If you retrace the history of the growth and evolution of pharmaceutical industry, a lot started towards the mid-1980s when the industry focused on reverse engineering of medicines to introduce new products in India. That set the stage for a massive effort in terms of development of chemical synthesis and active pharmaceutical ingredients (APIs).
This effort, largely by private pharmaceutical companies, set the stage for putting India among the top three generic drug suppliers in the world. Efforts over the past 15 years have resulted in situation where India is exporting drugs worth $6 billion, of which 55 per cent are formulations based on ingredients. The very high proportion of formulations reflects the industry’s ability to upgrade and add value to APIs.
I would say lack of patents in the last three to four decades and the policies of the late 1970s served the domestic industry very well. It allowed the industry to bring the latest medication to the market at reasonable prices and made a significant contribution to the country’s health needs.
Changing environment policy
There is, however, another side to the debate. The reverse engineering culture, arising out of the existing patent legislation of the time and insufficient innovation, forced the industry to focus on copying what was discovered outside.
Research by the government institutions was good, but did not find any commercial outlet. The argument from within the industry was that they were left with very little surplus to fund high-end research and development (R&D) activity because of strict price controls.
This is one factor that cannot be ignored as the policy environment over the period allowed industry players to spend only about 15 per cent of their funds on R&D.
I would, however, say funds are not the only factor in ushering innovation. It is also a matter of the mindset and policy environment.
In India, the interaction between government institutions and the industry is not sufficient enough to trigger initiatives in innovation. Most of the time, government institutions, where major R&D activity is taking place, and the industry operate on different wavelengths.
If we study the past, we would find that government institutions were more interested in publishing their R&D work rather than finding opportunities for commerce and patents.
Academic, government and industry synergy needed
This is quite unlike the situation in the United States where there are perfectly co-ordinated interactions between the academia, government R&D institutions and industry.
For any innovation to flourish, these three constituents will have to come together.
In pharmaceuticals and biological life sciences, discovering a new drug is a complex multi-disciplinary process.
In recent years, considerable efforts have been made in the domain of the discovery of drugs through contract research organisations, the current big generic pharma companies and independent stand-alone R&D institutions.
There are signs that an effort towards innovation has started in a big way. Venture capitalists and strategic investors are beginning to come, as Indian pharmaceutical companies have demonstrated the capability for high value-added work at low cost.
(Brar is chairman of GVK Biosciences and former managing director of Ranbaxy Laboratories.)