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Photo: iStock
Photo: iStock

Opinion | Can covid-19 be Indian pharma’s Y2K moment?

The country’s pharmaceutical industry has a rare but brief opportunity to capture the global market as the chief supplier of affordable and high-quality hydroxychloroquine

Prime Minister Narendra Modi’s medical diplomacy in clearing hydroxychloroquine supplies from India to countries like the US, Brazil and Israel, has won the country brownie points in the midst of the global pandemic. It also points to a once in a generation opportunity for Indian drug manufacturers as also the wider healthcare sector to become the dominant global supplier of key products and services.

Already, companies like Ipca Laboratories and Zydus Cadilla that produce the “wonder drug", have impressed with their ability to address the sudden demand, with many of them ramping up production ten-fold within weeks and this in the middle of a lockdown that should have crippled their supply chains.

Now it is for the industry to build on this unexpected bonanza before the world settles back to sourcing from China—whose giant plants have been turning out bulk drugs and intermediaries at a scale that leaves little room for India. But with many countries now looking at de-risking their supply lines by moving out partially or completely from China, Indian pharma companies have a golden opportunity to move in and present themselves as a viable option.

In some ways this could be the industry’s Year 2000 (Y2K) opportunity that catapulted India’s information technology services sector into the global league. In the late 1990s, large multinational corporations suddenly confronted the possibility that the decades-old systems, which powered their operations, could suddenly be rendered dysfunctional because they had been coded only for the date-date/month-month/year-year (dd/mm/yy) mode. Amidst frightening visions of flights crashing, washing machines and dishwashers tripping and bank accounts spewing out masses of miscalculated interest to account holders, they needed help to recode their backend systems to allow for the coming century. And they needed it done at a price point that wouldn’t bankrupt them.

The answer came in the form of India’s fledgling IT services companies, not one yet even a billion dollar in sales, but capable it would seem of throwing vast number of trained engineers to the task.

The Y2K threat as it was dubbed, came and went and on the morning of the first day of the new millennium, it was all systems go at airlines, banks and powerplants. The world heaved a sigh of relief but in India’s IT capital of Bangalore as well as in Mumbai, there were whoops of joy as companies counted their windfall gains. From $1.08 billion in 1995-96, India’s software exports jumped to $6.2 billion by 2000-01. From there to the present $137 billion of exports was a natural progression.

What’s more, companies like TCS, Infosys and Satyam gained far more in the Y2K moment than just the immediate accretion to their toplines. The work their engineers did leading up to 2000 served as proof of their capability for large global clients. More crucially, it was a vote of confidence in their own capabilities. Prior to 2000, Indian IT companies were disparagingly referred to as “body shops", with IT professionals unfairly termed as “software coolies". The Y2K event brought home to the people who ran these companies that their own competencies ran deep and that they could now pivot core business functions for their clients.

The net result of this epiphany is that India accounts for over 50% of the global services sourcing business.

Much the same opportunity now beckons India’s health sector. Drug makers, who have in recent years struggled to meet the stringent quality standards of the US Food and Drug Administration (FDA), now have the chance to shrug off the collective stigma that they suffer from.

But the opportunity goes beyond merely the production of cheaper generics. It extends to offering medical services using advances in telemedicine, to patients all over the world. Recently in Delhi, when a young boy fell and hurt his ankle, the doctor took a look at the swollen ankle on one of the video- and audio-conferencing platforms and diagnosed it as a sprain which needed rest. In the middle of a lockdown, it was the best solution possible. Effectively, it took care of the patient’s needs, prevented the further burdening of an already stretched hospital system and of course in the context of the current virus, eliminated any chance of infection. With 5G technology promising to revolutionize healthcare including diagnostics and real-time interaction between doctors and patients, there’s no reason the doctor can’t be in India even while the patient is in the US.

India’s generics business captured the imagination of the world in the late 1990s and made inroads into crucial market segments across the world. Despite that, it lost its way over the last 15 years as poor quality and an inability to adhere to mandatory compliance standards thwarted the early promise. As a result, despite a 20% share of the global generics market, total Indian pharma exports reached just $19.2 billion as of 2019.

That’s where the industry needs to take a leaf out of the IT companies’ playbook. One of the first things most Indian IT services firms did was to put in place systems to ensure the highest levels of quality standards. Today, that’s a given for even the smallest among them.

It is the kind of reassurance that the pharma companies need to provide to the world. The seeding is done but the time window is small.

Sundeep Khanna is former executive editor of Mint

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