Novartis India vice-chairman and MD Ranjit Shahani discusses the issues confronting the Indian pharmaceuticals industry today

Mumbai: Ranjit Shahani, who has built his career in the chemicals and pharmaceuticals industries, is a technocrat with an engineering degree from the Indian Institute of Technology, Kanpur, and holds an MBA from the Jamnalal Bajaj Institute of Management Studies, Mumbai.

After a long stint at the ICI group in India and the UK (where he oversaw the British multinational's Asia-Pacific operations), he joined Roche Products, as its CEO. Subsequently, Shahani joined Novartis India following the worldwide merger of Sandoz and Ciba-Geigy to create Novartis. At present, Shahani is vice-chairman and managing director of Novartis India.

Shahani is currently president of the Organisation of Pharmaceutical Producers of India, or OPPI. He spoke to domain-b about the Indian pharma industry and the issues confronting it. Excerpts:

What according to you are the challenges facing multinational drug companies in India? As OPPI's president what steps have you initiated to face these challenges?
First of all, OPPI is not an association of multinationals. It covers all large Indian companies and multinationals that strongly believe in patents. Multinational pharma companies have contributed significantly to the development of the pharma industry in India.

OPPI, which represents primarily research-based international and large Indian companies, is in the forefront of the world-class quality HSE [health, safety and environment] and cGMP [current good manufacturing practices] movement. It has published a Quality Assurance Guide and an Environment, Health and Safety Guide.

You will be surprised to learn that the first patent was granted in 1421 in Florence, Italy, for the product glass. Patents are nothing but the other side of generics. I feel India, with its pool of scientific and intellectual talent, should be the last place where one should debate about the introduction of IPRs [intellectual property rights].

The challenges faced by the pharmaceutical industry in India, of which multinational companies occupy a predominant sector, relate mainly to:

• Lack of world-class infrastructure to protect IPRs at present. Once this is in place, post-2005, it will be possible to intensify research independently and through collaboration to make newer and better medicines available for the diseases of the developing world.
  
• The possibility of becoming a dominant healthcare player in the global market, given India's vast pool of scientific and intellectual talent.

To meet these challenges effectively, new business models are being developed by intensifying core competencies. In order to realise the potential of the pharmaceuticals business we must ensure a liberalised pricing policy and a world-class patent protection regime. OPPI is leading the efforts to achieve these goals.

How do you think the WTO [World Trade Organisation] regime will affect pharma multinationals operating in India?
From 2005 the WTO regime will affect pharma multinationals operating in India in a positive way. New R&D products will be launched in India ensuring the drug discoverer's original standards and quality. Increased FDI [foreign direct investment] and expansion of business will take place. There will be an assured inflow of the latest and best international technology. Indian companies will see a significant increase in co-licensing opportunities.

As a result, there will be a check on spurious and substandard products and an upgrading of quality control of the entire industry. Collaborative R&D between global companies and Indian companies will be speedily strengthened.

Thus the introduction of the WTO regime in 2005 will not only help multinationals, it will also help Indian pharma companies. A strong IPR system in India will lead to better utilisation of scientific manpower and a reversal of the brain drain. India will gain a high world ranking in the pharma industry. Patients will have availability of better and newer medicines, particularly for inadequately and untreated medical conditions.

You said there will be FDI and collaborations between multinationals and Indian companies. Could you elaborate in the context of your own company?
As far as FDI is concerned, Novartis has set up a research centre for tropical diseases [malaria, tuberculosis and dengue] in Singapore with an investment of US$120 million. India would have been a possible destination of this investment had we had a strong IPR infrastructure in place at that time.

As regards tie-ups between multinationals and Indian companies, Novartis has a $60-million collaboration with Dr Reddy's Laboratories for research into diabetes. We are entering into another collaboration with Torrent for 'age breaker' medicines. India has huge untapped potential for clinical research, which can develop into one of our strengths.

What are OPPI's demands from the Indian government? What has been conceded and what has not been conceded?
We look forward to a proactive approach and business-friendly conditions to be created by the government. In this context, we would like to have an early introduction of the new Drugs (Prices Control) Order to accelerate the growth of the industry and the passing of the third amendment to the Indian Patents Act. A positive policy framework will result in an increase in exports from India. Further, it will attract more FDI in the pharma sector. A patent regime, which encourages and protects drug innovators, will attract more R&D investment.

More investment for research in tropical diseases will be forthcoming if the government takes up the role of facilitator rather than the controller's. Eventually India will emerge as a global powerhouse in the world pharma industry. The progress in implementation of the new pharma policy has been retarded due to litigation, and the industry sincerely hopes this will be resolved soon. It is difficult to plan under uncertainty.

Article 39.3 of the [WTO's] Trade Related Intellectual Property Rights states that data exclusivity should be maintained when data is submitted to the government for drug approval. This is an important aspect of our demand - we find that very often when we submit data about our products to the government, data exclusivity is not maintained. Hopefully, the third amendment to the Indian Patents Act will cover this aspect, too.

There is great anticipation regarding the WTO regime being implemented in 2005. India will finally recognise pharma product patents in that year. Will the cost of healthcare go up?
The myth that is perpetuated by some lobbies, that cost of healthcare will go up post-2005, is utterly baseless. Over 95 per cent by value of drugs marketed in India today are not patented products. This applies to almost all antibiotics, anti-diabetics, anti-tubercular, cardiovascular drugs, vitamins, minerals and protein supplements. The consumer will always have a wide choice of products whose patents have expired even after the implementation of the WTO regime in 2005. For every new product there always will be a number of therapeutically equivalent substitutes.

The number of new drugs introduced into the market globally per year is in the region of 10 to 20. As these newly patented drugs are introduced, old ones drop off from the patented category. Again, with so many formulators for molecules, market forces will determine the price structure.

A study of prices in six therapeutic categories [anti-ulcerants, anti-depressants, calcium antagonists, non-narcotic analgesics, broad spectrum penicillins and ACE inhibitors], conducted in nine countries [South Korea, Mexico, Hungary, Taiwan, Brazil, Argentina, Egypt, Jordan and Turkey], demonstrated that strengthening IPRs does not have a measurable impact on the real or nominal prices of existing drugs. Indeed, in a country like Italy, for example, where patents were introduced overnight, product prices rose only 6 or 7 per cent. But more importantly, local companies benefited. There was significant FDI inflow as well.

With patented products coming to India, a lot of generic products manufactured by Indian companies will enter the markets of advanced countries. Do you think this is a fair exchange? Will this exchange balance out?
According to the international definition of generics, the Indian pharma market can be considered as one dominated by generics, essentially by branded generics, due to the lack of IPR protection. The market of 'generic generics' in India has normally been the forte of small local players in India. The Indian generics market is estimated at Rs 1,500 crore ($315 million). In the US, the branded drug industry is facing substantial patent expiries during the next five years, and drugs worth over $80 billion are expected to go off patent. This is a very significant opportunity for Indian pharma companies.

Additionally, governments all over the world have been promoting generic products due to increasing healthcare costs. This represents a sizeable opportunity for Indian players to export to other countries. India is increasingly being recognised as a reliable source of good quality medicines.

Please remember that there is an organic link between patented medicines and generic medicines. After the expiry of its patent, a product enters the generic domain. Hence, if there are more patented medicines, there will be more generic medicines also. As such, the two are complementary.

What has been your experience as president of the prestigious OPPI?
You have rightly described OPPI as a prestigious association. It is, indeed, a vibrant and dynamic organisation. I should emphasise that it is not just an industry association formed to protect and promote the interests of the industry as a whole; it is also a professional and scientific body. It organises a number of national and international seminars and workshops to hone the skills of managers. It has recently organised a workshop on talent management as also a workshop on the code of marketing practices.

OPPI members contribute significantly to various social causes. It has recently commissioned a research project to reflect the collective contribution of its members in terms of the social responsibility of the pharma industry.

What has been Novartis's contribution in terms of social responsibility?
At a global level, Novartis Foundation for Sustainable Development has joined the international initiative to eradicate leprosy. This initiative comprises the WHO [World Health Organisation] and a few other organisations. Novartis has committed to donating medicines worth $30 million to help eradicate leprosy from Asia and Africa. The WHO has set 2005 as the deadline to eradicate leprosy.

On a local level, in 2002, Novartis India launched the Joint Effort to Eradicate Tuberculosis (www.ourjeet.com) which is a campaign aimed at creating awareness about tuberculosis and provides scientific information and assistance to practising physicians to treat their patients. As part of this campaign the company provided 5,500 tuberculosis patients with free medicines.

Novartis' Glivec is a breakthrough drug that treats chronic myeloid leukaemia, a slow-growing cancer in which the bone marrow produces too many white cells. Realising that there will be people everywhere in the world, particularly in India, who will not be able to afford the cost of treatment with Glivec, Novartis has set up a programme called the Glivec International Patient Assistance Programme. Under this programme, patients who meet specific criteria receive Glivec free of charge. But with generic substitutes available in the country, the programme has been limited to existing patients.

What are your expectations from the WTO? Will the relaxing of patent rules for developing countries affect multinationals? What are 'compulsory licences'?
We expect that the WTO will balance the interests of the patient and the drug innovator. It is wrongly believed that patents hinder the promotion of public health. In fact, it is the other way around. Patent protection for a drug innovator will lead to revolutionary discoveries in various therapies.

I remember, before the 1970s, India had a perfectly legitimate product patents regime in place. Then patented products and generic products were freely available and widely used for treatment. Even the prices of drugs were not unaffordable in those days. Governments have the right to control prices if they feel the price of any drug is exorbitantly high.

The real issue in the entire controversy, which gets waylaid, is access to medicines. The solution to this key problem is through public-private partnership. Globally, a number of projects have been initiated in this context. 'Compulsory licences' are sought to be invoked by developing countries under the WTO when there is a national health emergency. But what is a health emergency and what is the duration of this emergency has not been specified. The current definition and scope are too wide. Perhaps these will be clarified by the WTO.

What do you consider your philosophy of work and life?
I believe that the twenties in a person's life are for learning; the thirties for earning; the forties for consolidation; and the fifties for giving. I am in the giving phase now, and I would like to do it as unobtrusively as possible - which I do attempt.

Having been in the pharma industry I feel I have had the opportunity to empathise with people and feel their pain. I take immense satisfaction from the fact that I have been able to give back to society as much as I have received from it in my earlier years. Both my wife, who is an educationist, and I take pride in what we are doing and contribute to society in our own different ways.

What are your hobbies and how do you relax from the pressures of work?
I listen to classical music - both Indian and western - to relax. I also play tennis.