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Continues ‘The Cat And Mouse Game’ In Pharma Business?

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Many are already aware of the critical factors that make generic drugs so important for patients – virtually for all. These don’t just facilitate greater access to health care – offering affordable alternatives to high-priced off-patent innovative drugs. This is as relevant in the largest pharma market in the world – the United States (US), just as in India. Let me illustrate this point with two examples – one from the US and the other from India.

According to US-FDA, ‘9 out of 10 prescriptions filled, are for generic drugs’ in the United states, as off-patent branded generic drugs cost more than their generic equivalents. The US drug regulator explains, ‘Increasing the availability of generic drugs helps to create competition in the marketplace, which then helps to make treatment more affordable and increases access to healthcare for more patients.’

However, unlike the US, there prevails a unique perception difference even within generic drugs – between branded and unbranded generics. The Indian Survey, undertaken to review and analyze various facts on branded and equivalent unbranded generic medicines, found a huge difference in prices between them in the country. Interestingly, as the researchers also noted, although, more consumers want an economical alternative to high priced branded generics, most physicians do not prefer unbranded generic medicines.

There is another important point worth noting regarding India made generic drugs. Although, Indian pharma sector caters to around 40 percent of generic demand in the US, as IBEF reports, many Americans nurture serious apprehensions on the quality of generic drugs manufactured even by India’s top drug companies. 

This is quite similar to apprehension that exists in India between the quality branded and unbranded generic medicines in India. The only difference is – the above perception in India is not based on impartial and credible scientific studies, whereas it is not so in America. The New York Times report, published on May 11, 2019 vindicates this point. It questioned: “Americans Need Generic Drugs. But Can They Trust Them? The fake quality-control data, bird infestations and toxic impurities at the overseas plants that could be making your medication.” Incidentally, there aren’t any such large-scale accusations regarding dubious quality of drugs manufactured by Big Pharma. 

On the other hand, big pharma players have long been accused of drug price gouging or price-fixing of life-saving drugs, primarily to maximize earnings by ‘extending’ product patent-life. Curiously, in recent times, even the generic drug players are being accused of following a similar practice. Thus, in this article, I shall explore how generic drug players are also trying to hoodwink measures to bring down the drug price, either through price control or through the encouragement of intense competition – playing a ‘cat and mouse game’, as it were, whenever an opportunity comes. If it continues and probably it will, what is the way ahead? Let me begin by recapitulating a historic pace-setting move in the global generic market by an Indian drug player.

A historic pace-setting move by an Indian generic drug player:

Being a major exporter of generic drugs in many developed, developing and even poor countries around the world, India is often termed as ‘the pharmacy of the world.’ That apart, a historical move in this space, by a top domestic player – Cipla, earned global accolades, at the turn of this new millennium. In 2001, Cipla slashed the price of its triple-therapy drug ”cocktails” for HIV-AIDS – being sold by MNCs, ranging from USD 10,000/ USD 15,000 a year to USD 350 a year per patient to a doctors’ group working in Africa.With the generic industry’s focus on a deeper bottom line, the scenario has changed now. Finding ways and means for the price increase, evading both competitive pressure and also drug price control, as in India, has turned into a ‘cat and mouse game’, as it were.

Generic drug pricing – ‘a cat and mouse game?’

Pricing pressure, especially for generic drugs, from patients, payers, politicians and governments, is gradually becoming more intense. More the pressure greater is the effort of affected players to come out of it, in any way –akin to a ‘cat and mouse game’, as it were. Although, it has recently started in the USA, the same exists in India, since 1970, when the first drug price control was introduced in the country. Intriguingly, in the midst of this toughest ever drug price control, phenomenal rise of almost all top Indian companies, including the top ranked company in the Indian pharma market commenced – from scratch. Nonetheless, to get a feel of how is this game being played out, let me start with the Indian scenario.

How this game is played in India to evade price control:

Instead of taking a deep dive into the history of drug price control in India, let me give a bird’s eye view of a few mechanisms, out of many, used to evade price control, since it commenced. The idea is to give just a feel of how this ‘cat and mouse game’ game pans out, with a few of such examples in a sequential order, since 1970, as much as possible, by:

  • Including price decontrolled molecule in the FDC formulations.
  • Replacing a price-controlled molecule by a similar decontrolled one, keeping the brand name unchanged, when the number of controlled molecules came down.
  • Making a major shift towards selling more of higher-priced decontrolled molecules, jettisoning low priced controlled molecules.
  • Resorting to vigorous campaigns, when the government started encouraging prescription of low-priced generic molecules, to ensure further shift to branded FDC prescriptions, alongside image enhancement of branded generics over equivalent unbranded ones. Its outcome is visible in the above Indian Survey on the image of branded and unbranded generics.

Has Indian pharma industry succeeded in this game?

It appears so and gets reflected in the CAGR of the industry. According to IBEF, “The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach US$ 55 billion.” I underscore, this is value growth.

Thus, the point, I reckon, that the government should ponder: How both can happen, at the same time – price control is bringing down drug prices, extending real benefits to patients on the ground, and at the same time the industry is recording an impressive growth rate in value terms?  Whatever it means, let’s now try to explore, how such ‘cat and mouse game’ is being played to increase generic drug prices in the United States.

How similar game is played in the US to increase generic drug price:

On May 10, 2019, international media reported that ‘44 US states announced a lawsuit alleging an anti-competitive conspiracy to artificially inflate prices for more than 100 drugs, some by more than 1,000 percent.’ This lawsuit is based on an investigation involving a number of generic drug companies. The process, which took five-years to complete, accused twenty generic drug players. Teva Pharmaceuticals USA, whose parent company is based in Israel was, reportedly, named as the ringleader of the price-fixing. The company raised prices of around 112 generic formulations.

Other companies, reportedly, named in the complaint, include Pfizer, Novartis subsidiary Sandoz, Mylan, and seven Indian drug companies, including Lupin, Aurobindo, Dr. Reddy’s, Wockhardt, Taro Pharmaceutical Industries (a subsidiary of Sun Pharma) and Glenmark. Some of the 15 senior company executives who were individually named in the lawsuit for their involvementin this alleged “multibillion-dollar fraud ”belong to Teva, Sandoz and Mylan.

The ‘cat and mouse game’ in this case is slightly different. Instead of government price control, the US drug regulator encouraged intense generic competition to bring down the price. When the priced did not come down as expected, the State of Connecticut, reportedly, began investigating select generic drug price increases in July 2014. Subsequently, other states also joined the investigation, and uncovered the reason for prices not coming down.

According to the complaint, between July 2013 and January 2015, Teva significantly raised prices on approximately 112 different generic drugs. Of those 112 different drugs, Teva had colluded with its competitors on at least 86 of them. The complaint noted: “Teva had understandings with its highest quality competitors to lead and follow each other’s price increases, and did so with great frequency and success, resulting in many billions of dollars of harm to the national economy over a period of several years.” In this way, the impact of intense competition on drug prices, was made ineffective.

Not the first time, it was detected:

The 2019 anti-trust lawsuit against the generic drug makers may be ‘the biggest price-fixing scheme in the US history’, but not the first lawsuit of this kind in America. A similar lawsuit for illegal price-fixing against six generic companies, was filed by the states in 2016, as well, which is still being litigated. The 2019 case is a sweeping version of the same and is the result of a much wider investigation. It indicates, instead of taking corrective measures, the ‘cat and mouse game’ still continues. However, almost all the companies have vehemently denied this allegation.

Is this game existential in nature of the business?

One may well argue that such ‘cat and mouse game’ with the government is existential in nature, for the generic drug business. When price control or intense market competition brings down the price to such a level, it becomes a matter of survival of most businesses. There doesn’t seem to remain enough financial interest for them to remain in the market. If and when it happens, causing shortage of cheaper generic drugs, patients’ health interest gets very adversely affected. It also prompts the manufacturers to find a way out for the survival of the business. This is understandable. But it needs to be established, supported by scientific studies.

An off the cuff solution:

A general and off the cuff solution to the above issue would naturally be, there should be a right balance between affordability of most consumers and the business interest of the drug makers. This broad pointer is also right and understandable. But again, no one knows the expected upper limit of the generic drug profit margin for their manufacturers – where hardly any breakthrough and cost-intensive R&D is involved. Equally challenging is to know – below what margin, generic players, by and large, loose interest in this business?

What do some available facts indicate?

According to the year-end report of the Pharmaceutical Export Promotion Council (Pharmexcil) the total pharma exports from India has been pegged at USD 19.14 billion for 2018-19. This represents a growth of 10.72 per cent over USD 17.28 billion in thelast year. It further reported, “The top 25 export destinations contribute 76.52 per cent of the formulation exports amounting to USD 10.38 billion. Among these, the US continues to be the largest export destination with over 38.62 per cent of the total generic exports to that country at USD 5.24 billion.” Does it mean business as usual, despite ‘price-fixing’ law suits in the US, since 2016?

Similar impression one would probably get from the Indian scenario, as well. Notably, despite price control, which is continuing since last five decades, the growth rate of the Indian pharma market, which is dominated by branded generics, remains very impressive.According to the January 2019 report of IBEF: “The country’s pharmaceutical industry is expected to expand at a CAGR of 22.4 per cent over 2015–20 to reach USD 55 billion.” So also the same game, probably!

Conclusion:

It appears, there is certainly a huge reputation or image crisis for the generic drug industry, as such, due to such alleged delinquencies. However, from the business perspective, the manufacturers are still having enough leeway to move on with similar measures, supported by fresh thinking. At the same time, it seems unlikely to have any form of drug price control in the United States, at least, in the foreseeable future. Nevertheless, price pressure due to cut-throat competition could even be more intensive, as it gets reflected even in the US-FDA statements.

Nearer home, the Indian generic drug business has been hit with a double whammy – allegations for dubious drug quality standards, on the one hand, and price manipulation on the other, besides dented reputation and image – widening trust gap with patients and governments.

Moreover, unlike the best export market even for generic drugs – the United States, India has been following some patchy policy measures for health care, as a whole. The drug price control system is one such. Till a holistic policy on health care is put in place for all, backed by an effective monitoring system, The Indian price control system may remain like a ‘maze’, as it were, with several ways to hoodwink it.

Hence, the ‘cat and mouse game’, albeit in a different format, is likely to continue, until one gets caught, or till all concerned puts their act together – putting patients at the center of the core business strategy.

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.

Slugfest in Pharma Land: Isn’t ‘The Pot Calling the Kettle Black?’

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Close on the heels of detention of a British Citizen, an American citizen too has  been reportedly detained, for the first time, by the Chinese Government in connection with unfolding mega corruption scandal in the country’s pharma industry involving even ‘third party’.

A slugfest over this corruption scandal too has already begun. Media reports highlight, vested interests, as usual, retaliate by saying that China’s attention to the alleged corruption by MNCs is to benefit the local Chinese companies.

As per reports, big global pharma innovator companies like, GlaxoSmithKline, AstraZeneca and UCB are currently being questioned by the Chinese authorities related to this scam.

Critical role of ‘Third Party’ in pharma bribery and corruption: 

Although in the above Chinese scam, a third party, in form of a travel agency, has been accused to have played a critical role in the GSK case, it will be hard to believe that this is a solitary example.

Internal ‘Compliance Systems’ of global pharma companies, in most cases, are believed to be robust enough and will generally be found squeaky clean by any audit. Unfortunately, as it appears from various international reports, corruption still enters through cracks between seemingly robust ‘compliance firewalls’ for business gain.

Invariably in response, expensive and high decibel Public Relations (PR) machineries are put to overdrive. These extremely capable PR agents, with their  all guns blazing, keep trying to establish that such incidents, though quite frequent and are taking place across the world unabatedly, are nothing but  ‘small aberrations’ in pursuit of pharma ‘innovation’ for newer drugs just to benefit the patients.

As one understands from the GSK case, the ‘third party’ travel agent reportedly attempted to keep all transactions at arm’s length to avoid detection of any unholy nexus by the Chinese regulators. 

However, in the real world, it could possibly be any crafty and well-identified ‘third party’, intimately associated with the pharmaceutical business process. These ‘third parties’ are crafty enough to exploit the loopholes in the seemingly robust compliance systems of the concerned companies to help facilitating their financial performance. 

An interesting commonality in all such often repeated scams is the lack of top management accountability of the companies involved. This would probably surprise even the recent public sector scam tainted concerned ministers and top bureaucrats of India.

Much to everybody’s dismay, such incidents reportedly continue to take place in various parts of the world and in all probability in India too.

Other countries initiated probes:

Unlike the high-octane development in China, in many developed countries probes against such corruption have already been initiated at a different scale and level. For example, in Canada a conservative MP reportedly testified on October 17, 2012 to the ‘Standing Senate Committee on Social Affairs, Science and Technology’ as an expert witness regarding post-approval drug monitoring and the corrupt practices of pharmaceutical companies.

Global Corruption Barometer 2013:

When a person talks about corruption, it usually gets restricted to corrupt practices in the Public Sector. Any such issue involving Business, Healthcare, Education and even Judiciary, Media and NGOs are considered at best as misdemeanor, if not minor aberrations.

In this context it is worth mentioning that ‘Transparency International’ has released Global Corruption Barometer 2013 recently.  This ‘2013 Barometer’ is the world’s largest public opinion survey on corruption. It surveyed 114,000 people in 107 countries.

The reported global findings of this survey, which indicate a general lack of confidence in the institutions tasked to fight corruption, is as follows:

  • More than one in two people thinks corruption in their country has worsened in the last two years.
  • 54 per cent of people surveyed believe their governments’ efforts to fight corruption are ineffective.
  • 27 percent of respondents have paid a bribe when accessing public services and institutions in the last 12 months, revealing no improvement from previous surveys.
  • In 51 countries around the world, political parties are seen as the most corrupt institutions.
  • In 36 countries, people view the police most corrupt, in 20 countries they view the judiciary as most corrupt.
  • 54 percent of respondents think that the government in their country is run by special interests.

Situation alarming in India:

However, in India, the situation is much worse. Besides political parties, police and legislature, institutions like, Health Systems, Business, Judiciary, NGOs and even Media smack of high level of corruption, as follows:

No: Institutions Bribe Quotient %
1. Political Parties 86
2. Police 75
3. Legislature 65
4. Education 61
5. Health Systems 56
6. Business 50
7. Judiciary 45
8. Religious Bodies 44
9. Media 41
10. NGO 30
11. Military 20

Moreover, as per the report, approximately one out of four people paid a bribe globally in 2012, while in India, the bribe-paying rate was twice, with a little over one out of two people paying a bribe. Based on this indicator alone India occupies 94th rank out of 107 countries.

Coming back to healthcare in India, manifestations of high level corruptions in this critical area taken together with the same, as reported for its close connects like, as follows, are indeed alarming:

  • Business houses (include pharma companies)
  • Education (produces doctors, nurses etc.) 
  • Judiciary (also resolves various pharma disputes) 
  • Media (help creating unbiased public opinion) 
  • NGOs (takes care of Patients’ interest) 

The prevailing situation is highly disturbing, as any meaningful reform measures in the healthcare space of India could be effectively blunted, if not negated, by influencing related corrupt institutions.

It is important to note that bribery in the Indian healthcare sector was as rampant as Education and Judiciary in 2012, as follows:

No. Sector Bribe Paid in 2012 %
1. Police 62
2. Registry & Permits 61
3. Land 50
4. Utilities 48
5. Education 48
6. Tax Revenue 41
7. Judiciary 36
8. Health 34

Source: Global Corruption Barometer 2013

Where there’s smoke, there’s fire:

All these numbers vindicate the well-known dictum ‘where there’s smoke, there’s fire’ for the healthcare sector, in general, and the pharmaceutical sector, in particular, of India.

Bribery and corruption appear to have emerged as the key compliance related issues in the pharma sector. A report indicates that this is mainly due to manipulable environment in the pharma industry, just like in many other sectors as mentioned above.

Such manipulations could range from influencing drug procurement prices in return for kickbacks, giving expensive freebies to the medical practitioners in return of specific drug prescriptions, and even making regional regulatory bodies to provide favorable reports overlooking blatant malpractices.

High level of tolerance:

KPMG Fraud Survey Report 2012 also highlights, though bribery and corruption continues to be an issue, pharma industry shows reluctance to discuss it openly. Moreover, close to 70 per cent of respondents surveyed said, they faced no significant threats from such issues.

The report also indicated, around 72 per cent of respondents expressed that their respective companies have in place a robust mechanism to address bribery and corruption. However, only few respondents expressed inclination to explain such in-house mechanisms. This vindicates the point of high levels of institutional tolerance to bribery and corruption in the pharmaceutical sector of India, just like in many other countries.

“Collusive nexus”:

Even a Parliamentary Standing Committee in its findings reportedly indicted India’s top drug regulatory agency for violating laws and collusion with pharmaceutical companies to approve medicines without clinical trials with the following remark:

“There is sufficient evidence on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.”

A Research Scientist fumes:

Following is a reported comment of a research scientist on corruption and bribery in the pharmaceutical industry of India:

“It would not make me happy, to put it mildly, to think of a drug that I’d had a part in discovered being flogged via sleazy vacation offers and sets of cookware dumped on a doctor’s office floor.”

Where pharma and political slugfests unite:

This short video clip captures one of too many pharma slugfests given a very high level and fiery political dimension in the global pharma land.

Conclusion:

As we have seen in the ‘Global Corruption Barometer 2013’, the respondents regarded almost all key institutions and industrial sectors in India as being corrupt or extremely corrupt.

As per the above report, corruption seems to have engulfed the private sector too, and alarmingly has not spared even the ‘healthcare system’ at large , as it quite prominently shows up in the ‘Corruption Barometer 2013’. 

As deliberated above, some ‘third parties’ of any type, working within the pharmaceutical value chain, could well be the fountain heads of many types of corruptions, as reported in China. They should be put under careful vigil of the regulators, placed under magnifying glasses of scrutiny and the rogues must quickly be brought to justice wherever and whenever there are violations. A report stating, Chinese administration has decided to punish 39 hospital employees for taking illegal kickbacks from pharmaceutical companies as a part of country’s widening investigation against pharma corruption, would justify this point.

That said, the task in hand is much tougher. On the one hand an Indian Parliamentary Panel observes that both regulators and the pharma companies are hand in glove to fuel corruption, instead of dousing the fire.

On the other hand, the global pharma industry has been accusing the Indian government of ‘protectionism’, ‘lack of transparency/predictability in its policy measures’ and ‘draconian IP laws’.

In the midst of all these cacophony, haven’t the stakeholders and the public at large, with exposure to contextual information, started pondering:

Gosh! in the slugfest on the pharma land, isn’t ‘The Pot Calling the Kettle Black?’

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.

 

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

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

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

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

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

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

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

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

Countries started taking steps with disclosure norms:

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

USA

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

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

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

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

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

France:

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

Netherlands:

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

UK:

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

Australia and Slovakia:

Similar requirements also exist in Australia and Slovakia.

Japan:

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

India still remains far behind:

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

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

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

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

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

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

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

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

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

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

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

Ministry of Finance fires the first salvo:

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

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

The High Court upheld the CBDT order:

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

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

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

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

Current situation in America post ‘Sunshine Act’:

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

Low awareness level of the ‘Sunshine Act’:

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

The ground reality:

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

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

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

Spin-off benefits of the Law:

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

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

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

Such Laws could be more impactful in India:

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

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

An interesting survey in India:

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

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

The Planning Commission of India expresses its anguish: 

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

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

The Ministry of Health may now intervene: 

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

Conclusion:

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

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

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

By: Tapan J Ray

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

Allegation of ‘Marketing Malpractices’ in the pharmaceutical Industry of India has assumed a huge proportion– who will ‘bell the cat’?

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Sometime back, in its January – March, 2004 issue, ‘Indian Journal of Medical Ethics’ (IJME)in 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 year after, 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.”

This situation is not limited to India alone. It has been reported from across the world. ‘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 specialities (anaesthesiology, cardiology, family practice, general surgery, internal medicine and paediatrics) 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-imbursement 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.

Even our own ‘The Times of India’ reported the following on December 15, 2008:

1. “The more drugs a doctor prescribes of a company, greater the chances of him or her winning a
car, a high-end fridge or TV set.”

2. “Also, 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.”

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 continue 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 malpractice 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.”

Huge settlement sums involved in such ‘federal misdemeanour’ cases could act as a reasonably strong deterrent in the USA. However, in India, even the written complaints to the Drug Controller General of India (DCGI) about ‘off label’ promotion of drugs attracts no such punitive measure. Marketing malpractices in India seems to have now become a routine, as it were. All stakeholders, in principle, agree that it should stop. But in absence of any strong deterrent, like in the USA, will it remain just as another wishful thinking?

Both the Government and the industry talk about ‘self regulation’ to address this issue. This is indeed a very pragmatic thought. A part of the industry already has such a self regulation system in place. But the moot question that comes in everybody’s mind is it working, effectively?

To effectively address this issue should the entire pharmaceutical industry in India together not form a self regulatory body in line with “Consumer complaint council” of “The Advertising Standards Council of India”, as was created by the Fast Moving Consumer Goods (FMCG) industry? The decisions taken by the ‘pharma council’ against each complaint of marketing malpractice should be disseminated to all concerned, to make the system robust and transparent…and in that process it will act as a strong deterrent too.

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.