Health Care in India: Disrupt The Status Quo

Posted on August 24, 2015 by Tapan Ray

Over decades, we have been trying to ferret out the unfeigned reasons of failure for India to provide access to reasonably affordable, quality health care to all its citizens, but in vain. The quest to know its rationale becomes more intense, as we get to know, even some developing countries in Asia, Africa and Middle East are taking rapid strides to catch up with the health care standards of the developed countries of the world.

In the last few years many such countries, such as, Thailand, Turkey, Rwanda and Ghana, besides China, have successfully ensured access to quality and affordable healthcare to their citizens through well-structured national initiatives. Governments of economically poorer countries, such as, Sri Lanka and Bangladesh too are making rapid progress in this direction. All these commendable health care initiatives are protecting the most vulnerable populations in their respective countries from getting swept away by extreme poverty.

No more than just assurances:

In India, economic and social costs of public health care infrastructural inadequacy, consequent low access and inefficient delivery mechanism keep going north, unabated, barring a small number of States. Over decades, Union Governments of all political dispensations have been making no more than incoherent promises and that too in bits and pieces on reform in public health care services. As on date, no Union Government has articulated a comprehensive pathway to achieve this goal, in tandem with the States, specifying required time-frames and making commensurate budgetary allocations.

Despite the legacy factor, the incumbent Government as well, has not taken any tangible measure in this direction, just yet, besides giving similar in-coherent assurances. Nor has it clearly articulated that providing access to quality health care for all, at a reasonable cost, is one of its top areas of priority in the widely publicized ‘National Development Agenda’.

Agonizing wait continues:

That the Government is now in the process of drafting a National Health Policy to meet the rising demand for sustainable healthcare across the country, was announced by the Secretary – Health & Family Welfare on September 1, 2014. The first draft of The National Health Policy 2015 was placed in the public domain seeking inputs from the stakeholders in January 2015.

That said, agonizing wait of the patients with unfathomable patience still continues for better days of high quality and affordable health care services in India. Palpable feeling of long standing apathy of the decision makers in this area keep lingering simultaneously.

Two critical admissions:

Besides others, following are the two critical and unambiguous admissions in the draft National Health Policy 2015:

“The failure to attain minimum levels of public health expenditure remains the single most important constraint.”

“Over 63 million persons are faced with poverty every year due to health care costs alone, it is because there is no financial protection for the vast majority of health care needs.”

In my article of January 12, 2015 published in this Blog, titled “National Health Policy 2015 Needs Wings To Fly ”, I deliberated on the draft National Health Policy 2015.

No commensurate budgetary provisions:

Despite being aware of the above facts, the Union Budget for 2015-16 allocated just below Rs. 30,000 Crore for health care in India, without unveiling any longer term picture in this regard, not even a ‘broad brush’ one.

To give a perspective regarding how meagre is this budgetary allocation on so critical an area, I quickly add that on August 19, 2015, Prime Minister Modi announced an allocation of Rs.1.25 lakh crore for the development of only Bihar, just prior to the state going for the assembly election.

Untenable reason:

The Finance Ministers reasoned in his budget speech that post devolution of resources to the states following the recommendations of the 14th Finance Commission, the states will address the issue of healthcare in their respective geographical jurisditions.

However, it does not make much sense to me, if at all. This is mainly because, though health is a state subject, it is still a very critical national issue with an overall dismal performance of the country against most of the ‘Millennium Development Goals’.

Only a ‘National Health Plan’ funded jointly and adequately by both the center and the States with clear budgetary provisions and executed immaculately against clearly measurable performance parameters with specifically assigned accountabilities, could salvage the disastrous consequences of further neglect in the health care space of the country.

Not just deployment of financial resources:

The core issue, I reckon, is not just inadequate deployment of financial resources, but continuation of lack of effective governance in the Union Ministry of Health, as well. And, this is indeed a deadly combination. It has been pushing a large number of patients in India embracing abject poverty every year, as admitted in the draft National Health Policy 2015 of the incumbent Government, but with no visible rectifying measures, as on date.

Dangling carrots, as it were, to the patients by different Union Governments in shedloads, such as, ‘free medicines for all’, ‘free health insurance for all’, ‘free diagnostics for all” and what not ‘for all’, has been continuing forever, with patients having no other choices but to have patience in plenty and probably in perpetuity.

When Primary Health Care itself is a critical issue… :

In such deteriorating heath care environment, when primary health care still remains a key issue mostly in rural India, yet another interesting and tentative assurance reportedly comes from no less than the Union Minister of Health himself on August 18, 2015, when he said:

“The government is working both in secondary and tertiary medical sector and I believe that we need to work out a module in PPP mode to lessen the healthcare burden of common man.”

Having said that, when it comes to providing healthcare services to the poor and the needy, the Honorable Minister, expressed his vision in a notably interesting way, which is reportedly as follows:

“How will we be able to give the healthcare facility to helpless is one question that is unanswered…. All stakeholders should answer this question. Enhance the teaching, the training should be at much higher, speed, scale and skill and above all there should be better communication.”

Going beyond just allopathic treatment:

To answer the Health Minister’s above question – “How will we be able to give the healthcare facility to helpless”, one of the many important ways for the Government, I reckon, is to make a decisive and robust move much beyond Allopathic treatment, just as what China has done with its ‘traditional medicines’.

The strengths of traditional Indian medicines need to be properly leveraged with requisite intervention of science and technology and supported by effective awareness building campaigns.

Expand the role of ‘Traditional Medicines’:

Treatment with traditional medicines in India for many well-tried common diseases, has the potential to play an important role in providing access to health care for all, at least in the public health care space of the country, where AYUSH (Ayurveda, Yoga, Unani, Siddha and Homoeopathy) needs to be promoted and encouraged, actively.

It is expected that the new National Health Policy 2015 would have a much greater focus on the traditional systems of medicine – AYUSH, for the treatment of many common diseases.

It appears from various reports, AYUSH system that calls for not very sophisticated technological inputs for diagnosis of common diseases and preparation of medicinal substances, could be made an integral part of the entire healthcare spectrum, starting from the primary health centers.

As a basic preparatory measure to achieve this goal, the rejuvenated ‘Department of AYUSH’ should work, in consultation with the respective domain experts, to chart out an effective and implementable pathway for the development of education and research in Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homeopathy systems.

Need to increase focus on AYUSH:

It has been widely reported that the use of herbs to treat various common ailments is almost universal among many societies, as these are quite often more affordable than buying expensive modern allopathic medicines.

According to the World Health Organization, around 80 per cent of the population of some Asian and African countries currently use traditional medicines to address their health care needs.

I thought the same holds good for India, as well.

However, from a very recent and credible survey report, I find that the above impression is not quite true for India. Penetration of traditional AYUSH systems of treatment, even within the rural population of India, is currently abysmally low.

According to NSSO’s (National Sample Survey Office) Household Expenditures on Health Survey, conducted between January and June 2014, usage of Allopathy for “spells of ailment” is unusually high both in urban and rural India, as follows:

Category	Allopathy Treatment %
Rural Males	90.6
Rural Females	88.7
Urban Males	90.4
Urban Female	91.0

(Source: NSSO 2014-15)

In the absence of adequate access to safe and cost-effective treatments through public health care infrastructure and delivery systems, be it Allopathic or AYUSH, more number of patients are compelled to seek expensive private healthcare services for their “spells of ailment”, as follows:

Category	Private Doctors	Private Hospitals
Male	51.3	24.3
Female	49.7	23.9

(Source: NSSO 2014-15)

AYUSH could play an important role to address such issues, appreciably.

An intriguing recent media report:

On August 19, 2015, I read an intriguing media report that highlights the following two points on apparently a ‘recently overhauled draft’ of the National Health Policy 2015, as follows:

“The National Democratic Alliance (NDA) government plans to increase public investment in health from 1.04 per cent of GDP (gross domestic product) to 2.5 per cent by 2020, with 70 per cent of this being dedicated to primary health care. This target has been set in the overhauled draft National Health Policy that now emphasizes on substantially ratcheting up government investment in public health care facilities across the country.”

“Of the total funds required, the Union government would provide 40 per cent, which could be shored up through a health cess on the lines of an education cess. The cess fund to be used specifically for public health investments could be partly shored up by imposing additional duties on tobacco, alcohol, fatty, salty and sugary products that are considered unhealthy by experts.”

Why is this media report so baffling?

This news really baffled me…a lot, as another more than six month old media report of January 1, 2015 stated just the same on the same two points, exactly quoting the very first draft (not the ‘overhauled’ one) of the National Health Policy 2015 , as follows:

“The draft National Health Policy, 2015 has proposed a target of raising public health expenditure to 2.5 % from the present 1.2% of GDP. It also notes that 40% of this would need to come from central expenditure.”

“The government is also keen to explore the creation of a health cess on the lines of education cess for raising money needed to fund the expenditure it would entail. Other than general taxation, this cess could mobilize contributions from specific commodity taxes such as the taxes on tobacco, and alcohol, from specific industries and innovative forms of resource mobilization.”

Be that as it may, I would urge you to please read both the old and new original media reports on the same draft National Health Policy 2015 and draw your own conclusions, as you deem appropriate.

No change on the ground:

The media reports, such as above, elaborately detailing a significant increase in the health care expenditure as a percentage of GDP in the so called “overhauled” draft of the National Health Policy 2015, gave me an impression that the status quo, at least, in the public health care expenditure scenario has now been disrupted, which in reality has not, at all.

Such reports make patients continue ‘counting colors in the rainbow’, as it were. They keep expecting that getting access to quality and affordable health care for all would soon become a reality, with the Government thinking afresh to raise the public health care expenditure significantly. In reality, the status quo on the ground continues and it can’t be just wished away.

Deserves ‘Infrastructure Status’:

To achieve the basic health care goals of the nation, the Government would require to set the national priorities right. Health care has to be placed at the top rungs of its ‘National Development Agenda’ just as ‘infrastructure’- disrupting the prevailing status quo.

Considering its critical social and economic impact on the progress of the nation, it is about time that ‘Health Care Sector’ be given the ‘infrastructure status’ in India, not just to give a further boost to the industry, but also to make health care products and services affordable to all.

Conclusion:

Making health a ‘Fundamental Right’ for Indian Citizens, as narrated in the draft National Health Policy (NHP) 2015 of Narendra Modi Government, is indeed profound in its both content and intent. However, inordinate delay in its finalization and commencement of implementation process is rather disturbing.

Overhaul and expansion of public health care infrastructure, services and the effective delivery mechanism, undoubtedly, are very necessary requirements for the length and breadth of the country, excepting a very small number of states, which are doing so well in this area.

That said, the real issue is much more deep seated. As the well-known economist Subir Gokarn wrote in one of his articles that in health care “the consequence of inaction is a vicious circle between morbidity and poverty.”

This ‘vicious circle’ has to be broken, sooner. Many developing countries, including much poorer nations, have successfully demonstrated that access to basic quality healthcare can be provided to all, at an affordable cost.

Well-crafted robust national health care plan and policy, which are integrated with similar initiatives of the States should soon be put in place. Effective implementation of a comprehensive, well-integrated and time-bound health care strategic plan, with requisite budgetary allocations and periodic review, assigning specific accountabilities to individuals, are the needs of the hour. Otherwise, the social and economic consequences of the status quo in the health care space of India, would impede the sustainable growth of the nation, seriously.

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.

Leading Through The Challenge Of Change: Is Pharma Leadership Too Archaic?

Posted on June 16, 2014 by Tapan Ray

A recent major global survey titled “Testing The Health Of The Pharmaceutical Industry” has revealed that a sizable majority of executives polled, though believe the sector is in good shape, are concerned of its reputation. Interestingly, 73 percent of respondents believe that pharma companies should become “Genuine Healthcare Providers”.

From many other reports, as well, one gets to know that the overall image of the global pharmaceutical industry, despite the high profile personas being on the saddle, is currently as good or as bad as the same of, say, Tobacco or Alcoholic beverages sectors. Lamentably, the common perception is that the industry is hugely self-serving, problem making, largely exploitative and mostly surreptitious in its dealings.

This perception prevails, despite the fact that pharma industry exists to help mankind fighting against diseases continuously, thus improving the quality of life, quite unlike the other two industries, as indicated above.

Media reports on ignoble acts of this otherwise noble industry keep coming in tidal waves regularly and unabated, from many parts of the world, the latest being the alleged mega bribery scandal involving the large global majors in China, besides many others.

While industry leadership is generally smooth articulators, ‘Talking the Talk’ and ‘Walking the Walk’ slogans in the frontiers of ethics, values and shared goals of many of these much reported companies, are probably used to run expensive global ‘Public Relations (PR)’ campaigns, lobbying and advocacy initiatives in the corridors of power.

What then could possibly be the reason of such perception gap that this great industry is allowing to increase, over a long period of time? Could it be that pharma collective leadership has not been able to adequately adapt itself with the demands of changing healthcare environment and the needs of various nations in this space, across the globe? Is the leadership, therefore, too archaic?

Is Pharma leadership too archaic?

In this context, an interesting article titled, “Healthcare Leadership Must Shift From Cottage Industry To Big Business”, published in one of the latest issues of Forbes, though deals with issues pertaining to the ‘Healthcare Industry’ in America, nevertheless makes some interesting observations, which are relevant to India as well, just as many other countries of the world.

It states that the ‘Healthcare Leadership’ has not kept up with the industry’s evolution to big business over the past 25-30 years – nor does it possess the required change management competencies to effectively lead and rapidly turn-around an adaptive healthcare business model.

As a result, unlike many other knowledge industries, pharma sector is still struggling hard to convert the tough environmental challenges into bright business opportunities.

Inward looking leadership?

From the available details, it appears that today, mostly inward looking pharma leadership tends to ignore the serious voices demanding access to medicines, especially for dreaded diseases, such as, Cancer. Instead of engaging with the stakeholders in search of a win-win solution, global pharma leadership apparently tries to unleash yet another barrage of mundane and arrogant arguments highlighting the importance of ‘Drug Innovation’ and hyping how expensive it is. The leaders do it either themselves or mostly through their own funded trade associations.

In tandem and unhesitatingly, the leadership and/or their lobbyists reportedly exert all types of pressures even to get the relevant laws of sovereign countries amended or framed to further their business interests. The leadership continues to demonstrate its insensitivity to the concerns of a vast majority of patients, other stakeholders and their respective governments, further reinforcing its self-serving image.

Does anyone really talk against ‘Drug Innovation’?

The moot question, therefore, is: Why is this hype? Who on earth really talks against drug innovation? None, I reckon. On the contrary, drug innovation is considered by all as absolutely fundamental in the continuous combat of mankind against a galore of ailments. It should certainly be encouraged, protected and rewarded all the way, following a win-win pathway for providing access to these innovative drugs for all. There is no question about and no qualms on it.

Insensitive comments do matter:

Insensitive comments from the leadership further widens the perception gap. Let me give two examples:

I. Recently while justifying the price of US$ 1000/tab of the Hepatitis C drug Sovaldi of Gilead, the CEO of Sanofi reportedly highlighted, “Unprecedented innovation comes at a price.” This is of course true, but at what price…US$ 1000/tablet? If this comment is not insensitive and outrageous, does it at least not smack of arrogance?

II. Another such insensitivity was expressed through reported proclamation in public of the Global CEO of Bayer, not so long ago, which clarified that: “Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western Patients that can afford it.” Incidentally, the above comment came from the same Bayer whose research chemists synthesized Prontosil, the first antibiotic, in 1932, more than a decade before penicillin became commercially available. Prontosil and subsequent “Sulfa” drugs – the first chemicals used to treat bacterial infections, ushered in a new era for medicine, saving millions of lives of patients globally. At that time, the then Bayer CEO probably did not say that Prontosil was developed “just for the Western Patients that can afford it.”

‘Inclusive Innovation’ for greater access:

Any innovation has to have an impact on life or life-style, depending on its type. Each innovation has a target group and to be meaningful, this group has to have access to the innovative product.

So far as drugs and pharmaceuticals are concerned, the target group for innovation is predominantly the human beings at large. Thus, to make the drug innovation meaningful, the new medicines should be made accessible to all patients across the globe, with social equity, as per the healthcare environment of each country. This underscores the point that drug innovations would have to be inclusive to make meaningful impacts on lives.

New age pharma leadership should find out ways through stakeholder engagement that innovative drugs are made accessible to majority of the patients and not just to a privileged few…fixing a price tag such as US$ 1000/tab for Sovaldi, Sanofi CEO’s above comment notwithstanding.

Leadership lessons to learn from other industries:

Traditional pharma leadership has still got a lot to learn from other industries too. For example, to speed up development of electric cars by all manufacturers, the Co-Founder and Chief Executive Officer Elon Musk of Tesla Motors has reportedly decided to share its patents under ‘Open Source’ sharing of technologies with all others. Elon Musk further reiterated:

“If we clear a path to the creation of compelling electric vehicles, but then lay Intellectual property (IP) landmines behind us to inhibit others, we are acting in a manner contrary to that goal.”

In the important ‘green’ automobile space, this is indeed a gutsy and exemplary decision to underscore Tesla Motor’s concern on global warming.

Why such type of leadership is so rare in the global pharma world? Besides some tokenisms, why the global pharma leaders are not taking similar large scale initiatives for drug innovation, especially in the areas of dreaded and difficult diseases, such as, Cancer, Alzheimer’s, Multiple Sclerosis and Metabolic disorders, just to name a few?

Finding cost-effective ways for even ‘Unprecedented’ drug innovation:

Taking a lesson from the Tesla example and also from my earlier blog post, ‘Open Source’ model of drug discovery, would be quite appropriate in the current scenario not just to promote more innovative and intensive approaches in the drug discovery process, but also to improve profit.

According to available reports, one of the key advantages of the ‘Open Source’ model would be substantial reduction of cost even for ‘Unprecedented’ innovations, besides minimizing the high cost of failures of several R&D projects. These, coupled with significant savings in time, would immensely reduce ‘mind-to-market’ span of innovative drugs in various disease areas, making these medicines accessible to many more patients and the innovation inclusive.

Indian Pharma – promoter driven leadership:

Back home in India, fast growing India Pharma businesses predominantly consist of generic drugs and are family owned. A 2011 study conducted by ‘ASK Investment Managers’ reported, “Family Owned Businesses (FOB)” account for 60 percent of market cap among the top 500 companies in India and comprise 17 percent of the IT Industry, 10 percent of refineries, 7 percent of automobiles and 6 percent of telecom, in the country. In the domestic pharmaceutical sector, almost hundred percent of the companies are currently family owned and run, barring a few loss making Public Sector Units (PSUs).

As most of these companies started showing significant growth only after 1970, we usually see the first or second-generation entrepreneurs in these family run businesses, where the owners are also the business leaders, irrespective of size and scale of operations.

However, it is unlikely that the pharma business owners in India would be willing, just yet, to go for a regime change by hiring professional leaders at the helm of a business, like what the IT giant Infosys announced the week last or Cipla did sometime back. Nevertheless, they all should, at least, attune themselves with the mindset of the new age pharma leaders to reap a rich harvest out of the opportunities, at times veiled as threats.

New leadership to be ethically grounded and engage everyone:

Unlike what is happening with the current pharma leadership today, the new age leadership needs to be ethically grounded and engage all stakeholders effectively in a transparent manner with impeccable governance.

Quoting Dr. Michael Soman, President/Chief Medical Executive of Group Health Physicians, the above Forbes article states that in the new age healthcare leadership model, the leader may not have to have all of the answers to all the problems, but he would always have a clear vision of where we wants to lead the company to.

This new leadership should create a glorious future of the pharma industry together with all other stakeholders by asking: “How can we all be part of healthcare solutions?”

Conclusion:

Unfortunately, despite so much of good work done by the pharmaceutical industry in various fields across the world, including in India, the general public perception on the leadership of the pharma world, is still very negative for various reasons. Pharma industry also knows it well.

Thus, around the close of 2007, the Chairman of Eli Lilly reportedly said publicly what many industry observers have been saying privately for some time. He said: “I think the industry is doomed, if we don’t change”.

The available statistics also paints a grim picture of the traditional big pharma business model going from blockbuster to bust with the mindset of the leadership, by and large, remaining unchanged, barring some cosmetic touch-ups here or there.

The old business model – sprawling organizations, enormous capital investments, and spiraling costs, underwritten by a steady stream of multibillion blockbuster products – is simply a pipe dream today.

Has anything much changed even thereafter? May be not. Thus, to meet the new challenge of change in the healthcare space, doesn’t the new age pharma leadership still look too archaic, at least, in its mindset and governance pattern?

Is it, therefore, not high time for them to come out of the ‘Ostrich Mode’ collectively, face the demanding environmental needs squarely as they are, try to be a part of healthcare solutions of a nation in a win-win way and avoid being perceived as a part of the problem?

Effective leadership learning process has always been eclectic, borrowing ideas and experiences from other disciplines. In case of pharma, it could well be from other knowledge industries, such as, Information Technology (IT), Telecommunications etc. But change it must. Not just for business growth creating shareholders’ value, but for long-term survival too, basking in glory.

By: Tapan J. Ray

For Affordable Healthcare: Synergize Resources Through PPP Models

Posted on February 24, 2014 by Tapan Ray

According to a 2012 study of IMS Consulting, the key factor of significantly high ‘Out of Pocket (OOP)’ expenditure on healthcare in India is that people are pushed into seeking costlier private care services due to imbalanced infrastructure of healthcare workers, medicines and facilities.

Currently, 74 percent of patients in ‘Out-Patient (OP)’ care and 65 percent in ‘in-Patient (IP)’ care seek healthcare in the private channels. In private inpatient care, the average cost of treatment exceeds the average monthly household income at 121 percent for the affording population and 217 percent for the poor population, forcing many families to borrow money or sell assets.

Thus, the affordability challenges for healthcare of the country, as manifested by high OOP spend, is mostly a consequence of a large patient population using the private healthcare channel due to still inadequate availability of public healthcare services.

The situation is looking up:

According to IMS study 2012, currently, on an average about 54 percent of the patients are receiving free medicines from the Government hospitals. In progressive states like, Tamil Nadu, Andhra Pradesh, Maharashtra and Karnataka this number goes up to 85 percent. At the same time, in rural India, which constitutes around 70 percent of the total 1.2 billion populations of India, usage of Government facilities for OP care has increased from 22 percent in 2004 to 29 percent in 2012, mainly due to the impact of National Rural Health Mission (NRHM).

Consequently, this increase will also have significant impact in reducing OOP healthcare expenses of the rural poor.

Medicines constitute highest component of OOP:

Medicines still constitute the highest component of OOP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012. Similarly for IP care, the share of medicines in total OOP has also decreased from 46 percent in 2004 to 43 percent in 2012.

However, still 46 percent of the patients seeking healthcare in public channels had to purchase medicines from private channels. Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation and distribution of those drugs free of cost from Government hospitals and health centers, could address this issue effectively.

Further scope to reduce OOP:

The study highlights that OOP spend could be lowered by 22 percent with:

Improved availability of healthcare facilities at public hospitals and health centers, which can be achieved through effective implementation of “National Health Mission” with higher budgetary allocation.

Improved availability of medicine at the public channels, which is feasible through effective implementation of already announced “Free Medicine” scheme of the Government across the country.

A total reduction of ~40% in overall OOP spend appears to be possible, the study reiterates, when more people would get confidence that public healthcare can meet all their needs.

The roadmap to achieve the goal:

Fundamentally there are five ways to deal with the affordability issue:

1. Reduction in demand: Creating a better health environment,

2. Reduction in costs: Through price control, increased competition, group purchasing power

3. Increase in financial support from government

4. Increased penetration of health insurance programs

5. Increase per-capita income of households

All these five areas, I reckon, would not be difficult to address through well-structured and strategic Public Private Partnership (PPP) initiatives.

It is increasingly recognized that there are many other healthcare challenges, which do not fall exclusively under either the public or the private sectors. These challenges need to be addressed with combined efforts… with well structured Public Private Partnership (PPP) models.

Private sector should play its role:

The private sector is already a major provider of health services in India. Hence, it has the wherewithal to support implementation of Government’s flagship healthcare programs, especially in the area of service delivery, to enhance their overall effectiveness.

As the Universal Health Care (UHC) proposal made by the High Level Experts Group (HLEG) to the Planning Commission of India highlighted, the government would provide the budget, while the private sector would take the responsibility for delivery of healthcare services.

Accountability for PPP should not fall through the systemic cracks:

The above study indicates, the private parties could include individual physicians, commercial contractors, large private and corporate super-specialty hospitals, not-for-profit agencies (NGOs), pharmaceuticals and device manufacturers. Expertise of all these stakeholders should be appropriately leveraged.

It is absolutely essential to make sure that the accountability of the PPP initiatives does not fall through the cracks now existing in the system.

To control costs and ensure required standards are met, all contractual agreements for PPPs, as recommended, must have adequate built-in monitoring and supervision mechanisms of the highest order, assigning clear roles and responsibilities for each party.

Similarly, NGOs need to be given a larger role of monitoring the activities or services rendered at such facilities to make sure the designated institutions are fulfilling their obligations to the public.

Conclusion:

To make healthcare affordable in India, well-strategized PPP initiatives would have critical roles to play.

Thus, instead of resorting to blame games with Government accusing the private sector to be exploitative and the private sector continuously moaning for ‘unfriendly’ business policies of the government, there is a fundamental need for both the constituents working closely together.

As a result, patients will have greater access to quality healthcare at an affordable price, the industry will grow faster in a sustainable way and the government will have its public healthcare obligations fulfilled to a reasonable extent.

Some of the major sectors in India where PPP has been quite successful are infrastructure, telecom, irrigation, power and airports. So, why should it not work for the healthcare sector of the country, as well?

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.

Big Pharma Demands Transparency, Keeping their ‘Black-Boxes’ Tight and Safe?

Posted on October 28, 2013 by Tapan Ray

Pharmaceutical Industry across the globe wants absolute transparency in all government laws, policies, guidelines, transactions and overall governance. They also expect the trade environment should be predictable, non-manipulative and business-friendly. These expectations are indeed well justified and deserve whole-hearted support from all concerned.

However, when similar expectations of transparency are voiced by stakeholders in the Big Pharma business operations, that will have direct or indirect impact on public health interests, one would mostly encounter a well guarded, mammoth and impregnable ‘Black Box’, wearing a ‘Top Secret’ label, with all relevant information kept inside.

Such areas of stakeholders’ interests on Big Pharma could well be related to details, like for example:

Actual break-up of R&D expense details,
Transparency in all clinical trials data for experts review,
Patented products’ pricing rationale,
Enormous total costs of lobbying and related expenses at the global level,
Marketing spend on doctors and other decision makers, directly or indirectly, just to name a few.

Mounting curiosity:

Continuation of such opaque practices for a long time, in turn, sparks the curiosity of the intelligentsia to know more in details, especially, about the areas as stated above.

Various research studies are now coming up, with huge revelations and strong findings in these areas. All of these together indicate, it is about time for the global pharma to also demonstrate transparency in their respective business practices and corporate governances, without further delay.

If it does not happen, probably respective governments in various countries will start acting on these areas of opaque self-serving pharma business practices, with the enactment and more importantly, stricter enforcement of requisite laws and policies. President Obama Administration in the United States has already initiated some important actions in these areas with proposals and laws, like for example, the “Physicians Payment Sunshine Act’ .

The ‘Power Game’:

An interesting article of May 3, 2013 highlighted that the global pharmaceutical industry exerts incredible influence over the prescription medicines across the globe. This power, as many will know, flows from robust political contacts and influences over various important government agencies administrating the entire healthcare system, executed immaculately by expensive lobbying and PR campaigns by their globally integrated trade bodies.

Similar powerful influences also get extended to doctors and the people who matter to further their interests. These well crafted plans are reportedly executed through sponsored or paid opinion-modifying articles, ‘advertorials’, DTC advertisements (wherever legally permitted) and well-organized, seemingly third party, speeches to push the envelopes further.

Most probably, keeping such ongoing practices in mind and coming under intense media pressure, the Medical Council of India (MCI) on December 10, 2009 amended the “Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002″ for the doctors in India. Unfortunately, its implementation on the ground is rather tardy.

The above article also stated, “In fact, in the United States the industry contributes heavily to the annual budget of the U.S. Food and Drug Administration (FDA), which is charged with regulating drugs and devices made by those same companies.”

Avoidable Expenditures:

The paper indicates that in the United States alone the industry associations:

Have 1,100-plus paid lobbyists on Capitol Hill,
Allocated US$ 188 million annual lobbying budget
Doles out around US$ 14 million to political candidates every year

The report also comments, ‘Drug companies spend substantially more on marketing than they do on research and development.’

Influencing opinion against patients’ interest?

The article in the ‘drugwatch’ also states:

“Doctors are persuaded by the pharma companies to attach their names (ghost writing), against financial considerations, to favorable article on a particular drug ensuring that it is published in a well reputable medical journal.”

The author continues that ‘Ghost writings’ are being used to promote numerous drugs to influence concerned stakeholders.

In 1998, a study of the prestigious New England Journal of Medicine found that ‘out of 75 published articles, nearly half were written by authors with financial conflicts. And, worse than this, only two of the articles disclosed interests.’

Richard Smith, former editor of the British Medical Journal, was quoted saying, “All journals are bought – or at least cleverly used – by the pharmaceutical industry.”

Striking facts:

Following are some striking facts as reported in the article, as mentioned above:

“Advertising instead of research: For every US$ 1 spent on “basic research,” Big Pharma spends US$ 19 on promotions and advertising.

Distribution of free drug samples: The United States has 1 pharmaceutical sales representative for every 5 office-based physicians.

Sponsorship of symposiums and medical conventions: Drug and medical device makers spend lavishly on doctors, including covering meals, travel, seminars and conventions that may look more like vacations.”

Pressure on publications:

The paper highlights that large global pharma majors may even pull its advertisements out, if the concerned medical journal will question the accuracy of an ad. Such types of threats have very serious effects on these journals in running their businesses without getting lucrative advertisement dollars from the drug manufacturers.

Making drugs looking good:

The same article highlights:

“Quite often the academics and scientists are hired hands who supply human subjects and collect data according to the instructions from their corporate employers. Sponsors keep the data, analyze, write the papers and decide whether and when and where to submit them for publication. Drug companies have discovered ways to stage-manage trials to produce predetermined outcomes that will put their products in the best light.”

With this strategy even a bad drug can allegedly be made looking good by doing many things, like for example:

Comparing them to a placebo
Comparing them to a competitor’s medication in the wrong strength
Pairing them with a drug that is known to work well
Shortening a trial before any bad results surface
Testing in groups too small to provide valid evidence

Pay-for-delay deals:

A recent report titled, “Top twenty pay-for-delay drugs: How Industry pay-off delay generics” highlights that ‘Pay-for-delay deals’ have forced patients in the United States to pay an average of 10 times more than necessary for at least 20 blockbuster drugs.

Key findings of the analysis on the impact of pay-for-delay deals are as follows:

This practice has held back generic medicines used by patients with a wide range of serious or chronic conditions, ranging from cancer and heart disease, to depression and bacterial infection.

These payoffs have delayed generic drugs for five years, on average, and as long as nine years.

These brand-name drugs cost 10 times more than their generic equivalents, on average, and as much as 33 times more.

These patented drug companies have made an estimated US$ 98 billion in total sales of these drugs while the generic versions were delayed.

Citing example, the paper says, a pay-for-delay deal kept a generic version of the breast cancer drug Tamoxifen off the US market for nine years, while Pfizer made $7.4 billion in sales of its cholesterol-lowering drug Lipitor (atorvastatin) in 2012 alone.

The point to ponder yet again is, why such practices are being surreptitiously carried out for years sacrificing patients’ interest and without the regulators’ strong interventions, in general?

French Government has initiated a probe:

The French Competition Authority is reportedly expected to publish a report on the findings of its inquiry, initiated in February 2013, into the costs and pricing of medicines in France. The report will also look at whether industry practices are interfering with the market entry of generic drugs, including distribution arrangements between drug manufacturers, wholesalers and pharmacists.

An appreciable initiative in America, but why not in India?

There is still a simmering hope. As indicated above, President Obama’s Affordable Care Act reportedly requires that from September 2013, pharmaceutical companies will need to collect data and openly report information on payments, investment interests, ownership and items of value given to doctors and hospitals. Very unfortunately, the Department of Pharmaceuticals of the Government of India has not taken any such steps, as yet, despite the situation turning grave in the country.

The power of pharma lobby in the US:

According to a recent NYT report, in the United States, government health programs are forbidden from rejecting new drugs on cost grounds.

When the issue of drug prices came up as part of President Obama’s ‘Affordable Care Act’ debate, it was summarily rejected in Congress. Simultaneously, a move toward comparative-effectiveness studies, putting rival drugs or treatments through trials to determine which work better, was also decried.

The report highlights, the mere suggestion of the US government throwing its weight around on drug prices stirs up talk of ‘socialism’. The pharma lobby doesn’t have to look far for support in fighting that idea. In the US, the so-called ‘free market’ is trusted to regulate drug prices, despite the reality that the healthcare market is far from transparent, ‘with byzantine pricing mechanisms and costs that vary wildly region-by-region, pharmacy by pharmacy and even patient-by-patient’.

The usual supply/demand/pricing relationships do not apply to drug prices at the consumer level in the US too, just as it has been proved in India.

A large part of creation of this environment is attributed to pharmaceutical and other health-products firms, who reportedly spent a total of US$ 250 million on lobbying last year.

Big Pharma keeps failing credibility tests:

This happened very recently, when The Guardian in July 2013 reported, the pharmaceutical industry has “mobilized” an army of patient groups to lobby against plans to force companies to publish secret documents on drug trials. This is related to the news that the European Medicines Agency (EMA) could force drug companies to publish all Clinical Trial (CT) results in a public database.

The above report says, while some pharma players agreed to share data, important global pharma industry associations have resisted this plan of the EMA. The report continues, a leaked letter from two large pharma trade associations, the Pharmaceutical Research and Manufacturers of America (PhRMA) of the United States and the European Federation of Pharmaceutical Industries and Associations (EFPIA), have drawn out a strategy to combat calls by drug regulators to force companies to publish all CT results.

The strategy reportedly shows how patient groups, many of which receive some or all of their funding from drugs companies, have been drawn into this battle by these Big Pharma lobby groups.

The e-mail reportedly seen by ‘The Guardian’ was from Richard Bergström, Director General of EFPIA, addressed to directors and legal counsel at Roche, Merck, Pfizer, GSK, AstraZeneca, Eli Lilly, Novartis and many smaller companies.

The e-mail leaked by an employee of a pharma company describes a four-pronged campaign that starts with “mobilizing patient groups to express concern about the risk to public health by non-scientific re-use of data”.

Translated, as ‘The Guardian’ reported, “that means patient groups go into bat for the industry by raising fears that if full results from drug trials are published, the information might be misinterpreted and cause a health scare.”

This appears to be another classic case of vested interests working against patients’ interests.

Global lobbying started taking the center stage in India too:

With the above back-drop and lobbying scandals reportedly being surfaced in many other countries, it is about time that India puts its acts together with India-specific stricter disclosure policies, including R&D, Clinical Trials (CTs), Patented Products Pricing, Marketing Practices and Trade Lobbying.

Interestingly, to influence Government policies India’s top lobbying spenders in 2012 (US$ million) were reported as follows:

1	US Chamber of Commerce	136.3
2	National Association of Realtors	41.5
3	Blue Cross / Blue Shield	22.5
4	General Electric	21.1
5	American Hospital Association	19.2
6	National Cable & Telecom. Association	18.9
7	Pharmaceutical Research & Mfrs. of America (PhRMA)	18.5
8	Google	18.2
9	Northrop Grumman	17.5
10	AT&T	17.4
11	American Medical Association	16.5
12	Boeing	15.6

Source: The Center for Responsive Politics (Economic Times, June 4, 2013)

According to the latest lobbying disclosure reports filed with the US Senate and the House of Representatives, at least two dozen American companies and industry associations are reportedly lobbying hard with the US lawmakers on issues in India, which include:

Intellectual Property (IP)
Patent
Market access

Another recent report comments as follows:

“The US Chamber of Commerce has become a portal for dubious reports that claim India’s intellectual property regime is worse than China’s. Such “research” by paid lobbyists and disseminated through the halls of US Congress…”

Hefty fines for illegal practices, yet Black Box remains tight and safe:

In December 2010, Healthcare advocacy group Public Citizen published a report that, for the first time, documented all major financial settlements and court judgments between pharmaceutical manufacturers and the federal and state governments of the United States since 1991.

It says, almost US$ 20 billion was paid out by the pharmaceutical industry to settle allegations of numerous violations, including illegal, off-label marketing and the deliberate overcharging of taxpayer-funded health programs, such as Medicare and Medicaid.

Three-fourths of the settlements and accompanying financial penalties had occurred in just the five-year period prior to 2010. There has been no indication that this upward trend is subsiding.

10 Largest Settlements and Judgments on Big Pharma mis governance:
(Period: Nov. 2, 1010 – July 18, 2012)

	Company	Amount US$ Million	Year	Reasons
1.	GlaxoSmithKline	3, 000	2012	Unlawful promotion, kickbacks, concealing study data, overcharging government health programs
2.	Abbott	1,500	2012	Unlawful promotion, kickbacks
3.	Johnson & Johnson	1,200	2012	Unlawful promotion
4.	Merck	950	2011	Unlawful promotion
5.	Ranbaxy	500	2012	Poor manufacturing practices, falsifying data on FDA applications.
6.	Johnson & Johnson	327	2011	Unlawful promotion
7.	Boehringer Ingelheim	280	2011	Overcharging government health programs
8.	Mylan’s Dey Pharma unit	280	2010	Overcharging government health programs
9.	Elan	203	2010	Unlawful promotion, kickbacks
10.	Johnson & Johnson	158	2012	Unlawful promotion

Conclusion:

All such expenditures, including expensive lobbying and court settlement charges for illegal business practices, as mentioned above, I reckon, are wasteful and avoidable. These are mostly outcomes of self serving measures, shorn of public health interest,

If all these costs are eliminated and actual R&D expenses are reflected, in a transparent manner, there could be significant reduction in the costs of newer innovative drugs, extending their access to billions of patients, across the world.

Thus to help evaluating the innovative drugs with greater transparency, there is an urgent need for the Big Pharma to set examples by voluntarily disclosing the secrets hidden within the ‘Black Boxes’, as deliberated above. These disclosures should be made to the independent experts and the respective Governments under appropriate statutes.

Expectations of transparency in Governance should not, therefore, be restricted just to Government laws, policies and decisions, the industry should reciprocate it too, in equal measures.

To be patient-centric, transparency in governance needs to be a two-way traffic, where pharma industry should volunteer to be an integral part, sooner than later. Otherwise it may be too late for them to avoid harsh interventions of the respective regulators, as the intense pressure from intelligentsia, civil society and media, keep mounting.

That said, the question lingers:

When the ‘Big Pharma is rightly demanding transparency in all areas of public discourse, why are they so reluctant in making their intriguing ‘Black Boxes’ transparent, that too only in areas of public health interest, for fair experts review?

By: Tapan J. Ray

Drug, Patent and Hype: Quo Vadis Pharma Innovation?

Posted on October 21, 2013 by Tapan Ray

A recent research report reveals, though the pharmaceutical companies in the United States since mid 2000 have spent over US$ 50 billion every year to discover new drugs, they have very rarely been able to invent something, which can be called significant improvement over already existing ones.

As per available reports, from the year 2000 to 2010, the US-FDA, on an average, approved just 24 new drugs per year. This number is a sharp decline from the same of 1990, when on an average 31 new drugs were approved per year.

These studies throw open some important questions to ponder:

What is then the real issue with pharma innovation?
Is it declining quality or quantity (number)?
What impacts the patients more?

Quantity vs quality of innovation:

A recent paper explored whether declining numbers of New Molecular Entities (NMEs), approved in the United States (US) each year, is the best measure of pharmaceutical “innovation.”

Thus, studying in detail the NME approvals in the US during 1987 to 2011, the authors proposed the following three distinct subcategories of NMEs:

First-in-class
Advance-in-class
Addition-to-class

This classification was aimed at providing more nuanced and informative insights into underlying trends.

The paper established that trends in NME approvals were largely driven by ‘Addition-to-class’, or “Me too,” drug approvals. However, the good news is that ‘First-in-class’ approvals remained fairly steady over the study period.

Thus I reckon, there should be much greater focus with higher resource deployments for more of ‘First-in-class’ drugs research and development.

To achieve this objective with requisite wherewithal, there will be a need to drastically cut down massive R&D expenditures on “Me-too” types of so called ‘innovative’ drugs. Such drugs, carrying exorbitant price tags, creating a financial burden to the payers, could perhaps help increasing the number of innovations, but certainly not the quality of innovations to meet important unmet needs of patients in a cost effective manner.

Some facts:

In 2010, the healthcare journal Prescire rated 97 new drugs or new indications. Only 4 of these provided any therapeutic advantage over the available existing drugs. Interestingly, 19 others (1 in 5) were approved despite having more harms than benefits.

According to another analysis, “About 1 in 6 new products had more harms than benefits, while more than half of all new products provided no advantages over existing options.”

Further, a different article published in Nature Reviews indicated, “doctors were more likely to rate drugs more than a decade old as transformative.”

Decline in the quality of innovation:

In this context, Dr Mark Olfson of Columbia University and statistician Steven Marcus of the University of Pennsylvania have reportedly established as follows:

“By the 1980s new drugs were less than four times better; by the 1990s, twice as good, and by the 2000s just 36 percent better than a placebo. Since older drugs were much superior to placebo and newer ones only slightly so, that means older drugs were generally more effective than newer ones.”

While even in earlier years, newer patented drugs on an average used to be 4.5 times more effective, as compared to placebo.

The winds of change?

As a result, under the new ‘Affordable Care Act’ of President Obama, “comparative effectiveness research” by an independent research institute could well conclude that older drugs or even cheaper generic equivalents are better than the high priced patented ones, which create fortunes for the innovator pharmaceutical companies at the cost of patients and payers.

The above initiate in ‘Obamacare’, if and when fructifies, will indeed hit the ‘Me-too’ type of drug innovators, especially in the United States, very hard. Nevertheless, is a music to the ear for the private health insurance companies and the patients at large.

A ray of hope?

‘Comparative drug effectiveness analysis’, as stated above, could eventually lead to replacement of newer high priced ‘me-too’ patented drugs by older relatively low priced generic equivalents, at least, for reimbursements.

This will, no doubt, lead to huge profit erosion of the big pharmaceutical players. Hence, extensive lobbying by industry groups in top gear, against this ‘patient-centric’ proposal, is currently on, .

As the new federal healthcare law will find its roots in America, despite strong opposition from the powerful and influential pharma lobby groups, a ray of hope is now faintly seen in otherwise blatantly exploitative and rather cruel drug pricing environment.

Where hype is the key driver:

Despite enormous hype, being created and spearheaded by the Big pharma, on the ‘essentiality’ of most stringent Intellectual Property Rights (IPR) regime in a country with patent laws blatantly in favor of commercial considerations, to enjoy a monopolistic marketing climate with pricing freedom, breakthrough pharma innovations are now indeed rather difficult to come by, as we shall deliberate below.

Reasons for decline:

Many experts believe that the following reasons, among many others, have attributed to the decline in the quality of pharmaceutical R&D output:

Most important drug discoveries for mankind have already been made or in other words, the low hanging fruits of pharma R&D have already been plucked. Now not so easy and rather difficult drug targets are remaining.

In the last decade, most of pharma R&D efforts were reportedly concentrated mainly in four major disease areas: central nervous system, cancer, cardiovascular and infectious diseases.

There is a need now to focus more on poorly understood and more complex therapeutic areas such as, autoimmune diseases or complex diseases related immune system of the body, to meet greater unmet needs of patients.

Clinical trial volunteers are now more difficult to recruit and treat.

More stringent regulatory requirements for clinical trials with studies using much larger number of patients, making the clinical drug development process very expensive.

Could it be worse for Big Pharma?

The evolving situation, though very early in the day now, has the potential to turn much worse for the big pharma and good for the patients, if some key changes take place.

Many industry analysts, across the world, feel that ‘liberal’ patent laws are responsible for acceptance of minor advances over the existing products as patentable with 20 years of market exclusivity.

Thereafter, another ‘liberal’ minded drug regulatory framework allows the pharma players to market such ‘not-so-innovative patented medicines’ aggressively, enabling them to amass astronomical profits in no time at the cost of patients’ interests and payors’ financial burden , as happened in the United States and many other countries recently.

To avoid such trivial innovations the law and policy makers in the industrialized countries may well ponder as follows:

1. Align the country’s ‘Patents Act’ with similar to what Indian law makers had formulated in 2005 to avoid minor and ‘evergreening’ types of patents under section 3(d) of the Act.

2. The clinical research data must establish that the new drugs offer significantly more tangible benefits to the patients than the existing ones.

Denial of patentability for ‘me-too’ innovations and their subsequent regulatory approvals would significantly reduce the drug treatment cost with virtually no adverse impacts on patients, across the world.

If such measures are taken by the developed countries of the world and also the emerging markets, the Big Pharma would be compelled to change their respective business models, making ailing patients of varying financial status, color and creed central to their respective strategic ideation processes.

Otherwise, it is highly unlikely that anything will change for the patients from what we are all experiencing today, at least in the near to medium term.

A possible pathway:

Highly conflicting interests of Big pharma and the patients, should get resolved sooner than later and that again for the interest of both.

Thus, to find a meaningful and generally acceptable solution to this issue, there is a dire need for a much wider global debate. The deliberations, at the same time, should include possibilities of finding ways to avoid huge wasteful expenditures on pharmaceutical R&D for developing new products that offer no significant benefits to the patients over the existing ones. On the contrary, such products burden them with exorbitant incremental drug treatment costs,

The motions of the debate could well be in the following lines:

1. ‘Should United States amend its patent laws by categorically stating that a mere “discovery” of a “new form” of a “known substance” that does not have properties resulting in significant improvement in clinical efficacy, will not be patentable?

2. Shouldn’t the clinical research data must always establish that the new drugs offer significantly more tangible benefits to the patients than already available cheaper equivalents?

The positive outcome of this global debate, if fructifies, will indeed be considered as a paradigm shift in the new world order for all, hopefully.

Unfathomable reluctance:

Despite all these developments, a recent report indicated that the heads of seventeen industry associations of the United States wrote a letter to President Obama complaining, among others, India’s patents regime. This includes the most powerful, yet equally controversial, pharmaceutical lobby group of America.

The letter alleged that the recent policy decisions in India undermine internationally recognized Intellectual Property (IP) standards, which are “jeopardizing domestic jobs” in America and are unacceptable to them.

Though the details of issues were not highlighted in the letter, One concern it specifically expressed that the defeat of Novartis on the Glivec case that challenged Section 3(d) of the Patents Act of India has raised the bar on what can be considered a true innovation for the grant of patent in India.

Though this judgment of the apex court of India was widely acclaimed even globally, American Trade Association Lobby Groups seem to project exactly the opposite, reportedly, driven solely by profit motives of their members and shorn of patients’ interests

Interestingly, an article published in The New England Journal of Medicine, July 17, 2013 also states as follows:

“A patent law that treats incremental innovation and significant innovation in the same way, encourages companies to prioritize less important research over more important research.”

A diametrically opposite viewpoint:

Another school of thought leaders opine, ‘me too’ innovations will continue to remain alive and well. This will happen, even if such new products are starved of oxygen by ‘the tightening purse strings of the eventual customers’. These innovations are sustained by the stronger imperative to avoid clinical failures and to play relatively safe in the space of expensive R&D investments.

They feel that pharma players will continue to focus on to leaner drug discovery and development models to have healthier late-stage product pipelines of such types. In tandem, by cutting costs even more aggressively, as we witness today, they will find space to keep the level of risk optimal for delivering real innovation, when the time comes.

This type of business model, the experts feel is based on the belief that it is far better to acquire a product with very little innovation ensuring that it can hardly fail to be approved by the regulator. Thereafter, the concerned players may figure out ways of how payors will actually pay for it, rather than focusing primarily on acquiring a genuinely innovative ‘First-in-class’ product and then discover it has ‘feet of clay’.

For example, AstraZeneca reportedly invested a little over US$1 billion in two such products in one month: another LABA combination from Pearl Therapeutics and a prescription ‘Fish Oil’ capsule from Omthera Pharmaceuticals.

Conclusion:

Be that as it may, a large number of experts do opine, especially in the light of the above letter of the American Trade Associations that the verdict of the Honorable Supreme Court of India on the Glivec case, though does not serve the business interests of pharma MNCs, definitely signals the triumph of justice over ruthless patient exploitations. It also vindicates that this particular rule of law, as enacted by the Indian Parliament, is indeed for the best interest of the patients of India at large.

This verdict could well be construed as a huge lesson to learn and implement by other like minded countries, across the world.

Having a glimpse at the pharmaceutical innovations, which are often laced by crafty hypes created by expensive PR Agencies of the pharma lobby groups, the global thought leaders do tend to believe, rather strongly, that Section 3(d) of the Patents Act of India would encourage more ‘First-in-class’ innovations, in the long run, benefiting all.

Such a provision, if implemented by many countries, could also help saving significant wasteful expenditures towards ‘Me-too’ type pharma R&D, favorably impacting billions of lives, across the world.

That said, the question keeps haunting – ‘Sans Hype, Quo Vadis Pharma Innovation?

By: Tapan J. Ray

After Mollycoddling China Cracks Down on Pharma MNCs…But Why Now?

Posted on July 22, 2013 by Tapan Ray

In tandem with exemplary growth in the healthcare sector, China has started confronting with some consequential hazards in form of serious regulatory violations involving, besides many others, hospitals, pharmaceutical pricing and food and drug safety, which reportedly include contaminated milk powder and rat meat sold as mutton.

A recent report indicates, there are rampant kickbacks at various stages in the healthcare delivery process. For example, hospitals get kickbacks from drug and device companies, and hospital executives give a portion of these kickbacks to their doctors, involving even the pharma MNCs.

While looking back, in 1997, China took its first healthcare reform measures to mend the earlier not so good practices, when medical services used to be considered just as any other commercial product or services in the country. As a result, staggering healthcare expenses made Chinese medical services unaffordable and difficult to access for a vast majority of the local population.

In April 2009, China, a country with over 1.35 billion population, unfolded a blueprint of a new phase of healthcare reform to provide safe, effective, convenient and affordable healthcare services to all its citizens. An incremental budgetary allocation of US$ 124 billion was made for the next three years to achieve this objective.

The core principle of healthcare reform in China:

The core principle of the new phase of Chinese healthcare reform is to provide basic health care as a “public service” to all its citizens, where more government funding and supervision will play a critical role.

This reform process will ensure availability of basic systems of public health, medical services, medical insurance and medicine supply to the entire population of China. It was also announced that priority would be given to the development of grass-root level hospitals in smaller cities and rural China. The general population will be encouraged to use these facilities for better access to affordable healthcare services. However, public non-profit hospitals would continue to remain one of the important providers of medical services in the country.

Medical Insurance and access to affordable medicines:

Chinese government has planned to set up diversified medical insurance systems to provide basic medical coverage to over 90 percent of the country’s population. In tandem, the new healthcare reform measures will ensure better availability of affordable essential medicines at all public hospitals.

Highly lucrative healthcare business destination:

New Chinese healthcare reform process carries an inherent promise of a large additional spending worth billions of US dollars every year catapulting China as one of the most lucrative healthcare markets of the world.

China’s healthcare spending has reportedly been projected to grow from US$ 357 billion in 2011 to US$1 trillion in 2020.

Consequently, this huge investment has started attracting a large number of global companies of various types, sizes and nationality competing for the right size of their respective pies of profits.

In that process, as the media reports highlight, global pharmaceutical players started fast increasing both their top-line revenue and bottom-line profits from the booming Chinese healthcare market.

Pharma MNCs growing bigger, outpacing local industry:

Another report highlighted, “60% of China’s healthcare stimulus money ended up going to non-Chinese multinationals”. Quoting a recent JP Morgan report the article indicated AstraZeneca, Sanofi, Roche, GlaxoSmithKline, Novo Nordisk, Johnson & Johnson and Pfizer realized over 30 percent growth from their China operations in the early part of 2011.

With the slow down of business in Europe and in the United States, even large global pharmaceutical players like, Bayer, Sanofi, Novartis, Eli Lilly, Novo Nordisk and many more have reportedly invested huge resources for capacity building in sales and distribution channels, local manufacturing and R&D.

Chinese Government woke-up:

Kick starting the reform process and in the face of high level of corruption, Chinese government initiated monitoring the effective management and supervision of healthcare operations of not only the medical institutions, but also the health services, together with basic medical insurance system, in good earnest.

It has been reported, though the public hospitals will receive more government funding and be allowed to charge higher fees for quality treatment, they will not be allowed to make profits through expensive medicines and treatment, which has been a common practice in China.

Violations meted with harsh measures:

Accordingly, with increased vigil in many of these areas since last couple of years, Chinese regulators have started cracking down on the culprits, who are being meted out severe and harsh punishments, consequently.

In 2012, seven public hospital directors were reportedly sent to jails for accepting kickbacks. One corrupt drug regulator was even executed along with two food-company managers involved in a poisoned milk scandal, as the report mentions.

Pharma MNCs targeted for alleged corrupt practices:

As stated above, the new healthcare reform measures include regulation of prices of medicines and medical services, together with strengthening of supervision of health insurance providers, pharmaceutical companies and retailers.

China has now reportedly targeted Multinational Companies (MNCs) for allegedly corrupt practices, including price-fixing, quality issues and consumer rights. This has forced some MNCs to defend their reputations in China where global brands often have a valuable edge over local competitors in terms of public trust.

Recently, in an effort to reduce drug prices, China has initiated probes involving 60 drug manufacturers.

According to a recent report, to make the pricing system for medicines more effective, the regulatory agencies in China are investigating the costs and prices of drug manufacturers including global pharma majors like:

GlaxoSmithKline Plc (GSK)
Merck & Co.
Novartis AG
Baxter International Inc.

The regulators are expected to go through the details of 27 companies for costs and 33 companies for pricing, as per the July 2, 2013 statement posted on China’s National Development and Reform Commission’s (NDRC) Evaluation Center of Drug Pricing.

The report highlights that a possible impetus for the NDRC to probe into pricing and costs of domestic and foreign drug companies was the announcement of China’s National Essential Drugs List in March, which increased the items on the list to 500 from 305.

Clampdown on government spending:

To exercise control on public expenditure towards drugs, the government has also reportedly clamped down on drug spending, placing some foreign drug makers’ products under price controls for the first time.

Since 2011, the Chinese Government has reduced the drug prices four times, including 15 percent reduction earlier in 2013, though the price reduction will be as much as 20 percent for the expensive drugs. At the same time, the government has reduced tax rebates on investments.

Mr. Chen Zhu, Health Minister of China has reportedly expressed that healthcare in China is still too expensive and there is still inadequate control over improper use of drugs in the country.

Another report indicates that Nestlé, Abbott Laboratories and Danone are under investigation in China for “monopolistic” pricing.

Crackdown on bribery and kickbacks:

An article in a similar context mentions that the “Chinese police started an investigation into the Chinese unit of the biggest pharmaceutical manufacturers of UK – GlaxoSmithKline and Senior executives at the unit are suspected of ‘economic crimes”.

On the same subject, a different news report also indicates, a senior Glaxo finance executive in Shanghai and employees in Beijing were detained as part of a corruption investigation.

Recently a Chinese Security Ministry official has reportedly said that GlaxoSmithKline (GSK) executives in China have confessed to bribery and tax violations.

The same report quoting the ministry highlighted that the case against GSK involved a large number of staff and a huge sum of money over an extended period of time, with bribes offered to Chinese government officials, medical associations, hospitals and doctors to boost sales and prices. Concerned executives also used fake receipts in unspecified tax law violations.

Interestingly, earlier in 2012, Global CEO of GSK reportedly admitted that the company made “unacceptable” mistakes in “mismarketing” their antidepressants Paxil and Wellbutrin, which were the subject of a US$ 3 billion settlement with the Justice Department of the United States. At that time the CEO was reported to have said “very sorry” for the incident and “determined that this is never going to happen again.”

Another very recent news highlights that currently China is investigating at least four pharma MNCs as it widens its probe. Chinese enforcers had suggested that these pharma companies were using the same tactics to boost their businesses in the country.

It is now learnt that anti-trust body of China - State Administration for Industry and Commerce (SAIC) has also visited Shanghai office of UCB.

Happening elsewhere too:

Reports of similar alleged malpractices have started surfacing from elsewhere in the world too. For example, in Denmark, a country known for low incidence of corrupt practices, a Norwegian cardiologist was reportedly charged with taking 2 million kronor, or about US$ 350,000, from Merck and Pfizer, despite the fact, Danish law prohibits doctors from accepting money directly from the drug makers. The concerned doctor allegedly used the cash to buy expensive furniture and salmon-fishing holidays in his home country.

Last year, both the Department of Justice and the Securities and Exchange Commission of the United States reportedly charged Pfizer and its subsidiary Wyeth for paying millions of dollars in bribes to officials, doctors and healthcare professionals in Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia during 2001-2007 in violation of the US Foreign Corrupt Practices Act. They had also set hefty fines on the two to settle the charges.

Conclusion:

To effectively address serious and longer term healthcare related issues of the country, the Chinese Government has already started implementing its new healthcare reform measures earnestly. Possibly to maintain equity, stay on course and uproot corrupt practices, they have now started cracking down on the violators in all seriousness, be they are from within the country or beyond its shores.

So far as the pharma MNCs are concerned, such harsh measures are being taken for alleged malpractices probably for the first time ever of this scale and that too with full media glare.

All these measures coupled with pricing pressure and gradual rise of local Chinese players, would make the Chinese market increasingly challenging to pharma MNCs.

Some global players have already started feeling the scorching heat of tough Chinese measures. But China is too powerful a country and too lucrative a market for any entity to flex its muscle to stall the current juggernaut, at least, till the ‘Dragon’ achieves its objective of bringing down public healthcare expenditure to its expectations…Or is there more to the problem than meets the eye?

Thus, the key question emerges:

Why has China, after mollycoddling the pharma MNCs for so many years, now started cracking down on them so hard?

By: Tapan J. Ray

In the Wonderland of Pharma Generics: Some Steps In, Some Steps Over the Line

Posted on June 10, 2013 by Tapan Ray

To scale-up access to healthcare, especially for the marginalized population of any country, greater access to affordable generic drugs will always remain fundamental, besides improving healthcare infrastructure and its delivery mechanism.

Thus, there should be a robust mechanism across the world to facilitate quick entry of cheaper generic equivalents immediately after patent expiry of the original molecule. Any attempt to step over the line, blocking entry of generics surreptitiously by vested interests must be brought to justice sooner. Such measures assume increasing importance, as without availability of newer generics, unmet medical needs of the most vulnerable section of the society cannot be met effectively by any country.

Newer generics will play a critical role even in the Indian context. Besides many other diseases, India is already known as the diabetic capital of the world with an estimated population of 70 million diabetics by 2020.

Greater access to treatment for such chronic ailments and many other dreaded diseases with increasing trend of prevalence, like cancer, multiple sclerosis, Alzheimer and autoimmune disorders, besides common tropical diseases, would also depend on the availability of cheaper and newer generic medicines.

Global innovators stepping into generics business in emerging markets:

Sniffing the growth opportunities in the generics business in an environment of patent cliff, even many hard-nosed innovator companies have been entering into this business either through local acquisitions or through various collaborative arrangements. Examples of some of these companies are as follows:

Novartis entered in generic business with its Sandoz arm
Pfizer with collaborative arrangements in India with Aurobindo Pharmaceuticals (India) in March 2009 and with Strides Arcolab in January 2010
Daiichi Sankyo acquired Ranbaxy of India
GlaxoSmithKline acquired 16 percent stake of Aspen Pharmacare of South Africa, Laboratorios Phoenix in in Argentina and signed a development and commercialization license with Dr. Reddy’s Laboratories (DRL)
Sanofi acquired Shantha Biotechnics and Universal Medicare of India, Zentiva in Czech Republic, Laboratorios Kendrick in Mexico, Medley in Brazil and Helvepharm in Switzerland
Abbott Laboratories acquired the pharmaceutical formulations business of Piramal Healthcare and collaborated with Zydus Cadila

A pro-generic initiative in the west:

Ireland’s parliament has recently passed a bill on pro-generic initiatives. Under this new law pharmacists will be permitted to substitute branded medicines, which have been designated by the Irish Medicines Board (IMB) as interchangeable.

Currently in Ireland, if a specific brand of medicine is prescribed for a patient, the pharmacist must supply only that brand.

Some steps over the line blocking entry of generics:

Interestingly, to continue marketing high priced innovative drugs even after patent expiry, attempts are still being made to block entry of cheaper generics through equally innovative means by stepping over the line.

On April 15, 2013 ‘The New York Times’ reported several such cases of the recent past in the United States. The report gives details of the players involved in each of these cases.

Prompted by these unfortunate incidents, the Federal Trade Commission (FTC) of the US investigated into the matter involving the American drug companies and charged many of them with ‘anticompetitive behavior’. These practices are no longer new and are being followed by some companies over a long period of time.

One of the latest and elegant, yet a very simple strategy reportedly works as follows:

Generic drug makers need samples of patented drugs to generate required regulatory data to obtain marketing approval for launch after the molecules go off patent.
Some innovator companies (named in the report) refuse to sell their patented drugs to generic manufacturers for development of generic equivalents.
Traditionally, the generic drug makers purchase their requirements from the concerned wholesalers.
However, because of safety concerns, drugs are now mostly sold with restrictions on who can buy them.
This compels the generic manufacturers to ask the innovator companies for samples of the patented products.
Unfortunately, mostly they get a negative answer.
In defense, innovator companies explain that they are ensuring any possible improper use of their innovative drugs and also say that no law binds any company to do business with another.

It is alleged that the companies, which most aggressively pursue such measures are those with drugs nearing end of their patent life.

The report indicates that the federal regulators in USA do consider this strategy of creative interpretation of drug safety laws, is illegal.

The news item also indicates that most of these drugs are for serious illnesses like various types of cancers, multiple sclerosis and other rare diseases costing US$ 79,000 to US$ 229,000 a year to patients.

More instances:

Another recent report highlights that European Union’s anti-trust regulator will fine two European pharmaceutical Company and seven other drug makers for blocking generic drugs against “pay-for-delay” deals. Ranbaxy’s name also features in this report.

The report also states that brand name companies, especially in the western world, have been defending “pay-for-delay” deals to extend patents and avoid costly litigation.

It reports that in a typical case, a generic rival may challenge the patent of a brand-name competitor, which then pays the rival a sum of money to drop its challenge. Interestingly, defenders of the practice call it a legitimate means to resolve patent litigation.

A recent debate:

Another interesting development has come up with the pain killer drug OxyContin of Purdue Pharma, which went off patent in April 2013.

Just before patent expiry, Purdue Pharma reportedly reformulated and pulled out its previous version of OxyContin, without abuse-deterrent measures, from the market giving reasons related to safety and efficacy of the drug.

In the notice to the Federal Register, US-FDA reportedly said, “Compared to original OxyContin, reformulated OxyContin has an increased ability to resist crushing, breaking, and dissolution using a variety of tools and solvents.” The regulator, consequently, barred the generic companies from making copies of the older versions of OxyContin without tamper-resistant qualities.

This development, will not allow drug manufacturers like Teva and Impax to make and launch generic equivalents of older versions of OxyContin.

This report also says that similar request has been filed with US-FDA by Endo Health Solutions Inc. for safety of its old painkiller drug Opana, which could force the generic version of the drug manufactured by Impax’s going out of the market in favor of high priced medicine.

On this development the Generic Pharmaceutical Industry in America has reportedly commented, “Blocking generic drugs could mean leaving behind the millions of patients who stand to benefit from access to lower-cost versions of OxyContin”. Some experts have also expressed apprehension that such a precedent would likely to encourage many others to work for similar safety related changes to extend patent life of a product.

Having said that, it appears to be a complex regulatory issue where the possibility of drug abuse has to be carefully weighed against the benefits of low cost generic entry for greater access to patients.

‘Disparaging’ generic drugs:

Reuters , quoting the French Competition Authority, recently reported from Paris that a global pharmaceutical major has “created a doubt over the quality and the safety of generics, without any proven basis.”

As a result, the report says, the French Competition Authority has fined the drug maker 40.6 million euros (US$52.7 million) for “disparaging” generic competition.

The news report further indicates that this decision followed a complaint of Teva Sante filed in 2010 against communication practices of the branded molecule discouraging the use of its generic versions by the doctors.

The innovator company may appeal against this decision.

European Commission found similar practices:

It is interesting to note that in 2009, the European Commission also reportedly found similar practices, including ‘pay-for-delay deals’ which not only adversely impacted competition, but also delayed entry of cheaper generic drugs into the EU markets.

That said, entry of generic drugs is still not speedy in all therapy areas. In this context, a study titled, “Drug patent expirations and the speed of generic entry,” concluded that the generic industry mostly target chronic drug markets with high turnover products and entry of a generic drug is also greatly influenced by the existing branded substitutes in the marketplace.

Importance of the Indian generic drugs:

According to BCC Research, the global generic drug market is expected to grow at a CAGR of 15 percent over five years registering a turnover of US$ 169 billion in 2014.

In this market, India is now the world’s biggest provider of low priced high quality generic medicines to the developing world. The experts opine in various context, the world must ensure that this vibrant hub of generic drugs does not get adversely impacted at any cost for any vested interest.

According to Pharmexcil pharma exports from India stood at an impressive US$ 14.6 billion during 2012-13 compared to US$ 13.2 billion in 2011-12. Indian Ministry of Commerce had unfolded a ‘Strategy Plan’ to take it to US$ 25 Bn by 2013-14, which currently appears to be a very ambitious objective.

Taken together, India and China now reportedly manufacture over 80 percent of the Active Pharmaceutical Ingredients (APIs) of all drugs used in the United States.

As reported by BMJ from 2003 to 2008, in various programs supported by donor organizations like the Global Fund, generic drugs from India contributed over 80 percent of the medicines used to treat AIDS, including 91 percent of pediatric antiretroviral products and 89 percent of the adult nucleoside and non-nucleoside reverse transcriptase inhibitor markets.

In addition, India is considered to be an extremely valuable source of high quality affordable generic drugs for the treatment of cancer, cardiovascular conditions, infections and other non-infectious chronic diseases and conditions.

Allegations against Indian generic drugs:

In a situation is like these, some aberrations within the Indian generic space like, what has happened currently with Ranbaxy are, at times, made universal and blown out of proportion, probably on behalf the interested players to paint the domestic pharmaceutical industry, in general, black. There is no doubt, however, all such cases of fraud on patients, wherever these take place must be brought to justice.

The issue arises when such instances are grossly generalized. For example, an American Enterprise Institute report titled, “Cheap Indian generic drugs: Not such good value after all?” quoting US-FDA, highlights that “Pharmaceutical companies in developing countries are increasingly falsifying data about the quality of their medicines.”

It further alleges, Indian producers in particular strive to reduce costs by substituting cheaper ingredients or skimping on good manufacturing practices, and often patients and well-informed pharmacists alike will overlook the flaws.

The article laments, “Indian companies and regulators simply deny there is any difference in product quality between their products and those made in the West.”

Indian perspective to the allegation:

In response to such allegations a very recent FICCI –Heal 2012 publication titled “Universal Healthcare: Dream or Reality?” articulated as follows:

“Selected reporting of malpractices in healthcare has painted a poor picture of the sector. However, the instances of misconduct/corruption are miniscule compared to public perception.”

Some important campaigns in favor of generics:

However, a publication from ‘Global Pharmacy Canada’ says,

“Generic medications are just as safe and effective as their brand-name equivalents. All the drugs supplied by the pharmacies we deal with are government approved. The manufacturers they buy from follow strict World Health Organization (WHO) standards for Good Manufacturing Practices (GMP). One or several of the following agencies have approved these manufacturing facilities:

Food and Drug Administration (FDA), USA
Medicines Control Agency (MCA), UK
Therapeutic Goods Administration (TGA), Australia
Medicines Control Council (MCC), South Africa
National Institute of Pharmacy (NIP), Hungary
Pharmaceutical Inspection Convention (PIC), Germany
State Institute for the Control of Drugs, Slovak Republic
Food and Drug Administration (FDA), India”

Similarly USFDA comments on generic drugs as follows:

“Generic drugs are important options that allow greater access to health care for all Americans. They are copies of brand-name drugs and are the same as those brand name drugs in dosage form, safety, strength, and route of administration, quality, performance characteristics and intended use.”

“Health care professionals and consumers can be assured that FDA approved generic drug products have met the same rigid standards as the innovator drug. All generic drugs approved by FDA have the same high quality, strength, purity and stability as brand-name drugs. And, the generic manufacturing, packaging, and testing sites must pass the same quality standards as those of brand name drugs.”

The growth drivers:

According to a recent study, following are the key growth drivers of the global generic pharmaceutical industry:

Governments’ and payers’ need to contain rapidly increasing healthcare expenditures

A growing middle-class in emerging markets

Longer life expectancy

A large number of patent expiries for innovator drugs, many of them are mega blockbusters

All these have contributed to the growth of global generic industry from less than US$ 50 billion in 2004 to over $80 billion by 2011 improving global patient-access to medicines significantly.

The report also says, if a more general definition of off-patent medicines is used to define generics, estimates have placed the size of the industry at closer to $150 billion. In the United States alone, generic sales have more than tripled since 2000 and now exceed $51 billion in 2011.

Encourage speedy entry of generics:

Even the Federal Trade Commission (FTC) in a report titled “Generic Drug Entry Prior to Patent Expiration: An FTC Study,” stated as follows:

“Expenditures on pharmaceutical products continue to grow and often outpace expenditures for other consumer products. Pharmaceutical expenditures concern not only consumers, but government payers, private health plans, and employers as well. Generic drugs offer opportunities for significant cost savings over brand-name drug products.”

In its report FTC recommended that generic drugs should not experience delays when entering the market. The Commission also highlighted that both pharmaceutical innovation and cheaper generic drugs bring enormous benefits to patients.

Conclusion:

It is widely recognized that generic medicines play a key role to improve access to medicines to a very large section of population of the world.

Currently, important policy measures taken by the countries like, United States, United Kingdom, Canada, Holland, Denmark and Germany for increasing use of generic drug have started helping them to achieve this objective. At the same time, such policies are helping them to garner significant savings in their respective healthcare cost.

Out of pocket expenditure towards healthcare being around 80 percent in India, un-interrupted availability of high quality affordable generic medicines will help the patients significantly. This should, no doubt, need to be ably supported by the Government by rolling-out much awaited ‘The Universal Healthcare’ proposal of the High Level Expert Group (HLEG) appointed by the Planning Commission of India, sooner.

To improve demand of generic drugs, the prescribers too need to be influenced by the regulators, as has happened in many countries of the world.

Finally, the requirement to maintain high quality standards for generic medicines should be non-negotiable and continuously be kept under careful vigil of the drug regulators.

The complex dynamics of the global generic drugs market are indeed intriguing. It is indeed a ‘Wonderland’, as it were.

Be that as it may, in this wonderland of pharma generics, as some continue to step in and some others continue to step over the line, it is also important to understand how this industry caters to the healthcare needs of billions of poor and needy.

Respective Governments across the world should facilitate speedy entry of more number of newer generic drugs in the market. Simultaneously, the drug regulators will require bringing to justice to all those forces, which will attempt blocking or delaying entry of generics, causing great harm to a vast majority of patients across the world.

By: Tapan J. Ray

Chasing the “Holy Grail”: Reasonably affordable healthcare for all

Posted on April 23, 2012 by Tapan Ray

The Healthcare industry of the world as a whole with a size of several trillion US$ is growing at a fast pace in many countries for various reasons. The industry can be broadly divided into six categories as follows:

Managed Health Care, like the US and many other OECD countries providing ‘Universal Health Coverage’
Medical Equipment and Devices
Pharmaceuticals
Bio-pharmaceuticals
Health Insurance
Health Support Services

Though BRIC countries and other emerging markets are showing promising growth potential, United States of America (USA) still remains the largest entity within the global healthcare industry, followed by European Union (EU) and Japan.

Success requirements:

The most important success requirements for the Global healthcare industry may be listed as follows:

Proficiency in early capturing of the key market trends
Leveraging technology in all areas of business
Continuous product and service innovation
Meeting customer needs even before they feel for the same
Cutting-edge, well-differentiated and well-executed market and marketing strategies
Always in touch with customers with win-win business objectives
Outpacing competition with continuous proactive moves

India:

The success factors for excellence in the healthcare sector of India are no different from other emerging markets. However, some key components of this sectoral space, like optimal infrastructure and efficient delivery mechanisms, especially in the hinterland and rural areas of the country, are still in ‘Work In Progress (WIP)’ stages of development.

Healthcare growth drivers in India:

According to the Investment Commission of India, the healthcare sector of the country has registered a robust CAGR of over 12 percent during the last four years and the trend is expected to be ascending further.

Quite in tandem, other important areas of the healthcare sector have also recorded impressive performance as follows:

Areas	Growth %
Hospitals/Nursing Homes	20
Medical Equipment	15
Clinical Lab Diagnostics	30
Imaging Diagnostics	30
Other Services (includes Training & Education; Aesthetics & Weight loss; Retail Pharmacy, etc.)	40

In addition, from the allocation made for health (2.5 percent of the GDP) in the 12^th Five Year Plan Document of India, it appears that the country will clock a mid to high-teen growth in its healthcare spending during this period, mainly due to the following reasons:

Economy to turn stronger
Massive public healthcare expansion through projects like Universal Health Coverage (UHC), expanded National Rural Health Mission (NRHM), new National Urban Health Mission (NUHM)
Expanded Rashtriya Swasthya Bima Yojojana (RSBY) for Below Poverty Line (BPL) population
Growing middle income households both in the urban and rural areas
Increasing life-style related health issues
Improving penetration of Health Insurance

Key Challenges:

The path ahead will not really be strewn with the beds of roses. The rural healthcare infrastructure will continue to pose a key challenge, at least in the near term, some of the facts being as follows:

A. Status of Rural Healthcare Infrastructure in India:

Infrastructure and Services	Villages [%]
Connected with Roads	73.9
Having any Health Provider	95.3
Having trained birth attendant	37.5
Having ‘Anganwadi’ Worker (Child Care Center in rural areas)	74.5
Having a doctor	43.5

(Source: Ministry of Health and Family Welfare)

B. Hospital Beds per 1000 of population:

Country	Hospital Beds Per 1000 Population
India	> 0.7 [Urban: 2.2 and Rural 0.1]
Russia	9.7
Brazil	2.6
China	2.2
World Average	3.96

(Source: Kshema)

Needs more innovative business models:

Being supported by the monetary and other fiscal incentives of the Government, Tier II and III cities of India will continue to attract more investors for their future growth potential. At the same time, anticipated lower profit margins from these areas, predominantly due to relatively lower affordability threshold of the local population and inadequate health insurance penetration in these areas, is expected to make these healthcare providers to plan for no-frill innovative business models, like much talked about ‘the hub-and-spoke model’, as practiced in many other industries.

Some of the key players of the healthcare industry of India like, Apollo and Fortis have already started expanding into tier-II and tier-III cities of the country, prompted by increasing demand for high-quality specialty healthcare services at reasonably affordable prices in the smaller towns of the country.

Meanwhile, Frontier Lifeline Hospital is reportedly in the process of setting up India’s first Special Economic Zone (SEZ) for healthcare, ‘Frontier Mediville’ at Elavoor, near Chennai.

Areas of caution:

While looking at the big picture, the following factors should also be taken note of:

At least in the short to medium term, it will be unrealistic to expect that India will be a high margin / high volume market for the healthcare sector in general.
The market will continue to remain within the modest-margin range with marketing excellence driven volume turnover.
The government focus on reasonably affordable drug prices may get extended to medical devices / equipment and other related areas, as well.

India is taking strides:

I. According to the Rural Health Survey Report 2009 of the Ministry of Health and Family

Welfare, in rural India during the last five years:

The number of primary health centers has increased by 84 per cent to 20,107.
Around 15,000 health sub-centers and 28,000 nurses and midwives have been added.

II According to RNCOS December, 2010 report:

Indian health insurance market is currently not only the fastest growing, but also second largest non-life insurance segment in the country.
The health insurance premium in India is expected to grow at a CAGR of over 25 per cent from 2009-10 to 2013-14.
By end 2013 India is expected to curve out a share over 3 per cent in the global medical tourism industry with a CAGR in the number of medical tourists to over 19 per cent, during 2011-2013 period.

III. According to PwC, the medical technology industry of India is expected to grow from US$

2.7 billion in 2008 to US$ 14 billion by 2020.

IV. Leveraging cutting edge technology, digital bio-surveillance projects are being initiated to

generate data on the prevalence of various diseases and to create actionable databases on healthcare needs in rural India by several private players like, Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre.

V. Major healthcare players of India like, Manipal Group, Max Healthcare and Apollo are now

reportedly venturing into new segments such as primary care and medical diagnostics.

Job creation  in healthcare sector:

The trend of new job creation in the healthcare sector of India is also quite encouraging, as supported by the following details:

The Healthcare sectors in India recorded a maximum post recession recruitment to a total employee base of 33,66,000 with a new job creation of 2,95,000, according to ‘Ma Foi Employment Trends Survey 2010’.
Despite slowdown in other industries, in the healthcare sector the new job creation continues at a faster pace.
With many new hospital beds added and increasing access to primary, secondary and tertiary / specialty healthcare, among others, the ascending trend in job creation is expected to continue in the healthcare sector of India in the years ahead.

Pharmaceutical Industry:

McKinsey & Company in its report titled, “India Pharma 2020: Propelling access and acceptance realizing true potential” estimated that the Indian Pharmaceutical Market (IPM) will grow to US$ 55 billion by 2020 and the market has the potential to record a turnover of US$ 70 billion with a CAGR of 17 per cent.

Currently India:

Ranks 4th in the world in terms of pharmaceutical sales volume.
Caters to around a quarter of the global requirements for generic drugs.
Meets around 70 per cent of the domestic demand for Active Pharmaceutical Ingredients (API).
Has the largest number of US FDA approved plant outside USA
Files highest number of ANDAs and DMFs
One of most preferred global destinations for contract research and manufacturing services (CRAMS)

Conclusion:

Despite all these, the healthcare Industry of India is still confronted with many challenges while striking a right balance between public health interest and expectations for a high margin ‘free market’ business policies by a large section of players in the healthcare sector of India, across its sub-sectors, both global and local, quite unlike many other emerging sectors, like telecom and IT.

Moreover, pharmaceuticals come under the ‘Essential Commodities Act’ of the country, where government administered pricing is common.

That said, without further delay, all stakeholders, along with the Government, should now join hands, to collectively resolve the critical issues of the healthcare sector of the nation, like:

Creation and modernization of healthcare infrastructure leveraging IT
Universal Health Coverage
Win-win regulatory policies
Creation of employable skilled manpower
Innovation friendly ecosystem
Reasonably affordable healthcare services and medicines for the common man through a robust government procurement and delivery system
Right attitude of all stakeholders to find a win-win solution for all issues, instead of adhering to the age-old blame game in perpetuity, as it were, without conceding each other’s ground even by an inch.

Now is the high time for India, I reckon, to reap a rich harvest from the emerging lucrative opportunities, coming both from India and across the world in its healthcare space. This, in turn, will help the country to effectively align itself with the key global healthcare need of providing reasonably affordable healthcare to all.

In pursuit of this ‘Holy Grail’, the nation has all the success ingredients in its armory, as mentioned above, to play a key role in the global healthcare space, not just as a facilitator to help achieving reasonable corporate business objectives of the healthcare players, but more importantly to alleviate sufferings of a vast majority of the ailing population, living even beyond the shores of India.

By: Tapan J Ray

PILMAN

A Tapan Ray Website

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