India is the third largest manufacturer of pharmaceutical products in terms of volume and it is growing steadily. The market has seen the entry of many foreign players as well as rise of many domestic manufacturers. Over the last decade or so, Indian pharmaceutical industry has emerged as a robust, globally-aligned industry that has witnessed substantial growth but the challenges remain. Indian pharmaceutical sector, 2016 is seen as a year of hope for further growth boosted by a better US Markets. The challenges however comes from domestic market, with many policy decisions lined and few even implemented.
Key Challenges –
- Faced with the rise of competition from China in bulk drugs production, the sector has been urging government to back domestic industry like in China by creating industry clusters where basic infrastructure is created and common utilities such as power are provided by the government at a competitive price. This is yet to take off and therefore, India remains totally dependent on China for the supply of bulk drugs of select essential drugs. Also what adds to the salt on wound is the aggressive implementation of Drug price control. In one way because of dependency on china the input cost has gone up, the margins of pharmaceutical companies have taken a major hit due to price control on essential medicines. Though price control is necessary but simultaneously government should also look in to ways of boosting the pharmaceutical industry. The total spending on healthcare is around 4 per cent of GDP, while the government spends less than 1 per cent of the GDP on health, even as the insurance penetration remains low (industry experts talk of less than 20 per cent of the population having health insurance).
- Marketing code
A mandatory code is set to replace the voluntary Uniform Code of Pharmaceutical Marketing Practices by June. This will prohibit the practice of drug makers offering gifts to doctors in return for prescribing their products. The Department of Pharmaceuticals implemented a “Uniform Code of Pharmaceuticals Marketing Practices” that aimed to stop the practice of giving freebies to doctors to promote sale of medicines.
- Cap on Trade Margins
A cap on the margins that drug makers make on generic medicines sold through distributors is expected this year. The total business in these drugs, known as trade generics, is pegged at 8,000 – 9,000 crore or 8 % of India’s total pharmaceutical market. In trade generics, the distributors appoint medical or sales representatives to market products to doctors in rural & extra urban areas, in addition to supplying to retailers. The sales is mainly driven by margins provided to the channels (Stockists, whole-sellers & Retailers) by the companies. A cap on trade margins may lead to supply issue of essential drugs to the rural area as companies appointing field force for rural area is most cases is not commercially viable.
- Fixed Dose Combination (FDC) Drugs – The government has decided to prohibit manufacturing, sale and distribution of FDCs as the said drugs have “no therapeutic justification” and are likely to “involve risk to human beings”. There are 344 such formulations which have been banned and more formulations are to be followed. Given that there is not much data available on drug-drug interaction and side-effects in FDC, India’s system for collecting data for problematic drug reactions is weak. When multiple drugs from the same therapeutic group, like antibiotics, are clubbed together, it may lead to resistance. A lot of FDCs sold in India are unapproved, given the lack of coordination between state and central regulators.
There is no doubt that the intent of the Government was good, but the delivery was bad.
It seemed like an overnight decision was taken to impose a ban, a day before a case was expected to come up in the Supreme Court questioning the role of drug regulator in enforcing rules of product safety. Though Prof. Chandrakant Kokate, the head of the consultative committee that recommended the curbs on irrational combinations, says that notice had been given to companies three months after a sub-clause notice was sent to them asking why their drugs should not be banned. The response from the industry, he claims, was poor.
According to Ranjit Roy committee set up by health ministry, based on which Kokate committee carried its work, the country has an unacceptably large number of drug formulations – somewhere between 60,000 and 85,000 – in the market. The pharmaceutical industry too has a point. Out of the 6,220 samples that were taken up by the committee 963 have been found irrational after a year of study, but the government decided to ban only 344. If all the 963 drugs are banned the industry would have to take a hit of Rs 10,000 crore, which is nearly 10% of the pharmaceutical market.
The industry has reason to feel betrayed given the opacity with which the entire process has been carried out. Though no one doubts the credibility of Professor Kokate or his group of scientists, the fact that the findings have not been made public is a valid reason for grievance. Banning a drug overnight would not only mean stopping production but also taking back the products that are in the supply chain pipeline. The 344 drugs that have been banned will result in a hit of around Rs 3,000 crore to the sector. The authorities who cleared the drugs need to be taken to task for allowing drugs that are banned abroad to be sold in India.
It is time adequate focus is put on addressing some of these and other challenges faced by Indian pharmaceutical and healthcare sector.
Author is Dr Sudip Lal Nagar. A Senior Executive In Leading Indian Pharmaceutical Company