The Rs 1,20,000 crore plus Indian pharma industry has been through a churn in the past five years. Over the last year, it has finally seen double-digit growth, after having suffered periods of single-digit growth and even de-growth, post demonetisation and implementation of the Goods and Services Tax (GST). It is today growing at around 11 per cent per annum as compared to a high of around 15 per cent about five years ago.
The first term of the Modi government saw a series of measures being taken by the government, which looked positive and beneficial to the end consumer. It pushed the case for lower prices of medicines (including anti-cancer drugs) and medical devices and greater emphasis on the sale of generic drugs.
But industry has been upset. The industry argues that many measures taken by the government were either unilateral or not quite consultative in their approach. They have been quite critical of the fact that while the government has been controlling prices and checking irrational fixed-dose combinations, it has not made investments to strengthen the drug regulatory institutions. According to the pharma companies, this could lead to a situation where a big player is competing with a spurious drug manufacturer.
"Either consider my input cost and my cost of manufacturing and give me a fair return or check the spurious drug manufacturers and eliminate those drugs from the market," they have been insisting.
The industry says that the first term of the Modi Government has been quite harsh on the sector. And certain measures such as ban on the sale of certain fixed-dose combination drugs, price ceilings on knee-cap and stents, have been particularly jarring for the industry.
Some measures, pharma companies say, though may sound good for the end-consumer; they could end up hurting the industry.
FDC ban: The Ministry of Health and Family Welfare in 2016 banned 344 fixed-dose combinations (FDC), affecting about 6,000 brands made by 100 odd companies. The ban followed the recommendations of an expert committee that they lacked therapeutic justification. The industry immediately took the matter to court.
Implementation issues around price control: The industry is upset that while the government has not changed the list of essential drugs, it has invoked Para 19 of the Drugs (Price Control) Order, 2013 (DPCO), which gives the regulator power to control prices of drugs that are not under the National List of Essential Medicines (NLEM).
Anti-cancer drugs: The National Pharmaceutical Pricing Authority (NPPA) in February 2019, invoked extraordinary powers "in public interest", under Para 19 of the DPCO, to bring in certain anti-cancer drugs under price control through trade margin rationalisation.
Medical devices: In 2017, price caps were imposed on stents and later in the year, even on knee-caps.
Generic drugs: Promotion of generic drugs in government hospitals through the Jan Aushadhi model.
Exports: Some of the Indian pharma industry representatives feel the government could have done much more to make a case for the value in Indian generic story, especially, when Indian companies that have been under the USFDA scanner are seeing the import alerts being lifted.
The only big positive is Ayushman Bharat. If the government were to push it further, not only will it mean more people can afford healthcare but it could also eventually mean more demand for drugs, and therefore would be a good news for the pharmaceutical industry.
However, the question now is--will the next NDA Government mean a status quo on pharma policy or will it get more negative.
A senior leader of a top pharma company based out of Mumbai, who did not want to be quoted, says, "The key concerns will now be around aggressive actions on pricing despite industry acknowledging the importance of affordability in the Indian context."
Though few experts expect a reversal of the measures introduced, there are apprehensions around more price caps and a greater push for generic medicines. These are the questions the industry is seeking answers to. After all, if they do bring in more curbs, the sector stocks could see a fall on the bourses.
The Healthcare index has underperformed the Sensex during the first term of the Modi Government
What would second term of the Modi government mean for the pharma industry?
K Sujatha Rao, former Union health secretary and author of a widely read and reviewed book 'Do We Care? India's Health System', says: "My concerns are around a few things. First, I hope they do not succumb to the pressures and do away with the section 3D of the Indian Patent Act. It is an important provision, which should be retained as it does not allow the evergreening of patents."
Equally important, she says, "Is the need to more effectively regulate the industry for quality and also create an enabling environment for strengthening the domestic pharma industry."
"Without incentivising the industry and complementary policies in order to make the industry self-sustaining, price curbs if applied across the board can have implications for the industry and may also have implications for the overall availability of essential drugs," she says.
"In other words a strong, independent and empowered regulatory system like the US Food and Drug Administration is essential-endowed with domain experts, resources and infrastructure." And this she feels is need of the hour.
The second term of the government could see the following measures unfold:
- Price control regime may get even more broad-based.
- More FDCs can be banned (there are over 1000 drug combinations available in the market, though, all may not be considered irrational) but the list of 344 could get expanded as recommended by the Kokate Committee.
- Generic drug sales through the Jan Aushadi route may get a further push.
- More medical devices such as hospital consumables may come under the ambit of price control.
- Uniform Code of Pharmaceuticals Marketing Practices (UCPMP) guidelines may become a reality. This could be a negative for the companies as it will bring in greater scrutiny of companies and their engagement with doctors but could be a huge positive for patients.
- The industry has been seeking a pharmaceutical ministry. Currently, the pharma sector comes under multiple ministries such as the ministry of chemicals and fertilisers and the ministry of health and family welfare. This could be good for the industry.