Cipla's Yusuf Khwaja Hamied, Fair Price Messiah (IND), OutlkBusn

8/13/2019 Cipla's Yusuf Khwaja Hamied, Fair Price Messiah (IND), OutlkBusn

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Every factory of

ours has been

world class and

these very factories

were used

irrespective of

whether the

product was for a

regulated or

unregulated

market"

Dr Hamied has

proven that human

interest and

business can go

hand in hand and I

dont read this

about other

companies or

industries very

often"

Enterprise/ Profiles MAGAZINE | JUL 06, 2013

SUPER SEVEN

Fair Price MessiahHe has tirelessly fought against a monopoly in life-saving drugs. Fighting alone has failed to dissuade him and his quest continues

RAJESH PADMASHALI

Steps Towards Affordable Medicines

Ensure compulsory licensing with a fixed royalty of a maximum of 4% on the net selling price1.

Act against evergreening and frivolous patenting, Section 3(D) of the present Patent Bill has to be retained at all cost2.

Keep life-saving drugs under price control as also all monopoly patented drugs, e.g., all biotech products3.

Enforce a regulatory regime that focuses on quality and affordability4.

Improve co-ordination and pure research capabilities at government laboratories and in universities and institutions supported and funded by the

government

5.

State-owned manufacturing facilities should produce and sell life-saving medicines at a affordable price, technology for which can be provided by Cipla and

similar companies

6.

Government-owned drug companies should collaborate with private players to access latest technology at a nominal cost; Cipla is willing to provide the

needed technology free

7.

***

In 1991, Jaideep Gogtay was working on a Thalassemia project, which involved developing an oral iron chelator

. Thalassemia patients, mostly children, need repeated blood transfusion: the only way to survive is by taking a bottle of blood every

two weeks. Over a period of time, iron builds up in the body due to the extra blood that is being taken and eventually, there is an iron

imbalance that can kill the patient by getting into the heart and liver. The way to neutralise this iron overload is to take iron chelators.

From 1970 to 1990, there was only one way to take iron chelators: a 12-hour injection that ran all night and in 1991, cost Rs 10,000

a month. Since the late 1980s, Cipla had been working with a British scientist on an oral drug that

would achieve the same result, and in 1991, it was going through clinical trials in India. The drug was

the first of its kind in the world and obviously, came with all sorts of challenges. Gogtay, despite his

passion and commitment, would wonder at times if it was worth all the trouble. But the determination of

his boss would not let him give up. If we have decided that we will do it, we will do it, the boss would

insist. And Cipla did it. In 1995, after four backbreaking years of hard work, the company launched

Kelfer at a patient cost of Rs 2,000 a month, a fifth of what the injectibles were selling at. It made a

difference to the lives of thousands of young patients they could now live a more normal, less painful

life. This was also a rare instance where a drug discovered and developed in the UK was approved and

launched in India before anywhere else in the world. The drug was approved in Europe only three

years after it was launched in India, says Gogtay, medical director, Cipla. He joined the company in

December 1990 by sheer accident but has stayed on only because of one man who has steadfastly

made it possible to save the lives of millions of people across the world. It is his passion that ignites all

iness.outlookindia.com | Fair Price Messiah http://business.outlookindia.com/printarticle.aspx?286366

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In an extremely

complicated and

regulated

environment, Cipla

has always stood

for doing the right

things"

of us at Cipla. The reason so many of us have worked with him for so many years is simply this.

Yusuf Khwaja Hamied is no ordinary businessman in the business of making drugs to further his position in the billionaires list.

Cipla having a great quarter would not give him as much satisfaction or for that matter, motivate him as the latest anti-cancer

drug being available at an affordable price, says S Radhakrishnan, executive director, who has spent 30 years with Cipla. Such a

thought would be blasphemous at most private sector companies, but Hamieds single-point mission in life has been to ensure that

medicines, especially life-saving medicines, are available to a larger section of society at an affordable price. If it meant relentlessly

knocking on the governments doors, he did it. If that meant taking on mighty multinationals, he did it. If it meant absorbing losses to

get going, he did even that. In healthcare, our end goal is to make patients better. Dr Hamied has proven that human interest and

business can go hand in hand and I dont read this about other companies or industries very often, says Gogtay. To truly appreciate the scale of Hamieds

achievement, one needs to go back to his family history, the point from where it all began.

Stepping stone

Hamieds family can trace its origins to a Sufi saint, Khwaja Ahrar of Iran, and his great-great-grandfather was given the title Naqibul-aulia (member of a saintly

order) by Mughal emperor Bahadur Shah Zafar II. His grandfathers uncle was the founder of the Aligarh Muslim University while his grandfather was a district

level judge in present-day Uttar Pradesh. Hamieds father, Khwaja Abdul Hamied, was a staunch Gandhian who left Allahabad University (after finishing his

masters degree in science) when Gandhi asked students to boycott British educational institutions. Six months later, the senior Hamied got together with Zakir

Hussain (who would go on to become the President of India) to establish the Jamia Millia University at Aligarh.

In Hamieds office in Mumbai, there is a large photo of his father with Gandhi, Sardar Patel and Sushila Nayar, who

was Indias health minister twice and who changed the patent law in 1972. Its a photo taken when Gandhi visited the

Cipla factory in Bombay in 1939. A year before Hamied was born, his father founded Chemical, Industrial and

Pharmaceutical Laboratories (Cipla) in 1935. Cipla was far from a roaring success in its initial days but its fortunes

changed after Gandhis visit. Apparently, Gandhi told his father that the British had promised India independence if

the country helped them in their war efforts World War II had just started. One way was to supply the British Army

medicines. Cipla flowered in the war years by supplying medicines to the Indo-British army. It provided medicines for

malaria, dysentery and trauma as supplies had stopped coming in from overseas, says Hamied. Yet, it took Cipla

35 long years before it reached a turnover of Rs 1 crore.

Hamied grew up in Bombay and then went to Christ College, Cambridge, where he went on to study for a PhD in

chemistry. Upon his return to India, the young Hamied realised what a byzantine web bureaucracy and stifling

regulation could weave. To begin with, he could not be employed by Cipla from day one, because no relative of a

director in a public company could be employed unless the Company Law Board approved it. For the first year,

therefore, Hamied worked as a research and development officer but received no pay. Still, he went at his job full

throttle he taught himself to make tablets, injections and all other products Cipla was involved with at the time.

And he devoured all the books on pharmaceuticals in his fathers extensive library.

It didnt take too long for Hamied to figure out just what was holding back the Indian pharma industry. No, it wasnt

the Licence Raj the stumbling block was the existing patent regime. While multinational companies ruled the roost

with an 80% marketshare, the growth of Indian companies was stifled as they could not manufacture drugs under

patent. Within a year of joining Cipla, Hamied, along with a few like-minded manufacturers, formed the Indian Drugs

Manufacturers Association (IDMA) with the primary objective of getting patent laws changed from product patents to process patents. His strenuous efforts paid

off in September 1972, a new patent bill was finally passed and companies could now re-engineer drugs and launch the same products using alternative

processes.

Soon after, in December 1972, Cipla hosted an industry tea party where the then-chairman of Glaxo came up to Hamied and said, Oh, Dr Hamied. So what ifyou have changed the laws? You mean to tell me you Indians can do anything? Hamied smiled and politely retorted, Look, we will show you. That marked the

beginning of a golden era for indigenous pharmaceutical companies, not to mention the social impact of having drugs widely available at low prices. If today

Indian companies have a lions share of the domestic market or enjoy a dominant position in the global generics space, its because of that one move. Currently,

the pharmaceutical industry with total exports of $15 billion is among the few sectors that have a positive exchange balance, that is, where the exports exceed

imports.

Learning curve

Even before the patent laws were amended, Hamied had started his crusade to provide low-cost drugs, even if he had to take a financial hit. The ampicillin

incident is a telling example. In 1967, when Hamied went to the office of the drug controller general of India, he saw four Englishmen leave the room. When his

meeting with the officer started, he learnt that they were directors of pharma company Beecham, which had invented ampicillin, and wanted a licence to import

the drug. Trouble was, Beecham wanted to sell it at Rs 8 a tablet in India, whereas the price in the UK was Rs 2 a tablet.

The visibly perturbed officer made Hamied a counter-offer instead if he would import and sell the drug at Rs 2 a tablet, Cipla would get the licence. Hamied

agreed, after discovering that he could import the drug in generic form from Italy, which didnt have patent laws. Cipla didnt make any money on the deal it had

to pay 100% duty on the imported raw material and given patent restrictions, it had no brandname for the drug. As was to be expected, pretty soon, Hamied

received a legal notice from Beecham accusing Cipla of violating its patent.

Hamied took the notice to the regulator, who was unconcerned. Ask them to come see me. I will withdraw their other licences in India if they pursue the case, he

declared. In the summer of 1968, Hamied met Beechams directors in London and passed on the message. And then he offered them an alternative: if Beecham

would supply Cipla ampicillin at the same price as the Italian firm, Hamied would never try and stop the British firm from selling the drug in India when and if it

ever chose to. Hamied left Beechams office with a commitment for 200 kg of ampicillin; legal action was never mentioned again. It was his first brush with the

multinationals. There would be many more as the years went by.

The development that catapulted Cipla onto the world stage was one such incident, although it happened several decades later. In 1991, the Indian Institute of

Chemical Technology, Hyderabad, succeeded in making zidovudine (AZT), the only monotherapy drug for HIV, in its lab, and the Indian Council of Medical

Research (ICMR) then asked Cipla to manufacture AZT. It took two years for Cipla to begin selling the drug. At the time, Burroughs Wellcome sold AZT at $12 a

day. Ciplas offering was priced at $2 a day but for six months, it had no sales at all. Hamied went back to the ICMR and asked for government help in distributing

the drug. His request was refused: the government had resources for detection and prevention, not treatment, he was told. Frustrated, Hamied scrapped the

project immediately, throwing away some 200,000 capsules.

A few years later, he read a report that a cocktail of specific drugs could retard HIV. In 2000, Hamied was invited to address the European Union on HIV and

AIDS. He made an open offer there: Cipla would make the drug cocktail for $800 if private sector distributors bought it, $600 for governments and would give the

technology free to any government that wanted to produce its own anti-retroviral drug. The offer was a steal as the regular, MNC price of the cocktail in Africa was$12,000-15,000. But there were no takers for Hamieds offer. Then, a US-based activist made a suggestion sell the cocktail for $1 a day. Hamied went back to

the drawing board and the following year, sent an e-mail to international medical aid organisation Medecin Sans Frontires, offering the cocktail at $1 a day. The

next day, the story was on page 1 of The New York Times and, as Hamied says, Life has not been the same since.

New horizon


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If Hamied had the audacity to challenge MNCs and take them head-on, it was because he had invested wisely and

built competencies strategically. One of his early learnings from his father was self-reliance something that was

etched into the Cipla founder after seeing the British army face a shortage of medicines during war time. Having

understood that the backbone of the drugs industry was active pharmaceutical ingredients (APIs), that is, raw

material for drugs, Hamied devoted substantial energy into making Cipla self-reliant in APIs, which has helped the

company attain leadership in several categories, including respiratory medicine, anti-malaria and AIDS. Not just that;

no other company can boast of the range, dosage forms and the advancements that Cipla has achieved with respect

to new drugs. Still, during the early days, Made in India did not have a positive connotation. So Hamied decided to

challenge it by exporting to the United States the worlds most competitive market.

In 1983, Hamied landed in the US and started cold-calling all the big API distributors, whose first and last

question was whether Cipla was US FDA approved. He finally visited an FDA-approved plant in the US, tied up with

a then-small company called Byron Chemicals as its representative in the US and brought in a former FDA

inspection head to upgrade its factories. The recommended gentleman Dick McDermott was an expensive

proposition. He not only charged $1,000 a day but also insisted on flying first class. But we were determined to do our best to sell in the US, recalls Hamied.

In 1985, Cipla was the first Indian pharmaceutical company to get US FDA approval for exports of drugs to the US. Radhakrishnan recalls those early days, I

was at our Vikhroli factory when it became the first manufacturing facility to get FDA approval. I remember the urgency and the preparatory work before the

inspection. Since then, every factory of ours has been world class and these very state-of-the-art factories were used irrespective of whether the product was for

a regulated or unregulated market.

Mission affordable

Indeed, Hamied has been truly his fathers son. If Khwaja Abdul Hamied transferred all his patents to the company free of cost, Hamied has borrowed liberally

from his fathers copybook and over time created a corporate culture that is not materially driven unlike most big companies, the loyalty Cipla inspires is not

because of employee stock options (the company hasnt issued any so far). No new medicine launch at Cipla has ever been driven by the amount of profit the

company can make. When we launched zidovudine in 1993, we did not take it up as a business case, as India was nowhere on the HIV map. With Dr Hamied,

the discussion does not start with business; he looks at the impact an affordable drug can make to an individuals life, says Gogtay.

Yet, sales have grown at a compounded rate of 22% for the past 20 years, powered by the companys drugs pipeline. Hamieds understanding of which drugs willdo well has ensured that Cipla never had a dearth of new products. That is how the company has reached a topline of nearly $2 billion and its products are now

sold in about 170 countries. Incidentally, those sales and profit numbers would be far higher if you were to consider the volume of drugs sold by Cipla at the price

its multinational competitors charge for the same products.

Behind achieving such a remarkable balance between human and commercial aspects is a solid corporate culture whose hallmarks are ease of access, mutual

cordiality and putting people ahead of profits. When Radhakrishnan joined Cipla, it had sales of under Rs 50 crore and less than 1,000 people each, in the

factories and on the field. Hamied has always ensured that he was approachable to everyone at Cipla. More importantly, people in Cipla say Hamied is a

voracious reader who shares his learning with his team. That sort of information sharing is critical in our kind of work. Hamieds reading appetite ranges from

business magazines, scientific journals, technical and medical journals. His ability to assimilate and connect things is remarkable, says Gogtay. Even today

Hamied spends five to six hours every day reading and marking the material to the concerned person in Cipla who can make use of it.

Hamieds approach has endeared him to many in the healthcare business itself. In 2011, when he approached Ranjan Pai, managing director, Manipal Education

and Medical Group, to become an independent director on the Cipla board, he got an instant yes. Pai, the youngest member on the Cipla board, first met

Hamied in 2008 and is all admiration for the man and how he has shaped Cipla. Dr Hamied and Ciplas values and principles are highly appreciable. In an

extremely complicated and regulated environment, Cipla has always stood for doing the right things, he says.

Now, Hamied endeavours to replicate Ciplas HIV drug success in cancer treatment, but the going will be much tougher. AIDS has always been regarded as ablack mans disease; cancer is a universal disease and there is much more awareness. A lot of MNC fortunes are linked to highly-priced cancer drugs, he

explains. While the market for anti-cancer drugs is much more lucrative, so is the manufacturing and regulatory complexity. Small molecule cancer drugs are not

that difficult to manufacture and we have seen Indian generic offerings in that space. The bigger challenge is some of the cancer drugs are much more

expensive to manufacture, so the prices may not go down as much as we have seen in small molecules for AIDS and cancer, says Gogtay. Since most of the

newer drugs may be patented in India, it remains to be seen how the government ensures accessibility of such drugs to Indian patients?

They are back

Hamied might be used to fighting the odds, but his war is far from over. MNCs are back to muscle flexing as India reintroduced product patents in 2005. Some

international pharma companies have already used their cash to buy their way in. Abbott became the biggest player in the domestic market by buying out Piramal

Healthcares formulation business. Hamied fears that post 2015, most new products will be covered under patents and India could witness tremendous increases

in drug prices. He cites the example of Italy and Spain, both of which had a flourishing domestic pharmaceuticals industry before they joined the European Union.

After joining the EU, they had to adopt the European patent system and from an export surplus, these countries are now net importers. Lack of a research base

and patent monopoly meant that local manufacturers couldnt introduce or market newer drugs. Hamied warns, Monopoly is the biggest barrier to affordable

medicine. Our self sufficiency in medicines can only be sustained in the absence of monopoly.

MNC pharma companies have always made the argument that new drug discovery is a prohibitively expensive process and they need to be compensated

adequately. That, Hamied says, is nothing but a myth; the reality is that Big Pharma ends up spending maximum money on clinical trials and marketing expenses,

not on concept research, which is largely carried out by government-sponsored universities, taxpayer-funded bodies such as the National Institutes of Health in

the US or small start-ups. Moreover, in many cases, blockbuster drugs are marketed and manufactured by companies that did not invent them. For example,

Lipitor, which was the worlds leading drug until last year, was not invented by Pfizer; it was developed at Parke Davis and came to Pfizer when it acquired the

company. Similarly, Abilify was invented by Japans Otsuka but is marketed by BMS in the US. Then, Pliva is the originator of Zithromax but Pfizer markets it and

so is the case with Crestor, which owes its origin to Shionogi but is marketed by AstraZeneca.

Hamied says the way to make drugs easily available and affordable in the country is by pushing for compulsory licensing, that is, a company can produce any

patented drug by paying a reasonable royalty, usually 1-5%. Canada had embraced this through the S-91 bill; between 1966 and 1992, any Canadian company

could produce a patented drug by paying a royalty of 4% to the patent holder. But after the country joined Nafta, it had to discontinue this policy because of a

pre-condition put forth by the United States.

Hamied also calls for stronger government resolve in dealing with life-saving drugs. After all, there can be no denying that high-cost medicines essentially defeat

the very purpose for which medicines are made, that is, to prolong human lives. Sure, there is a need for new life-saving drugs and that involves a certain amount

of ingenuity, but the challenge in a country such as India is that the vast majority cannot afford high-priced drugs. Hamied emphasises, India simply cannot afford

a monopoly in healthcare. Policy makers have to understand that what works for the Americans and the Europeans is different from what works for us. Thehumane aspect aside, he says a compulsory licensing policy could also be a trigger for the next wave of growth for domestic pharma companies.

Another thing that gets Hamieds goat is evergreening, a term that is more common to industrial lending in India. In

the pharmaceuticals business, evergreening refers to scientifically tweaking and renaming an existing molecule that

is about to go off-patent and then applying for an extension of patent. To counter such frivolous patenting, there is a

safeguard in the form of section 3(D) of the Indian Patents Act. Section 3(D) only allows an innovation that gives a


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Cipla's Yusuf Khwaja Hamied, Fair Price Messiah (IND), OutlkBusn