what guidelines are to be followed by

8/14/2019 What Guidelines Are to Be Followed By

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what guidelines are to be followed by indian pharmaceutical

companies to trade in CIS countries?

Overview

Indian pharma companies are growing strong and going global. Once the Indian pharma marketwas dominated by foreign MNCs. From a stage of being nowhere, Indian pharma companiestoday are not only dominating the domestic market but have also begun to dominate some of theworld markets.

One of the main reasons for Indian pharma companies success is the support from the

Government. Without the Government intervention Indian pharma companies would not havegrown to this great level. Various policies followed by the Indian Government initially sowed theseed of development of the Indian pharma industry. The Indian Patent Act, 1970, allowedpharma companies to reverse-engineer the already available product i.e., the act recognizedprocess patents and not the product patents unlike in the western world. This enabled Indiancompanies to flourish, and at the same time demotivated foreign companies from doing businessin India.

Liberalization of Indian economy to some extent motivated foreign companies to enter India.When the foreign MNCs entered India, Indian companies established technical and marketing

alliances and learnt expertise in those areas from foreign MNCs. Relaxation of limits in overseasforeign direct investment motivated Indian companies to go global. Even though Indiancompanies began to internationalize during 1960s, it gained significant momentum only during1990s.

Today, Indian pharma companies are going global through exports, joint venture, mergers &acquisitions, CRAMS and out-licensing. Many Indian players are using these strategiesaccording to their needs. For example, most of the Indian companies prefer the acquisitionstrategy to enter Europe and the Greenfield Investment strategy to enter the US market. Thestrategic reason behind this is that the valuation of European companies is lower than that of UScompanies. Moreover, by acquiring European firms they can also establish their presence in the

US market because most of the European firms have a good presence in the US market too. Also,many more pharma companies are available for acquisition in Europe than in the US.

Indian companies are not only targeting developed and regulated markets like the US, Europeand Japan but have also begun to exploit the opportunities in developing markets like SouthAfrica, Mexico and China.

One of the main reasons behind the success of Indian companies both in the domestic and


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international markets is that India offers many advantages to Indian firms. India has a largernumber of US FDA approved plants compared to any other country in the world. India has 75US FDA approved plants, Italy has 55 and China is lagging behind with 27 plants. India also hasa large pool of scientific talent with cheaper cost that puts Indian companies ahead of theircompetitors.

Even though going global offers many advantages for Indian firms it is not without challenges.Indian companies have had to tackle many challenges in going global. Political challenges,cultural challenges and integration challenges are faced by Indian pharma, but these challengesare common to companies in every sector. The unique challenges faced by pharma companiesare litigation challenges. Most Indian companies are generic players and they have manyproductions in the pipeline. So, litigation will be one of the biggest challenges for Indian pharmacompanies. In order to become successful in the highly competitive pharma market, Indiancompanies have to invest more on R&D and come out with innovative products. Even thoughnone of the Indian companies is in the list of 50 global majors, they will become strongcontenders globally if they innovate.

This book has been divided into three sections. The first section Growth Trends gives insightsinto different strategies followed by Indian companies like exports, joint ventures, mergers &acquisitions, greenfield investment, CRAMS and out-licensing. The second section ExpandingGlobal Foot Print analyses different markets in which Indian companies are doing business likethe US, Europe, Mexico, Africa and Russia. The third section Corporate Experiences highlights

the globalization experiences of Indian companies like Ranbaxy, Dr.Reddys Lab, Wockhardt,Cipla, Dishman Pharma and Sun Pharma.

Section I: Growth Trends

The first article The Growth and Globalization of Indian Pharma authored byB V SPrasadandR Puratchimani traces the evolution of Indian pharma industry, its growth over theyears and its globalization. The evolution of the industry can be traced to 1901 when BengalChemical and Pharmaceutical Works Ltd. was established in Kolkata by Professor PrafullaChandra Roy. The Patent Act 1970 played a significant role in promoting the pharma industry inIndia. This Act ignored product patents and recognized only the process patents. This allowedIndian companies to produce even the existing products using different production processmethods. This strengthened Indian pharmas R&D activities. Following the efforts of the IndianGovernment, pharma firms began meeting the demands of the domestic market in the 1980s. Italso marked its globalization by exporting its drugs to foreign countries. Apart from exports,Indian pharma uses JV, brownfield or M&A and greenfield investment to go global. The articlealso highlights some of the globalization challenges faced by Indian companies like intensecompetition and litigation. The article explores the growth opportunities available for Indianfirms.

The next article Mergers and Acquisitions Trends in the Pharmaceutical Sector isauthored by Shivani Shukla. The author states that besides consolidation in the domesticindustry and investments by the US and European firms, the spate of mergers and acquisitions byIndian companies has ushered in an era of the Indian Pharmaceutical MNC. After traversing


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the learning curve through partnerships and alliances with international pharmaceutical firms,Indian pharmaceutical companies have now moved up a step in the value chain and are lookingat the inorganic route to growth through acquisitions. The lack of research and development(R&D) productivity, expiring patents, generic competition and high profile product recalls aredriving the mergers and acquisitions (M&A) activity in the global pharmaceutical and biotech

sector. Indian companies are looking at front-end integration as building a front-end distributionset-up from scratch could take a significant amount of time. Acquisitions are the quickest way tofront-end access. What is interesting is the fact that apart from market access, i.e., marketing anddistribution infrastructure, the acquiring company also gets an established customer base as wellas some amount of product integration (the acquired entities generally have a basket of products)without the accompanying regulatory hurdles.

The third article India Inc.s Overseas Acquisitions in Pharma Sector is written byRVijaya. In this article the author discusses overseas acquisitions by Indian pharma majors likeRanbaxy, Dr. Reddys and Wockhardt besides briefing the challenges faced by pharma firms like

reduced client base, cost etc. Among the Indian players, Ranbaxy Labs, Indias largest drug firm,

has been the leading acquirer. The major deal has been the acquisition of Terapia, the largestindependent generic Romanian company. Ranbaxy acquired 96.7 percent stake in Terapia, thusgaining two manufacturing units, bioequivalence centres, 60 products and access to Terapiasclient base of almost 4000 pharmacies and 450 hospitals in Romania. Indias biggest foreign

acquisition in the pharma sector ever was made by Dr. Reddys Labs in 2006. Indias secondlargest pharma company bought out German generic company Betapharm from UKs privateequity firm 3i for an incredible USD 576 million in an all-cash deal. Betapharm expects toexpand its growth further and also help Dr. Reddys global product development and entry intothe European generics market. Indias major pharma andbiotechnology company Wockhardtalso joined the acquisition mode by acquiring the Pinewood Laboratories Limited, the largest andfastest growing branded generic pharmaceutical company in Ireland. The deal was to the tuneUSD 150 million, all in cash.

The next article Bucking the Trend authored by Gauri Kamath is sourced fromBusinessworld. In this article the author discusses the overseas acquisitions by the IndianContract Research and Manufacturing Services (CRAMS) players. The author states a paradoxfacing Indias outsourcing industry. Its low cost location is its raison detre. But to stay in the

game, it also has to be where the customer is, often an expensive site in Western Europe or theUS. First, Indias IT services industry began to buy Westerncompanies. Now, Indias drugmakers are following suit. Indian pharma outsourcing companies are buying up high costoperations in the West. In the last years, three Indian companiesNicholas Piramal, DishmanPharmaceuticals and Chemicals, and Shasunhave acquired European contract research andmanufacturing (CRAM) outfits. The reasons for this are sound: Indian companies have foundthat Big Pharma is either wary of offshoring some key, patent-sensitive activities to India orlacks adequate incentive to do so. This article discusses in detail the pros and cons of acquiringCRAMS firms overseas.

The last article in the first section is White Paper on Indian Pharma Industry: Quest forGlobal Leadership sourced from Cygnus Consulting. This article gives an overview about theIndian pharma industry and highlights as to how it is poised to emerge as global leader. It gives a


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note about Indias globally competitive strategy, policy and pricing framework, industry

partnership and alliances, CRAMS and clinical trials, strong R&D of Indian firms and dataexclusivity issues. Indian pharma industry is emerging as globally competitive because today it isa preferred manufacturing base due to its larger number of US FDA approved plants outside theUS, increasing number of regulatory filings by Indian firms and Special Economic Zones.

Moreover, Indian pharma establishes global presence through acquisition and the new patentregime attracts more investments. With the implementation of product patents in India inJanuary, 2005, investing in R&D became inevitable for the Indian pharma companies to competeglobally and survive in the long run. The benefits reaped by a few companies such as Ranbaxyand Dr. Reddys in the R&D field have attracted others to follow suit. Most of the Indianpharmaceutical companies, including Cipla, Lupin, Wockhardt, Nicholas Piramal and Torrent,are actively involved in R&D activities. Foreign MNCs also establish their R&D centers in India.

Section II: Expanding Global Footprint

The first article in the section is Indian Pharma: Globalizing via China authored byN

Janardhan Rao andFeroz Zaheer. The authors state that India Inc., aims at having a globalpresence and it is doing this via the China route. Indian pharmaceutical industry has venturedinto China in order to make it their base and then, gradually supply their products and servicesworld over. It gets easier for Indian companies to tap other Asian and European markets bymaking China their manufacturing base. Moreover, China itself, being a promising optionoffering a huge market with economical manufacturing and labor costs, which are in fact lowerthan India, is also attracting India Inc. The Chinese pharmaceutical market is currently theseventh largest in the world (worth $14 bn), and by the year 2010, it is estimated to be the fifthlargest. Considering the Chinese economic boom and the pace with which the country isgrowing, it is surely a market which cannot be ignored. The article also highlights Chineseoperations of Indianpharma like Ranbaxy, Dr. Reddys, Orchid and Aurobindo Pharma. TheChinese pharmaceutical market, though very attractive, poses significant challenges to the Indianfirms. Perhaps, the biggest challenge for the Indian players, and even MNCs, is the lack of orlimited patent protection of drugs in China. Even though the country has joined the WTO (WorldTrade Organization) and claims to be TRIPS compliant, it still lacks proper enforcement andimplementation of the norms. The authors say that to succeed in China, India Inc. should analyzethe cultural, political, economic factors and market characteristics not only to enjoy a profitableforay into China but also boost their globalization efforts.

The next article also on China presents an experts panel views on doing business in China titledIndian Pharma Companies: Doing Business in China. This panel is coordinated byFerozZaheer. The experts share their views on reasons for Indian companies to venture into China likehuge domestic demand, low operational cost etc. They discuss as to how Chinese pharma marketis different from the rest of the world and the Indian companies have competitive advantage overdomestic companies like credibility in terms of quality, regulatory experience in developedmarkets like the US and the UK and strong R&D. The experts also share their views on likelychallenges to be faced by Indian companies like domestic competition, not so conduciveregulatory environment and the strategies to be adopted. The panel also points out that playingwell in China means succeeding in the largest market of the world. With all the barriers, Indiancompanies that are doing well in China are qualifying themselves to have a major say even in the


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regulated and developed markets.

The third article in this section Indian Pharmaceuticals Aiming for the US Market isauthored byDhandapani Alagiri. India ranks fourth in terms of production volume and thirteenthin terms of production value in the world. The Indian pharmaceutical industry has grown from a

virtual non-entity to a leading industry, especially in the production of generic drugs over the lastfew decades. The Indian pharmaceutical companies have made inroads into the US market eventhough their share in the market is meager as of now. The USA is the worlds largestpharmaceutical market, accounting for around 48% of the world total. The strength of the Indianpharmaceutical companies lay in their strength of reverse engineering, and the large number ofUS FDA approved labs. India has also been very aggressive in filing for patents. As 30 of thebest selling US patent-protected drugs go off patent by 2010, Indian companies are positioningthemselves to offer generic versions of these drugs. But the Indian companies also face toughcompetition from other players, especially China. But with the strength of a more sophisticatedtechnology and manpower, India can get a major share of the US pharmaceutical market in thecoming years.

The next article Indian Pharmaceutical Companies Eye European Market is written byPSivarajadhanavel. The author says that Indian Pharmaceutical companies look beyond the Indianmarket moving towards Europe as the market has greater potential business for growth. It givesan overview of the European pharmaceutical markets where Indian companies have greateropportunities to grow compared to the US and other markets in terms of value. Europe is themost preferred acquisition destination for Indian pharma firms. In the last three years Europe hasaccounted for 60 percent of Indian pharmaceutical acquisitions. Acquiring European firms offerdistinctive advantages over acquiring Indian firms. The valuations of the EU-based firms are lowcompared to US-based firms and, moreover, these European firms also have strong presence inthe US apart from Europe. By acquiring European firms, Indian pharma firms spread theirtentacles to both Europe and the US simultaneously. The author also discusses the issues relatedto patent rights where Indian firms have a smaller number of patent rights compared to theircompetitors in the European market, and highlights cases of some of the Indian pharmaceuticalsin Europe like Ranbaxy, Dr. Reddys and Cipla.

In the article Indian Pharma Exports to Russia byD M Banerjee, the author discusses thepharmaceutical exports to Russia. The author states that the Indian pharmaceutical industry isexpanding its presence across the globe through a lot of mergers and acquisitions. India is one ofthe most preferred manufacturing bases due to its strong chemistry skill, and high skilledmanpower at cheaper cost. Indias pharma industry has been focusing on exports, given its

superior manufacturing skills. The CIS countries are a prime target as they promise faster growthrates than the saturated US market. A Cygnus report shows that among the CIS countries, Russiais the largest export destination and is likely to remain so for the next few years. For the yearended March 31, 2005, exports to Russia accounted for 58.35% of the total exports to the CIScountries. Out of the total exports of Rs.7079.78 million to Russia, nearly 87.17% of the exportsis of products related to formulations sector. Around 5% and 4.5% of the exports are related toayurveda, herbal and homeopathic medicines and bulk drugs respectively.

The last article in this section is Mexico: Unraveling New Boundaries for the Indian


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Pharma Industry. The authorNeeraj Mankadexplores the untapped potential andopportunities in the Mexican pharmaceutical industry, and provides guidelines for Indiancompanies who wish to exploit this opportunity. The author, through his suggestions, tries topropel the Indian pharmaceutical companies towards success in this market, by identifyingproduct segments based on the strengths of the Indian industry. The Mexican pharmaceutical

market, valued at US$11.3 bn in 2005, is the leading Latin American market and the ninthlargest worldwide. Commitment to improving access to high quality healthcare along with anequally high demand for modern medicines from its growing population is helping Mexicoemerge as the leading pharmaceutical market in Latin America. With pharma majors likeRanbaxy and Wockhardt having already made a mark in the Mexican market, the pharmacompanies are now looking upon Mexico as a goldmine waiting to be tapped. The Mexicanmarket offers a large, stable, lucrative and growing market both for trade and investment forIndian pharma companies. Mexico has the distinction of being the largest destination for Indianpharmaceutical exports in Latin America.

Section III: Corporate Experiences

The first article of the last section Cipla: Capturing the Global AIDS Drugs Market byArun K, gives a detailed note on history of Cipla, how it seized generic opportunity, itsglobalization initiatives and its foray into South African and Malaysian markets with HIV drugs.Ciplas success was driven largely by its generic pharmaceutical business. Over the years, Ciplahad produced generic version of Western medications that were on high-demand such as Viagra,Prozac, Diflucan, Prilosec and Norvasc, products that were originally patented or licensed bywestern multinationals, including Pfizer, Eli Lilly & Co. and Warner-Lambert Co. Cipla soldthese products primarily in India, but looked for opportunities to export to developing countrieswith patent laws similar to those in India. Cipla entered into US market through a strategicalliance with US generics major Watson in late 2002 to develop and commercialize genericpharmaceuticals. Later, it also established alliance with major US firms like Ivax, Biogenerics.Cipla developed affordable AIDS drugs and captured markets like South Africa and Malaysia,besides facing many challenges. In recent times, Cipla has attracted considerable media attentionbecause of its efforts to offer AIDS drugs globally at very low prices. But in its quest to capturethis market, Cipla faces the might of global multinational corporations, which are doing all theycan to protect and enforce their patent rights. This article also has a value addition CIPLAsGlobal Presence. It highlights Ciplas globalization initiatives after 2004 and its globalpresence.

The next article Ranbaxy Lab: Global Hunt for Growth authored byAmit Singh Sisodiyaand Sanghamitra Dhara,discusses how Ranbaxy Laboratories, Indias top drug maker by sales,has become a truly global player. It announced splendid performance for the fiscal year 2006,with robust sales across markets of US, BRICS, Africa, Latin America, Middle East and Asia-Pacific. Ranbaxy recently signed a new multi-year R&D agreement with GSK. Under this newagreement, which is the expansion of the terms of their strategic alliance signed in 2003, theIndian drug maker will garner over $100 mn in payments for a product developed by it andsubsequently launched by GSK. To improve its chances in European markets, Ranbaxy isincreasingly concentrating on leveraging its existing infrastructure to bolster its presence in theseregions. Indian companies have also developed a considerable service industry for the global


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pharmaceutical market. Nonetheless, for Ranbaxy, which has come a long way since being afringe player in 1970s to survive under a protected regime to emerge as Indias top drug maker,

the battle for global big league is only going to intensify.

The next article Wockhardt: French Foray byAmit Singh Sisodiya and Sanjoy De, discusses

the Wockhardt entry into France. Continuing its mergers and acquisitions (M&A) spree in theEuropean market, the Indian drug major Wockhardt recently acquired Negma Laboratories, thefourth largest independent and research-based pharmaceutical group in France, in a dealinvolving $265 mn. The all-cash deal marks the Indian firms fifth acquisition in Europe after itacquired Wallis, CP Pharmaceuticals (both UK-based), Germanys Esparma and IrelandsPinewood Laboratories. With the acquisition of Negma, more than 60% of Wockhardts business

comes from Europe, compared with 48% before the acquisition. Wockhardt has an impressiveportfolio of 130 products in the European market and plans to launch 24 new products within oneyear. On the other hand, Negma possesses a strong research and lifecycle managementcapability. With a rich portfolio of 172 patents, the French company holds leading positions inosteoarthritis/rheumatology, phlebotonic and arterial hypertension segments, which is likely to

complement the existing product portfolio of Wockhardt, and improve Wockhardts business inEurope. Analysts say that Negma acquisition has all the ingredients to step up Wockhardts salesas well as profits. Further, Wockhardts impressive track record in M&As will also come in

handy as it moves ahead in its French foray.

In the article Dr. Reddys Laboratories, the Leading Indian Pharmaceutical Company, inEurope: The Inorganic Growth Strategy the authorSatyakama Paulpresents an overview ofDr. Reddys growth and globalization, and discusses its inorganic growth strategy to enterEurope. In February, 2006, the Indian pharmaceutical company, Dr. Reddys LaboratoriesLimited (DRL), announced that it would acquire Germanys fourth largest generic

pharmaceutical, betapharm. The deal was settled at US$570 million. After the US, Europe wasthe second largest pharmaceutical market with Germany as its largest constituent. Moreover, itwas the third largest generic market worldwide. The market trends showed that generics had abetter market potential over their branded counterparts. In addition, the European generic marketproved to be more lucrative than the US market because it had less governmental rules directedtowards drug approvals and marketing. The author also analyses the synergies and possiblechallenges of such an acquisition and discusses the inorganic growth strategy of DRL that wasaimed at penetration into the German and subsequently the European generic market. It alsoprovides a brief overview of the two companies.

The next article Dishman Pharmaceuticals is written byE Naveen Kumar. In this article, theauthor discusses its CRAMS business and its globalization initiatives. Dishman Pharmaceuticalsand Chemicals Ltd., an integrated player in Contract Research & Manufacturing, headquarteredin Ahmedabad and promoted by J Rajnikant Vyas, is a standard provider of commercial, highquality chemical services and products to the global pharmaceutical and chemical industry.Dishman is a globally-focused company oriented towards the production of QUATS, ActivePharmaceutical Ingredient (API), API intermediates and chemicals. It has established itspresence in almost all countries including Eastern Europe, Holland, Turkey, United Kingdom,China, Japan, Africa and Middle East, with wholly-owned subsidiaries in the US, Europe,Holland and China. Since its inception, Dishmans strongest markets were Europe and the US,


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establishing subsidiaries there, called Dishman Europe, Dishman Holland and Dishman USA. Ithas also achieved several contract research and manufacturing projects globally. Recently,Dishman acquired Belgium headquartered Solutia Europes pharmaceutical services firmCarbogen-Amcis for $75 million. On account of this acquisition, Dishman would be the onlyIndian contract manufacturing organization with high-power manufacturing capability.

The last article in this book is Sun Pharmaceuticals in 2004 authored byB N Renuka Prasadand Srikant G. Sun Pharmaceutical Industries Ltd. (SPIL) is one of the leading companies in theIndian pharmaceutical industry. The company has used both organic and inorganic growthstrategies to grow domestically and internationally. Most of its merged companies facilitieswere approved by both US Food and Drug Administration (FDA) and UK Medical ControlsAgency (MCA). SPIL was the pioneer in addressing and developing lifestyle therapeuticsegments in India and also targeted the overseas-unregulated markets. The companys bulk drugexports grew at 25% of CAGR during 1997-2002 period. SPIL exported its products to some 36countries. The company intends to focus and grow in the regulated markets by filing DrugMaster Filings (DMFs) and supply bulk actives to US-based Caraco and others. In February,

2004, its US-based subsidiary Caraco Pharma entered into an agreement with two largeshareholders by which SPILs stake in Caraco increased to 61% from 40% in 2003. But till nowSPIL was not happy as it lost $57 million, which was nearly half of net worth, due to wrongexecution. The companys R&D competence was to play a crucial role in increasing its globalpresence. The company had been limited to the export of the bulk drugs to regulated markets andformulations to markets with loose regulatory regimes. However, SPILs ambition is to cash in

on the growing market for generics in the US market, which is lucrative. This article has a valueaddition, Global Drive of Sun Pharma written by D Thiyagarajan. The author covers theimportant events (post-2004) in the history of Sun Pharma and its globalization activities.

DRUGS & PHARMACEUTICALS

Overview of Pharmaceutical Sector

The Indian Pharmaceutical industry has been witnessing phenomenal growth in recent years,

driven by rising consumption levels in the country and strong demand from export markets.Thissegment of Industry has shown tremendous progress in terms of infrastructure development,technology base and wide range of products. The industry now produces bulk drugs belonging toall major therapeutic groups requiring complicated manufacturing processes and has alsodeveloped excellent GMP (Good Manufacturing Practices) compliant facilities for the productionof different dosage forms. The strength of the industry is in developing cost effectivetechnologies in the shortest possible time for drug intermediates and bulk activities withoutcompromising on quality. This is realized through the country's strengths in organic chemicals'


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synthesis and process engineering. India is today recognized as one of the leading global playersin pharmaceuticals. Europe accounts for the highest share of over 23% of Indian Pharma exportsfollowed by North America and Asia. Exports to USA have crossed the land mark figure of US$1 billion during 2006-07. Internationally recognized as amongst the lowest-cost-producers ofdrugs, India holds fourth position in terms of volume and thirteenth position in terms of value of

production in pharmaceuticals. It is estimated that by the year 2010, the Indian pharmaceuticalindustry has the potential to achieve over Rs.1,00,000 crore production of formulations and bulkdrugs.

The domestic Pharma Industry

The domestic Pharma Industry has recently achieved some historic milestones through aleadership position and global presence as a world class cost effective generic drugs'manufacturer of AIDS medicines. Many Indian companies are part of an agreement where majorAIDS drugs based on Lamivudine, Stavudine, Zidovudine, Nevirapine will be supplied toMozambique, Rwanda, South Africa and Tanzania which have about 33% of all people living

with AIDS in Africa. Yet another US Scheme envisages sourcing Anti Retrovirals from someIndian companies whose products are already US FDA approved.

Many Indian companies maintain highest standards in Purity, Stability and International Safety,Health and Environmental (SHE) protection in production and supply of bulk drugs even to someinnovator companies. This speaks of the high quality standards maintained by a large number ofIndian Pharma companies as these bulk actives are used by the buyer companies in manufactureof dosage forms which are again subjected to stringent assessment by various regulatoryauthorities in the importing countries. More of Indian companies are now seeking regulatoryapprovals in USA in specialized segments like Anti-infectives, Cardiovasculars, CNS group.Along with Brazil & PR China, India has carved a niche for itself by being a top generic Pharmaplayer.

Increasing number of Indian pharmaceutical companies have been getting internationalregulatory approvals for their plants from agencies like USFDA (USA), MHRA (UK), TGA(Australia), MCC (South Africa), Health Canada etc. India has the largest number of USFDA -approved plants for generic manufacture. Considering that the pharmaceutical industry involvessophisticated technology and stringent "Good Manufacturing Practice (GMP) requirements,major share of Indian Pharma exports going to highly developed western countries bearstestimony to not only the excellent quality of Indian pharmaceuticals but also its pricecompetitiveness. More than 50% share of exports is by way of dosage forms. Indian companiesare now seeking more Abbreviated New Drug Approvals (ANDAs) in USA in specializedsegments like anti-infective, cardio vascular and central nervous system groups.

Exports

According to the Quick Estimates of Directorate General of Commercial Intelligence andStatistics (DGCIS), Pharmaceuticals exports (valued in US dollar terms) registered an impressivegrowth rate at 30.7% terms during April-October,2008 compared to the corresponding period ofthe last year. This growth further increases to 38.5% when valued in rupees terms. Exports on


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account of Pharmaceuticals have been consistently outstripping the value of correspondingimports during 1996-97 to 2007-08. The trade balance increased from Rs. 2157 crores in 1996-97 to Rs. 13893 crores in 2007-08. Exports of pharmaceuticals registered a growth at the rate of16.22% during 2007-08. The share of exports of Pharmaceuticals products to the total nationalexports have been in excess of 2% during each of last 12 years ending 2007-08. It has exhibited a

long-term upward trend from 2.01% in 1996-97 to 2.55% in 2007-08.

Investment

According to Ministry of Commerce and Industry, Domestic investment in thePharmaceuticals sector is estimated at Rs. 31.43 thousand crores, which is equivalent toUS $ 7.14 billions.

The Drugs and Pharmaceuticals sector has been able to attract FDI amounting to US $1428.96 million in the sector from April 2000 to December 2008.

So far, as domestic industrial proposals between August 1991-March 2008 are concerned,total Industrial Entrepreneur Memorandum (IEMs) filed including Letter Of Intent (LOI)& Direct Industrial Licences (DIL) add upto Rs. 31257 crores in Drugs & PharmaceuticalSector, according to Ministry of Commerce & Industry.

According to the Ministry of Commerce & Industry, Pharmaceutical sector is estimatedto have created 2.20 lakh employment opportunities.

According to Centre For Monitoring Indian Economy (CMIE), the aggregate sectoralincome grew by 18.9% during the quarter ending June 2008 while the growth in netprofits during 2007-08 was 8.2%.

Recent Initiatives in Pharma sector

Government has taken various policy initiatives for the Pharma sector

Government has offered fiscal incentives to R&D units in Pharma sector

Steps have been taken to streamline procedures covering development of new drugmolecules, clinical research etc.

A number of inhouse R&D units holding recognition of DSIR have come up in thePharma sector. These units are eligible for weighted tax deduction@150% under Section

35 (2AB) of the Income Tax Act 1961 for the R&D expenditure incurred.

Government has also come up with two new schemes specially targeted at drugs &pharmaceutical research.These are: 'The New Millennium Indian Technology LeadershipInitiative' (NMITLI) and the 'Drugs and Pharmaceuticals Research Programme' (DPRP).

Key Strengths


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Strong manufacturing base Cost competitiveness Network of laboratories and R&D infrastructure Highly trained pool of scientists and professionals World-class quality products

Strong marketing and distribution network Strong process development skills Potential ground for clinical trials Fast growing health care industry Rich biodiversity Growing biotechnology industry Highest Quality approvals from USFDA, EDQM, MHRA etc. Ranks 4th in the world, accounts 8% by volume and 2% by value. Very strong in Indian medicine systems of Ayurvedic, Homoepathy, Unani, Siddha and

Herbals medicines An excellent center for clinical trials.

Research and Development

In no other Industry segment innovative R&D is as critical as in Pharma industry. Here, the NewDrug Discovery Research (NDDR) has to keep pace with the emerging pattern of diseases aswell as responses in managing existing diseases where target organisms are becoming resistant toexisting drugs. The NDDR is also an expensive activity. It is encouraging to observe that at least10 Indian companies are into new drug discovery in the areas of infections, metabolic disorderslike diabetes, inflammation, respiratory, obesity & cancer. Most of these companies haveincreased their R&D spending to over 5% of their respective sales turnovers. There is notablesuccess from some Indian companies in out licensing new molecules in the asthma and diabetessegments to foreign companies. Introduction of Product Patent for Pharmaceuticals is animportant feature for Indian Pharma R&D scenario. This has boosted the confidence of MNCPharma companies in India where a number of western Pharma companies have already R&Dcollaborations with Indian Pharma companies in the field of NDDR. Some Indian companieshave also got US-FDA approvals for their new molecules as Innovative New Drugs (lND).

Western Pharma companies have recognized the attractiveness of India as a R&D outsourcingdestination due to low cost scientific manpower, excellent infrastructure, top quality withcapability to conduct modern research under GLP, GCP guidelines. Many of them have set upindependent R&D centres in India.

Clinical Trials to establish safety and efficacy of drugs constitute nearly 70% of R&D costs.Considering the low cost of Research and Development in India, several MNC Pharmacompanies as well as global Clinical Research Organizations are increasingly making India aclinical research hub. In conclusion new drug discovery in India has made a promising startwherein at least five to six potential candidates in the areas of Malaria, Obesity, Cancer, Diabetesand Infections are likely to reach Phase II clinical trials.

Contract Manufacturing


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Many global pharmaceutical majors are looking to outsource manufacturing from Indiancompanies, which enjoy much lower costs (both capital and recurring) than their westerncounterparts. Many Indian companies have made their plants cGMP compliant and India is alsohaving the largest number of USFDA-approved plants outside USA.

Indian companies are proving to be better at developing Active Pharmaceutical Ingredients(APIs) than their competitors from target markets and that too with non-infringing processes.Indian drugs are either entering in to strategic alliances with large generic companies in theworld of off-patent molecules or entering in to contract manufacturing agreements withinnovator companies for supplying complex under-patent molecules.

Some of the companies like Dishman Pharma, Divis Labs and Matrix Labs have beenundertaking contract jobs for MNCs in the US and Europe. Even Shasun Chemicals, StridesArcolabs, Jubilant Organosys, Orchid Pharmaceuticals and many other large Indian companiesstarted undertaking contract manufacturing of APIs as part of their additional revenue stream.Top MNCs like Pfizer, Merck, GSK, Sanofi Aventis, Novartis, Teva etc. are largely depending

on Indian companies for many of their APIs and intermediates. The Boston Consulting Groupestimated that the contract manufacturing market for global companies in India would touch$900 million by 2010.

Selected Contract Manufacturing Deals in India

Indian company Multinational Product

Lupin Laboratories Fujisawa Cefixime

ApotexCefuroxime Axetil, Lisinopril(Bulk)

Nicholas Piramal Allergan Bulk and Formulations

Advanced MedicalOptics

Eye Products

Wockhardt Ivax Nizatidine (anti- ulcerant)

DishmanPharmaceuticals

SolvayPharmaceuticals

Eprosartan Mesylate

IPCA Labs Merck Bulk Drugs

Tillomed Atenelol

Orchid Chemicals andPharmaceuticals Apotex Cephalosporin and otherinjectables

Sun Pharma Eli LillyCVS products, anti-infectivedrugs and insulin

KopranSynpacPharmaceuticals

Penicillin- G Bulk Drug

Cadila Healthcare Altana Pharma Intermediates for Pantoprazole


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Boehringer IngelheimGastrointestinal and CVSProducts

Biocon Bristol Myers Squibb Bulk Drugs

Public Sector Undertakings

1. Hindustan Organic Chemicals Ltd HOCL), Rasayani,Maharashtra.2. Hindustan Insecticides Ltd,New Delhi.3. Indian Drugs & Pharmaceuticals Ltd (IDPL),Dundahera Industrial

Complex,Dundahera,Gurgaon,Haryana.4. Hindustan Antibiotics Ltd (HAL),Pimpri,Pune,Maharashtra.5. Smith Stanistreet Pharmaceuticals Ltd. (SSPL) ,Kolkata.6. Bengal Chemicals & Pharmaceuticals Ltd (BCPL), Kolkata,West Bengal.7. Bengal Immunity Limited (BIL) ,Kolkata,West Bengal.

Joint Sector Undertakings

1. Rajasthan Drugs & Pharmaceuticals Limited (RDPL)2. Orissa Drugs & Chemicals Limited (ODCL)3. Karnataka Antibiotics & Pharmaceuticals Limited (KAPL)4. Maharashtra Antibiotics & Pharmaceuticals Ltd. (MAPL)5. Manipur State Drugs & Pharmaceuticals Limited (MSDPL)

Wholly Owned Subsidiaries

1. IDPL (Tamil Nadu) Limited,Chennai

2. Bihar Drugs & Organic chemicals Limited,Muzaffarpur

Other Organisations

1. Petrofils Cooperative Ltd,PO Petrofils,District-Vadodara,Gujarat.2. Central Institute of Plastics Engineering & Technology,Guindy,Chennai.3. Institute of Pesticides Formulation Technology,Gurgaon,Haryana.4. National Institute of Pharmaceuticals Education and Research,Mohali,Punjab.

Regulatory Issues in the Indian Pharmaceutical


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Industry

Parvathi K. Iyer

This section undertakes a review and assessment of regulatory issues in the

Indian pharmaceutical industry. Understanding the regulatory scenario in

this sector is extremely crucial not only due to the rapid and ongoing

changes at the global level, largely with reference to good manufacturing

practices (GMP), good clinical practices (GCP) and good laboratory practices

(GLP) but also due to the onus on the regulatory bodies to ensure a healthy

supply of quality drugs at affordable prices to the Indian masses.

The present section begins with a brief description of the major regulatory

bodies monitoring the Indian pharmaceutical sector. It then undertakes areview of the prevailing mechanisms for drug regulation and temporal

progression of some predominant policy measures and Acts. The section

subsequently provides a comprehensive account of the status and key

guidelines pertaining to the dimensions of drug pricing, patent related

issues, GMP and clinical trials, in addition to a brief review of standards for

medical devices and biotech products. It concludes with an assessment of

the deficiencies of present regulatory regime and some new initiatives by theState to ensure the production and marketing of safe and efficacious drugs

at affordable prices in the domestic sphere and to sustain current growth

prospects in the global markets.
mailto:[email protected]:[email protected]://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/en/section2/section5/section436.htmhttp://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://indiaglp.gov.in/http://indiaglp.gov.in/http://cdsco.nic.in/html/GCP.htmhttp://www.whoindia.org/en/section2/section5/section436.htmmailto:[email protected]


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Major bodies regulating drugs and pharmaceuticals

The principal regulatory bodies entrusted with the responsibility of ensuring

the approval, production and marketing of quality drugs in India at

reasonable prices are:

The Central Drug Standards and Control Organization (CDSCO), located

under the aegis of the Ministry of Health and Family Welfare. The CDSCO

prescribes standards and measures for ensuring the safety, efficacy and

quality of drugs, cosmetics, diagnostics and devices in the country; regulates

the market authorization of new drugs and clinical trials standards;

supervises drug imports and approves licences to manufacture the above-

mentioned products;

The National Pharmaceutical Pricing Authority (NPPA), which was instituted

in 1997 under the Department of Chemicals and Petrochemicals, which fixes

or revises the prices of decontrolled bulk drugs and formulations at judicious

intervals; periodically updates the list under price control through inclusion

and exclusion of drugs in accordance with established guidelines; maintains

data on production, exports and imports and market share of pharmaceutical

firms; and enforces and monitors the availability of medicines in addition to

imparting inputs to Parliament in issues pertaining to drug pricing.

The Department of Chemicals and Petrochemicals also oversees policy,

planning, development and regulatory activities pertaining to the chemicals,

petrochemicals and pharmaceutical sector. The responsibilities assumed by

this body are relatively broader and varied in comparison to the other two

bodies. The main aspects of pharmaceutical regulation are thus divided

between the above two ministries. The Ministry of Health and Family Welfare

examines pharmaceutical issues within the larger context of public health

while the focus of the Ministry of Chemicals and Fertilizers is on industrial
http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://www.cdsco.nic.in/http://www.cdsco.nic.in/


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policy. However, other ministries also play a role in the regulation process.

These include the Ministry of Environment and Forests, Ministry of Finance,

Ministry of Commerce and Industry and the Ministry of Science and

Technology. The process for drug approval entails the coordination of

different departments, in addition to the DCGI, depending on whether the

application in question is for a biological drug or one based on recombinant

DNA technology. Issues related to industrial policy such as the regulation of

patents, drug exports and government support to the industry are governed

by the Department of Industrial Policy and Promotion and Directorate

General of Foreign Trade, both under the aegis of Ministry of Commerce and

Industry and the Ministry of Chemicals and Fertilizers. With respect to

licencing and quality control issues, market authorization is regulated by the

Central Drug Controller, Ministry of Health and Family Welfare, Department

of Biotechnology, Ministry of Science and Technology (DST) and Department

of Environment, Ministry of Environment and Forests. State drug controllers

have the authority to issue licences for the manufacture of approved drugs

and monitor quality control, along with the Central Drug Standards Control

Organization (CDSCO).

Prevailing Mechanisms

This sub-section primarily focuses on major regulatory policies and

mechanisms in relation to drug pricing and development of standards for

ensuring safety and efficacy.

In India, drug manufacturing, quality and marketing is regulated in

accordance with the Drugs and Cosmetics Act of 1940 and Rules 1945. This

act has witnessed several amendments over the last few decades. The Drugs

Controller General of India (DCGI), who heads the Central Drugs Standards
http://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://www.dst.gov.in/http://www.dst.gov.in/http://www.dst.gov.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://www.cdsco.nic.in/http://www.dst.gov.in/http://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htm


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Control Organization (CDSCO), assumes responsibility for the amendments

to the Acts and Rules. Other major related Acts and Rules include the

Pharmacy Act of 1948, The Drugs and Magic Remedies Act of 1954 and Drug

Prices Control Order (DPCO) 1995 and various other policies instituted by

the Department of Chemicals and Petrochemicals.

Some of the important schedules of the Drugs and Cosmetic Actsi include:

Schedule D: dealing with exemption in drug imports, Schedule M: which,

deals with Good Manufacturing Practices involving premises and plants and

Schedule Y: which, specifies guidelines for clinical trials, import and

manufacture of new drugs

In accordance with the Act of 1940, there exists a system of dual regulatory

control or control at both Central and State government levels. The central

regulatory authority undertakes approval of new drugs, clinical trials,

standards setting, control over imported drugs and coordination of state

bodies activities. State authorities assume responsibility for issuing licenses

and monitoring manufacture, distribution and sale of drugs and other related

products.
http://www.cdsco.nic.in/http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.cdsco.nic.in/


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Source:Adapted from Dun & Bradstreet (D&B) 2007
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Temporal Progression of Drug Policies & Acts

The Patents Act of 1970, Drug Price Control Order 1970 and Foreign

Exchange Regulation Act 1973 played a significant role in terms of the

building of indigenous capability with regard to manufacture of drugs. The

New Drug Policy of 1978 provided an added thrust to indigenous self-

reliance and availability of quality drugs at low prices.

DPCO 1987 heralded the increasing liberalization in the industry. One of theimportant features of this act was the reduction of the number of drugs underprice control to 143.

The major objective of DPCO 1995 was to decrease monopoly in any given

market segment, further decrease the number of drugs under price control to 74and the inclusion of products manufactured by small scale producers underprice control list.

In 1997, the National Pharmaceutical Pricing Authority was constituted in orderto administer DPCO and deal with issues related to price revision.

The Pharmaceutical Policy 2002 carried forward earlier governmentalinitiatives in terms of ensuring quality drugs at reasonable prices, strengtheningof indigenous capability for cost-effective production, reducing trade barriersand providing active encouragement to in-house R&D efforts of domestic firms.

In 2003, the Mashelkar Committee undertook a comprehensive examination ofthe problem of spurious and sub-standard drugs in the country andrecommended a series of stringent measures at Central and state levels. Theregulatory body came in for censure with the committee noting that there wereonly 17 quality-testing laboratories, of which only seven laboratories were fully


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functional.

The National Pharmaceuticals Policy 2006, among other initiatives, hasproposed a slew of measures such as increasing the number of bulk drugs underregulation from 74 to 354, regulating trade margins and instituting a new

framework for drug price negotiations in a move to make drugs more affordablefor the Indian masses.

Drug Pricing

As mentioned earlier, pricing policy and industry regulation constitutes one

of the key responsibilities of the NPPA. Price control on medicines was first

introduced in India in 1962 and has subsequently persisted through the Drug

Price Control Order (DPCO). As per the directive of NPPA, the criterion for

price regulation is based on the nature of the drug in terms of whether it

enjoys mass consumption and in terms of whether there is lack of adequate

competition for the drug. The year 1978 witnessed selective price controls

based on disease burden and prevalence. The list of prices under DPCO

subsequently witnessed a gradual decrease over a period of time. Around

80% of the market, with 342 drugs, was under price control in 1979. The

number of drugs under DPCOdecreased from 142 drugs in 1987 to 74 in

1995.

Drugs with high sales and a market share of more than 50% are subjectedto price regulation. These drugs are referred to as scheduled drugs. The

NPPAalso regulates the prices of bulk drugs. The MRP excise on medicines

was levied by the Finance ministry in 2005. The objective was to increase

revenue and lower prices of medicines by using fiscal deterrent on MRP. This
http://medind.nic.in/haa/t07/i1/haat07i1p1.pdfhttp://medind.nic.in/haa/t07/i1/haat07i1p1.pdfhttp://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugs-price-control-order.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://medind.nic.in/haa/t07/i1/haat07i1p1.pdf


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change may have had some impact in terms of magnifying the advantage to

industries located in the excise free zones. This also succeeded in attracting

some small pharmaceutical firms to these zones. (Gehl Sampath 2008,

Srivastava 2008).

As the report by NIPER, submitted to the Ministry of Chemicals and

Fertilizers in 2007 points out, this may have led to tax disparities among

firms located in tax exempt zones and tax non exempt areas. This has also

led to small firms in non exempt areas requesting for tax subsidies from the

government.

For drugs not under price control, firms can set the Minimum Retail Price

(MRP). TheNPPAonly intervenes in cases where drugs have significant sales

and where the annual price increases by 10%. This is a recent development,

which came into effect in 2007, as in the past the NPPA would intervene only

if the annual price increases were more than 20%. This development

indicates the heightened sensitivity of the government towards consumer

access to medicines at reasonable prices and keeping a check on profit

mongering by the industry. (ibid)

Fixed dose combinations and prevalence of counterfeit and spurious

drugs

Recently, 294 fixed dose combinations were withdrawn by the Central Drug

Control Authority on grounds that these drugs were therapeutically

irrational. The order was subsequently stayed by the Madras High court. The

issue of the definition of counterfeit drugs is relevant in the context of

different drug quality standards prevailing in the Indian market. While

exported drugs were of a higher quality (WHO/FDA/EMEA/TGA), to meet the
http://niper.nic.in/http://niper.nic.in/http://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://nppaindia.nic.in/index1eng.htmlhttp://www.who.int/en/http://www.who.int/en/http://www.fda.gov/http://www.emea.europa.eu/http://www.emea.europa.eu/http://www.tga.gov.au/http://www.tga.gov.au/http://www.tga.gov.au/http://www.tga.gov.au/http://www.emea.europa.eu/http://www.fda.gov/http://www.who.int/en/http://nppaindia.nic.in/index1eng.htmlhttp://niper.nic.in/


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required standards in the country of export, in the case of the domestic

market, adherence to local quality standards, fixed by the regulatory body

was sufficient. Also absence of transparency in licensing procedures has

resulted in the market being flooded with counterfeit and substandard drugs.

In this context, the Mashelkar Committee report has referred to a WHO

study, which declared that nearly 30% of the Indian market was flooded

with spurious, substandard or counterfeit drugs. The governments own

estimates have been in the range of 8-10% for substandard drugs and 0.2-

0.5% for spurious drugs.

Patents and Data Protection related issues

The Indian Patent Act, 1970 was amended through the Patents Amendment

Act (2005). A technical expert group was constituted under the chairmanship

of Dr R.A. Mashelkar, then Director General of the CSIR. The Committee

decision was that it would be TRIPS incompatible to exclude microorganisms

from patents and to limit the grant of the patent for pharmaceutical

substance to a new chemical entity or a new medical entity involving one or

more inventive steps. The committee also opposed the granting of frivolous

patents and evergreening and recommended the formulation of detailed

guidelines to ensure that only those patents proving substantial human

intervention and utility were granted.

As per the provisions of Article 39(3) of the TRIPS Agreement, member

countries have to provide protection to regulatory data submitted for market

approval of pharmaceutical products under specific circumstances. The

government of India constituted an expert committee under the

chairmanship of Mr Satwant Reddy to formulate adequate steps to deal with

the issue of data protection. The Reddy Committee report, brought out in
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Schedule M Compliance:The requirements specified under the upgraded

Schedule M for GMP have become mandatory for pharmaceutical units in

India w.e.f. July 1, 2005. Schedule M classifies the various statutory

requirements mandatory for drugs, medical devices and other categories of

products as per the current Good Manufacturing Practices (cGMP). Schedule

M protocols have been revised to harmonize it along the lines of WHOand

US-FDAprotocols. These revised protocols include detailed specifications on

infrastructure and premises, environmental safety and health measures,

production and operation controls, quality control and assurance and

stability and validation studies.iiProblems related to Schedule M compliance

are mostly confined to small-scale pharmaceutical units as large-scale firms

have shown greater willingness to comply with the revised norms in order to

increase their competitiveness in the global arena. The Central Drugs

Standards Control Organization has, however, yet to compile data on the

extent of Schedule M compliance by the firms. The Najma Heptullah

Committee on Subordinate Legislation, which tabled its report in Parliament

recently, is scheduled to compile data on extent of Schedule M compliance

shortly. However, according to state regulatory sources, units in states like

Gujarat, Karnataka, Maharashtra and Andhra Pradesh have achieved a high

percentage of Schedule M compliance in comparison to units in other states.

International regulatory certification for Indian manufacturing units: A principalissue relating to good manufacturing practices is that WHO-GMP is no longersufficient, particularly for exporting of drugs and related products to developed

countries. Regulators from these countries visit Indian firms to carry out a thoroughinspection of their manufacturing units before registering the concerned product. Alarge number of domestic players are seeking international regulatory approvals

from agencies likeUS-FDA,MHRAUK,TGAAustralia andMCCSouth Africa in orderto export their products, mostly generics, in these markets. A large number ofIndian firms are increasingly seeking at least WHO GMP approval in order tocompete for exports to CIS countries and other Asian markets. India has thedistinction of having the largest number ofUS-FDAapproved manufacturing units,totaling 100, mainly for production of Active Pharmaceutical Ingredient (API),outside of the United States.
http://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/EN/Index.htmhttp://www.whoindia.org/EN/Index.htmhttp://www.fda.gov/http://www.fda.gov/http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.fda.gov/http://www.fda.gov/http://www.fda.gov/http://www.mhra.gov.uk/index.htmhttp://www.mhra.gov.uk/index.htmhttp://www.mhra.gov.uk/index.htmhttp://www.tga.gov.au/http://www.tga.gov.au/http://www.tga.gov.au/http://www.mccza.com/http://www.mccza.com/http://www.mccza.com/http://www.fda.gov/http://www.fda.gov/http://www.fda.gov/http://www.pharmaceutical-technology.com/contractors/materials/http://www.pharmaceutical-technology.com/contractors/materials/http://www.pharmaceutical-technology.com/contractors/materials/http://www.pharmaceutical-technology.com/contractors/materials/http://www.fda.gov/http://www.mccza.com/http://www.tga.gov.au/http://www.mhra.gov.uk/index.htmhttp://www.fda.gov/http://www.nistads.res.in/indiasnt2008/t4industry/t4ind18.htm#_edn1http://www.fda.gov/http://www.whoindia.org/EN/Index.htmhttp://www.whoindia.org/en/section2/section5/section436.htm


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State-wise distribution of manufacturing units with WHO-GMP certification

State No of units

Assam 1

Kerala 14

Gujarat 307

Maharashtra 136

Haryana 19

Uttar Pradesh 21

Andhra Pradesh 138

Karnataka 52

Goa 42

Daman 26

Pondicherry 10

Tamil Nadu 5

Rajasthan 4

Delhi 12

Uttarakhand 1

Punjab 7

Madhya Pradesh 24

Orissa 1

Bihar 5


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29/57

chart clearly indicates that the majority of trials carried out in India fall

under the Phase III category.

Indias clinical development sector has witnessed a tremendous growth in

recent times. In 2005, the revenues from contract R&D for international

sponsors totaled $100 million and the sector enjoys an annual growth rate of

about 40 per cent. Several global CROshave entered the Indian market in

the last few years. Some of these have also entered into alliances with local

CROs.

CLINICAL TRIAL COST DIFFERENCES ININDIA & U.S.

United States India

Phase 1 $ 20 mn. < $10mn.

Phase 2 $ 50 mn. < $30mn.

Phase 3 $ 100mn. < $60mn.

Source:FICCI2005

CLINCIAL TRIALS IN INDIA: A SWOT ANALYSIS

Strengths Opportunities WeaknessesThreats /

Challenges
http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.ficci.com/http://www.ficci.com/http://www.ficci.com/http://www.ficci.com/http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.biores.org/dir/Companies/Contract_Research_Organizations/


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-Resource pool of well-

trained, qualified, English

speaking manpower

-Diverse genetic pool and

disease variation

-Numerous government

funded and private medical

and pharmaceutical

institutions with state of art

facilities

-Cost efficiency (up to

60%) in comparison to

USA/ Europe

-Fast recruitment of large

number of patients

-Revamped regulatory

regime

-Establishment of Clinical

Trial Registry

-Relaxation of

duties on import

of clinical trial

samples

-Removal of

phase lag and

permission to

conduct Phase I

trials

concurrently in

India along with

rest of the world

- Lack of

adequate

mechanisms to

safeguard

illiterate and

vulnerable

patients, prevent

informed consent

violations and

ensure proper

functioning of

institutional

ethics

committees

- Need for a strong

centralized

regulatory regime

to effectively

monitor GCP

guidelines

-Need for expertise

on data

management

related specialized

services

Policies relating to clinical trials

In this context, it would also be useful to review prominent changes in

policies related to clinical trials in the last few decades. Till about a decade


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ago, regulatory and ethics based environment for the conduct of quality

clinical trials in India were conspicuous by their absence. The Central Drugs

Standards Control Organization (CDSCO) has played a critical role towards

this end. The progression towards Good Clinical Practice (GCP) has largely

been a gradual and slow process.

It was in 1988 that local clinical trials for new drug introductions were first

made mandatory in India. There was also a phase lag as permissions for

trials were granted for one phase behind the rest of the world. Thus, Phase

II and Phase III trials were permitted only after these had been carried out

elsewhere in the world. The period before 2000 witnessed several incidents

of ethical violations related to informed consent and conduct of trials by

multinational firms and domestic players as well. In 2000, due to the

proactive initiatives of regulators, the Central Ethics Committee on Human

Research (CECHR) and Indian Council of Medical Research (ICMR)

conceptualized and issued Ethical Guidelines for Biomedical Research on

Human Subjects. In 2001, a Central Expert Committee was set up by Central

Drugs Standards Control Organization (CDSCO) to develop Good Clinical

Practice (GCP) guidelines in line with the latestWHOandICHguidelines.

Subsequently, the requirements of data submission on animal testing for

permission to undertake Phase I, Phase II and Phase III clinical trials were

laid down in the revised Schedule Y of the Drugs and Cosmetics rules.

As per these revisions, the relevant data submitted to the Drugs Control

General of India (DCGI), is evaluated with the assistance of expert clinicians

& scientists.

Similarly, for registration and approval of new drugs, which have already

been registered and used in the country of origin, Phase II trials in about

100 patients is usually insisted upon by DCGIbefore allowing such products
http://www.cdsco.nic.in/http://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://www.whoindia.org/LinkFiles/HSD_Resources_Ethical_Guidelines_for_Biomedical_Research_on_Human_Subjects.pdfhttp://www.whoindia.org/LinkFiles/HSD_Resources_Ethical_Guidelines_for_Biomedical_Research_on_Human_Subjects.pdfhttp://icmr.nic.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://www.who.int/en/http://www.who.int/en/http://www.who.int/en/http://www.ich.org/cache/compo/276-254-1.htmlhttp://www.ich.org/cache/compo/276-254-1.htmlhttp://www.ich.org/cache/compo/276-254-1.htmlhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://www.ich.org/cache/compo/276-254-1.htmlhttp://www.who.int/en/http://cdsco.nic.in/html/GCP.htmhttp://www.cdsco.nic.in/http://icmr.nic.in/http://www.whoindia.org/LinkFiles/HSD_Resources_Ethical_Guidelines_for_Biomedical_Research_on_Human_Subjects.pdfhttp://cdsco.nic.in/html/GCP.htmhttp://www.cdsco.nic.in/


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to be marketed in India. Normally, new drug approval is usually granted for

a period of about two years. The trials are conducted only after clearances

are obtained from the Institutional Ethics Committees. Consent of patients

for participation in such trials is an integral part of the regulatory framework.

In 2005, Drugs Technical Advisory Board (DTAB) made GLP practices

mandatory for all laboratories and in-house units of pharmaceutical firms

and Contract Research Organizations (CROs). In 2007, norms pertaining to

the Phase lag have also been revised and Schedule Y now permits Phase I

trials to be carried out concurrently in India along with the rest of the

world.

For an efficient and ethical growth of the clinical trials industry, the

appropriate mechanisms to be adopted include the presence of a strong

centralized regulatory regime to effectively monitor GCP guidelines and

ensure transparency in the functioning of institutional ethics committees

(IECs).

Medical devices

In June 2007, the DCGI formulated a new set of guidelines for the import

and manufacture of medical devices in the country. The guidelines were the

aftermath of the JJ Hospital controversy, involving the use of unapproved

and untested stents on 60 patients and the subsequent recommendations

made by the Mashelkar Committee in 2004.

The immediate outcome of the JJ Hospital controversy was that the

Department of Medical Education and Research (DMER) banned the use of

unapproved stents and stressed on regulatory approvals from the country of

manufacture orUS-FDAapproval for medical devices.
http://www.mohfw.nic.in/kk/95/ia/95ia0g01.htmhttp://www.mohfw.nic.in/kk/95/ia/95ia0g01.htmhttp://www.mohfw.nic.in/kk/95/ia/95ia0g01.htmhttp://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.biores.org/dir/Companies/Contract_Research_Organizations/http://cdsco.nic.in/html/GCP.htmhttp://cdsco.nic.in/html/GCP.htmhttp://nims.ap.nic.in/research/Institutional_Ethics_Committee.pdfhttp://dmer.org/vol.htmhttp://dmer.org/vol.htmhttp://www.fda.gov/http://www.fda.gov/http://www.fda.gov/http://www.fda.gov/http://dmer.org/vol.htmhttp://nims.ap.nic.in/research/Institutional_Ethics_Committee.pdfhttp://cdsco.nic.in/html/GCP.htmhttp://www.biores.org/dir/Companies/Contract_Research_Organizations/http://www.mohfw.nic.in/kk/95/ia/95ia0g01.htm


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The Mashelkar Committee subsequently recommended the creation of a

specific medical devices division within the CDSCO in order to address the

management, approval, certification and quality assurance of all medical

devices. This essentially consisted in alteration of the status of sterile

medical devices, intended for internal or external use to medical drugs and

creation of suitable provisions and amendments to the Drugs and Cosmetics

Act of 1940.

The Drugs Consultative Committee approved these recommendations in

2005, ensuring that in future all devices would be licensed for manufacture,

distributed and sold by the CDSCO, with special evaluation committees in

order to ensure that the concerned manufacturing units complied with the

requisiteGMPrequirements.

The principal provisions of these guidelines are as follows:

Ten categories of sterile devices: cardiac and drug eluting stents, catheters,

bone cement, heart valves, scalp vein sets, orthopedic implants, internal

prosthetic replacements, IV cannulae and intraocular lenses; would be

considered as drugs and consequently regulated.

Importers would have to submit US-FDAclearance, the EU medical device

directive or similar approvals from other countries as proof of adherence to

quality standards. Expert committees would be set up for evaluation and

granting of licences to locally manufactured devices, in the absence of

international quality certification.

The approval of the committees would be verified by both Central and State

licensing committees.

Some of the problems associated with compliance to these regulations

include lack of awareness among smaller firms, high registration fees, delays
http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://www.cdsco.nic.in/http://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/en/section2/section5/section436.htmhttp://www.whoindia.org/en/section2/section5/section436.htmhttp://www.fda.gov/http://www.fda.gov/http://www.fda.gov/http://www.whoindia.org/en/section2/section5/section436.htmhttp://www.cdsco.nic.in/http://www.cdsco.nic.in/


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in granting of licences, restrictions in the entry of new players in the sector

and lack of preparation by the firms with respect to documentation

requirements.

TTK-Sree Chithra Tirunal Collaboration on medical devices

TTK Healthcare Ltd and Sree Chithra Tirunal Institute for MedicalSciences and Technology (SCTIMST) are jointly developing a tissue

heart value or bioprosthetic for older patients. The device will beready in around three years and will subsequently undergo clinicaltrials. These valves are used in patients above the age of 40 in Indiaand patients above the age of 50 in the United States. TheChitra-TTK

valves mechanical valves are sold at a price of Rs 25,000 each, about

a quarter cheaper than the cost of similar imported valves. The tie-upis a significant move towards generating affordable indigenous

technology in the wake of high registration fees of imported devices.

The bioprosthetic device would have a shorter lifespan of around 15years in comparison to the existing mechanical valve but the patient

would need to take medication only for a period of 6 months incomparison to a longer duration of medication for patients fitted withmechanical valves.

Biotech Products

The Ministry of Environment and Forests under the Environment (Protection)

Act of 1986 have notified the rules for the manufacture, use, import, export

and storage of hazardous microorganisms or genetically engineered

organisms or cells. As per these rules, biological materials are regulated

from the R&D stage to their release in the environment. The Institutional
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BioSafety Committee (IBSC), Review Committee on Genetic Manipulation

(RCGM) and the Genetic Engineering Approval Committee (GEAC) to monitor

rDNA research, product development and commercialization. The ISBC

functions as the nodal point for interaction within the institution for the

implementation of the rDNA Biosafety guidelines. The RCGM essentially

monitors the safety related aspects of activities involving genetically

engineering organisms or hazardous microorganisms. The GEACundertakes

the responsibility of approval of activities involving large-scale use of

genetically modified/ hazardous microorganisms and products thereof in

research and industrial production and their safety in terms of environmental

protection. In addition, theDCGIand state drug controllers as per the Drugs

and Cosmetics Act 1945 and its subsequent amendments regulate

biologicals.

Deficiencies and Limitations of the current regulatory regime:

Proliferation of spurious and substandard drugs in the Indian market Dual licencing mechanism acts as a deterrent to uniform

implementation of regulatory procedures Lack of transparency in licencing procedures Inadequate regulatory expertise and testing facilities to implement

uniform standards Need for greater thrust on institutional support to small scale firms to

enable speedy implementation of Schedule M upgradation andstandardization of drug quality

Need for greater clarity on patentability of pharmaceutical substancesand conditions under which firms can apply for compulsory licences to

prevent legal battles between local firms, MNCs and civil rights groups. Need for greater coordination, accountability and transparency in

functioning among different ministries concerned with drug regulation.

Recent regulatory initiatives:
http://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/rcgm.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/rcgm.htmhttp://dbtbiosafety.nic.in/committee/rcgm.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://cdsco.nic.in/html/CDSCO%20Contact%2025-9-08.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://dbtbiosafety.nic.in/committee/rcgm.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htmhttp://dbtbiosafety.nic.in/committee/geac.htmhttp://dbtbiosafety.nic.in/committee/rcgm.htmhttp://dbtbiosafety.nic.in/committee/ibsc.htm


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Move to establish an integrated regulatory system through theconstitution of a National Drug Authority so that quality regulation andprice control is performed by the same agency

Establishment of pharmacovigilance centres at national, zonal andregional levels to monitor adverse drug reactions

Move to bring nearly 374 bulk drugs under price control and regulatetrade margins

Capability strengthening to monitor clinical trials, including the settingup of the Clinical Trials Registry of India (CTRI)

Globalisation and its Impact on the Indian Pharmaceutical

Industry

D.P. Dubey

Globalisation is a process which involves economic inter-dependence of countries world-wideremoving all barriers for economic integration as if the whole world is a single village.Obviously, in this process, the rich nations with their superior financial power, control thescenario and the poor and the developing nations are forced to integrate surrendering theireconomic independence knowing fully well what they are forced to accept is really prejudicial totheir own interest. In this process the world financial institutions like the World Bank, IMF andnow the WTO advance the interest of the rich countries alone. The draconian policies of theWorld Bank and the IMF under the structural adjustment programme resulted in the net transferof $178 billion between 1984 and 1990 from the poor countries to the commercial banks of richnations. (UNDP Human Development Report, 1994). The Transnational Corporations (TNCs) ofthe rich nations are practically controlling the world finances. Today, the whole world iscolonised by global finance and the TNCs supported by the neo-colonial structure including theWorld Bank, IMF and WTO are controlling the financial situation world-wide. The governmentsof third world countries are powerless against global finance and are unable to control its

movement within their own national boundaries.

The situation of the world drug industry is no different. 'Operating at the behest of thePharmaceutical Research and Manufacturers' Association (PhRMA) for a decade and a half, theU.S.Government has waged a ruthless crusade to force third world countries to adopt straitjacketing intellectual property rules at the expense of protecting public health', says the editorialcomment in the June 1998 issue ofMultinational Monitor, a journal published from Washington.
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The structural adjustment programme introduced by the government of India at the behest of theIMF, World Bank and WTO created a serious impact on India's drug industry, health caresystem, on the workers engaged in the industry and ultimately on the people of the country.These reform policies are mainly the reduced role of the Government, cut in subsidy in the socialsector, increase in administered prices, liberalisation of trade by increasing tariff rates providing

incentives for foreign investment, privatisation of the public sector, equating foreign companieswith Indian companies, de-regulating the labour market etc. This is aimed at the withdrawal ofthe state initiative from the social and welfare sectors like health, education, public distributionetc.

In this article I shall try to show how the workers of the drug industry and the people of ourcountry are affected by the impact of globalisation.

Drug industry situation prior to the Indian Patent Act, 1970

At the time of independence, the total drug production in our country was around Rs. 10 crores.

At that time the MNCs taking the help of the colonial Patent and Designs Act, 1911 exploited thedrug market of our country. They were engaged mainly in the import of drugs from their countryof origin. Between 1947-57, 99% of the 1704 drugs and pharmaceutical patents in India wereheld by foreign MNCs. During that time the MNCs who were controlling 80% of the market didnot come forward with financial investment and technological help to establish drug productioncentres in India. Drug prices in India were amongst the highest in the world. In 1954, the firstpublic sector drug company Hindustan Antibiotic Ltd. (HAL) was established with the help ofWHO and UNICEF. The Indian Drugs and Pharmaceutical Limited (IDPL) was established in1961 with help from the Soviet Union. The establishment of these two public sector units and thecoming into force of the Drug Policy of 1978 had been mainly responsible for the availability ofdrugs and medicines at relatively lower prices in India. The country became almost self-

sufficient in the production of drugs.

Indian Patent Act 1970

The Patent Bill was first introduced in Parliament in 1967, but the Patent Act, 1970 came intoforce only in 1972. The Indian Patent Act 1970 which is in operation in our country does notallow product patents on medicines, agricultural products and atomic energy. This is the mostsuitable patent act for the developing world. Here, process patents are allowed for 5-7 years.Mainly with the help of the Indian Patent Act 1970 India is today self-sufficient in the productionof basic drugs covering various groups of drugs. Indian scientists developed new processes for107 drugs. Indian companies are now among the world leaders in the production of bulk drugsfrom basic stages. At present, the prices of drugs in India are comparatively cheaper than manyother countries. As per UNIDO, India is identified to produce its own drug needs with its owntechnology and manpower indigenously. After 1970, many new drug firms were established byIndian businessmen. At present, around 23 thousand small, big, and medium factories areproducing drugs in India.

Attempts to change the Indian Patent Act 1970 are a part of this globalisation programme. Theimposition of an unequal trade treaty like the World Trade Organisation (WTO) is a step towards


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globalisation in favour of the MNCs of rich nations. With its help, the market of the developingnations is forced open for the developed countries. Most of the developing countries were forcedto sign the WTO agreement without realising its implication: as a result, the developed countriesare the gainers. Already, at the dictates of the IMF, World Bank and WTO, the Government ofIndia is slackening all checks and controls to invite the MNCs in all industries including the

pharmaceutical industry. FERA and MRTP Acts have been amended. Customs duties andcorporate taxes have been lowered. Relief, concessions and facilities have been extended to theMNCs as to Indian companies. All these, already, had an adverse impact on the indigenous drugindustry. As per the requirement of WTO guidelines for the product patent regime, theavailability of new drugs in our country may be delayed depending on the desire of the patentholders. As per the guidelines, a product patent is granted for 20 years and a process patent foranother 20 years. At present, newer drugs are made available in our country within a 4-6 yearsperiod. Prices of drugs will go up by 5 to 10 times as it is evident from the prices of drugs inIndia and other countries like Pakistan, U.K. and U.S.A. where product patents are in force.Ranitidine is sold by Glaxo in India at Rs. 7.20. The same product is sold by the same companyin Pakistan at Rs. 65 and in the U.S.A. at Rs. 545. Similarly, the anti-viral drug Aciclovir costs

Rs. 33.75 in India while the same drug is sold in Pakistan at Rs. 363. There are many suchexamples. The drug prices in the U.S.A., U.K. and other developed countries have gone up sohigh that the health care expenditure in those countries is predominantly funded by insurancecompanies at a very high premium. In those countries people cannot think of treatment withoutinsurance coverage. Product patent regime will definitely hamper India's drugs exports ascountries will be forced to purchase from patent holders only.

Dilution of Drug Policy and Drug Price Increase

Unlike consumer goods, drugs are not purchased by the preference of a person, but on a doctors'prescription. Consumers have no choice of their own on this matter.

Prices of drugs are increasing by leaps and bounds along with the prices of other commodities inrecent times. The drug manufacturers are flouting the Drug Price Control Order (DPCO). TheDPCO was first introduced in 1970. In 1970 most of the drugs were under price control. In 1987this was diluted and the number of drugs which were restricted declined to 347, in 1987 it wasbrought down to 163 drugs and in 1994 only 73 drugs were under DPCO. Even then industry isnot happy; they want the control to be abolished totally. They have already demanded decontrolof 17 bulk drugs and further recommended full decontrol within 3 years time (Economic Times,28th September, 1998). Many developed countries of Europe control drug prices directly. In theU.K., the government determines the profit level of drugs supplied by individual companies.Acompany has to reimburse excess profits to the Department of Health.

A recent study shows that the prices of many life-saving bulk drugs have gone up steeply. Drugspolic

what guidelines are to be followed by

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