Pharmaceuticals Sector

Perilous prescription

Print edition : February 03, 2017

At the entrance to the Rajasthan Drugs and Pharmaceuticals Limited plant on the Jaipur-Shikar highway. Photo: PHOTOGRAPHS: T.K. RAJALAKSHMI

Oral rehydration solution-producing machine at RDPL.

A bottling section in the plant.

A capsule-making machine. All the machines are in good working condition.

The Union Cabinet’s recommendation to close down Rajasthan Drugs and Pharmaceuticals Limited, along with IDPL and two other public sector pharmaceutical companies, is a big blow to the concept of the state ensuring affordable, and possibly free-of-cost, medicines for millions.

AT first glance, the logo embossed on the facade of the building and the main gate of Rajasthan Drugs and Pharmaceuticals Limited’s (RDPL) plant located in the Vishwakarma industrial area on the Jaipur-Shikar highway does not look anything out of the ordinary. An employee points out that a closer look will reveal the images of a tablet, a capsule, an injection and a cough syrup bottle engraved in the logo, symbolising the work undertaken at RDPL, a company that was incorporated in 1978 as a joint venture of Indian Drugs and Pharmaceuticals Limited (IDPL) and the Rajasthan State Industrial Development and Investment Corporation with equities of 51 and 49 per cent respectively. The plant began production in 1981. RDPL was set up to make available quality medicines at affordable prices to the Medical and Health Department of Rajasthan in order to distribute them among the poor. In 2010, RDPL became a Government of India unit when the equity share held by IDPL was transferred to it. The unit produced tablets, capsules, liquid orals, ORS (oral rehydration solution) and ophthalmic medicines in a Schedule “M”-compliant facility. (Schedule M of the Drugs and Cosmetics Rules, 1945, contains regulations for good manufacturing practices (GMP) and requirements of premises, plant and equipment for pharmaceutical products.) Both RDPL and IDPL are slated for closure following a Union Cabinet recommendation to the effect on December 28. What was shocking was that none of the RDPL staff, probably save its Managing Director, knew this was coming. The 150-odd workers and their families now stare at a bleak future. Nearly 50 per cent of the workers have more than 10 to 25 years of service left. But the issue is not only about what will happen to the manpower. The move has come as a blow to the concept of the state ensuring the availability of affordable, and possibly free-of-cost, quality medicines for all.

The Union Cabinet also recommended the strategic sale of the surplus land of Bengal Chemicals and Pharmaceuticals Limited (BCPL, the first pharmaceutical public sector company to be set up in India) and Hindustan Antibiotics Limited (HAL, in Pimpri, Pune). BCPL and HAL were the two public sector undertakings identified by the NITI Aayog, the Central government’s policy think tank, for sale of the government stake in companies to private entities in the name of efficiency.

The note put out by the Press Information Bureau unambiguously stated: “The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the sale of surplus land of Hindustan Antibiotics Limited (HAL), Indian Drugs & Pharmaceuticals Limited (IDPL), Rajasthan Drugs & Pharmaceuticals Limited (RDPL) and Bengal Chemicals & Pharmaceuticals Limited (BCPL), as would be required, to meet their outstanding liabilities. In this way, the national assets would be utilized in the best national interest. The sale would be through open competitive bidding to government agencies and the outstanding liabilities will be met from the sale proceeds. Voluntary Retirement Scheme (VRS)/Voluntary Separation Scheme (VSS) will also be implemented in these Public Sector Undertakings. The remaining part of the land will be managed in accordance with the guidelines of the Department of Investment & Public Assets Management (DIPAM) and Department of Public Enterprises (DPE). After meeting the liabilities, steps will be taken to close IDPL and RDPL. The option of strategic sale will be explored for HAL and BCPL. The Department of Pharmaceuticals, the administrative department for these undertakings, will take time bound follow-up action.”

The writing was on the wall. Four healthy pharmaceutical companies in the public sector were slowly destroyed, not for any fault of their own or their employees but owing to a combination of neglect, oversight and indecisiveness. Take the case of RDPL; it was a profit-making PSU as the webpage of the plant claims. The companies were established with the idea of making India self-sufficient in the production of essential and life-saving medicines at affordable prices for all, but that concept was rendered redundant. In short, it was an open invitation to private pharmaceutical companies to fully establish their control over the pharmaceutical sector with little or no countervailing effect from PSUs.

RDPL, as documents available with Frontline show, was not a loss-making unit, at least until 2013. At the time of visiting the factory, it was noticed that production was on although the morale of the employees was low. “We want to work. This is what we conveyed to the State government as well as the Department of Pharmaceuticals at the Centre. But the government is determined to close down the company,” a staff member told Frontline, requesting anonymity. Employees said they were committed to their work as they did not view RDPL as a profit-making entity but as having a public role to play.

From 2013-14, the company began running into losses. Its total liability to date is Rs.50 crore, mainly in the nature of bank loans and accumulated interest. The employees had not received their salaries for over seven months. The company went into the red or was pushed into the red mainly because government orders had stopped.

In March 1998, the State government came up with a purchase policy according to which medicines required by the government would be procured from PSUs at the lowest rates offered by them. RDPL was preferred, given the investment of the State in the unit. The unit regularly received orders worth Rs.30 crore to Rs.40 crore every year from the State government. After the creation of Rajasthan Medical Service Corporation Limited (a nodal agency of the government of Rajasthan) in 2011, the policy was discontinued and orders began declining. The corporation began procuring from other agencies, including private pharmaceutical companies. RDPL’s downhill journey started three years ago mainly because of a lack of government procurement orders and working capital, which took a toll on production, supply and profit. The company could not alter its rates as they were fixed by the National Pharmaceutical Pricing Authority. Employees said that the Karnataka government purchased exclusively from Karnataka Antibiotics and Pharmaceuticals Limited. RDPL, on the other hand, got no support from the State government and the Centre. It had, by all accounts, including annual reports of the Department of Pharmaceuticals, the capacity to produce quality pharmaceutical products along with quality control arrangements ensuring highest quality standard formulations with the efforts of highly qualified technical persons to oversee production and quality control. It had, in addition, nine acres (3.6 hectares) of land for future expansion. The RDPL plant was one of the oldest establishments in the industrial area. But despite setbacks in the matter of orders, the plant ploughed on. In 2011-12, RDPL received Rs.25 crore worth of orders; in 2012-13, it was Rs.20 crore; in 2013-14, it came down to Rs.16 crore. In the subsequent year it dipped to Rs.3 crore, and since last year, the plant has not received any orders. In mid-October, the Managing Director of the company stopped attending office and it was rumoured that he had put in his papers. The resignation, it was learnt, was yet to be accepted. He constituted a five-member committee to run the day-to-day affairs of the company. The employees union as well the Scheduled Caste and Scheduled Tribes Welfare Employees Association made several representations to the State and Central governments requesting the restoration of the preferential purchase policy and to make funds available in order to restart normal production. The plant had started work for making its operations compliant with the World Health Organisation’s system of GMP and had even been sanctioned funds. It was in the midst of all this that the Union Cabinet recommended, on December 28, RDPL’s closure.

This correspondent saw new equipment lying unopened and machinery in perfect working condition during the visit to the plant. In fact, syrup bottling and packaging operations were on. In their efforts to revive the unit, the employees sent proposals to the Centre seeking an equity share capital of Rs.10 crore, approval to manufacture on a loan-licence basis, sanction of loan or grant as working capital, and salary dues and bulk orders from the Ministry of Health and Family Welfare. The State government was requested to frame an exclusive policy for purchase of medicines from RDPL and to place regular orders. Clearly, the employees felt the company could be brought out of the red with minimum intervention.

Appeals go unheard

On December 26, two days before the Union Cabinet announcement, the five-member committee appointed by the absentee Managing Director met the Joint Secretary in the Department of Pharmaceuticals, New Delhi, and gave him a representation highlighting the issues, including that of a missing company head. The committee had sent a detailed note regarding funds on November 25. A sum of Rs.16.33 crore was required immediately and Rs.44.70 crore subsequently. The board of directors of the company, which has both State and Central representatives, recommended that the Ministry provide a minimum funding of Rs.5.10 crore for settling an insurance claim arising out of a fire, payment of statutory dues, salary of up to at least three months and legal expenses. The company had orders in hand worth Rs.8 crore to Rs.10 crore and the value of materials was worth Rs.48 lakh. The committee requested for materials worth Rs.10-12 lakh, which, it said, would help make finished goods worth approximately Rs.100 lakh. The proposals went unheeded.

The closure of RDPL was surprising as the company had never been referred to the Board of Industrial and Financial Reconstruction (BIFR) and no revival package was given at any stage. The employees said 60 per cent of them were around 40 years old and were averse to taking VRS or VSS. They wrote to Arjun Meghwal, Union Minister of State (Finance), reminding him of the role played by RDPL and the government’s commitment to “Make in India”. (Meghwal was elected to the Lok Sabha from Rajasthan.)

“The union affiliated to the Centre of Indian Trade Unions (CITU) told the Managing Director that the employees would run the unit. He told us to keep out of it,” said Kapoor Chand Sharma, president of the RDPL employees union. Interestingly, the Bharatiya Janata Party (BJP) MP from Jaipur wrote to the Union Minister for Chemicals and Fertilizers, Ananth Kumar, in July 2014 about the state of RDPL and the Minister responded that he had instructed the Secretary (Pharma) to do the needful. In fact, the union approached all Union Ministers from Rajasthan for intervention to help RDPL get back on its feet.

The December 28 announcement, therefore, invited predictable reactions. Tapan Sen, general secretary of the CITU and Rajya Sabha MP from the Communist Party of India (Marxist), said it was a plan to sell the huge land assets by disposing of IDPL (which had five branches) and RDPL. He told Frontline that there was deliberate neglect of these companies and the government was succumbing to private pharmaceutical giants, both domestic and foreign. BCPL, he said, was a 150-year-old heritage company set up by the renowned scientist Prafulla Chandra Ray and had earned a margin, too. It needed protection, he said. Both HAL and BCPL had proved time and again their capability to produce life-saving medicines whenever there was an outbreak of disease and in emergency situations. This was a sale of national assets, he said.

The Federation of Medical and Sales Representatives Association of India has criticised the Cabinet decision by saying that the National Democratic Alliance government had made a commitment when it formed the government that it would revive PSUs.

Report optimistic

The Department of Pharmaceuticals’ annual report for 2015-16, while outlining the initiatives taken to improve the performance of Central public sector enterprises, observed that of the five enterprises under the control of the department, IDPL, HAL and BCPL were sick and had been referred to the BIFR, while RDPL reported losses for the first time in 2013-14. Of the five, Karnataka Antibiotics and Pharmaceuticals Limited was the only profit-making enterprise. The same report stated that a revival package for IDPL and HAL was under the active consideration of the Government of India. The government was also exploring the idea of a pharma park in the Rishikesh (Uttarakhand), Hyderabad and Chennai units of IDPL. As for RDPL, it was noted that the company had “embarked on expansion, modernisation and upgradation (Phase II) to qualify for WHO-GMP certification to become eligible for exploring international markets as well as for participating in the internationally funded projects of government of India and other governments.” On BCPL, the report noted the completion of two projects, the commissioning of a third and the impending commissioning of two more projects. Clearly, all these did not warrant their closure or sale of their surplus land.

On RDPL specifically, the report observed that the company had “quality management, well-equipped laboratory with modern equipment” and that it was working towards obtaining ISO 9001:2008 and WHO-GMP certifications. The company had enhanced its manufacturing capacities by installing new machines and workers had acquired skills and expertise for high productivity. It had, according to the report, acquired a name in the institutional market in the country as a reputed manufacturer of high-quality life-saving drugs and other specialised medicines. RDPL was selling not only to the State government, but to Central government institutions such as the ESIC (Employees State Insurance Corporation), the Railways, Defence and other PSUs, including State government institutions. It was also a partner in the implementation of the “Janaushadhi” programmes for making available quality generic medicines (unbranded) at affordable rates. Its products included anti-infective, anti-malarial, antacid, NSAIDS (nonsteroidal anti-inflammatory drugs), analgesic, anti-pyretic, anti inflammatory, anti-emetic, anti-spasmodic, and anti-diarrhoeal medicines. It is also learnt that when an outbreak of swine flu occurred, it was RDPL that rose to the occasion and manufactured medicines that were produced and sold to the government at very low rates. In 2008-09, when the first outbreak of swine flu was reported, RDPL staff worked multiple shifts in order to meet the challenge. “Whenever there was an emergency, they relied on us. We produced medicines during the plague outbreak in Surat,” they said. In 2015, Gujarat and Rajasthan were among the States that were worst affected by swine flu.

Medicines for millions

The story of IDPL, incorporated as a Government of India undertaking in 1961, is equally interesting. The webpage of the company says: “It was the vision of the first Prime Minister of India Jawaharlal Nehru that the drug industry must be in the public sector.” It quotes Nehru as saying: “I think an industry of the nature of the drug industry should not be in the private sector anyhow.”

The motto of IDPL is summed up in the signature message “Medicines for millions”, on the webpage. As the largest pharmaceutical PSU with plants in Rishikesh, Gurgaon and Hyderabad and two subsidiary units in Chennai and Muzaffarpur, the company could indeed produce medicines for millions.

The objective, says the website, was to create “self-sufficiency in respect of essential life-saving medicines, to free the country from import dependence and to provide medicines to the millions at affordable prices and not to make millions from medicines”. It played a major role in all the National Health Programmes such as family welfare, war on malaria and efforts to combat dehydration.

In 1994, during the plague outbreak, it was the only company that supplied tetracycline to the entire country. Likewise, it supplied chloroquine during malaria outbreaks, and as recently as 2005, IDPL supplied doxycycline capsules in record time to deal with an outbreak of leptospirosis, which had become a national emergency after the floods in Maharashtra. The webpage quotes the WHO as saying that “IDPL products have been examined for quality very carefully by the developed countries and many of them want to buy from here”.

Dr Jayashree Gupta, who was Chairman and Managing Director of IDPL from 2006 to May 2010, said that it was conceived as a profit-making venture. It was declared sick in 1992 but it could have been revived had the government not been indecisive. It was in the 1990s that private pharmaceutical companies began coming up but none of them had bulk facilities to manufacture active pharmaceutical ingredients (APIs). They bought APIs, set up formulation plants and marketed them as well. She told Frontline that “mid course correction” was required. “It was a ghost house when I took over. At some point of time the company had 13,000 employees; when I took over, there were 350. Employee morale was down as pay revisions and promotions had not happened. I gradually worked on those areas and we managed a turnaround of production and profits. There was 1,500 per cent growth when I left IDPL. All the plants needed upgradation. The government gave some money to make them Schedule M compliant but it was not enough to upgrade all plants. We upgraded sections within three plants. Once people were motivated, work took off.”

During Jayashree Gupta’s tenure, a rehabilitation package was prepared and sent to the Board for Reconstruction of PSEs. The board cleared the package but the Cabinet did not approve it. As was the standard practice, during the tenure of the United Progressive Alliance (2009-14), a Group of Ministers was constituted. At Rishikesh, which had a township around the plant, electricity was disconnected owing to non-payment of bills. “It was a hurdle every day,” Jayashree Gupta recalls.

The foundation stone of the Pimpri (Pune)-based HAL was laid by none other than Alexander Fleming in 1954. HAL was India’s first drug manufacturing company to be set up with help from WHO and the United Nations Children’s Fund (UNICEF). Its motto is “Cure for Millions: Care for all”. In 1996, when it was referred to the BIFR, there were 3,000 employees. Today, there are 1,100 employees. The company manufactured all basic antibiotics. When ciprofloxacin (generic name for the antibiotic) was launched by a private pharmaceutical company at Rs.35 a tablet; within a year HAL launched the same drug at Rs.7-8. It is the only laboratory in the public sector to discover a new drug, hamycin, to cure skin infections. A medical representative said that before 1996, HAL competed with other PSUs and supplied medicines to government hospitals. But after 1996, orders for medicines stopped. HAL employees have not got their salaries for 26 months.

In fact, Amitava Guha, a member of the All India Working Committee of the CITU who had worked in the pharmaceutical sector, said Kallam Anji Reddy, the founder of the multinational Dr Reddy’s Laboratories, worked as a chemist at IDPL, Hyderabad.

“The medicine market depends on marketing. This aspect was discouraged in the public sector. The medical representatives have been pushing for increasing the business of the public sector but the government is not interested,” he said. HAL, he said, was the only company that had been producing penicillin G, the life-saving antibiotic. He said the Left Democratic Front government in Kerala was taking steps to revive Kerala State Drugs and Pharmaceuticals Limited, which manufactures 35 items of generic allopathic medicines, which are supplied to government hospitals in States outside Kerala as well.

Therefore, it is quite another matter how Nehru’s political successors viewed the drug industry, particularly from the 1990s onwards. Basic health care continues to be out of reach for millions of Indians. What the Congress governments could not do, that is, do away with the public sector in pharmaceutical industry, the BJP-led government has done with extraordinary ease. There are proposals even to do away with the BIFR, one of its objectives being the revival of viable units.

Public sector units are needed in the pharmaceutical industry because of their ability to produce bulk drugs at cheaper rates. A 400 gram de-worming formulation by RDPL, called Albendazole, costs Rs.1.48 while the same manufactured by GSK, called Zental, costs Rs.21. Similarly, the medicine for swine flu, for which RDPL got the manufacturing licence, costs Rs.16 a capsule while that sold by Cipla as Tamiflu costs Rs.48.

RDPL is also the only PSU to get the licence to manufacture anti-retrovirals at cheap prices required for human immuno-deficiency virus patients, but as the plant was not WHO-GMP-compliant, the production of the drug was stalled.

The Cabinet decision has serious ramifications. The PSUs in pharmaceuticals are required for a population that is barely able to afford medical treatment of the most basic kind. The privatisation of health care is for the benefit of a few, not the majority, and any government that has pretensions of caring for its people should revisit such a disastrous decision.

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