Indian Pharma Sector to face tough Challenges in 2014 : G V Prasad, chairman of Dr Reddy’s Laboratories
Indian pharmaceutical industry, one of the country’s most globally competitive, faces a challenging 2014. The most important challenge comes from regulators in developed markets, which have imposed strictures on several leading Indian exporters like Ranbaxy, Wockhardt and Strides for failing to comply with good manufacturing practices. Unfortunately, the word is being spread around that Indian exporters, who are growing in strength, are being unfairly targeted. This is a negative approach and can be counterproductive. G V Prasad, chairman of Dr Reddy’s Laboratories, has said that the share of Indian pharmaceutical companies that have been warned by the United States Food and Drug Administration – from which many regulators across the world take their cues – is not all that high.
In any case, there is an urgent need for improvement in pharmaceutical manufacturing practices across the country, irrespective of what the US regulator says. Better Indian practices – they are not up to the mark, particularly for smaller firms – will above all be good for the Indian public. For this to happen, the Indian regulators, central and state, need to vastly improve their plant inspection regimen. Instead, they are undertaking inspection of Chinese facilities that export bulk drugs to India.
The industry does have a case when it complains that price control reduces margins and leaves that much less for investment in research and development. There is no short-term solution to this. Governments, of whatever hue, will have to keep the prices of essential medicines low and a highly fragmented industry that is in the commoditised generics end of the market cannot expect to earn high margins. However, there are medium- and long-term solutions. The medium-term solution is that the regulators should get strict on quality so that many of the smaller firms that produce substandard drugs and sell them through heavy margins to retail druggists are eliminated. Such firms often survive on the patronage of state-level politicians and flawed procurement for public health services. This move will enable bigger players to increase their market share and raise profits through larger volume sales. As price control on essential medicines will remain, there will be no chance of a few big players who command most of the market forming cartels.
The longer-term solution is that the more innovative and enterprising Indian companies make a successful foray into drug discovery. Firms that are able to market patented products earn high margins on them, which enables such companies to plough back more resources into research and development as well as come up with more useful discoveries. The government can help in this. Strong public funding for joint research in therapeutic areas important for the Indian population can go a long way.
