Licensing needed for pharma exports

Aug 03, 2023

LICENSING is a dirty word in the common sense of contemporary economic policymaking. But, at the risk of inviting criticism from self-styled free-market champions, the government must introduce licensing for the export of drugs. India’s fair name as the pharmacy of the world is far too valuable to risk by letting market forces work freely in the area of supplying drugs to the world.

On July 28, Bloomberg reported that a sample of a cough syrup called Cold Out, manufactured by a Chennai-based company and exported to Iraq, contained ethyl glycol at a level 21 times higher than what is considered acceptable. The testing was done at a US-based lab that the World Health Organisation (WHO) finds acceptable.

Indian-made cough syrups had killed children in Gambia and Uzbekistan last year. In April this year, Bloomberg reported that the WHO found tainted samples of a cough syrup, Guaifenesin TG, in Marshall Islands and Micronesia. The syrup was made by an Indian pharmaceutical firm, QP Pharmachem. The syrup contained “unacceptable amounts of diethylene glycol and ethylene glycol as contaminants,” substances which are toxic to humans when consumed, it said.

Another Bloomberg report (August 1) says that an Indian drug producer sold low-quality abortion pills to a non-profit organisation that distributes it across the world.

Most such stories will recount past lapses on the part of Indian pharma exporters that led to the deaths in Gambia, Indonesia and Uzbekistan and damage to the eyes of consumers in other parts of the world.

India cannot afford to tarnish the reputation of its pharma industry. Indian pharma should be remembered for saving the lives of millions of people in Africa by producing low-cost drugs for AIDS. The Indian price was so low compared to the prices charged by global drug multinationals, the resultant public outrage forced all drug companies to slash their prices to the level of India’s offering, and made the drugs truly affordable for individuals and national health systems in Africa.

The global drug market is worth trillions of dollars. India’s latest export figure is about $25 billion a year. India is just scratching the surface of what it could achieve. The generic pharma industry alone can easily expand at least 10 times, generate jobs, taxes and re-investible profits on a scale that few industries outside information technology services can match. A strong enough generic industry can invest in research and development of new molecules and enter the new areas of genetic medicine, synthetic biology and novel vaccines.

All that is being put at risk by some small operators exporting substandard drugs to markets with low capacity to check the quality of the drugs they import. This must stop.

India needs to institute strict quality control on drug production processes and the final product. One major problem is that quality control standards vary from state to state. This must change. Quality control must have uniform standards and standard protocols that apply across all states and union territories. While setting up contract manufacturing plants is one of the fastest ways to create value, and must be encouraged rather than stopped, there is no reason to adopt a laissez faire attitude to drug exports, given the structure of the Indian pharma industry.

There are some 3,000 pharma companies and 10,000 manufacturing units, which together produced drugs worth Rs 3.36 lakh crore in 2021. Of these companies, the top 50 accounted for 75 per cent of the revenue. This means that the average sales of the remaining is Rs 85 crore. Some of them might well be the future Ciplas and Sun Pharmas. But some of them could well be the kind which produce spurious drugs, for which the penalty has been reportedly diluted to a monetary fine from a jail term.

The Indian drug quality control regime does not have the capacity to rigorously monitor and enforce quality at all 10,000 manufacturing plants. All of them cannot be allowed to turn exporters and find markets on the strength of their marketing nous rather than on the basis of their reputation as sound pharmaceutical companies. Marketing nous, in some cases, could be as simple as knowing which official to bribe in which importing country.

India must institute licensing for drug exports. Only companies with a turnover of at least Rs 1,000 crore should be allowed to even apply. They will have a stake in defending their brand name and winning more markets. They would not think of shutting down an operation and starting another somewhere else, if one of their projects to make a fast buck results in tragedy and scandal.

Every consignment of exports must be checked for quality, with samples being tested at a standard facility recognised by India’s own accreditation board and the WHO.

Does this mean India would bar entry to the pharma sector for tiny and small companies? Absolutely not. They could start small, sell in the domestic market, sell to big exporters who maintain quality control and acquire the threshold, qualifying volume of sales and then start exporting.

‘Business as usual’ is doing reputational damage to Indian pharma and killing its potential. This is a cut-throat market, in which any number of countries and their companies have an interest in tarnishing India’s reputation. Policymakers should recognise this and take measures to ensure that only reliable quality producers and reliable products are exported.

By adopting stringent quality control in pharma exports, we only stand to lose a bit of free-market fundamentalism. But we have a trillion-dollar pharma market to win.

The Tribune