Tag Archives: generic

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.

Prescribing medicines by generic names…a good intent… but is it a practical proposition in India?

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Parliamentary Standing Committee for Health and Family Welfare in their recommendation to the ‘Rajya Sabha’ of the Indian Parliament on August 4, 2010, recommended prescription of medicines by their generic names.

This recommendation appears to be based on the premises that the cost of ‘Brand Building’ exercise of the generic drugs in India, including varying degree of presumably ‘high sales and marketing expenditure’ incurred by the formulators towards such efforts, can be easily eliminated to make medicines available to the common man at much cheaper prices.

This recommendation, on the face of it, makes immense sense. However, the moot question remains, “Is it a practical proposition to implement in India?”

In the following paragraphs, let me try to deliberate on this important issue.

Generics and Branded Generics:

As we know generic name is the actual chemical name of a drug. The brand name is selected by the producer of a formulation and is built on various differential value parameters for its proper position in the minds of health professionals as well as the patients. Thus, brand name offers a specific identity to the generic drug.

The prevailing situation in India:

In India, over 50% medicines prescribed by the physicians are for Fixed Dose Combinations (FDCs), spanning across almost all therapeutic categories. Thus, it could be difficult for them to prescribe such medicines in the generic name and could equally be difficult for the chemist to dispense such prescriptions.

Moreover, in case of any mistake of dispensing the wrong drug by the chemist inadvertently, the patients could face serious consequences. It is well known, the concentration of ingredients in the fixed dose combination of any two medicines, many a times, differs from manufacturer to manufacturer. There are over 50,000 odd formulations in the Indian pharmaceutical market and it would be almost impossible for any doctor to keep track of exact concentrations of each of these drugs and prescribe in their right strengths.

Current prescription practice:

Currently doctors use brand names to differentiate one such formulation from the others. Different brands of even single ingredient medicines may have inherent differences in their formulations like, in the drug delivery systems (controlled/sustained release), kind of coatings allowing dissolution in different parts of alimentary canal, dispersible or non-dispersible tablets, chewable or non-chewable tablets etc. Since doctors are best aware of their patients’ conditions, they may wish to prescribe a specific type of formulation based on specific conditions of the patients, which may not be possible by prescribing only in generic names.

Other Patients related issues:

Patients also could face other difficulties due to generic prescribing. As is known, different brands of FDCs may have different proportions of same active ingredients. If chemists do not know or have the exact combination prescribed by the doctor in their shops, thye would possibly substitute with a different combination of same drugs, which could well be less effective or even harmful to the patients.

Conclusion:

Prescriptions by generic names instead of brand names could likely to lead to substitution of the medicines at the chemists’ outlets because of the reasons, as mentioned above.

Thus, the major concern with generic prescriptions is that a chemist will then make the choice of the manufacturer while dispensing a medicine. There could only be one criterion for the choice of such medicines by a chemist i.e. to select what gives them highest margin of profit. In such a case, the ultimate decision making authority for the prescription medicines shifts from the physicians to the chemists, which could make the situation far worse for the patients. For the interest of the patients, it is, therefore, extremely important that the government, regulators, physicians, chemists and even the patients’ groups are aware of such risks.

Considering all these risk factors, in my view, if the prescriptions of medicines are made mandatory by their respective generic names in India, it could compromise with patients’ safety, very significantly.

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.

Recent appetite of Global Pharmaceutical Majors for Generic Pharmaceutical Business: can it pose a threat to pure generic players?

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Last year Lehman Brothers estimated that by 2012 over 25% of the global pharmaceutical market will face competition from generics. Higher demand of generics is mainly due to the following reasons:1. Increased number of patented drugs is going off-patent.2. Cost containment and pricing pressure, especially from the Government, in the developed markets of the world.

3. Increasing number of patents is being challenged, especially in the U.S courts, on the ground of “obviousness”.

“Obviousness” is becoming a key reason of patent challenges in the U.S:

In first quarter of the last year we read about the U.S trial court making void the key patent of Yasmin, the contraceptive drug of Bayer for ‘obviousness’. This incident had compelled Bayer to revise its profit forecast downwards, for 2008.

‘Obviousness’ is increasingly becoming one of the key reasons for challenging Patents in many countries of the world, including India. Financial Times reported recently that keeping protection to all patents intact, could eventually pose to be a key challenge for the R&D based global pharmaceutical companies. Many analysts feel that the issue of “obviousness” could indeed be a threat to many U.S pharmaceutical patents, especially those, which will be considered by the court just as a ‘tweaked-up’ version of existing drugs.

As reported by ‘Chemical Weekly’, March 2008, total 338 patent challenges were recorded globally in 2008. India ranks only next to USA with a share of 21% pharmaceutical patent challenges.

Global generic pharmaceutical market is growing at a faster pace:

Prescription market in the U.S grew by just 1.3% last year to U.S$291 billion. Key factors believed to be responsible for slower growth in the U.S market are as follows:

1. Higher prescriptions for less expensive generic medicines.

2. Lower sales of higher priced new products.

3. Economic downturn has made more patients to move to generics and large number of consumers to lose their health insurance.

Similarly in the United Kingdom (U.K) generics industry supplies 64% of medicines dispensed by the National Health Scheme (NHS), though they contribute just around 30% of NHS expenditure towards medicines.

Recent reports indicate that the generic global pharmaceutical market is expected to record a turnover of U.S$ 520 billion by 2012. This market size is too lucrative to ignore by any big global pharmaceutical player.

Based on sales turnover of 2007, Teva tops the list of global generic players with a turnover of U.S$ 9.1 billion, followed by Sandoz with U.S$ 5.8 billion and Mylan/Merck with U.S$ 4.6 billion.

From India, Ranbaxy registered a turnover of U.S$ 1.7 billion, Dr.Reddy’s U.S$ 1.4 billion, Cipla U.S$ 1 billion and Sun Pharma/Taro U.S$ 900 million, during that year.

48% of the total 422.6 million prescriptions written in Canada in 2007 were for generic medicines, which registered an annual growth of 14%, reports IMS Canada. Compared to this performance, branded products in Canada recorded a growth of meager 0.2%, during this period. As a consequence, generic Canadian pharmaceutical companies like Novopharm (Teva) and Apotex recorded impressive growth of 46.8% and 18.5%, respectively, in that period.

Despite such outstanding performance of generic pharmaceuticals, overall growth of prescription drugs in Canada was at just 6.3%, the lowest in the last ten year period.

President Obama’s Healthcare Policy will encourage generics and biosimilar drugs:

It is widely believed that the new U.S administration under President Barak Obama will try to encourage speedy introduction of generics into the U.S market.

So far as ‘Biosimilar’ drugs are concerned, in 2009 Obama administration is expected to work out the road map to facilitate the introduction of ‘Biosimilar dugs’ in the U.S market. Due to inherent characteristics that biological are ‘grown and not just manufactured’, biosimilar drugs are not expected to be replica of the original products.

To find out a solution to the heated debate, an answer has to be found out regarding the extent of clinical trials that the ‘biosimilar’ manufacturers will require to undertake to satisfy the U.S FDA that these drugs are as safe as the original ones. It is believed by some that the answer to this question lies in the approach that gives regulatory authority the flexibility in ‘what it demands that asks for more evidence than is now required for generic drugs, but something less than the kind of full-blown trials required for products new to the market.’

Global pharmaceutical majors are developing appetite for generics business:

Keeping a close vigil on these developments, as it were, even Pfizer, the largest pharmaceutical player of the world, has started curving out a niche for itself in the global market of fast growing generics, following the footsteps of other large global players like Novartis, GlaxoSmithKline, Sanofi-Aventis and Daiichi Sankyo.

Is Pfizer planning to follow the business model of Abbott and Johnson & Johnson (J&J)?

As reported by the Wall Street Journal (WSJ), Mr. Kindler the CEO of Pfizer very recently commented, “We are breaking the company down into smaller units so we aren’t dependent on any single product… I am a great admirer of J&J and Abbott’s business model.”

It appears what Mr. Kindler perhaps meant by this statement is that smaller business units, like Over the Trade Counter (OTC), Vaccines, Nutrition and Animal Health can be more ‘manoeuvrable and innovative’ for faster business growth. Acquisition of Wyeth could actually help Pfizer to implement this business model.

Coming back to generic business, the recent collaborative arrangement of Pfizer with Aurobindo Pharma in India vindicates Pfizer’s recent appetite on generic global pharmaceutical business. The company is already in this business with some of its off patent products. But now like others, Pfizer seems to be strategizing to reap a rich harvest from fast-growing generic pharmaceutical business through most probably its “Established Products” business division.

Could such business model of Global Pharmaceutical majors pose a threat to pure generic players in the business?

The entry of the global pharmaceutical majors into generic pharmaceutical business, in my view, could pose a serious threat to current generic players in the business, including those who are operating from India in the ‘regulated markets’ of the world, for the the following reasons:

1. Generic pharmaceutical business is usually a high volume, relatively low margin and highly competitive business. To survive in this business of cut-throat competition will require both financial and innovative marketing expertise, as well as financial and marketing muscle, where large global players are expected to easily score over others.

2. Product price of generics of the same or similar molecules being within a price band, prescribers and payors’ preference are expected to be in favour of large global pharmaceuticals, because of corporate brand image.

3. In future, the pharmaceutical marketing model, in my view, is expected to shift from ‘marketing of only medicines’ to ‘marketing of a bundle of medicines and services’. In the changed scenario global pharmaceutical majors are expected to have a distinct strategic advantage.

4. Global Pharmaceutical majors may also use this business model as a ‘preventive strategy’ to restrict market entry of number of players for an off-patent molecule and thereby effectively contain the extent of price erosion, as the brands will go off-patent.

It will, therefore, be quite interesting to watch, what happens in the global generic pharmaceutical business in the next five to ten years. I expect a significant consolidation taking place in this market, both global and local.

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.