Falling standards of pharma companies is industry’s big bane: GV Prasad, Chairman, Dr Reddy’s Lab

HYDERABAD: The pharmaceutical industry is facing pressure from regulators in the US because companies have allowed standards to decline, the head of one of India’s biggest drug makers has said.

GV Prasad, who took over as chairman of Dr Reddy’s Laboratories in April from the company’s late founder Anji Reddy, said the increased scrutiny is good for the industry and will help it get its act together.

“Increasing regulatory pressures are largely because the companies have slipped off in terms of quality, in terms of systems, in terms of integrity. And we are feeling the pressure of that,” he told ET in an interview, his first to an Indian publication since becoming chairman. “In the long run it is good for the industry to get its act together and comply with the regulations.”

Prasad’s statement comes in the backdrop of a record $500-million ( Rs 3,000 crore) fine imposed by the US on Ranbaxy Laboratories. Now owned by Japan’s Daiichi Sankyo, Ranbaxy pleaded guilty to violating manufacturing norms and falsifying statements to US drug regulator FDA.

Prasad, whose company sold drugs worth over Rs 11,600 crore in 2012-13, said Ranbaxy under its new owners has improved and adopted an “uncompromising approach towards quality”. India has emerged as an important global supplier of low-cost generic medicines, helping to drive down prices of drugs that were hitherto inaccessible to low-income patients.

In 2012-13, Indian pharmaceutical companies are estimated by the government to have exported drugs worth over Rs 90,000 crore.

Following such success, multinational pharmaceutical companies have in recent years acquired Indian generics makers, among them Ranbaxy and Piramal Healthcare Solutions (bought by American firm Abbott). This has prompted tighter rules from the government, which says its approval is required if a foreign firm is to buy an Indian pharma company. The government’s argument is that it is trying to balance public health concerns with strengthening domestic manufacturing capacity.

Prasad, who said Dr Reddy’s has no intention of being sold, was, however, of the view that hurdles in the way of acquisitions are not right. “Today nobody restricts us from buying their companies anywhere in the world. Why should we put all these things? Competition will take care of pricing.”

The government’s decision to impose price caps on essential drugs, he observed, is not ideal but better than the earlier cost-based pricing system. “I think the government has a role to keep prices affordable and we take it in our stride. It’s not something we are happy about, but what can we do?”

On the other hand, Prasad, a chemical engineer, said complaints from multinationals about violation of intellectual property rights and weak patent protection are misplaced. In the most high-profile case on the issue, patent authorities and the Supreme Court rejected an application by Novartis claiming protection for its cancer drug Glivec by saying innovation was only incremental.

“I think we are on that path of giving full respect to all intellectual property. That doesn’t mean we will blindly follow everything that is there and that is what has been demonstrated in the Glivec case.”

Based in Hyderabad, Dr Reddy’s operates plants in India, the US, UK and Mexico. It has technology development centres in Hyderabad, Cambridge in the UK, and the Netherlands. In Russia, an important emerging market for the company, Prasad said the company would set up a local manufacturing facility if it makes a “significant