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Inside India’s shadow pharma industry — dingy drug units, cash payments, poor inspection

ThePrint visited drug units in Modi Nagar to see what keeps them running. Death of 18 children in Uzbekistan after they allegedly consumed a spurious drug has hurt India’s image of pharmacy to the world.

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The website of a drug-making company in Modi Nagar, Uttar Pradesh, says it is one of the largest suppliers of medicines in India and around the world. The photographs and description make it appear like a big company. But in reality, it is tucked away in a three-floor house in the corner of a narrow, dank alleyway in this industrial town outside Delhi with a signboard saying ‘wholesale chemist and druggist’.

Huge sealed cartons, scattered medicines, desktops, CCTV cameras and six men – that’s all there is to the company. They manufacture and distribute paracetamol, multivitamins, cough syrups, and medicines to treat gastritis. And all their business is conducted in cash. There are no bills.

“That’s how we keep ourselves safe,” one man on the desktop said as he moved his fingers steadily on the keyboard.

It’s an open secret in district Ghaziabad’s Modi Nagar.

“We are ready to give whichever product you want, but it has to be a cash payment. The product will reach your doorstep,” one of the men assured a customer dressed in a business suit.

While others were busy packing a carton of medicine, one of the employees shouted, “Yaar! Duplicate bhi rakhna (Please keep the duplicate (medicine) as well).”

The firm operates in a shadowy, unregulated world of dubious drugs on the outskirts of India’s capital. The increased scrutiny and media attention brought on after the death of 18 children in Uzbekistan allegedly after they consumed cough syrup made by a small company in Noida called Marion Biotech, has done little to curb this business.

Fly-by-night drug manufacturing units continue to thrive with the added bonus of ‘home delivery’.

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The trinity of drug, trust, money

In small pockets of Modi Nagar, this dubious shadow industry runs openly with clients coming from different states and even outside India to get medicines manufactured, local people claimed.

“You name the product, give good money and the product is ready. You don’t have to worry about anything,” said a man working at another such pharma firm in Modi Nagar, requesting anonymity.

Once trust is built, they rarely refuse a client’s order. This reporter asked whether they would also make cheap, duplicate medicines. The man promptly agreed.

“Yes, you can give any order. But make sure you give good money and once you get the order, the company doesn’t know you,” the man said. It’s almost like a no-strings-attached relationship between these firms and their customers.

Modi Nagar isn’t the only home to the seedy underbelly of the pharmaceutical industry. Dubious medicine manufacturing units and suppliers thrive in Noida, Faridabad, Delhi and Ghaziabad as well. ThePrint found rampant instances of small drug manufacturing units built on the back of untrained, low-skill labour, poor ingredients, and manipulated data.

One such drug manufacturing firm in Ghaziabad had obtained a licence to produce ayurvedic medications. But at night, it allegedly manufactured ersatz Corex and other cough syrups, said a middleman involved in such transactions from Bhiwani told ThePrint.

While the batches intended for distribution contained legal ayurvedic medications, the small company would also include boxes of counterfeit Corex and other cough syrups that would be distributed to the Delhi, Meerut and Agra grey markets, claimed a dealer from Bhiwani who has worked in the medicine business for last 15 years.

These drug manufacturing units are a nuisance for legitimate pharmaceutical firms that invest crores in infrastructure and jump through hoops to get the required licences to manufacture and export.

“How do you think these counterfeit drugs are made? How are they so rampant? How do they reach different places?” thundered a managing director of a big pharmaceutical firm in Faridabad. He’s invested crores in his over one lakh sq ft facility, and has the licence to sell drugs to Uzbekistan, Cambodia, Middle East and South Africa, among 35 other countries. But the company has not been selling drugs in India for the last 15 years.

“A counterfeit drug made in Faridabad must have reached Kerala or maybe, outside India as well. The regulatory process is weak and many people in the authorities are corrupt,” said the managing director who requested that his name be withheld.

After the Uzbekistan tragedy, the state drug controller suspended the production licence of Marion Biotech because the Noida-based pharmaceutical firm was allegedly unable to produce documents related to the production of Doc-1 Max cough syrup. The Uttar Pradesh Drug Control and the Central Drugs Standards Control Organisation (CDSCO) have also launched a probe into the matter.

“During the inspection, the company couldn’t produce a Certificate of Analysis (COA) of the related solvent used by them in the cough syrup. Marion Biotech has been running for the last 10 years and has been exporting cough syrups to Uzbekistan,” said Vaibhav Babbar, Gautam Buddh Nagar drug inspector.

“They have taken permission from the central authority and WHO following which they have been exporting. However, we have taken the samples of the cough syrup and the results are yet awaited.”

Marion Biotech’s building in Sector 67 Noida stands between several steel and iron factories, but there is a lull in activity. The company was temporarily closed after its licence got suspended. The signboard removed. A couple of guards keep an apathetic watch at the gates while grinding gutka in their palms.

They claim to know nothing of what happens inside the facility they are guarding, but the factory provides fodder for local gossip.

“Everyone knew what was happening,” claimed a tea seller near the factory, with a certain authority.

“Even a tea seller like me knew they were doing some fraud. How come the authorities missed it? The company has been running for several years. Such things don’t remain hidden for long,” he adds.

But the Uzbekistan incident wasn’t the only tragedy to throw shade over India’s drug export business. Barely two months before the Uzbekistan poisoning in December, a similar tragedy was unfolding in The Gambia. In October 2022, the health authorities in the African nation revealed their suspicions that made-in-India cough syrups were linked to the deaths of at least 70 children. The victims had developed acute kidney disease, allegedly after consuming paracetamol syrups, this time manufactured by the Harayana-based Maiden Pharmaceuticals Ltd.

WHO claimed that its laboratory analysis of samples of the four products found that they contained “unacceptable amounts” of two “contaminants” — diethylene glycol and ethylene glycol, which can be toxic to humans. In December, a parliamentary committee in The Gambia recommended that the pharmaceutical firm be prosecuted. But it’s not so cut and dry: the Drugs Controller General of India (DCGI) found that the samples it had tested were “complying with specifications”. 

The matter is under investigation, but earlier this month, CDSCO flagged five cough syrup samples manufactured by Maiden Pharmaceuticals at its Baddi plant in Himachal Pradesh after being found as ‘not of standard quality’, according to a Money Control report.

The tragedies in Uzbekistan and Gambia were not caused by fake medicines, but rather the quality of Active Pharma Ingredients (API) used in their formulation. More often than not, in low-scale pharma companies, quality is compromised for costs.

“If you want good medication with proper quality checks, you need proper equipment for them. They cost crores. Small and mid-size industries can’t afford that. They outsource the testing to private labs where the settlement is made over some money. That’s how adulteration happens,” said the managing director of a pharmaceutical giant in the Okhla Industrial area, Delhi.

“Their intention is to make the cough syrup but they don’t have resources for that,” he added.

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The testing troubles 

If small-scale drug manufacturing facilities are cutting corners to save costs, then the government is burdened by the lack of infrastructure to test the products coming out of such units. The problem is also one of poor government inspection.

There are only 29 government drug testing laboratories set up by State/UTs and eight Central drug testing laboratories, according to the Ministry of Health and Family Welfare.

“The reason why drug testing is weak is also because of the state of government laboratories,” said a retired drug inspector in Haryana. When a drug controller officer, sets out to test a strip of tablets for quality, the government lab often skips the impurity test because of the lack of equipment.

There are four types of tests done to ascertain the quality of a medicine. The first tests whether the medicine contains the Active Pharmaceutical Ingredient (API). The second checks whether the ingredients present in the medicine are of the same proportion as mentioned on the label. The third is to ensure that the medicine dissolves in the bloodstream within the required time. And fourth is to check for impurities — if the presence of excipients has resulted in some sort of reaction or impurity in the medicine. It’s the fourth that is often skipped by the authorities concerned.

“Laboratories should be well-equipped but that is not the case in Haryana. If you have to run a drug control department and if we have to ensure that people get the right medicine, we need to have a full-fledged and functional laboratory,” said Girdhari Lal Singal, former State Drugs Controller, Haryana.

According to Singal, instruments such as the Gas Liquid Chromatography (GLC) used to check the presence of Diethylene glycol and ethylene glycol are not present in most state labs.

“Green light is often given after just a partial testing of the medicine,” said a retired official who worked with the CDSCO.

Multiple drug inspectors ThePrint spoke to insist that the onus is not on them, that they cannot be held responsible for less-than-perfect testing. Raw materials required to manufacture drugs fall into two categories—medicinal grade and commercial grade. A retired drug inspector from Hisar in Haryana broke down the process.

“Commercial-grade raw material is cheaper, this is where the manufacturer compromises,” he said. “During the inspection, the drug inspector takes the sample and sends it via registered post to the government lab. However, these government labs are not well equipped to test the medicines. The drug inspector has no role to play there.”

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The network, its tentacles

The supply of spurious drugs works through a network of pushy, smart-talking agents who help float them in wholesale markets from where they find their way into neighbourhood pharmacies.

One such wholesale market in Bhagirath Palace, Chandini Chowk, hums with activity. The narrow alleys open up to a warren of small chemist shops selling medicines. Workers load stripes of pills and bottles into massive cartons. But simmering under the volume of legal trade is a thriving grey market.

Drugs and syrups meant for other countries can be brought here, alleged one of the shop employees at the Bhagirath Palace. To a known and trusted face, even Corex is available—for a price.

“The distributorship of a medicine that had been banned aboard was available earlier. But now it has been a month and it has not reached the market,” said a worker at one of the chemist shops in Bhagirath Palace.

Following the Maiden Pharma controversy, the government allayed fears that the syrups were being sold in India. “These drugs were not licensed for manufacture and sale in India, and the said drugs are not marketed or distributed in India,” Minister of State for Health Bharati Pravin Pawar had told the Lok Sabha in December.

But public health activists are not convinced. Ranbaxy whistleblower Dinesh Singh Thakur who co-authored The Truth Pill, explained the possible loopholes in the system. A pharmaceutical company will sell the same or similar products in different markets under different brand names.

“In the context of the Gambian tragedy, Maiden Pharmaceuticals’ product portfolio indicates that it was selling cough syrups under several different brand names. We discovered that at least some of these brand names are registered as trademarks with the Indian Trademark Registry, indicating that they were likely being sold in India,” he told ThePrint.

Based on this, he alleged that “there is a reasonably high possibility that the same cough syrup is sold in India under a different brand name by the same company.”

Maiden Pharmaceuticals did not respond to ThePrint’s email queries, though shortly after the incident, its Managing Director Naresh Kumar Goyal had told Reuters that he had full faith in the Indian regulatory and judiciary processes. “I have not done anything wrong,” he had said. He has also categorically denied selling any products in India.

At the wholesale market in Chandini Chowk, there is no guarantee for buyers. Not just spurious but fake drugs often make their way here. In November last year, the Delhi crime branch busted a gang involved in manufacturing fake life-saving cancer drugs, and arrested two engineers, a doctor and an MBA graduate in connection with the case.  The same life-saving drug was also sold in this market. “Four months ago, a team of police officers came and raided a few shops selling fake anti-cancer drugs. It was a part of a racket,” said an employee working at one of the wholesale shops.

The drugs were allegedly being manufactured by a company in Sonipat, Haryana, and were stored in a godown in Ghaziabad.

An annual report by the US Trade Representative office on intellectual property rights protection in 2019 stated that around 20 per cent of medicines sold in India were counterfeit. In 2018, a report by the Central Drug Standard Control Organisation underlined that around 4.5 per cent of the generic drugs in the domestic market are substandard.

India cannot afford more such incidents in its global export markets. Not when the country’s pharmaceutical exports have witnessed a 103 per cent growth in less than ten years— from Rs 90, 415 crore in 2013-14 to Rs 1,83,422 crore in 2021-22.

“India is booming,” said Piyush Goyal in a tweet. “Under the active leadership of PM @NarendraModi ji, India is serving as ‘Pharmacy of the World’.

The double standards

What happened in Gambia and Uzbekistan is also a story of different standards of regulation in the pharmaceutical world.

Small and mid-size companies focus on exporting medicines to poor countries where the regulation is weak. Many allegedly allow spurious drugs to float in an attempt to make more profit.

“Everyone knows. It is a question of actively promoting two different standards of quality. One of the markets which have a strong regulator, like the US FDA and second, lower quality standards for Africa, India and several countries in Latin America and SE Asia. This is why substandard products like cough syrup with DEG make it to The Gambia and Uzbekistan,” said Thakur.

A pharma industry source paints a picture of bribes and kickbacks. “Most of these industries evade regulatory inspections by sending controlled samples to the drug inspector or often no samples but a gift to cover up the fraud,” said the source.

ThePrint reached out to Central Drugs Standard Control Organisation officials but received no response.

Controlled samples are the ones that manufacturing companies keep aside as testing samples. It’s these samples that are sent to CDSCO and other regulatory bodies for testing, claimed the source.

And they hide what’s happening in the factories.

“You send controlled samples and get the required licence. Once you get the license, hardly anyone checks you unless there is an alarm raised,” said the managing director of a firm in Faridabad that exports medicine to 36 countries, including Canada, Uzbekistan and Cambodia among others, but don’t sell in India.

A manufacturing firm first needs to apply for a licence from the State License Authority (SAL) and Central License Authority (CLA) for which they put an application.

“After that, a joint inspection takes place and the licence is allotted. This is followed by drug permission for API, where we inspect the sample and give licence. However, the final product is not tested by us but we do check the documents,” said Ghaziabad-based central drug control officer, Mukesh Sharma.

When a new drug gets approved by the regulators, the manufacturers get the right to sell the medicine for years. For most of the manufacturing units, it is easy to find vendors in countries like Uzbekistan, Cambodia and others.

“For a poor country, the small profit is big,” said the managing director of the pharmaceutical firm Faridabad.

Almost every firm that has the licence to export invests in a small but efficient team to deal with vendors who in turn will flood the market with drugs.

“And once the name is out, more vendors come out and you expand your base,” the director added, sitting in his office where photographs of the Chief Ministers of Haryana and Uttar Pradesh are prominently displayed.

“We also have to give some money to expand ourselves. Everyone does it. Thoda upar neeche toh hota hai quality.”

(Edited by Anurag Chaubey)

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