Vol. 5, No. 3 March, 2001

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The controversy over CIPLA's sale of AIDS drugs in Africa has not ended. India's third-largest drug company's cheap anti-AIDS drugs has created a controversy with multinationals like Glaxo Wellcome, Aspen, SmithKline, etc. Since India doesn't recognise product patents, CIPLA can manufacture proprietary patented products using a different process. Meanwhile CIPLA has received approval from Medecins Sans Frontiers (MSF) to market its cheaper drugs in all countries that need it to fight the dreaded disease. The company's triple-combination anti-retroviral drug can be had directly from the company for $ 600 per patient per year.

CIPLA will shortly launch two more AIDS drugs - Indinavir (originally Merck's) and Efavirenz (originally Dupont's). These multinationals are also under pressure to reduce the prices of their drugs. CIPLA is also in a spat with the South African company Aspen over supply of lamivudine, stavudine and nevirapine. Aspen claim to provide these drugs for $ 350 per patient per year while CIPLA provides these for $ 600 per patient per year. Aspen has been able to lower prices as it sources bulk drugs from an Indian company Hetero Drugs. Hyderabad based Hetero supplies the basic drugs to Aspen which converts it into finished dosage forms. Meanwhile CIPLA has denied Glaxo's allegation that it is involved in drug piracy.

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Since the government imposed anti-dumping duties on Vitamin C imports from China the domestic production has zoomed by over 150 per cent in 2000-01 compared to the previous year. The growth has been partly due to the use of Vitamin C as an anti-oxidant. According to a study conducted by Centre for Marketing & Advertising Research Consultancy (CMARC) the demand for Vitamin C as a prescription drug is on the decline. However, the use of Vitamin C as an anti-oxidant has increased.

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Glaxo SmithKline has entered into an agreement with the New York based Sepsicure for a joint venture to overcome the dangers posed by sepsis in most intensive care units. The compound (GR 270773) being developed is about to enter Phase II of clinical studies and will remove a bacterial toxin called endotoxin, which leads to the fatal result of sepsis. The US multinational Eli Lilly is also developing a cure for sepsis, which will hit the market in the latter half of 2001. GlaxoSmithKline will develop the product and will get the world-wide marketing rights. Sepsicure will receive royalties and milestone payments.

The compound is a lipid emulsion derived from a research program of Rogosin and Sepsicure. It will remove endotoxin which activate pathways of inflammation and blood clotting leading to sepsis. The toll taken by sepsis is very high in India especially after surgery, wounds and burns.

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Ranbaxy is the latest to enter the anti-AIDS market with its own brand of anti-viral drug in a few months. This market is currently dominated by CIPLA. The company will launch a range of drugs like lamivudine, nevirapine, abacavir and indinavir. Ranbaxy is considering pricing its drug competitively considering that CIPLA has lowered its drugs' prices. Cipla has brought down prices of lamivudine, zidovudine and nevirapine to Rs 6,780 per month from Rs 11,400 per month in March last year. Vorin Laboratory, a Ranbaxy subsidiary will make the bulk drugs. This will then be converted to the finished form by Ranbaxy's manufacturing unit in Dewas, Madhya Pradesh.

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Heart Outcomes Prevention Evaluation (HOPE) has found that people with diabetes can reduce risk of a stroke by 33 per cent if they use Ramipril. Ramipril is an anti-hypertensive drug developed by Hoechst Marion Roussel and has been found to be beneficial in reducing mortality in those suffering from cardiovascular disease. Diabetics are particularly prone to cardio-vascular diseases. This study assumes importance in view of the fact that WHO has predicted that the number of diabetic patients in India will increase from 22 million at present to 57 million in another 25 years.

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Glaxo has developed a pill, Zyban, to help smokers to quit smoking which will be introduced in May 2001. The company is planning a high-profile launch backed by a social campaign against smoking. India has 37 million smokers and this drug will be a potential "blockbuster" for the company. Though the price of the drug is not yet set, it will work out to less than a pack of cigarettes a day. The custom duty will also play a part since it is imported. Glaxo is trying to persuade the government to waive the customs duty by calling the drug a 'life-saving' drug.

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India is focussing itself on becoming a leading provider of herbal remedies to the world. Despite the fall in consumption of bestsellers like Ginseng, Ginkog and John's Wort, the Indian herbal remedies producers are optimistic of a better market for their products. India focuses on supplying raw materials like Ashwagandha and ginger. Also India may become a major out-sourcing destination for herbal products.

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The Asta stake in German Remedies which was up for grabs had two suitors in India ie, Nicholas Piramal and Ranbaxy Laboratories. Asta has a 13.86 stake in German Remedies. Both Zydus Cadila and Wockhardt were also reported to be in the fray and so is multinational Pharmacia & Upjohn. Bristol-Myers Squibb also is in the reckoning, as it wants to enter the Indian pharmaceutical industry with a stake in German Remedies.

Schering AG and Boehringer Ingeheim AG the two other partners in German Remedies will continue to hold their stake in German Remedies. In a later development Nicholas Piramal stated that it is out of the race for German Remedies and said it had never bid for German Remedies. Earlier Nicholas Piramal had taken Aventis' 40 per cent share in Rhone-Poulenc and also bought the Indian businesses of Hoffman La Roche and Boehringer Mannheim.

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Wockhardt and the US generics company Sidmak has terminated their marketing agreement for the US generics market. This follows two other Indian companies, Ranbaxy and Dr Reddy's calling off their alliances with Schein of the US. The inability to meet targets was cited as the reason for the break up. The target set up was US $ 100 million but Wockhardt got only $ 1 million from the collaboration. The initial agreement was for 15 cardio-vascular and gastro-intestinal products. But only two have been launched namely the gastro-intestinal ranitidine and cardio-vascular enalapril maleate. Reportedly Wockhardt is looking for new partners and is believed to be in advanced discussions for novel drug delivery products.

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The pharmaceutical business of Rallis India has been sold to Shreya Impex, a part of the Moscow based Shreya Corporation for Rs 49 crore. Rallis will now concentrate more on agrochemicals and seeds businesses. Thus the Tata group has exited the pharma business entirely with the divestment of its stake in Merind a short while ago. The pharmaceutical division of Rallis had a turnover of 60 crore during the financial year ended 1999-2000 and had stakes in gastrointestinal and respiratory care. Rallis' joint venture with Zimbabwe-based Caps will now become part of Shreya Impex.

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The Mumbai-based chemical company Hikal Chemicals has acquired a stake in pharmaceuticals with the acquisition of the pharmaceutical intermediates business and research facilities of Bangalaore-based Wintac. Hikal is mainly into contract manufacturing. Reportedly, Hikal will use the acquisition to undertake pharmaceutical manufacturing and contract research for multinational companies.

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After Nicholas Piramal's acquisition of 40 per cent stake in Rhone-Poulenc India, it was required to make an open offer for 20 per cent more stake, that is 9 lakh more shares. Nicholas has successfully closed this 20 per cent open offer at a premium to the market price. Reportedly, the response was good. Nicholas will have paid Rs 236.3 crore for the entire 60 per cent acquisition. The acquisition was funded by borrowing from ICICI. Rhone-Poulenc has presence in respiratory, anti-infective, central nervous, anti-emetic and hepatoprotective segments of the industry.

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Ranbaxy is reported to have made a windfall with its exit from the joint venture with Eli Lilly, Eli Lilly Ranbaxy. Its stake of 50 per cent made at an equity investment of Rs 7.2 crore is reported to have been sold for more than ten times at Rs 78 crore. Eli Lilly will acquire the entire stake in Eli Lilly Ranbaxy for $ 17 million. Thus Eli Lilly has gained a foot hold in the Indian pharmaceutical industry with an established research and development infrastructure.

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With the acquisition of Knoll world-wide from BASF by Abbott, Abbott India will make an offer to shareholders of Knoll Pharmaceuticals at Rs 328 per share. The open offer is less than the prevailing market price of about Rs 334. Abbott informed BSE that it had bought Lupharma UK Holding which has a 51 per cent stake in Knoll India. Therefore Abbott has to make an open offer to buy an additional 20 per cent stake of Knoll. This will take Abbott's stake in Knoll to 71 per cent. Knoll Pharma has a paid-up equity of Rs 16.2 crore. Abbott US has a subsidiary in India, Abbott Laboratories, in which it has a 51 per cent stake. Reportedly these two companies will eventually be integrated.

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It has been a good budget for the pharmaceutical industry. The finance minister has cut the span of the price control and increased the weighted deductions for research and development from 125 per cent to 150 per cent. He has also assured the pharmaceutical industry that clinical trials and patent filings will be considered as R&D expenditure. Biotechnology industry has also been accorded deductions for R&D expenses and will encourage this sector. The proposed digital library of traditional Indian medicinal knowledge will ensure that Indian medical heritage will be protected and nurtured.

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The Indian System of Medicine (ISM) which comprises Ayurveda and Homeopathy will get a fillip in budget 2001-02 with the government deciding to give it industry status. Right now ISM is a Rs 4,200 crore business with Ayurveda accounting for Rs 3,500 crore share. However the industry will have to modernise and conduct clinical trials in Phase I, II and III like pharmaceutical companies. The government has earmarked Rs 30 crore for setting up State Drug Testing Laboratories in all states across the country. Meanwhile the Ayurvedic Drugs Manufacturers Association has demanded tax exemptions, roll-back of excise on patents and proprietary products from 16 to 8 per cent and grant of priority industry status to the ISM industry.

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The biotechnology industry will be given a separate status from the pharmaceutical and information technology industries according to budget 2001-02. The biotechnology industry can now lobby under the new umbrella for special treatment as it has emerged out of the shadow of the pharmaceutical industry. The weighted deduction of 150 per cent of the expenditure on in-house research and development in areas like clinical trials, filing patents and obtaining regulatory approvals will be a shot in the arm for this industry.

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Till now Glaxo, Hoechst, Pfizer, Lupin, Cipla, Ranbaxy, Novartis and Dr Reddy's had 30 or more per cent of their turnover under price control. But effective from budget 2001-02 this will not be the situation. With the reduction in the span of price control the percentage of the total industry turnover under control will be considerably lower. DPCO will still exist but the list of drugs under its umbrella will be considerably reduced. A new drug policy is also being drawn up. The Indian pharmaceutical industry is growing at a rate of 11 per cent. The definition of R&D expenditure has been expanded to include expenses incurred on clinical trials, patent filings and regulatory approvals. This will benefit companies like Ranbaxy, Wockhardt, Sun and Dr Reddy's who have established R&D programmes. However, income from milestone payments and royalties will be taxed at the regular rates.

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Reportedly, a parallel pharmaceutical market exists in the country. Roughly 10 per cent of over Rs 20,000 crore pharmaceutical industry is unaccounted in terms of sales. This allegation has been made by the Federation of Medical and Sales Representatives' Association of India (FMRAI). This is because most pharmaceutical companies engage smaller companies with spare capacity to undertake manufacture of their drugs. These units put in extra hours and product more than what is ordered by the company. The FMRAI maintains that this extra production is then dumped at economic rates in the market by truck loads under cover of the night. It has also alleged that sometimes drugs are invoiced in the name of fictitious hospitals and then passed on to wholesalers who pass it to retailers who sell it without an invoice to the public.

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