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Drug MNCs Baulk At Patent Issues

Drug MNCs Baulk At Patent Issues

After a two-decade stint with PfizerIndia, Kewal Handa, managing director, is hanging up his boots in August. A management accountant and company secretary by qualification, Handa, who joined as a controller of information systems at PfizerIndia, rose through the ranks and has been MD since 2005. He has steered the company through two mergers, Parke-Davis and Pharmacia, and the ongoing integration with Wyeth, which theUSparent acquired in January 2009 for $68 billion. A sport enthusiast, he loves tennis and cricket. Handa, also MD of Wyeth, is credited with opening up new avenues for the parent both in branded generic medicines and allied pharma activities like contract manufacturing and BPO operations. However, the increasing number of litigations against patented drugs and the recent patent controller’s order allowing local firm Natco to make and sell copycat versions of German firm Bayer’s cancer drug through the compulsory licensing route can dent multinationals’ confidence in the Indian market, he tells FE’s MG Arun in an exclusive interview. Edited excerpts:

The three large M&As and the divestment of consumer products to Johnson & Johnson, along with a reorganisation in 2008, made Pfizer change its complexion drastically inIndia. What were the major challenges thrown up by the M&As and how did they benefit the company?

It had been an excellent experience to manage people, their expectations, a variety of cultures, taking the best of each and blending into one culture. We don’t talk about legacies any more, we just talk about Pfizer. That, to my mind, has been a big achievement. In all the M&As, we lived with the core value of Pfizer. I still have Parke-Davis consumer team as intact as it was, or the oncology team of Pharmacia. So it was a question of keeping structures intact, and leveraging on the strengths of the teams you are merging with.

How were the people issues dealt with, especially when there could be job redundancies?

Every merger throws different challenges and every merger has to deal with people. The challenges are of managing the merging of functions, territories and roles. For instance, Pharmacia’s product profile was more oncology and specialty, while we were into acute. The question was how to bring these companies together, where one team was in high touch with doctors, while the other had a mass profile.

On the day of merger of Wyeth, all the Wyeth colleagues were engaged through teleconference, welcomed with lit candles and flowers. The result is that, although Pfizer and Wyeth are still two different companies legally, the staff and operations have seamlessly integrated.

After you took over as MD in 2005, what were the immediate challenges? How difficult was it to convince the parent to invest more inIndiaas you went about with the restructuring?

Pfizer was not investing a lot in the marketplace, mainly because there was no patent protection, and we didn’t have the opportunity to have launch proprietory products here. However, we followed a different approach vis-à-vis other MNCs and expanded our market and reach through people and products. This was a defining moment, where we moved out from the legacy of managing just old and established products of Pfizer to managing our own destiny through the launch our products, not necessarily launching Pfizer global products.

Did a favourable product patent regime spur the parent’s interest post-2005?

Not exactly. Product patents came in 2005, and our efforts to bolster our presence inIndiacame in 2008-09. The effort was to see how Pfizer got its right share in this country and what value we can add in terms of reach, the quality of products and the quality of servicing doctors.

What change did this see in the number of people and products?

We added around 1,500 people, and nearly 50 products. For instance, in CNS (central nervous system) products, we brought the portfolio of Wyeth and Pfizer together, launched some branded generics and pooled in some of Pfizer’s established products. We formed a full diabetes team of 250 people. We have been above market for almost two years now, according to IMS Health.

What were the near-term and long-term goals then?

The most important thing was to do things differently, grow and take the top position. We were in the 15th or 16th position, and the growth rate was in single digits. Our objective was to grow in double digits and be in the top five bracket. Equally important was to convince the parent company that it needs to invest here. So you need to have people, products, a local manufacturing strategy, and a different way of managing the business.

How have all these changes impacted the company’s presence and growth inIndia?

From launching two products in a decade, we are launching around 50 products a year. From having less than 1,000 people on the field, we have more than 2,500 today. The animal health division, from less than R50 crore, today is the largest in the country with R400 crore turnover. From one team, we are now six business units. We have been largely into the acute segment, but the growth in pharma has been more in chronic. So we strived for a larger chronic presence.

Today the business is very healthy, people are motivated, and we are growing above the market. We launched two Pfizer global patented products, and this year, we will be launching two more. We have a very healthy blend of global products and a strong portfolio of branded generics.

How has the foray into allied operations like CRAMS helped?

We were the first to start clinical research activities inIndia. We have done various tie-ups in manufacturing, BPO activities, the formulation development for animal health. All this helped the parent get interested inIndiain a big way. Apart from increasing the size of the domestic business, we also increased the pie for PfizerIndia. Today, we have around 40 clinical trials being conducted inIndia.

How do you see the rising number of litigations around patented products inIndiaand the patent controller’s recent move to invoke compulsory licensing (CL) in favour of Natco Pharma regarding Bayer’s Nexavar?

Since 2005, when product patents came into force, 14 or 15 products have been patented and commercially launched. The turnover of all these is less than 0.5% of the entire pharma market. Therefore, it has not made a huge dent, so the fear that Indian companies and others had that patented products will drive the prices of medicines up, and access will not be there, is not correct. Also, there is always a therapeutic equivalent available.

Now the challenge before all MNCs is, even if they have a patent, how they can commercialise the product. There are a few cases lying with the court and are yet to be resolved. So we have to see how that goes before planning the future course of action. The other challenge is CL by the controller of patents. The clause is that if the product is not manufactured inIndiafor three years after getting patent, it can be a candidate for CL. All these can create a huge deficit of trust. That is where the confidence level in the country has come down.

Will the CL ruling and litigations make MNCs rethink their investments inIndia?

People are now saying, “Is it worthwhile to launch this product if it is getting challenged? Is this market going to be a litigation market? Will this patent ever see some exclusivity?” If these are the challenges for global patented products, then the question is, isIndiathe right country to invest? If I am not able to get returns in the domestic market, should I invest in the market? Should I also invest in opportunities further around the pharma sector or is there any other country gives a better investment environment and a better domestic market? You have to remember that resources are limited globally, so investment allocation is a decision that has to be taken.

There is a lack of confidence now and we need to address this immediately. IfIndiawants to be a global player in the pharma space, it needs to behave like one right now. Some companies argue that in the case of drugs for deadly diseases, CL will help bring prices lower. We cannot mix the issue of patents with access and affordability. How we provide access to a larger population through programmes like national immunisation is something that needs to be addressed separately. Health insurance is an area that needs attention. How do we build the right model for insurance for middle class, for chronic diseases, how do we get young people to be part of the insurance scheme when they are healthy, attract more players and make insurance affordable? So we need to go to the root cause.

The reason why people feel drug is expensive is because we don’t have a safety net. InIndiajust lower prices will not help since even those low prices would still be a challenge to patients.

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