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The Generic Manoeuvre

 Pradip Mazumder ( is a trade union activist at the Federation of Medical and Sales Representatives’ Associations of India. He is a blogger ( on medicine- and health-related issues.

The unsound argument in favour of prescription of medicines in their so-called generic version as a panacea for drug price reduction is discursive in nature and, hence, untenable. Such a recommendation by the Prime Minister of India may discount the drug cartel on account of their unethical trade practices, while disowning the government’s responsibility towards effective drug price control.

This article was developed from the author’s blog post “Monsieur Modi’s Generic Prescription Detriments Public Interest,” dated 24 April 2017.

As soon as Prime Minister Narendra Modi indicated in his speech on 17 April 2017 at Surat that prescribing medicines by their generic names would be made mandatory for doctors to help achieve reduction in drug prices, people’s expectations soared again. In India, the cost of medicine constitutes the largest share of all out-of-pocket health expenditure—around 72% in rural and 68% in urban areas—for non-hospitalised patients, according to the 71st round of the National Sample Survey conducted from January to June 2014 (Singh 2016).

However, the Prime Minister’s deliberation also incited once more the debate as to whether prescribing medicines by generic names alone would be sufficient to reduce their cost, without addressing many other complex, yet inescapable, issues involved. While the price of medicine is a common concern for everyone, the buoyant pharmaceutical market of the country is no less important to think about, especially when the question arises about its future possession.

Brand-name and Generic Drugs

Before entering the centre stage of the controversy between brand and generic drugs, it is important to know the differences between these two. Philip DeShong, professor of chemistry and biochemistry at the University of Maryland, offers an easy-to-remember explanation:

The major difference between a brand-name pharmaceutical and its generic counterpart is neither chemistry nor quality, but whether the drug is still under patent protection by the company that initially developed it. When a company develops a new drug, it typically receives a patent that lasts 20 years. This means that other pharmaceutical companies may not sell this substance without permission from the developing company during that time. Once the patent expires, however, other companies may begin to sell the compound. Because companies wishing to sell the generic drug have much lower development costs, they can produce it at a lower unit cost, sell it for less and still make a profit on the sale. (Scientific American 2004)

According to the United States (us) Food and Drug Administration (FDA) definition,

generic drugs are important options that allow greater access to health care for all Americans. They are copies of brand-name drugs and are the same as those brand name drugs in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. (FDA 2017)


generic drugs are inevitably made once its brand name’s counterpart’s patent protection is already expired; brand name drugs are the ones made originally by a pharmaceutical company and are sold under a patent protection. Generic drugs are relatively cheaper; whereas, brand name drugs are a tad expensive because they are sold exclusively by the company that developed them. While generic drugs cannot be sold without the permission of the company that developed the brand name counterpart, brand name drugs have an inherent patent protection that can last up to twenty years. (Clarisse 2011)

Branded Generics

With regard to brand-name medicines and their generic counterparts, the scenario in India is entirely different from that of the rest of the world. However, for easy understanding, a working paper of the Indian Institute of Management, Ahmedabad by Shamim S Mondal and Vishwanath Pingali (2015) might be reckoned with. The paper states,

In the first phase, immediately after independence, the Indian pharmaceutical industry was dominated by global multinational manufacturers. The prevailing system was due to a law enacted in British India called Patents and Designs Act, 1911, which ensured strong product patent protection regime.1 Entry into the Indian market was easy for the global manufacturers who had the technological capabilities to bring new medicines to the market, but at a very high cost for the existing population (in fact, average drug prices in India were among the highest in the world). There were very few indigenous manufacturers of consequence during this time, and eight of the top 10 pharmaceutical firms were subsidiaries of MNCs (Greene 2007). Most of the patents granted originated from foreign countries, a consequence of underdevelopment of India. (Mondal and Pingali 2015: 4)

During that period, price of medicines was very high and access to such products was not guaranteed.

The Patents Act, 1970 can be considered a watershed moment in the evolution of pharmaceutical industry in India. It led to the development of the domestic pharmaceutical industry which now specialized in reverse engineering bulk drugs. Moreover, the Foreign Exchange Regulation Act (1973) limited foreign ownership of Indian companies to 40% except for some exceptional cases, and they were required to produce most of the bulk drugs (intermediate products) that go into formulations (products sold to retail customers) in India rather than importing them. In addition to this, price controls in the form of Drug Price Control Orders (DPCOs) under the framework of National Drug Policy, 1978 were introduced. These sets of events eliminated incentives of foreign multinationals to sell their products in India; and in their place, domestic pharmaceutical companies specializing in manufacturing generic versions of patented pharmaceutical drugs developed. (Mondal and Pingali 2015: 5)

Further, the government supported domestic companies in the research and development activities undertaken by them.

Two public sector companies, Hindustan Antibiotics Ltd (HAL) and Indian Drugs and Pharmaceuticals Ltd (IDPL) engaged in significant research and development, and their R&D efforts spilled over to the private sector through various means—often through movement of scientists. In addition, research efforts of laboratories such as Central Drug Research Institute (CDRI), Indian Institute of Chemical Technology (IICT) and National Chemical Laboratory (NCL) provided various technical supports to the pharmaceutical industry. (Mondal and Pingali 2015: 5)

Mondal and Pingali (2015) further state,

Initially, the domestic companies were confined to simply producing for the domestic market. Later on, they developed capabilities to produce generic versions of branded drugs for the world market that were off-patent. They also specialized in production of bulk drugs that formulation-producing MNCs outsourced to India, and thus generated exports. (Mondal and Pingali 2015: 5–6)

Indian firms have historically specialized in process innovation, and not necessarily product innovations. This is due to the fact that the Indian pharmaceutical industry developed in a protected environment where product patent was not recognized from a period of 1970 to 2005. (Mondal and Pingali 2015: 14)

Thus, India became self-reliant in the pharmaceutical sector and the prices of medicines were also lowered effectively. Simultaneously, a unique feature was evolved in the country’s domestic market called branded generics, which is not found in most developed markets. Such drugs are bioequivalent to the original product, but are marketed under another company’s brand name. These branded generic medicines, though sold under brand names, are usually off-patent and under price control in whatsoever manner as applicable. The existence of inter-brand competition at the intra-molecule level is, therefore, peculiar to India.

Drug Price Control in India

During the 1950s, drug prices in India were one of the highest in the world. The multinational drug firms originating from the US heavily overpriced their medicines, particularly antibiotics. This was noted by the Kefauver Committee, a senate committee set up to study the working of pharmaceutical companies in the US. The Government of India filed a suit in the US Court of Law in 1974 against the US companies, namely, Pfizer, American Cynamid Co, Squibb Inc, E R Squibb and Son’s I&C, etc.

In India, the price control over drugs was first introduced through the Drugs (Display of Prices) Order, 1962 and the Drugs (Control of Prices) Order, 1963 under the Defence of India Act, 1915. Thereafter, a series of price control regimes were notified through various orders from time to time, based on different principles. The Drugs Prices (Control) Orders of 1966 and 1970 were issued under Section 3 of the Essential Commodities Act, 1955, declaring drugs to be essential commodities.

However, the Drug Prices (Control) Order, 1979 (DPCO 1979) has to be considered as the first effective drug price control mechanism in post-independence India, and a landmark regulation in the sense that it had several implications in shaping the country’s pharmaceutical industry, which came into effect following the Hathi Committee’s recommendations of 1975 (GoI 1975). The DPCO 1979 put 370 bulk drugs and their formulations under price control, which was around 80% of the Indian pharmaceutical industry in value terms. These drugs were segregated into three categories, having different markups. The pricing formula was:

Retail Price = (MC + CC + PM + PC) × (1 + MU/100) + ED,

where MC = material cost, including cost of bulk drugs and excipients; CC = conversion cost as per the dosage form; PM = cost of packing material suitable to dosage form; PC = packaging charge worked out in accordance with established costing procedures; MU=markup, including the distribution cost, outward freight, promotional expenses, manufacturer’s margin and the trade commission; and ED = Excise duty.

All essential drugs, including the life-saving drugs were put in Category I, while Category II consisted of important drugs, and Category III was for the rest of the drugs. It was mentioned that the markup of formulations shall not exceed 40% for Category I, 55% for Category II, and 100% for Category III of the Third Schedule (GoI 2015).Besides the DPCO 1979, with the setting up of public sector drug companies, like Hindustan Antibiotics Limited (HAL), Indian Drugs and Pharmaceuticals Limited (IDPL), the prices of medicines, particularly of antibiotics, were reduced by as much as 60% to 70%.

The drug cartels, mostly the multinationals, did not accept the DPCO 1979. Thirteen multinational corporations challenged the order in different courts and obtained stay orders to block its implementation. They also resorted to cut-down in the production of essential drugs to create artificial scarcity. Their pressure tactics worked and the Government of India agreed to review the order. It appointed a steering committee and working groups having representatives from the drug multinationals in these committees. In 1984, the Kelkar Committee came out with its recommendations on excluding a number of drugs from the purview of price control. The government delicensed 94 bulk drugs in 1985, changing the basic contents of the Drug Policy of 1978 and resorted to liberal imports. Subsequently, the Drug Policy, 1986 and DPCO 1987 were announced.

The DPCO 1987 reduced the number of bulk drugs under price control from the earlier 370 to 142. The number of drugs taken off was 20 and 120 from Category I and Category II, respectively. The number of categories of control was also reduced from three to two and higher markup was provided for each category of controlled drugs. Markup for Category I was increased to 75% and for Category II to 100%. Industrial licensing norms were also changed and multinationals were allowed to amend their product mix, ensuring improved profitability. Still, around 75% of the pharma industry was somehow under price control.

The DPCO 1995 further reduced the span of price control from 142 dugs to just 76. Moreover, a uniform markup of 100% was given on all formulations under price control. In the new system, the pricing formula was fixed as:

Retail Price = (MC + CC + PM + PC)×2 + ED

While fixing the maximum retail price (MRP), local taxes were included additionally. A panel of the Planning Commission pointed out that there was nearly 40% average rise in all drug prices between 1996 and 2006.

The National Pharmaceutical Pricing Authority (NPPA) was established in 1997 under the DPCO 1995 to fix/revise the prices of controlled bulk drugs and formulations. However, the Drug Price Control Review Committee (DPCRC) was set up in 1999 “to review the drug price control mechanism, where they have become counter-productive”.1 As the DPCRC recommended “effective monitoring,” the whole system moved away from a “controlled regime” to a “monitoring regime.”

The first National List of Essential Medicines (NLEM) of India was released in 1996, which was subsequently revised in 2003 and then again in 2011. NLEM 2011 prepared a list of 348 essential medicines, out of which only 37 medicines were under price control by the NPPA. In the mean time, the Government of India in 1995 changed the pricing formula. Excise duty, which was earlier collected on ex-factory cost of medicines, was revised and levied upon the MRP. Such an exercise, though benefiting the government exchequer in terms of earnings, actually caused further increase in drug prices.

The DPCO 2013 completed the withering of price control on medicines since it recommended that, henceforth, the price of medicines would be determined in the open market, by the market, and for the benefit of the market in accordance with the recommendations of the National Pharmaceutical Pricing Policy, 2012. The cost of medicine would be fixed on the simple average price of all brands having a market share (on the basis of moving annual turnover) more than and equal to 1% of the total market turnover of that medicine. The order also allowed an increase in drug price by 10% every year.

Why Generic Drugs Work Better for the US

The US FDA notes that the cost of a generic drug is 80% to 85% lower than the brand-name product on an average in the US domestic market (Sheriff 2017). The director’s message in the Annual Report of the Office of Generic Drugs (OGD) for 2016 noted,

First generics, in particular, help reduce the cost of high-priced brand-name drugs. Multiple generic versions of brand-name drugs are also important contributors to price competition, leading to more affordable drugs. Use of generic drugs saved the US health system almost $1.5 trillion in the past 10 years, leading to cost savings for consumers. (FDA 2016)

Therefore, a number of initiatives have been taken by the OGD for promoting generic medicines in the US:

(i) The doctors are encouraged to prescribe only the name of the molecule for a generic drug, and not the brand name.

(ii) Pharmacists are also incentivised to steer the consumers to the cheapest available option.

(iii) Strict quality controls are in place to ensure that all the drugs sold by different companies meet the required quality standards.

(iv) Besides, the insurance companies also insist on the lowest priced generic available since medicines are under insurance coverage.

Thus, patients in these jurisdictions receive low-cost generic medicines.

Moreover, from the above message of the OGD’s director, two aspects are clear: (i) there is no phenomenon called branded generics in the US; and (ii) inter-brand competition at the intra-molecular level is quite useful for drug price reduction.

Indian Perspective

Presently, the prices of drugs in India are fixed as per the provisions of the First Schedule of the DPCO 2013 and are uniformly applicable to all branded and generic medicines containing the “same molecule”/“Active Pharmaceutical Ingredient” (API). Though, India is under a reluctant price control regime, according to the order of the Indian government, there should not be any price difference between the branded and the generic medicines of the same molecule.

However, it is not yet clear as to how the government would incentivise or monitor retail chemists. There are over 8,00,000 chemists in India. According to the sales and marketing heads of the pharmaceutical industry, a prescription in generic names would shift the decision-making from the doctor’s desk to the chemist’s counter because the chemist might sell medicines that suit him the best and might push those that yield him better profits.Even on the question of price, studies have shown that it is the retailer’s margin that often plays the key role in deciding how much the patient pays for a drug.

We are also not very sure how the government would ensure uniform quality of all medicines sold in the market. At present, no more than 1% of generic drugs sold in India undergo quality tests. Therefore, the priority of the government should be to bring in a legal framework to ensure “quality” in generic drug testing. For this, the number of drug inspectors from its present strength of approximately 1,500 must be increased manifold.

Again, public provisioning and insurance coverage of healthcare in India is very low and, in most of the cases, insurance coverage is limited to inpatient care only. Medicines purchased for outpatient care mostly remain out of the purview of insurance. How the government would universalise healthcare insurance, including medicines purchased for outpatient care, is quite unclear as of now.

Prescription in Generic Names

As per the formula of inter-brand competition at intra-molecular level that exists in India, let us take the example of treating diabetes. Reasons are there to consider diabetes as an example. According to the statistics from the International Diabetes Federation (IDF), India has more diabetics than any other nation of the world. By the year 2030, over 100 million people in India are likely to suffer from diabetes, say the researchers (Sujatha 2015). So, the diabetes market in India is very “lucrative” for the drug cartel.

It is a comparison between two branded drugs having the same fixed dose combination of Glimepiride and Metformin Hydrochloride (2 mg/500 mg), used for the treatment of diabetes. Amaryl M2 is a brand marketed by the US multinational Sanofi, and Azulix 2MF is a brand marketed by the Indian drug major Torrent Pharma. Amaryl M2 costs ₹7.02 per tablet more to the patient than Azulix 2MF (Table 1).

If the prescription is in the generic name, Glimepiride and Metformin Hydrochloride (2 mg/500 mg), and the patient is dispensed Amaryl M2, then, the patient has to go for the costlier option. With the given price difference between the two brand-name medicines having same generic molecule, it is likely that the patient would be dispensed the costlier one.

Brand–Generic Controversy

Worldwide, the pharmaceutical industry is passing through a series of interesting events. The multinational drug cartels led by the US are losing their domestic market rapidly. They are desperate in search of newer and emerging markets. The Indian pharmaceutical industry is expected to grow to $55 billion by 2020, thereby emerging as the sixth largest pharmaceutical market globally by absolute size. Between 2015 and 2020, the expected growth rate would be over 15% per annum, which is far ahead of the global pharma industry’s expected annual growth rate of 5% in the same period.

On the other hand, since 2016, generic alternatives are available for some of the highest-revenue drugs of the multinationals, including products such as Lipitor, Plavix, Seroquel, Actos and Singulair, as the patents on those drugs expired. Within the next few years, the amount of worldwide revenue affected by drugs going off-patent would range from about $80 billion to $250 billion, which amounts to a significant percentage of the worldwide pharmaceutical market of over $850 billion. In addition to the “patent cliff” faced by branded pharmaceuticals, long-awaited regulations providing an approval pathway for biosimilar drugs may further open the door to more generic competition, as alternatives to patent-protected brand-name drugs. With about 120 drugs going off-patent over the next 10 years, the growing percentage of generics appears to represent a long-term trend. This trend will pressure the sales and earnings of some of the major multinational drug firms (PharmaNews 2014).

Under these circumstances, the pharmaceutical market of India, which is actually a generic market in nature, has emerged as the centre of attraction for all profiteering drug corporates, where they want to establish their monopoly in the off-patent regime. Branded generics dominate the pharmaceutical market in India, constituting nearly 80% of the market share (in terms of revenues) (IBEF 2017).

Having a firm grip over the market with branded generics, Indian drug manufacturers are the biggest hurdle for the foreign multinationals. Therefore, the latter wants to destroy those branded medicines that have been well-established over a period of time through ethical promotion and still continue to maintain their market position through doctors’ prescriptions. Moreover, tarnishing their brand image is also necessary to generate popular discontent against them. Prescription in generic names alone is insufficient for reducing the cost of medicine, as we have already seen. Hence, promulgation of generic prescriptions without taking care of other logistics would only facilitate the multinational drug cartel to pave their way in the Indian market much more smoothly. The scenario of the 1950s and 1960s will return and it will not be for the benefit of the Indian people.

Indian Drug Firms in the US

According to data from the Ministry of Commerce and Industry, India’s pharmaceutical exports grew by 11.44% with year-on-year basis to $12.91 billion in financial year (FY) 2015–16. In addition, Indian pharmaceutical exports are poised to grow between 8%–10% in FY 2016–17. Overall drug approvals given by the US FDA to Indian companies have nearly doubled, from 109 in FY 2014–15 to 201 in FY 2015–16. The country accounts for around 30% (by volume) and about 10% (by value) in the $70–$80 billion US generics market.

India’s biotechnology industry, comprising biopharmaceuticals, bio-services, bio-agriculture, bioindustry and bioinformatics, is expected to grow at an average of around 30% a year and reach $100 billion by 2025. Biopharma, comprising vaccines, therapeutics and diagnostics, is the largest subsector contributing nearly 62% of the total revenues at $1.89 billion.

Facing the challenges of losing market share, the US pharma lobbyists are now advocating trade restrictions before the Indian drug firms. Earlier, India was under pressure from the US to introduce “data exclusivity,” which grants intellectual property (IP) protection to the data produced while developing a drug, as well as the drug itself. In practice, this would mean banning compulsory licensing, and might even restrict generic versions of off-patent drugs. Such a move by the US authorities can reverse the advancement of India’s position in pharmaceuticals, which was achieved through a long-standing battle since the 1970s.

Another trade barrier, erected by the US authorities, is the Generic Drug User Fee Amendments (GDUFA). Since its implementation in October 2012, US FDA inspections have doubled in India. Back in 2012, around 11% of inspections were conducted in India, while today it has shot up to 20%, whereas overall inspections globally remained at a similar level. This has led to considerable increase in issuance of warning letters, around 55% today versus 33% of the total earlier, to Indian drug manufacturers.

Despite promoting generic drugs as advantageous in their domestic market, the US administration is restricting the entry of Indian drug manufacturers, though these companies are poised to supply generic drugs with equal efficacy and at a much reduced price when compared with their own branded drugs. At the same time, they are keen to grab the Indian generic market!

Action Required

India successfully negotiated the “compulsory licence” under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. Hence, the Government of India should continue to allow local companies to produce generic copies of foreign drugs for domestic use as well as to sell to foreign buyers. A newer DPCO should be brought about for stringent price control of all essential and life-saving medicines. There should be a complete removal of excise duties and other taxes levied on medicines to make them cheaper for the end user. It is also important to see that the Indian drug industry is not crippled by extreme patent reforms. Immediate revival of all the public sector drug units is also required for effective price control of all essential medicines, including life-saving antibiotics.

The government at the centre should strictly implement the Uniform Code for Pharmaceutical Marketing Practices (UCPMP), which came into effect from 1 January 2015 after long deliberations. As per the UCPMP,

no gifts, pecuniary advantages or benefits in kind may be supplied or offered to physicians to prescribe drugs by a pharmaceutical company or any of its agents or distributors. Gifts for the personal benefit of healthcare professionals or their family members should not be offered or provided by the pharma companies. Code prohibits companies from paying cash or monetary incentives to any healthcare professionals under any pretext. And the companies should not provide free samples of drugs to any person, not qualified to prescribe such product. (GoI 2014)

Ironically, the UCPMP was left to the discretion of the pharmaceutical companies for voluntary adoption and implementation by way of submitting a self-declaration by their managing directors or chief executive officers.

Proper implementation of the UCPMP would ensure success for the Medical Council of India (MCI) in implementing its notification [MCI-211(2)/2016 (Ethics)/131118] dated 21 September 2016, wherein the MCI had amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, which was published in the Gazette of India on 8 October 2016. The amendment modified Regulation 1.5, which read:

Every physician should prescribe drugs with generic names legibly and preferably in capital letters and he/she shall ensure that there is a rational prescription and use of drugs.2


The Parliamentary Committee on Government Assurances (PCGA), in its report submitted on 11 August 2016, sharply criticised the National Democratic Alliance (NDA) government for “not fulfilling its assurances to control the prices of patented dugs” and criticised the Department of Pharmaceuticals (DoP) as “it did not believe in keeping its promises.” The committee pulled up the DoP using terms like “gross negligence,” “lackadaisical attitude,” and “vested interests” to describe the lack of initiatives of the DoP, which falls under the Ministry of Chemicals and Fertilizers.

The government at the centre must act on the recommendations of PCGA immediately to bring down the prices of patented (branded in real terms) drugs. Otherwise, its sincerity towards bringing down the prices of medicine for public benefit would be viewed through the lens of doubt.


1 Memorandum (No 5(1)/98-PI I),  Department of Chemicals & Petrochemicals, Ministry of Chemicals & Fertilizers, Government of India, New Delhi, 31 March 1999, 

2 Quoted in Circular No MCI-211(2) (Gen)/2017–Ethics 104728, Medical Council of India, New Delhi, 21 April 2017,


Clarisse (2011): “Difference between Generic and Brand Name Drugs,” DifferenceBetween.Com, 27 March,

FDA (2016): Office of Generic Drugs, 2016 OGD Annual Report, Ensuring Safe, Effective and Affordable Medicines for the American Public, US Food & Drug Administration,

GoI (1975): Report of the Committee on Drugs & Pharmaceuticals (Hathi Committee Report), Ministry of Petroleum and Chemicals, Government of India, New Delhi, April,

— (2014): “Uniform Code of Pharmaceuticals,” Section 5.1, F No 5/3/2009-PI-I/PI-II (Vol III), Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilisers, Government of India, New Delhi, 12 December,

— (2015): Recommendations of the Task Force on Development of Manufacturing Capabilities in Each Medical Vertical in Pharmaceutical Production, Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers, Government of India, New Delhi,

IBEF (2017): “Indian Pharmaceutical Industry,” Indian Brand Equity Foundation, 1 June,

Mondal, Shamim S and Viswanath Pingali (2015): “Competition Law and the Pharmaceutical Sector in India,” Working Paper (W. P. No. 2015-11-02), Indian Institute of Management, Ahmedabad, November.

PharmaNews (2014): “Why Biosimilar Has Different Approval Process from Generic Drugs,” Biotech and Biosimilar Regulation, 28 October,

Scientific American (2004): “What’s the Difference between Brand-name and Generic Prescription Drugs?,”

Sheriff, Kaunain M (2017): “Cheap Generic vs Costly Branded: Issues in Picking Right Drug in India,” Indian Express, 20 April.

Singh, Jyotsna (2016): “Medicine Costs form Bulk of Out-of-pocket Health Expenses: NSSO,” LiveMint, 13 April, 30z97MDZDMewkJHsfM5D6I/Medicine-costs-form-bulk-of-outofpocket-health-expenses-N.html.

Sujatha (2015): “Prevalence of Diabetics in India,” 30 June,

Updated On : 5th Sep, 2017


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