Has the huge demand for Indian generics lulled the country’s pharma industry into somnolence, as reflected from the lack of priority accorded to R&D and new drug discovery initiatives? In an interaction with The Dollar Business, Dr. P. V. Appaji, Director General, PHARMEXCIL, elucidates on this and other related issues

Interview by Satyapal Menon | The Dollar Business 

TDB: What are your expectations from the yet to be released Foreign Trade Policy (FTP)? Have you made some recommendations to be incorporated into the new FTP? If so, what are they?

Dr. P. V. Appaji (PVA): I don’t have much idea and I cannot off-hand talk about the FTP. But we do have some issues when it comes to pharma products covered under the FPS (Focus Product Scheme), which are entitled to 2% duty credit scrip. We have actually recommended some hi-tech products and want the government to also offer them the incentive. But, most of the products, which are a part of the notified list, come from one particular HS code. Incentives are not available to all products across the entire spectrum. There are hi-tech products in other HS codes like antibiotics, HIV medicines and oncology medicines, which do not get the benefit because they are not included in the notified list. The customs authorities accept only those items which have been mentioned under the specified HS code. This puts the industry at a disadvantage, since the codes are not properly defined and not everyone can benefit from the incentive scheme. We have submitted representations to both the Director General of Foreign Trade (DGFT) and the Commerce Ministry requesting them to include the products in the same HS code that has been incentivised. As an alternative we have also suggested that a certain percentage of incentive be distributed across all HS codes and let the objective of the government to give benefits to the industry be availed completely. Otherwise the purpose of such incentive schemes will not be served. There is a difference of opinion and there are disputes within the industry because some really dominant and crucial hi-tech pharma products have been deprived of the benefits extended by the government. The industry is of the view that if incentives are not provided to hi-tech pharma products then it would become really difficult to compete with China in this segment.

TDB: For Indian pharmaceutical industry United States is the biggest market with exports valued at over $4 billion. However, globally, Germany tops the list of countries that are exporting pharma products to US with India still being positioned 5th behind Switzerland, Ireland and Israel? To what do you attribute this trend?

PVA: India is the global leader in generic exports and United States is the biggest buyer of generics from our country. In fact, a lion’s share of generics imports by United States is from India. But, in terms of patented products, Germany, followed by the other countries mentioned, is the biggest exporter of pharmaceutical products to United States.

TDB: Does the fact that US is a major market for Indian generics warrant inspections of facilities located in India, and does it mean a lack of trust in India’s regulatory and monitoring machinery and process?

PVA: Since it is related to human life and health, and, coupled with the fact that US dependence on India-produced generics is quite high, US needs to ensure that quality standards are maintained before the products go to consumers. From this point of view there is nothing wrong with inspections. In fact, inspections have only revealed some discrepancies at a few facilities and related documentation issues, but nothing that is harmful or hazardous to consumers’ safety or health. We have our own regulatory mechanism in place to ensure safeguards.

TDB: According to consulting firm McKinsey & Company, India’s pharmaceutical market will grow to $45 billion by 2020? Do you think this forecast is achievable and based on firm facts?

PVA: Yes, it is achievable since the existing and future demand for generics is growing at a fast pace, particularly in the emerging economies and low-income countries because of the low cost of the products. A case in point is HIV drugs. The cost of the patented product is quite high compared to the generic version of the same. Similar is the case with many essential medicines.

TDB: Traditionally, active pharmaceutical ingredients (APIs) made up the majority of Indian pharma exports. However, recently, the manufacturers and exporters have started focusing more on finished dosage formulations (FDFs). What’s your take on this new trend?

PVA: In case of APIs or bulk drugs, which are mostly exported to regulated markets, there is a negative growth. We are really worried about this trend. However, what is consoling is that many drug manufacturers in India have now started utilising their manufacturing facilities to convert such APIs to formulations rather than sourcing them from outside the country.

TDB: But then the API segment still ends up on the losing side?

PVA: The API segment may be losing the export markets as there is more demand for formulations than APIs now, but when you look at the big picture you can clearly see an increased demand for APIs in the domestic market. API manufacturers, who do not have the facility to convert APIs into formulations, are now supplying to Indian companies or importers that till now were sourcing APIs from outside India. These importers have their own facilities or they are outsourcing the work to the formulation companies in India. Although the products are finally marketed by the formulations companies, the API segment is indirectly benefiting from the exports of formulations.

TDB: There are concerns about China’s exports into India and also the country’s potential to make inroads into India’s traditional export markets. How do you view these issues?

PVA: China has expertise in fermentation technology which gives the country an advantage over India. Still very few companies in India are appropriately equipped with this technology used to produce APIs. This gives China an edge in APIs. Huge capacities, low cost of finance, low utilities cost, and availability of highly developed industrial parks etc. in China are also putting India in a disadvantageous position when it comes to API/Drug intermediate segment.

TDB: The general impression is that priority is not accorded to R&D spend? Is the focus on producing customised and made-to-order products required by the export markets hampering innovation?

PVA: India has introduced some innovative products and some NCEs (new chemical entities) in the domestic market using its own R&D mechanism. This clearly indicates that some original discovery is happening here in the country. For instance, Indian companies like Zydus Cadila, Torrent Pharma and Glenmark etc. are currently developing drugs for diabetes and cardiovascular diseases. However, overall, it is realised that Indian companies do not have the fund support required for pursuing innovations. Pharma companies in India are more known for developing cost effective non-infringing manufacturing processes for off patented APIs and formulations. Therefore, when it comes to manufacturing process we have proven capabilities and capacity to innovate, based on clients’ requirements. Drug discovery involves huge R&D expenditure. Still, most of our home-grown pharma companies cannot afford a full-fledged R&D facility. I think there is a crucial need for enhanced government support to promote R&D in India.