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BW Businessworld

Mindset Malady

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Regulatory compliance issues have become the key concern for top Indian drug makers of late as most of them earn more than half of their sales revenue from foreign markets, where people's health is valued more and thereby medicine quality norms are more stringent and strictly enforced. India's drug industry, although third largest in the world by volume with a significantly large number of manufacturing facilities approved by foreign drug regulators, is yet to realise the importance of being updated with the quality standards laid out these authorities with whom they have a contractual obligation to do so. The basic reason; Indian industry has been for long used to a culture of lax regulations and a poorly managed enforcement at the home turf. It had never faced stringent actions and consequent revenue impacts in the local market as such issues are typically easily "manageable" here with short cuts and other not-so-fair deals.
But, at least some companies have learnt the hard lessons through heavy impacts on the export revenue after serious compliance issues flagged by foreign regulators in the recent past. Ranbaxy (now merged with Sun Pharma) lost half of its $2 billion worth business when the US Food and Drug Administration banned four of its export facilities in India since 2008, Wockhardt’s US sales have shrunk almost fully in the last two years when the regulator from that market raised quality issues at the company’s export facilities in Aurangabad in 2013. Another a dozen or two, including the country's largest drug maker Sun Pharma, are currently struggling with negative observations on quality standards raised by foreign drug authorities.  
Since the local industry have been so used to this "easy-to-manage" attitude and its negligence on quality norms were so deep-rooted in the country, the remedial measures seems difficult unless it changes the mindset completely.   
Going forward, the industry's key challenges are rebuilding the lost reputation and earning adequate skill to guard the compliance side.
According to a latest survey by consultancy and audit firm Deloitte India, about 55 per cent of respondents, comprises of leading life sciences companies in India, have indicated that their compliance teams were not adequately trained to address regulatory requirements.
Besides skill shortage, lack of efficient internal controls or compliance system, inadequate utilization of technology to identify red flags and lack of a zero tolerance approach towards non-compliance and malpractice were also indicated as key contributors to non-compliance and malpractice in the sector, said the Deloitte report.
Another recent survey by consultancy firm EY observes that one third of pharmaceutical companies in India have not conducted reviews to assess potential gaps in data integrity, a key issue raised by US FDA for their actions on Indian drug makers. EY’s fraud investigation and dispute services team conducted the survey to assess the state of compliance issues related to data integrity faced by pharmaceutical companies in the country.  
Strangely, India's drug regulator-- the Central Drug Standards Control Organisation (CDSCO), which still functions under a law that was framed in 1952 when the local pharmaceutical industry was not even 5 per cent of what it is today, hasn't still found anything seriously wrong with the industry here. Neither it is bothered about the potential harm this quality negligence can have on the people's life.  
The reason is simple. The local regulator doesn't have enough resources, including people, to find the fault, and the pharmacovigilance or the drug safety review that every drug regulator should have in place is just restricted to the law.   
India has about 546 drug manufacturing plants approved by the US FDA, 857 manufacturing units approved by the UK drug regulator Medicines and Healthcare Products Regulatory Authority and about 1295 units with World Health Organisation’s good manufacturing practices certification. Regulatory agencies across the world are now getting more aggressive on medicine quality issues as it is a matter of saving human life. 
So, the going will be proved tougher for the Indian drug industry unless it changes its culture at the earliest. Hope our regulator too value human life more by aligning with this change.