Drug cos bet on India, China: E&Y

Mumbai: The India and China story continues to be on a roll in the pharmaceutical sector, says Ernst & Young (E&Y) in its latest report on the sector. International pharma companies are increasingly bullish on investment prospects in China and India, with 37 per cent of those surveyed saying that their company investments would reach in excess of $150 million in both countries by 2010, the report said.

Several companies have either established or plan to set up research and development and/or manufacturing facilities in these two countries, it added.

Though multinational companies are happy with the product patent regime that has become effective in India since January 2005, respondents on the study did consider patent infringement a problem in India. Companies that left India in the 1990s are back in the country, scaling up operations, sales-force and promotion budgets, the report said.

There has been an increase in the number of new drugs launched since January 2006, besides the time lag between international and domestic drug launches is reducing, said E&Y's Mr Utkarsh Palnitkar. Research credit has emerged as an appealing financial instrument to attract foreign investment, says the report. However, better tax incentives are required, it added.

The report underlined the continued importance of the generics industry. 'India will remain a market dominated by branded generics, as patented drugs that account for less than 2 per cent will grow to only about 7 per cent by 2015,' it said. The global generics market is expected to grow to an estimated $70 billion, doubling its size by 2010-2011.

An ageing population, pressure on Western Governments to contain healthcare costs, pressures on policy-makers in developing countries to increase access to drugs and scores of upcoming patent expirations will contribute to this growth, the report said.

Other avenues of growth come from clinical research being sent to India, besides the growing chronic diseases segment. There are concerns on the need for standards to regulate contract research organisations (CRO). 'While larger CRO's follow industry standards, accreditation of smaller service providers will reduce the risk posed by unscrupulous players/CROs with limited or no credibility,' the report said.

'New markets for treatment directed at chronic diseases are growing. Therapies for chronic diseases currently account for 1/4th of the domestic market and by 2015 is expected to increase to nearly 1/3rd of the market,' the report says.