Pharmaceutical Industry: ‘It’s refreshing to see administration responding to its citizens’

On April 13, the Indian Pharmaceutical Alliance (IPA), through its general secretary, published an op-ed criticising the current government’s implementation of pharmaceutical pricing policy. It advanced several arguments which are worth examining, because it is the first time that the Centre is taking proactive measures to clean up the country’s drug supply.

The IPA says that the growth of the domestic industry is slowing, and it attributes this to actions of the National Pharmaceutical Pricing Authority (NPPA) in implementing a pricing policy. While I have no basis to deny the IPA’s assertion of the slowing growth of the industry, two recent reports show otherwise. In its review of the Indian pharmaceutical industry in November 2016, ICRA said the domestic business was recovering. Their report showed that domestic formulations business grew by more than a percentage year-on-year and twice the rate in second quarter of FY17, compared with the previous quarter. India Brand Equity Foundation (IBEF), the cheerleader for the Indian industry, has similar data here.

Another argument the IPA advances is that domestic companies are investing and acquiring manufacturing facilities abroad, driven by the pricing policy of this government. It blames loss of investment in India and deteriorating jobs situation in the industry on the pricing policy being considered by the administration. Facts say otherwise. In its report in January 2017, IBEF says that by 2020, the domestic market will become the sixth largest globally, largely driven by increased penetration of health insurance. It lists out cumulative investments in billions of dollars by Indian pharma in its March 2017 industry snapshot. Assocham says that the domestic industry will exceed $55 billion in 2020 and last year, $620 million of FDI came into this sector.

Is the IPA arguing that the Indian companies will supply the growing domestic market from its manufacturing facilities located abroad? This makes no sense because if they import the drug manufactured abroad into India, NPPA rules still apply. Vice-versa, if they are exporting from India, the NPPA anyway doesn’t apply. Price control is absolutely no reason for the drug industry to move out of the country.

The industry is setting up manufacturing facilities abroad to cater to foreign markets and this has nothing to do with NPPA. Confidence in the industry to produce quality product is an all-time low, thanks to its own actions. Foreign regulators have time and again caught companies with fudging data, making up test results, etc., at more than 45 facilities in India. It is for this reason that the industry now has adopted a strategy to serve those high-value markets by making finished goods locally. The logic is that foreign regulators have better confidence in the facilities located in the foreign markets because they can keep a closer eye.

Speaking of jobs, I wonder which part of NPPA caused the shuttering of the Ranbaxy’s manufacturing facilities in Poanta-Sahib and Mohali? Several thousand jobs were lost because of the US Food and Drug Administration (US FDA) import alert which was the cause of the lockdown. The same goes for several other companies which are currently under import alert from the US FDA. Why does the IPA not talk about the effect of these regulatory actions on the loss of jobs in the country? The arguments advanced by the IPA are disingenuous.

After a long time, the current administration is taking decisions in the interest of citizens of this country. The industry, like any other, needs to be profitable and create value for its shareholders. However, unlike any other industry, the customer here is ill-equipped to make a decision on what to buy when it comes to healthcare. All decisions about "care" in healthcare are often taken by someone else, your physician, your hospital, your pharmacist or your regulator. This is why the presence of a strong regulatory framework, a competent regulator and the full force of the law in enforcing standards of quality are essential to the healthcare market place.

I wish the IPA was as vocal about the industry’s misdeeds as it is today.

For a very long time, the industry has exploited the dysfunction in the regulatory framework, whether it comes to price or to quality, all at the expense of the citizens of this country. I found it astonishing that the same IPA finally admitted that 85 per cent of the products the industry sold in this country were never proven to work. In its own words, the IPA said: "They may or may not be harmful but will certainly not cure patients." So, much for ethical business practices.

A 2012 study commissioned by the corporate affairs ministry found that mark-up on cost of production of medicines ranges from 203 to 1,123 per cent and in nine of the 21 drugs, it was found to be more than 500 per cent. By any standard, these are healthy profit margins.

On April 3, the government amended the Drugs & Cosmetic Rules, 2017 through a notification to make bioequivalence studies mandatory for certain classes of generic drugs manufactured in India. While, long overdue, this is a welcome move. Likewise, it also implemented price control on some stents which are commonly used to treat cardiovascular diseases a few months ago. While the initial reaction from the industry was to cry foul, initial anecdotal reports from the hospitals indicate that the industry is well and thriving despite these new controls.

Credit should be acknowledged where it is due. K L Sharma, the joint secretary in the health ministry assured me six months ago, after I sent in my report on the dysfunction within the CDSCO, that the government will take action. Two weeks ago, it did. It is refreshing to see for once an administration responding to its citizens.

The writer is a public health activist and the chairman of Medassure Global Compliance Corporation