With Changing Customer Behavior Pharma To Leverage AI For Better Engagement

Posted on April 5, 2021 by Tapan Ray

More than 55 million doses of Coronavirus vaccines were administered in India, reportedly, at the beginning of the last week of March 2021, in what is the world’s biggest inoculation drive. Notably, amid this mega initiative, the news media simultaneously reported that ‘India is facing a second wave of coronavirus because it let its guard down too soon.’ I also reiterated in my article of November 16, 2020 that in the thick of ‘Covid Vaccine Challenges – Abidance To Defined Health Norms Stays As Lifeguard.’

From the pharmaceutical industry perspective – as I had written on July 06, 2020, in the midst of this pandemic, there appears to be a break in the clouds that pharma should effectively leverage. There isn’t an iota of doubt that Covid pandemic, for-all-practical-purposes, has propelled healthcare into a virtual world, primarily for survival of business, maintaining the continuity.

Most pharma players, especially in the sales and marketing domain, either were not or, were using e-marketing, in a selective way, as a key strategic tool in their brand prescription generation process. The pace of this shift in the digital space is now getting accelerated to more than neutralize the long-term impact of unprecedented business disruptions that overwhelmed the industry, last year.

Interestingly, a large number of pharma marketers weren’t focusing much beyond syndicated retail and prescription audit data, in the old normal. Whereas, to make digital strategies work effectively during rapidly changing customer behavior and business environment, ‘customer centricity’ is no longer an option today. It’s rather a key business success factor for effective customer engagement, in the prevailing environment. Thus, unlocking the ‘Herculean Power’ of targeted data of many types and genre, is a pre-requisite for acquiring deep insight in this area, while moving in this direction.

Alongside, comes the need to unleash the power of Artificial Intelligence (AI) to ensure pinpoint accuracy in targeted strategy formulation for the same. Well before Covid struck, I wrote on April 01, 2019 – ‘A New Pharma Marketing Combo That Places Patients At The Center of Business,’ flagging a slowly emerging need. Covid, unexpectedly, has provided a strong tailwind to it, increasing its urgency manifold in the new normal.

Consequently, pharma marketers should have, at least, a working knowledge in this area – such as ‘machine learning’ and other analytics-based processes of AI that can help them enormously. In this article I shall discuss, why it is so important for today’s astute pharma marketers to hone their knowledge in this area for making a strategic shift towards ‘real-life’ Patient-Centricity. No wonder, why top pharma leaders now consider this transformation so critical for pharma strategy formulators, to acquire a cutting-edge in the digital marketing warfare.

Patient needs aren’t really at the center of a business strategy, today:

Despite so much hype on patient-centricity – in a true sense, patient-expressed needs aren’t generally placed at the center of a business strategy, as on date, unlike most non-pharma companies. That pharma players, by and large, don’t have a robust online feedback mechanism in place to capture ‘patient-experience’ with medications – directly from patients, vindicates the point.

As I reiterated in my article of March 21, 2021: ‘Measuring patient-experience has always been an integral part, virtually of all types of sales and marketing using digital platforms. We experience it almost every day, such as, while buying a product through Amazon, buying grocery items through D-Mart, scheduling a doctor appointment through Practo, buying medicines through PharmEasy, or even for availing a service through Urban Company.’

Thus, patient-experience, in their own words, with prescribed medications, is generally expressed to the physician, if at all. The process, generally, doesn’t get extended to drug companies’ strategy formulators for taking a patient-centric amendment, wherever needed.

However, assuming that doctors would convey the same to concerned medical representatives, it becomes a third hand (patient-doctor-Rep-Company) feedback, with commensurate distortions in each verbal transfer of communications. The outcome of this strategic gap has been captured in several research studies.

Outcomes of absence of online direct ‘patient experience’ feedback system:

Let me elaborate this point by quoting an example from a contemporary research in this area. This study was conducted by DrugsDisclosed.com in August 2020 with a total of 3,346 patients all taking medicine on a daily basis – aged between 18 and 80. The key findings are as follows:

72% of patients feel ignored by pharma companies.
76% don’t trust advice from them.
81% feel that drug players influence prescribing decisions.
63% would like to give product feedback to directly to companies.
69% find their medication effective.
81% feel their medication is needed.
77% feel confident with their medication.
82% don’t feel bothered by side effects from their medicine.
73% take the medicine as agreed with their doctor.
74% feel that the benefits of their medication outweigh the disadvantages.

The study concluded – the above insights show the need for patients’ voices to be heard by the pharma companies. If medicines are to solve health problems for billions of people who need them, listening to real-life patient-experience with medication, is the key to unshackle the full potential of the world’s health systems. Thus, pharma companies need to directly listen to what patients experience and express with their medicines. It will help them earn customer-trust and greatness in business, while gaining new and important insights for performance excellence.

I hasten to add, although, this study was conducted among patients residing in the UK, Ireland and Denmark, the core issue, even in India, is unlikely to be much different from what appears above. This genre of pharma marketing approach would warrant extensive use of AI, much more in the coming days – than ever before.

The above genre of pharma marketing calls for extensive use of AI:

The above genre of pharma marketing calls for extensive use of AI, much more in the coming days than ever before. For example, as new generations of Covid vaccines will come – with some without the use of needles, like a nasal drop, machine learning tools may be necessary for pinpoint accuracy in market segmentation. I reckon, there will be many such areas, where those companies who would use AI to orchestrate a cohesive customer experience, will drive stronger differentiation, better customer access and higher sales impact.

In that process, creating opportunities and empowerment for deserving marketers to reap the benefits of AI based digital tools and systems, such as machine learning with human integration within sales and marketing, will be the need of the hour. Gaining actionable insights from this endeavor, marketers need to go whole hog to unleashing the power and value of AI for achieving business excellence. I wrote about it, even during pre-Covid days – on July 15, 2019. But, this approach has assumed much greater importance in the new normal, when innovative e-marketing is gaining momentum to gain a competitive edge. However, this would require more investment in AI than what it is today.

The process has accelerated during the Covid pandemic:

This has come out clearly in the results of McKinsey Global Survey 2020 on AI. The paper is titled – ‘The state of AI in 2020’ and was published on November 17, 2020. The findings of the study ‘suggest that organizations are using AI as a tool for generating value. Increasingly, that value is coming in the form of revenues.’

Although, the number of these companies is small, they are planning ‘to invest even more in AI in response to the COVID-19 pandemic and its acceleration of all things digital.’ The paper emphasizes that this could create a wider divide between AI leaders and the majority of companies who are still struggling to capitalize on the technology.

Pharma’s increasing use of AI during the pandemic:

The above trend gets reflected in the ‘AI In Pharma Global Market Report 2021: Covid-19 Growth And Change.’ The report underscores, the global AI in pharma market is expected to grow from $0.91 billion in 2020 to $5.94 billion in 2025 at a CAGR of 47%. The initial spurt in growth was mainly due to companies resuming their operations and adapting to the new normal while recovering from the COVID-19 impact, the report underscores.

Although, the number of pharma entrants in this space isn’t yet very many, major players includePfizer, Novartis, IBM Watson, Merck, AstraZeneca and Bayer. Gradually, some Indian drug companies are also testing water in this area, as discussed in the article – ‘The Increasing Use Of AI In The Pharmaceutical Industry,’ published by Forbes on December 26, 2020.

Conclusion:

“Patient-Centricity” emerging as a hallmark, fueled by rapidly changing expectations and behavior of pharma customers, especially doctors and patients. To be effective with such changes in market dynamics – capturing ‘patient experience’ with medication – directly from them – to the respective companies online, is a necessity today.

Most other industries involved in digital marketing are already doing so. Pharma companies while embracing e-marketing can’t just wish it away, any longer. Today, when digital marketing has commenced in the pharma industry, with accelerated speed – machine learning alongside the creative application of AI powered analytics, can immensely help gaining actionable insights on customers. These include customer experience, their perception and pattern of usage of brands, besides channel preferences, preferred contents for effective engagement.

Thus, the consequences of not directly listening to patients’ voice on structured digital platforms – supported by analytics, can be ignored at pharma marketer’s own peril. Many of them may not yet be able to fathom the depth of its potential, opportunities and possible roadblocks, or simply unable to figure out where to begin with and – how. Experts’ hand-holding will be pivotal for them in the transition phase of this endeavor. From this perspective, I reckon, to keep pace with fast-changing customer behavior, pharma marketers need directly listen to patients’ voice online. And based on which, develop customized strategies by leveraging AI – for more productive engagement with them.

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.

How Relevant Is A Pharma Brand Name To Patients?

Posted on February 26, 2018 by Tapan Ray

Are brand names necessary for medicines? Well – its’s a contentious issue, at least, as on date. It becomes the subject of a raging debate when the same question is slightly modified to: – Are brand names necessary for prescription drugs?

The current reality is, almost all pharma companies believe, and have been following this practice. This has been happening for decades, regardless of the fact that unlike other branded non-pharma products, each and every drug also carries another specific name – the generic name. Which is why, questions are often raised, why can’t drugs be prescribed only in generic names by the doctors?

Before I proceed further, let me recapitulate the definition of a ‘brand’. One of the most comprehensive definitions of a brand is: Unique design, sign, symbol, words, or a combination of these that identifies a product and differentiates it from its competitors. It helps create a level of credibility, quality, and satisfaction in the consumer’s mind, by standing for certain benefits and value. And, the creative marketing practices followed in this process is termed as ‘branding’. Keeping this at the center, in this article, let me try to arrive at a relevant perspective on this subject.

The arguments in favor:

Votaries of pharma branding believe that a pharma brand helps establish an emotional connect with the consumers on various parameters, including quality, efficacy, safety and reliability. This is expected to establish a preferential advantage of a brand over its competitors. Quoting the ‘father of advertising’ David Ogilvy, some of these proponents relate the outcome of branding to offering ‘intangible sum of a product’s attributes’ to its consumers, and also prospective consumers.

Entrepreneur India puts across such favorable outcome of ‘branding’ very candidly, which is also applicable to branding medicines – both patented and generic ones. It says, “Consistent, strategic branding leads to a strong brand equity, which means the added value brought to your company’s products or services that allows you to charge more for your brand than what identical, unbranded products command.”

The general belief within the pharma industry is that, ‘branding’ facilitates doctors in choosing and prescribing medicines to patients, especially in those situations where the choices are many. Aficionados of pharma product branding argue, that to save time, doctors usually select those top of mind products, which they are familiar with and feel, can serve the purpose well. This belief prompts the necessity to go all out for ‘branding’ by the pharma companies, even when the process is an expensive one.

Where pharma ‘branding’ is necessary:

There are a few old publications of the 1980’s, which claim that studies based on human psychology have found that medicines with brand names can have a better perceived impact on the actual effectiveness of ‘Over the Counter (OTC)’ medications. One of the examples cited was of aspirin.

Be that as it may, the relevance of branding for OTC pharmaceutical products is undeniable, where a medicinal product is generally treated just as any other Fast-Moving Consumer Goods (FMCG) goods. Establishing an emotional connect of OTC brands with consumers is, therefore, considered an important process to create a preferential perceived advantage over its competitors.

There is no well-laid out legal or procedural pathway, as yet, for pharma OTC brands in India. No ‘Direct to Consumer (DTC) promotion is allowed in the country for Schedule H and Schedule X drugs – the only exceptions being Ayurvedic proprietary medicines and for homeopathy drugs. That said, the question continues to haunt, how relevant is branding for prescription drugs – now?

Relevance of ‘branding’ for prescription drugs:

The juggernaut of ‘branding prescription drugs’, riding mostly the wave of vested interests – of many hues and color, has been made to be perceived as necessary to ensure drug quality and safety for patients. It continues to move on, up until today, even for highly specialized prescription drugs. Nonetheless, some initiatives are visible from some Governments to gradually shift this contentious paradigm.

This move has been catalyzed by a blend of changing times with changing expectations of a large number of patients. They want to be an integral part in their treatment decisions, receive more personalized healthcare from both doctors and pharma companies. Patients, ultimately, want to feel confident that they’re receiving the best treatment – says a fresh study.

A number of other research papers also confirm that, a virtually static bar of patients’ expectations, in the disease treatment process – either for themselves or their near and dear ones, is slowly but surely gaining height, measurably. For better outcomes, patients have started expecting new types of services both from their doctors and the drug manufacturers. This process begins, even before a final decision is taken in the treatment process. As this paradigm shifts, pharma players would be significantly impacted – in several parameters.

Fast expanding digital empowerment options for all, across the world, is expediting this process further, including India. Placing oneself in the midst of it, one may ponder – how relevant is pharma branding today, as is being highlighted by many, since long.

In my view, a part of the answer to the above question arguably lies in a study titled, “Product Launch: The Patient Has Spoken”. The Key findings from the survey that covered 8,000 patients from three generations in the US, the UK, Germany and France, were published by ‘Accenture Life Sciences’ in January 2018. The research reveals how these patients evaluate and select new treatments in eight therapeutic areas (immune system, heart, lungs, brain, cancer, hormone/ metabolism and eye disease) across three generations, spanning across – Baby boomers, Generation X and Millennials.

Brands don’t matter to most patients…outcomes do:

69 percent of patients said, the benefits of the product are more important to them than the brand of the product. The four top factors influencing patients’ while making decisions about their healthcare are listed in the report as:

The doctor/ physician relationship: 66 percent
The patient’s ability to maintain their current lifestyle: 55 percent
Patients’ ease of access to health care they’ll need: 53 percent
Patients’ financial situation / ability to pay: 51 percent. When this is read with another finding where, 48 percent of patients believe that their doctors discuss the whole range of product options with them, a more interesting scenario emerges.

Further, lack of knowledge about the treatments available, as expressed by 42 percent of patients obviously indicate, pharma players’ intent to better inform patients by educating the doctors through brand promotion is not working. Interestingly, brand loyalty or popularity appeared relatively unimportant, ranking twelfth out of 14 influencing factors. Just 25 percent of patients characterized themselves as having a strong affinity with brands in a healthcare setting – the above report revealed.

Could there be an alternative approach?

An effective ‘branding’ exercise should lead to creating a ‘brand loyalty’ for any product. For pharma companies, doctors’ brand loyalty should lead to more number of its brand prescriptions. This expectation emanates from the idea that the prescription brand will represent something, such as quality, trust, assured relief, or may well be anything else. That means pharma product ‘branding’ is primarily aimed at the medical profession.

In an alternative approach to the current practice, an article titled, “From Managing Pills to Managing Brands”, published sometime back in the March-April 2000 issue of the Harvard Business Review (HBR), finds its great relevance, even today. It says, pharma companies can retain the loyalty of customers by building a franchise around specific therapeutic areas based on a focused approach to R&D. In other words, their corporate brand can replace individual drug brands. For example, a doctor looking for a treatment for – say asthma, would look for the latest GlaxoSmithKline medicines. Let me hasten to add, I used this example just to illustrate a point. This may appear as a long shot to some. Nonetheless, it would significantly reduce the cost of marketing, and subsequently the cost of a drug to patients. Incidentally, I also wrote about the relevance of ‘Corporate Branding’ in this Blog on June 15, 2015.

Conclusion:

With this fast-emerging backdrop, the Accenture Study raises an important issue to this effect. It wonders, whether the expenses incurred towards branding medicines, especially, during product launch be significantly reduced and be made more productive?

Illustrating the point, the report says, in 2016, the US pharmaceutical and healthcare industry alone spent US$ 15.2 billion in marketing. To earn a better business return, could a substantial part of this expenditure be reallocated to other programs that matter more to patients, such as access to patient service programs, and creating ‘Real-World Evidence (RWE)’ data that can document improved health outcomes, particularly those that matter to patients?

Well-crafted pharma branding and other associated initiatives, targeted predominantly to the medical profession, may make a doctor emotionally obligated to prescribe any company’s specific brands, for now. However, in the gradually firming-up ‘patient outcomes’-oriented environment, where patients want to participate in the treatment decision making process, will it remain so?

Dispassionately thinking, to most patients, a brand is as good or bad as the perceived value it delivers to them in the form of outcomes. Or, in other words, prescription pharma brands may not even matter to most of them, at all, but the outcomes will be. Hopefully, before it is too late pharma players would realize that, especially the well-informed patients are becoming co-decision makers in choosing the drug that a doctor will prescribe to them. If not, the current targeted process of pharma prescription drug branding, may lose its practical relevance, over a period of time.

By: Tapan J. Ray

‘Big Pharma’ Prowls Falter: Triggers Off Yet Another Critical Debate

Posted on November 25, 2013 by Tapan Ray

The ‘Big Pharma’ prowls faltered yet again exposing the ‘fault line’ to all, when the GSK global head honcho, a pharma icon in his own right, Sir Andrew Witty supported the pharmaceutical policy of India, while in the country earlier this month. This support is quite in contrary to arrogant displeasure being expressed by his MNC counterparts against the pharma regime in India up until now.

Sir Andrew reportedly spoke against the usual pharma MNC practices of charging very high prices for patented medicines during an interview and said that multinationals need to look at things from India’s perspective.

The above comment, when analyzed especially in context of one of the recent actions of Big Pharma MNCs complaining in writing to President Obama against India’s prevailing pharmaceutical regime, the fault line gets clearly visible.

In this context, a recent report captured the anger and desperation of Big Pharma. This hostility vindicates the general apprehensions in India that MNCs are once again pushing for a stringent patent regime in the country, against the general health interest of Indian patients for access to affordable newer medicines.

Quoting US Chamber of Commerce’s Global Intellectual Property Center another report reconfirmed the impatient prowl of the mighty lobby group in the corridors of power. This piece states, “Recent policy and judicial decisions (Glivec judgment and Nexavar) that invalidate intellectual property rights, which have been increasing in India, cast a daunting shadow over its otherwise promising business climate.”

The ‘fault line’, thus surfaced, triggers off yet another critical debate, especially related to the slugfest on a stringent pharmaceutical product patent regime in India, as follows:

“Does Stricter IPR Regime Spur Pharma Innovation?”

Global innovator companies strongly argue that stringent Intellectual Property Rights (IPR) and stricter enforcement of IP laws have strong link with fostering innovation leading to a robust economic growth for any nation.

However, another group of thought leaders opine just the opposite. They argue that strong IPR and IP laws have little, if any, to do with fostering innovation and economic growth, as there are no robust research findings to drive home the above point.

It has been noticed that the MNC lobby groups quite often very cleverly use their magic word ‘innovation’ on a slightest pretext with an underlying desire of having a ‘very strict patent regime’ in India. Thus they seem to be trying to mislead the common man, as if India is against innovation.

Comment of the Chairman of National Innovation Council of India:

On September 15, 2012, while delivering his keynote address in a pharmaceutical industry function, Dr. Sam Pitroda, the Chicago based Indian, creator of the telecom revolution in India, Chairman of the National innovation Council and the Advisor to the Prime Minister on Public Information, Infrastructure & Innovations, made a profound comment for all concerned to ponder, as follows:

“Everyone wants to copy the American model of development. I feel that this model is not scalable, sustainable, desirable and workable. We have to find an Indian Model of development which focuses on affordability, scalability and sustainability.”

Recent Indian stand:

On March 5, 2013, the Government of India made a profound statement on the subject of ‘Innovation and Small and Medium Enterprises (SMEs)’ at the TRIPS Council meeting covering the following points:

There is no direct correlation between IP and Innovation even for the Small and Medium Industries.

The technological progress even in the developed world had been achieved not through IP protection but through focused governmental interventions.

The proponents of this Agenda Item have reached the present stage of technological development by focusing solely on the development of their own domestic industry without caring for the IPRs of the foreigners or the right holders.

After achieving a high level of development, they are now attempting to perpetuate their hold on their technologies by making a push towards a ‘TRIPS plus’ regime.

Their agenda is not to create an environment where developing countries progress technologically, but to block their progress through stringent IP regime.

It is essential that the flexibilities provided by the TRIPS Agreement need to be secured at any cost, if the people in the developing countries are to enjoy the benefits of innovations.

A Wharton Professor’s view:

As the Wharton professor of Healthcare Management Mark V. Pauly has been quoted saying that the link between patent protection and innovation has never been definitely proven.

However, Pauly reportedly is aware that the innovator global pharma companies do say, ‘If you don’t allow us to reap the benefits of our R&D expenditure, we won’t put as much into it, and we won’t invent as many great things’.

However, the Wharton Professor counters it by saying, “The problem is that nobody really knows how much less innovation there would be if there were less patent protection. We just don’t know what the numbers are.”

The above report says, according to Pauly, the onus to prove that patent protection matters should be on the drug industry itself.

He argues, “Rather than always just insisting you should never limit intellectual property protection, they really ought to develop some evidence to show that without that protection, there would be an impact on the rate of adoption of new products. Everybody has an opinion, but nobody knows the facts.“

A French Professor’s view:

In another WIPO seminar held on June 18, 2013, Margaret Kyle, a Professor at the Toulouse School of Economics and the Université de Toulouse I in France, reportedly presented preliminary findings of a study.

This paper explored in detail the impact of World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in various areas related to the speed of launch, price, and volume of sales of drugs across countries and across different drug products.

In this study, as the above report states, Kyle analyzed the trade-off between the dynamic and static effects of Intellectual Property Rights (IPRs).

The dynamic effect of IPRs was considered as an incentive for innovation based on the general belief that patent protection, through granting market exclusivity, incentivizes companies to invest in the research and development (R&D) to develop new drugs.

On the other hand, the static effect of IPRs in the short term is that granting market exclusivity often leads to innovator companies pricing their products at levels, which will be unaffordable by a large number of patients, especially in lower-income countries.

Kyle explained that the results implied as follows:

IPRs are neither necessary nor sufficient to launch new pharmaceutical products.

The existence of a product patent does not always inhibit generic imitation, nor does the lack of such a patent necessarily deter an originator from making a product available in a given market.

Other eminent voices:

While highlighting that TRIPS-Plus intellectual property protection is passed by some developing countries in order to implement FTA obligations, another recent paper presents the following examples in support of the argument that there no correlation between strong IP laws and fostering innovation:

UK Commission on Intellectual Property Rights. Integrating Intellectual Property Rights and Development Policy. 2002. (Link)

“…Strong IP rights alone provide neither the necessary nor sufficient incentives for firms to invest in particular countries… The evidence that foreign investment is positively associated with IP protection in most developing countries is lacking.”

Robert L. Ostergard., Jr. “Policy Beyond Assumptions: Intellectual Property Rights and Economic Growth.” Chapter 2 of The Development Dilemma: The Political Economy of Intellectual Property Rights in the International System. LFB Scholarly Publishing, New York. 2003

“…No consistent evidence emerged to show that IPR contributed significantly to economic growth cross-nationally. Furthermore, when the nations are split into developed and developing countries, results to suggest otherwise did not emerge.”

Carsten Fink and Keith Maskus. “Why We Study Intellectual Property and What We Have Learned.” Chapter one of Intellectual Property and Development: Lessons from Economic Research. 2005. (Link)

“Existing research suggests that countries that strengthen their IPR are unlikely to experience a sudden boost in inflows of FDI. At the same time, the empirical evidence does point to a positive role for IPRs in stimulating formal technology transfer.”

“Developing countries should carefully assess whether the economic benefits of such rules outweigh their costs. They also need to take into account the costs of administering and enforcing a reformed IPR system”

“We still know relatively little about the way technology diffuses internationally.”

Keith Mascus. “Incorporating a Globalized Intellectual Property Rights Regime Into an Economic Development Strategy.” Ch. 15 of Intellectual Property, Growth and Trade. (ed. Mascus). Elsevier. 2008.

“Middle income countries must strike a complicated balance between promoting domestic learning and diffusion, through limited IP protection, and gaining greater access to international technologies through a strong regime… it makes little sense for these nations to adopt the strongly protectionist IP standards that exist in the U.S., the EU and other developed economies. Rather, they should take advantage of the remaining policy space provided by the TRIPS Agreement.”

“It is questionable whether the poorest countries should devote significant development resources to legal reforms and enforcement of IPR.”

Kamal Saggi. “Intellectual Property Rights and International Technology Transfer via Trade and Foreign Direct Investment. Ch. 13 of Intellectual Property, Growth and Trade. (ed. Mascus). Elsevier. 2008.

“Overall, it is fair to say that the existing empirical evidence regarding the overall technology-transfer impacts of increased IPR protection in developing countries is inconclusive at this stage. What is not yet clear is whether sufficient information flows will be induced to procure significant dynamic gains in those countries through more learning and local innovation.”

Alexander Koff, Laura Baughman, Joseph Francois and Christine McDaniel. “Study on the Economic Impact of ‘TRIPS-Plus’ Free Trade Agreements.” International Intellectual Property Institute and the U.S. Patent and Trademark Office. August 2011.

“TRIPS-Plus IPRs viewed as ‘important, but not essential’ for attracting investment. Many other factors matter like, taxes, human capital, clustering, etc.”

Patients versus Patents:

Another recent article on this subject states as follows:

“Compulsory licensing and stricter patentability standards allow domestic manufacturers to produce lower-cost versions of patented NCD medications and break into lucrative therapeutic areas, such as oncology, in which multinational drug firms are heavily invested.”

The paper clearly highlights, “If patients are pitted against patents, international support for IP protection—upon which drug firms and many other developed country industries now heavily rely—will again diminish.”

Yet another article published in The New England Journal of Medicine, July 17, 2013 states:

“Patents are government-granted monopolies. As monopolies, they can drive the prices of drugs up dramatically. For example, in 2000, when only patented antiretroviral drugs for Human Immunodeficiency Virus (HIV) infection were widely available, they cost approximately $10,000 per person per year, even in very poor countries. Today, these same medicines cost $150 or less if they are purchased from Indian generics companies…. patents cause especially acute problems for access to medicines in developing countries – not only because of low incomes but also because insurance and price-control systems are often absent or inadequate.”

A WHO Report:

To chart the way forward at the backdrop of ongoing global debate elated to the relationship between intellectual property rights, innovation and public health, the World Health Assembly decided in May 2003 to give an independent Commission the task of analyzing this key issue. Accordingly, the Director-General of WHO established the Commission in February 2004. This report titled, “Public health, innovation and intellectual property rights” was published in 2006 and articulated that neither innovation nor access depend on just intellectual property rights and highlighted, among others, the following:

Intellectual property rights have an important role to play in stimulating innovation in health-care products in countries where ﬁnancial and technological capacities exist, and in relation to products for which proﬁtable markets exist.

In developing countries, the fact that a patent can be obtained may contribute nothing or little to innovation if the market is too small or scientiﬁc and technological capability inadequate.

In the absence of effective differential and discounted prices, patents may contribute to increasing the price of medicines needed by poor people in those countries.

Although the balance of costs and beneﬁts of patents will vary between countries, according to their level of development and scientiﬁc and technological infrastructure, the ﬂexibility built into the TRIPS agreement allows countries to ﬁnd a balance more appropriate to the circumstances of each country.

India – now the most attractive global investment destination:

Trashing the anger and displeasure of pharma MNCs, as per the latest international survey, India reportedly has emerged as the most attractive global investment destination followed by Brazil and China. It is worth noting that even recently, during April- June period of 2013, with a capital inflow of around US$ 1 billion, the pharma sector became the brightest star in the FDI landscape of India.

Conclusion:

In the Indian context, a 2013 paper titled, “Intellectual Property Protection and Health Innovation: Concerns for India” published by Center for WTO Studies highlights that the regime change in the patent system has not been very supportive for improving access to medicines in India. It reiterates, it has not been established yet that a stricter patent regime in the developing countries like India, has helped health innovation and access to medicines at economically viable prices.

The paper recommends, although India is trying to incorporate all the flexibilities under TRIPS in its Patents Act, the ‘Indian Policy Makers’ should not give in to the pressure of western powers to make IPR more stringent in the country.

In the backdrop of arrogance exhibited by Big Pharma MNCs, in general, against Indian policies and judicial verdicts on this subject, the comments made by Sir Andrew on the issue, as deliberated above, are indeed profound and far reaching. However, it clearly exposes the fault line in the collective mindset of pharma MNCs, without any ambiguity.

I shall not be surprised either, if clever attempts are made now by the MNC lobby groups to negate or trivialize the profoundness of this visionary statement not just in India, but beyond its shores, as well.

Further, as stated above recent emergence of India as the most attractive global investment destination with pharma leading the deck is a point worth noting, more in the context of policy and statutes that India has decided to follow.

Be that as it may, it is beyond the scope of any doubt that innovation or for that matter encouraging innovation still remains the wheel of progress of any nation.

However, have we garnered enough evidence yet, to establish that stringent IPR regime with absolute pricing freedom would lead to fostering more innovation leading to well-being of people of the developing countries, like India?

By: Tapan J. Ray

Pharma FDI Debate: Highly Opinionated, Sans Assessment of Tangible Outcomes?

Posted on November 18, 2013 by Tapan Ray

In 2001, the Government of India (GoI) allowed 100 percent Foreign Direct Investments (FDI) in the pharmaceutical sector through automatic route to attract more investments for new asset creation, boost R&D, new job creation and ultimately to help aligning Indian pharma with the modern pharma world in terms of capacity, capability, wherewithal, reach and value creation.

Thereafter, several major FDI followed, such as:

No.	Company	Acquirer	Value US$M	Year
1.	Ranbaxy	Daiichi Sankyo	4600	2008
2.	Shantha Biotechnics	Sanofi Pasteur	781	2009
3.	Piramal Healthcare	Abbott	3700	2010
4.	Orchid Chemicals	Hospira	200	2012
5.	Agila Specialties	Mylan	1850	2013

FDI started coming:

Even recently, in April- June period of 2013, with a capital inflow of around US$ 1 billion, the pharma sector became the brightest star in otherwise gloomy FDI scenario of India.

However, out of 67 FDI investments till September 2011, only one was in the Greenfield area. It is now clear that the liberal pharma FDI policy is being predominantly used for taking overs the domestic pharma companies, as indicated earlier.

The Reserve Bank of India (RBI) data reveals that between April 2012 and April 2013, US$ 989 million FDI was received in brownfield investments, and just US$ 87.3 million in Greenfield investments.

As a result, in 2010 pharma Multi-National Corporations (MNCs) captured over 25 percent of the domestic Indian market, as against just around 15 percent in 2005.

An assessment thus far:

While assessing the outcomes of liberal pharma FDI regime, especially at a time when India is seeking foreign investments in many other sectors, following facts surface:

New asset creation:

Most of the FDIs in pharma, during this period, have been substitution of domestic capital by foreign capital, rather than any significant new asset creation.

Investment in fixed assets (1994-95 to (2009-10):

Companies	Rs. Crore	Contribution %
Indian	54,010	94.7
MNC	3,022	5.3
Total	57,032	100

(Source: IPA)

Thus contrary to the expectations of GoI, there has been no significant increase in contribution in fixed assets by the pharma MNCs, despite liberalization of FDI.

Similarly, the available facts indicate that 100 percent FDI through automatic route in the pharma sector has not contributed in terms of creation of new modern production facilities, nor has it strengthened the R&D space of the country. The liberalized policy has not contributed to significantly increase in the employment generation by the pharma MNCs in those important areas, either.

The following figures would vindicate this point:

R&D Spend:

Companies	1994-95(Rs. Crore)	Contribution %	2009-10(Rs. Crore)	Contribution %
Indian	80.61	55.7	3,342.22	78.1
MNC	64.13	44.3	934.40	21.9
Total	144.74	100	4,276.32	100

(Source: IPA)

The above table vindicates that post liberalization of FDI regime, MNC contribution % in R&D instead of showing any increase, has significantly gone down.

Wage Bill/ Job Creation:

Companies	1994-95(Rs. Crore)	Contribution %	2009-10(Rs. Crore)	Contribution %
Indian	664	65.5	8,172	87.1
MNC	350	34.5	1,215	12.9
Total	1,014	100	9,387	100

(Source: CMIE)

In the area of job creation/wage bills, as well, liberalized FDI has not shown any increasing trend in terms of contribution % in favor of the MNCs.

Delay in launch of cheaper generics:

There are instances that the acquired entity was not allowed to use flexibilities such as patent challenges to introduce new affordable generic medicines.

The withdrawal of all patent challenges by Ranbaxy on Pfizer’s blockbuster medicine Lipitor filed in more than eight countries immediately after its acquisition by Daiichi-Sankyo, is a case in point.

Key concerns expressed:

Brownfield acquisitions seem to have affected the entire pharma spectrum, spanning across manufacturing/ marketing of oral formulations; injectibles; specialized oncology verticals; vaccines; consumables and devices, with no tangible perceptible benefits noted just yet.

Concerns have been expressed about some sectors, which are very sensitive, such as, cancer injectibles and vaccines.

Moreover, domestic Indian pharma exports generic medicines worth around US$ 13 billion every year establishing itself as a major pharmaceutical exporter of the world and is currently the net foreign exchange earner for the country. If the Government allows the domestic manufacturing facilities of strategic importance to be taken over by the MNCs, some experts feel, it would adversely impact the pharmaceutical export turnover of the country, besides compromising with the domestic capacity while facing epidemics, if any or other health exigencies. It would also have a negative fall out on the supply of affordable generic medicines to other developing nations across the world.

Countries such as Brazil and Thailand have a robust public sector in the pharma space. Therefore, their concerns are less. Since India doesn’t have a robust public sector to fall back on, many experts feel that unrestrained acquisitions in the brownfield sector could be a serious public health concern.

Some conditions proposed:

The DIPP proposal reportedly wants to make certain conditions mandatory for the company attracting FDI, such as:

If a company manufactures any of the 348 essential drugs featuring in the National List of Essential Medicines (NLEM), the highest level of production of that drug in the last three years should be maintained for the next five years
The acquirer foreign company would not be allowed to close down the existing R&D centres and would require to mandatorily invest upto 25 per cent of the FDI in the new unit or R&D facility. The total investment as per the proposed condition would have to be incurred within 3 years of the acquisition.
Reduction of FDI cap to 49 per cent in rare or critical pharma verticals, as discussed above.
If there is any transfer of technology it must be immediately communicated to the administrative ministries and FIPB

Vaccines and cancer injectibles, which have a limited number of suppliers, could fall under the purview of even greater scrutiny.

Conclusion:

The Ministries of Health and Commerce & Industries, which are in favor of restricting FDI in pharma stricter, are now facing stiff opposition from the Finance Ministry and the Planning Commission.

The Department of Industrial Policy and Promotion (DIPP) has now repotedly prepared a draft Cabinet Note after consulting the ministries of Finance, Pharma and Health, besides others. However, as comments from some ministries came rather late, the DIPP is reportedly moving a supplementary note on this subject.

The matter is likely to come up before the cabinet by end November/December 2013.

While FDI in pharma is much desirable, it is equally important to ensure that a right balance is maintained in India, where majority of the populations face a humongous challenge concerning access to affordable healthcare in general and affordable medicines in particular.

There is, therefore, an urgent need for critical assessment of tangible outcomes of all pharma FDIs in India as on date, based on meaningful parameters. This would help the Government while taking the final decision, either in favor of continuing with the liberalized FDI policy or modifying it as required, for the best interest of country.

Otherwise, without putting the hard facts, generated from India, on the table, is it not becoming yet another highly opinionated debate in its ilk, between the mighty MNC pharma lobby groups either directly or indirectly, the Government albeit in discordant voices and other members of the society?

By: Tapan J. Ray

Pharma FDI: Damning Report of Parliamentary Panel, PM Vetoes…and Avoids Ruffling Feathers?

Posted on August 19, 2013 by Tapan Ray

An interesting situation emerged last week. The Parliamentary Standing Committee (PSC) on Commerce proposed a blanket ban on all FDI in brownfield pharma sector. Just two days after that, the Prime Minister of India vetoed the joint opposition of the Department of Industrial Policy and Promotion (DIPP) and the Ministry of Health to clear the way for all pending pharma FDIs under the current policy.

On August 13, 2013, Department related Parliamentary Standing Committee on Commerce laid on the Table of both the Houses of the Indian Parliament its 154 pages Report on ‘FDI in Pharmaceutical Sector.’

The damning report of the Parliamentary Standing Committee flags several serious concerns over FDI in brownfield pharma sector, which include, among others, the following:

1. Out of 67 FDI investments till September 2011, only one has been in green field, while all the remaining FDI has come in the brown field projects. Moreover, FDI in brown field investments have of late been predominantly used to acquire the domestic pharma companies.

2. Shift of ownership of Indian generic companies to the MNCs also results in significant change of the business model, including the marketing strategy of the acquired entity, which are quite in sync with the same of the acquirer company. In this situation, the acquired entity will not be allowed to use flexibilities such as patent challenges or compulsory license to introduce new affordable generic medicines.

The withdrawal of all patent challenges by Ranbaxy on Pfizer’s blockbuster medicine Lipitor filed in more than eight countries immediately after its acquisition by Daiichi-Sankyo is a case in point.

3. Serial acquisitions of the Indian generic companies by the MNCs will have significant impact on competition, price level and availability. The price difference between Indian ‘generics’ and MNCs’ ‘branded generic’ drugs could sometimes be as high as 80 to 85 times. A few more larger scale brownfield takeovers may even destroy all the benefits of India’s generics revolution.

4. FDI inflow into Research & Development of the Pharma Industry has been totally unsatisfactory.

5. FDI flow into brown field projects has not added any significant fresh capacity in manufacturing, distribution network or asset creation. Over last 15 years, MNCs have contributed only 5 per cent of the gross fixed assets creation, that is Rs 3,022 crore against Rs 54,010 crore by the domestic companies. Further, through brownfield acquisitions significant strides have not been made by the MNCs, as yet, for new job creation and technology transfer in the country.

6. Once a foreign company takes over an Indian company, it gets the marketing network of the major Indian companies and, through that network, it changes the product mix and pushes the products, which are more profitable and expensive. There is no legal provision in India to stop any MNC from changing the product mix.

7. Though the drug prices may not have increased significantly after such acquisitions yet, there is still a lurking threat that once India’s highly cost efficient domestic capacity is crushed under the weight of the dominant force of MNCs, the supply of low priced medicines to the people will get circumvented.

8. The ‘decimation’ of the strength of local pharma companies runs contrary to achieving the drug security of the country under any situation, since there would be few or no Indian companies left having necessary wherewithal to manufacture affordable generics once a drug goes off patent or comply with a Compulsory License (CL).

9. Current FIPB approval mechanism for brownfield pharma acquisitions is inadequate and would not be able to measure up to the challenges as mentioned above.

The Committee is also of the opinion that foreign investments per se are not bad. The purpose of liberalizing FDI in pharma was not intended to be just about takeovers or acquisitions of domestic pharma units, but to promote more investments into the pharma industry for greater focus on R&D and high tech manufacturing, ensuring improved availability of affordable essential drugs and greater access to newer medicines, in tandem with creating more competition.

Based on all these, The Committee felt that FDI in brown field pharma sector has encroached upon the generics base of India and adversely affected Indian pharma industry. Therefore, the considered opinion of the Parliamentary Committee is that the Government must impose a blanket ban on all FDI in brownfield pharma projects.

PM clears pending pharma FDI proposals:

Unmoved by the above report of the Parliamentary Committee, just two days later, on August 16, 2013, the Prime Minister of India, in a meeting of an inter-ministerial group chaired by him, reportedly ruled that the existing FDI policy will apply for approval of all pharmaceutical FDI proposals pending before the Foreign Investments Promotion Board (FIPB). Media reported this decision as, “PM vetoes to clear the way for pharma FDI.”

This veto of the PM includes US $1.6-billion buyout of the injectable facility of Agila Specialties, by US pharma major Mylan, which has already been cleared by the Competition Commission of India (CCI).

This decision was deferred earlier, as the DIPP supported by the Ministry of Health had expressed concerns stating, if MNCs are allowed to acquire existing Indian units, especially those engaged in specialized affordable life-saving drugs, it could possibly lead to lower production of those essential drugs, vaccines and injectibles with consequent price increases. They also expressed the need to protect oncology facilities, manufacturing essential cancer drugs, with assured supply at an affordable price, to protect patients’ interest of the country.

Interestingly, according to Reserve Bank of India, over 96 per cent of FDI in the pharma sector in the last fiscal year came into brownfield projects. FDI in the brownfield projects was US$ 2.02 billion against just US$ 87 million in the green field ventures.

Fresh curb mooted in the PM’s meeting:

In the same August 16, 2013 inter-ministerial group meeting chaired by the Prime Minister, it was also reportedly decided that DIPP will soon float a discussion paper regarding curbs that could be imposed on foreign takeovers or stake purchases in existing Indian drug companies, after consultations with the ministries concerned.

Arguments allaying apprehensions:

The arguments allaying fears underlying some of the key apprehensions, as raised by the Parliamentary Standing Committee on Commerce, are as follows:

1. FDI in pharma brownfield will reduce competition creating an oligopolistic market:

Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands. Even after, all the recent acquisitions, the top ranked pharmaceutical company of India – Abbott enjoys a market share of just 6.6%. The Top 10 groups of companies (each belonging to the same promoter groups and not the individual companies) contribute just over 40% of the IPM (Source: AIOCD/AWACS – Apr. 2013). Thus, IPM is highly fragmented. No company or group of companies enjoys any clear market domination.

In a scenario like this, the apprehension of oligopolistic market being created through brownfield acquisitions by the MNCs, which could compromise with country’s drug security, needs more informed deliberation.

2. Will limit the power of government to grant Compulsory Licensing (CL):

With more than 20,000 registered pharmaceutical producers in India, there is expected to be enough skilled manufacturers available to make needed medicines during any emergency e.g. during H1N1 influenza pandemic, several local companies stepped forward to supply the required medicine for the patients.

Thus, some argue, the idea of creating a legal barrier by fixing a cap on the FDIs to prevent domestic pharma players from selling their respective companies at a price, which they would consider lucrative otherwise, just from the CL point of view may sound unreasonable, if not protectionist in a globalized economy.

3. Lesser competition will push up drug prices:

Equity holding of a company is believed by some to have no bearing on pricing or access, especially when medicine prices are controlled by the NPPA guidelines and ‘competitive pressure’.

In an environment like this, any threat to ‘public health interest’ due to irresponsible pricing, is unlikely, especially when the medicine prices in India are cheapest in the world, cheaper than even Bangladesh, Pakistan and Sri Lanka (comment: whatever it means).

India still draws lowest FDI within the BRIC countries:

A study of the United Nations has indicated that large global companies still consider India as their third most favored destination for FDI, after China and the United States.

However, with the attraction of FDI of just US$ 32 billion in 2011, against US$ 124 billion of China, US$ 67 billion of Brazil and US$ 53 billion of Russia during the same period, India still draws the lowest FDI among the BRIC countries.

Commerce Minister concerned on value addition with pharma FDI:

Even after paying heed to all the above arguments, the Commerce Minister of India has been expressing his concerns since quite some time, as follows:

“Foreign Direct Investment (FDI) in the pharma sector has neither proved to be an additionality in terms of creation of production facilities nor has it strengthened the R&D in the country. These facts make a compelling case for revisiting the FDI policy on brownfield pharma.”

As a consequence of which, the Department of Industrial Policy and Promotion (DIPP) has reportedly been opposing FDI in pharma brownfield projects on the grounds that it is likely to make generic life-saving drugs expensive, given the surge in acquisitions of domestic pharma firms by the MNCs.

Critical Indian pharma assets going to MNCs:

Further, the DIPP and the Ministry of Health reportedly fear that besides large generic companies like Ranbaxy and Piramal, highly specialized state-of-the-art facilities for oncology drugs and injectibles in India are becoming the targets of MNCs and cite some examples as follows:

Through the big-ticket Mylan-Agila deal, the country would lose yet another critical cancer drug and vaccine plant.

In 2009 Shantha Biotechnics, which was bought over by Sanofi, was the only facility to manufacture the Hepatitis B vaccine in India, which used to supply this vaccine at a fraction of the price as compared to MNCs.

Mylan, just before announcing the Agila deal, bought over Hyderabad based SMS Pharma’s manufacturing plants, including some of its advanced oncology units in late 2012.

In 2008, German pharma company Fresenius Kabi acquired 73 percent stake in India’s largest anti-cancer drug maker Dabur Pharma.

Other major injectable firms acquired by MNCs include taking over of India’s Orchid Chemicals & Pharma by Hospira of the United States.

With the US market facing acute shortage of many injectibles, especially cancer therapies in the past few years, companies manufacturing these drugs in India have become lucrative targets for MNCs.

An alternative FDI policy is being mooted:

DIPP reportedly is also working on an alternate policy suggesting:

“It should be made mandatory to invest average profits of last three years in the R&D for the next five years. Further, the foreign entity should continue investing average profit of the last three years in the listed essential drugs for the next five years and report the development to the government.”

Another report indicated, a special group set up by the Department of Economic Affairs suggested the government to consider allowing up to 49 per cent FDI for pharma brownfield investments under the automatic route.However, investments of more than 49 per cent would be referred to the Foreign Investment Promotion Board (FIPB).

It now appears, a final decision on the subject would be taken by the Prime Minister after a larger inter-mimisterial consultation, as was decided by him on August 14, 2013.

The cut-off date to ascertain price increases after M&A:

Usually, the cut off point to ascertain any price increases post M&A is taken as the date of acquisition. This process could show false positive results, as no MNC will take the risk of increasing drug prices significantly or changing the product-mix, immediately after acquisition.

Significant price increases could well be initiated even a year before conclusion of M&As and progressed in consultation by both the entities, in tandem with the progress of the deal. Thus, it will be virtually impossible to make out any significant price changes or alteration in the product-mix immediately after M&As.

Some positive fallouts of the current policy:

It is argued that M&As, both in ‘Greenfield’ and ‘Brownfield’ areas, and joint ventures contribute not only to the creation of high-value jobs for Indians but also access to high-tech equipment and capital goods. It cannot be refuted that technology transfer by the MNCs not only stimulates growth in manufacturing and R&D spaces of the domestic industry, but also positively impacts patients’ health with increased access to breakthrough medicines and vaccines. However, examples of technology transfer by the MNCs in India are indeed few and far between.

This school of thought cautions, any restriction to FDI in the pharmaceutical industry could make overseas investments even in the R&D sector of India less inviting.

As listed in the United Nation’s World Investment Report, the pharmaceutical industry offers greater prospects for future FDI relative to other industries. Thus, restrictive policies on pharmaceutical FDI, some believe, could promote disinvestments and encourage foreign investors to look elsewhere.

Finally, they highlight, while the Government of India is contemplating modification of pharma FDI policy, other countries have stepped forward to attract FDI in pharmaceuticals. Between October 2010 and January 2011, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Need to attract FDI in pharma:

At a time when the Global Companies are sitting on a huge cash pile and waiting for the Euro Zone crisis to melt away before investing overseas, any hasty step by India related to FDI in its pharmaceutical sector may not augur well for the nation.

While India is publicly debating policies to restructure FDI in the ‘Brownfield’ pharma sector, other countries have stepped forward to attract FDI in their respective countries. Between October 2010 and January 2011, as mentioned earlier, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Thus the moot question is, what type of FDI in the pharma brownfield sector would be good for the country in the longer term and how would the government incentivize such FDIs without jeopardizing the drug security of India in its endeavor to squarely deal with any conceivable eventualities in future?

Conclusion:

In principle, FDI in the pharma sector, like in any other identified sectors, would indeed benefit India immensely. There is no question about it…but with appropriate checks and balances well in place to protect the national interest, unapologetically.

At the same time, the apprehensions expressed by the Government, other stakeholders and now the honorable members of the Parliament, across the political party lines, in their above report, should not just be wished away by anyone.

This issue calls for an urgent need of a time bound, comprehensive, independent and quantitative assessment of all tangible and intangible gains and losses, along with opportunities and threats to the nation arising out of all the past FDIs in the brownfield pharma sector.

After a well informed debate by experts on these findings, a decision needs to be taken by the law and policy makers, whether or not any change is warranted in the structure of the current pharma FDI policy, especially in the brownfield sector. Loose knots, if any, in its implementation process to achieve the desired national outcome, should be tightened appropriately.

I reckon, it is impractical to expect, come what may, the law and policy makers will keep remaining mere spectators, when Indian Pharma Crown Jewels would be tempted with sacks full of dollars for change in ownerships, jeopardizing presumably long term drug security of the country, created painstakingly over decades, besides leveraging immense and fast growing drug export potential across the world.

The Competition Commission of India (CCI) can only assess any possible adverse impact of Mergers & Acquisitions on competition, not all the apprehensions, as expressed by the Parliamentary Standing Committee and so is FIPB.

That said, in absence of a comprehensive impact analysis on pharma FDIs just yet, would the proposal of PSC to ban foreign investments in pharma brownfield sector and the PM’s subsequent one time veto to clear all pending FDI proposals under the current policy, be construed as irreconcilable internal differences…Or a clever attempt to create a win-win situation without ruffling MNC feathers?

By: Tapan J. Ray

Patent Conundrum: Ignoring India Will Just Not be Foolhardy, Not An Option Either

Posted on April 29, 2013 by Tapan Ray

The recent verdict of the Supreme Court against Novartis, upholding the decision of the Indian Patent Office (IPO) against grant of patent to their cancer drug Glivec, based on Section 3(d) of the Indian Patents Act, has caused a flutter and utter discontentment within the global pharmaceutical industry across the world.

However, on this verdict, the Director General of the World Trade Organization (WTO), Pascal Lamy has reportedly opined, “Recent decisions by the courts in India have led to a lot of protest by pharmaceutical companies. But decisions made by an independent judiciary have to be respected as such.”

The above decision on Glivec came close on the heels of IPO’s decision to grant its first ever Compulsory License (CL) to the Indian drug manufacturer Natco, last year, for the kidney cancer drug Nexavar of Bayer.

Interestingly, no member of the World Trade Organization has raised any concern on these issues, as the Head of WTO, Lamy recently confirmed, “No country has objected to India issuing compulsory license or refusing patent for drugs.” He further added, “TRIPS provides flexibilities that allow countries to issue compulsory licenses for patented medicines to address health urgencies.”

That said, simmering unhappiness within innovator companies on various areas of Indian patent laws is indeed quite palpable. Such discontent being expressed by many interested powerful voices is now reverberating in the corridors of power both in India and overseas.

Point and Counterpoint:

Although experts do opine that patent laws of India are well balanced, takes care of public health interest, encourage innovation and discourage evergreening, many global innovator companies think just the opposite. They feel, an appropriate ecosystem to foster innovation does not exist in India and their IP, by and large, is not safe in the country. The moot question is, therefore, ‘Could immediate fallout of this negative perception prompt them to ignore India or even play at a low key in this market?’

Looking at the issue from Indian perspective:

If we take this issue from the product patent perspective, India could probably be impacted in the following two ways:

New innovative products may not be introduced in India
The inflow of Foreign Direct Investments (FDI) in the pharma sector may get seriously restricted.

Let us now examine the possible outcome of each of these steps one at a time.

Will India be deprived of newer innovative drugs?

If the innovator companies decide to ignore India by not launching such products in the country, they may take either of the following two steps:

Avoid filing a patent in India
File a patent but do not launch the product

Keeping the emerging scenario in perspective, it will be extremely challenging for the global players to avoid the current patent regime in India, even if they do not like it. This is mainly because of the following reasons:

1. If an innovator company decides not to file a product patent in India, it will pave the way for Indian companies to introduce copy-cat versions of the same in no time, as it were, at a fractional price in the Indian market.

2. Further, there would also be a possibility of getting these copycat versions exported to the unregulated markets of the world from India at a very low price, causing potential business loss to the innovator companies.

3. If any innovator company files a product patent in India, but does not work the patent within the stipulated period of three years, as provided in the patent law of the country, in that case any Indian company can apply for CL for the same with a high probability of such a request being granted by the Patent Controller.

A market too attractive to ignore:

India as a pharmaceutical market is quite challenging to ignore, despite its ‘warts and moles’ for various reasons. The story of increasing consumption of healthcare in India, including pharmaceuticals, especially when the country is expected to be one of the top 10 pharmaceutical markets in the world, is too enticing for any global player to ignore, despite unhappiness in various areas of business.

Increasing affordability of the fast growing middle-class population of the country will further drive the growth of this market, which is expected to register a value turnover of US$50 billion by 2020, as estimated by PwC.

PwC report also highlights that a growing and increasingly sophisticated pharmaceutical industry of India is gradually becoming a competitor of global pharma in some key areas, on the one hand and a potential partner in others, as is being witnessed today by many.

Despite urbanization, nearly 70 percent of the total population of India still lives in the rural villages. Untapped potential of the rural markets is expected to provide another boost to the growth momentum of the industry.

Too enticing to exit:

Other ‘Enticing Factors’ for India, in my views, may be considered as follows:

A country with 1.13 billion populations and a GDP of US$ 1.8 trillion in 2011 is expected to grow at an average of 8.2 percent in the next five-year period.

Public health expenditure to more than double from 1.1 percent of the GDP to 2.5 percent of GDP in the Twelfth Five Year Plan period (2012-17)

Government will commence rolling out ‘Universal Health Coverage’ initiative

Budget allocation of US$ 5.4 billion announced towards free distribution of essential medicines from government hospitals and health centers.

Greater plan outlay announced for NRHM, NUHM and RSBY projects.

Rapidly growing more prosperous middle class population of the country.

Fast growing domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets.

Rising per capita income of the population and relative in-efficiency of the public healthcare systems will encourage private healthcare services of various types and scales to flourish.

Expected emergence of a robust health insurance model for all strata of society as the insurance sector is undergoing reform measures.

Fast growing Medical Tourism.

World-class local outsourcing opportunities for a combo-business model with both patented and branded generic drugs.

Core issues in patent conundrum:

I reckon, besides others, there are three core issues in the patent conundrum in India as follows, other issues can be sorted out by following:

1. ‘Pricing’ strategy of patented products: A large population across the globe believes that high prices of patented products severely restrict their access to many and at the same time increases the cost of healthcare even for the Governments very significantly.

2. To obtain a drug patent in India, passing the test of inventive steps will not just be enough, the invention should also pass the acid test of patentability criteria, to prevent evergreening, as enshrined in the laws of the land. Many other countries are expected to follow India in this area, in course of time. For example, after Philippines and Argentina, South Africa now reportedly plans to overhaul its patent laws by “closing a loophole known as ‘ever-greening’ used by drug companies to extend patent protection and profits”. Moreover, there does not seem to be any possibility to get this law amended by the Indian Parliament now or after the next general election.

3. Probably due to some legal loopholes, already granted patents are often violated without following the prescribed processes of law in terms of pre or post – grant challenges before and after launch of such products. There is a need for the government to plug all such legal loopholes, after taking full stock of the prevailing situation in this area, without further delay.

Some Global CEOs spoke on this issue:

In this context the Global CEO of GSK commented in October 18, 2012 that while intellectual property protection is an important aspect of ensuring that innovation is rewarded, the period of exclusivity in a country should not determine the price of the product. Witty said, ‘At GSK we will continuously strive to defend intellectual property, but more importantly, defend tier pricing to make sure that we have appropriate pricing for the affordability of the country and that’s why, in my personal view, our business in India has been so successful for so long.’

Does all in the global pharma industry share this view?

Not really. All in the global pharmaceutical industry does not necessarily seem to share the above views of Andrew Witty and believe that to meet the unmet needs of patients, the Intellectual Property Rights (IPR) of innovative products must be strongly protected by the governments of all countries putting in place a robust product patent regime and the pricing of such products should not come in the way at all.

The industry also argues that to recover high costs of R&D and manufacturing of such products together with making a modest profit, the innovator companies set a product price, which at times may be perceived as too high for the marginalized section of the society, where government intervention is required more than the innovator companies. Aggressive marketing activities, the industry considers, during the patent life of a product, are essential to gain market access for such drugs to the patients.

In support of the pharmaceutical industry the following argument was put forth in a recent article:

“The underlying goal of every single business is to make money. People single out pharmaceutical companies for making profits, but it’s important to remember that they also create products that save millions of lives.”

How much then to charge for a patented drug?

While there is no single or only right way to arrive at the price of an IPR protected medicine, how much the pharmaceutical manufacturers will charge for such drugs still remains an important, yet complex and difficult issue to resolve, both locally and globally.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals. The report also indicated that the reimbursement prices in these countries are often treated as de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market.

Should India address ‘Patented Products’ Pricing’ issue with HTA model?

Though some people hate the mechanism of Health Technology Assessment (HTA) to determine price of a patented drug, I reckon, it could be a justifiable and logical answer to price related pharmaceutical patent conundrum in India.

Health Technology Assessment, as many will know, examines the medical, economic, social and ethical implications of the incremental value of a medical technology or a drug in healthcare.

HTA, in that process, will analyze the costs of inputs and the output in terms of their consequences or outcomes. With in-depth understanding of these components, the policy makers decide the value of an intervention much more precisely.

Companies like, Merck, Pfizer and GSK have reportedly imbibed this mechanism to arrive at a value of the invention. National Pharmaceutical Pricing Authorities (NPPA) may well consider this approach for a well judged, scientific and transparent pricing decision mechanism in India, especially for innovative new drugs.

Could local manufacturing be an option?

Considering relatively higher volume sales in India, to bring down the price, the global companies may consider manufacturing their patented products in India with appropriate technology transfer agreements being in place and could even make India as one of their export hubs, as a couple of their counterparts have already initiated.

Accepting the reality responsibly:

In view of the above, the global pharmaceutical players, as experts believe, should take note of the following factors. All these could help, while formulating their India-specific game plan to be successful in the country, without worrying much about invocation of Compulsory License (CL) for not meeting ‘Reasonably Affordable Price’ criterion, as provided in the Patents Act of the country:

While respecting IPR and following Doha declaration, the government focus on ‘reasonably affordable drug prices’ will be even sharper due to increasing pressure from the Civil Society, Indian Parliament and also from the Courts of the country triggered by ‘Public Interest Litigations (PIL)’

India will continue to remain within the ‘modest-margin’ range for the pharmaceutical business with marketing excellence driven volume turnover.

Although innovation will continue to be encouraged with IPR protection, the amended Patents Act of India is ‘Public Health Interest’ oriented, including restrictions on patentability, which, based on early signals, many other countries are expected to follow as we move on.

This situation though very challenging for many innovator companies, is unlikely to change in the foreseeable future, even under pressure of various “Free Trade Agreements (FTA)”.

Sectors Attracting Highest FDI Equity inflows:

When one looks at the FDI equity inflow from April 2000 to March 2013 period as follows, it does not appear that FDI inflow in Drugs and Pharmaceuticals had any unusual impact due to ‘Patent Conundrums’ in the country at any time:

Ranks	Sector	US$ Million
1.	Service Sector	37,151
2.	Construction Development:(Township, Housing, Built-up infrastructure)	22,008
3	Telecommunication(Radio paging, Cellular mobile,Basic telephone services)	12,660
4	Computer Software &Hardware	11,671
5	Drugs & Pharmaceuticals	10,309
6	Chemical	8,861
7	Automobile Industry	8,061
8	Power	7,828
9	Metallurgical Industries	7,434
10	Hotel & Tourism	6,589

Further, if we look at the FDI trend of the last three years, the conclusion probably will be similar.

Year	US$ Million.
2010-11	177.96
2011-12	2,704.63
2012-13	1,103.70

(Source: Fact Sheet on Foreign Investments, DIPP, Government of India)

Conclusion:

In search of excellence in India, global pharmaceutical companies will need to find out innovative win-win strategies adapting themselves to the legal requirements for business in the country, instead of trying to get the laws changed.

India, at the same time, should expeditiously address the issue of blatant patent infringements by some Indian players exploiting the legal loopholes and set up fast track courts to resolve all IP related disputes without inordinate delay.

Responsible drug pricing, public health oriented patent regime, technology transfer/local manufacturing of patented products and stringent regulatory requirements in all pharmaceutical industry related areas taking care of patients’ interest, are expected to be the key areas to address in the business models of global pharmaceutical companies for India.

Moreover,it is worth noting that any meaningful and long term FDI in the pharmaceutical industry of India will come mostly through investments in R&D and manufacturing. Such FDI may not be forthcoming without any policy compulsions, like in China. Hence, many believe, the orchestrated bogey of FDI for the pharmaceutical industry in India, other than brownfield acquisitions in the generics space, is just like dangling a carrot, as it were, besides being blatantly illusive.

Even with all these, India will continue to remain too lucrative a pharmaceutical market to ignore by any. Thus, I reckon, despite a high decibel patent conundrum, any thought to ignore or even be indifferent to Indian pharmaceutical market by any global player could well be foolhardy.

By: Tapan J. Ray

‘Maira Committee’ delivers: Resolves 100% FDI issue in the pharma sector of India

Posted on October 17, 2011 by Tapan Ray

On October 10, 2011, Dr Man Mohan Singh, the Prime Minister of India accepted the recommendation of the ‘Maira Committee’ on Foreign Direct Investment (FDI) in the Pharmaceutical Sector of India and decided that the Competition Commission of India (CCI) will continue to scrutinize all Mergers and Acquisitions (M&A) in this area to avoid any possible adverse impact on Public Health Interest arising out of such deals.

Finance Minister Mr. Pranab Mukherjee, Health Minister Mr. Ghulam Nabi Azad, Commerce and Industry Minister Mr. Anand Sharma, Deputy Chairman of the Planning Commission Mr. Montek Singh Ahluwalia and the head of the ‘Maira Committee’ Mr. Arun Maira were reported to be present in the meeting.

Finer details are still not known:

Although the details of the ‘Maira Committee Report’ nor the discussion with the Prime Minister are not known, as yet, the key recommendation, as reported by the press was to be in relaxation of the threshold limits of CCI scrutiny for pharmaceutical M&As, which under the current law involve target companies with a turnover of above Rs 750 Crore (Rs 7.5 billion) and assets worth more than Rs 250 Crore (Rs 2.5 billion).

The CCI will now be strengthened and directed to set up a standing advisory committee especially to look into M&A in the pharmaceutical sector of India to address the concerns of the stakeholders in this matter.

The new system in CCI within six months:

The new system will be put in place within a period of six months. By the time CCI equips itself to handle the recommendations of the ‘Maira Committee’, as an interim measure, all brownfield pharma M&A proposals will be routed through Foreign Direct Investment Promotion Board (FIPB) for a period not exceeding six months.

A press note from the commerce & industry ministry announced at the same time that “India will continue to allow FDI without any limits (100 per cent) under the automatic route for Greenfield investments in the pharma sector. This will facilitate the addition of manufacturing capacities, technology acquisition and development.”

Looking back:

While looking back, the consolidation process within the Pharmaceutical Industry in India started gaining momentum since 2006 with the acquisition of Matrix Lab by Mylan. 2008 witnessed one of the biggest mergers in the Industry till that period, when Daiichi Sankyo of Japan acquired Ranbaxy of India for USD 4.6 billion.

Key apprehensions and counter arguments ‘for and against’ FDI cap:

Last year, Abbott’s acquisition of Piramal Healthcare with USD 3.72 billion followed several media reports on the Government’s keen interest in instituting new restrictions on Foreign Direct Investment (FDI) in the pharmaceutical sector for the following apprehensions:

The first apprehension of some stakeholders was that such FDI will create ‘Oligopolistic Market’ with adverse impact on ‘Public Health Interest’. It was argued by others that Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands. Consolidated Abbott, being the largest domestic player, enjoys a market share of just 6.1% in a highly fragmented market. Thus, the apprehension that an ‘Oligopolistic Market’ will be created through acquisitions by the MNCs is unfounded.

The second apprehension was on limiting the power of government to grant Compulsory License (CL). With a CL, the Government, under the Indian Patents Act can authorize any pharmaceutical company to manufacture any medicine required by the country in an emergency situation for ‘Public Health Interest’. On this point the argument put forth was that with more than 20,000 registered pharmaceutical manufacturing companies operating in India, many of them with high skill sets, there will always be skilled manufacturers willing and be able to make needed medicines in an emergency situation, as happened during H1N1 influenza pandemic.

Creation of a legal barrier by putting a cap on FDI to prevent domestic pharma players from voluntarily selling their respective companies at a lucrative price, just from the CL point of view, others argued, sounds highly protectionist in the globalized economy.

The third apprehension was that lesser competition will push up drug prices. The counter-argument was that equity holding of a company has no bearing on prices or access, especially when prices are governed by the National Pharmaceutical Pricing Authority (NPPA) and competition pressure. Thus, prices of medicines of Ranbaxy, Shantha Biotechnics and Abbott have reportedly remained stable even after their acquisition.

India needs FDI in the Pharmaceutical sector:

Both ‘Greenfield’ and ‘Brownfield’ FDI contribute not only to the creation of high-value jobs for the country, but also improve access to high-tech equipment and capital goods. Technology cooperation with the MNCs stimulates growth in manufacturing and R&D spaces of the domestic industry. It was articulated that any restriction to FDI in the pharmaceutical industry could make overseas investment even in the R&D sector less attractive. India has already suffered a 40% drop in FDI between 2009 and 2010 with a 17% drop in pharmaceutical FDI.

Foreign investors look up to India for cost arbitrage and expertise in Contract Research and Manufacturing Services for improved market access. Thus, it is believed by many that FDI can lead to increased domestic pharmaceutical exports by India, as happened in countries like China and Brazil, where they have programs to encourage partnerships with MNCs to bolster their domestic industry, helping the nation to benefit more from FDI.

India is against protectionist measures by other countries – Safeguards are in place:

Moreover India as a country, is known to be quite vocal and against any form of protectionist measures by other countries which will adversely impact the trade and commerce of our nation. It was perhaps felt by the ‘Maira Committee’ that any policy decision to do away with the current practice of allowing 100% FDI will be taken by the international community as a ‘protectionist measure’ in the pharmaceutical sector of India. It was reportedly felt by them that any possible adverse impact of M&A on competition could be effectively scrutinized by the Competition Commission. At the same time, it is a known fact that any unreasonable price increase is currently being effectively addressed by the NPPA. Thus it appears, effective safeguards to protect ‘Public Health Interest’ arising out of any M&A in the pharmaceutical sector of India, have been put well in place.

FDI policy needs predictability and stability to attract more investments:

Pharmaceutical sector was opened up for 100% FDI through automatic route only in 2002 as a part of the financial reform process, positioning India as an attractive investment destination for pharmaceuticals. This reform process, investors feel, needs stability, as by partnering with MNCs local drug companies have begun to gain access to international expertise, technology, resources, good manufacturing practices and markets.

It now appears that the ‘Maira Committee’, some key ministers present in the meeting and the Prime Minister himself felt that any move, at this stage of economic progressive of the country to restrict FDI in the pharmaceutical sector, especially when appropriate safeguards are in place, will be a retrograde step in the financial reform process of India. This could adversely impact FDI not only in the Pharmaceutical sector but possibly far beyond it.

Conclusion:

The final decision of the PM is a victory to all participants in this raging debate. All stakeholders seem to be satisfied with the decision, as their concerns have been well taken care of by the ‘Maira Committee’.

The issue of 100% FDI in the pharmaceutical sector, without putting any cap on it, has now been finally resolved, as it has come from the highest decision making authority of the country.

Both ‘Greenfield’ and ‘Brownfield’ FDI in the pharmaceutical industry of India, I reckon, will continue to contribute not only to high-value job creation, improving access to high-tech equipment and capital goods, boosting global technology cooperation in manufacturing and R&D spaces of the domestic industry, but will also make a significant contribution to the overall progress of the pharmaceutical industry of India.

The decision taken by the PM on the ‘Maira Committee’ report on October 10, 2011, therefore, seems to be a right step towards a long term nation building process without compromising with the ‘Public Health Interest’ of our country in any form.

‘Maira Committee’ has indeed delivered!

FDI in ‘Brownfield’ Pharma acquisitions and the growth of ‘Greenfield’ projects in India

Posted on September 17, 2011 by Tapan Ray

Just when global multinational companies are inking deals to get more and more drugs manufactured in India, because of various financial and other considerations, giving a fillip to the domestic manufacturing capacity, recent media reports are carrying news items expressing apprehensions on possible declining trend of pharmaceutical manufacturing activities in the country due to ‘brownfield’ acquisitions of the domestic pharmaceutical companies by large multinationals.

Almost around this time, the Bureau of Labor Statistics data (USA) of May 2010 reported that the number of employees engaged in “pharmaceutical and medicine manufacturing” in the US went down by 5% from what it was about two years ago with around 35000 layoffs in the first half of 2010.

According to ‘New York Times’, there has been around 15,000 manufacturing job loss in Europe around this period.

Where the global manufacturing capacity has started shifting then?

As compared to above, the Department of Pharmaceuticals of the Government of India, as reported by Fierce Pharma, have indicated that pharmaceutical manufacturing industry of the country employed 340,000 people during April 2008 to March 2009 period with a sizable increase in number compared to the previous period. Overall, the industry provides employment to over 4.2 million persons directly or indirectly in India (Source: IDMA). This is happening despite a series of large to medium brownfield acquisitions in the country.

Moreover, a study by the Organization of Pharmaceutical Producers of India and Ernst & Young, based on 50 survey respondents from 30 pharmaceutical companies in the US, Europe and Asia, projects growth of formulations manufacturing and intermediate drugs in India at a rate of 43%, which is three times more than the projected global rate.

Growth in manufacturing through global collaborations:

With a large number of the world class manufacturing facilities conforming to cGMP requirements of various regulatory authorities across the globe, India is fast emerging as a global hub for pharmaceutical manufacturing services.

Emerging pharmaceutical manufacturing environment in the country, no doubt, is attracting a large number of global pharma majors to ink contract manufacturing deals, as mentioned above, with their Indian counterparts. Such collaborative arrangements with global partners are giving a further thrust to the pharmaceutical manufacturing activities of the country. To cater to the growing demand in manufacturing, some domestic companies are setting up ‘greenfield’ projects, while others are getting engaged in major expansion of their existing manufacturing facilities.

As per Frost & Sullivan, contract manufacturing market in India registered a turnover of around US$ 2.3 billion with a CAGR of 33% on 2010. RNCOS, an Industry Research solution company estimates that this sector will grow at a CAGR of over 45% during 2011-2013, in India.

Large global pharma companies like, Eli Lilly, AstraZeneca, Abbott, Merck, GSK and Pfizer have already inked collaborative arrangements with Indian Pharmaceutical companies related to manufacturing.

Eisai Co. Ltd of Japan inaugurated its second largest active pharmaceutical ingredient (API) production facility (after their Kashima plant in Japan) at Visakhapatnam on December 2009. The company is also to start a Research & Development (R&D) center for formulation development around the same place starting with four to five projects.

In the recent past the following predominantly manufacturing collaborative agreements have been signed by the MNCs in India:

Collaborative Deals
Year	Multinational Companies	Indian Companies
2009	GSK	Dr. Reddy’s Lab
2009	Pfizer	Aurobindo Pharma
2010	AstraZeneca	Torrent
	Abbott	Cadila Healthcare
	Pfizer	Strides Arcolab
	AstraZeneca	Aurobindo Pharma
	Pfizer	Biocon
2011	Bayer	Cadila Healthcare
2011	MSD	Sun Pharma

This is happening mainly because of inherent cost arbitrage, other factors being the same:

Comparison of Cost Advantage in India (%)
Costs in the Western Countries	100.0
Production Costs	50.0
R&D Costs	12.5
Clinical Trials Costs	10.0
Source: Pharmexcil Research

ANDAs and DMFs are manufacturing growth boosters:

Large portfolios of ANDAs and DMFs of domestic pharmaceutical players will also spur manufacturing in India:

ANDA approval by country:

Final ANDA Approvals by Country (2007) (figs. in Nos.)
Country	Numbers
USA	169
India	132
Israel	40
Germany	25
Canada	24
Switzerland	19
Iceland	14
Jordan	11
Other	25
Source: Thomson Scientific

DMF approval by country:

Comparison of Drug Master Filings (Type II) by India, China & World (1998-2007) (Figs. in Nos.)
Year	India	China	World Total
1998	32	27	316
1999	26	6	199
2000	33	9	201
2001	47	6	238
2002	55	20	264
2003	115	19	360
2004	160	25	435
2005	233	70	615
2006	267	78	627
2007	274	90	656
Source: Thomson Scientific,

Patent challenge to boost manufacturing for exports:

To further boost manufacturing, especially for exports, Indian pharmaceutical players have also started challenging global patents. In fact in patent challenge, India ranks just next to USA with a share of 21% of the total:

Country-wise Number of Patent Challenges (As on March 2008)
Country	Numbers
USA	200
India	113
Israel	89
Canada	43
Switzerland	34
Iceland	17
Germany	10
Other	32
Source: Thomson Scientific,

Boosting up domestic manufacturing with overseas acquisitions and collaborations:

At the same time, domestic Indian companies are also on a spree of overseas acquisition and collaborative deals. The following details from the Ministry of Commerce are a testimony to this fact:

Selected International Acquisitions and Foreign tie-ins by the Indian Pharmaceutical Industry
Company	International Acquisition (s)	Foreign Alliances, JVS, and other tie-ins
Nicholas Piramal	Pfizer-Morpeth (UK), Avecia Pharmaceutical (UK), Dobutrex brand acquisition (US), Rhodia’s inhalation business (UK), Biosyntech (NPIL Pharmaceutical) (Canada), Torcan Chemical (Canada), 51 percent of Boots (S. Africa), Biosyntech	Ethypharm (France), Genzyme (US), Eli Lilly (US), Biogen Idec (US), Chiese Farmaceutici (Italy), Minrad (US), Pierre Fabre (France), Gilead Sciences (US), Allergan (US), Hoffmann-La Roche (Switzerland)
Ranbaxy	Terapia (Romania), Allen-GSK (Spain & Italy), Ethimed (Belgium), Betapharm (Germany), RPG Aventis (France), 40 percent stake in Nihom Pharmaceuticals (Japan), Brand-Veratide (Germany), Efarmes (Spain), Be-Tabs (S. Africa), Akrikhin (Russia), Basic (Germany), Ohm Labs (US)	GlaxoSmithKline (UK), Janssen-Ortho (Canada), IPCA Labs (US), Zenotech (India), Sonkel (S. Africa), Cephalon (US), Gilead Sciences (US), Schwartz (Germany)
Dr. Reddy’s	Betapharm Group (Germany), Trigenesis (US), BMS Laboratories and Meridian Healthcare (UK), Roche’s active ingredients business (Mexico), BMS Labs (UK)	Novo Nordisk, Bayer AG (Germany), Par (US), Novartis (Switzerland), Merck (Germany), Clin Tech, Pharmascience (Canada), ICICI (India), Merck (Germany), Schwartz
Marksans	Nova Pharmaceuticals (Australia)	NA
Aurobindo	Milpharm (UK), Pharmacin (Netherlands)	Gilead Science (US), Citadel (India)
Sun Pharmaceutical	Able Lab (US), Caraco (US), Valeant Pharmaceuticals (US & Hungary), ICN (Hungary), Caraco (US), MJ Pharmaceutical	Dyax
Dishman	Amcis (Switzerland), Solutia’s Pharma (Switzerland)	Azzurro (Japan)
Orchid	Bexel Pharma (US)	Stada, Alpharma, Par, Apotex
Biocon	Nobex (US)	Centre of Molecular Immunology (Cuba)
Wockhardt	Wallis Labs (UK), CP Pharmaceutical (UK), Esparma (Germany), Pinewood Laboratories (Ireland), Dumex (India)	Pharmaceutical dynamics (S. Africa)
Cadila	Alpharma (France-formulations), Dabur Pharma Redrock (UK)	Schering (Germany), Boehringer Ingelheim (Germany), Vitaris (Germany), Novopharm (Canada), MCPC (Saudi Arabia), Cilpharm (Ivory Coast), Geneva (US), GSK (UK), Ranbaxy (India), Mallinckrodt (US), Mayne (Australia), Shinjuki (Japan), Zydus Atlanta
Jubliant Organosys	Target Research Association (US), PSI (Belgium), Trinity Laboratories (US)	NA
Matrix Labs	22 percent controlling stake in Docpharma (Belgium), Explora Lab (Switzerland), MCHEM (China), Fine Chemicals (S. Africa), API (Belgium)	Aspen, Emchem, Docpharma, Explora Labs
Glenmark	Kinger Lab (Brazil), Uno-Ciclo (Brazil), Srvycal (Argentina), Medicamenta (Czech), Bouwer Bartlett	Forest Labs (US), Lehigh Valley Technologies (US), Shasun (India), KV, Apotex (US)
Source: Source: Ministry of commerce, Government of India .(IBEF, Ernst & Young, The Economic Times, Individual company web pages)

Conclusion:

M&A is a natural business processes in any country with appropriate safeguards for any possible adverse effect on competition. India has already put similar safeguards in place with the scrutiny of the Competition Commission before acquisition and continuous price monitoring by the National Pharmaceutical Pricing Authority (NPPA) after the acquisition is over.

It is worth mentioning, just on September 16, 2011, the Competition Commission of India, after stringent scrutiny on the impact of competition, cleared the proposal of Danone Asia Pacific to acquire the nutrition business of Wockhardt Ltd.

In the wake of all these, the apprehension that the ‘brownfield’ pharmaceutical acquisitions will retard the growth of ’greenfield’ pharmaceutical projects or have adverse impact on competition in the country, does not seem to hold much water. To a great extent FDI in ‘brownfield’ pharmaceutical acquisitions and the growth of ‘greenfield’ pharmaceutical projects in India, are unrelated.

Be that as it may, India should perhaps not expect that the country will continue to remain one of the pharmaceutical manufacturing hotspots for any indefinite period mainly because of cost arbitrage, which, in any case is not sustainable over a long period of time by any country.

As we have seen above, with the emergence of Asia, USA and EU are gradually but surely losing their pharmaceuticals manufacturing hubs’ status to China (API) and India (formulations). Who knows, some time in future, with the awakening of sleeping Africa, Asia will also not have the same fate?

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

PILMAN

A Tapan Ray Website

Tag Archives: direct

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FDI in ‘Brownfield’ Pharma acquisitions and the growth of ‘Greenfield’ projects in India