Haj pilgrims' vaccination: Family-run drug maker that lost to pharma giants

Small family-run generic drug maker, Biomed Pharma failed to challenge two global pharma giants

It was a fight over a Rs 6 crore contract of the Ministry of Health to supply Quadrivalent Meningococcal Meningitis Vaccine to Haj pilgrims spanning over a decade. Heard in two tribunals and two courts, it assumed the form of a fight between a small family run generic drug maker and two global pharma giants. In the end Biomed Pharma Private Ltd, that developed the capability to make the meningitis vaccine in 2005 lost the battle in the Supreme Court. The country's highest court in a judgment on Thursday upheld the Competition Appellate Tribunal (COPMPAT) order cancelling the Rs 64 crore fine imposed on pharma giants Glaxo Smithkline and Sanofi Pasteur by the Competition Council of India (CCI).

While the merits and demerits of the case are in the public domain, little is known about Biomed Pharma that sought to add the Haj pilgrim contract to its fledgling business. Based in Ghaziabad, close to India’s national capital New Delhi, Biomed Pharma had started manufacturing the meningitis vaccine in 2004 after cracking its generic formulation. The company has been in existence since 1974. Biomed pharma is owned by the Garg family with the family patriarch Dr SP Garg along with his wife Usha holding almost half of the 9990 shares in the company. Garg’s sons Puneet and Pankaj hold another 14% in the company. Other blood relatives have been given the remaining holding in the business. The shareholding pattern of Biomed Pharma has remained unchanged over the last decade.

Although a family run business, the father-son duo were qualified doctors. The senior Garg being a doctorate while Puneet Garg holding MS and MBBS degrees. Biomed Pharma was spending close to 3% of its turnover on developing various kinds of vaccines. Among them included vaccines for acellular pertussis, rabies tissue cultures for animals and humans and vaccines for conjugate typhoid. Among other things it was developing Botulinum toxin for use in cosmetic products and anti-coagulant enzyme based therapeutic agents. Biomed was also importing raw material for manufacturing the oral polio vaccine being supplied to authorities in India.

Biomed pharma’s interest in the meningitis vaccine seems to have been ignited after the Indian government decided to vaccinate all Haj pilgrims for meningitis, a disease that was widely prevelant in Sub Saharan Africa, in 2002. Since a large number of Muslims from Sub Saharan Africa came to Mecca every year, the Indian government, in line with international practices, decided to vaccinate Indian Haj pilgrims against the deadly disease. The market was open for anyone who had the know-how to make this vaccine. During the first three years after the government started vaccinating Haj pilgrims, only Glaxo Smithkline was participating in the bidding process for supplying these vaccines. The contract in first year to supply 1.3 lakh doses was estimated to be almost Rs 8 crore. Glaxo Smithkline had offered to sell a 10 dose vial of the vaccine at a cost of almost Rs 6000. The following year, Glaxo Smithkline supplied 1.2 lakh doses at a much reduced price of Rs 4950 per vial. Sensing an opportunity, Biomed entered the bidding in 2005-06. It quoted the lowest bid of Rs 4000 for a vial but it’s bid was rejected. In 2006-07 and 2007-08, Biomed was again not allowed to participate according to its submissions before the Director General of CCI for failing to meet the minimum turnover criteria of Rs 10 crore. In 2008, Biomed’s financial fortunes turned around. Despite the government doubling the minimum turnover limit to Rs 20 crore in any of three preceding years, Biomed’s strong performance in 2007-08 meant that it was finally eligible for participating in the tender. Biomed’s balance sheet shows that in 2007-08, it recorded an annual turnover of Rs 20.11 crore. In 2008-09, its turnover climbed almost 20% to Rs 24 crore.

In 2009-10, Biomed finally won the contract after offering to supply at a cost of Rs 2150 per vial. It managed to again win the contract the next year by offering a vial for Rs 1999 – the lowest among all three bidders. However, in June 2011 the government decided to modify tender rules. Under the new rules, to be eligible to participate in the tender, the company’s annual turnover should have been Rs 50 crore in any of the three preceding years. But Biomed’s best performance in terms of turnover was in 2010-11 when it earned Rs 41 crore from its operations.

This effectively shunted out Biomed from participating in the bidding. Within a couple of weeks, Biomed moved the Delhi High Court. The Court ruled in Biomed’s favour and it was allowed to participate. Despite being allowed to participate by the court, Biomed did not submit a bid on time. A re-tendering was done in August 2011 but Sanofi went to the Delhi High Court against it. The court again stayed the tender and a limited tendering was done. This time both Sanofi and Biomed were given the contract to supply the 1.82 lakh doses of the vaccines for Haj pilgrims. Since Biomed’s bid was lower, even Sanofi was asked to asked to sell its quota at that price.

With this tendering done, the ministry reverted to its rule mentioning a minimum turnover criterion of Rs 50 crore in any of the preceding three years. This again made Biomed ineligible to participate in the tender. Biomed was out of the bidding in 2012 and 2013. In 2013, it approached the CCI against the Ministry of Health, Glaxo Smithkline and Sanofi alleging that the two pharma giants had indulged in bid rigging. The CCI in its June 2015 order found Glaxo Smithkline and Sanofi guilty of bid rigging and imposed a Rs 64 crore fine on them. Both companies challenged the CCI order in COMPAT which inturn overturned CCI’s fine in 2016. Biomed approached the Supreme Court as a last resort and India’s highest court upheld COMPAT’s order favoring Glaxo Smithkline and Sanofi.

The rejection of Biomed from the contract meant that in 2006-07, despite developing the capability to develop the vaccine, Biomed Pharma’s stock of the meningitis vaccine was just about 1900 doses. This was the lowest among all other vaccines that it was developing at its facilities. Although a small player, Biomed Pharma’s range of vaccine manufacturing capabilities was impressive. It was manufacturing 15 vaccines. Among others they included vaccines for – Ranikhet disease, fowl pox, enterotoxaemia, gumboro disease, sheep pox, hemorrhagic septicemia and Marek’s disease.