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Brand vs. Generic Drugs Speak of Conflicts Reality

Fri, 12/07/2012 - 11:17am
GIRISH MALHOTRA, PE, EPCOT Intl.

By GIRISH MALHOTRA, PE, EPCOT Intl.

GIRISH MALHOTRAOn October 12, 2012, the government of India issued directions that drugs will be sold under their generic name rather than their brand names. This definitely caused an uproar in the drug manufacturing communities in India as evident by opinions and suggestion of legal action by different lobbying groups (Economic Times: 1, 2, 3, 4). I am sure that eventually there will be a clarification, settlement and path forward.

Reading news accounts, few things become obvious. Brand and generics drugs sold in India can have different purity. This means that the customer is not getting the correct dosage with every tablet. Statements also hint that many companies are not using the best manufacturing technology and appropriate analytical equipment to produce consistent and high-quality products.

Since low-potency drugs sell, companies will use threat of lawsuit to avoid any changes in their practices. Batch-to-batch variability is acceptable to these companies. It is clear that these companies are putting the general population, including their own families, at risk. In addition, brand companies do not want to lower their prices to generic levels, thus losing their margins.

India’s Pharma Industry

Most of the time in western press, we get to read the glorious status of India’s pharma business. This is basically due to exceptional growth due to exports. However, not many know about the domestic market and its status. It would be worth having an overview of the India’s domestic pharma industry.

About 7,000 drug companies are registered with the Central Drugs Standard Control Organization, a government of India organization. This number is different from the number cited in a report of the upper house of India’s Parliament. About 550, 814 and 150 are registered with the U.S. FDA, World Health Organization and European Directorate of Quality Medicine (EQDM) respectively. Some of these are common.

How many have been inspected by the respective regulatory body is not in public domain. Companies serving USFDA, EQDM and WHO markets have high profit margins. They will do whatever is necessary to meet those standards. Active pharmaceutical ingredients (APIs) produced for developed countries, India and other markets can be of different quality. Different pharmacopeia standards add to the complexity.  

Companies serving the Indian market are supposed to meet the schedule M (Indian cGPM standard). Compared to WHO or USFDA cGMP standards (private communication V. Hattangadi), the Indian standard is very lax. How many facilities that meet the Indian regulatory standard is not known. Companies meeting “schedule M” will not be able to meet brand drug standards unless investment is made in technology and equipment.

A report of the upper house of the Parliament of India states that there are not enough personnel to carry out inspection and approval of the drugs produced by Indian companies. Besides inspection of drug formulation units, API producers have to be inspected also. This is added regulatory burden. Based on general business practices, which at times are less than honorable, it would be a challenge to access and authenticate quality of drugs from such plants. This is a sad state of affairs.  

Government’s Objective & Issues

I believe by having a single generic form of a drug, the government of India wants to eliminate differences (price and quality) that exist between the same molecule, whether it be brand or generic. However, the published discussion tells us that the following would need to be addressed before price and quality equalization can happen.  

Brand drugs are priced higher than the generic drugs. Therefore the sales commission is much higher for everyone in the supply chain. Since the generics are priced considerably lower, the revenue earned by everyone in the supply chain is lower. Thus, to generate the same commission revenue, the overall sales of brand sellers will have to be considerably higher. This would be perturbation in the existing business and lifestyle of the companies in the supply chain, not an acceptable scenario. Thus the brand sellers will resist sale of generics. Brand sellers in India are a very powerful lobby and have significant influence. They could prevent the government’s move to generics. Supply chain lobby could also raise the selling price of generics, knowing well of their inferior quality, to account for loss of their profit margins. This could negate government’s intentions of lower drug prices unless the government enforces price controls.

For the existing generic producers to meet the quality standard of brand drugs and have their products approved, they will have to invest in equipment and necessary approval processes, a challenge that could be met by few. Generic companies that will invest in upgrades will have to raise their selling prices to recoup their investment. Prices could inch to brand levels. This will be quite contrary to government’s intention of price and quality equality. Companies who will not invest will either go out of business, raising unemployment in this sector, or will go underground i.e. producing counterfeits.
If the government forces price equalization through price controls, drug shortages could result, as the brand producers are not going to lower brand selling prices to generic levels. Generic producers will take shortcuts to fill the supply gap, and at times, quality could be questionable unless the government can police such situations with appropriate penalties. India’s policing ethics may be a hindrance.

Even if the companies are able to invest and do what will be necessary to meet the drug quality standards, government regulatory infrastructure is not set up to implement its own guidelines. This is due to not having properly trained staff and not having necessary standards. If the brand producers are able to meet the shortage created by the lack of availability of generics, the question could be: Would the average consumer be able to afford the brand drugs?

I believe government of India has good intentions of making quality drugs affordable to all at reasonable prices, but its policies and methods are not in place to achieve the goal. Without having the necessary inspection and approval systems in place, it seems that the cart has been put in front of the horse. Political patronage and unethical practices will have to be replaced by transparency and honesty to produce quality drugs, as companies are dealing with human life. Once all the methods to produce quality drugs are in place, only competition will determine the lowest price. 

The drive to lower the cost of quality drugs can be an opportunity for entrepreneurs who can produce drugs using the best technology and methods that are cost-effective and sustainable. This is very feasible, and if implemented, it could change the landscape in and outside India.

With the Affordable Care Act in place in the USA, the USFDA has to make sure that the Indian companies exporting their generic APIs and formulated drugs comply with regulations. Regulatory compliance has to be checked not only through a paper trail of manufacturing practices, but also through an actual audit of the physical manufacturing areas. Checking of the actual operations is very important.

What’s your take? Please feel free to comment below! For more information, please visit www.epcotint.com 

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