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Indian pharma industry needs to secure itself with comprehensive insurance solutions against risks globally to ensure sustainability of operations, according to Amit Agarwal, managing director, Liability & Specialty Risk, Howden Insurance Brokers India Pvt Ltd.
As the domestic pharma industry witnesses significant expansion in line with the growing international demand, insurance products that cover against risks globally have become increasingly important to ensure sustainability of operations.
“The Indian pharmaceutical companies need to secure themselves with comprehensive insurance solutions that are available for the entire product lifecycle. This includes coverage against material and financial risks associated with the manufacturing process, cyber-attacks that are becoming rampant against advanced drug manufacturers today and even directors’ liability claims against top management officials,” according to experts.
The growing market demand has encouraged pharma companies to expand their operations to cater to the growing global audience, with the total industry size having already flourished by more than ten folds in the past two decades.
While the domestic market has witnessed a compounded growth rate (CAGR) of ~11%, exports have increased by ~16% in the same period. In fact, according to a joint report by EY and FICCI, the Indian pharma industry is expected to grow by ~12% by 2030 and cross $130 billion in revenue.
“This acceleration however makes India’s thriving pharma Industry exposed to many uncharted risks and also equally susceptible to negative growth. It is important for companies within the pharma sector to safeguard against operational, reputational and product liability risks that could otherwise jeopardize long-term sustainability. With the government fast-tracking initiatives that are aimed at making the Indian pharma industry globally competitive, let us look at why domestic players need to embrace Insurance solutions that offer financial protection against known perils,” Agarwal said.
A recent Madras High Court judgement emphasizes the risk of criminal proceedings being initiated against officials of a pharma company that has been alleged to be supplying drugs below the prescribed quality levels. In fact, the court went as far as to include the board of directors in liability proceedings, quashing their arguments that they weren’t involved in the actual manufacturing. This case sets a precedent that could have a far-reaching impact on the Indian pharma industry and further highlights the importance of having an insurance cover to cushion against business risks.
A Global Risk Cover programme can offer ample protection from the risks for multinational pharma companies or those supplying to international firms or markets, ensuring business is not affected on account of the associated financial expenses.
With one eye on catering to the growing global demand for quality medical and healthcare products, many Indian firms have established manufacturing facilities in developed countries such as the USA. While this provides them with more opportunities in terms of improving their reach, it does necessitate that they conform to stringent manufacturing norms as decided by the country’s governing body for public health. Additionally, India is home to 100+ US FDA approved manufacturing sites that are subject to periodic evaluations, failure in which could even result in penal action.
This is accurately demonstrated by a recent incident in which an Indian pharma major had to issue a Class II recall, initiated in situations where manufacturing lapses could result in adverse health consequences, for its New Jersey-based production of hypertension medications.
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