Govt may rethink proposal to ban contract manufacturing in draft pharma policy

The Union government may be rethinking on its plan to implement the principle of 'one manufacturer, one salt, one brand name and one price’ effectively ending the practice of loan licensing or third-party manufacturing.

A person who provided inputs to the government on preparing the Draft Pharmaceutical Policy - 2017 on condition of anonymity said that the government is aware of industry concerns over the proposal.

The proposal was met with strong resistance from the industry as ban on third-party manufacturing or loan licensing is feared to hit small and medium enterprises (SMEs), disrupt supplies, and make installed capacities redundant.

"Such policy is not new - the government decided to discontinue loan licensing in 1986, but today that proposal doesn't make much sense as companies strong in manufacturing may not necessarily be good at marketing, and vice-versa and a lot of plants will be shut down if this is implemented," the person above said.

The government in the Draft Pharmaceutical Policy - 2017 prepared by Department of Pharmaceuticals under Ministry of Chemicals and Fertilizers called for phasing out loan licensing in three years for all other drugs excluding biopharmaceuticals. While loan licensing will be allowed only for WHO GMP approved facility, but limited only 10 percent of the total production of the company.

“When India is saturated with formulation manufacturing, ‘loan licensing’ is not of overwhelming benefit,” the government said in draft policy.

“Instead, it raises many quality maintenance and assurance issues,” the government added.

Typically, in pharmaceutical industry, one company gets the approval for manufacturing one drug and manufacturing it under different brand names and then gives it under exclusive brand names to other companies to market it. Thus, the other company without getting approval for manufacturing the drug starts marketing it in a brand name at a different price.

“The practice of ‘loan licensing’ and ‘contract licensing’ also undermines the veracity of drug manufacturing and pricing practice,” the draft policy reasoned.

In the pharmaceutical industry, about 2500 pharmacopeial salts are manufactured but there are more than 60,000 brand names with varying prices.

“One of the provisions of pharma policy was to do away with contract manufacturing,” said Dinesh Dua, Vice Chairman of Pharmaceuticals Export Promotion Council of India (Pharmexcil) and CEO of Nectar Lifesciences to Moneycontrol.

“The government says there is enough capacity, no need for contract manufacturing; you manufacture your own stuff and sell, it’s completely ill-conceived,” Dua said.

“Even the big boys of pharma outsource 40 to 80 percent of their manufacturing to third party plants,” Dua added.

Dua said the Niti Aayog and Prime Minister Office (PMO) were apprised of the consequences of the proposed ban.