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Forty years after historic report, new challenges for Indian pharma industry

While the Union Finance Minister Arun Jaitley in his Budget speech this year said he proposed "to work towards creating a universal social security system for all Indians", the fact remains that India still continues to lag peers on healthcare.

E. Kumar Sharma        Last Updated: May 29, 2015  | 10:50 IST

E Kumar Sharma, associate editor
A lot of us may not have been around when seeds were being sown to build a domestic pharmaceutical industry in India. Forty years ago, India was discussing the report of Jaisukhlal Hathi, an eminent Parliamentarian, on the Indian pharma industry, to address the issues of lack of indigenous capability and drug shortages plaguing India at the time.

What followed was a massive push for indigenous manufacturing of drugs and the emergence of the public sector in this space. This was just five years after India had put in place its new Patents Act of 1970, abolishing product patents and giving a big blow to global multinationals operating and dominating in India at the time.

This resulted in the creation of a whole industry that built the Indian generic drug industry or produced low-cost copycat versions of innovator drugs. That was also the time Indian companies like Cipla, Ranbaxy and Unichem were hoping to enter a new growth cycle. But 40 years later, while the Indian pharma industry has emerged as a robust, globally-aligned industry that has witnessed substantial growth, challenges remain.

Consider some of them: while the private sector has taken over and emerged as nearly a $30-billion industry almost equally divided between domestic industry and exports, there is a very limited role being played by the public sector in case of essential medicines.

One person who was inspired by the developments at that time to take an entrepreneurial plunge was Kallam Anji Reddy, the founder of Dr. Reddy's. Reddy, who left his public sector job when he quit the Indian Drugs and Pharmaceuticals Limited, had this to say in his memoirs published early this year and after his death in March 2013: "IDPL and Hindustan Antibiotics manufactured several life-saving drugs including penicillin, streptomycin and sulpha drugs and made them widely available at affordable price." Today both these PSUs need revival packages.

One could argue that they have been replaced by the Indian private sector but then even these domestic pharma players are today dealing with severe challenges.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 such as Penicillin-based antibiotics.

Also, while the Union Finance Minister Arun Jaitley in his Budget speech this year said he proposed "to work towards creating a universal social security system for all Indians", the fact remains that India still continues to lag peers on healthcare. 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).

The World Health Organisation also ranks India at a low 112 level out of 190 countries on healthcare systems. Even countries with demographics similar to India, seem to have fared better. For instance, check out "Jaminan Kesehatan Nasional", the Indonesian government's insurance programme. Even the draft National Health PoIicy 2015, which is yet to see the light of the day, points out that the total health expenditure as a percentage of GDP stood at 3.9 per cent for India in 2011, for which data is provided. The same was 5.1 per cent for China, 4.1 per cent for Thailand, 8.7 per cent for South Africa, 8.9 per cent for Brazil. Not to talk of the US, which was at a high 17.7 per cent.

India, despite being armed with a domestic industry that has made the country a leading producer of low-cost medicines in the world, is still having to grapple with issues of seasonal diseases like Swine Flu, which resulted in numerous deaths despite an available vaccine. The same was the case with some region-specific and cyclic ailments like Chikungunya and Dengue. Experts point out that India still lacks a stockpiling policy on vaccines (in cases where they are available) and in cases where the vaccines are not available, there is lack of government push or a national focus to aid research in select therapy areas.

All this leaves out the one aspect that impacts ordinary patients every day: issues around the unholy nexus between pharma companies and doctors. There were moves in the direction of correcting this when, starting January 1 this year, 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. It has been put in place as a voluntary code and could be made statutory if it proves ineffective but that alone may not help if is no mechanism is in place to check companies from find ways around this.

While India seems to have corrected the challenge of lack of adequate indigenous production that the Hathi committee set out to address in 1975, it is time adequate focus is put on addressing some of these other challenges facing Indian pharma and healthcare sector.

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