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India's Pharmaceutical Success - YouTube
Channel: Asianometry
[3]
the indian economy is largely a
[4]
service-based one and the past few years
[7]
has only seen that trend intensify with
[9]
one big exception pharmaceuticals
[12]
india has the third largest
[14]
pharmaceutical industry by volume and
[16]
the 11th largest by value as of 2020 and
[19]
it is growing extremely fast
[22]
india is the world's largest provider of
[24]
generic drugs the united states relies
[26]
on india for 40 percent of its generics
[30]
in 2020 they exported 16 billion more of
[32]
pharmaceuticals than they imported these
[35]
exports meet the strict standards and
[37]
regulations of many countries around the
[39]
world
[40]
india's pharmaceutical industry is legit
[44]
the story of how this industry came
[46]
about is an interesting one in this
[48]
video we look at how the indian
[50]
pharmaceutical industry started out as
[52]
mere copycats but then evolved
[54]
throughout the value chain to become a
[56]
global leader but first let me talk
[59]
about the asian armature newsletter i
[61]
know everyone has a newsletter now but
[63]
there's more content in the newsletters
[65]
that aren't in the videos and those have
[68]
been quite well received so i think it's
[70]
worth your while
[71]
you can find the link to the newsletter
[73]
in the video description below i try to
[75]
put one out every week maybe two all
[77]
right back to the show
[79]
our story begins in 1947 with india's
[82]
independence at this time millions of
[85]
indians had no access to basic drugs the
[88]
country's drug industry was almost
[90]
completely controlled by foreigners
[93]
eight of the top ten firms were
[94]
multinationals from the west mostly the
[97]
uk france and germany and they held a 90
[100]
percent market share
[102]
domestic indian companies spend most of
[104]
their resources marketing and
[105]
distributing other people's drugs rather
[108]
than actually creating their own
[110]
indians had to import almost every drug
[112]
they took domestic drug prices were
[114]
amongst the highest in the world since
[117]
99 of those drugs were locked up in
[119]
patents so only the rich had access to
[122]
any drugs at all
[125]
obviously the situation cannot hold and
[127]
the indian government a few times
[129]
attempted to deal with this
[131]
over-reliance on foreign drug imports
[134]
in 1954 the government established a
[136]
public sector pharmaceutical firm called
[139]
hindustan antibiotics limited or how
[142]
a few years later they founded a second
[144]
one indian drugs and pharmaceuticals
[146]
limited this time in cooperation with
[149]
the soviets
[151]
then in the 1960s the british
[153]
pharmaceutical company ici
[155]
pharmaceuticals developed a high blood
[157]
pressure medication called propanolol it
[160]
is a beta blocker that helps with
[161]
anxiety and also prevents migraines
[164]
the drug was too expensive to be used in
[167]
india an indian company called sipla
[169]
began manufacturing a generic version of
[171]
the drug for the indian market
[174]
ici complained to the indian government
[176]
about this
[177]
syphilis r d head yusuf hamid justified
[181]
his actions to india's prime minister at
[183]
the time indira gandhi gandhi saw the
[186]
merits of the argument and urged
[188]
parliament to modify the laws governing
[190]
drug patents
[192]
this led to the passing of the patent
[193]
act of 1970 which sparked the
[196]
revitalization of the indian
[198]
pharmaceutical industry
[201]
the patent act of 1970 had two goals the
[204]
first was to guarantee low-cost access
[206]
to drugs the second was to foster the
[209]
development of an indigenous indian
[211]
pharmaceutical industry and encourage
[213]
import substitution
[216]
india's prior patent laws last updated
[218]
in 1872 were rooted in british ip law
[222]
specifically they protected products for
[225]
instance the aforementioned chemical
[227]
compound
[228]
this was the farmer industry's favored
[230]
ip protection regime
[233]
the 1970 act replaced this with a new
[236]
system that protected the process rather
[238]
than the product in other words if the
[241]
old laws protected the treasure then the
[243]
new ones protected only the treasure map
[245]
that leads to it
[247]
in addition the act set time limits on
[250]
those process patents about five to
[252]
seven years after filing rather than the
[254]
15 years afforded by the old law
[257]
furthermore if the indian patent office
[260]
determined that the patents were not
[261]
being used in a socially beneficial way
[264]
the office had the leeway to force
[266]
patent holders to license those patents
[268]
to others at a reasonable rate
[271]
you can see how this new system opened
[273]
up massive new opportunities for the
[275]
indian pharmaceutical industry
[278]
it was now possible to backwards
[279]
engineer every popular drug import for
[282]
the indian market
[284]
let's stop here for a little bit so that
[286]
we can briefly review the pharmaceutical
[288]
production value chain
[290]
there are four major activities
[292]
discovery clinical trials production and
[296]
marketing slash distribution
[299]
discovery refers to the process of
[301]
finding new drugs as with everything
[303]
relating to the human body it is a messy
[306]
complicated process
[308]
first scientists generate potential
[310]
molecules sometimes referred to as leads
[313]
and then test the efficacy of those
[315]
leads in petri dishes
[318]
these are referred to as in vitro tests
[321]
if the petri dish tests show promise
[323]
then you move to live animal tests in
[326]
vivo tests
[328]
these tests can take years to administer
[330]
and only a very small percentage of them
[332]
make it through to the next stage
[335]
after discovery we have the clinical
[337]
trial stage clinical trials for humans
[340]
have considerably tighter standards
[342]
procedures and oversight thus they are
[345]
extremely expensive to hold and
[346]
multinationals choose them carefully
[350]
even with all their efforts failures
[352]
happen my favorite failure is that of
[354]
the super hyped startup stem centrics a
[358]
cancer drug startup that had been backed
[360]
by peter thiel's founders fund
[362]
in 2016 they sold to app va for 5.8
[366]
billion dollars with additional cash out
[369]
options as high as 4 billion more
[372]
but the company's cancer stem cell drugs
[374]
failed to distinguish themselves in
[376]
clinical trials at va had to take a 5
[379]
billion write-off stem centrics was
[382]
closed down and its employees laid off
[385]
founders fund made a 1.4 billion dollar
[387]
profit on their investment though so
[389]
that's nice
[391]
after the clinical trial approval by the
[393]
relevant regulating authority the drug
[395]
company has to produce its new drug
[398]
there are two types of production
[400]
bulk drug manufacturing where you
[402]
produce the actual active compounds at
[404]
an industrial scale
[406]
and formulation manufacturing where you
[408]
package those active ingredients into
[410]
pills tablets capsules liquid
[413]
injectables and so on
[416]
bulk drug manufacturing is more
[418]
technically sophisticated than the
[419]
formulation but this part of the value
[422]
chain is in general less valuable than
[424]
the rest scale and cost control are
[426]
essential here which make it harder for
[429]
small companies to compete
[432]
the final part of the industry is
[433]
marketing and distribution large
[436]
pharmaceutical companies employ large
[438]
sales forces to build relationships with
[441]
doctors and their patients
[443]
the goal of course is to sell a lot of
[445]
prescriptions and earn back a good
[447]
return
[448]
on what was spent on the other three
[450]
stages
[452]
managers and scientists working in
[454]
india's public sector laboratories
[456]
recognized a sudden weakness in the
[458]
patent law and left to take advantage of
[460]
it the number of firms in india's
[462]
pharmaceutical industry more than
[464]
doubled from 1970 to 1980.
[468]
at this early stage domestic indian
[470]
companies did little more than reverse
[472]
engineer existing drugs they studied the
[474]
sequential steps towards making the drug
[476]
and made slight modifications
[479]
here's what that roughly means let's say
[482]
we have a drug made up of three
[484]
ingredients a
[485]
a combo of b and d and c cooked together
[489]
at temperature x and pressure y
[492]
to reverse engineer the molecule a
[494]
company might take a plus b plus e
[497]
cooked together at temperature x and
[499]
pressure y
[500]
this is a new process except in this
[503]
case e is actually a combo of c and d
[508]
same ingredients different steps new
[510]
patent
[512]
as a former planning director from that
[514]
area once said
[515]
earlier there was no r d has such it was
[518]
simply reverse engineering whatever the
[520]
patent said you would reproduce and
[522]
optimize it
[524]
this sounds cheap and derivative but it
[527]
helped domestic companies gain real
[529]
competency in pharmaceuticals
[532]
by the end of the 1980s indian
[533]
pharmaceutical companies could
[535]
manufacture practically any new molecule
[537]
without needing any access to the
[539]
original innovator company's recipes
[542]
the time gap between the original
[544]
innovations introduction and the indian
[546]
generics introduction steadily narrowed
[548]
over the years and this demonstrated
[550]
domestic firms steadily improving
[553]
reverse engineering capabilities
[555]
for instance ibuprofen
[557]
ibuprofen hit the world market in 1967.
[561]
india's first generic came six years
[563]
later in 1973.
[566]
in 1986 bayer introduced the antibiotic
[569]
ciprofloxacin to the world market i
[572]
remember cipro because back in 2001 tens
[575]
of thousands of people took it for no
[577]
reason other than because they were
[579]
worried about anthrax reminds me of the
[582]
horse drug fiasco
[584]
anyway
[585]
indian domestic firms had a generic
[587]
version of ciprofloxacin in just three
[590]
years cutting the time lag in half
[592]
for some other molecules the gap was
[595]
even shorter
[596]
by 2006 indian companies supplied a 95
[600]
of the country's drugs the import
[602]
substitution had been a success
[605]
however as with any policy the 1970
[608]
patent change had its drawbacks for one
[611]
thing the indian pharmaceutical industry
[613]
it created was high in volume but low in
[616]
value
[617]
a drug firm has low barriers to entry
[619]
with little capital needed to start one
[622]
by 1990 there were around 16 000
[625]
pharmaceutical companies in the industry
[627]
the companies that survived focused on
[629]
making as many molecules as they could
[631]
as cheaply as possible
[634]
this resulted in extremely low margins
[636]
and vast over capacity because the only
[638]
way to make a profit would be to produce
[641]
at massive scale
[642]
the industry got extremely fragmented
[644]
with up to 100 brands for a single
[647]
molecule
[648]
the industry had grown to have too many
[650]
small players and too little profit for
[652]
all of them
[653]
without resources incentive or
[655]
protections for it the domestic indian
[657]
pharmaceutical industry did not invest
[660]
meaningful amounts of r d and did not
[662]
produce many new drugs
[664]
some companies turned to the export
[666]
market by the 1990s some 40 percent of
[669]
indian drug production was for export
[672]
this might seem like a success but again
[674]
most of these were of low value
[676]
indian companies were locked out of more
[678]
valuable markets
[681]
in 1992 india signed the agreement on
[684]
trade related aspects of intellectual
[686]
property rights or trips this would be a
[689]
major milestone in the history of the
[691]
indian pharmaceutical industry and a
[693]
good one when it comes to fostering
[695]
indigenous innovation
[697]
it required the indian government to
[699]
amend its prior patent policies to more
[701]
conform to international trade standards
[704]
the government will now among other
[705]
things recognize product patents and
[708]
grant exclusive marketing rights to new
[710]
products
[711]
signing this agreement had been
[713]
extremely controversial the domestic
[715]
industry split into two camps one
[718]
favoring more stringent i.p protections
[720]
and the other opposing it
[722]
the opposition camp made some compelling
[724]
points for instance the lack of
[726]
knowledge transfers and that strong i.p
[728]
rights had not done good for the indian
[730]
people in the past
[732]
in the end though the first group won
[734]
out encouraged by a stay in the
[736]
regulations
[737]
the international trade community gave
[739]
india until 2005 to first prepare its
[742]
drug industry the government thus
[744]
started gradually implementing the
[746]
necessary changes for instance the
[748]
exclusive marketing rights amendment to
[750]
the 1970 patent law enacted in 1999.
[755]
from 1992 to 2005 the industry underwent
[758]
a monumental shift leaving behind what
[761]
had made it so successful for decades
[764]
towards a new more profitable model
[768]
the indian industry adapted to these
[769]
encroaching changes in different ways a
[772]
few firms decided to invest in r d climb
[775]
the value chain and enter the drug
[777]
discovery business
[778]
for instance ranbaxy drl and walkhart
[783]
their announcements garnered a lot of
[784]
attention with some promise from 1956 to
[787]
1987 the indian pharmaceutical industry
[790]
discovered and developed just 13 new
[793]
drug compounds from 1991 to 2005 that
[797]
number was seven
[799]
prior to 1992 the industry grew its r d
[802]
spent by just 4.9 percent annually after
[805]
1992 that accelerated to 6.6 percent
[810]
a number of indian firms started putting
[813]
molecules into the drug discovery
[815]
pipeline pharmaceutical drug patents in
[817]
india by indian institutions grew from
[820]
just nine from the 1990 to 1994 period
[823]
to 48 in the
[825]
1995-1998 period that number further
[828]
expanded to 227
[830]
in the years after from 1999 to 2002.
[835]
the government encourages r d spend with
[837]
a number of schemes in 1995 they founded
[840]
various government bodies to coordinate
[843]
the academic and commercial areas they
[845]
also created a pharmaceutical r d
[848]
support fund that disbursed money
[851]
but going the drug discovery path though
[853]
hyped was rare most indian
[855]
pharmaceutical firms correctly
[857]
considered it out of their grasp
[859]
especially before 2005.
[862]
drug discovery is an expensive and
[864]
time-consuming process
[866]
multinationals in the west have been
[867]
doing it for decades and it still is
[870]
hard for them
[871]
it would be unrealistic to expect many
[873]
indian companies most of them small or
[876]
medium sized to match up to this right
[878]
away few can afford it even by 2005
[881]
smaller firms spent one percent or less
[884]
of their revenue on r d
[886]
so many of them have looked to other
[888]
ways to strengthen or diversify their
[890]
revenues
[892]
some companies started r d into drug
[894]
adjacent fields like drug delivery less
[897]
technical than drug discovery but still
[899]
very difficult
[901]
others expanded and strengthened other
[903]
parts of the value chain for instance
[905]
marketing and production
[907]
other companies struck strategic
[909]
collaboration deals with multinationals
[911]
for instance zeitus cadilla did such
[914]
deals with companies in france cuba
[917]
switzerland and the united states
[919]
throughout the 1990s into today
[922]
biocon a biopharmaceutical company based
[924]
in bangalore did the same
[926]
deals have been signed with big
[928]
companies like novartis
[930]
their joint venture with the cuban
[932]
center of molecular immunology helped
[934]
them gain the competency and knowledge
[936]
to develop the first new monoclonal
[939]
antibody treatment by an indian
[941]
pharmaceutical
[943]
yet others decided that they needed to
[945]
scale up to match the size of the
[946]
western multinationals this means
[949]
mergers and acquisitions with other
[950]
companies operating in other parts of
[952]
the value chain different paths towards
[955]
the same goal surviving a new more
[958]
challenging business environment
[961]
india's pharmaceutical companies have
[963]
long signaled a shift towards the export
[965]
market but trips really helped push that
[968]
along
[969]
once the industry met its ip regulation
[971]
responsibilities the global market
[974]
opened up to them
[975]
today india's generics industry is very
[978]
internationally competitive helped along
[980]
by its lower costs as well as the
[982]
expertise honed from competing in the
[985]
brutal domestic market
[987]
a favorable generic drug regulatory
[989]
environment helped too with the u.s
[991]
passing the hatch waxman act in 1984
[995]
which allowed the fda to more easily
[997]
approve generic drugs
[999]
dr reddy's laboratories grew the export
[1002]
ratio of their overall revenue from 53
[1004]
in the 2000-2005 time frame to 74 in the
[1008]
2012 2017 time frame
[1013]
markson's pharma went from 21.2 percent
[1015]
back in the 2000 2005 period to 97.5
[1020]
in the
[1021]
2012-2017 period
[1024]
the whole industry grew its export
[1026]
intensity an average rate of about 13
[1028]
percent in the years after the 2005
[1031]
implementation of trips
[1033]
it is nearly eight times the size since
[1035]
then with sales to north america
[1038]
africa and asia alike
[1041]
one concerning issue to be had with this
[1043]
export success is the indian
[1045]
pharmaceutical industry's concurrent
[1047]
dependence on china for its active
[1049]
ingredients
[1051]
these are the most important raw
[1052]
materials for the making of the finished
[1055]
drug
[1056]
for instance tylenol's active ingredient
[1058]
is acetaminophen
[1060]
india relies on china for 70 percent of
[1063]
its active pharmaceutical ingredients
[1066]
imports of chinese active pharmaceutical
[1068]
ingredients antibiotics in particular
[1070]
have tripled since 2005.
[1074]
india used to make these domestically
[1076]
but lost the market in the 1990s with
[1078]
the chinese entered with products 40
[1080]
percent cheaper than what indians can
[1082]
make
[1083]
even today with chinese labor costs
[1086]
higher than what they were back then the
[1088]
price gap remains about 20 percent
[1091]
in 2020 this industrial weakness became
[1094]
especially pronounced when china locked
[1096]
down chinese vendors ran out of stock to
[1099]
send to india and restricted the export
[1101]
of certain ingredients for making virus
[1104]
medicines
[1105]
furthermore geopolitical tensions
[1107]
between china and india are a real thing
[1110]
so the indian industry should work in
[1112]
tandem with the government to close
[1114]
these shortcomings with new import
[1116]
substitution policies for these active
[1119]
ingredients
[1121]
india's pharmaceutical success has not
[1123]
gone unnoticed other countries saw how
[1125]
the indian patent act of 1970 helped
[1128]
lower drug costs and break the hold the
[1130]
multinationals had on the domestic
[1133]
market
[1134]
so ironically about the same time the
[1136]
indians were moving away from
[1137]
process-based patents other countries
[1140]
started moving towards them
[1143]
the indian pharmaceutical industry would
[1145]
not be where it is today without the
[1146]
removal and re-application of these ip
[1149]
rights it is a perfect example of market
[1152]
driven reform sparked by a change in the
[1154]
environment
[1156]
i also admire that they made these
[1158]
changes based on the notion of what was
[1160]
right for them at the time
[1162]
rather than sticking to an ideology that
[1164]
wasn't working for them
[1166]
as deng xiaoping popularized they
[1168]
crossed the river by touching the stones
[1171]
while there remain a few concerns going
[1174]
forward india's pharmaceutical industry
[1176]
has a huge role to play in helping to
[1179]
address the world's health issues in the
[1181]
future
[1182]
all right everyone that's it for tonight
[1184]
thanks for watching subscribe to the
[1186]
channel sign up for the newsletter and
[1187]
i'll see you guys next time
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