Tag Archives: Challenging

Biosimilar Drugs: First Indian Foot Print In An Uncharted Frontier

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A homegrown Indian biologic manufacturer is now about to leave behind its first foot-print, with a ‘made in India’ biosimilar drug, in one of the largest pharma market of the world. This was indeed an uncharted frontier, and a dream to realize for any Indian bio-pharma player.                                                      

On March 28, 2016, by a Press Release, Bengaluru based Biocon Ltd., one of the premier biopharmaceutical companies in India, announced that the Ministry of Health, Labour and Welfare (MHLW) of Japan has approved its biosimilar Insulin Glargine in a prefilled disposable pen. The product is a biosimilar version of Sanofi’s blockbuster insulin brand – ‘Lantus’.

The Company claims that Glargine is a high quality, yet an affordable priced product, as it will reportedly cost around 25 percent less than the original biologic brand – Lantus. This ‘made in India’ biosimilar product is expected to be launched in Japan in the Q1 of 2017. Incidentally, Japan is the second largest Glargine market in the world with a value of US$ 144 Million. Biocon will co-market this product with its partner Fujifilm.

Would it be a free run? 

Although it is a very significant and well-deserved achievement of Biocon, but its entry with this biosimilar drug in Japan’s Lantus market, nevertheless, does not seem to be free from tough competition. This is because, in 2015, both Lilly and Boehringer Ingelheim also obtained Japanese regulatory approval for their respective biosimilar versions of Lantus. In the same year, both these companies also gained regulatory approval from the US-FDA, and the European Medicine Agency (EMA) for their respective products.

Moreover, Sanofi’s longer acting version of Lantus – Lantus XR, or Toujeo, to treat both Type 1 and Type 2 diabetes, has already been approved in Japan, which needs to be injected less, expectedly making it more convenient to patients.

Key barriers to a biosimilar drug's success: 

Such barriers, as I shall briefly outline below, help sustaining monopoly of the original biologic even after patent expiry, discourage investments in innovation in search of biosimilars, and adversely impacts access to effective and much less expensive follow-on-biologics to save patients’ precious lives. 

These barriers can be broadly divided in two categories: 

A. Regulatory barriers:

1. Varying non-proprietary names:

A large number of biosimilar drug manufacturers, including insurers and large pharmacy chains believe, just as various global studies have also indicated that varying non-proprietary names for biosimilars, quite different from the original biologic, as required by the drug regulators in the world’s most regulated pharma markets, such as, the United States, Europe, Japan, and Australia, restrict competition in the market for the original biologic brands. 

However, the innovator companies for biologic drugs hold quite different views. For example, Roche (Genentech), a developer of original biologic, reportedly explained that “distinguishable non-proprietary names are in the best interest of patient safety, because they facilitate Pharmacovigilance, and mitigate inadvertent product substitution.”

Even, many other global companies that develop both original biologic and also biosimilar products such as, Amgen, Pfizer and others, also reportedly support the use of ‘distinguishable nonproprietary names’.

That said, the Biosimilars Council of the Generic Pharmaceutical Association argues that consistent non-proprietary naming will ensure robust market formation that ultimately supports patient access, affordability, Pharmacovigilance systems currently in place and allow for unambiguous prescribing, 

2. Substitution or interchangeable with original biologics:

Besides different ‘non-proprietary names’, but arising primarily out of this issue, automatic substitution or interchangeability is not permitted for biosimilar drugs by the drug regulators in the major pharma markets of the world, such as, the United States, Europe and Japan.

The key argument in favor of interchangeability barrier for biosimilar drugs is the fact that the biological drugs, being large protein molecules, can never be exactly replicated. Hence, automatic substitution of original biologic with biosimilar drugs does not arise. This is mainly due to the safety concern that interchangeability between the biosimilars and the original biologic may increase immunogenicity, giving rise to adverse drug reactions. Hence, it would be risky to allow interchangeability of biosimilar drugs, without generating relevant clinical trial data.

On the other hand, the Generic Pharmaceutical Association (GPhA) and the Biosimilars Council, vehemently argue that a biosimilar drug has a lot many other unique identifying characteristics “including a brand name, company name, a lot number and a National Drug Code (NDC) number that would readily distinguish it from other products that share the same nonproprietary name.”

Further, the interchangeable status for biosimilar drugs would also help its manufacturers to tide over the initial apprehensions on safety and quality of biosimilar drugs, as compared to the original ones.

3. 12-year Data Exclusivity period for biologics in the United states:

Currently, the new law for biologic products in the United States provides 12 years of data exclusivity for a new biologic. This is five years more than what is granted to small molecule drugs. 

Many experts believe that this system would further delay the entry of cost-effective biosimilar drugs, restrict the biosimilar drug manufacturers from relying on the test data submitted to drug regulator by the manufacturers of the original biologic drugs while seeking marketing approval.

A rapidly evolving scenario in the United States:

The regulatory space for approval of biosimilar drugs is still evolving in the Unites States. This is vindicated by the fact that in March 2016, giving a somewhat positive signal to the biosimilar drug manufacturers, the US-FDA released another set of a 15-page draft guidelines on how biosimilar products should be labeled for the US market. Interestingly, it has come just around a year of the first biosimilar drug approval in the United States – Zarxio (filgrastim-sndz) of Novartis.

The US-FDA announcement says that all ‘comments and suggestions regarding this draft document should be submitted within 60 days of publication in the Federal Register of the notice announcing the availability of the draft guidance.’ Besides labeling issues, this draft guidance document, though indicates that the ‘interchangeability’ criteria will be addressed in the future, does not still throw enough light on how exactly to determine ‘interchangeability’ for biosimilar drugs.

That said, these key regulatory barriers are likely to continue, at least in the foreseeable future, for many reasons. The biosimilar drug manufacturers, therefore, would necessarily have to work within the set regulations, as applicable to different markets of the world.

I deliberated a related point in my article of August 25, 2014, titled “Scandalizing Biosimilar Drugs With Safety Concerns” 

B. Prescribers’ skepticism:  

Initial skepticism of the medical profession for biosimilar drugs are, reportedly, due to the high voltage advocacy of the original biologic manufacturers on the ‘documented variability between original biologic and biosimilars. Which is why, any substitution of an original biologic with a related biosimilar drug could lead to increase in avoidable adverse reactions.

‘The medical platform and community QuantiaMD’, released a study just around September 2015, when by a Press Release, Novartis announced the launch of the first biosimilar approved by the US-FDA – Zarxio(TM) (filgrastim-sndz). However, in 2006, Novartis after suing the US-FDA, got the approval for its human growth hormone – Omnitrope, which is a biosimilar of the original biologic of Genentech and Pfizer. At that time a clear regulatory guideline for biosimilar drugs in the United States, was not in place.

The QuantiaMD report at that time said, “Only 12% of prescribing specialists are ‘very confident’ that biosimilars are as safe as the original biologic version of the drug. In addition, a mere 17% said they were ‘very likely’ to prescribe a biosimilar, while 70% admitted they were not sure if they would.” 

Since then, this scenario for biosimilar drugs is changing though gradually, but encouragingly. I shall dwell on that below.

The major growth drivers:

The major growth drivers for biosimilars, especially, in the world’s top pharmaceutical markets are expected to be:

  • Growing pressure to curtail healthcare expenditure
  • Growing demand for biosimilar drugs due to their cost-effectiveness
  • Rising incidences of various life-threatening diseases
  • Increasing number of off-patent biologics
  • Positive outcome in the ongoing clinical trials
  • Rising demand for biosimilars in different therapeutic applications, such as, rheumatoid arthritis and blood disorders. 

This in turn would probably usher in an unprecedented opportunity for the manufacturers of high quality biosimilar drugs, including in India.

Unfolding a huge emerging opportunity with biosimilars: 

This unprecedented opportunity is expected to come mainly from the world’s three largest pharma market, namely the United States, Europe and Japan, due to very high prices of original biologic drugs, and simultaneously to contain rapidly escalating healthcare expenditure by the respective Governments. 

Unlike in the past, when the doctors were apprehensive, and a bit skeptic too, on the use of new biosimilars, some new studies of 2016 indicate a rapid change in that trend. After the launch of the first biosimilar drug in the US, coupled with rapidly increasing incidences of various complex, life-threatening diseases, better knowledge of biosimilar drugs and their cost-effectiveness, doctors are now expressing much lesser concern, and exhibiting greater confidence in the use of biosimilars in their clinical practice.

Yet another, March 2016 study indicates, now only 19.5 percent of respondents feel little or no confidence in the use of biosimilar monoclonal antibodies compared to 61percent of respondents to a previous version of the survey undertaken in 2013 by the same market research group. The survey also shows that 44.4 percent of respondents consider that the original biologic and its biosimilar versions are interchangeable, as compared with only 6 percent in the 2013 survey.

As a result of this emerging trend, some global analysts of high credibility estimate that innovative biologic brands will lose around US$110 billion in sales to their biosimilar versions by 2025.

Another March, 2016 report of IMS Institute for Healthcare Informatics states that lower-cost biosimilar versions of complex biologic, could save the US and Europe’s five top markets as much as US$112 billion by 2020,

These encouraging developments in the global biosimilar arena are expected to encourage the capable Indian biosimilar drug players to invest in this high-tech format of drug development, and reap a rich harvest as the high priced blockbuster biologic brands go off-patent.

Conclusion:

Putting all these developments together, and considering the rapidly emerging scenario in this space, it now appears that challenges ahead for rapid acceptance of biosimilar drugs though are still many, but not insurmountable, at all.

The situation necessitates application of fresh and innovative marketing strategies to gain doctors’ confidence on biosimilar medicines, in total conformance with the regulatory requirements for the same, as they are, in the most important regulated markets of the world.

It goes without saying that success in the generation of enough prescriptions for biosimilar drugs is the fundamental requirement to benefit the patients, which, in turn, would lead to significant savings in health care cost, as estimated above, creating a win-win situation for all, in every way.

As more innovator companies start joining the biosimilar bandwagon, the physicians’ perception on these new varieties of medicines, hopefully, would also change, sooner.

Biocon’s grand announcement of its entry with a ‘made in India’ biosimilar drug in one of the word’s top three pharma markets, would probably be a great encouragement for all other Indian biosimilar drug manufacturers. It clearly showcases the capabilities of an Indian drug manufacturer to chart in an uncharted and a highly complex frontier of medicine.

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.

New Drug Price Control Order of India: Is it Directionally Right Improving Access to Medicines?

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The last Drug Policy of India was announced in 2002, which was subsequently challenged by a Public Interest Litigation (PIL) in the Karnataka High Court on the ground of being inflationary in nature. The Honorable Court by its order dated November 12, 2002 issued a stay on the implementation of the Policy.

This judgment was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 and ordered as follows:

“We suspend the operation of the order to the extent it directs that the Policy dated February 15, 2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

As a result DPCO 1995 continued to remain in operation, pending formulation of a new drug policy as directed by the honorable court.

In the recent years, following a series of protracted judicial and executive activities, the New National Pharmaceutical Pricing Policy 2012 (NPPP 2012) came into effect on December 7, 2012. In the new policy the span of price control was changed to all drugs falling under the National List of Essential Medicines 2011 (NLEM 2011) and the price control methodology was modified from the cost-based to market based one. Accordingly the new Drug Price Control Order (DPCO 2013) was notified on May 15, 2013.

However, the matter is still subjudice, as the new policy would require to pass the judicial scrutiny.

In this article, I shall try to explore whether the new DPCO 2013 is directionally right in improving access to medicines for a vast majority of population in the country .

An overview:

As stated above, the new DPCO 2013 has just been notified after an agonizing wait of about 18 years, bringing all 652 formulations under 27 therapeutic segments of the National List of Essential Medicines under price control.

As prescribed in the Drug Policy 2012, in the new DPCO the cost based pricing mechanism has been replaced with a market-based one, where simple average price of all brands with a market share above 1% in their respective segments will be considered.

Only decrease in price and no immediate increase:

Companies selling medicines above the new Ceiling Prices (CP), as will be notified by the National Pharmaceutical Pricing Authority (NPPA) soon, would have to slash prices to conform to the new CP level. However, those selling these scheduled drugs below the ceiling price will not be allowed to raise prices, resulting in significant price reduction of most essential drugs with price increases in none. Prices of all these formulations will be frozen for a year. Although a silver lining is that manufacturers will be permitted an annual increase in the CPs in line with the Wholesale Price Index (WPI).

The span:

The span of DPCO 2013 will cover approximately 18% of US$ 13.6 billion domestic pharmaceutical market. However, the total coverage will increase to around 30%, for a year, after coupling it with existing price controlled medicines, as these will continue with the current prices for a year.

No change in retail margin:

DPCO 2013 continues with the provision of DPCO 1995, fixing margin for the Retailers at 16% of Ceiling Price, excluding Taxes.

Benefit to consumers:

Indian consumers will undoubtedly be the biggest beneficiaries of the new DPCO, as ceiling prices will now be based on roughly 91% of the pharmaceutical market by value, resulting upto 20% price reduction in 60% of the NLEM medicines. The prices of some drugs will fall by even upto 70%.

Overall impact:

In the short-term, Indian pharma market may shrink by around 2.3 per cent on implementation of the new policy, according to an analysis by market research firm AIOCD AWACS. The impact could be more pronounced for multinationals, given their premium pricing strategy for key brands. For the patients, anti-infective, cardio-vascular, gastro-intestinal, dermatology and painkillers would witness relatively steeper drop in prices.

However, despite initial adverse impact, higher volume growth over the next few years may help the pharmaceutical companies to recover and pick-up the growth momentum.

More transparent and less discretionary:

Moreover, the industry reportedly feels that the shift in the methodology of price control from virtually opaque and highly discretionary cost based system to relatively more transparent market based one, is directionally right and more prudent. They point out, even WHO in its feedback to the Department of Pharmaceuticals welcomed the intent to move away from cost-based pricing as it has been abandoned elsewhere.

The drafting of DPCO 2013 also appears to have reduced the discretionary criteria for the National Pharmaceutical Pricing Authority (NPPA) to bare minimum.

Check on any essential drug going out of market:

DPCO 2013 has tried to prevent any possibility of an essential drug going out of the market without the knowledge of NPPA by incorporating the following provision in the order:

“Any manufacturer of scheduled formulation, intending to discontinue any scheduled formulation from the market shall issue a public notice and also intimate the Government in Form-IV of schedule-II of this order in this regard at least six month prior to the intended date of discontinuation and the Government may, in public interest, direct the manufacturer of the scheduled formulation to continue with required level of production or import for a period not exceeding one year, from the intended date of such discontinuation within a period of sixty days of receipt of such intimation.” 

Patented Products:

DPCO 2013 does not include pricing of patented products, as the Department of pharmaceuticals (DoP) has already circulated the report of an internal committee, specially constituted to address this issue, for stakeholders’ comments.

Encourages innovation:

The new DPCO encourages innovation and pharmaceutical R&D offering significant pricing freedom. It states all locally developed new drugs, new drug delivery systems and new manufacturing processes will remain exempted from any price control for a five-year period.

Implementation:

Interestingly, the changes in prices will be effective after 45 days (15 days in the earlier DPCO 1995) from the date of  respective CP notifications. This increased number of days is expected to allow the trade to liquidate stocks with existing prices.

However, the industry feels that its hundred percent implementation at the retail level, even within extended 45 days, for previously sold residual stocks lying in remote locations, could pose a practical problem.

The Government reportedly answers to this apprehension by saying, the provisions and wordings for implementation of new CPs in DPCO 2013 are exactly the same as DPCO 1995. Only change is that the time limit for implementation has been extended from 15 days to 45 days in favor of the industry. Hence, those who implemented DPCO 1995, on the contrary, should find effecting DPCO 2013 changes in the CPs much easier.

Opposite views:

  • Reduction in drug prices with market-based pricing methodology is significantly less than the cost based ones. Hence, consumers will be much less benefitted with the new system.
  • A large section in the industry reportedly does not co-operate with the NPPA in providing details, as required by them, to make the cost based system more transparent.
  • Serious apprehensions have been expressed about the quality of outsourced market data, which will form the basis of CP calculations.

Key challenges:

I reckon, there will be some key challenges in the implementation of DPCO 2013. These are as follows:

  • Accuracy of the outsourced market data based on which Ceiling Prices will be calculated by the NPPA.
  • In case of any gross mistakes, the disputes may get dragged into protracted litigation.
  • Outsourced data will provide details only of around 480 out of 652 NLEM formulations. How will the data for remaining products be obtained and with what level of accuracy?
  • The final verdict of the Supreme Court related to the Public Interest Litigation (PIL) on the NPPP 2012, based on which DPCO 2013 has been worked out, is yet to come. Any unfavorable decision of the Honorable Court on the subject may push the NPPP  2012 and DPCO 2013 back to square one.

Conclusion:

Thus, DPCO 2013 should achieve the objectives of the Government in ensuring essential medicines are available to those who need them most by managing prices in the retail market and balancing industry growth on a longer term perspective. Interestingly, it also encourages indigenous innovation and R&D.

Thus, DPCO 2013, at long last, seems to be a well balanced one.

That said, making drug prices affordable to majority of population in the country is one of most important variables to improve access to medicines. This is an universally accepted fact today, though not an end by itself.

It is worth noting, price control of medicines since the last four decades have certainly been able to make the drug prices in India one of the lowest in the world coupled with intense cut-throat market competition. Unfortunately, this solitary measure is not good enough to improve desirable access to modern medicines for the common man due to various other critical reasons, which we hardly discuss and deliberate upon with as much passion and gusto as price control.

Therefore, industry questions, why despite so many DPCOs and rigorous price control over the last four decades, 47% of hospitalization in rural area and 31% of the same in urban areas are still financed by private loans and selling of assets by individuals?

Others reply with equal zest by saying, the situation could have been even worse without price control of medicines.

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.