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry. Accessed Sept 2006. 13 www.buyusa.gov/india/en/motm.html. Accessed Sept 2006.