Indian pharmaceutical sector could be
the next IT industry for our economy, both its ability to leverage our skilled
manpower and to emerge as a global powerhouse. According to a report, in 2017
the pharmaceutical sector in India was valued at US$ 33 billion and in May
2018, the Indian pharmaceutical market grew at 10.8 per cent year-on-year. The
country’s pharmaceutical industry is expected to expand at a CAGR (compound
annual growth rate) of 22.4 per cent over 2015–20 to reach US$ 55 billion and
is likely to be among the top three pharmaceutical markets by incremental
growth and 6th largest market globally in absolute size. India contributes the
second largest share of pharmaceutical and biotech workforce in the world.
The row over faulty
hip-resurfacing system provided in India by Johnson & Johnson shows
shortcomings in the legal and institutional mechanism to deal with quality
issues in pharmaceutical industry. This episode has made it abundantly clear
that global pharmaceutical companies would continue to treat Indians as second
rate patient-customer. The conduct of Central Drugs Standard Control
Organisation (CDSCO) in the whole affair also leaves much to be desired. India
should use this experience to plug gaps in the legal and institutional
framework applicable to the pharmaceutical industry and ramp up the working of
the CDCSO. All these will bode well for the domestic pharmaceutical industry
and place it on a firmer footing.
Generic drugs form the largest segment of the Indian
pharmaceutical sector. A generic drug is a
medication created to be the same as an already marketed brand-name drug in
dosage form, safety, strength, route of administration, quality, performance
characteristics, and intended use. Generic drugs tend to cost less than
their brand-name counterparts because generic drug applicants do not have to
repeat animal and clinical (human) studies that are required of the brand-name
medicines to demonstrate safety and effectiveness. The market for the generic
drug has been accelerated by increasing number of patent expiration of branded
drugs and government initiatives in all the countries. Increasing prevalence of
chronic diseases and ever-rising cost of hospitalization and medicines are
responsible for the growth of generic drugs market.
India
is the largest provider of generic medicines globally in terms of volume. Indian pharmaceutical sector
industry supplies over 50 per cent of global demand for various vaccines, 40
per cent of generic demand in the US and 25 per cent of all medicine in UK.
Presently over 80 per cent of the antiretroviral drugs used globally to combat
AIDS (Acquired Immuno Deficiency Syndrome) are supplied by Indian
pharmaceutical firms. Around 40.6 per cent of India’s US$ 16.8 billion pharmaceutical
exports in 2016-17 were to the American continent, followed by a 19.7 per cent
to Europe, 19.1 per cent to Africa and 18.8 per cent to Asian countries.
Apart from the global demand for
Indian pharmaceutical products increase in the size of middle class households
coupled with the improvement in medical infrastructure and increase in the
penetration of health insurance in the country will also influence in the
growth of pharmaceuticals sector. In this context National Health Protection
Scheme (NHPS), also known as ‘Aayushman Bharat’ which seeks to provide
insurance cover to 10 crore families for an amount of Rs. 5,00,000 is expected
to be a watermark for the Indian pharmaceutical industry. A vastly improved
access to medical facilities under this scheme to the hitherto excluded
population is expected to provide a significant boost to the domestic health
service and pharmaceutical industry.
A serious threat to the Indian pharmaceutical industry comes from its
global counterparts. The big international pharmaceutical
companies and their governments have been trying to lobby with the Indian
government to make patent protection more stringent despite the fact that both
compulsory licensing and prohibition of ever greening, provided under the
Indian Patents Act, 1970, are valid under the TRIPS agreement of the WTO. It
should not surprise us that India regularly figures on the ‘Priority Watch
List’ of the Office of the United States Trade Representative (USTR) for
providing ‘weak’ intellectual property protection. The annual ranking by
‘Global Innovation Policy Centre’ of the US Chamber of Commerce also ranks
India poorly for its IPR climate. Any change in Indian IPR law made under
foreign pressure will prove to be detrimental to the interest of the domestic
companies.
Another threat emerges
from manufacturing practices of some of the domestic pharmaceutical companies. As
of 2016 there were around 10,000 generic manufacturers in India, of
which only 1,400 were WHO GMP (Good Manufacturing Process) –compliant and only
523 of them were US FDA-approved. Now that the Indian companies have captured a
significant part of the global generic drug market, it faces a very intense
international scrutiny regarding its systems and processes. Any instance of
poor manufacturing by one company is likely to attract global attention and
affect the brand equity of Indian pharmaceutical industry as a whole. It is time
that CDSCO sets higher benchmarks for quality standards for the drug and
pharmaceutical industry.
Regulatory complexity
is another obstacle faced by the Indian pharmaceutical industry. One of the
most commonly cited reason for the growth of Indian Information Technology
industry is the lack of governmental interference. While such a scenario is not
possible for the pharmaceutical industry considering it literally deals with
matters of life and death, the regulatory burden can certainly be reduced. Currently,
five ministries of the Government of India are involved in regulating drug and
pharmaceutical industry. ‘Price control’ under which the Government fixes the
maximum price that can be charged for a medicine also needs to strike a fine
balance between the health interests of the consumers and the financial health
of Indian pharmaceutical companies.
The bulk import of
cheaper Active Pharmaceutical Ingredients (API) from China has led to an
evisceration of the Indian manufacturing capacity in the sector. In order to
ensure the long term health and independence of the Indian pharmaceutical
industry, it is required that instances of dumping of API from China are
quickly identified and remedial measures taken. It is equally important that
issues that hobble Indian manufacturing are removed.
Gopal Krishna Agarwal
National Spokesperson of BJP on Economic Affairs
Member Board of Governors Indian Institute of Corporate Affairs (IICA)
gopalagarwal@hotmail.com
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