Will the Ranbaxy imbroglio hurt Brand India?

Indian companies export about $14 billion worth pharmaceuticals every year and a majority of this are US-bound. In recent months, however, India's drug-makers have been rattled by a rash of US regulatory rebukes, including a record fine for Ranbaxy Laboratories. While increased on-the-ground oversight reflects India's growing importance as a supplier to the United States, it has also raised questions about its manufacturing practices and the quality of products made in the country.

Have these developments impaired the image of brand India? Or will the FDA's stepped-up scrutiny inculcate a more rigorous attitude towards compliance in a country whose cheap generics have made it the low-cost pharmacy to the world?

  The US has a lot more to lose than India: Anand Nandkumar

To know whether the FDA objections with regard to the violations of good manufacturing practices by generic drug majors like Ranbaxy and Wockhardt will adversely affect India's position as the preferred generic drugs' supplier to US, it is imperative to understand how patients make decisions about prescription drugs in that country.

A few years ago, when worms were found in Cadbury chocolates in India, the consumers could choose not to buy the product. If a similar incident had happened in the US, the consumers could have exercised a similar right of choice, provided the economics underlying such a decision was largely irrelevant and they could exercise their choices in the same way as they would do with chocolates. Pharmacy Benefit Management or PBMs play a critical role in the purchase decision of patients.

PBMs are most often third party administrators of prescription drug programmes. Sometimes they may also operate as a service inside of an integrated healthcare system. They are responsible for processing and paying prescription drug claims. They negotiate with drug makers and pharmacies to get the best possible prices for the drugs. In many cases PBMs operate formularies, which is a list of equivalent generic drugs for a given prescribed drug. The main focus of the PBMs is to minimise costs, including those related to prescription drugs and in many cases using formularies they often provide financial incentives to patients to select lower-cost drugs.

PBMs, thus, exercise a significant amount of discretion and in many cases even switch between an expensive, branded drug and a generic drug independent of the prescribing physician. If the consumer wishes to buy a drug that is not on the formulary maintained by the PBM that she is affiliated with, she has to dip into her own funds and often this involves a significant co-pay element. In sum, consumers will likely only exercise their discretion when the health hazards are significant.

That said there may, however, be some short-term repercussions such as increased scrutiny of processes or tightening of FDA regulations. But in my opinion, drugs manufactured in India are largely safe for consumption and this is a one-off event. Most companies will likely be found to comply with the FDA rules and emerge unscathed from the shadow of this controversy.

Moreover, given that 30-40 per cent of the generics sold in the US are sourced from India currently, even the short-term impact cannot be that dramatic - a sudden shift in sourcing destination require substantial investments in building capacity.

Alternatives to the Indian generic drugs will likely be more costly. So even if the US explores alternatives, it will be unlikely to act on that intent given the recent concerns about the cost of healthcare in the US. Hence in some sense, the US has a lot more to lose than India. For India, assuming that the generics manufactured in India are largely safe for human consumption, what is at stake is economic growth, which depends upon the large scale success in export markets such as the US. For the US, it is a question of how much more its governments and people should spend just to stay healthy.

The big caveat to this is the recent diplomatic row between the two countries. If the Ranbaxy incident gets included in the larger diplomatic game of one-upmanship, resolution may not be as forthcoming or immediate or even palatable to the people of both countries.

Anand Nandkumar
assistant professor, strategy, ISB

Brand India is under scrutiny: Nikhil Dey

Confucius supposedly said you have two choices when you wake up every morning. Choose to be happy or choose to be sad. I vote, we choose the happy mode today.

I am in no way trying to trivialise or wish away the problems that the drug industry in India is grappling with.

We must certainly up our game in terms of adherence to globally accepted good manufacturing processes, data integrity and other protocols that ensure quality standards.

Like in all progressive and industrial nations, Indian enterprises too began by charting their global journey in the right earnest. Working with the best of intentions, they embraced globalisation with its benefits and ills. Somewhere down the line, however, governance and compliance took a back-seat over ambitions of growth and profit. Particular to the global pharmaceutical industry, this lack of compliance and inherent corruption isn't a new phenomenon. But for a country that is at the cusp of setting global benchmarks for affordable healthcare, the recent controversies surrounding one of the largest Indian pharma companies doesn't augur well. Here is where India Inc needs to turn the situation around and realise that if anything, this controversy is a much needed wake-up call. Pharma companies must respond effectively to the challenges brought about by transparency at a global level and respond to the dramatic changes in customer needs and societal expectations.

Brand India is under scrutiny and the world is now watching how we learn from these mistakes and lead the way for future Indian multinationals. These issues don't limit themselves to how Indian companies conduct themselves outside of India. Our age-old practices and legacy of the Indian way of doing business may also be holding us back within the country. The transfer pricing taxation issue in the telecom sector that has been playing out on the front pages of our newspapers is another case in point where brand India's credibility is under pressure. The silver lining here is that anti-corruption has become a clarion call for the Indian elections and here again lies the opportunity for India to show it can change. The list of things that we could do better is endless and that is what is most exciting about being in India today. We can do better and we will.

That brings us to the question, what does brand India stand for today? Brand building ultimately boils down to identifying the one thing, above all else that you want to stand for and then building an ecosystem that allows for that brand essence to breathe and come alive. I believe the spirit of Indian entrepreneurship is a powerful force to rally behind. It goes to the root of who we are as a people, cuts across age, gender, income, religion and political orientation. There are many things that divide us as a country but that which unites is the simple fact that we are an enterprising bunch of people. With our 'jugaad' driven innovation orientation we find a way to succeed in spite of all the odds. This is our strength. As much as others like order, systems and process and predictable outcomes the world is an unpredictable place. We survive and thrive in this environment and we should embrace it as our strength and not simply seek to emulate the west.

For our individual dreams to come behind a common cause is what will make for a better brand India. Many of us are filled with optimism and hope of a better tomorrow. We are a nation of enterprising students, enterprising farmers and small business owners, micro entrepreneurs, social entrepreneurs, start-up entrepreneurs, struggling entrepreneurs, successful entrepreneurs and even some global entrepreneurs. Let's celebrate "Enterprising India" and all that it stands for, together.

Nikhil Dey
president, Genesis Burson Marsteller