Guest Post: A ‘captured’ Commerce Ministry puts profits before the safety of ‘Made in India’ medicines

Prashant Reddy has for our readers a telling post that opens a can of worms as it throws light on the goings-on in the drug regulatory arena in India. Prashant is a lawyer who advises on IP & regulatory issues in the pharmaceutical sector.

A ‘captured’ Commerce Ministry puts profits before the safety of ‘Made in India’ medicines 

Prashant Reddy*

In December, 2014 news broke of possible action by European drug regulators against GVK Biosciences over discrepancies in clinical trials that it had conducted for different generic manufacturers. News soon trickled in of the possibility that Europeans regulators would cancel several hundred regulatory approvals granted by them on the basis of data generated at GVK Biosciences. While GVK’s guilt is yet to be established in a court of law, it should be noted that the issue of certification laboratories manipulating data to suit the commercial interests of the Indian pharmaceutical industry is nothing new. The imposition of a $500 million penalty on Ranbaxy by the USFDA was, in a large part, due to fudged data supplied by the company to the USFDA for securing regulatory approval in the US. In the content of the scandal at Ranbaxy, the allegations against GVK Biosciences appear to be a déjà vu experience for those of us who observe the Indian pharmaceutical industry.

As was the case with Ranbaxy, the Government of India has come out all guns blazing in the defence of GVK Biosciences, threatening to drag the EU to the WTO. While it is natural for any government to defend one of its most successful manufacturing industries, it should trouble all Indians that the most vociferous defence of the Indian pharmaceutical industry is being proffered by the Ministry of Commerce, an arm of the government which has nothing to do with the regulation of safety of Indian medicine. In the GVK Biosciences case, the Commerce Ministry has adopted the same line of defence as it did in the aftermath of Ranbaxy affair. At the time of the Ranbaxy scandal, the Commerce Ministry put out a press release dismissing the extensive media coverage on poor quality control standards followed by the Indian pharmaceutical industry, as western vendetta. It attributed the criticism of the Indian pharmaceutical industry to countries who felt threatened by the growing strength of the Indian industry. Its press release stated: “Government has strong reason to believe that some of the spurious drugs detected in the international markets, alleged to be exported from India, are desperate attempts by other countries getting affected by the strength of Indian pharma industry.” But the penalty on Ranbaxy isn’t the only instance where a foreign regulator has found things amiss with an Indian pharmaceutical company. Since the Ranbaxy scandal, there have been several other Indian companies cited or penalized for poor manufacturing practices and also for data integrity issues.  Neither the industry, nor the Commerce Ministry has offered an explanation for this pattern of fradulent behavior to anyone yet.

In the aftermath of the recent action by European regulators against GVK Biosciences, the Commerce Secretary Rajeev Kher has been quoted by the Hindu Business Line as “The Secretary said that there were just a few big multinationals that were driving an agenda against the generic (off-patent drug) industry, affecting India’s annual drug exports of $15 billion. “It is important for us to take the matter to its logical conclusion,” Kher said. As was the case in the Ranbaxy affair, the sins of Indian industry have been attributed to the invisible foreign hand – a favourite theme of the Indian bureaucracy. While the Secretary claims that there is a plethora of evidence to show that there was no manipulation of data by GVK Biosciences, there is the small issue regarding the competence or jurisdiction of the Commerce Secretary to comment on safety issues of ‘Made in India’ medicine. India has a specialized drug safety regulator and a Ministry of Health with a mandate to comment on safety issues but which have kept a silence on the issue. Why then is the Commerce Ministry so keen to speak out of turn?

The actions of the Commerce Ministry are not limited to manufacturing conspiracy theories. It has actively sabotaged efforts by the Ministry of Health to strengthen central regulation of the Indian pharmaceutical industry. Two years ago, the Government introduced in Parliament the Drugs & Cosmetics (Amendment) Bill, 2013 to centralize drug regulation since many state regulators were perceived to be too weak to effectively monitor the local industry. Typically, before a bill is introduced in Parliament, the Ministry in charge circulates the bill within the Government and solicits comments from other Ministries. Any conflicts of jurisdiction or policy objectives between different Ministries are sorted out either by the Cabinet or Group of Ministers before the Bill is introduced in Parliament. Thereafter, the Government of India is supposed to put up a unified face to the outside world.

In this case however, when the Bill was referred to the Parliamentary Standing Committee on Health, the Ministry of Commerce went out of its way to sabotage the Bill. One of the major reforms sought to be made by the Bill was to introduce a new section, “Section 18D” to bring regulation of exports of pharmaceuticals within the purview of a strengthened central drug regulator. This was keeping with the overall intent of the Bill, which was to bestow more authority and accountability on the central regulator to regulate the industry. This was a significant reform because until then manufacturing sites were within the purview of the State regulators and enforcement was uneven and weak. After the scandal at Ranbaxy and in light of the severe international criticism of the Indian drug regulatory framework, the proposed Bill in 2013 was meant to strengthen the powers of the central regulator over manufacture and exports of drugs made in India.

The Indian pharmaceutical industry was up in arms against these changes and protested before the Standing Committee. They argued that increased regulation translated into increased compliance costs. In other words, the increased cost of complying with safety norms would eat into their profits. The Commerce Ministry joined hands with the industry in opposing these changes and in a rare move made a representation to the Standing Committee to drop the move to place exports under increased central regulation. A few of the comments of the Commerce Ministry, as reproduced in the 79th report of the Standing Committee are reproduced below:

In India, in addition to the product permission granted by the Licensing Authority, the exporter has to ensure that the factory complies with the Good Manufacturing Practices guidelines issued by the World Health Organization and has also to obtain Certificate Of Pharmaceutical Product for every product intended to be exported. In the circumstances, the requirement of obtaining additional license from the Central Licensing Authority would be an hassle for the manufacturer and will cause unnecessary delay in export. It is apprehended by the industry that such additional requirement resulting in delay will adversely affect export of drugs.

The exporters are required to take separate license from Central Drugs authority in addition to the license taken from State drug controllers. This is likely to cause substantial delays and increases transaction costs. SME sector is likely to face hurdles.

The Commerce Ministry’s submission to the Standing Committee is eerily similar to the arguments made by the industry – that the new requirements would only increase costs and cause delays. There is no discussion of ‘safety’ issues in the note by the Commerce Ministry. In its final report, the Standing Committee took note of the Commerce Ministry’s submission and reprimanded the Ministry of Health, stating that the concerns raised by the Commerce Ministry: is indicative of the fact that the Ministry of Health and Family Welfare has not done due diligence and in-depth study of all the issues involved therein. Wider consultations were not held before formulating the Bill. The Committee, therefore, recommends that before enactment of the Bill, the Ministry of Health and Family Welfare should hold intensive and meaningful consultations with the Department of Commerce with specific reference to the concerns expressed by that Department and address them in a mutually satisfactory manner.

The Commerce Ministry had once again succeeded in embarrassing the Ministry of Health. This and other related behaviour of the Commerce Ministry raises serious concerns of possible ‘capture’ of the Ministry by the Indian pharmaceutical industry. ‘Regulatory capture’ is a phrase used to describe a situation where a regulator, or in this case a Ministry, ends up pushing the agenda of a special interest group. The situation at the Commerce Ministry isn’t ‘regulatory capture’ in the traditional sense since it was never meant to regulate the pharmaceutical industry. However given the convergence between the commercial interests of the pharmaceutical industry and the policy objectives of the Commerce Ministry, the latter has ended up representing the interests of the former in a sphere of governance which deals with public safety and not commerce. It is necessary to have a course-correction and show the Commerce Ministry its place when it comes to issue of drug safety but who exactly is going to bell the cat?

*The writer is a lawyer who advises on IP & regulatory issues in the pharmaceutical sector.

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Aparajita Lath

Aparajita graduated from the WB National University of Juridical Sciences, Kolkata. She was formerly an editor of the NUJS Law Review. She is a lawyer based in Bangalore. All views expressed by her on the blog are her personal views.

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