industry eyes vast expansion
Ernst and Young Analyst Muralidharan Nair spoke about the boon to India.
WHILE MOST MEDIA and Republicans seem obsessed with the problems related to the rollout of healthcare reform, a few entities are rejoicing.
They are about to become very rich – or, in some cases, even richer.
There are some obvious beneficiaries. Giant insurance companies, for instance, which will enroll millions of new customers.
There are other less obvious ones, like the start-ups hoping to take advantage of the new healthcare rules.
But, the most surprising one of all, however, is not even in America.
India and its pharmaceutical industry is gearing up for a massive expansion as millions of new prescriptions are written for generic drugs covered under the new insurance policies.
THE BOON TO India’s economy – which is far from certain – was reported during the height of the government shutdown on Oct. 4 by the BBC in ‘Obamacare’ boost to Indian pharmaceutical industry.
In the online program notes it says:
The BBC story about the Indian drug industry boon from healthcare reform. Click image to enlarge.
“Whilst the introduction of President Obama’s healthcare reforms has proved controversial in the US, in India it is expected to boost the pharmaceutical industry.
“India produces nearly 40 percent of the generic drugs used in the US and has been stepping up production in anticipation of increased demand in the wake of the introduction of Obamacare.”
According to the BBC’s Brajesh Upadhyay, the ACA “is creating thousands of new jobs in India. The Indian generic medicine industry is gearing up for a huge boost in demand from the U.S.
“Nearly 40 percent of the generic drugs used in the US now comes from India, and it’s going to get much bigger.”
The reporter then interviews Muralidharan Nair, an analyst with the accounting firm Ernst and Young.
“Obamacare will be a tectonic change in the way generic consumption of pharmaceuticals is going to happen in the United States,” Nair says.
“Being a big provider of that kind of product to the world India stands to gain significantly.”
However, before you rush out to buy stock in one of the Indian pharmaceutical companies that stands to benefit, better do some homework.
The industry is rife with problems, and it’s not difficult to find examples.
On the same day as the BBC report, a contrarian overview of the Indian drug industry was published in the magazine Foreign Policy with an alarming headline.
In Bad Medicine: India is flooding the world with tainted drugs — and getting away with it Roger Bate writes:
The article in Foreign Policy warning about “bad medicine” coming from India.
“Evidence is mounting … that some pharmaceutical manufacturers in countries like India cut corners and send low-quality products to major, developed markets. Worse still, they may have separate production lines for drugs they sell in developing markets like Africa, where poor quality is more likely to go unnoticed.”
Bates recounts that few a months previously India’s largest drugmaker, Ranbaxy, pleaded guilty in a U.S. court to several criminal offenses relating to the fraudulent manufacture and sale of adulterated drugs.
The US is the biggest importer of generic Indian drugs.
“The Indian government, protective of its country’s $20 billion pharmaceutical industry, quickly responded by claiming that Indian drugs are in fact safe,” Bates adds. “But in September, the U.S. Food and Drug Administration banned imports of drugs from another Ranbaxy plant that had not been implicated in the recent settlement.”
Bates then sums it up in simple arithmetic:
“Given that probably over 100 million people around the world take Indian drugs every week, if one in 20 of those drugs doesn’t work, millions of patients are not taking the medicines they need.”
A MORE RECENT example involving another company was reported Oct. 22 in UK Watchdog Restricts Drugs from India’s Wockhardt.
“In the third such plant to face restrictions, Britain’s health regulator has restricted exports from a factory of Indian pharmaceutical firm Wockhardt, the company said Tuesday.
“Britain’s Medicines and Healthcare Products Regulatory Agency has cancelled Wockhardt’s “good manufacturing practices” certificate for a factory in Kadaiya (Daman) in western India for noncompliance with its manufacturing standards,” the report said.
“In recent months both the U.S. and UK watchdogs issued import alerts on drugs made at another Wockhardt manufacturing unit in Waluj, Maharashtra in western India, citing quality concerns.”
The web site of Ranbaxy, a giant maker of generic drugs in India. Click image to enlarge.
So it is no slam dunk that the troubled Indian generic drug industry is going to score big from Obamacare. It is, in fact, drawing more scrutiny than ever from American regulators, perhaps accounting for the spate of recent citations and bans on specific firms and their products.
As the BBC’s Upadhyay reported Oct 4:
“More and more doctors in the US are now prescribing generic drugs. For the consumers, the savings for these drugs can be substantial.
“To ensure quality, the US Food and Drug Administration has stepped up its presence on the ground in India…. Experts say this is good news because it will ultimately bolster quality and confidence in Indian-made drugs.”
As if to rub salt into the wounds of those who then hoped to overturn the healthcare law in its entirety, Upadhyay ended with:
“While Republicans find Obamacare a bitter pill to swallow, it is proving sweet for India.”
But consumers and investors need to exercise considerable caution. It is not at all clear that all generic drugs imported from India are safe and effective. It is even less clear which of the manufacturers have unblemished records.
It would pay to do a great deal of research on the topic before ingesting prescribed medications imported from India.
And it could cost an arm and a leg if you rush headlong into investing in a drug maker with a dubious track record.
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