We aim to grow in India through bolt-on acquisitions

Written by MG Arun | Updated: Jan 5 2012, 09:33am hrs
Its been no easy ride for Novartis India, formed in 1997 through the merger of Hindustan Ciba-Geigy and Sandoz (India). An arm of Swiss pharma giant, the $50.6-billion company had to divest some of its legacy businesses like agrochemicals and seeds to become a pre play pharma firm and integrate operations of two culturally diverse companies. Ranjit Shahani, vice-chairman and MD, an IIT Kanpur and Jamnalal Bajaj Institute of Management Studies alumnus, says his focus was on increasing reach, widening product portfolio, and building talent. However, Indian patent laws need more clarity for multinational companies to launch innovative products and be viable, says Shahani, whose company is fighting a case on its cancer drug Glivec in the Supreme Court. Although slack patent laws have dampened investment, the company will still look to grow in India through bolt-on acquisitions and select product launches, he tells FEs MG Arun in an exclusive interview. Edited excerpts:

Indian pharma has grown 17%, but R&D still lags. The Bayer Group is the latest to say they are wary of patent laws in India. Your views.

Lack of clarity on areas related to patents and data protection, together with scope for subjective evaluation by the authorities will be a strong deterrent to global pharma businesses to invest in R&D in India. Any global business would expect, and rightly so, that the patent law in India should meet Indias obligations under the TRIPS Agreement and remove the scope for subjective evaluation or ambiguity by the authorities and the courts.

You have called for specialised courts to deal with IPR issues. How will this help

The Indian legal system is overburdened. Courts deal with a variety of issues that are sometimes so diverse that it is a challenge when dealing with IPR issues that are a recent phenomenon in our country. India is on the learning curve and specialised courts will mean that the lawful owners of IPRs will have a fair opportunity to pursue their rights for enforcement. Further, having such specialised courts will mean that the conditions will need to be defined clearly by legislation or by way of the operative rules for the courts.

The Glivec case is being closely watched by all. How important is this from Novartis point of view

The Glivec decision could bring in the much-needed clarity on the scope of Section 3(d), which could help in fostering an environment conducive to innovation one that is predictable for the innovator. In fact, the Glivec case is about safeguarding incentives for better medicines so that patients needs will be met in the future. Obtaining a patent for Glivec in India is important to Novartis because we want to ensure effective protection for innovation. We believe there are important issues to be addressed that are essential to the future of intellectual property law in India and the viability of the innovative pharmaceutical business in our country.

Price was also a factor on the basis of which a patent for Glivec was rejected...

Linking patentability to price is unprecedented. There is nothing in the Indian patent law to support such an interpretation. There are mechanisms in the law to prevent abuse of a patent once it is granted. With regard to Glivec, in particular, price is irrelevant since more than 95% of all Glivec patients in India currently around 15,000 receive their medicine free of charge through the Glivec International Patient Assistance Program (GIPAP), which Novartis began in 2002. Since that time, Novartis has provided more than $1.7 billion worth of Glivec completely free of charge to patients enrolled in GIPAP in India.

Do you think Novartis growth would have been better in India if there were innovative laws in place

Novartis has been in India through its predecessor companies since 1947. In fact, Novartis, through its predecessor company, was the first global company to set up an R&D centre here. When the law changed and there was no sign of any form of IPR protection for innovative research, the company was forced to relook at its Indian strategy and stopped all new molecule synthesis in 1990. Novartis, however, continued to introduce its global innovative products in India even though product patent laws did not exist. We believe that having an environment that is conducive to research will increase R&D investment.

What would be the impact of the government plans to bring 348 essential drugs under price control Interestingly, consumer groups have also slammed this. So who will the policy, if implemented, benefit

The pharma industry has always been in favour of price monitoring as opposed to price control. Our fear is that the proposed ceiling price formula will not result in equitable price reduction. While four brands with 25% market share will face price reductions, customers buying brands that comprise the balance 75% market share will see no benefit. As an alternative, in order to provide quality and affordable medicines to the rural masses and those below the poverty line, pharma companies could supply products at a significant discount for government purchases.

Around 35% of our population that lives below the poverty line will not be able to afford medicines at any price because of the huge socio-economic disparities. Any efforts at price control will, therefore, be unsuccessful at reaching the loftier goal of healthcare for all.

Will more M&As, with buyouts by foreign companies, make drugs dearer in this market

There seems to be a wrong perception that FDI in pharma means higher prices. The reality shows that there has been no significant change in drug prices, if at all, as a direct consequence of mergers or acquisitions in the country. The Indian pharma market is very wide and fragmented in terms of coverage and there are multiple options available in each therapeutic area allowing market forces to actually drive prices down.

How keen is the parent to look at the inorganic route to growth

We are always on the lookout for opportunities to grow our business. And at this point in time, we believe that bolt-on acquisitions as opposed to large acquisitions or mergers are the way ahead. Fifteen years is a long period, and it has been fulfilling. Innovation, growth and productivity are the three planks we work on. The fundamental nature of this is good talent. Innovation is central to pharma and needed in to keep productivity in competitive environment.