On
October 12, 2012 Government of India issued directions that
the drugs will be sold under their generic name rather than their brand names.
This definitely caused an uproar in the drug manufacturing communities in India
as evident by opinions and suggestion of legal action by different lobbying
groups (Economic Times 1,
2,
3,
4).
I am sure eventually there will be a clarification, settlement and path forward.
Reading
news accounts, few things become obvious. Brand and generics drugs sold in
India can have different purity. This means that the customer is not getting
the correct dosage with every tablet. Statements also hint that many companies
are not using the best manufacturing technology and appropriate analytical
equipment to produce consistent and high quality products. Since low potency drugs
sell, companies will use threat of lawsuit to avoid
any changes in their practices. Batch-to-batch variability is acceptable to these
companies. It is clear that these companies are putting general population
including their own families at risk. In addition, brand companies do not want
to lower their prices to generic levels thus loose their margins.
India’s pharma industry:
Most
of the time in western press we get to read the glorious status of India’s
pharma business. This is basically due to exceptional growth due to exports. However,
not many know about the domestic market and its status. It would be worth
having an overview of the India’s domestic pharma industry.
About
7,000 drug companies are registered with Central
Drugs Standard Control Organization, a Government of India organization. This number is
different from the number cited in a report
of upper house of India’s Parliament. About 550, 814 and 150 are registered
with US FDA, World
Health Organization and European Directorate of Quality Medicine (EQDM)
respectively. Some of these are common. How many have been inspected by the
respective regulatory body is not in public domain. Companies serving USFDA,
EQDM and WHO markets have high profit margins. They will do whatever is necessary
to meet their standard. APIs produced for the developed countries, India and
other markets can be of different quality. Different pharmacopeia standards add
to the complexity.
Companies
serving the Indian market are supposed to meet schedule M (Indian cGPM
standard). Compared to WHO or USFDA cGMP standards (private communication V.
Hattangadi) Indian standard is very lax. How many of the facilities meet the
Indian regulatory standard is not known. Companies meeting “schedule M” will
not be able to meet brand drug standard unless investment is made in technology
and equipment.
A report
of the upper house of the Parliament of India states that there are not enough
personnel to carry out inspection and approval of the drugs produced by the
Indian companies. Besides inspection of drug formulation units, API producers have
to be inspected also. This is added regulatory burden. Based on general
business practices, which at times are less than honorable, it would be a
challenge to access and authenticate quality of drugs from such plants. This is
a sad state of affairs.
Government’s objective and
issues:
I
believe by having a single generic form of a drug, Government of India wants to
eliminate differences (price and quality) that exist between the same molecule
whether be brand or generic. However the published discussion tells us that the
following would need to be addressed before price and quality equalization can
happen.
1.
Brand drugs are priced higher than the generic drugs. Therefore the
sales commission is much higher for everyone in the supply chain. Since the generics
are priced considerably lower, the revenue earned by everyone in the supply chain
is lower. Thus to generate the same commission revenue, the overall sales of
brand sellers will have to be considerably higher. This would be perturbation
in the existing business and lifestyle of the companies in the supply chain,
not an acceptable scenario. Thus the brand sellers will resist sale of
generics.
Brand sellers in India are a very powerful lobby and have significant
influence. They could prevent government’s move to generics. Supply chain lobby
could also raise the selling price of generics, knowing well of their inferior
quality, to account for loss of their profit margins. This could negate
government’s intentions of lower drug prices unless government enforces price
controls.
2.
For the existing generic producers to meet the quality standard of brand
drugs and have their products approved, they will have to invest in equipment
and necessary approval process, a challenge that could be met by few. Generic companies
who will invest in upgrades will have to raise their selling prices to recoup
their investment. Prices could inch to brand levels. This will be quite
contrary to government’s intention of price and quality equality. Companies who
will not invest will either go out of business raising unemployment in this
sector or will go underground i.e. producing counterfeits.
3.
If government forces price equalization through price controls, drug
shortages could result, as the brand producers are not going to lower brand selling
prices to generic levels. Generic producers will take short cuts to fill the
supply gap and at times quality could be questionable unless government can
police such situations with appropriate penalties. India’s policing ethics may
be a hindrance.
4.
Even if the companies are able to invest and do what would be necessary
to meet the drug quality standards, government regulatory infrastructure is not
set up to implement its own guidelines. This is due to not having properly
trained staff and not having the necessary standards. If the brand producers
are able to meet the shortage created by lack of availability of generics, question
could be: Would the average consumer be able to afford the brand drugs?
I
believe Government of India has good intentions of making quality drugs
affordable to all at reasonable prices but its policies and methods are not in
place to achieve the goal. Without having the necessary inspection and approval
systems in place it seems that the cart has been put in front of the horse. Political
patronage and unethical practices will have to be replaced by transparency and
honesty to produce quality drugs, as companies are dealing with human life. Once
all the methods to produce quality drugs are in place only competition will
determine the lowest price.
Drive
to lower the cost of quality drug can be an opportunity for entrepreneurs who
can produce drugs using best of the technology and methods that are cost
effective and sustainable. This is very feasible and if implemented it could
change the landscape in and outside India.
With
the Affordable Care Act in place in USA,
USFDA has to make sure that the Indian companies exporting their generic APIs
and formulated drugs comply with its regulations. Regulatory compliance has to be
checked not only through paper trail of manufacturing practices but also
through actual audit of the physical manufacturing areas. Checking of the
actual operations is very important.
Girish
Malhotra, PE
EPCOT
International
