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Should ‘Pharma Marketing’ Be In The Line of Fire?

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Close to half a century ago, Peter Drucker – the Management Guru wrote: As the purpose of business is to create customers, any business enterprise has two basic functions: marketing and innovation. Drucker’s concept is so fundamental in nature that it will possibly never change, ever.

That innovation is the lifeblood of pharma industry is well-accepted by most people, if not all. However, when similar discussion focuses on pharma marketing, the industry virtually exposes itself in the line of fire, apparently from all directions. This trend, coupled with a few more in other areas, is making a significant dent in the reputation of the pharma industry, triggering a chain of events that create a strong headwind for business growth.

The consequences of such dent in pharma reputation get well-reflected in an article titled “How Pharma Can Fix Its Reputation and Its Business at the Same Time,” published in the Harvard Business Review (HBR) on February 3, 2017. The author observed:

“This worrisome mix of little growth potential and low reputation is the main explanation for why investors are increasingly interested in how pharma companies manage access-to-medicine opportunities and risks, which range from developing new treatments for neglected populations and pricing existing products at affordable levels to avoiding corruption and price collusion.”

On the above backdrop, this article will try to explore the relevance of Drucker’s ‘marketing’ concept in the pharma business – dispassionately. Alongside, I shall also deliberate on the possibility of a general misunderstanding, or misinterpretation of facts related to ‘pharma marketing’ activities, as these are today.

Communicating the intrinsic value of medications:

Moving in this direction, let me recapitulate what ‘pharma marketing’ generally does for the patients – through the doctors.

Despite being lifeblood that carries the intrinsic value of a medication from research lab to manufacturing plants and finally to patients, ‘pharma marketing’ is, unfortunately under incessant public criticism. It continues to happen, regardless of the fact that one of the key responsibilities of pharma players is to disseminate information on their drugs to the doctors, for the benefits of patients.

One may justifiably question any ‘marketing practice’ that is not patient-friendly. However, the importance of ‘marketing’ in the pharma business can’t just be wished away – for patients’ sake.

Way back in 1994, the article titled, “The role and value of pharmaceutical marketing” captured its relevance, aptly articulated:

“Pharmaceutical marketing is the last element of an information continuum, where research concepts are transformed into practical therapeutic tools and where information is progressively layered and made more useful to the health care system. Thus, transfer of information to physicians through marketing is a crucial element of pharmaceutical innovation. By providing an informed choice of carefully characterized agents, marketing assists physicians in matching drug therapy to individual patient needs. Pharmaceutical marketing is presently the most organized and comprehensive information system for updating physicians about the availability, safety, efficacy, hazards, and techniques of using medicines.”

The above relevance of ‘pharma marketing’, whether globally or locally, remains unchanged, even today, and would remain so, at least, in the foreseeable future.

It’s a serious business:

As many would know, in many respect ‘pharma marketing’, especially of complex small and large molecules, is quite a different ball game, altogether. It’s markedly different from marketing activities in most other industries, including Fast Moving Consumer Goods (FMCG), where customers and consumers are generally the same.

In contrast, in prescription drug market customers are not the consumers. In fact, most consumers of any prescription medicine don’t really know much, either about the drugs or their prices. They get to know about their costs while actually paying for those directly or indirectly. Healthcare providers, mostly in those countries that provide Universal Healthcare (UHC) in any form, may also be customers for the drug manufacturers. Even Direct to Consumer (DTC) drug advertisements, such as in the United States, can’t result into a direct choice for self-medication, other than Over the Counter (OTC) drugs.

Additionally, pharma market is highly regulated with a plethora of Do’s and Don’ts, unlike most other industries. Thus, for the drug manufacturers, medical professionals are the real customers, whereas patients are the consumers of medicines, as and when prescribed by doctors.

With this perspective, ‘Pharma marketing’ assumes a critical importance. It is too serious a strategic business process to be jettisoned by any. There exists a fundamental responsibility for the drug manufacturers to communicate important information on various aspects of drugs to individual physicians, in the interest of patients. This has to happen, regardless of any controversy in this regard, though the type of communication platforms, contents used and the degree of leveraging technology in this process may widely vary from company to company.

Assuming that the marketing practices followed by the industry players would be ethical and the regulators keep a strict vigil on the same, effective marketing of a large number of competing molecules or similar brand increases competition, significantly. In that process, it should ultimately enable physicians to prescribe drugs that will suit each patient the most, in every way. There can’t possibly be any other alternative to this concept.

A common allegation:

Despite these, a common allegation against ‘pharma marketing’ keeps gathering momentum. Reports continue pouring in that pharma companies spend far more on marketing drugs than on developing them. One such example is a stinging article, published by the BBC News on November 6, 2014.

Quoting various published reports as evidence, this article highlighted that – 9 out of 10 large pharma players spend more on marketing than R&D. These examples are generally construed as testimony for the profiteering motive of the pharma companies.

Is the reason necessarily so?

As any other knowledge-based industry, effective communication process of complex product information with precision, to highly knowledgeable medical professionals individually, obviously makes pharma marketing cost commensurately high. If the entire process of marketing remains fair, ethical and patient centric, such costs may get well-neutralized by the benefits accrued from the medicines, including lesser cost of drugs driven by high competition.

Further, a successful pharma marketing campaign is the ultimate tool that ensures a reasonable return on investments for further fund allocation, although in varying degree, to offer more new drugs to patients – both innovative and generics.

Marketing decision-support data generation is also cost-intensive:

Achieving short, medium and long-term growth objectives are as fundamental in pharma as in any other business. This prompts that investments made on ‘pharma marketing’, fetch commensurate returns, year after year. To succeed in this report, one of the prime requirements is to ensure that the content, platform and ultimate delivery of the product communication is based on current and credible research data having statistical significance.

With increasing brand proliferation, especially in competing molecules or branded generic market, arriving at cutting-edge brand differentiation has also become more challenging than ever before. Nevertheless, identification of well-differentiated patient-centric product value offerings will always remain ‘a must’ for any persuasive brand communication to be effective.

It calls for generating a vast amount of custom made decision-support data on each aspect of ‘pharma marketing’, such as target market, target patients, target doctors, competitive environment, differential value offering, and scores of others. The key to success in this effort is to come out with that ‘rare commodity’ that separates men from the boys. This is cost intensive.

What ails pharma marketing, then?

So far so good –  the real issue is not, therefore, whether ‘pharma marketing’ deserves to be in the line of fire. The raging debate on what ails ‘pharma marketing’ should primarily focus on – how to ensure that this process remains ethical and fair, for all.

Thus, when criticism mounts on related issues, it may not necessarily mean that ‘marketing’ is avoidable in the pharma business. Quite often, critics do mix-up between the crucial ‘importance of pharma marketing’ and ‘malpractices in pharma marketing.’ Consequently, public impressions take shape, believing that the pharma marketing expenses are generally higher due to malpractices with profiteering motives.

As a result, we come across reports that draw public attention with conclusions like: “Imagine an industry that generates higher profit margins than any other and is no stranger to multi-billion dollar fines for malpractice.”

A similar article published ‘Forbes’ on February 18, 2015 also reiterates: “The deterioration of pharma’s reputation comes from several sources, not the least of which is the staggering amount of criminal behavior that has resulted in billions of dollars’ worth of fines levied against the industry.”

One cannot deny these reports – lock, stock and barrel, either. Several such articles named many large pharma players, both global and local.

Conclusion:

In my view, only pharma marketers with a ‘can do’ resolve will be able to initiate a change in this avoidable perception. No-one else possibly can do so with a total success in the foreseeable future – not even the requirement of a strict compliance with any mandatory code having legal teeth, such as mandatory compliance of the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) that the Indian Government is currently mulling.

I guess so because, after a strong deterrent like mandatory UCPMP is put in place, if reports on marketing malpractices continue to surface, it will invite more intense public criticism against ‘pharma marketing’ – pushing the industry’s reputation further downhill, much faster.

Be that as it may, it’s high time for all to realize, just because some pharma players resort to malpractices, the ‘pharma marketing’ process, as such, doesn’t deserve to be in the line of fire – in any way.

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.

 

“Fire in The Blood”: A Ghastly Patents Vs Patients War – for Pricing Freedom?

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International award winning documentary film, ‘FIRE IN THE BLOOD’ could possibly set a raging fire in your blood too, just like mine. It made me SAD, REFLECTIVE and ANGRY, prompting to share ‘MY TAKE AWAYS’ with you on this contentious subject, immediately after I put across a brief perspective of this yet to be released film in India.

FIRE IN THE BLOOD is an intricate tale of ‘medicine, monopoly and malice’ and narrates how western pharmaceutical companies and governments aggressively blocked access to low-cost HIV/AIDS drugs in African countries post 1996, causing ten million or more avoidable deaths. Fortunately, in the midst of further disasters in the making, some brave-hearts  decided to fight back.

The film includes contributions from global icons, such as, Bill Clinton, Desmond Tutu and Joseph Stieglitz and makes it clear that the real struggle of majority, out of over 7 billion global population, for access to life-saving affordable patented medicines is far from over. This film has been made by Dylan Mohan Gray and narrated by Academy Award winner, William Hurt.

Two trailers worth watching:

Please do not miss watching, at least, the trailer of this the sad and cruel movie by clicking on the link provided on the word ‘trailer’ above and also here. To get an independent perspective, please do watch the review of the film along with interesting interviews by clicking here.

(Disclaimer: I have no personal direct or even remotely indirect interest or involvement with this film.)

International newspaper reviews:

The NYT in its review commented as follows:

“The only reason we are dying is because we are poor.” That is the heartbreaking refrain heard twice in the documentary “Fire in the Blood,” about an urgent and shameful topic: the millions of Africans with AIDS who have died because they couldn’t afford the antiretroviral drugs that could have saved their lives. Former President Bill Clinton, the intellectual property lawyer James Love, the journalist Donald G. McNeil Jr. of The New York Times and others offer perspectives on this situation and also on the concern that pharmaceutical companies value profits over lives.”

The Guardian reviewed the film as follows:

“A slightly dry, yet solid reportage on a humanitarian disgrace: the failure of western pharmaceutical companies to provide affordable drugs to patients in the developing world. As presented, the corporate defense sounds horribly racist: that poorer Africans’ inability to read packaging or tell the time leaves them ill-suited to following any medication program… hope emerges in the form of the Indian physicist Yusuf Hamied, whose company Cipla undertook in the noughties to produce cheap, generic drugs in defiance of the Pfizer patent lawyers.”

MY TAKE AWAYS:

Discrimination between human lives?

Life, as we all have been experiencing, is the greatest miracle of the universe and most astonishing creation of the Almighty. Among all types of lives, the human lives indeed have been playing critical roles in the development and progress of humanity over many centuries. These lives irrespective of their financial status, cast, creed, color and other inequities need to be protected against diseases by all concerned and medicines help achieving this objective.

What’s the purpose of inventing medicines?

“The purpose of business is to create and keep a customer”, said the management guru of global repute,  Peter F. Drucker. What is then the purpose of inventing new medicines in today’s world of growing financial inequity? 

Further, in his well acclaimed book, “Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits”, C.K. Prahalad, explained that the world’s over five billion poor make up the the fastest growing market in the world. Prahalad showed how this segment has vast untapped buying power, and represents an enormous potential for companies, who can learn how to serve this market by providing the poor with innovative products that they need. Do the Big Pharma players have any lesson to learn from this doctrine?

R&D is not free, has costs attached to it:

Medicines protect human lives against various types of diseases. Pharmaceutical companies surely play a critical role in this area, especially the innovator pharma players, by making such medicines available to patients.

These companies identify new products largely from academic institutions and various research labs, develop and bring them to the market. This has obviously a cost attached to it. Thus, R&D cannot be considered as free and the prices of patented products should not be equated with off-patent generic drugs. Innovators must be allowed to earn a decent return on their R&D investments to keep the process of innovation ongoing, though the details of such costs are not usually made available for scrutiny by the experts in this field. 

Discourage insatiable fetish for profiteering:

Respective governments must always keep a careful vigil to ensure that earning a decent profit does not transgress into a limitless fetish for profiteering, where majority of people across the world will have no other alternative but to succumb to diseases without having access to these innovative medicines. This situation is unfair, unjust and should not be allowed to continue.

Big Pharma – strongest propagators of innovation…bizarre?

It is indeed intriguing, when patients are the biggest beneficiaries of pharmaceutical innovations, why mostly the Big Pharma MNCs, their self-created bodies and cronies, continue to remain the most powerful votaries of most stringent IPR regime in a country, though always in the garb of ‘encouraging and protecting innovation’.

Thinking straight, who do they consider are really against innovation in India? None, in fact. Not even the Government. India has under its belt the credit of many pioneering innovations over the past centuries, may not be too many in the field of medicine post 2005, at least, not just yet. Do we remember the disruptive invention of ‘Zero’ by the Indian mathematician Brahmagupta (597–668 AD) or the amazing ‘Dabbawalas’ of Mumbai?  India experiences innovation daily, it has now started happening in the domestic pharma world too with the market launch of two new home grown inventions.

Coming back to the context, India, as I understand, has always been pro-innovation, in principle at least, but is squarely and fairly against obscene drug pricing, which denies access to especially newer drugs to majority of patients, in many occasions even resorting to frivolous innovations and evergreening of patents.

Mighty pharma MNCs are increasingly feeling uncomfortable with such strong stands being taken by a developing nation like India, in this regard. Thus, expensive and well orchestrated intense lobbying initiatives are being strategized to project India as an anti-innovation entity, while pharma MNCs, in general, are being highlighted as the sole savior for encouraging and protecting innovation in India. The whole concept is indeed bizarre, if not an open display of shallow and too much of self-serving mindset. 

This analysis appears more convincing, when genuine patients’ groups, instead of supporting the pharma MNCs in their so called ‘crusade’ for ‘innovation’, keep on vehemently protesting against obscene drug pricing, across the world. 

Obscene pricing overshadows the ‘patient centric’ facade:

Obscene pricing of patented medicines, in many cases, overshadows the façade of much hyped and overused argument that ‘innovation must be encouraged and protected for patients’ interest’. This self-created ‘patient centric’ facade must now be properly understood by all.

I reckon, India has now assumed a critical mass attaining a global stature. This will not allow any successive governments in the country to change the relevant laws of the land, wilting under intense pressure of global and local lobbying and expensive PR campaigns. 

Genuine innovation must be protected:

  • Genuine innovations, as explained in the Patents Act of India, must be encouraged and protected in the country, but not without sending a strong and clear signal for the need of responsible pricing.
  • It is also a fact, though some people may have different views, that Intellectual Property Rights (IPR) encourage innovation.
  • At the same time, the real cost of R&D must be made transparent by all innovators and available for scrutiny by the experts in this field to put all doubts to rest on the subject.

When Corporate Social Responsibility (CSR) is being widely discussed globally, which has now been made mandatory in India, these players keep arguing almost unequivocally that, thinking about ‘have nots’ is the sole responsibility of the Government.

Patents guarantee market exclusivity, NOT absolute pricing freedom:

Patent gives right to the innovators for 20 years market exclusivity, but NOT absolute pricing freedom in the absence of any significant market competition in that area.

Innovator companies do argue that patented products also compete in their respective therapeutic classes. This is indeed baloney. If patented products meet the unmet needs, how can it be ‘me too’ even in a therapy class? Unless of course, insatiated fetish of Big Pharma for market monopoly with free pricing even for ‘me too’ types of so called ‘innovative products’, becomes the key motive behind such an argument.

Who benefits more with patented medicines?

Who gets benefited more with these patented medicines? Certainly a small minority living in the developed world and NOT the vast majority of the developing world.

At the same time, huge profits earned by these companies from a small minority of these patients make them so rich and inexplicably arrogant that they do not bother at all for others without having adequate deep pockets, even in India. 

Conclusion:

I have a huge problem in accepting the pharma MNCs’ argument that ‘IPR’ and lack of ‘Access’ to IP protected drugs for ‘affordability’ reasons, are unrelated to each other. For heaven’s sake, how can they be?

As I said before, absolute pricing freedom for patented drugs is obscene, if not vulgar and must be curbed forthwith with the application of intelligent and well-balanced sensible minds and also in a way, which is just for all, both the innovators and the patients.

Big pharma MNCs can no longer afford to remain just as huge profit making entities, responsible only to their shareholders, shorn of societal needs for affordable medicines, required for around six out of over seven billion human lives of the world. 

Modern society, key opinion leaders and respective governments should not allow them to shirk their responsibility in this area any more, as we move on.

If not, will narratives like ‘FIRE IN THE BLOOD’, not keep us haunting again, again and again, on similar incidents taking place in some other countries, at some other time, involving extinction of millions of precious lives for not having access to affordable new drugs? They may be ‘have nots’, so what? 

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.

 

 

Slugfest in Pharma Land: Isn’t ‘The Pot Calling the Kettle Black?’

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Close on the heels of detention of a British Citizen, an American citizen too has  been reportedly detained, for the first time, by the Chinese Government in connection with unfolding mega corruption scandal in the country’s pharma industry involving even ‘third party’.

A slugfest over this corruption scandal too has already begun. Media reports highlight, vested interests, as usual, retaliate by saying that China’s attention to the alleged corruption by MNCs is to benefit the local Chinese companies.

As per reports, big global pharma innovator companies like, GlaxoSmithKline, AstraZeneca and UCB are currently being questioned by the Chinese authorities related to this scam.

Critical role of ‘Third Party’ in pharma bribery and corruption: 

Although in the above Chinese scam, a third party, in form of a travel agency, has been accused to have played a critical role in the GSK case, it will be hard to believe that this is a solitary example.

Internal ‘Compliance Systems’ of global pharma companies, in most cases, are believed to be robust enough and will generally be found squeaky clean by any audit. Unfortunately, as it appears from various international reports, corruption still enters through cracks between seemingly robust ‘compliance firewalls’ for business gain.

Invariably in response, expensive and high decibel Public Relations (PR) machineries are put to overdrive. These extremely capable PR agents, with their  all guns blazing, keep trying to establish that such incidents, though quite frequent and are taking place across the world unabatedly, are nothing but  ‘small aberrations’ in pursuit of pharma ‘innovation’ for newer drugs just to benefit the patients.

As one understands from the GSK case, the ‘third party’ travel agent reportedly attempted to keep all transactions at arm’s length to avoid detection of any unholy nexus by the Chinese regulators. 

However, in the real world, it could possibly be any crafty and well-identified ‘third party’, intimately associated with the pharmaceutical business process. These ‘third parties’ are crafty enough to exploit the loopholes in the seemingly robust compliance systems of the concerned companies to help facilitating their financial performance. 

An interesting commonality in all such often repeated scams is the lack of top management accountability of the companies involved. This would probably surprise even the recent public sector scam tainted concerned ministers and top bureaucrats of India.

Much to everybody’s dismay, such incidents reportedly continue to take place in various parts of the world and in all probability in India too.

Other countries initiated probes:

Unlike the high-octane development in China, in many developed countries probes against such corruption have already been initiated at a different scale and level. For example, in Canada a conservative MP reportedly testified on October 17, 2012 to the ‘Standing Senate Committee on Social Affairs, Science and Technology’ as an expert witness regarding post-approval drug monitoring and the corrupt practices of pharmaceutical companies.

Global Corruption Barometer 2013:

When a person talks about corruption, it usually gets restricted to corrupt practices in the Public Sector. Any such issue involving Business, Healthcare, Education and even Judiciary, Media and NGOs are considered at best as misdemeanor, if not minor aberrations.

In this context it is worth mentioning that ‘Transparency International’ has released Global Corruption Barometer 2013 recently.  This ‘2013 Barometer’ is the world’s largest public opinion survey on corruption. It surveyed 114,000 people in 107 countries.

The reported global findings of this survey, which indicate a general lack of confidence in the institutions tasked to fight corruption, is as follows:

  • More than one in two people thinks corruption in their country has worsened in the last two years.
  • 54 per cent of people surveyed believe their governments’ efforts to fight corruption are ineffective.
  • 27 percent of respondents have paid a bribe when accessing public services and institutions in the last 12 months, revealing no improvement from previous surveys.
  • In 51 countries around the world, political parties are seen as the most corrupt institutions.
  • In 36 countries, people view the police most corrupt, in 20 countries they view the judiciary as most corrupt.
  • 54 percent of respondents think that the government in their country is run by special interests.

Situation alarming in India:

However, in India, the situation is much worse. Besides political parties, police and legislature, institutions like, Health Systems, Business, Judiciary, NGOs and even Media smack of high level of corruption, as follows:

No: Institutions Bribe Quotient %
1. Political Parties 86
2. Police 75
3. Legislature 65
4. Education 61
5. Health Systems 56
6. Business 50
7. Judiciary 45
8. Religious Bodies 44
9. Media 41
10. NGO 30
11. Military 20

Moreover, as per the report, approximately one out of four people paid a bribe globally in 2012, while in India, the bribe-paying rate was twice, with a little over one out of two people paying a bribe. Based on this indicator alone India occupies 94th rank out of 107 countries.

Coming back to healthcare in India, manifestations of high level corruptions in this critical area taken together with the same, as reported for its close connects like, as follows, are indeed alarming:

  • Business houses (include pharma companies)
  • Education (produces doctors, nurses etc.) 
  • Judiciary (also resolves various pharma disputes) 
  • Media (help creating unbiased public opinion) 
  • NGOs (takes care of Patients’ interest) 

The prevailing situation is highly disturbing, as any meaningful reform measures in the healthcare space of India could be effectively blunted, if not negated, by influencing related corrupt institutions.

It is important to note that bribery in the Indian healthcare sector was as rampant as Education and Judiciary in 2012, as follows:

No. Sector Bribe Paid in 2012 %
1. Police 62
2. Registry & Permits 61
3. Land 50
4. Utilities 48
5. Education 48
6. Tax Revenue 41
7. Judiciary 36
8. Health 34

Source: Global Corruption Barometer 2013

Where there’s smoke, there’s fire:

All these numbers vindicate the well-known dictum ‘where there’s smoke, there’s fire’ for the healthcare sector, in general, and the pharmaceutical sector, in particular, of India.

Bribery and corruption appear to have emerged as the key compliance related issues in the pharma sector. A report indicates that this is mainly due to manipulable environment in the pharma industry, just like in many other sectors as mentioned above.

Such manipulations could range from influencing drug procurement prices in return for kickbacks, giving expensive freebies to the medical practitioners in return of specific drug prescriptions, and even making regional regulatory bodies to provide favorable reports overlooking blatant malpractices.

High level of tolerance:

KPMG Fraud Survey Report 2012 also highlights, though bribery and corruption continues to be an issue, pharma industry shows reluctance to discuss it openly. Moreover, close to 70 per cent of respondents surveyed said, they faced no significant threats from such issues.

The report also indicated, around 72 per cent of respondents expressed that their respective companies have in place a robust mechanism to address bribery and corruption. However, only few respondents expressed inclination to explain such in-house mechanisms. This vindicates the point of high levels of institutional tolerance to bribery and corruption in the pharmaceutical sector of India, just like in many other countries.

“Collusive nexus”:

Even a Parliamentary Standing Committee in its findings reportedly indicted India’s top drug regulatory agency for violating laws and collusion with pharmaceutical companies to approve medicines without clinical trials with the following remark:

“There is sufficient evidence on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.”

A Research Scientist fumes:

Following is a reported comment of a research scientist on corruption and bribery in the pharmaceutical industry of India:

“It would not make me happy, to put it mildly, to think of a drug that I’d had a part in discovered being flogged via sleazy vacation offers and sets of cookware dumped on a doctor’s office floor.”

Where pharma and political slugfests unite:

This short video clip captures one of too many pharma slugfests given a very high level and fiery political dimension in the global pharma land.

Conclusion:

As we have seen in the ‘Global Corruption Barometer 2013’, the respondents regarded almost all key institutions and industrial sectors in India as being corrupt or extremely corrupt.

As per the above report, corruption seems to have engulfed the private sector too, and alarmingly has not spared even the ‘healthcare system’ at large , as it quite prominently shows up in the ‘Corruption Barometer 2013’. 

As deliberated above, some ‘third parties’ of any type, working within the pharmaceutical value chain, could well be the fountain heads of many types of corruptions, as reported in China. They should be put under careful vigil of the regulators, placed under magnifying glasses of scrutiny and the rogues must quickly be brought to justice wherever and whenever there are violations. A report stating, Chinese administration has decided to punish 39 hospital employees for taking illegal kickbacks from pharmaceutical companies as a part of country’s widening investigation against pharma corruption, would justify this point.

That said, the task in hand is much tougher. On the one hand an Indian Parliamentary Panel observes that both regulators and the pharma companies are hand in glove to fuel corruption, instead of dousing the fire.

On the other hand, the global pharma industry has been accusing the Indian government of ‘protectionism’, ‘lack of transparency/predictability in its policy measures’ and ‘draconian IP laws’.

In the midst of all these cacophony, haven’t the stakeholders and the public at large, with exposure to contextual information, started pondering:

Gosh! in the slugfest on the pharma land, isn’t ‘The Pot Calling the Kettle Black?’

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.

 

In the Pharmaceutical Space: The Dragon breathes fire

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Currently both China and India, the two most populous nations of the world are also the front runners of the global economy in terms of the pace of GDP growth. The economies of the two countries are greatly influenced by their respective sociopolitical environment. However, the economy of China is more robust ranking second in the world, against eleven of India. The dragon is indeed breathing fire.

A comparison of the economy of the two countries, as reported by ‘MapsofIndia.com’ updated in July 2011, is as follows:

Facts India China
GDP US$1.31 trillion US$ 4.90 trillion
GDP growth 8.90% 9.60%
Per capital GDP US$1124 US$7,518
Inflation 7.48 % 5.1%
Labor Force 467 million 813.5 million
Unemployment 9.4 % 4.20 %
Fiscal Deficit 5.5% 21.5%
Foreign Direct Investment US$12.40 billion US$9.7 billion
Gold Reserves 15% 11%
Foreign Exchange Reserves US$2.41 billion US$2.65 trillion
World Prosperity Index 88th Position 58th Position
Mobile Users 842 million 687.71 million
Internet Users 123.16 million 81 million.

Global pharmaceutical ranking:

As reported by IMS, in global ranking, China was ninth largest pharmaceutical market against thirteenth of India in 2004, became  fifth largest in 2009 against thirteenth of India and is expected to be the third largest by 2014 against tenth of India, growing at a much faster pace.

2004 Rank

2009 Rank

2014 Rank
1 United States 1 United States 1 United States
2 Japan 2 Japan 2 Japan
3 France 3 Germany 3 China
4 Germany 4 France 4 Germany
5 Italy 5 China 5 France
6 United Kingdom 6 Italy 6 Brazil
7 Canada 7 Canada 7 Italy
8 Spain 8 Spain 8 Canada
9 China 9 United Kingdom 9 Spain
10 Brazil 10 Brazil 10 India
11 Mexico 11 Russia 11 Russia
12 Australia 12 Mexico 12 United Kingdom
13 South Korea 13 India 13 Venezuela
14 India 14 Australia 14 Turkey
15 Netherlands 15 Turkey 15 South Korea

Source: IMS Health MIDAS, Market Prognosis September 2010; Market size ranking in constant US$

Healthcare coverage:

In China, out of a population of 1.3 billion, 250 million are covered by health insurance, another 250 million are partially covered by insurance and balance 800 million are not covered by any insurance.

Against these statistics of China, in India total number of population who have some sort of healthcare financing coverage will be around 200 million and penetration of health insurance will be just around 3.1% of the population. India is fast losing grounds to China in this respect mainly due to better response to healthcare infrastructure and regulatory challenges by China.

Commitment to globalization:

A very high level of commitment of the Chinese Government to make China a regional global hub for pharmaceutical R&D and contract research and manufacturing (CRAM) activities within next seven to ten years is now paying rich dividends.

Department of Pharmaceuticals (DoP) of the Government of India (GoI) also expressed its intention to make India a R&D hub in not too distant future. Unfortunately, this cannot be achieved with just good intent of investments of couple of million US$ through Public Private Partnership (PPP) initiatives, as announced by the DoP earlier.

A strong commitment of the GoI to hasten regulatory reform processes with visible action will be the deciding success factor. IPR regime in the pharmaceutical industry has been put in place, but an appropriate to foster innovation in the country is yet to be created.

Healthcare Infrastructure:

Korn/Ferry International has reported that China’s infrastructure in the pharmaceutical space is better than India, primarily due to firm commitment of the Chinese government to accelerate reform measures to fetch maximum benefits of globalization process in the country.

It has been reported that China has not only better healthcare infrastructure as compared to India, but they are also more open  to of foreign trade and investments to improve these further in their country.

R&D Comparison:

Talent Pool and no. of Patents granted:

According to WIPO, China has better R&D talent pool and grants more patent per year than India as follows:

India

China
R&D Talent Pool

45,000

56,000
Patents Granted (2008-09)*

16,061

48,814

*Patent Granrted in India during 2009-10:6168

Source: FE Bureau / WIPO / IPO

Scientific Publications:

India also lags behind China in the number of scientific publications as follows:

Pre 2000 (A)

Post 2000 (B)

B/A*
India 3,04,737 4,98,394 1.64
China 2,30,154 19,94,706 8.67

*Multiple of Post-2000 over Pre 2000

Between pre-2000 and post-2000 era, China’s count of scientific publications rose more than eight times compared to India’s 1.6 times. (Source: Search on Scopus Sciverse (Database from Elsevier)

Based on ‘WIPO PCT’ applications, it has been reported that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India as against 8.4% located in China.

Biology Research:

China is taking faster strides in the Biology Research area as follows:

INDIA

CHINA
  1. Only about five companies with proven skills in basic molecular biology and protein expression

2. Innovative research focused on bioinformatics and bio-chips

3. Limited biology talent pool owing to historic focus on generics1. Established skills in basic molecular biology and protein expression

2. Innovative research in stem cells, bio-chips, and gene sequencing

3. Expanding biology talent pool

(Source: BCG report, Looking Eastward)

Clinical trials:

In the area of clinical trial, though by amending  the Schedule Y of the Drugs and Cosmetics Act in line with ICH GCP, India has already put in place the Good Clinical Practices (GCP), China has, on the other hand, brought its GCP, GLP, and GMP standards in line with ICH guidelines.

May be because of all these reasons ‘A.T. Kearney’ in its ‘Country Attractiveness Index’ (CAI) for clinical trials has given 6.10 to China against 5.58 to India.

BCG compared India with China in the Clinical Trial space as follows:

INDIA

CHINA
1. Experienced CROs with full service range and output of similar quality to that of developed markets.

3. Limited FDA approved hospitals

4. Shorter trial approval times than in China

5.Uneven infrastructure and shortage of clinical research assistants

  1. Experienced CROs and growing vendor pool providing full spectrum of services
  2. High quality FDA-approved hospitals
  3. Low-cost and efficient enrollment compared to the US and Europe
  4. Trial approvals lengthy and complex

(Source: BCG report, Looking Eastward)

Despite all these, both India and China pose challenges to both global and the local pharmaceutical players in dealing with subjects of wide cultural diversity within the country besides illiteracy and poverty. Many cases of conflict between ethics and natural justice have been reported from both countries during recruiting process of the subjects for clinical trial.

Pharmaceutical outsourcing:

In terms of attractiveness for outsourcing among the emerging pharmaceutical markets of the world, India and China are outpacing others with their cutting edge offering of high quality services at lower cost together with large pool of skilled manpower.

India has the potential to be a contender of supremacy for Pharmaceutical outsourcing of all types with all the required success ingredients. However, putting these ingredients together for effective use to make it happen has indeed become a real challenge.

On the other hand China is racing ahead to effectively avail the global opportunities and in that process fast distancing itself from India, widening the competitive performance gap between the two countries. Brain drain:

Korn/Ferry International has reported that more and more Indian talent is being pulled to China to fill key roles, especially in the API sector, signaling ‘brain drain’ from India to China.

Where India is a high flier:

Chemistry Research:

India is globally considered as a more mature place for chemistry related drug-discovery activities than China. Probably, because of this reason, companies like, Aurigene, Advinus, Divis Lab and Jubilant Organosys could enter into long-term collaborative arrangements with Multinational Companies (MNC) to discover and develop New Chemical Entities (NCEs).

BCG report, ‘Looking Eastward’ compared India with China in the Chemistry Research area as follows:

INDIA

CHINA
  1. Large pool of vendors with full services and track record of strong capabilities

2. Generally better IP protection than in China

3. Trend toward project based alliances and emerging build-operate-transfer (BOT) contracts

4. Vast pool of skilled and low cost chemists

  1. Capabilities residing mostly with government institutes; only a few small private companies with a track record
  2. Established basic chemistry skills moving to more complex offerings, but no end to end capabilities
  3. Large and growing pool of raw talent, but limited English language skills still an issue

(Source: BCG report, Looking Eastward)

Earlier reform in China: It is important to mention that healthcare reform process started much earlier in China. The Product Patent regime in India was reintroduced in January 1, 2005. Well before that time China started creating and encouraging a large number of independently funded pharmaceutical R&D institutions to create an environment of innovation within the country. Many of these institutions are now viable profit centers, creating wealth for the country.

At the same time, focusing on economies of scale, Chinese pharmaceutical players have now become globally competitive, may be a shade better than India. Clear dominance of China in the business of ‘Active Pharmaceutical Ingredient (API)’ among many others, will vindicate this point.

On other hand in the formulations business, India is miles ahead of China, catering to over 20 percent of global requirements for the generic pharmaceuticals. Even in ANDA and DMF filings, India is currently ahead of China. 

Conclusion:

While comparing India with China one should also take into consideration that not only the sociopolitical structure of India and China are quite different, but the difference exists also in their commerce and industry related political decision making process.

Moreover, the average age of Chinese population is much more than Indians and continues to increase rapidly. The factor of aging population may have an adverse impact on the overall productivity of their people in the coming years constraining the economic growth of China. In contrast, the percentage of young working people in India is expected to keep increasing through 2030, offering a very critical  demographic advantage to the country in the years ahead.

Though China will continue to have aging population and India the younger ones, both countries will have to deploy greater resources to cater to the growing healthcare needs for altogether different reasons. The net gainer will indeed be the pharmaceutical industry in both the countries.

That said, just a wishful thinking of the Government of India, sans expeditious and prudent regulatory and other related policy reforms, will helplessly make India watching the gap between the pharmaceutical industry of the two countries fast widening, making the dragon keep breathing fire, unabated.

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.