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Envisaging a paradigm shift in strategic marketing of pharmaceutical in India

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PricewaterhouseCoopers (PwC) recommended, about three years ago, in mid-2007 that for sustainable business performance the research-based global pharmaceutical companies should move a part of their significant expenditure from marketing to research. They also recommended that the drug prices should be related to incremental efficacy that the products would provide.

The report titled ‘Pharma 2020: The Vision’ commented that the business model of the global pharmaceutical companies is “economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets.”

Undergoing a paradigm shift:

As we witness, the global pharmaceutical industry is undergoing a paradigm shift. More drugs are going off patent than what the innovator companies can replace with the new products. The research is undoubtedly failing to deliver.

At the same time, the business growth in the developed markets of the world has been declining over a period of time. The growth in the top two pharmaceutical markets of the world viz, USA and Japan had gone negative. IMS predicted in their recent ‘CEO Conclave’ in Mumbai that low growth trends in these markets will continue even beyond 2013.

In the same conclave IMS predicted that within ‘Pharmerging’ markets, China is expected to record highest CAGR growth of over 25%, followed by India and Turkey around 12-14% each. With such a scorching pace of growth China is expected to become third largest pharmaceutical market in the world in 2013 with India holding its 2008 ranking of no. 13.

Global pharmaceutical ‘Marketing Expenditure’ is increasing:

The publication titled “The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States” co-authored by Marc-André Gagnon and Joel Lexchin estimated from the data collected from the industry and doctors during 2004 that the U.S. pharmaceutical industry spent 24.4% of the sales turnover on promotion, versus 13.4% for research and development. This was as a percentage of US domestic sales of US$ 235.4 billion in that year.

The researchers used 2004 as the comparison year, as this appears to be the latest year in which information was available from both IMS Health and CAM Group, the two international market research companies that provide the marketing and sales data together with those of consulting services. IMS obtains its data from pharmaceutical companies, while CAM obtains its data from the doctors. This study appeared in the January 3, 2008 issue of PLoS Medicine, an online journal published by the Public Library of Science.

The above findings though highlight that the US pharmaceutical industry is overall marketing-driven, also argues strongly in favor of a shift away from this direction.

Another publication named, the ‘Triangle Business Journal’ reported the findings from another study of ‘Cutting Edge Information’, a pharmaceutical research company based in Durham, North Carolina, USA. This survey reported, “the companies marketing the six blockbuster (turnover US $ 1 billion in the first year) drugs it studied spent an average of $238.5 million to market each product.”

The “Pharmabiz” of April 2, 2007 also reported, “The study of top 15 global pharma giants revealed that the marketing expenditure as percentage of total sales of these companies worked out to 30.5 as against the R&D expenses as a percentage of total sales of 15.1.”

Such high marketing expenditure is not sustainable in the long run – alternatives being explored:

As reported by IMS Health, in 2009 though the global pharmaceutical market recorded a turnover of US $ 837 billion with a growth rate of around 6.4% compared to 11.8% in 2001, the moot question remains, whether such type of marketing expenditure is sustainable during the era when the “patent cliff’ is pushing the global pharmaceutical industry to the brink.

This situation gets further aggravated when IMS Health reports, as the world’s 10 top selling prescription drugs go off patent, it will be difficult to replace them in terms of single-product value turnover. These brands are as follows:

- Lipitor, US$13.5 billion (Pfizer)

- Plavix, US$7.3 billion (sanofi-aventis)

- Nexium, US$7.2 billion (AstraZeneca)

- Seretide/Advair, US$7.1 billion (GlaxoSmithKline)

- Enbrel, US$5.3 billion (Amgen and Pfizer)

- Zyprexa, US$5 billion (Eli Lilly)

- Risperdal, US$4.9 billion (Johnson & Johnson)

- Seroquel, US$4.6 billion (AstraZeneca)

- Singulair, US$4.5 billion (Merck)

- Aranesp, US$4.4 billion (Amgen)

The business focus is now on the emerging markets like, India:

Thus the business focus of the global pharmaceutical majors are now on the key emerging markets, like India not only with their patented products, but more importantly by having a robust fast growing branded generic portfolio to more than offset the loss of revenue and profit from the blockbusters, as they go off patent.

Publicly expressed expectations of some Governments of the emerging markets:

Governments of some of these emerging markets expect local benefits out of the evolving growth opportunities of the global pharmaceutical companies from their respective countries. Various reports indicate that there could be following two key issues in these markets:

• Local manufacturing of products
• Pricing

Local manufacturing:

Out of these emerging markets, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia had commented, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “They can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It has been reported that India and China may ultimately come out with similar requirements for their respective countries.

U.S. Chamber of Commerce has registered a strong protest in this matter with the President of Indonesia and has urged a reversal of this decision. However, the country appears to have taken a firm stand in this matter. This is evident when in response to the report that some global pharmaceutical companies have threatened withdrawal of their business from Indonesia because of this reason, the Health Minister retorted, “If they want to go away, go ahead.”

Pricing:

Anticipating such moves in the emerging markets, some global companies like, GlaxoSmithKline (GSK) and MSD have already started implemeting differential pricing strategies for their patented products in the emerging markets like India.

Some visionary global CEOs like, Andrew witty of GSK strongly believes that such differential pricing will enable more patients in the emerging markets to afford his company’s products. Consequently the increased sales volume will not only offset the sales value loss but will also create a substantial goodwill for the company in these markets, over a period of time.

Quoting Andrew Witty the ‘Wall Street Journal’ (WSJ) reported that in Philippines, GSK had reduced the price of 28 products by 30% to 50%. In other emerging markets of Asia including India, Malaysia and Thailand the company has reduced the prices of Cervarix, its cervical cancer vaccine, substantially.

India has also witnessed such differential pricing strategy by other innovator companies for their patented products in the country.

Prescribing four new key strategic changes in the new paradigm:

In the new paradigm, almost in tandem, four new key strategic changes, in my view, will gradually unfold in the Indian pharmaceutical market. These are as follows:

1. An integrated approach towards disease prevention will emerge as equally important as treating the diseases.

2. A shift from just product marketing to marketing of a bundle of value added comprehensive disease management processes along with the product will be the order of the day.

3. Over the counter (OTC) medicines, especially those originated from natural products to treat common and less serious illness, will curve out a sizable share of the market, as appropriate regulations are expected to be put in place adequately supported by AYUSH.

4. Most importantly, the country will move towards an integrated and robust healthcare financing system, as already articulated just in the last month by Mr. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission of India, which will usher in the following changes:

- Doctors will no longer be the sole decision makers for prescribing drugs to the patients and the way they will treat the common diseases. Ministry of Health/ Healthcare providers/ Medical insurance companies will start playing a key role in these areas by providing to the doctors well thought out treatment guidelines.

- For a significant proportion of the products that the pharmaceutical companies will sell, tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable.

- Health Technology Assessment (HTA) or outcome based pricing will gradually play an important role in pricing a healthcare product.

- This could well mean lesser role of the Medical Representatives in the demand generation process for the pharmaceutical products, which could possibly have a positive impact on the cost of marketing and sales promotion, incurred by the respective pharmaceutical companies.

Conclusion:

With all these changes within the Indian pharmaceutical industry, it may not be easy for the local players to adapt to the new paradigm sooner and compete with the global players on equal footing, even in the branded generic space. In my view, those Indian Pharmaceutical companies, who are already global players in their own right and relatively well versed with the nuances of this new ball game, will have a significant competitive edge over other domestic players. The global-local companies, in my view, will offer a tough competition to the local-global players, especially, in the branded generic space and at the same time will be able to bring down their marketing expenses significantly.

So far as other domestic players are concerned, the fast changing environment could throw a new challenge to many of them, accelerating the consolidation process within the Indian pharmaceutical industry.

We all should be well aware, just as today’s pharmaceutical business dynamics in India are not replica of what these were in the yesteryears, tomorrow’s pharmaceutical business dynamics of the country will not be a replica of what these are today.

By Tapan Ray

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

Exploring a new ‘Business Model’ to improve access to healthcare in rural India with the industry participation

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Rural India – the home of around 72% of 1.12 billion population of India is undergoing a metamorphosis, as it were. Disposable income of this population is slowly but steadily rising, as evidenced by rapid market penetration of the ‘Fast Moving Consume Goods (FMCG)’ industry in general and companies like Hindustan Unilever Limited (HUL) and Dabur in particular.

Size of the Healthcare Sector in India:

It has been reported that the current size of the healthcare industry in India ia around US $ 23 billion or around 5.2% of the GDP. Though the sector is showing an overall healthy growth of around 13%, public expenditure towards healthcare is just around 0.9% of the GDP of the country. As per WHO (2005) per capita government expenditure on health in India was just around US $7, against US $31 of China, US $24 of Sri Lanka, US $11 of Kenya and US $12 of Indonesia.

Currently the number of Government Hospitals/Healthcare centers in India are grossly inadequate and are as follows:

  • Medical Colleges: 242
  • Community Health centers: 3346
  • District Hospitals: 4400
  • Other Public Hospitals: 1200
  • Primary Health Centers: 23236
  • Subcenters: 146026
  • Number of Hospitals in rural areas: 53400
  • Population to rely on Public Hospitals: 43%

Even with the above network of public healthcare centers in India, overall effectiveness of public healthcare delivery system is very poor in the country. Increasing penetration of Information Technology could perhaps partially address this problem.

Growth drivers of rural India?

I reckon, mainly the following reasons attribute to the growth of the rural economy:

- Gradual increase in procurement prices of food grains by the government and waiver of agricultural loans to the tune of US$13.9 billion

- Growing non-farm income: Currently more than 50% of rural income is through non-farm sources, fuelled by various non-farm activities like food-processing, manufacturing, trading, in addition to the income flow from the rural migrants.

– Increased spending by the Government, which is expected to be around US$ 20 billion by March 2010, in the rural areas through various projects and schemes, like National Rural Employment Guarantee Scheme (NREGS), Bharat Nirman Program etc. coupled with easier access to requisite loans and credits, have improved the spending power of rural households significantly.

Though the government is making heavy budgetary allocations in rural India to improve the basic infrastructural facilities, healthcare and education, the implementation of most of these schemes still remains far from satisfactory, as of now.

A gaping hole in the rural healthcare space:
In the healthcare space of rural India there is still a gaping hole in various efforts of both the government and the private players to create a robust primary healthcare infrastructure for the common man. Thus poor access to healthcare services, coupled with lack of ability to pay for such services and medicines round the year, are the key challenges that the country will need to overcome. Lack of disease awareness and poor affordability towards healthcare services, still account for 60% of rural ailments not getting treated at all.

Key shortcomings of the current rural healthcare infrastructure:

Despite the numbers quoted above, following shortcomings continue to exist in the healthcare infrastructure of the country:
- Number of Primary Health Centers (PHC) are far less than the budgetary estimate/allocation
- Inadequate treatment facilities even where the PHCs exist
- Shortage of doctors, nurses and paramedics
- Very high rate of absenteeism

Pharmaceutical companies in India should now explore fortune at the ‘Bottom of the Pyramid’ to reap a rich harvest, creating a win-win situation:

If the pharmaceutical companies operating within the country, partner with the government and other key stakeholders, as a part of their corporate business strategy, to make a fortune from the ‘bottom of the pyramid’, this critical issue can be effectively resolved, sooner. Novartis India has already ventured into this area and has tasted reasonable success with their ‘Arogya Parivar’ program.

However, in my view additional sets of the following value delivery objectives need to be considered to make this the rural healthcare mission with PPP initiatives successful:

- Affordable medicines of high quality standard
- Increase in health awareness by collaborating with the NGOs and rural institutions for various common diseases.
- Continuing Medical Education (CME) for the rural doctors and para-medics
- Arranging microfinance for the healthcare professionals to create small micro- level healthcare infrastructure and also for the patients to undergo treatment
- Help reducing the transaction cost of medicines and healthcare services through fiscal measures by collaborating with the government
- The product portfolio to be tailor made to address the common healthcare needs of rural India

Private healthcare facilities are preferred to public healthcare facilities even in the rural India:

Irrespective of rich or poor, around 80% of the population in India prefer private domiciliary treatment facilities and 50% of the same prefer private hospital treatment services. However, let me hasten to add that even within the private healthcare space in rural India, a lot needs to be done. Many so called ‘doctors’, who are practicing in rural India, have no formal medical qualifications. Moreover, even such doctors are not available in villages with a population of around 300 to 500 households.

The key success factors of the rural marketing ‘Business Model’:

Urban pharmaceutical marketing model, I reckon, should not be replicated for ‘rural pharmaceutical marketing’, as the success factors required for each of them, is quite different. In rural marketing the stakeholders’ needs and wants are quite different. If these are not properly identified and thereafter adequately addressed, mostly through collaborative initiatives, the rural pharmaceutical marketing ‘Business Model’ may not fly at all.

Partnership with Microfinance Institutions will be a key requirement:

Interested pharmaceutical companies will need to collaborate with the rural microfinance institutions for such business initiatives. This will ensure that appropriate loans can be extended to doctors and retailers, wherever needed, to help them create requisite local healthcare infrastructure to make such projects viable and successful. At the same time, such institutions will also require to help the needy rural population with requisite loans to help meeting their cost of medical treatment.

Conclusion:

From a ‘back of the envelope calculation’ it appears that such projects can definitely be made profitable with a modest gross margin of around 40% – 50% and operating profit of around 6% to 8% . The high volume of turnover from over 650 million population of India, will make these ‘rural pharmaceutical marketing projects’ viable. Simultaneously, such corporate business initiatives will help alleviating pain and suffering from diseases of a vast majority of the rural population of India.

By Tapan Ray

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

Patients’ Safety, regulatory approval of Biosimilar Drugs in India and WHO Biosimilar guidelines

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Biopharmaceutical drugs are broadly defined as:

”Those medicines produced using a living system or genetically modified organism. These drugs are different from traditional chemical medicines in many ways. Size of the molecule is one of the most obvious distinctions: the molecules of a biopharmaceutical medicine are much larger, have far more complex spatial structures and are much more diverse (“heterogeneous”) than the chemical molecules which make up classical drugs.”

The Biosimilar drugs:

Biosimilar drugs are follow-on versions of original biopharmaceutical medicines. Biosimilar medicines are intended to have the same mechanism of action for the same diseases as the original biopharmaceutical drugs.

The term “bio generic” will be misleading for off patent biopharmaceutical products, as no two biopharmaceutical products could possibly be exactly identical. This is mainly because of the following reason:

“Whereas generics of chemistry based medicines are identical in the molecular structure and therefore copies of the original product, based on a strict definition of “sameness”, a corresponding definition cannot be established for biosimilar medicines because of their nature and the complexity of their manufacturing process. Here post-translational modifications are dependent of the host cell and the process.”

Thus the common terminologies used to describe such products when the original products go off-patent are follow-on biologics and biosimilars.

Manufacturing Conditions of biosimilars ultimately define the final product:

Unlike chemical drugs, the manufacturing conditions and the process followed to produce biopharmaceutical drugs largely define the final product and its quality. Any alteration to the manufacturing process may result in a completely different product. Additionally proteins are relatively unstable. Thus additional measures in their storage, formulation and delivery are very critical.

Key concerns with the existing regulatory approval process for Biosimilar drugs:

• Small changes in the manufacturing process of biosimilar drugs could significantly affect the safety and efficacy of the molecule.

• Due to the very nature of a biologic it is virtually impossible for two different manufacturers to manufacture two identical biopharmaceutical drugs. Identical host expression systems, processes and equivalent technologies need to be demonstrated in extensive comparability trials. Thus, as stated above, a ‘bio generic’ cannot exist.

• As against the situation applicable for generics of chemical molecules which can be replicated, biosimilar drugs cannot be replicated. At the most such biopharmaceuticals can be at the most “similar” but not “identical” to the original reference products. To ensure desired efficacy and safety of biosimilar products, these products should only be approved after charting out a formal and well validated regulatory pathway for the biosimilar drugs in India.

• Currently biosimilar drugs are given marketing approval by the regulator without such guidelines for large molecule biological and following just the bioequivalence model as specified in the Schedule Y of the Drugs and Cosmetics Act (D&CA) of India for small molecule chemical entities only, as the current Drugs and cosmetics Acts of India, very unfortunately, do not differentiate between large and small molecular drugs. This could, in turn, endanger patients’ safety with serious medical consequences.

Although, Central Drugs Standard Control Organization (CDSCO) and the Drugs Controller General of India (DCGI) are responsible for approvals of the new drug applications, health being a state subject, respective state regulatory authorities are responsible for granting manufacturing license to the pharmaceutical manufacturers.

Pharmaceutical manufacturers setting up facilities in the states, where regulatory oversight and incidences of weaker enforcement are common, will be able to market their products, including biosimilars, across the country. It is alleged that there are hardly any regulatory control over the mistakes or offences committed by the State Drug authorities who permit manufacture of drugs even unapproved by the DCGI. The existing issue of mushrooming of various irrational Fixed Dose Combinations (FDC) products in India will vindicate this point.

The Government’s response to this public health concern:

Express Pharma in its June 30, 2009 edition reported Dr M K Bhan, Secretary, Government of India, DBT, saying, “The first question is do we have written guidelines available to people? Currently, we have a large committee of about 30 people in the Review Committee on Genetic Manipulation (RCGM) which frequently discusses the current FDA and EMEA guidelines and makes sure that it is updated as per the guidelines in case by case approvals.”

He acknowledged, to make sure that the product is identical or original is harder for biological than for chemical entities and said, “So the next question is, what is the degree of difficulty you create to be sure that some of the products in the in vitro laboratories and the strength of the biomolecule, are to be characterized in details, and the other side is how expensive should the chemical evaluation be? At this moment, RCGM is seeing the issues and is in touch with both the FDA and the EMEA, and they are taking case by case decisions while trying to standardize the minimum information that is required to show how companies have characterized their products.”

“If we ask a big established company on this issue they will tell us to be strict, whereas a smaller company will suggest otherwise. What we are trying to do is being very scientific and come to a conclusion,” reported Express Pharma quoting Dr. Bhan.

The current practice:

Much water has flown down the bridge since the above interview was published. Nothing much has changed on ground regarding this critical issue, thus far. The industry sources allege that even today regulatory approval of biosimilar drugs (large molecules) are granted based on Phase III clinical trials, as specified in the schedule Y of the Drugs and Cosmetics Acts for the small molecules (chemicals) and that too conducted mostly on just 40 to 45 patients. At times the number of patients studied is even lesser. Immunogenicity study, which is so important for biosimilar drugs is, more often than not, overlooked. This could seriously compromise patients’ safety with such category of drugs.

Conclusion:

It is, indeed, quite surprising that in our country there is still no separate transparent and published guidelines for regulatory approval of Biosimilar drugs even when the World Health Organization (WHO) has come out with the same and India had actively participated in that exercise.
The question, therefore, comes to my mind whether the Biosimilar drugs manufactured in India would conform to international quality and safety standards, like in the U.K or what has been recently announced in the USA? If not, who will address the safety concerns of the patients administering these life saving medicines?

Such a concern gets vindicated by widely reported serious quality problems, detected by the drugs regulatory authorities, at some large and well known Biosimilar drug’s manufacturing units in India, in not too distant past and also from the condition of some vaccine manufacturing units in our country. The recent example of WHO cancelling the pre-qualification of ‘Shan 5’ (Shanta Biotech) vaccines for quality related problems, perhaps may help opening the eyes of our regulators, on the related patients’ safety issues arising out of regulatory laxity.

This issue assumes even greater importance considering the very recent development of the Department of Biotechnology (DBT) unfolding an interesting scheme to encourage development of biosimialr dugs in India by offering financial support to the domestic pharmaceutical and biopharmaceutical industry.

The proposed new regulatory pathway for the marketing approval of Biosimilar drugs in India will immensely help paving the way for the Biopharmaceuticals drugs manufacturers in India to adequately prepare themselves to grab a significant share of the fast emerging Biosimilar drugs markets, particularly, in Europe and the USA, in the years to come.

The Ministry of Health and the Department of Biotechnology of the Government of India should, therefore, urgently and jointly consider amending the Drugs & Cosmetics Acts of India accordingly and establish robust regulatory guidelines for marketing approval of biosimilar drugs in the country, acknowledging the widespread concern for patients’ safety.

By Tapan Ray

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

 

85% of the patented new drugs have therapeutic equivalents…they do not increase the cost of treatment for the common man: Points…Counterpoints

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Affordability of patented drugs has become a major controversial and at the same time a very sensitive issue in the healthcare space of India, just as in many other parts of the world. The government, the NGOs and other stakeholders, on the one hand, seem to be quite concerned about it. Innovator companies, on the other hand, also have quite robust arguments in their favor.

Meanwhile, the daily newspaper ‘DNA’ published a report on June 15, 2010 with a headline, “NPPA may cap cancer drug prices via Para 10’.

Let us now try to go through the points and counterpoints of this raging debate.

The basic reasons of concern:

The key points for this concern, I reckon, is based on the following two beliefs:

1. All our citizens should have access to all new drugs
2. All these new drugs are essential to treat most of the related disease conditions

Points in favor of free pricing for patented new drugs:

- Price is a function of the value that a patented new drug will offer to the patients. The price of new drugs will, in addition, include components of the cost incurred by the innovators towards research and development, to offer these products to the patients. This is absolutely essential to ensure continuous investment towards R&D by the innovator companies to meet the unmet needs of the patients.

- It has been reported that currently only 2.3% of the Indian Pharmaceutical Market (IPM) will represent drugs, which have no therapeutic equivalent. This means over 97% of the IPM constitutes of medicines, which have one or more therapeutic equivalents.

- So far as the patented products are concerned, over 85% of all those will have therapeutic alternatives. Empirical evidence suggests that just around 15% of the patented molecules have significant therapeutic advantages over existing drugs and cannot be replaced.

- Beta-lactam, Cephalosporin and Quinolone group of antibiotics are still relevant today and will remain for many more years. So are the likes of Beta Blockers, Calcium antagonists, Ace inhibitors, Proton Pump inhibitors and Statins.

- Therefore, all patients with any common disease profile will have adequate and a good number of cheaper treatment options with the generic drugs. As all new drugs are not essential to treat all related disease conditions, generic and patented medicines should co-exist to cater to the healthcare needs of patients of all income groups. Those who can afford to pay extra for the incremental value of such patented drugs should also have an option.

The Counter points:

- The opponents of the above argument raise the counter question, “if 85% of the patented drugs will have appropriate therapeutic equivalents, why then the pharmaceutical companies spend such a huge amount of money and other resources towards R&D to invent molecules, which do not add significant and substantial value to the existing ones to treat patients? Rationalization of such avoidable R&D expenditures will help reducing the price of even path-breaking patented molecules for the treatment of many disease conditions of the ailing patients”

- In this context ‘Australian Prescriber (2004; 27:136-7)’ commented:

“The patent system, which assumes that investment in the development of new drugs, is so important that the principles of the free market should be abrogated to reward pharmaceutical companies with a legally enforced period of protection from competition”.

- NGOs with a differing view point ask, “Many patented products are still not available in India, does the medical profession in the country find themselves seriously handicapped for not having access to these drugs?’

- This group puts forth the counter argument, “patent protection is based on the fundamental belief that for continuing investment to invent newer drugs, innovations must be adequately rewarded through appropriate protection of the patents. Thus patent protection should only be given to those innovations for which no therapeutic equivalents are available.”

Conclusion:

A die-hard protagonist for fostering innovation commented, though the exclusivity for a patented drug given to an innovator would last for 20 years, the real commercial benefits will be available for just around 10 years, that too after spending a fortune towards R&D. Whereas, post patent expiry, the commercial benefits to the generic manufacturers (virtually spending nothing towards R&D) for the same molecule will last in perpetuity…for the patients’ sake!

By Tapan Ray

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

Access to affordable healthcare to 65% of Indian population still remains a key issue even after six decades of independence of the country.

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Despite so much of stringent government control, debate and activism on the affordability of modern medicines in India, on the one hand, and the success of the government to make medicines available in the country at a price, which is cheaper than even Pakistan, Bangladesh and Sri Lanka, on the other, the fact still remains, about 65% of Indian population does not have access to affordable modern medicines, as compared to just 15% in China and 22% in Africa.The moot question therefore arises, despite all these stringent price regulation measures by the government and prolonged public debates over nearly four decades to ensure better ‘affordability of medicines’, why then ‘access to modern medicine’ remained so abysmal to a vast majority of the population of India, even after sixty years of independence of the country?This vindicates the widely held belief that in India no single minister or ministry can be held accountable by the civil society for such a dismal performance in the access to healthcare in the country. Is it then a ‘system flaw’? May well be so.

Poor healthcare infrastructure:

As per the Government’s own estimate, India falls far short of its minimum requirements towards basic public healthcare infrastructure. The records indicate, as follows:

1. A shortage of 4803 Primary Health Centres (PHC)

2. A shortage of 2653 Community Health Centres (CHC)

3. No large Public Hospitals in rural areas where over 70% of the populations live

4. Density of doctors in India is just 0.6 per 1000 population against 1.4 and 0.8 per 1000 population in China and Pakistan respectively, as reported by WHO.

The Government spending in India towards healthcare is just 1.1% of GDP, against 2% of China and 1.6% of Sri Lanka, as reported by the WHO.

Some good sporadic public healthcare initiatives to improve access:

The government allocation around US$2.3 billion for the National Rural Health Mission (NRHM), is a good initiative to bring about uniformity in quality of preventive and curative healthcare in rural areas across the country.
While hoping for the success of NRHM, inadequacy of the current rural healthcare infrastructure in the country with about 80 percent of doctors, 75 percent dispensaries and 60 percent of hospitals located only in the urban India may encourage the skeptics.

PPP to improve access to medicines:

At this stage of progress of India, ‘Public Private Partnership (PPP)’ initiatives in the following four critical areas could prove to be very apt to effectively resolve this issue

1. PPP to improve affordability:

It appears that in earlier days, the policy makers envisaged that stringent drug price control mechanism alone will work as a ‘magic wand’ to improve affordability of medicines and consequently their access to a vast majority of Indian population.

When through stricter price control measures the access to medicines did not improve in any significant measure, the industry associations reportedly had jointly suggested to the government for a policy shift towards public-private-partnership (PPP) model way back in December 2006. The comprehensive submission made to the government also included a proposal of extending ‘concessional price for government procurement’ under certain criteria.

In this submission to the government, the industry did not suggest total price de-regulation for the pharmaceutical industry of India. Instead, it had requested for extension of the price monitoring system of the ‘National Pharmaceutical Pricing Authority (NPPA)’, which is currently working very effectively for over 80 percent of the total pharmaceutical industry in India. Balance, less than 20 percent of the industry, is currently under cost-based price control.

However, the argument of the NPPA against this suggestion of the pharmaceutical industry is that the market entry price of any formulation under the ‘price monitoring’ mechanism is not decided by the government. Hence without putting in place any proper price control/negotiation system to arrive at the market entry price of the price decontrolled formulations, the existing ‘price monitoring’ mechanism may not be as effective, as in future more and more high price patented non-schedule formulations are expected to be introduced in the market.

However, the government seems to have drafted a different drug policy, which has now been referred to a new Group of Ministers for approval. It is worth noting that to make the PPP proposal of the industry effective, the Ministry of Health, both at the centre and also at the state levels, will require to quickly initiate significant ‘capacity building’ exercises in the primary and also in the secondary healthcare infrastructural facilities. FICCI is reported to have suggested to the Government for an investment of around US$ 80 billion to create over 2 million hospital beds for similar capacity building exercises.

Frugal budgetary allocation towards healthcare could well indicate that the government is gradually shifting its role from public healthcare provider to healthcare facilitator for the private sectors to help building the required capacity. In such a scenario, it is imperative for the government to realize that the lack of even basic primary healthcare infrastructure leave aside other financial incentives, could impede effective penetration of private sectors into semi-urban and rural areas. PPP model should be worked out to address such issues, as well.

2. PPP to leverage the strength of Information Technology (IT) to considerably neutralize the healthcare delivery system weaknesses:

Excellence in ‘Information Technology’ (IT) is a well recognized strength that India currently possesses. This strengths needs to be leveraged through PPP to improve the process weaknesses. Harnessing IT strengths, in the areas of drug procurement and delivery processes, especially in remote places, could hone the healthcare delivery mechanism, immensely.

3. PPP in ‘Telemedicine’:

‘‘Telemedicine” is another IT enabled technology that can be widely used across the nation to address rural healthcare issues like, distant learning, disease prevention, diagnosis and treatment of ailments.
Required medicines for treatment could be made available to the patients through ‘Jan Aushadhi’ initiative of the Department of Pharmaceuticals (DoP), by properly utilising the Government controlled public distribution outlets like, ration shops and post offices, which are located even in far flung and remote villages of India.

4. PPP in healthcare financing for all:

Unlike many other countries, over 72 percent of Indian population pay out of pocket to meet their healthcare expenses.

While out of a population of 1.3 billion in China, 250 million are covered by insurance; another 250 million are partially covered and the balance 800 million is not covered by any insurance, in India total number of population who have some healthcare financing coverage will be around 200 million and the penetration of health insurance is just around 3.5% of the population. India is fast losing grounds to China mainly due to their better response to healthcare needs of the country.

As the government has announced ‘Rashtriya Swasthaya Bima Yojna (RSBY)’ for the BPL families, an integrated and robust healthcare financing model for all, is expected to address the affordability issue more effectively.

According to a survey done by National Sample Survey Organisation (NSSO), 40% of the people hospitalised in India borrow money or sell assets to cover their medical expenses. A large number of population cannot afford to required treatment, at all.

Conclusion:

An integrated approach by creating effective healthcare infrastructure across the country, leveraging IT throughout the healthcare space and telemedicine, appropriately structured robust ‘Health Insurance’ schemes for all strata of society, supported by evenly distributed ‘Jan Aushadhi’ outlets, deserve consideration of the government to improve access to affordable healthcare to a vast majority of population of the country, significantly.

Well researched PPP models in all these areas, involving the stakeholders, need to be effectively implemented, sooner, to address this pressing issue.

By Tapan Ray

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

A global pharmaceutical iconoclast, who sees “Fortune” beyond the creamy top layers of the society … even at the bottom of the Pyramid

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In March 2009 GlaxoSmithKline (GSK) unraveled a path breaking vision, within the global pharmaceutical industry, with the creation of a ‘voluntary patent pool’to spark development of new treatments for neglected diseases of the poorest countries of the world.

The head honcho of GSK Andrew Witty articulated, as reported by Reuters, ‘he feels that this is the right way to help research, especially of tropical diseases like malaria, filariasis, cholera etc. to meet the unmet needs of the poorer population of the world’.

Cares for the poor:
Simultaneously, Witty also announced that GSK will sell its patented medicines in the 50 poorest countries of the world at 25% of their cost in the developed nations and invest 20% of profits made in these poorest countries to help creating and developing local healthcare infrastructure and treatment facilities for the indigenous population.

It appeared to me that this young global pharma CEO is charting the yet uncharted frontiers where there are no footsteps to follow. Witty attained this iconic status when he aired his views without slightest hesitation by admitting openly, “Society expects us to do more in addressing these issues. To be frank, I agree. We have the capacity to do more and we can do more”.

Challenged the global pharmaceutical industry:
The young CEO, to utter surprise of many, further added, “he was challenging the industry to go further to address global health problems by being more flexible on patent protection and pricing in the neediest countries”.

That was March 2009…Came March 2010…

Repeated the firm resolve:
During his visit to India in March 2010, Witty reiterated the same resolve with unequivocal clarity. When a Journalist from “The Economics Times” asked him, ‘There are concerns among some of your global peers about the patent and regulatory environment in this country. Are you concerned with the existing regulatory environment in India?’, Witty replied with his usual conviction and élan as follows:

“I am relatively relaxed with the Indian regulatory environment. The government has made it clear about the direction to have an intellectual property (IP) mechanism and to be TRIPS compliant. Some people are unrealistic and want everything to change overnight. But we should be absolutely realistic about pricing to keep it affordable for India. If someone has the IP right, it does not mean that it should make it inaccessible for lower income people. Over the next 10-15 years India will become increasingly IP defined market.”

Is it a mere ‘lip service?’:
If you ask me, does this leader belong to a different genre? I shall reply with an emphatic ‘yes’. Andrew Witty seems to be indeed ‘walking the talk’ and is understandably quite capable of thinking much beyond of pleasing ‘The Wall Street’ and the likes of it, just with quarter to quarter business performance and ‘guidance’. He thinks about the patients both rich and poor. There are no reasons to doubt this patient-centric noble intent, Nor does it appear to me as a mere ‘lip service’.

One can interpret a ‘one-off statement’ made by any global pharma CEO in a way that one would like to. However, repetition of the same statement time and again in different counties possibly reflects nothing but firm resolves of a young visionary, determined to translate the same into reality with unprecedented courage.

Conclusion:
This iconic CEO, I reckon, is doing no charity or philanthropy with his path breaking vision, as those are not certainly the purpose of any business. Neither should one do charity or philanthropy with shareholders’ money and without their clear consent. Andrew Witty, in my view, perhaps is in the same page as with the management Guru C.K. Prahalad, who first postulated, now an oft repeated hypothesis, ‘The fortune at the bottom of the pyramid’.
Witty, as I have been witnessing, has already demonstrated his prowess with the traditional pharmaceutical global business model, in a comparative yardstick. Now professionally equipped with a strong pharmaceutical marketing background, honed over so many years, I am sure, Andrew will succeed even more in curving out a lion’s share of the global pharmaceutical business for his company, in the long run, creating a win-win situation for much over six billion global people, including a vast majority of the ailing, poor, neglected, hungry and marginalized population of the world.
By Tapan Ray

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

Collaborative commercialization of inexpensive smaller incremental innovation in Chemistry will play an important role in bringing affordable new drugs or new drug delivery systems

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It started in the 17th century:

Alchemy, a medieval chemical science and speculative philosophy aiming to achieve the transmutation of the base metals into gold, searching for a universal cure for disease and indefinitely prolonging life, not considered a science by many, gradually became the basis for the development of chemistry into the 17th century. However, perceivable impact of chemistry on humanity, through its smaller incremental innovation, started being felt only in the second half of the 19th century.

Chemistry – an interface between the physical world and humanity:

Experts in this field often opine that the current form of human civilization has been made possible, to a great extent, through significant advancement of such innovation in chemistry and its role in modern technology. Chemistry is indeed an interface between the physical world on the one hand and the humanity on the other.

Getting a perspective of resource and time requirements for such initiatives:

Is there any similarity between development of pharmaceutical chemistry and IT software?

Now a days, one finds a striking similarity between small incremental innovation in IT software and the same in pharmaceutical chemistry. Both are creative and belong to the knowledge economy. Scientists in both the communities try to generate innovative ideas, which can lead to their effective commercialization.

Resource requirements for these two are strikingly different:

However, the nature of the commercialization process of these two sciences, though seemingly similar in terms of innovativeness, is indeed quite different. In the software community, two people can implement an idea with minimal resource requirement and could end up with a profitable commercialized product, without much difficulty. In contrast, two chemists may come up with a brilliant idea, which in many cases, may require significant investment of resources much before to even think to get the initial product commercialized. Subsequent steps of scaling up will be a separate issue altogether, with more resource commitment.

The process of commercialization of smaller incremental innovation in pharmaceutical chemistry is much longer:

As we all know, the process of commercialization of incremental innovation in chemistry takes a much longer time scale, as these are not usually spare time projects, unlike computer softwares. The cost involved in testing out and implementing a new idea in chemistry is very high and may not even be possible without any robust institutional backing.

Target inexpensive smaller incremental innovation in pharmaceutical chemistry:

Some illustrative examples of such smaller incremental innovation in chemistry are as follows:

1. Development of pharmaceutical co-crystals

2. Merger of chemistry of traditional and modern medicines for synergy in both efficacy and safety

3. Chemical technology switch: taking technology of one field and transferring it to a different field to get a new drug substance

4. Application of polymorphic chemistry in drug discovery.

The process has begun:

International experience:

The chemistry department of Oxford University, U.K, which is incidentally the biggest chemistry department of the western world, has made significant advances in commercializing incremental innovation in chemistry. Among many, they created and commercialized the following three entities through such incremental innovation:

• Medisense

• Oxford Molecular

• Oxford Assymetry

The Indian experience:

Despite all challenges, in India, as well, the commercialization process of smaller incremental innovation in chemistry has already begun. The Chemistry Department of the University of Delhi has developed 11 patentable technologies for improved drug delivery system using nano-particles. One of such technologies was development of ‘smart’ hydrogel nano-particles for encapsulating water-soluble drugs. This technology was sold to Dabur Research Foundation in 1999.

Another nano-particle drug delivery technology in opthalmogy area was also commercialized by transferring it to Chandigarh based Panacea Biotech Ltd.

Conclusion:

This process is expected to gain momentum in our country too, contributing significantly to the progress of the healthcare sector of the nation. “Commercializing smaller incremental innovation in Pharmaceutical Chemistry”, I reckon, will play a key role in providing affordable modern medicines to a vast majority of the population, as India transforms itself into a knowledge superpower.

By Tapan Ray

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

Regulatory Data Protection and Indian Interest

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Of late, I read and hear raging debates, especially through media, on the relevance of Regulatory Data Protection (RDP) or Data Exclusivity in India. This issue is being considered by many as a fight between the commercial interests of multinational and the domestic Indian companies. In this fight the provision for RDP is being highlighted as something, which is against our national interest.

In this scenario, I shall try to argue that in our country, on the contrary, a provision for a robust RDP mechanism, which will protect clinical trial data of ANY innovator both against disclosure and unfair commercial use, is in the best interest of India, at least, for the following four important reasons:

1. RDP to benefit even small to medium size domestic Indian pharmaceutical companies:

Small to medium size pharmaceutical companies in India, who do not have adequate wherewithal to get engaged in drug discovery research, will also be benefitted from RDP. They will be able to obtain data exclusivity for a specific period on the new clinical data that they will be generating for new fixed dose combinations (FDC), new medical uses and new formulations of medicines. This will help them create more resources to invest in R&D to meet the unmet needs of the patients.

2. RDP on traditional medicines to benefit Indian Pharmaceutical companies:

Rich reservoir of Indian traditional medicines, commonly categorized under Ayurvedic, Unani and Siddha, are being used by a large majority of Indian populations over centuries. Such medicines are not protected by product patents, as such.

Further clinical development of these traditional medicines for greater efficacy and safety profile or newer usage, even if the ultimate product is not patentable, will help the common man immensely with affordable medicines.

The new clinical data generated by the researcher for such initiatives will be protected through RDP for a specific time period both against disclosure and unfair commercial use to make such efforts commercially viable and attractive.

RDP in this way can help the researcher to invest in the R&D of traditional plant based or similar medicines, which are not protected by any product patent. This in turn will help many domestic Indian pharmaceutical companies to get engaged in less cost intensive R&D with a robust economic model, built around RDP or data exclusivity.

3. RDP to boost outsourcing of clinical trials to India:

As per CII, clinical trials market in India is currently growing at 30-35%. McKinsey estimated that EU and US based pharmaceutical companies will spend US$ 1.5 billion per year on clinical trials in India by 2010. Currently China with 5 year regulatory data protection in place is having significant edge over India in this area.

Many CROs have started making investments in India to create world class clinical trial facilities to encash this opportunity. Such investments, both domestic as well as in form of FDI, are expected to further increase, if an effective RDP mechanism is created within the country.

4. RDP to help Competition from China:

Despite some significant inherent weaknesses of China, as compared to India, in terms of a preferred global pharmaceutical business destination, China is fast outpacing India in R&D related activities. More number of global R&D based pharmaceutical companies has started investing quite significantly in China. One of the key reasons for such development is that China provides product patent, patent linkage and RDP, whereas India provides only product patent.

R&D based global pharmaceutical and biotech companies who want a robust IPR regime in the countries where they will invest more, therefore, prefer China to India in terms of FDI.

A robust RDP mechanism in India would help bridging this gap considerably.

Conclusion:

There is a widespread apprehension in some quarters in India that RDP will delay the entry of cheaper generic drugs in the country. This apprehension seems to be unfounded.

Unlike product patent, RDP will not provide any market exclusivity even within the specified period of RDP. Any generic manufacturer can generate its own regulatory data and obtain marketing approval from the Drug Controller General of India (DCGI) to market a non patent related product in the country, just as in any developed market of the world. Thus RDP will not delay any generic entry into the market.

My final argument, if the provision for RDP or Data Exclusivity will delay the entry of cheaper generic medicines into India, why the same is not happening in the developed markets of the world like, USA, EU, Japan and even in China, despite having a robust provision for RDP or Data Exclusivity firmly in place in each of these countries?

Thus in my view, the provision for RDP in India is undoubtedly in the best interest of our country.

By Tapan Ray

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