But the lockdown has thrown a set of new challenges. What does the future hold for the Indian generics industry, the largest in the world.

An exclusive interview where Ajay Piramal Chairman of Piramal Group, Pankaj Patel Chairman of Zydus Cadila Healthcare and Samina Hamied Executive Vice-Chairperson of Cipla speak with Shereen Bhan on CNBC-TV18.

Q: Let us start by talking about the US and I will start by asking you about what you make of the signals coming in from President Trump? President Trump saying “Today I am declaring a simple but vital national goal. The US will be the worlds’ premiere pharmacy drug store and medical manufacturer.” What do you make of these comments, do you believe that beyond rhetoric this could have an impact on the Indian pharmaceutical industry?    

Hamied: Indian generic manufacturers, one in every three pill in the US is actually a pill that is manufactured in India, so while the Buy America campaign is taking up a lot of steam in the US I think there is a long path way ahead. So it starts with the APIs which are the active ingredients right after the manufacturing. I think while America is pushing really hard to say – in America for America, I think there is a pathway for this and here could be partnership models with Indian companies for manufacturing in US.

Q: You believe that this could in fact be an opportunity or further opportunity for Indian companies to partner with their US counterparts. But Mr. Patel let me ask you what you make of these comments that have come in from President Trump and do you like Samina believe that this is more rhetoric at this point in time given the sheer cost advantage that countries like India and China enjoy as well as the API supply chain it is unlikely that this – make in America for America movement of the pharmaceutical industry is going to gather momentum anytime soon?

Patel: I would agree with Samina on what she is talking about. The challenge is that the US wants to see that there is more production happening in US to ensure the supply chain which any country will think like in this kind of crisis. India has been proven to be a very successful and reliable partner to US up till now and even during crisis India had supplied all those generics product freely and fully. As a result US is not facing any problem with respect to supply in spite of the fact that there were some supply disruption happening earlier time because of the Chinese epidemic there. So given that track record we strongly believe that India is poised to actually partner with US to make sure that this supply uncertainty of the world is taken care of.

Now if you look at manufacturing of pharmaceutical in any country you start with API and the intermediates and classical process of process development, scaling up, putting up a plant and then getting FDA clearance would generally take about 3 years’ time and subsequently the product. Given that it is not going to be something which can happen overnight by putting lot of money behind it because it is not the question of money, it is work and time is required to complete every study which is required before a product is manufactured in any plant.

So given that it is not a thing, but every country in the world is going to think like that and as Indian companies we are also very clear that India has to partner with countries to make sure that the supply chain surety is there.

Q: Let us talk specifically about this API business, now China has 20 percent of market share in the API production globally. India’s dependence on China has been declining, we still are significantly dependent on China for APIs, but it has been declining. What do you make of the government’s efforts to ramp up our capabilities in the API supply chain how do you see that panning out and what do you believe more needs to be done to ensure the robustness of this plan?

Piramal: What is really important now for every country is to ensure that the supply chain is secured. This is what Pankaj said and I agree with that. When I see it we have manufacturing facilities of both API and finished formulations whether it is in the US, we have facilities in Canada, the UK and India. It is important that every country is looking how they can secured their sources of manufacturing.

As I see it the importance of some critical manufacturing taking place in the various geographies is going to become even more important because nobody wants to – it is almost like you have to keep your defence, like a military defence and you have to keep investing in it. I see that happening and definitely I think this whole crisis has shown that there is too much of reliance on just one country and people are looking to diversify and so will India look.

Q: I remember having this conversation with you a few months ago where you were very clear that we need to go beyond intent. All of this sounds good on paper, but it needs to be fast tracked into execution if India wants to make good of this opportunity of emerging as a strong contender to China in the active pharmaceutical ingredient (API) space. Now we have seen several meetings, several discussions, draft policy being put in place, do you believe that that is good enough and how do you see this playing itself out? Also do you believe that this case of India being dependent on China for APIs is overstated because GV Prasad just a few days ago on Global Dialogues seemed to suggest that it was overstated?

Patel: Government has come out with this API policy which is a right policy to move forward and manufacture API in India. Unfortunately, as soon as the policy was announced COVID crisis came up and all of our attention has moved towards how to fight the COVID crisis and continue running manufacturing facility. I think those are now almost stabilized and we know what is the next normal for us. So, we are all looking at now what we can do with the API.

The policy is very positive; I believe it is in advanced stage for a final policy guideline to come out so that people can make application and start going for it. If you see the list of the drugs which are there in that, there are limited number of APIs for which we need to really backward integrate; many of them we do not need to do it. Now I will give you example, hydroxychloroquine (HCQ) we are the manufacturer, we were getting 1 intermediate from China and the moment we learnt that the Chinese problem is there and supply may not come in, we immediately moved our machinery in place and within less than 4 weeks we could start making that intermediate also in India.

So, I think Indian companies and chemist have capability to make this happen. Some fiscal support was necessary which government has now come out with a policy to provide and I am pretty sure that in next few years you will see India become much more self-reliant than it was ever.

Q: What do you make of the various warnings and the WHO, etc. to suspend trials when it comes to HCQ in the use of COVID-19?

Patel: When you do a clinical trial, there is a process under which there is a data safety committee which has to review the data at certain interval and then move forward. Since the data safety committee has not yet met, the WHO has put a hold on the clinical trial. Based on the data what safety committee’s outcome, they will take a call.

As far as we are concerned, we are manufacturer and we are happy to supply. We are not involved in any clinical studies that we can comment about the clinical outcome of the drug.

Q: Let me move to the other issue and that is of R&D spends. Once again I go back to the data, the aggregate R&D spend of domestic pharmaceutical companies rose to 9 percent in FY17 versus almost 6 percent in FY11 but since then we have seen a steady decline. Now the emphasis is not just development but more so on research. When you compare what the US is spending, what China is spending which has been steadily increasing from 10 billion dollars to now about 30 billion dollars every year, what more needs to be done by Indian pharma companies as we move forward?

Hamied: Indian companies are in the range of 7-10 percent in terms of R&D spends. I think this gives reason for a solid partnership, whether it is with government organisations, whether it is research institutes, whether it is with the medical fraternity etc. The government does have to boost R&D by incentivising pharma companies and also having a very favourable pricing policy post new launches because that is the only way that pharma companies can recover a very large spend on R&D for new products.

Q: You need an environment that allows for fair pricing but in most cases we haven’t really seen the government intervene by way of price caps except for as and when necessary. So, what will it take for Indian companies to push ahead on spending more on R&D or are we largely going to continue to track what we have done so far which is essentially repurposing and stay with the generics business?

Piramal: A few years ago we had perhaps the largest investment in a research facility in India and that was doing pure research. However unfortunately after several years of trying, may be 10 years of trying we had to shut it down and that is because there is no environment to encourage pure research or discovery of new drugs in India.

First of all we allow clinical trials today in India, at one time people thought it would be a big industry for India but unfortunately it has not taken off because the regulations for clinical trials are just not there. The time it takes for approval, the liabilities that you have in a clinical trial, and so many more things that are there, are not there in India.

Secondly, we have to develop a cluster approach where we have expertise in biology which is not very well prevalent in India. We have expertise much more in chemistry and that is why you find that the development taking place but true research is not taking place today in India.

In fact I am sorry to say that after so many decades of the pharmaceutical industry and having so many strengths compared to many other countries, we still have not got a single drug which is in the global market, discovered out of India.

Q: Why is that the case? What is holding us back?

Patel: One, we require an ecosystem which is supportive to R&D. Innovation has always has taken a backseat as far as India is concerned. There are incentives for innovation, there are no funding mechanism available for doing innovation.

You mentioned about western companies spending large amounts of money, now if we have it in our pocket we will also like to spend and do research but where is that money? The point remains that we are highly price controlled and, in a way, that research is not encouraged. Now if you do research, there has to be a return in order to make sure that you continue investing on research.

So incentivizing research, creating an ecosystem in India for that is going to be very important.

The point also is that we have setup so many government labs, they all have to partner with industry or partner with others to make sure that more new drugs and development activity does happen in India.

I am confident that India would change and India would move towards innovation. We as a company very strongly believe in that and we continue to invest in research, we have found our ways to make that happen and we are pretty sure that we will have number of new molecules coming out of our research pipeline. The question here is, we need to create an ecosystem in India and there the government has to play a very important role.