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‘Made-to-Measure’ Marketing for ‘Made-to-Measure’ Medicines

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We have entered into a new era of innovation in medical science where ‘one size fits all’ type of treatment is making a sizeable space for a new ‘made-to-measure’ variety of the same. Such medicines are being developed particularly for life-threatening and rare diseases, where individual genetic differences in patients play a key role in the choice of therapy.

The marketers of such drugs, at the same time, will need to make sure that the right sets of messages are delivered to the right person, in the right way and at the right time, for brand success. This isn’t a piece of cake, as it will be akin to finding out a needle from a haystack. It would call for craftily ferreting out from an enormous database, both the patients’ and the prescribers detail profile virtually in each stage of the treatment process.

Such information would form the bedrock for effective brand value creation and its delivery, to achieve best possible business results and also patient outcomes. Thus, ‘made-to-measure’ marketing would be a whole new ball game for many pharma marketers – a  completely different situation that, very often, they know little about.

In this article, I shall dwell on this subject. Let me begin with a brief description of the emerging ‘made-to-measure’ variety of treatments.

‘Made-to-measure’ treatment:

There are many serious and life-threatening disease conditions where ‘One Size Fits All’ sort of treatment approach doesn’t work too well. One such dreaded disease is cancer. Conventionally, following standard treatment guidelines, doctors generally opt for similar treatment for patients suffering from the same type and stage of cancer. Interestingly, it has been conclusively established over a period of time that this approach often yields different outcomes to different patients.

With the progress of genetic science, the researchers have unraveled this mystery from the genetic difference of patients. This understanding heralded the dawn of a new era of targeted or ‘made-to-measure’ drug therapies. These are called “personalized medicine” or “precision medicine”. According to the National Research Council, “personalized medicine” is an older term with a meaning similar to “precision medicine.”

Personalized medicines:

According to the American Society of Clinical Oncology (ASCO), understanding a patient’s genetic makeup and ascertaining how certain gene changes during cancerous tumor growth, doctors can now choose more effective treatment options for each patient. In other words, based on genetic test results, oncologists can now opt for a customize treatment, based on each patient’s specific needs. Such drugs can block or turn off the signals that tell malignant cells to grow and divide, keep cells from living longer than normal, or kill the cancer cells altogether.

Moreover, by performing genetic tests both on the cancer and normal cells, doctors can also:

  • Find out the chances of a person developing cancer and selecting the screening strategies to lower the risk
  • Match patients with treatments that are likely to be more effective and cause fewer side effects
  • Predict the risk of recurrence, which means the return of cancer

The new era began in 1998:

The era of ‘personalized medicine’ for cancer, in all practical purposes, commenced in 1998, when the US-FDA approved the targeted therapy, Herceptin (trastuzumab). Breast cancer patients having high levels of a biomarker, known as “HER-2,” are more likely to be susceptible to this drug.

Since then, the development of targeted therapies has grown rapidly. As reported by the American Journal of Managed Care (AJMC), published on January 31, 2018, one in every 4 drugs approved by the US-FDA over the past 4 years was a personalized medicine, and the agency approved a record-breaking 16 personalized therapy in 2017. The same year, US-FDA also approved the first biosimilar of a personalized medicine - trastuzumab-dkst (Ogivri) for HER-2-positive breast cancer patients. This biosimilar was developed with Herceptin as its reference.

The February 2018 report of Research and Markets titled, ‘Personalized Medicine – Scientific and Commercial Aspects’ says, the aim of ‘personalized medicine’ is to match the right drug to the right patient and, in some cases, even to design the appropriate treatment for a patient according to his/her genotype. I deliberated on genotype-based treatment in my article titled, ‘A Disruptive Innovation to Fight and Cure Intractable Diseases’, published in this blog on October 30, 2017.

At this point, let me hasten to add that the development of personalized medicine raises some ethical issues, as well. Currently, this debate is mostly limited to the area of genetic testing.

Personalized dosage:

An article published on March 23, 2015 in the ‘FDA Voice’ of the US-FDA states, since the 1990s, the agency is also working on personalized drug dosing. This is because individuals differ in how they eliminate a drug. Some eliminate it much more slowly than most other people, and thus are susceptible to overdosing, while others eliminate it much faster, and may not get the desired therapeutic effect. There are biomarkers to identify people who may have these unusual results. Personalized drug dosing makes sure that drug efficacy for such patients are not compromised, or they are not at high risk of any severe side effects.

Marketing ‘personalized medicine’ a whole new ball game:

All this vindicates that ‘personalized medicine’ is not just a flash in the pan. With each passing year, it’s moving ahead at a brisk pace. In this emerging scenario, what happens to marketing of these drugs? Will the marketing of ‘personalized medicine’ remain just the same as the conventional one, or it warrants radically different cerebral inputs?

The opportunities for personalization in pharma marketing are immense. ‘Personalized medicines’ offer a greater scope in leveraging its potential that is yet to be fathomed, meaningfully. Broadly, this will mean targeting customers or potential consumers even at the individual level, to add greater differential value.

This, in turn, will involve making the marketing content, the message format and choosing the effective value delivery platforms, virtually ‘made-to-measure’ for the target audience. Marketing interaction of this ilk, has proven to offer a cutting-edge experience to the target groups with greater outcomes, in tandem, yielding superior financial results to the concerned pharma players.

Recent reports:

On December 18, 2017, Cambridge BioMarketing – one of the world’s leading rare disease agency highlighted, as personalized medicine continues to take hold, it will be more important than ever for healthcare companies to incorporate the ‘hyperpersonalized’ experience in marketing and communications. Patients’ voice has already started becoming more important than ever before, in various facets of pharma business. In 2018, one may expect to witness more pharma companies tapping the experts who can help explain the life-changing benefits of a treatment for the patient, effectively – the report predicted.

Moving forward, patients embarking on new treatments will be better empowered to take charge of their well-being. Physicians and nurses will also be better connected to their patients, along with other care providers, with the support of enhanced digital connections and mobile apps. Interestingly, one can find it happening in several developed countries, especially, in areas like rare diseases, where ‘personalized medicines’ will be used more – underscored this agency.

On January 22, 2018, quoting the same Cambridge BioMarketing, FiercePharma also reported, more ‘personalized medicines’ also mean more ‘personalized marketing’ – and the ‘hyperpersonalization’ trend goes to extremes. Crunching data gathered from multiple sources, such drug marketers need to identify small groups that could be receptive to specific messaging. Advanced data and analytics, would facilitate the marketers to whittle down their targets and tailor messages to consumer audiences, sometimes as small as one person – the report asserted.

Conclusion:

As the February 2018 report of ‘Research and Markets’ highlights, increase in efficacy and safety of treatment by individualizing it, has benefitted in financial terms too. Available information indicates that ‘personalized medicine’ will ultimately be cost-effective in healthcare systems. This would also eliminate the need for various assumptions in the process of diagnosing a disease.

Thus, conventional pharma marketing based on the mostly segmentation strategy used for blockbuster molecules may not work for a ‘personalized medicine’. Instead, ‘personalized marketing, focused on smaller and exclusive markets – identified based on robust research and analytical data, will be the name of the new game for business excellence in this specialized area.

Thus, I reckon, as we move ahead, ‘made-to-measure’ marketing will no doubt be one of the key success requirements to make ‘made-to-measure’ medicines’ – a money spinner.

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 Pharmacy of the Developing World’ keeps its eye on the ball to emerge as ‘The Pharmacy of the World’

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The incessant march of the home grown pharmaceutical companies of India in search of excellence, especially in the space of high quality low cost generic medicines for almost all disease areas, continues at a scorching space, probably more than ever before.

It has been recently reported  that among the top 10 fastest-growing generic companies globally, three are now from India with Sagent Pharma of the U.S topping the league table. These ‘Crown Jewels’ of India are as follows:

Company Global rank Growth %
Glenmark pharmaceuticals 5 37
Dr. Reddy’s Laboratories (DRL) 6 34
Sun Pharma 8 29

In terms of country ranking, currently India is among the top 20 pharmaceutical exporting countries of the world. It exports high quality and very reasonably priced generic drugs to around 220 countries across the world, including highly regulated markets like USA and EU.

Today India contributes around 20 percent of the total volume of global generic formulations and has registered a CAGR of 21 percent between 2005 and 2011. It is, therefore, no wonder that India is popularly called ‘The Pharmacy of the Developing World’, despite many formidable challenges from various corners.

Focus on opportunities and less of moaning:

It is worth noting that Indian pharmaceutical players have been keeping their eyes on the ball always as they keep expanding their market access globally and do not seem to let go any opportunities untried, like:

  • Large number of blockbuster drugs going off- patent
  • Product portfolio strategy with many first-to-file products.

Unlike many others, these winners do not also seem to get engaged much in moaning, which could significantly dilute their operational focus. 

Aiming the top: 

Currently, more than a third of the Abbreviated New Drug Applications (ANDA) in the U.S is being filed by the domestic Indian players.  Another industry estimate indicates that the Indian companies are filling on an average around 1000 ANDAs every year to reap a rich harvest out of the available opportunity, which will increase by manifold as about US$150 billion worth of drugs go off-patent between 2010 and 2015 as reported by the Crisil Research.

Similarly, India accounted for 45 percent in 2009 and 49 percent in 2010 of the total Drug Master Filing (DMF) for bulk drug in the US, which has reportedly increased to 51 percent in 2011. 

The key trigger factor:

Experts opine that the reason for the domestic Indian pharmaceutical industry being able to be recognized as a global force to reckon with, especially in the generic pharma landscape, is due to the amendment of the Indian Patents Act in 1970 allowing only process patents for drugs and pharmaceuticals.

The Government of India had taken such a path-breaking decision in the 70’s to lay the foundation of a vibrant domestic pharmaceutical industry capable of manufacturing low cost and high quality modern medicines for the people of the country leveraging latest technology, including IT.

This decision was also directed towards creation of ‘drug security’ for the country as in the 70’s the country was very heavily dependent on drug imports and the domestic pharmaceutical industry was virtually non-existent. 

The rich pay-off:

Though the country reverted to the product patent regime again in January 1, 2005, the critical mass that the home grown pharma industry had developed during almost thirty five years’ time in between, had catapulted India towards achieving today’s self-sufficiency in meeting the needs of affordable drugs for the ailing population of the country and perhaps including even those living beyond the shores of India.

The above ‘trigger factor’ has indeed paid a rich dividend to the country, by any yardstick. Currently India ranks third globally in terms of manufacturing of pharmaceutical products in volume.

Moreover, domestic pharmaceutical companies have now between themselves around 175 USFDA and approximately 90 UK-MHRA approved manufacturing units to cater to the needs of high quality and affordable pharma products across the world. 

The Leading Indian Pharmaceutical ‘Crown Jewels’:

The following are the leading Indian Pharmaceutical players in terms of sales:

Company Sales in US $Mn Year End
Cipla 6,368.06 March 2011
Ranbaxy Lab 5,687.33 December 2010
Dr Reddy’s Labs 5,285.80 March 2011
Sun Pharma 1,985.78 March 2011
LupinLtd 4,527.12 March 2011
Aurobindo Pharma 4,229.99 March 2011
Piramal Health 1,619.74 March 2011
Cadila Health 2,213.70 March 2011
Matrix Labs 1,894.30 March 2010
Wockhardt 651.72 December 2011

(Source: India Biz News: April 13, 2012)

Domestic Indian pharmaceutical companies currently control not only over 75 percent of the total domestic market, but also export low cost and high quality drugs to over 220 countries, as mentioned above, including  US, EU, Kenya, Malaysia, Nigeria, Russia, Singapore, South Africa, North Africa, Ukraine, Vietnam, and now Japan.

US accounts for 22 percent of the total Indian pharmaceutical exports, with Africa accounting for 16 percent and the Commonwealth of Independent States (CIS) eight percent, as reported by India Biz News: April 13, 2012.

Incessant growth story:

As reported by Dolat Capital, US generic market currently estimated at US $350 billion, is expected to grow by around 12 to13 per cent over 2011to15 period keeping the Indian pharmaceutical growth story intact, adding albeit more shin to it.

After the new healthcare reform brought in by President Barrack Obama, generic drugs now play a critical role in the US healthcare system, predominantly driven by the cost containment pressure of the government.

According to the Generic Pharmaceutical Association of US, generic medicines saved the healthcare system of the country over US$734 billion during 1999 to 2008 period. Expenditure on patented medicines being one of the fastest-growing components of healthcare costs, over a period of time, has now become a prime target for cost reduction by the US government.

‘The Guardian’ guards:

Some international experts do contemplate that potentially retarding global forces may attempt to cast their dark shadows over the well hyped ‘India Pharma Shining Story’ in the generic space of the industry from time to time, which needs to carefully guarded against and more importantly effectively negated.

In an interesting article, though in a different context, titled “Pharmaceutical companies putting health of world’s poor at risk: India makes cheap medicines for poor people around the world”, recently published in ‘The Guardian’, the author Hans Lofgren, an associate professor in politics at Deakin University, Melbourne articulates as follows:

“The EU, pharmaceutical firms and now the US are pressuring the ‘pharmacy of the developing world’ to change tack”.

Lofgren further commented: “We ought to be asking why governments in the rich world still seem happy to checkmate the lives of poor people to save their political skins. And why the pharmaceutical industry sees India as such a threat. Could it be that they detect the whiff of real competition?”

Conclusion: 

Be that as it may, after gaining the required critical mass, the shining story of the home grown pharmaceutical industry of India seems to be irreversible now, despite possible challenges as they will emerge.

Paying kudos to the pharmaceutical ‘Crown Jewels’ of India, many industry watchers feel that the global industry is now keener than ever before to take extra steps to keep the domestic pharma industry, enjoying a mind boggling over 75 percent share of the Indian Pharmaceutical Market, in the forefront and in a good humor to achieve their India objectives.

‘The Pharmacy of the Developing World’ should, therefore, continue to keep its eye on the ball keeping the flocks together and try to effectively translate it into the ‘The Pharmacy of the World’, as the global community keeps looking at this great transformation as a ‘miracle’ with much admiration and probably blended with a dash of awe and envy.

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.

Balancing Strong IP Protection, Public Health Safeguards and Declining R&D Productivity – A Crafty Gutsy Ball Game

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Pharmaceutical innovation has always been considered the lifeblood for the pharmaceutical industry and very rightly so. However, many studies do point out that such innovation has benefited the developed world more than the developing world.

Product Price and Access:

In the paper titled ‘TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond’, published in ‘Chicago Journal for International Law, Vol. 3(1), Spring 2002’, the author argues, though the reasons for the lack of access to essential medicines are manifold, there are many instances where high prices of drugs deny access to needed treatments for many patients. Prohibitive drug prices, in those cases, were the outcome of monopoly due to strong intellectual property protection.

The author adds, “the attempts of Governments in developing countries to bring down the prices of patented medicines have come under heavy pressure from industrialized countries and the multinational pharmaceutical industry”.

While the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) of the World Trade Organization (WTO) sets out minimum standards for the patent protection for pharmaceuticals, it also offers adequate safeguards against negative impact of patent protection or its abuse in terms of extraordinary and unjustifiable drug pricing. The levels of these safeguards vary from country to country based on the socio-economic and political requirements.

The Doha Declaration:

Many independent experts in this field consider the Doha Declaration as an important landmark for recognizing the primacy to public health interest over private intellectual property and the rights of the members of WTO to use safeguards as enumerated in TRIPS, effectively.

To protect public health interest and extend access to innovative medicines to majority of their population whenever required, even many developed/OECD countries do not allow a total freehand for the patented products pricing in their respective countries.

Early signals of global empathy:

While expressing similar sentiment ‘The Guardian’ reported that Andrew Witty, the global CEO of GlaxoSmithKline, has decided to slash prices on all medicines in the poorest countries, give back profits to be spent on hospitals and clinics and more importantly share knowledge about potential drugs that are currently protected by patents.

Witty further commented that he believes, drug companies have an obligation to help the poor patients getting appropriate treatment and reportedly challenged other pharmaceutical giants to follow his lead.

An interesting study:

A study titled, ‘Pharmaceutical innovation and the burden of disease in developing and developed countries’ of Columbia University and National Bureau of Economic Research, to ascertain the relationship across diseases between pharmaceutical innovation and the burden of disease both in the developed and developing countries, reported that pharmaceutical innovation is positively related to the burden of disease in the developed countries but not so in the developing countries.

The most plausible explanation for the lack of a relationship between the burden of disease in the developing countries and pharmaceutical innovation, as pointed out by the study, is weak incentives for firms to develop medicines for the diseases of the poor.

Point – Counterpoint:

A contrarian view to this study argues that greater focus on the development of new drugs for the diseases of the poor should not be considered as the best way to address and eradicate such diseases in the developing countries. On the contrary, strengthening basic healthcare infrastructure along with education and the means of transportation from one place to the other could improve general health of the population of the developing world quite dramatically.

The counterpoint to the above argument articulates that health infrastructure projects are certainly very essential elements of achieving longer-term health objectives of these countries, but in the near term, millions of unnecessary deaths in the developing countries can be effectively prevented by offering more innovative drugs at affordable prices to this section of the society.

A solution emerging:

Responding to the need of encouraging pharmaceutical innovation without losing focus on public health interest, in 2006 the ‘World Health Organization (WHO)‘ created the ‘Inter-governmental Working Group on Public Health, Innovation and Intellectual Property (IGWG)‘. The primary focus of IGWG is on promoting sustainable, needs-driven pharmaceutical R&D for the diseases that disproportionately affect developing countries.

Declining R&D productivity:

Declining R&D productivity adds another dimension to this raging debate with a snowballing effect, as it were.

Over a period of decades, the business models for small-molecule based blockbuster drugs have successfully catapulted the global pharmaceutical business to a high-margin, dynamic and vibrant industry. However, a time has now come when the golden path from the ‘mind to market’ of the drug discovery process is becoming increasingly arduous and prohibitively expensive.

Deploying expensive resources to discover a New Chemical Entity (NCE) with gradually diminishing returns in the milieu of very many ‘me too’ types of new drugs, does no longer promise a strong commercial incentive.

The impact of the above scenario also gets reflected in the status of International patent filings under the Patent Cooperation Treaty (PCT) of the ‘World Intellectual Property Organization (WIPO)’ as follows:

A. Last five years, PCT filings:

The last five years’ PCT filing status does not seem to be encouraging either.

Year

PCT Filings

Change %

2007

159,926

2008

163,240

2.1

2009

154,406

(5.4)

2010

164,316

6.4

2011

181,900

10.7 *(E)

* Estimate

B. Country-wise PCT Filing in 2011:

While having a closer look at the data, it becomes quite evident that in terms of percentage increase in the PCT filings two Asian countries, China and Japan, have registered their overall dominance. However, in terms of absolute number USA still ranks first.

County

No. Of PCT Filings

% Increase

USA

48,596

8

China

16,401

33.4

Japan

38,888

21

Germany

18,568

5.7

South Korea

10,447

8

C. Technical-field-wise PCT Filing in 2011:

In terms of the technical fields, pharmaceuticals ranked fifth in 2011.

Rank

 Industry

No. Of PCT Filings

1.

 Electrical Machinery, Apparatus, Energy

11,296

2.

 Digital Communication

11,574

3.

 Medical technology

10,753

4.

 Computer technology

10,455

5.

 Pharmaceuticals

7,683

6.

 Organic fine chemistry

5,283

7.

 Biotechnology

5,232

D. Biotech/Pharma companies featuring in WIPO’s Top 100 filers list:

Very few biotech and pharmaceutical companies featured in the Top 100 PCT filers’ list of WIPO as follows:

Company
1. Procter & Gamble
2. Sumitomo Chemical
3. DuPont
4. Dow Global
5. Novartis AG
6. Roche
7. Merck GmbH
8. Sanofi-Aventis GmbH
9. Bayer CropScience AG

E. The top five university PCT filers in 2011:

Universities of the US dominated among the PCT filings by the Academic institutions as follows:

University

No. Of PCT Filings
University of California, US

277
Massachusetts Institute of Technology, US

179
University of Texas System, US

127
Johns Hopkins University, US

111
Korea Advanced Institute of Science and Technology, South Korea

103

Need to encourage pharmaceutical innovation:

Based on the WIPO data, as mentioned above, the current status of the global pharmaceutical innovation does not seem to be very encouraging.

That said, in the environment of declining R&D productivity of the global pharmaceutical industry, there is indeed a strong requirement to encourage pharmaceutical innovation across the globe, based on the socio-economic environment of each country, together with adequate safeguards in place to protect public health interest.

Why protect patent?

The pharmaceutical major Eli Lilly has very aptly epitomized the reason for patent protection in their website called ‘LillyPad’, as follows:

“Pharmaceutical companies continue to invest in innovation not only because it is good for business, but it is what patients expect. If we want to continue to have breakthrough products, we need patent protection and incentives to invest in intellectual property.  The equation is simple, patents lead to innovation – which help lead to treatments and cures”.

Conclusion:

Currently, various socio-economic expectations, demands and requirements, not just for the poor, but also of the powerful growing middle class intelligentsia are gradually getting unfolded on this subject from many parts of the globe. These collective demands cannot be either wished away or negotiated with a strong belief that the future should be a replication of the past.

There should be full respect, support and protection for innovation and the product patent system in the country. This is essential not only, for the progress of the pharmaceutical industry, but also to alleviate sufferings of the ailing population, effectively.

At the same time, available indicators point out that the civil society would continue to expect in return just, fair, responsible and reasonably affordable prices for the innovative medicines, based on the overall socio-economic status of the local population. Some experts have already opined that prices of life saving innovative drugs, unlike many other patented products, will no longer remain ‘unquestionable’ in increasing number of countries.

Thus, even at the time of declining pharmaceutical R&D productivity, striking a right balance  between a strong patent regime and safeguarding overall health interest of its population, particularly of those with a very high ‘out of pocket’ expenditure towards healthcare, will indeed be a crafty gutsy ball game for a country.

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.

Quantum Growth Envisaged in Government Procurement for Pharmaceuticals: A Challenging Ball Game for Pharma Players

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Direct procurement by the Governments of various countries is attracting increasing importance not just at the domestic level, but internationally, as well. The systems adopted for Government Procurement (GP) globally are aimed at making a significant difference in the effectiveness of utilization of the exchequers’ fund and the quality of governance in the respective countries. Absolute transparency in the entire process of GP, extending fair and equal opportunities to all suppliers, is of utmost importance.

According to ‘The Center of International Development at the Harvard University, USA’, Government Procurement of goods and services typically accounts for 10-15% of GDP for the developed countries, and up to 20% of GDP for the developing nations. As a result, the local GP markets have started attracting attention of even the overseas suppliers to make this process an integral part of Free-Trade Agreements (FTAs) between countries.

GP was excluded in the General Agreement on Tariffs and Trade (GATT) negotiated in 1947. However, as the years progressed the members of WTO started exploring various ways to include GP in the multilateral trading system.

The proponents of WTO agreements on GP argue that the purchase decision of the governments on GP of goods and services should be non-discriminatory, irrespective of who produces the goods or renders required services, including foreign suppliers, if any.

GPA- The plurilateral Agreement:

In January 1, 1994 along with ‘Uruguay Round’ a landmark agreement was reached on GP, which is known as “The plurilateral Agreement on Government Procurement (GPA)”. This agreement was administered by a Committee of WTO members, who are Parties to the GPA and was signed by 41 of the 153 members of the WTO.

India joins as an observer in GPA – the first step for membership:

On Feb 11, 2010 ‘Reuters’ reported that “India has joined the World Trade Organization’s government procurement agreement as an observer, a first step to membership in the scheme regulating trade in goods bought by governments”. With this India joined other 22 WTO members with the same observer status, when 9 members including China are in the process of negotiation for full membership of the GPA.

On December 15, 2011, WTO reported a historic agreement by the members of GPA to ‘improve the disciplines for GP and expand the market access coverage valued at between 80 to 100 billion dollars a year’.

The opposition to GPA:

That said, those who oppose GPA also put forth strong arguments. They believe that such agreements instead of creating so called a ‘level playing field’ for all, would further complicate the situation where the developing countries, leave aside the least developed ones, would continue to remain at a disadvantage as compared to  the developed industrial nations.

The developing countries and the relief organizations argue that the growing industries of the developing nations will suffer most, if matured global companies are allowed to compete for GP together with the domestic players. Such a situation, they apprehend, could snow ball into huge balance of payment issues for the developing and the least developed nations.

Pharmaceuticals: Second largest item in public healthcare budget:

According to WHO, for the developing countries like India pharmaceuticals are the second largest item of expenditure, after personnel costs, ranging from 8 per cent to 12 per cent of the public health budget. Thus, such fund should be utilized with utmost care within a transparent and highly efficient GP system. It is envisaged, that efficient GP systems will play critical role in improving access to medicines in India.

GP for Pharmaceuticals in India:

The process of procurement of drugs and pharmaceuticals by the Ministry of Health of the Government of India is usually entrusted to an agency known as ‘Hospital Services Consultancy Corporation (HSCC)’. This multidisciplinary consultancy organization was set up to extend quality consultancy services in healthcare and other social sectors of the country.  HSCC undertakes the following:

  • Procurement of drugs and pharmaceuticals
  • Tendering process
  • Placement of orders
  • Follow-up, inspection and dispatch

So far, many World Bank supported programs for procurement of drugs and pharmaceuticals for Malaria, Tuberculosis, and Reproductive Child Health etc. were initiated by the HSCC. The procurement services of HSCC are in line with the procedures adopted by the World Bank.

Health being a State subject in India, pharmaceutical procurement is made by both the Central and State Governments, besides large private health institutions.

Though over 25 per cent of the total public sector drug volume is procured by the Central Government, there is no single Central Government procurement agency. Following are the key agencies currently handling the Central Government procurement for pharmaceuticals through competitive tendering process:

  • Central Government Health Services (CGHS)
  • Armed Forces Medical Services (AFMS)
  • Medical Stores Organization (MSO)

Examples of GP in the states:

Many state Governments have already started putting in place the GP process for pharmaceuticals in their respective states. This process is expected to gain momentum as we move ahead. Examples of GP system of some of the State Governments in India are as follows:

Delhi:

In 1996, to promote rational drug use with high quality of medicines, the ‘Delhi Society for Promotion of Rational Use of Drugs (DSPRUD)’ with the technical assistance from WHO introduced a pooled procurement system for all state-run hospitals and 150 Primary Health Centers (PHCs) in Delhi.

This robust procurement system with a competitive bidding process has reportedly resulted in price reduction of high quality medicines by 30-40 per cent. State-run hospitals and the PHCs now supply these prescriptions medicines to over 80 per cent of patients.

WHO, encouraged by the success of the ‘Delhi Model’, has recommended it to the other States of India. Currently the following State Governments are implementing the program in their respective states:

  • Maharashtra
  • Rajasthan
  • Punjab
  • Himachal Pradesh

Tamil Nadu:

In January 1995, Tamil Nadu Government had set up a Government-run Company known as, Tamil Nadu Medical Services Corporation (TNMSC). The main purpose of TNMSC was to make all essential drugs available in nearly 2000 government medical institutions throughout the State, with a well-structured, uniform and standardized system for procurement, storage and distribution of medicines.

To ensure efficient procurement of high quality drugs at competitive prices, TNMSC follows an open tendering system for purchases only from reputed manufacturers with a pre-specified minimum overall business turnover, having a market standing of not less than three years. Standby suppliers are also selected at the same time to eliminate any drug shortages for delayed or non-supply by the first supplier.

The competitive procurement bid system has reportedly enabled TNMSC to save on drugs to the tune of 36% of the allocation.

Andhra Pradesh (AP):

In AP public health care system delivers services at all levels of primary, secondary and tertiary care.

In 1998, a centralized pooled drug procurement system was implemented in AP with the establishment of the Drug Procurement Wing (DPW) within the ‘Andhra Pradesh Infrastructure State Development Corporation (APISDC)’.

For high quality GP they introduced a two tier system for bidding and procurement, starting with the technical bid and followed by the actual financial bidding process.

In this system, details of drug requirements are collected from public hospitals within the state, collated by the DPW and thereafter consolidated orders are placed to the competitive bid winners for supplying required essential medicines at the medical stores of each district of the state.

Odisha:

Odisha has a centralized system of procurement of drugs featuring in the National List of Essential Medicines (NLEM).

To ensure quality procurement, a pre-qualification stipulation of quality parameters and competitive price quotations are looked at.

Small Scale Industries (SSIs) are entitled to 5 per cent price preference along with other relaxations like, partial exemption from earnest money deposit and concession in sales tax.

A recent evaluation of the Drugs Distribution System in Odisha by WHO has highlighted that the key NLEM drug availability in all the centers except one in the state ranged from 80 to 100%.

UHC – A potential GP growth booster:

The recommendation no. 3.1.10 of the report titled ‘High Level Expert Group Report on Universal Health Coverage (UHC) for India’, instituted by the Planning Commission, clearly indicates that purchases of all health care services under the UHC system should be undertaken either directly by the Central and state governments through their Departments of Health or by quasi-governmental autonomous agencies established for the purpose.

PMO push for free drugs at Government hospitals:

Quoting the Prime Minister’s Office (PMO), ‘The Times of India’ on February 13, 2012 reported that availability of free medicines to all patients visiting any government health facility across the country will soon be a reality, as the Ministry of Health (MoH) is planning to spend around Rs 30,000 Crore under ‘free-medicines-for-all’ scheme with the  strong support of the PMO.

Quantum growth envisaged in the GP system:

UHC along with the above free medicine initiative by the MoH and expanded coverage of the National Rural Health Mission (NRHM)/ National Urban Health Mission (NUHM) are expected to make GP for pharmaceuticals a critical procurement initiative of the nation.

This appears more realistic when seen together with the increase in public spend allocation on health by the Planning Commission of India from current 0.9 per cent to 2.5 per cent of GDP during the Twelfth Five Year Plan period.

Thus a quantum growth is envisaged in the GP system for pharmaceuticals within the country.

Conclusion:

From all available indicators, it appears that GP for pharmaceuticals in India will assume immense importance to both the global and local pharmaceutical companies.

The Central Government, with ‘The Draft Public Procurement Bill, 2011’, seems to have already started moving in this direction. The enactment of this Bill will facilitate the Government not only to effectively leverage the state bargaining power for the prices of medicines, but also to ensure efficient delivery of high quality products to a very large section of the society.

Quite in tandem various State Governments should also either create afresh or revamp the existing procurement system, as the case may be, to put in place a robust GP mechanism in their respective states.

One clear outcome of the expansion of GP system for sure will be enormous pricing pressure on the pharmaceutical players in India, which will be quite challenging to navigate.

The scenario will get even more complex and heated up, especially for the smaller pharmaceutical players, as and when India becomes a signatory to the GPA of the WTO, opening its door wide ajar for the large global players to participate in the pharmaceutical bidding process of the Government, well facilitated by various FTAs.

In this rapidly evolving environment, are the pharma players, both global and local, ready with appropriate strategies and systems in place to participate in yet another challenging new ball game of low margin and high volume pharmaceutical business in India?

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.