On the healthcare front there has been little progress

If you objectively look at three years of Modi government, undoubtedly there has been a positive change in major policy making. Several reformative steps taken such as GST, IBC (Insolvency and Bankruptcy code), RERA, repealing
of over 1200 laws which were relics of the License Raj, digitisation, Make in India, Swacch Bharat etc. will improve the governance in times to come.

On the healthcare front, however, there has been little progress. Government’s spend on healthcare which hovers around 1.4 per cent of the GDP needs to be increased to at least four to five per cent of GDP. This low investment has resulted in lower access to essential medicines. The proposal to introduce UHC for all Indians, if implemented, will go a long way in improving this situation.

The new draft pharma policy has some good elements such as proposal to form a consultative body to monitor NPPA’s activities which often hinge on ‘guilty until proven innocent’. However, NPPA’s recent action on hospitals and nursing homes charging disproportionate margins on medical devices and consumables has come as a welcome relief to patients and their families.

But, the proposal to discontinue the universally accepted loan license/contract manufacturing system will not only affect the large Indian pharma majors but also MNCs who depend on contract manufacturing for many of the products for which a specialised manufacturing facility is required e.g. soft gelatine capsule,
hormonal products etc. This system also creates several well paying jobs for the SME sector, as well as keeps manufacturing costs down due to lower overheads compared to large pharma companies and utilises the spare manufacturing
capacity available. Despite a reasonably progressive IPR policy, enforcement
is sketchy, for instance, an Indian company was allowed to market a copy product of an MNC’s anti-diabetic molecule which had perfectly valid patent (and also priced at 1/5th US price) in India.

The regulatory system also needs to be strengthened. Lack of proper co ordination between State FDAs and DCG(I) has resulted in problems like ban on 344 Fixed Dose Combinations (FDCs). The controversy has cost the industry close to `3000 crores due to loss of sales.

The ‘Generics Only ‘ proposal from the PMO’s office while good in principle to make medicines affordable, is also going to affect companies who have built strong brands in spite of intense generic competition. With an oversight fromthe FDA, the quality and efficacy of many such generics will remain questionable. Digitisation of approvals, licences, permissions etc. by FDA has also helped to improve operational efficiency. It is noteworthy that many state FDAs like Gujarat have taken a lead in this area.

Rigid price control policies have reduced the industry’s ability to invest
in R&D, innovation, upgradation of manufacturing facilities to comply with latest trends in cGMP and automation to improve quality and productivity. We have already seen what has happened after 74 bulk drugs were placed under price control in 1995 DPCO. Most companies exited this category resulting in our over dependence on Chinese APIs for domestic formulation manufacture.

The 2013 DPCO hasn’t fared any better, there has been shift towards making de-controlled products and fresh investment in pharma industry is sluggish. Recent GMP non-compliance and data integrity issues flagged by the US FDA as well as price cartelisation accusations have significantly impacted the market cap of export-oriented companies.

Overall, for the pharma industry, three years of Modi Sarkar is a mixed bag.