Answer Synopsis 16/12/2020

Question :Pharmaceutical sector has seen an exponential surge in FDI coming in the recent weeks. Even then Indian pharmaceutical sector has not reached its full potential. Discuss the challenges and reforms necessary for the rejuvenated performance of pharmaceutical sector?

Structure of the answer

  • Give a short background on the recent surge in FDI.
  • Point out the challenges which pulls back Pharmaceutical sector from achieving its full potential
  • Mention the reforms necessary for the rejuvenation.

Synopsis

India is the third largest manufacturer of pharmaceutical products in terms of volume and it is growing steadily. The market has seen the entry of many foreign players as well as rise of many domestic manufacturers. However, the industry faces many speed breakers

Problems & Challenges faced by Pharmaceutical Sector

  • Lack of R&D:
    • The Indian pharma industry faces lack of research components and real time good manufacturing practices.
    • No doubt investment (as % of sales) in research & development by Indian pharma companies increased from 5.3 per cent in FY12 to 8.5 per cent in FY18 but it is still low as compared to US counterparts that invest in R & D 15–20% of their sales.
  • Compliance issues and good manufacturing practices:
    • This has somehow always been a problem for the Indian companies. The ongoing rumor is that the United States Food and Drug Administration is trying to block the growth of the companies.
    • The approval of USFDA is important because the largest consumer of pharma products is the USA and India is a major exporter. The opinion of the USFDA is considered to be the standard in the sector as well.
  • Highly fragmented industry
    • The Indian pharma industry is highly fragmented. The market is overloaded with generic manufacturers.
    • This is a cause for concern because high fragmentation causes instability, volatility and uncertainty. This is certainly not a good omen for the pharma sector.
  • Low Margins of profits due to government pricing policies – Drug Price Control Order
    • Indian pharma companies are not getting proper profits; their earnings are basically very low as compared to their counterparts in other countries such as the US.
    • Their income is not sufficient enough to invest money on research component.
  • Stronger IP regulations
    • IP regulation has always been a thorn in the skin for the companies, especially the foreign companies. The companies strongly feel that the rules have to be amended and the so-called victim of the lax regulations have been the foreign entrants.
  • Dependency on China
    • The pharma industry is dependent on China for the supply of raw material for generic medicines production.
    • India’s dependence on Chinese APIs imports makes the former vulnerable to the price mechanisms.
  • Lack of Policy Support
    • India needs user friendly government policy for the common man to establish small scale, raw material manufacturing units/ incubators in all states of the country to improve availability of raw materials to manufacture generic drugs at affordable rates.
    • The government and industry should facilitate the pharmacist community to become entrepreneurs and promote incubators’ establishment.
  • Lack of good quality of indigenously produced Raw Materials
    • Raw material produced from small scale units should be properly validated in the testing laboratory of the state to ascertain their quality specifications.
    • There is a need for a functional testing laboratory in every state to fasten the work of specification of raw materials.
    • Small scale produces may be re-processed in another industry or via a chain of industry for quality products that can be used for parenteral/tailor-made formulations.
  • Lack of Skilled Labour
    • Skilled manpower from academic institutions can be achieved through continuing education programmes.
  • Pharmaceutical Marketing Malpractices
    • The pharmaceutical industry has been accused of adopting questionable practices in relation to the marketing of their products. The main focus of attention in this respect has been the suspect interactions between pharmaceutical companies and healthcare practitioners/ providers (HCPs). The unethical marketing practices comprises of:

Reforms necessary for the rejuvenation of pharmaceutical sector

  1. Research schemes
    • Should be initiated by the industry via direct contact with identified researcher/faculty.
    • Incentives should be paid to students contributing towards development of any research formula for the industry.
  2. Industry-Academia Tie-Up
    • Industries should contact Indian academic institutions to get qualified students who have the knowledge and aptitude for research and development in pharma.
    • Industry should explore the availability of qualified students beyond metro cities.
  3. International Collaborations
    • The industry and the government must collaborate with the international research organisations for research and development to invent new formulas, drugs and treatments.
  4. Internal Industrial Trainings:
    • Every industry has its own protocol to serve the society. Therefore, the pharma industry should train students as per their need. Only a few industries are thinking in this line.
  5. Setting Up Special Pharma Research Centers
    • With changing times, students are getting exposure through internet about research/ technology around them.
    • Indian academic institutions are full of ideas born from the young, creative brains of students.
    • Indian pharma industry can explore these ideas for future progress.

Sweden has already acknowledged India’s role as the ‘pharmacy of the world’ and this Corona period has given us a chance to enhance our role as a big player in the pharmaceutical sector. It is with the policies and approach of government that would help India to change the momentum.

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