Pharmaceutical Industry: For the interest of the people
Indian Pharmaceutical Alliance (IPA) criticized the government’s implementation of pharmaceutical pricing policy. It put forward many 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. IPA stated that the growth of the domestic industry is slowing, and it is due to National Pharmaceutical Pricing Authority’s (NPPA) implementations of the pricing policy. While IPA confidently commented on the slowing growth of the industry, two recent reports show otherwise. 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) also has a similar data.
Domestic companies are investing and acquiring manufacturing facilities overseas, driven by the pricing policy of the government. It blames loss of investment in India and deteriorating jobs situation in the industry on the pricing policy being considered by the administration. But the facts say otherwise. In the report of January 2017, IBEF stated 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 pharmaceutical in its March 2017 industry analysis. The domestic industry will exceed $55 billion in 2020 and last year, $620 million of FDI came into this sector.
The industry is setting up manufacturing facilities abroad to provide foreign markets what they require nothing relating with NPPA. Confidence in the industry to produce quality product is an always low because of its own actions. Foreign regulators have time and again caught companies with fudging data, making up test results and many other flaws 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. Now the foreign regulators have better confidence in the facilities located in the foreign markets because they can keep a closer eye. After a long time, the current administration has started taking decisions in the interest of citizens of this country. The industry needs to be profitable and create value for its shareholders. But, unlike any other industry, the customer here does not have necessary resources to make a decision on what to buy when it comes to their health care. The reason behind this is all the decisions regarding your health are often taken by someone else, that maybe 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 health care market place.
The industry has exploited the dysfunction in the regulatory framework, whether it comes to price or to quality or 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 of the industry sold in this country were never proven to work. A study in 2012 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, it can be said that these are healthy profit margins. Recently the government amended the Drugs & Cosmetic Rules, 2017 to make bioequivalence studies mandatory for certain classes of generic drugs manufactured in India. It a welcome move. It also implemented price control on some stents which are commonly used to treat cardiovascular diseases. The hospitals indicate that the industry is well and thriving despite these new controls.