Right prescription for pharma

The recently released Report of the 110th Parliamentary Standing Committee on Commerce deals with FDI in the pharmaceutical sector. The Report’s recommendations are spot on – it has its priorities right as far as public health is concerned.

Despite its sane recommendations, it has received a lukewarm response from commentators. Probably they are not sure whether public health priorities should override the “principle” of opening up pharma for foreign direct investments. It is also reflected in the waffling among the arms of the Government, especially the Department of Pharmaceuticals and the Department of Economic Affairs, leaving the Department of Industrial Policy and Promotion and the Ministry of Health to bat for the recommendations of the Report.

BACK TO THE PAST

The core recommendation of the Committee is that FDI in brown field companies – that is investments in existing companies in pharma -- be banned. Para 4.4 of the Report minces no words: “The Committee also notes the danger arising out of FDI in brown field pharma projects to the entire health and IPR framework of our country in terms of access and affordability of medicines, domination and elbowing out of our pharmaceutical industry, comprising of predominantly small and medium pharma units…. The Committee is, therefore, of the considered opinion that the Government must impose a blanket ban on any FDI in brown field pharma projects. It strongly recommends that the Department take all measures to stop any further takeover/acquisition of domestic pharma units. …the pharmaceutical industry is not like any other industry/business. It is one sector of the economy which has to be dictated by public good rather than foreign investments, profit and revenue.”

During the 1970s, 85 per cent of medicines were manufactured and supplied by MNCs and the rest 15 per cent by Indian companies. The position was reversed in the 1990s. It is the Patents Act 1970 that helped India’s pharma industry achieve the preeminent position of being the third largest in the world by volume and 14th by value. With the recent spate of takeovers, foreign control has increased once again.

Indian pharma companies have become targets for takeovers because they have proved that they can make some of the lowest priced generics in the world. So, the strategy of the buyers seems to be to take over the local generic companies, make the generics here and sell at much higher prices abroad. The 100 per cent FDI route in pharma will ensure that India reverts back to the pre-1970s era.

HIGHER COSTS

The Report has noted that 52 per cent -- $ 4,392 million --- of the FDI equity flows into pharma during the period April 2000 to February 2012 has been spent on acquiring stakes in domestic pharma companies. During the three years 2010-13, FDI inflows were to the tune of Rs 18678.11 crore – out of which only 3 per cent was the share in pharma R&D. As the Report notes (para 2.36), “…. despite the profusion of FDI into the pharma industry in general, R & D in pharma has not got any significant benefit in particular….indicative of the fact that FDI is primarily being used to strengthen the business network of pharma MNCs…and in keeping the domestic pharma companies in a subservient position without adding anything positive to the Indian health scenario. It is high time the Government took concrete steps to attract and ensure substantial amount of investments into R&D sector of the pharma industry with special thrust on tropical diseases.”

The most important fall-out of indiscriminate takeovers – through the brown field investment route -- of Indian pharma would be that India’s public health programmes, as also many developing countries, will be deprived of a steady low-priced generic source, with brands being promoted instead.

PATENTS UNDER ATTACK

The last three years have witnessed several molecules going off patents, worth $80 billion. That itself should be sufficient incentive for many Indian companies to stay in the game. If there were no Indian companies, post takeover, there would be no local pharma in sufficient numbers to provide the necessary competition to keep drug prices in check, or to manufacture using CLs (compulsory licences).

India also has been an obstacle to big pharma’s ambitions of diluting TRIPS flexibilities and safeguards. This is borne out by the many recent rulings of patent revocations in India, including that of Glivec, the increasing willingness of the Government to consider issuing CLs, etc. The Report recommends more such drugs like Glivec be “identified on continuous basis and their prices be reduced suitably… by utilising the various instruments like compulsory licence, etc. and other safeguards envisaged under TRIPS.” (Para 3.11)

The Report advocates price control and lauds the recent efforts at price regulation – the Parliamentary Committee was not probably informed at the time of writing the Report that even these recent efforts will regulate prices only to the extent of 12-14 per cent of the market. The Report suggests wholesale use of generic drugs and rightly so – but stops short of suggesting de-branding medicines totally. That is the only way doctors would be compelled to use generic names.

PROMOTE BULK DRUGS

The Report endorses green field investments (investing in new companies from scratch). And it suggests unexceptionable conditionalities like bringing in new technologies and especially technologies for making bulk drugs as we have in the recent years been importing more from China than making these locally. Local self-reliance in bulk drugs needs not only green field investments but a whole lot of fiscal and other incentives.

The Report found the Department of Pharmaceuticals and the Ministry of Health and Family Welfare at different wavelengths – and has rightly recommended (Para 4.11) that “since medicines/drugs are an integral aspect of public health structure, the Department of Pharmaceuticals may be subsumed within Ministry of Health and Family Welfare for… and monitoring of pharma sector in larger public interest.” An objective that is as desirable as is the recommendation that pharma PSUs be revived.

Unfortunately, the Prime Minister has chosen to express his demurral of the Report by approving the Mylan-Agila Specialities deal.

The author is with LOCOST, Vadodara, and All India Drug Action Network.

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