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| October 24, 2005 | Monday | Ramzan 19, 1426 |
Patent regime vs generic drugs: Letter from Mumbai
THE sudden threat of a global pandemic caused by the H5N1 strain of avian flu has revived the raging controversy over generic drugs and the patent regime. And for a change, drug multinationals are showing flexibility, indicating they are willing to co-operate with generic producers.
The two key players involved in the on-going row over the lack of availability of drugs to tackle bird flu are Swiss giant Roche, and India’s leading generics company, Cipla Ltd. Last week, Mumbai-based Cipla announced that it planned to market a generic version of Roche’s Tamiflu, the anti-viral drug oseltamivir phosphate, which is the only known effective treatment for bird flu. Demand for Tamiflu has soared, especially in the US and Europe, following the global scare over bird flu. The H5N1 strain of the avian flu has been spreading through the poultry population in Asia over the past two years, and has already taken 65 human lives.
In Europe, the first strains of the disease were detected in poultry in Turkey and Romania earlier this month, fuelling the scare. Cipla, which has a 75 per cent share of the anti-Aids drugs market in Africa – where it slashed prices and took on top drugs multinationals – has started laboratory tests on a generic version of Roche’s Tamiflu.
According to Amar Lula, joint managing director, Cipla, the company plans to approach the Swiss multinational regarding the generic version of the anti-viral drug. Roche, which holds the patent on Tamiflu and was reluctant to co-operate with generic producers like Cipla, reversed its long-standing opposition, following the uproar in the US over its rigid stand, and following pressures from the United Nations. American politicians wanted the government to withdraw Roche’s patent and allow other producers to come out with generic versions. The Swiss multinational, which is unable to jack up production to meet the global demand for the drug, did a quick about-turn and promised to co-operate with generic producers like Cipla. Roche is now willing to grant sub-licenses and collaborate with other manufacturers. Cipla is confident of marketing a cheaper version of the drug in a few weeks time, churning out enough capsules to ensure a set of million courses of treatment by the middle of next year. With fears of a global pandemic, governments around the world (especially in the west) have started stockpiling the drug. The Indian firm is hopeful of selling the generic version at a far lower cost than what Roche sells in Europe and the US – where a course of 10-capsules costs about $60. Tamiflu would be unaffordable for most patients in the developing world, but companies like Cipla can sell cheaper generic version in these countries for another 10 years without violating the World Trade Organization’s patents regime.
For Mumbai-based information technology giant, Tata Consultancy Services (TCS), it has come as a significant achievement. TCS last week announced it has won a whopping $850 million, 12-year contract from UK-based insurance and pension funds major, Pearl Group.
According to Phiroz Vandrevala, executive vice-president, TCS, the firm edged out a dozen other international players who were in the race for this major deal. The contract covers third party administration of over four million policies of the UK firm, besides restructuring its systems.
TCS is floating a separate business process outsourcing (BPO) subsidiary in the UK to run this unit. It will also absorb the nearly 1,000 Pearl employees who are already involved in the operations.
The company, which went public last year, is growing aggressively abroad. Last week for instance, TCS also announced the acquisition of an Australian banking technology solutions provider, Financial Network Services, for about $26 million. The acquisition, its first major international one, will help TCS emerge as a complete solutions provider for the global banking industry. It will also help TCS consolidate its strengths in the banking and financial services business, one of the fastest growing sectors in India.
S. Ramadorai, CEO and managing director, TCS, notes that the acquisition will also provide the company with several new customers in Asia, Europe and Africa. The Australian company has supplied solutions to over a hundred banks in the three continents, besides its own domestic market.
TCS, which along with Infosys Technologies and Wipro Ltd, make up the top-three IT companies in India, last year earned about $700 million from the global banking and financial services sector. It has also supplied the Australian firm’s solutions to banks in India.
Recently, it won a huge outsourcing contract, together with Infosys, from ABN Amro Bank. TCS has over the last four months announced deals amounting to nearly $1.5 billion. It is, however, likely to see the end of a much smaller contract – worth over $10 million — with Barclays Bank. The British bank, which is planning a hefty increase in off-shoring work to India, has set up a joint venture with Housing Development Finance Corporation (HDFC), a financial services giant, to handle all its outsourcing work in India.
All three IT majors – TCS, Infosys and Wipro – in India have been expanding their revenues thanks to the growing trend of American and European companies opt for outsourcing of their software development and related work. In the bargain, they are wooing away business from international consultants including Accenture and IBM. Both international firms are also aggressively expanding their offshore centres in India and are on a hiring spree. They are also expected to double their current manpower over the next couple of years.
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The ailing textile industry in Mumbai – once known as the Manchester of the East – received a setback last week when the Bombay High Court ordered the cancellation of all real estate deals signed by different mills with property developers.
The National Textiles Corporation (NTC), a state-owned company that had signed a record number of high-value deals with a clutch of developers was the worst hit by the judgement. Mill owners (including NTC) plan to file an appeal in the Supreme Court shortly. The Bombay Environment Action Group, an NGO, had filed a writ petition seeking cancellation of the agreements. The activist group accused the Maharashtra government of changing the development control rules on the sly, benefitting the mills. Mumbai’s textile industry has been on the decline since the 1980s, following a crippling strike organized by a militant trade union leader. The mills also failed to adapt to new technologies, and could not face competition posed by the power-loom sector. The organized textile industry was paying hefty wages to its workers, while the unorganized sector got away with measly payments.
But the city’s textile mills sat on 600 acres of prime land in the heart of Mumbai. The Maharashtra government has been dilly-dallying over whether to clear the redevelopment proposals relating to the mill lands. After much delays, a government committee announced that redevelopment could occur but only if a third of the land was handed over to the civic body for parks and gardens, and another third given to a government agency for constructing low-cost housing. The remaining third could be disposed of by the mills to private developers.
However, in 2001 the government amended the rules without any public debate, and benefiting the textile mill owners. The Bombay High Court has now struck down this amendment, freezing all new developments. Billions of rupees have already been invested by many banks and developers in new projects, and these are likely to be caught up in the legal tussle.
Mumbai’s property business is witnessing a boom, and prices have been soaring of late. The freeze on development of mill land will lead to a further spiralling of property prices. Many investors who made a killing on the stock markets over the past year have been investing in properties. The government of India recently allowed 100 per cent foreign direct investment in the property business and many leading international groups – including those from the US, Singapore, Malaysia and Dubai – have launched mega projects in cities like Hyderabad, Bangalore, and Kochi. Others have made plans for large townships on the outskirts of Mumbai and Delhi. The government is also keen that financial institutions set up real estate mutual funds to ensure availability of funding for the property sector. In the past, small-time builders dominated the industry, but had no access to finance. Speculators would provide them much-needed resources, but this was a dicey business, as the source of funds was never clear. Now with many established business houses – including the Tatas, the Mahindras, the Godrejs and even professional companies like Larsen & Toubro – entering the sector, the profile of the industry has undergone transformation. But most state government have still not brought about transparency in the sector, and the rules are changed at the behest of lobbies or specific builders. Maharashtra has still to introduce reforms in the sector, including the repealing of the regressive Urban Land Ceiling Act.
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