Financial Daily from THE HINDU group of publications
Friday, Feb 15, 2002
Industry & Economy
`Patents for pharma companies must be dealt with cautiously'
P.T. Jyothi Datta
NEW DELHI, Feb. 14
EVEN as pharma majors demand legal parameters to protect their intellectual property India needs to tread the patents issue with caution, warns Mr John Morris, Partner, KPMG-UK, or it just may end up "throwing out the baby with the bathwater!"
Against the backdrop of the recently announced Drug Policy 2002, Mr Morris told Business Line that while he was in favour of progressive dismantling of price control, he was "concerned" about the transition to the patent regime.
Mr Morris is the head of KPMG Europe/Middle East and Africa, Pharmaceutical practise, with expertise in pharma supply-chain, pharma economics, R&D and UK Pricing Regulation.
While it was imperative that India needed to put in place, and fast, a framework that provided patent protection to pharma companies, the pace should not be such that it lose its inherent strengths in research and development (R&D).
"In the developed markets, talent in research has drifted away with changing patterns in control and investment. The expertise of the developing world is its low cost chemical manufacturing abilities and if that is taken away then there is the peril of taking the sting out of your competition," he said.
"While the likes of Eli Lilly and Astra Zeneca are already present in the country the opportunities here are big enough to be on the radar screen of every pharma company," he said.
Globally, pharma giants are trying to balance their investments in R&D, against actual productivity. With companies such as Merck recently coming under pressure, pharma companies worldwide are getting into a re-think on their sustainability models.
Huge R&D costs are resulting in "me-too products" and there is also the colossal cost of marketing the drugs. Consequently, there is a de-fragmentation of sorts taking place, with pharma companies identifying their core competence as R&D, sales and marketing or manufacturing.
Companies would increasingly look for synergies of scale, even as they de-fragment their own operations. As a natural consequence, developing countries, such as India, with an expertise in low cost manufacturing could well become a "contract manufacturing paradise", he said.
He did not concur with the manner in which pharma companies handled themselves in South Africa over the issue of supply of anti-AIDS drugs. "Differential pricing will continue to exist across the different markets and it is for the companies to evolve a value for themselves."
On the opportunities for domestic pharma companies, such as Dr Reddy's and Ranbaxy, which were looking global he said, with 19 per cent, in value terms, of the world's ethical products coming off patent in 2004, opportunities are enormous.
"While there needs to be more consistency and transparency in the accounting patterns, Indian companies can find an opportunity for licensing collaborations with small pharma companies in Europe, besides tapping into the huge portfolios of MNC pharma companies."
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