The Principle of Monopolization

The Draft Pharmaceutical Policy - 2017

(Article-3)

The Department of Pharmaceuticals (DoP) under the Ministry of Chemicals & Fertilizers recently released the 18 page Draft Pharmaceutical Policy – 2017 which has been circulated among various stake-holders of the pharmaceutical industry and civil society. 

In an attempt to understand the draft, I have decided to present a series of articles portraying my own interpretations on this draft policy. This is the third of the series.

The Principle of One Manufacturer-One Salt-One Brand Name would destroy competition and establish monopoly

Blanket promotion of Brownfield FDI in pharma sector is undoubtedly a contentious issue. But, the draft pharmaceutical policy – 2017 extends enough scope for its further consolidation through the principle of ‘one company – one drug – one brand name – one price’. The draft policy suggests: “the government will pursue the policy of sale of single ingredient drugs by their pharmacopeial name/salt name. For patented drugs and Fixed Dose Combination (FDCs) drugs the brand names may be used. However here, the principle of ‘one company – one drug – one brand name – one price’ would be implemented.” [Para:5.5; Page:12 of the draft].

Government has come out with the above proposal since it has discovered (?) that “the same company manufactures the same salt (pharmacopeial name of the drug) on the same production line but sells it under different brand names at different prices! The widely varying prices for the same drug and the mark ups thereon for retailers, distributors and the stockists has created a largely negative perception about the industry’s drug pricing practice.” [Para:3.7; Page:7&8 of the draft]. This is a lie of its highest order. If the government intends to implement the price control mechanism effectively then the price can be controlled for any number of medicine brands available in the market. The issue of effective price control mechanism for drugs and pharmaceuticals would be discussed later in this article.

However, the principle of ‘one company – one drug – one brand name – one price is not for reducing the drug price. Such attempt has been made with a view to destroy the competition among brands. The inter-brand market competition is a unique phenomenon of Indian pharma sector which has been developed through years of historic events like process patent, compulsory licensing etc. India’s self-reliance in drugs and pharmaceuticals is indicative enough through experiencing the presence of a plethora of medicinal brands. The draft policy notes: “In the pharmaceutical industry, about 2500 pharmacopeial salts are manufactured but there are more than 60,000 brand names….” [Para:3.10; Page:8 of the draft]. All these brands are surviving through intense competition. The major brands, however, enjoy the lion’s share of the total volume sales of a particular therapeutic segment.

India’s generics (available in India under different brand names for a particular pharmacopeial name) market has immense potential for growth. The share of generic drugs could have represented about 85 per cent of the prescription drug market by 2016 amounting USD26.1 billion and is expected to reach USD27.9 billion in 2020. Due to their competence in generic drugs, growth in this market offers a great opportunity for Indian firms. Generic drug market is further expected to grow in the next few years, with many drugs going off-patent in the US and other countries. Moreover, India accounts for 20 per cent of global exports in generics. During 2016, India exported pharmaceutical products worth USD16.89 billion, with the number expected to reach USD40 billion by 2020. [Source: India Brand Equity Foundation; March, 2017].

It’s difficult for the multinational drug firms to capture and dominate such highly competitive market of India. But, it is also their dire need to do so since they are losing sales and profit in their domestic markets due to economic meltdown since 2008 and they shall be losing monopoly due to patent expiry. Hence, they are eyeing the buoyant market of India. But, without killing competition, how can they achieve their desired goal?

Astonishingly, the Draft Pharmaceutical Policy – 2017 is designed to abolish this competitive environment of the country’s drugs and pharmaceutical market. The “New Policy Initiatives” emphatically declares: “the practice of P2P (product to product) manufacturing by which one manufacturer manufactures one pharmacopeial drug in multiple brand names and gives them to other manufacturers to market them at price chosen by the marketers, will be phased out. This will be achieved by following a principle of one manufacturer, one salt, one brand name and one price.” [Para:5.9; Page:13 of the draft].

This means, in coming future a manufacturing company shall produce a particular medicine only for one particular company. Thus, fewer brands would survive and large number of smaller brands would simply get evaporated. Next, it would be easier for the multinationals to acquire/purchase those few brands through Brownfield investment route to establish their absolute monopoly. The country has already experienced the “muscle power” of multinationals particularly in drug industry. India would be pushed back to the pre 70s scenario where foreign multinationals dictated the pharma market and medicines used to cost one of the highest in the world. 

(To be continued....)

@pradipsinterpretations