Pharma policy needs a cure

Written by Sujay Shetty | Sujay Shetty | Updated: Sep 27 2013, 02:47am hrs
The Indian pharma sector is currently grappling with a number of issues which need speedy resolution.

Regulatory delay in clinical trials is an issue impacting the pharma industry in a big way. The delays have severely derailed the innovation curve and also the growth of the clinical trial industry. Ineffective regulatory oversight, need for safeguards for informed consent for vulnerable populations and compensation guidelines for patients have emerged as major concerns. So in clinical trials, where India could have been a leader, it is losing out on opportunities. This has severely impacted the industry because without research and development, the industry can't move up the value chain. A robust regulatory system which safeguards the interests of all stakeholders is the need of the hour.

Another issue is the lack of clarity in FDI policy. Given the high current account deficit, India does require foreign direct investment. The FDI policy in pharma, however, gives confusing signals. For greenfield investments, 100% FDI is allowed by the automatic route but brownfield investments require Foreign Investment Promotion Board (FIPB) approval which often comes with conditions. The time taken in getting clearances for brownfield investments is a deterrent. The conditions placed by FIPB include the need to maintain production levels for National List of Essential Medicines (NLEM ) at the highest level in the three years preceding foreign investment, the need to maintain R&D expenses at the highest level in the three years preceding foreign investment, the need for information on transfer of technology to administrative ministries and FIPB, etc. The intention behind such restrictions may be good but it discourages investment. So, the need is for a FDI policy which addresses the concerns of the pharmaceutical industry while ensuring the affordability and availability of drugs in India.

The National Pharmaceutical Pricing Policy (NPPP) is another such issue. The government enhanced the scope of Drugs Price Control Order (DPCO) to include all drugs in the National List of Essential Medicines. Combination drugs in which one of the drugs is part of the NLEM were also brought under the ambit of DPCO. The government also changed the formula of arriving at the ceiling price from a cost-based method to a market-based method. Pharma companies are feeling the effects of the price controls associated with NPPP which will have a negative impact on their topline. While companies have accepted the reality of price controls, one issue which has affected the industry is timelines for implementation of DPCO. The industry feels that the government did not give sufficient time for implementing new packaging and labelling with revised prices. There was also a lack of clarity about the location where such packaging and labelling activities could be performed. Some companies had to go to court to get extensions and those who have not been able to take the legal relief route are suffering. Clearly, this confusion could have been avoided through consultations by giving adequate time to the industry to implement the revised prices.

The department of Pharma (DoP) has issued guidelines on Uniform Code on Sales and Marketing Practices which are applicable to pharmaceutical companies. This is a laudable step aimed at preventing corrupt practices in sales and marketing. DoP guidelines however are different from the Medical Council of India (MCI) guidelines on sales and marketing practices. Tax authorities use the Central Board of Direct Taxes (CBDT) circular based on MCI guidelines to decide on permissible sales and marketing expenses. Because of the differing standards between the DoP and MCI guidelines, there is need for clarity, both from the point of view of the industry as well as tax authorities.

Finally, there is the issue of compulsory licensing. In countries like India there should be a balance between the need for affordability of drugs and Intellectual Property (IP) protection. The intention of the government to ensure availability of patented medicines at a reasonable price is noble but there are other ways of achieving the same goal. The indiscriminate use of compulsory licensing will undermine both Indian and foreign pharmaceutical companies.

India has a great pharmaceutical industry which has been making affordable drugs not just for Indian market but is also exporting them to the world. Addressing the above challenges in a holistic way will strengthen the sector which is a vital part of the Indian economy.

The author is leader-pharma & life sciences, PwC India