A few proposals from overseas companies to invest in Indian drug makers are stuck with the government, although 100 per cent foreign direct investment is allowed in the sector under the automatic route. That’s because domestic producers have argued that multinational pharmaceutical corporations are buying local companies only to stifle competition. The day is not distant, they say, when the Indian market will be controlled by multinationals, and medicine will become prohibitively expensive for the aam admi. So, guidelines are being framed that will enable the Competition Commission of India (CCI) to vet all cases of acquisition of an Indian drug maker by an overseas company. And permission will come with stringent riders: the acquired company will have to take the CCI’s permission before discontinuing production of an essential drug. Till the guidelines are framed, the Foreign Investment Promotion Board has decided to play it safe and put all foreign investment proposals on hold. This is in spite of the fact that, with 20,000 pharmaceutical companies, India’s is the most fragmented market in the world — and hence the most competitive. There are hundreds of brands for every medicine, and a market share of five per cent to six per cent is good enough to become the leader. The chances of collusion to ramp up prices are, thus, minimal: prices in India are amongst the lowest in the world. So, instead of worrying too much about the ownership of Indian pharmaceutical companies and its impact on prices, the government had better address the other problems that afflict the sector.
A report of the Parliamentary Committee on Health and Family Welfare, tabled in the Rajya Sabha on Tuesday, has found that expert opinions necessary for drug approvals were ghostwritten by the companies that had sought the approvals. Reports sent in by different experts on the same drug were found to be exact copies of each other — with the same errors! These opinions are submitted to the Central Drugs Standard Control Organisation, which, going by these opinions, approves or rejects the application to launch the drug. This report said that there was “ample evidence” to suggest that these expert opinions were “actually written by the invisible hand of the drug companies and experts merely obliged by putting their signatures”. The committee also found that pharmaceutical companies were carrying out clinical trials of new drugs in non-cosmopolitan Tier-II and Tier-III towns. The idea behind carrying out clinical trials in large, diverse cities is to gauge the drug’s effectiveness across various ethnic groups. It is an open secret that pharmaceutical companies prefer to go to small towns because the expenses are lower.
To raise the regulatory standards in the sector, the government must revisit the proposal mooted by the industry some time back to become a member of the Pharmaceutical Inspection Convention. This is an association of drug regulators who agree to stick to certain standards. It is estimated that it will take India five years to raise its regulatory ecosystem to that level. This will also help exports to the 40 countries that are its members, as inspection from their regulators of Indian drug manufacturing units will no longer be required. The flip-side is that this could push smaller drug makers, many of whom operate out of garages and holes in the wall, out of business. That makes it a political decision. But the clean-up will be substantial.