Who Really Makes Money From Your Medicines? | MedPlus Founder Madhukar Gangadi

The Prakhar Gupta Xperience

Prakhar Gupta sits down with Dr. Madhukar Gangadi Reddy, Founder & CEO of MedPlus Health Services, to dissect the opaque economics and safety risks of India's pharmaceutical

Key takeaways

• Dr. Madhukar Gangadi Reddy launched MedPlus in September 2005 after discovering that roughly 30% of the world's fake drugs are manufactured in India, prompting a business model built on guaranteed authenticity.
• Fake medicines rarely contain zero active ingredients; instead, they fail due to poor factory conditions, incorrect API dosages, improper compaction, or failed dissolution tests that prevent absorption.

Main topics

• Fake medicines prevalence & supply chain vulnerabilities
• Pharmaceutical manufacturing standards & quality control

Notable quotes

Unfortunately, it's almost impossible [to tell if a medicine is fake] just by looking at the label.

Conclusion

Listeners gain actionable guidance on navigating India's pharma market by focusing on salt names

Transcript preview

Speaker 1 (0:00) It's so interesting that in India, medicines are fake. Speaker 4 (0:03) Fake cancer drugs, fake ICU medications, fake injections found to be distributed in several hundred hospitals in the city. Speaker 1 (0:13) You know, it's a shocking fact. Does a chemist know that it's fake? Does a hospital know that the medicines they have are fake? In some cases, yes. And in some cases, no. Speaker 1 (0:22) There was some news about injections for cancer patients. Speaker 3 (0:26) Fake cancer drug racket busted in Bengaluru. Over 90 Bengaluru hospitals under scanner. Speaker 1 (0:31) 90 odd days worth of injections that were completely Speaker 2 (0:35) fake in an ICU. Completely possible. Cancer medicines also are super expensive. And so obviously there's a lot of money to be made. Speaker 4 (0:41) And so yeah. Speaker 2 (0:43) No company wants to go out and say, I'm getting a lot of fake in the market. If you go and say that, then people will stop buying that. They'll Speaker 1 (0:50) think, okay, maybe it is fake. Maybe whatever I'm getting original is also fake. Why are there price differences between two companies selling the same drug? Speaker 2 (0:56) You know, let us say I'm a bigger brand and I'm able to come in to more doctors that, you know, my quality is better. He's writing the prescription. So I Speaker 1 (1:02) feel I can get more. But there is also this unique phenomenon that if I want to buy a medicine, that same medicine, suppose it's for 100 rupees, that same medicine is for 110-120 rupees of Speaker 2 (1:13) the same brand. Speaker 1 (1:13) Why does that happen? See, Speaker 2 (1:14) the... Speaker 2 (1:17) There are some drugs that cost just 1 or 2 rupees and they sell for 1000 or 10000 rupees. Today, of all the drugs we sell, not even one has been discovered by Speaker 1 (1:27) any value in India. Realistically, my medicine bill, if it is 1000 rupees, what could it be if all these small little games were not happening around me? It should be... I'm a customer. I need medicines. I go to the pharmacy. I have medicine in my hand. How can I tell if it's fake, non-fake, good or bad? Speaker 2 (1:50) Unfortunately, it's almost impossible. Speaker 1 (1:54) Guys, my team told me that 73 % of the viewers who watch our show regularly have not subscribed yet. You binge episodes and come back for new episodes, but you don't press the subscribe button. I request you to hit the subscribe button. Or if you have already done so, then recheck it. In return, I promise to bring your favorite guests and exciting conversations. We all take medicines from random chemists every other day without knowing how safe they are. We don't even know what to check when buying medicines. So how do we make sure we're not buying fake ones? Not just that. Different brands sell the same medicine at very different prices. And we pick one without knowing what's actually in it. That's exactly what we talked about with our guest, Dr. Madhukar Gangadi. founder and CEO of MedPlus Health Services. He's an incredible entrepreneur with a deep understanding of India's healthcare system and he shared so many insights about the industry that made me question my own choices. If you want to learn how to buy the right medicines for yourself and your family and get an inside look at India's healthcare system, then do Speaker 2 (3:10) watch this Speaker 1 (3:10) episode till the end. Speaker 1 (3:13) Tell me something, I've been researching a lot of the work that you do and it's so interesting that in India, medicines are fake. Speaker 1 (3:25) How big is it? What percentage? Like, you know, it's a shocking fact. Speaker 2 (3:30) Absolutely, absolutely. See, think of it this way. Anyway, I'll tell you how we got started on the whole thing. Just so that, you know, put some context out there. So, 2005, I was at business school at Wharton. I was thinking about coming to India. And what business was it? I was writing a business plan after one. I had written a business plan by doing GPO. Group Purchasing Organization. GPO is a pretty big business in the US. That business is such that they bring together a bunch of hospitals and combine the buying capacity of all the hospitals to negotiate better rates for all the things. For hospitals, which is necessary. So I thought in India, when I was writing that plan, 85 % of all the hospitals were under 30 beds. So I thought bringing them all together would be a great platform and they would also benefit. But then I started looking at the supply chain and all and I read somewhere that 30 % of all the fake drugs in the world are made in India. So that got me thinking. I said, this is probably even a better way to actually get myself started in the healthcare area. I said, We will establish a company which will promise people that you will get 100 % genuine medicine from Speaker 4 (4:48) Medplus. Speaker 2 (4:48) This will be the USP. That's all. Guaranteed genuine medicine is what we started off with. And that's how we came back to India to start the thing. Now, why is there so much fake medicine in India? Because unlike, let us say, Nike shoes or Levi's jeans or whatever, Speaker 2 (5:08) Where if you make a fake one, the wearer will easily get to know. You can look at the quality of stitch, quality of leather, and quality of the fabric and everything else and you can find out very easily. It's not very difficult to make out. And if you want to achieve that quality, it is very difficult. So, there is nothing like this in drugs. It is very difficult. Printing and packing is easy. Nowadays, everyone is able to make the same quality of printing and packing. That's not very difficult. Cost of the drug is very small compared to the cost of MRP. A lot of the cost is in building the brand and marketing and everything else. If you don't have any of this, there is a lot of money to be made. Easy to make. Fake. So, why will people not make? It is surprising that there are not more people making it, right? It's so much easy money out there. Speaker 1 (5:55) No, but like my question is, okay, I'm talking from a consumer point of view. And Speaker 2 (5:59) when you take it, you really don't feel much difference out there. It is very difficult to make out. A lot of times, it can happen that when you're taking fake drugs, let's say you're taking 650 mg paracetamol. Speaker 1 (6:10) The Speaker 2 (6:10) name is Dolo, but someone else made it and put a stamp on it. So it is not as if he is using 100 % fake in Dolo. He is also using Paracetamol. But it is different in that too. He is probably using the same. So you may get some benefit of it. But you will not get the full benefit. And there are a lot of problems. So it goes to the thing that it is not that easy to know the customer. Speaker 2 (6:34) Right? And banana easy. There is a lot of money. That's why fake medicine is in the market. That's fine. Speaker 1 (6:41) There is money in fake medicine. Understood. But let me contextualize this. I am a customer. My father needs some medicines. I need some medicines. What are the chances that I am going to encounter fake medicine when I go to buy it? Speaker 2 (6:57) Difficult to say, right? Definitely, if you are in rural places, suburbs, small shops, then there is a good chance of Speaker 1 (7:07) getting Speaker 2 (7:07) top brands' fakes. Does the chemist know that it is fake? In some cases yes or in some cases no. Because it gets you into the system through the wholesale market. A lot of chemists, since their... buying capacity or scale jyada nahi hai. Yeh log har company ka, har distributor ka nahi jaake toh nahi kharij sakte. They go to buy from a wholesaler. Wholesaler buys from all the distributors and then sells it to these guys. Wahan pe aapko inject honaka. It's a good chance. Okay, that's the mixing. That's the mixing. Maybe the medical shop owner won't even know. In Speaker 1 (7:47) some places, Speaker 2 (7:47) the medical shop owner Speaker 1 (7:48) will also know. He'll say, okay, give me some fake Speaker 2 (7:50) and he'll take the fake also and bring. Speaker 1 (7:51) Because everybody will make money on that fake? Everybody will make money. The entire supply chain will make money on that. So, Speaker 2 (7:57) it is very difficult to make out, right? If you look at all the news for the last one year or last two years or three years, right? 100 % every one month or two months or three months, you'll find these raids in which distributors are caught, factories are caught, retailers are caught. Fake warehouses are there. Fake warehouses are there. Right. If anything, as you say, there's only the tip of the iceberg. Right? Because no company wants to go out and say, I am getting a lot of fake in the market. Because if you go and say that, then people will stop buying that. They'll think, okay, maybe it is fake. Right? Maybe whatever I'm getting originally is also fake. So people are also not really interested in promoting the idea. Are you saying that, okay, let Speaker 1 (8:41) the Speaker 2 (8:41) loss happen, the rest will be left. Right? So they're all making good money anyway. But this was the problem. Oh my Speaker 1 (8:47) God. There was some news about injections for cancer patients. Yeah. 90 odd. I think ICU Bangalore, 90 odd days worth of injections that were completely fake in an ICU. Speaker 2 (9:02) I don't know. Completely possible. I did not see that report. But I'm not surprised. Because cancer medicines also are super expensive. Right. And so obviously there's a lot of money to be made. Speaker 1 (9:12) And so, yeah. So, and... Because I'm trying to see as a customer, what is my point of trust? I don't know about chemists, maybe chemists know but don't tell. Does the hospital know that the medicines they have are fake? Is there any way they can know? Speaker 2 (9:27) In my opinion, there are very few chances of getting fake in Speaker 1 (9:31) hospitals. Speaker 2 (9:31) Because their scale is so big that they directly supply to the Speaker 1 (9:38) doctors. Speaker 2 (9:39) Right? Because hospitals are directly in connection with the company. They are trying to get their prescription out. So they are meeting some targets and everything else. And the distributor and the company guy is coming and selling directly to them. So I would say it's highly unlikely unless they are going for some small drug through some wholesaler. Speaker 1 (9:58) Let me ask you another question. Let's take a standard drug, Paracetamol. Or the injectable form, Ozympic. Now the fake Speaker 2 (10:07) of Speaker 1 (10:07) Paracetamol that I am getting is a sugar pill. And the fake of the Olympics is a shot of water. My question is, is it just nothing? No. No. It's Speaker 2 (10:17) not nothing. It's not nothing. So... See, the cost of making a drug is so less that it makes no sense to put chenille or whatever. Speaker 1 (10:27) It's even cheaper. Speaker 2 (10:29) It Speaker 1 (10:29) doesn't Speaker 2 (10:30) matter. No, compared to the overall cost. Cost of selling. This cost is so low that... There is no point. Because if I give you Chini, you'll immediately come next day only. Let us say you're getting a Chini shot. And fever instead of coming down is basically staying there. You'll immediately go. No, it'll be a drug. They will put some this thing out there. It may not be the brand you're thinking it is. Okay. So it may be generic. It'll be generic. Now, what is the problem of generic? So let's address it. And some people say, like, Speaker 2 (11:05) This is Speaker 1 (11:06) a Speaker 2 (11:06) problem. And this is unfortunately a problem which a lot of educated people also don't understand. And they say, if it's generic, then just take it. The problem is, If you take API, right, there is paracetamol in the dough, right? Taking paracetamol and making a 650 mg tablet doesn't work. Because A, what you are making in the factory, How is the condition of the factory? How are the air filters? How is the water supply? How is everything? Right? On that, your quality of the product is made. On that, the impurities that come in it. they all go into your body. If they're not 100 % taken care of, the quality of the conditions is not like super high, you're ingesting something bad into your stomach, right? That is one. Second. Speaker 2 (11:58) If that fellow does not have the right machinery, does not have the right equipment, then, what is 650 mg? It is very, very small. It could go in slightly higher or lower quantities. You don't want that. It has to be mixed thoroughly for every tablet to be exactly that much. Right? So, you could, and forget 650 mg, dolo. There are many tablets which are of 1 mg, 2 mg. Absolutely. Right? If 1 mg is, one thousandth of a gram, which is one thousandth of a kilo. If it is not mixed properly, instead of one mg, if your doctor is saying, boss, you should take one mg for your condition, you take two because it is not done properly. Then there's a problem, right? API, correct line I say, Speaker 2 (12:41) It will go up and down. Maybe the strength is too less or strength is too high. Speaker 1 (12:45) That's one. Speaker 2 (12:46) Second, maybe it doesn't dissolve properly. Speaker 2 (12:50) It is compacted too hard. So basically it just passes through your system without fully dissolving. Dissolution is a very critical test. If it doesn't dissolve, it is not available to your body. What are the use? Speaker 2 (13:03) Then it is made in a bad factory. Packed improperly. leak hoa, moisture aagaya andar, ya heat ke kaaran kharab hoa, then also it is not working properly. Speaker 1 (13:16) Everything Speaker 2 (13:16) has to be 100 % right for the drug to be proper. So, these three are the minimum conditions you would say where you could have a problem. But Speaker 1 (13:23) these three are also not, toh, at best blank shot hai. Like, main liya kuch hua nahi. Right? Like, ya, karab ho gaiy dawaai pehle. Is there a loss condition also? Yeah, I'll Speaker 2 (13:34) tell Speaker 1 (13:34) you. So, Speaker 2 (13:35) let us say, you're taking chronic medication. For diabetes, you take a medication in the morning and evening. And you are taking something which is actually fake. And at the time of making it, impurities came in it. Those impurities can cause renal failure for you. Right? So, you would get impurities into your body which you would otherwise not get. So, unless stringent condition... See, you would have seen, right? Sometimes, big companies also, they fail USFDA tests. You keep getting stuff like, okay, these guys have gotten some notice from here and that notice from there and all that sort of stuff. Speaker 1 (14:10) Right. Speaker 2 (14:12) If in such big companies, if the US stops small things for them, then obviously there is some problem. That's why it is happening. And if such large companies can happen, fake factories which are running in literally garages or some really random stuff. You think what problems are happening there. What impurities are there in this? Speaker 1 (14:34) So, you know, I don't even have an imagination of what these kind of factories would look like. Have you Speaker 2 (14:40) seen some of these? Speaker 1 (14:40) I have seen one. What was it like? Speaker 2 (14:42) I'll tell you what. When I first started, someone said, okay, private label, something is being made here, you go and see. This is the year? Quite a while back, right? We went out there. He was making it in a... steel tumbler Speaker 2 (15:04) and taking that in a mug and pouring it into bottles. Speaker 2 (15:10) Plastic bottles. But the making is being done by people who you would not employ in your kitchen. Speaker 4 (15:21) They are being employed in Speaker 2 (15:22) medicine. And they're pouring using utensils which you would not use in any street food kind of thing. So that is an extreme condition. There are such conditions also. There are all sorts of factories. Government is now doing a good job. Recently, they have gone ahead and basically given notices to several small companies. They're trying to cut the licenses. I believe in a short while, this thing will consolidate and come down. But till then... You have a lot of factories which are non-compliant. Speaker 1 (15:51) Is there specific areas in India where this type of work is done more as opposed to others? See, obviously, Speaker 2 (15:57) wherever, see, what happened maybe around 50-20 years back, governments of Uttaranchal and all those other places gave some excise-free and sales tax-free and VAT-free or whatever concessions to governments, to pharma companies. And they set up their factories out there. Some very nice large companies are there. Where big companies are, they will be small. Some employee will come out and he will set up a factory. That employee comes out, he is small. That employee is even smaller. At last, basically it becomes a shed in which that guy is stamping out tablet. It becomes that basic thing. So wherever you have lot of activity, lot of good activity, you have lot of bad activity also. So that's there. In Hyderabad is another place, but Hyderabad is a place where you do only APIs mainly. APIs being? APIs being the active pharmaceutical Speaker 4 (16:41) ingredient, which Speaker 2 (16:42) is the bulk drug, right? This is where the, in these states, which I told you, Uttaranch and all, that's where the formulations are made. Got it. Where formulations are made, where you will just get some random API and API, maybe they're all thinking, but where are you making it? How are you making it? How is your process? That is very critical. Speaker 1 (17:05) Got it. So you are in Wharton and you figure out that you can do the GPO work. And in figuring out this GPO thing, you realize 30 % of medicines made in