The Pharma Barons

Business Today - - LETTERS TO THE EDITOR - pros­en­jit.datta@in­to­day.com @Pro­saicView

The post-In­de­pen­dence In­dian pharma in­dus­try was re­ally cre­ated by a gen­er­a­tion of sci­en­tist-en­trepreneurs who took ad­van­tage of the two changes made by the gov­ern­ment in the 1970s. The first was the new Patent Act that recog­nised only process patents of a drug.

Till then, In­dia fol­lowed a patent law that was mod­elled on the patent laws of west­ern coun­tries and recog­nised both the prod­uct and process patent of a drug. Since all the orig­i­nal drugs were de­vel­oped by global gi­ants, they dom­i­nated the mar­ket as well. Even the bulk drug man­u­fac­tur­ing in In­dia was dom­i­nated by multi­na­tion­als.

The In­dian Patent Act, 1970 changed that. It recog­nised only process patents, and not prod­uct patents. This es­sen­tially meant that any com­pany that could cre­ate the same drug fol­low­ing a dif­fer­ent chem­i­cal process would be al­lowed to in­tro­duce it. A num­ber of In­dian chemists and re­searchers work­ing in ei­ther Hin­dus­tan An­tibi­otics Ltd or In­dian Drugs and Phar­ma­ceu­ti­cals Ltd, the two public sec­tor gi­ants set up by the gov­ern­ment in 1954 and 1961, re­spec­tively, de­cided to strike out on their own and started their own com­pa­nies.

The other big change was the in­tro­duc­tion of the Drug Price Con­trol Or­der of 1970, which gave a big fil­lip to low-cost man­u­fac­tur­ers of do­mes­tic ori­gin com­pared to the higher cost multi­na­tional drug com­pa­nies.

Many of the In­dian pharma en­trepreneurs started with ei­ther bulk drug man­u­fac­tur­ing or de­vel­oped new pro­cesses for cre­at­ing pre­scrip­tion drugs orig­i­nally de­vel­oped by multi­na­tion­als. Most of the sci­en­tists-en­trepreneurs also wanted to de­velop their own new drugs, though most lacked the resources to do so.

By the time the In­dian gov­ern­ment switched back to fol­low a WTO com­plaint new patent law in 2005, which recog­nised prod­uct patents, most of these com­pa­nies – Lupin, Wock­hardt, Ci­pla etc. – had be­come es­tab­lished en­ti­ties with strong-branded generic port­fo­lios. Many of them tried to de­velop orig­i­nal drugs as well, but fal­tered at the clin­i­cal trial stages. To­day, sev­eral of the orig­i­nal en­trepreneurs are ready to hand over the ba­ton to the next gen­er­a­tion. And the heirs are chart­ing their own strate­gies. Some of them have made in­roads into global mar­kets, and have used well thought out ac­qui­si­tion strate­gies to find new growth av­enues. Oth­ers have looked at new ther­a­peu­ti­cal lines to ex­pand their port­fo­lios and foot­print in the mar­ket.

Our cover story this is­sue looks at the in­her­i­tors in six com­pa­nies and the paths they are chart­ing out.

With ru­ral con­sump­tion be­gin­ning to pick up once again be­cause of a bet­ter har­vest fol­low­ing the good mon­soon of last year, and also be­cause of var­i­ous gov­ern­ment ini­tia­tives for ru­ral ar­eas, a num­ber of com­pa­nies have fo­cused very sharply on grow­ing their cus­tomers in ru­ral ar­eas. The ini­tia­tives they have taken in­clude ex­pand­ing dis­tri­bu­tion lines and cre­at­ing spe­cial prod­uct sizes to ap­peal to this mar­ket. Our story on page 36 looks at the com­pa­nies and their strate­gies.

This is­sue also con­tains the first part of our fintech sec­tor re­port. Fintech was al­ready grow­ing with great speed when de­mon­eti­sa­tion and the gov­ern­ment’s ef­forts to pro­mote dig­i­tal pay­ment gave an ex­tra growth boost to the in­dus­try. Our sec­tor re­port looks at both the op­por­tu­ni­ties as well as the road­blocks that need to be re­moved for fintech to come into its own.

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