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‘Diversity And Inclusion’: A Missing Link For Indian Pharma

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Inadequate access to affordable health care to a vast majority of the population has been a favorite topic of debate, since long, globally. This discourse is generally centered around the least developed and the developing world, such as India. However, in the recent time, the reverberations of the same can be heard even from the most developed countries, like the United States.

Possible solutions in this area generally encompass several tangible issues, e.g. high cost of drugs and care, alleged unethical practices of the providers, infrastructure bottlenecks – to name a few. Curiously, despite the availability of an increasing number of innovative drugs, state of the art facilities and diagnostics, brilliant healthcare professionals and so on, disparities in the degree of access to all these, between different members of the civil society, keep steadily mounting.

This cascading socioeconomic issue, creating a widening the trust deficit, especially on pharma, throws a critical management challenge for long term sustainability of business, if not survival too.

Transformation to a customer-oriented, profit-making organization:

Building a profit-making organization is not an easy task. However, transforming a profit-making organization to a profit making through customer-centric policies, is several times more challenging. That’s because, making a true external customer-centric organization gets kick started from a significant cultural change within the organization. Systematically creating a pool of requisite internal customers (employees), with diverse background, experience, gender, belief, perspective, talent and, more importantly, ably supported by the organizational vision of inclusion, forms the nerve center of this transformative process. No doubt, why the quality of ‘Diversity and Inclusion (DI)’ culture of an organization is assuming the importance of a differential success factor in business excellence.

The August 25, 2016 E&Y article, titled “Embracing customer experience in the pharmaceutical industry” epitomizes its relevance by articulating: “It is the companies that focus on continuously delivering a better customer experience to build a trusted and transparent relationship over time that will win in the market. They will not only acquire customers that will remain loyal, but also win advocates that will refer the company or brand to more customers.”

The missing link:

It is now being widely established that creating a culture of ‘Diversity and Inclusion (DI)’ across the organization, is of critical importance to maintain sustainable business excellence, with a win-win outcome. Going a step forward, I reckon, although, this is an arduous task for any organization, but an essential one – even for long-term survival of a business. However, today, the very concept of DI is apparently a ‘missing link’ in the chain of sustainable organizational-building initiatives, particularly for most Indian pharma companies.

The role of DI in making a customer-centric business:

Health care customers, like many others, are generally of diverse backgrounds, financial status, ethnicity, gender, health care needs, expectations, and also in their overall perspective. Thus, to make a customer-centric organization for greater market success, and drive product and service innovation accordingly, pharma companies need to deeply understand them, empathetically. A competent pool of well-selected employees with diverse backgrounds, race, ethnicity, gender, perspectives, could facilitate this process, more effectively. However, the company should also create an environment and culture of inclusion for all to listen to each other’s well-reasoned views – expressed uninhibited and fearlessly for this purpose.

In making this process more effective to add a huge tangible and intangible worth to the business, pharma players need to untether the employee potential through empowerment, making them feel valued and grow. This would also help immensely in charting newer pathways of all-round success in many other high-voltage complexities of pharma business.

‘Why diversity matters’?

That diversity within an organization matters in several ways, has been established in several studies. For example, the February 2015 article, titled “Why diversity matters”, of McKinsey & Company says, “More diverse companies are better able to win top talent, and improve their customer orientation, employee satisfaction, and decision making, leading to a virtuous cycle of increasing returns.” The analysis found a statistically significant relationship between a more diverse leadership team and better financial performance (measured as average EBIT 2010–2013).

Why is inclusion so important?

In a large number of organizations that include Indian pharma, senior management staffs generally seem to appreciate hearing more of what they want to hear. This culture quickly percolates top-down – encompassing the entire company, probably with a few exceptions. Personal ‘likes’ and ‘dislikes’ of various nature and degree spread wings within many organizations. Such a situation is created from intrinsic apathy to patiently listen to and accept another employee’s viewpoint – even on critical customer-centric issues. Employees, in that process, also get branded as ‘argumentative’ and often ‘disloyal’, if not a ‘socialist’. The major decisions often get biased accordingly – sometimes unknowingly.

Whereas, inclusion entails empowerment and close involvement of a diverse pool of employees with dignity, by recognizing their intrinsic worth and value. Moving towards a culture of inclusion would require creation of an organizational desire to communicate professionally and learn how to listen to each other’s well-thought-through arguments with interest.

The business should accept that it is not really important in getting along with everybody on all issues – every time. Neither, does it make sense for professionals to develop personal ‘likes’ or ‘dislikes’ on other fellow colleagues, based on issue-based differences, while finding out ways and means to improve organizational performance, image or reputation. Inclusion helps employees to learn to work closely, despite personal differences on all important issues.

Has Global pharma industry started imbibing DI?

Yes, many global pharma majors, such as, GSK, Novartis and Merck and several others, have started practicing DI as a way of organizational life and culture. Some of them like GSK India has put it on its country website. But, generally in India, the scenario is not quite similar. Though, many head honchos in the country talk about DI, the February 16, 2017 edition of Bloomberg/Quint carried a headline “Most Indian Companies Do Not Value Diversity At Board-Level Hirings,” quoting Oxfam India.

A voluntary survey of ‘company diversity’ conducted by US-based DiversityInc at Princeton, ranks the companies on four key areas of diversity management: talent pipeline, equitable talent development, CEO/leadership commitment, and supplier diversity. It revealed an interesting fact in its 2016 study. The survey reported, while diversity continues to improve in the overall perspective, its ‘Pharma 50’, as a group, ‘is right in the middle of the industry pack when benchmarked against the Fortune 500.’  The survey also brought to light significant differences in the levels of gender, national, and ethnic diversity even at the company boards and executive committees of individual companies. Nonetheless, some global pharma entities are taking significant steps in this direction. But, these are still early days in many organizations.

Conclusion:

The E&Y article quoted above, also says that pharma “customers are becoming resistant to push sales and marketing, and are instead preferring to relate to the overall experience provided in their pull interactions with the company. The customer experience will be the next battleground for the pharmaceutical industry. The deployment of a customer experience capability is a transformational journey in often unchartered territories. The key to success is to start early and drive a process that is both rigorous and iterative, allowing the organization – and its customers – to learn along the way and always to be ready with the next best action in place.” DI, I reckon, plays a critical role in attaining this goal.

Pharma companies are also realizing that building a profit-making organization with blockbuster high-priced, high-profit making molecules, such as Sovaldi is possible, but this may not be sustainable. It isn’t an easy task either, not anymore. There lies the urgency of transforming a profit-making organization to a profit making through customer-centric business entity. This process, I repeat, is several times more challenging, but the business success is much more sustainable.

Organizational transformation of this nature is prompting the global pharma majors to use Diversity and Inclusion (D&I) while achieving their key financial and people goals. Both D (Diversity) and I (inclusion) work in tandem for taking any fairness-based organizational decisions, irrespective of whether it’s staff or customer decision.

DI has the potential to help an organization to create and chart new and more productive pathways almost in all functions within the company – right from R&D, communication, service delivery to market access. In all these initiatives, customer focus to occupy the center stage – for a win-win outcome – significantly reducing the degree of difficulty for access to affordable medicines. DI is not a panacea to mitigate this problem totally, but would help significantly, nonetheless – with the help of employees with diverse background but having fresh eyes. Many global pharma majors have initiated action in this direction. However, in Indian pharma business generally, DI still remains a missing link, as it is seen today.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Will AB-NHPM Mitigate Indian Healthcare Crisis?

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Since long, hypes have created on several healthcare schemes in India, by the successive Governments of different political dispensation. These attracted mostly positive vibes at the time of announcements. Nevertheless, as we move on, a vast majority of Indians continues to live in the midst of a health care crisis, as it were.

The National Health Policy 2017 also acknowledges this crisis as it writes: ‘growing incidences of catastrophic expenditure due to health care costs, which are presently estimated to be one of the major contributors to poverty.’

More recently, the May 31, 2018 article, published in the British Medical Journal (BMJ) continued to echo the similar concern. It reiterated, since both government funding and social health insurance contributions are insufficient to meet health care needs of households, over three-fourth of all healthcare payments are paid Out of Pocket (OOP) at the point of service delivery while medicine purchase (approximately 63 percent) account for the single largest component of these payments.

A major cause of catastrophe and impoverishment at the household level is undoubtedly the OOP expenditure on health care, including medicines. According to the above BMJ paper, 29 million households, implying about 38 million persons were pushed into poverty in the year 2011–2012, only because of this reason. Although, this study was based on a cross- sectional analysis of ‘National Sample Survey data, 1994–2014’, the public health expenditure in India has not shown any significant increase since then, either. On the contrary, the public spending in some health-related areas has come down in the recent years.

Is a health care crisis primarily a ‘financial’ crisis?

The issue of budget allocation and adequate public expenditure on healthcare in India assumes significance to understand this point better. It is generally believed that ‘a health care crisis is primarily a ‘financial’ crisis in which countries cannot successfully meet people’s access to medicine due to the rising cost of health care services and, more importantly, pharmaceuticals.’ A sincere political will is absolutely necessary to resolve these issues, meaningfully – the paper points out.

But, there doesn’t seem to be any financial crisis in the country now, as the Government claims. India is the fastest growing nation in the world. Why is then the health care crisis continuing for the majority of Indian, if not worsening? Why isn’t public expenditure on health care increasing despite such spectacular financial achievements? Could it be due to lack of requisite political intent?

On paper all health care related schemes look good:

Yes, I reckon, on paper all health care related schemes look reasonably good, assuming these will be implemented well. These may include, National Health Missions (NHM) covering both rural and urban poor or even the likes of Rashtriya Swasthya Bima Yojana (RSBY). So is also the most recent one - Ayushman Bharat – National Health Protection Mission (AB-NHPM) announced by the Government during 2018-19 Union budget presentation and approved by the cabinet on May 21, 2018. However, its implementation on the ground seem to be wobbly, too. Thus, many wonders whether this new scheme on the block will help the nation tiding over the existing health care crisis.

I broadly discussed this subject on February 5, 2018, in this Blog. However, in this article, I shall try to ferret out the reasons of such apprehension on the AB-NHPM, against some critical parameters, just as illustrations:

Who contributes and how much to health expenditures: 

From the National Health Account Estimate (NHAE) of October 2017, one gets a broad idea of who contributes and roughly how much of the health expenditures in India, as follows:

Union Govt. State Govts. Local bodies Enterprises, including insurance NGOs External donors OOPE
8.2% 13.3% 0.7% 4.4% 1.6% 0.7% 67%

Where does the treatment take place?

Place Urban (%) Rural (%)
Public healthcare 21 28
Private healthcare 79 72

It is interesting to note, although private health care costs over 4 times more than the public healthcare, more patients are compelled to go for private health care. (Source: National Sample Survey 2014, Ministry of Statistics and Program Implementation.)

Reasons for not using public health care facilities:

Around55.1percent of households are not using public health facilities.The reasons for not using public health care facilities by the members of the household when they fall sick, as reflected in the National Family Health Survey (NHFS) data, are interesting. Following are the main reasons:

Poor quality of care No nearby facility Long waiting time Inconvenient facility timing Health Personnel absent
48.1% 44.6% 40.90% 26.4% 14.8%

Addressing these reasons would help significant reduction in OOPE:

The February 2018 report of the ‘Centre for Technology and Policy Department of Humanities and Social Sciences, IIT Madras,’ vindicates this important point. It provides unambiguous evidence that strengthening the basic infrastructure of Health Sub-Centers (HSC), along with trained personnel and adequate medicines, ensure diversion of patients from expensive private facilities – increasing patients’ access to affordable health care. Consequently, OOP expenditure by families in health care and particularly medicines, sharply comes down.The study reported that such reduction in outpatient care varied between 77 percent and 92 percent in a pilot project on ensuring universal health coverage.

Break-up of healthcare expenditure – primary care costing the most:  

One gets a broad understanding on the general break-up of health care expenditure in India from the (NHAE) of October 2017, as follows:

Primary care Secondary care Tertiary care Patient transportation Governance & supervision
45.1% 35.6% 15.6% 4.6% 2.6%

It is worth noting that transportation costs are significant for many patients, just for accessing the existing public or private health care facilities, besides getting important diagnostic tests done, or even to buy many medicines. This expenditure would continue to exist, even if NHPS is put in place. On the other hand, strengthening the low-cost Government HSCs, would help greater patient access to health care, bringing down the OOPE, remarkably.

Currently, a sizeable number of reasonably decent medical treatment points, are located quite far from many villages. Thus, availing any decent health care facility by a large number of rural folks, no longer remains a matter of choice, up until the disease turns into a life-threatening one, due to protracted negligence. One such example is a large number of child deaths occurred at the state-run BRD Medical College hospital in the Gorakhpur city of Uttar Pradesh, in 2017. Most of them were brought in a critical condition from far-off villages.

Highest OOPE expenditure incurred for outpatient treatment:

According to the December 2016 publication titled ‘Household Health Expenditure in India’  of the Union Ministry of Health, one will get an idea of top 3 key consumption areas, out of the total OOPE on health care services, which are as follows:

Outpatient care Inpatient care Preventive care
54.84% 31.96% 4.26%

However, of the total OOPE, 53.46 percent was spent on medicines and 9.95 percent was spent on diagnostics. More importantly, 82.29 percent of the total OOP medicines expenditure and 67 percent of total OOP diagnostic expenditure were in outpatient treatment, the report highlights.

New NHPM excludes two major components of OOPE: 

Based on the above facts, it is interesting to note, while the maximum expenditure for health is incurred towards Primary Care and Outpatient treatment, the brand new NHPM does not cover both. In that case, how will it address the health care crisis in India and significantly reduce OOPE on health?

Does the total cost for AB-NHPM reflect in any budget allocation?

In this context, let me touch upon the other aspect of AB-NHPM, which is giving shape to 150,000 ‘Health and Wellness Centre (HWC)’ in India.On April 14, 2018, the first HWC – under the AB scheme was launched by the Prime Minister of India at Bijapur in Chhattisgarh.But, the fund allocated in the Union Budget 2018-19 for HWCs is just Rs. 120 million, which realistically is expected to support just around 10,000 HWCs. Whereas, 150,000 HWC would cost around Rs. 3 billion. The same issue of abysmal budgetary allocation, both by most of the state governments and the center, has been raised for NHPM, as well.

As we have seen in the chart of ‘who contributes and how much to current health expenditures’, that OOPE stands out, it should in no way be allowed to remain around that number in India, because of continuing low public health expenditure on health care.

Conclusion:

Coming back to what I started from – the issue of ongoing health care crisis in India with incredibly high OOPE expenditure of the households on health. Many health care schemes have come, gone or about to be jettisoned – getting replaced by the tweaked versions of the old ones – of course in a new Avatar, supported by much expected media hypes, virtually terming it as a panacea. But, the key problem of sincere implementation of those schemes still lingers.

Sharp Government focus, backed by adequate budget allocation, on primary health care and bringing down outpatient treatment cost, which contribute to a high proportion of OOPE, remain as elusive as ever. Thus, I reckon, AB-NHPM is unlikely to mitigate the health care crisis in India, at least,in the short to medium term.

By: Tapan J. Ray    

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

 

Increasing Consumerism: A Prime Mover For Change in Healthcare

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Increasing ‘consumerism’ has already become a strong prime mover to reckon with, even in healthcare, including the pharma industry, across the world. Patients’ longing for better participative treatment experience at an affordable cost, has started gathering momentum as a major disrupting force in the healthcare space of India, as well.

In this article, which discusses a different topic from what I said in my last article that I will write this week, let us try to fathom today’s reality in a fast expanding area, primarily by connecting the emerging dots, both globally and locally. However, before doing so, it won’t be a bad idea to recapitulate, in the general term, what exactly is ‘consumerism’ – and then looking at it in context of healthcare.

What it really means?

The Oxford dictionary defines ‘consumerism’ as: ‘The protection or promotion of the interests of consumers.’ As an example, it says, ‘The impact of consumerism emerges as a factor of stabilization, as do the different understandings of stability and stabilization.’ Whereas, consumerism in healthcare is an assertion of patients’ right to be a key participant in their healthcare decision making process. As aptly put by Healthcare Success: “It is a movement from the ‘doctor says/patient does’ model, to a ‘working partnership’ model.”

Should pharma strategic marketing process, not take care of it?

When the above question is asked differently as: If the pharma strategic marketing process is effective, why is healthcare consumerism increasing across the world, including India? To find an answer to this, let’s go the basic of the definition of ‘marketing’. American Marketing Association (AMA) defines it as: ‘‘Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.’ A more specific definition of pharma marketing (Olszewska A. Strategic management in pharmaceutical marketing. Chemik 2006: S91-4.)is: ‘A management process that serves to identify and meet patients’ needs in a profitable way.’

This prompts the key question, if the above basic process of ‘marketing’ is followed by the pharma industry as it ought to be, why should there be an increasing trend of ‘consumerism’ in Healthcare, in general, and the pharma industry in particular?

The major drivers:

NRC Health through various surveys, has captured the major drivers of consumerism in healthcare. I am listing below a few of those, as I understand, just as examples:

  • Significant increase in health care cost to payers, including the patients.
  • Consumers are the fastest growing payer in the industry.
  • They foot most costs of their health premiums and out-of-pocket co-pays.
  • As consumers have more money at risk, they want to get more engaged with their own treatment decision for the best value for money.
  • One-way monologue for treatment doesn’t not enough for most patients.
  • 3 of 10 patients defer necessary treatment to avoid self-confusion and expense.
  • 4 out of 5 find difficult to compare costs Vs. drug quality.
  • 3 out of 4 feel their health care decisions are the most important and expensive
  • Patients face difficulty to compare cost, quality, and access to physicians.

In my view, sooner than later, the emerging situation in India will also be no different, especially with its increasing digitally empowered population.

Is pharma marketer cognizant of this emerging trend?

It will be unfair to make any sweeping statement that they are not. This is based on what I see and experience around, mostly in the global arena. But locally, although significant publicity of a large number of pharma training programs appear in the social media, most of these are apparently based on the ‘buzz of the time’.

Besides a few sporadic exceptions, generally the Indian pharma marketers still appear to believe in the same age-old model – what the ‘doctor says/patient does’. As a result, increasing consumerism keep haunting the industry – the Government often responds – mostly with sound bites, though, the industry keeps lamenting on the ‘ease of doing business’ or the lack of it, in India. The much avoidable cycle continues.

A prime mover for change in healthcare:

Increasing health care consumerism is a prime mover to usher in significant changes in this space. These changes are mostly unexpected and disruptive, but usually good for the patients. I shall illustrate this point here with just two examples, out of many. The first one comes from three global corporate head honchos of unrelated business, aimed at their own employees. And the other is related to all patients with the initiative coming from within the healthcare industry, including pharma.

The first example of an unexpected move comes from the announcement of three corporate behemoths – Amazon, Berkshire Hathaway and JPMorgan Chase, saying they would form an independent health care company for their employees in the United States. This was reported by The New York Times (NYT) on January 30, 2018. The alliance signals how frustrated American businesses are not just with their health care system, but also rapidly spiraling cost of medical treatment – the report said. The NYT also quoted Warren E. Buffett of Berkshire Hathaway as saying:“The ballooning costs of health care act as a hungry tapeworm on the American economy.”

The initial focus of the new venture, as announced, will be on “technology solutions” that will provide U.S. employees and their families with “simplified, high-quality and transparent healthcare at a reasonable cost.”  They also plan to “bring their scale and complementary expertise to this long-term effort.Nevertheless, it is unclear how extensively the three partners would overhaul their employees’ existing health coverage to reduce healthcare cost and improving outcomes for patients. They may simply help workers find a local doctor, steer employees to online medical advice or use their muscle to negotiate lower prices for drugs and procedures. While the alliance will apply only to their employees, these corporations are so closely watched that whatever successes they have could become models for other businesses – NYT commented.

The second examplecomes from an article, titled ‘Consumerism in Health Care’, published in NEJM Catalyst on January 11, 2018. It says, another important change that is a direct outcome of the consumerism of health care is personalization of care to facilitate health outcomes. However, ultimate personalization, that is, a “one-to-one relationship” between a company and an individual appear increasingly possible with the data and analytics that are now within the reach of many global pharma players, the paper says. However, most Indian pharma players, I reckon, still lack wherewithal that’s required to build capabilities to deliver high degree of personalization for patients.

As a result, pharma industry, in general, is still charting in the primary stages of delivering personalization, although, progress made by some global players in this direction is quite encouraging.

Consumerism in healthcare to gather momentum in India:

A September 2016 paper, titled ‘Re-engineering Indian health care’, published jointly by FICCI and EY points to this direction. The results of their survey done as a part of this study indicates, the aspirations of the middle and upper classes are evolving and their demands for convenience, participation and transparency in the health care delivery process are indicative of the shift from being a docile patient to an informed “health consumer.”

Thus, it is irrefutable today that digitally empowered patients are fast increasing, even in India. This is fueled by rapid expansion of broadband Internet in the country – a bottomless source of information. In this scenario, would the general pharma marketing assumption in India - what the ‘doctor says/patient does’, still yield results? Indian pharma marketers may need to possibly do some crystal gazing in this area – sooner the better.

Conclusion:

Accepting the reality of increasing consumerism in the healthcare space, both globally and locally, pharma players, especially in India, need to clear all clutter in the pathway to reach out and directly interact with their end-customers – the patients, aiming at improving clinical outcomes, the way patients would want – individually or in a cluster.

In a nutshell, what do patients want through increasing consumerism: Personal and meaningful involvement in their healthcare decision making process, based on requisite credible information from independent expert sources. Thus, what pharma the players should gear up to be: Cultivating a truly patient-centric approach in their business. And, there lies the real challenge for many in the industry, as it will mean all marketing and related organizational decisions will revolve around in-depth understanding of the patient’s mindset, along with their associated needs, want and health aspirations.

While moving towards this direction, providing personalized care by leveraging optimally selected modern technological platforms, will be a cutting-edge tool for pharma business excellence and achieving sustainable all-round growth – over a long period of time. As I see it, increasing consumerism will continue to remain a prime mover for unexpected, but welcoming changes in the healthcare space, at least for a medium term. It is to be taken rather seriously, with as much care as it deserves.

By: Tapan J. Ray    

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Drug Innovation and Pharma M&As: A Recent Perspective

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The 21st CEO Survey 2018 of PwC highlights a curious contradiction. This is based on what the Global Pharma Chief Executive Officers (CEOs) had articulated regarding their business outlook for 2018 and beyond. The report says: Despite highly publicized hand wringing over geopolitical uncertainty, corporate misbehavior, and the job-killing potential of artificial intelligence, the CEOs expressed surprising faith and optimism in the economic and business environment worldwide, at least over the next 12 months.

As the survey highlights, beyond 2018, CEO sentiment turns more cautious. They expressed more confidence in revenue growth prospects over the longer term than the immediate future. In the largest pharma market in the world – the United States (US), acquisitions appeared to be the core part of the 2018 growth playbook for the CEOs. More of them plan to drive growth with new Mergers and Acquisitions (M&A) for this year. The US CEOs intent in this area came out to be more than their peers globally.

Thus, in this year we may expect to witness several M&A deals, at least by the pharma majors based in the US. As the saying goes, the proof of the pudding is in the eating, the success of any strategic M&A process should get clearly reflected in its revenue, profit and cost synergies over a period of time, consistently.

In this article, I shall try to look back, and attempt to fathom the net outcome of M&As in the pharma sector. Its key drivers for the global and Indian pharma players are somewhat different, though. In this piece, I shall focus on the M&A activities of the global companies, and my next article will focus on the Indian players in this area.

2018 – best start to a year of healthcare deal making:

The finding of the 21st CEO Survey 2018 that more global pharma CEOs plan to drive growth with new M&A for this year, has been reiterated in the January 22, 2018 issue of the Financial Times (FT). The article titled “Big Pharma makes strongest start to M&A for a decade” writes: “Healthcare companies have announced almost $30bn of acquisitions since the beginning of the year in the sector’s strongest start for deal making in more than a decade, as Big Pharma scrambles to replace ageing blockbusters by paying top dollar for new medicines.”

Big names involved and the reasons:

On February 18, 2018, an article published by the BSIC wrote, the M&A value in the healthcare sector recorded its strongest start to a year in more than a decade, excluding 2000, with almost USD32bn of global deals announced since the start of January 2018. Of these USD32bn, Sanofi SA and Celgene Corporation performed almost a combined USD26bn value of acquisitions for the American Bioverativ Inc. the cell therapy provider Juno Therapeutics, respectively.

As many would know, the FT also wrote in the above piece that Sanofi is trying to offset declining sales of its top-selling insulin – Lantus, which has lost market share following the introduction of cheaper biosimilar versions. Celgene is preparing for the loss of patent protection on its top cancer medicine, Revlimid, which will face generic competition from 2022 at the latest.

Is new drug innovation a key driver of M&A?

The core intent of M&A is undoubtedly creating greater value for all the stakeholders of the merged entity. Nevertheless, such value creation predominantly involving the following two goals, revolve around new drug innovation activities, as follows:

  • New value creation and risk minimization in R&D initiatives
  • Acquisition of blockbuster or potential blockbuster drugs to improve market share and market access, besides expanding the consumer base.

There could be a few other factors, as well, that may drive a pharma player to go for a similar buying spree, which we shall discuss later in this article.

However, in the international scenario, with gradually drying up of R&D pipeline, and the cost of drug innovation arguably exceeding well over USD 2 billion, many companies try to find easier access to a pipeline of new drug compounds, generally at the later stage of development, through M&A.

Thus, I reckon, one sees relatively higher number of big ticket M&As in the pharmaceutical industry than most other industrial sectors and that too, very often at a hefty price.

At a hefty price?

To give an example, the year 2018 has just begun and the pharma acquirers have agreed to pay an average premium of 81 percent – a number that is well above the 42 percent paid on average in 2017, according to Dealogic. The examples are the 63.78 percent bid premium paid by Sanofi SA on Bioverativ Inc. and the 78.46 percent premium paid by Celgene Corporation to acquire Juno Therapeutics.

A key reason of paying this kind of high premium, obviously indicate an intent of the acquirer to have a significant synergy in drug innovation activities of the merged company.

Do drug innovation activities rise, or decline post M&A?

A paper titled “Research: Innovation Suffers When Drug Companies Merge”, published by the Harvard Business Review (HBR) on August 03, 2016 answers this question. This research involves, pre and post M&A detailed analysis of 65 pharma companies. After detailed scrutiny of the data, the authors wrote: “Our results very clearly show that R&D and patenting within the merged entity decline substantially after a merger, compared to the same activity in both companies beforehand.”

Having also analyzed companies that were developing drugs in similar therapeutic areas, but hadn’t merged, the paper recorded: “We applied a market analysis, the same one used by the European Union in its models, to analyze how the rivals of the merging firms change their innovation activities afterward. On average, patenting and R&D expenditures of non-merging competitors also fell – by more than 20% – within four years after a merger. Therefore, pharmaceutical mergers seem to substantially reduce innovation activities in the relevant market as a whole.”

‘Other critical objectives’ may also drive pharma M&A:

As I had indicated before, besides attaining synergy in innovation activities at an optimum cost through M&A, there may also be other important drivers for a company to initiate this process. One such example is available from Sanofi-Aventis merger in 2004.

Just to recapitulate, Sanofi was formed in 2004 when Sanofi-Synthélabo (created from the 1999 merger of Sanofi and Synthélabo) acquired Aventis (the result of the 1999 merger of Hoechst and Rhône-Poulenc).

A June 2016 case study of the Sanofi-Aventis merger titled ‘Does M&A create value in the pharmaceutical sector?’, and published by HEC Paris – considered a leading academic institution in Europe and worldwide, brings out the ‘other factors’ driving pharma M&A.

The research paper says that Sanofi-Aventis deal ‘is the perfect example of the paramount importance that external factors have on M&A activity, which sometimes are more critical than the amount of value created from a particular deal.’ It further says, ‘facing a changing pharmaceutical industry (heightened competition and consolidation trend), Sanofi-Synthélabo decided to merge with Aventis as a defense strategy.’

This strategy ensured, even if the merger had not ended being a successful one, it would achieve the following two ‘other critical factors’:

  • Manage to save Sanofi-Synthélabo from being acquired and disappearing.
  • Comply with the French government pressure to create a national champion in the pharma industry, to ultimately benefit the French population.

Conclusion:

In the pharma business, M&A has now become a desirable strategic model for shareholder value creation. In the global perspective, one of the most important drivers for this initiative is, greater and less expensive access to new drug innovation or innovative new drugs, beside a few others, as discussed above.

In-depth expert analysis has also shown that “R&D and patenting within the merged entity decline substantially after a merger, compared to the same activity in both companies beforehand.”  Moreover, as other independent researchers have established that inside the merged companies, there’s a great deal of disruption in many areas, including people, besides the global drug market getting less competitive with declining number of players.

Pharma M&As may well be any stock market’s dream and could a boost the merged company’s performance in short to medium term. But the important points to ponder are:  Does it help improve drug innovation or its cost related issues over a reasonably long time-frame? Does it not ultimately invite even more problems of different nature, creating a vicious cycle, as it were, putting the sustainable performance of the company in a jeopardy?

By: Tapan J. Ray  

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Pharma Stakeholder Sentiment: Back to Square One?

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Is it fair to push out the core purpose of an important process, or rather a mission, unfairly? Whether we like it or not, it happened that way, over a period of time.

Way back on December 01, 1950, George W. Merck (President and Chairman Merck & Co., Inc.1925-1957), epitomized the core purpose of the drug innovation process. This is something, which apparently was possible only for him to articulate exactly the way he did.

On that day, while addressing the students and the faculty at the Medical College of Virginia, Richmond, George Merck said: “We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”

To many of us, it may sound more as an altruistic statement, and not really coming from a businessman who wants to excel in the financial performance of the organization. Interestingly, that was not the case, either. Merck removed any possible ambiguity in his statement by stating categorically: “In doing this, it will be as a business­ man associated with that area of the chemical industry which serves chiefly the worlds of medicine and pharmacy.”

In this article, I shall deliberate on whether or not the core purpose of drug innovation, as articulated by George Merck in 1950 has been pushed out of the mind of the stakeholders for good.

Management Guru – Peter Drucker’s similar observation:

It is worthwhile to recapitulate at this stage that around the same time, the Management Guru – Peter Drucker also made a similar observation, which is relevant even today. He said: “Because the purpose of business is to create a customer, the business enterprise has two – and only two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Interestingly, when the word ‘customer’ is replaced with ‘patients’, George W. Merck’s iconic statement fits so well even in the realm of business management, including drugs and pharmaceuticals.

Signs of the core purpose of new drug discovery getting pushed out:

The core purpose of new drug innovation in pharma business, as articulated by a top industry pioneer – ‘Medicine is for the patient and not for the profits’, was pushed out eventually, regardless of its reasons. Today’s core purpose of the same process has seemingly become just the opposite of that – ‘Medicine is only for the patient who can afford it – to maximize profit.’

This change in the core purpose was visible in a large number of instances. For example, when the then Bayer CEO Marijn Dekkers reportedly said: ‘Our cancer drug is for rich westerners, not poor Indians.’  However, his exact wordings were “we did not develop this product for the Indian market, let’s be honest. We developed this product for Western patients who can afford this product, quite honestly.” If so,the question that comes up: why then Bayer fought so hard and spent so much of money, efforts and time to keep selling this specific product in India – exclusively?

In any case, this statement from the highest echelon of one of the top global pharma players is a contentious one, especially against George Merck’s articulation, or even Peter Drucker’s for that matter, on the same. By the way, Dekkers made this commentat the Financial Times Global Pharmaceutical & Biotech Conference in December in December 2013.

A wind of change?

The hope for a wind of change flickered when in an interview, Andrew Witty,the erstwhile global CEO of GlaxoSmithKline (GSK), signaled a totally contrasting view of his company. Witty said: “GSK is committed to offering all its new drugs in India at affordable prices.”

Much prior to this, on March 14, 2013 he told a conference on healthcare in London that: “It’s not unrealistic to expect that new innovation ought to be priced at or below, in some cases, the prices that have pre-existed them.” He further expressed: “The pharmaceutical industry should be able to charge less for new drugs in future by passing on efficiencies in research and development to its customers.”

Witty era is also over now. He retired from GSK at the age of around 53 on March 31, 2017. Perhaps his refreshing patient-centric thoughts would also not find any takers within the industry. Nonetheless, in March 2018, the same issue resurfaced in an interesting article, followed by a few other related developments.

Call for socializing drug development?

The issue, which is not just limited to high prices for new patented drugs, is much broader. An interesting article titled, “Developing drugs wasn’t always about profit, and it shouldn’t be now”, was published in Quartz- a news website owned by Atlantic Media, brings to the fore the same key point, yet again. It makes some profound observations, such as socializing drug development. The word ‘socializing’ may not be quite acceptable to many, though. Nevertheless, it raises some critical issues worth pondering over, such as:

  • Faith in the power of money pervades our modern medical system. Pharmaceutical companies aren’t evil (usually). They just choose to make the most profitable drugs, not the drugs of greatest value to society.
  • For example, despite antimicrobial resistance being a global threat, pharma companies have largely abandoned new antibiotic development on the eminently sensible principle that they are money-losers. Promising narrow-spectrum antibiotics – agents that precisely target pathogens and spare “good” bacteria - languish in development limbo because there is no hope that they might churn as much profit as several other drugs.

It’s high time, I reckon, to adequately address the dire need for a reliable supply of the medicines that make a vibrant modern society possible. All stakeholders, including the pharma industry, globally, would require putting their heads together in charting out a clear and time bound pathway for its effective resolution, soon. Otherwise, sheer gravity and the complexity of the situation may prompt the policy makers to move towards ‘socializing drug development,’ much to the dismay of many of us.

Hospitals creating nonprofit generic drug company:

On January 18, 2018, The New York Times (NYT), published an article titled “Fed Up With Drug Companies, Hospitals Decide to Start Their Own,” highlighted a novel initiative to address the prevailing situation, in their own way, without depending on others.

It reported, for many years, several hospital administrations have been expressing frustration when essential drugs like heart medicines have become scarce, or when prices have skyrocketed because investors manipulated the market. Now, about 300 of the country’s largest hospital systems are taking an aggressive step to combat the problem. They plan to go into the drug business themselves, in a move that appears to be the first on this scale.

‘The idea is to directly challenge the host of industry players who have capitalized on certain markets, buying up monopolies of old, off-patent drugs and then sharply raising prices, stoking public outrage’, the article elaborates.

‘Price of medications has soared, so have pharma profits’:

‘Big Pharma is jacking up prices for one reason – because it can,’ says a CNN Article, published on April 04, 2018. The article further emphasizes: “As the price of medications has soared, so have pharmaceutical company profits. Total sales revenue for top brand-name drugs jumped by almost $8.5 billion over the last five years. The Government Accountability Office (GAO) reported that 67% of drug manufacturers boosted their annual profit margins between 2006 and 2015 – with profit margins up to 20% for some companies in certain years.”

It further writes, “Not only have pharmaceutical companies reaped outsized profits from these price hikes, so have their CEOs. According to a USA Today analysis, the median compensation package for biotech and pharmaceutical CEOs in the Standard & Poor’s 500 was 71% higher than the median compensation for S&P 500 executives in all industries in 2015.”

Conclusion:

This is happening the world over. But its degree varies. In those countries where there are drug price regulators, only a small percentage of the total pharma market by value comes under price regulation, the rest of the products enjoy virtually free pricing freedom.

Would this ground situation change on its own any time soon? There is no specific answer to this question, yet. Moreover, there doesn’t seem to be none around in the pharma industry today with the stature and articulated vision like George Merck. He started from the very basic. Drawing the ‘square one’, he clearly defined the core purpose of discovery, manufacturing and marketing of medicines. Today’s pharma industry, by and large, seems to be charting in other newly drawn squares. Maximizing profit is now considered a key objective of achieving the core purpose – and not an outcome of achieving the core purpose of pharma business.

However, there are some very early signs of several stakeholders’ sentiment changing in this regard. Are they moving back to the basic – square one?

From the chronicles of the past several years on this issue, pharma industry does not seem to be on the same page with those stakeholders, just yet. If they do, a humongous health worry of a vast majority of the global population could be effectively addressed, as many believe.

The reverberations of this sentiment, though rather faint, can be felt in many countries, including the United States, and not just in the developing world, such as India.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Key Drivers And Long-Term Impact of Pharma M&A in India

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Corporate M&A is increasingly considered an integral part of the organization’s growth strategy for value creation, by a large number of pharma companies, across the world. In tandem, it throws open many other doors of opportunities, such as reduction of business risks and massive corporate restructuring.

In the post globalization era, mostly the large to medium sized Indian players are imbibing this strategy to gain a competitive edge, in the highly crowded generic drug market, not just in India, but also in various other parts of the world. At the same time, it is equally true that there are many other pharma biggies who have moved into the top 10 of the domestic league table in India, following mainly the organic growth path, and are still staying that way.

For example, the league table ranking (MAT October 2017) of the Indian domestic pharma market, published by AIOCD Pharmasofttech AWACS Pvt. Ltd, reflects a similar scenario. It shows, not many local Indian drug players seem to be too aggressive in Merger and Acquisition (M&A) within the country. In fact, among companies featuring in the TOP 10, only around half seems to have not gone for any major domestic M&A. The remaining half pursued a predominantly organic route, for a quantum growth in the Indian market.

In this article, I shall try to fathom, both the critical drivers and the long-term impact of pharma M&A initiatives – both inbound and outbound, with their either origin or destination being in India.

Are the key drivers different?

India is overwhelmingly a branded generic market. So are its key players. Thus, most pharma M&As in India are related to generic drugs.

Thus, unlike research-based global pharma players, where one of the most critical drivers for M&A, is related to new drug innovation to maintain sustained growth of the organization, the drivers for the same in India is somewhat different. Neither are these exactly the same for exports and the domestic market, with occasional overlaps in a few cases, though.

Export markets:

To expand and grow the pharma business in the export markets is obviously the main overall objectives. To attain this, the acquiring companies generally take into consideration some common critical factors, among others. Each of which is carefully assessed while going through the valuation process and arriving at the final deal price for the company to be acquired. A few examples of which are as follows:

  • The span and quality of market access and the future scope for value addition
  • Opportunities for value creation with available generic products, active ANDAs and DMFs
  • A competitive portfolio, especially covering specialty products, novel drug delivery systems and even off-patent biologic drugs
  • Market competitors’ profile
  • Product sourcing alternatives and other available assets

Domestic market:

Similarly, in the domestic market too, there could be several critical drivers. The following, may be cited just as an illustration. There could well be some overlaps here, as well, with those of export markets:

  • Moving up the pharma value chain, e.g., from bulk drug producer to formulation producer with marketing, intending to climb further up
  • A new range and type of the generic product portfolio
  • Expansion of therapeutic and geographic reach
  • Expansion of consumers and customers base
  • Greater reach, depth, efficiency and productivity of the distribution channel
  • Acquiring critical manufacturing and other related tangible and intangible assets

A glimpse at the 2016-17 M&A trend in India:

An E&Y paper titled, “Transactions 2017” says, India continues to enjoy a prominent position in the global generic pharma space, due to many preferred advantages available within the country, such as a large number of USFDA approved sites coupled with low Capex and operating costs. As a result, the pharmaceuticals sector witnessed 51 pharma deals in the year 2016, with an aggregate disclosed deal value of USD4.6 billion.

However, according to Grant Thornton Advisory Pvt. Ltd, there have been around 27 M&A deals in pharma and healthcare sector by Q3 2017, valued at USD719 million. This appears to be way below 54 deals, valued at USD4.7 billion in calendar year 2016.

Cross-border activity dominated the sector:

Highlighting that cross-border activity dominated the sector, the E&Y paper said, “outbound and domestic transactions drove most of the deal activity, with 21 deals each. In terms of the disclosed deal value, outbound and inbound activity stood at USD2.1 billion each. Domestic deal-making was concentrated in smaller value bands with an aggregate deal value of USD342 million, of which USD272 million (4 deals) worth of deals were restructuring deals.”

Inbound and a domestic M&A occupied the center stage:

It is interesting to note that despite initial hiccups, inbound overseas interest in sterile injectable continued, along with a range of different generic formulations. The notable among which, as captured in the above paper, are as follows:

  • China-based Shanghai Fosun Pharmaceutical (Group) Company Limited announced the acquisition of an 86 percent stake in Gland Pharma Limited for up to USD1.26 billion.
  • US-based Baxter International Inc. entered into an agreement to acquire Claris Injectable Limited, a wholly owned subsidiary of Claris Lifesciences Limited, for USD625 million.
  • In November 2017, India’s Torrent Pharmaceuticals acquired more than 120 brands from Unichem Laboratories in India and Nepal, and its manufacturing plant at Sikkim for USD558 million.

Outbound M&A:

Facing continuous pricing and other pressures in the largest pharma market in the world – United States, Indian pharma players sharpened their focus on Europe and other under-penetrated markets, with a wider range of product portfolio. Following are a few examples of recent outbound M&As for the year, done predominantly to serve the above purpose, besides a couple of others with smaller deal values:

  • Intas Pharma, through its wholly owned subsidiary inked an agreement to acquire Actavis UK Limited and Actavis Ireland Limited from Teva Pharmaceutical for an enterprise value of USD767 million.
  • Dr. Reddy’s Laboratories entered into an agreement with Teva Pharmaceutical and an affiliate of Allergan plc to acquire a portfolio of eight ANDAs in the US for USD350 million.
  • Sun Pharma stepped into the Japanese prescription drug market by acquiring 14 brands from Novartis for USD293 million.
  • Lupin also strengthened its position in Japan by acquiring 21 products from Shionogi & Company Limited for USD150 million. In 2017, Lupin also acquired US-based Symbiomix Therapeutics – a privately held company focused on bringing innovative therapies to market for gynecologic infections. The acquisition value stands at USD 150 million.
  • Two other relatively large outbound acquisitions in 2017 were Piramal Enterprises’ acquisition of anti-spasticity and pain management drug portfolio of Mallinckrodt for USD171 million and Aurobindo Pharma’s Generis Farmaceutica USD142.5 million.

Long term business impact of M&A on the merged entity:

So far so good. Nevertheless, a key point to ponder, what is the long-term impact of M&A on the merged entities in India. It may impact several critical areas, such as financial ratios, reputation on drug quality standards or even its impact on employee morale. Sun Pharma’s acquisition of Ranbaxy in 2015 may be an example in this regard. Not too many credible studies are available for Indian pharma companies in this regard, it could be an interesting area for further research, though.

A research paper titled “Post-Merger Performance of Acquiring Firms: A Case Study on Indian Pharmaceutical Industry”, published by the International Journal of Research in Management & Business Studies (IJRMBS), in its July-September 2015 issue, captured an interesting point. It found, that M&As have a significant impact on the merged company performance as compared to the pre-merger period, but the impact is evident more in the immediate year after the merger.

The paper concluded, although the profitability had improved in the merged company as indicated in the financial ratios, like PBIT, Cash Profit margin and Net profit margin, but the improvement in the performance is observed only up to 1 year of the merger. As far as operating performance is concerned the short term positive impact can be observed, but again it lasts up to 1 year only. The overall study results, therefore, indicate the positive impact of merger on the operating and financial performance only in the short run (+1 year).

Is it a mixed bag?

Nevertheless, there are also other studies in this regard, which concluded the favorable impact of M&As on corporate performance. However, those studies adopted certain other parameters of measuring the financial and operational improvements in the merged companies. Some more research findings in this area – ferreted out from literature review and are available in the same issue of IJRMBS), revealing a mixed bag. Let me quote some these findings, starting from the earlier years, as follows:

Kruze, Park and Suzuki (2003): With a sample of 56 mergers of manufacturing companies from the period 1969 to 1997 concluded that the long term operating performance of control firms was positive but insignificant and high correlation existed between pre and post-merger performance.

Beena (2004): Analyzed the pre and post-merger performance of firms belonging to pharma manufacturing industries with samples of 115 acquiring firms between the period 1995 and 2000. For the purpose of analysis four sets of financial ratios were considered and it was tested using t –test. The study showed no improvement in the performance, as compared to the pre-merger period for the sample companies. 

Vanitha. S and Selvam. M (2007): With a sample of 58, to study the impact of merger on the performance in the Indian manufacturing sector from 2000 to 2002, the study concluded, overall financial performance is insignificant for 13 variables.

Pramod Mantravadi and Vidyadhar Reddy (2008): Investigated a sample of 118 cases of mergers in their study. They found, more impact of merger was noticed on the profitability of banking and finance industry, pharmaceutical, textile and electric equipment sector, whereas the significant decline was seen in chemical and Agri-Products sector.

More Indian studies are expected in this interesting area to understand the possible long-term impact of pharma M&A in India.

Conclusion:

Be that as it may, inbound and outbound consolidation and expansion of the Indian pharma industry through M&A will continue. However, this likely to happen at a varying pace, depending upon both the opportunities and constraints for business growth. This will include both in the export and the domestic markets.

Increasingly complex business environment, intense drug pricing pressure in the US, dwindling much differentiated product pipeline, impending patent expiry of blockbuster drugs, will drive the inbound M&A. Whereas, the domestic players would like to spread their wings in search of greater market access, across the world. This process is likely to include a different type of product-mix, including specialty and biologic products, creating some barrier to market entry for many other generic players.

Going forward, the critical drivers for pharma M&A in India, both inbound and outbound, are unlikely to undergo any radical change. Interestingly, available research studies regarding its long-term impact on the companies involved in this process are not yet conclusive. However, many researchers on the subject still believe, especially the financial impact of M&As on the merged entities in India last no more than short to medium term.

By: Tapan J. Ray  

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Why MNC Pharma Still Moans Over Indian IP Ecosystem?

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Improving patient access to expensive drugs, paving the way for entry of their cheaper generic equivalents, post patent expiry, and avoiding evergreening, is assuming priority a priority focus area in many countries. The United States is no exception, in this area. The Keynote Address of Scott Gottlieb, Commissioner of Food and Drug at the 2018 Food and Drug Law Institute Annual Conference inWashington, DC by, on May 3, 2018, confirms this. Where, in sharp contrast with what the MNC Pharma players and their trade associations propagated, the US-FDA commissioner himself admitted by saying, “Let’s face it. Right now, we don’t have a truly free market when it comes to drug pricing, and in too many cases, that’s driving prices to unaffordable levels for some patients.”

Does US talk differently outside the country?

At least, it appears so to many. For example, in April 2018, the Office of the United States Trade Representative (USTR) released its 2018 Special 301 Report. In this exercise, the USPTO names the country’s trading partners for not adequately protecting and enforcing Intellectual Property (IP) rights or otherwise deny market access to U.S. innovators that rely on the protection of their IP rights.’ Accordingly, U.S. trading partners are asked to address IP-related challenges, with a special focus on the countries identified on the Watch List (WL) and Priority Watch List (PWL).

In 2018, just as the past years, India continues to feature, along with 11 other countries, on the PWL, for the so called longstanding challenges in its IP framework and lack of sufficient measurable improvements that have negatively affected U.S. right holders over the past year.

From Patient access to affordable drugs to Market access for Expensive Drugs: 

Curiously, the USTR Report highlights its concerns not just related to IP, but also on market access barriers for patented drugs and medical devices, irrespective of a country’s socioeconomic compulsion. Nevertheless, comparing it to what the US-FDA Commissioner articulated above, one gets an impression, while the US priority is improving patient access to affordable drugs for Americans, it changes to supporting MNC pharma to improve market access for expensive patented drugs, outside its shores.

Insisting others to improve global IP Index while the same for the US slides:

In the context of the 2018 report, the U.S. Trade Representative, reportedly said, “the ideas and creativity of American entrepreneurs’ fuel economic growth and employ millions of hardworking Americans.” However, on a closer look at the U.S. Chamber of Commerce’s annual Global IP Index for 2018, a contrasting fact surfaces, quite clearly. It shows, America, which once was at the very top of the overall IP Index score, is no longer so – in 2018, the world rank of the US in offering patent protection to innovators, dropped to 12thposition from its 10thglobal ranking in 2017. Does it mean, what the US is asking its trading partners to follow, it is unable to hold its own ground against similar parameters, any longer.

Should IP laws ignore country’s socioeconomic reality? 

MNC Pharma often articulated, it doesn’t generally fall within its areas of concern, and is the Government responsibility. However, an affirmative answer, echoes from many independent sources on this issue. No wonder, some astute and credible voices, such as an article titled “U.S. IP Policy Spins Out of Control in the 2018 Special 301 Report”, published by the Electronic Frontier Foundation on May 01, 2018, termed 2018 Special 301 Report – ‘A Tired, Repetitive Report.’ It reiterates in no ambiguous term: ‘The report maintains the line that there is only one adequate and effective level of IP protection and enforcement that every country should adhere to, regardless of its social and economic circumstances or its international legal obligations.

The ever-expanding MNC Pharma list of concerns on Indian IP laws:

The areas of MNC Pharma concern, related to Indian IP laws, continues to grow even in 2018. The letter dated February 8, 2018 of the Intellectual Property Owners Association, Washington, DC to the USTR, makes these areas rather clear. I shall quote below some major pharma related ones, from this ever-expanding list:

  • Additional Patentability Criteria – section 3 (d): The law makes it difficult for them to secure patent protection for certain types of pharma inventions.
  • TADF (Technology Acquisition and Development Fund)is empowered to request Compulsory Licensing (CL) from the Government:Section 4.4 of India’s National Manufacturing Policy discusses the use of CL to help domestic companies access the latest patented green technology.This helps in situations when a patent holder is unwilling to license, either at all or “at reasonable rates,” or when an invention is not being “worked” within India.
  • India’s National Competition Policyrequires IP owners to grant access to “essential facilities” on “agreed and nondiscriminatory terms” without reservation. They are not comfortable with it.
  • Regulatory Data Protection: The Indian Regulatory Authority relies on test data submitted by originators to another country when granting marketing approval to follow-on pharma products. It discourages them to develop new medicines that could meet unmet medical needs.
  • Requirement of local working of patents: The Controller of Patents is empowered to require patent holders and any licensees to provide details on how the invention is being worked in India. Statements of the Working, (Form 27),must be provided annually.Failure to provide the requested information is punishable by fine or imprisonment. It makes pharma patent holders facing the risk of CL, if they fail to “work” their inventions in India within three years of the respective patent grant.
  • Disclosure of Foreign Filings: Section 8 of India’s Patent Act requires disclosure and regular updates on foreign applications that are substantially “the same or substantially the same invention.” They feel it is irrelevant today.

Pharma MNCs’ self-serving tirade is insensitive to Indian patient interest:

Continuing its tirade against some developed and developing countries, such as India, the US drug manufacturers lobby group – Pharmaceutical Research and Manufacturers of America (PhRMA) has urged the office of the US Trade Representative (USTR) to take immediate action to address serious market access and intellectual property (IP) barriers in 19 overseas markets, including India, reports reported The Pharma Letter on February 28, 2018. It will be interesting to watch and note the level active and passive participation of India based stakeholders of this powerful US lobby group, as well.

Government of India holds its ground… but the saga continues:

India Government’s stand in this regard, including 2018 Special 301 Report, has been well articulated in its report released on January 24, 2018, titled “Intellectual Property Rights Regime in India – An Overview”, released by the Department of Industrial Policy and Promotion Ministry of Commerce and Industry (DIPP). The paper also includes asummary of some of the main recommendations, as captured in the September 2016 Report of the High-Level Panel on Access to Medicines, constituted by the Secretary-General Ban Ki-Moon of the United Nations in November 2015.  Some of these observations are as follows:

  • WTO members must make full use of the TRIPS flexibilities as confirmed by the Doha Declaration to promote access to health technologies when necessary.
  • WTO members should make full use of the policy space available in Article 27 of the TRIPS agreement by adopting and applying rigorous definitions of invention and patentability that are in the interests of public health of the country and its inhabitants. This includes amending laws to curtail the evergreening of patents and awarding patents only when genuine innovation has occurred.
  • Governments should adopt and implement legislation that facilitates the issuance of Compulsory Licenses (CL). The use of CL should be based on the provisions found in the Doha Declaration and the grounds for the issuance left to the discretion of the governments.
  • WTO members should revise the paragraph 6 decision in order to find a solution that enables a swift and expedient export of pharmaceutical products produced under compulsory license.
  • Governments and the private sector must refrain from explicit or implicit threats, tactics or strategies that undermine the right of WTO Members to use TRIPS flexibilities.
  • Governments engaged in bilateral and regional trade and investment treaties should ensure that these agreements do not include provisions that interfere with their obligations to fulfill the rights to health.

The DIPP report includes two important quotes, among several others, as follows:

Joseph Stiglitz, Nobel Prize for Economics (2001) – an American Citizen:

-       “If patent rights are too strong and maintained for too long, they prevent access to knowledge, the most important input in the innovation process. In the US, there is growing recognition that the balance has been too far tilted towards patent protection in general (not just in medicine).”

-       “Greater IP protection for medicines would, we fear, limit access to life-saving drugs and seriously undermine the very capable indigenous generics industry that has been critical for people’s well-being in not only India but other developing countries as well”.

Bernie Sanders, an American Citizen and Senior U.S. Senator:

-      “Access to health care is a human right, and that includes access to safe and affordable prescription drugs. It is time to enact prescription drug policies that work for everyone, not just the CEOs of the pharmaceutical industry.”

-      “Healthcare must be recognized as a right, not a privilege. Every man, woman and child in our country should be able to access the health care they need regardless of their income.”

Conclusion:

Why is then this orchestrated moaning and accompanying pressure for making Indian IP laws more stringent, which apparently continues under the façade of ‘innovation at risk’, which isn’t so – in any case. But, cleverly marketed high priced ‘me too’ drugs with molecular tweaking do impact patient access. So is the practice of delaying off-patent generic drugs entry, surreptitiously. Instead, why not encourage Voluntary Licensing (VL) of patented drugs against a mutually agreed fee, for achieving greater market access to the developing countries, like India?

Whatever intense advocacy is done by the vested interests to change Indian patent laws in favor of MNC pharma, the intense efforts so far, I reckon, have been akin to running on a treadmill – without moving an inch from where they were, since and even prior to 2005. The moaning of MNC Pharma on the Indian IP ecosystem, as I see it, will continue, as no Indian Government will wish to take any risk in this area. It appears irreversible and is likely to remain so, for a long time to come. The time demands from all concerned to be part of the solution, and not continue to be a part of the problem, especially by trying to tamper with the IP ecosystem of the country.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Prescription Digital Therapy Now A Reality

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The pursuit of offering ‘prescription digital therapeutics’ or ‘digiceuticals’ by Big Pharma, to ensure better clinical outcomes for patients, has apparently come to fruition now.

On April 18, 2018, by a media release, Novartis announced that the Sandoz Division of the Company has entered into collaboration with Pear Therapeutics to commercialize and continued development of digital therapeutics, designed to effectively treat disease and improve clinical outcomes for patients.

The collaboration brings on to the table, a synergy between Sandoz expertise in launching and commercializing various disease treatments, with Pear’s leading experience in digital therapeutics design and implementation. This deal has attracted attention of many. Mainly because, any pharma player will, for the first-time, detail a digital therapy treatment directly to the medical profession, and seek their prescription support.

It is worth noting that Pear’s flagship digital therapeutic – reSET is the first USFDA-cleared mobile medical application with both a safety and efficacy label to help treat patients with Substance Use Disorder, in September 2017. According to published reports, several studies have established that it is two-times more effective than conventional in person therapy sessions. Interestingly, the rate of treatment efficacy increases even up to tenfold, in refractory patients.

Just the beginning of a long run: 

The above market launch of a digital therapy by Novartis signals just the beginning of a long run in changing in the disease treatment archetype for better outcomes. Incidentally, prior to this announcement, on March 1, 2018, the same Company had announced, “Novartis and Pear Therapeutics to collaborate on prescription software applications aimed to treat patients with schizophrenia and multiple sclerosis.”

The media release underscored:“Psychiatric and neurodegenerative diseases place a heavy physical, mental and economic burden on patients and their families. With widespread adoption of digital devices, prescription digital therapeutics could potentially play an important role in future treatment models for a range of diseases with high unmet medical need”.

The scope and potential:

An article titled – ‘Digital therapeutics: Preparing for takeoff’,published by McKinsey & Company in February 2018, captures its scope succinctly. It says, “digital therapeutics tend to target conditions that are poorly addressed by the healthcare system today, such as chronic diseases or neurological disorders. In addition, they can often deliver treatment more cheaply than traditional therapy by reducing demands on clinicians’ time.”

A separate McKinsey interview article, titled ‘Exploring the potential of digital therapeutics’, published in the same month, elucidated the potential of digital therapy equally well.  It highlighted:“A digital therapeutic is an intervention based on software as the key ingredient, which has a direct impact on a disease. This is what distinguishes this category from the broader term digital health. We will see digital therapeutics and digital diagnostics integrate into the health system…”

‘Prescription digital therapy’ are not just ‘Fitness and Well-being’ Apps:

Prescription digital therapy are not just to monitor a person’s general fitness level against pre-identified parameters, and overall well-being. Whereas, digital therapeutics help patients to regularly and consistently monitor relevant and tailor-made disease related data - in real-time to detect behavioral, lifestyle and requisite biological changes on a daily basis. However, this is not ‘a so well-realized necessity’ today, especially, in the treatment of certain serious disease conditions, to ensure significantly better clinical outcomes for patients.

Digital therapeutics can ensure making a favorable change in patient behavior, which is not merely as efficient as administering medicines, but could also ensure greater effectiveness than conventional medications. Further, it assists patients to better understand, manage and control several disease conditions, and more importantly, sans any untoward side-effects.

Besides, with digital therapy, the required treatment interventions will reach patients faster than traditional treatment processes. Both the patient request and the medical response for the same can be quickly exchanged, together with relevant data support, through smartphones or other wearable digital interfaces – either in the form of voice or text or both. I shall dwell on this later in the article. Thus, digital therapy may not require patients to meet the doctor every time a need arises.

Moreover, fitness and wellbeing Apps do not require marketing approval from a country’s drug regulator. Mostly because, they help monitoring general and generic fitness parameters, capturing some low-risk changes. Whereas, a custom-made prescription digital therapy would necessarily require such regulatory nod.

In tandem, various studies are also being conducted on wearables, such as an Apple Watch, as an interface. The following are examples of some of these studies:

Digital therapy study with Apple Watch as an interface:

In February 2017, Takeda Pharmaceuticals U.S.A. and Cognition Kit Limited, announced a collaboration to pilot the use of a specially designed app on an Apple Watch wearable to monitor and assess cognitive function in patients with Major Depressive Disorder (MDD).

In November 2017, they presented results from ‘Digital Wearable Technology Study’ in patients with MDD. The observational study involved 30 participants, aged 18-65, with a clinical diagnosis of mild to moderate depression who have been prescribed antidepressant monotherapy for MDD.

The study also evaluated feasibility and participant compliance with measures of mood and cognition on wearable technology; and compared measures of mood and cognition on wearable technology using traditional neuropsychological testing and patient reported outcomes on depression symptoms at 6 weeks. Participants were provided with an Apple Watch on which brief cognitive and mood tests were administered daily.

The researchers observed that patients were compliant with the wearable Apple Watch device on a daily basis to evaluate mood (95 percent) and cognition (96 percent). The study also demonstrated that abbreviated daily assessments delivered through the wearable Apple Watch device corresponded with objective Cambridge Neuropsychological Test Automated Battery (CANTAB) cognitive tests and full-length patient reported outcomes, PHQ-9 and PDQ-D, assessed during weeks 1, 3 and 6. No adverse events were reported in the study.

According to another report, this user interface with Apple’s smart-watch versions 2 and 3 is now being used in a number of studies for chronic conditions, such as Parkinson’s disease – combining biometric data with user input. Again, in February 2017, Johns Hopkins University announced a project to use the smart-watch for research on possible triggers of epileptic seizures.

When used as an interface with prescription digital therapy, the provision of e-SIM and GPS in Apple Watch Series 3, I reckon, would also help patients to immediately communicate with the remote therapy centers using the same device, anytime – as and when the patients want.

Digital therapy initiatives in India:

Initiative on digital therapy has already started rolling in India, as well. Its pace is also quite encouraging. For example, Wellthy Therapeutics is building a patient centric solution for diabetes through digital intervention and management. On February 20, 2018, the Company, reportedly, shared the interim results of an ongoing real-world pilot to evaluate the effectiveness of the Wellthy Diabetes Smartphone App (WD). The results were shared at the 11th International Conference on Advanced Technologies and Treatments for Diabetes (ATTD 2018) in Vienna, Austria.

The data demonstrated how the use of WD improved glycemic control. On completion of 16 weeks, participants showed a reduction in their HbA1c by (-0.61%) on average, with 61.5% of participants having showed significant reduction in their HbA1c with an average of (-1.17%) reduction.

Conclusion:

As indicated in my article titled, ‘Digiceuticals: A Force Multiplier to Contain Chronic Diseases’, published in this blog on October 23, 2017,prescription digital therapies are primarily of two types – one for “medication augmentation” and the other for “medication replacement.”

Be that as it may, prescription digital therapyimproves clinical outcomes for patients by manifold. It also shows potential to take over from traditional treatment with medicines in several serious and virtually crippling ailments, mostly related to human behavior and lifestyle, such as a host of chronic diseases, and without causing any side-effects.

Thus, prescription digital therapy is now a reality. It has come to stay for long – can’t be wished away, any longer.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.