Jul 14, 2014

Asia - Southeast Asia Steals Indian Pharma

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Flight of majors hits India’s image as fast-growing hub for medical research

Red tape, idiosyncratic laws and frustrating regulatory architecture are propelling Indian clinical trials and pharmaceutical companies to relocate to more conducive business environments in Southeast Asia.

The beneficiaries, according to the Associated Chambers of Commerce and Industry of India, are Cambodia, the Philippines, Singapore, Thailand, Vietnam and others that are wooing India’s trial research companies and R&D industry with transparent regulations and other benefits.

The efforts of Southeast Asian governments to lure Indian trial companies to their shores are already bearing fruit. Last month, Ahmedabad-based Lambda Research Labs opened its first center in Thailand following welcome from the Thai government. Lambda has tied up with Government Pharmaceutical Organization, a state-run pharma company, to set up a clinical trial unit and train its workforce there.

The Philippines too – which has played a major role in stealing India’s once-dominant business office processing industry to become the world’s leader in offshoring – has invited the Indian pharma and biotechnology companies to invest in the country’s special economic zones (SEZs) and has even proposed to offer full incentives for the investing firms.

At a joint meeting between India and Philippines Joint Working Group on Trade and Investment (JWGTI) in 2013, the Philippine authorities presented a proposal to encourage Indian pharmaceutical companies to start operations in the Philippines.

The major suggested business areas for investment include research and development and production of oncology drugs, intravenous (IV) and oral antibiotics, topical and eye medicines, vaccines and other high-priced pharmaceuticals.

According to the proposal by Filipino authorities, the investing firms are allowed to export 70 percent of their production from their units to Southeast Asian and Asia-Pacific markets, while the remaining 30 percent would cater to the needs of the domestic markets.

"The pharma market in Southeast Asia is experiencing a very dynamic period with growth of both domestic manufacturing and international trade. A crucial element of the ASEAN region's development, which is predicted to reach a market value of US$80 billion by 2017, will be the establishing of close regional partnerships and cross-sharing of information between companies,” says a newsletter by CPhI Worldwide, a global pharma sourcing event.

While this dynamic growth is spreading across Southeast Asia, India is facing dramatic contraction. British drug maker AstraZeneca’s decision this January to shutter its R&D center in the southern Indian city of Bangalore resulted in the departure of 170 employees and a halt to early-stage research into a raft of neglected tropical diseases including tuberculosis and malaria. The company cited an abysmal rate of drug approvals as one of the key reasons for its departure from a country once considered the hub for pharma companies, given to its high-caliber doctors and cheaper research facilities.

The global contract research organization, Quintiles also stalled its phase-I clinical trial unit in southern Hyderabad last year, quoting a “challenging external business environment.”

The US National Institutes of Health has shut down more than 35 clinical trials underway in India over the past two years.

Domestic companies are similarly moving trials abroad despite an increase in drug development costs up to 20 times. Piramal Enterprises, Biocon and Lupin have moved trials to countries like Taiwan, Germany, the US, Canada, the Netherlands and Australia. Other clinical research organizations have set up operations in Malaysia, Thailand and Philippines. Analysts say India may lose all of its investments in this crucial sector to its Southeast Asian rivals.

Ironically, the Indian pharma industry – currently pegged at Rs1 trillion (US$16.67 billion) with more than Rs400 billion in exports – had captured over 20 percent of the world's generic market in the past decade, becoming the world's single largest supplier of vaccines. In fact, over the past two decades Indian generics have been tested for bio-equivalence studies in humans and cleared the toughest regulatory standards of bodies across the globe, underscoring the high caliber of Indian scientists. This led to booming business and India emerging as the first choice for drug companies to conduct their clinical trials.

The problem began last year with the Central Drug Standard Control Organization (CDCO) – the country’s top drug and clinical trial approval body, which amended the guidelines for clinical trials, making enrollment for patients far more stringent. That resulted in an alarming fall in the number of trials – from 500 in 2011 to just 20 in 2013.

The regulations have also affected new drug discoveries and registrations, which plunged from 260 new drugs in 2008 to fewer than 25 in 2013. Worse, the approval process for global drugs sold in India has been increased from six months to more than three years.

Three new committees were set up by the CDCO to clear clinical trials. However, they approved clinical trials for only five drugs over the September-December 2013 period. In late October, the Supreme Court suspended 157 trials that had been previously approved until the new committees could review the cases further, compounding the crises. These new regulations require organizations conducting clinical trials in India to obtain trial protocol approval from pre-accredited ethics committees, register trials with regulators, and procure good clinical practice certification.

In early February 2014, the Minister of Health and Family Welfare acknowledged publicly that clinical trial regulations were hurting innovation and that the new norms might be relaxed.

“There is complete paralysis of regulation, and we cannot have policy that takes us backwards, a good industry needs a good regulation," an angry Swati Piramal, director of Piramal Healthcare Ltd, one of the frontrunners in the Indian pharma sector, told the media last year.

According to Assocham national secretary general D S Rawat, "The flight of operations by India's pharma majors will surely hit India's image as a fast-growing, low-cost hub for medical research." Permissions and approvals for trials have slowed to such an extent that unlike the US Food and Drug Administration, the European Union or Singapore which may grant such clearances in a month’s time, India takes 12-15 months. Such predictions clearly don’t augur well for India’s once thriving pharma sector.

Neeta Lal

Neeta Lal is a Delhi-based senior journalist & Editor.

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