are many reasons why drugs are misused. We discuss some of the important ones below.
DRUGS ARE PROFITABLE
Much as the drug industry likes to deny it, the marketing and manufacture of drugs is one of the most profitable businesses in the world.
In 1973, according to the Hathi Committee report, 49 multinational drug firms were holding foreign equity of more than 40% and 17 firms less than that. By 1986, according to Indian Government sources, 44 multinational companies (MNCs) in India have ‘dominant control by their principal international companies’ (See Table 1).
Number of MNCs in India and their Country of Origin
|Country of Origin||No. of Companies|
Table 2 shows that formulations were the major preoccupation of the MNCs and they did very little basic drugs or bulk drug manufacture.
Market Share of National Sector and MNCs
|Bulk Drugs||(Rs. in crores)|
(including public sector)
(both FERA or ex-FERA)*
|Source: Indian Drug Statistics. 1984-85. Ministry of Chemicals and Fertilisers, p.103.|
*[FERA refers to the Foreign Exchange Regulation Act (1973)]
Accoding to FERA a company is considered ‘foreign’ if more than 40% of its ‘Equity in india is held by its foreign parent company or equivalent foreign agency’. Section 29 of the FERA lays down that all non banking foreign branch companies and those incorporated in India with foreign equity of more than 40 percent require the permission of the Reserve Bank of India to carry on, establish, purchase shares of, and acquire wholly or partly any undertaking engaged in activities whether of trading, commercial or indutrial nature. The FERA also laid down guidelines for foreign branch companies to reduce their equity to 40 percent or less. In practice, even though the foreign subsidiary reduces its equity even less than 40 percent, it still continues to be controlled as has been observed, by the foreign parent company. This defeats the purpose of Section 29 of FERA.
The profitability and share prices of some major drug companies in India is shown in Tables 3A and 3B. In addition to drugs being profitable, a significant percentage of medicines marketed are of doubtful efficacy and many have no value, and/or are harmful. However, drug companies are able to push these drugs successfully because of the millions spent on advertising and persuading doctors to use them.
who Says the Drug Companies are Incurring Losses
Company-wise Financial Data with Profitability Ratios
for Selected 30 Pharmaceutical Companies
|Name of Company||Financial Year||Total assets||Net sales||Gross profit||% return on total capital employed|
|2||Hind Ciba Geigy||Dec.83||62.04||101.18||10.89||14.12|
|7||may & Baker||Dec.83||31.29||41.30||5.98||6.67|
|24||Nicholas Lab.||Jun. 83||9.84||11.31||1.29||12.20|
|25||Fulford (I)||Dec. 83||5.88||9.42||0.64||22.18|
|Source: Chemical Weekly, March 5, 1985|
WHO SAYS THE DRUG COMPANIES ARE INCURRING LOSSES
Book Values and Price Share of Pharmaceuticals
|Name of Company||31.12.81||31.3.82||31.12.82||31.3.83||31.12.83||31.3.84||31.12.84||31.12.86|
|Source : Chemical Weekly and Times of India, March 5, 1985 and Feb. 12, 1986|
GROWTH OF HIGHEST SELLING (1984) NON-ESSENTIAL & HAZARDOUS PRODUCTS
(Rs. in Crores)
|BECOSULES||PFIZER (USA)||6.75||9.98||47.85||B Complex with B 12|