Govt has step-motherly attitude towards industry

Written by MG Arun | Updated: Mar 5 2012, 07:52am hrs
Yusuf Khwaja Hamied, 75, chairman and managing director of the R6,135-crore pharmaceutical major Cipla, has championed the cause of affordable generic medicines throughout his five-decade-old career. In 2001, he took the battle against multinational companies (MNCs) to the African turf, and supplied anti-AIDS drugs at $1 a day, at a time when the best selling drug by an MNC cost over $32 a day. He now considers Indias patent laws, which prevent launch of copy cat version of drugs patented after 1995, and the governments price control regime, as major disincentives for the domestic industry. By 2015, drugs in India will become expensive for the masses, and drug companies will need to turn to overseas markets where their products can be better priced, he tells MG Arun in an exclusive interview. Edited excerpts:

You advocated years ago that current Indian patent laws will favour MNCs and lead to monopoly pricing. What are your concerns in the context of some top Indian firms already being sold out to MNCs

The backbone of India is its indigenous industry. MNCs are here to take the money out. How many pharma MNCs are exporting from India Very few. Indian companies are the mainstay for earning foreign exchange. The government has a step-motherly attitude towards authentic, national industry. That, and the infrastructure they provide, has to change. If this is not done, Indian companies are either going to sell off, amalgamate, or seek partnerships for survival.

Matrix Laboratories has changed to Mylan. Piramal has become Abbott Healthcare. Maybe, one day, Ranbaxy will be called Daiichi. You will see more of this, unfortunately.

Do you think India-EU Free Trade talks will stymie generic medicines

Why should the talks be held in secret I have been in the industry for 52 years. There are others like Anji Reddy (chairman, Dr Reddys Laboratories), IA Modi (chairman, Cadila Pharma) or Habil Khorakiwala (chairman, Wockhardt), who know the industry in and out. The government should have taken us into confidence. This year alone, Cipla is exporting R3,500 crore worth of drugs. Instead of giving us a pat on the back for earning foreign exchange, we are dragged to court for overpricing. The only way to prevent monopoly is through compulsory licensing. I am willing to pay for innovation.

The government has now proposed to put more drugs under price control. How detrimental will this be

We want policies that last five or ten years so that we can plan. I cant talk about pricing, because Cipla is in court with the government for overpricing. We have won all the cases in the lower courts, the High Court and now it is in the Supreme Court. None of the foreign companies products are under price control. Since 2005, there are 33 new monopoly products in the Indian market. None of them are in price control. My view is that if a drug is marketed by more than five companies, there is competition that will rein in the prices, and it should not be controlled. If theres a monopoly drug, or a drug with less than five companies making it, it should come under price control. So should any imported, finished drug.

Your career has mirrored the transformation of the Indian pharma industry. What do you consider as major milestones

After I joined Cipla in 1960, my first endeavour was to make oral contraceptives, but that plan fizzled out with no support from the government. In the 1960s, we were still following the British patent law of 1911, and MNCs were 60% of the Indian market. Cipla was ranked 56th at that time. We then formed the Indian Drug Manufacturers Association to fight patents. It took us 12 years to have the patent law changed. Most MNCs then quit India, except British companies like GSK, and some Swiss companies, but now want to come back since monopoly is allowed.

A third milestone was the manufacture of raw materials or active pharmaceutical ingredients, the backbone of the pharma industry. Today, India is the pharmacy capital of the world because of that. The next was affordable medicines to combat HIV-AIDS.

How did the idea of making HIV-AIDS drugs come about What were the challenges

We were approached by the Indian government in 1991 to make the drug, but the drug did not sell. So we marketed it at one-sixth of the global price, and told the government to procure and distribute it. But it did not want to, so we stopped making it in 1993. By chance, in 1996, I saw a medical article that said a cocktail of drugs can make AIDS patients live longer. We had a strong base to produce raw materials at that time, so in 2000, we started offering the cocktail. In Africa, at that time, the price was $12,000 per patient a year, and we sold at $800. In 2001, we announced a price of $1 a day. Today, over 7 million are treated not just by Cipla, but by Indian companies. There are eight leading Indian companies producing anti-AIDS drugs, comprising 92% of the worlds AIDS drugs. This is valued at $1 billion. Interestingly, the 8% that the MNCs make is valued at $16-20 billion.

You have argued for compulsory licensing (CL), where the government can step in to prevent over-pricing and let others make and supply cheaper drug

Yes, since under the current laws, we cant make those HIV drugs patented after 1995. If I am making hundred drugs, I need to make profits on four. The HIV drugs I sell today are a loss-making proposition, and we need to write off $5-10 million every year on this, since some countries do not pay. I believe that a pragmatic compulsory licensing is the best thing for India, and the government should not bow down to pressures.

Some companies are shifting focus to regulated markets and earning more revenues there

I wish Cipla could do that, too, like Lupin did in the US. The way the patent laws have changed is forcing firms like us to look outside India. We are under massive price control. The difference in price in India and the US are 30-40 times for branded products.

We will look at US, Europe, Japan, Australia, West Asia, for branded generics, classical generics, and biosimilars, where the guidelines have been just announced and which will be big in five years. Cipla will be more global. Another area is in-licensing, where we will sell products of foreign companies wanting to sell in India. We have to re-focus. We are targeting those countries where price of generics drugs is better than in India.

Will this mean an eventual change in the revenue mix

Ten years ago, Ciplas domestic sales was 90%, and 10% was exports. Today it is 50:50. This can become 60:40 tomorrow, or 70:30. Why should I use my 7-star factories to produce goods only to compete with so many companies in this market Unless a CL system is in place and a policy where you can export more, many companies will sell out.

Theres a frequent buzz that promoters will sell Cipla at some point

Why should I My work has given me satisfaction. I wont sell to anybody. Selling should have a purpose. I am already invested in Cipla, why should it change In 50 years, I have not invested in any company but Cipla.

What is the depth of management at Cipla How strong is the leadership pipeline

The thrust today is on teamwork, since it is a nearly R7,000 crore company. The stakes are too high for a single person to take a decision.