India, Japan need a ‘silver bullet’ to heal pharma ties

When Ranbaxy’s promoter family sold its entire stake to Japanese drugmaker Daiichi Sankyo for $4.6 billion in 2008, many sat up and took note of this tectonic trade transaction between the two countries.

But soon enough, details began to tumble out of the United States Food and Drug Administration on transgressions at Ranbaxy’s plants. And the import bans and expensive settlement with US authorities that followed did not just mark a floundering Ranbaxy-Daiichi relationship. It also scorched business confidence between the two countries, particularly in the realm of medicines.

Daiichi subsequently sold its stake to Sun Pharma in 2014 for $4 billion. But Ranbaxy’s promoter family and Daiichi are still locked in a legal battle in India.

This week, though, saw Japanese Prime Minister Shinzo Abe in India launching the high-profile bullet train project. But will this track of diplomacy funnel some confidence in the pharmaceutical sector as well? Or does it come with pressure for more rigorous intellectual property (IP) norms?

Interactions between the two countries have typically seen Japanese authorities push for high quality standards in sectors like information technology, automobiles and pharmaceuticals. This time would have been no different, says Dr Sanjit Singh Lamba, India-head of Japanese drugmaker Eisai Pharmaceuticals.

Japan has quality standards that are higher than the US; it is the only market where even a grandmother will pull out a magnifying glass and read the label of the medicine, he explains.

The sentiment was very negative in 2009, recalls Lamba; some Japanese companies came out openly with concerns on stable supplies, consistency and quality of medicines from India. That situation has improved a little in recent years, with Japanese companies bringing their medical devices into India or showing an interest in partnering or picking up equity in Indian companies ( see box ).

Eisai India makes and exports raw materials and finished medicines from its Vizag plant to not just its parent company in Japan, but to other Japanese companies as well, he says proudly.

However, the same cannot be said of other companies based in India that are looking to sell into Japan, a highly quality-conscious market that is the second-largest single market in the world after the US.

There is a trade deficit of pharmaceutical exports to Japan and less than 2 per cent of the Japanese pharma market comes from India. About 4 per cent comes from East Europe and 5 per cent from South Korea.

Indian companies are still to break into the Active Pharmaceutical Ingredients (API) market, let alone the finished drug segment. There still is a deficit of trust, observes Lamba.

Chinese API makers also do not find favour in Japan, for reasons similar to the quality concerns in India. But there is also the added political reason, and that is an opportunity Indian companies could have capitalised on. Especially since Japan is looking to push its use of generic products from 55 per cent to about 80 per cent in 2018.

Some of the biggest Indian drumakers have tried to enter Japan, but exited as their products were unable to match requirements. Don’t fly solo, suggests Lamba, as the Japanese have a concept of working together. And that’s where Lupin’s strategy seems to have met with some success as it acquired Kyowa. Partnering with Japanese companies to understand their requirements and winning their confidence would be a step towards later shipping products from India, says Lamba.

But there is one aspect of trade relations between the two countries that worries civil society, and that has to do with IP.

Japan constantly pushes for higher IP standards at trade talks, undermining affordable generic medicines from India, says Leena Menghaney, South Asia head of the Access Campaign with humanitarian organsation Médecins Sans Frontières (MSF) or “ Doctors without Borders”. “This is a matter of great concern and should be raised with Japan”, she says, giving a different dimension on the trade dealings between the two countries.

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