Indian biotech industry?s much-cherished dream of launching generic biotech drugs in the US market seems to be going sour. High-level policy changes in the US political establishment seem to be favouring protection for biotech drugs from competition from cheaper generic rivals for 12 years.

Such an inordinate long protection period means the likes of Biocon, Reliance Life Sciences, Dr Reddy?s, Ranbaxy, Intas Biopharmaceuticals and Wockhardt cannot launch their copycat biotech medicines or biogenerics in the near future. Disappointment looms large as they were gearing up to launch a dozen generic biotech drugs for oncology, cardiology, dermatology, neurology, gastroenterology, and others in the near future.

?The move will definitely be an entry barrier to the US,? says Kiran Mazumdar-Shaw, chairman and managing director, Biocon. ?It is now well recognised that chemically synthesised generic drugs are rapidly commoditising and making way for high-value generic biotech drugs. If patents extend beyond the 12 year exclusivity, it is unlikely to impact Indian companies. However, there may be several molecules where the 12 year exclusivity may extend beyond the patent in which case, it will negatively impact Indian and other bio-generic companies,? she adds.

The opportunity lost is significant. Americans spend more than $60 billion a year on biotech drugs to treat cancer, rheumatoid arthritis and other illnesses, at an average of $200,000 per patient. Generic copies of expensive biotech drugs would have reduced the amount of money spent on healthcare in the US. For instance, some of the high-profile biotech products used to treat cancer like Avastin and Herceptin from Roche cost $100,000 and $48,000 per year for treatment. The argument being given out by Indian drug companies: their generic biotech drugs would have been sold 10% to 30% below the price of the original drugs, thereby providing a major relief to the US consumers.

Also, biotech drugs worth $15 billion have already gone off-patent during the last two to three years. ?This was the available opportunity for Indian companies as there are no generic offerings for these off-patent biotech drugs in the US market,? says Sujay Shetty, associate director, PricewaterhouseCoopers.

Typically, pharma drugs have a patent period for five to seven years in the US market. And generic biotech drugs have so far been barred in the highly lucrative market. ?It is forecast that by 2016, $25 billion worth of biotech drugs will lose patent protection, creating large market opportunities for generic products like insulin and insulin analogs, monoclonal antibodies and other protein therapeutics. ?If one were to extrapolate that 50% of this represents the US market, then the potential opportunity would be approximately $10 billion,? the Biocon chief reveals.

?A 12-year protection from generic competition will be disappointing for Indian companies as it delays access to the US market,? says Villoo Morawala-Patell, chairman and managing director of Bangalore-based Avesthagen. ?The saving grace is that there are now clear norms for the introduction of generic biotech drugs in the US market and their relevance is being recognised. The pipelines of most large pharma companies are also tilting in favour of biotech drugs,? she adds.

A cryptic reply from Dr Reddy?s was on similar lines. ?We are closely monitoring the developments regarding the regulatory pathway for follow-on biologics (biotech copies) in the US Senate and the house. Dr Reddy?s endorses a reasonable exclusivity period that is of sufficient length to incentivise innovation of new drugs, but not so long as to create a barrier to competition.?

But amidst the outcry, it becomes necessary to get to the bottom of the entire issue. The protection period for biotech drugs has been approved by two key committees?the US Senate Health, Education, Labour and Pensions Committee and the House Energy and Commerce Committee. The policy changes are part of a massive health reform legislation winding its way through both chambers of the US Congress.

Strictly from a policy point of view, the 12 year patent protection for biotech drugs is yet to come into practice. But broad indications are that when the two committees have given their go-ahead after months of deliberations, the US Congress too will vote in its favour, healthcare analysts feel. The US Congress will take up the healthcare bill for voting, which is seeking an overhaul of the country?s $2.5 trillion healthcare system, by the end of this year. Recommendations for the patent protection for biotech drugs are included in the healthcare bill.

Globally, the market for biotech drugs is estimated at $100 billion and growing at 18% every year. There are an estimated 800 biotech drugs that are currently under development worldwide. These drugs are produced by means of biological processes involving recombinant DNA technology and are more complicated to produce than traditional, chemical-based drugs. For instance, Amgen?s Epogen for cancer patients is generally made from proteins manufactured in living cells. Biotech drugs have had a profound impact on many medical fields, primarily rheumatology, oncology, cardiology, dermatology, gastroenterology, neurology, and others.

Ironically, Indian drug majors had been toiling hard for years to strengthen their biogeneric product pipelines in anticipation of entering the much-sought after US market. Early success has come to them in the emerging markets in Asia, Africa and Latin America.

For instance, Dr Reddy?s biogeneric product portfolio spans multiple therapeutic areas?oncology, auto-immune diseases and central nervous systems. It has developed two biogenerics?Grafeel (filgrastim) and Reditux (rituximab) and has a portfolio of eight products in the pipeline with two products at clinical development stage. ?We view generic biopharmaceuticals as an integral part of our mid to long term growth strategy and believe that building depth in development and manufacturing capabilities will be critical in accessing this opportunity,? says GV Prasad, vice-chairman and CEO, Dr Reddy?s.

Similarly, Reliance Life Sciences has developed three biogenerics?ReliPoietin (erythropoietin), ReliGrast (granulocyte colony stimulating factor) and ReliFeron (Interferon Alpha 2b). Additionally, it is working on a range of biogenerics, which are at different stages of development.

Biocon too is making very good progress. Mazumdar-Shaw says, ?We have three very important programmes. Our oral insulin is in phase 3 clinical development. CD6, or the T1h programme, is making good progress. We expect to be able to share our phase 2 data for psoriasis and rheumatoid arthritis next quarter and we expect to commence phase 3 trials in psoriasis soon thereafter. Our BVX-20 programme is in preclinical development and we expect to enter clinical development within the next 9 to 12 months.?

Perhaps the disappointment for Indian drug companies is largely on account of the hope that had been building up for generic biotech drugs in recent months. Brand companies such as Amgen, Roche and other traditional drugmakers advocated for 12 years of protection from generic competition in order to earn a profit on biotech drugs.

On the other hand, generic drugmakers backed proposals limiting the exclusivity period to five or seven years. Their rationale: waiting that long would discourage them from developing competing products and would keep drug prices high. Expectations knew no bounds when the US President Barack Obama himself seemed to be inclined towards a seven-year protection.

?Recently, President Obama made a firm commitment to healthcare reforms and a very important part of this is going to be biogenerics or biosimilars. So I have no doubt that this is going to be a big play for companies like Biocon in the years ahead,? says Mazumdar-Shaw.

It is true that the complexity and costs involved in developing generic biotech drugs are expected to see only a few players gain entry into the highly regulated markets of Europe and US. Yet, not only were Indian companies hoping for a breakthrough and make a killing in the US market, they have been in sync with the global trends prevailing in the pharmaceuticals market. The product pipelines of most large pharmaceutical companies are now tilting strongly in favour of biotech drugs.

For example, it is estimated that Eli Lilly with the acquisition of Imclone would now have more biotech drugs in their pipeline than small molecules; similar is the case with Pfizer as it integrates Wyeth, the number of biotech drugs will start to outnumber the chemical molecules in the pipeline. Swiss drugmaker Roche Holding bought Genentech, maker of the cancer drug Avastin, in March this year for $46.8 billion. ?Demand for new products and the promise of higher profit margins have led conventional drug makers to move into biotechnology,? says Shetty.

With the gates to the US market shut on them, Indian drug companies are looking elsewhere. The growth of biogenerics in the emerging markets is also expected to grow from the current size of $1 billion at a projected rate of 20% per annum over the next five years. ?Most Indian biogeneric companies are pursuing a strategy of first entering non-US markets which itself is a large opportunity,? says Mazumdar-Shaw.

The generics segment in the pharmaceutical industry is currently based almost entirely on chemically synthesised drugs. But the pressure to lower healthcare costs is galvanising governmental efforts globally to facilitate the entry of generic biotech drugs. Moot question is: ?Can Indian drug companies replicate the success they achieved in the generics segment in the pharmaceutical industry?this time in the biotech industry?