What pharma PSUs and government vaccine makers can and cannot do in the uphill battle against Covid-19

Eight kilometres from Bulandshahr, on Sher Shah Suri’s Old Grand Trunk Road, lies Chola, a dusty village with over 2,700 inhabitants.

Much like in any rural hamlet in India, people of Chola complain about power cuts and poor mobile connectivity. But they do have one local hero to rally around: Bharat Immunologicals & Biologicals Corporation (BIBCOL), which manufactures the bulk of oral polio vaccines used in India and will soon be producing the Covid-19 vaccine Covaxin for the central government.

“We cater to nearly 60% of the government’s oral polio vaccine procurement programme,” says RK Shukla, vice-president, BIBCOL, a publicly listed pharma PSU. “Our production lines for Covaxin are almost ready. We are ramping up our facilities to produce 2 crore doses a month, from next year.” In the initial months, BIBCOL hopes to produce 1 crore doses a month.

The stock market has got wind of the development, as BIBCOL shares have nearly doubled to Rs 63 per unit since mid-April. While government-owned pharma companies are ailing from years of neglect, some have rolled up their sleeves and joined India’s uphill battle against Covid, with plans to manufacture drugs that are used for treatment of Covid-19 patients or to produce vaccines that can shield people from the dreaded SARS-CoV-2 virus.

Karnataka Antibiotics Ltd (KAL), a profit-making PSU, has ramped up its production of drugs given to Covid patients such as paracetamol, doxycycline, ivermectin injectable and azithromycin.


Hyderabad-based Indian Immunologicals Ltd (IIL) has decided to bulk manufacture its competitor Bharat Biotech’s Covaxin. According to IIL officials, from June 15, the company will start manufacturing “bulk drug substance” on behalf of Bharat Biotech which, in turn, will fill the vaccine vials. From 20-30 lakh doses a month initially, it says it will later turn out 60-70 lakh doses.

Maharashtra’s Haffkine Bio-Pharmaceutical Corporation Ltd is also gearing up to produce Covaxin in its facilities. The company — an offshoot of Haffkine Institute, one of the oldest biomedical research institutes in the country, established in 1899 — has the capacity to produce over 22 crore doses annually. However, it may take six to eight months to start manufacturing, according to media reports. Haffkine officials, when contacted, refused to give more details.

There are five CPSE (Central Public Sector Enterprise) pharma companies in India: Hindustan Antibiotics, KAL, Bengal Chemicals, Indian Drugs & Pharmaceuticals Ltd (IDPL) and Rajasthan Drugs. Among these, IDPL and Rajasthan Drugs are almost on the verge of permanent closure. There are also a few state government-owned pharma manufacturers, but most of them are defunct now.

While Pune-based Hindustan Antibiotics is trying to get a licence to manufacture remdesivir and amphotericin-B (for mucormycosis) for the government, Bengal Chemicals has expanded its product portfolio, which includes phenol floor cleaners for the disinfection of treatment facilities. The company also plans to set up an oxygen plant that will cater to the needs of West Bengal. The question is, will these companies be able to deliver?


“We could not help much during the second Covid wave, but we are getting ready for the third,” says Nirja Saraf, MD of Hindustan Antibiotics, who is also in charge of Bengal Chemicals and Rajasthan Drugs.

Some industry experts think this ambition is misplaced. Yashwant Gharpure, the 88-year-old former MD of Hindustan Antibiotics, believes the government should divest its pharma businesses — or, at the very least, run them in a public-private partnership model. A venerable voice among drug manufacturers, Gharpure has been trying to develop a “biotech corridor” between Mumbai and Pune for the last three decades. “The government should have divested PSU pharmaceuticals when they were running well. Now it looks difficult,” he says.

Some of the current PSU managements disagree. They say the units have faltered because the government hasn’t supported investment in new and state-of-the-art facilities.

“Our plants are old and our machinery is outdated. We were not able to modernise our facilities as the government’s disinvestment plans came in the way. But with some financial support, we will be able to turn around some of these facilities and put them to good use,” says Saraf.


When R&D budgets soared for private companies, PSU companies walked the opposite direction. In due course, most of them were reduced to being producers of generic formulations and not-so-complex pharma ingredients. They also produced a range of old-generation drugs, which were purchased by the government for its hospitals and primary health centres.

According to pharma consultants, government-owned companies have decent capacities to manufacture old-generation drugs such as paracetamol, azithromycin and doxycycline. But manufacturing new-generation drugs like amphotericin-B is a different ball game.

KAL is a profitable venture, and is considered important as it is the sole manufacturer of the drug oxytocin, which controls bleeding during childbirth. In the last fiscal, it booked profits worth Rs 31 crore on sales worth Rs 437 crore. “But we do not have the facility to manufacture new drugs like amphotericin,” says a senior official at KAL, who did not wish to be identified. “We will be able to manufacture new-age drugs if the government invests in new machinery and production units. Our liquid injection facility can also be converted into a vaccine unit with some additional investments, but that may take 6 to 8 months.”

Unlike mainstream PSU pharma majors, companies like IIL, a subsidiary of the National Dairy Development Board, took the road less travelled to steer away from redundancy and low growth. The company specialises in both animal and human health vaccines. It posted profits worth Rs 88 crore on revenues amounting to Rs 614 crore in FY2019. “We are manufacturing Covaxin to help the country in these trying times. As a company, we are quick to absorb the technology needed to produce different types of vaccines,” says K Anand Kumar, MD, Indian Immunologicals. “We have set aside one of our two vaccine manufacturing facilities for Covaxin production. Trial runs have been completed; we will start commercial bulk drug production in the second week of June.”

The benefits are many when PSUs manufacture vaccines, says M Ayyappan, former MD of HLL Lifecare, a PSU pharma manufacturer and GoI’s nodal healthcare procurement agency. “Vaccine manufacturing has to be done by PSU pharma companies to ensure adequate supply at affordable cost,” he says. “Many of these PSU companies were well-equipped in the 1980s and ’90s. They started lagging the private sector after that. Now many of them have obsolete plants and inadequate manpower. If the government wants to run pharma companies, it has to be run like a professionally-managed private company with absolute freedom (to managers),” says Ayyappan, who now heads OhMyGene, a genome tech start-up.

Paucity of marketing budgets has also played a role. While no pharmaceutical company can advertise its products, it often cajoles doctors to prescribe their brands. “Private manufacturers gave gifts and other freebies to doctors to get their brands in; PSU companies did not have the budget to do that,” says Gharpure.

Also, these companies sell to the government at a fixed price irrespective of the trends in raw material prices. Over the past year, raw material prices for most pharma companies have gone up by two to four times. However, this price rise is not taken into account when government buys drugs from these PSUs. In the West, while many R&D centres are funded by the government, there aren’t very many state-owned pharmaceutical manufacturers. China, India, Brazil, Israel and Cuba lead in state-owned pharma product manufacturers.

“For PSU pharma companies to survive, they will have to start competing with private players in the trade market,” says PV Appaji, former director-general of Pharmexcil. “Private sector has grown well because they have managed to keep their cost structures intact and their technology up-to-date.”

Appaji, a veteran in the pharma industry, has a dire take on PSU companies. He says many of these companies were set up at a time when India was not self-sufficient in medical drugs. “That phase is long gone. By the late 1980s, many of these companies had turned redundant. Perhaps there’s no need for PSU pharma companies anymore,” he adds.

Or, at a time when the country is clamouring for free and affordable vaccines, can Covid give them a shot in the arm and make them relevant all over again?


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