One of the perceptible challenge before the pharmaceutical industry is the gradual erosion of domestic manufacturing capacity for certain key APIs and their advanced intermediates. Over a period of time, Indian players have steadily migrated up the value chain to focus on value-added formulations with higher margins. As a result, India is today severely dependent on imports for many essential and large– volume drugs.

Needless to say, that this lack of self- sufficiency poses significant risk, given that most of India’s drug imports are concentrated in China. Any deterioration in relationships with China can potentially result in severe shortages in the supply of essential drugs to the country. Additionally, China could easily increase prices of some of these drugs where it enjoys virtual monopoly.

Moreover, this risk extends beyond the domestic market to the export markets, as Chinese pharmaceutical companies, that have traditionally focused on large– volume intermediates and unregulated markets are beginning to “forward integrate”, and are increasing focus on exports to regulated markets. This emerging trend is underscored by the recent improvements in local Chinese GMP and quality standards, acceleration in the number of manufacturing sites approved by the United States Food and Drug Administration (USFDA), and recent filings of Abbreviated New Drug Applications (ANDAs) by Chinese companies. Given their dominance in intermediates and API manufacturing, Chinese pharmaceutical firms can pose a serious competitivethreat to their

Indian counterparts, once this trend picks up.
Suggested way forward

• ASSOCHAM urges the Government to take steps towards securing short– term supply of essential drugs and at the same time catering to longer–term risk to the domestic API industry from its excessive reliance on China.
• Identify key drug categories that address disease areas with significant burden in India.
• Promote the setting up of vertically integrated manufacturing facilities for essential drugs, at a competitive scale. Old infrastructure of sick PSUs may be leveraged in this regard, through public–private partnerships.
• Utilize capacities of public sector undertakings (PSUs) like Indian Drug & Pharmaceutical Limited etc that invested in manufacturing infrastructure required for many of these APIs and intermediates.
• Engage private players to manage operations so that optimal utilization of the existing capacity is ensured. These capacities need to be enhanced in order to achieve economic scale of production.
• Government can help set up capacities for these APIs/ intermediates by providing fiscal incentives such as subsidized debt, tax and duty breaks on capital equipment.
• Facilitate the establishment of vertically integrated manufacturing facilities by offering incentives to petrochemical and agrochemical companies such as secured committed orders in order to encourage them to set up plants in close proximity.
• Increased investments in the latest technology and R&D can facilitate novel and alternate routes to manufacturing and help to bring down the cost of production through more efficient processes and improved yields. Additionally, alternative routes of synthesis can be explored to reduce effluents, thereby reducing the environmental impact as well as the costs of effluent treatment.
• For long term, the Government could offer fiscal incentives during the formative years to encourage setting up of large–scale pharma and chemical clusters in close proximity to each other
• to enable companies to build scale and vertical integration.

 Innovation & Intellectual Property Rights (IPRs)
Value - addition in pharmaceutical industry comes from the innovation it creates. IPRs encourage innovation, scientific discovery and technology transfer. A strong IPR system not only provides an economic incentive to inventors, but also provides an incentive to investors to invest risk capital in inventive activity – a very high-risk enterprise in which failure is more common than success. Economic incentives are crucial to the process as companies strive to recover the high and growing cost of research and development. On an average a new drug today costs (approx) US$ 1.5-2 billion. The failure rate is high and capital investment is tied up for 12 to 15 years as successful drugs progress through the drug approval process.

To ensure that full potential of the pharmaceutical industry be realized, innovation must be allowed to flourish and the IP rights must be properly recognized, respected and rewarded. This will add speed to the wheels of progress of the nation ushering in a new paradigm. The new paradigm of IP protection brings for the country an excellent opportunity to further stimulate the biopharmaceutical industry creating thousands of new, highvalue jobs, while paving the way for newer avenues of foreign direct investments. Uncertainty over weak enforcement of patents in the country should be dispelled with efficient administration of the new patent regime.

Absence of a strong IPR enforcement regime in India would seriously impact the pharmaceutical companies' ability to recoup their costs and reinvest in other research projects. Enormous investments are necessary to support this time-intensive, extremely expensive, and risky effort. Patent incentives and publicprivate partnerships are necessary in the pharmaceutical industry. Without them, useful innovative adaptations would not be possible. This absence of innovation would ultimately have an adverse outcome on health benefits of people. India has a stake in the global IPR regime in view of the gains being made by its own software and pharmaceutical industry. India, with its vast reservoir of scientific talent and established pharmaceutical industry stands at the threshold of success in biotechnology, after its success in the IT sector and capable of being part of the next revolution underway. India needs to stoke an innovative culture. In this research driven sector the right legal framework is lacking, which discourages continuation and deepening of international partnerships and expanded research and development in India.
 
Suggested way forward

• Establishment of a strong IPR enforcement regime that would protect innovation and stimulate the growth of Indian pharmaceutical industry
• Setting up of specialized courts which are equipped to adjudicate upon technical and scientific issues involving pharmaceutical patents.
• Patents protection is granted to the patentee for a finite period and therefore, expeditious adjudication of disputes involving patents assumes great significance. Therefore, it is urged that establishment of specialized courts may enable early disposal of the disputes within a specified timeframe.
• Synergy between industry and major government institutions and universities for technology transfer and Intellectual Property Right for research and innovation is the need of the day and the same should be Encouraged.
• Adopt a holistic approach for promoting innovation and realizing the potential of the India as a destination for global R&D investment.

FDI in pharmaceutical sector
India’s liberalization of FDI policies over the past two decades has enabled Indian companies to flourish, due in, part to technology co-operation (technology transfer), resources and new market access opportunities from foreign investments. Mergers and acquisitions (M&A), greenfield and brownfield investments, and joint ventures contribute not only to the creation of high-value jobs for Indians but also access to high-tech equipment and capital goods. Technology co-operation from the foreign pharmaceutical industry not only stimulates growth in manufacturing, R&D, and the domestic industry, but improves patients’ health with increased access to breakthrough medicines and vaccines. The work and progress of this industry is helping to turn India into a country with a research-based pharmaceutical industry capable of developing innovative medicines.

100% FDI in pharmaceutical sector has been allowed in India in greenfield investments under the automatic route and in Brownfield investments with Government approval route. The Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting such approval. A new rider has been implemented from January 2014 that non-compete clauses would not be allowed except in special circumstances with the approval from Foreign Investment Promotion Board (FIPB).

India has attracted US$ 1279 millions of FDI in drugs & pharmaceuticals in the year 2013 and this is primarily because of the liberal FDI policy. Existing data belies the apprehension raised by few quarters of the Government that there has been, or there is, a trend towards decreased availability of medicines on account of mergers and acquisition of Indian companies.

Even as per data analysis conducted by the Department of Pharmaceuticals (DoP) regarding prices and availability of medicines over the past few years and also exports and imports do not indicate that M&As so far have led to stoppage of nationally relevant drugs. Further, there are existing mechanisms in place in the form of National Pharmaceutical Pricing Authority which acts as a watch dog over the pricing of drugs in India. Additionally, there is Competition Commission of India (CCI) that keeps an eye on all the sectors, including pharmaceuticals, intending to form cartels or follow any unfair trade practice. The M& As have, in fact, always resulted in capacity building, growth in technology, increased competition and medical advancement by bringing on board the entire product portfolio approved and marketed globally by the acquiring country.

Because of the concerns being raised by few departments within the Government of India, particularly, the Department of Industrial Policy and Promotion (DIPP), there have been deliberations to revise the existing pharmaceutical FDI policy. The industry wishes to apprise this

Government that investors are already apprehensive of the real implications that the recent imposition of the restriction on the non-compete clauses may have on India’s domestic pharmaceutical industry, patients and economy. This is particularly because the conditions under which the non-compete clauses may be allowed by the FIPB have not been specified leaving room for subjectivity.

Non-compe importance and are necessary in case of M&As - the purpose of this covenant is to protect the buyer from the seller’s unfair competition. Non-compete clauses that are reasonable are standard to most M&A transactions worldwide though with some checks and balances. The reasonableness of the restrictions on competition is usually measured by analysing issues such as subjects, content (subject matter, scope), the geographical territory and the duration of application.
 
Suggested way forward

• Present policy on FDI in pharmaceuticals government should be continued with specified riders for approval in case of brownfield investments.
• Government of India may also consider addressing some of the grey areas that continue to exist – for example, the criteria adopted by FIPB for giving approvals; time frame within which such approvals will be given; etc. and come out with clearer guidelines that are transparent, predictable and reasonable.

Biologics/similar biologics
Bio-pharmaceutical sector is growing at exponential rate in India. It goes without saying that India has a tremendous potential for being an international hub in this sector. This potential has to be harnessed and given the right impetus to maximize growth. One of the biggest hindrances for the biopharma sector is the ambiguity in the regulatory framework with respect to approval of biotech pharmaceutical products. Approvals are to be obtained from multiple agencies, where one agency, i.e. Department of Biotechnology, follows a set of guidelines (i.e. Guidelines on Similar Biologics, 2012) whereas the other agency, CDSCO, which is another arm of the same Government, does not implement the same guidelines.
 
Suggested way forward

• Clarity in the regulatory framework on the basis of which the technological, financial and regulatory challenges can be truly assessed and the utilizations of such valuable resources be optimized to its fullest potential.
• Implementation of the guidelines on similar biologics by the CDSCO and to promote comprehensive indigenous manufacturing of similar biologics and vaccines under the said guidelines to meet for local and export requirements;
• Revive export incentives and Biotechnology Park (BTP) schemes for this sector to realize its full potential. Tax and excise holidays in such BTPs should be provided to overcome the high capital investment in R&Ds and funding of innovative researches.

 Ethical marketing
The DoP issued the Revised Draft Uniform Code of Pharmaceutical Practices (UCPMP) on March 26, 2012 as a voluntary code of marketing practices for the Indian pharmaceutical Industry, with the intent to review it six months from the date of its issue. If not implemented effectively by pharma companies, the Government was to consider making it a statutory code. The Government aims to follow through its intent, both to inspire confidence among patients and to demonstrate India’s commitment to a high level of ethics and compliance to ensure a level playing field for all.

While it is important to achieve results, how we achieve them is equally important. Being a patient-focused industry, we are committed to product safety and quality. In our interactions with the medical community, we are committed to following ethical promotional practices in our interaction with healthcare professionals and patients. We believe there must always be confidence that prescription decisions are made ethically and to benefit the patients.

Drugs & Cosmetics Amendment Bill, 2013
The Drugs & Cosmetics (Amendment) Bill, 2013 (Bill), was introduced in the Rajya Sabha on August 29, 2013 with a primary objective of making amendments to the Drugs & Cosmetics Act, 1940 (an Act promulgated prior to Independent India) in line with some of the major recommendations of the Mashelkar Committee and to frame a robust regulatory oversight on account of the significant growth in the pharmaceutical and medical devices sector. ASSOCHAM members supports a substantive overhaul of the Drugs & Cosmetics Act, 1940 to meet the special requirements of the 21st century and would like to pledge its full support to the Government’s initiative for bringing about a regulatory regime that will merge the best interest of patients with that of the producers without compromising issues on patient safety. The industry believes that the proposed amendment of the Act is the best opportunity available to all stakeholders concerned to work together towards a perfect law and would earnestly request this to be a collective and participative process.

While the industry is aligned with and is wholly supportive of the authorities endeavour to ensure availability of quality, safe and effective medicines, it is, however, concerned that the proposed law in its present form does not provide an equitable, fair and conducive environment to the matured pharmaceutical and devices industry for its healthy growth and development in India. ASSOCHAM made a detailed clause by clause analysis of the Bill and submitted its recommendations/ suggestions to the Department Related Parliamentary Standing Committee on Health and Family. Unfortunately, recommendations of the said Committee in its 79th Report do not address the concerns of the industry and is grossly unfair to the manufacturers and marketers of pharmaceutical products.

One of the biggest drawbacks of the Bill is that it has been drafted with a unilateral focus on enforcing the strictest of liabilities on the producers and importers of pharmaceutical products without considering whether such liabilities may be warranted or not. The Bill fails to recognize the fact that an equitable and a nonambiguous legal environment provided to genuine producers, importers and researchers serves a vital public interest purpose as it ensures access to quality life saving products. The Bill makes it extremely difficult for producers of pharmaceutical products and medical devices to invest in India and to risk getting into the business of developing life saving products. The law governing the pharmaceuticals and together towards a perfect law and would earnestly request this to be a collective and devices should not result in unwarranted harassment to genuine manufacturers due to unintentional technical breaches, which can be corrected and rectified without compromising patient interest & safety.

Further, if the clauses related to conduct of clinical trial in the Bill become the law in its present form, researchers in India will be averse to conducting clinical trials in India. This will not only deny adaption of new life saving techniques and treatments for the benefit of Indian patients, but will also curb innovation and knowledge development so vitally needed to achieve the goal of quality health access to all.

The Bill, in its present form, needs a complete overhaul particularly in respect of manufacturing and labeling. The Act needs to provide for simplified labeling and manufacturing provisions that are aligned to well established and recognized practices and remove ambiguities and uncertainty in interpretation.
 
Suggested way forward

• ASSOCHAM members urge the Government to reconsider the Bill from a fresh perspective and specially determine whether the recommendations of the Mashelkar Committee and its rationale are actually being met by the Bill in its present form.
• Ambiguous and discretionary power conferred to the regulator should be clearly defined;
• Strict punitive actions prescribed under the Bill should be made commensurate with the offences committed. Further, provision for compounding of certain minor offences should be made as currently under the Bill there is risk of imprisonment for minor technical non-compliances even if committed without intention and /or knowledge.
• Provision on medical devices should be covered separately in the Bill. The Bill predominantly equates medical devices with pharmaceutical products. For example the Bill does not define the terms ‘manufacture’ and ‘manufacturer’, as appropriate to medical devices - such a treatment is fundamentally flawed.
• Genuine concerns of the industry should be considered in a positive manner and be given due weightage without compromising on issues o patient safety. The new law should reflect convergence of interest of all concerned, be fair and equitable and should support the pharmaceutical/device importers, manufacturers and the clinical researchers in providing quality, safe and efficacious treatment to all concerned.
• Any and all ambiguities, which have been identified by Government appointed experts them selves, should be remov ed.

Fixed Dose Combinations (FDCs) in India
India is the world leader in FDCs. Traditionally, India has been a trend setter in innovative and novel FDCs offering patient convenience especially in chronic therapy, reducing pill burden and ensuring better compliance resulting in better healthcare management for patients. FDCs are considered as a valuable avenue in the medical armamentarium that needs encouragement. According to the latest IMS TSA April 2014 datasheet, out of the total pharmaceutical market, FDCs constitutes 48% of the market share. Recently FDCs came into a lot of controversy with concerns over irrationality, potential misuse and as cause of drug resistance. The Parliamentary Standing Committee (PSC) on Health and Family Welfare in its 59th Report took serious note of State Licensing Authorities (SLAs) granting marketing approvals for FDCs without prior clearance from the CDSCO as mandated under the Drug & Cosmetics Rules, 1945 pursuant to its effective amendments in 1988 and 2002.

Following this, the Drug Controller General of India (DCGI) issued circulars dated Jan 15, 2013 and July 05, 2013 to all State/UTs Drug Controllers directing the manufacturers of FDCs, licensed to manufacture prior to October 1, 2012 without approval from the CDSCO, to prove safety and efficacy before CDSCO within 18 months from January 15, 2013. FDCs which have been in market for decades and since the time they were not even considered as new drug under the Drugs & Cosmetics Rules, 1945 and which never raised any safety concerns have fallen within the ambit of these circulars

ASSOCHAM appreciates the move of CDSCO towards streamlining the FDC segment by allowing only those FDCs in the market that are not only science based with proven safety and efficacy parameters but     also have projected their rationality and therapeutic value. However, IPI is deeply concerned that the regulatory directive has a significant impact on the medical community and patient convenience as products which were consumed by patients for decades without safety issues may get discontinued. IPI is also deeply concerned over the uncertainties that loom large in respect of examination of these FDCs by the CDSCO - the sub-committee constituted under the chairmanship of Dr. B. Suresh, President, and Pharmacy Council of India to give recommendations and suggest guidelines for examination of these FDCs are still awaited. In the absence of guidelines, the process of examination followed by the Expert Committees constituted to examine the rationality as well as safety and efficacy of the SLA approved FDCs and to evaluate the applications is far from being transparent and there seems to be discontent in the industry that the same yard stick is not applied for all FDCs or by all the Committees.

Suggested way forward

• Principle of non-requirement of proving safety and efficacy for FDCs licensed prior to September 21, 1988 should also be extended to the FDCs licensed prior to 2002 as the requirement of obtaining a prior approval from the DCGI for getting a manufacturing license of drug formulations falling under the definition of “new drugs” came only in 2002 - these FDCs are being used by the medical fraternity for years and their safety and efficacy is well established.
• FDCs marketed prior to 2007 should be exempted from proving safety and efficacy as DCGI has already done the exercise of weeding out irrational FDCs in 2007 wherein it banned 294 FDCs. Even for these banned FDCs, Madras High Court has granted a stay on the ban.
• For FDCs licensed post 2007, the process of examining safety and efficacy should only be done once the guidelines as recommended by Drug Technical Advisory Board (DTAB) are in place. Till such time, the process of examination of the FDCs should be Stopped.
• Certain flexibilities in additional data requirement should be considered by the Government in case of FDCs with good therapeutic record, some. CDSCO’s 2010 Guidance Document on FDCs itself states that if the combination of FDCs is for mere convenience, then generally studies are not required provided the ingredients are already approved.
• Data on safety and efficacy may be asked on a case to case basis for only those FDCs which are irrational or which have no therapeutic justification. The same was being done in 2007.

 Drug Price Controls in India
Price controls for drugs and formulations have a long history in India with the first price control order being issued under the Defence of India Act in 1963. In 1970, the Drug Price Control Order (DPCO) was introduced almost simultaneously with the amendments to the Patents Act in 1970 that derecognized product patents. Under the Drug Prices Control Orders, the Government has been regulating prices of drugs and formulations since 1970. Initially, there was a 100-percent control on all drugs and formulations. However, progressive liberalization reduced it to 74 bulk drugs in 1995. An attempt to reduce it further to 25 bulk drugs in 2002 was unsuccessful, with litigation against the move.

National Pharmaceutical Pricing Policy (NPPP 2012), the market-based policy covering medicines under the National List of Essential Medicines (NLEM) 2011, as announced by the Government on December 7, 2012, was not only a simple, transparent and balanced formula in terms of implementation and monitoring, but also could significantly improve the availability of essential medicines for patients.

This positive move was however, lost in translation to a large extent while framing of the drug price control order. Further, a delicate balance that was well struck between availability and affordability of essential medicines has been somewhat translated into an unpredictable policy giving rise to erroneous interpretation by the National Pharmaceutical Pricing Authority (NPPA) thereby causing undue hardships on the manufacturers. One of the outstanding issues that pose a threat to not only the industry but also to the patients at large is arbitrary and ultra vires exercise of powers by NPPA that is beyond the scope of NPPP 2012 as well as DPCO, 2013. These powers are vested in Paragraph 19 of DPCO, 2013 and NPPA has exercised these powers to an extent that it amount to de facto policy making. Such arbitrary actions cause chaos and unpredictability for the industry in terms of implementation and adherence to policy. Another pressing issue is that Price fixation mechanism does not provide any distinction for formulations under NLEM, which are sold as (NDDS – New Drug Delivery System) systems like Dispersible Tablets, Gelatin Coated Tablets, Bilayered Tablets, Sustained Release Tablets, Chewable Tablets, Effervescent Tablets, Inlay Tablets etc. Such formulations were developed for different set of patient groups as also for improved release pattern and stability of the APIs and the industry has made considerable investments in producing such delivery forms.

ASSOCHAM members wish to flag a yet another practical difficulty faced by the IPI. Paragraphs 13 & 24 of the DPCO, 2013 require manufactures to ensure that the prices of scheduled formulations, as fixed under the Ceiling Price Notifications, are implemented within 45 days even for the stocks in the market. In the matter of Writ Petition No.4373 of 2013 filed by Cipla Limited before the High Court of Delhi, the Government clarified that as long as the manufacturer has issued Form – V to the Dealers, State Drug Authorities and the Government, no coercive action shall be taken against the manufacturer and such stocks can continue to be sold as per DPCO, 2013. While this clarification has helped in effective implementation of the revised prices for a few companies, many manufacturers are witnessing market returns due to issues raised in some of the states by the drug authorities. Further, manufacturers cannot practically ensure that retailers have been given a copy of Form V. This is because in pharmaceutical trade, manufacturers do not deal with retailers directly.

Another anomalous policy decision apparently taking shape could as well be a cause of extreme concern for the medical device industry. The earlier Government took an initiative to extrapolate the drug price control mechanism to medical devices as well. This is inherently erroneous as medical devices are fundamentally different from drugs and cater to completely different market having substantially different market dynamics. This is unequivocally clear from the fact that Government of India is deliberating on a separate regulatory regime for medical devices thereby differentiating them from drugs under the schemes of Drugs and Cosmetics Act 1940.

Preparation of a National List of Essential Medical Devices would involve far more complex parameters than what could be applied for drugs. In fact, the WHO has been working for many years to develop a comprehensive list of essential medical devices but it is still far from close to completing the list. Moreover, the trend at WHO seems to be a move towards creating lists of Essential Medical Devices for certain situations (i.e. influenza outbreak, natural disaster, etc.) or human conditions (maternal health, reproductive health, diabetes, etc.) rather than a single comprehensive list.

Pharmaceutical industry is an integral part of the healthcare ecosystem and growth and sustainability of this industry is as important for a healthy healthcare environment as the presence of other factors. The stated objective of NPPP 2012 is to put in place a regulatory framework for pricing of drugs so as to ensure availability of required medicines – “essential medicines” – at reasonable prices even while providing sufficient opportunity for innovation and competition to support the growth of industry, thereby meeting the goals of employment and shared economic well being for all. The industry is willingly duty-bound to partner with the Government in its endeavour to provide access to affordable healthcare for people of India and seeks further dialogue on the issue in order to maintain the critical balance between affordable medicines and industrial growth.
 
Suggested way forward

• The stated objectives of NPPP 2012 should strictly be followed while exercising price controls, i.e. to put in place a regulatory framework for pricing of drugs so as to ensure availability of required medicines – “essential medicines” – at reasonable prices even while providing sufficient opportunity for innovation and Competition.
• Clarify that submission of information regarding price revision would amount to implementation of Price Fixation Orders. Manufacturers should not be made liable for lapses on the part of the retailers.
• Special delivery systems like ER/SR are clearly out of the scope of the price control span as NLEM 2011 itself specifies only normal delivery routes. Therefore, special delivery routes should be considered only in cases where NLEM explicitly mentions such forms against the drug in question.
• Drug Price control mechanism cannot be used in case of Medical devices as medical devices are fundamentally different from drugs.
• Plenary powers like that of Para 19 of DPCO 2013 must be only used under emergency circumstances on a case to case basis as a temporary arrangement. These powers should not be vested in authorities like NPPA where there is an already evident case of abuse of powers.
• Medicine is one of but many links in the health care chain, along with providers, hospitals and clinics, and health insurance. Focusing on one aspect, e.g. pharmaceuticals, while ignoring the other aspects, will not solve the problem of access to health care.

 (Courtesy: Assocham study  "Pharmaceuticals Sector in India: Challenges Faced & Suggested Way Forward")