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To Curb Pharma Marketing Malpractices in India Who Bells the Cat?

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Bribing doctors by the pharmaceutical companies directly or indirectly, as reported frequently by the media all over the world, including India, to prescribe their respective brand of drugs has now reached an alarming proportion, jeopardizing patients’ interest, seriously more than ever before.

In this context July 4, 2012, edition of  The Guardian reported an astonishing story. Since quite some time many pharmaceutical giants are being reportedly investigated and fined, including out of court settlements, for bribery charges related to the physicians.

In another very recent article titled “Dollars for Docs Mints a Millionaire” the author stated as follows:

“The companies in Dollars for Docs accounted for about 47 percent of U.S. prescription drug sales in 2011. It’s unclear what percentage of total industry spending on doctors they represent, because dozens of companies do not publicize what they pay individual doctors. Most companies in Dollars for Docs are required to report under legal settlements with the federal government.”

In India, deep anguish of the stakeholders over this issue is also being increasingly reverberated day by day. It has also drawn the attention of the patients’ groups, NGOs, media, Government and even the Parliament. An article titled, “Healthcare industry is a rip-off” published in a leading business daily of India states as follows:

“Unethical drug promotion is an emerging threat for society. The Government provides few checks and balances on drug promotion.”

Unfortunately, nothing substantive has been done in India just yet to address such malpractices across the industry in a comprehensive way, despite indictment by the Parliament, to effectively protect patients’ interest in the country.

Countries started taking steps with disclosure norms:

It is interesting to note that many countries have already started acting, even through implementation of various regulatory disclosure norms, to curb such undesirable activities effectively. Some examples are as follows:

USA

The justice department of the U.S has reportedly wrung huge settlements from many large companies over such nexus between the doctors and the pharmaceutical players.

To address this issue meaningfully, on February 1, 2013 the Department of Health and Human Services (HHS) of the United States of America released the final rules of implementation of the ‘Patient Protection and Affordable Care Act (PPACA)’, which is commonly known as the “Physician Payment Sunshine Act” or just the “Sunshine Act”.

This Act has been a part of President Obama’s healthcare reform requiring transparency in direct or indirect financial transactions between the American pharmaceutical industry and the doctors and was passed in 2010 by the US Congress as part of the PPACA.

The Sunshine Act requires public disclosure of all financial transactions and transfers of value between manufacturers of pharmaceutical / biologic products or medical devices and physicians, hospitals and covered recipients. The Act also requires disclosure on research fees and doctors’ investment interests.

The companies have been directed by the American Government to commence capturing the required data by August 1, 2013, which they will require to submit in their first federal reports by March 31, 2014.The first such disclosure report will be available on a public database effective September 30th, 2014.

France:

On December 2011, France adopted a legislation, which is quite similar to the ‘Sunshine Act’. This Act requires the health product companies like, pharmaceutical, medical device and medical supply manufacturers, among others to mandatorily disclose any contract entered with entities like, health care professionals, hospitals, patient associations, medical students, nonprofit associations, companies with media services or companies providing advice regarding health products.

Netherlands:

On January 1, 2012, Netherlands enforced the ‘Code of Conduct on Transparency of Financial Relations’. This requires the pharmaceutical companies to disclose specified payments made to health care professionals or institutions in excess of € 500 in total through a centralized “transparency register” within three months after the end of every calendar year.

UK:

According to Deloitte Consulting, pharmaceutical companies in the UK are planning voluntary disclosures of such payments. One can expect that such laws will be enforced in the entire European Union, sooner than later.

Australia and Slovakia:

Similar requirements also exist in Australia and Slovakia.

Japan:

In Japan, the Japan Pharmaceutical Manufacturers Association (JPMA) reportedly requires their member companies to disclose certain payments to health care professionals and medical institutions on their websites, starting from 2013.

India still remains far behind:

This issue has no longer remained a global concern. Frequent reports by Indian media have already triggered a raging debate in the country on the subject. It has been reported that a related case is now pending before the Supreme Court against a Public Interest Litigation (PIL) for hearing, in not too distant future.

It is worth noting that in 2010, ‘The Parliamentary Standing Committee on Health’ expressed its deep concern stating, the “evil practice” of inducement of doctors by the pharma companies is continuing unabated as the revised guidelines of the Medical Council of India (MCI) have no jurisdiction over the pharma industry.

It was widely reported that the letter of the Congress Member of Parliament, Dr. Jyoti Mirdha to the Prime Minister Dr. Manmohan Singh, attaching a bunch of photocopies of the air tickets to claim that ‘doctors and their families were beating the scorching Indian summer with a trip to England and Scotland, courtesy a pharmaceutical company’, compelled the Prime Minister’s Office (PMO) to initiate inquiry on the subject.

The letter had claimed that as many as 30 family members of 11 doctors from all over India enjoyed the hospitality of the pharmaceutical company on the pretext of ‘Continuing Medical Education (CME)’.

In addition Dr. Mirdha reportedly reiterated to the PMO, “The malpractice did not come to an end because while medical profession (recipients of incentives) is subjected to a mandatory code, there is no corresponding obligation on the part of the healthcare industry (givers of incentives). Result: Ingenious methods have been found to flout the code.”

The report also indicated at that time that the Department of Pharmaceuticals (DoP) is trying to involve the Department of Revenue under the Ministry of Finance to explore the possibilities in devising methods to link the money trails of offending companies and deny the tax incentives on such expenses.

Incidences of such alleged malpractices are unfolding much faster today and are getting increasingly dragged into the public debate where government can no longer play the role of a mere bystander.

Indian Parliamentary indictment for not having a ‘Marketing Code’:

Thereafter, the Department Related Parliamentary Standing Committee on Health and Family Welfare presented its 58th Report on the action taken by the Government on the recommendations / observations contained in the 45th report to both the Lower and the Upper houses of the Parliament on May 08, 2012.

The committee with a strong indictment to the Department of Pharmaceuticals (DoP), also observed that the DoP should take decisive action, without any further delay, in making the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ mandatory so that effective checks could be ensured on ‘huge promotional costs and the resultant add-on impact on medicine prices’.

Unfortunately nothing substantive has happened on the ground regarding this issue as on date.

Ministry of Finance fires the first salvo:

Firing the first salvo closer to this direction, Central Board of Direct Taxes (CBDT), which is a part of Department of Revenue in the Ministry of Finance, has now decided to disallow expenses on all ‘freebies’ to Doctors by the Pharmaceutical Companies in India.

An internal circular dated August 1, 2012, of the CBDT addressed to its tax assessment officers categorically stated that the any expenses incurred by the pharmaceutical companies on gifts and other ‘freebies’ given to the doctors, which do not conform to the revised MCI guidelines, will no longer be allowed as business expenses.

The High Court upheld the CBDT order:

As expected, the above CBDT circular was challenged in the court of law by an aggrieved party.

However, on December 26, 2012, in a significant judgment on the this CBDT circular related to promotional expenses, the High Court of Himachal Pradesh, ordered as follows:

“Therefore, if the assesse satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the Medical Council of India (MCI), then it may legitimately claim a deduction, but it is for the assesse to satisfy the assessing officer that the expense is not in violation of MCI regulations as mentioned above. We, therefore, find no merit in the in the petition, which is accordingly rejected, No costs.”

Unless this High Court order is challenged in the Supreme Court and reversed subsequently, the CBDT circular related to pharmaceutical promotional expenses has assumed a legal status all the way.

Current situation in America post ‘Sunshine Act’:

After enactment of the ‘Sunshine Act’ one gets a mixed response as follows, though these are still very early days of implementation of this new Law in America.

Low awareness level of the ‘Sunshine Act’:

Though this Act was passed in the U.S in 2010, the awareness level is still very low. More than half of the 1,025 physicians interviewed in a recent survey said, they didn’t know that the law requires pharmaceutical and medical device companies to track any payments or “transfers of value” to physicians and teaching hospitals as of August 1, 2013.

The ground reality:

Despite all such measures, current situation in the United States on this issue is still not very encouraging.

The same 2013 survey highlights that many physicians in the United States continue to have some sort of financial relationship with the industry, as follows:

  • Receiving samples (54%)
  • Receiving food and beverage in their workplace (57%),
  • Participating in an “industry-funded program” (48%),
  • Participating in speakers bureau programs (11%)
  • Advisory board programs (10%).

Spin-off benefits of the Law:

It has been reported that the ‘Sunshine Act’ will also provide enormous data on how much the pharmaceutical companies and each of their competitors spend to make the doctors prescribe their drugs from the public data that will be available from September 2014. This will help these companies tracking which type of marketing tools and processes have a linear relationship to generate increased number of prescriptions.

Thus the above report concludes that pharmaceutical players ‘will not stop wooing doctors. They may simply get better at it’, making their marketing expenditure increasingly productive.

However, despite all these, another recent report indicated that after the ‘Sunshine Act,’ some pharma companies have really started cutting back on their payments to doctors and many others have stepped up their efforts in this direction. This augurs a good beginning, if fructifies on a larger scale.

Such Laws could be more impactful in India:

A law like ‘Sunshine Act’ of America, if implemented well in India is expected to have much greater and positive impact. This is mainly due to existence of an effective pharmaceutical pricing ‘watchdog’ in the country in form of the ‘National Pharmaceutical Pricing Authority (NPPA)’ .

When pharmaceutical-marketing expenditures of individual pharma companies, through such public disclosures, will be found to contributing disproportionately to the total expenses of any player, pressure from the regulators and the civil society will keep mounting to bring down the prices of medicines.

An interesting survey in India:

A survey report of Ernst and Young titled, “Pharmaceutical marketing: ethical and responsible conduct”, carried out in September 2011 on the UCMP and MCI guidelines, highlighted the following:

  • Two-third of the respondents felt that the implementation of the UCPMP would change the manner in which pharma products are currently marketed in India.
  • More than 50% of the respondents are of the opinion that the UCPMP may lead to manipulation in recording of actual sampling activity.
  • Over 50% of the respondents indicated that the effectiveness of the code would be very low in the absence of legislative support provided to the UCPMP committee.
  • 90% of the respondents felt that pharma companies in India should focus on building a robust internal controls system to ensure compliance with the UCPMP.
  • 72% of the respondents felt that the MCI was not stringently enforcing its medical ethics guidelines.
  • 36% of the respondents felt that the MCI’s guidelines would have an impact on the overall sales of pharma companies.

The Planning Commission of India expresses its anguish: 

Recently even the Planning Commission of India has reportedly recommended strong measures against pharmaceutical marketing malpractices as follows:

“Pharmaceutical marketing and aggressive promotion also contributes to irrational use. There is a need for a mandatory code for identifying and penalizing unethical promotion on the part of pharma companies. Mandated disclosure by Pharmaceutical companies of the expenditure incurred on drug promotion, ghost writing in promotion of pharma products to attract disqualification of the author and penalty on the company, and vetting of drug related material in Continuing Medical Education would be considered.”

The Ministry of Health may now intervene: 

It was reported by the media just last week that the Ministry of Health (MoH) strongly feels that unethical practices and aggressive promotion of drugs by the pharmaceutical companies through the doctors in lieu of gifts, hospitality, trips to exotic foreign and domestic destinations are adding up to cost of medicines significantly in India. Thus, the MoH is expected to suggest to the Department of Pharmaceuticals for 
mandatory implementation of the ‘Uniform Code of Pharmaceutical Practices (UCPMP)’ by the industry soon.

Conclusion:

Statistics of compliance to UCPMP are important to know, but demonstrable qualitative changes in the ethics and value standards of an organization in this regard should always be the most important goal to drive any pharmaceutical business corporation in India.

The need to announce and implement the UCPMP by the Department of Pharmaceutical, without further delay, assumes critical importance in today’s allegedly chaotic pharmaceutical marketing scenario.

Very unfortunately, the status quo remains unbroken even today. The juggernaut of marketing malpractices keeps moving on unabated. The ‘Cat and Mouse’ game continues as ever. The moot question still remains, who bells the cat? …For patients sake.

By: Tapan J Ray

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

India and China…Practical relevance of ‘Priority Watch List (PWL)’ status in ‘Special 301 Reports’ of America…and the REAL ‘Game Changers’

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Many stakeholders around the world believe that Intellectual Property Rights (IPR) environment in China is far better than what we have in India. Interestingly “2010 Special 301 Report” of the United States of America dated April 30, 2010, paints a totally different picture.

The priority watch list (PWL)’ countries:

The Office of The United States Trade Representative, in the Press Release of ’2010 Special 301 report’, mentioned the names of PWL countries as follows:
“Trading partners on the Priority Watch List (PWL) do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection. China, Russia, Algeria, Argentina, Canada, Chile, India, Indonesia, Pakistan, Thailand, and Venezuela are on the Priority Watch List. These countries will be the subject of particularly intense engagement through bilateral discussion during the coming year”.

It is, therefore, quite clear that so far as IPR environment is concerned both China and India feature in the PWL of America. This totally breaks the perceived myth, as is being very often made out to be by many, that China is a better implementer of IPR than India.
Reasons for featuring in the ‘Priority Watch List’ (PWL):
“2010 Special 301 Report” makes the following comments for China and India being in the PWL of the USA:

China:
1. China will remain on the Priority Watch List in 2010 and will remain subject to Section 306 monitoring. China’s enforcement of IPR and implementation of its TRIPS Agreement obligations remain top priorities for the United States…the overall level of IPR theft in China remains unacceptable.
2. The United States is heartened by many positive steps the Chinese government took in 2009 with respect to these issues, including the largest software piracy prosecution in Chinese history, and an increase in the numbers of civil IP cases in the courts.
3. The United States is also deeply troubled by the development of policies that may unfairly disadvantage U.S. rights holders by promoting “indigenous innovation” including through, among other things, preferential government procurement and other measures that could severely restrict market access for foreign technology and products.
4. China’s IPR enforcement regime remains largely ineffective and non-deterrent.
5. The U.S. copyright industries report severe losses due to piracy in China.
6. Counterfeiting remains pervasive in many retail and wholesale markets.
7. China maintains market access barriers, such as import restrictions and restrictions on wholesale and retail distribution, which can discourage and delay the introduction into China’s market of a number of legitimate foreign products that rely on IPR.
8. China’s market access barriers create additional incentives to infringe products.
9. China adopts policies that unfairly advantage domestic or “indigenous” innovation over foreign innovation and technologies.
10. Draft Regulations for the Administration of the Formulation and Revision of Patent-Involving National Standards, released for public comment in November 2009 by the Standardization Administration of China (SAC), raise concerns regarding their expansive scope, the feasibility of certain patent disclosure requirements, and the possible use of compulsory licensing for essential patents included in national standards.
11. With respect to patents, on October 1, 2009, the Third Amendment to China’s Patent Law, passed in December 2008, went into effect. While many provisions of the Patent Law were clarified and improved, rights holders have raised a number of concerns about the new law and implementing regulations, including the effect of disclosure of origin requirements on patent validity, inventor remuneration, and the scope of and procedures related to compulsory licensing, among other matters. The United States will closely follow the implementation of these measures in 2010.
12. The United States encourages China to provide an effective system to expeditiously address patent issues in connection with applications to market pharmaceutical products.
13. The United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.
14. Generally, IPR enforcement at the local level is hampered by poor coordination among Chinese government ministries and agencies, local protectionism and corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, and inadequate and non-transparent processes. As in the past, the United States will continue to review the policies and enforcement situation in China at the sub-national levels of government.

India:
1. India will remain on the Priority Watch List in 2010.
2. India continues to make gradual progress on efforts to improve its legislative, administrative, and enforcement infrastructure for IPR.
3. India has made incremental improvements on enforcement, and its IP offices continued to pursue promising modernization efforts.
4. Among other steps, the United States is encouraged by the Indian government’s consideration of possible trademark law amendments that would facilitate India’s accession to the Madrid Protocol.
5. The United States encourages the continuation of efforts to reduce patent application backlogs and streamline patent opposition proceedings.
6. Some industries report improved engagement and commitment from enforcement officials on key enforcement challenges such as optical disc and book piracy.
7. However, concerns remain over India’s inadequate legal framework and ineffective enforcement.
8. Piracy and counterfeiting, including the counterfeiting of medicines, remains widespread and India’s enforcement regime remains ineffective at addressing this problem.
9. The United States continues to urge India to improve its IPR regime by providing stronger protection for patents.
10. One concern in this regard is a provision in India’s Patent Law that prohibits patents on certain chemical forms absent a showing of increased efficacy. While the full import of this provision remains unclear, it appears to limit the patentability of potentially beneficial innovations, such as temperature-stable forms of a drug or new means of drug delivery.
11. The United States also encourages India to provide protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products.
12. The United States encourages India to improve its criminal enforcement regime by providing for expeditious judicial disposition of IPR infringement cases as well as deterrent sentences, and to change the perception that IPR offenses are low priority crimes.
13. The United States urges India to strengthen its IPR regime and will continue to work with India on these issues in the coming year.

Responses and reactions in India:
‘Special 301 Reports’ have always been received with skepticism both by the Government of India and the domestic media. Even in the past, PWL status has hardly bothered either India or China to bring in a radical change in the IPR environment of the respective countries, as desired by the USA.

A recent article on the ‘Special 301 Report 2010’ that appeared in ‘Business Standard’, Sunday, May 2, 2010 comments as follows:

“India, in fact, continues to be on the ‘priority watch list’ of the USTR’s ‘Special 301’ report, despite a detailed submission of the intellectual property rights (IPR) compliance measures initiated by it in 2009”.

Many stakeholders in India feel and have also articulated that despite the country taking important steps to improve implementation of IPR within the country, the position of India in ‘Special 301 Reports’ has not changed much since last so many years. India, therefore, envisages no harsh measures by the US Government as a result of being continuously in the PWL of the ‘Special 301 Reports’.

Why then China attracts more Foreign Direct Investments (FDI) than India in the Pharmaceutical space?

In my view, this has got not much to do with the IPR environment in these two countries. The key ‘Game Changers’ for China, I reckon, are as follows:

1. Larger market size due to greater access to medicines:
Access to medicine in China covers 85% of their 1.2 billion population, against 35% of 1.1 billion population of India.

2. Larger market size due to better affordability of medicine:

Around 85% of the population in China is covered through various medicine price reimbursement schemes. Whereas in India around 78% of such expenditure is ‘out of pocket’ expenses. Conversely, not more than 22% of the population is currently covered by drug price reimbursement schemes in India.

3. Strong signals to the Government that ‘innovative companies’ are contributing to the ‘Economic Progress’ of the country:

In such a booming pharmaceutical market scenario, it is essential for the business to keep the government engaged to help create a more ‘innovative pharmaceutical business’ friendly environment, where even a slight improvement in the prevailing IPR conditions will give a significant boost to their business performance.

IMS forecasts that by 2013 China is going to be the third largest pharmaceutical market in the world with an estimated turnover of US $66.7 billion against 13 ranking of India in the same league table, with an estimated turnover of US $15.5 billion.

Similar trend was observed in the immediate past, as well. As reported by IMS MAT September 2009, China registered a turnover of US $24 billion with 27.1% growth against US $7.7 billion with 12.9% growth of India, during the same period. IMS, based on their research data forecasts that during 2008-13 period, China will contribute 36% of the growth of the Asia Pacific Region, against 12% of India.

Under this situation, it appears quite prudent for the ‘innovative pharmaceutical companies’ to send signals to the Chinese Government that they are contributing to the ‘Economic Progress’ of the nation by making significant direct investments, obviously with an expectation to get more business friendly environment in that country.

Recent ‘Healthcare Reform’ in China has further improved its market attractiveness.

Thus the business attractiveness of China as a pharmaceutical market scores much higher than India, fetching more FDIs for them, prevailing IPR environment and PWL status in the ‘Special 301 Reports’ for the country not withstanding.

Conclusion:

Overall IPR environment in India, many experts strongly believe, does not seem to be much different from China, if not a shade better. While interacting with Chinese experts recently in that part of the world, I understand, ‘Data Protection’ is just ‘on paper’ in China, causing a huge issue for the innovator companies in that country. Similar situation prevails so far as the effectiveness of patent enforcement mechanism is concerned, where innovator companies are fighting and required to fight such infringement cases in the provincial level and in so many provinces of the country, posing a huge challenge to the patent holders.

So far as PWL status in ‘Special 301 Reports’ is concerned, it seems to have almost lost its relevance, as both India and China become stronger economies with increasing global dependence on them, consistently registering double digit or near double digit GDP growth.

In china, the pharmaceutical market attractiveness, its size and growth are driven by two key factors as mentioned above, viz, huge domestic market access/ penetration and better affordability of medicines through various effective medicine price re-imbursement schemes, across the country. The recent ‘Healthcare Reform’ of the country has added further momentum to this progress.

So long as India does not take robust policy measures, followed by their effective implementation to address, much ignored, the access and affordability issues of medicines for the common man, the country will continue to be a laggard, compared to China in the race of market leadership within the global pharmaceutical industry.

By Tapan 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.