NEW DELHI: The grant of the country’s first compulsory drug licence and recent attempts at populist policy initiatives have raised fears of overseas pharmaceutical firms.
The companies say that local regulations may stifle their business but domestic firms and health groups say the government’s moves strike a balance between industry’s growth and public’s healthcare needs.
On Monday, the Indian government allowed Natco Pharma to manufacture and sell its low-cost version of a cancer drug at a fraction of the price charged by patent holder Germany’s Bayer AG, opening the doors for more such efforts by Indian firms.
Last year, there was a strong move to restrict foreign direct investment through mergers and acquisitions, though finally it was shot down by the prime minister’s office. However, it has been made mandatory that all M&As undertaken by foreign drug firms be cleared by the Competition Commission of India (CCI).
These developments reinforce the belief of MNCs that India’s patent laws fail to adequately protect their intellectual property rights, and local laws do not encourage foreign investors.
Pfizer India’s managing director Keval Handa said that just as Indian drug makers were treated on par with the drug companies of host countries when they went overseas, local laws should provide a level playing field for foreign firms who have invested in the country. “The domestic market is becoming less and less attractive for foreign MNCs to invest in India,” he said.
A less attractive foreign investment regime will cost Indian companies big business opportunities in clinical research, manufacturing and R&D. “So far we have just scratched the surface in these high potential areas,” he said.
Novartis India VC and MD Ranjit Shahani said compulsory licences should be given judiciously in exceptional cases. “Many of these signals (regulatory moves) are negative not only for overseas companies but also for local research-based firms. Naturally, capital will go to those markets where the business ecosystem is encouraging,” he said.
The Swiss firm has been fighting a protracted legal battle to challenge the rejection of its patent application for its cancer drug Glivec. The case comes up for hearing at the Supreme Court on March 28.
But Indian Pharmaceutical Alliance (IPA), the body that represents big Indian drug makers, dismissed fears that there is a spate of compulsory licensing applications. “Nothing has changed. The conditions for compulsory licensing were known to them for years,” IPA’s secretary general DG Shah said.
According to Shah, there may be only a couple of more such cases as most Indian companies had not based their business models on the compulsory licensing provision. “Natco’s drugs cost just 3% of Nexavar’s price. For most companies, it does not make economic sense to sell drugs at such a low cost, given the huge legal expenses such cases will incur,” said Shah.
The 60,000-crore Indian drug industry is consistently growing at over 15% annually, compared to developed markets which are only managing low-single digits growth. But as more than 90% of Indians pay for their medical expense from their pockets, healthcare is an emotive issue and consumer interest plays an important role in deciding policies.
Healthcare groups say no big pharma company in the world can afford to stay away from the country. “India is too big a market for any overseas player to stay away. There are many expensive drugs which are out of price control, and these give MNCs adequate profit margins,” said Leena Menghaney of Medecins Sans Frontieres (MSF), a global healthcare NGO.
The Department of Pharmaceuticals (DoP) is currently finalising a new drug pricing policy for the country. Pricing models proposed by the health ministry and other NGOs could seriously impact the profitability of drug makers.
While the DOP is in favour of more industry friendly measures, it wants to do away with dual pricing policy norms for local and imported brands, a move that will adversely impact foreign companies.