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 Q:
The GlaxoSmithKline merger was first announced in January 2000,
and fell into place by December of that year. What has been the
progress of the integration process?
A: The year 2001 has been very productive
as far as progress with the merger is concerned. We had to wait
a year before we could consummate the merger. That allowed a lot
of things to get sorted out. The companies have come together well
with the organisations coming up to speed very quickly. And results,
as predicted, are very good.
You talked about savings of $1.3 billion
over three years. How much have you saved in this one year?
Yes. That's right on track. Savings are made
and they will continue to be made. But the maximum savings will
be made over a three-year period.
The last two years haven't been too good
for both your companies, Glaxo and SmithKlineBeecham, in India.
Sales and margins have slipped. Except for the anti-asthma drug,
Seretide, from Glaxo, there has been no new launch from your companies.
Are we going to see more launches through the merged entity?
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"Once the regulations change,
Indian pharma companies will have to become more research-based." |
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The Indian market is a peculiar one because
of the status of intellectual property. It's not our intention to
launch new drugs in the Indian market in the near future because
it's a pointless exercise. Any generic house could copy them and
put them in the marketplace and sell them at a lower price. The
dynamics of the market will not change until there are clear rules
about intellectual property rights. So, for a company like ours,
which is a prescription medicine-based company, India will become
really attractive only when we get some IPR protection.
But as far as copying of drugs is concerned,
that could happen even if you launched a drug in, say, the US. The
Indian companies could still buy the drug, copy it, and sell here
in India at a much lower price. So does it make sense for you to
not launch the drug under your own brand name?
Of course it does. It then means that we are
selling the drug way below the price we sell at in the rest of the
world. Then that drug can be re-exported and anything can happen.
But it doesn't make any business sense to do that. But once IPR
is recognised, that will change the whole dynamics of the market.
What drugs are going to come in over the
next couple of years from the GlaxoSmithKline stable?
We have a drug for benign prosthetic hypotrophy
(BPH). We have a pd5 inhibitor for male erectile dysfunction that
will come out this year. And then we have a number of enhancements
of our own drugs. Although it's not as perfect as we would want
it to be.
Do you plan an Indian subsidiary for launching
new products?
No. I think GlaxoSmithKline will be the vehicle.
Whether there are any plans to change that, I don't think so. Not
to my mind.
How dramatically do you expect the Indian
market to change after 2005, when a product patent regime comes
into place?
I think the market will change significantly
after 2005 because India is potentially a huge market. I think there
will be significant changes for companies like GlaxoSmithKline,
which have a long history in India. We will introduce all our new
drugs here and put in more into R&D in India, something we haven't
done before. That will mean more investments coming into India.
There are good people in India-good scientists and technical people,
a sound educational system, and reliable infrastructure. All these
factors taken together make India an attractive market in the long-run.
How will you cope with the way prices are
controlled in India. Would it make sense for you to launch new drugs?
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"Intellectual property affords
you exclusivity for a given duration of time. When it goes,
it goes." |
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After the patent regulation, we will know what
the rules of the game are. There are no rules at present. Anybody
can do anything. Under the new regime, we would be able to make
a correct decision on whether to launch the drug or not. In any
case, it is not in the government's best interest to deny people
the best drugs. I'm sure there will be compromises of the right
sort.
How do you rate companies like Ranbaxy,
Dr Reddy's and Cipla as competitors?
They are all generics companies. They are not
prescription pharmaceutical companies. I believe that when IPR does
come to India and the market is protected well, these companies
will move in the direction of becoming much more like GlaxoSmithKline.
Today, they operate the way they do because the environment allows
them to. Once the regulations change, they will have to become more
research-based.
You talked about making more investments
in India in the area of research. Will alliances with companies
like Dr Reddy's or Ranbaxy power that strategy or will you be going
on your own?
I think in this industry, alliances, collaboration
and interaction with various groups is very important. We don't
hold all the intellectual property. We only have a little piece
of what we need. We have to make alliances with a lot of research
institutes, universities, biotech companies, and other pharma companies.
That's a very important part of the business.
Can a company like GlaxoSmithKline save
on costs and reduce the time to market by sourcing out R&D to
local companies?
Yes, the costs could certainly be brought down
that way. That will make our processes more efficient. I believe
that new technology will also help us reduce the time to market
and make drugs cheaper at the end of the day.
Can you give an example of how you are using
technology to speed up things?
To put it simply, it's the sheer scale of R&D
today-everybody is duplicating everything; if you bring them together
you don't have to duplicate. You have one set of this, one set of
that. You don't have to do clinical trials and genetic databases
five times. You just have to do them once. So we have set up centres
where research groups work on the basic chemistry, and then we have
five special labs so that the molecules go to the R&D centres
of cardiovascular, cancer and anti-viral diseases. They then take
it right through to the proof of concept. We have organised them
in a manner that they reach a critical mass in all the therapeutic
areas. So that size gives us the opportunity to create a framework
with all technology around and everything else in the middle and
curtail duplication.
A major reason why drugs, at least the patented
ones, are expensive is because of the cost of discovery. The hit
rates are low, making the heavy back-end investments prohibitive.
What are you doing to improve your hit rate?
Use modern technology. If you go back in time,
most drugs were discovered serendipitously. But now, we are starting
to understand the underlying mechanism of diseases thanks to modern
genetics and molecular genomics. Once you understand the disease,
you can target it with more specific drugs.
That will enable us to increase the hit rate.
In the past, we were in a blind corner. But we can now see what
we are up against clearly. I think that is likely to change the
whole dynamics of the business.
In the US there is a move towards generics
because of the cost factor...
I think that issue has always been there, but
it's not a live one because of the problem of litigation. So if
you bring out a drug and there are no generics of that drug, there
may still be drugs in the same class. If you take beta-blockers,
there would be 15 other similar beta-blockers. Some of them are
patent-protected, others are not. The ones that don't have a patent
will be a lot cheaper. If you can't differentiate between a molecule
and a generic, people will buy the latter since it's cheaper. Why
shouldn't they?
Modern drugs have been dominated by antibiotics
through the 20th century. What radical changes in medicine will
we see in this century?
Antibiotics are interesting because their target
is an invader. A bacteria, fungus, virus, or a parasite that comes
from outside and we've got to rid of it. But many of the diseases
are born in our mechanism. You can't see them. It's a completely
different paradigm for treating diseases such as diabetes.
Diabetes is a complex disease. So you can't
take a drug for seven days and hope to kill it. You can't cure it,
but only treat it. But if you know the genetics behind it, the dynamics
of treatment becomes completely different. Knowledge of a person's
genetic propensity for a disease goes a long way in preventing its
occurrence through making changes in lifestyle and environment.
That is one way.
The second way of dealing with diseases is
to understand the underlying mechanism. All these allow you to treat
diseases in a fundamentally different way. In the 21st century,
we will be curing diseases like diabetes or bone-joint, cardio-vascular
and neurotic disorders the way we cured infectious diseases in the
20th century. Things like tissue and organ regeneration will also
happen.
But will the advantages of these developments
ever trickle down to the masses?
It always happens. Initially, only people who
can afford it will have access to the technology. But in the second
round, people excluded in the initial period will also benefit.
Not everybody can access everything initially. But new things eventually
become available to the masses. Today, millions of people possess
cars. But in 1901, only the extremely rich had them. So we should
not stop technology. People who buy it (when it is expensive) drive
its growth.
Indian companies like Ranbaxy or Dr Reddy's
are licensing molecules to Novartis and Novo-Nordisk. Are the global
pharma majors looking at sharing research knowledge with these companies?
That's our competitive advantage. Research
base gives us the edge. I don't think anyone's going to share R&D
knowledge with their local counterparts. But I still think basic
research offers small companies tremendous opportunities because
they can work on specific areas, whereas a company like ours is
looking at too many different areas all once. The smaller companies
should engage in more basic research and then hope to sell the results
to the bigger companies.
I understand that in the next 10 years,
patents for about four billion drugs are going to go off. That will
be a goldmine for Indian generic companies. Will GlaxoSmithKline
aim for some sort of an arrangement where it gets a share of this
pie?
Intellectual property affords you exclusivity
for a given duration of time. When the exclusivity goes, it goes.
That's it. You can sell your drugs, but the sales drop. There is
no point getting involved in that. Adjust to it, recognise it, and
carry on.
What about marketing pacts with local companies
for critical mass in sales?
Yeah. Just like some big companies come to
us and say, ''Look you have a better infrastructure in Korea or
US. So would you sell our drugs?'' We'll go for that, if we believe
it is necessary. Apart from having excellent reach in the local
markets, our local partners' ethical standards should match ours.
They should also be adding something significant to what we already
have.
Research in companies like GlaxoSmithKline
appears to be more geared to the US, Japan, or Europe. What if markets
like India truly open up. Would your labs start working on tackling
tropical diseases or those more prevalent in India?
We have been doing a lot of research in those
areas. So do other big companies on diseases like TB and malaria.
AIDS, of course, is the big one. We are making significant efforts
in all these areas. We can't limit ourselves to diseases that affect
only a certain part of the world. There is an enormous amount of
work being done on Third World diseases.
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