FDA bans, India crowns - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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18 SEPTEMBER 2013


The US government's Food and Drug Administration (FDA) recently issued a "import ban" on Ranbaxy's medicines causing a 30% drop in the price of Ranbaxy' stock. The FDA is responsible for ensuring that US consumers get access to medicines that comply with certain quality standards. Indian generic drugs account for over 40% of all generic drugs sold in the US.

Business Standard carried an article asking whether Indian pharmaceutical companies are being selectively targeted by the FDA who plan to add 7 inspectors to their existing team of 12 inspectors based in India

I hold no brief for Ranbaxy which, the article noted, has new owners (the Japanese company, Dai-ichi Sankyo but "experts say taking shortcuts is in the DNA of the company". A DNA that is common to many of the illustrious business houses in India - but that is another story.

A quote in the article ascribed to Ranjit Shahani, the CEO of Novartis India, describes how the FDA works: "in god we trust, the rest we audit."

Now, being in the greatest of the god-fearing nations that is India, one would expect the RBI and SEBI to apply those same FDA-type principles to the foreign and local financial firms doing business - or wishing to do business - in India.

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Toxic products
Medicines kill. The FDA is right in searching the world to prevent bad stuff from finding its way into the bloodstream of US citizens.
And, as President Obama has outlined, regimes that use chemicals and gas to kill their citizens are also a danger to the US people and humanity at large: those regimes need to be eliminated.

But five years after the great Lehman bust of September 2008 which sent the global economy into a tailspin, the financial firms are more powerful than ever. The great Change agent, President Obama, has indeed proven himself to be a deliverer of change: he has overseen a set of policies that have made them stronger and more powerful.

Like bad medication sold by drug companies, the bad advice, bad products, or mis-sold products of many of the global financial firms can cause long term pain and have lasting side effects. Fortunately for the financial firms, this level of pain and damage is not easily measured. Do we know how many people committed suicide because of the financial crisis? Do we know how many families ended up with mental depression or physical challenges due to the aftermath of the global financial crisis? There are no statistics on this. But we know there was pain and dislocation. This fuzziness of data allows the pain to be diffused and forgotten.

But maybe government and regulators should have solid, institutional memories and do the policing.
Did the RBI, SEBI, or Ministry of Finance issue any kind of public "warning letters" FDA-style to these financial firms who are doing business in India?
Anyone heard of any import ban on their products?
Rather, we flock to them for inputs, advice and help.
A photo-op at their global conferences makes everyone purr and smile.

But it's not the "system" that is solely to blame. Society is willing to forget - the financial firms pay great salaries to win loyalty. Ever heard any Indian parent feel embarrassed that their children still work for these firms - whether in India or abroad? There is no shame in having money - no matter what the source may be.

And before we get all emotional about "foreign" financial firms being bad, recognise that there is a long list of Indian financial firms with products that can wipe out investors. The NSEL is only one recent name in a long list of financial accidents that have kept the savings of Indians sheltered in fixed deposits of banks and in gold.

A US consumer of medicines has the FDA for protection.
The consumers of financial products - globally - are on their own: Buyer Beware.

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Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"


Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.


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2 Responses to "FDA bans, India crowns"

Kishore

Sep 18, 2013

Me sitting in HYDERABAD have no clue if FDA is doing some intentional sabotage of Indian Pharma companies (OR) it is an essential cracking whip (OR) there is some other hidden agenda. In CHINA, something similar is happening, where the Chinese Government has been targeting Western Companies either for faulty marketing (APPLE), or bribery chargers, when their own companies are in so much deep dust. They have the muscle to elbow them, we do not have it. We have to accept that, our 80% of efforts are towards maintaining the CHAIR/KHURSI, we do not have time for targeting/maligning OR atleast defending the same being done on our side.

Like (1)

N.P.Unni

Sep 18, 2013

Why do you talk of walstreet firms. Think of the indian variety like ICICI Bank. Do check to find out how many people would have been ruined by these new generation bank who taught their marketing guys to say white lies to force innocent men and woman to part with their hard earned savings to invest in their ponzy schemes. I have not met any smart progeny of Kamaths meeting people for deposits but most of them being privy to the information they had about the hard earned saving kept with them persuaded to invest in their schemes and lost money not knowing that they were taking market risks. If banks like ICICI Bank does not change their way of targeting gullible depositors, more disasters await indians. The big wigs of RBI talks of financial innovation but these innovations should not be experimented at the cost of a retired persons life's earnings. You would do a great service to the nation, if you do some study into the amount collected by ICICI Banks of this world from average middle class indians for venture funds etc without evening letting them know that they are exposing themselves to great risk

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