India’s Generic Drug Industry Has a Maggi Problem

India’s favorite comfort food, Maggi two-minute noodles, is mired in scandal. It all began in late May, when state-level regulators in Uttar Pradesh announced that they had found trace elements of lead — 17.2 parts per million, or at least seven times the allowable levels — in samples of the popular product from across the northern state. Other states, including Delhi, also claim to have found elevated levels of lead in Maggi noodles; samples in states such as Maharashtra and Kerala and Goa, meanwhile, came back clean. Singapore, which had initially asked importers to pull Maggi noodles, has now allowed sales to resume after its food regulator cleared it.

Nestlé India, which claims to have conducted its own tests on more than 1000 samples and found them safe, denies the claims of elevated lead levels. It asserts that all of its products are safe. What’s more, no one has fallen sick or died from consuming Maggi products. Still, on June 5, the company issued a nationwide recall. So far, neither Nestlé India nor Indian authorities have been especially forthcoming with details on their testing methodologies or information on the quality of the labs they used.

While authorities are now making an example out of Maggi, it’s hard to believe that this is the only consumer product in India that fails to meet safety norms. In fact, a 2015 report by the Food Safety and Standards Authority of India, the national food regulator, revealed that almost a fifth of all food samples tested were adulterated or mislabeled. In 2012, a government study revealed that over 68 percent of milk sampled was adulterated with potentially harmful additives such as detergents, hydrogen peroxide, and even urea.

While some commentators in India tend to blame foreign multinationals for producing lower-quality goods for Indian consumption, even when this claim turns out to be true, the real fault lies with Indian authorities. With a patchwork quilt composed of a central regulator and an array of state government regulators, many of which are woefully understaffed, it’s a miracle that this system finds any product quality lapses at all. In such an environment, it’s hard to see how Prime Minister Narendra Modi’s grand “Make in India” initiative to turn the country into a global manufacturing powerhouse can possibly come to fruition. India is not yet a major exporter of manufactured food products, but it does export its generic pharmaceutical products to over 200 countries. Could a Maggi-style disaster be awaiting the Indian drug industry?

If you believe the results of a 2014 academic study by a team of researchers from the University of Maryland, the University of Ottawa, and the American Enterprise Institute, a conservative Washington, D.C., think tank, the answer could well be yes. The researchers tested samples of antibiotic and tuberculosis drugs labeled “made in India” and sold in India, Africa, and other non-African middle-income countries. They found that 10.9 percent of the products were of poor quality — that is, they either contained none or less than the required dosage of active pharmaceutical ingredients. Of this 10.9 percent, 7 percent contained less than the required dosage of active ingredients, while 3.9 percent were duds without any of the necessary active ingredients. Drugs without or with less than the required pharmaceutical ingredients will be ineffective, and therefore potentially harmful since they won’t treat the condition they’re meant to address.

What’s more, poor-quality drugs were more likely to show up in Africa than in India or other middle-income markets. While some of this difference could be due to counterfeit drugs and poor storage conditions, the authors of the study claim that a more plausible explanation is that Indian companies are directing lower-quality drugs to the African market. Roger Bate, one of the researchers on the drug study, believes that Indian drugmakers or their distributors are deliberately doing this since regulation in African markets is even looser and laxer than it is in India. For those who claim that Western multinationals are producing lower-quality products for India, the shoe might be on the other foot.

Meanwhile, U.S. regulators are poised to keep Indian drugmakers on a tight leash. In May 2013, Ranbaxy Laboratories Ltd., a major Indian drug company, pleaded guilty to seven felony charges and paid a $500 million fine for fabricating data, committing fraud, and selling adulterated drugs in the U.S. market. Regulation may be at the heart of the issue. India’s national drugs regulator, the Central Drugs Standard Control Organization, has a staff of a little more than 300 employees, or about 2 percent the size of the U.S. Food and Drug Administration (FDA). What’s more, it only has authority over newer drugs; pharmaceuticals that have been on the market for over four years are under the regulatory jurisdiction of state-level regulators, who are understaffed and, in some cases, corrupt.

Low-cost Indian generics also continue to draw the ire of advanced economies like Canada, whose socialized medical system is trying to cut costs by importing cheaper drugs from India. Currently, some 5 percent of generic prescriptions in Canada are filled by drugs made in India. Meanwhile, in the United States, a whopping 40 percent of over-the-counter and generic drugs consumed are made by India’s pharmaceutical companies.

While Modi wants to make India synonymous with high-quality manufacturing, the reality is that “Make in India,” at least when it comes to a key sector like pharmaceuticals, usually evokes visions of low-priced products of dubious quality. It’s striking, for instance, that in 2008 the FDA opened an office in New Delhi to ensure the safety of food and medical exports from India to the United States, and partner with Indian regulators to beef up their capacity on things like clinical trials and production facility inspections — essentially making the FDA a U.S. watchdog for Indian watchdogs. That arrangement, originally approved by the previous Congress-led Indian government, continues now under the Modi government. The FDA drug inspectors reportedly even have the authority to conduct surprise inspections at plant facilities in India. Clearly, American authorities don’t have a lot of confidence in their Indian counterparts. And perhaps it’s oversight like this — assisted by the United States — that has prevented a Maggi-style disaster for Indian-made drugs consumed in the West.

But India’s food and drug safety problems are only the beginning. According to a 2009 study by the Associated Chambers of Commerce and Industry in India, an industry lobby group, 20 percent of manufacturing units in India were producing products that were deemed substandard by globally accepted norms. What’s more, defect rates in Indian manufacturing plants were five to 10 times higher than in advanced economies such as the United States.

These problems also plague the growth prospects for India’s automobile-parts industry. In 2008, a study by global management consultancy A.T. Kearney found that the quality of automobile parts exported by both India and China were, in most cases, well below global norms. And in more bad news for the Indian auto industry, independent tests conducted in 2014 by the New Car Assessment Program (NCAP), a global safety group, awarded zero out of five stars for safety to each one of the five Indian small cars tested, including the Tata Nano, the world’s much-publicized cheapest car. According to NCAP, “death or very serious injury” would be the likely result following a serious collision.

If an Indian manufacturer is ever forced to recall a defective component, it would damage the credibility of the industry. And if India does become a more important part of global supply chains in automobile manufacturing, up from 1 percent currently, concerns about quality are sure to become central.

In fairness, Modi’s government has begun working to overcome these hurdles by improving infrastructure and committing to boosting India’s abysmal ranking in the World Bank’s Ease of Doing Business Index. India’s food minister has also suggested that the central government may take up a tough new law to penalize companies that engage in misleading advertising to dupe consumers.

But for “Make in India” to become more than just a catchy slogan with an appealing mascot, Modi will need to get serious. Beyond paying lip service to providing foreign investors a transparent regulatory environment, Modi’s government has done nothing concrete. The haphazard handling of the Maggi situation is a perfect illustration of trying to build a skyscraper without first establishing a solid foundation.

Indians themselves must also demand that their government provide a sensible, transparent, and fair regulatory environment for everything from food and drug safety to aviation. Otherwise, “Make in India” will become synonymous with “Make badly in India” — and, like the 23 kids in Bihar who died from eating pesticide-contaminated food in July 2013, it’ll be mostly Indians themselves who pay the price.

Photo credit: Chandan Khanna / Stringer