GlaxoSmithKline (GSK) holds a unique position in India. Among the first foreign pharmaceutical companies to enter the country decades ago, GSK is one of India’s oldest pharmaceutical firms and is viewed “almost like an Indian company,” according to Hasit Joshipura, vice president-south Asia and managing director for GSK in India.
Today, GSK views its India operations as a model for expansion into emerging markets, where drug sales are expected to grow more rapidly than in developed countries. GSK’s years of experience in India may soon pay significant dividends, Joshipura suggests: The company has developed low-cost manufacturing sites for selling internally and for export, set up a clinical trials network, and tapped local know-how in R&D. A key goal behind the company’s efforts, he says, is to create a “branded generics portfolio, apart from our own pipeline, in emerging markets.” During an interview with India Knowledge at Wharton at the recent Wharton India Economic Forum in Philadelphia, Joshipura discussed these strategies and also the future of pharmaceutical regulation in India, which he believes will copy some of the approaches taken by the U.S. to create a “pharmacovigilance” regime to monitor drug development and new product launches.
An edited transcript of the conversation follows.
Knowledge at Wharton: Could you tell us how the pharmaceutical industry in India has changed since the early 1990s, when there was a wave of liberalization for corporations in general?
Hasit Joshipura: Well, first of all, I do not think the liberalization has had a direct impact on the pharmaceutical industry. However, I think, there has been an indirect impact in the sense that liberalization has brought in greater economic prosperity, and that has in turn driven demand for quality health care. And so I think that has driven the growth in pharmaceutical industry, if you like.
Liberalization has also created an interest in India, in general, that focused the attention [of global companies] on the R&D capabilities here.
Knowledge at Wharton: Tell us about that R&D capability. Are we talking about the clinical study capability or is it the research capability, the scientific knowledge that is available?
Joshipura: Well, it is actually all [of those] because the development of the generic industry really demonstrated a very significant chemistry capability. But that was not the first point of contact, because the first point of contact came from the fact that the global pharma companies needed to reduce the costs of bringing a molecule to market, and the largest piece in that is clinical R&D. You have a large patient pool in India that is also treatment naïve. So, I think, the first place where companies went in was clinical R&D. Then, having understood the infrastructure and the capabilities of the country, different companies have taken different routes — some have gone to chemistry, some have gone to early discovery. So there are different routes that [companies] have taken.
Knowledge at Wharton: There seems to be a big difference between what a foreign company wants to do within India, and what the domestic companies want to do, in terms of exporting generics or building a global business outside of India. Could you talk about that difference?
Joshipura: Yes. Up until 2005, we had a patent law which was different from the rest of the world. We had a process patent law. Everybody knew that post 2005, we would have a patent law which was like [that of] most of the countries in the world, which is product patent law. That [change] necessitated that the Indian companies look for avenues for growth, beyond what they had been — the model they had been following earlier. And I think, as a result of that, a lot of them went out and expanded the generics business globally. So, that has been the route the generic companies have taken.
Knowledge at Wharton: Could you explain how that change in the patent law would drive Indian companies to look beyond the country’s borders?
Joshipura: Up until 2005, Indian companies could replicate or reverse-engineer a product which was on patent elsewhere in the world, and they would get a process patent for it. So it was not a product patent. Post 2005, it is a product patent. Therefore, Indian companies cannot use that as a basis for growth, and they needed to look for other growth drivers. Expanding the generic footprint globally was one such opportunity which companies have taken. Now, as far as innovative [global] companies are concerned, it is the reverse; they suddenly begin to see India as a very attractive opportunity. Apart from the fact that the traditional markets are not growing as fast and there is a general focus on emerging markets in health care, India has become very attractive because now it is compliant with the International Patent Law. So, companies which were not playing in the Indian market — global companies — are now [rushing] to come back.
Knowledge at Wharton: India offers certain low-cost advantages when it comes to performing clinical trials, for example. What about outsourcing other kinds of R&D — actually creating new molecules and that kind of activity? What is the future for that?
Joshipura: That activity has also picked up fairly substantially. Up until 2005, the model for growth of Indian companies was quite different. Now, there are different motivations. So post 2005, in the last four years actually, we have seen a very substantial increase in the number of patents being filed globally by Indian companies and the amount of work that they are doing to bring the first Indian molecule to market.
Knowledge at Wharton: And how does your company fit into this picture? Because your company, GSK, has been in India much longer than most foreign pharmaceutical companies, I would imagine the strategies that you are pursuing are different from some of the others’?
Joshipura: Yes, that is true. Now, I think, we are seen almost like an Indian company. That is a plus in the Indian market. The success of the Indian model has actually led our new CEO to try and replicate that in a cluster of markets which is now called the emerging markets, which he thinks are going to drive growth for GSK globally.And really, what they are trying to do is to build a branded generics portfolio, apart from our own pipeline, in emerging markets, because that is the kind of model which works. The inspiration for that has come from the success of GSK; because GSK in India developed a business model which was India-specific many, many years ago, [the company] moved manufacturing to India. Therefore, they could price the product appropriately, and, that is why they have been able to develop such a substantial footprint in the country. And that is the model now they are trying to replicate elsewhere.
Knowledge at Wharton: What about some other activities for India’s pharma companies — for example, what about personalized genomics-based medicine?
Joshipura: I will come to genomics, but bio-tech certainly is one [area] which, I think, some companies have pursued big time, and there was a belief that once the guidelines for follow-on biologics got into place both in Europe and the U.S., then that would be a big opportunity.
Some companies have gone the route of genomic-based medicine. There are some initial [projects] by people who have come back from other parts of the world and have started operations in India, but my guess is biotech will develop faster than genomics-based medicine.
Knowledge at Wharton: What about prevention of sickness?
Joshipura: Well, first of all, I think we like the generic pharmaceutical industry. I think India also now is beginning to show signs of a fairly well developed vaccine industry. So there are a number of local vaccine companies who were doing extremely well; we’re now able to provide products to UNICEF [and other organizations]. Certainly, on the vaccine side, there is fair degree of activity.
Prevention of sickness generally requires a dissemination of good practices, good hygiene — all of which is being done either by government agencies, under the National Rural Health Mission, or by NGOs advocating safe practices. So, there is [progress] in that area, as well. And I think that is demonstrated in the continued decline in some of our mortality rates, and the improvement in our health care statistics.
Knowledge at Wharton: What kind of changes do you see in the regulatory structure going forward? Any further big loosening coming up?
Joshipura: Sure. I think India so far has had almost a dichotomy, as far as regulatory structures are concerned. You had a state-level regulatory structure and then you had a national regulatory structure. What is being envisaged is an FDA-type of structure, which will then encompass not just drug approval, but also “pharmacovigilance” — the monitoring of trials, all activities surrounded or associated with drug development and the launch of new products. In the next couple of years, we are going to see that kind of a structure come into play, and I think then we will have a regulatory system which is comparable to the best in the world.
Knowledge at Wharton: India has had a lot of small manufacturers which will be facing some difficulties in meeting the new scrutiny that is going on in manufacturing. Do you have any plans to work with some of those small companies, to help bring them along or collaborate? What is your level of collaboration with Indian companies at this point?
Joshipura: About 45% to 50% of our current product portfolio is outsourced to contact manufacturers. So, we are already working with a fairly large number of, not small but medium-sized players, whose manufacturing practices we have upgraded to meet with our standards of quality. We have been doing it not just now, but for many years.
Knowledge at Wharton: What are the key things that Indian companies need to do to move to the next level of serving worldwide markets?
Joshipura: I think they are already serving worldwide markets. And, I really do not think it [involves] doing “key” things; I think it is more about focusing on the right therapeutic areas, focusing on the right opportunities, so that [companies] find these international forays profitable enough to be sustainable.
Knowledge at Wharton: There are big changes coming in U.S. health care. We do not know what they are, but we all know that they are coming. How will that affect the export of, say, generics from India? What are the opportunities there?
Joshipura: Well, I think, the changes would largely be governed by two things, if I read the tea leaves. One is that the cost of health care is prohibitive in the U.S.; it is very expensive, so you want to bring it down. Secondly, you want to make it available to those who do not have access today. And if those are the considerations, then I have no doubts that Indian generic players will have a significant opportunity, because of the cost and quality combination that they are able to deliver.
Knowledge at Wharton: Does that mean you would be more interested in taking over some smaller companies, so that you can increase your manufacturing base to be able to deliver more to the U.S.?
Joshipura: No, being a global company, we have our own subsidiary in the U.S. serving the U.S. market. So I do not think that is the intent, or will be the intent, but there is a stated intent of going into branded generics in the emerging markets — and if that requires that we go and acquire either somebody who can do it for us, then yes. But otherwise, not as a source for manufacturing GSK products and sending them elsewhere — no, that is not the intent.
Knowledge at Wharton: In addition to changes in the U.S. health care system, the other big thing that you are probably working with is the worldwide economic downturn. Health care tends to be resistant to downturns, but can you speak to how your company is being affected in India and elsewhere by the economic crisis?
Joshipura: I can talk about India. So far in India — not just our company, but in the market — we have not seen any impact. Last year, the market grew at 10%, which was in line with what was expected. Given the level of penetration of health care in India, I do not think that we may see an acceleration of this growth rate, but I would be surprised if the growth drops below this.
Knowledge at Wharton: Are there specific disease categories or other categories where you see big opportunities opening up, whether there is going to be more insurance money available, or whether there is just a push to solve the problems with particular diseases?
Joshipura: I think it is well known that Indians are particularly susceptible to cardiovascular diseases and diabetes. So, these two are slated to become the biggest health care problems for India. And then associated with diabetes, you have the other problems of end organ failure and all of that. So in that whole area we are going to have some challenges, and this is something — it is not an opportunity, but I think it is something which the government is working on, and we need to work on, to make sure that there is enough awareness about Indians being susceptible to this and doing something about it.
Knowledge at Wharton: India has long been known as having an advantage when it comes to low cost, and now everyone is concerned about the high cost of health care, particularly in the U.S. How can you leverage India’s reputation as a low-cost producer, to increase market share?
Joshipura: First of all, when you say India is “low cost,” it is in relation to the West. If you look at the cost of health care in India, it has been going up fairly substantially. So that is not good news for Indians. But having said that, the fact that there is economic growth, and the fact that health insurance is opening up, is resulting in a substantial increase in demand for quality health care. You are seeing a number of tertiary care hospitals, which are world class, coming up.All of these can also provide services to the itinerant medical care seeker. So, medical tourism is expected to grow fairly substantially over the next several years. And I hope that the capacity build also happens concurrently.