Interview | Russia-Ukraine war piles stress on Indian pharma industry, says Sudarshan Jain of IPA

Sudarshan Jain is secretary general of the Indian Pharmaceutical Alliance (IPA), which groups the country’s leading drug makers, a senior adviser with private equity firm APAX Partners and a board member in multiple organisations. He has more than 40 years’ experience in companies doing business in pharmaceuticals, hospitals, diagnostics and nutrition. Jain has worked in senior positions in Abbott Laboratories and Johnson & Johnson, among others.

In an interview to Sumi Sukanya Dutta and Ayushman Kumar of Moneycontrol, Jain spoke about the role played by the Indian pharma sector during the COVID-19 pandemic and the impact of the Russia-Ukraine war. Edited excerpts:

How do you think things have changed in the pharma sector, especially companies which are part of your association, in the last two years of the pandemic? 

India is rightly described as the pharmacy of the world and a crisis is an opportunity to get the best out of any organisation, any system, any process. And during this time, the Indian pharma industry demonstrated that... they are able to maintain supplies of medicines around the world, and we are proud to say that we have been able to meet supplies to more than 200 countries during the most difficult time of the pandemic... (it is an indication of) a very, very strong commitment and collaboration between industry and the government to make it happen.

We have got a very strong manufacturing set-up, which has been built up over the years. So that helped us to make sure that we are able to deliver medicine not only to India and around the world, point number one.

Secondly, we are proud to say that we made sure that the system has worked in unison to deliver the medicines in an environment which is volatile, which is uncertain. There is uncertainty both on demand side and supply side; demand side you never know when the demand shoots up and of what product category because what was required in wave one was totally different (from what was required in) wave two and wave three. It was hydroxychloroquine in wave one, remdesivir in wave two and paracetamol in wave three, right?

On the top of it, there are issues of supplies of inputs, raw materials of China, volatility in the supply chain, but industry met the demand. Now we have also got a proper system to estimate the demand; the demand and manufacturing processes are connected...

The third big change is the regulatory processes. Now who could have imagined that you could develop vaccines in 9 months’ time, anything which used to take nine years to 10 years, we could do in nine months’ time.

And the fourth is self-reliance as a country whether it is PPE (personal protective equipment) or diagnostic tests or vaccines or raw materials, we have been able to move forward in our agenda of self-reliance. And the last key, I will say, human resources has become a very important function because now COVID-19 has been a great equalizer.

There were a lot of apprehensions when the Russia-Ukraine war began. How much of the fear that the pharma industry has or had has come true? What do we expect going ahead? 

India is a very strong supplier to Russia and Ukraine. We have been able to, from our side, maintain the supplies for three to six months. Point number two is regarding payments, (the pharma industry has) not totally resolved the issue of payments from Russia and Ukraine. So, our money is stuck but we made sure first the supply should be there. And the third is the impact of fuel price. Fuel price has zoomed and it has an impact on inflation, which is impacting the pharma industry most. Because even if the input cost goes up, my output cost doesn’t go up. Because everything in the pharma industry is controlled, you can’t take price increase even for medicines outside price control beyond 10 percent. So, there is operational stress in terms of liability of the operation. But the key task at this particular moment the pharma industry is doing is making sure that the medicines are available to the patient who needs it most during this time.

There is concern that due to the Russia-Ukraine war, prices of active pharmaceutical ingredients (APIs) are also getting affected.  How long will this continue? 

So basically, the impact of price is not only dependent on Russia and Ukraine, it is also the supply choking up from China. So the volatility in the pricing is because of the China situation. Very difficult to say when the control will take place, we will continue to anticipate the volatility in the pricing environment.

So, both the geopolitical situation and the COVID situation have amplified the pressures on the industry, but we have got a very important task and that we have to make medicines available despite all this. And the next task for us is to move up the value chain not only in the supply of medicines but move up the value chain in biosimilars, complex medicines and research and development (R&D).

Also read: No end in sight for India’s wait for Paxlovid, the most promising COVID-19 drug yet, despite surging cases

So there is a war against virus and then there is a war against physical war but India is performing its role beautifully in both the areas.

Tell us something about the exciting things happening in the pharma industry. What are the new therapy areas that your partner companies would be looking at?  

One of the big things is that all the pharma companies are increasing their investments in R&D because everyone knows that particularly in large companies, two-thirds of the value is in innovation. So, one is moving up the value chain in biosimilars and complex products and you must have heard about Biocon getting insulin in the US and interchangeability is allowed. So, that will be a big thing.

Companies like Lupin and Intas are happy with their product portfolio in terms of complex products; Zydus came with the first DNA vaccines in the world, and they are working on new molecules, which have got approvals in hepatitis and other areas.

But there is uncertainty in the area of R&D because no one knows what will happen and when but there is no choice but to invest in innovation going forward. So everyone is trying to get into the areas of oncology, anti-microbial resistance, and monoclonal antibodies but what will come out, only time will tell.

Would you like to say something about the regulatory processes in India? Are there any challenges, gaps that need to be addressed? 

... that is a very important area to build the R&D ecosystem in the country. A lot has been happening such as the emergency use approval and the subject expert committees but still a lot needs to be done.

It takes more time in India to get approvals, maybe three times more, compared to what it takes in Europe and the US. Even if we have to start developing a product, we need to take permission from the government. Why should I take permission from the government to start developing the product? It takes time.

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India has got a federal structure. So the regulatory departments at the Centre work in a very different way compared to the state levels. So how do we integrate and (ensure that) regulatory upgradation of the overall system and broad areas are a one-point approval system, digital management, capability building and project management approach to the regulatory system that becomes important and so on. If we have to make an R & D climate in this country, we have to bring about regulatory simplification.

Why aren’t R&D budgets within the pharma companies not really improving the way they probably should? 

In India, there is stringent price control, so the profitability is always under pressure. And second is the size. So once there is price control, the opportunity to earn from success is also low and the size of the market for R&D for a product is relatively low. So the biggest product in India is Rs 1,000 crore but the biggest product in the US is $200 million.

So where do you get the money to invest? So the question is the overall size of the market, the pricing of the product. Despite that, some of the companies spend around 8 to 10 percent on R & D. And it shows the strength of Indian entrepreneurship, right? So what we need to do going forward is if we can fund R&D and the government can take that initiative.

When we talk about the Indian pharma industry, mostly we talk about the volume (contribution to global sales). While volume stays at 20 percent, value stays at a mere 2 percent. Is it being worked on? 

At the moment we are on, say $45-$46 billion in terms of overall value. We should go to $130 billion by 2030 with a growth rate of 6-7 percent and that can be possible only if we move up the value chain. We have to develop innovative products because value will not come only from small chemicals, value will come from biosimilars, value will come from complex generics, value will come from incremental innovation. We should be able to develop three to four chemical entities in India in the next three to five years’ time. Importantly, we should focus on quality.