By Bobby George, Ph.D., VP and head of regulatory affairs, Reliance Life Sciences Pvt. Ltd.
The Indian pharmaceutical sector is largely fueled by exports. It is the third-largest foreign exchange earner for India. However, recent trends have shown declining CAGR; non-adherence to quality standards and norms; increasing competition from other countries; overdependence on imports for key starting materials (KSMs), intermediates, and APIs; and lack of focus on R&D and drug discovery. Over the last five years, many changes have affected the pharmaceutical sector, which have necessitated a fresh, comprehensive national policy to maintain and enhance its global competitive edge in quality and prices. The Department of Pharmaceuticals (DoP), under Government of India (GoI), released in August 2017 a new draft of the pharmaceutical policy, addressing a wide range of issues. Some of the proposals have stirred a hornet’s nest, as they would impact revenues and long-term strategic plans of many of the market’s stakeholders. Further deliberations and negotiations are expected.
The policy’s key objective is to make essential drugs accessible at affordable prices to common masses while providing a long-term, stable policy environment for the pharmaceutical sector. It aims to make India sufficiently self-reliant in end-to-end indigenous drug manufacturing, while ensuring world-class quality of drugs.
Stress On Indigenous Drug Manufacturing
Concerns have been expressed in the policy on the very high dependence on imports from few countries (like China) for the raw materials and intermediates needed for manufacturing drugs. Today, more than 60 percent of APIs are sourced from other countries, and more in the case of intermediates and KSMs. This is perceived by DoP to have a direct bearing on the nation’s drug security. In an attempt to restore and revive the API, KSM, and other intermediates’ manufacturing capabilities indigenously, the policy encourages end-to-end indigenous drug manufacturing. It proposes the formulations produced from indigenously produced API and its intermediates be given preference in government procurements. It also proposes such formulations be taken out of price control for five years and the price control be linked to the indigenous content of the formulations. It states all APIs which can be indigenously manufactured should be imported at peak customs duty. The policy also proposes to create an enabling environment for setting up mega-bulk drug parks where benefits of scale can be availed of by using common facilities for pollution control, effluent treatment, or any common activity with minimum interface/single-window clearance of various agencies. In the long term, this could reduce risk for the domestic pharmaceutical sector and provide a sustainable environment for growth. However, manufacturing these locally may not be cost-efficient.
Focus On R&D
There is disproportionate focus on generic formulations to the point of exclusion with lack of adequate R&D. To encourage R&D, per the policy, GoI would allow a concessional rate of customs duty of 0 to 5 percent on import of specified goods and services required for R&D in the pharmaceutical industry. All novel drug delivery systems (NDDSs) should be considered new drugs unless certified otherwise by the licensing authority. This will also encourage innovation. It is also proposed to strengthen the existing National Institute of Pharmaceutical Education and Research (NIPER). In the policy, there is no mention of encouraging R&D of orphan drugs for catering to unmet medical needs, say by giving incentives to manufacturers.
Rationalizing Registration Fees For Overseas Manufacturing Sites For Import
Currently per the Drugs and Cosmetics Act and Rules, the registration fee for overseas manufacturing sites is $1,500 per facility and $1,000 per drug/strength. Inspection/audit of the facility, if necessary, carries an additional $5,000 fee. These rates are peanuts compared to what is charged in developed economies like the U.S. or EU. Further, overseas facility inspections are not frequent. Having recognized the gap, the policy intends to amend the fee structure and states the fee structure would match international standards being followed by larger pharmaceutical-producing countries. It remains to be seen to what extent the regulatory fees are hiked, given that the earlier draft GoI notification for increasing the fee structure was met with a lot of resistance.
Bioavailability And Bioequivalence (BA/BE) Requirements
Currently, the manufacturing license for established drugs (already on market for more than four years) is given by state drug administrators without any BA/BE test of the products. For better quality control, the policy makes BA/BE tests mandatory for all drug manufacturing permissions and for future renewals of manufacturing licenses for all drugs. It is to be implemented in phases so small-scale industries are not impacted upfront. Still, this is expected to raise a cry from manufacturers as it will impact the overall development cost and affordability of drugs. The industry has expressed difficulties implementing BA/BE studies for all drugs and has suggested it should be restricted to BCS Class II and Class IV drugs only. They have also suggested that relevant infrastructure (accredited BE centers and testing laboratories) must be established before implementation.
The policy also states the central drug regulator shall conduct regular annual audits of laboratories accredited to conduct BA/BE tests and certify the results. Provisions for self-certification for BA/BE compliance by existing license holders would also be introduced so effective quality standards can be ensured without waiting until the time of future renewals. Self-certification of manufacturing plants based on a regulatory-driven checklist has already been initiated, and the same concept seems to be getting extended to BA/BE centers as well, which is a welcome move.
Emphasis On Quality Standards
The quality assurance of indigenously manufactured drugs has been an area of concern. The DoP in its policy admits that while the drugs that get exported have a stringent quality assurance system insisted upon by the importing countries, concerns have been raised on the quality surveillance of indigenously manufactured drugs for domestic consumption. There are not enough Nationally Accredited Laboratories (NABLs) for conducting frequent and regular tests. The record of regular audit of these NABLs is also not encouraging. Delays in analyzing not-of-standard and substandard drugs and preparing results of drug samples could be reduced considerably with more drug testing laboratories.
Inspection of manufacturing premises and processes is often perfunctory or absent. Many manufacturing units are not compliant with the WHO’s GMP or GLP. The policy states the government shall ensure he WHO’s GMP and GLP are adopted by all manufacturing units. As the first step, all national-/central-government-level procurements as well as state-government-level procurements completed with National Health Mission funds would be required to be from GMP- and GLP-compliant manufacturing units. For small-scale industries, this will be mandated phase-wise and they would be given incentives to upgrade. Companies supplying in the domestic market and not intending to export their products would be up in arms about this, as currently they only need to comply with the local Schedule M, GMP requirements. Implementation of this proposal could lead to the closure of many of these companies if they are not willing to raise their quality standards.
Reduction Of Drug Approval Timeline
The approval of a new drug (by the central drug regulator) is a long process with a huge economic implication for pharmaceutical manufacturers. The draft policy proposes to shorten the approval process to three months (which could be extended by another three months) and to standardize the process. Though a welcome move, restructuring the review and approval process and crunching timelines will certainly be a challenge for regulators.
Phasing Out Loan Licensing
The policy states loan licensing will be not be allowed, except in the case of biopharmaceuticals. As this initiative is bound to be resisted by many industry players, the policy has a Plan B, which includes:
- phasing out over three years
- allowing only WHO GMP-approved facilities
- allowing up to 10 percent of the company's total production.
Industry stakeholders have argued if implemented in totality, it will be counterproductive and lead to a monopoly in the hands of large manufacturers. Loan licensing allows utilization of spare capacity for small and medium enterprises (SMEs), and more than 40 percent of pharmaceutical production is generated through this model. Also, manufacturing plants offering loan licenses are subject to approval from regulatory authorities on their quality adherence; hence, the concern is not valid.
Similarly, another variant of loan licensing is the practice of P2P (product-to-product) manufacturing by which one company is approved to manufacture one drug and manufacture it for different companies, which market it under their respective brand names at varying prices. The policy intends to phase out the P2P practice, following the broad principle to have one manufacturer, one salt, one brand name, and one price. Opponents feel the P2P arrangement improves the market reach of a drug and should be allowed.
Emphasis On Generic Drug Prescription And Public Procurement
Per the policy, drugs should be prescribed per generic and not brand names, exemptions being fixed-dose combinations (FDCs: drug-drug combinations) and patented drugs. Giving brand names to generic drugs hampers innovation and should be discouraged. The policy also proposes to enhance pharmacists’ skills. Public procurement and dispensing of drugs will be of generic drugs in salt names. This proposal will be resisted by both manufacturers and doctors, and understandably so as it will affect their revenues and margins/incentives. Promotional activities may shift from doctors to pharmacists. Since FDCs were excluded, companies also may focus more on developing them to retain their brands.
To aid registered medical practitioners in prescribing medicines in their generic names, the policy states e-prescription will be implemented whereby prescriptions will be computerized and the medicine name will be chosen from a drop-down menu of salt names. Further, there will be detailed guidelines for encouraging e-pharmacy with adequate safeguards. The union health ministry is examining technical feasibility and modalities involved in effectively regulating online pharmacy in the country. This is in line with GoI’s much-awaited plan to launch a centralized portal to use information technology to make medicines available transparently across the country.
The policy recognizes there is no authentic database on the pharmaceutical sector. It states one will be created featuring manufacturers, brands, and products. Convergence of multiple data sets generated at different levels into one database could be put to multiple uses at both the domestic and international levels.
Regulating Marketing Practices
Unethical marketing practices ead to an unfair advantage. It is widely known that doctors are lured to recommend a particular brand with referral incentives, often disguising and terming them as educational conventions and other incentives. There is a voluntary Uniform Code for Pharma Marketing Practices (UCPMP), which was issued by the DoP in 2011 and amended in 2015. Per the UCPMP, no gifts, pecuniary advantages, or benefits in kind may be supplied, offered, or promised to persons qualified to prescribe or supply drugs by a pharmaceutical company or any of its agents (i.e., distributors, wholesalers, retailers). However, the UCPMP has no legal backing and lacks penal provisions to deter wrongdoers. While The Drugs & Magic Act prohibits any advertisement of a drug, “educational” conferences are used to circumvent this. These add to the overhead cost of the drugs. The policy states the UCPMP would become mandatory to level the playing field, and penalty for violations and an agency for implementation would be assigned. The DoP now plans to introduce the UCPMP under Essential Commodities (EC) Act with the aim of deterring and regulating unethical promotional practices in the industry. However, this has evoked a sharp response from the pharmaceutical industry, which feels separate legislation should be introduced making the UCPMP mandatory and ensuring its effective implementation instead of bringing it under the EC Act.
Drug Pricing And Trade Margins
In India, 65 percent of medical costs are for out-of-pocket drugs. The policy aims to make drug pricing more oriented to the poor while retaining industry friendliness. The draft policy states the DoP will take over control of the National List of Essential Medicines (NLEM), which is the basis for determining which drugs the government can control the prices of. It further states the government in the DoP will prepare the list of medicines for price regulation and transmit it to the National Pharmaceutical Pricing Authority (NPPA) for fixing the price ceilings. Currently 680 medicines are under the NLEM, and the NPPA has fixed the ceiling prices of around 530 of them.
Per the policy, the Drugs (Prices Control) Order (DPCO), which is implemented by the NPPA, will be modified on many counts. The Schedule I of the DPCO shall contain only the medicine’s name in the NLEM, without referring to its strength and dosage forms. The DPCO will include only off-patent medicines. In-patent medicines will not be subjected to price ceilings by the NPPA, a move welcomed by foreign multinational drug firms. Prices for patented drugs would be regulated through a compulsory license mechanism, provided under the WTO TRIPS Agreement and Patents Act of India. However, there should be a mechanism and database to generate appropriate statistical results to support issuance of compulsory licenses.
The policy envisions to strengthen the NPPA to be a multi-member body, with decisions made only by consensus. This is in line with the GoI think tank NITI Aayog’s view as well. The policy goes on to state the NPPA will be assisted by an advisory body for pricing, nominated by the government. However, the government shall not be the regulator. From the wording of the policy, the DoP seems to be curbing the NPPA’s autonomy. Some have even questioned the need for an advisory body, as the NPPA has been perceived to be doing its job fairly, as seen from the recent cap imposed on the pricing of medical devices like stents and knee replacement implants.
Per the policy, all regulators/commissions pertaining to the pharmaceutical industry will be brought under one department. The NLEM is prepared under the aegis of the Ministry of Health. The constitution of the DoP, on the other hand, is under the Ministry of Chemicals and Fertilisers, instead of being a part of the Ministry of Health, which is perceived as a structural flaw. Being under one ministry could create greater synergy in policy implementation.
In the Indian pharmaceutical industry, about 2,500 pharmacopeial salts are manufactured, but there are more than 60,000 brand names with varying prices! The widely varying prices for the same drug and the markups thereon for retailers, distributors, and stockists have created a negative perception of the industry’s pricing practice. Recent cases came to light of medical devices and some lifesaving drugs being sold at huge margins, in clear violation of the DPCO. The policy proposes to prescribe the level of trade margins to create a level playing field and bring down prices. Institutions receiving supplies directly from manufacturers/distributors or retailers will also be covered under the trade margin reforms.
Per the policy, “Compulsory provision of static bar code containing price information on drugs will be enforced. Bar code reading and computerized billing will be introduced in pharmaceutical distribution and retailing.” This will help in traceability and compliance monitoring.
The pharma policy is expected to significantly contribute to the GoI mandates of "ease of doing business” and “make-in-India.” The policy aims to bring sweeping changes to the industry including curbing unethical marketing practices, contract manufacturing, and loan licensing. DoP efforts are certainly laudable, though many of the proposed radical changes may be diluted due to stakeholder pressures. Once finalized, there will be challenges in effective implementation and providing enabling infrastructure. It will also have to work in unison with the recently launched National Health Policy, 2017 from GoI, which has a mandate of providing affordable healthcare services. For both policies to meet their objectives, the GoI will have to strike a balance between economic and industry imperatives and ensuring affordable, quality medicines accessible to the poorer members of society.
Declaration: The author declares no conflict of interest.
About The Author:
Bobby George, Ph.D., is head of regulatory affairs at Reliance Life Sciences (Navi Mumbai, India). In this role, he is responsible for regulatory services across all the company’s divisions (pharmaceuticals, biosimilars, and plasma proteins). He holds a Ph.D. in pharmacology and has over 20 years of industrial experience. He has 32 publications in peer reviewed journals and has authored three book chapters. Dr. George recently authored and published a book titled The Act that Wasn’t, in which he deliberates on the “Acts” (laws) and “acts” (wrong deeds) of the people in the drug and healthcare industry, quoting several examples of the nexus between stakeholders.