There were two pieces of news in the same sector that caught the eye this week. One told the story of how a French teenager has been effectively cured of AIDS, thanks to early use of drugs made by Gilead Sciences Inc. and GlaxoSmithKline Plc. The other news was far from good—Sun Pharmaceutical Industries Ltd, Asia’s largest generics drugmaker, said revenue for 2016 could decline as it struggles to fix manufacturing problems at some of its plants.
One piece of news is about the wonders of medicine, if sufficient time and money and expertise are invested in it. The other is about shortcuts taken to make quick cash. Unfortunately many, not all, but many Indian pharma companies fall in the latter category.
Out of the $350-billion US pharma market, the generic drug market is worth roughly about $35 billion. India accounts for nearly 40% of that generic drugs and over-the-counter products in the US. Just in the past couple of years, US watchdog Food and Drug Authority (USFDA), has raised concerns at least a dozen times—even as recently as last week—about the processes followed by various Indian drug companies, including Sun Pharma (mintne.ws/1GnGP4I).
Sun Pharma’s problems are twofold—legacy issues in manufacturing and quality adherence that it inherited when it acquired troubled rival Ranbaxy Laboratories Ltd last year and manufacturing problems at its own factories, including at Halol in Gujarat.
Sun Pharma earned about 60% of its annual revenue from the US last year, and Halol contributed about 15% to the company’s US sales. The FDA seized incomplete records at Halol in a surprise check last September (mintne.ws/1m08NAe).
Before Halol, there was Karkhadi, also in Gujarat, where the FDA alleged data integrity issues and banned imports to the US from that factory.
Until not too long ago, Ranbaxy was the second largest pharma company in India (after GlaxoSmithKline). Now Sun Pharma is fighting multiple legal fires on its behalf, thanks to shortcuts and shoddy practices that Ranbaxy allegedly adopted.
In contrast, it’s stories like that of the French girl (mintne.ws/1Mk9sqQ) that remind you about the possibilities of the world of medicine. The French girl, Bloomberg reported, was infected at birth and treated until she was about six years old. Doctors then lost track of her for about a year, and her parents stopped the therapy for unknown reasons. When the girl was next seen by a doctor, the virus had not spread in her blood as would normally be the case when a person stopped treatment. Doctors decided to monitor her and only resume therapy if the virus rebounded. She’s now 18, and while the virus is still detectable, it’s lying dormant and doesn’t require drugs to keep it subdued.
Companies like Gilead and GlaxoSmithKline are now increasing investments in drugs that can flush out the reservoirs of HIV to rid the body of the virus.
And that’s an important part of what defines these two very different sets of companies—the amount of money spent on research and development, and the kind of research that money is spent on—if it’s true innovation or old-fashioned reverse engineering.
For instance, Gilead spent or 11.46% on research and development (R&D) in 2014 (this was down from 18.92% a year ago, which, in turn, was up from the two years prior). GSK, for that matter, spent 13.53% of revenue on R&D, up from 12.82% the year before. In comparison, Sun Pharma spent 7% of revenue on R&D for fiscal year ending 2014, up from 6% for four years prior, even when the company’s revenues were shooting up.
To be sure, Indian generic drug makers with their cheap medicines have saved millions of lives and that is the business model that they have largely adopted over the years—price competitiveness. But in the last few years they seem to have not bothered with basic things, such as manufacturing practices. Surely, getting that right is not expecting a lot.
Trushna Udgirkar contributed to this story.