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Pharma cos need to quickly learn how to balance interests of investors and patients

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ET Intelligence Group: Shares of Indian pharmaceutical companies were hit on Monday following a US FDA clampdown on two of the drug makers over the weekend.

This was the third trading session in a row that saw pharma stocks come under pressure. For Indian pharma companies, supplying low-cost drugs globally, balancing the interests of shareholders with those of patients was not so difficult till the US FDA came down heavily on the manufacturing practices of some of the companies. Now, any lapse in ensuring patient safety is becoming a reason for erosion of shareholder wealth.

Quality control, compliance with best manufacturing practices and drug safety have become very important to ensure that margins, returns and sales are not hit. While companies are making efforts to protect shareholders’ interest, their efforts towards patients' interest are still lagging.

From holding investor meets, management calls and issuing prompt press releases to taking explicit measures like changes in senior management and board of directors, Indian pharma companies are doing their bit to woo back investors. At the same time, they are taking steps to improve drug quality by hiring FDA consultants and appointing separate heads for drug quality.

For instance, last week Lupin appointed an expatriate as the global head of quality.

Companies are spending more on hiring new talent from outside to restructure their manufacturing businesses.

Their measures to beef up drug quality have, however, generated a limited impact.

Repeated observations from the USFDA are still a big concern for the companies and their shareholders. The release of Katherine Eban's book ‘Bottle of Lies’, featuring the manufacturing issues of Ranbaxy Labs, once India’s largest pharma firm, has further brought quality issues of the Indian pharma under the spotlight.

It has become pertinent for Indian pharma companies to do enough to improve drug quality and thereby fight the negative perception related to low-cost generic drugs produced by them. However, a content analysis of the latest annual reports of the top five pharma companies alludes to the priorities of the companies for now.

Except for Cipla, the rest of drug majors — Sun Pharma, Dr Reddy’s Labs, Aurobindo Pharma and Lupin — have the word ‘shareholder’ occurring many times more than the word ‘patient’ through the report.

In case of Cipla, the word ‘patient’ occurs 143 times against the 119 times occurrence of the word ‘shareholder’. To be sure, the global big pharma, embroiled in its own set of controversies, may not be a good example for Indian pharma to follow.

The Indian drug industry needs to reinforce that it is the price of the drug that is cheap and not the quality, especially when it is looking at gaining entry into another strategic market like China. Improved compliance, better communication and higher transparency are needed.

Shareholders in the pharma companies are learning it the hard way.




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