"Self-reliance has always been my driving philosophy" | Outlook Business
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Photographs by Soumik Kar and Raman Pruthi

Think Beyond, Stay Ahead

"Self-reliance has always been my driving philosophy"
The Cipla chairman on how he and his team grew a Rs.50 lakh company to one that now does sales of over Rs.10,000 crore

Rajesh Padmashali

I have been called many names over the course of my business career — Pirate, Copycat, Dr Evil (okay, I made the last one up) etc., but I have never been called a profiteer. Even my most avowed critics cannot call me that because all my life I have fought against the power of monopoly. Today Cipla might be known internationally for its reliability but we had a very humble beginning. So much so, that it took us 35 years to achieve a turnover of 1 crore. 

After finishing my doctorate at Cambridge University, I had gone to Munich, Germany, to continue with my post-doctorate. As I did not get along with my professor there, I packed my bags and returned to India to serve in the company that my illustrious father had founded. 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. The plea had come from none other than Mahatma Gandhi, who said that the British had agreed to give India independence, if it helped them in the war effort. For my father, that supply shortage drove home the gospel of self-reliance and self-sufficiency. One that the company still follows and lives by.  

The 1960s were truly inhospitable times if you were trying to grow a business. To begin with, I could not be employed by Cipla from day one. That is because no relative of a director could be employed unless the Company Law Board approved it. Then, for everything you needed a licence. You could not travel abroad as obtaining foreign exchange was very difficult. Therefore, getting an import licence of a lakh or two lakh of rupees was a major cause for celebration. 

When I finally joined Cipla as a research and development officer, I decided to learn everything about the industry. Pretty soon it dawned upon me that the backbone of the industry was active pharmaceutical ingredients, known in trade parlance as APIs. If you didn’t have the APIs you couldn’t make the finished products. At the same time, another reality hit home — the existing patent regime was a growth block for Indian pharmaceutical companies. Multinational pharmaceutical companies ruled the roost with an 80% market share. So, in 1961, with a few like-minded manufacturers I formed the Indian Drugs Manufacturers Association (IDMA). The primary objective was not to abolish patents in India, but to get patent laws changed. 

Tough but good times

While I started API manufacturing in Cipla in 1962, until 1972 I could only manufacture those products that weren’t under patent. A big challenge then was that the medical profession in India did not have quicker access to new drugs. As a company we wanted to bridge that gap and that is why we started research on a heart drug called propranolol. This wonder drug for heart disease was invented by ICI in 1963, marketed worldwide in 1965 but was still not available in India in 1971.

We used reverse-engineering ingenuity and started selling it locally. Naturally, ICI suffered heartburn and sent us a legal notice. We therefore sent a representation to the then-prime minister, Indira Gandhi, about ICI’s objection to a patented heart drug that was being made available to Indians. After some deliberation, she changed the Patent Act, paving the way for process patents. It was called the Patent Act, 1970, but it came about in September 1972. Soon after, in December 1972, we had hosted an industry tea party where the then-chairman of Glaxo came up to me and said, “Oh, Dr Hamied. So what if you have changed the laws? You mean to tell me you Indians can do anything?” I smiled and politely retorted, “Look, we will show you.” 

Once the patent law was changed in 1972, the star of most indigenous pharmaceutical companies was on the rise. What helped was several multinational companies packed up their bags and left India in protest. Roche, Merck, Parke-Davis were among those. Now they tell me that was a big mistake in retrospect and that they should have hung on. Those that remained were British companies because of the historical connection and one or two Swiss companies like Ciba-Geigy. 

In 1972 when the patent laws changed, our year ending was October 1972. Cipla’s turnover at that time was just 1.6 crore and our all-India ranking was 56. Buoyed by the success of propranolol, I decided to introduce in India more products that were doing well internationally but were not available here. By this time we had also successfully cracked the API game, having made the APIs for propranolol ourselves. When we set out to reverse-engineer propranolol, we could not source the API abroad due to the existing patent laws and had to rely on our research to make them. We were the first in the world after ICI to produce the API and market the finished product. Our second success came with salbutamol for asthma in 1974.

Due to the propranolol experience, I actively encouraged all my IDMA colleagues to be self-reliant. This brings to my mind an interesting nugget of history. In 1979 Ranbaxy was not producing any of its raw materials. I urged Bhai Mohan Singh and Parvinder Singh at that time, saying, “If you want to survive in the industry you must produce your APIs.” I did the same with Wockhardt and the erstwhile Cadila. The other thing that I wanted to change was the perception that Indian pharmaceutical companies cannot deliver.  During those days, “Made in India” did not have a positive connotation. I decided to challenge it by exporting to the United States — the world’s most competitive market. 

Luck of the draw

It was around this time that my extended generosity towards others in the business paid off with dividends. After landing in 1983 in the US, I started cold-calling all the big API distributors. The first question, invariably, was, “Are you US FDA approved?” When I used to answer ‘No’, the response was, “Not interested.” Click. 

The seventh distributor I phoned was a Greek guy called Chris Pappas who ran a small company called Byron Chemicals. I said, “I am Dr Hamied from Cipla. I am interested in exporting APIs to the United States from India.” Pappas said, “Dr Hamied, I have heard of you. Why don’t you come over and we will have a talk.” When I went over to his office, he said, “Dr Hamied, put aside business. What can I do for you?” I replied, “Do you really want to know Mr Pappas? I would love to see a chemical unit making APIs that is FDA approved.” He said: hold on, got off from his chair, went up to the telephone and spoke, “Can I speak to Mr Zotos? Mr Zotos, I have a gentleman here. Can I bring him to see you? All right, Mr Zotos, we will be there.” In the Bronx area, near the Yankee Stadium in New York, in 1983, there was a factory called Hexagon. Zotos was its chief executive. Even though it doesn’t exist there any more, I can still vividly recall the entire event. 

Within an hour of my picking up the phone and cold-calling Mr Pappas, I was inside a factory that was FDA approved. I went around wide-eyed for maybe an hour and a half. After we left the factory, Pappas asked, “Dr Hamied, what did you think of this factory?” I said, “Mr Pappas, if this factory is US FDA approved, then there is no problem in any of my factories getting approval.” His response was, “That being the case, can I represent you?” He extended his hand and we shook hands. He has long passed away. His company is still a very tiny company. We have been approached subsequently by all the big distributor companies in America. But Byron still represents us as what Pappas did for me made a very big difference to the future of Cipla.

Pappas not only reaffirmed my faith in peer generosity, he also helped us get in touch with an ex-FDA inspection head to upgrade our 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 in order to sell in the US. So, we not only contracted McDermott, we also let him consult for Ranbaxy and Wockhardt. Shortly, Cipla became the first Indian company to get US FDA approval. Now 70-80 Indian companies have approval but at that time we were the only one and a class act. 

Life well-lived

Our driving philosophy since my father’s days and more so after our API foray has been self-reliance. As a result, over the years we have emerged as India’s biggest standalone pharmaceutical company, powered entirely by organic growth. The major factor behind our success is that we have never compromised on quality. Our medicines are on par with what the MNCs produce and in the treatment of respiratory diseases we are world leaders. Today, we have 11 US FDA-approved factories through which we export to over 150 countries.

A very important decision was the stance that Cipla took in 2001 in the fight against HIV. This is what really propelled us to the world stage. Our initial effort in introducing an antiretroviral (ARV) drug in 1993 was not quite the success that we had expected it to be. Then I came across a scientific paper that postulated that a certain drug cocktail could successfully slow down the spread of HIV. We got busy trying to crack it. In September 2000, at a European Union conference, I made the claim that we should soon be able to supply an ARV treatment for HIV costing $600-800 per patient per year. This was at a time when the cheapest dosage available cost $12,000 per patient per year. The audience response was alarming — the impact zero, despite health ministers from 30 countries being present. 

But we kept working at it and on 6th February 2001 at the behest of my activist friends; we decided to run it at a loss and offer it at $300. That night I was at a dinner party and my phone rang. It was my friend from The New York Times, Donald McNeil. He asked, “Dr Hamied, Is it true that you have offered the Aids cocktail for a dollar a day? I replied, ‘Yes’. He further asked, “Can I ask you a few questions?” I said ‘Sure’. When he was done with his questions, he thanked me and said, “Dr Hamied, from tomorrow your life will not be the same.” The next day, his story made it to the front page. I am mentioning this because the effect has been revolutionary. In 2001, only two to four thousand Africans could afford treatment; today about 8 million patients in Africa can. Our endeavour now is to replicate this success in drugs to treat cancer. That however is easier said than done as the cost of regulatory approval is increasingly going up. Everything connected with launching new products has seen an escalation in costs. This has to, at some stage reflect in the selling price and balancing that is what keeps us pre-occupied nowadays.

In India, too, we cannot afford a monopoly in healthcare. Even when I started in 1960, I was never personally against multinationals or against patents. Being a scientist myself, I can’t object to valid innovation. It should be rewarded, but not by way of monopoly for 20 years. Allow me to give you another example of an anti-AIDS drug, which just went off-patent a few weeks ago in the US. A bottle of 60 Viramune tablets, 200 mg each, used to retail for $400. The day it went off-patent, the generic price was $3.45. That shows what generics can do to a monopoly. 

Providing access to medicines at affordable prices has always been Cipla’s objective. That is why we continue to make drugs for neglected diseases like leishmaniasis and schistosomiasis. Their contribution to the bottomline is negligible but they score high on the satisfaction scale. In the healthcare business it is imperative that we take a humanitarian approach. It is ingrained in my genes probably, precisely the reason why I have had a very satisfying life in spite of the problems faced.

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