Tag Archives: Drug

Pharma Stakeholder Sentiment: Back to Square One?

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Is it fair to push out the core purpose of an important process, or rather a mission, unfairly? Whether we like it or not, it happened that way, over a period of time.

Way back on December 01, 1950, George W. Merck (President and Chairman Merck & Co., Inc.1925-1957), epitomized the core purpose of the drug innovation process. This is something, which apparently was possible only for him to articulate exactly the way he did.

On that day, while addressing the students and the faculty at the Medical College of Virginia, Richmond, George Merck said: “We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”

To many of us, it may sound more as an altruistic statement, and not really coming from a businessman who wants to excel in the financial performance of the organization. Interestingly, that was not the case, either. Merck removed any possible ambiguity in his statement by stating categorically: “In doing this, it will be as a business­ man associated with that area of the chemical industry which serves chiefly the worlds of medicine and pharmacy.”

In this article, I shall deliberate on whether or not the core purpose of drug innovation, as articulated by George Merck in 1950 has been pushed out of the mind of the stakeholders for good.

Management Guru – Peter Drucker’s similar observation:

It is worthwhile to recapitulate at this stage that around the same time, the Management Guru – Peter Drucker also made a similar observation, which is relevant even today. He said: “Because the purpose of business is to create a customer, the business enterprise has two – and only two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

Interestingly, when the word ‘customer’ is replaced with ‘patients’, George W. Merck’s iconic statement fits so well even in the realm of business management, including drugs and pharmaceuticals.

Signs of the core purpose of new drug discovery getting pushed out:

The core purpose of new drug innovation in pharma business, as articulated by a top industry pioneer – ‘Medicine is for the patient and not for the profits’, was pushed out eventually, regardless of its reasons. Today’s core purpose of the same process has seemingly become just the opposite of that – ‘Medicine is only for the patient who can afford it – to maximize profit.’

This change in the core purpose was visible in a large number of instances. For example, when the then Bayer CEO Marijn Dekkers reportedly said: ‘Our cancer drug is for rich westerners, not poor Indians.’  However, his exact wordings were “we did not develop this product for the Indian market, let’s be honest. We developed this product for Western patients who can afford this product, quite honestly.” If so,the question that comes up: why then Bayer fought so hard and spent so much of money, efforts and time to keep selling this specific product in India – exclusively?

In any case, this statement from the highest echelon of one of the top global pharma players is a contentious one, especially against George Merck’s articulation, or even Peter Drucker’s for that matter, on the same. By the way, Dekkers made this commentat the Financial Times Global Pharmaceutical & Biotech Conference in December in December 2013.

A wind of change?

The hope for a wind of change flickered when in an interview, Andrew Witty,the erstwhile global CEO of GlaxoSmithKline (GSK), signaled a totally contrasting view of his company. Witty said: “GSK is committed to offering all its new drugs in India at affordable prices.”

Much prior to this, on March 14, 2013 he told a conference on healthcare in London that: “It’s not unrealistic to expect that new innovation ought to be priced at or below, in some cases, the prices that have pre-existed them.” He further expressed: “The pharmaceutical industry should be able to charge less for new drugs in future by passing on efficiencies in research and development to its customers.”

Witty era is also over now. He retired from GSK at the age of around 53 on March 31, 2017. Perhaps his refreshing patient-centric thoughts would also not find any takers within the industry. Nonetheless, in March 2018, the same issue resurfaced in an interesting article, followed by a few other related developments.

Call for socializing drug development?

The issue, which is not just limited to high prices for new patented drugs, is much broader. An interesting article titled, “Developing drugs wasn’t always about profit, and it shouldn’t be now”, was published in Quartz- a news website owned by Atlantic Media, brings to the fore the same key point, yet again. It makes some profound observations, such as socializing drug development. The word ‘socializing’ may not be quite acceptable to many, though. Nevertheless, it raises some critical issues worth pondering over, such as:

  • Faith in the power of money pervades our modern medical system. Pharmaceutical companies aren’t evil (usually). They just choose to make the most profitable drugs, not the drugs of greatest value to society.
  • For example, despite antimicrobial resistance being a global threat, pharma companies have largely abandoned new antibiotic development on the eminently sensible principle that they are money-losers. Promising narrow-spectrum antibiotics – agents that precisely target pathogens and spare “good” bacteria - languish in development limbo because there is no hope that they might churn as much profit as several other drugs.

It’s high time, I reckon, to adequately address the dire need for a reliable supply of the medicines that make a vibrant modern society possible. All stakeholders, including the pharma industry, globally, would require putting their heads together in charting out a clear and time bound pathway for its effective resolution, soon. Otherwise, sheer gravity and the complexity of the situation may prompt the policy makers to move towards ‘socializing drug development,’ much to the dismay of many of us.

Hospitals creating nonprofit generic drug company:

On January 18, 2018, The New York Times (NYT), published an article titled “Fed Up With Drug Companies, Hospitals Decide to Start Their Own,” highlighted a novel initiative to address the prevailing situation, in their own way, without depending on others.

It reported, for many years, several hospital administrations have been expressing frustration when essential drugs like heart medicines have become scarce, or when prices have skyrocketed because investors manipulated the market. Now, about 300 of the country’s largest hospital systems are taking an aggressive step to combat the problem. They plan to go into the drug business themselves, in a move that appears to be the first on this scale.

‘The idea is to directly challenge the host of industry players who have capitalized on certain markets, buying up monopolies of old, off-patent drugs and then sharply raising prices, stoking public outrage’, the article elaborates.

‘Price of medications has soared, so have pharma profits’:

‘Big Pharma is jacking up prices for one reason – because it can,’ says a CNN Article, published on April 04, 2018. The article further emphasizes: “As the price of medications has soared, so have pharmaceutical company profits. Total sales revenue for top brand-name drugs jumped by almost $8.5 billion over the last five years. The Government Accountability Office (GAO) reported that 67% of drug manufacturers boosted their annual profit margins between 2006 and 2015 – with profit margins up to 20% for some companies in certain years.”

It further writes, “Not only have pharmaceutical companies reaped outsized profits from these price hikes, so have their CEOs. According to a USA Today analysis, the median compensation package for biotech and pharmaceutical CEOs in the Standard & Poor’s 500 was 71% higher than the median compensation for S&P 500 executives in all industries in 2015.”

Conclusion:

This is happening the world over. But its degree varies. In those countries where there are drug price regulators, only a small percentage of the total pharma market by value comes under price regulation, the rest of the products enjoy virtually free pricing freedom.

Would this ground situation change on its own any time soon? There is no specific answer to this question, yet. Moreover, there doesn’t seem to be none around in the pharma industry today with the stature and articulated vision like George Merck. He started from the very basic. Drawing the ‘square one’, he clearly defined the core purpose of discovery, manufacturing and marketing of medicines. Today’s pharma industry, by and large, seems to be charting in other newly drawn squares. Maximizing profit is now considered a key objective of achieving the core purpose – and not an outcome of achieving the core purpose of pharma business.

However, there are some very early signs of several stakeholders’ sentiment changing in this regard. Are they moving back to the basic – square one?

From the chronicles of the past several years on this issue, pharma industry does not seem to be on the same page with those stakeholders, just yet. If they do, a humongous health worry of a vast majority of the global population could be effectively addressed, as many believe.

The reverberations of this sentiment, though rather faint, can be felt in many countries, including the United States, and not just in the developing world, such as India.

By: Tapan J. Ray

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

Key Drivers And Long-Term Impact of Pharma M&A in India

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Corporate M&A is increasingly considered an integral part of the organization’s growth strategy for value creation, by a large number of pharma companies, across the world. In tandem, it throws open many other doors of opportunities, such as reduction of business risks and massive corporate restructuring.

In the post globalization era, mostly the large to medium sized Indian players are imbibing this strategy to gain a competitive edge, in the highly crowded generic drug market, not just in India, but also in various other parts of the world. At the same time, it is equally true that there are many other pharma biggies who have moved into the top 10 of the domestic league table in India, following mainly the organic growth path, and are still staying that way.

For example, the league table ranking (MAT October 2017) of the Indian domestic pharma market, published by AIOCD Pharmasofttech AWACS Pvt. Ltd, reflects a similar scenario. It shows, not many local Indian drug players seem to be too aggressive in Merger and Acquisition (M&A) within the country. In fact, among companies featuring in the TOP 10, only around half seems to have not gone for any major domestic M&A. The remaining half pursued a predominantly organic route, for a quantum growth in the Indian market.

In this article, I shall try to fathom, both the critical drivers and the long-term impact of pharma M&A initiatives – both inbound and outbound, with their either origin or destination being in India.

Are the key drivers different?

India is overwhelmingly a branded generic market. So are its key players. Thus, most pharma M&As in India are related to generic drugs.

Thus, unlike research-based global pharma players, where one of the most critical drivers for M&A, is related to new drug innovation to maintain sustained growth of the organization, the drivers for the same in India is somewhat different. Neither are these exactly the same for exports and the domestic market, with occasional overlaps in a few cases, though.

Export markets:

To expand and grow the pharma business in the export markets is obviously the main overall objectives. To attain this, the acquiring companies generally take into consideration some common critical factors, among others. Each of which is carefully assessed while going through the valuation process and arriving at the final deal price for the company to be acquired. A few examples of which are as follows:

  • The span and quality of market access and the future scope for value addition
  • Opportunities for value creation with available generic products, active ANDAs and DMFs
  • A competitive portfolio, especially covering specialty products, novel drug delivery systems and even off-patent biologic drugs
  • Market competitors’ profile
  • Product sourcing alternatives and other available assets

Domestic market:

Similarly, in the domestic market too, there could be several critical drivers. The following, may be cited just as an illustration. There could well be some overlaps here, as well, with those of export markets:

  • Moving up the pharma value chain, e.g., from bulk drug producer to formulation producer with marketing, intending to climb further up
  • A new range and type of the generic product portfolio
  • Expansion of therapeutic and geographic reach
  • Expansion of consumers and customers base
  • Greater reach, depth, efficiency and productivity of the distribution channel
  • Acquiring critical manufacturing and other related tangible and intangible assets

A glimpse at the 2016-17 M&A trend in India:

An E&Y paper titled, “Transactions 2017” says, India continues to enjoy a prominent position in the global generic pharma space, due to many preferred advantages available within the country, such as a large number of USFDA approved sites coupled with low Capex and operating costs. As a result, the pharmaceuticals sector witnessed 51 pharma deals in the year 2016, with an aggregate disclosed deal value of USD4.6 billion.

However, according to Grant Thornton Advisory Pvt. Ltd, there have been around 27 M&A deals in pharma and healthcare sector by Q3 2017, valued at USD719 million. This appears to be way below 54 deals, valued at USD4.7 billion in calendar year 2016.

Cross-border activity dominated the sector:

Highlighting that cross-border activity dominated the sector, the E&Y paper said, “outbound and domestic transactions drove most of the deal activity, with 21 deals each. In terms of the disclosed deal value, outbound and inbound activity stood at USD2.1 billion each. Domestic deal-making was concentrated in smaller value bands with an aggregate deal value of USD342 million, of which USD272 million (4 deals) worth of deals were restructuring deals.”

Inbound and a domestic M&A occupied the center stage:

It is interesting to note that despite initial hiccups, inbound overseas interest in sterile injectable continued, along with a range of different generic formulations. The notable among which, as captured in the above paper, are as follows:

  • China-based Shanghai Fosun Pharmaceutical (Group) Company Limited announced the acquisition of an 86 percent stake in Gland Pharma Limited for up to USD1.26 billion.
  • US-based Baxter International Inc. entered into an agreement to acquire Claris Injectable Limited, a wholly owned subsidiary of Claris Lifesciences Limited, for USD625 million.
  • In November 2017, India’s Torrent Pharmaceuticals acquired more than 120 brands from Unichem Laboratories in India and Nepal, and its manufacturing plant at Sikkim for USD558 million.

Outbound M&A:

Facing continuous pricing and other pressures in the largest pharma market in the world – United States, Indian pharma players sharpened their focus on Europe and other under-penetrated markets, with a wider range of product portfolio. Following are a few examples of recent outbound M&As for the year, done predominantly to serve the above purpose, besides a couple of others with smaller deal values:

  • Intas Pharma, through its wholly owned subsidiary inked an agreement to acquire Actavis UK Limited and Actavis Ireland Limited from Teva Pharmaceutical for an enterprise value of USD767 million.
  • Dr. Reddy’s Laboratories entered into an agreement with Teva Pharmaceutical and an affiliate of Allergan plc to acquire a portfolio of eight ANDAs in the US for USD350 million.
  • Sun Pharma stepped into the Japanese prescription drug market by acquiring 14 brands from Novartis for USD293 million.
  • Lupin also strengthened its position in Japan by acquiring 21 products from Shionogi & Company Limited for USD150 million. In 2017, Lupin also acquired US-based Symbiomix Therapeutics – a privately held company focused on bringing innovative therapies to market for gynecologic infections. The acquisition value stands at USD 150 million.
  • Two other relatively large outbound acquisitions in 2017 were Piramal Enterprises’ acquisition of anti-spasticity and pain management drug portfolio of Mallinckrodt for USD171 million and Aurobindo Pharma’s Generis Farmaceutica USD142.5 million.

Long term business impact of M&A on the merged entity:

So far so good. Nevertheless, a key point to ponder, what is the long-term impact of M&A on the merged entities in India. It may impact several critical areas, such as financial ratios, reputation on drug quality standards or even its impact on employee morale. Sun Pharma’s acquisition of Ranbaxy in 2015 may be an example in this regard. Not too many credible studies are available for Indian pharma companies in this regard, it could be an interesting area for further research, though.

A research paper titled “Post-Merger Performance of Acquiring Firms: A Case Study on Indian Pharmaceutical Industry”, published by the International Journal of Research in Management & Business Studies (IJRMBS), in its July-September 2015 issue, captured an interesting point. It found, that M&As have a significant impact on the merged company performance as compared to the pre-merger period, but the impact is evident more in the immediate year after the merger.

The paper concluded, although the profitability had improved in the merged company as indicated in the financial ratios, like PBIT, Cash Profit margin and Net profit margin, but the improvement in the performance is observed only up to 1 year of the merger. As far as operating performance is concerned the short term positive impact can be observed, but again it lasts up to 1 year only. The overall study results, therefore, indicate the positive impact of merger on the operating and financial performance only in the short run (+1 year).

Is it a mixed bag?

Nevertheless, there are also other studies in this regard, which concluded the favorable impact of M&As on corporate performance. However, those studies adopted certain other parameters of measuring the financial and operational improvements in the merged companies. Some more research findings in this area – ferreted out from literature review and are available in the same issue of IJRMBS), revealing a mixed bag. Let me quote some these findings, starting from the earlier years, as follows:

Kruze, Park and Suzuki (2003): With a sample of 56 mergers of manufacturing companies from the period 1969 to 1997 concluded that the long term operating performance of control firms was positive but insignificant and high correlation existed between pre and post-merger performance.

Beena (2004): Analyzed the pre and post-merger performance of firms belonging to pharma manufacturing industries with samples of 115 acquiring firms between the period 1995 and 2000. For the purpose of analysis four sets of financial ratios were considered and it was tested using t –test. The study showed no improvement in the performance, as compared to the pre-merger period for the sample companies. 

Vanitha. S and Selvam. M (2007): With a sample of 58, to study the impact of merger on the performance in the Indian manufacturing sector from 2000 to 2002, the study concluded, overall financial performance is insignificant for 13 variables.

Pramod Mantravadi and Vidyadhar Reddy (2008): Investigated a sample of 118 cases of mergers in their study. They found, more impact of merger was noticed on the profitability of banking and finance industry, pharmaceutical, textile and electric equipment sector, whereas the significant decline was seen in chemical and Agri-Products sector.

More Indian studies are expected in this interesting area to understand the possible long-term impact of pharma M&A in India.

Conclusion:

Be that as it may, inbound and outbound consolidation and expansion of the Indian pharma industry through M&A will continue. However, this likely to happen at a varying pace, depending upon both the opportunities and constraints for business growth. This will include both in the export and the domestic markets.

Increasingly complex business environment, intense drug pricing pressure in the US, dwindling much differentiated product pipeline, impending patent expiry of blockbuster drugs, will drive the inbound M&A. Whereas, the domestic players would like to spread their wings in search of greater market access, across the world. This process is likely to include a different type of product-mix, including specialty and biologic products, creating some barrier to market entry for many other generic players.

Going forward, the critical drivers for pharma M&A in India, both inbound and outbound, are unlikely to undergo any radical change. Interestingly, available research studies regarding its long-term impact on the companies involved in this process are not yet conclusive. However, many researchers on the subject still believe, especially the financial impact of M&As on the merged entities in India last no more than short to medium term.

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.

Providing Unique Patient Experience – A New Brand Differentiator

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“Pharma industry, including the patients in India are so different from other countries. Thus, any strategic shift from conventional pharma brand marketing approach – going beyond doctors, won’t be necessary.”

The above mindset is interesting and may well hold good in a static business environment. But, will it remain so when ‘information enabled’ consumer behavior is fast-changing?

“Shall cross the bridge when we come to it” – is another common viewpoint of pharma marketers.

Many might have also noted that such outlooks are not of just a few industry greenhorns. A wide spectrum of, mostly industry-inbred marketers – including some die-hard trainers too, subscribe to it – very strongly.

Consequently, the age-old pharma marketing mold remains intact. Not much effort is seen around to reap a rich harvest out of the new challenge of change, proactively. The Juggernaut keeps moving, unhindered, despite several storm signals.

Against this backdrop, let me discuss some recent well-researched studies in the related field. This is basically to understand how some global pharma companies are taking note of the new expectations of patients and taking pragmatic and proactive measures to create a unique ‘patient experience’ with their drugs.

Simultaneously, I shall try to explore briefly how these drug companies are shaping themselves up to derive the first-mover advantage, honing a cutting edge in the market place. This is quite unlike what we generally experience in India.

As I look around:

When I look around with a modest data mining, I get increasingly convinced that the quality of mind of pharma marketers in India needs to undergo a significant change in the forthcoming years. This is because, slowly but surely, value creation to provide unique ‘patient experience’ in a disease treatment process, will become a critical differentiator in the pharma marketing ball game. Taking prime mover advantage, by shaping up the change proactively for excellence, and not by following the process reactively for survival, would separate the men from the boys in India, as well.

Patient experience – a key differentiator:

A recent report titled, “2017 Digital Trends in Healthcare and Pharma”, was published by Econsultancy in association with Adobe. This study is based on a sample of 497 respondents working in the healthcare and pharma sector who were among more than 14,000 digital marketing and eCommerce professionals from all sectors. The participants were from countries across EMEA, North America and Asia Pacific, including India.

Regarding the emerging scenario, the paper focuses mainly on the following areas:

  • Pharma companies will sharpen focus on the customer experience to differentiate themselves from their competitors.
  • ‘The internet of things (IoT)’ – the rapidly growing Internet based network of interconnected everyday use computing devices that are able to exchange data using embedded sensors, has opened new vistas of opportunity in the pharma business. Drug players consider it as the most exciting prospect for 2020.
  • Virtual Reality (VR) and Augmented Reality (AR) have started filling critical gaps in pharma and healthcare technologies and systems. Their uses now range from training doctors in operating techniques to gamifying patient treatment plans. Over 26 percent of respondents in the study see the potential in VR and AR as the most exciting prospect for 2020.

Commensurate digital transformation of pharma industry is, therefore, essential.

Prompts a shift from marketing drugs to marketing outcomes:

The above study also well underscores a major shift – from ‘marketing drugs and treatments’ – to ‘marketing outcome-based approaches and tools’, both for prevention and treatment of illnesses. This shift has already begun, though many Indian pharma marketers prefer clinging on to their belief – ‘Indian pharma market and the patients are different.’

If it still continues, there could possibly be a significant business impact in the longer-term future.

Global companies have sensed this change:

Realizing that providing a unique experience to patients during the treatment process will be a key differentiator, some global companies have already started acting. In this article I shall highlight only one recent example that was reported in March 01, 2018.

Reuters in an article on that day titled, “Big pharma, big data: why drugmakers want your health records,” reported this new trend. It wrote, pharma players are now racing to scoop up patient health records and strike deals with technology companies as big data analytics start to unlock a trove of information about how medicines perform in the real world. This is critical, I reckon, to provide a unique treatment experience to the patients.

A recent example:

Vindicating the point that with effective leverage of this powerful tool, drug manufacturers can offer unique value of their medicines to patients, on February 15, 2018, by a Media Release, Roche announced, it will ‘acquire Flatiron Health to accelerate industry-wide development and delivery of breakthrough medicines for patients with cancer.’ Roche acquired Flatiron Health for USD 1.9 billion.

New York based Flatiron Health – a privately held healthcare technology and services company is a market leader in oncology-specific electronic health record (EHR) software, besides the curation and development of real-world evidence for cancer research.

“There’s an opportunity for us to have a strategic advantage by bringing together diagnostics and pharma with the data management. This triangle is almost impossible for anybody else to copy,” said Roche’s Chief Executive Severin Schwan, as reported in a December interview. He also believes, “data is the next frontier for drugmakers.”

Conclusion:

Several global pharma companies have now recognized that providing unique patient experience will ultimately be one of the key differentiators in the pharma marketing ballgame.

Alongside, especially in many developed countries, the drug price regulators are focusing more on outcomes-based treatment. Health insurance companies too, have started looking for ‘value-based pricing,’ even for innovative patented medicines.

Accordingly, going beyond the product marketing, many drug companies plan to focus more on outcomes-based marketing. In tandem, they are trying to give shape to a new form of patient expectation in the disease prevention and treatment value chain, together with managing patient expectations.

Such initiatives necessitate increasing use advanced data analytics by the pharma marketers to track overall ‘patient experience’ – against various parameters of a drug’s effectiveness, safety and side-effects. This would also help immensely in the customized content development for ‘outcomes-based marketing’ with a win-win intent.

Providing unique ‘patient experience’ is emerging as a new normal and a critical brand differentiator in the global marketing arena. It will, therefore, be interesting to track how long the current belief – ‘Pharma industry and the patients in India are so different from other countries’, can hold its root on the ground, firmly. Or perhaps will continue till it becomes a necessity for the very survival of the business.

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.

Drug Pricing Pressure to Escalate Further?

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On February 09, 2018, NITI Aayog released its “Healthy States, Progressive India” Report. The study ranked the States based on ‘health index’. Kerala, Punjab and Tamil Nadu featured as top three in terms of overall performance in 2015-16. However, the interstate variation of ‘health indices’ was quite significant, with the highest being 76.55 (Kerala) and the lowest in Uttar Pradesh with 33.69, during the same period.

Importantly, the report also noted: “About one-third of the States have registered a decline in their performance in 2016 as compared to 2015, stressing the need to pursue domain-specific, targeted interventions.” It’s worth noting, the reported decline in performance was registered despite several promises of the Government in this space, during immediately preceding years.

Apparently, as a corrective measure to this effect, the world’s largest government-funded health care program – the ‘National Health Protection Scheme (HPS)’ of India was announced in the Union Budget Proposal, on February 01, 2018. HPS is expected to provide insurance cover of up to ₹500,000 to 100 million poor and vulnerable families, covering around 500 million population in the country.

As enshrined in the National Health Policy 2017 (NHP 2017), HPS too seeks to ensure improved access and affordability of quality secondary and tertiary care services with a significant reduction in Out of Pocket Expenditure (OOPE) on health care, for the common citizens in the country.

Such a massive public health care program as HPS, is obviously expected to use a transparent drug procurement and logistics framework. This, in turn, would necessitate tough price negotiations with the pharma manufacturers for the purchase of medicines, leading to significant reduction in drug prices. This is already happening in some States, like Tamil Nadu.

High OOPE on health:

According to the December 2016 report of the Union Ministry of Health and Family Welfare, of the total 64.2 percent OOPE in 2013-14, 53.46 percent was spent on medicines and 9.95 percent was spent on diagnostics, in India. 82.29 percent of the total OOP medicines expenditure and 67 percent of total OOP diagnostic expenditure was for outpatient treatment. Of the total OOPE, 15.96 percent was on traditional medicines/ AYUSH, of which equal proportion was spent on outpatient and inpatient care.

In an interview, published on December 18, 2017, the Chairman of the Insurance Regulatory and Development Authority of India (IRDAI), reportedly, also said, OOPE makes up about 62 percent of all health care costs in India, causing impoverishment of many patients. In a comparative yardstick, OOPE is about 20 percent in the U.S. and the U.K. and 20-25 percent in BRICS countries. Thus, there is a need to significantly bring it down in India, he said.

Curiously, the ‘Health in India’ report, which draws data from the 71st round of the National Sample Survey conducted from January to June 2014, presents a somewhat different picture. It reportedly says, of the total OOPE, 72 percent in rural and 68 percent in urban areas was towards buying medicines for non-hospitalized treatment. The Health in India report shows, in rural India, 25 percent patients relied on “borrowings” for hospitalization, and 68 percent on household income and other savings. In urban India, 18 percent patients had to borrow while admitted in hospital, and 75 percent relied on income or savings – the report further added.

Containing OOPE – a dire necessity:

Be that as it may, OOPE for health in India and, especially, on drugs, is indeed very high, by any measure. To contain this burden on the general population in the private market, the Government had introduced, since quite some time, a balancing mechanism through various Drug Price Control Orders (DPCO).

Similarly, to contain its own health care expenditure, as HPS comes into force, the Government is expected to choose a digitalized and transparent drug procurement process. This would, almost certainly, prompt tough price negotiations for the purchase of medicines, as well.

Thus, HPS may further add to the current discomfort of the pharma players in this area, as they mostly want free pricing of drugs that will only be regulated by market forces. Unfortunately, market forces do not work for drugs. I explained it in an article, published in this blog on April 27, 2015, titled “Does Free Market Economy Work For Branded Generic Drugs In India?”

Industry lobbying for free pricing of drugs and devices:

It is well known that pharma industry, supported by other businesses dependent on it, including a section of the media, is still against such a move by the Indian policy makers, for various reasons. The primary one being, such pressure on drug prices would stifle  innovation, impacting patient access to the best possible health care.

Pharma Multination Corporations (MNC) appear to be in the forefront of this ‘innovation’ bandwagon to score a brownie point in this area, as many say. This is an ongoing process for them. Even recently, in the report titled, ‘2017 Accomplishments’, the US-India Business Council’s (USIBC) made a strong assertion in this regard, quite expectedly, though.

The report articulated, as part of advocacy around price controls, USIBC had sent a letter to the National Pharmaceutical Pricing Authority (NPPA), detailing American industry concerns on setting up ceiling prices for drugs and medical devices. USIBC, reportedly has also sent a letter, expressing its concern on the “serious problems for US companies that sell these products in the Indian market.” Advocacy initiatives of this kind, reportedly included the then Foreign Secretary, Minister of Commerce and Industries of India, and the Prime Minister’s Principal Secretary, as well.

Pricing pressure getting more intense, even in the US:

Curiously, a similar and equally interesting scenario is rapidly developing alongside in the largest pharma free-market economy in the world – the United States. On January 30, 2018, during his State of the Union address, President Donald Trump said that he wants his administration “to make fixing the injustice of high drug prices one of our top priorities.”

Likewise, as reported by Bloomberg on February 09, 2018, President Trump’s Health and Human Services Secretary – Alex Azar reaffirmed that he plans to take up the President’s promises to do something about pharmaceutical prices to reduce patients’ out-of-pocket spending. He assured, “The president is firmly committed in this space.” Incidentally, Alex Azar is a former executive at drug maker Eli Lilly & Co.

HPS needs efficient public procurement and logistics mechanisms:

As the cost of drugs and devices contribute so much to the total OOPE on health, together with ensuring patients’ easy access to convenient to reach primary, secondary and tertiary health care facilities – access to drugs, devices and diagnostics for the target population of HPS must also increase, effectively. Thus, bulk procurement and distribution of these, free of cost, at the designated health centers, assumes paramount importance for its success. Consequently, the trust of the HPS beneficiaries will keep ascending.

The Public Health Foundation of India (PHFI) too, had aptly asserted, any inefficiency due to poor governance, lack of transparency and inequities in public health financing and delivery would greatly impede access to medicines and diagnostics for those who would need these most.

Admitting its importance, the NHP 2017 noted: “Quality of public procurement and logistics is a major challenge in ensuring access to free drugs and diagnostics through public facilities. An essential prerequisite that is needed to address the challenge of providing free drugs through the public sector, is a well-developed public procurement system.”

Thus, putting in place an effective framework and process for this purpose, at both the central and the state government levels, as the situation would warrant, requires to be a key priority focus area of the HPS implementation process. There doesn’t seem to be any other viable choice, either.

Any need to ‘reinvent the wheel’?

The answer is, of course, ‘no’. Perhaps, to attain similar goals, the Government had established the fully autonomous Central Medical Services Society (CMSS) as a Central Procurement Agency (CPA). This was intended to streamline drug procurement and distribution system of the Ministry of Health and Family Welfare of India. Accordingly, the Gazette Notification on the formation of CMSS said that it:

  • Will be responsible for procuring health sector goods in a transparent and cost-effective manner and distributing them to the States/UTs by setting up an IT enabled supply chain infrastructure including warehouses in 50 locations.
  • Will ensure uninterrupted supply of health-sector goods to the State Government, which will then maintain the flow to the government health facilities, such as district hospitals, primary health centers and community health centers.
  • All decisions on procurement will be taken by the CMSS without any reference to the Ministry of Health and Family Welfare.
  • The Ministry will be responsible only for policy decisions concerning procurement and for monitoring its performance.
  • The CMSS will also assist the State Governments to set up similar organizations in states to reform their procurement.

Currently, CMSS carries out procurement for following ‘Disease Control and Welfare Programs’ of the Union Ministry of Health & Family Welfare:

  • Revised National Tuberculosis Control Program (RNTCP)
  • National Vector Borne Disease Control Program (NVBDCP)
  • Family Welfare Program (FWP)
  • National Aids Control Organization (NACO)

The scope of services of CMSS includes tendering, bid Evaluation, procurement decision, concluding rate agreement, placing purchase orders, receiving in stores, sampling and testing, releasing payment to suppliers and keeping stocks of drugs available in warehouses for distribution to state program offices.

So far as State Governments are concerned, a World Bank article says, the Tamil Nadu Medical Services Corporation (TNMSC) had successfully demonstrated a cost-effective model. This IT enabled system is an integral part in the supply chain infrastructure to support the management decisions, and adequate attention to quality in drug procurement.

CMSS follows similar processes to procure and distribute supplies to States through web-connected warehouses in State capitals. An IT vendor takes up the IT work with a quality control framework in place. Its warehouses are being equipped with necessary storing and warehousing equipment, which will distribute to the States the items that are procured by the Ministry. Since the warehouses will be connected through the IT system, it will be possible for the Society to monitor the inventory in warehouses preventing stock outs and wastage.

Many State governments have also adopted a similar reform process. However, any duplication in the drug procurement and logistics systems needs to be avoided.

Conclusion:

Hence, I reckon, CMSS can be extended to the procurement process of both the new ‘Health Protection Scheme (HPS)’ and also for the ‘Health and Wellness Centers,’ without trying to ‘reinventing the wheel.’

As stated before, this seemingly transparent drug procurement process for public use, would naturally involve tough price negotiations, leading to significant reduction, not just in drug prices, but also containing the overall HPS cost to the Government, enabling the country to experience the roll out of Universal Health Coverage (UHC) for all. From this perspective, it appears, while translating into reality, this noble Government intent of providing wider access to health care, including free medicines, overall pressure on drug prices may escalate further.

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.

Union Budget 2018: The ‘WOW’ Moment for Indian Healthcare?

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The 2018-19 Union Budget proposals, presented before the Parliament on February 01, 2018. Especially for those who take keen interest in the Indian healthcare environment, was there a ‘WOW’ moment in the budget? Some say, this long-awaited moment came with the Union Finance Minister’s (FM) announcement of the ‘Ayushman Bharat Program (ABP)’ – the “world’s largest healthcare program,” taking a major step towards the Universal Health Coverage (UHC) for all, in India.

Two other health care related major announcements made by the FM in his 2018 Union Budget proposal are:

  • 24 new government medical colleges by upgrading existing district hospitals.  This is to bridge the gap between doctor-patient ratio in the country.
  • An allocation of ₹60 million for nutritional support to all tuberculosis patients – ₹ 500 per month per patient for 10 months, during the duration of their treatment.

The ‘Ayushman Bharat Program (ABP)’:

In this article, I shall not touch upon what expectations of pharma and healthcare industries were not met with the budget, as that will no more than an academic deliberation, at this stage. I shall rather restrict my discussion to ABP, for obvious reasons. This potential game changer, covers two commendable initiatives, as follows:

1. The New Health Protection Scheme (HPS) offering health insurance coverage of ₹500,000 per family per annum, is expected to take under its wings 100 million vulnerable families, or around 500 million beneficiaries. The total budgetary allocation for this mega proposal, for which the detail contours, apparently, are yet to be fleshed out and made public.

Some Senior Government officials, though, have put across its sketchy outline during post-budget Television coverage, on last Thursday. However, many industry watchers construe HPS as an expanded version, with a different name, of the current ‘Rashtriya Swasthya Bima Yojana (RSBY)’, which provides annual coverage of just ₹30,000 for poor families.

A fund of just ₹20 billion has been earmarked for this mega project in the Union Budget 2018-19.

2. Creation of 150,000 health and wellness centers to provide ‘comprehensive health care’ – for prevention and treatment of both communicable and non-communicable diseases (NCDS), including maternal/child health services, and free essential drugs alongside diagnostic services. This will “bring healthcare closer to home”, as the FM articulated.

A sum of ₹1.2 billion (₹1200 crore) had been allocated for this project in the 2018 budget proposal. The FM also requested contributions from the private sectors through CSR, besides philanthropic entities, in adopting these centers.

The points to ponder before saying ‘WOW!’

So far so good. However, as the saying goes, the devil is in the detail. From that angle, sans any meaningful details, does it look merely as an expression of the Government’ intent? Or it is for real! This serious doubt emanates from some key considerations. Three of which, as I reckon, are as follows:

I. Is it the beginning of implementation of the much-awaited National Health Policy 2017 (NHP), where the Government had committed and expenditure for UHC around 2.5 percent of the India’s GDP? This number currently hovers around 1.4 percent –  reportedly, less than even Nepal (2.3 percent) and Sri Lanka (2 percent). There is no mention of this in the Union Budget Proposal 2018, either, how much it will now go up to. By the way, the same report, as above, of January 2018 also indicated that health costs push 39 million Indians back into poverty, every year.

  • Attaining the NHP 2017 objectives, prompts a rise of around 40 percent in the public health expenditure of the Government. Whereas, the allocated reported expenditure for health in 2018-19 at ₹52.8 billion over the revised estimate of ₹50.1 billion in 2017/18. This works out to an increase of just around 5.4 percent.
  • The allocated expenditure of ₹20 billion for ABP in 2018-19, over the last year’s (2017-18) very similar health budget for ‘National Health Mission (NRM)’, reportedly, of ₹26.70 billion, looks rather pale. The financial arithmetic doesn’t appear to add up, defying simple logic. Is the allocation enough to support the ABP for 2018-19, even if the ABP funding is shared in the ratio of 60:40 between the Central and the State Governments?
  • Diving slightly deeper, on February 02, 2018, quoting a Government official Reuters reported, the cost of providing health insurance to 100 million vulnerable families or close to about half the country’s population would require an estimated ₹110 billion (USD$ 1.72 billion) in central and state funding each year.
  • The government estimates the cost of insuring each family would be about ₹1,100 rupees (US$17.15), the above report says. Curiously, on the face of it, this huge amount appears as an ‘off balance sheet’ expenditure, as of now.
  • Intriguingly, when the ABP is still not in place, there has been, reportedly, a 2.1 percent decline in the allocation towards the NRM in 2018-19. Currently, NHM provides financial support to States to strengthen the public health system, including upgradation of existing or construction of new infrastructure. In addition, there is a 7 percent cut in the allocation for the ‘Swachh Bharat Mission’ Budget from 2017-18’s revised estimates.

II. The second question is equally critical. Just as the erstwhile State Sales Tax (now a part of GST), healthcare is also a state subject. Thus, a similar process of intensive consultation with all State Governments, as happened before the implementation of GST, to take them on board, has to be replicated for a consensus. This will include a commitment for 60:40 funding, alongside the mechanisms for effective implementation of ABP – step by step. Has that happened? Have all the States agreed to contribute 40 percent of total funding requirements in their respective states for ABP?

  • If the answer is yes – excellent! If not, when will the ABP be rolled out? Different senior government officials have indicated different dates on Television. Some said on the Independence Day this year – August 15, 2018. Some other official said on October 02, 2018 – Gandhi Jayanti of this year. Yet another responsible official said the actual implementation may, actually, take even more time. This could mean only one thing, the ABP has been announced without any fixed timeframe for its implementation.

III. The third question lies in the effectiveness of insurance-driven health care system, such as in the United States. The key question often is raised on this system: Do the health insurance companies derive more benefit out of this system rather than the patients?

  • Concurring with the experts of many other countries, India’s own – Dr. (Professor) K. Srinath Reddy, globally acclaimed cardiologist and the President, Public Health Foundation of India, reportedly is also of the opinion that “Government-funded social insurance schemes do increase access to advanced care. But they have not been shown to provide financial protection as they cover only part of the hospitalization cost and none of the expense of prolonged outpatient care which forms a higher percentage of out-of-pocket spending.”
  • Insurance-driven healthcare has been found wanting to properly balancing health insurance costs with access, quality of care and outcomes in several countries. The experience of most of those people in India who can avail the benefits of insurance-driven – the Rashtriya Swasthya Bima Yojana (RSBY) or Employee State Insurance Schemes (ESIS), are not very pleasant, either.
  • On the other hand, despite some peripheral issues, many prefer, the government run UHC, such as in Britain. These generally offer a broader health coverage to all, and most health and care related services are available free to the citizens. The UHC is fully funded by taxes there, though a private health care system exists along with it. Thus, serious apprehensions related to the depth of health care access, reach in the rural heartland, and the quality of product and services to be generally provided by the insurance-driven new HPS, continue to haunt.

Conclusion:

Considering all these aspects, renamed HPS, as it was announced by the FM on February 01, 2018, and subsequent incongruent and very tentative clarifications expressed through the media by some Senior Government officials, raises even more questions than answers.

Sans any transparent and well-laid out financial road map, detail mechanism of its operation, level of involvement and consensus reached with all the States on funding and implementation, specific timeframe for its rollout, besides addressing almost a collapsing public health-infrastructure framework in most States, the Government appears rather unprepared with HCP rollout in 2018.

Does this announcement for HCP, therefore, not reflect a bit of haste, if not an intent to achieve any other non-related objective? Thus, this edict didn’t fetch a WOW moment to me, at least for this year, or…did it?

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.

For Improving Drug Quality in India – A Bizarre Intent

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On January 16, 2017, quoting a Government source, a media report revealed, “India’s drug regulator is looking to inspect US pharmaceutical facilities, making critical medicines so that only high-quality products are imported from them.”

This intent follows a similar decision of the apex regulatory body – the Central Drugs Standard Control Organization (CDSCO), against some Chinese manufacturers on drug quality concern. The latest proposal to this effect was sent to the health ministry the previous week – the above report adds.

In this article, I shall explore the fundamental basis of this specific initiative. If it has any, I shall try to fathom whether it’s yet another case of misplaced priority of the decision makers, if not a bizarre one.

The current perspective:

About a couple of years ago, an article published in the global financial daily – the Financial Times, on September 9, 2015 titled, ‘Indian drugs: not what the doctor ordered’, articulated that the Indian pharma industry ‘now face a serious credibility crisis, as they battle to allay western regulators’ concerns about their manufacturing practices — especially the reliability of data from trials of their medicines.’

The report also pointed out: ‘Overseas regulators have been scrutinizing and banning products from some of India’s biggest and most reputable groups — including Sun Pharmaceuticals, IPCA, and Wockhardt – many of which have ongoing relationships with large multinational drug companies.’

Has anything changed now?

Nothing perceptibly seems to have changed in this area since then, to set our ‘own house in order’. Not even after witnessing a barrage of drug quality related ‘import bans’ by the US-FDA that involves Indian manufacturers of all sizes and scale. Instead, CDSCO turns its focus on setting-right ‘others’ manufacturing houses with its reportedly meagre manpower resources. Curiously, these initiatives include even those countries, which are globally acclaimed for having stringent regulatory frameworks well in place, such as the United States (US) and the European Union (EU).

Where a justifiable reason exists:

On Chinese API import by different countries, the article titled “Imports To Fuel India’s Active Pharmaceutical Ingredients’ Requirements,” published by Bloomberg | Quint on November 15, 2017 brings out a nice comparison. It says: ‘Among the top emerging and developing economies, India is a major importer of bulk drugs from China at 54 percent, followed by Indonesia at 24 percent, Brazil at 12 percent and South Africa at 8 percent.’ It also writes, in comparison, most of the developed markets of the world import in the range of just 2-3 percent from China.’

Going by this fact, Indian drug regulator’s inspection of some of the Chinese API plants is, by all means, understandable – mainly for two reasons. One, India is largely dependent on Chinese bulk drugs for formulations manufacturing and consumption in the country, besides exports. And the second, some incidents of compromised Chinese drug ingredients have already been reported. For example, citing quality issues, the Drug Controller General of India (DCGI) has recently, reportedly banned import of such questionable drug constituents from six major Chinese pharma companies. This is not a solitary instance. Similar incidents involving Chinese drugs were  reported in the past, as well.

An irony:

When international media agencies flash headlines, such as “U.S. and EU regulators urge Indian drug companies to step up standards,” Indian drug regulators decide to inspect overseas manufacturing plants, as well. Such a decision becomes intriguing, especially when it includes those countries, where from imports are meager, besides their stringent drug quality standards being globally acclaimed.

This is an irony, as the recent local media headlines like, “India among countries where 10% of drugs are substandard: WHO” or “… 27 medicines sold by top firms ‘fail’ quality tests in seven states”, unfold the veracity of drug regulatory laxity within the country.

The basis of the recent proposal becomes more incomprehensible, when the DCGI himself reportedly admits, even today that: “Substandard medicines are a major issue in India and we are looking out for ways to tackle the problem. As quality regulator, we are developing proper mechanisms to stop manufacturing and sale of counterfeit drugs so that they don’t reach the patients.”

The reasons cited for overseas plant inspection:

According to media reports, the reasons cited in the CDSCO proposal for Indian Drug Inspectors’ (DI) inspecting other overseas manufacturers, including those in the US and Europe, are broadly as follows:

  • Most of over 28 manufacturing sites registered in India from the US, manufacture critical formulations or critical new therapies, which are not available in other countries, as they fall into high-risk categories.
  • Inspections will not only result in compliance to the Drugs and Cosmetics Act and Rules, but also give exposure to Indian drugs inspectors to new technology adopted in the manufacturing and state-of-the-art facilities.
  • The sites will be inspected if they have made substandard drugs, received quality complaints, or faced action by other regulatory authorities.
  • Companies shortlisted for the proposed inspections include those making biologic and anti-cancer medicines.

Let me hasten to add, there is nothing wrong with this intent as such, but the moot point is: what’s the core issue that we are talking about? While addressing this point, let’s first have a quick look at India’s import of pharmaceutical product around the last two decades.

India’s import of pharmaceutical products – 1996 – 2018:

According to ‘Trading Economics’ (last updated in January of 2018), India’s import of pharmaceutical products decreased to USD 254.57 Million in 2016 from USD 795.34 Million in 2015. Average drug imports are shown as USD 645.06 USD Million from 1996 until 2016, reaching an all-time high of USD 1747.65 Million in 2012, and a record low of USD 64.32 Million in 1996.

Nonetheless, the micro- picture of India’s bulk drugs or API import isn’t quite the same. On December 19, 2017 in a written reply to the Lok Sabha, the Minister of State, Chemicals and Fertilizers gave details of India’s bulk drug imports from top five countries, as follows:

Country Import value Rs Crore Import value $ Million (Approx.)
China 12,254.97 1915 (66%)
United States 820.18 128 (4.5%)
Italy 701.85 110 (3.8%)
Germany 485.11 76 (2.6%)
Singapore 422.01 66 (2.3%)
Total 18,372.54 2871

It’s worth noting, although the overall value of API import has declined, including from China, its volume share still remains too high in India. More importantly, Indian drug import from the United States and the European countries, are not only very small, there doesn’t seem to be enough instances of substandard drugs imported from these countries to India, either.

The core issue:

Taking a serious note of the reported incidences of widespread substandard drugs by various reports, including the WHO, the core issue becomes rather obvious. What else could possibly be the core issue other than taking effective remedial regulatory measures to contain the menace of substandard drugs circulating within the country?

An article titled, “Correcting India’s Chronic Shortage of Drug Inspectors to Ensure the Production and Distribution of Safe, High-Quality of Medicines,” published by the International Journal of Health Policy and Management (IJHPM) on April 27, 2017, made an important observation in this regard.

It reiterated: Good drug regulation requires an effective system for monitoring and inspection of manufacturing and sales units. In India, despite widespread agreement on this principle, ongoing shortages of drug inspectors have been identified as a major hindrance to this effort by the national committees, since 1975. Rapid growth of India’s pharmaceutical industry and its large export market makes the problem more acute.

Thus, the major remedial measure that CDSCO needs to take on priority to effectively address this core issue, is the chronic shortage of competent drug inspectors in the country.

An assessment of the current situation:

On the ground, the above situation continues to prevail almost in every state of the country, with a varying degree, though. However, at this point, I shall quote just three such instances – only to illustrate the gravity of the situation.

Example 1 – Delhi:

The article titled, “Delhi’s pharmacy woes: Only 21 inspectors for city’s 25,000 chemists,” published by ‘India Today’ on November 25, 2017, well-captured the latest scenario in this regard, of India’s national capital – New Delhi.

It wrote, there’s no guarantee that the medicine you are buying from a pharmacy is safe. The drug regulatory body does not have enough manpower to conduct regular inspections of the city’s mushrooming chemist shops and wholesale units.

Against the sanctioned posts of 31 drug inspectors, the department has only 21 DI for keeping an eye on Delhi’s 25,000 medical stores, and blood banks. Quoting Government officials the report reiterated, while the number of DI has declined – or at best remained constant – over the past 40 years, the number of pharmacies has increased from 5,000 to 25,000.

Whereas, going by the Centre’s recommendation, Dr. Mashelkar Committee report and the Task Force Committee’s observation, there should be one drug inspector for every 50 manufacturing units. Considering the magnitude of the problem, the Drugs Technical Advisory Board (DTAB), in a recent meeting, reportedly suggested, there should be one official for every 200 sales outlets, and one official for every 50 manufacturing units.

Example 2 – Kerala:

Another report of July 08, 2017, with a similar headline – “Remedial action needed in medicine market”, focused on one more important state – Kerala. It wrote that the Kerala has just 47 drug inspectors to monitor the entire State drug market that has over 20,000 drug stores, excluding those located in the hospitals. “In Kerala – the consumer of about 15 to 20 percent of drugs manufactured in the country, there are no quality checks taking place owing to the manpower shortage” – the article cautioned.

Example 3 – Maharashtra:

Yet another national media report of March 16, 2017 carried a headline ‘FDA faces staff shortage again.’ It discussed the same issue for a major State where the financial capital of India is located – Maharashtra. Giving details, the article pointed out that out of 160 posts of drug inspectors across Maharashtra, only 90 have been filled so far and of the 250 food safety officer posts, just 180 have been filled. More than 50,000 pharmacies, 15,000 wholesalers and over 8,000 manufacturing units, are supposed to be properly governed as per the regulatory rules and godliness, to ensure high quality drug safety standards, by this meager DI staff strength of the State.

Conclusion:

Against the above backdrop, it appears absolutely minimum to expect that CDSCO would make the public know, how does it plan to make the drugs manufactured for domestic consumption of high quality standards, as a safeguard to patients’ health and safety.

This calls for strict quality audits by the DIs of the individual states, at pre-determined periodicity, just as what US-FDA does to ensure exactly the same, for patients in their own country. With dwindling resources of DI, CDSCO seems to be continually failing in achieving this critical goal. There doesn’t seem to be any specific and transparent accountability criteria in place, for the CDSCO to comply with.

In this situation, the plan to audit the overseas manufacturing plants located in the US and EU for drug quality assessment, carving out a slice from the existing DI manpower strength, appears rather foolhardy. Moreover, the safety-risk for those imported medicines is apparently low, not just due to meager quantity of drug import, but also for stringent regulatory environment prevailing in those countries.

In view of all this, the media report on CDSCO’s plan to inspect US and EU pharma facilities, making ‘critical’ drugs to ensure high product-quality, is interesting. If it holds any water, the initiative may be construed by many not merely a case of misplaced priority, but a bizarre one, to say the least.

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.

Blockchain: Pharma Keeps An Eye On The Ball

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On April 24, 2017, The Wall Street Journal (WSJ) came out with an interesting headline, “Dubai Aims to Be a City Built on Blockchain.” Some may have taken note of it seriously. However, a vast majority of its readers possibly equated the article with something, which is far from reality – like a distant dream.

However, looking at the rapid transformational phase of digital technology, nothing apparently is a dream – not even ‘a distant one.’ The following recent example, in a similar but not exactly the same context, would vindicate this point.

On January 09, 2018, Reuters reported with a headline, “JPMorgan’s Dimon regrets calling bitcoin a fraud.” Interestingly, at a conference held in September 2017, the same Dimon – the Chief Executive of JPMorgan, had commented: “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.”

I cited the example of ‘Bitcoin’ while deliberating on ‘Blockchain’, primarily because ‘Bitcoin’ – an unregulated virtual or cryptocurrency was built on ‘Blockchain’ technology. This technology reportedly facilitates absolutely transparent, smooth, safe and corruption-free transaction of ‘Bitcoin’, without any third-party intervention at any stage.

Currently, moving beyond Bitcoin, many industries – including pharma, have started finding various uses of Blockchain in their respective businesses. Domain experts envisage, this technology has the potential to offer game changing values – revolutionizing various business processes.

In this article, I shall focus on how the healthcare industry, in general, and more specifically some global pharma players are contemplating to leverage the path breaking ‘Blockchain’ technology to add unprecedented value in the business. The technology being rather a complex one, I shall put it across in a way that an ordinary man like me can easily absorb. Which is why, I start with the first basic question that comes to the fore: ‘What exactly is ‘Blockchain’?

‘Blockchain’:

‘Blockchain’ is a technology that was reportedly conceptualized by an anonymous individual or a group known as Satoshi Nakamoto, in 2008. It was implemented in 2009, as a core component of ‘Bitcoin’ transactions – in an altogether different form of Internet. The technology provides in its network access to transparent digital information that no user can corrupt or probably even hack, leave aside taking copies. The December 13, 2017 article, featured in the Computerworld on this ‘Most disruptive tech in decades’, describes Blockchain as:

  • “Blockchain is a public electronic ledger – similar to a relational database – that can be openly shared among disparate users. It creates an unchangeable record of their transactions, each one time-stamped and linked to the previous one. Each digital record or transaction in the thread is called a block (hence the name), and it allows either an open or controlled set of users to participate in the electronic ledger. Each block is linked to a specific participant.”
  • “Blockchain can only be updated by consensus between participants in the system, and when new data is entered, it can never be erased. The Blockchain contains a true and verifiable record of each and every transaction ever made in the system.”
  • “As a peer-to-peer network, combined with a distributed time-stamping server, Blockchain databases can be managed autonomously to exchange information between disparate parties. There’s no need for an administrator. In effect, the Blockchain users are the administrators.”

Blockchain has, therefore, been meticulously designed to reveal any interference with the contents, ensuring a very high level of data security and access for all its users. Thus, many domain experts justifiably believe, what ‘open-source’ software did almost two and half decades ago, ‘Blockchain’ technology is possibly on a similar threshold of changing much of the ball game in Information Technology (IT), globally.

Big corporate houses of several industries, such as Fintech, Healthcare and Shipping envisage that ‘Blockchain’ technology has a great potential, as they start making limited use of it. It is still in its infancy for scalable use in most industries, probably other than ‘Bitcoin’ transactions.

Use of ‘Blockchain’ in pharma and healthcare:

Let me now explore the potential of ‘Blockchain’ in healthcare and pharma. A paper titled, “Healthcare rallies for Blockchains: Keeping patients at the center” by IBM Institute for Business Value, provides some important insight on its application in healthcare sector. This study is based on a survey of 200 healthcare executives in 16 countries, conducted by The Economist Intelligence Unit. The key highlights are as follows:

  • 16 percent of pharma and healthcare respondents expected to have a commercial Blockchain solution at scale in 2017, as compared to 15 percent of the Banks and 14 percent of Financial enterprises. Thus, it appears, the adoption of Blockchain by healthcare entities are taking place at a faster pace than the other two.
  • 6 in 10 anticipate Blockchains will help them access new markets, and new and trusted information they can keep secure.
  • 7 in 10 of them expect the greatest Blockchain benefits to be in clinical trial records, regulatory compliance and medical/ health records.

Accordingly, the authors posed a few questions: How valuable would it be to have the full history of an individual’s health? What if every vital sign that has been recorded, of all the medicines taken, information associated with every doctor’s visit, illness, operation and more, could be efficiently and accurately captured – and securely stored?

If and when all this is put to scalable use, the designated users will get access to the historic and real-time patient data of various types, of high credibility. In turn, it is expected to significantly reduce many other costs, including the cost towards data reconciliation. Consequently, the quality and coordination of care would rise manifold, with lesser risk, if at all. I shall give below just a couple of examples to drive home the point:

I. Adds credibility and value to Clinical Trials:

The issue of not reporting around half of all clinical trial data, conducted by pharma players while obtaining marketing approval for innovative products, has become a topic of raging debates, across the world. The reason for the same is apparently the intent for the deliberate creation of an information-gap, by cherry picking more favorable trial data. This could eventually lead to compromising patient safety, seriously.

Allegations continue for not just mostly favorable trial data being presented to drug regulators and policymakers to obtain marketing and other approvals, but also for product promotion to doctors. This prompts many believing, “if the clinical trials are supported by Blockchain solution, all results, protocols, and other related information would be time-stamped and immutable, resulting in less data snooping and errors.” Consequently, it would help enhance the dwindling public trust on pharma, especially in this area.

II. Adds unprecedented security and transparency in SCM:

Another example of its effective use is in making a tamper-evident pharma Supply Chain Management (SCM), with unprecedented built-in security features to prevent drug counterfeiting and circulation of substandard drugs. Moreover, ‘Blockchain’ would ensure supply chain tracking even at the individual Stock Keeping Unit (SKU) level by establishing proof of ownership for specific sources of any product. This is especially important in the backdrop of the WHO report, highlighting that 30 percent of such drugs are sold primarily in developing countries.

Global pharma keeping an eye on the ball:

An article titled, ‘Big Pharma Seeks DLT Solution for Drug Costs’, published on January 09, 2018 by the CoinDesk – a digital media and information services company, discussed on this fascinating subject.

It reported, at least, three global pharma heavyweights – Pfizer, Amgen and Sanofi, are pondering, whether ‘Blockchain could be used to actually save lives?’ To achieve this goal with combined efforts, they are now exploring a Blockchain framework to streamline the process of developing and testing new drugs. These early initiators believe, as areas such as this, are of industry-wide importance, there is a need to create a growing momentum for collaboration on foundational issues. And, Blockchain framework that can address the current issues in drug development and clinical trials, will fetch a win-win outcome, both for the innovators and patients, besides other stakeholders.

To reduce the time and cost of bringing new drugs from research labs to patients, improved data management and movement is critical. Blockchain technology could hasten this process, by automating communication between pharma companies, researchers and patients. At the same time, it will ensure a very high level of data integrity, which is so important for health and safety interest of patients.

This area has assumed greater relevance in the recent years, when pharma innovators are facing different challenges to bring new, more personalized drugs to market – faster and at affordable prices, the paper highlights.

Areas of initial use by Indian pharma:

In my article “SCM: Embracing Technology For Patients’ Safety”, published in this Blog on December 18, 2017, I discussed a similar point, not in context of ‘Blockchain’, though. I wrote that by a notification dated January 05, 2016, the Directorate General of Foreign Trade (DGFT) has made encoding and printing of unique numbers and bar codes as per GSI Global Standard mandatory. This would cover tertiary, secondary and primary packaging for all pharmaceuticals manufactured in India and exported out of the country to facilitate tracking and tracing.

Although, the ‘Track and Trace’ system in India for drugs is currently applicable only to pharma exports, will ultimately cover drugs in the domestic market, as well. This is evident from a draft proposal of the Government to the stakeholders in June 2015, in this regard.

Blockchain-based public electronic ledgers that can be openly shared among disparate users, creating an unchangeable record of their transactions, with each one time-stamped and linked to the previous one, would be of immense importance for all concerned towards the reliability of medicines in India.

Similarly, as Indian players venture into more complex clinical trials, such as with biosimilars, Blockchain could catapult the narrative on reliability of Indian clinical data to a much higher level of trust.

Blockchain has come to stay:

As I said in the beginning, ‘Blockchain’ technology has started coming to the fore of many discussions and debates, mainly for its critical role in transparent transaction and distribution process of the cryptocurrency – Bitcoin.

December 16, 2017 issue of the Gulf News reported that UAE’s central bank is working on a joint cryptocurrency, based on Blockchain, with its counterpart in Saudi Arabia. Just prior to that, in August 31, 2017 issue of the Financial Times also reported: “Six of the world’s biggest banks have joined a project to create a new form of digital cash that they hope to launch next year for clearing and settling financial transactions over Blockchain, the technology underpinning bitcoin.”

And just this month, we got to know about the combined efforts of Pfizer, Amgen and Sanofi, to use a Blockchain framework for streamlining the process of developing and testing new drugs.

Besides many other industries, even several Governments are envisaging to unleash the transformative potential of Blockchain in various Governance processes. It may include the confidential data procured and used by Governments to confirm the identity or identification of individuals for different purpose, or even to ensure that the country’s election process is transparent and beyond corruption.

An expression of interest on the use of Blockchain by some State Governments in India, gets reflected in what the Chief Minister (CM) of Maharashtra said while inaugurating the Maharashtra Technology Summit (MTECH), jointly organized by FICCI and Govt. of Maharashtra in Mumbai on January 17, 2018.

The CM clearly indicated, as Blockchain can transform the e-governance, the State Governments must start interacting with technology providers to make Public delivery of goods and services transparent. This will reduce the trust deficit between businesses, and citizens with government departments. He admitted, in the space of technology, ‘Blockchain is one level up and it’s not just Internet of Thing, but it is Internet of trust, Internet of values, that can change the entire space of governance’.

Conclusion:

Blockchain may be just a technological component, but, nonetheless, a game changing one. Thus, the good news is, several pharma players are also taking great interest to step into this never ever experienced – and a new kind of digital paradigm.

It is heartening to note that a number of global pharma head honchos, such as of Novartis, Takeda, and several others, are creating a new global position of chief digital officer. GSK, reportedly, is the latest one to initiate similar step.

Indian pharma players, I reckon, can also reap a rich harvest, both tangible and intangible, by putting ‘Blockchain’ technology in place. It may start with building a transparent, incorruptible ‘Track and Trace’ system for medicines, in addition to achieving high degree of international reliability in its clinical trials, especially on biologic drugs.

The benefits built into the Blockchain technology for pharma, apparently, are far too many than perceived constraints to leverage it effectively. Encouragingly, global pharma seems to be keeping an eye on the ball – but what about Indian pharma?

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.

With ‘Cutting Corners’ Going North, Pharma Reputation Dives South

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Just a few months ago, on October 24, 2017, ‘New Jersey Law Journal’ came out with an eye-catching headline – “Sanofi Set to Pay $ 61M Settlement in Antitrust Suit Over Vaccine Bundling.” The suit says: “Sanofi-Pasteur allegedly suppressed competition for its pediatric meningococcal vaccine, Menactra, by charging physicians and hospitals up to 35 percent more for its product, unless they agreed to buy Sanofi’s pediatric vaccines exclusively. Sanofi-Pasteur is the vaccines division of French drug manufacturer Sanofi.”

Nevertheless, a statement from the company said: “Despite Sanofi’s strong defenses, Sanofi recognizes that continued litigation is likely to be extraordinarily expensive and time-consuming and thus has agreed to enter into this Settlement Agreement to avoid the further expense, inconvenience, risk and distraction of burdensome and protracted litigation. Sanofi is finally putting to rest this case by obtaining complete dismissal of the action and a release by settlement class members of all released claims.”

When such incidences – of various scales and dimensions, continue being reported by both the global and local media, over a long period of time, one can fathom the potential of their cumulative impact on public and other stakeholders. Severely dented image and reputation of pharma, in general, before the eyes of so many, across the world, is a testimony to this phenomenon. Considering these as ‘cutting corners’ syndromes, I shall discuss in this article, how fast is pharma reputation diving South, with incidences of ‘cutting corners’ keep going North.

‘Cutting Corners’:

The Oxford dictionary defines ‘cutting corners’ as: ‘Doing something perfunctorily so as to save time or money’. Putting it in the context, I reckon, legally or ethically questionable actions with a deliberate intent of making quick profits, if not profiteering, can be termed as ‘cutting corners’ or business malpractices.

‘Cutting Corners’ going North:

This is no way a recent phenomenon. Gradually increasing number of new reports on pharma’s alleged malpractices are not uncommon, either. On the contrary, these keep coming rather too frequently – baffling many industry watchers and its well-wishers, for different reasons.

The details of 20 largest settlements in this area reached between the United States Department of Justice and various pharmaceutical companies from 1991 to 2012, as available from Wikipedia, provide a glimpse to its magnitude and dimension. The settlement amount reportedly includes both the civil (False Claims Act) settlement and criminal fine. Glaxo’s US$ 3 billion settlement is apparently one of the largest civil, False Claims Act settlement on the record, and Pfizer’s US$ 2.3 billion settlement includes a record-breaking US$ 1.3 billion criminal fine. A federal court also recognized all off-label promotion as a violation of the False Claims Act, leading to a US$ 430 million settlement during that period, as this report highlights.

In one of my articles, titled ‘Big Pharma Receives Another Body Blow: Would Indian Slumber End Now?’, published in this blog on May 19, 2014, I quoted a few more examples from 2013 and 2014, as well. A few of these are as follows:

  • In March 2014, the antitrust regulator of Italy reportedly fined two Swiss drug majors, Novartis and Roche 182.5 million euros (U$ 251 million) for allegedly blocking distribution of Roche’s Avastin cancer drug in favor of a more expensive drug Lucentis that the two companies market jointly for an eye disorder.
  • Just before this, in the same month of March 2014, it was reported that a German court had fined 28 million euro (US$ 39 million) to the French pharma major Sanofi and convicted two of its former employees on bribery charges.
  • In May 2013, Sanofi was reportedly fined US$ 52.8 Million by the French competition regulator for trying to limit sales of generic versions of the company’s Plavix. 

Pharma reputation dives South:

That pharma reputation is diving south, is well captured in the ‘Business and Industry Sector Ratings’ by Gallup, dated August 2-7, 2017. According to this public rating, the top 5 and bottom 5 industries came up as follows:

Top 5:

Industry Total Positive % Neutral % Total Negative % *Net positive or negative %
Computer

75

15

8

+67
Restaurant

72

21

7

+65
Farming and agriculture

70

17

12

+58
Grocery

60

23

17

+43
Internet

59

21

18

+41

The bottom 5, including the federal government:

Industry Total Positive % Neutral % Total Negative % *Net positive or negative %
Airline

41

20

35

+6
Oil and gas

38

21

40

-2
Healthcare

38

18

45

-7
Pharmaceutical

33

16

50

-17
Federal Govt.

29

19

52

-23

*Net Positive is % Positive minus % negative (in percentage points)

Image rejuvenation campaign not yielding results:

Arguably, the richest and the most powerful pharma industry lobby group in the largest pharmaceutical market of the world, is incurring a mind-boggling sum of expenditure to mend the severely dented collective reputation and image of its members.

Vindicating this point, a January 18, 2017 media report articulated that a major pharma industry lobby group – PhRMA, is gearing up for a new image building campaign by spending in the “tens of millions” each year to drum up support for the reputationally challenged pharma industry. Such initiatives by PhRMA, as I understand, are not totally new, but rather ongoing. Be that as it may, as the Gallup survey confirms, pharma reputation keeps diving South, unabated.

Mending pharma’s reputation surfaces as one of the top concerns of the pharma industry. It, therefore, demands commensurate priority in working out a meaningful strategic plan, and its effective implementation on the ground, collectively. More so, when the POTUS – Donald Trump, has also emerged as a vocal pharma critic. He has already proclaimed that drug companies “are getting away with murder,” – as the above media report highlights.

Where is this campaign going off the mark?

On this subject, an article of September 5, 2017, published by Ars Technica – a technology news publication aptly epitomized, what is happening today with these campaigns, against what should have happened, instead. The column carries a headline ‘Big Pharma hopes research spending – not reasonable pricing – will improve image’.

The columnist wrote: “To scrub down their filthy reputations, drug makers could try lowering prices, a public mea culpa, or pledging to make pricing and marketing more responsible and transparent. But they seem to have taken a different strategy.” On this score, a relevant example, out of several others, was of Biogen introducing a drug in 2016, for a rare spine disorder and priced it at an eye-popping US$ 750,000 for the first years’ worth of treatment.

In pharma image revamp campaign, the focus on R&D spending or drug innovation, including blatant self-serving demands, such as strictest product patent and data exclusivity provisions, is rather overwhelming. It is understandable that all this fits in well with various pharma lobby group’s mission and mandate, but is unlikely to deliver what consumers would consider good behavior on the part of drug companies.

Is Indian pharma out of this loop?

The answer to this question is an emphatic – ‘No’. Alleged ‘dubious product quality’ related ongoing saga, is known today by all concerned. This had often culminated into US-FDA import bans of many drugs, manufactured by several Indian drug manufacturers – starting from the very top. Nonetheless, that’s not ‘the all’ or ‘end all’ in the ballgame of ‘cutting corners’ in India, as I explained above.

On September 26, 2017, a media report flashed: ‘The Income Tax (IT) investigation wing claims to have unearthed a nexus between a leading pharmaceutical company and doctors, and the evidence showing payments running into Crores to the latter for prescribing the company’s medicines.’

Close on the heels of ‘compromised drug quality standard’, such malpractices come as a double whammy for patients. But, the saga continues. In my article, titled ‘Healthcare in India And Hierarchy of Needs’, published in this blog on November 06, 2017, I mentioned about the October 31, 2017 public notice of the State Attorney General (AG) of Connecticut. The notice cited several instances of alleged drug price fixing in the United States. Interestingly, this lawsuit includes name of several large Indian companies, such as Dr. Reddy’s Laboratories, Emcure, Glenmark, Sun Pharma, and Zydus Pharma. The expanded complaint also names two individual defendants, one among them is the promoter, the chief executive officer and managing director of a large Indian pharma manufacturer.

Further, as I wrote before, the Maharashtra government’s recent announcement on enactment of a new law called the “Cut practices in Medical Services Act, 2017”, casts a darker shadow, not just on the doctors’ reputation, but also over the health care industry, in general, including pharma.

Today’s patients are more informed:

In today’s world, wider access to the Internet for a large number of global population has a profound implication in every sphere of life. News, discussions, opinions, comments and a plethora of other information on various industries, including pharma, are available from different credible websites, just as anything else.

Additionally, the social media, collectively, have made exchanges and interpretations of such information within various groups and communities, as fast as these could be. Just as many other different things, wrongdoings or malpractices, if any, of various industries, also get quickly captured and shared by the Netizen with ease and élan. These include incidences of ‘cutting corners’ by constituents of the pharma industry too.

Conclusion:

The Public Relationship campaigns of pharma lobby groups, with a hope to bridging the industry’s ‘trust deficit’, have been reported from the United States and other countries. However, any such campaign for the pharma industry in India hasn’t arrested my attention, as yet.

It’s beyond any reasonable doubt or debate that the pharma industry, in general, has saved and is still instrumental in saving more lives, in every nook and corner of the world. Ironically, the same industry, for its own deeds prompted mostly by the self-serving needs, has been suffering a massive collateral damage.

The industry’s long unblemished image and reputation have been severely tarnished,   requiring rejuvenation with an inclusive approach. This may call for a mindset, at least, nearer to the same of George W. Merck – the legendary President and Chairman Merck & Co., Inc. He articulated a vision – “Medicine Is For The Patient, Not For The Profits”, and practiced it religiously. In today’s context, this may sound rather utopian in letters, but surely not in its spirit… be that as it may….

Pharma lobby groups hope to reverse the current trend by focusing only on R&D spending, drug innovation and strictest patent protection and data exclusivity ecosystem is apparently a non-starter. That ongoing multi-million-dollar pharma image revamp campaigns haven’t yet captured any tangible positive outcomes – not even in the United States, is possibly a testimony to this fact.

The status quo is expected to continue. More so, when ‘reasonable pricing’ of drugs is one of the top most demands of patients, patient groups and even many governments – and that’s exactly where the buck stops in pharma business.

In my view, pharma reputation restoration process isn’t merely a one-sided communication issue, as it appears today. A strategic blue print of this critical industry need, deserves to be drawn on a much broader canvass with a patient-serving mindset, instead of just a self-serving one. Otherwise, with incidences of ‘cutting corners’ going North, pharma reputation will keep diving South… till it finds its very bottom.

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.