Tag Archives: Compliance

Focus On Patient Compliance To Boost Pharma Sales…And More…

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One high-impact area in the healthcare space that often finds its place in the backseat is – patient noncompliance. A term that is commonly used in regard to ‘a patient who does not take a prescribed medication or follow a prescribed course of treatment.’ It comes with a steep price, for causing serious adverse impact not just on human health and health system, but also in the pharma business. Intriguingly, such incidents are still not scientifically monitored enough and vigorously acted upon, both globally and locally.

The World Health Organization (W.H.O) has also flagged it as a huge problem, as it reports, 10 percent to 25 percent of hospital and nursing home admissions result from patient noncompliance. Furthermore, about 50 percent of prescriptions filled for chronic diseases are not taken correctly, with 40 percent of patients not adhering to the treatment regimen.

In this article, just after giving a flavor to its financial cost to patients, I shall dwell mostly on its impact on the pharma players, as overcoming this important problem doesn’t generally fall in the area of strategic focus for most of them. Finally, I shall explore how drug manufacturers can translate this problem into an opportunity – as the third growth driver for business, creating a win-win situation for all.

Economic and health impact on patients:

Noncompliant patients suffering from both acute and chronic ailments, pay a heavy price, not just in terms of longer suffering arising out of complications, but also incurring significantly more health expenditure for treatment of the same diseases. According to IMS Institute for Healthcare Informatics, on average, less than 40 percent of patients around the world are fully complying with their treatment instructions.

Even in the Indian context, the problem is no different. Let me illustrate the point with the example of a chronic disease, such as Asthma. The article published on June 26, 2018 in ‘Lung India’ – the official publication of Indian Chest Society reported: “The mean annual direct costs among compliant and non-compliant patients were ₹14, 401 and ₹24, 407, respectively. Percentage of hospitalization was less among the compliant group (6 percent) when compared with noncompliant group (17 percent).”

The study concluded, asthma is not only associated with patient-specific impairment, but also creates a significant economic burden for the family and society. The major contributors to the burden are the medication cost and hospital admissions. Patient compliance with prescribed drugs can help keep asthma under control, thereby decreasing the economic burden and emergency hospital admissions – avoiding the economic risk from ill health with high out of pocket payments.  Productivity loss is another under-appreciated source of economic loss contributing to indirect cost. The rising costs of investigations, interventions, and treatment of chronic diseases further complicate the problem.

Economic impact on pharma business:

According to November 16, 2016 report, published by Capgemini and HealthPrize Technologies, globally, annual pharmaceutical revenue losses had increased from USD 564 billion in 2012 to USD 637 billion due to non-adherence to medications for chronic conditions. This works out to 59 percent of the USD 1.1 trillion in total global pharmaceutical revenue in 2015.

The report highlights, besides medication nonadherence being a serious global health issue that needs to be addressed immediately, it also happens to be a critical business issue for pharmaceutical companies. Thus, it is the only area of their business where a sharp strategic focus “can generate significant top – and bottom-line growth, improve outcomes, and create substantial savings for the healthcare system – all at the same time.”

Major reasons for patient noncompliance:

Several reasons are commonly attributed to patient-noncompliance to medicines, such as:

  • Lack of knowledge of its health and economic impact
  • Importance of completing the full-course of the drug and dosage regimen for long-term remission, following immediate relief
  • Untoward side-effects and other inconvenience
  • Forgetting therapy because of preoccupation
  • Financial inability to complete the prescribed treatment regimen due to the high cost of drugs.

Nevertheless, the 9th Edition of Global Research Report by Capgemini Consulting underscores that reality is more complex. Patient adherence initiatives, if any, when undertaken, even by pharma companies, often lack a thorough understanding of the root causes of discontinuing treatment and failure to effectively engage patients with a holistic approach to the issue. It also emphasizes: “Individual tactics are tried by different brands and then discontinued as budgets and priorities shift, before their impact is known. Successes are seldom pulled through and expanded across the organization.”

Using it as the third major growth drivers for pharma:

The two primary factors that drug manufacturers are leveraging to boost growth of the organization are:

A.  New product introduction – gradually extending to line extensions and new indications. One such illustration is the cholesterol-fighting drugLipitor of Pfizer. The lifetime sales of this brand as of the end third quarter 2017 generated a stunning USD 150.1 billion of business for the company. Incidentally, Lipitor patent expired in 2011. There are many similar examples, including Humira of AbbVie.

B.  Regular and hefty price increases for already marketed products, for various reasons, but almost regularly. According to this 2019 report, percentage price increases, on a huge base, of some of the world’s top pharma brands were as follows:

  • AbbVie: Humira, a blockbuster drug with USD 15 billion in sales in the first 9 months of 2018: +6.2%
  • Allergan: Many of its brand-name drugs, including dry-eye medication Restasis: +9.5%
  • Biogen: Multiple sclerosis drug Tecfidera: + 6%
  • Bristol-Myers Squibb: Eliquis, a drug that prevents blood clots and is on pace for USD 6 billion in sales in 2018: + 6%
  • Eli Lilly: Type 2 diabetes medication Jardiance: + 6%

Many studies have captured the importance of regular price increase, as a key pharma strategy, not only to drive the internal growth, but also to keep their investors, as well as, the stock market on the right side. There are examples that for some of the top global pharma players, this strategy was directly responsible for 100 percent of earnings-per-share growth in 2016, and more than 20 percent of the revenue made in the first three quarters of 2018.

On the other hand, some top analysts’ findings highlight that drug companies serious strategic focus just on the issue of patient noncompliance with novel tactical measures, could fetch as much as a 30 percent increase in annual earnings per share for many players, even in India.

This brings up to the point – can strategic focus to minimize patient’s non-compliance, supported by adequate resources, be the third growth driver for drug companies?

Can focus on patient noncompliance be the third growth driver for pharma?

For a moment, leaving aside the above two primary growth drivers, if we look at the estimates, as quoted above, well over 50 percent to 60 percent of a brand’s potential sales is wasted due to patient noncompliance. Isn’t it huge? Can this be ignored? Obviously not. Instead, why not pharma converts this problem into an opportunity, with a sharp strategic focus, leveraging technology.

Translating this potential opportunity into reality is neither very easy nor is every company’s cup of tea. But the reward for the winners is indeed phenomenal. To chart on this frontier, one of the toughest barriers, besides a winner’s mindset, is getting access to credible and meaningful patient-data, for various reasons. On the other hand, it isn’t an insurmountable problem, either – especially, with today’s rapidly progressing technology.

Some companies have started the long march:

According to the review article, published in the New England Journal of Medicine: ‘The ability of physicians, to recognize non-adherence is poor, and interventions to improve adherence have had mixed results. Furthermore, successful interventions generally are substantially complex and costly.’

Realizing that it as a potential opportunity – disguised as a problem, several pharma players have started thinking about exploring this not much charted territory, confirm reports coming from different countries of the world. To give an illustration, November 22, 2016 edition of Fierce Pharma reported: ‘Pharma companies have more recently joined the conversation with partnerships and programs that include adherence aims.’

It is generally believed today that rapid ascendency of modern technology, and its strong influence on people, will help create a new awareness of its current adverse impact both on patients and the drug companies.

What else could be done in a much wider scale?

Digital interventions, such as smartphone apps, are becoming an increasingly common way to support medication adherence and self-management of chronic conditions. In this regard, the May 14, 2018 study titled, ‘Smartphone apps for improving medication adherence in hypertension: patients’ perspectives’, published in the journal of Patient Preference and Adherence, concluded as follows:

‘These data showed that patients can identify the benefits of a medication reminder and recognize that self-monitoring their blood pressure could be empowering, in terms of their understanding of the condition and interactions with their general practitioners.’ But some loose knots are still to be tightened.

Tightening the loose knots:

Having leveraged the state of the part digital technologies to tighten the loose knots in this area,a host of AI-enabled smartphone health and diagnostic apps, capturing patient compliance details, especially in chronic disease areas, are fast coming up. Most of these are being developed by large, small and medium sized non-pharma pure tech companies, including startups. For example, according to reports: ‘With the release of the Apple Health Record and Apple Watch with a single-lead ECG, it’s evident that Apple has officially entered the healthcare space.’

A good number of these apps have received even the US-FDA approval, such as: MyDose Coach - a reliable dose calculating app for type 2 diabetic patients who take insulin once-daily in concert with physician guided insulin recommendations. Or, GoSpiro – a home spirometer, to measure air output from the lungs for COPD patients and connects wirelessly to provide hospital-quality data regarding breathing.

That many non-pharma entities are trying to create a space for themselves in a high-tech, but non-drug treatment segment within the pharma space, has prompted, several drug manufacturers to rewrite their marketing playbook, incorporating this ‘new notation’.

It’s real now…for some:

As the above Fierce Pharma article reported: ‘Pharma companies have more recently joined the conversation with partnerships and programs that include adherence aims; efforts from Verily and Sanofi and IBM and Novo Nordisk have recently made the news.’Further, on November 07, 2018, in another report it brings to the fore that Geisinger Health System has developed mobile apps to manage asthma with AstraZeneca, and a wearable app to manage pain with Purdue. It also joined forces with Merck to develop tools for patients and caregivers to improve care coordination and medication adherence.

Moreover, on February 09, 2019, Japanese drug major Astellas and WiserCare - a company that develops healthcare decision support solutions, announced a collaboration that includes improving patient adherence to care plans, and improve the overall care experience.

In tandem, concern on patients’ data privacy, may also now be addressed, possibly by making use of blockchain or similar technology for such initiatives, as I discussed earlier in this blog.

Conclusion:

‘Acquiring new customers is important, but retaining them accelerates profitable growth,’ is the theme of an article, published in Forbes on June 08, 2016. Therefore, just as any other business, this dictum applies to the pharma industry, as well, especially in context of patient noncompliance to medicines, with a clear strategic focus to minimize its impact on performance.

The major reasons for patient noncompliance ranges from ignorance of its adverse impact on health to side effects, forgetfulness and right up to inability to afford full-course of the prescribed drug treatment. Despite its continuity over decades, adversely impacting patients, health system and the pharma players, it won’t be prudent to infer that no attempt was being made in the past, to address this critical issue. Nevertheless, those measures have not worked, for many reasons, as we see today from various research studies in this area, even in the Indian context.

Once again, intervention of technology to make patients compliant to medicine, is showing promise for following it up more vigorously. That some global drug majors are entering into collaborative arrangements with non-pharma, technology companies of various sizes, sends a signal of the emergence of a third major growth driver for pharma, as discussed above.

This issue is so important, especially considering that the low hanging fruits of R&D have mostly been plucked, just as regular hefty increases of drug prices are meeting with tough resistance, squarely. In this scenario, a robust strategic focus on patient compliance would not only boost pharma sales but would also reduce the disease burden of a large section of people significantly. This will benefit all and harm – none.

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.

Trees Die From The Top: Apt For Pharma Leadership Too?

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The Management Guru of all-time – Peter F. Drucker once said: “The spirit of an organization is created from the top… If an organization is great in spirit, it is because the spirit of its top people is great.” As “Trees die from the top”, no one should ever become a strategist unless he or she is willing to have his or her character serve as a model for subordinates – Drucker emphasized.

Decades after this assertion from Drucker, meant for management practitioners, it is discernible even today how irrefutable these axioms are.  In the contemporary times, as well, particularly when reality bites a company hard, being caught on the wrong side of ‘generally acceptable’ ethics, value and compliance standards.

While zeroing in to pharma, soundbites usually generated at that time, especially from the top echelon of the management, seem to hint that employees down the rung are responsible for such misdeeds, besides, of course, the legacy factor.

At this moment of truth, it is also not unusual for them to romancing the utopia, as it were. Senior management comes out with several ideas, which are squeaky clean in terms of optics. Some of them also talk about introducing behavior metric on ethics and values in employee performance appraisal before releasing any performance related pay out. In this article, I shall focus on this leadership issue in view of some latest developments in this area.

The latest developments:  

Let me now come straight to the latest developments in this area, as I see around.

“Novartis links bonuses to ethics in bid to rebuild reputation” – was a headline of Reuters on September 18, 2018. It reported: “Swiss drug maker Novartis has revealed its employees only get a bonus if they meet or exceed expectations for ethical behavior as it seeks to address past shortcomings that have damaged its reputation.”

Some interesting points stand out from this report on the ownership of such alleged malpractices. These reconfirm that the reasons for the same, including the repeated allegations of such nature, are being passed on to others by the top management. For example:

  • To past practices or the legacy factor, even if the current CEO has been a part of that corporate environment, since long.
  • To employees responsible down the line, and a new system is being adopted to address the issue.

In this case, as Reuters reports: “Chief Executive Vas Narasimhan has made strengthening the Swiss drug maker’s ethics culture a priority after costly bribery scandals or legal settlements in South Korea, China and the United States.”

Interestingly, as reported by the media, “the company was also this year embroiled in a political controversy over payments it made to U.S. President Donald Trump’s ex-attorney.”  Previously, even in the clinical trial area, Japanese authorities, reportedly “uncovered serious misconduct during a trial of its leukemia drug, Tasigna.”

As I said above, in response to such incidents, the General Counsel of Novartis, reportedly expressed: “This allows us to look at the behavior metric before any money leaves Novartis and catch potential misconduct before there is any risk to our reputation.” The official further added, “You can expect us to continue focusing on resolving the legacy issues that we read about in the press, ensuring we address any remaining underlying behaviors.”

Such steps not taken for the first time by a pharma company: 

EvenGlaxoSmithKline tried something akin in the past.

“GSK scraps sales rep targets after scandal,” was the headline of December 17, 2013 edition of the Financial Times. It reported: “GlaxoSmithKline is to scrap individual sales targets for its commercial staff as it seeks to repair its image and reform working practices in the wake of allegations in China that its staff paid officials up to $500m in bribes. The move comes amid concerns over aggressive marketing across the pharmaceutical industry and follows a series of damaging regulatory probes leading to a record $ 3bn fine in the US last year.”

However, later on GlaxoSmithKline, reportedly “altered the plan when its sales began to suffer in the world’s largest market.”

Where is the real issue lying?

As“PwC‘s 21st CEO Survey: Preparing for disruption” found, 71 percent of CEOs surveyed said that their organizations face greater pressure to deliver business results in less time.

There isn’t an iota of doubt, I reckon, that pharma CEOs are under constant performance pressure from the investors and other stakeholders to deliver expected financial results. This makes them keep their eyes primarily glued on to the grindstone for churning out expected profits from the business. This also means that they expect management efforts to be generally directed to deliver ‘values’ at the least possible cost.

On the other hand, the same PwC survey findings reiterated that with rising drug costs, the demand for the drug companies to demonstrate the treatment efficacy, is increasing by manifold. Thus, “to remain competitive, Big Pharma will have to do things faster (like drug development) and cheaper for the patient, add more value for the same money, and become more proactive partners with patients and doctors in both wellness and cure” - one of the findings of this study emphasized.

It is quite common for most large to medium sized pharma companies to have in place a well-articulated organizational ‘ethics, compliance and values’, together with requisite checks and balances in the form of rigorous rules, regulations and other guidelines.

Most often these adorn the respective websites too, for public knowledge. The question, therefore, surfaces what could then possibly go wrong in the organization and where exactly does the real issue lie, while effectively managing the organizational growth?

“Non-compliance – A serious challenge to growth”: 

Serious malpractices and their related fallout in pharma business – not just in marketing, but clinical trials, manufacturing, quality assurance and other areas, are not usually due to any lack of requisite processes or expertise. These are generally serious consequences of non-compliance of various organizational norms. At times, with the indirect support of senior management, or senior management keeps their eyes closed on such non-compliances, under demanding obligation for delivering expected financial results and business growth.

Tweaking areas, such as employee performance-incentive norms, as happened in the cases of GSK or Novartis, can’t fetch a long-lasting solution in such a situation, as I see it. Nonetheless, the survey report findings of Deloitte, titled “Non-compliance – A serious challenge to growth,” are interesting to get a sense of the reasons behind the same.

Key reasons for non-compliance: 

The Deloitte report identifies some key contributors to malpractices and non-compliance in the pharma sector, indicating the percentage of survey respondents involved against each, as follows:

  • Lack of an efficient internal control/ compliance system:  61 percent
  • Weak regulatory enforcement / action taken against fraudsters:  55 percent
  • Inadequate utilization of technology tools available to identify red flags:  45 percent
  • Lack of a zero-tolerance approach towards malpractice and regulatory non-compliance:  45 percent
  • Inadequate due diligence on employees/ third party associates:  36 percent
  • Unrealistic targets/goals linked to monetary compensations:  33 percent
  • Senior management override of controls:  24 percent
  • Inadequate oversight by the Board/ Audit Committee:  06 percent

As I mentioned before, most key contributors to malpractice and non-compliance point towards a lack of senior management efficiency in internal controls, systems, and “inadequate utilization of technology tools available to identify red flags.” Curiously, no one mentions about the requirements for any fresh measures or systems to curb such incidents, in the future.

Just tweaking the present system may not help:

Just for changing the optics, tweaking the present system often doesn’t help. Many similar instances in the past, such as GSK’s example, as cited above, would vindicate this point. In the GSK case, at least, it’s the then CEO – Sir Andrew Witty expectedly realized that ‘unrealistic targets/goals linked to monetary compensations’ lead to such corruptions.

But total delinking of the core responsibility of any sales staff, namely ‘generation of top-level numbers both in volume and value’, with performance incentive, could throw some future challenges. Similar reason, presumably prompted GSK altering the plan when its sales began to suffer, at a later date.

Similarly, Novartis is, reportedly introducing a new behavioral metric as qualifying criteria for its employees to earn bonuses or incentives. Intriguingly, despite the existence of rigorous rules, regulations, guidelines and associated punitive provisions for not complying with the company ethics and values for a long-time, malpractices are still being reported today.

Thus, I wonder, how will an additional system of similar nature prevent recurrence of such incidents in the future? Anyway, only the future will tell whether a tweaking of this nature in the present system that did not work in the past, will work in this particular case effectively.

Conclusion:

The reasons for less than adequate internal controls of an organization, I reckon, fall squarely on the senior management, especially for repeat offences. Passing the blame to employees down the line or tweaking their performance appraisal system by introducing a ‘behavioral metric’, is likely to be short term, finger-pointing on the legacy factor notwithstanding.

On the contrary, these may likely to be construed as manifestations of knee-jerk reactions, and not so well-thought-out strategic measures. Neither do such repeated malpractices demonstrate a great spirit of the organization, nor do these evince astute leadership qualities of its top management.

Coming back to where I started from, quoting what the management guru Peter Drucker once said: “The spirit of an organization is created from the top… If an organization is great in spirit, it is because the spirit of its top people is great.” He also reiterated, no one should ever become a strategist unless he or she is willing to have his or her character serve as a model for subordinates This is certainly not the situation for those pharma players mired with alleged malpractices, repeatedly – not just in marketing, but in other operational areas too.

As the good old saying goes: “trees die from the top,” so is also an organization when its senior management lacks a moral compass on ethics, compliance and values. Considering what is being often reported on business malpractices within the drug industry, isn’t the saying equally apt for pharma leadership, as well?

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.

Rebuilding Pharma Image: A Laudable Mindset – Lacking In Many

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The fierce debate on ethics and compliance related issues in the pharma marketing practices still reverberates, across the globe. One of its key fallout has been ever-increasing negative consumer perception about this sector, sparing a very few companies, if at all. As a result, many key communications of the individual players, including the industry associations specifically targeted to them, are becoming less and less credible, if not ineffective.

Which is why, though pharma as an industry is innovative in offering new medicines, consumers don’t perceive it so. Despite several drug players’ taking important steps towards stakeholder engagement, consumers don’t perceive so. The list goes on and on. I discussed on such consumer perception in my article of June 26, 2017. Hence, won’t further go into that subject, here.

General allegation on the pharma industry continues to remain unchanged, such as the drug industry tries to influence the medical profession, irrespective of whether they write prescription drugs for patients or are engaged in regulatory trial related activities aimed at product marketing.

Let me give an example to illustrate the later part of it, and in the Indian context. On April 26, 2017, it was reported that responding to a joint complaint filed by Mylan and Biocon in 2016, alleging that the Roche Group indulged in “abusive conduct”, the Competition Commission of India (CCI) gave directions for carrying out a detailed investigation on the subject. This probe was initiated to ascertain, whether Roche used its dominant position to maintain its monopoly over the breast cancer drug Trastuzumab, adversely impacting its access to many patients.

Such a scenario, though, undoubtedly disturbing, is very much avoidable. Thus, winning back the fading trust of the consumers in the industry, should be ticked as a top priority by the concerned parties.

In this article, I shall mostly focus on some recent developments related to ethics and compliance issues, mainly in pharma marketing, and with a small overlap on the regulatory and other areas, as and when required to drive home a point.

It shakes the trust base on the medical profession too:

This menace, as it were, though, more intense in India, is neither confined to its shores alone, nor just to the pharma industry, notwithstanding several constituents of big pharma have been implicated in mega bribery scandals in different countries. There doesn’t seem to be much doubt, either, that its impact has apparently shaken the very base of trust even on the medical profession, in general.

Not very long ago, Dr. Samiran Nundy, while holding the positions of Chairman, Department of Surgical Gastroenterology and Organ Transplantation at Sir Ganga Ram Hospital and Editor-in-Chief of the Journal of Current Medicine Research and Practice, reportedly exposed the widespread malpractices of the doctors in India who are taking cuts for referrals and prescribing unnecessary drugs, investigations and procedures for profit.

This practice continues even today, unabated. On June 18, 2017, it was widely reported in India that Maharashtra Government has decided to form a 3-member committee for suggesting effective ways to check the ‘cut practice’ of doctors. This decision followed a public awareness campaign on this subject, initiated by well-reputed late heart surgeon – Dr. Ramakanta Panda’s Asian Heart Institute, located in Mumbai. The hospital had put up a hoarding saying: ‘No commission. Only honest medical opinion’. The Indian Medical Association opposed the hoarding. But the hospital wrote to Maharashtra medical education minister seeking a legislation to fight this malpractice.

To contain this malady across India, for the sake of patients, Dr. Nundy had then suggested that to begin with, “The Medical Council of India (MCI), currently an exclusive club of doctors, has to be reconstituted. Half the members must be lay people like teachers, social workers and patient groups like the General Medical Council in Britain, where, if a doctor is found to be corrupt, he is booted out by the council.”

This subject continues to remain an open secret, just as pharma marketing malpractices, and remains mostly confined to the formation of various committees.

“Corruption ruins the doctor-patient relationship in India” – a reconfirmation:

“Corruption ruins the doctor-patient relationship in India” - highlighted an article published in the British Medical Journal (BMJ) on 08 May 2014. Its author – David Berger wrote, “Kickbacks and bribes oil every part of the country’s health care machinery and if India’s authorities cannot make improvements, international agencies should act.”

He reiterated, it’s a common complaint, both of the poor and the middle class, that they don’t trust their doctors from the core of hearts. They don’t consider them honest, and live in fear of having no other choice but to consult them, which results in high levels of doctor shopping. David Berger also deliberated on the widespread corruption in the pharmaceutical industry, with doctors bribed to make them prescribe specified drugs.

The article does not fail to mention that many Indian doctors do have huge expertise, are honorable and treat their patients well. However, as a group, doctors generally have a poor reputation.

Until the medical profession together with the pharma industry is prepared to tackle this malady head-on and acknowledge the corrosive effects of medical corruption, the doctor-patient relationship will continue to lie in tatters, the paper says.

Uniform code of ethical pharma marketing practices:

This brings us to the need of a uniform code of ethical pharma marketing practices. Such codes, regardless of whether voluntary or mandatory, are developed to ensure that pharma companies, either individually or collectively, indulge in ethical marketing practices, comply with all related rules and regulations, avoid predominantly self-serving goals and conflict interest with the medical profession, having an adverse impact on patients’ health interest.

This need was felt long ago. Accordingly, various pharma companies, including their trade associations, came up with their own versions of the same, for voluntary practice. As I wrote before, such codes of voluntary practice, mostly are not working. That hefty fines are being levied by the government agencies in various countries, that include who’s who of the drug industry around the world, with India being a major exception in this area, would vindicate the point.

Amid all these, probably a solitary global example of demonstrable success with the implementation of voluntary codes of ethical pharma marketing practices, framed by a trade association in a major western country of the world, now stands head and shoulders above others.

Standing head and shoulders above others:

On June 23, 2017, the international business daily – ‘Financial Times’ (FT), reported: “Drug maker Astellas sanctioned for ‘shocking’ patient safety failures”

Following ‘a series of shocking breaches of guidelines’ framed by ‘The Prescription Medicines Code of Practice Authority (PMCPA)’ – an integral part of the ‘Association of the British Pharmaceutical Industry (ABPI)’, publicly threatened the Japanese drug major – Astellas, for a permanent expulsion from the membership of the Association. However, PMCPA ultimately decided to limit the punishment to a 12-month suspension, after the company accepted its rulings and pledged to make the necessary changes. Nevertheless, Astellas could still be expelled, if PMCPA re-audit in October do not show any “significant progress” in the flagged areas – the report clarified.

Interestingly, just in June last year, ABPI had suspended Astellas for 12 months ‘because of breaches related to an advisory board meeting and deception, including providing false information to PMCPA’. The company had also failed to provide complete prescribing information for several medicines, as required by the code – another report highlights.

Astellas is one of the world’s top 20 pharmaceutical companies by revenue with a market capitalization of more than £20bn. In 2016 its operations in Europe, the Middle East and Africa generated revenues of €2.5bn –reports the FT.

What is PMCPA?

One may be interested to fathom how seriously the implementation of the uniform code of pharmaceutical marketing practice is taken in the United Kingdom (UK), and how transparent the system is.

The Prescription Medicines Code of Practice Authority (PMCPA) is the self-regulatory body which administers the Association of the British Pharmaceutical Industry’s (ABPI) Code of Practice for the Pharmaceutical Industry, independent of the ABPI. It is a not-for-profit body, which was established by the ABPI on 1 January 1993. In other words, the PMCPA is a division of the British pharma trade association – ABPI.

According to PMCPA website, it:

  • Operates the complaints procedure under which the materials and activities of pharmaceutical companies are considered in relation to the requirements of the Code.
  • Provides advice and guidance on the Code.
  • Provides training on the Code.
  • Arranges conciliation between pharmaceutical companies when requested to do so.
  • Scrutinizes samples of advertisements and meetings to check their compliance with the Code.

As I often quote: ‘proof of the pudding is in eating’, it may not be very difficult to ascertain, how a constructive collective mindset of those who are on the governing board of a pharma trade association, can help re-creating the right image for the pharma industry, in a meaningful way.

Advertisements and public reprimands for code violations:

The PMCPA apparently follows a system to advertise in the medical and pharmaceutical press brief details of all cases where companies are ruled in breach of the Code. The concerned companies are required to issue a corrective statement or are the subject of a public reprimand.

For the current year, the PMCPA website has featured the details of three ABPI members as on May 2017, namely, Gedeon Richter, Astellas, and Gedeon Richter, for breaching the ethical code of practices.

However, in 2016, as many as 15 ABPI members featured in this list of similar violations. These are:  Vifor Pharma, Celgene, Takeda, Pierre Fabre, Grünenthal Ltd, Boehringer Ingelheim Limited, Eli Lilly, AstraZeneca, Janssen-Cilag, Astellas, Stirling Anglian, Guerbet, Napp, Hospira, Genzyme, Bausch & Lomb and Merck Serono. It is worth noting that the names of some these major companies had appeared more than once, during that year.

I am quoting the names of those companies breaching the ABPI code, just to illustrate the level of transparency in this process. The details of previous years are available at the same website. As I said, this is probably a solitary example of demonstrable success with the implementation of voluntary practices of ethical pharma marketing codes, framed by any pharma trade association.

In conclusion:

Many international pharmaceutical trade associations, which are primarily the lobbying outfits, are known as the strong votaries of self-regulations of the uniform code of ethical pharma marketing practices, including in India. Some of them are also displaying these codes in their respective websites. However, regardless of all this, the ground reality is, the much-charted path of the well-hyped self-regulation by the industry to stop this malaise, is not working. ABPI’s case, I reckon, though laudable, may well be treated as an exception. 

In India, even the Government in power today knows it and publicly admitted the same. None other than the secretary of the Department of pharmaceuticals reportedly accepted this fact with the following words: “A voluntary code has been in place for the last few months. However, we found it very difficult to enforce it as a voluntary code. Hence, the government is planning to make it compulsory.”

Following this, as reported on March 15, 2016, in a written reply to the Lok Sabha, the Minister of State for Chemicals and Fertilizers, categorically said that the Government has decided to make the Uniform Code of Pharmaceutical Marketing Practice (UCPMP) mandatory to control unethical practices in the pharma industry.

The mindset that ABPI has demonstrated on voluntary implementation of their own version of UCPMP, is apparently lacking in India. Thus, to rebuild the pharma industry image in the country and winning back the trust of the society, the mandatory UCPMP with a robust enforcement machinery, I reckon, is necessary – without any further delay.

However, the sequence of events in the past on the same, trigger a critical doubt: Has the mandatory UCPMP slipped through the crack created by the self-serving interest of pharma lobbyists, including all those peripheral players whose business interests revolve round the current pharma marketing practices. Who knows?

Nonetheless, the bottom line remains: the mandatory UCPMP is yet to be enforced in India… if at all!

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.

Managing Pharma Investors’ Expectations When The Chips Are Down

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Triggered by several critical factors, over a relatively short period of time, a downward spiral is visible with most Indian Pharma stocks, with a significant erosion in market capitalization of many large players in the country.

A set of important factors has been fueling this current downturn since around the last four years. These include, issues related to serious regulatory non-compliance with US-FDA and other foreign drug regulators, pricing pressure both in the domestic and the overseas markets, including the United States, delayed approval of several new generic drugs in the number-one pharma market of the world, for various reasons. Initial rollout period of GST expected to commence on July 1, 2017, may also prompt some major readjustments in the distribution setting of many pharma organizations. This has been further compounded with the wholesalers’ and retailers’ demand for compensation for any losses on input credit arising out of this critical reform.

As eroding market cap generally leads to commensurately lower market valuation of a company, it adversely impacts company’s many business growth related activities, which encompasses attracting low cost – high value investments, and M&A related activities, besides many others. Consequently, this negative swing has alarmed many investors, making them more demanding on company performance – uninterrupted, almost at any cost, as it were.

Not much headroom for necessary course correction:

Unrelenting expectations of this nature from the investors, inclusive of activist shareholders, to continue driving the business growth engine up the steep slope of ever increasing return on investment, is not expected to die down, anytime soon.

They may not be willing to leave enough headroom for the respective pharma management teams to realign their growth path with the changing and challenging needs of time, if it adversely impacts business even in the short-term. Nonetheless, if it is not allowed, the tailspin is likely to continue, as has been happening since, at least, the last couple of years, pushing the business at a dangerous level of sustainability.

Such demand of the investors and shareholders, irrespective of the gravity of the situation where their respective companies are in, may not be too uncommon, even in the global arena. However, many experts are now raising a key question in this area. In this article, I shall try to look at this issue, not just from the investors’ perspective, but also from what the concerned pharma players can and should do in this area, sooner the better.

A pertinent question needs to be addressed:

This important and relevant question is: what is the accountability of the investors, if their pressure for performance when the company is at a crossroad of this nature, causes a long-term irreparable damage to the business?

The very issue has been discussed immaculately in an article titled, “The Error at The Heart of Corporate Leadership”, published in the May-June 2017 issue of the Harvard Business Review.

The paper reiterates that attributing ownership of the corporation to its investors involves a challenging problem of accountability. This is because, ‘shareholders or private investors have no legal duty to protect or serve the companies whose shares they own and are shielded by the doctrine of limited liability from legal responsibility for those companies’ debts and misdeeds.’ Moreover, they are both physically and psychologically distant from the activities of the companies they invest in, and may generally buy and sell these shares without restrictions.

Nevertheless, such strong and ever increasing demands put the top pharma managers under increasing pressure to deliver faster and more predictable returns, regardless of the headwind that the business is facing. The issue becomes more complex when temporary-holders of large blocks of shares intervene to reconstitute a company’s board, change its management, or restructure its finances to drive up the share price, only to sell out and move on to another target, without ever having to answer for their intervention’s impact on the company or other parties, the article highlights.

Export business – the pain points:

“Pharma stocks take a beating on renewed US FDA scrutiny” – flashed the headline of a recent media report of June 12, 2017. As I see it, in the export business, especially in the top pharma market in the world, there appears to be a strong possibility of further worsening the business environment, especially for the Indian drug exporters.

Wave after wave of US-FDA import bans involving many India made drug formulations and Active Pharmaceutical Ingredients (API), since over last four years, have significantly affected the short-term export sales of the domestic pharma exporters. Alongside, these have seriously dented the image of the Indian pharma players, collectively, which encompasses the critical area of regulatory compliance – to offer well-documented safe and effective drugs, as required by the regulator, for the patients in the United States.

The situation gets messier with media headlines, such as, one from Bloomberg’s on January 24, 2017, conveying to the world community – “Document Shredding at Night Raises FDA Eyebrows During India Visit.”

Besides current drug pricing pressure, President Donald Trump’s election pledge for local manufacturing of products consumed in the United States, for more job creation in the country, sends another possible storm signal in this area. This is serious too, as Indian generic drug producers cater to around 40 percent of the total generic drug consumption in America.

Overcoming the odds in export business:

While taking corrective and effective measures for a sustainable long-term business performance, doing the same things more intensely that precipitated the current crisis, would be counterproductive.

Improving the situation, would also call for a strong preparedness for launching new generic products at a regular interval. However, in tandem, there is a crying need for the concerned pharma companies to take a pause, and conclude, a well-structured and expert-guided corporate introspection and brainstorming process, on priority. This will help them to arrive at a set of actionable strategic plans to effectively address each of the pain points, in a meticulous and time-bound manner.

Investors must necessarily be taken on board by opening appropriate communication channels, accordingly. This is to enable them to understand and accept the reasons for a short-term pain for a sustainable long-term gain. The tangible results of corrective measures should subsequently unfold to all concerned, with minor course corrections on-the-run, wherever necessary.

Domestic business – the pain points:

This is again another complex issue, which is often manifested through pressure on drug prices. The blame for such a situation, though originates from somewhere else, generally falls on the Government and the drug price regulator, for obvious reasons. It has a palpable boomerang effect, that is brought out by various research studies, and captured in consumers and the expert opinion, such as one that was published by the Washington Post on June 14, 2017 with the title, “The pharmaceutical industry puts profits above people.”

In the United States, where the drug pricing pressure is widely believed to have primarily originated from the escalating cost containment pressure of the Government and the key health care providers – triggered by a dangerous drug-pricing trend. Whereas in India, in addition to the latter that is related to non-schedule branded generic drugs, it is mostly related high out of pocket expenses on drugs, attempts to dodge various drug price regulations, and ignoring several ethical marketing practices related issues. The net outcome of all this is growing trust deficit on the pharma industry, in general.

Let me illustrate this point with a very contemporary example.  On May 18, 2017, Reuters reported, “India’s drug pricing regulator has demanded explanations from 65 domestic and global drug makers for selling new forms of essential diabetes and antibiotic drugs without its approval.” Interestingly, these companies reportedly include many big names, such as, Abbott Laboratories, Sanofi, Novartis and Indian firms such as Sun Pharmaceutical Industries and Lupin.

According to a circular of the National Pharmaceutical Pricing Authority (NPPA) of May 17, 2017, the above companies have allegedly launched formulations by altering an essential drug formulation with strength/dosage other than as specified in the Drug Price Control Order (DPCO) 2013 or combination with another drug not under price control, without even applying for price approval from NPPA as required. NPPA also doesn’t seem to be sure, whether such Fixed Dose Combinations (FDC) are rational or irrational and have the approval of the Central Drug Standard Control Organization (CDSCO).

If so, it’s indeed a sad development and a sorry state of affair, especially for those companies, which do some chest-thumping on ethics and compliance, often browbeating many Indian players, especially on USFDA related issues, besides pharma marketing practices.

As on date, Union Ministry of Health has banned several hundreds of such FDCs – on the ground of being irrational, launched without proper regulatory approval, lacking in therapeutic efficacy and safety profile, which may even cause harm to patients. March 11, 2016 notification of CDSCO banned 296 irrational FDCs.

However, many pharma players have succeeded in obtaining stay orders against almost all such regulatory bans from various High Courts. Nevertheless, the good news is, from July 2017, the Supreme Court is expected to hear all these cases, collectively. There could be another possible downturn in the market, if the Government wins the case.

Overcoming the odds in domestic business:

In these specific areas, there doesn’t seem to be any other option left to satisfy the long-term interest of the investors, other than addressing the ethics, values and compliance issues of the company on the ground, head on. It doesn’t really matter, what is displayed on the subject in their respective websites. Thus, in this area too, there is a crying need for a well-structured and expert-guided corporate introspection and brainstorming process to disrupt the status quo from its very root.

The above process would help the pharma players to arrive at a set of actionable strategic plans to effectively address the ethics and compliance issues in all the pain points – regulatory, marketing or financial, in a meticulous and time-bound manner. Alongside, all the stakeholders, including the investors, to be taken on board through customized content and the engagement platforms, to put the companies back into the long-term growth trajectory.

In conclusion:

Investors are very important, but if they aren’t an integral part of the corporate management team, should not try to overwhelm the business management process, especially for any short term financial gain. Attributing such authority to investors, involves a challenging problem of accountability for action, as they can get in or out of their investments at any time they choose to do so.

However, it’s also one of the key responsibilities of the management to listen to them, seriously. Take them on board by appropriately explaining to them in every critical situation, the broad strategic direction that the company would follow in pursuit of excellence. Thereafter, demonstrable outcome of all management action against the top operational goals, should be placed before them at a periodic interval, on an ongoing basis.

This process, if carried out with absolute transparency, integrity and seriousness, could help the Indian pharma players getting enough breathing space from the investors, for making the right operational interventions, before it’s too late.

Earlier this year, stepping down of former CEO of GSK – Andrew Witty, was reported to be due to pressure from investors for below par sales and profit in the past three years, besides a few other reasons. Another recent report of June 15, 2017 on “rebel investors looking to remake the board of Mylan” would possibly reinforce this point, further.

Outside the pharma industry, such a situation is not uncommon now, even in India. Besides, what happened recently in Tata Sons,  the June 14, 2017 media headline highlighting “Infosys flags ‘activist shareholder’ as risk factor”, vindicates the same point, yet again.

Thus, managing pharma investors’ expectations through a process of continuous engagement with them, effectively, especially when the chips are down, as it is today, is so critical for the long-term success and sustainability of pharma business.  Maintaining the status quo any further, would possibly make a high-flying pharma player to experience the strong gravitational pull, uncontrolled, with its its serious but avoidable consequences.

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.

Pharma Innovation Absolutely Critical: But NOT Shorn from Ethics, Propriety, Compliance and Values

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Significant value added innovation is the bedrock of progress of the pharmaceutical industry and is essential for the patients. This is a hard fact.

However, this current buzzword – ‘innovation’ can in no way be shorn from soft business necessities like, ethics, propriety, compliance and values… not just for longer term sustainability of business, but more in the larger interest of patients and patient groups.

Most importantly, ‘ethics, propriety, compliance and values’ are not meant for mere display  in the corporate websites like, any other business showpieces. These should neither be leveraged to create a false positive impression in the minds of the stakeholders with frequent PR blitzkriegs.

The creators of these soft ‘X factors’ are now being increasingly hauled up for gross violations of the same by the Governments in various parts of the world .These are not just legal issues. The net impact of all such acts goes much beyond.

In this article, I shall deliberate on these continuing and annoying issues both in global and local perspectives, quoting relevant examples at random.

The sole purpose of my argument is to drive home that all such repeated gross violations, as reported in the media, go against patients’ interests, directly or indirectly. None of these incidents, in any way, can be negated with stories of great innovations or with any other make of craftily designed shields.

Under increasing scrutiny in the developed world:

Ethics, propriety and business value standards of big pharma, besides various types of legal compliance, are coming under increasing stakeholders’ scrutiny, especially in the developed markets of the world.

Very frequently media reports from across the world, highlight serous indictments of the Government and even judiciary for bribery, corrupt business practices and other unbecoming conduct, aimed at the the global mascot for healthcare.

It is indeed flabbergasting to note that more and more corporates, with all guns blazing at the same time, publicize with equal zest various initiatives being taken by them to uphold high ethical standards and business practices, if not propriety, as the juggernaut keeps on moving forward, unabated.

The scope of ‘ethics and propriety’:

The scope of ‘ethical business conducts, propriety and value standards’ of a company usually encompasses the following, among many others:

  • The employees, suppliers, customers and other stakeholders
  • Caring for the society and environment
  • Fiduciary responsibilities
  • Business and marketing practices
  • R&D activities, including clinical trials
  • Corporate Governance
  • Corporate espionage

That said, such scope should not be restricted to the top management, but must be allowed to percolate downwards in a structured manner, looking beyond the legal and regulatory boundaries.

Statistics of compliance to ‘codes of business ethics and corporate values’ are important to know, but the qualitative change in the ethics and value standards of an organization should always be the most important goal to drive any corporation and the pharmaceutical sector is no exception.

‘Business Ethics and Values’ in the globalized economy:

Globalization of business makes the process of formulating the ‘codes of ethics and values’ indeed very challenging for many organizations in many ways. This is mainly because, the cultural differences at times create a conflict on ethics and values involving different countries.

For this purpose, many business organizations prefer to interact with the cultural and religious leaders in the foreign countries, mainly to ascertain what really drives culturally diverse people to act in certain ways.

With the wealth of knowledge of the local customs and people, the cultural and religious leaders can help an organization to unify the code of ethics and values of the globalized business.

Such leaders can also help identifying the ‘common meeting ground of minds’ from a specific country perspective, after carefully assessing the cultural differences, which are difficult to resolve in the near term.

The ‘common meeting ground of minds’ within a given society, thus worked out, could form the bedrock to initiate further steps to strengthen global business standards of ethics and values of an organization.

OECD with USA started early enacting ‘Foreign Corrupt Practices Act (FCPA)’: 

To prevent bribery and corrupt practices, especially in a foreign land, in 1997, along with 33 other countries belonging to the ‘Organization for Economic Co-operation and Development (OECD)’, the United States Congress enacted a law against the bribery of foreign officials, which is known as ‘Foreign Corrupt Practices Act (FCPA)’.

This Act marked the early beginnings of ethical compliance program in the United States and disallows the US companies from paying, offering to pay or authorizing to pay money or anything of value either directly or through third parties or middlemen. FCPA currently has significant impact on the way American companies are required to run their business, especially in the foreign land.

A dichotomy exists with ‘Grease Payment’:

OECD classified ‘Grease payment’ as “facilitating one, if it is paid to government employees to speed up an administrative process where the outcome is already pre-determined.”

In the FCPA of the US, ‘Grease Payment’, has been defined as “a payment to a foreign official, political party or party official for ‘routine governmental action,’ such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform. The payment is not intended to influence the outcome of the official’s action, only its timing.”

Many observers opine, ‘Grease Payments’ is an absolute dichotomy to the overall US policy for ethical standards and against corruption.

Currently besides US, only Canada, Australia, New Zealand and South Korea are the countries that permit ‘Grease payments’.

Notwithstanding, the governments of the US and four other countries allow companies to keep doing business without undue delay by making ‘Grease Payments’ to the lower government officials, such payments are considered illegal in most other countries, in which they are paid, including India.

In India such a business practice is viewed as bribery, which is not only perceived as unethical and immoral, but also a criminal offense under the law of the land. Even otherwise, right or wrong, ‘Grease Payments’ are viewed by a vast majority of the population as a morally questionable standard of ‘business conduct’.

Many companies are setting-up the ethical business standards globally:

While visiting the website of especially the large global and local companies, one finds that all these companies, barring a very few exceptions, have already put in place a comprehensive ‘code of business ethics and values’. Some of these companies have also put in place dedicated code compliance officers across the globe.

‘Practice as you preach’:

Despite all these commendable initiatives towards establishing corporate codes of business ethics and values, the moot question that keeps haunting many times and again: “Do all these companies ‘practice what they preach’ in real life?”

Instances are too many for breach in ethics, propriety and value standards:

The media is now increasingly reporting such instances of violations both locally and globally.

Some Indian examples: (At random, not in a chronological order)

Criminal drug regulatory manipulation:

One of India’s top pharma players reportedly will pay a record fine of US$ 500 million in the US for lying to officials and selling badly made generic drugs.

The company has pleaded guilty to improper manufacturing, storing and testing of drugs, closing a year long civil and criminal investigation into the matter.

Compensation for deaths related to Clinical Trials not paid:

In 2011 the Drug Controller General of India (DCGI) reportedly summoned nine pharma companies on June 6 to question them on the amount of compensation they have decided to pay the ‘victims of their clinical trials’, which is a mandatory part of any clinical trial, or else all other trials of these nine companies going on at that time or yet to start, will not be allowed.

Clinical Trial is another area of pharmaceutical business, especially in the Indian context, where more often than not, issues related to ethics and values are being raised. In an article titled, ‘Clinical trials in India: ethical concerns’ published by the World Health Organization (WHO) following observations have been made:

“The latest developments in India reflect a concerted effort on the part of the global public health community to push clinical trials issues to the fore in the wake of several high-profile cases in which pharmaceutical companies were shown to be withholding information from regulators.”

Alleged marketing malpractices:

In 2010, the Parliamentary Standing committee on Health reportedly expressed concern that the “evil practice” of inducement of doctors by the pharma players continues.

Congress MP Jyoti Mirdha sent a bunch of photocopies of air tickets to Prime Minister Manmohan Singh to claim that doctors and their families were ‘beating the scorching Indian summer’ with a trip to England and Scotland, courtesy a pharmaceutical company.

30 family members of 11 doctors from all over the country reportedly enjoyed the hospitality of the concerned company.

Department of Pharmaceuticals reportedly roped in the Revenue Department under Finance Ministry to work out methods to link the money trail to offending companies.

Some global examples: (At random, not in a chronological order)

United States Government sues a Swiss pharma major for alleged multi-million dollar kickbacks:

The United States Government very recently reportedly announced its second civil fraud lawsuit against a Swiss drug major accusing the company of paying multimillion-dollar kickbacks to doctors in exchange for prescribing its drugs.

Fraud fines: 

Two largest drug makers of the world reportedly paid US$ 8 billion in fraud fines for repeatedly defrauding Medicare and Medicaid in the USA over the past decade.

Denigrating generics:

Another global pharma major reportedly has been recently fined US$ 52.8 million for denigrating generic copies.

Drug overcharging: 

Another global drug major reportedly stirred an ethics scandal and paid US$ 499 million towards overcharging the US government for medicines.

Bribing doctors:

  • A top global pharma player reportedly paid total US$ 60.2 million to settle a federal investigation on alleged bribing overseas doctors and other health officials to prescribe medicines. 
  • Another European pharma group reportedly was fined US$ 3bn after admitting bribing doctors and encouraging the prescription of unsuitable antidepressants to children.

 Concealment of important facts:

A judge in USA reportedly ordered a large pharma company to pay more than $1.2 billion in fines after a jury found that the company had minimized or concealed the dangers associated with an antipsychotic drug.

Off-label marketing:

  • A Swiss pharma major reportedly agreed to pay US$ 422.5 million to resolve an investigation into alleged off-label promotion of a drug, as well as civil allegations relating to five other products.
  • The U.S. Justice Department reportedly hit an American drug major with a US$ 322 million penalty for illegally promoting a drug before it received approval by the Food and Drug Administration for that condition.

Other illegal marketing practices:

Yet another European pharma group was reportedly fined USD 34 million by a court in the United States for illegal marketing practices for its medicine.

‘Illegal’ Clinical Trials: 

It was revealed on May 17, 2013 that global pharmaceutical companies reportedly paid millions of pounds to former communist East Germany to use more that 50,000 patients in state-run hospitals as unwitting guinea pigs for drug tests in which several people died.

All these are some random examples of alleged malpractices associated with ‘ethics, propriety, compliance and values’ in the pharma world, both local and global.

Middle and lower management becomes the ‘fall guy’: 

It is interesting to note that whenever, such incidents take place, the fingers are usually pointed towards the middle or lower management cadre of the corporations concerned for violations and non-compliance.

Corporate or top management ownership of such seemingly deplorable incidents still remains confined within a ‘black box’ and probably a distant reality.

Public perception is not encouraging:

In the pharmaceutical sector all over the world, many business practices have still remained very contentious, despite many well-publicized attempts of self-regulation by the industry. The flow of complaints for alleged unethical business practices have not slowed down either, across the world, even after so many years of self-regulation, penalty and severe indictments.

Government apathy in India:

Nearer home, the Government apathy, despite being pressured by the respective Parliamentary Committees and sometimes including judiciary in repose to Public Interest Litigations (PIL), has indeed been appalling, thus far.

The Department of Pharmaceuticals of the Government of India has already circulated a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for stakeholders to comment on it. The final UCPMP, when it comes into force, if not implemented by the pharmaceutical players in its ‘letter and spirit’, may attract government’s ire in form of strong doses of regulatory measures. However, the moot question remains, will the UCPMP come at all?

Similar issues are there in drug regulatory areas falling under the Ministry of Health, especially in the clinical trial area. In this matter, very fortunately Supreme Court has intervened against a Public Interest Litigation (PIL). Thus, one can expect to witness some tangible steps being taken in this area, sooner than later.

Walking the talk:

The need to formulate and more importantly effectively implement ‘Codes of Business Ethics & Values’ should gain increasing relevance in the globalized business environment, including in India.

It appears from the media reports, many companies across the world are increasingly resorting to ‘unethical behavior, impropriety and business malpractices’ due to intense pressure for business performance, as demanded primarily by the stock markets.

There is no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ across the world. However, even if these are implemented in a country-specific way, the most challenging obstacle to overcome by the corporates would still remain ‘walking the talk’ and owning responsibility at the top.

Conclusion:

Pharmaceutical innovation will continue to remain the launch pad for the industry growth in the battle against diseases of all types, forms and severity. However, that alone should in no way deserve to receive encouragement from any corner shorn from Ethics, Propriety, Compliance and Values.

Balancing pharmaceutical innovation with Ethics, Propriety, Compliance and Values, I reckon, will in turn help striking a right balance, to a considerable extent, between pharmaceutical innovation and public health interest for everyones’ satisfaction, mostly the patients.

Being equipped with the wherewithal to bring new drugs for the global population and being the fundamental source of growth momentum for the generic drug industry of the world, the innovator companies are expected to lead by setting examples in this area too. After all, as the saying goes:

“Caesar’s wife ought to be above suspicion. ‥Caesar himself ought to be so too”.

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.

 

 

Business Ethics, Values and Compliance: Walking the Talk

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Wish you and your family all happiness, prosperity, peace and good health in the brand new year 2012

Business Ethics, Values and Compliance: Walking the Talk

Ethical business conduct and value standards, especially of medium, large to very large corporations are coming under increasing stakeholders’ scrutiny and being severely criticized for non-compliance in many instances. At the same time, more and more corporate initiatives are being taken towards this direction by both the global and local companies with special emphasis to combat bribery/ corrupt business practices and contribute to social justice and environmental protection.

The scope of ‘ethical business conducts and value standards’ of a company usually encompasses the following, among many others:

  1. The employees, suppliers, customers and other stakeholders
  2. Caring for the society and environment
  3. Fiduciary responsibilities
  4. Business and marketing practices
  5. R&D activities, including clinical trials
  6. Corporate Governance
  7. Corporate espionage

That said, codes of ethical conduct, corporate values and their compliance should not only get limited to the top management, but must get percolated downwards, looking beyond the legal and regulatory boundaries.

Statistics of compliance to codes of business ethics and corporate values are important to know, but the qualitative change in the ethics and value standards of an organization should always be the most important goal to drive any business corporation and the pharmaceutical sector is no exception.

Business Ethics and Values in the globalized economy:

Globalization of business makes the process of formulating the codes of ethics and values indeed very challenging for many organizations. This is mainly because of the fact that the cultural differences at times create a conflict on ethics and values involving different countries.

For this purpose, many business organizations prefer to interact with the cultural and religious leaders in the foreign countries, mainly to ascertain what really drives culturally diverse people to act in certain ways.

With the wealth of knowledge of the local customs and people, the cultural and religious leaders can help an organization to unify the code of ethics and values of the globalized business.Such leaders can also help identifying the ‘common meeting ground of minds’ from a specific country perspective, after carefully assessing the cultural differences, which are difficult to resolve in the near term.

The ‘common meeting ground of minds’, thus worked out, could form the bedrock to initiate further steps to strengthen global business standards of ethics and values of an organization.

OECD with USA started early enacting ‘Foreign Corrupt Practices Act (FCPA)’:

To prevent bribery and corrupt practices, especially in a foreign land, in 1997, along with 33 other countries belonging to the ‘Organization for Economic Co-operation and Development (OECD)’, the United States Congress enacted a law against the bribery of foreign officials, which is known as ‘Foreign Corrupt Practices Act (FCPA)’.

This Act marked the early beginnings of ethical compliance program in the United States and disallows the US companies from paying, offering to pay or authorizing to pay money or anything of value either directly or through third parties or middlemen. FCPA currently has significant impact on the way American companies are required to run their business, especially in the foreign land.

But a dichotomy exists in the US for ‘Grease Payment’:

‘Grease payment’ is classified by OECD as “a facilitating one if it is paid to government employees to speed up an administrative process where the outcome is already pre-determined.”

In the FCPA of the US ‘grease payment’, has been defined as “a payment to a foreign official, political party or party official for ‘routine governmental action,’ such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform. The payment is not intended to influence the outcome of the official’s action, only its timing.”

Considering all these ‘grease payments’ seem to be an absolute dichotomy to the overall US policy for ethical standards and against corruption.

Currently besides US, only Canada, Australia, New Zealand and South Korea are the countries that permit ‘Grease payments’.

Notwithstanding the fact that the governments of the US and four other countries allow companies to keep doing business without undue delay by making ‘grease payments’ to the lower government officials, such payments are considered as illegal in most other countries, if not all, in which they are paid, including India.

In India such a business practice is viewed as bribery, which is not only perceived as unethical and immoral, but also a criminal offense under the law of the land. Even otherwise, ‘grease payments’ are viewed by a vast majority of the population as a morally questionable standard of ‘business conduct’.

Many companies are setting-up the ethical business standards globally:

While visiting the website of especially the large global and local companies, one finds that all these companies barring a very few exceptions have already put in place a comprehensive ‘code of business ethics and values’. Some of these companies have also put in place dedicated code compliance officers across the globe.

However, it is important to ensure that the persons who are appointed either as the ‘Watch Dogs’ for such commendable initiatives or to head any committee on the subject, are individuals with squeaky clean record of adherence to the ‘Code of Ethics and Values’. Otherwise, the entire exercise may be perceived as making a mockery of the whole purpose.

Despite all these commendable initiatives towards establishing a corporate codes of business ethics and values, the moot question that haunts many time and again: “Are all these companies ‘walking the talk’?”

Otherwise, why does one read news items like ‘Dirty Secrets In Soap Prices’ as appeared in the ‘Wall Street Journal’ dated December 9, 2011 reporting that P&G, Colgate and Henkel have been fined $484 million by the French Government for ‘Price Fixing’ of laundry soap.

Or why do we see reports like one in the “Fierce Pharma’ dated October 5, 2010 stating that in the US eleven pharmaceutical companies have paid a total of over $6 billion to the government in 22 months for unethical marketing practices Or a ‘Bloomberg’ report dated January 17, 2011 with the headline, “Glaxo Sees $3.5 Billion Charge Related to Avandia Claims, Sales Practices.”

Or…

It is perhaps a sheer coincidence that whenever, such incidents take place, the fingers are usually pointed towards the middle or lower management cadre of the corporations concerned for non-compliance. The Corporate or top management ownership of such seemingly avoidable incidents still remains a distant reality.

Public perception of ethical standards of Pharmaceutical companies is not encouraging:

In the pharmaceutical sector all over the world, the marketing practices have still remained a very contentious issue despite many attempts of self-regulation by the industry. The flow of complaints for alleged unethical business practices have not slowed down significantly, across the world, even after so many years of self-regulation.

Nearer home, the Department of Pharmaceuticals of the Government of India has already circulated a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for stakeholders to comment on it. The final UCPMP, when it comes into force, if not implemented by the pharmaceutical players in its ‘letter and spirit’, may attract government’s ire in form of strong doses of regulatory measures.

A study on the UCPMP:

Ernst & Young released the key findings of a survey report on the UCPMP in September, 2011 titled ‘Pharmaceutical marketing: ethical and responsible conduct’, which are as follows:

  • Around two-third of the respondents felt that the implementation of the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) drafted by the Department of Pharmaceuticals, would change the manner in which the pharma products are currently marketed in India
  • More than 50% of the respondents are of the opinion that UCPMP guidelines may lead to manipulation in recording of actual sampling activity
  • More than 50% of the respondents indicated that the effectiveness of the code will be very low in the absence of legislative support provided to the UCPMP committee
  • Majority of the respondents (90%) felt that pharma companies in India should focus on building a robust internal controls system for ensuring compliance with the UCPMP
  • Around 72% of the respondents felt that the MCI was not stringently enforcing its medical ethics guidelines
  • Only 36% of the respondents felt that the MCI’s guidelines would have an impact on the overall sales of the pharma companies

Thus the quality of implementation of self-regulatory ‘Code of Marketing Practices’ is not only attracting heavy criticism from the stakeholders in many countries in the world, including India, but also indicating a trust deficit between the industry and the civil society in general.

Clinical Trials in India: Ethics and values

Clinical Trial is another area of pharmaceutical business, especially in the Indian context, where more often than not, issues related to ethics and values are being raised. In an article titled, ‘Clinical trials in India: ethical concerns’ published by the World Health Organization (WHO) following observations have been made:

“The latest developments in India reflect a concerted effort on the part of the global public health community to push clinical trials issues to the fore in the wake of several high-profile cases in which pharmaceutical companies were shown to be withholding information from regulators.”

Similarly ‘Times of India’ in its June 6, 2011 issue reported, “Clinical trials claimed 25 lives in 2010, only 5 paid compensation.”

Conclusion:

The need to formulate ‘Codes of Business Ethics & Values’ and even more importantly their compliance are gaining increasing importance and relevance in the globalized business environment. Unfortunately, at the same time, many companies across the world are being increasingly forced to come to terms with the heavy costs and consequences of ‘unethical behavior and business practices’ by the respective governments, perhaps arising out of intense pressure for the business performance.

There is no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ across the world. However, even if it these are implemented in a country-specific way, the most challenging obstacle to overcome by the corporates would still remain ‘walking the talk’ and owning the responsibility.

The million dollar question thus emerges ‘How to make it happen?’

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.

Does India need an equivalent of ‘The Physician Payment Sunshine Act’ of the US for transparency in pharmaceutical marketing?

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Currently a strong and palpable public sentiment against corruption has engulfed India albeit more than what we witness in movements like ‘Occupy Wall Street’ against systemic corruption not only in the US but in a large number of cities across the world.

Long suppressed public sentiment against corruption is fast spreading like a wild fire in India and has now become all pervasive and almost irreversible, as it were.

That said, this strong sentiment is not just against corruption, but also for greater transparency and clean governance both in the government and corporate sectors of the country.

In a situation like this, there is a wide spread belief within the civil society not just in India, but across the world that the pharmaceutical companies try to skew the ‘prescription decision making process’ of the doctors towards their respective brands largely through different types of allurements and not based solely on robust health outcome criteria.

The key reason:

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

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

Growing discontentment:

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

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

A global issue, not just local:

For quite some time from now this issue has indeed become a global phenomenon. Many countries, including India, have seriously taken note of such examples of socioeconomic decay.

Just the other day, the November 3, 2011 edition of ‘The Guardian’ reported, “British drugs giant GlaxoSmithKline has agreed to pay $3bn (£1.9bn) to settle a series of old criminal and civil investigations by the US authorities into the sales and marketing of some of its best-known products”.

The Scenario in India:

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

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

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

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

The pharmaceutical industry of India, in general, has expressed many a time, the need for self-regulation of marketing practices in the absence of any regulatory compulsion, as is not uncommon in many other countries of the world, in various ways.

Be that as it may, after a protracted debate on the alleged ‘unethical marketing practices’ by the pharmaceutical companies, in May 2011, the Department of Pharmaceuticals (DoP) came out with a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCMP)’ to address this issue squarely and effectively in India. It has been reported that the final draft of UCMP is now lying with the Ministry of Health and Family Welfare of the Government of India for its clearance.

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

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

“Market malpractices is a barrier to healthcare access”: The WHO report of 2006:

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

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

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

The scenario in the US:

Like in India, a public debate started since quite some time in the US as well, on allegedly huge sum of money being paid by the pharmaceutical companies to the physicians on various items including free drug samples, professional advice, speaking in seminars, reimbursement of their traveling and entertainment expenses etc. All these, many believe, are done to adversely influence their rational prescription decisions for the patients.

As the financial relationship between the pharmaceutical companies and the physicians are getting increasingly dragged into a raging public debate, making disclosure of all payments made to the physicians by the pharmaceutical companies’ is being made mandatory by the Obama administration, as a part of the new US healthcare reform process of the last year.

Some global pharmaceutical majors have set examples by taking absolutely voluntary measures to make their relationship with the physicians transparent. Eli Lilly, the first pharmaceutical company to announce such disclosure voluntarily around September 2008, has already uploaded its physician payment details on its website.

US pharma major Merck followed suit and so are many other large companies like, Pfizer, GSK, AstraZeneca and Johnson & Johnson.

Cleveland Clinic and the medical school of the University of Pennsylvania, USA are in the process of disclosing details of payments made by the Pharmaceutical companies to their research personnel and the physicians. Similarly in the UK the Royal College of Physicians has been recently reported to have called for a ban on gifts to the physicians and support to medical training, by the pharmaceutical companies.

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

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

‘The Physician Payment Sunshine Act’:

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

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

However, on November 1, 2011 Reuters reported that the Department of Health and Human Services of the US Government missed the October 1, 2011 deadline for drafting the regulations for ‘The Physician Payment Sunshine Act’ to outline procedures for the concerned companies for reporting the requisite information and sharing the same with the public.

US health officials will now delay the enforcement of the Act to ensure that they can implement the statutory goals of the Act with minimal regulatory burden on the pharmaceutical and the medical device companies.

Last year, ‘The New York Times (NYT)’ in its April 12, 2010 edition commented that come 2013, under the new ‘The Physician Payment Sunshine Act’, disclosure of such database will become mandatory for all pharmaceutical and medical device makers, who will then be subjected to stricter disclosure requirements aimed at making their marketing practices much more transparent.

Conclusion:

In the US, ‘The Physician Payment Sunshine Act’ is now in place, though its effective implementation has got delayed. It appears that Obama Administration, with the help of this new law, will make the disclosure of payments to physicians by all pharmaceutical and medical device companies transparent and effective as the rules and procedures for the same are being worked out.

If President Obama administration can take such an important regulatory step with the enactment of ‘The Physician Payment Sunshine Act’ to ensure transparency in pharmaceutical marketing practices, will Dr. Man Mohan Singh government stay much behind in taking similar measures or give the self-regulatory mechanism, as is being charted by the Department of Pharmaceuticals, one last chance?

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.