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A
bitter pill for Indian drug
industry
By Jayanthi Iyengar
A patient is prescribed fast-acting
netromycin injections, an antibiotic useful in treating
infections. Netromycin is manufactured in India by
Fulford India Ltd, a wholly-owned subsidiary of US drug
major Schering-Plough. The drug is expensive by Indian
standards, costing the equivalent of US$7 per vial. The
doctor administers the dose but the patient does not
show recovery. The doctor is puzzled. The patient loses
faith, and shifts his custom to another. It is only
subsequent reports of 10,000 vials of netromycin worth
$70,000 being seized from Jagatpuri, one of New Delhi's
many industrial slums, that sets alarm bells ringing.
The seizure shows that counterfeiters have reached new
levels of sophistication. They no longer stop at merely
copying the blister packs or superimposing the holograms
of well-known brands on their fake products. They also
seem to be investing heavily in equipment necessary for
mass-manufacture of high-value, high-demand drugs when
selecting medicines to fake.
NEW DELHI -
Reports coming from across Asia, Africa and the Middle
East indicate that a patient may be paying top market
prices to buy well-known brands of neomycin eye drops
and meningococcal vaccine made of tap water; paracetamol
syrup made of industrial solvent; ampicillin consisting
of turmeric; contraceptive pills made of wheat flour;
and antimalarials, antibiotics and snake antivenom
containing no active ingredients.
Such fakes are
to be differentiated from the cheap knock-offs of
well-known global drugs that flood Asia, including
India. Such knock-offs are copycat versions of the
original medicine, manufactured and sold by non-patent
holders, causing a loss of revenue to those who have
spent billions of dollars in developing the drug. Since
the drug "pirates" - a term popularized by the New York
Times in December 2000 - do not spend on research and
development, they are also able to market the drug in
their country at one-twentieth to one-fifth its price in
the Western market.
In India, drug pirating is
made possible by the existing patents regime. These laws
offer protection only for manufacturing processes and
not for the products themselves. Besides, protection for
process is also available for a period of seven years,
unlike in the West, where patent protection is for a
period of 20 years. As a result, under existing Indian
patent laws, Indian drug companies are well within their
rights to reverse-engineer well-known brands and sell
them as their creation.
This explains how one
can buy a cheaper knock-off of Viagra called Erecto in
Indian drug stores. Prozac can be bought as Nuzac,
antifungal Diflucan as Forcan and hypertension drug,
Norvasc by the name of Amlopres, all priced at miniscule
their retail prices in US markets. "We did a little
study," Yusuf K Hamied, the managing director of Indian
pharmaceutical company Cipla told the New York Times in
a December 2000 article to reflect the price
differentials between the markets, "Our turnover is $200
million. If we sold our products at the
American-originator prices, our turnover would be $4
billion."
Hamied spoke without guilt or
hesitation since he was not breaking any law in India,
his operating base. Disputes continue on the loss of
revenue to Western drug manufacturers on account of drug
piracy in countries like India, Brazil, Argentina,
Thailand, Egypt and China, but estimates range between
10-15 percent of the world annual pharmaceutical sales
of $3 trillion.
Significantly, drug piracy of
this kind is due to end in 2005, when India and many
other developing countries extend process patents to
products too under the World Trade Organization. In view
of this development, some Indian drug companies are
already moving away from the manufacture of generics to
the development of new drugs through research and
development. Two standing examples are leading Indian
drug firms Ranbaxy and Cipla. The former is developing a
new and patentable dosage form of Bayer's antibiotic
Ciprobay (ciprofloxacin) before patent expiry.
Similarly, Cipla has developed a new dosage form of
AstraZeneca's anti-ulcer drug Losec. Simultaneously,
Indian drug companies are also developing new molecules.
At the helm of this brigade is Dr Reddy's, which is
developing new drugs for diabetes and related ailments
in collaboration with Danish company Novo Nordisk. These
drugs, which are under clinical trial, are expected to
hit the shelf by 2005. Similarly, Ranbaxy is working on
a new drug for the treatment of the prostrate gland in
aging men.
Simultaneously, India is also
expected to see renewed interest from foreign drug
companies - whose numbers have fallen during the decade
in the top 20 Indian drug manufacturers from nine to
five, along with a fall in their market share - starting
in 2005. Under a stronger patent protection regime,
multinationals are expected to relocate their research
and development base in India to take advantage of the
lower costs and highly qualified manpower.
Against this background, the new focus is off
piracy and on counterfeiting of drugs, where the intent
is to deceive the public by selling substandard drugs,
placebos or even dangerous variants of a known drug,
thereby endangering lives.
The World Health
Organization (WHO) defines counterfeiting as a criminal
activity, often occurring in countries where drug
regulation is ineffective, smuggling of drugs is
rampant, clandestine manufacturing exists, sanctions are
absent or very weak, and there is high corruption.
According to the WHO definition, a counterfeit is a "a
medicine which is deliberately and fraudulently
mislabeled with respect to identity and/or source.
Counterfeiting can apply to both branded and generic
products and counterfeit products may include products
with the correct ingredients or with the wrong
ingredients, without active ingredients, with
insufficient active ingredients or with fake packaging."
Though no firm estimates of counterfeit and
substandard drugs are available, the WHO pegs estimates
at roughly 10 percent of the global drug trade.
"Counterfeiting is an underworld activity," states the
WHO. "It is hard to detect and investigate. Moreover,
countries and companies that detect the problem do not
report. So, it is hard to know or even estimate the true
extent of the problem." What is known is that they occur
worldwide, are more frequent in developing countries and
they affect all countries, says the WTO.
That
the counterfeit drug menace has the global community
worried is reflected by the fact that in 2000, a US
House Commerce Subcommittee on Oversight and
Investigations probed counterfeit drugs. The
subcommittee's investigations revealed that the US Food
and Drug Authority (FDA) had linked adverse drug
reactions in 155 US citizens to drug ingredients
originating from China. The FDA informed the
subcommittee that the 4,600 foreign, bulk drug suppliers
to the US had not been inspected. Of these, 5-8 percent
could be substandard, fake or unapproved.
The US
has been concerned since 80 percent of the active
ingredients in its prescription drugs are made overseas.
Hence the pressure from the US to resort to tough
regulatory norms in developing countries, testing at the
point of entry in the US, as well as global information
sharing to nab counterfeiters.
For India, the
concerns are as severe, with estimates of fake or
spurious drugs being pegged in the range of 10-35
percent of the total annual pharmaceutical manufacture
in value terms. That could be a lot of fake drugs in
circulation, though India is contesting these figures.
In 2000-01, India's pharmaceutical production in value
terms stood at $4.52 billion, as against an estimated
global trade of $3 trillion. Of this, formulations
(medicines ready for consumption by patients) accounted
for $3.64 billion and bulk drugs (chemicals having
therapeutic value used for production of formulations)
for $886.5 million. The value of Indian exports stood at
about $1.35 billion in 1999-00 (as against global
exports in pharmaceuticals exceeding $94 billion), while
import of drugs and pharmaceuticals amounted to about
$400 million during this period.
This roughly
means that about $452 million to $1.58 billion of
India's annual drug production in value terms could be
controlled by counterfeiters, but Kashyap Nansi, product
manager, Wockhardt Merind, has an even more frightening
insight to share. "This is just in monetary terms.
Actually, spurious drugs are cheaper than the real ones
[to make]. Thereby, fabulous amounts reach the market,"
he told the Times of India, India's leading news daily
after a recent drug raid.
Added S C L Gupta of
the Delhi Medical Association, briefing the media soon
after the spurious-drug raid, "The most serious issue
which concerns the medical fraternity is that of
spurious drugs. Any famous brand is susceptible to being
copied." Sujata Tiwari, coordinator, brand protection
committee of India's leading industry chamber, the
Federation of Chambers and Commerce and Industry, echoed
Gupta's concern soon after the raid. "Of the 53 samples
of drugs seized as part of the raid, only nine were
genuine. In fact, there are spurious drugs in the market
made of chalk powder," she said.
The spurious
samples collected in these raids belonged to well-known
companies like Cadila, Unichem, Lupin, Novartis, Dabur,
Aristro, Pfizer and Glaxo, clearly indicating that all
drug companies were susceptible to the threat from
counterfeiters. Delhi apart, raids by the drug
authorities show that spurious drug manufacturing units
are operating out of the Indian states of Bihar,
Gujarat, Madhya Pradesh and Uttar Pradesh. The Indian
Pharmaceutical Alliance also spearheaded some raids last
year to safeguard the interests of members, but these
were disconcerted efforts to check the spurious drug
menace.
Manufacturers have come together to put
pressure on the authorities to tackle the fake drug
menace as counterfeiting of such dimensions could hit
India's large drug manufacturing industry hard, which
currently comprises about 250 large units, and about
8,000 small-scale units, including five Central Public
Sector Units. These units produce the complete range of
formulations and about 350 bulk drugs.
It is
estimated that 70 percent of the indigenous demand for
bulk drugs and almost the entire demand for formulations
is met through domestic production. The big names
include Cipla, Ranbaxy, Dr Reddy's, Lupin, Alkern, Knoll
(BASF), Hoechst Marion Roussel, Pfizer and Cadilla.
The Indian pharmaceutical industry in the past
decade has shown a compounded annual growth rate (CAGR)
of 15 percent to achieve a turnover of $4.5 billion in
2000-01, but lately it has been growing only at 10
percent per annum. The industry is fragmented, but the
top 50 players account for 70 percent of industry
turnover. Government-owned companies command about 65
percent market share, while the rest of the market is
divided among private players. One distinct trend in
recent years has been the fall in the share of the
public sector, accompanied by a gradual increase in the
share of the private sector.
It is against this
growing importance of the drug and pharmaceutical
industry and the growing threat of spurious drugs that
the inability of the Indian government to constitute a
National Drug Authority (NDA) comes as a surprise, and a
setback for the industry.
The constitution of an
NDA is considered to be the panacea for the several ills
that plague the Indian drug industry, such as the
alarming prevalence of spurious and fake medicines,
entry of irrational drugs, fixed dose combinations and
wrongful branding in the market.
The
constitution of strong national drug regulatory
authorities is also a part of the WHO's prescription for
dealing with the menace of spurious and substandard
drugs. India's drug policy of 1994, the spirit of which
is enshrined in the drug policy announced by the
government recently, also recommends the constitution of
the NDA.
The constitution of the NDA involves
the setting up of a single drug licensing and regulatory
authority at the center (that is, from the government in
New Delhi) replacing the two-tier regulatory system in
existence, where the center is responsible for policy
formulation, while the state governments control
licensing and enforcement. Merging of the two functions
under a single umbrella should sound like a simple
enough feat, but it is full of hurdles on account of
India's federal character.
This character makes
it impossible for the central government to dictate to
the states. Instead, they have to be convinced on any
reform measure. Significantly, it is not easy to take
the states along on the NDA, as they are loath to give
up the licensing powers, which not only means erosion in
their powers, but also spells the end to speed money
that normally accompanies the licensing function.
It is in this context that a recent meeting
called by Shatrughan Sinha, India's actor-turned-union
minister for Health and Family Welfare, in November
assumed significance. At this meeting, Sinha mooted the
idea of the NDA in the presence of 13 state health
ministers, belonging to critically important states in
India's federal set-up.
Soon after the meeting,
senior health ministry officials even briefed the media
about the receptiveness of some of the state health
ministers to the idea. However, given the pulls and
pressures of coalition politics, the center's grandiose
plans of having a strong, single drug licensing and
regulatory authority, seem to have come to naught.
Answering a question in the Indian parliament in
early December, minister A Raja informed the Lok Sabha,
the lower house, that there was no "live" proposal for
setting up the NDA. In his reply, Raja, who is
Shatrughan Sinha's deputy in the ministerial hierarchy,
made the point that the setting up of the NDA would
require major structural changes, including
strengthening the central drug standard control
organization, which was not possible at this point of
time. Clearly, the message had gone through to the
leadership in the health ministry. The NDA was a
political hot potato that the highly fragmented
Bharatiya Janata Party, s head of the coalition central
government, could ill afford to hold.
For India,
the decision can only mean a loss, since a weak
regulatory structure will promote the unchecked sale of
spurious and substandard drugs, which can only be
detrimental to public health, add to social costs, and
hurt the interests of drug companies, both domestic and
foreign.
According to the WHO, the use of
unsafe, substandard, ineffective and counterfeit drugs
and vaccines can be harmful to the health and well being
of the individual user as well as to a wider section of
the population. They also undermine confidence in the
health service, health professionals who treat patients,
prescribers, as well as those who manufacture,
distribute and dispense drugs. Further, the purchase of
unsafe, substandard, ineffective and counterfeit drugs
is a waste of money for the government, the individual
patient and the public.
It is because of this
that the WHO strongly advocates that governments
regulate manufacture, export, import, storage,
distribution, supply and sale of drugs to ensure the
safety, efficacy and quality of drugs. "Governments have
to establish strong national drug regulatory authorities
(NDRAs). To enable the NDRAs to operate effectively,
governments have to provide strong political support,
adequate and sustainable human, financial and other
resources, and legal power for enforcement. Ineffective
regulation and control can result in the proliferation
of unsafe, ineffective, substandard and counterfeit
drugs. In addition, manufacturers have to produce drugs
in accordance with good manufacturing practice
requirements and distributors have to store and
distribute drugs under proper conditions," it states.
WHO reports that between January 2000 and
December 2001, it received 42 reports of cases of
counterfeit drugs from 20 countries. The types of
counterfeits reported included: products with no active
ingredients (43 percent); low content of active
ingredients (21 percent); poor quality drugs (24
percent); wrong ingredients (2 percent); and wrong
source (7 percent).
The WHO reports, based on
reports received from member countries and information
published in newspapers and journals, show that both
well established (generic) drugs and innovative drug
products are affected. The largest number of reports
relate to antibiotics, antiprotozoals, hormones and
steroids. In developing counties, antibiotics and other
aniprotozoals such as anti-malarial drugs are commonly
counterfeited. In developed countries hormones and
steroids account for the majority of the cases reported.
Generally, high volume (high consumption) and expensive
drugs are the main targets of counterfeiters.
It
further reports that out of the 191 WHO member states,
about 20 percent are at present known to have
well-developed drug regulation. Of the remaining, about
50 percent implement drug regulation at varying levels
of development and operational capacity. The remaining
30 percent either have no drug regulation in place or a
very limited capacity that hardly functions. Ineffective
or weak drug control could promote smuggling, and
illegal manufacture and distribution of drugs leading to
the proliferation of counterfeit drugs on national
market.
Taking this argument further, Paul N
Newton, clinical lecturer, Center for Tropical Medicine
and Infectious Disease, Nuffield Department of Clinical
Medicine, Oxford University argues in the British
Medical Journal (Murder by fake drugs, April 6, 2002),
that governments need to take steps to reduce the profit
margins for manufacturing fakes, such as reducing the
price and increasing the availability of genuine,
quality assured drugs. He further adds that
uncompromising international police action against the
factories and distribution networks needs the same vigor
as that associated with the pursuit of narcotic
peddling.
"International technical, logistical,
and financial support, possibly through a specialized
non-governmental organization, is needed to allow
impoverished countries to protect their drug supplies.
Measures would include supporting drug regulatory
authorities; providing simple, easily interpretable and
cheap markers of authenticity; coordinating
international surveillance for fake and substandard
drugs; improving the availability of quality assured
essential drugs; and educating patients, healthcare
workers, and pharmacists," he states.
Newton
further makes a case for information sharing on
counterfeit drugs. "Information on fake drug identity
and distribution needs to be shared nationally and
internationally between government drug regulatory
authorities, customs and police organizations,
pharmaceutical companies, non-governmental
organizations, and consumer groups," he states.
(©2002 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
for information on our sales and syndication
policies.)
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