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[NEW DELHI] Much-hyped tie-ups between Indian and multinational drug companies have not improved domestic research and development (R&D) capabilities, according to a study.

But they have raised fears of a steady loss of domestic manufacturing capacity for the cheap drugs needed in the rest of the developing world.

Some Indian drug companies have acquired foreign firms in the past decade or agreed marketing deals to promote the products of foreign companies in India. Meanwhile, foreign companies have bought Indian firms, including Ranbaxy, Nicholas Piramal India and Shantha Biotech.

An analysis by India's National Institute of Science, Technology and Development Studies (NISTADS) shows there has been no improvement in the R&D capacity of domestic companies, nor any significant technology transfer from abroad. The analysis will be published in the July 2011 special issue of the International Journal of Institutions and Economies.

India's clinical research organisations, which specialise in carrying out drug trials more cheaply than can be done abroad, also largely failed to improve technologically. A closer look at their annual growth of 20–25 per cent shows that 80 per cent of this was in their capacity for conducting trials, with only 20 per cent in their capacity for drug discovery, mostly aimed at Western markets.

NISTADS scientist Dinesh Abrol, who led the analysis, told SciDev.Net that one cause for concern was the loss of domestic manufacturing capacity for cheaper 'generics' — versions of a drug made by alternative chemical processes and thus free from licensing restrictions.

The international medical non-governmental organisation Médicins Sans Frontières, which relies on India to supply 80 per cent of the generic HIV drugs it distributes in developing countries, describes India as the "pharmacy of the developing world".

Abrol said that foreign companies bought Indian ones that had large markets in several developing countries as well as India. The Indian firms will no longer be able to make cheaper versions of new drugs owned by the foreign firms — reducing the supply of cheap drugs to other countries.

International patent laws allow countries to issue compulsory licences to make or buy generics during a national health emergency. But if India were to declare a national health emergency in the future, there would be few domestic firms left to make generics in sufficient amounts, Abrol pointed out.

A discussion paper by India's commerce ministry in November 2010 cautioned: "There is a concern that their [Indian drug firms'] take-over by multinationals will further orient them away from the Indian market, thus reducing domestic availability of the drugs being produced by them. This may weaken competition leading to headroom for increase in domestic drug prices."

The ministry said such alliances had also been seen in Brazil, Egypt and Pakistan, indicating a "consolidation in developing country markets" that could "alter the pharmaceutical landscape".

Abrol said that Indian drug firms often challenged multinational drug companies' patent applications in India. "Buying the domestic firms would lead to fewer irksome patent challenges," he said.

Another problem is the intellectual property rights for Indian technologies that fall into foreign hands through takeovers. Indian companies have benefited from tax incentives, technology transfers and patent waivers on the products of research from Indian publicly funded institutes. The Council of Scientific and Industrial Research alone gave out the rights to 50 new processes and 50 new reactions for 100 essential drugs from 1965 to 1980.

The goal of these waivers has been to boost domestic Indian industry but, after a takeover, the final beneficiaries of such technologies are foreign firms.

Such firms are also now the ultimate beneficiaries of market access privileges enjoyed by under bilateral agreements between developing countries, including Brazil.

"What happens to such agreements is at stake," said Sachin Chaturvedi, a senior analyst with the Research and Information System for Developing Countries.

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