A FRANTIC Christmas race to a late-night pharmacy in South London was my introduction to Indian drug companies. I handed over a prescription written for an unhappy two-year-old and was given a bottle of antibiotic syrup.

I looked at the label suspiciously. Would this cure my son’s ear infection (and the Bank Holiday misery of an entire family plus grandparents)? Who or what, I asked, is Ranbaxy? The pharmacist, a Sikh, replied: “It is an Indian drug company.” And then, anticipating my response, said: “Don’t worry. We sell a lot of it.”

The syrup went down a treat and I swallowed my prejudice. But the Christmas earache also brought to my attention a business success story that is not well understood outside the pharmaceutical arena. Within little more than two decades, a clutch of pill-makers, branch plants inherited from Western drug companies, have been transformed by Indian scientists into a multibillion-pound generic drug industry.

Their star is ascendant. The share price of Ranbaxy Laboratories has risen by more than 50 per cent since the beginning of the year, valuing the company, which is quoted on New York’s Nasdaq exchange, at some £2 billion. Within the past two months, the stock price of Dr Reddy’s Labs, a leading competitor of Ranbaxy, has risen 40 per cent, making the Hyderabad firm a billion-pound enterprise.

The Bombay share market is notoriously volatile but there is reason for excitement about Indian pharmaceuticals. The industry was built on copycat products, some would say rip-offs, of branded drugs developed by the world leaders, firms whose names you know well: Pfizer, GlaxoSmithKline and Roche. Firms you know less well, such as Cipla, another Indian company based in Bombay, became highly accomplished at making knock-off versions of famous brands. Erecto is Cipla’s version of Viagra and Nuzac is its version of Prozac, sold in India at a tiny fraction of the US price.

The drug multinationals ranted and raged at the impudence of the Indian upstarts, accusing them, not unreasonably, of stealing intellectual property. Recently, the war of words has been muted. The big guns of Indian pharma have changed tack and are launching legal challenges to US patents. Dr Reddy’s made a small fortune with a six-month exclusive right to sell generic Prozac as the product came off-patent. Meanwhile Ranbaxy secured an exclusive on Ceftin, a GlaxoSmithKline antibiotic.

Bigger legal changes are on the way, both in India and in the US, which will cause upheaval in the worldwide drug industry. India is to bring its patent law into line with the West, outlawing copycats. At the same time America is making it easier for generic drug-makers to challenge US patents.

The new Indian patent law could consign smaller, weaker drug-makers to bankruptcy and oblivion. But for the successful firms, the US craving for cheaper drugs, combined with greater patent leniency, opens a wealth of opportunity and there is excitement among some Indian manufacturers.

“This is a big opportunity for Indian companies,” Ajay Pira-mal, managing director of Nicholas Piramal, a Bombay drug manufacturer, says. “Until a few years ago a US consumer would not accept a product made in India.”

He rationalises the lack of Indian patent protection as a tool needed to build up a manufacturing base. “We needed time for the industry to develop. People could not afford imported drugs. Indian companies could produce products at a hundredth of the cost.”

Poor Indian patent law made it possible. But it was the skills of Indian scientists and the entrepreneurial flair of men such as Anji Reddy that made it happen. In 1984, the farmer’s son founded Dr Reddy’s Labs with a $120,000 bank loan and set about making generic versions of branded prescription drugs. Today his family’s quarter share of the company is worth half a billion pounds.

Indian science and engineering graduates fled to America in the 1970s and 1980s, but in the past decade the brain drain has become more of a two-way shuttle. Returnees from the US West Coast have created software empires in the southern cities of Bangalore and Hyderabad. The same phenomenon is occurring in the pharmaceutical sector.

Lars Walan is in charge of AstraZeneca’s Indian venture, a £25 million investment in a research facility in Bangalore. He predicts a bright future for the best Indian firms. “The Ranbaxys and the Reddy’s are extremely good at producing high-quality generic products. I see some of the Indian companies in the same situation as Japanese pharmaceutical companies were two decades ago.”

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