BRICs view on pharmaceuticals

Any pharmaceutical company with aspirations of long-term growth and global reach is either present or looking at expanding its presence in Bric countries (Brazil, Russia, India and China). Fast growing economies and rising income levels, burgeoning patient potential, improving healthcare infrastructure, facilities for low-cost and quality manufacturing and research, government support and liberalising FDI policies of Bric nations have created significant potential waiting to be unlocked.

Per capita expenditure on healthcare in Bric countries as per industry reports is $72 for Brazil, $59 for Russia, $9 for India and $17 for China. Bric countries' total projected health expenditure in 2006 was estimated over $250 billion. This seems like a lot of money, but is approximately equal to that spent by Germany alone each year and far less than the US healthcare expenditure of over $2 trillion.

Among Bric countries, India is recognised as a low-cost, high quality destination for R&D, manufacturing and clinical trials. MNCs are keenly looking at strategic alliances in place of pure play service arrangements. Risk and reward sharing arrangement between GSK and Ranbaxy, to name one, is an indicator of this trend. While Brazil shows good potential and China is already a known competitor, Russia is catching up.

Although China is a popular source for raw materials and early-stage intermediates, compliance with good manufacturing practices (GMP) and enforcement of intellectual property laws are strong concerns from an outsourcing perspective. However, low operating cost advantage has attracted several multinational companies to set up their own manufacturing facilities in China. India is posing as a strong competitor to China-India has the largest number of US FDA approved plants outside of the US and all manufacturers are required to comply with GMP guidelines.

Demographically speaking, India has a huge young population; yet, in absolute numbers, there is an increase in the ageing population. Changing lifestyle and food habits have brought along chronic and lifestyle diseases. India is poised as the diabetes capital of the world. India's patient potential is matched only by China's, on account of its greying population. Brazil, the fifth most populous country in the world, has an ageing population and a disease burden akin to Western countries. Russia has a large and ageing population with declining health. Just as these factors translate into substantial market potential for the pharmaceutical industry, they also place India in an advantageous but equally challenging position for the clinical trials market.

With liberalisation of FDI and a growing economy, India has a positive business image. However, a stringent price control norm is a dampener. The story is similar in Brazil. China is enforcing continued price cuts on reimbursed drugs, thereby squeezing the profit margins. On the other hand, Russia has few restrictions on drug pricing. All the four Bric countries are replete with weak enforcement of patent protection laws and the problem of counterfeit drugs at varying levels.

There are a number of factors and measures that India would have to implement/undertake to ensure that it attains a leadership position on many of the counts amongst Bric countries. Responsibility lies equally with corporates, investors and the government. India must ensure that it capitalises on the advantageous position it currently has in the contract research and manufacturing services space and clinical trials arena. Indian companies would need to increasingly focus on innovation for long-term growth and global scale. This requires support from investors who believe in nurturing companies as against short-term returns. India has a talent pool of highly skilled technical personnel. To maintain this advantage, public-private partnership and collaboration with universities would further help. India will also need to ensure that its patent protection and data exclusivity norms are appropriately enforced.