A pioneering research published on April 9 in Nature Biotechnology said that India's health biotech firms are emerging as major global players, with growing means and knowhow to produce innovative as well as generic drugs and vaccines at a fraction of a cost compared to those produced by global giants.

The blossoming of an innovative Indian biotech sector holds major implications for the global industry and for improving both health and prosperity in the developing world, according to Professor Peter A Singer, principal author of the research study.

"India is innovating its way out of poverty . . . it is poised to revolutionise biotechnology just as it did the information technology industry," Dr Singer, co-director and senior scientist at the McLaughlin-Rotman Center for Global Health, University Health Network, professor of medicine at University of Toronto and a Distinguished Investigator of the Canadian Institutes of Health Research, said.

In an interview with Senior Editor Suman Guha Mozumder, Dr Singer, along with Dr Sarah E Frew, a research associate at the McLaughlin-Rotman Center for Global Health, program on life sciences, ethics and policy at the University of Toronto in Canada, explained what India holds for the future of global health and the importance of its innovation in today's world. Excerpts:

What are the implications of India becoming a health biotech innovator as the research suggests, for the global industry, especially North America?

The implications for biotech five or ten years from now for the global market will match exactly what information technology has done to India. IT in India is a grown up version of what health biotech is at present. Both of them are following a growth path. That is the potential.

India has drawn a lot of flak from the Americans for providing cheap labour -- people who come here on temporary work permits -- and also for outsourcing jobs to India. From that perspective what is the kind of social impact health biotech is going to have?

Increasingly we are living in a globalised world and talent is all that matters. That is why the fact that Indian biotech industry is starting to follow an innovative path is quite significant. Everyone knows that India has a large generic industry, but our study focussed on the innovative companies in India's health biotech sector. We witnessed a range of innovations, from business model to process innovation, and increasingly India is becoming TRIPS (Trade-Related Aspects of Intellectual Property Rights) compliant. 

Please elaborate...

Let me give you one quick example for each of these.  In terms of business model innovation, a good example is Indian Immunologicals Ltd, an animal health company, which started making rabies vaccine. They faced difficulty in having those supplied to the villages. However, they adopted a franchise model along with Abhay Clinics, who had 1,500 clinics in their fold, and maintaining the chain solved their delivery problem. This franchise model has now expanded to 4,000 clinics. This is the McDonald's of rabies vaccine in India.

A good example of process innovation is a company called Shantha Biotechnics of Hyderabad.  It manufactures Hepatitis B vaccine. As you know Hepatitis B is a serious global public health hazard with up to 8 per cent of the population in some parts of Asia and sub-Saharan Africa being the chronic carriers. This infection can lead to liver cancer.

One of the appalling stories in global health is that the vaccine was actually discovered 25 years ago but did not reach the masses because of its high price.

When Shantha entered the market in 1997, the price of the hepatitis vaccine in India dropped from $15 to $0.50. Now, 40 per cent of UNICEF vaccine (Hepatitis B) needs are met by Shantha.

How were they able to bring down the cost? Simple. They started preparing the vaccine in a different yeast, where purification was easier and the cost was much lower. Purification, I am sure you know, accounts for one of the very high costs in drug development.  This is an example of process innovation in biotechnology leading to lower cost and greater affordability.

The third example of product innovation is Biocon Ltd, which is a large company. They made an insulin product, which is vital for India's diabetic patients. From there they started a co-development partnership with a US biotech company called Nobex to deliver insulin without needle, I mean, oral insulin. That is true product innovation. Recently Biocon acquired Nobex.

These three examples are the kind of things that we have talked about in our research. The key issue here is that India is innovating its way out of poverty.

Does it strike you in any way that India has not been able to deliver primary healthcare facilities to its poor while it is forging its way ahead?

Hepatitis B is now part of the expanded program of immunisation in India. Of course, healthcare delivery to the rural poor is a huge challenge for India as for any other developing country with a billion plus population. (There is) no doubt that it is a significant challenge. The important issue is do domestic private health biotech industry has the solution to the problem of delivering affordable health products?

Could you elaborate?

Sarah is here to answer your question.

Hi Sarah?

Innovation is driven by local needs. And given that the local market in India has its own special characteristics - several of the Indian firms are focused on specific local needs.  Many smaller players recognised the local needs and started to develop products to address that, which in turn helped Indian companies to become innovative.

Biocon and Shantha could deliver drugs as lower prices only because they were innovative in their approach.

Peter, your take.

As far as reaching out to the poor is concerned, I would say Indian health biotech industry manufactures important products that are globally significant. The DPT vaccine of the Serum Institute in Pune, which accounts for about half the world's supplies is an example. There are other examples of Indian companies manufacturing products, especially vaccines that are helping global health.

Lessons learnt from India and the concept that a vibrant health biotech sector can actually help in economic development is something other countries should ponder over. This is a lesson even lesser developed countries can learn.

Innovation is key to solving problems. To graduate from being just a developing country innovation, especially in health biotech, is an important step. The Indian example shows that such investments in medium and long term can be very helpful.

In North America, many industries are protected and entrepreneurs, like the shrimp importers, often go to the World Trade Organisation seeking protection for their products because Indian imports are cheaper. Now, when patents of most of the drug companies expire in some years from now in the US and generics from India flood the market, what is going to be the scenario?

Of course geopolitical issues always cause friction. But our focus is not on generics when the patents expire, but our focus is India going the other way as acceding to the TRIPS agreement and the companies that we studied are those that need global standards of intellectual property protection and are moving forward.

Therefore they are operating according to global rules and entering global markets on the basis of innovation, which is our key point and not low-cost labour. In the end labour costs will equalise.

It is innovation, which is going to win the day. The study finds that many of these Indian firms will become increasingly innovative. Many know about the Indian generic industry, and what it is capable of producing, but very few knows the details.

You mentioned in the study that the lure of world market profits may divert much needed Indian research attention away from treatments for specific developing country illnesses. Could you elaborate on this please?

I think Sarah can answer this one.

Sarah?  What's your thought on this?

It is one of the risks. Many of these companies were founded with specific focus of addressing a local health need and now that they are being successful and generating revenues.

They need to keep their business afloat and one of the attractive ways of doing that is to look to the regulated international markets.

Our advice to the Indian government is, 'let us not lose the (vision) of social responsibility that these companies have demonstrated by their founding. . . we must be able to work together with these firms, to continue to develop innovative products for local health needs, to support them politically and also, perhaps, to incentivise them financially so that domestic companies begin to develop health products for local needs.

Peter, one last question. Sometime back (Biocon chief) Kiran Mazumdar-Shaw said that the financial markets are averse to taking risks when it comes to funding health biotech companies. How would the Indian companies get funding for further research?

So far they have grown up with revenues from their services and products and that actually is a pretty non-diluted way to grow. At some point they are going to face some limitation, especially some of the smaller, earlier companies.

But I think as the story of Indian innovation becomes more widely known, we will see a growing reach of the venture capital, hopefully, Indian venture capital and also global venture capital finding its way to support some of the Indian innovative companies.