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The opioid crisis in the US has hit Indian drug companies which once dreamt of riches and chased the restricted but lucrative business of opioid-based drugs in the North American continent.

This week, India’s third-largest drug maker Lupin made an impairment provision of Rs 1,400 crore for Gavis Pharma, a company it had bought for 0 million three years ago for its portfolio of controlled drugs. Lupin has discovered that the business’ profitability is not as strong as it once believed, and other Indian pharma players may be coming to the same conclusion after rushing to acquire companies in this space following a sharp rise in prescriptions a few years ago.

Opioid-based drugs are one of the most commonly prescribed medicines for pain relief across the world. The main ingredient of the drug is opium, a narcotic substance derived from poppy seeds. The total market size of opioid-based painkillers is estimated at billion, with Fentanyl and Oxycontin being some of the commonly prescribed drugs.

“The opioid crisis has really had an impact on the controlled substances business; the prescriptions of controlled substances have also come down significantly,” Lupin CEO Vinita Gupta told ET. “We felt there was a good part of the portfolio that did not have the value that we started with two years ago. And thought that it would be prudent for us to recast and take an impairment against those products,” Gupta added.

Lupin is probably among the last few companies to continue to have a big portfolio of opioid-based drugs. Others such as Sun Pharma and Aurobindo Pharma have significantly pared their exposure in the past few years. Aurobindo’s business is now worth just million, which is an insignificant part of its overall revenue. But Lupin is feeling the pain because it valued certain drug approvals in this segment really high.

With nearly 45,000 recorded deaths in the US in 2016 due to drug overdose, the role of pharma companies in encouraging the use of such drugs is being probed by authorities.

US-based consultancy IQVIA Institute for Human Data Science reported in April this year that prescription opioid dosage volume — as defined by morphine milligram equivalents (MME) — declined 12% in 2017, the largest annual drop in more than 25 years of measurement.

The drop in prescription rate seem to be coming on back of severe measures taken by US authorities such as the Food and Drug Administration, Drug Enforcement Administration and Centers for Disease Control & Prevention.

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For companies such as Lupin, the portfolio of products in the Gavis pipeline has seen a 30-40% decline, according to Gupta, and the situation is so bad the company has decided to drop a few products.

Glenmark, Sun Pharma and Cadila did not respond to ET’s queries.

“This slowdown of controlled drugs for Indian companies is a macro story. Over the years, there have been several tightening measures. We have seen companies such as Sun slowly reducing exposure in these areas,” said Surjit Pal, an analyst with Prabhudas Lilladher, a brokerage firm.

The Centers for Disease Control, in its recent report on drug overdose, reported that during 2015 an estimated 12 lakh people aged 12 years or older in the US misused prescription pain relievers. It is these figures that have led to the new US FDA head Scott Gottlieb to come up with stringent measures.

Some of the measures include asking drug makers to change packaging of opioid release drugs for shorter duration use. “Companies have been pushed to adopt the abusive-free technology too in the last few years, where the drugs are manufactured in such a way that they cannot be broken and snorted or take days to dissolve in water,” explained Pal of Prabhudas Lilladher.

Analysts believe that with insurance companies too taking a stricter approach for reimbursement, the road ahead may be tough for bruised Indian generic makers in the US.

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By Joe McCarthy  and  Erica Sanchez

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The news highlighted another factor in the Chinese threat: Regardless of the different regulatory framework, many researchers think the data they report is valid.

“Chinese research is often dismissed as rubbish,” said Alexey Bersenev, co-founder of the Cell Trials Data Project and a research scientist at Yale School of Medicine and Yale-New Haven Hospital. “When I read their papers, I don’t see a lot of rubbish. The results are comparable in (leukemia).”

Set aside the widely held belief that the Chinese, not just in medicine, are copiers but not innovators. Much of the innovation needed for development of CAR-T treatments has already been done. “All the components that were required for clinical treatments to start in the U.S. — safety, regulatory, scientific, manufacturing – everything that had to be optimized for a successful trial to occur, has now been codified,” said Dr. Matthew J. Frigault, professor of cell therapy at Massachusetts General Hospital. “This knowledge is spreading. The expertise that up until recently existed in just a few labs is now becoming a commodity.”

If the U.S. is going to maintain its lead in immune-based treatments, we need to ensure that our industry and academic researchers have the funding they need to enable the breakthroughs that make new treatments a reality. This means federal funding for basic research needs to grow. But the Trump Administration’s proposed budget would slash funding to the Centers for Disease Control and Prevention 12 percent and flatline money going to the National Institutes of Health.

In addition, we will need true innovation in manufacturing to make the labor-intensive manufacture of autologous CAR-T therapies – in which cells are extracted from each patient, modified and then returned to the patient – more efficient. Lastly, we must find ways to reduce drug development costs to significantly lower the prices of these life-saving therapies.

The approval of Kymriah and other treatments is indeed a cause for celebration. Immuno-oncology treatments hold the promise of true cures. But if we are complacent, China will eat our lunch.

Jeffrey Krasner is president of Emerging BioCommunications, which consults to early- and mid-stage life science companies.

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