While the Indian industry’s growth stuttered in recent years, the pharmaceutical sector seemed to hold its head high with a double-digit growth, but this concealed a skewed growth model caused by a regulatory impasse: Increasingly, the growth is driven by the increased consumption of older medicines, rather than new therapies being made available to patients as in the past.
Leading drug companies attribute the problem to the central authorities resorting to a short cut that is not in line with the law to curtail state drug regulators’ power to grant marketing licences when it comes to “new drugs”. The Centre’s move is goaded by past experiences of companies using the allegedly lax (and conniving) state authorities to bring new fixed dose combinations (FDCs) of dubious validity into the market to boost profits.
While the Drug Controller General of India had been preventing licensing of new drugs by state authorities for many years, heeding his advice, the National Pharmaceutical Pricing Authority (NPPA) too, later followed this approach.
The price regulator now asks the drug companies to produce copies of their agreements with contract manufacturing units while applying for price approvals of new drugs. On this premise, the regulator has withheld as many as 135 applications for price approvals in the last one year itself, according to industry sources. The NPPA formalised its stance in February by issuing a fresh set of guidelines for price approvals.
Drug companies argue that these agreements are not relevant for granting price approvals (neither does it falls under NPPA’s remit) and is tantamount to forcing them to disclose confidential business information. Without a price approval, companies cannot launch a drug (or new FDC) formulation containing one or more of the “essential medicines” that are under price regulations. About 15-18% of the nearly Rs 90,000 crore domestic drug industry (an equivalent export market adds to this) is subject to price regulation.
The not-so-progressive trend of the dip in new products, which bucked the scenario until a few years ago, has reached an acute stage with the number of new drug approvals declining by 62% between 2008 and 2011 and indicated a further declining trend thereafter as per available data (see chart).
According to Indian Pharmaceutical Alliance (IPA), an industry body comprising the top-notch firms, the delay in price approval for new drugs only helps the established brands that monopolize the market; in many cases, more than 90-95% of the market is either with one player or two-three firms. “Delaying and denying price approvals make it more difficult for companies to do business. It slows down industry growth and adversely affects competition in the market, which goes against the interest of patients,” said D G Shah, Secretary General, IPA. Besides, a mere communication from the DCGI cannot have the effect of undoing a law passed by the Parliament, said Shah. (Under the Drugs & Cosmetics Act, 1940, state drug controllers have the power to grant manufacturing and marketing licences).
The Department of Pharmaceuticals is exploring a solution to the issue. “NPPA and the industry have different views on this issue. We have sought legal opinion. It will indicate a specific direction for resolving the issue,” said a person privy to the department’s thinking. NPPA officials said the guidelines for granting price approvals and the check list of documents needed have been framed taking into account health ministry’s views. “This matter is being discussed at various platforms. We cannot comment any further at this juncture,” said an NPPA official.
The health ministry is uncomfortable with the legal provision that four years after it approves a new drug, it loses the ‘new drug’ tag and state drug controllers are authorized to give marketing permission for the same formulation by any other producer. The industry contends that the fear of irrational FDCs are largely unfounded. The Kokate committee appointed by the health ministry in 2014 found that only 15% of the 6,200 FDCs it examined were “irrational” but the rest of them were yet to be regularised, said Shah.
Incidentally, the tightening of new drug approvals by NPPA comes at a time when the industry is largely relieved from excessive regulations on clinical trials imposed by the DCGI after a 2012 Supreme Court order. While the court order was against clinical trials of New Chemical Entities, the DCGI had clamped down on confirmatory trials of generics with proven safety and efficacy as well, hitting new product launches.
A new drug pricing regime came into force in 2013, covering about 680 formulations of specified strengths across 27 therapeutic categories. As per this, the ceiling price of a particular drug is fixed based on the simple average of prices of all brands and generic versions of that medicine having 1% or more of market turnover for that medicine. Drugs outside direct price controls are being monitored to prevent any abnormal price increase of more than 10% over 12 months. This pricing mechanism replaced the earlier cost based price control that covered almost a fourth of the market.
