With economic growth, market opportunities have increased manifold. The value of natural resources under government control has grown. Infrastructure projects require big investments. Discretionary authority with government officials in matters such as licensing, clearances, tariffs, etc, enable corrupt officials to make sizeable illegal incomes. It is to speed up the process of project clearances and implementation, and minimise the opportunities for corruption, that a transparent, consultative and independent regulatory system is needed.
According to the Constitution, pharmaceuticals, like electricity, are a concurrent subject. The central government makes the rules on matters that affect more than one state while state governments draft rules for matters within their respective states. For the pharma sector, these include rules on manufacturing, retail, and preventing sub-standard drugs from reaching the consumer. Similarly, electricity is under the central government on interstate matters (like interstate transmission rules, the grid code, etc). State governments make the rules for generating plants within the state and for intra-state transmission and distribution. There are state load dispatch centres that supervise the operations of the grid within the state. Drug controllers in each state supervise the pharmaceutical manufacture and trade in the state. Both load dispatch centres and state drug controllers are under the overall control of the respective ministries in the state government. Thus, the state drug controllers are under the secretary in the health ministry, and like heads of load dispatch centres, much lower in the hierarchy. Coordination between the Centre and the states is vital. Electricity follows no political boundaries but flows along the wires taking the path of least resistance. Similarly, drugs are traded all over the country, irrespective of where they are made.
Electricity quality parameters are standard, but vary both around the country and at different times. Distortions against standards of quality result when state distribution enterprises and large consumers over- or under-draw electricity from the grid. Similarly, the drugs controller in one state may have cleared a manufacturer or allowed a formulation. But drug controllers of other states have to assume that the clearances were given correctly.
India for many years did not recognise product patents, allowing Indian manufacturers to develop alternative processes for making drugs that enjoyed product patents in other countries. This enabled Indian manufacturers to ?reverse engineer? the drug and offer it much cheaper in its generic form (without brand names). India was able to tap into a huge worldwide market, especially in the US, where branded drugs are very expensive. Thus, generic drug manufacture enabled Indian manufacturers to sell expensive AIDS drugs very cheap in Africa. This reduced the scourge of the disease in Africa. Indian pharmaceutical industry became a major exporter of generic drugs to the large US market.
The drug regulator in the US?the Food and Drug Administration (FDA)?is very capable, well-staffed and has enormous powers to prosecute and punish. Last year, FDA punished the largest Indian drug manufacturers and exporters (Ranbaxy being just one example) and made them pay enormous fines for a host of violations including poor hygiene, poor manufacturing standards, false trials and sub-standard quality. FDA found faults (admitted by the companies) with the Indian factories of these manufacturers. This adversely affected Indian generic drug exports and harmed the global perception of all Indian pharma manufacturers.
The pity is that India, with its network of drug controllers, did not have a clue about these violations of regulation. India learnt only after FDA caught the manufacturers. There have been defensive pleas of victimisation by the US government and local manufacturers there. Highly unlikely as these pleas are, they are irrelevant even if true. The Indian pharma industry has lost face overseas. This could harm Indian exports and the growth of an industry in which India had a lot of potential. If our drug regulators were able to do their job completely, we could have prevented such episodes.
Coming to the power sector, we have progressed with comprehensive and independent regulation of electricity, but unsatisfactorily. Electricity has independent regulatory commissions in each state and one at the Centre. Most electricity enterprises are government-owned with an electricity department in each state government. The chiefs of the electricity regulatory bodies are almost all retired bureaucrats, used to a lifetime of subservience to political and other authorities and inured to procedure. The load dispatch centres are electricity traffic policemen under the government-owned distribution enterprises, the state electricity boards. Because of these and other reasons, independent electricity regulation in India has failed to ensure 100% grid discipline or to keep the sector financially viable.
Our drug regulation is at two levels?the Centre and states. At the central level, new drugs and clinical trials are approved. The state drug regulators approve formulations, ensure quality in manufacturing and ensure that the consumer is not sold dangerous drugs except with prescriptions from medical practitioners. They report to largely itinerant bureaucrats, who do not stay in the job for over three years in the ministries. The level of the drug regulator in the hierarchy is well below that of a secretary to the government. Thus, the drug regulator is not independent. Decisions are taken with limited consultation with stakeholders, and are not transparent. All drug regulatory authorities are grossly understaffed. It is impossible for them to oversee the over 20,000 organised, small-scale and informal enterprises that manufacture drugs, or the almost 1 lakh retailers who sell them. While governments attempt to ensure coordination between their regulators and to share information, coordination and communication between them are weak. Use of technology is haphazard. States like Gujarat are far advanced than others. An ?independent? regulator, the National Pharmaceutical Pricing Authority (NPPA), determines prices of drugs, again in a non-transparent way.
Another major problem increases the need for strong independent regulation. Self-regulation by manufacturers and retailers is poor, with very few exceptions. Ranbaxy would not have falsified trials for submission to FDA (for which they ended up paying a huge fine) if they had an honest self-regulatory mechanism that was followed by all employees, and governance committed to high standards.
Thus, the major issues are weak self-regulation and corporate governance, low-level drug regulators subservient to administrators, understaffed regulatory authorities, weak penalties, poor enforcement, long drawn-out processes of trial, lack of special policing powers with the regulators, and the lack of use of modern technologies enabling speedy and full communication between regulators. There should be a national forum of all drug regulators who must meet regularly to exchange ideas and for training. Drug regulators must be independent of administrators, be selected independently, have long tenures and be accountable to legislatures. Legislation which incorporates all this and provides for severe penalties to violators is needed.
These are issues of life and death for the sick as well as for the growth of the industry. But little attention is being paid towards them.
The author is former director general, NCAER, and was the first chairman of CERC