“Pharmaceutical Marketing Malpractices are Barriers to Healthcare Access” – The Relevance of Government Code of Ethical Marketing Practices in India

Posted on July 23, 2012 by Tapan Ray

Last week (July 19, 2012), most of the leading English business dailies of India reported that much-awaited “Uniform Code of Pharmaceutical Marketing Practices (UCPMP)” authored by the Department of Pharmaceuticals, quite in line with the amended guidelines for the Medical Profession by the Medical Council of India (MCI), is expected to be notified by the government next month for implementation by the entire pharmaceutical industry on a voluntary basis, to start with.

This is only because the draft UCPMP has already specified the following:

“This is a voluntary code of Marketing Practices for Indian Pharmaceutical Industry, for the present and its implementation will be reviewed after a period of six months from the date of its coming into force and if it is found that it has not been implemented effectively by the Pharma Associations/Companies, the Government would consider making it a statutory code.”

This decision of the government is the culmination of a series of events, covered widely by the various sections of the media, at least, since 2004.

The series of events:

Way back, in its January – March, 2004 issue, ‘Indian Journal of Medical Ethics (IJME)’ in the context of marketing practices for ethical pharmaceutical products in India commented: “If the one who decides, does not pay and the one who pays, does not decide and if the one who decides is ‘paid’, will truth stand any chance?” Three years later in 2007, the situation remained unchanged when IJME (April – June 2007 edition) once again reported: “Misleading information, incentives, unethical trade practices were identified as methods to increase the prescription and sales of drugs. Medical Representatives provide incomplete medical information to influence prescribing practices; they also offer incentives including conference sponsorship. Doctors may also demand incentives, as when doctors’ associations threaten to boycott companies that do not comply with their demands for sponsorship.”

‘The Times of India’ also reported the following in its December 15, 2008 edition:

“1. More drugs a doctor prescribes of a specific company, greater are the chances of his/ her winning a car, a high-end fridge or a TV set. 2. Drug companies dole out free trips with family to exotic destinations like Turkey or Kenya. 3. In the West, unethical marketing practices attract stiff penalties. 4. In India, there are only vague assurances of self-regulation by the drug industry and reliance on doctors’ ethics”.

Thus, it has been quite a while from now, serious concerns are being expressed by the media, government and the civil society at large about the means adopted by the pharmaceutical industry in general to get their respective brands prescribed by the doctors.

The discontentment still growing:

Many within the civil society feel, as a result of fast degradation of ethical standards, moral and the noble values, just in many other areas of public life, in the healthcare space as well, the patients in general have started losing their absolute faith and trust both on the medical profession and the pharmaceutical companies, by and large. However, health related multifaceted compulsions do not allow them, either to avoid such a situation or even raise a strong voice of protest against the vested interests.

Growing discontentment of the patients both in the private and public healthcare space in the country, is being regularly and very rightly highlighted by the media all over the world, including reputed medical journals like, ‘The Lancet’ to help arrest this moral and ethical decay with demonstrable and tangible proactive measures.

The issue:

The entire issue arises out of the key factor that the patients do not have any say on the use/purchase of a medicine brand/brands that a doctor will prescribe.

It is generally believed by the civil society that doctors predominantly prescribe mostly those brands, which are promoted to them by the pharmaceutical companies in various ways. Thus, in today’s world and particularly in India, the degree of commercialization of the noble healthcare services, as reported quite often by the media, has reached a new high, sacrificing the ethics and etiquette both in medical and pharmaceutical marketing practices at the altar of unlimited greed, want and conspicuous consumption.

A credible international report: Let me now combine this scenario with a relatively recent report on India dated January 11, 2011, published in ‘The Lancet’, which states in a similar (though not the same) context, as follows:

1. “Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.” 2. “Most people accessed private providers for outpatient care – 78% in rural areas and 81% in urban areas.” 3. “India’s private expenditure of nearly 80% of total expenditure on health was much higher than that in China, Sri Lanka and Thailand.” Considering the above three critical issues of India, as reported in ‘The Lancet’, the need to follow a transparent code of pharmaceutical marketing practices by the entire pharmaceutical industry is of utmost importance.

A global phenomenon:

Since quite some time, this issue has indeed become a global phenomenon. Many countries, including India, are taking note of such examples of socioeconomic decay, that too in the healthcare sector.

Just the other day, the July 4, 2012 edition of ‘The Guardian’, while reporting that GlaxoSmithKline has agreed to pay $3bn (£1.9bn) to settle a series of old criminal and civil investigations by the US authorities into the sales and marketing of some of its best-known products, commented, “GlaxoSmithKline’s bribes are evidence that Big Pharma isn’t working – the inadequacies of relying solely on market forces for our drugs are clearer than ever. This scandal should prompt a rethink.”

The Guardian further commented:

“After all, this has happened before. All the giants – AstraZeneca, Bristol-Myers Squibb, Merck, Eli Lilly, Pfizer – have been investigated for bribery. One of the most notorious episodes of misconduct involved Merck’s anti-inflammatory drug Vioxx, withdrawn in 2004 after the company persistently played down its risk of causing cardiovascular problems.”

The New York Times (NYT) in its April 12, 2010 edition in an article titled, “Data on Fees to Doctors is Called Hard to Parse”, reported that though some big pharmaceutical companies have started disclosing payments to doctors who act as consultants or speakers, many still find it far too difficult to follow the money trail.

NYT reported in the same article, “Senate researchers have found that some prominent doctors at academic medical centers have failed to disclose millions of dollars in drug company payments, despite university requirements that they do so. Federal prosecutors say some payments are really kickbacks for illegal or excessive prescribing”.

General scenario was not much different even in the US until recently:

‘The New England Journal of Medicine’, April 26, 2007 reported that virtually, all doctors in the US take freebies from drug companies, and a third take money for lecturing, and signing patients up for trials. The study conducted on 3167 physicians in six specialties (anesthesiology, cardiology, family practice, general surgery, internal medicine and pediatrics) reported that 94% of the physicians had ‘some type of relationship with the pharmaceutical industry’, and 83% of these relationships involved receiving food at the workplace and 78% receiving free drug samples. 35% of the physicians received re-reimbursement for cost associated with professional meetings or Continuing Medical Education (CME). And the more influential a doctor was, the greater the likelihood that he or she would be benefiting from a drug company’s largess. As a result of some strict regulatory measures, the situation in the US has presumably started changing now.

However, such issues are not related only to physicians. ‘Scrip’ dated February 6, 2009 published an article titled: “marketing malpractices: an unnecessary burden to bear”. The article commented:

“Marketing practices that seem to be a throwback to a different age continues to haunt the industry. Over the past few months, some truly large sums have been used to resolve allegations in the US of marketing and promotional malpractices by various companies. These were usually involving the promotion of off-label uses for medicines. One can only hope that lessons have been learnt and the industry moves on.”

“As the sums involved in settling these cases of marketing malpractices have become progressively larger, and if companies do not become careful even now, such incidents will not only affect their reputation but financial performance too.”

‘The Physician Payment Sunshine Act’:

As the financial relationship between the pharmaceutical companies and the physicians are getting increasingly dragged into the public debate, disclosure of all such payments made to the physicians by the pharmaceutical companies has been made mandatory by the Obama administration, as a part of the new US healthcare reform process.

As a result, ‘The Physician Payment Sunshine Act’, originally proposed in 2009 by Iowa Republican Charles Grassley and Wisconsin Democrat Herb Kohl, became a part of the US healthcare law in 2010. This Act came as an integral part of the healthcare reform initiatives of President Obama to reduce healthcare costs and introduce greater transparency in the system.

The Act requires all pharmaceutical and medical device companies of the country to report all payments to doctors above US $10. As stated earlier, the industry’s gifts to physicians in the US, reportedly, can range from expensive hospitality/dinner in exotic locations, pricey golfing vacations in various places of interest to consulting and speaking fees. As the Act came into force with all its rules in place, failure to provide such details will attract commensurate penal provisions.

Australia sets another example: The Australian Competition and Consumer Commission (ACCC) has decided to grant authorization for five years to Medicines Australia’s 16th edition of its Code of Conduct. The Code sets standards for the marketing and promotion of prescription pharmaceutical products in Australia. The Code provides, among other measures, a standard to address potential conflicts of interest from unrestricted relationships between pharmaceutical companies and the doctors, which may harm the consumers through inappropriate prescriptions. The Code also prohibits the pharmaceutical companies from providing entertainment and extravagant hospitality to doctors with the requirement that all benefits provided by companies should be able to successfully withstand public and professional scrutiny. “The requirement for public disclosure was imposed by the ACCC as a condition of authorization of the previous version of Medicines Australia’s Code and was confirmed on appeal by the Australian Competition Tribunal.” Edition 16 of the Code fully incorporates the public reporting requirements.

“Market malpractices are barriers to healthcare access”: The WHO report of 2006:

A 2006 report of the ‘World Health Organization (WHO) and ‘The Ministry of Health and Family Welfare, Government of India’ titled ‘Options for Using Competition Law/Policy Tools in Dealing with Anti-Competitive Practices in Pharmaceutical Industry and Health Delivery System, states:

“The right to health is recognized in a number of international legal instruments. In India too, there are constitutional commitments to provide access to healthcare. However despite the existence of any number of paper pledges assuring the right to health, access to health remains a problem across the world”.

“There are several factors that are responsible for such deprivation. Market malpractices in general, and in particular, anti-competitive conduct in the pharmaceutical industry and the health delivery system are also among them.”

India Today:

The current scenario in India though not very much different, in terms of seriousness of the issue, from what is being reported in the US, the evolving regulatory standards in the US in this matter are definitely more robust and far superior to what we see in our country.

In India, over 20, 000 pharmaceutical companies of varying size and scale are currently operating. It has been widely reported in the media that the lack of regulatory scrutiny is prompting many of these companies to adapt to ‘free-for-all’ types of aggressive sales promotion and cut-throat marketing warfare involving significant ‘wasteful’ expenditures. Such practices reportedly involve almost all types of their customer groups, excepting perhaps the ultimate consumer – the patients.

It has been well reported that industry’s gifts to physicians in India can range from expensive cars, dinners in exotic locations, pricey vacations at various places of interest of the world and sometimes with the doctors’ families, to hefty consulting and speaking fees.

Unfortunately in India there is no single government agency, which is accountable to take care of the entire healthcare needs of the patients and their well-being, in a holistic way.

The pharmaceutical industry in India, in general, has already expressed its desire for self-regulation of marketing practices, instead of any regulatory compulsion by the Government.

However, many activists groups and NGOs still feel that the bottom-line in this scenario is the demonstrable transparency by the pharmaceutical companies in their dealings with various customer groups, especially the physicians/doctors.

Ministry of Health blinked first by amending the MCI Guidelines:

Being concerned with the media outcry, MCI, in 2009, amended their guidelines of ‘Professional Conduct, Etiquette and Ethics’ for the doctors, clearly articulating what they can and cannot do during their interaction and transaction with the pharmaceutical and related industries.

MCI, through amendment of the “Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation 2002” introduced a new code of conduct for doctors and their professional associations in their relationship with the pharmaceutical and allied industry in India. The amended regulations are known as the “Indian Medical Council (Professional Conduct, Etiquette and Ethics) (Amendment) Regulations, 2009 – Part-I”, which prohibit the doctors from accepting, among many others, any travel facility or hospitality, including gifts of any value, from any pharmaceutical companies.

The Ministry of Health believes that these guidelines, if strictly enforced, would severely limit what the doctors can receive from the pharmaceutical companies in terms of free gifts of wide ranging financial value, entertainments, free visits to exotic locations under various commercial reasons, lavish lunch and dinner etc. in exchange of prescribing specific pharmaceutical brands of the concerned companies.

‘Draft Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ from the DoP:

In May 2011, the Department of Pharmaceuticals (DoP) released a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for the Pharmaceutical Industry of India for comments by the stakeholders.

Some Key features of the DoP Code are as follows:

All promotional material must be consistent with the requirements of this Code.
Brand names of products of other companies must not be used for comparison without prior consent of the concerned companies.
Paid or arranged publication of promotional material in journals must not resemble editorial matter.
The names or photographs of healthcare professionals must not be used in promotional material.
Audio-visual material must be accompanied by all appropriate printed material to ensure compliance of the Code.
Samples should be provided directly to prescribing authority and be limited to prescribed dosages for three patients and in response to a signed and dated request from the recipient. Each sample pack shall not be larger than the smallest pack presented in the market.
Medical and Educational events for doctors should be organized in the appropriate venue in India and all expenses must be incurred only for the events held in India.
Outline of a detailed Complaint Lodging and Redressal mechanism (Committee for Code of Pharma Marketing) to ensure compliance of the marketing code.

The quality of UCPMP:

The UCPMP draft document is well written, balanced and by and large fair. The DoP should indeed be commended on the great work that they have done in putting all details of pharmaceutical marketing practices together in this document in a very comprehensive manner.

Draft UCPMP does not seem to pose any major extra restrictions to the pharmaceutical companies as compared to the MCI guidelines. All concerned should welcome this decision of the DoP, as the same ethical standards will now be applicable to all small, mid-sized and large pharma players, equally. The main focus of the DoP should be in ensuring that all companies across the pharmaceutical industry follow these well-defined standards in their marketing practices and interactions with the doctors.

The draft UCPMP also states that companies must maintain a detailed record of expenditures incurred on these events. It is not quite clear though, as to what extent the pharmaceutical companies are expected to keep these detail records and how long? It is also not clear whether such records have to be maintained on file by the individual companies and supplied to the DoP only on specific requests for the same or all these details are expected to be disclosed on a regular basis to the regulator.

The draft UCPMP indicates that industry associations must upload full details of received complaints on their respective websites. Although this provision could help making the system transparent, the DoP should clearly articulate the details about the specific information that will require to be disclosed in cases of any proven breach of the marketing code.

It is interesting to note that the draft UCPMP states that media reports and published letters alleging that a company has breached the UCPMP will be treated as complaints.

Skepticism with the UCPMP:

Some are quite skeptical about the effectiveness of UCPMP in containing unethical marketing practices within the Indian Pharmaceutical Industry.

This section of people believes, with thousands of pharmaceutical companies operating in India, just self-control with UCPMP without any properly enforceable stringent Government regulation, will simply not work.

Conclusion:

In all countries and India is no exception, pharmaceutical companies, by and large, have been articulating that they try to follow the legal ways and means to maximize turnover of their respective brands. Many of them do follow transparent and admirable stringent self-regulations, stipulated either by themselves or by their industry associations.

‘Self-regulation with pharmaceutical marketing practices’ and ‘voluntary disclosure of payment to the physicians’ by some leading global pharmaceutical companies are laudable steps to address this vexing issue. However, the moot question still remains, are all these good enough for the entire industry in India?

It appears, immediately after the Department Related Parliamentary Standing Committee on Health and Family Welfare presented its 58th Report on the action taken by the DoP 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 DoP has reportedly taken an extra step forward towards this direction last week. The amended MCI regulations for the doctors coupled with the notified UCPMP for the entire pharmaceutical industry should make the financial transactional relationship between the physicians and the pharmaceutical industry in India clean and transparent.

It was also reported last week that Government will soon decide whether there will be an independent industry appointed ‘Ombudsman’ for the enforcement of UCPMP across the country or the implementation of the code will strictly be monitored under the Government control.

It is worth reiterating that the draft UCPMP very categorically warns, in case the self-control with UCPMP by the industry appointed independent ‘Ombudsman’ does not work effectively, the Government would seriously consider making it statutory for the entire pharmaceutical industry of India. This is indeed quite a strong signal from the government to the industry for ‘Shaping Up’… sooner the better.

The popular dictum, especially used by the healthcare industry, “patients’ interest come first”, should not be allowed to be misused or abused, any further, by some unscrupulous elements and greedy profiteers, to squeeze out even the last drop of financial resource from the long exploited population of ailing patients of India, as “Pharmaceutical Marketing Malpractices are Proven Barriers to Healthcare Access”.

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.

The domestic API players are fast losing their dominance in the Indian API market

Posted on October 24, 2011 by Tapan Ray

There are two broad categories of markets for the Active Pharmaceutical Ingredients (API) across the world namely, highly regulated and semi regulated markets. Countries like, USA, Europe and Japan will fall under highly regulated category with high entry barriers for the global API players like, robust Intellectual Property (IP) regime and stringent regulatory requirements to meet their product quality standards. Such an environment prompts a premium price for the APIs. On the other hand, the semi regulated markets, which offer low entry barriers with not so stringent IP and regulatory requirements, attract more number of API players engaging in cut throat price competition.

The top three markets for Active Pharmaceutical Ingredients (APIs) are the US, Europe and Asia Pacific. According to ‘Business Wire (July 13, 2011), the API market in the Asia-Pacific is expected to grow from 6.7% between 2005 and 2010 to 9.6% between 2010 and 2016.

Currently a perceptible shift in API manufacturing is being noticed from the western markets to the emerging markets like, India and China. In the Asia Pacific region Japan and China enjoy the highest market share for API with 42.8% and 20.8%, respectively. India accounts for 10.3%, while South Korea holds an 8.1% share of the market. To avoid price erosions now seen in the US, Indian manufacturers have started exporting more APIs to Japan.

In 2010, contribution of generic API from the Asia-Pacific market was at 71.5%, with patented APIs contributing for the rest, where Japan enjoys a larger share than India and China. While this is the current scenario, many experts in this field contemplates that important players from the regulated markets will soon start making significant inroads in India.

Current API Market in India:
In 2007 the API output value in India was around US $4.1 billion registering a 5 year CAGR of around 19% and ranking fourth in the world API output. According to the Tata Strategic Management Group, Indian API export value is expected to increase to US $12.75 billion in 2012.

Currently in India about 400 different types of APIs are manufactured in around 3000 plants, Ranbaxy Laboratories, Lupin, Shasun Pharmaceuticals, Orchid Chemicals, Aurobindo Pharma, Sun Pharmaceuticals, Ipca Laboratories and USV being the top API manufacturers of the country. Indian domestic companies source almost 50 percent of their API requirements from China, because of lower cost in that country.

In terms of global ranking, India is now the third largest API producers of the world just after China and Italy and by end 2011 is expected to be the second largest producer after China. However, in Drug Master File (DMF) filings India is currently ahead of China.

In addition, India scores over China in ‘documentation’ and ‘Environment, Health and Safety (EHS)’ compliance. All these have contributed to India having around 125 US-FDA approved world class manufacturing facilities, which is considered the largest outside the USA.
Indian API manufacturers are facing a cut throat competition from their Chinese counterparts mainly because of lower costs in China. Considerably higher economies of scale and various types of support that the Chinese API manufacturers receive from their Government are the main reasons for such cost differential.
Growing competition from the regulated markets:
We now observe a new trend within the API space in India. Many of the global innovators and generic companies are keen to enter into the API space of India.

It is known that API manufacturers from the regulated markets are already selling their products in India. However, at present, the numbers of Indian registrations for API applied by some of the large global companies, as reported by ‘Thomson Reuters Newport Horizon Premium’, are quite significant, which are as follows:

1. Novartis, Switzerland: 20 2. Pfizer, USA: 16 3. Sanofi-Aventis, France: 26 4. Teva, Israel: 45 5. MSD, USA: 39 6. BASF: 37 7. DSM: 26 8. EON AG: 16 9. Kyowa Hakko: 23

All these companies, who are entering into the API business space in India, I reckon, have worked out a grand design to compete not only with the low cost domestic API manufacturers, but also with the cheaper imports, particularly from China.

China an emerging global force to reckon with in the API market:

An economy of scale leading to cost leadership is fast establishing China in the global API market as a force to reckon with. Dominant presence of China even in the bulk intermediate category with high level of technical expertise, especially in the fermentation technology, strong manufacturing base, supported by increasing standard of regulatory compliance and better IP protection, as perceived by the global pharmaceutical community, are helping the API manufacturers of China to gradually increase their presence even in the highly regulated markets of the world.

In this emerging scenario, when China throws a tough competition to the API producers of India, developing and manufacturing niche APIs will be the key differentiating factors for the Indian players to maintain their global presence in future, especially with APIs involving non-fermentation technology.

What will then be the competitive edge of these companies in India?
It appears that each of these companies has weighed very carefully the existing strategic opportunities in the API sectors of India, both in terms of technology as well as domestic demand.

Strategic gap in API manufacturing technology:
India, undeniably, is one of the key global hubs in the API space, with competitive edge mainly in ‘non-fermentation technology’ product areas. This leaves a wide and perceptible technological gap in the areas of products requiring ‘fermentation technology‘.

Significant demand from domestic formulations manufacturing:
India is much ahead of China in pharmaceutical formulations manufacturing, especially in the area of exports to the regulated markets like, the USA and EU. Over 25 domestic Indian companies are currently catering to exports demand of the U.S market. However, it is interesting to note that the global manufacturers like Sandoz, Eisai, Watson, Mylan have already set up their formulations manufacturing facilities in India and some more are expected to follow suit over a period of time. Hence, fast growing domestic demand for APIs, especially for exports, will drive the business plan of the global API players for India.

Is the cost arbitrage of India sustainable?
Indian API manufacturers although currently have a cost advantage compared to their counterparts in the regulated market, this advantage is not sustainable over a period of time because of various reasons. The key reason being sharp increase in cost related to more stringent environmental and regulatory compliance, besides spiraling manpower and other overhead costs.

Indian regulatory requirements for the global API players:
To sell their APIs into India, global companies are now required to obtain the following regulatory approvals from the Indian authorities:

1. Foreign manufacturing sites for the concerned products

2. APIs which will be imported in the country

The Drug Controller General of India (DCGI) has stipulated a fee of U.S$1,500 to register the manufacturing premises and U.S$1,000 to register each individual API. Since January 2003, around 1,200 registration certificates have been issued in India. Large number of Indian registrations is attributed by many to the strategic technology gap in India, as stated above, demand of high-quality API for finished formulations required by the regulated markets like the U.S and EU, and relatively cheaper product registration process.

As we see above Teva has gone for maximum number of Indian registrations, so far and most probably selling the APIs to their contract formulations manufacturers in India. Similarly, Schering-Plough and Sanofi, if not Pfizer are perhaps catering to the API demand of their respective formulations manufacturing plants in the country.

Apprehension of counterfeit APIs from the emerging markets:

Growing apprehensions of counterfeit APIs from the emerging markets like, India and China must also be addressed expeditiously by all concerned.

‘The New York Times’ dated August 15, 2011 reported that APIs from India, China and elsewhere now constitute 80% of the active ingredients in US drugs. The US FDA Commissioner Margaret Hamburg was quoted saying, “Supply chains for many generic drugs often contain dozens of middlemen and are highly susceptible to being infiltrated by falsified drugs.”

Conclusion:

Be that as it may, some key global players mainly China, as mentioned above, are now exporting APIs at a much larger scale to India and in that process have started curving out a niche for themselves in the Indian API market. Impressive growth of the domestic pharmaceutical formulations manufacturing market fueled by increasing domestic consumption and exports to the regulated markets, coupled with gradual improvement in the regulatory environment of the country and some global collaboration for the pharmaceutical formulations sourcing from India, are expected to drive the growth of API business of the global players in India. However, the moot question still remains: will the Indian API players be able to thrive or even survive the tough competition from the global players, especially China?

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.

The top two reasons for not seeking medical treatment, across the population, are not poor ‘Access to Healthcare’ in India

Posted on February 7, 2011 by Tapan Ray

“About 1.8 million children under age of 5 die in India every year; 68,000 mothers die due to maternal causes, and 52 million children in the country are stunted”.

“With 70% people living in more than 600,000 villages across rural India, not more than an estimated 30% have access to modern medicine”.

Such sensational headlines could be fallacious at times and may tend to divert the attention of all concerned from some of the key healthcare issues in India. We are indeed too negative in our approach towards a problem solution process. All stakeholders interested in improved healthcare facilities are continuously engaged in an eternal blame game. Government blames the industry and the industry blames the government and so on. In this unfortunate logjam scenario since last several decades, any possibility of breaking it will require active interference by a ‘Cerebral Braveheart”

Moreover, taking advantage of this situation, some groups of people want to progress their vested interests by projecting a ‘Weaker India’ and pontifying with crocodile tears.

Let me now try to explore these issues with hard facts.

Access to ‘round the year’ healthcare facilities in India:

As reported by the Government of India in 2004, access to healthcare infrastructure and services for the rural villages in terms of percentages were as follows (Source:India Health Report 2010) :

Primary Health Centers: 68.3
Sub-Centers: 43.2
Government Dispensaries: 67.9
Government hospitals in urban areas: 79
Private Clinics: 62.7
Private Hospitals: 76.7

I reckon, after implementation of National Rural Health Mission (NRHM) and National Urban Health Mission (NRUM), this situation prevailing in 2004 has improved. However, the scope for further improvement in all these areas still remains very high.

Hence, the shrill voice highlighting around 65% of population of India does not have access to healthcare or medicines seem to be motivated and highly misplaced.

‘Access to Modern Medicines’ is improving in India:

In addition to the above facts, CAGR (volume) of the pharmaceutical industry since the last ten years has been over 10%, leaving aside another robust growth factor being contributed through the introduction of new products, every year. Encouraging growth of the Indian Pharmaceutical Market (IPM), since the last decade, both from the urban and the rural areas certainly signals towards significant increase in the domestic consumption of medicines in India.

IPM maintained a scorching pace of 16.5% growth in 2010. A recent forecast of IMS highlights similar growth trend in 2011, as well.

In addition, extension of focus of the Indian pharmaceutical Industry, in general, to the fast growing rural markets clearly supports the argument of increasing ‘Access to Modern Medicines’ in India. The improvement in access may not exactly be commensurate to the volume growth of the industry during this period, but a major part of the industry growth could certainly be attributed towards increase in access to medicines in India.

For arguments sake, out of this rapid growth of the IPM, year after year consistently, if I attribute just 5% growth per year, for the last nine years over the base year, to improved access to medicines, it will indicate, at least, 57% of the population of India is currently having access to modern medicines and NOT just 35%, as I wrote in this blog earlier.

Unfortunately, even the Government of India does not seem to be aware of this gradually improving trend. Official communications of the government still quote the outdated statistics, which states that 65% of the population of India does not have ‘Access to Modern Medicines’ even today. No wonder, why many of us still prefer to live on to our past.

Be that as it may, around 43% of the population will still not have ‘Access to Modern Medicines’ in India. This issue needs immediate attention of the policy makers and can be resolved with a holistic approach. A robust model of healthcare financing for all socio-economic strata of the population, further improvement of healthcare infrastructure and healthcare delivery systems are the needs of the hour.

So called ‘Diseases of the Poor’ are no longer the ‘Leading Causes of Death’ in India:

Unlike popular belief that diseases of the poor are the leading causes of death in India. The office of the Registrar General of India (2009) highlights a totally different scenario, where the top five leading causes of death in terms of percentage, have been reported as follows:

Cardiovascular diseases: 24.8
Chronic Obstructive Pulmonary Disease (COPD): 10.2
Tuberculosis: 10.1
Cancer: 9.4
Ill-defined conditions: 5.3

Thus the diseases of the developed world like cardiovascular diseases, COPD and Cancer cause over 45% of the total deaths in India, whereas Tuberculosis, Malaria, Diarrheal and digestive diseases cause around 23% deaths in the country.

The key reasons for not seeking medical treatment are not poor ‘Access to Healthcare’:

As I wrote before, the key reasons for not seeking medical treatment across socio-economic status in the country are not predominantly ‘Poor Access to Healthcare ‘. The following data will vindicate this point:

Reason	Rural Poorest 20%	Rural Richest 20%	Urban Poorest 20%	Urban Richest 20%
Financial Reasons	39.7	21.2	37.2	2.3
Ailments not considered serious	27.2	45.6	44.3	84.4
No Medical facilities	12.8	10.0	1.6	_
Others	20.3	23.2	16.9	13.3
Total	100	100	100	100

(Source: India Health Report 2010)

Conclusion:

Thus even if the government ensures ‘Access to Healthcare’ to 100% of the population of India by taking all drastic infrastructural, policy and delivery measures, still a large section of the population both rich and poor and from urban as well as rural India will not seek medical treatment assuming many of their ailments are not serious enough. Such a situation will definitely not materially improve the healthcare scenario of India, adversely affecting the economic progress of the country by a robust productive population.

This necessitates continuous disease awareness campaigns with active participation of all stakeholders, including the civil society across the country, sooner rather than later, in tandem with all measures as will deem necessary.

By: Tapan J Ray

Non-Communicable Diseases (NCD) are hitting the poor even harder, economically: a time to ponder and a time to act

Posted on December 6, 2010 by Tapan Ray

November 11, 2010 edition of ‘The Lancet’ published an article titled, “Raising the priority of preventing chronic diseases: a political process”. The article enumerated the following:

“Chronic diseases, especially cardiovascular diseases, diabetes, cancer, and chronic obstructive respiratory diseases, are neglected globally despite growing awareness of the serious burden that they cause. Global and national policies have failed to stop, and in many cases have contributed to, the chronic disease pandemic. Low-cost and highly effective solutions for the prevention of chronic diseases are readily available; the failure to respond is now a political, rather than a technical issue.”

The situation is no different in India. The disease pattern in India is also showing a perceptible shift from age old ‘Infectious Diseases’ to ‘Non-infectious Chronic Illnesses’. As reported by IMS, incidence of chronic ailments in India has increased from 23 percent in 2005 to 26 percent in 2009. It has been estimated that chronic illnesses will be the leading cause of both morbidity and mortality by the next decade.

As a consequence of such findings healthcare needs and systems of the country should need to undergo a paradigm shift with the emergence of a carefully planned concept of ‘Preventive Healthcare’ in the country.

It is a myth that non-infectious illnesses are more prevalent in higher socio-economic strata:
There is a common perception that non-communicable diseases are more prevalent within higher socio-economic strata of the society, a national survey done in India shows that diseases related to misuse of alcohol and tobacco are higher in the poorest 20 percent quintile of our society.

Current healthcare system in India:

Currently the medical alleviation of the acute symptoms and the disease that a particular patient is suffering from is the key concern of all concerned starting from the doctor to the patient and his/her family. The process of the medical treatment revolves round symptom relief, diagnostic measures and appropriate treatment protocols and procedures conforming to the proper diagnosis of the ailments. While addressing the acute problems of the patients’ ailments is very important, proper assessment of the underlying diseases or evaluation of their risk factors do not get as much or no attention. As a result the important advice on preventive healthcare from the doctor properly highlighting its importance is not available to most of the patients.

Keeping such common practices in view and noting that ‘Preventive Healthcare’ is significantly different from ‘Curative Healthcare’, developing an appropriate protocol for ‘Preventive Healthcare’ has become the crying need of the hour.

‘Preventive Healthcare’ in India should be made mandatory:

The ‘Preventive Healthcare’ system in India is in its very nascent stage. If appropriate measures are taken in this area, like learning to reduce the impact of stress, avoiding sedentary life style, taking healthy diet, avoidance of tobacco and alcohol consumption, leading healthy sex life etc., it can in turn help the population to remain disease free and thereby to improve their respective work productivity in a very significant way.

Taking all these points into consideration, through policy initiative, The Medical Council of India (MCI) should make ‘Preventive Healthcare’ an integral part of each interaction of a patient with a doctor through appropriate regulations.

Chronic illnesses will significantly increase the disease burden of the country:

Many of the diseases like cancer, chronic respiratory disorders, cardiovascular, diabetes can be identified with preventable risk factors and. Therefore, such diseases can be prevented effectively, provided the healthcare policy of the country supports the ‘Disease Prevention’ process, program and initiatives through adequate resource allocation.

Role of a medical professional in customized ‘disease prevention plan’:

Role of medical professionals in the disease prevention process is also very important. The interaction of the patients with the doctors when they meet to address any ailment provides huge opportunity to the doctors to advice the patients about the ways of specific disease prevention, for which the individual patients have high exposure.

Need to raise general public and political awareness towards ‘Preventive Healthcare’:

Raising the level of awareness for ‘Preventive Healthcare’ is indeed very important. It requires a change in the mindset of the community in general together with healthcare policy makers, medical profession, employers, patients and their families.

National Non-Communicable Disease (NCD) prevention program of the government:

As per the Planning Commission, the government of India has reported to have initiated structured measures for the prevention of NCD, the main features of which are as follows:

• “Health education for primary and secondary prevention of NCDs through mobilizing community action
• Development of treatment protocols for education and training of physicians in the prevention and management of NCDs
• Strengthening/creation of facilities for the diagnosis and treatment of CVD and stroke, and the establishment of referral linkages
• Promotion of the production of affordable drugs to combat diabetes, hypertension, and myocardial infarction
• Development and support of institutions for the rehabilitation of people with disabilities
• Research support for: Multispectral population-based interventions to reduce risk factors
• The role of nutrition and lifestyle-related factors
• The development of cost effective interventions at each level of care”

Conclusion:

Many diseases in India with proper ‘Disease Prevention’ measures can be effectively averted. Some common measures which can be easily practiced through community initiatives are maintenance of proper hygiene, sanitation, adequate physical activities, moderation in alcohol and tobacco consumption, healthy sexual activities, avoidance of unhealthy food etc.

To address this issue ‘The Lancet’ November 11, 2010, in the article, as mentioned above, prescribed three specific strategies as follows:

1. “Reframe the debate to emphasize the societal determinants of disease and the inter-relation between chronic disease, poverty, and development
2. Mobilize resources through a cooperative and inclusive approach to development and by equitably distributing resources on the basis of avoidable mortality
3. Build on emerging strategic and political opportunities, such as the World Health Assembly 2008—13 Action Plan and the high-level meeting of the UN General Assembly in 2011 on chronic disease”.

The government should spearhead the paradigm shift towards this direction with appropriate regulation, generating increased societal and political awareness within the country and through mobilization of adequate resources. All these will ultimately help us to translate the well-known dictum into reality, ‘prevention is better than cure’.

Otherwise, especially the poorer section of the society will continue to get caught in the vicious cycle of debt and illness, seriously jeopardizing the economic progress of the country.

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.

Creating an IPR friendly robust ‘Echo-System’ and ‘Improving Access to Affordable Medicines’ are not either/or situation in India

Posted on September 13, 2010 by Tapan Ray

Last year, though the growth of the Global Pharmaceutical Industry with a turnover of US$ 752 billion significantly slowed down to just 6.7% due to various contributing factors, the Indian Pharmaceutical Industry continued to maintain a robust of growth of 18% with a turnover of US$ 8.1 billion (IMS 2009).

Need to invest more in R&D:

On a longer term perspective, the domestic industry growth will be significantly driven by the newer products, which will be the outcome of painstaking innovative research and development initiatives. Keeping this point in mind, the fact that today India accounts less than one per cent of over US$130 billion of the worldwide spending on research and development for pharmaceuticals, despite its known strength in process chemistry and abundant talent pool, has started attracting attention of the government.

Robust IPR regime and addressing the needs of the poor both are equally important:

The Prime Minister of India, Dr Manmohan Singh in his address at the Fortune Global Forum in New Delhi in October, 2007 clearly enunciated, “We have affirmed our commitment to the protection of intellectual property rights. But, the global economy, the global community cannot afford the complete privatization of research, of knowledge generation, especially in fields like medicine. We need to evolve mechanisms that protect intellectual property and at the same time, address the needs of the poor”.

Thus encouragement, reward and protection of IPR and addressing the crying needs of the poor are definitely not an either/or situation. The country needs to address both with equal importance and focus.

‘Vision 2020’ of the Department of Pharmaceuticals:

It is encouraging to note that the Department of Pharmaceuticals (DoP) of the Government of India through its ‘Vision 2020’ initiatives is planning to create a new echo-system in the country to promote new drug discovery platforms. This is expected to catapult the country as one of the top five global pharmaceutical hubs, by 2020 attracting additional investments of around US$ 20 billion to the GDP of the country.

The Primary role of the Pharmaceutical Industry in India, like in many other countries of the world, is to make significant contribution to the healthcare objectives of the nation by meeting the unmet needs of the ailing patients, with innovative affordable medicines. This role can be fulfilled by developing newer medicines through painstaking, time-consuming, risky and expensive basic research initiatives. To help translate this vision into reality appropriate echo-system needs to be created in the country, urgently, for the Pharmaceutical Industry in India to commit themselves to its one of the prime functions of discovering and developing newer medicines not only for the patients in India but for all across the world.

Ongoing efforts in Research & Development (R&D) would require a robust national policy environment that would encourage, protect and reward innovation. Improving healthcare environment in partnership with the Government remains a priority for the Research based Pharmaceutical Companies in India.

Need to tighten the loose knots:

However, in the new paradigm, which has been designed to foster innovation in the country, there are still some loose knots to be tightened up to achieve the set objectives for the nation, in the longer term perspective.

Uncertainty over weak enforcement of patent in the country should be dispelled, with efficient administration of the new patent regime. Regulatory Data Protection should be introduced to spur R&D investment and global collaborative opportunities. This will, in turn, help improving the competitiveness of India vis-à-vis countries like China to attract appreciable investments towards R&D of pharmaceutical and bio-pharmaceutical products. It is believed that the capacity of our judiciary should be expanded and specialized courts that can enforce Pharmaceutical patents be provided with requisite technical expertise.

How to address the core issue of ‘availability of quality medicines at affordable prices’?

India needs to address the root cause of the ‘pricing issue’ affecting ‘access to quality medicines at affordable prices’ to a vast majority of its population, in a holistic way, rather than superficially with a piecemeal approach, as is being done since long.

The policy of ‘stringent price control of medicines’ of the government since 1970, has certainly enabled India to ensure availability of medicines at the lowest price in the world, lower than even the neighbouring countries like, Pakistan, Bangladesh and Sri Lanka. However, the core issue of ‘affordability of medicines’ has still remained elusive and will remain so, if we continue to tread this much beaten path, though not so successful in the perspective of the core issue, even today.

This is mainly because, around 40% of our population still costitutes of ‘Below the Poverty Line (BPL)’ families, who, very unfortunately, will not be able to afford any price of medicines. This is vindicated by the WHO report, quoted by even our government that 65% of Indian population has no access to modern medicines, as against 15% in China and 47% in Africa, despite medicines prices being the cheapest in India.

In such a situation, even if prices of all drugs featuring under the National List of Essential Medicines (NLEM), anti-cancer and other drugs are brought under stringent price control, the same ‘affordability of medicines’ issue will continue to linger.

Moreover, the recent announcement by the National Pharmaceutical Pricing Authority (NPPA), “as per the Secondary Stock Audit Report of ORG-IMS for the month of April 2010, which covers 60,000 packs, in the non-schedule category, the percentage of packs whose prices have increased on monthly basis during 2009-10, is only in the range of 0.0003 to 4.75%, while the remaining have shown stable to declining prices,” clearly vindicates that unusual price increase of medicines is also not a problem either, in India.

Considering all these points, as I have been suggesting since long, the government should, at least now, allocate adequate fund to cover all BPL families under “Rashtriya Bima Yojona’ and ensure its effective implementation by creating adequate healthcare infrastructure and measurable/transparent delivery systems. Similarly, the rest of the population of the country should be covered by encouraging opening-up and deep penetration of a variety of medical insurance products to suit all pockets together with appropriate tax incentives, as is currently being extended to the ‘Mediclaim’ policy holders.

In all developed countries and many emerging markets like China (where about 85% of the population are covered by different types of healthcare expenditure reimbursement schemes), the issue of ‘affordability of medicines’ has been addressed with such type of approach and other social security measures by their respective governments.

“Employers must take health cover for staff or lose tax gains”: Montek Singh Ahluwalia

It is indeed quite encouraging to note from the report of The Hindu Business Line dated September 9, 2010, as this critical issue is being regularly deliberated through this column, the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, has “mooted denial of tax deductibility on wage payment if the employer in the organised sector does not take steps to enrol the employee in a group health insurance scheme. Mr Ahluwalia said employers in the organised sector should be encouraged to make it compulsory for their employees to join a group health insurance scheme, in which the employer and the employee make contributions. As an incentive for this, the insurance premium that is paid can be exempt from tax as India will never be able to expand insurance for which people pay unless an element of incentive-cum-compulsion is introduced”. Mr. Ahuluwalia further commented, “If you leave it to people, only rich people will buy insurance, even middle class people will not buy insurance,” He insisted that “his proposal is feasible and the Government should give it a very serious consideration”.
High incidence of mortality and morbidity burden of India can only be addressed by improving ‘Access to Healthcare’:

Therefore, improving access to healthcare in general and medicines in particular should be on the top priority agenda of the policy makers in our country. High incidence of mortality and morbidity burden in a country like ours can only be addressed by improving Access to healthcare through a concerted partnership oriented strategy. Thus, Pharmaceutical Industry in India should be committed to actively support all efforts from all corners towards this direction to improve Access to Medicines to a vast majority of population in India. Although sporadic, efforts to this direction are being made through various laudable Corporate Social Responsibility (CSR) Initiatives by both local and global pharmaceutical companies within the country.

Pharmaceutical Industry also needs to behave as a responsible corporate citizen:

Another area of focus should be on good corporate governance. This encompasses adherence to high ethical standards in clinical trials, regulatory and legal compliance, working to prevent corrupt activities, high ethical standard in promotion of medicines and addressing all other issues that support good healthcare policies of the Government. In addition, the Pharmaceutical Industry should take active measures to involve all concerned to fight the growing menace of counterfeit and spurious medicines which significantly harm the patients all over the country.

Conclusion:

It is obvious that the Pharmaceutical Industry alone will have a limited role to address the key healthcare issues of our nation. All stakeholders like the government, corporate and the civil society in general must contribute according to their respective capabilities, obligations and enlightened societal interests to effectively address these pressing issues.

However, it is worth reiterating that the Pharmaceutical Industry in India should continue to act responsibly and demonstrate commitment to work closely in collaboration with all stakeholders to make newer innovative medicines both preventive and therapeutic available and accessible adequately at an affordable price to the ailing population of the nation. Thus, in my view, for the progress of the nation, creating a robust IPR friendly ‘Echo System’ and ‘Improving Access to Quality Medicine at an Affordable Price’, are certainly not an either/or situation for the astute policy makers in India, as is being made out to be at some quarters.

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.

Making quality medicines available at an affordable price – Are we ‘missing woods for the trees’?

Posted on August 16, 2010 by Tapan Ray

On August 4, 2010 the Parliamentary standing committee for Health and Family Welfare in its 45th report, recommended the following to the ‘Rajya Sabha’ of the Parliament of India for ‘Making quality medicines available at an affordable price’ to the common man:

1. Blanket caps on the profit margins of all medicines across the board, as these are the ‘only items’ where the purchasing decision is taken by a doctor – a third party and not by the patients who will actually pay for such medicines. In such a situation, a possible’ unholy nexus’ between the prescribing doctors and the pharmaceutical companies could put the patients at a disadvantage and in a helpless situation.

2. This blanket cap on profit for ALL drugs will discourage pharmaceutical companies to shift the balance of their product portfolio from schedule (price control) to non-schedule (outside price control) formulations.

3. This action will make the administration of the ‘Price Control’ mechanism by the Government much simpler by eliminating the current practice of price monitoring and the government preference of substitution of generic drugs for the branded pharmaceuticals

4. MRP of ALL medicines should be determined by the NPPA based on an open and transparent process and considering interests of all stake holders, as is currently being followed in other areas like, electricity tariff, bus, auto rickshaw and taxi fares, insurance premiums and various interest rates.

5. The Department of Health and Family Welfare and the Department of Pharmaceuticals should work out a system through the Inter-Ministerial Coordination Committee to put a blanket cap on profit margins of ALL drugs across the board, immediately.

6. Despite amendment of the MCI guidelines for the doctors in December 2009, banning the acceptance of all kinds of gifts, trips to foreign destinations and availing various types of hospitality by them from the pharmaceutical companies, nothing much has changed on the ground related to such ’unethical practices’. Since MCI has no jurisdiction over the pharmaceutical companies, the government should formulate similar punitive steps through the DCGI, CBDT etc. against the erring pharmaceutical companies.

7. The Committee indicated that it desires to be kept apprised of the action taken in this regard by the Government.

The key factors influencing affordability of medicines:

All the above steps will remain as good intent by the policy makers, if the issue of access to medicines is not addressed simultaneously. As we know that affordability will have no meaning, if one does not have even access to medicines.

In my view, there are five key factors, which could ensure smooth access to medicines to the common man across the country; affordable price being just one of these factors:

1. A robust healthcare infrastructure
2. Affordable healthcare costs including pharmaceuticals
3. Rational selection and usage of drugs by all concerned
4. Availability of healthcare financing system like, health insurance
5. Efficient logistics and supply chain support throughout the country

High out of pocket expenditure could push a section of population below the poverty line:

In India ‘out of pocket expenditure’ as a percentage of total healthcare expenses is around 80%, being one of the highest in the world.

A study by the World Bank conducted in May 2001 titled, “India – Raising the Sights: Better Health Systems for India’s Poor” indicates that out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year.

‘Missing woods for the trees’?

Affordability is indeed a relative yardstick. What is affordable to an average middle class population may not be affordable to the rest of the population even above the poverty line. Similarly, below the poverty line population may not be able to afford perhaps any cost towards medicines. In a situation like this, putting a blanket profit cap on all medicines will not be just enough. There is a crying need to put in place an appropriate healthcare financing model by the policy makers, covering all sections of the society. Are we then ‘missing woods for the trees’?

Create a robust healthcare provider group through Public Private Partnership (PPP) initiatives to offer quality healthcare at an affordable price:

To resolve the issue of affordability of healthcare in general including medicines, the policy makers should take immediate steps to put in place the ‘Healthcare Financing’ initiatives through a robust PPP model in the country. A highly competitive ‘Health Insurance’ sector, created through PPP, could emerge as a powerful and key healthcare provider in the country. The power that such stakeholders will then assume in deciding for their respective clientele, types of doctors, hospitals, diagnostic labs and even what types of medicines that will be dispensed to them to offer quality healthcare at an affordable price, could indeed be a game changer having an immense influence in bringing the cost of overall healthcare for the common man, including medicines, very significantly.

The ‘Health Insurance’ companies can then decide through the Third Party Administrators (TPA), based on public interest, what types of fees should be charged by the following to offer quality healthcare services at an affordable price to their clientele, if these groups would like to avail the huge business potential for a long period of time:

1. Doctors
2. Hospitals
3. Diagnostic laboratories
4. Other related service providers

For making centralized purchase of medicines, these insurance companies or payors may enter into a hard negotiation with the pharmaceutical companies directly to bring down the price of medicines for the use of their respective clientele.

A recent incident:

To illustrate the above point let me quote an important and related news item, which was published in almost all the leading national daily newspaper, just in the last month.

In July 2010, it was reported that about 18 health insurance companies, who were providing cashless services to the policy holders at over 3,000 hospitals across India, found out that only 350 of them constituting around 11% of the total, were consuming more than 80% of the total claims.

It was also reported that the patients were overcharged by these hospitals for each hospitalization irrespective of the treatment provided and were left with them very little funds for their next treatment. This prompted the said insurance companies to bring some order out of the chaos, as it were.

As a result, at least 150 hospitals only from Delhi and the National Capital region were taken out of their designated list for the cashless facility, keeping the facility available at around 100 hospitals where none belonged to any corporate chain. Similar action was taken against hospitals in other cities, as well.

Thereafter, these insurance companies also decided to convey to the invidual policy holders the fresh list of hospitals for cashless facilities, working out new treatment packages depending on the quality of available healthcare infrastructure of each hospital and a lower or a higher rate was worked out for implementation, accordingly.

This illustration will vindicate how powerful and assertive the health insurance companies could be with the effective use of the TPAs for the sake of public health interest, if they wish to and at the same time to protect their respective bottom lines, creating a win-win situation for all.

Conclusion:

It is indeed an irony that despite being the 4th largest producer of pharmaceuticals and catering to the needs of 20 per cent of the global requirements for the generic medicines, India is still unable to ensure access to modern medicines to around 650 million population of the country (The World Medicine Report, WHO 2004). Like in many other emerging economies of the world, in India too, access to modern medicines along with their affordability, is the key macro healthcare issue of the nation.

In a situation like this, as stated above, when the payors or health insurance companies will start exerting immense performance pressure to all concerned to provide quality healthcare at an affordable price, even the alleged ‘unholy nexus’ between the pharmaceutical companies and the medical profession, perhaps will not have any practical relevance.

It is worth pondering, whether the Government is now sending confusing signals to the civil society at large by propagating ‘non-regulated pricing’ for Petroleum Products and ‘regulated pricing’ for pharmaceutical products?

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.

The traditional ‘Business Models’ of R&D focused Global Pharmaceutical majors are undergoing a metamorphosis

Posted on August 2, 2010 by Tapan Ray

Mounting pressure on the P&L account, as the products go off patent:

Patented new products are the prime growth driver of the research based pharmaceutical companies of the world. Since last few years, because of various reasons, the number of launch of such products has been greatly reduced. To add fuel to the fire, 2010-12 will witness patent expiries of many blockbuster drugs, depleting the growth potential of the most of the research based pharmaceutical companies.

The existing model of growth engine needs a relook:

The blockbuster model of growth engine of the innovator companies effectively relies on a limited number of ‘winning horses’ to achieve the business goal and meeting the Wall Street expectations. In 2007, depleting pipeline of the blockbuster drugs hit a new low in the developed markets of the world. It is estimated that around U.S. $ 140 billion of annual turnover from blockbuster drugs will get almost shaves off due to patent expiry by the year 2016. IMS reports that in 2010 more than U.S. $ 30 billion will be adversely impacted because of patent expiry. Another set of blockbuster drugs with similar value turnover will go off patent the year after i.e. 2011. It will not be out of context to mention, that last year around U.S. $ 27 billion worth of patented drugs had gone off-patent.

Decline in R&D productivity is not related to investments:

The decline in R&D productivity has not been due to lack of investments. It has been reported that between 1993-2004, R&D expenditure by the pharmaceutical industry rose from U.S.$ 16 billion to around U.S.$ 40 billion. However, during the same period the number of applications for New Chemical Entities (NCEs) filed annually to the U.S. FDA grew by just 7%.

Total global expenditure for pharmaceutical R&D was reported to have reached U.S. $ 70 billion in 2007 and is expected to be around U.S. 90 billion in year 2010. 75% of this expenditure was incurred by the U.S alone. It is interesting to note that only 22 NMEs received marketing approval by the US FDA during this period against 53 in 1996, when R&D expenditure was almost less than half of what was incurred in 2007 towards R&D.

Be that as it may, the pressure on the P&L (Profit and Loss) accounts of these companies is indeed mounting.

The silver linings:

However, there seem to be following two silver linings in the present scenario, as reported by IMS:

1. Number of Phase I and Phase II drugs in the pipeline is increasing.

2. R&D applications for clinical trials in the U.S. rose by 11.6% to a record high of 662 last year.

Significant growth of generic pharmaceuticals is expected in near future, far surpassing the patented products growth:

Patent expiry of so many blockbusters during this period will fuel the growth of generic pharmaceutical business, especially in the large developed markets of the world. The market exclusivity for 180 days being given to the first applicant with a paragraph 4 certification in the U.S. is, indeed, a very strong incentive, especially for the generic companies of India.

Healthcare reform of March/April 2010 in the USA is expected to give a further boost to this trend.

Pressure on traditional Marketing strategies:
The marketing expenditure for pharmaceutical of the global pharmaceutical companies as reported by Scrip is U.S. $ 57.5 billion. However, an industry association reported that research based pharmaceutical companies in the U.S. spent $ 29.4 billion on R&D and $ 27.7 billion on promotional activities.

New Product Differentiation could be a big issue:

Products in R&D pipeline could face problems of ‘differentiation’ in terms of value offering to the patients, once they are launched. This issue is expected to surface especially with products in the oncology disease area. IMS Health reports that about 55 oncology projects are now in Phase III and 8 in the pre-registration stage. Thus about 50 new oncology products are expected to hit the market by end 2010. Many experts anticipate that there may not be significant brand differentiation between the brands of the ‘same basket’, leading to cut-throat competition and further pressure on expenditure towards marketing of brands.

The changing business strategy of global pharmaceutical companies during this trying time:

In this trying time, the global pharmaceutical companies are resorting to an interesting strategy, combing both old and the new ones. I shall touch upon the following seven strategies:

1. Mergers and Acquisitions (M&A):
Mega M&A strategies are still being actively followed by some large Pharmaceutical companies mainly to enrich R&D pipeline and achieve both revenue and cost synergies.
However, some of these large global companies have started realizing that ‘powerhouses’ created through past mega mergers and acquisitions have now become too large to manage effectively for various reasons. Mismatch between two different organization cultures also throws a great challenge to obtain desired output, many a times. Moreover, the merged R&D set up could become too large to manage, impacting the R&D productivity very adversely.

2. Extension of the Product Life Cycle and Effective Product Life Cycle Management:
Many global pharmaceutical companies are now engaged in ‘product life cycle management’ of their existing products by extending the ‘product life cycle’, effectively. In that process they are trying to maximize the brand value of these products in the international markets. For example, AstraZeneca has developed once daily treatment with their anti-psychotic drug Seroquel XR. This extended-release formulation of the same drug will help patients avoid 5 to 7-day titration required with the immediate-release version.
Towards similar initiative, Pfizer has also recently set up a dedicated “Established Product Business Unit” within worldwide pharmaceutical operations, to hasten business growth in the international markets.

3. OTC Switch:
Prescription to ‘Over the Counter’ (OTC) switch is another business strategy that many innovator companies are now imbibing, at a much larger scale.

This strategy is helping many global pharmaceutical companies, especially in the Europe and the U.S to expand the indication of the drugs and thereby widening the patients base.

Recent prescription to OTC switches will include products like, Losec (AstraZeneca), Xenical (Roche), Zocor (Merck), etc.

4. Emerging of Preventive Therapy, like Vaccines:
Many large global companies, like GSK, Sanofi Aventis and Merck are getting attracted by the emerging opportunities in the fast developing vaccines market. This trend has been triggered primarily by heightened awareness and greater focus on preventive medicines almost all over the world. It is estimated that in 2011, the vaccines market will grow from U.S.$ 13 billion to U.S.$ 30 billion registering a growth of 18% each year during this period. PricewaterhouseCoopers (PwC) estimates vaccine market to be U.S. $ 42 billion by year 2015 based on data of 245 pure vaccines and 11 combination vaccines currently under clinical development. It is interesting to note that 90 of these are therapeutic vaccines for cancer.

5. Entry into highly contentious market of Biosimilar drugs:
The Generic Pharmaceutical Association (GPhA) has estimated that it is possible to save US$ 10 billion – 108 billion over a period of 10 years with biosimilars in the top 12 categories of biological drugs. Some of these biological are already off patent and for others the patents will expire shortly.
Only a few biosimilar drugs have reached the global markets as on date because of their regulatory restrictions in most of the developed markets of the world. Even those biosimilar drugs, which have since been launched in Europe like, human growth hormone (HGH) Somatropin and Epoetin alfa for anemia, are yet to make a mark in the market place.

IMS Health reports that Omnitrope (somatropin) of Sandoz, the first biosimilar drug launched in the developed world, has registered less than 1% of the U.S. $ 831 million HGH market in Europe. Moreover, the launch of 3 more biosimilar versions of epoetin alfa in 2007, made almost negligible impact in the market. Such a low acceptance of biosimilars in the western world, so far, could well be due to lingering safety concern of the medical profession with such types of drugs.

Currently, Japan and USA are working on formal guidelines for biosimilar drugs, whereas Health Canada has already issued draft regulatory guidelines for their approval in Canada.

In April 2010, Reliance Life Science has already announced its intent to enter into the Biosimilar market of the EU in not too distant future.

6. Entry into Generic Markets:

Some large global pharmaceutical companies have already made a firm commitment to the generics market. Novartis paved the way for other innovator companies to follow this uncharted frontier, as a global business strategy. Last year the generic business of Novartis (under Sandoz) recorded 19% of their overall net sales, with turnover from generics registering U.S$ 7.2 billion growing at 20%.

Keen business interest of Sanofi Aventis to acquire Zentiva, the generic pharmaceutical company of Czechoslovakia; it’s very recent acquisition of the generic pharmaceutical company Laboratorios Kendrick of Mexico and Shantha Biotech in India and acquisition of Ranbaxy Laboratories of India by Daiichi Sankyo, will vindicate this point.

Pfizer has also maintained its generics presence with Greenstone in the U.S. and is using the company to launch generic versions of its own off patent products such as Diflucan (fluconazole) and Neurontin (gabapentin).

7. Collaboration with the Indian Companies:

Another emerging trend is the collaboration of MNCs with the Indian pharmaceutical companies to market generics in the global market, like, Pfizer with Aurobindo and Claris, GSK with Dr. Reddy’s Laboratories (DRL), Astra Zeneca with Torrent. I guess that similar trend will continue, in future, as well.

Conclusion:
Another ‘new pharmaceutical sales and marketing model’ is gradually emerging in the global markets. This model emphasizes partnership by bundling medicines with services. The key success factor, in this model, will depend on which company will offer better value with an integrated mix of medicines with services. PwC indicates that in this ‘new pharmaceutical marketing model’, besides required medicines, the expertise of a company to effectively deliver some key services like, patient monitoring and disease management could well be the cutting edge for future success.

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.

Path-breaking medicines are just not enough… a comprehensive healthcare reform in India is long overdue

Posted on June 14, 2010 by Tapan Ray

The Prime Minister of India, Dr. Manmohan Singh reiterated the following in his speech at the 30th Convocation of PGIMER, Chandigarh on November 3, 2009:

”As in economics, so as in medicine too, it is easy to get lost in high level research and forget the ground realities. A common perception among the public is that institutions running with public money end up as ivory towers. It is widely felt that the poor and under-privileged sections of our population do not have adequate access to the health care system. The system needs structural reforms to improve the quality of delivery of services at the grass-root level. It has to be more sensitive to the needs of our women and children. We must also recognize that a hospital centered curative approach to health care has proved to be excessively costly even in the advanced rich developed countries. The debate on health sector reforms is going on in US is indicative of what I have mentioned just now. A more balanced approach would be to lay due emphasis on preventive health care”.

Some key research findings on ‘Public Health’:

Interesting research studies on public health highlight two very interesting points:

- Health of an individual is as much an integral function of the related socio-economic factors as it is

influenced by the person’s life style and genomic configurations.
- Socio-economic disparities including the educational status lead to huge disparity in the space of healthcare.

WHO ranking of the ‘World’s Health Systems’:

The WHO ranking of the ‘World’s health Systems’ was last produced in 2000. This report is no longer produced by the WHO due to huge complexity of the task.

In this interesting report, the number one pharmaceutical market of the world and the global pioneer in pharmaceutical R&D, the USA features in no. 37, Japan in no. 10, UK in no.18 and France tops the list with no.1 ranking. Among emerging BRIC countries, India stands at no. 112, Russia in no.130 and China in no. 144.

In a relative yardstick, although India scored over the remaining BRIC countries in year 2000, one should keep in mind that China has already undertaken a major healthcare reform in the last year. Early this year, we all have seen how President Obama introduced a new healthcare reform for the USA, despite all odds. India’s major reform in its healthcare space is, therefore, long overdue.

Details of WHO ‘World’s Health Systems’ ranking of the countries are available at the following link:

http://www.photius.com/rankings/healthranks.html

No need to reinvent the wheel:

When we look at the history of development of the developed countries of the world, we observe that all of them had invested and are continuously investing to improve the social framework of the country where education and health get the top priority. Continuous reform measures in these two key areas of any nation have proved to be the key drivers of economic growth. This is a work in continuous progress. Recent healthcare reforms both in China and the USA will vindicate this argument. In India we, therefore, do not require to reinvent the wheel, any more.

It has been observed that reduction of social inequalities ultimately helps to effectively resolve many important healthcare issues. Otherwise, the minority population with adequate access to knowledge, social and monetary power will always have necessary resources available to address their concern towards healthcare, appropriately.

Path breaking medicines are just not enough:

Regular flow of newer and path breaking medicines in India to cure and effectively treat many diseases, have not been able to eliminate either trivial or dreaded diseases, alike. Otherwise, despite having effective curative therapy for malaria, typhoid, cholera, diarrhea/dysentery and venereal diseases, why will people still suffer from such illnesses? Similarly, despite having adequate preventive therapy, like vaccines for diphtheria, tuberculosis, polio, hepatitis and measles, our children still suffer from such diseases.

Reducing socio-economic inequalities is equally important:

All these continue to happen in India, over so many decades, because of socio-economic considerations, as well. Thus, together with comprehensive healthcare reform measures, time bound simultaneous efforts to reduce the socio-economic inequalities will be essential to achieve desirable outcome for the progress of the nation.

Proper focus on education is critical for a desirable health outcome:

Education is of key importance to make any healthcare reform measure to work effectively. Very recently we have witnessed some major reform measures in the area of ‘primary education’ in India. The right to primary education has now been made a fundamental right of every citizen of the country, through a constitutional amendment.

As focus on education is very important to realize the economic potential of any nation, so is equally relevant in the healthcare space of the country. India will not be able to realize its dream to be one of the economic superpowers of the world without a sharp focus and significant resource allocation in these two critical areas – Health and Education, simultaneously.

Progress in the healthcare space of India:

It sounds quite unfair, when one comments that nothing has been achieved in the area of healthcare in India, as is usually done by vested interests with a condescending attitude in various guises. Since independence, India has made progress, may not be highly significant though, with various government sponsored and private healthcare related initiatives, as follows:

- Various key disease awareness/prevention programs across the country, for both communicable and non-communicable diseases.
- Eradication of smallpox
- Excellent progress in polio eradication program
- Country wide primary vaccination program
- Sharp decline in the incidence of tuberculosis
- Significant decrease in mortality rates, due to water-borne diseases.
- Good success to bring malaria under control.
- The mortality rate per thousand of population has come down from 27.4 to 14.8 percent.
- Life expectancy at birth has gone up to 63 years of age.
- Containment of HIV-AIDS
- India has been recognized as the largest producers and global suppliers of generic drugs of all categories and types.
- India has established itself as a global outsourcing hub for Contract Research and Contract Manufacturing Services (CRAMS).
- The country has now been globally recognized as one of the fastest growing emerging markets for the pharmaceuticals

New healthcare initiatives in India:

There are various hurdles though to address the healthcare issues of the country effectively, but these are not definitely insurmountable. National Rural health Mission is indeed an admirable scheme announced by the Government. Similar initiative to provide health insurance program for below the poverty line (BPL) population of the country, is also commendable. However, effectiveness of all such schemes will warrant effective leadership at all levels of their implementation.

Per capita public expenditure towards healthcare is inadequate:

Per capita public expenditure towards healthcare in India is much lower than China and well below other emerging countries like, Brazil, Russia, China, Korea, Turkey and Mexico.

Although spending on healthcare by the government gradually increased in the 80’s overall spending as a percentage of GDP has remained quite the same or marginally decreased over last several years. However, during this period private sector healthcare spend was about 1.5 times of that of the government.

It appears, the government of India is gradually changing its role from the ‘healthcare provider’ to the ‘healthcare enabler’.

High ‘out of pocket’ expenditure towards healthcare in India:

According to a study conducted by the World Bank, per capita healthcare spending in India is around Rs. 32,000 per year and as follows:

- 75 per cent by private household (out of pocket) expenditure
- 15.2 per cent by the state governments
- 5.2 per cent by the central government
- 3.3 percent medical insurance
- 1.3 percent local government and foreign donation

Out of this expenditure, besides small proportion of non-service costs, 58.7 percent is spent towards primary healthcare and 38.8% on secondary and tertiary inpatient care.

Role of the government:

In India the national health policy falls short of specific and well defined measures.

Health being a state subject in India, poor coordination between the center and the state governments and failure to align healthcare services with broader socio-economic developmental measures, throw a great challenge in bringing adequate reform measures in this critical area of the country.

Healthcare reform measures in India are governed by the five-year plans of the country. Although the National Health Policy, 1983 promised healthcare services to all by the year 2000, it fell far short of its promise.

Underutilization of funds:

It is indeed unfortunate that at the end of most of the financial years, almost as a routine, the government authorities surrender their unutilized or underutilized budgetary allocation towards healthcare. This stems mainly from inequitable budgetary allocation to the states and lack of good governance at the public sector healthcare delivery systems.

Encourage deep penetration of ‘Health Insurance’ in India:

As I indicated above, due to unusually high (75 per cent) ‘out of pocket expenses’ towards healthcare services in India, a large majority of its population do not have access to such quality, high cost private healthcare services, when public healthcare machineries fail to deliver.

In this situation an appropriate healthcare financing model, if carefully worked out under ‘public – private partnership initiatives’, is expected to address these pressing healthcare access and affordability issues effectively, especially when it comes to the private high cost and high quality healthcare providers.

Although the opportunity is very significant, due to absence of any robust model of health insurance, just above 3 percent of the Indian population is covered by the organized health insurance in India. Effective penetration of innovative health insurance scheme, looking at the needs of all strata of Indian society will be able to address the critical healthcare financing issue of the country. However, such schemes should be able to address domestic and hospitalization costs of ailments, broadly in line with the health insurance model working in the USA.

The Government of India at the same time will require bringing in some financial reform measures for the health insurance sector to enable the health insurance companies to increase penetration of affordable health insurance schemes across the length and the breadth of the country.

A recent report on healthcare in India:

A recent report published by McKinsey Quarterly, titled ‘A Healthier Future for India’, recommends, subsidizing health care and insurance for the country’s poor people would be necessary to improve the healthcare system. To make the healthcare system of India work satisfactorily, the report also recommends, public-private partnership for better insurance coverage, widespread health education and better disease prevention.

Conclusion:

In my view, the country should adopt a ten pronged approach towards a new healthcare reform process:

1. The government should assume the role of provider of preventive and primary healthcare across the nation to ensure access to healthcare to almost the entire population of the nation.

2. At the same time, the government should play the role of enabler to create public-private partnership (PPP) projects for secondary and tertiary healthcare services at the state and district levels.

3. The issue of affordability of medicine can best be addressed by putting in place a robust model of healthcare financing for all sections of the population of the country. Through PPP a strong and highly competitive health insurance infrastructure needs to be created through innovative fiscal incentives.

4. These insurance companies will be empowered to negotiate all fees payable by the patients for getting their ailments treated including doctors/hospital fees and the cost of medicines, with the concerned persons/companies, with a key objective to ensure access to affordable high quality healthcare to all.

5. Create an independent regulatory body for healthcare services to regulate and monitor the operations of both public and private healthcare providers/institutions, including the health insurance sector.

6. Levy a ‘healthcare cess’ to all, for effective implementation of this new healthcare reform process.

7. Effectively manage the corpus thus generated to achieve the healthcare objectives of the nation through the healthcare services regulatory authority.

8. Make this regulatory authority accountable for ensuring access to affordable high quality healthcare services to the entire population of the country.

9. Make operations of such public healthcare services transparent to the civil society and cost-neutral to the government, through innovative pricing model based on economic status of an individual.

10. Allow independent private healthcare providers to make reasonable profit out of the investments made by them

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.

PILMAN

A Tapan Ray Website

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