India Poised for Pharmaceutical Boom ; India Is Revamping Its Drug Industry, Hoping to Duplicate Success of IT Sector

Article excerpt

During a lifetime spent treating AIDS patients from Asia to the deepest reaches of Africa, Chinkholal Thangsing has noticed something extraordinary. Whenever patients learn that he is from India, their response is almost universal.

"They say, 'Thank you very much. You saved our lives,' " he remarks.

Dr. Thangsing knows they are speaking not of him, but of his country. For decades, India's drugmakers have been the pharmacy for the world's destitute, finding ways to copy the best medicines at the lowest prices. By some estimates, India's generic medicines treat half the AIDS patients in the developing world.

Yet this picture has begun to change since India decided to comply with global patent standards last year. Now as never before, Indian pharmaceutical companies are looking to expand business in rich countries, which, critics say, will come at the expense of the world's poor. The intent is to follow the footsteps of India's information-technology (IT) sector, which parlayed lower costs and improved innovation into India's greatest modern success story.

The timing could be fortuitous. As the cost of healthcare rises worldwide, Indian pharmaceuticals have positioned themselves to take advantage. For instance, Indian drugmakers now have 75 plants approved to make drugs for the American market - the most of any nation except the United States itself. Also, like Indian IT a decade ago, pharmaceuticals are on the cusp of an outsourcing trend that could become a $3-billion-a-year industry by 2010.

"IT reached that threshold" as a global brand, says Ramesh Adige, a spokesman for Indian drugmaker Ranbaxy. "The pharmaceutical industry is right there."

Leaving behind the poor?

The concern, however, is that as the industry reaches for newfound levels of prosperity, it will leave behind those poor who have long depended on it.

The industry is trying its best to straddle the old and the new. Last month, Ranbaxy and a second Indian pharmaceutical, Cipla, agreed to provide half-price HIV drugs to the foundation of former President Bill Clinton. The Clinton Foundation will distribute the medicines to 100,000 children in 62 countries.

The pact is further proof that India is still in many ways the premier drug-provider for the developing world. "If you take the country as a whole, there is probably none like it," says Sujay Shetty, an industry analyst at PricewaterhouseCoopers. "No other country has that kind of influence."

Yet maintaining that influence might be difficult. Until last year, Indian pharmaceuticals were free to produce copies of patented drugs, so long as they made the drugs in a different way.

Given India's low production costs and its scientists' skill at "reverse-engineering," companies produced their own versions of patented drugs at a fraction of the price. Famously in 2000, Indian drugmaker Cipla unveiled new drugs for HIV patients that cut the annual price of treatment from $11,000 to $400. Today, 1 in 3 AIDS patients in Africa takes Cipla drugs.

India bows to patent pressure

The bounty of the third-world, however, was the bane of first- world pharmaceutical companies. …