For the first time in 15 years, health care is the top domestic issue in an American presidential election. The fact that health care reform is a priority among both Republicans and Democrats means that there will be a change, with effects that will ripple globally.
India’s pharmaceutical industry could be among the prime beneficiaries: The US already is its single biggest export market, and policy changes being debated in the election could greatly increase the flow of foreign-manufactured drugs to US shores.
The potential is particularly strong in generic drugs, where India already accounts for nearly one-fifth of the global production.
Growth in generics worldwide is driven by the US, where as many as two-thirds of the prescriptions written are for generics. Yet, there are sharp divisions in the US over whether—and how—growth in generics should be encouraged.
Many big research-based pharmaceutical companies worry that the growing use of generics will reduce their ability to recoup the costs of drug development and pay for new research, stifling innovation.
Moreover, biogenerics are emerging. These are the generic versions of biologics—fragile, large-molecule drugs that are expensive to develop, but have been the fastest growing segment of the life sciences industry. Although biogenerics are already being manufactured in Europe as well as in India, there is no pathway for regulatory approval in the US, stalling their introduction into that lucrative market.
The presidential candidates are split on the importance of encouraging greater use of generic pharmaceuticals.
All three of the leading Democratic candidates would authorize the US Food and Drug Administration (FDA) to approve safe and effective generic drugs, and each has specific plans on how to achieve this.
Senator Hillary Rodham Clinton proposes removing barriers to generic drug competition. Senator Barack Obama would increase the use of generic drugs in government-funded programmes and prohibit drug companies from making “reverse payments” to competitors linked to their delaying the sale of generic products. John Edwards would accelerate biogenerics and encourage availability of low-cost, generic drugs to treat HIV/AIDS.
Among the Republican candidates, only Senator John McCain has publicly supported faster introduction of generics. Rudolph Giuliani has proposed streamlining the regulatory approval process for new drugs, but has not addressed other pharmaceutical issues, such as generics. Mitt Romney, Fred Thompson and Mike Huckabee have not issued specific positions on pharmaceutical industry issues.
The debate comes at a crucial time.
With a record number of patents expiring over the next several years, generic sales are expected to grow dramatically. Indian companies—with costs half of those in the US, more than 75 FDA-approved manufacturing plants and experience in producing generics—are well-positioned to profit from this growth.
In order to benefit from an expanded US market for generics, Indian pharmaceutical companies need to continue aggressively pursuing first-time generic approvals from the FDA. These approvals offer a six-month period of exclusivity, which translates into a formidable first-mover advantage.
Through November 2007, Indian companies had secured 20 such approvals, nearly doubling their total in 2006.
India’s pharmaceutical companies also need to consider expanding their scale, which can help in the highly competitive generics sector.
The Indian industry currently is split among hundreds of companies, and the largest of these— none of which holds even a 10% market share—should explore either domestic mergers and acquisitions or overseas alliances to create greater scale for improved competitiveness.
While there are more FDA-approved facilities in India than anywhere but the US itself, by definition there are no approved biogeneric plants. Should the next president and Congress authorize a regulatory pathway for biogenerics, competition will be fierce and the capacity for rapid entry could prove decisive.
Indian companies should prepare to capitalize on their existing strength in biogenerics by ensuring that their production capabilities can move quickly to enter the US market.
With the fortunes of so many around the globe affected by its outcome, the US presidential election is re-earning its reputation as the world’s foremost spectator sport.
Indian pharmaceutical companies will be closely watching the election results to see whether a candidate favouring expanded generic competition will take office in January 2009. If so, one of the world’s most prolific generic producers will be well-positioned to take advantage of the policy changes that will result.
Thomas Mathew is leader of PricewaterhouseCoopers pharmaceuticals and life sciences practice, and Sujay Shetty is associate director, PricewaterhouseCoopers. Comments are welcome at firstname.lastname@example.org