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The Biocon bribery case is a disaster for public health and Indian pharma

Mazumdar-Shaw and Biocon Biologics have rejected all the charges and claimed that all their drugs product approvals were “legitimate”, backed by “science and data” and obtained after following all regulatory due processes. Photo: Hemant Mishra/MintPremium
Mazumdar-Shaw and Biocon Biologics have rejected all the charges and claimed that all their drugs product approvals were “legitimate”, backed by “science and data” and obtained after following all regulatory due processes. Photo: Hemant Mishra/Mint

On Monday, CBI arrested a senior official of the rank of joint drug controller of the Central Drugs Standard Control Organisation (CDSCO) as well as executives of a Delhi-based agency, allegedly while they were in the process of handing over a bribe of 4 lakh to the CDSCO official

The 4% fall in Biocon’s stock price in early trading on Wednesday is just the tip of the iceberg. Unless the issue is thoroughly investigated, the guilty brought to book and India’s already iffy pharmaceutical regulatory system thoroughly overhauled, India’s position, as in Prime Minister Narendra Modi’s words “the pharmacy of the world", is at stake.

But first, a recap of what happened. On Monday, India’s premier investigative agency, the Central Bureau of Investigation, arrested a senior official of the rank of joint drug controller of India’s pharmaceutical regulator, the Central Drugs Standard Control Organisation (CDSCO), as well as executives of a Delhi-based agency, allegedly while they were in the process of handing over a bribe of 4 lakh to the CDSCO official.

The CBI also booked three others including an associate vice-president of Biocon Biologics Ltd, a subsidiary of Biocon, founded by one of India’s most famous woman entrepreneurs, Kiran Mazumdar-Shaw. The agency charged that the bribe was paid to get regulatory clearances for an insulin injection, Insulin Aspart, manufactured by the company without undergoing mandatory Phase III clinical trials. It has also named Praveen Kumar, head of Biocon’s national regulatory affairs section, and other senior executives of the company and its subsidiaries and associates as co-conspirators in the bid to bypass regulatory processes and manipulate the minutes of the Subject Expert Committee of the CDSCO, which actually considered the case.

Mazumdar-Shaw and Biocon Biologics have rejected all the charges and claimed that all their drugs product approvals were “legitimate", backed by “science and data" and obtained after following all regulatory due processes.

At present, the CBI’s charge is just that – a charge. The agency has to present and defend its case in court, which will decide whether Biocon is guilty as charged as not.

But, as the stock ticker shows, investors are already discounting long-term damage to Brand Biocon. However, the long-term impact on Brand India could be worse.

Consider this. The Indian pharmaceutical industry is the world’s 3rd largest by volume and 14th largest in terms of value. The total annual turnover of the pharmaceuticals sector was Rs. 2,89,998 crore in 2019-20, growing at a CAGR of over 11% a year.

According to the India Brand Equity Foundation, India is the largest provider of generic drugs globally. The Indian pharmaceutical sector produces over 60% of the world’s vaccines and meets over half of the world’s vaccine demand.

India also has the largest number of US drug regulator Food and Drugs Administration-approved pharma manufacturing plants outside the US, and supplies 40% of generic drugs in the US – the world’s biggest pharma market. Globally, India ranks third in terms of pharmaceutical production by volume and 14th by value. The domestic pharmaceutical industry includes a network of 3,000 drug companies and approximately 10,500 manufacturing units. And total pharmaceutical exports stood at Rs. 1,46,260 crore in the year 2019-20.

This is not the first instance of India’s burgeoning pharma sector coming under a cloud for shady manufacturing processes, manipulated quality control certifications and short-circuiting of regulatory processes. In the Ranbaxy case, where a whistleblower’s complaint eventually led to India’s then second-largest pharmaceuticals manufacturer admitting to seven counts of criminal felony in US courts and paying hundreds of millions of dollars in fines eventually led to the exit of the promoters from Ranbaxy and the company's sale to a Japanese pharma company.

In 2020, an operation called Operation Broadsword conducted by FDA and other US agencies led to around 500 shipments of illegal and unapproved prescription drugs and medical devices from reaching the US and led to multiple “voluntary recalls" by other manufacturers.

Dinesh Thakur, the whistleblower in the Ranbaxy case, has publicly charged the CDSCO with being under the “undue influence" of manufacturers and has documented multiple instances of regulatory failure.

So far, all this has led to little concrete action from either the government or the industry side on cleaning up the mess in pharma regulation. India’s main drug regulatory bodies, the CDSCO and the Drugs Controller General of India at the central level, and drug regulators at the state level, continue to be woefully understaffed and underfunded, lack sufficient scientific and industry expertise to maintain adequate oversight of the industry, and, as multiple previous cases in these bodies attest, riddled with corruption.

The issue is much graver than mere moral turpitude. Quite apart from the very real threat to the economy, investments and jobs in the pharma sector, substandard or fake medicines seriously endanger public health. The government owes a moral duty to patients -- both Indian and the millions of consumers overseas – to ensure that regulatory and quality control processes are followed in letter and spirit. The industry also needs to clean up its act, starting with empowering its internal quality assurance and compliance heads with the power to take decisions that put patients above profits.

The cleanup has to start now.

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