TPP: Discord Within A Strange Mélange And Impact On Access To Medicines

Posted on May 25, 2015 by Tapan Ray

On May 19, 2015, Bloomberg reported that a sizable number of President Barack Obama’s own party colleagues, besides teachers, seniors, Internet freedom groups and nuns, have joined the push to defeat the proposed Trans-Pacific Partnership (TPP) treaty.

Before I delve into the TPP, solely from the Indian pharmaceutical industry perspective, it is worth acknowledging upfront India’s firm assertion, repeatedly, to continue with its well-thought out and robust Patents Act 2005.

Even the final draft of the National IPR policy, which is now being circulated for inter-ministerial consultations and will soon be taken up by the Cabinet, reasserted that the country’s IPR policy is fully compliant with the Trade Related aspects of IPR (TRIPS) agreement of the World Trade Organization (WTO).

In this process, global demonstration of India’s firm resolve against dilution of the country’s Intellectual Property (IP) regime, coming under any form of intense external pressure, seems to have become a model to follow for the emerging economies of the world, in general.

This trend now gets reflected from some constituents even within the United States, besides several members of the 12-nation TPP, which is a proposed regional regulatory and investment treaty, aimed at strengthening relationship on economic policies and regulatory issues between the member nations.

Publicly articulated key objectives of the pact are to significantly reduce tariffs between the member nations and open up trade, boosting investment flows between its signatories, to accelerate economic growth.

The member countries of TPP have also agreed to work together on issues such as customs procedures, labor practices, intellectual property and competition policies.

Through its comprehensive coverage of issues and binding regulations, TPP is expected to set new benchmark for international trade. It is expected to eventually mature into a regional trade agreement covering the entire Asia-Pacific region.

Uneasy secrecy:

However, the uneasy secrecy surrounding the negotiations of the agreement makes its critics seriously apprehensive about its impact on the developing nations of the world. This is because; the concerned delegates of the negotiating team always remain tight lipped about the progress made in coming to an agreement on the scope of the pact. This information is critical for assessment of direct and indirect global impact of TPP on the trade, economy and society, in general.

According to reports, TPP members, such as, Brunei, Malaysia, Singapore and Vietnam are negotiating hard to get incorporated somewhat similar to Indian IP rules in the TPP agreement.

Besides the above countries, other members of TPP are United States, Australia, Japan, New Zealand, Canada, Chile, Mexico and Peru.

Large Asian economies are not a part:

Interestingly, large Asian economies, especially, four important members of the G20, namely, China, India, South Korea and Indonesia, are not a part of the TPP, just yet.

It is worth noting, TPP is being led by the world’s largest economy and the biggest trading nation – the United States, the country that sees Asia-Pacific as key to its future growth.

Noting all these, many experts in this field, across the world, have already raised a flag saying that the US may be trying to use TPP as a means to undermine China’s growing economic might in the region.

Many gaps still to bridge:

The real negotiations for this treaty started only in 2010 and are still continuing. However, the details of negotiations is so much shrouded under water tight secrecy, even to the lawmakers of the United States, it is indeed challenging for anyone to predict the timeframe of its coming to fruition.

Reuters reported on May 21, 2015, “Chief negotiators from the 12 TPP countries are trying to bridge gaps for a deal at a meeting in Guam that will run through to May 28, 2015. But ministers would need to meet to clinch an accord,”

In this article, I shall only focus on the possible impact of this pact on the access to medicines, especially in the developing world.

Leaked drafts of TPP negotiations:

As the progress of negotiations of this pact continue to remain under uneasy secrecy, on November 13, 2013, WikiLeaks released the secretly negotiated draft text for the entire IPR Chapter of the TPP.

30,000-word IP chapter of the leaked documents, besides others, reportedly contains proposals to increase the term of drug patents beyond 20 years, and lower global standards for patentability.

TPP and patents:

When it comes to the issue of access to affordable medicines for a vast majority of the global population, the overall patent ecosystem of a nation and how evergreening of patents with monopolistic high pricing are addressed, automatically enter into the broader framework of intense public and stakeholders’ discourse.

Article 8.1 of the draft agreement sets-forth the availability of patents, and provides that “patents shall be available for any new forms, uses, or methods of using a known product; and these may satisfy the criteria for patentability, even if such invention does not result in the enhancement of the known efficacy of the product.”

Interestingly, TRIPS agreement, on the other hand, specifies that patents are available “provided that the invention is new, involves an inventive step and is capable of industrial application.”

In that sense, the above provision in the Article. 8.1 is quite inconsistent with the patent laws of many TPP member countries, and especially India.

Consequently, experts have raised serious concerns about the impact of TPP on the IP laws of a country, in general, as it may extend the scope of drug patents, preventing free distribution of cheaper generic drugs to the needy patients.

Impact on access to medicines:

As stated earlier, there have been serious apprehensions that TPP would adversely impact the access to medicines.

According to widely reported leaked drafts of TPP negotiations, the US is demanding aggressive IP provisions in the agreement. It is believed, if accepted, these would directly undermine public health safeguards available in international law, making it harder for TPP member countries to gain access to cheaper generic drugs.

Many experts in this field reportedly construe, these stringent IP provisions that the US is demanding may be categorized as ‘TRIPS-plus’ and have the following serious impact adversely impacting access to medicines :

Make it impossible to challenge the validity of a patent before it is granted

Lower the requirements for patentability, so that minor alterations of existing medicines can be  given additional protected monopoly status, even if the alteration offers no therapeutic benefit

Require the patenting of diagnostic, therapeutic and surgical methods

Lengthen patent monopolies for pharmaceutical firms so that they keep generics out and inflate drug prices for longer periods of time

Make it harder for generic manufacturers to obtain regulatory approval for their drugs

Create additional monopolies based on clinical data

Impose new forms of IP enforcement that give customs officials excessive powers to impound legitimate generic medicines

Impose higher prices on national pharmaceutical reimbursement programs

Allow pharmaceutical companies to sue governments and limit governments’ abilities to effectively set prices for medicines and legislate in the interest of public health.

Discord within key TPP member countries:

Though Australia is one of the key signatories of TPP, in February 2015, the Medical Journal of Australia also commented that the leaked draft of the agreement includes patenting standards that would delay cheaper drugs.

Quoting the Medical Journal of Australia, ‘The Guardian’ too reiterated: “The most recently leaked draft of the international trade deal includes provisions proposed by the US that would further protect the monopoly pharmaceutical companies hold over drugs, and delay cheaper versions from entering the market. The draft agreement sets in stone low patenting standards, which allow drug companies to practice ‘evergreening’ – when a pharmaceutical company tries to maintain its market monopoly on a drug for longer by applying for extra patents. This prevents other companies entering the market with cheaper versions of the same medicine and imposes large and unnecessary costs on the health system and consumers.”

Similarly, across Canada, people are speaking out about the TPP. They are rallying against the secrecy of the 12-country negotiations and the corporate agenda behind the deal.

On February 12, 2015 legislators in seven of the 12 TPP countries issued the following joint statement about the negotiations:

“We, the undersigned legislators from countries involved in the negotiation of the Trans-Pacific Partnership Agreement, call on the Parties to the negotiation to publish the draft text of the Agreement before any final agreement is signed with sufficient time to enable effective legislative scrutiny and public debate.”

In Canada, the federal NDP and the Green Party of Canada endorsed the above statement. It is the simplest of demands for democracy on a “trade” deal that threatens to undermine the very notion of the public good, by giving corporations more power to undermine public policy.

As stated above, Brunei, Malaysia, Singapore and Vietnam are also negotiating hard to get incorporated somewhat similar to Indian IP rules in the TPP agreement.

Though not in the areas of access to medicines, Japan too expressed its concerns on TPP impacting its agriculture sector. Protests are forthcoming in the copyrights area, as well.

Apprehensions catching-up in the US too:

May 19, 2015 Bloomberg report also indicates, specifically from the pharmaceutical industry perspective, some key stakeholders are worried about the effects of more open markets on drug pricing that could increase their costs and “Foreign corporations or subsidiaries will be able to challenge a number of public health programs.”

In a letter of May 12, 2015 to the House and Senate, the Alliance for Retired Americans has reportedly underscored the possibility of this grave danger to them, if TPP comes into effect.

On May 21, 2015, Reuters reported, just 13 out of 44 Democrats (of President Obama’s own Party) backed the legislation in the Senate’s second procedural vote on last Thursday.

Earlier, a group of over 30 legal academics reportedly sent a letter to the US Trade Representative, expressing “profound concern and disappointment at the lack of public participation, transparency and open government processes in the negotiation of the intellectual property chapter of the TPP”.

Other important areas of criticism:

Other key areas of criticism of TPP are as follows:

Excessive emphasis on trade issues that have remained unresolved or unaddressed at the WTO due to differences between developed and emerging markets.

Adopting a negotiating style reflecting the US regulatory approach to international trade

Allowing companies to sue foreign governments, which would allow them to dodge health and environmental standards.

Giving shape to a geo-political road map of the US that supports its strategic rebalancing towards Asia.

A strange mélange:

An article published in the April 9, 2015 edition of Forbes, titled “TPP Is A Mistake”, very appropriately describes TPP as a strange mélange of 12 members countries that includes five from the Americas (Canada, Chile, Mexico, Peru and the US), five from Asia (Brunei, Japan, Malaysia, Singapore and Vietnam), along with Australia and New Zealand.

In terms of populations, the total American contingent which stands at 535 million, more than half the total population of the Americas (947 million), is significantly larger than the Asian population figures which amount to no more than 256.6 million (285 if one adds Australia and New Zealand), compared to Asia’s total population of 4.3 billion: almost half of the Asian contingent is accounted for by one member – Japan, the articles states.

In this article, former Malaysian Prime Minister Tun Dr Mahathir Mohamad, the architect of Malaysia’s impressive economic growth and development during his tenure from 1981 to 2003, was quoted saying:

“The strongest campaigner of TPP is America … which seeks … to contain China and to safeguard its own economic interests by exploiting all resources from small but growing independent nations such as Malaysia”.

He further adds, “TPP is not a fair or free trade partnership, but an agreement to tie down nations with rules and regulations that would only benefit American conglomerates”.

Is TPP more than just a trade agreement?

Many experts feel, that TPP is basically a geopolitical tool to contain China with ‘trade’ as its façade.

The votaries of TPP argue that it aims to achieve a very high standard trade agreement and thus the reason of keeping China out of it is not geopolitical. Other Asian nations, including China, can apply and qualify for membership once they commit to meeting these high standards, they reiterate.

The above argument does not seem to be a robust one, as that would mean, a sizable proportion of its smaller current members, such as, Vietnam, already conform to so called ‘high standards’, as required for the TPP agreement.

Besides geopolitical issue, many are also questioning whether TPP is what the developing countries need, especially, at this stage of their development.

Conclusion:

One may quite pertinently ask, in what way TPP is relevant to India?

TPP is relevant to India in the sense that it is expected to eventually mature into a regional trade agreement covering the entire Asia-Pacific region.

Be that as it may, if I restrict myself only to the drug patent related area of the proposed pact, it appears, unless the damaging provisions in the concerned chapters are removed through negotiations before the agreement is finalized, the TPP would possibly turn out to be the most harmful trade pact ever, especially from the perspective of access to medicines in the developing countries of the worlds.

May 2015 issue of ‘amfAR’ – The Foundation for AIDS Research based in Washington DC of the United States captured the essence of possible healthcare related issues with TPP – the pact of a strange mélange of 12 member countries, with the following words:

“By providing avenues for pharmaceutical companies to extend IP protection beyond what is required by current international standards, the TPP could greatly delay the entrance of generic competition for much-needed medicines and keep prices high. Doing so would continue an unacceptable and dangerous trend of irrevocable expansion of IP protections at the expense of access to medicines and would serve as a justification for even more aggressive measures in future FTAs.”

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.

Booming Sales Of Unapproved Drugs: Do We Need “Safe In India” Campaign For Medicines?

Posted on May 18, 2015 by Tapan Ray

“To sin by silence when they should protest makes cowards of men” - Abraham Lincoln

Not just the Federal Drug Administration of the United States (USFDA), global concerns are being expressed regularly about the laxity of drug regulatory and clinical trial standards in India, exposing patients to health safety related risks.

The problem is significantly more with the Fixed Dose Combination (FDC) Drugs for various reasons. This is worrisome because; the domestic market for FDCs is very large and growing much faster, in sharp contrast to the western world. For example, in 2011-12 FDCs accounted for more than half of all NSAID and oral anti-diabetic drug sales, and one-third and one-fifth of anti-psychotic and anti-depressant/benzodiazepine sales, respectively, according to a recent study. Both the domestic and multi-national pharma players market FDCs in India

Alarmingly, a plethora of FDCs unapproved by the drug regulators of India on their rationality, efficacy and safety, have flooded the domestic pharma market, in large quantities.

All such drugs are being actively promoted by the respective pharma players, widely prescribed by the doctors, openly sold by the chemists and freely consumed by the patients without any apprehension or having no inkling of the magnitude of the possible health hazards that such drugs might cause, both in short and long term.

Public health safety hazard arising out of this scenario does not seem to have ever been estimated by the Indian drug regulators, despite indictments even by the Parliamentary Standing Committee, nor is there any properly functional system in place to capture such data for meaningful analysis.

As the saying goes ‘better late than never’, a credible report on this menace has just been published on May 12, 2015 by independent experts, which I shall discuss in this article.

Is the situation out of control?

On the ground, the situation seems to be out of control of even the Central Drugs Standard Control Organization (CDSCO).

This is vindicated by a March 2013, written reply of the Minister for Health and Family Welfare, where the Government reportedly informed the Lok Sabha (the lower House of the Parliament) that in twenty three cases of new FDC, licenses have been granted by the State Licensing Authorities (SLAs) without the mandatory approval of the DCGI and action will be taken in all these cases.

However, no one seems to know, as yet, what action the Government has taken against those errant officials.

The latest investigative report on the criticality of the situation:

The May 12, 2015 issue of “PLOS Medicine” – a Peer-Reviewed Open-Access Journal, published the results of an investigation on CDSCO approval for and availability of oral FDC drugs in India from four therapeutic areas – analgesia (non-steroidal anti-inflammatory drugs (NSAIDs), diabetes (metformin), depression/anxiety (anti-depressants/benzodiazepines), and psychosis (anti-psychotics).

This study was done based on the Department Related Parliamentary Committee on Health and Family Welfare’s 2012 Report, stating that manufacturing licenses for large numbers of FDCs had been issued by state authorities without prior approval of the CDSCO in violation of rules, and considered that some ambiguity until 1 May 2002 about states’ powers might have contributed to this worrying consequences.

I shall also discuss the above Parliamentary Committee report in this article.

Booming sales of unapproved drugs:

‘PLOS Medicine’ report highlighted the following:

A. They obtained information on FDC formulations approved between1961 and 2013 in each therapeutic area from the CDSCO.

B. FDC sales details were obtained for the period 2007 to 2012 from PharmaTrac database of drug sales in India. Over the five years included in the time-trend analysis, FDCs accounted for an increasing proportion of total sales volumes. By 2011–2012, FDCs accounted for more than half of all NSAID and oral anti-diabetic drug sales, and one-third and one-fifth of anti-psychotic and anti-depressant/benzodiazepine sales, respectively.

C. Of the 175 FDC formulations marketed in India in the therapeutic areas studied, only 60 (34 percent) were approved.

Out of these, percentages of approved formulations are as follows:

- 80 percent of 25 marketed metformin FDC formulations

- 27 percent of 124 NSAID FDC formulations

- 19 percent of 16 anti-depressant/benzodiazepine FDC formulations

- 30 percent of 10 anti-psychotic FDC formulations

D. In 2011–2012, percentages of FDC sales volumes arising from unapproved formulations was:

- 43 percent for anti-psychotics

- 69 percent for anti-depressants/benzodiazepines

- 28 percent for NSAIDs

- 0.4 percent for metformin

E. Formulations including drugs of which use is banned or restricted internationally accounted for 13.6 percent and 53 percent of NSAID and anti-psychotic FDC sales, respectively.

F. While “ambiguity” in the rules prior to 2002 was advanced as a reason for some FDCs having been marketed without a record of central approval, the researchers identified no ambiguity, and in fact, following an amendment to the rules in May 2002 that extended the requirements on approval applicants, new FDCs continued to be marketed without a record of central approval.

The suggestions:

The ‘PLOS Medicine’ report concluded with the following suggestions:

Unapproved formulations should be banned immediately, prioritizing those withdrawn or banned internationally, and undertaking a review of benefits and risks for patients.

To ensure long-term safety and effectiveness of new medicines marketed in India, as well as transparency of the approval process, amendments in India’s regulatory processes and drug laws are called for. A review should be undertaken of the safety and effectiveness of FDCs currently available in India.

Indian lawmakers too pointed out this embarrassing regulatory laxity:

This saga of drug regulatory laxity in general and for the FDCs in particular, is continuing since quite a while. This is despite the fact that the Department Related Parliamentary Committee on Health and Family Welfare presented its 59^th Report of 118 pages in total on the functioning of the Indian Drug Regulator – the Central Drug Standards Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

The report begins with a profound observation:

Medicines apart from their critical role in alleviating human suffering and saving lives have very sensitive and typical dimensions for a variety of reasons. Prescription drugs are the only commodities for which the consumers have no role to play. Nor are they able to make any informed choices, except to buy and consume whatever is prescribed or dispensed to them, because of the following reasons:

Drug regulators decide which medicines can be marketed
Pharma companies either produce or import drugs that they can profitably sell
Doctors decide which drugs and brands to prescribe
Consumers are at the mercy of external entities to protect their interests

The ‘Mission Statement’ of CDSCO is ‘Industry Oriented’ and not ‘Patient Focused:

Very interestingly, the lawmakers’ report highlights, citing the following examples, how out of line the ‘Mission Statement’ of CDSCO is, as compared to the same of other countries, by being blatantly industry oriented instead of safeguarding Public Health and Safety interests :

	Drug Regulator	The ‘Mission Statement’
1.	CDSCO, India	Meeting the aspirations…. demands and requirements of the pharmaceutical industry.
2.	USFDA, USA	Protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs.
3.	MHRA, UK	To enhance and safeguard the health of the public by ensuring that medicines and medical devices work, and are acceptably safe.
4.	TGA, Australia	Safeguarding public health & safety in Australia by regulating Medicines…

Consequently, the Parliamentary Committee took a strong exception for such utter disregard and continued neglect of patients’ interest by the Drug Regulator of India. It recommended immediate amendment of the ‘Mission Statement’ of CDSCO incorporating in very clear terms that the existence of the organization is solely for the purpose of protecting the best interest of patients and their safety. It is needless to say, thereafter it would call for its stringent conformance with high precision.

A scathing remark against CDSCO:

The parliamentary Committee report made the following scathing remarks on CDSCO in its point 2.2:

“The Committee is of the firm opinion that most of the ills besetting the system of drugs regulation in India are mainly due to the skewed priorities and perceptions of CDSCO. For decades together it has been according primacy to the propagation and facilitation of the drugs industry, due to which, unfortunately, the interest of the biggest stakeholder i.e. the consumer has never been ensured.”

Allegation of possible collusion:

The report also deliberates not only on the utter systemic failure of CDSCO along with the DCGI’s office to enforce the drug regulations effectively, but also towards a possible collusion between CDSCO and the pharmaceutical industry to implement a self-serving agenda by hoodwinking the system. This is a very serious allegation, which needs to be thoroughly probed and the findings of which should be made public for everybody’s satisfaction.

The committee, therefore, felt that effective and transparent drug regulation, free from all commercial influences and callous enforcement of rules and laws, are absolutely essential to ensure safety, efficacy and quality of drugs keeping just one objective in mind, i.e., welfare of patients.

Do we need “Safe in India” campaign for drugs?

Do we need a well-hyped “Safe in India” campaign for drugs? Looking around, at least conceptually, the answer is probably ‘yes’…Seriously…I am not joking!

The reason being, despite scathing remarks of the Parliamentary Standing Committee in 2012, apparently no systematic enquiry has been undertaken by the CDSCO to ascertain the reason for continuation and the veracity of this menace, just yet.

A very significant number of unapproved medications still remain undetected by the drug regulators and continue to be abundantly available, frequently prescribed, openly sold and freely consumed by the patients without even an iota of doubt regarding possible health safety hazards that these prescription drugs might cause.

May 2015 ‘PLOS Medicine’ Report helps unraveling the underbelly of the drug regulatory scenario in India, along with its systemic decay, which fails to halt the possible serious health safety hazards that Indian patients are exposed to.

India’s image as an emerging ‘pharmacy of the world’ for cheaper generic drugs has already been dented with a number of ‘import bans’ from the US and UK for flouting the specified drug manufacturing quality standards.

The saga of ‘import bans’ for Indian drugs, together with this critical health safety related menace, probably necessitates an effective launch of a “Safe in India” campaign for medicines, in general, by the Government.

This initiative gains additional importance, as painstakingly developed reputation of the Indian drug exporters, including the largest domestic players, has now been dented. It needs to be revamped, sooner.

I addressed a related issue in my blog post of February 3, 2014, titled “FDA ‘Import Bans: Valuing Drug Supply Chain Security For Patients’ Safety.”

Conclusion:

Effective resolution of this critical issue demands high priority at the highest level of the decision making process of the Government, with commensurate sense of urgency.

Keeping that in mind, would it be a bad idea, if just like “Make in India” campaign of the Prime Minister; “Safe in India” campaign for medicines is also undertaken with equal gusto and monitored by the top echelon of the country’s rejuvenated governance machinery?

This initiative would probably help sending the very contextual ‘shape up or ship out’ signal to the drug regulators, both at the Center and also in the States to erase the prevailing menace for good.

In that process, it would eventually allay the public health safety concern with the ‘Made in India’ drugs, coming out of ‘Make in India’ campaign, not just in the country, but also beyond its shores.

The speed of action in this situation is the essence. Otherwise, the following golden words of wisdom as enunciated by Abraham Lincoln would keep haunting us, till the remedial measures taken by the Government become palpable on the ground:

“To sin by silence when they should protest makes cowards of men”

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 To Expand NLEM 2011: A Step In The Right Direction

Posted on May 11, 2015 by Tapan Ray

Responding to growing discontentment on the flawed National List of Essential Medicines 2011 (NLEM 2011) and equally vociferous demand for its urgent rectification, on May 5, 2015, in a written reply to the Lower House of Indian Parliament (Lok Sabha) the Union Minister for Chemicals and Fertilizers – Mr. Ananth Kumar made the following submission:

“The Ministry of Health and Family Welfare, has constituted a Core Committee of Experts to review and recommend the revision of National List of Essential Medicines (NLEM) 2011 in the context of contemporary knowledge of use of therapeutic products.”

According to earlier media reports, the Government had formed this Core Committee in May 2014 under Dr. V.M Katoch, Secretary, Department of Health Research (DHR) and Director General, Indian Council of Medical Research (ICMR). However to utter dismay of many, even in a full year’s time, the Committee has not been able to come out with any tangible recommendations in this area.

In his reply from the floor of the Parliament, the Union Minister added with a tinge of reassurance:

“The Core committee has already held wide consultations with stakeholders and is likely to come out with its recommendations on the revised NLEM soon… The revised NLEM would form the basis of number of medicines which would come under price control,”

This reply from the Minister was in response to a query from a lawmaker on what steps have been taken by the Government to expand the list of NLEM 2011 and provide them to the poor at affordable prices.

Mr. Ananth Kumar also reiterated, the National Pharmaceutical Pricing Authority (NPPA) has already fixed the ceiling prices in respect of 521 medicines till date, out of 628 NLEM formulations included in the first schedule of DPCO, 2013.

“The revised NLEM would bring more drugs under price control”, the Minister said.

NPPA’s earlier initiative was thwarted:

It is worth noting that in 2014, to include all drugs of mass consumption, in addition to essential and life saving medicines, NPPA initiated an exercise to expand the NLEM 2011.

At that time, quite rightly I reckon, the pharmaceutical industry vehemently protested against this regulatory overreach of NPPA and sought judicial intervention at least in two High Courts of India.

Moreover, as is well known today, NPPA’s attempt to regulate prices of medicines of mass consumption got thwarted, when the Union Government intervened and directed the price regulator to withdraw its related internal guidelines. Coincidentally this lightning action was taken just before Prime Minister Narendra Modi’s schedule visit to the United States in end 2014.

Be that as it may, the industry observers consider the last week’s announcement of the Union Minister, from the floor of the Parliament, to expand the span of NLEM 2011 as a step in the right direction for improving access to affordable essential medicines for all in India.

A brief backdrop for ‘Essential Medicines’:

The World Health Organization (W.H.O) has defined ‘Essential Medicines’ as those that ‘satisfy the priority healthcare needs of the population’. It has been propagating this concept since 1977, when W.H.O published the first Model List of Essential Drugs with 208 medicines. All these medicines together provided safe, effective treatment for the majority of communicable and non-communicable diseases, at that time.

Every two year this list is updated. The current Model List of Essential Medicines, prepared by the W.H.O Expert Committee in April 2013, is its 18^th Edition.

According to W.H.O, such ‘Essential Medicines’ are selected with due regard to disease prevalence, evidence on efficacy and safety, and comparative cost-effectiveness. The Organization categorically states:

“Essential medicines are intended to be available within the context of functioning health systems at all times in adequate amounts, in the appropriate dosage forms, with assured quality, and at a price the individual and the community can afford.”

Many countries of the world, India included now, have the National List of Essential Medicines (NLEM) and some have provincial or state lists as well, such as, in Tamilnadu Rajasthan and Delhi.

Health being a state subject in India, NLEM usually relates closely to Standard Treatment Guidelines (STGs) for use within the State Government health facilities. Ironically, such measures are currently being taken by just a small number of State Governments in the country.

NLEM – A forward-looking ongoing concept:

According to W.H.O, the concept of ‘Essential Medicines’ is forward-looking and ongoing. This idea prompts the need to regularly update the selection of medicines in the NLEM, reflecting:

New therapeutic options
Changing therapeutic needs
The need to ensure drug quality
The need for continued development of better medicines
Medicines for emerging diseases
Medicines to meet changing resistance patterns

As a part of its ongoing exercise, on May 8, 2015, The World Health Organization (W.H.O) by a ‘News Release’ announced addition of several new treatments for cancer and hepatitis C to its list of ‘Essential Medicines’, which the agency believes should be made available at affordable prices.

All 5 new products for the treatment of Hepatitis C, including sofosbuvir and daclatasvir, were included in the List. These medicines cure more than 90 percent of those infected and cost from US$63,000 to US$94,500 in the United States, depending upon the drug and treatment regimen.

Considering, new breakthroughs made in cancer treatment in the last years, W.H.O also revised the full cancer segment of the Essential Medicines List this year: 52 products were reviewed and 30 treatments confirmed, with 16 new medicines added in the list, including Herceptin of Roche, and Gleevec of Novartis.

“When new effective medicines emerge to safely treat serious and widespread diseases, it is vital to ensure that everyone who needs them can obtain them,” said W.H.O Director-General, Dr Margaret Chan. “Placing them on the WHO Essential Medicines List is a first step in that direction.”

India would also require putting similar effective systems in place for a robust, ongoing and time-bound review process for its NLEM.

Immense health and economic impact of ‘Essential Medicines’:

Globally the health and economic impact of ‘Essential Medicines’ have been proved to be remarkable, especially in the developing countries, as such drugs are one of the most cost-effective elements in healthcare system of any time. That’s why the stakeholders bestow so much of importance on a well thought out and properly crafted list of essential medicines by the astute experts appointed by the Government.

According to W.H.O, while spending on pharmaceuticals represents less than one-fifth of total public and private health spending in most developed countries, it represents 15 to 30 percent of health spending in transitional economies and 25 to 66 percent in developing countries.

In developing countries, such as India, pharmaceuticals are the largest Out of Pocket (OoP) household health expenditure. “And the expense of serious family illness, including drugs, is a major cause of household impoverishment.”

Flawed NLEM could multiply access to medicines problems:

Despite well-documented global evidence regarding high potential of health and economic impact of ‘Essential Drugs’, if the NLEM does not include right kind of drugs and remains flawed, it could have significant adverse impact on the overall access to ‘Essential Medicines’ in India.

In addition, properly structured NLEM could help setting the right course in the procurement and supply of medicines in the public sector – national or state Government schemes that reimburse medicine costs, and also for domestic production of drugs in the country.

A quick overview of NLEM in India:

There was no functional NLEM in India before 2002. According to a paper titled “Decisions on WHO’s essential medicines need more scrutiny”, published in the BMJ on July 31, 2014, in India the first National Essential Medical List (NEML) was prepared in 1996. However, this list was neither implemented for procuring drugs nor were STGs drawn up.

It all started in 2002, when the National Drug Policy of India, announced in that year, was subsequently challenged through a Public Interest Litigation (PIL) in the Karnataka High Court on the ground of being inflationary in nature. The Honorable Court by its order dated November 12, 2002 issued a stay on the implementation of that Policy.

This judgment was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 and ordered as follows:

“We suspend the operation of the order to the extent it directs that the Policy dated February 15, 2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

As a result DPCO 1995 continued to remain operational, pending formulation of a new drug policy, based on NLEM based span of price control, as directed by the Honorable Supreme Court of India. Necessitated by this directive of the Apex Court of the country, the first NLEM of India came into effect in 2002.

In 2011, NLEM 2002 was subsequently reviewed and re-evaluated by a committee of 87 experts from various fields, and was replaced by the NLEM 2011 with 348 drugs.

In the recent years, following a series of protracted judicial and executive activities, the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) came into effect on December 7, 2012. In the new policy the span of price control was changed to all drugs falling under the National List of Essential Medicines 2011 (NLEM 2011) and the price control methodology was modified from the cost-based to market based one. Accordingly the new Drug Price Control Order (DPCO 2013) was notified on May 15, 2013.

However, the matter is still subjudice, as NPPP 2012 would ultimately require passing the acid test of scrutiny by the Supreme Court of India, in the future days.

A recent study emphasizes need for urgent expansion of NLEM:

A March 2015 independent evaluation of DPCO 2013, which controls prices of essential medicines in India as featured in the NLEM 2011, brought to light some interesting facts. The Public Health Foundation of India (PHFI) and the Institute for Studies in Industrial Development released this report titled “Pharmaceutical Policies in India: Balancing Industrial and Public Health Interests” at a conference on pharmaceutical policies in India, held in New Delhi from 3 to 7 March, 2015.

This independent evaluation would most probably be submitted to the Supreme Court where PHFI is one of the petitioners in a case challenging the current NPPP 2012.

The study found that price regulations of NLEM 2011 are limited to just 17 percent of the total pharmaceutical market in India. This leaves 83 percent of the domestic pharma market free from price control, providing only marginal financial relief to patients for all essential medicines, in its true sense, as desired by the Supreme Court of India. Thus, one of the key recommendations of this study is to review the NLEM 2011, urgently.

“Clearly the interests of the pharmaceutical industry have received precedence over the interest of the patient population,” the report highlighted.

Anurag Bhargava, of the Himalayan Institute of Medical Sciences, was quoted in March 2014 BMJ Article titled, “Analysts in India call for urgent expansion of essential medicines list”, saying:

“This is a matter of concern given that the NLEM was not drafted as an instrument for price regulation. It is a representative rather than a comprehensive list of medicines utilized in actual practice. To serve as a reference for rational prescribing, the NLEM includes only a few model dosage forms, strengths, and combinations of drugs.”

NLEM 2011 fails to reflect public health priorities:

The report, with relevant details, brings to the fore that NLEM 2011 has failed to reflect India’s public health priorities. It underscores the following glaring deficiencies in NLEM 2011, which covers just:

1 percent of drugs for anemia
5 percent of respiratory drugs
7 percent of antidepressants
15 percent of drugs for diabetes
18 percent of drugs for tuberculosis
13 percent of anti-malarial drugs
23 percent of cardiac drugs
35 percent of antibiotics

Areas for revision in NLEM 2011:

A critical appraisal of NLEM 2011 was done in the above-mentioned 2014 BMJ paper and also by the NPPA separately.

Taking all these into consideration, some key areas of concerns related to NLEM 2011 floats at the top of mind. A few examples of important issues, which need immediate attention, are as follows (not necessarily in the same order):

Other key strengths and dosage forms of the same drugs covered under NLEM 2011

Analogues of scheduled formulations not covered

Close substitutes in the same therapeutic class not covered

Some essential drugs listed in the W.H.O model list and even in Delhi list are missing in the NLEM 2011

Several essential HIV and Cancer drugs are not included in NLEM 2011

Essential oral anti-diabetic medicines, like glimeperide and glicazide do not find place in NLEM 2011, especially when the list in the DSPRUD for Delhi includes anti-diabetic medicines such as glimepiride, sitagliptin, vildagliptin, saxagliptin

Commonly used anti-asthmatic medicines like almeterol and montelukast are missing in NLEM 2011

When W.H.O model List (EML) includes capreomycin, cycloserine, ethionamide, kanamycin and para-aminosalicylic acid for treatment of multi-drug resistant tuberculosis, these drugs are missing in NLEM 2011 list

Though a large number of Fixed Dose Combinations (FDCs) are prescribed to treat common ailments in India, especially in certain therapeutic groups such as respiratory, cardiovascular, anti-diabetic, dermatology, anti-malarial and anti TB/MDR TB, most of these are missing in NLEM 2011

While the W.H.O list mentions 21 vaccines, the NLEM 2011 mentions only nine vaccines

A separate list of lifesaving drugs based on existing lifesaving drugs list of government agencies like the CGHS needs to be worked out

Pediatric formulations need to be included in NLEM

Inclusion of some medical devices which are already covered under the definition of drugs under the Drugs and Cosmetics Act 1940

Essential and well-selected lifesaving patented drugs should also feature in the NLEM, just as what W.H.O has done this month by adding to its ‘Essential Medicines List’ all the five patented new curative treatments for hepatitis C, besides 16 new cancer drugs.

Thus, in its present form the NLEM 2011 needs a critical relook and revision, mainly in the light of the missing drugs and keeping in view of the requirements under various National Health Programs as well as the National Formulary of India 2010.

The BMJ paper also highlights, the Indian Academy of Pediatrics has come out with a list of ‘Essential Drugs’ for children in India. Such a list might be consulted for the Pediatric List of Essential Medicine within the NLEM. Provision should be made to review the NLEM at two yearly intervals, as is currently practiced by the W.H.O.

Civil Society steps in:

Accordingly, in August 2014, seven Civil Society Organizations in a letter to Minister Ananth Kumar with a copy to Prime Minister Narendra Modi, among others, wrote as follows:

“Limiting all price regulation only to a list of 348 medicines and specified dosages and strengths in the DPCO 2013 goes against the policy objective of making medicines affordable to the public. The National List of Essential Medicines, a list of 348 rational and cost-effective medicines, is not the basis for production, promotion and prescription in India. In reality the most frequently prescribed and consumed medicines are not listed in the NLEM.”

Healthcare: China on a fast track, India crawls through a slow lane:

Interestingly, to help improve economic growth and boost domestic consumption, China has recently decided to floor the gas pedal on the fast lane of healthcare reform, while India chose to continue to crawl through its slow lane.

Interestingly, both the countries want to draw similar sets of trend lines for health and economic progress of their respective nations.

This has been vindicated by Reuters report of May 9, 2015, when it highlighted, China would increase its healthcare subsidies by 19 percent this year as part of efforts to deepen social reforms and strengthen safety nets.

The report also indicated, economists view this measure as crucial for China to improve the quality of its healthcare, if it wishes to remake its economy and boost domestic consumption. They say a stronger safety net will encourage Chinese to spend more and save less.

As opposed to the Chinese scenario, in India, the Union Budget 2015-16 came as a real dampener for the healthcare space in the country. This assumes greater significance, as the budget was planned by the reform oriented Modi Government.

Despite the dismal state of current public healthcare services, the annual budgetary allocation for healthcare has been kept at Rs. 33,152 Crore, just a tad more than Rs. 30,645 Crore of 2014-15, with no visible indication for any healthcare reform measure in the country, any time soon.

Conclusion:

‘Essential Medicines’ based drug price control, as was directed by the Honorable Supreme Court of India, is just not far sighted, but a potential game changer in the healthcare space of the country.

While looking at the bigger picture, this policy also promises a significant contribution in the overall economic progress of the nation.

To make this policy effective in the longer term, NLEM should be fair, impartial, far sighted, up to date, robust and beyond obvious any controversy, which includes its authors… just as the spirit behind the good old saying: “Caesar’s wife must be above suspicion.”

Unfortunately, NLEM 2011 is mired with many shortcomings for all the wrong reasons, as discussed above.

The incumbent Government would require striking a just and right balance between public health interest and expectations of the Pharma industry in this critical area. Taking the right policy decision in a transparent an effective manner, balancing the healthcare and economic interest of the country, would be critical.

That said, Pharma industry in India, I reckon, would also not be devastatingly impacted with the possible expansion of NLEM. This is mainly because, currently only 17 percent of the total pharmaceutical market in India comes under price control, based on the span of NLEM 2011 formulations. In any case, the balance 83 percent of the domestic pharma market still falls under the free-pricing zone.

Even when DPCO 1995 came into force, which continued till DPCO 2013 became effective, 20 percent of the total domestic pharmaceutical market was under price control.

Moreover, there was no provision for automatic annual price increases for price-controlled drugs under DPCO 1995. Whereas DPCO 2013 has a provision for annual price increases for all such essential drugs based on WPI. As a result, MRPs of all price controlled essential drugs have gone up effective April 1 of this year and would continue to happen so every year, as long as NPPP 2012 remains in force.

Under this complex mosaic and fast evolving backdrop, the announcement of the Union Minister for Chemicals and Fertilizers – Mr. Ananth Kumar on the floor of the Parliament last week is a laudable one.

To help improve access to affordable essential medicines for all in the country, the Minister has reiterated, “The expanded NLEM would bring more essential drugs under price control.” This categorical affirmation by the Government in power, though belated, is a step in the right direction…for both better healthcare and also its consequential critical impact on the economic progress of India.

By: Tapan J. Ray

The Curious Imbroglio: Innovation, IPR, India and ‘Uncle Sam’

Posted on May 4, 2015 by Tapan Ray

Last week, the Office of the United States Trade Representative (USTR) released the “2015 Special 301 Report”, which is its annual review of the global state of Intellectual Property Rights (IPR) protection and enforcement.

While looking through the Kaleidoscope of business interests of the United States, variegated changing patterns of a wide variety of country-specific observations can be noted in this report.

It is widely believed that the report ‘pontificates’ about the adequacy and effectiveness of IPR protection and enforcement of its trading partners against USTR’s own yardstick, hinting unhesitantly at the possible consequences, if found lacking.

USTR reviewed seventy-two (72) trading partners for this year’s Special 301 Report, and placed thirty-seven (37) of them on the ‘Priority Watch List’ or ‘Watch List’. Thirteen (13) countries – Algeria, Argentina, Chile, China, Ecuador, India, Indonesia, Kuwait, Pakistan, Russia, Thailand, Ukraine, and Venezuela, are on the ‘Priority Watch List’. These countries will be the subjects of particularly intense bilateral engagement during the coming year.

India specific significant elements of the 2015 Special 301 Report include the following:

Increased bilateral engagement in 2015 between the United States and India on IPR concerns, following the 2014 Out-of-Cycle Review (OCR) of India on this issue.

India will remain on the ‘Priority Watch List’ in 2015, but with the full expectation of US about substantive and measurable improvements in India’s IPR regime for the benefit of a broad range of innovative and creative industries.

The US offered to work with India to achieve these goals.

No OCR at this time for India, but US will monitor progress in India over the coming months, and is prepared to take further action, if necessary.

The 2015 report also highlights:

“While it is impossible to determine an exact figure, studies have suggested that up to 20% of drugs sold in the Indian market are counterfeit and could represent a serious threat to patient health and safety.”

According to media report, a senior Commerce & Industry Ministry official has commented, “India is disappointed at being featured yet again in the US ‘Priority Watch List’ of weak IPR countries. But it is not worried.”

Recent Action by India:

In October 2014, almost immediately after Prime Minister Modi’s return to India from the US, the Government formed a six-member ‘Think Tank’ to draft ‘National IPR Policy’ and suggest ways and legal means to handle undue pressure exerted by other countries in IPR related areas.

The notification mandated the ‘Think Tank’ to examine the current issues raised in such reports and give suggestions to the ministry of Commerce & Industry as appropriate.

However, the domestic pharma industry, many international and national experts together with the local stakeholders, continue to strongly argue against any fundamental changes in the prevailing robust patent regime of India.

In the same month, the Department of Industrial Policy and Promotion (DIPP) constituted a six-member ‘Think Tank’ chaired by Justice (Retd.) Prabha Sridevan to draft the ‘National IPR Policy’ of India. Taking quick strides, on December 19, 2014, the Think Tank’ released its first draft of 29 pages seeking stakeholders’ comments and suggestions on or before January 30, 2015. A meeting with the stakeholders was also scheduled on February 5, 2015 to take it forward.

Possible reasons of US concern on the draft ‘National IPR Policy’:

As I discussed in my blog post of January 19, 2015 titled, “New “National IPR Policy” of India – A Pharma Perspective”, I reckon, there are three possible key areas of concern of American pharma industry against Indian patent regime. However, in the draft National IPR Policy India seems to have stood its ground in all those areas.

The draft IPR policy responded to those concerns as follows:

Concern 1: “India’s patentability requirements are in violations of ‘Trade Related Aspects of Intellectual Property Rights (TRIPS)’ Agreement.” (Though it has not yet been challenged at the WTO forum)

Draft IPR Policy states: “India recognizes that effective protection of IP rights is essential for making optimal use of the innovative and creative capabilities of its people. India has a long history of IP laws, which have evolved taking into consideration national needs and international commitments. The existing laws were either enacted or revised after the TRIPS Agreement and are fully compliant with it. These laws along with various judicial pronouncements provide a stable and effective legal framework for protection and promotion of IP.”

A recent vindication: On January 15, 2015, Indian Patent Office’s (IPO’s) rejection of a key patent claim on Hepatitis C drug Sovaldi (sofosbuvir) of Gilead Sciences further reinforces that India’s patent regime is robust and on course.

Gilead’s patent application was opposed by Hyderabad based Natco Pharma. According to the ruling of the IPO, a new “molecule with minor changes, in addition to the novelty, must show significantly enhanced therapeutic efficacy” when compared with a prior compound. This is essential to be in conformity with the Indian Patents Act 2005. Gilead’s patent application failed to comply with this legal requirement.

Although Sovaldi ((sofosbuvir) carries an international price tag of US$84,000 for just one treatment course, Gilead, probably evaluating the robustness of Sovaldi patent against Indian Patents Act, had already planned to sell this drug in India at a rice of US$ 900 for the same 12 weeks of therapy.

It is envisaged that this new development at the IPO would prompt entry of a good number of generic equivalents of Sovaldi. As a result, the price of sofosbuvir (Sovaldi) formulations would further come down.

However, reacting to this development Gilead has said, “The main patent applications covering sofosbuvir are still pending before the Indian Patent Office…This rejection relates to the patent application covering the metabolites of sofosbuvir. We (Gilead) are pleased that the Patent Office found in favor of the novelty and inventiveness of our claims, but believe their Section 3(d) decision to be improper. Gilead strongly defends its intellectual property. The company will be appealing the decision as well as exploring additional procedural options.”

For more on this subject, please read my blog post of September 22, 2014 titled, “Gilead: Caught Between A Rock And A Hard Place In India”

Concern 2: “Future negotiations in international forums and with other countries.”

Draft IPR Policy states: “In future negotiations in international forums and with other countries, India shall continue to give precedence to its national development priorities whilst adhering to its international commitments and avoiding TRIPS plus provisions.”

Concern 3: “Data Exclusivity or Regulatory Data Protection.”

Draft IPR Policy states: “Protection of undisclosed information not extending to data exclusivity.”

I discussed a similar subject in my blog post of October 20, 2014 titled, “Unilateral American Action on Agreed Bilateral Issues: Would India Remain Unfazed?”

Confusion with the Prime Minister’s recent statement:

It is worth noting that in end April 2015, Prime Minister Narendra Modi reportedly remarked to align India’s patent laws with “international standards”.

What the Prime Minister really meant by patent laws with “international standards” could be of anybody’s guess. This is because, even the World Trade Organization (WTO) considers Indian Patents Act compliant to TRIPS Agreement, which has been globally accepted as the ‘Gold Standard’ in the realm of IPR…unless, of course, Prime Minister Modi intends to accept ‘TRIPS Plus’ provisions for India, under US pressure and at the cost of health interest of majority of Indian patients.

It is noteworthy though, his own Ministry of Commerce & Industry has categorically emphasized and re-emphasized several times in the past that India’s patent regime is fully TRIPS compliant.

To add greater credence to this argument, the noted free market economist and Professor of Economics at Columbia University – Arvind Panagariya, who has recently been appointed to run Prime Minister Narendra Modi’s new NITI Aayog, has also endorsed it in his published articles, unambiguously.

As usual, leaving nothing to chance, immediately after the above remark of the Indian PM to align India’s patent laws with “international standards”, the USTR urged India to ‘expeditiously undertake’ initiatives stated by PM Modi, flashing across a long list of changes that the US wants to get incorporated in the Indian IP Acts and policies.

Pressure for amendment of Indian Patent Law:

From the intensity of pressure that the US Pharma industry is generating on the US Government, it is clear that American pharma industry will not be satisfied till Modi Government brings in changes in the Indian Patents Act 2005, as dictated by its constituents.

At the top of much publicized US wish list on IPR, features abolition of Section 3(d) of the Indian patent law. This provision of the Act denies patents to frivolous and incremental innovations without offering any significant value to the patients in terms of improved clinical efficacy of the drug. Many would term such innovation as attempts towards evergreening of patents through minor molecular manipulation or similar other means. This kind of innovation gives already a very high priced blockbuster drug another full term of patent monopoly, often with even higher price, at the cost of patients.

Pressure for a relook at the National IPR Policy:

In fact, the USTR 2015 report, also asks India to have yet another round of consultations with stakeholders before finalizing its IPR policy. This is widely construed as an attempt on the part of the US Government and industry to conclude their unfinished IPR agenda for India.

Whether Modi Government would be bullied by the American Pharma industry to succumb to its pressure at the cost of the Indian patients and going against the national and international experts’ opinion, only time would tell.

Benefits of Innovation and India:

India has amply demonstrated time and again that it does understand the value and benefits of innovation in different facets of life and business. The country endeavors to protect it too, according to the law of the land. However, there are still some procedural loose knots existing in the IPR environment of the country.

As stated above, for effective remedial measures in those areas, a ‘Think Tank’ has already been constituted by Modi Government to formulate a robust and comprehensive National IPR Policy.

In this context, a media report quoted a senior official from the Union Ministry of Commerce & Industry saying, “We hope this year we can convince the US that our laws are drafted in a way so as to protect both our consumer and industry’s interest. The new IPR policy that we are coming out with will take care of any anomalies or vagueness in our existing regime and make it tight and also fast-track clearances of patent applications.”

Would there be a ‘Ghost Writer’ for Indian IPR Policy?

The first draft of the policy has already been circulated in January 2015 and discussed in the following month with the stakeholders. However, American Pharma industry does not seem to be satisfied with its overall content, leave aside the nitty-gritty.

Going by this development some apprehends that a powerful lobby group probably wants to be the ‘Ghost Writer’ for the IPR Policy of India. Coincidentally enough, we also see the USTR blowing hot and cold on this critical issue…blowing hot through its ‘Special 301 Report’ and cold by praising Prime Minister Modi’s remark to align India’s patent laws with “international standards”.

India should play a catalytic role in changing the drug innovation model:

A paradigm shift in the drug innovation model can materialize only when there will be a desire to step into the uncharted frontier…coming out of the comfort zone of much familiar independent money spinning silos of all kinds of drug innovations…from break-through drugs to me-too varieties. Dove tailing scientific and business excellence with patients’ health interest, dispassionately, would then be the name of the game.

Though arduous, playing a catalytic role to bring out this transformation sooner, is extremely important for India. This is because, drug innovation with significant value addition would continue to remain as critical as access to important medicines for all, in perpetuity. India understands that just as clearly as USTR …for its ‘make in India’ campaign or otherwise. No well-orchestrated and spoon-fed pontification required in this area…uncalled for.

Conclusion:

The bottom line is, the US Pharma industry continues to flex its muscle relentlessly under the very often used, misused and even abused façade that India does not understand the value of innovation.

On the other hand, the general sentiment in this area, both national and international, favors India.

As the new Vice Chairman of NITI Aayog of India, Dr. Arvind Panagariya wrote, “India must call the US’ bluff on patents,” it’s indeed time to demonstrate the same, once and for all.

However, in the context of upholding patients’ health interest in India, a lurking fear does creep in, after PM Modi’s well publicized recent remark to align India’s patent laws with “international standards”, especially when Indian Patents Act 2005 is already TRIPS compliant, according to WTO requirements.

That said, in the midst of a raging debate involving innovation, IPR, India and ‘Uncle Sam’, the moot question that floats at the top of mind is:

Has seemingly tough-minded Prime Minister Modi already yielded to ‘Uncle Sam’s’ bullying tactics to effect changes in an otherwise robust Indian patent regime, and that too at the cost of health interest of needy patients of the country?

By: Tapan J. Ray

Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?

Posted on April 27, 2015 by Tapan Ray

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.

Currently, the National Pharmaceutical Pricing Authority (NPPA) has fixed prices of 509 formulation packs, covering 348 drugs, based on NLEM, as specified in the Drugs Price Control Order (DPCO) 2013. Such price controlled essential drugs currently contribute less than 18 percent of the total pharmaceutical market of India in value terms. Whereas, according to reports, total number of formulation packs in India would be much over 60,000.

The panel noted that the ceiling prices of even all those medicines, which should come under price control under DPCO 2013, are yet to be announced by the NPPA. Accordingly, it advised the Government to expedite the process of notifying ceiling prices for all the remaining medicines featuring in the NLEM, without further delay.

The Parliamentary Standing Committee observed that Rs 17,944 Crore was spent in 2013-14 to import medicinal and pharmaceutical products. It expressed dissatisfaction on the Department of Pharmaceuticals’ (DoP) explanation that imports were made on quality and economic considerations and not necessarily because the products were unavailable at home.

“The Committee is of the strong view that to realize the dream of ‘Make in India’ concept in pharmaceutical sector, the government should boost and incentivize domestic bulk drug industry and discourage Indian pharmaceutical firms from importing”, the report said.

It also observed that to make India self-reliant in this area, revival of sick public sector units was necessary to create capacity of bulk drugs. The Committee urged the DoP to expedite formulation of ‘Make in India’ policy for APIs (active pharmaceutical ingredients) in India.

Indictment against the DoP:

The committee reportedly came down heavily on the DoP for its inability to utilize funds allocated for various purposes, which clearly speaks about “the poor performance of the department in utilization of its plan allocation.”

The report clearly mentions, “The committee therefore feels that department could not achieve its avowed objectives and targets set for various scheme/programs unless the funds are utilized by the department optimally and efficiently.”

Stating that the department “should make earnest efforts for optimum utilization of funds allocated to them”, the committee expressed it would “like to be apprised of the initiatives undertaken by the department in this regard”.

A quick recapitulation:

In may 2012, the Department Related Parliamentary Standing Committee on Health and Family Welfare in its 58th Report also expressed great concern on rampant prescription of irrational and useless drugs by many doctors with ‘ulterior motives’ and expressed the need of inclusion of the essential and lifesaving drugs under strict price regulation.

As it usually takes a very long time to effect any perceptible change in India, the above critical observations, as well, remained virtually unattended, even today.

Does ‘Competition’ impact Branded generic pricing?

I am personally a strong believer of ‘free-market economy’, driven by ‘market competition’, for the industrial sectors in general. It ensures rapid economic progress and growth, creating much needed wealth to cater to the growing needs of various kinds for the citizens of a nation.

However, I would strongly argue that Indian pharma industry is one of the key exceptions in this regard; as it is basically a branded generic market contributing over 90 percent to the total domestic pharmaceutical retail market.

Although, domestic market of branded generic drugs is quite crowded with a large number of respective ‘brands’ of exactly the same off-patent molecule/molecules available at widely different price ranges, patients do not derive any economic benefit out of such intense competition in a ‘free-market economy’. This happens, as the patients have no say or role in the brand selection process of the doctors to choose a price of their likings and affordability, especially when the basic drug/drugs are the same for all those brands.

Examples of huge rice variation in branded generics of the same drug:

A Research Paper published in The Indian Journal of Applied Research’ of May 2014, titled, “Cost Variation Study of Anti-diabetics: Indian Scenario” observed as follows:

“In Single drug therapy, among sulfonylurea group of drugs, Glimepiride (2 mg) shows maximum price variation of 829.72%, while Glipizide (10mg) shows minimum variation. In Meglitinides groups of drugs Repaglinide (0.5mg) shows maximum price variation 194.73% and Nateglinide (120mg) shows Minimum price variation. In Biguanides & Thizolidinediones groups of drugs, Metformin (500 mg) & Pioglitazone (15 mg) show maximum price variation of 384.18% & 600 % respectively. In α-glucosidase inhibitor group of drugs, Voglibose (0.2mg) shows maximum price variation of 387.17%, while Miglitol (25mg) shows minimum price variation.”

“In combination therapies, Glimepiride+Metformin (1+500mg) combination shows the maximum variation up to 475 %. In case of Insulin Premixed 30/70 100IU/ml shows maximum price variation of 1881.24%, while minimum variation is found with short acting 40IU/ml.”

Similar scenario prevails virtually in all therapy categories in India.

No qualms on branding:

It is understandable that generic drugs are branded o create differentiation even within exactly identical drugs. There are no qualms on branding per se, which comes at a reasonably high cost though. However, the question is, who pays for this branding exercise and for what additional tangible value/values?

If no additional tangible value is added to a generic medicine through branding, why should most of the patients sweat to pay significantly extra amount, just to help the pharma companies fighting with each other to increase their respective pies of revenue and profit?

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

It is indeed a very pertinent question. Equally pertinent answers are also available in a 2014 paper titled, “Competition Issues in the Indian Pharmaceuticals Sector” of Delhi School Economics (DSE). The paper deals with issues related to failure of ‘Free Market Economy’, despite intense competition, especially for branded generic drugs in India.

In an ideally free-market economic 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, does not happen at all.

Branded generics pricing paradox:

In the pharmaceutical market place, the scenario is almost just the reverse of what should happen in a highly competitive ‘free market’ model.

This means, highest priced branded varieties of identical drugs, mostly enjoy highest market share too. This in turn proves that competition within the pharma brands do not bring down the prices, benefiting the consumers/patients.

Branding of generic drugs:

Unlike many developed nations, in India, even the off-patent generic drugs are branded and differentiated on flimsy perception based intangibles to the prescribers, along with other contentious and dubious sales tools, decrying unbranded generics.

This is done in the guise of so-called pharma ‘sales and marketing’ strategies, which are sometimes shrewd and many times equally blatant, if not crude.

The DSE paper, very clearly says, ‘head to head’ competition between undifferentiated (non-branded) products would certainly cause a precipitous fall in prices.

However, it is generally believed, the prescription demand of branded generic drugs is basically created by influencing the prescribing behavior of the medical practitioners. Not just by personal selling through medical representatives, medical advertising and publicity of different types, but also through a chain of processes that many stakeholders, including the Government and law-makers generally consider as grossly unethical.

In January 2015, the Government directive for implementation of the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ by the pharma industry in India, further reinforces the point.

‘Dorfman-Steiner’ condition vindicated:

The above paper from the DSE underscores the old and well-established ‘Dorfman-Steiner’ condition that mathematically proves that the price-cost margin is positively related to the ratio of advertising expenditure to sales revenue.

Quoting a practicing surgeon, the DSE article states:

“Sometimes it could be just plain ignorance about the availability of a cheaper alternative that makes doctors continue to prescribe costlier brands. But one cannot ignore the role of what are euphemistically called marketing “incentives”, which basically mean the inappropriate influence pharmaceutical companies exert on doctors. This runs deep. Hospitals choose to stock only certain drugs in their in-house pharmacies and insist that hospitalized patients buy drugs only from the hospital pharmacy. Drug companies sell drugs to hospitals at a price much lower than what the patient is charged, further incentivizing the hospital to stock their products. The cheaper brands often get left out in this game.”

Reasons for success of high-priced branded generics:

Low priced non – branded cheaper generics have been systematically made to perceive as of low quality. In several media reports, including some recent ones even some well-known doctors castigated the low priced non- branded cheaper generics. Pharma industry lobby groups, in tandem, has been strongly resisting various Government initiatives of un-branding the generic drugs.

Over a long time, a common public perception has been painstakingly created that high-priced branded generics are more of high quality; MNC brands are of better quality than their ‘Desi’ counterparts and branded generics are more reliable than their non-branded equivalents.

This perception is fuelled by poor enforcement of the Drugs and Cosmetics Act of India that also regulates drug-manufacturing standards in the country, besides the prevailing overall drug regulatory scenario in the country.

The New Government attributes “Market Failure for pharmaceuticals”:

In its price notification dated July 10, 2014, the NPPA has categorically stated the following:

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 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 and also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.

Civil Society echoed the same sentiment:

In this context, it is important to note that in a letter dated August 20, 2014 written by seven large Civil Society Organizations to Mr. Ananth Kumar, the present Minister of Chemicals and Fertilizers with a copy to Prime Minister Modi, articulated similar view, as follows:

I broached on a similar issue in my blog post of April 6, 2015 titled, “Would Affordable ‘Modicare’ Remain Just A Pipe Dream In India?”

An opposite view: ‘Bad Medicine’

On April 23, 2015, an Editorial with the above headline, articulating exactly opposite viewpoint, was published in a leading English business daily.

With all due respect to the concerned editor, it appeared quite funny, if not ‘hilarious’ to me for several reasons. One of which is seemingly total lack of understanding on the issue by the concerned editor.

I am quoting below some of the most obvious ones, just to cite as examples:

A. Quoting the above recommendation of the Parliamentary Standing Committee on drug price control the Editorial states:

“Not only will this make investors from other countries look at India with suspicion – Japanese pharma firm Daiichi just exited its disastrous investment in Ranbaxy (later taken over by Sun Pharma) – it will ensure Indian patients are deprived of good quality medicines.”

It is known to everybody that drug price control in India had got nothing to do with the exit of Daiichi. It was primarily due to import bans by the USFDA, caused by alleged falsification of GMP related data in Ranbaxy’s manufacturing plants selling drugs to America.

B. The Editorial continues:

“So much for Make-in-India—the other problem with price controls is that, with little incentive to invest in fraud-prevention, between a fourth and a third of India’s pharmaceuticals production is estimated to be spurious. Also, price caps have resulted in a situation where R&D expenses are very low, and there is little research on drugs of particular relevance to India.”

Again, it is much known fact that over 82 percent of Indian pharmaceutical market is currently outside price control, offering free-pricing opportunity. What does then prevent the drug companies to come out robust ‘fraud-prevention’ measures for all those free-pricing drugs?

C. The Editor stated:

“Since Indian prices are amongst the lowest in the world, it is not clear what exactly the committee had in mind, more so since costs of medicine are not, in any case, the most expensive part of medical treatment.”

Of course, all concerned knows that lowest range of generic drug prices in India, are perhaps the cheapest in the world. However, the point is, should it be considered in isolation? Not in relation to per capita income of the Indians? Not in terms of Purchasing Power Parity? In drug pricing context, one Committee Report of the DoP had shown, when adjusted against these two factors, drug prices in India are as high, if not more, as compared to the developed countries of the world.

I hasten to add that I fully resect all different view points. If I have made any mistakes in understanding this piece of bizarre editorial, I am more than willing to stand corrected with all humility, as this a very serious issue of ‘what is right’ and NOT ‘who is right’.

Conclusion:

India is a market of branded generics, where brand differentiation process involves creation of mostly unsubstantiated perceptions.

As the stakeholders, media and even the Indian Government have alleged, drug companies exert a strong influence in the brand prescription decision of the doctors, even at the cost of patients who cannot afford the same.

Even in a free-market economy with cutthroat competition, patients do not have any means to exercise their price preferences even within identical branded generic drugs. They are compelled to buy high priced brands, as prescribed by their doctors, even where low priced identical equivalents are available.

This condition gives rise into ‘Market Failure’, especially for branded generics in India. The NPPA has unequivocally enunciated it, which I have quoted above.

Being a strong believer and votary of ‘free-market economy’ and ‘market competition’, I find this pharma scenario unique. It is a rare example of failure of otherwise so successful free-market economy model, especially in the branded generic pharma space of India.

Around a decade ago, the ‘Indian Journal of Medical Ethics’ (IJME, January – March 2004 issue) captured the very essence of this deliberation, epitomized in the following sentence:

“If the one who decides, does not pay and the one who pays, does not decide and if the one who decides is ‘paid’, will truths stand any chance?”

By: Tapan J. Ray

“Make in India” Image of Pharma Needs An Early Makeover

Posted on April 20, 2015 by Tapan Ray

“It is never too late to be what you might have been” - George Elliot

The chronicle of events since the last couple of years or so, related to ‘Make in India’ image of the local drug industry, have been instrumental to significantly slowing down the scorching pace of pharma exports growth of the country.

The Union Ministry of Commerce estimates that India’s export of drugs and pharmaceuticals may hardly touch US$16 billion in 2014-15, against US$14.84 billion of last financial year. This would mean that pharma exports growth would just be around 5 percent, against the projected number of 10 percent for the year. This is a significant concern, as pharma exports contribute around 40 percent to the total value turnover of the sector.

Despite this fact and couple of other important reasons, as I shall discuss below, about 45 percent of listed pharma stocks in India have reportedly more than doubled in the past one year. The current tail wind in the domestic pharma market could possibly have contributed to this aberration.

According to AIOCD Pharmasofttech AWACS, the last financial year started in April 2014 with 7.3 percent domestic retail pharma growth, which accelerated to 20.9 percent in March 2015, as the year ended.

High level of optimism and positive sentiments, thus generated in this process, possibly prompted many to ignore even some of the critical storm signals for the domestic pharma industry in its totality.

Declining pharma exports growth – A key challenge:

In 2014, pharmaceutical exports contributed 39 percent to the sector’s total value turnover. Consistently strong export performance over the last few decades, has catapulted the local drug industry in the not so common trajectory of the net foreign exchange earner for India. It is worth noting, though pharma exports grew at a rate of just 1.2 per cent to reach in 2013-14, it registered a CAGR of 21 percent over the last decade.

Some analysts estimate, the chances of Indian pharma exports touching even US$16 billion in 2014-15 are indeed challenging, especially considering low growth recorded by some of the large Indian pharma companies, including Ranbaxy, Dr. Reddy’s Laboratories and Lupin, especially in the US market.

Mounting pricing pressure:

Consolidation process of pharmacy players in the US market is also affecting the profit margins of the Indian drug exporters.

Some key examples are:

Global alliance among three large pharmacy distributors – Walgreen, Alliance Boots and Amerisource –Bergen, in early 2013

Joint venture between the second largest US wholesale distributor, Cardinal Health, and CVS Caremark in December 2013

US pharmacy McKesson’s announced acquisition of US distributor Celesio in January 2014.

On April 9, 2015, Bloomberg reported that Walgreens Boots Alliance Inc.’s acting Chief Executive Officer Stefano Pessina has expressed his intent to do more deals, just months after being on the saddle of the biggest US drugstore chain.

As a result, a few dominant pharmacy players emerged with hard bargaining power, exerting tough pricing pressures on the generic drug companies and that too in a market that has been facing already facing cutthroat generic price competition.

Consequently, according to published reports, the prices of generic drugs, in general, declined by around 20 to 30 per cent over the past 19 months, in the US.

Vulnerability in the key market:

According to IBEF March 2015, the United States (US) has been the prime importer of pharmaceuticals from India, accounting for over 25 per cent of Indian pharmaceutical exports, followed by the European Union and Africa at second and third positions, respectively.

India exports over US$4 billion of pharmaceutical products to the US, out of its annual exports of around $15 billion. Large domestic companies, such as Ranbaxy, Sun Pharma and Lupin account for around US$3 billion of exports to the US and the balance comes from a large number of other Indian pharma players.

Government sites 3 reasons:

According to the Union Ministry of Commerce, there are reportedly three key reasons for the pharma export falling short of target in the financial year 2014-15, namely:

- Delayed regulatory approvals

- Consolidation of pharmacy players in North America (discussed above)

- Steep depreciation of currencies in emerging markets such as, Russia, Ukraine and Venezuela

A major controllable concern seems to be out of total control:

While articulating the above three factors, the Union Ministry of Commerce seems to have missed out a very important one that has been instrumental in perpetuating the recent slow down of Indian pharma exports, significantly. It is very much a controllable too, unlike the other three, though appears to be virtually out of total control of the domestic pharma companies.

Fortunately, media kept harping on it. PTI News of January 11, 2015 reported, while Indian pharma exports expected to touch a turnover US$16 billion in 2014-15, many Indian pharmaceutical companies continue to face regulatory action by the USFDA for alleged violation of ‘Good Manufacturing Practices (GMP)’ and other irregularities at the respective drug manufacturing facilities in different parts of the country.

This report observed, a number of Indian drug-makers, including Ranbaxy, Sun Pharma, IPCA Labs, Wockhardt and Dr. Reddy’s Laboratories faced sanctions of the USFDA over different issues ranging from hygiene levels in the plant and concealment of data on failed tests to even fabrication of records. As a result, in several cases, these companies have been barred from selling their drugs in the US and other countries.

The issue involves the very top:

Sun Pharma, post acquisition of Ranbaxy, tops the pharma league table in India with around 9 percent of domestic market share.

It is much well known though, that the US drug regulator has already imposed a ban on import of medicines into the US, produced at its key constituent Ranbaxy’s India-based factories. Earlier, certain drugs produced at its Dewas plant of Ranbaxy were also barred from export to the entire EU region for non-compliance to GMP norms.

On its own, the acquirer – Sun Pharma has also faced USFDA ban on import of products made at its Karkhadi plant in Gujarat.

Taking all these into consideration, one can probably argue that the ‘Make in India’ issue for Indian pharma is humongous and quite a widespread one. Its adverse impact is very much palpable even at the very top.

The root cause:

The root cause of non-conformance of specified GMP standards probably dwells deep within the mindset of the concerned companies, as comes in the narrative of a whistleblower. In that case, the speed of progress of Indian pharma exports’ revival, alongside the industry image makeover, would possibly face a strong and silent headwind.

Pharma sector needs a health check:

On April 16, 2015, ET Intelligence Group commented that “High-flying pharma sector may be in need of a health check”, further reinforcing the case for re-rating of, especially, the export-oriented pharma sector.

The report underscored, that foreign brokerages Bank of America Merrill Lynch and CLSA have flagged concerns about valuations in pharma priced to perfection leaving little room for error. According to data from Bloomberg, since last week, ‘buy’ recommendations by analysts have dropped in stocks like Sun Pharma, Lupin, Cipla, Ipca Labs, Cadila Healthcare, Aurobindo Pharma and Torrent Pharma.

Smacks of irrational exuberance?

The article emphasized that the pharma growth story has now moved to being one that ‘smacks of irrational exuberance’.

The unprecedented interest in the sector has had the effect of shirking off negatives, like regulatory clamps by US FDA, price control, and currency fluctuations in the emerging markets and delay in drug approvals in the US.

The saga still continues:

Triggered by a whistleblower report and confirmed by a number of different adverse plant audit findings, the USFDA has stepped up scrutiny of India make generic drugs, over the last two years. It is worth noting that Indian generic drug players supply round 40 percent of such medicines sold in the United States.

As we discuss the subject, Indian pharma players continue to receive the warning letters from the USFDA, related to breach of GMP standards.

Lamentably enough, significant parts of the same continue to be the data integrity issues. Even in 2014, some large domestic players including, Sun Pharmaceuticals, Cadila Pharma and Orchid Pharma came under scrutiny of the US drug regulator.

Most recently in March 2015, USFDA banned most imports from the Ipca plants, in Pithampur in Madhya Pradesh and Silvassa in Dadra and Nagar Haveli, for non-compliance of GMP standards. Earlier, in January 2015, the US regulatory agency reportedly banned imports from another Indian manufacturing plant of Ipca.

India tops the list on the US import alerts:

According to USFDA data, from 2013 onwards, over 20 drug manufacturing facilities across India attracted ‘Import Alerts’ as against seven from China, two each from Australian, Canadian and Japanese units and one each from South African and German facilities.

Unfortunately, despite intense local and global furore on this subject, the Central Drugs Standard Control Organization (CDSCO) of India, very strangely, do not seem to be much concerned on this critical issue, at least noticeably enough, besides making some occasional public statements on its working together with the USFDA in this regard.

I discussed similar subject in my blog post of September 29, 2014 titled “Make in India…Sell Anywhere in The World: An India Pharma Perspective.

Conclusion:

As it appears to me, the USFDA import bans related to breach of GMP standards, including ‘Data Integrity’, are mostly unrelated to knowledge deficiency of any kind – technical or otherwise, in the teams handling large drug manufacturing plants of India.

The details, as listed in the USFDA website, indicate that a large number of such incidents are related to falsification of data in the critical documentation process.

Earlier in this article, I termed the problem as very much controllable with the right kind of mindset to set things right, without probably resorting to cost-saving short cuts.

Prime Minister Modi, even during his very recent trips to France, Germany and Canada, passionate appealed to all, including pharma investors both local and global, to “Make in India” and “Sell Anywhere in The World” (exports). This call deserves to be responded with the right spirit and mindset and not just with lip services.

Failure to effectively address the patients’ safety requirements related issues of the foreign drug regulators, such as USFDA, and any direct or indirect attempt to categorize this plight as international ‘conspiracy’ of any kind, could jeopardize India’s interest in pharma exports, for a much longer while.

There is not even an iota of doubt today that “Make in India” image of Indian pharma has suffered a huge set back, at least in the largest and most valuable pharmaceutical market of the world.

As the well acclaimed English novelist George Elliot once said, “It is never too late to be what you might have been”, Indian pharma industry urgently needs an image makeover in this critical area…through a demonstrable change in mindset for doing things right…in every occasion and situation, always.

This is critical, as loss of credibility and reputation too frequently can push a pharma company virtually out of major international business for good… its current clout, might and financial power, not withstanding.

By: Tapan J. Ray

Unsustainable New Cancer Drug Prices: Resolution Remains A Far Cry

Posted on April 13, 2015 by Tapan Ray

Prices of new drugs for the treatment of life-threatening ailments, such as cancer, are increasingly becoming unsustainable, across the world, and more in India. As articulated by the American Society of Clinical Oncology in 2014, this is primarily due to the fact that their prices are disconnected from the actual therapeutic value of products.

Today, a very large number of poor and even the middle-income patients, who spend their entire life-savings for treatment of a disease like cancer, have been virtually priced out of the patented new drugs market.

The plights of such patients are worse in India and would continue to be so, especially when no trace of Universal Health Care/Coverage (UHC) is currently visible anywhere near the healthcare horizon of the country.

I discussed about the recent decision of the Government for shelving UHC in my recent Blog Post titled, “Would Affordable ‘Modicare’ Remain Just A Pipe Dream In India?”

Irresponsible pricing?

To highlight this point, I shall quote from the research paper titled, “Five Years of Cancer Drug Approvals, Innovation, Efficacy and Costs” published in JAMA Oncology dated April 02, 2015. This report states that just one year’s cost of treatment with a patented new cancer drug now routinely exceeds US$ 100,000. It is much known today that the medical bills for cancer treatment have become the single largest cause of personal bankruptcy, in many countries of the world.

The issue is even more impactful and heart wrenching in India, as with much lower per capita income, compared to the global median, a cancer patient pays around the same price for the same patented drugs in the country. Much talked about Nexavar of Bayer, has been a good example.

The above report underscores, the big global pharma players still vigorously contend to establish that the high cost of drugs is required to support their research and development efforts. However, none would possibly deny the hard data that, when costs and revenues are balanced, the pharmaceutical industry generates high profit margins.

On a lighter vain – the fact that the richest person in India is a pharma player of ‘low price generic medicines’ vindicates this point.

The latest report on pharma R&D costs:

In a ‘Press Release’ of November 18, 2014, Tufts Center for the Study of Drug Development announced, “Cost to develop and win marketing approval for a New Drug is US$2.6 Billion”.

This is around 2.5 times more than its previous estimate published in 2003, which reads as US$802 million.

Although the study is not publicly available, neither has it been peer reviewed, it does reflect that above overall inflation rate, pharma R&D costs are reportedly going up at an annual rate of around 8 percent!

Even if the R&D cost of US$2.6 Billion is accepted as correct to justify high prices of patented drugs, one should note that this figure is applicable only to those types of New Chemical Entities (NCE) that did not receive any outside funding in their developmental process, such as, from the National Institutes of Health (NIH).

It is worth noting, such types of NCEs account for less than one-sixth of the annual new drugs approval in the United States.

Interestingly, Tufts Center receives its funding from the pharmaceutical industry, according to reports.

When is a high cost of medicine defendable?

According to some, high price may be justified, if novel products offer significant benefits to patients giving rise to indirect quantifiable economic value through restoration of health of patients.

This is understandable, as those patented drugs represent significant and well-accepted pharmacological advances over the existing ones, offering novel mechanisms of actions for better treatment value through ‘high-risk-high-cost’ research.

Price is a function of the value that a drug offers:

The price of any drug must be a function of the value that it offers to the patients. Not just the cost of its innovation, irrespective of the fact, whether it is a ‘New-Class (Novel)’ or ‘Next-in Class’ or even a ‘Me-too’ NCE.

The above April 2015 research report published in JAMA Oncology, investigated at length, whether novelty of medications or their relative benefits dictated drug pricing.

In that endeavor, the authors found out that from January 1, 2009, to December 31, 2013, the USFDA approved 51 drugs in oncology for 63 indications. During this period, 9 drugs received more than 1 approved indication.

The study observed:

Of these 51 drugs:

- 21 (41 percent) exert their effect via a novel mechanism of action

- While 30 (59 percent) are next-in-class drugs

Despite this fact, there was no difference in the median price per year of treatment between the 30 next-in-class drugs (US$119, 765) and the 21 novel drugs (US$116, 100).

Global cancer market is soaring high fuelled by astronomical prices:

According to a report that quotes an official of IMS Health, the overall cost for cancer treatments per month in the United States is now US$10,000, up from $5,000 just a year ago. At the same time, according to a 2014 study by the IMS Institute for Healthcare Informatics, global oncology spending has hit US$91 billion in 2013, and despite patent cliff is growing at 5 percent annually.

None likes nightmarish cancer drug-pricing trend:

None likes this worrisome drug-pricing trend, not even in the developed world. God forbid, just one cancer patient in the family can drag even a middle class household to the poverty level, especially in a country like India, where Out of Pocket (OoP) expenses for health hovers around 70 percent and Universal Health Coverage still remains a pipe dream.

Payers, including governments and private insurers, in the top cancer markets such as the United States and Europe, are trying hard to bring the cancer drug prices to a reasonable level through regulatory pressure of various kinds and forms. For example, National Institute for Health and Care Excellence (NICE) in the United Kingdom and the regulators for drug cost-effectiveness in other large European countries, are coming hard on patented new cancer drugs with small improvements in survival time but priced much higher than the existing ones.

Even many private insurers in those countries are now raising questions about the additional value offerings in quantifiable terms, especially for the new cancer drugs and other treatments for life-threatening ailments, such as hepatitis C. To give an example, in late 2014, Express Scripts in America negotiated hard for an exclusive deal with AbbVie to provide its hepatitis C treatment Viekira Pak over Gilead’s exorbitantly priced Sovaldi.

Action by the doctors outside India:

In 2012, doctors at the Memorial Sloan-Kettering Cancer Center reportedly announced in ‘The New York Times’ that their hospital would not be using Zaltrap, a newly patented colorectal cancer drug from Sanofi. This action of the Sloan-Kettering doctors compelled Sanofi to cut Zaltrap price by half.

Unlike in India, where prices of even cancer drugs do not seem to be a great issue with the medical profession, just yet, the top cancer specialists of the American Society of Clinical Oncology are reportedly working out a framework for rating and selecting cancer drugs not only on their benefits and side effects, but prices as well.

In a recent 2015 paper, a group of cancer specialists from Mayo Clinic also articulated, that the oft-repeated arguments of price controls stifle innovation are not good enough to justify unusually high prices of such drugs. Their solution for this problem includes value-based pricing and NICE like body of the U.K.

This Interesting Video from Mayo Clinic justifies the argument.

Tokenism by the Indian Government:

India sent a signal to global pharma players about its unhappiness of astronomical pricing of patented new cancer drugs in the country on March 9, 2012. On that day, the then Indian Patent Controller General issued the first ever Compulsory License (CL) to a domestic drug manufacturer Natco, allowing it to sell a generic equivalent of a kidney cancer treatment drug from Bayer – Nexavar, at a small fraction of the originator’s price.

In this context, it won’t be out of place recapitulating that an article published in a global business magazine on December 5, 2013 quoted Marijn Dekkers, the CEO of Bayer AG saying: “Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western Patients that can afford it.”

Whether, CL is the right approach to resolve allegedly ‘profiteering mindset’ at the cost of human lives, is a different subject of discussion.

Be that as it may, India did send a very strong signal in this regard, which some construe as mere tokenism. Nonetheless, this action of the Indian Government shook the global pharma world very hard, that it would find difficult to forget in a foreseeable future.

Government’s determination to make it happen is still eluding:

The headline of this article would probably invoke an instant negative response from my friends in the industry, an understandably so, expressing… ‘Hey, are you talking against innovation and suggesting one more regulator for the heavily regulated pharma industry?’

I would very humbly say, no…I am suggesting neither of those two, but requesting to give shape to a very important decision already taken by the Government on this issue, in a meaningful way. That decision has been scripted in Para 4.XV of the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) and was notified on December 07, 2012.

On ‘Patented Drugs Pricing’, it categorically states as follows:

“There is a separate committee constituted by the Government Order dated February 01, 2007 for finalizing the pricing of Patented Drugs, and decisions on pricing of patented Drugs would be based on the recommendation of this committee.”

The following long drawn unproductive events would vindicate, beyond even an iota of doubt, that a strong determination to make it happen, by even by the new Government, is still eluding by far.

Is this committee ‘Jinxed’?

To utter dismay of the patients and their well-wishers, the above committee took over six years after it was formed to submit its report.

It recommended ‘Reference Pricing’ for the Patented Drugs in India, after adjusting against India’s Gross National Income and Purchasing Power Parity. The suggested ‘Reference Countries’ were UK, Canada, France, Australia and New Zealand, where there exist a strong public health policy, together with tough bargaining power of the governments for drug price negotiations.

However, our Government found this report useless for various reasons and dissolved the panel. The grapevine in the corridors of power whispers, it could possibly be due to intense pressure from the global pharma players and their powerful lobby groups.

Interestingly, again by the end of 2013, the Department of Pharmaceuticals (DoP) set up a brand new inter-ministerial committee with four representatives each from the Ministry of Commerce and Industry, Ministry of Health and Family Welfare, National Pharmaceutical Pricing Authority (NPPA) and one from the DoP to resolve the same issue of ‘Patented Drugs Pricing’ in India.

Unfortunately, a serious issue of this magnitude has still remained unresolved, even under the new seemingly dynamic Government, till date. There were media reports though, just prior to the Union Budget in January 2015, that ‘the Government may negotiate prices of patented medicines with their manufacturers before allowing pharmaceutical companies to launch them in India.’

The scenario is still far from even sketchy. A lurking fear, therefore, creeps into the minds of many: Is this committee on ‘Patented Drugs Pricing’ jinxed or incompetent or has deliberately been kept non-functional under tremendous external pressure on pricing of patented drugs?

The way forward:

To find an implementable ‘Patented Drug Pricing Model’ soon, the new committee of the Government should consider Pharmacoeconomics Based or Value-Based Pricing (PBP/VBP) Model for the country.

Pharmacoeconomics, as we know, is a scientific model of setting price of a medicine commensurate to the economic value of the drug therapy. Pharmacoeconomics principles, therefore, intend to maximize the value obtained from expenditures towards medicines through a structured evaluation of products costs and disease outcomes.

Thus, PBP/VBP basically offers the best value for money spent. It ‘is the costs and consequences of one treatment compared with the costs and consequences of alternative treatments’.

To the best of my knowledge, the Public Health Foundation of India, spearheaded by well-reputed internationally acclaimed physician – Dr. Srinath Reddy, has requisite expertise in this area and to build on it further, as required by the committee.

This new model would help establishing in India that the price of any drug is always a key function of the value that it offers and not of the so called ‘high cost of innovation’, irrespective of whether it is a ‘New-Class (Novel)’ or ‘Next-in Class’ or even ‘Me-Too’ NCE.

The concept is gaining ground:

The concept of ‘Value-Based Pricing’, has started gaining ground in the developed markets of the world, prompting the pharmaceutical companies generate requisite ‘health outcome’ data using similar or equivalent products.

Cost of incremental value that a product delivers over the existing ones, is of key significance and should always be the order of the day. Some independent organizations such as, the National Institute for Health and Clinical Excellence (NICE) in the UK have taken a leading role in this area.

Conclusion:

Warren Buffet – the financial investor of global repute once said, “Price is what you pay. Value is what you get.” Unfortunately, this dictum is not applicable to the consumers of high priced life saving drugs, such as, for cancer.

Price tags of most of the patented new cancer drugs, do not seem to give any indication that the pharma players believe in this pricing model, even remotely. As JAMA Oncology has established in their recent research study, there is no difference in the median price of per year of treatment between ‘Next-in-Class’ and ‘Novel Drugs’.

Thus far, India has been able to address this issue either through section 3(d) or Compulsory Licensing (CL) provisions of its Patents Act. As the saying goes, ‘proof of the pudding is in the eating’, the net fall-out of these measures has been demonstrably profound. For example, the global pharma giant Gilead has entered into voluntary License (VL) agreements with several local companies to market in India one of the most expensive products of the world – Sovaldi, at a small fraction of its original price of US$1,000/tablet.

That said, effective long-term resolution of ‘Patented Drugs Pricing’ issue, in my view, is long overdue in India, especially for the treatment of life-threatening diseases, such as cancer. This has been necessitated by the fact that in many cases, therapeutic benefits of most of these drugs are not commensurate to their high costs.

The provision for ‘Patented Drugs Pricing’ has already been made in the NPPP 2012, though not implemented, as yet. While working out an implementable mechanism for the same, the new committee of the present Government may consider ‘Pharmacoeconomics Based or Value-Based Pricing (PBP/VBP) Model’ to effectively resolve this crucial issue. The specialized group that will operate this system could be a part of the National Pharmaceutical Pricing Authority (NPPA) of India.

The struggle for life in the fierce battle against dangerous ailments, without having access to new life-saving drugs, has indeed assumed a mind-boggling dimension in India, especially in the absence of Universal Health Coverage. It would continue to remain so, unless the new Government demonstrates its will to act, putting in place a transparent model of patented drugs pricing, without succumbing to any power play or pressures of any kind from vested interests.

The bottom-line is: It has to happen soon…very soon. For patients’ sake.

By: Tapan J. Ray

Would Affordable ‘Modicare’ Remain Just A Pipe Dream In India?

Posted on April 6, 2015 by Tapan Ray

When ‘Universal Health Care/Coverage (UHC)’, considering a critical socio-economic national responsibility’, has been implemented by the Governments in a large number of countries across the world, why has it still not been effectively addressed by the successive Governments in India, garnering adequate resources, at least, for its phased roll-out in the country?

According to published reports, not just all the developed countries of the world, a good number of developing nations too, including some in Africa, have various kinds of UHC mechanism already in place.

Even within the BRIC countries, India is still a laggard in this area.

Health related major national initiatives of this kind and scale, not only effectively addresses the issue of access to affordable healthcare for all, ensuring high quality of public health environment for a healthy society, but also helps improving economic productivity maintaining a healthy work force.

It goes without saying, UHC helps reducing ‘out of pocket expenses’ towards health, significantly.

OECD Health Statistics 2014: How does India compare?

Total health spending of India with only around 4.0 percent of GDP in 2012 was less than half the OECD average of 9.3 percent.

Public health spending usually tends to rise with the economic growth of a nation. However, despite high GDP growth in the past two decades, India ranks well below the OECD average in terms of per capita health expenditure, with spending of only US$ 157 in 2012 (calculated based on purchasing power parity), compared with an OECD average of US$ 3484.

It is indeed an irony that with highest billionaire wealth concentration, India still tops malnutrition chart in South Asia. (I discussed this subject in my blog post of January 26, 2015.)

Public sector usually becomes the main source of health funding:

In nearly all OECD countries, the public sector is the main source of health funding. 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.

In India, health accounted for only 4.8 percent of total government spending in 2012, significantly lower than the 14.4 percent across OECD countries. Out-of pocket costs accounted for 60 percent of health spending in India in 2012, higher than in any other OECD country.

This trend has not improved much even today.

UHC deserves public funding:

In almost all OECD countries, including many developing nations, as well, UHC remains a key area of public health funding.

Interestingly, very often UHC is projected as an idealistic social goal that is within reach of only the prosperous countries of the world. This is indeed a myth, as UHC is in place also in countries like, Bangladesh, Sri Lanka and even Rwanda in Africa, besides South-East Asian countries, such as, Japan, South Korea, Taiwan, Thailand, Singapore and China.

The strong relationship between health and economic performance of a country has now been well established globally.

Many case studies covering both the developed and developing nations, clearly point out that a country’s desirable focus on UHC does not just increase the life expectancy of its people, in general, but also facilitates economic growth in a sustainable way, which India is so keenly working towards.

Expectations for UHC received further boost from the new Government:

Just before the Union Budget Proposal 2015-16, in November 2014, national media reported: “ ‘Modicare’ to introduce free medicines, health insurance for citizens”.

It highlighted that in a major health sector reform, the new Government would ensure that every resident in India has access to affordable healthcare with provisions for free essential medicines while bringing over a dozen of diseases, including cancer and heart ailments, under the ambit of the proposed National Health Assurance Mission.

Another pre-budget media report on December 30, 2014, flashed: “The National Health Assurance Mission (NHAM) set to roll, once PM Modi gives go-ahead”.

It articulated, NHAM that has been in the works since 2011 when the erstwhile Planning Commission’s expert group submitted its report on UHC, is likely to take final shape in 2015. PM Narendra Modi is, however, still to see the presentation.

NHP 2015, bolstered hope for early adoption:

On December 31, 2014, when the present Government was in the midst of a series of major policy announcements for the country, The National Health Policy 2015 (Draft) was also released, further bolstering the hope for early adoption of UHC.

I discussed a related issue in my blog post of March 16, 2015 titled, “With Frugal Public Resource Allocation Quo Vadis Healthcare in India?”

Affordable ‘Modicare’ overshadows even ‘Obamacare’?

Universal Health Care (UHC), as narrated in the National Health Policy (NHP) 2015 (NHP 2015 Draft) of Narendra Modi Government, making health a ‘Fundamental Right’ for Indian Citizens, is indeed profound in its both content and intent.

In this article, I would term the new health policy as ‘Modicare’, just as many others did. If implemented in letter and in spirit, as it has been proposed, NHP 2015 has the potential to overshadow even ‘Obamacare’ of the United States…hands down.

A change in the fundamental narrative:

UHC, as detailed in NHP 2015, changes the fundamental narrative of the country’s approach to extend healthcare services to all Indians, irrespective of caste, creed, income level, age or any other pre-determined and conceivable parameters.

However, for this purpose, Modi Government would need to double the public healthcare expenditure from its current level of less than 1 percent to 2.5 of the GDP. It was also indicated that the required fund would be raised by levying healthcare tax to citizens, directly or indirectly.

Government to assume a key role in healthcare:

Currently, private players are playing dominating role with around 70-80 percent share (around US$ 40 Billion) of total healthcare services domain in the country. In other words, public healthcare services cater to no more than 20 percent of the total market, and mostly are of dubious quality standards.

It is interesting to note, NHP 2015 places the Government as the major provider of quality healthcare services for all. However, an individual would have the right to opt for private facilities, of course by paying significantly more.

The business scenario could change dramatically for private sector:

In NHP 2015, the Government becomes the major provider of UHC services. The private sector healthcare players would then probably require going back to the drawing boards to reorganize their business models.

They may well choose to embrace Public Private Partnership (PP) initiatives related to UHC or decide to turn into to niche players in the high-price private healthcare space or something else, as they would deem appropriate. But surely, they would have to take a step or two back from the current dominant role, where there is virtually no competition from the public sector, even in the mass healthcare market.

NHP 2015, underscores the need for affordable drug prices. Thus, the private players could also face tough pricing pressure, as well, while negotiating for large Government procurement.

Both the above issues, when put together and in perspective, would probably not make the private healthcare players terribly enthused or feel at ease. In that scenario, the Government has its task well cut out, mainly for navigating through tough resistance coming from both the national and international lobby groups, in the process of implementation of ‘Modicare’ in India, of course, if it fructifies any time soon or at all.

No control on quality even in private healthcare services:

In India, besides medicines, there is no quality control on any healthcare services, be it public or private.

As public healthcare services are hardly available to a vast majority of Indian population, common people remain virtually at the mercy of pricing diktats of the private healthcare providers, while availing the same. They usually do not have any inkling for high cost of such services, which generally follow the simple ‘demand and supply’ market economy model.

With the implementation of NHP 2015, the Government being the single largest buyer and provider of both healthcare products and services, would presumably negotiate hard both on quality and prices with the respective suppliers, benefitting the patients immensely.

Moreover, since Indian citizens would be paying for healthcare on an ongoing basis through direct and indirect taxes, NHP 2015 proposes free medicines and diagnostics facilities to all, as and when UHC would roll out.

Quietly comes the dampener:

When the Union Budget 2015-16 raised the national allocation for health only by 2 percent over the previous year, it literally extinguished the hope for healthcare reform in India, any time soon, even in a phased manner.

Central budgetary allocation for this initiative is very important, as UHC has been planned to be funded both by the Union and State Governments in 75:25 ratio.

In this intriguing phase, Reuters came out with the ‘Breaking News’.

On March 27, 2015, it reported, though the health ministry developed NHP 2015 on UHC in coordination with the prime minister’s office last year, along with an expert panel, including an expert from the World Bank, Prime Minister Narendra Modi has asked for a drastic cutback of the ambitious healthcare plan after cost estimates came in at US$18.5 billion over five years. Consequently, this would delay a promise on healthcare made in his well-publicized election manifesto, indefinitely.

Prime minister Modi’s manifesto, ahead of 2014 parliamentary election that brought him to power, accorded “high priority” to the health sector and promised a ‘Universal Health Assurance’ plan. The manifesto also said, previous public health schemes that have been mired in payment delays, had failed to meet the growing healthcare needs of the public, the above report highlighted.

Initially, the new Union Health Ministry reportedly proposed rolling out the system from April 2015, and in October 2014 projected its cost as US$25.5 billion over four years.

By the time the project was presented to Modi in January 2015, the costs were already brought down to US$18.5 billion over five years. Even that revised estimate was considered too much and the program was not approved by the Prime Minister, without assigning any timeframe even for a relook.

The delay in ‘Modicare’ is intriguing:

Inordinate delay in the commencement of implementation process of ‘Modicare’ or UHC in India is rather intriguing, primarily due to the following two basic reasons, besides some others:

- NHP 2015 proposes to fund the scheme through indirect and direct taxation on people, who would be covered by this new health policy.

- Experts, such as, Nobel Laureate Dr. Amartya Sen, in scholarly writings, have established with strong evidences, both from the developed and developing nations, that the national focus on UHC goes well beyond just increase in the life expectancy of the population. Besides many other tangible benefits, UHC helps facilitate sustainable economic growth of a nation significantly, which India is now so keenly working on.

Conclusion:

Over the past couple of decades, despite impressive GDP growth of the country, successive Governments in India have not shown desirable inclination to invest in a comprehensive public healthcare project, like UHC.

As a result, the nation still suffers from public health maladies, such as, grossly inadequate number of doctors, nurses, other paramedics, number of hospital beds and other related infrastructure to cater to even the basic healthcare needs of all Indians.

Ironically, at the same time, either the government fails to spend the paltry budgeted amount because of poor governance, or even that small amount faces a year end drastic budgetary cut from the Ministry of Finance to manage the fiscal deficit target of the year, as happened even in 2014-15.

Considering the series of events that followed the announcement of the draft NHP 2015, it appears, the prospects for affordable ‘Modicare’ in India is rather bleak, as it stands today.

There is also a possibility that in the implementation process of ‘Modicare’ the Government may encounter tough resistance from interested lobby groups, purely for business considerations, as deliberated above.

The real reason for delay of ‘Modicare’ has not come from the horse’s mouth, just yet. Nonetheless, it is certainly one of those much hyped and publicized public promises of the Government that remained unfulfilled, at least in the financial year of 2015-16.

Although one should not try to see ghosts where there isn’t any, the moot question that still keeps haunting today: ‘Would much publicized and well sought-after ‘Modicare’ continue to remain just a ‘Pipe Dream’ in India?’

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

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