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| Medicines for all | | FDI must play along |
| Business Standard / New Delhi Mar 11, 2010, 00:59 IST |
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Unrestricted entry of foreign equity into the Indian pharmaceuticals sector is being questioned on three grounds, one serious and two non-serious. The least serious of the three comes from the National Security Council, which has proposed that the sector be put on the “sensitive” list, requiring prior scrutiny by the Foreign Investment Promotion Board. This is difficult to understand as there is no intellectual property to guard against foreign takeover, the Indian industry being entirely generic. The second non-serious reason, given by the department of pharmaceuticals, is that Indian firms are not on a level playing field — they do not have deep pockets to do the kind of R&D necessary for survival in a free-for-all which global firms do. But the key example cited in favour of this argumentis the takeover of Ranbaxy by Japanese firm Daiichi Sankyo, which happened not because Ranbaxy ran out of money to carry forward the vision of Parvinder Singh, but because his heirs wanted to cash out.
The department is on firmer ground when it fears that a growing tide of foreign takeovers can impact the pricing and availability of medicines in India. It is in India’s national interest to ensure that essential medicines are available cheaply and easily to meet health-care needs. India was able to do this in the last century by ignoring the product patent regime and becoming a global leader in generics, using its chemistry skills to produce quality medicines cheaply. Now that it has accepted the product patent regime, it is faced with a new challenge, a growing tide of evergreening. Global majors, seeing their product patent pipelines dwindling, have resorted to more and more ingenious arguments and devices to prolong the life of patents so that generic substitutes cannot be marketed even after the running out of the original patent. The government has to actively guard against this, all the more so because Indian doctors appear entirely in thrall of costly medicines. If more and more good Indian firms get taken over by global firms, who will challenge patents because it is the former that are the global leaders in doing this? In allowing foreign entry, the government has to ensure that the firms take on an obligation to produce and sell essential medicines cheaply, according to the requirements of national policy.
Of the two devices used in the past to keep medicine prices low, a favourable patent regime and price control, the latter has worked up to a point. Any price control system has its limitations and in the past, populist ministers have sought to unduly extend the list of medicines under price control even as pharma companies have tried to dodge by tweaking formulations. A better way for the government to access good medicines cheaply can be through negotiated bulk purchase for distribution through the public health-care system. This way it can ask for precisely what it wants and talk only to the firms that follow good manufacturing practices. This route can become important over time as the government raises its expenditure on health care, which it must. Also, as incomes rise rapidly, private health-care expenditure is likely to rise even faster. Therefore, the market for affordable drugs is likely to grow long and fast. Foreign firms which play by these rules and get in are likely to reap early-bird advantages.
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