2011 witnessed many interesting developments within the pharmaceutical industry of India. All these developments may not be appreciated by all stakeholders alike, nonetheless had an impact on the industry of varying degree both in the qualitative and quantitative terms.

That said, the list of ‘unfinished agenda’ of the government to improve healthcare access and simultaneously to fuel the growth engine of the industry with reform oriented policy initiatives, kept on increasing staggeringly.

The issue of improving access to modern medicines with comprehensive measures continued to remain unaddressed even in the draft National Pharmaceuticals Pricing Policy 2011. Similarly, the Prime Minister’s dedication of the decade of 2010 as the decade of innovation remained a pipe dream for the pharmaceutical industry of the country.  Policy paralysis of the decision makers during the year failed to translate even this praiseworthy intent into reality.

Increasing consumption of medicines in India: 

Indian Pharmaceutical Market (IPM) continued to grow at a scorching pace of around 15% registering a turnover of Rs 59,621 Crore during the year. (Source: Nov 2011- AIOCD/AWACS).

Fast increasing consumption of medicines in the country continued to position IPM not just as another global success story, but also an emerging pharmaceutical force to reckon with, especially in the development and manufacturing of high quality and low cost generic pharmaceuticals together with its world-class  Contract Research and Manufacturing Services (CRAMS).  Indian pharmaceutical players now cater to about 20% of global requirements of high quality and affordable generic medicines of all types.

Consolidation process continues:

At the same time, ongoing consolidation process within the pharmaceutical industry continued in 2011 with Aventis Pharma (Sanofi) acquiring Universal Medicare and Zydus Cadila shopping for Biochem Pharma.

November 30, 2011: Signaled beginning of the end of the blockbuster drug era:

On November 30, 2011, the patent expiry of the world largest ever brand Lipitor (Pfizer), clocking an annual turnover of over US$ 14 billion and accounting for more than 20% of the company’s sales turnover until recently, I reckon, heralds beginning of the end of the blockbuster drug era.  To equal the turnover of Lipitor with another brand will be a huge challenge not only for Pfizer, but also for any other company in the near to medium term.

Patent expiry of Lipitor will now help opening up the super size Atorvastatin market of the developed world to the Indian generic players.

Launch of innovative products:

Launch of several innovative and patented products in India by the global players during 2011, reconfirmed the attractiveness of the IPM to the global innovator companies. Some of these innovative products are Revolade (Eltrombopag) , Votrient (Pazopanib Hydrochloride) of GlaxoSmithKline, Flexbumin solution of Baxter and BD Ultra-Fine III Nano of Becton Dickinson.

Looking back (2011):

During 2011, the industry witnessed a number of initiatives from the government as an ongoing process, some of which are as follows:

• Establishment of dedicated Pharma Zones in Mumbai, Hyderabad and Delhi airports, including cold rooms to help achieving world-class cold-chain logistics in India in the medium term.
• For the first time in 2011, the government initiated steps to put the ‘Biosimilar Guidelines’ in place to ensure high safety standards for follow-on biologics in India. The Department of Biotechnology (DBT) and the Central Drugs Standard Control Organization (CDSCO) prepared these guidelines in consultation with the industry, the effective implementation of which is keenly awaited. This important step will also help Indian biosimilar drug manufacturers to prepare themselves well to explore the opportunity of gradually opening-up biosimilar drugs markets in the western world, like the USA and EU.
• The Department of Pharmaceuticals (DoP) came out with a draft Uniform Code of Pharmaceutical Marketing Practices (UCPMP) in 2011 to curb alleged unethical practices of ‘bribing doctors’ by pharma companies. The code initially is expected to be of voluntary in nature and its effective implementation will be ensured by the pharmaceutical companies and the industry associations over a period of six months. Thereafter, if the implementation level of UCPMP does not measure up to the expectations of the DoP, it will be made mandatory under strict regulatory control.  However, the final UCPMP has not been announced by the government, as yet.
• The Ministry of Health and Family Welfare constituted a twelve member task force to evolve a long term strategy to address various issues faced by the Indian Pharmaceutical Industry. Unfortunately, tangible outcome from this committee is still awaited.
• Following the Supreme Court directive to the government to bring essential drugs under price control, after a very long time, the Government came out hurriedly with a draft National Pharmaceuticals Pricing Policy 2011 (Draft NPPP 2011) by increasing the span of effective price control to over 65% of the IPM. This flawed draft policy, if implemented, could stifle the growth of the industry.
• During the year the Ministry of Health and Family Welfare finalized the National Vaccine Policy to strengthen the institutional framework required for the universal immunization program. The policy is also expected to streamline the decision-making process on new and underutilized vaccine introduction, besides addressing issues of vaccine security, management, regulatory guidelines and vaccine research and development.
• The Ministry of Health and Family Welfare also came out with the National Health Research Policy in 2011 to overcome the weaknesses of the publicly funded health structures, which restrict research in the priority health areas. This policy is expected to help maximizing the returns on investments in health research through creation of a robust health research system.
• New National Manufacturing Policy (NMP), which ultimately saw the light of the day during the year, is expected to promote the productivity of the pharmaceutical sector, as well. The policy will help enhancing the share of total manufacturing of all industrial sectors put together from the current level of 15% to 25% of the GDP within a decade and would also help creating 100 million jobs in the country.
• 100% FDI in the Pharmaceuticals sector of India remained unchanged, which will attract more foreign investments in this sunrise sector of India.
• ‘Universal Health Converge’, announced during the year by the Planning Commission of India, will help reducing significantly the ‘out of pocket’ expenses incurred towards healthcare, improving its access to all.

Looking Ahead (2012):

• The good news for 2012 is that the Planning Commission has decided to increase the national spending on health to 2.5% of the GDP in the 12th Five Year Plan starting from 2012.
• In 2012, if the ‘NPPP 2011’ is implemented as in its current draft form, it could seriously impede the court of the vibrant pharmaceutical industry of India.
• Introductions of DTC and GST: The ‘Discussion Paper’ on the draft ‘Direct Taxes Code Bill, 2009’ highlighted the possibility that the GST regime could have multiple rates based on classification of goods that are to be listed under the exempted category, like goods which would attract lower rate and another category of goods qualifying for standard rate. This concept of multiple rate of tax under GST regime could impact the pharma/health science industry as the business models followed by this industry typically involves import/manufacture and sale of life saving drugs, medical devices and other formulations, which presently attract either NIL rate of duty under central excise/VAT or lower rate of excise duty at 4%. Presently clinical trial services/R&D services attract service tax at 10.30%.
• The growth trajectory of the IPM is expected to continue to go north despite slowdown in the US and European economies in 2012.

Conclusion:

Like many other sectors, the pharmaceutical industry of India also witnessed the reform oriented policy paralysis of the government in 2011, barring some superficial, half- hearted and incomplete initiatives, as indicated above.

Key areas of general public health interest, encouraging innovation, fostering R&D and improving access to medicines to alleviate healthcare related problems of the common man and at the same time to propel the industry to the inclusive high growth trajectory, have still remained unanswered.

Faster recovery from reform-oriented policy paralysis of the government and effective translation into reality of the seemingly good intent of the policy makers, is now eagerly awaited in 2012.

By: Tapan J Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.