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India’s Drug Pricing Policy: “Absurd, Unreasonable And Irrational” – Supreme Court

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On July 15, 2015, while hearing a petition related to the current ‘Market Based Drug-Pricing Policy’ of the country, the Supreme Court of India expressed its bewilderment on the very rationality of the ‘National Pharmaceutical Pricing Policy 2012’ and directed the Government for its review.

The petition was filed by an NGO called, ‘All India Drug Action Network’. It pleaded before the honorable court that ‘Market Based Drug-Pricing’ that is currently followed in India, was never used for any price regulatory purposes. Under this new policy, simple average ‘Ceiling Prices’, in many cases, are higher than the market leader price.

The petitioner reportedly also alleged that under the new drug policy, the profit margin for pharma companies and dealers has become in the range of 10-1300 per cent. Thus, the NGO sought a direction to the Government to continue with earlier ‘Cost-Based Pricing’ to arrive at ‘Ceiling Prices’ for all essential drugs.

‘All India Drug Action Network’ contended that the ‘National List of Essential Medicines (NLEM)’ consisted of only 348 drugs and had left out many other essential medicines from price control. Thus, it sought inclusion of more life-saving medicines in the NLEM whose prices would be regulated by the government. It also pleaded that the price control must extend to various “dosages, strength and combinations” of those drugs falling under NLEM.

Expressing its serious concern, the three-judge bench of the Apex Court reportedly told the Government, “You are fixing the maximum price of a medicine above the retail price of the leading company of the same drug. It is absurd.”

The honorable Supreme Court reportedly also observed that the “pharmaceutical companies were already charging 5,000 times of the production cost and then you are taking the average of them and fixing under the drug price control order. This is legitimizing the profiteering”.

Many construe this observation of the Supreme Court as virtual endorsement of ‘All India Drug Action Network’s accusation that the earlier ‘cost-based drug-pricing’ model was better for the patients, whereas the new ‘market-based drug pricing’ model just legitimizes profiteering and pushes drugs out of reach of the poor, who are already suffering under very high ‘out of pocket’ health expenditure burden.

The Honorable Court reportedly asked the Department of Pharmaceuticals of Union Ministry of Chemicals and Fertilizers to reconsider aspects like the formula to fix prices. And thereafter pass a “reasoned” order on the representation of the NGO on the issue within six months after hearing all parties concerned. It also asked the Centre to file a copy of its decision on the representation of NGO, which would file it in six weeks.

However, at the very beginning the bench had expressed, “this is not an easy area for the courts to intervene and it is very difficult for a court to sit in judgment in such kind of policy matters.”

The Additional Solicitor General appearing for the Government reportedly submitted that the Government is open to consider the representation. “We will have a look to add some more drugs under the price control order”, she reportedly said.

Key objectives for drug price control in India:

As has now been well established, backed by robust data, that in a country like India ‘Out of Pocket Expenditure’ for medicines is very high.

According to the World Bank Out-of-pocket health expenditure (% of private expenditure on health) in India was last measured at 85.88 in 2013.

In a situation like this, to ensure adequate access to affordable essential medicines for the common man, the Government has hardly any option but to regulate the prices of, at least, the essential medicines.

To achieve this objective meaningfully, the Government through the ‘National Pharmaceutical Pricing Authority (NPPA)’ tries to make sure that all such medicines are:

  • Adequately Available
  • Reasonably Affordable

Therefore, maintaining a right balance between ‘affordability’ and ‘availability’ of medicines is of critical importance, while framing any drug pricing policy, .

A January, 2013 article titled, “Pharma Policy 2012 and Essential Drug’s Pricing” gives the following examples to illustrate how current ‘market based pricing’ mechanism is going to make many drugs costlier:

Drug Disease Market-based pricing (simple average) Cost based pricing
Metformin Diabetes Rs.35 Rs.14
Atorvastatin Cholesterol Rs.127 Rs.16
Atenolol Hypertension Rs.38.5 Rs.08

Source: Jan Swasthya Abhiyan (JSA)

Why ‘drug price control’ at all in a ‘Free Market Economy’?

It is indeed a very pertinent question to ponder over.

However, equally pertinent answers are also available. One such was deliberated in a 2014 paper titled, “Competition Issues in the Indian Pharmaceuticals Sector” of Delhi School Economics (DSE). The paper deals with the subject related to failure of ‘Free Market Economy’ especially for branded generic drugs in India, despite seemingly intense price competition.

In an ideally free-market economy model, for each of these brands of identical drugs, having similar regulatory approvals from the Indian drug regulator on efficacy, safety and quality standards, competitive forces should have prompted uniform or at least near uniform prices for all such products.

Any brand of the same drug/drugs charging more, should generally have attracted lesser customers, if consumers would have exercised their purchase decisions directly; efficacy, safety and quality standards being the same, as certified by the drug regulator.

Interestingly, for prescription medicines, the much proven process of consumers exercising their free choice to select a brand, influenced by advertising or other available information, does not happen at all.

A snapshot of key changes in the new drug policy over the previous one:

The ‘Drug Price Control Order 2013 (DPCO 2013)’ clearly articulates two basic changes in the criteria for drug price control in India, as follows:

1. Span of price control:

This was re-defined in DPCO 2013 based on the ‘essentiality criteria’ of the drugs, which in turn is based on the ‘National List of Essential Medicines 2011 (NLEM 2011)’, instead of bulk drug based price control of DPCO 1995.

2. Methodology of price control:

This was also re-defined in DPCO 2013, making a clear departure from ‘Cost-Based Price Control’ of DPCO 1995 to ‘Market-Based Price Control’. The ‘Ceiling Prices’ are now arrived at by calculating the simple average price of each essential drug with market share of 1 percent and above. Instead, in DPCO 1995, ‘Ceiling Prices’ of price-controlled drugs used to be arrived at by applying specified ‘Maximum Allowable Post Manufacturing Expenditure (MAPE)’ on the manufacturing costs of each of such formulations. 

Key lacunae in DPCO 2013:

Besides contentious methodology of price control in DPCO 2013, NLEM 2011 does not also cover a wide range of essential drugs, which are so important for patients. I had highlighted this issue  in one of my earlier blog posts titled “Is The New ’Market Based Pricing Model’ Fundamentally Flawed?”

NLEM 2011 does not cover many combinations of TB drugs, a large number of important drugs for diabetes and hypertension. Many other critical life saving medicines, such as, anti-cancer drugs, expensive antibiotics and products needed for organ transplantation have been left out of price control. In fact, the prices of a number of these drugs have reportedly gone up after the notification of DPCO 2013, though NPPA has now started acting on this avoidable trend.

The government has reportedly admitted in an affidavit filed before the Supreme Court that the market value and share of medicines covered by new DPCO 2013, as ‘Essential Drugs’, is a meager 18 per cent of the Indian Pharmaceutical Market (IPM), instead of 20 percent under DPCO 1995.

As a result, DPCO 2013 based on NLEM 2011 undermines the entire objective of making essential drugs affordable to all.

All these lacunae in the current DPCO 2013 calls for a major revision of NLEM 2011, besides methodology of ‘Ceiling Price’ calculations. The Union Health Ministry has reportedly initiated steps to revise the list considering the existing market conditions and usage of drugs by the patients. This has reportedly happened again as recently as on July 16, 2015.

Observations of Indian lawmakers:

On April 20, 2015, a panel of 31 lawmakers of the Standing Committee on Chemicals and Fertilizers tabled its report in the Indian Parliament. The committee emphasized that patients in India should have access to all medicines, including life saving drugs, at affordable prices. Accordingly, it recommended expansion of the scope of price control to all medicines available in the country.

The Committee wondered why all medicines are still not listed in the ‘National List of Essential Medicines (NLEM)’ and is of the view that drugs of all kinds are essential and are required by the patients for treatment of various disease conditions at different times.

Government defines “Market Failure for pharmaceuticals”:

In its price notification dated July 10, 2014, the NPPA has categorically stated about “Market Failure for pharmaceuticals” as follows:

  • There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure, as different brands of the same drug formulation, which are identical to each other in terms of active ingredient(s), strength, dosage, route of administration, quality, product characteristics, and intended use, vary disproportionately in terms of price.
  • It is observed that, the different brands of the drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.
  • In India the market failure for pharmaceuticals can be attributed to several factors, but the main reason is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.
  • Market failure alone may not constitute sufficient grounds for the Government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals play in the area of public health, which is a social right, such intervention becomes necessary, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most patients. This also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.

Has DPCO 2013 delivered?

Many stakeholders, barring some NGOs, felt initially that DPCO 2013 would be a win-win drug pricing policy for both the industry and patients, as it would apparently be less intrusive for the pharma players.

Along side, through ‘Public Relations’ overdrive, a hype was successfully created in the media by vested interests to generate a feeling that the drug prices are coming down by 30-40 percent as a result of the new market-based price control regime under DPCO 2013.

That could well be true for a handful of drugs. However, the fact is that the industry was adversely impacted by just around 2.3 percent, with the provision for annual price increases for even the price-controlled drugs. On the other hand, the span of price control came down from 20 percent of the just pervious DPCO 1995 to 18 percent in DPCO 2013, not impacting the industry as significantly as it was hyped before. This is quite evident even from the reported overall performance of the industry.

For the general patients, by and large, DPCO 2013 has not delivered what it was expected to on the ground.

Conclusion:

Realization of these facts has been just enough for the public disillusionment to set in, with a possible snowballing effect. Now the Supreme Court has intervened responding to a Public Interest Litigation (PIL). It has also made tough observations on the rationale of ‘market based drug price control’ and directed the government to review it.

On the other side, the Government appointed experts are reportedly revisiting the NLEM 2011 to include more essential drugs in this list.

In the midst of all these, the same drug pricing juggernaut continues to keep rolling, with almost similar narrative, though with different packaging and all associated theatrics of the day. Universal Health Care (UHC) for all now seems to be no more than an illusion, as vindicated by the recent union budgetary allocations for health in India

The Supreme Court of the country has observed afresh that India’s drug pricing policy is “Absurd, Unreasonable and Irrational”. This ticks the general population looking up to the honorable Apex Court as the savior to their long outstanding misery in this area, especially when steep ‘Out of Pocket Health Expenditure’ in India continues to stand out as a sore thumb.

Be that as it may, hoping against hope, the common man continues to clutch on mostly to Government assurances, just on its face value, that ‘Achhe din anne wale hain (Good days are coming)’ for most patients in the country…who knows?

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.

India: Tops The GDP Growth, Remains At The Bottom On Health Care

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On February 9, 2015, the Wall Street Journal (WSJ) reported, “India’s statistics ministry surprised economists when it unveiled the new numbers for the growth of India’s gross domestic product. It ratcheted up India’s GDP growth figures using a new methodology that pegs expansion in Asia’s third-largest economy at 7.5 percent last quarter and 8.2 percent the quarter before that. Economists and the ministry, using the old methodology, had originally said growth was closer to 5.5 percent during those quarters. This recalculation indicates that India has already dethroned China as the world’s fastest-growing big economy, though China’s economy is still four times the size of India’s.”

For Indians in particular, this has indeed been a significant ‘feel good factor’.

However, keeping this ascending GDP growth rate in perspective, when we study the current health care related data of India as compared to BRICS nations (Brazil, Russia, India, China, South Africa) or even OECD (Organization for Economic Co-operation and Development) countries, India features at the rock bottom.

In this article, I shall quickly compare some critical health care parameters of India, against the same for other BRICS countries.

At the rock-bottom on healthcare:

This becomes absolutely clear when we look at the recent data on ‘Health Status’ of BRICS Nations, as follows:

Health Status of BRICS Nations (2013*)

Life Expectancy at Birth  Infant Mortality per 1,000 Live Births Child Mortality under 5 per 1,000 Live Births  Maternal mortality ratio (per 100 000 live births) 
Russia Federation 71 9 10 24
Brazil 74 12 14 69
South Africa 59 33 44 140
China 75 11 13 32
India 66 41 53 190

* Life expectancy at birth data is of 2012; maternal mortality ratio is of 2010; all the others are of 2013. Source: Health and Health Care in BRICS Nations by Victor G. Rodwin, Wagner School of Public Service, New York University, 

The legacy factor:

This has not happened overnight, public health care has been getting neglected in India over a long period of time. However, the process of slowing down in this area has become more pronounced in the recent years, as we shall discuss below.

The following table based on relatively recent data on ‘Health Expenditure’ in BRICS Nations, well captures the abject lack of focus in this area, which is so vital for sustainable economic progress of India:

Health Expenditure in BRICS Nations (2012*)

GDP Per capita (PPP)  Public Expenses on Health        (% GDP)  Private Expenses on Health  (%GDP)  Total Expenses on Health (%GDP)  Out-of pocket Health Expenses (% of Total Healthcare Expenditure) 1
Russia Federation  24,805 3.8 2.4 6.3 33.52
Brazil 16,096 4.3 5.0 9.3 31.08
South Africa 13,046 4.2 4.6 8.8 7.21
China 12,880 3.0 2.4 5.4 34.67
India 5,855  1.3 2.7 4.0 58.05

* GDP per capita in PPP is of 2014; Human Development Index is of 2013; the rest of the data is of 2012. 1. Calculated based on private expenditure on health (% of GDP), total expenditure on health (% of GDP), out-of-pocket health expenditure (% of private health care expenditure). Source: Health and Health Care in BRICS Nations by Victor G. Rodwin, Wagner School of Public Service, New York University.

Lowest Human Development Index:

Human Development Index (HDI) is broadly defined as a composite statistic of life expectancy, education, and per capita income indicators, which is used to rank countries into four tiers of human development. Net outcomes of both education and health care play critical roles in the statistical calculations of HDI.

Among the BRICS nations, India registers the lowest HDI at 0.586, as compared to 0.658 of South Africa, 0.719 of China, 0.744 of Brazil and 0.778 of Russia.

Source: Health and Health Care in BRICS Nations by Victor G. Rodwin, Wagner School of Public Service, New York University.

High economic costs of neglect to health care:

An April 30, 2015 article of Reuters stated that over 60 percent of deaths in India are due to non-communicable diseases (NCDs) such as cancer, diabetes, chronic respiratory and cardiovascular diseases, which are responsible for about 70 percent of spending on healthcare. They also make serious adverse impact on the economic health of the country, with NCDs and mental illness expected to cost India US$ 4.58 trillion between 2012 and 2030.

This, by all means, creates a high priority situation, which needs to be addressed with commensurate well thought-out policy measures backed by adequate budgetary support.

The condition assumes even greater significance, as healthy and well-productive workforces contribute immensely to high and sustainable economic growth aspiration of a nation, always.

Healthcare budget gets further axed:

To meet the expectations of many, when the incumbent government is trying to floor the gas pedal for accelerated economic growth of the country, requisite budgetary allocation for quality and affordable healthcare in India, continues to lag behind.

On the contrary, in December 2014, just prior to the Union Budget Proposal 2015-16, the new Government reportedly ordered more than Rs 6,000 Crore or US$948 million cut (20 percent) from its own healthcare budget allocation of around US $5 billion for the financial year ending March 31, 2015, due to financial constraints.

In 2014-15, the finance ministry also ordered a spending cut of around 30 percent to US$ 205.4 million on India’s HIV/AIDS program.

Then came the Union Budget proposal 2015-16. Interestingly, even after several well publicized announcements by the Government on the ‘National Health Assurance Mission’, with generous promises on rejuvenation of public health care services sooner, the budget ignored all these – lock, stock, and barrel.

For 2015-16, the health care budget allocation was kept at Rs. 33,152 Crore, a tad more than Rs. 30,645 Crore of 2014-15. There has been no indication either for any comprehensive and integrated focus on healthcare, adequately backed by commensurate budgetary allocation, any time soon.

Could crimp efforts to control the spread of diseases:

Just around this time, a report from Reuters, quoting one of the health ministry officials, stated that this budget cut could crimp efforts to control the spread of diseases.

Interestingly, more newborns die in India than in poorer neighbors such as Bangladesh, and preventable illnesses such as diarrhea kill more than a million children every year.

This issue becomes even more glaring, when India contributing to 21 percent of the global disease burden, accounts for just a fraction of global spending on health.

What the Government promised, but did not deliver:

Before the Union Budget proposal of 2015-16, another article of Reuters dated October 30, 2014, quoting an Government announcement, reported that under the National Health Assurance Mission, Narendra Modi government would provide all citizens with free drugs and diagnostic treatment, in addition to insurance cover to treat serious ailments.

The proposed plan was to be rolled out in phases from April 2015 and was to cover the entire population by March 2019. The project would reportedly cost an estimated US$11.4 billion annually, when the entire population of the country comes under it.

National Health Assurance Mission was reportedly to focus, among others, on the following:

  • Improving preventive healthcare services by ensuring adequate availability of medical practitioners in rural areas.
  • Creating new infrastructure under existing welfare programs.
  • Providing tertiary care services through an insurance-based model with the government offering more than 50 drugs free to all the citizens.
  • Offering in the package, along with the drugs, about 12-15 diagnostic treatments.
  • Encouraging the State Governments to enter into outsourcing agreements for the provision of treatment.

All admirers of the new dispensation felt greatly obliged for this announcement. It was to some extent fulfillment of a long awaited expectation for a just and efficient healthcare system in India.

Adding strength to the Government’s promise, it was also reported that the World Bank along with UK’s health cost-effectiveness agency NICE are assisting India in this regard, providing technical assistance and advice on treatments the government should offer in its health care package.

However, at the end of the day nothing got translated into reality, at least not just yet.

Patients are compelled to turn to expensive private sector providers:

At around 1.3 percent of GDP, India’s public health expenditure is already among the lowest in the world, even as compared to 1.4 percent of Bangladesh, 1.6 percent of Sri Lanka and 2.9 percent of Thailand.

It is noteworthy that the public sector is the main source of health funding in nearly all OECD countries. However, in India, only 33 percent of health spending was funded by public sources in 2012, a much lower share than the average of 72 percent in OECD countries.

Moreover, health accounted for only 4.8 percent of total government spending in 2012, significantly lower than the 14.4 percent across OECD countries.

A January 2015 paper titled, “Improving Health Outcomes And Health Care In India”, published by the OECD reconfirms that with India’s low life expectancy largely reflecting deaths from preventable diseases, the most significant gains in health would come from population-wide preventive measures.

The paper highlights that except a small number of states, overall access to public health care services in India is rather poor even today, resulting in many people turning to more expensive private-sector providers, who mainly serve those who can pay.

A quick comparison between public and private health care expenditure:

For a quick comparison between public and private health care expenditure, I shall refer to a very recent Government survey report.

This survey titled, “Key Indicators of Social Consumption in India Health” was conducted by the National Sample Survey Office (NSSO) under the Ministry of Statistics and Program Implementation of the Government of India from January to June 2014 period and was published in June 2015.

The following table prepared from the above NSSO survey, is an example that would highlight the extent of difference in the average medical expenditure per hospitalization between a public and a private sector hospital.

Average Medical Expenditure Per Hospitalization/Case in Public And Private Hospitals

Broad ailment category Public (Rs.) Private (Rs.)
Infections 3007  8134 
Cancers 24526  78050 
Cardio-vascular 11549  43262 
Respiratory 4811  18705 
Gastro-intestinal 5281 23933
Genito-urinary 9295 29608
Obstetric and neonatal 2651 21626
Psychiatric & neurological 7482 34561
Blood diseases (including anemia) 4752 17607
Endocrine, metabolic & nutrition 4625 19206

Need to garner resources to implement ‘National Health Assurance Mission’:

The High Level Expert Group (HLEG), constituted by the erstwhile Planning Commission in January 2011, under the chairmanship of Dr K. Srinath Reddy, produced a comprehensive report on ‘Universal Health Care (UHC) in India’ in November 2011.

On health financing, HLEG made 10 recommendations, where from I would quote just two as follows:

  • Government (Central government and states combined) should increase public expenditures on health from the current level of 1.3 percent of GDP to at least 2.5 percent in the first 5 years and to at least 3 percent of GDP by the next 5-year period.
  • Use general taxation as the principal source of health care financing – complemented by additional mandatory deductions for health care from salaried individuals and taxpayers, either as a proportion of taxable income or as a proportion of salary.

I reckon, to meet the budgetary needs for ‘National Health Assurance Mission’ both direct and indirect taxes require to be levied if possible, at least in the next budget, along with adequate incentives to the State Governments to do the same.

Conclusion:

Over a period of time, economic aspirations of India have grown by manifold and very rightly so. To achieve these aspirations, alongside, at least two critical social needs such as ‘Education’ and ‘Health Care’ must be focused on simultaneously. I underscore ‘simultaneously’. There does not seem to be any alternative either, if we want to ensure that Indian aspirations do not remain just a pipe dream, for long.

It does not give any pride to many when one witnesses India topping the league table of GDP Growth percentage, while continuing to remain at the rock bottom so far as the health care is concerned.

Education and health care are universally considered as the bulwark for sustainable progress and growth of any nation. Even all BRICS countries have realized and implemented that, being well ahead of India in those fronts, unquestionably.

Let’s believe and hope, India would not continue to neglect these two critical growth catalysts of any nation, for long, while trying to build a robust economy. Otherwise, pushing hard only for economic growth as a percentage of GDP, could well be akin to chasing a rainbow, if not creating an unsustainable bubble with disastrous consequences, in the long run.

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.

Evolving Trend Of Patient Engagement In Treatment Decisions

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Slowly but steadily the process of taking treatment decisions for the patients is undergoing a metamorphosis, where well informed patients no longer want to play just a passive role. These patients want the doctors to take a final decision on their treatment only after meaningful interactions with them.

Today, Internet is increasingly becoming a great enabler for the patients to get to know, learn and obtain more and more information about their fitness, overall health, illnesses, disease symptoms, various diagnostic test results, including progress in various clinical trials, besides drugs and their prices…and all these just with clicks.

As a result, equipped with relevant information from various dependable and user-friendly sources in the cyberspace, patients have started asking probing questions about the risks and benefits of various types of treatment decisions and diagnostics tests, recommended by the doctors. At times, such interactions even lead to changes, additions or deletions in choice of therapy, including drugs, devices and diagnostics tests.

Hence, this change, which could well be a game changer, assumes even commercial importance for the pharma companies and other healthcare players in this area.

The emerging trend of patients’ demand for engagement in the treatment decision making process by the doctors needs encouragement by all concerned, especially, doctors, marketers of pharma products and healthcare services.

This process would not just be more balanced, fair and humane; it would make the entire healthcare value chain more efficient and cost-effective, as it would also involve managing expectations of informed patients. Alongside, it would encourage outcomes based evaluation of healthcare process with commensurate pricing, making the system accountable and efficient more than ever before.

In an emerging situation like this, are the pharma companies connecting the evolving dots and re-strategizing their marketing game plans accordingly? In this article, that’s what I shall try to dwell on.

Pharma marketing still remains tradition bound:

Despite this gradually transforming scenario, which would possibly lead to a paradigm shift, especially in the way of making treatment decisions for the patients, most pharma players do not seem to be thinking so, as they continue to be tradition bound in their overall marketing approach.

Even today, to generate product prescription demand by influencing treatment decision of the doctors, the pharmaceutical companies provide them with not just product information through their respective sales forces, but also drug samples and a variety of different kinds of gifts, besides many other prescription influencing favors. This approach is working very well, albeit more intensely, in India too.

Be that as it may, this trend is a potential ‘Game Changer’.

Data vindicates continuation of traditional pharma marketing:

Broad types of marketing expenditure of the pharma industry vindicate that drug companies are still not deploying adequate resources for ‘patient engagement’ initiatives in creative ways.

According to a November 11, 2013 report of ‘The Pew Charitable Trusts’ titled, “Persuading the Prescribers: Pharmaceutical Industry Marketing and its Influence on Physicians and Patients”, pharma industry spent more than US$27 billion on drug promotion in 2012. Out of this expenditure, more than US$24 billion was incurred on marketing to physicians and over US$3 billion on advertising (mainly through television commercials) to consumers, wherever permitted by a country’s regulator.

This approach is traditional and is designed to promote drugs by influencing only the doctors’ prescription decisions and not so much towards ‘patient engagement’ for the same, as appears to be the emerging need of the time.

Expenditure by type of pharma marketing in 2012: 

A. Direct Marketing:

According to Cegedim Strategic Data, U.S. Pharmaceutical Company Promotion Spending (2013), expenditure by type of pharma marketing in 2012 was mainly as follows:

Type of pharma marketing Expenditure in US$
1. Detailing face-to-face to doctors 15
2. Free samples to doctors 5.7
3. Educational and Promotional Meetings 2.1
4. Promotional mailings 1.2
5. Journal and Web Advertisements 0.9
6. Direct-to-Consumer Advertising 3.1

B. Indirect marketing:

As indicate in the earlier mentioned report of ‘The Pew Charitable Trusts’, indirect marketing of US$2.35 billion incurred by the pharma companies were mainly in the following areas:

Continuing Medical Education (CME):

In 2011, the pharmaceutical and medical device industries provided 32 percent of all funding for CME courses in the United States, amounting to US$752 million out of $2.35 billion.

It is worth mentioning that to prevent these courses from functioning as veiled marketing, the Accreditation Council for ‘Continuing Medical Education’ regulates them.

However, a 2007 Senate Finance Committee report found that “drug companies have used educational grants as a way to increase the market for their products in recent years.”

Grants to Health Advocacy Organizations (HAO):

In this initiative, patient advocates can mobilize large numbers of people for an event on a specific disease related issue, which often goes to the benefit of pharma companies that manufacture related drugs.

A study found that organizations that had received grants from pharmaceutical manufacturers often endorsed the companies’ positions, while groups that had received minimal financing focused their advocacy on the drugs’ potential side effects.

Thus, the bottom-line is, in the marketing bandwidth of the pharma players, ‘patient engagement’ initiatives targeted towards patients’ benefits did not occupy a significant space.

Need to move beyond drugs and doctors:

From the above reports, it appears that while strategizing the marketing initiatives; pharma players start with products or brands and use doctors as the main decision makers to generate prescription support for those brands.

As stated earlier, though some global pharma companies are now talking about ‘patient centric’ approaches, but not much about ‘patient engagement’ approaches to harvest rich benefits out of the emerging new paradigm, in a win-win way.

Going beyond the drugs and the doctors, deploying significant resources to actively engage with the consumers to satisfy their needs and expectations, and in that process influencing patients’ behavior favorably towards the products or brands, need to be a critical part of the pharma marketing warfare, as we move forward.

Influencing patients’ behavior is challenging:

Influencing patients’ behavior through patient engagement is indeed more challenging. It calls for a multi-pronged approach involving all concerned stakeholders.

Besides innovative use of the cyberspace, digital Health Apps, among others, could well fit in nicely to achieve this goal.

I discussed this subject in my article dated March 30, 2015 in this Blog titled, “Quantum Value Addition With Health Apps, Going Beyond Drugs”.

In that direction, I reiterate that keeping pace with today’s ‘technology revolution’, rapid advent of various game-changing and user-friendly digital platforms, including Health Apps for consumers, are showing immense potential in this area. To usher in a refreshing catalytic change in the overall landscape for ‘patient engagement’ in healthcare, these platforms could emerge as key differentiating factors from the pharma players’ perspective.

Informed patients would want getting more and more engaged:

Currently, relatively smaller numbers of patients are keen to get engaged in their disease treatment decisions of the doctors or with the pharma companies on this subject, directly or indirectly.

Still a much larger number of patients, for historical reasons, remain passive while seeking treatment from the doctors.

This is changing and would change even faster with growing knowledge and awareness of digital power and its fast penetration in the hinterland along with increasing usage of smartphones.

As the patients would try getting more and more engaged in their respective treatment decision process, it would eventually hold the key to rapid progress of healthcare all over world. It has to happen in the ‘Smart Cities’ of  ‘Digital India’ too, which is just a matter of time.

An institutional patient engagement initiative:

Without any direct and significant involvement of pharma industry, there are already some exemplary organized moves towards this direction in several parts of the world. One such institution has recently been established through 2010 ‘Patient Protection and Affordable Care Act’ of the United States, known as ‘The Patient-Centered Outcomes Research Institute (PCORI)’. It helps patients in making informed healthcare decisions to significantly improve healthcare delivery and outcomes.

Active promotion of high integrity, evidence-based information that comes from intensive research, ably guided by patients, caregivers and the broader healthcare community, forms the bedrock of this Institute. PCORI ensures that, patients and the public at large have information that they can use to make decisions that reflect their desired health outcomes and other expectations.

This move can be termed as one of the key steps towards ‘Patients Engagement’ in the United States, setting a good example for many other countries to follow, across the world.

Meeting with the challenge of change:

To effectively respond to the challenges posed by the need of ‘Patients Engagement’ in the disease treatment process, some pharmaceutical companies, especially in the United States, have started developing more direct relationship with the patients. Besides innovative use of digital Health Apps, creation of ‘Patient Empowered’ social networks would help addressing this issue properly.

Global pharmaceutical majors, such as Pfizer, Johnson & Johnson, Novartis, Boehringer Ingelheim, AstraZeneca, Bayer, GlaxoSmithKline, Sanofi, Roche, Novo Nordisk, Becton, Dickinson & Co and Merck are now directly engaging with the customers through social media, such as, Twitter and Facebook. Some of them have also started experimenting with the Health Apps, as well; though in India not much green shoots are seen in this area.

Just to cite an example, I quote from the The Annual Review 2014 of Pfizer that captures the following:

“People today are able to access and exchange more information than ever before, and it’s no surprise that health is an area where information sharing is exploding. As patients become more informed, they become more involved – more active in their own care and the care of others, and in medical research.

This is the era of “patient-centricity,” where patients are far from passive subjects of study or treatment. Laypeople are taking starring roles in designing clinical trials; tracking and managing their personal health data; and, crowdsourcing new insights and solutions with diverse, far-reaching communities.”

This effort of Pfizer, by all means, is highly commendable, which leaves enough room for others in the pharma world to emulate, may be even more creatively.

Conclusion:

To achieve the objective of meaningful ‘patient engagement’ in the treatment decision making process, there is a primary need for the pharma players to put in place a credible, informative and interactive communication platform.

Today’s world prompts that this platform should ideally be digital and must be an outcome of extensive research on the information needs of patients in the identified areas. Patients’ queries and comments require to be appropriately answered by experts with compassion, remaining within the regulatory framework of the country.

Inputs and resources provided by the concerned pharma companies to the patients through these platforms would help strengthen the quality of their ‘patient engagement’ campaigns. This in turn would enable the patients to properly understand the disease, the rationale of treatment decision of the doctors, subsequent follow up steps and further treatment, if any, thereafter.

With such engagements, the image of the concerned pharma companies would grow by manifold in the eyes of the beholder – the patients. It would then expand much beyond just the buyer and seller relationship for drugs, transcending in the space of well-respected pharma institutions that helped patients in arriving at precise and most cost-effective treatment decisions for a better quality of life.

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.

‘Fake Drugs Kill More People Each Year Than Terrorism In The Last 40 years’

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In this article, I shall deliberate on ‘fake medicines’ that we may at times land up into buying, without any inkling that instead of curing or managing the ailments, these products can push us into serious health hazards, quite contrary to what we and our doctors hope for.

One may term these substances as ‘Counterfeit’, ‘Fake’, ‘Spurious’ or ‘Sub-standard’ drugs, or in whatever other names one may wish to. The bottom-line is that such products in the guise of drugs could precipitate very serious and life-threatening health crisis for patients. This mindless game has already become both a global and local health menace, though in varying degrees and parameters in different countries.

According to INTERPOL, large sums of money are involved with these transnational criminal enterprises. Fake drug makers, who run this deadly trade undercover, use sophisticated tools and technologies and are well equipped to operate stealthily.

Deploying requisite wherewithal, this growing threat to public health and safety needs to be addressed expeditiously by all concerned and in tandem. Curbing this menace would call for great concerted focus in approach and execution of a fool-proof strategy with military precision.

At this stage, I reckon, we should not clutter the subject by mixing it up with other commercial considerations, such as Intellectual Property (IP) related matter, for which appropriate laws and mechanisms are already in place.

CBI underscores veracity of the problem:

Under the above backdrop, a Central Bureau of Investigation (CBI) Press Release dated June 24, 2015 announced that the First Indo-French Workshop on “Combating Counterfeit Medicine” for Police Officers, Investigators and other officers was held on 23 and 24 June 2015 in New Delhi.

The event was organized in collaboration with the French Embassy; Institute of Research Against Counterfeit Medicines, France; Central Office Against Environmental & Public Health Violations, France and Central Fight Against Harm to the Environment And Public Health (OCLAESP) and was hosted by the CBI. Mr. Anil Sinha, Director, CBI inaugurated the workshop.

‘Fake Drugs Kill More People Each Year than Terrorism’:

In his inaugural address, Mr. Sinha made a startling revelation, when he said, according to an estimate of INTERPOL; fake medicines kill more people in a year than those who have died in the past 40 years as a result of terrorism.

Just a few years ago, INTERPOL reportedly estimated that while more than 65,000 people were killed in over 40 years in transnational terrorist incidents, the estimates of deaths caused by fake medicines range from tens of thousands to hundreds of thousands annually.

Quoting Ronald Noble, the erstwhile Secretary General of INTERPOL another report says, “40 years of terrorism has killed about 65,000 people, while 200,000 people died from the use of counterfeit drugs last year alone, and that’s just in China.”

Both crime and big money are involved in this life-threatening menace. Citing an example the CBI Director said, ‘One illicit online pharmacy network, which was dismantled by US authorities in 2011, managed to earn USD 55 million during two years of operations’.

In India, we have already read about the raids conducted by Mumbai FDA in April 2015 on similar unauthorized online pharmacies in the country. Following this development, the Drug Controller General of India has announced his yet another good intent to look into this issue with the help of a trade organization.

I shall also discuss, very briefly though, about problems associated with online pharmacies related to fake drugs, the world over.

More problems in the developing nations:

The CBI Director also articulated in his address, “Though the ramification of this menace is worldwide, it is more pronounced in developing and under developed nations.”

Sometime back in 2006, a study published by the then International Medical Products Anti-Counterfeiting Task Force (IMPACT) indicated that in countries like, the USA, EU, Japan, Australia, Canada and New Zealand, the problem is less than 1 percent. On the other hand, in the developing nations like parts of Asia, Latin America and Africa more than 30 percent of the medicines are counterfeits.

The above ‘Task Force’ also reported as follows:

“Indian pharmaceutical companies have suggested that in India’s major cities, one in five strips of medicines sold is a fake. They claim a loss in revenue of between 4 percent and 5 percent annually. The industry also estimates that spurious drugs have grown from 10 percent to 20 percent of the total market.”

‘Fake Drugs’ are more in countries with weak regulatory enforcement:

It has been observed that the issue of fake drugs is more common in those countries, where the regulatory enforcement mechanism is weak. India, I reckon, is one such country.

Interestingly, the Ministry of Health in India does not even recognize that fake Drugs are a growing menace in the country. This is vindicated by its latest report of 2009 on this subject.

The above report titled, “Report on Countrywide Survey for Spurious Drugs”, published by CDSCO on behalf of Directorate General of Health Services, Ministry of Health & Family Welfare, Government of India in 2009, concluded as follows:

“In view of above observations and data obtained from the manufacturers, after physical verification of all the drug samples and subsequent chemical analysis report on the representative of samples taken at random, it may be concluded that:

(i)             The extent of spurious drug in retail pharmacy is much below the projections made by various media, WHO, SEARO, and other studies i.e. only 0.046 % (11 samples out of 24,136 samples).

(ii)           Extents of substandard drugs among the branded items are only 0.1 % {Out of two thousand nine hundred seventy six (2976) unsuspected samples, 03 samples do not conform to claim with respect to Assay on chemical analysis}”

It is an irony that the drug regulators in India mostly keep demonstrating an ‘Ostrich Syndrome’ – refusing to acknowledge this menace that is blatantly obvious. They apparently believe that no health hazards due to prevalence of fake drugs exist in the country.

On the other side – many worrying reports:

Though the Government of India tends to wash its hands off on the very existence of this menace with the survey reports as above, following are just a few examples from other reports raising concerns on this critical issue in India:

  • A July 2014 ASSOCHAM report titled, “Fake and Counterfeit Drugs In India –Booming Biz” states that fake drugs constitute US$ 4.25 billion of the total US$ 14-17 billion of domestic pharmaceutical market. If the fake drugs market grows at the current rate of 25 percent, it will cross US$ 10 billion mark by 2017.
  • A May 2012 study published in ‘The Lancet’ reported that over one in three anti-malarial drugs sold in southeast Asia are fake while a third of samples in sub-Saharan Africa failed chemical testing for containing too much or too little of the active ingredient, potentially encouraging drug resistance. Around 7 percent of the drugs tested in India was found to be of poor quality with many being fake. India reportedly records 1.5 million cases of malaria every year.
  • A February 2012 report of ‘The National Initiative against Piracy and Counterfeiting’ of FICCI highlighted that the share of fake/counterfeit medicines is estimated at 15- 20 percent of the total Indian pharmaceutical market.
  • A 2011/12 report of the US Customs and Border Protection highlighted: “India and Pakistan both made it to top 10 source countries this year due to seizures of counterfeit pharmaceuticals. Pharma seizures accounted for 86 percent of the value of IPR seizures from India and 85 percent of the value of IPR seizures from Pakistan.”

DCGI intends to justify his moot point yet again:

In view of all these worrying reports and amid concerns around the quality of medicines being manufactured in India, in January 2015, the Drug Controller General of India (DCGI) proposed carrying out a nation-wide survey using methodology prepared by the Indian Statistical Institute, Hyderabad to assess the prevalence of fake and substandard drugs.

In the 2015 survey, around 42,000 locally made drug samples would be drawn from across the country throughout the rest of this year, which would include 15 therapeutic categories of drugs featuring in the National List of Essential Medicines (NLEM), 2011.

As I mentioned before, according to the DCGI this survey would “tell the world that our drugs are of quality”.

I discussed a similar issue titled, ‘Are We Taking Safe And Effective Medicines‘ in this Blog on November 13, 2013.

‘Fake Drugs’ and Online drug sales:

Before I touch upon this point and at the very outset, let me submit that in this article I shall not discuss on the merits or demerits of online pharmacies and the need of such e-outlets in India.

That said, it is now widely believed, backed by hard data that the Internet is increasingly assuming an attractive niche in the global diffusion of ‘fake drugs’.

Unlike India, some countries already support the business of legal online pharmacies by charting a transparent regulatory mechanism in place. For example in the United States all Internet pharmacies have to be licensed in the country. All their States require this. The general rule is, if an Internet pharmacy is offering to ship drugs into a particular state, they have to be licensed (but not necessarily located) there.

However, if an Internet pharmacy is shipping prescription drugs to individuals in the US from outside the US, that is absolutely illegal.

Some institutions in the US developed an accreditation system for Internet pharmacies. The official seals of these institutions, require to be posted on pharmacies’ website as a warrantee.

It is important to note that these institutions operate only at the national level and due to differences in domestic laws in different countries, it is difficult for any of them to provide customers with reliable information concerning the quality of pharmaceuticals, in general, available online.

Status of online pharmacies in India:

Although online sales of pharmaceuticals are totally illegal in India till date, there seems to be several such pharmacies still operating in the country.

It is generally believed that the impact of the Internet on ‘fake drugs’ business models is real. Thus, enforcement strategies need to be very stringent.

It is precisely for this reason, on April 17, 2015, Maharashtra’s Food and Drugs Administration (FDA) reportedly raided the premises of e-commerce major Snapdeal.com for allegedly selling medicines, including prescription drugs.

Immediately thereafter, the company announced that it has delisted the drugs on its portal and is assisting the FDA in the investigation.

Taking note of the prevailing scenario of illegal online sales of prescription drugs through e-commerce sites in India, DCGI office has reportedly started studying the existing regulations internationally to come out with a set of rules for online pharmacies. Meanwhile, DCGI has reportedly appointed the Federation of Indian Chambers of Commerce and Industry (FICCI) as the nodal agency for consolidating the guidelines.

Be that as it may, experts believe that online sale of drugs should be permitted in India only with strict and well thought out norms, which are enforceable hundred percent, anywhere within the country. Stringent guidance should be formulated in the amendment bill, 2015 of Drugs & Cosmetics Act & Rules, accordingly.

Conclusion:

Keeping this emerging scary scenario in perspective on the menace of fake drugs, the message of the CBI Director in this regard must be noted by the Government with all seriousness…continuing ‘all is well’ signals from the DCGI, not withstanding.

All stakeholders of the pharmaceutical industry must be made aware, on a continuous basis, of the health hazards posed by fake medicines in India.

As the penetration of Internet keeps increasing at a galloping speed in the country, unregulated online sales of ‘fake drugs’ in the guise of ‘licensed medicines’, pose a very real threat to public health and safety. If and when online sales of medicines are legalized, enforcement of all rules and laws in this regards need to be very stringent with exemplary punitive actions prescribed, for even slightest violations.

In tandem, the DCGI and other regulatory and enforcement agencies in the states, healthcare professionals, patients, all pharmaceutical manufacturers, drug distributors, wholesalers and retailers should join hands to play a proactive role in curbing the menace of ‘fake medicines’ that victimize the innocent patients.

No Wolf in sheep’s clothing must be allowed coming anywhere in the near vicinity…at all.

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.

 

Does The Attempt To ‘Debunk Five Big Myths About Big Pharma’ Not Reconfirm The Truth?

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Late last week while returning to India, to my pleasant surprise, I bumped into a longtime overseas friend and his wife working in the pharma industry. Incidentally, they were also traveling in the same flight with a plan to spend their vacation in India.

We both were immensely delighted spotting each other, and were trying to catch up with plethora of subjects at a break-neck speed and mostly with child-like zest. As a result, we were jumping from one topic to another, keeping many loops of discussion unknowingly incomplete.

One such rapid-fire colloquy got almost permanently interrupted with the final boarding announcement. It happened, just when he was referring to busting of some “myths about Big Pharma” by the global CEO of one of the Big Pharma constituents, recently. The article, he said before we got up, was published in the May edition of Forbes Magazine.

As I had missed this curious narrative during my recent relatively long overseas travel commitments, yesterday in Mumbai I did trace that out with the help of our “Google Guru” and went through the content of the article with interest.

‘Debunking Five Big Myths About Big Pharma’:

In the May 19, 2015 issue of Forbes Magazine, I came across an Op-Ed, titled “Debunking the Five Big Myths About Big Pharma”, written by Mr. John Lechleiter, President, Chairman and CEO of Eli Lilly and Company, whom I immensely respect as an icon of the global pharma industry.

The author in his article identified the ‘Five Myths’ as follows:

Myth1: Pharmaceutical companies exaggerate the costs of developing new medicines to justify high prices.

Myth 2: Industry does not develop most new medicines; they come from government and university laboratories.

Myth 3: Prescription medicines are the main driver of health-care cost increases.

Myth 4: Public and private health-care payers must accept and pay whatever prices drug companies charge for medicines.

Myth 5: Government-controlled pricing of medicines in other countries explains their lower health-care costs.

The article is indeed interesting, as it raises more questions than answers. This is mainly because, ‘the debunking of the Five Myths’ was done using the same old fragile arguments much often repeated by the international ‘Big Pharma Trade Associations’ and by some others as well, whom many call privately as their ‘poodles’, although I am not very sure about that.

The reason and time for ‘debunking’:

In the above Op-Ed John Lechleiter forcefully asserts:

“The Big Five Myths’ about this industry routinely poison debates, obscure genuine problems, and distort policy recommendations on healthcare. These myths have been all over the public arena again recently, and it’s time to confront them systematically.”

“The First Big Myth”:

As stated above, the Eli Lilly Chief described the first ‘Big Myth’ of ‘Big Pharma’ as follows:

“Pharmaceutical companies exaggerate the costs of developing new medicines to justify high prices.”

Arguments behind debunking the ‘Big Myth 1’:

The Chief debunked the first ‘Big Myth’ with the following argument:

“In fact: The research and development (R&D) expenditures of this industry are staggering – and since they are matters of public record there is no way and no need to exaggerate them.”

Raises more questions than answers:

Just to illustrate my point, that this article raises more questions than answers, I shall, try to explain the so called ‘debunking’ of this first of the ‘Five Big Myths’ of ‘Big Pharma’, as penned by Lechleiter.

The author seems to have missed the core narrative behind the so-called ‘Myth’ – lock stock and barrel. Whether deliberately or not, I can’t really figure that out.

The reason behind high costs of patented drug:

Even if for the arguments sake, what the author has said is accepted as a gospel truth while ‘debunking Myth 1’, experts’ discourses on the facts behind high costs of patented drugs do not just focus just on the ‘R&D Costs’, it also seriously points towards abnormally high ‘Marketing Costs’, which in many instances several times more than the ‘R&D Costs’.

Some hard facts:

An article of 6 November 2014 of BBC News, titled “Pharmaceutical industry gets high on fat profits” written by Richard Anderson, Business reporter, BBC News highlights:

Drug companies justify the high prices they charge by arguing that their Research and Development (R&D) costs are huge. On average, only three in 10 drugs launched are profitable, with one of those going on to be a blockbuster with US$1bn-plus revenues a year. Many more do not even make it to market.

But as the table below shows, drug companies spend far more on marketing drugs – in some cases twice as much – than on developing them… and besides, profit margins take into account R&D costs.

World’s largest pharmaceutical firms
Company Total revenue ($bn) R&D spend ($bn) Sales and marketing spend($bn) Profit ($bn) Profit margin (%)
Johnson & Johnson (US) 71.3 8.2 17.5 13.8 19
Novartis (Swiss) 58.8 9.9 14.6 9.2 16
Pfizer (US) 51.6 6.6 11.4 22.0 43
Hoffmann-La Roche (Swiss) 50.3 9.3 9.0 12.0 24
Sanofi (France) 44.4 6.3 9.1 8.5 11
Merck (US) 44.0 7.5 9.5 4.4 10
GSK (UK) 41.4 5.3 9.9 8.5 21
AstraZeneca (UK) 25.7 4.3 7.3 2.6 10
Eli Lilly (US) 23.1 5.5 5.7 4.7 20
AbbVie (US) 18.8 2.9 4.3 4.1 22
Source:GlobalData

The article states that in 2013, US giant Pfizer, the world’s largest drug company by pharmaceutical revenue, made an eye-watering 42 percent profit margin. The same year, five other major pharmaceutical companies made a profit margin of 20 percent or more – Hoffmann-La Roche, AbbVie, GlaxoSmithKline (GSK) and Eli Lilly.

Why does the drug industry spend more on marketing than on R&D?

Thus, one most persistent question that is being raised by the stakeholders is: Why does the drug industry spend more on marketing than on R&D?

Quoting these facts, a November 6, 2014 article of ‘FiercePharma’, titled “New numbers back old meme: Pharma does spend more on marketing than R&D”, also pointed out that even John Lechleiter headed Eli Lilly’s marketing spending clocked US$5.7 billion, compared with US$5.5 billion for R&D. That’s a difference of 7 percent.

High marketing expenditure and increasing marketing malpractices:

Interestingly there appears to be a curious coincidences between fines paid by ‘Big Pharma’ related to alleged marketing malpractices and spiraling marketing expenditure.

As I indicated earlier in my Blog Post of December 29, 2014, the following are a few recent examples of just the last three years to help fathom the enormity of the problem on this issue and also to vindicate the point made above:

  • In March 2014, the antitrust regulator of Italy reportedly fined two Swiss drug majors, Novartis and Roche 182.5 million euros (U$ 251 million) for allegedly blocking distribution of Roche’s Avastin cancer drug in favor of a more expensive drug Lucentis that the two companies market jointly for an eye disorder.
  • Just before this, in the same month of March 2014, it was reported that a German court had fined 28 million euro (US$ 39 million) to the French pharma major Sanofi and convicted two of its former employees on bribery charges.
  • In November 2013, Teva Pharmaceutical reportedly said that an internal investigation turned up suspect practices in countries ranging from Latin America to Russia.
  • In May 2013, Sanofi was reportedly fined US$ 52.8 Million by the French competition regulator for trying to limit sales of generic versions of the company’s Plavix.
  • In August 2012, Pfizer Inc. was reportedly fined US$ 60.2 million by the US Securities and Exchange Commission to settle a federal investigation on alleged bribing of overseas doctors and other health officials to prescribe medicines.
  • In April 2012, a judge in Arkansas, US, reportedly fined Johnson & Johnson and a subsidiary more than US$1.2 billion after a jury found that the companies had minimized or concealed the dangers associated with an antipsychotic drug.

Where does most of the marketing expenditure go?

On February 11, 2015, an article published in the ‘The Washington Post’ titled, “Big pharmaceutical companies are spending far more on marketing than research”, stated:

“Most of this marketing money is directed at the physicians who do the prescribing, rather than consumers.”

The HBO video that had gone viral:

The HBO Video with a dash of characteristic British humor of “John Oliver: Marketing to Doctors (HBO)” captures the essence of the issue. Many readers much have watched this video earlier. Nevertheless it helps understanding the point.

Some people associated with the industry did attempt nitpicking on this video and quite understandably; they did not find many takers.

Conclusion:

As deliberated above, I submit with humility that there are ample hard facts, which would debunk even more forcefully, the ‘debunking of the remaining so called four myths’ as was elucidated in the Forbes Magazine article authored by well-respected John Lechleiter, the President, Chairman and CEO of Eli Lilly and Company.

This seemingly well-timed article from the global pharma icon, though with disappointedly fragile content, I reckon, would not be able to evoke the desired response from its target audience. On the contrary, it carries the risk of being construed as no more than a half-hearted attempt of defending the indefensible and in that process reconfirming the truth, camouflaged in the paper as ‘myths’.

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.

Corporate Branding In Pharma: An Evolving Strategy In The Emerging Scenario

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Pharma advertisements in the mass media do not appear too frequently in India, for various reasons. Though few and far between, whenever these appear are mostly blunt and boring.

In that context, an interesting advertisement of a global pharma major featured in the May 25, 2015 Mumbai edition of the ‘Times of India’ arrested my curious attention.

The Ad does not talk about any medicine, nor does it caution us about or prevention of any disease. It does not even present the laundry lists of symptoms, urging us to rush to a doctor, whenever we experience any of those.

Though I was rushing thorough the pages of a bunch of newspapers at that time, under constraint of meeting an important deadline, the advertisement did prompt me to go into it. My eyes unknowingly followed the creative delivery of an intangible, yet unique ‘life style’ value proposition: “Life. To the fullest.” This was packaged with an innovative mix of intelligent copy writing and selection of emotive visuals with soft play of colors.

With a crisp copy, the Ad fondly takes one to the days of childhood, as it whispers…

“Remember when you were a child? The world was there just for you, to explore with bold and unbridled curiosity. A feeling of invincibility. Health fuels this state of mind, no matter your age.”

It then guides one’s attention to the corporate brand that commits to fulfill this promise and again with a cool swish tone:

“Abbott is about the power of health. We create new solutions – across the spectrum of health, for all stages of life. So every day can be just another play day.”

An innovative global ‘Corporate Branding’ strategy:

‘Wall Street Journal (WSJ)’ reported in December 2014 that in Rio de Janeiro, the same company created a WiFi channel for subway riders to listen to TED talks on their cellphones.

In Mumbai too, the Company has reportedly helped sponsor the TEDx Gateway convention, where there was an “Abbott Hive” room for participants to see new health technologies and meet speakers.

The WSJ article also underscored, “emerging markets accounted for about 40 percent of Abbott’s US$21.8 billion total sales n 2013. The sector will rise to about half of Abbott’s revenue after Mylan Inc. completes the acquisition of Abbott’s business that sells generic drugs in developed markets.”

Abbott reportedly planned to sell its generics business in the developed markets outside the United States to Mylan, retaining its generic brands in the fast-growing emerging markets.

Besides the above print Ad, I also noticed Abbott’s outdoor ‘Corporate Branding’ campaign in a couple of hoardings on Marine Drive and the Western Express Highway of Mumbai.

Just an example:

Before proceeding further, let me hasten to add that I have no intention, reason or motive to highlight any particular company’s marketing campaign, directly or indirectly, other than using it just as an example.

I reckon, this might leave a catalytic impact on an evolving frontier with a newer approach to ‘Corporate Branding’ within the global pharma industry in general and India in particular.

Such pragmatic and innovative strategic approach to create a novel corporate pharma marketing platform is indeed interesting. The domain experts in this area would be keenly watching its progress and would try to assess the net outcome of this seemingly cutting edge value creation process, on the pharma business as a whole.

It assumes greater significance as the process eventually aims at connecting with the consumers directly, creating an intangible value based robust cerebral link to overall brand portfolio offerings.

‘Corporate Branding’ versus ‘Product Branding’:

Corporate branding is broadly defined and explained as, “The practice of promoting the brand name of a corporate entity, as opposed to specific products or services. The activities and thinking that go into corporate branding are different from product and service branding because the scope of a corporate brand is typically much broader.”

Product branding, on the other hand, is “a marketing strategy wherein a business promotes and markets an individual product without the company name being at the center in the advertising or promotional campaigns.”

The success parameters:

Corporate branding is considered successful, “when consumers hear or see the name of the company they will associate, with a unique value and positive experiences. No matter what product or service the corporation offers, the corporate name is always an influence.”

If I am required to cite just one example out of many, and outside the pharma industry, I would say, ‘Apple’ has been established as a powerful corporate brand that focuses on the strength of its name as much as the features of any ‘Apple’ products.

The products usually attract a premium:

For a successful corporate brand, the name would immediately evoke a positive reaction in the consumers’ mind, without any detailed list of product features, and for which many consumers would be willing to pay a premium price, without any grumble.

Would it move the needle?

That’s really something to watch for. However, it holds that promise, undoubtedly.

The above types of corporate branding could help the concerned companies to significantly dilute the negative perception on a section of ‘Big Pharma’ constituents, acquired over a long period of time, though some of these players keep creating it even today, brazenly. This is happening as some of them continue faltering to even ‘talk the walk’ and most others do not probably want to ‘walk the talk’ either.

That said, the strength of the corporate brand image and the trust thus created on it would help building a strong positive image for the entire brand portfolio that the company offers, especially on brand promises, including efficacy, safety and overall high quality standards.

Broader impact of creation of a strong positive corporate public image with direct connects with consumers could be profound from sustainable business growth perspective, especially in a country like India.

Thus, innovative corporate branding strategies with direct connects to the consumers, like what we are discussing now, may help repositioning the pharma players as trusted healthcare partners.

‘Corporate branding’ initiatives of global pharma companies:

As reported by the ‘Wall Street Journal’, examples of initiatives taken towards this direction by some global pharma majors, besides Abbott, are as follows:

Pfizer’s “Get Old” campaign, though predominantly Internet and social media based, is aimed partly to strengthen its corporate reputation. With this campaign the company intends giving a new push to get people talking about their fear of aging, “Face your fears” being the company’s motto with its “Get Old” campaign.

Pfizer is reportedly also planning to showcase itself as “partners in health over a lifetime,” through corporate branding campaigns.

Johnson & Johnson launched a corporate advertising campaign, under the slogan “For All You Love,” focused on consumers, reportedly after the company faced recalls of children’s Tylenol and other over-the-counter medicines.

Eli Lilly & Co also has reportedly been planning to revamp its corporate brand.

Recently Biogen Idec changed back from the decade-old merger name to its original name, as the company would now be called just “Biogen”. The company used this name change to signal a new direction for the company.

The announcement of the change in name and the new logo was creatively used by Biogen to communicate the company’s broader focus beyond the multiple sclerosis treatments, which it is best known for, with the inclusion of Alzheimer’s and ALS treatments in its research and marketing portfolios.

Conclusion:

All these boil down to the important point, that the pharma marketers would ultimately be prompted to ponder, as the industry moves on.

Keeping that in mind, they may now consider brain storming with an open mind to crystallize their thought on: Whether for sustainable excellence in pharma business, the respective companies should focus on corporate branding campaigns, separately altogether, with strong and direct consumer emotional connects.

Thereafter, strengthening association between the ‘Corporate’ and ‘Product’ brands at appropriate times, directly or indirectly, could well be a strategic call.

It has been amply proved that a robust corporate brand, created painstakingly over time, would evoke stronger respect, trust and loyalty of the consumers.

While navigating through unpredictable business environment facing tough headwinds, or during product mishaps, if any, such favorable disposition of the consumers to the company as such, would prove to be an invaluable asset, in the long run. Nestle could well be an example after its Maggi saga in India.

For this reason, I reckon; it may be prudent keeping product brands at arm’s-length from the corporate brand. This could, of course, be leveraged as a dependable cushion, if situation so warrants. Otherwise ‘Corporate Branding’ campaigns should fly solo, as these keep reaping tangible and intangible sustainable significant returns for the company, over a long period of time.

To sum up, ‘Corporate Branding’, though currently is an evolving strategy in the emerging pharma scenario, shows immense potential to spread its wings to fly. Some global pharma players have already started initiating it in different parts of the world. Pharma industry in India too is expected to catch up with this new strategic ball game… sooner.

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.

Utility Model: Would It Work In India For Pharma?

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The revised draft of India’s IPR Policy penned by the Government constituted ‘Think-Tank’ in 2014, suggests enactment of new laws, such as for ‘Utility Models’ and Trade Secrets, to fill some gaps in the country’s IPR ecosystem .

However, media reports of May 21, 2015 indicate, the Department of Industrial Policy and Promotion (DIPP) is not in favor of changing the country’s ‘Patents Law’ framework to allow grant of utility patents, as suggested by the ‘Think-Tank’.

Though comments from the other Ministries and Departments on the revised draft IPR Policy is still awaited, DIPP reportedly feels, ‘Utility Models’ being less-stringent form of intellectual Property (IP) protection, could ultimately lead to ‘ever-greening’ of patents.

A volte-face?

This development is indeed interesting because on May 13, 2011 the same DIPP uploaded in its website a Discussion Paper on “Utility Models”. Many believed at that time, it as a precursor of a new policy initiative of DIPP on Intellectual Property Rights (IPR) to encourage innovation in the country, without diluting the prevailing strict criteria for patentability. The above Discussion Paper highlighted, among others:

“…minor technical inventions which frugally use local resources in a sustainable manner need to be encouraged by providing a legal framework for their protection and commercial exploitation. Such useful, low cost and relatively simple innovations which create new mechanical devices or contribute to the optimal functioning of existing ones may have commercial value only for a limited time period, before they are replaced by other products or rendered redundant by change of technology.”

In that paper DIPP also highlighted that many countries of the world, for example; Australia, China, Japan, Germany, France, Korea and Netherlands still find the ‘Utility Model’ as an extensively used tool to foster innovation within the local industries.

We shall also touch upon this point below.

The Discussion Paper did trigger a healthy national debate on this subject at that time, though Government did not make known to the public the outcome of this public discourse.

The definition:

The World Intellectual Property Organization (WIPO) defines ‘Utility Model’ as follows:

“Utility Model is an exclusive right granted for an invention, which allows the right holder to prevent others from commercially using the protected invention, without his authorization, for a limited period of time. In its basic definition, which may vary from one country (where such protection is available) to another, a utility model is similar to a patent. In fact, utility models are sometimes referred to as petty patents or innovation patents.”

Or in other words “A utility model is similar to a patent in that it provides a monopoly right for an invention.”

However, utility models are much cheaper to obtain, the requirements for grant of a ‘Utility Model’ are usually less stringent and the term is shorter – mostly between 7 and 10 years, as against up to 20 years term of protection for a patent. 

Major differences between Utility Models and Patents:

According to WIPO, the main differences between ‘Utility Models’ and patents can be summarized as follows:

  • The requirements for acquiring a ‘Utility Model’ are less stringent than for patents. While the requirement of “novelty” is always to be met, that of “inventive step” or “non-obviousness” may be much lower or absent altogether.  In practice, protection for ‘Utility Models’ is often sought for innovations of rather incremental in character, which may not meet the patentability criteria.
  • The term of protection for ‘Utility Models’ is shorter than for patents and varies from country to country (usually between 7 and 10 years without the possibility of extension or renewal).
  • In most countries where ‘Utility Model’ protection is available, patent offices do not examine applications as to substance prior to registration. This means that the registration process is often significantly simpler and faster, taking on an average about six months.
  • ‘Utility Models’ are much cheaper to obtain and to maintain.
  • In some countries, ‘Utility Model’ protection can only be obtained for certain fields of technology and only for products but not for processes.

Countries providing ‘Utility Model’ protection:

Many countries do not grant ‘Utility Models’. However, the major countries granting ‘Utility Models’, as stated above, include: Australia, China, Japan, Germany, France, Spain and Italy.

According to WIPO, currently the countries and regions that provide ‘Utility Models’ are as follows:

Albania, Angola, Argentina, ARIPO, Armenia, Aruba, Australia, Austria, Azerbaijan, Belarus, Belize, Brazil, Bolivia, Bulgaria, Chile, China (including Hong Kong and Macau), Colombia, Costa Rica, Czech Republic, Denmark, Ecuador, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guatemala, Honduras, Hungary, Indonesia, Ireland, Italy, Japan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Malaysia, Mexico, OAPI, Peru, Philippines, Poland, Portugal, Republic of Korea, Republic of Moldova, Russian Federation, Slovakia, Spain, Taiwan, Tajikistan, Trinidad & Tobago, Turkey, Ukraine, Uruguay and Uzbekistan.

Interestingly, ‘Utility Models are not available in the United Kingdom or the United States.

A recent allegation of ‘Utility Model’ infringement against a global pharma: 

Quite recently, in November 2014, Copenhagen headquartered Forward Pharma A/S reportedly filed a lawsuit against Biogen Idec GmbH, Biogen Idec Internaional GmbH and Biogen Idec Ltd. in the Regional Court in Dusseldorf, alleging infringement of its German ‘Utility Model’ DE 20 2005 022 112 due to Biogen Idec’s marketing of Tecfidera® in Germany.

Tecfidera® – a product containing dimethyl fumarate (DMF) as the active ingredient, is used for the treatment of Myasthenia Gravis (MS).

Forward Pharma asserted that its above ‘Utility Model’ precludes anyone from selling in Germany, without the Company’s consent, drugs with DMF as the sole active pharmaceutical ingredient for the treatment of MS at a daily dose of 480 mg.

With this lawsuit Forward Pharma did not seek to stop sales of Tecfidera® to MS patients, but rather sought damages for what the Company believes are Biogen Idec’s unlawful sales of Tecfidera® in Germany.

Although ‘Utility Models’ are registered without substantive examination, the Company reiterated its belief in the validity and enforceability of the said ‘Utility Model.’

Subsequently, on April 14, 2015 Forward Pharma A/S announced that an interference was declared by the Patent Trial and Appeal Board (PTAB) on April 13, 2015 between the Company’s patent application 11/576,871 (the “’871 patent application”) and Biogen’s issued patent 8,399,514 (the “’514 patent”).

The PTAB reportedly designated Forward Pharma A/S as the “Senior Party” in the interference based on the Company’s earlier patent application filing date.

Would ‘Utility Model’ be useful in pharma?

Utility Models (UM) are considered particularly suited for SMEs that make “minor” improvements to, and adaptations of, existing products. It is worth noting that UMs are primarily used for mechanical innovations.

However, in India, the ‘Utility Model’ concept in pharma would be directly conflicting with the intent and spirit of the section 3(d) of the Patents Act 2005 of the country, which clearly stipulates that mere discovery of a new form of a known substance which does not result in the enhancement of the known ‘clinical’ efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant, is not patentable.

Therefore, section 3(d) of the Indian Patents Act 2005, is considered as one of the most important safeguards against “evergreening” of patents, usually done through alleged “molecular manipulation or tweaking”, that delays entry of affordable generic equivalents, adversely impacting the public health interest.

In that sense, enactment of a new law granting protection to pharma ‘Utility Models’ in India could seriously jeopardize both short and long term health interests of the patients, in general.

This is primarily because, being denied of a 20 year product patent under section 3(d), the same company would then be eligible to apply and may also probably get a monopoly status for that molecule, though for a shorter term with ‘Utility Models’.It would obviously happen at the cost of quicker entry of equivalent affordable generics.

Conclusion: 

Considering all these, and having witnessed a serious allegation of a ‘Utility Model’ (which goes through no more than a liberal regulatory scrutiny) infringement, against a major patented pharma product that passed through the acid test of stringent and cost intensive regulatory requirements, it appears that ‘Utility Models’ need to be excluded, especially for pharmaceuticals in India.

This is purely for the sake of patients’ interest, at least on the following two counts:

  • All new/novel drugs, without any compromise whatsoever, should pass through the stringent acid test of the drug regulatory requirements for requisite efficacy, safety and quality standards.
  • ‘Evergreening’ of patents, under any garb, delaying entry of affordable equivalent cheaper generics, should not be encouraged in the country.

Thus, in my view, Indian Government should continue to remain firm with its bold stance on the relevance of section 3(d) of the Indian Patents Act. Any possibility of its dilution by a grant of market monopoly, though for a much shorter period, covering incremental innovations that do not conform to the country’s IP laws, must be openly discouraged with robust reasons.

In that sense, the flag raised by the DIPP on the intriguing recommendation of the IPR Policy ‘Think Tank’ for enacting new laws in India for ‘Utility Model’, appears to be pragmatic and far sighted, specifically in the context of pharmaceuticals.

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.

China Relaxes Drug Price Control: Is Pharma Euphoria In India Misplaced?

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On May 5, 2015, the National Development and Reform Commission (NDRC) of China announced that price controls on most drugs sold there would be lifted from June 1, 2015. This move was believed to tackle issues of drug quality and to encourage innovation among domestic companies. Only narcotics and some listed psychotropic drugs would continue to be controlled by the government.

Quite like in India, Chinese price controls for most drugs were blamed by the industry for low quality and even adulterated medicines that seem to threaten public health.

Apprehension expressed:

Almost immediately after the announcement for ending price control on most drugs, many started expressing serious apprehensions that this decision of the Chinese Government would lead to higher drug prices for the consumers at the retail level.

Without taking any chances, the Chinese Government immediately switched to a high decibel communication process to allay such fear.

Chinese Government quickly acted on allaying the fear:

Xinhua reported, China’s top economic planner, almost simultaneously, asked the country’s price watchdogs to organize a six-month check on the movement of medicine prices, following the above decision.

The NDRC said the move is intended to detect any illegal practices disrupting market order, such as price fixing and artificial inflation of prices.

The agency also urged local authorities to create an online platform for better price monitoring. The NDRC also said the key intent is to curb illegal practices, such as price fixing and manipulative changes to increase drug costs.

Gigantic role of Chinese ‘Universal Health Care’ system highlighted:

The following explanations also came from the Chinese Government to highlight that this decision is not likely to have adverse impact on its citizens:

  • China has a function Universal Health Care (UHC) system in place
  • According to NDRC, 80 percent of drugs are sold through hospitals in China and not through retail channels. Thus, public hospitals are the places where most transactions take place and drugs are procured through a process that involves tough price negotiations with the pharma companies.
  • In addition to control of prices at the local procurement level, most of the freed drugs would still be controlled somewhat by various medical insurance plans even before they reach the Chinese hospitals, where 80 percent of drugs are dispensed.
  • With this announcement, the Chinese Government would lift controls on the price of about 2,700 medicines from June 1, 2015 that accounts for just about 23 percent of medications available in the country.
  • Experts also said they expected medicine prices to remain unchanged.

Has the pricing pressure in China increased, on the Contrary?

On May 26, 2015 in an article titled, “Foreign Drug makers Face Pressure to Lower Prices in China”, Bloomberg reported:

“Starting June 1, 2015 most drugs in China will be liberated from government-set price caps. For foreign drug makers, though pressure to cut prices is rising. Since late last year, many provincial governments have introduced new bidding systems to bring down the cost of medicines they procure, and they’re pushing multinationals to compete more directly with cheap local generics on price.”

Chinese healthcare scenario is different from India:

From the above scenario, it is abundantly clear that Chinese drug procurement, distribution and consumption scenario is quite different from India.

  • China’s UHC is well in place and over 80 percent of its population gets medicines from public hospitals. Whereas, UHC seems to have been virtually jettisoned in India by the incumbent Government, at least for now, and around 75 percent of the populations purchase medicines from the retail market, out of pocket.
  • Whereas, the National Health and Family Planning Commission (NHFPC) of China announced in May 2015 that it would increase healthcare subsidies this year by 19 percent, i.e. just over US$ 60 per person, India decided not to make any increase even on its abysmal low expenditure on health, in its Union Budget 2015.
  • According to the National Health Policy 2015 (Draft) of India, total per capita health expenditure of the country was at US$ 62 in 2011, against China’s US$ 274 for the same year. This gap is likely to increase significantly with China adding to it another US$ 60 per capita through increase in healthcare subsidies in 2015.
  • Chinese Government believes that this step would help improve economic growth and boost domestic consumption, whereas Indian Government obviously thinks differently.

‘Why not in India’ type of reaction is misplaced:

There are many other critical differentiating factors in the comparative healthcare scenario between India and China.

Be that as it may, keeping only the above differences in mind, when one comes across some weird reasoning in a section of the Indian media stating, no wonder that raises many other eyebrows simultaneously. More so, as pharma related Indian media is not just vibrant, a large section of it is mostly on the ball, with up to date domain knowledge, and presenting incisive analysis.

A bizarre report: “Comparing apples to oranges”?

That said, I recently noted, while flipping through some pharma related business reports, a bizarre and seemingly uninformed comment on this subject. The article recently published in a leading business daily questioned, why the drug pricing policies of India and China are different? Obviously the author does not seem to be aware of the differences in the overall healthcare scenario between India and China, as deliberated above.

If the above question is taken as benign and laced with a dash of ignorance, it certainly raises the good old and much often repeated question, “Are we comparing apples to oranges”?

This is because we are comparing medicine procurement, distribution, usages and consumption scenarios of those two different countries that cannot be practically compared at all, especially in this regard.

An equally bizarre comment?

To make such ‘off the cuff’ reports spicy, some news-unworthy masala is also usually sprinkled on it. If I remember correctly, I read somewhere in one such typical report, probably a head honcho of the Indian unit of a pharma MNCs making blissfully ignorant, equally bizarre, attention hungry, ‘shooting from the hip’ type of remarks. The person most probably commented something like; the decade long ‘draconian price control in China’ failed to improve access to medicines. Thus, Indian Government, he imagines, should strongly introspect on its drug price control and allow free pricing for all drugs. I am not very sure, whether this is the representative view of the pharma industry in India or probably not.

Domain experts’ eyes on the ball:

Fortunately and most likely in the same piece, the real domain experts made very pertinent and sensible comments on India China comparison on this critical issue.

I hasten to add, this is my personal view, and may be the author concerned meant something different, which I would accept with due respect and humility.

Conclusion:

Just because China has relaxed drug price control in the context of its own environment of a reasonably well-functioning ‘Universal Health Care’ system, India should not toe the line with its abysmally poor public healthcare products and services offerings. As a result of this, the country records one of the highest, if not the highest, out of pocket expenditure towards medicine in the world.

The bizarre reports and comments in this regard, as above, probably need to be taken, not with a pinch but loads of salt, and trashed for abject ignorance in the specific area.

Moreover, the Indian Government too does not seem to be in any mood just yet, to pay attention in the area of ‘Universal Health Care’ to ensure health for all in the country. The situation is not expected to improve in this year either, as the Government has not made requisite budgetary allocations for health, to play the ball as the time demands.

Does all these not mean that, going by the Chinese example, the ill-informed euphoria of a section of the Indian pharma industry is unrealistic, if not absolutely misplaced?

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.