Vol. 6, No. 2 Feb.-Mar. 2002

American drug company Pfizer will take advantage of every available opportunity to undertake clinical trials in India (a clinical trial is the testing of promising news drugs on human subjects to determine their safety and effectiveness with the consent of the subjected patient). Pfizer had been giving this testing to its Indian subsidiary Pfizer India so far since 1996. India is being targeted as a unique destination for such clinical testing because of the sheer scale and diversity of diseases found. These trials are carried out in association with leading hospitals. Pfizer is sponsoring an Academy for Clinical Excellence (ACE) at the Bombay College of Pharmacy, which will offer training programmes in clinical research methodology, data management and biostatistics.

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Ranbaxy has won twin permissions for introduction of its drugs in India and the US. Its anti-infective Cefuroxime Axetil has received US FDA approval for manufacturing and marketing in the US and its anti-asthma compound Montelukast got the Drug Controller of India’s approval for introduction in the Indian market.

Cefuroxime Axetil will be in three basic dosages – 125 mg., 250 mg., and 500 mg. tablets. This is the first approval granted for this drug to any generic company in the US. This drug is the largest selling oral cephalosporin in the US. The combined sales of all three dosages of the branded product is estimated to be more than $ 254 million in the retail segment.

Ranbaxy will launch its anti-asthma Montelukast under the brand name "Romilast," which will be available in 10 mg film coated tablets and 4mg/5mg mouth dissolving tablet forms.

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Dr. Reddy’s stock vaulted nine per cent on the BSE with the announcement that the company’s application to market a generic version of a blockbuster hypertension and angina drug (amlopidine) in the US went unchallenged by its innovator, Pfizer. Pfizer’s amlopidine (brand: Norvasc) is a $ 1.7 billion drug in the US. DRL’s application involves the right to market a version of amlopidine under Paragraph IV of the relevant US law for 180 days of generic (off-patent) marketing exclusivity. Under this rule, the first generic manufacturer files an application stating that an existing patent is either not valid or will not be infringed by the marketing of the generic drug. This is known as "Paragraph IV Certification".

The patent holder has the right to challenge this in court but Pfizer hasn’t done so. Further DRL’s product has an opportunity of being granted 3 years exclusivity under existing laws if DRL conducts some portion of its clinical trials on the product.

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To cut down its manufacturing staff by 100, Dr. Reddy’s has taken recourse to the voluntary retirement scheme (VRS). It plans to pay between 3-4 lakhs to each worker opting for VRS. The company employs 800 workers across 11 manufacturing units. The VRS is for workers who have completed 40 years of age or have completed 10 years of service. The company expects 100 workers to take advantage of the scheme and will pay 3 months’ salary for each completed year of service.

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Nicholas Piramal has bought paint major ICI India’s pharmaceutical business for Rs 70 crore. The deal has been clinched by Nicholas in the face of competition from domestic and multinational companies. ICI’s pharmaceutical business has notched sales of Rs 69 crore in fiscal 2001 and annualised sales of Rs 76 crore. The deal therefore works out to a little less than one time of sales. ICI will also reimburse to Nicholas Rs 1 crore as cost of acquisition. The annualised gross profit of the pharmaceutical business stands at Rs 12 crore. Many of the brands of ICI were under perpetual licence from AstraZeneca, the Anglo-Swede drug manufacturer. The Nicholas share opened at Rs 221 on the Bombay Stock Exchange and closed at Rs 224.70 an increase of 2.3 per cent on the news of the acquisition.

Nicholas Piramal has also formed a new strategic business unit (SBU) from products carved out of its existing divisions, to focus on new growth areas, under the advise of consultants McKinsey & Company. The new SBU will focus on critical care, gynaecology and dermatology and will have a field force of 100. The SBUs will concentrate on products with sales of above Rs 30 crore. Mr. V P Kamath, head of the Biotek division is in charge of the new SBU. With 14 products in its bag the SBU will close this year with sales of Rs 60 crore a compounded annual growth rate of over 70 per cent since 1997. The Biotek division formed to market drugs licensed from Swiss company Hoffmann La Roche will be headed by Ashutosh Ojha former chief of Bupa Piramal. Two non-Roche brands AmBisome, an injectable anti-fungal from Gilead Sciences, and Zidime, an injectable antibiotic from Eli Lilly with total sales of Rs 5 crore will move to the new SBU. Thus Biotek will focus exclusively on Roche brands. Also two dermatology drugs – Lobate and Melalite (sales Rs 15 crore) originally with Boots Piramal will move to the new SBU. A dermatology product of ICI may also be included in the new SBU. Two female healthcare brands (antibiotic Rovamycin and anti-oxidant AO7, formerly from Rhone-Poulenc with sales of Rs 5-6 crore) will also move to the new SBU.

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The maker of brands like Digene and Brufen, Knoll plans to sell its manufacturing unit at Jejuri in Maharashtra. This formulation facility employs about 85 workers and makes Digene and the painkiller Brufen. No voluntary retirement scheme has been planned before the sale and this will also form a condition of the sale. However no prospective buyer has been found yet as most players in these product segments have their own capacity which is adequate. US drugmaker Abbott Laboratories is the largest shareholder in Knoll with a 58.2 per cent stake.

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US drug major Pharmacia Corporation has entered into an agreement to buy the 51.49 stake of fellow American company Abbott Laboratories’ 51.49 per cent stake in the Indian drug company Abbott Laboratories India. The deal is worked out at US$ 13.5 million (approximately Rs 65 crore) which works out to a value of Rs 242.8 per share a premium of 63 per cent over its current market price of 148.8. Mumbai based merchant banker Ambit Corporate Finance advised Pharmacia. Though Pharmacia has a wholly-owned subsidiary in India based in Gurgaon the Abbott stake has been directly acquired by Pharmacia Coporation of the US. However the two companies will promote each other’s products and both will be headed by Venkat Sohoni, managing director, Pharmacia India. In financial 2001 Abbott Labs India posted nett sales of Rs 96 crore with a net profit of Rs 3.2 crore. No redundancy of staff is expected as the present staff will stay with the company or will be absorbed by Knoll in which Abbott has a 58.2 per cent stake (see 060206 above). With the acquisition Pharmacia gets 270 more medical representatives in addition to 200 employees in Pharmacia India. The company will also get a slew of brands in the antibiotics, hypertension and vitamin segments.

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Alembic Chemical has finalised a major restructuring plan under which it will create a new division for cardiovascular and diabetic drugs while hiving off some old brands into a franchisee company for marketing. Growth through brand acquisition is also being planned mainly in cardio-vascular and anti-infective segments. The company will also perk up its over the counter (OTC) business through acquisitions and in-house development. The company is also planning a foray into biotechnology as part of its growth strategy. Alembic, at present, has a turnover of nearly Rs 500 crore and the restructuring plan is aimed to take it to the Rs 700-crore spot in two years. The company’s cardiovascular and diabetes segments, high growth areas for the company, will be augmented through third party manufacturing arrangements which will be handled by the new franchisee company.

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Ranbaxy Laboratories has reached an exclusive marketing arrangement with Penwest Pharmaceuticals under which it will have the marketing right for the US company’s cardiovascular drug Nifedipine XL in some select markets which include: China, Thailand, Malaysia, Singapore and South Africa. Ranbaxy will manufacture Nifedipine XL developed using Penwest’s TIMERxr drug delivery technology at its plant in Dewas and will commercially launch it by the end of 2002. Ranbaxy will pay royalty to Penwest after the commercial launch of the product.

Nifedipine is a cardiovascular drug indicated for treatment of hypertension and has an estimated market of $ 50 million in markets where Ranbaxy has received exclusive marketing rights. The two companies will also explore the joint development of other products that Ranbaxy will market in this region.

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After Warner Lambert (Parke Davis’ principal in the US) merged with Pfizer, Parke Davis (India) and Pfizer (India) have successfully merged their operations by integrating their field force and also offering VRS (voluntary retirement scheme) to those who wished to retire. About 430 of Parke Davis medical representatives have agreed to join as professional service officers (PSOs) of Pfizer on new terms and conditions and increase in pay.

PSOs come under the management category and therefore they cannot form a union or resort to strike or bargaining for raise in pay. The combined field force will number around 1,100 people now and will promote antacids like Gelusil and the cough syrup Benadryl. Those who have taken VRS have got around 8-16 lakhs per employee. Those who became PSOs were shortlisted by the management and given the option of VRS or continuing in service.

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February 5. The cabinet approved the new drug policy which entails releasing of 30 drugs from price control. Under the new rules price control will be imposed on companies manufacturing bulk drugs with annual sales of more than Rs 25 crore and where a single brand has 50 per cent or more market share. When a drug has 90 per cent or more market share, the turnover limit is reduced to Rs 10-25 crore. The government will fix its list on the database of ORG-Marg for the year ended March 2002.

Drug prices were controlled since 1979 by the Drug Prices Control Order (DPCO). DPCO has been gradually pruned from over 300 drugs in 1979 to 74 in 1995. Now only 38 drugs come within the scope of DPCO. Of these 26 drugs would attract price control in the more than Rs 25 crore sales and 50 per cent market share category and 12 would fall under the 10-25 crore sales and 90 per cent market share category. However any drug discovered in India and any novel drug delivery system developed in India would be out of price control.

The new pharmaceutical policy 2002 aims to ensure the abundant supply of essential pharmaceuticals at reasonable prices. It also aims to strengthen indigenous capability for cost-effective production, reduce trade barriers, encourage R&D and promote investment and use of technology. The notification of the policy is expected before the budget.

In the coming budget the industry can expect sops for royalty received on intellectual property right and concessional rate of duty for inputs required for research including minimum duty on equipment, machinery and raw material, etc. Additional a corpus of Rs 150 crore has been allotted to encourage domestic research.

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January 18. The pharmaceutical industry is in a furore over the lopsided implementation of a one-time six-month extension to advance licence holders to meet their export obligations. This grant was made by the commerce minister Murasoli Maran in 1997. When the notification was issued it covered licenses issued after April 1, 1997 excluding a large body of exporters under the Value-based Advance Licence.

Industry associations like the Indian Drug Manufacturers’ Association, Bulk Drug Manufacturers’ Association and the Association of Small and Medium Chemical Manufacturers have appealed to Mr. Maran to rectify the apparent inconsistency and give time to licence holders under the 1992-97 policy also to meet their export obligations.

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February 15. Pharmaceutical majors are upset over the new drug policy, which will bring drugs like Diclofenac, Betamethasone, Rifampicin, Ibuprofen and Insulin under the new drug price control order (DPCO). Companies like Novartis, Glaxo, Ranbaxy, Cipla, Lupin, Zydus Cadila, Alkem and Glenmark will be affected by the new policy.

The other drugs likely to come under the new DPCO include Erythromycin, Amikacin, Bisacodyl, Framycetin, Rabies Antigen, Xylometazoline, Prednisolone, Metaformin and Glipizide. The pharmaceutical policy has also accepted Drug Price Control Review Committee’s (DPCRC’s) suggestion that low cost drugs measured in terms of "cost per day per medicine" may be taken out of price control. The formulator can present evidence of per day cost to consumer/patient to the National Pharmaceutical Pricing Authority and it will be authorised to exempt such formulation from price control if the cost to consumer-patient does not exceed Rs 2 per day. If a formulator wishes to revise the price he will be required to inform the NPPA and seek fresh exemption for the drug. However some industry associations are upset over the provision of more discretionary powers to the NPPA. Also they have alleged that under the "cost per day per medicine" for exempting drugs that cost under Rs 2 per day could lead to corruption.

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February 25. The face-off between Nicholas Piramal and Dr Reddy’s Laboratories over the biotechnology drug filgrastim has put a break on approval of Indian biotechnology products by the Drug Controller General of India (DCGI). Apparently the DCGI hasn’t approved a single biotechnology product in the last few months.

The DCGI is revising the process of approving biotechnology products and it is consulting a panel of experts comprising scientist and clinicians. The Nicholas-Dr Reddy dispute arose in September 2001 over filgrastim an immunity-boosting drug given to cancer patients. Nicholas had been marketing Hoffman La Roche’s filgrastim drug branded Neupogen for a decade without competition until Dr. Reddy’s came out with its brand Grastim. Nicholas alleged that Grastim was not filgrastim as it was not identical to Neupogen on certain parameters. However the parameters used to compare biotechnology products remains a vast grey area vulnerable to different interpretations.

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January 30. India pharmaceutical companies may be on a launching spree judging by recent product launches. It recently launched a slew of Viagra clones which, obviously, helped domestic pharmaceutical companies to outdo their multinational rivals in 2001. A total of 1,417 new products were launched during 2001 valued at a turnover of Rs 340 crore.

Cipla was the most prominent launcher with 93 new products in 2001. Its products picked up a market share of 5.1 per cent (a percentage of total sales of all new products) and showed a turnover of 17.2 crore. Ranbaxy stood second with 58 new products and showed sales of 20.7 crore and registered a market share of 6.1 per cent. Other companies in the launching game included Alkem Laboratories (53 new products, sales Rs 9 crore, market share 2.7 per cent), Sun Pharma (40 new products, sales of Rs 19.7 crore, market share 5.8 per cent) and Zydus Cadila (36 new proudcts, sales of Rs 13.6 crore and market share 3.9 per cent). Multinationals however lagged behind (Novartis India: 7 products, sale Rs 2.1 crore and Glaxo: 6 new products, sale of Rs 4.7 crore).

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February 25. Following ICRA’s announcement of its foray into grading of healthcare entities, its rival CRISIL has also announced that it has completed gradings of three hospitals under a system developed by it. They have rated two Delhi-based hospitals and one Chennai-based one and are in talks with another dozen hospitals across the country. The rating cost the hospitals between Rs 1 to 5 lakhs per annum and involves an annual surveillance fee of one-third this amount and a grade based on a four-point scale. The parameters are meeting the needs of key constituents like hospitals, patients, healthcare insurance companies, third-party administrators and the government. The type of institution is also taken into consideration as nursing homes are compared with nursing homes and hospitals with hospitals. The relative quality of healthcare is judged and institutions graded higher would have better facilities, superior quality levels and greater consistency in service-delivery. CRISIL has developed its grading methodology after analysing the grading criteria adopted by international agencies in the US, Australia and Canada.

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