Clampdown hits drug export

Print edition : January 02, 1999

The Government's abrupt decision five months ago to stop the issue of no-objection certificates and licences for the manufacture of new drugs for export has affected the Indian pharmaceutical industry.

R. RAMACHANDRAN

IT is an irony of sorts that while there is a general industrial recession in the country and exports are declining, the bureaucracy should raise legalese and quibble over the semantics of a 53-year-old law, resulting in a halt to the export of drugs valued at nearly $30 million for over five months now. Allegations of "corruption in the corridors of power" and "giving in to pressures of the multinationals" that are going the rounds in pharmaceutical industry circles do not therefore seem surprising.

The issue seems to have been triggered by the new "wonder" drug of potency, Viagra, or sildenafil citrate in chemical parlance, for which many Indian companies, having succeeded in re-engineering the molecule, have won huge export orders even as the drug is yet to be cleared for the domestic market. Viagra is the brand name of the drug made by the multinational Pfizer, which holds the patent for the drug in over 30 countries and is making a strong bid to enter markets worldwide. Indian companies, with their cost advantage, could offer competition to Pfizer by exporting the bulk drug to formulators around the world. In some countries of West Asia, Latin America, Africa and South-East Asia, the drug has been approved and some companies are already in the business of making formulations of this drug (in many of these countries there are no product patents in the area of pharmaceuticals). Indeed, some companies even exported a few consignments (Cipla exported 20 to 30 kg) before the clampdown. Orchid Chemicals and Pharmaceuticals, Chennai, is reportedly sitting over an export order of 40 tonnes and has the necessary permission from the Government.

But all this was in May-June 1998. In July the issue of no-objection certificates (NOCs) and licences for the manufacture of "new drugs or molecules" meant for export was abruptly stopped. Thus Orchid has not been able to get an NOC for the proposed export of its formulation of the drug.

The controversy has given rise to quibbling over the clauses of the Drugs and Cosmetics Act of 1940 and the Drugs and Cosmetics Rules of 1945, which talk only of import and manufacture of drugs for "stock, exhibit, sale and distribution" but do not specifically refer to "export". Considering that the rules give detailed procedures for obtaining import licences, there is not even a mention of a licence for export. Perhaps when the rules were framed no one thought India would be exporting drugs in the future and the Act and the Rules have not been modified according to the changing face of the Indian pharmaceutical industry. But that did not prevent drugs from being exported all these years. Since one could interpret sale and distribution to include exports, and since the Exim Policy allows export of drugs, the Central and State authorities respectively have been issuing NOCs and licences for manufacture even if the products were meant exclusively for export. Indeed, companies such as Orchid are 100 per cent export units. Now, all of a sudden, this technical issue around the wording of the Act and the Rules is being invoked. At a meeting a couple of months ago with representatives of the pharmaceutical industry, the Drug Controller General of India (DCGI) apparently gave this as the reason for not clearing applications for export of "new molecules" and said that the matter was under review and had been referred to the Law Ministry.

As a consequence, besides Viagra, applications for the export of some "new" drugs and molecules have not been approved. The value of these exports would be in the region of $30 million according to the Commerce Ministry and of the order Rs.200 crores according to the Indian Drug Manufacturers Association (IDMA). It is not clear who (or which department) first raised this legislative lacuna, and why after so many years files have been shuttling between the Health and Law Ministries. After five months of keeping the industry on tenterhooks, some progress seems to have been made only in the third week of December - thanks to intervention by the Commerce Ministry - but the problem is far from being resolved. Given that the issue may even require an amendment of the Act, this may take several months.

Essentially, the procedure for obtaining licences for manufacture amounts to classifying drugs into three categories: (a) a drug or a molecule approved for marketing in the country; (b) an approved "new" drug or a molecule; and (c) a non-approved drug or a molecule. These follow from Section 122 of the Drugs and Cosmetics Rules which defines a "new" drug and, according to Rule 122E, "a new drug shall continue to be considered as a new drug for a period of four years from the date of its first approval or its inclusion in the Indian Pharmacopoeia whichever is earlier." The designated authority for issuing licence to manufacture is the State Drug Controller who does so on the strength of an NOC or approval from the DCGI in the Health Ministry. For category (a) drugs - that is, after four years of the first approval - a one-time ministerial approval is sufficient. All aspects of manufacture (for the domestic market or for exports) are controlled at the State level and, for example, a renewal of the manufacturing licence is automatic. For category (b) - that is, until the drug finds its way into the Indian Pharmacopoeia - every new manufacturer has to provide data of the company's own toxicology and bio-availability studies on the proposed drug and seek the DCGI's approval for manufacture. Based on this approval, the State Drug Controller would issue a licence for the manufacture of a stated capacity.

Similarly, permission to export category (b) drugs or molecules is given only against a specific order and for a specific consignment. Every new export order requires a fresh DCGI approval for a specified quantity of the drug in accordance with the order. The same applies to category (c), non-approved drugs such as sildenafil, as well. Since there is no domestic market for these, an approval to export a specified quantity of a category (c) drug implies an approval to produce only that quantity. This is to ensure that the drug does not find its way into the Indian market.

Until about three and a half years ago, any such permission for approval from the DCGI against an export order was to be routed through the Commerce Ministry. Once the Ministry gave the licence to export, the DCGI had only to satisfy himself or herself with the basic data of toxicity and bio-equivalence of the drug and whether the drug figures in a pharmacopoeia of significance and issue an NOC for manufacture. Since July 21, 1995, however, this authority has been entirely delegated to the DCGI, who has the discretion to approve an application to manufacture and export. Industry sources allege that vesting the discretionary power with the DCGI has meant a certain arbitrariness in the whole system, particularly in respect of the time taken for approval.

Sources in the DCGI, however, say that the Commerce Ministry is only concerned with foreign exchange earnings and it is not bothered about the need to ensure the export of standard and quality drugs. Very often, they say, drug companies do their export business through 'merchant exporters' who are not able to provide the information and data required for an export approval. They also point out that quite a few consignments of these bulk "new" drugs are to German formulators who have operations in countries with weak regulatory systems. Any substandard consignment could give a bad name to the country, they fear.

Ministry sources also point out that from an ethical point of view too it is not proper to export a drug that has not been approved in one's own country. Justifying the stopping of the export of sildenafil citrate, Ministry officials point to the social implications of approving a drug like Viagra in India. "Viagra may have been approved by the United States Food and Drug Administration but that society has a degree of social permissiveness which is unknown in India," said one source.

Even as sildenafil citrate is undergoing trials in the country, these issues, in their judgment, could make granting approval for marketing it in India difficult. The industry, however, points out that it is up to the importer and the laws of that country to allow or disallow a drug here.

It must, however, be emphasised that prohibiting the export of unapproved drugs has some merit. From the perspective of an ineffective and weak regulatory system that obtains in India, sale in the domestic market cannot be prevented altogether. There are reports that Viagra can already be clandestinely procured in the country. Also, in the case of 100 per cent export units, the law itself permits products valued at 25 per cent of their total exports to be sold in the domestic tariff area. More important, the drug is specific and its abuse can lead to side-effects such as cardiac arrests as medical reports from the West have indicated.

The ethical argument being trotted out by the Health Ministry would have been credible if no export had been allowed at all. But that has not been the case. The clampdown has come only after the first consignments were cleared, which lends credibility to the allegation that pressures from multinationals are at work. Accusing fingers are being pointed at Pfizer. Indeed, Pfizer has been actively engaged in an indirect publicity for Viagra through interviews with its inventor, Dr. Simon Campbell, recently even while claiming that it would not manufacture Viagra in India. According to industry sources, the prohibited category (c), or new and unapproved, drugs include, besides Viagra, 17 or 18 drugs such as doxazasine (an anti-hypertensive), venlafaxim, meloxicam and ebastine (an orthopaedic drug), in whose markets Indian manufacturers have made an entry. While stopping the export of unapproved drugs (category (c)) on ethical grounds may be understandable, preventing category (b) drugs from being exported defies logic. If the lack of a legislative provision - the absence of any reference in the Act to exports - is the reason, then all exports, including those of category (a), should be put on hold. If ethics is the issue, then only category (c) should be disallowed. Ballpark figures of the export earnings of the Indian drug industry are in the region of Rs.2,000 crores but nearly 90 per cent of it comes from category (a). This must have been the reason for not including category (a) in the ban but if legality of exports is the question, this consideration should not have been there. Ban on categories (b) and (c) implies a loss of export earnings to the tune of Rs. 150-200 crores and that is significant.

Obviously concerned by it, the Export Promotion Board (EPB) discussed the issue in September when the matter was being tossed between the Health and Law Ministries. The Board decided that until such time that the Law Ministry gave its final verdict, the status quo should prevail and accordingly directed the DCGI to clear the pending export applications. But the Health Ministry did not budge, and there was total silence from the DCGI, according to sources in the industry.

A highly placed source in the pharmaceutical firm Ranbaxy pointed out that it was not sildenafil citrate alone that had triggered the controversy. Clarithromycin, a new substitute for the antibiotic erithromycin, is also a reason. Abbott, its manufacturer, has applied for a licence to manufacture and market the drug in India. But already several Indian manufacturers of clarithromycin equivalents have emerged as competitors to the multinational in the world bulk drug market. Even though this is an off-patent drug, it is an approved "new" drug in the sense of Section 122E of the Rules.

Besides the opening of new markets in countries of Africa, South-East Asia and Latin America, the emerging trend in the West of moving away from formulations and branded drugs to generic drugs has also meant yet another opportunity for the export of newer bulk drugs, like those belonging to category (b), from India. Any hurdle in the efforts to export would only lead to the loss of these markets, the IDMA points out. Apparently, there is already disquiet among the traditionally important importers such as Russia and Latin American countries as a result of this stoppage of export licences. Category (b) drugs, or "new" approved drugs, include, besides clarithromycin, over 100 drugs and Indian exporters have firm export orders for a number of these. Some important ones include newer antibiotics and synthetic drugs such as cephalosporin and sparfloxacin. Indeed some companies claim to have export orders for some drugs that were approved only this year, such as pentaprazole, namubetone and carvidilol, for which applications have apparently been made to the DCGI. Repeated representations by the pharmaceutical industry to the Health Ministry, strengthened by EPB recommendations, have finally led to the Health Minister deciding to grant permission for the export of category (b) drugs. The concurrence of the Law Ministry has been obtained to revert to the pre-July status for these. Pending final verdict from the Law Ministry - and this, as mentioned earlier, could even require an amendment to be moved - export of category (c) is still not permitted. According to Health Ministry officials, nearly 90 per cent of the pending applications belonged to category (b). But the value of export orders for category (c) drugs remains fairly substantial because orders for sildenafil citrate are reportedly huge and these will remain unmet. This could also mean that all those companies that have invested in the production of the drug may find themselves without a market given the likelihood of it being banned by the Indian Government.

In the final analysis, whatever triggered this controversy, it has resulted in an important ethical issue being raised - namely, whether or not drugs not approved for marketing in India - on grounds of rationality, morality, culture or whatever - should be allowed to be exported. That should call for a larger public debate than the one going on within the confines of the office of the DCGI.

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