The Covid-19 pandemic has exposed the myth of India’s import dependency on critical goods pharmaceutical ingredients and other medical equipment. The pandemic situation had triggered spurt in demand globally for medical supplies required for the Covid response which led to disruptions in supply.
India was facing acute shortage of personal protection equipment (PPE) and medical kits, as domestic production of these items were almost nil. This impacted our initial response to the pandemic. The current shortage of medical products conveys the importance of maintaining manufacturing capabilities to respond to health security crisis. The experiences show that the existence of manufacturing capabilities in the private sector alone cannot ensure uninterrupted supply especially during crisis in a country like India.
The prime focus of the private sector business model is maximisation of profit. The private sector companies stop the production and marketing of many old medicines or vaccines which do not rake in huge profits. The quest for profit of the pharmaceutical companies lead to market failure in many areas starting from tropical disease to infectious diseases, antibiotics, etc. The market failure has affected both the discovery and production of medical products for many disease affecting poor, including TB and sickle cell amimia. Thus, the market failure demands an intervention form the state.
Often the health crisis-induced demand lead to price spikes. The Javed Chuadhary Committee, which investigated the closure of public sector vaccine manufacturing units, notes: “(What) the Ministry had to pay the private suppliers was unacceptably high.” Further, the risk aversity of the Indian private sector prevents them from making huge investments required to achieve economy of scale in the production in intermediaries, API, biotherapeutics, etc. Therefore, from a health security perspective, it is critical for India to maintain manufacturing capabilities in the critical medical products to meet the substantial percent of its demand through public sector production.
The public sector units (PSUs) played a major role in the development of Indian pharmaceutical industry. First, PSUs made huge investment and produced APIs and provided this to the formulation industry, which was in the private sector. Further, the PSU also played a role in the technological dissemination and human resource training. However, the public sector units in the pharmaceuticals and vaccines sectors need intensive care or a reboot.
According to the annual report of the Department of Pharma (DoP), there are only five pharmaceuticals companies which are under the Central Government. Of these, two are sick and one is incipient sick while two managed to make a measly profit of Rs 25 crore each. The government has already decided to close down two PSUs — Indian Drugs & Pharmaceuticals Limited (IDPL) and Rajasthan Drugs & Pharmaceuticals Limited (RDPL) and strategic selling of the remaining three PSUs — Hindustan Antibiotic Limited (HAL), Bengal Chemicals & Pharmaceuticals Limited (BCPL) and Karnataka Antibiotic & Pharmaceuticals Limited (KAPL). There are three units producing vaccines under the Central government: they are Central Research Institute (CRI), Kasauli, Paster Institute of India (PII), Conor, and BCG Vaccine Laboratory (BCGVL). These are supposed to supply vaccines for the universal immunisation programme (UIP). Apart from this, Human Biological Institute also suppy to UIP program as per the government orders. Though there is HLL owned integrated vaccine park in Tamil Nadu producing two vaccines. The National Health Profiles 2019 shows that during 2017-18 CRI supplied TT vaccines and HBI supplied DPT vaccines to UIP programme. The government is heavily depending on the private sector for vaccines for UIP.
The role of PSU should not be of perennial competition with the private sector: In many areas, they can complement each other to the benefit of all. The backbone of the pharmaceutical industry is the production of Active Pharmaceutical Ingredients (API). Dependence on China for API has created panic in the pharma sector during the initial days of the pandemic. The public sector can invest and achieve economy of scale in the production of API and intermediaries and supply to the private sector for formulations. Similarly, the new areas like biotherapeutics need huge investments. This can be met by the private sector. Even the Katoch Committee recommended infusion of capital to each PSU to start manufacturing of important APIs. The Javed Chaurdary Committee recommended that to “insulate the UIP from price and supply shocks a cardinal principle of public health policy requires the sourcing of the vaccines from public sector manufacturing units to a substantial extent”.
Though the public sector reliability is accepted within policy circles, the fear of criticism of ‘return to license raj’ prevents the political leadership to take concrete actions in this regard. Though India’s PSU management bears the threat of political interference, the experiences of South East Asian countries, especially Singapore, show that there can be different management structure for PSUs. The government can set up plants and lease to the private sector with assured supply commitments. The leasing out model is already at work in the medical device park at Visakhapatnam. The government should implement this model in API and vaccines. The government should move away from the revival of sick public sector and should approach it as a restart. The need of the hour is the government take over the existing fixed assets and start manufacturing in PSUs with updated technologies and management approach.
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