Despite Losses, Ranbaxy Won’t Back Down

Ranbaxy Laboratories will not back down from its patent-busting strategy, despite a recent loss to Pfizer in the US. Ranbaxy and other Indian generic drug manufacturers are seeing diminishing profit margins and sales, especially in the US.

A December 2005 US District Court ruling blocked Ranbaxy's patent challenge to Pfizer's Lipitor, the world's top-selling drug. Effectively Pfizer has exclusive rights to sell Lipitor until its main patent expires in June 2011. The decision blocked Ranbaxy's plan to release generic Lipitor and also questioned the Indian generics industry’s patent-breaking strategy.

According to Ranbaxy Labs President Malvinder Singh, "we will contest this ruling by going on appeal… we will pull out all stops in going after [big drug companies]…we are undeterred in our effort to bring affordable generics to the world."

By aggressively challenging drug patents, leading Indian drug companies have been putting large global drug makers on the defensive. For generic drug companies, their primary market, the US, is becoming intensely competitive as the number of generics manufacturers is increasing, while the number of buyers remains small. In the US, three large wholesalers (AmerisourceBergen, Cardinal, and McKesson), five major retail chains, and three large mail-order suppliers are the main drug buyers. The US prescription drug market is worth $260 billion.

Ranbaxy saw a similar result London in October 2005, where a court upheld a Lipitor patent that the company challenged. The ruling means Pfizer has exclusivity on Lipitor in Britain until 2011. Ranbaxy is also fighting more than six patent challenges on brands like GSK’s Valtrex; AstraZeneca's Nexium; and Takeda Pharmaceutical's Actos.

Dr. Reddy's Laboratories, another leading Indian generic manufacturer is fighting about 24 patent challenges.

Ranbaxy’s profit dropped by a staggering 91% from 2004 due to increased costs for research and litigation and lower prices in the US.

The loss of profits is a cause of concern for Ranbaxy's management. According to Ranbaxy’s chief executive and managing director, Brian Tempest, "we would rather have less of a reputation as a challenger of patents, and more sales and profits." Ranbaxy could have trouble reaching its $2 billion revenue goal by 2007.

To increase profits, the company is shifting resources to other markets like the EU and Japan and also plans to grow through mergers and acquisitions. Its shareholders have approved a plan to raise about $1.5 billion through sales of shares or bonds overseas to finance future M&A’s.

Source: International Herald Tribute, December 12, 2005.