In the cacophony of FDI in the pharmaceutical sector of India

Posted on June 6, 2011 by Tapan Ray

It is a widely accepted fact that Foreign Direct Investment (FDI) in the Pharmaceutical industry, just like in any other industry, is important for an emerging economy like India, mainly because of various important benefits that the country would derive out of such investments, like for example:

Job creation
World class infrastructure development
Transfer of modern technology
Help creating a talent pool through international training and development
Meeting unmet needs of patients through innovative medicines
Help imbibing the best practices of the world

Types of FDIs in the Pharmaceutical sector of India:

There are mainly three types of FDIs that we have witnessed so far in India:

Green field investment: Like, setting up new manufacturing facility at Vizag by Eisai of Japan
Brown field investment: Like, acquisition of Ranbaxy by Daiichi Sankyo of Japan, Piramal Healthcare by Abbott USA or Shantha Biotech by Sanofi Aventis of France.
Joint venture: Like, Bayer Healthcare and Cadila Healthcare or Sun Pharma and MSD etc.

Besides these, as mentioned below, there have been some collaborative arrangements, as well, between global and Indian Pharmaceutical companies in the last five years like, GSK with Dr. Reddy’s Laboratories (DRL), Pfizer with Biocon etc.

Key drivers for FDI:

Following are the key factors, which attract FDI in the pharmaceutical sector, especially in an emerging market like India:

Domestic market size, prospects for future market growth,
Cheaper operating cost
Cheaper input and English-speaking skilled manpower cost
Regulatory environment
Pricing environment
Robust IT infrastructure
Legal, IPR and financial framework

Relationship between FDI and Intellectual Property (IP) Environment:

Some recent media reports in various parts of the world including India had highlighted that China attracts more investment from foreign drug makers due to more robust Intellectual Property (IP) laws in that country.

US Trade Representatives (USTR) is one such agency which evaluates the adequacy and effectiveness of protection of Intellectual Property Rights (IPR) with US trading partners in various countries of the world through annual release of their ‘Special 301 Report’.

The report of US Trade Representatives (USTR 2011 Special 301) rates IPR regime of both China and India as unsatisfactory, so far as law enforcement, piracy prevention and transparency are concerned. The two main categories in the report are the ‘Priority Watch List’ and the ‘Watch List’. Both India and China fall under ‘Priority Watch List’ of this report.

An apparent contradiction:
The key question, in this context, that is being raised for quite some time now is, whether the decisions of foreign drug makers to invest in the emerging markets, like India and China are predominantly dependent on the IPR scenario in the respective countries.

If it is so, some would obviously like to know whether or not the ‘USTR 2011 Special 301 Report’ contradicts the above hypotheses.

Notwithstanding ‘USTR Special 301 Reports’ and being featured in their ‘Priority Watch List’ year after year, China continues to attract more and more FDI in pharmaceuticals over a long period of time. In any case, the FDI from USA in China was just around 12% of the total FDI that the country attracted in 2008. The same trend continues even today.

However, without going into the details of any report, relative robustness of IPR regime could at best be just one of the several key factors for a research based global pharmaceutical company to decide on FDI in any emerging market of the world.

Relatively speaking:

China is certainly attracting more FDI in the Pharma space than India. According to “The Survey of Foreign Investments in China’s Medicine Industry” of the Government of China, the FDI in the pharmaceutical industry of the country for a three year period commencing from 2006 to 2008 was around US $ 1772 million. The percentage of total investments made by the major countries is as follows:

Country wise pharmaceutical FDI % in China in 2008

Rank	Country	%
1.	Hong Kong	39.69
2.	United States	11.95
3.	British Virgin Island	11.64
4.	Bermuda	6.45
5.	Singapore	4.91

(Source: Invest in China 2009, Ministry of Commerce of the People’s Republic of China)

Whereas, as per Mr. Jyotiraditya Scindia, Minister of State, Ministry of Commerce and Industry, from the year 2006-07 up to September 2009, India attracted FDI of US $ 817.39 million, as follows:

FDI ( US$ million)

Sector	2006-07	2007-08	2008-09	2009-10 (upto Sept.09)	Cumulative
DRUGS & PHARMACEUTICALS	214.84	334.09	181.61	86.85	817.39

These figures would change significantly if FDI through M&A is taken into consideration.

In any case, this trend should not necessarily be exclusively correlated to the relative robustness of the IPR regime in India and China, notwithstanding the fact that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India as against 8.4% located in China (Based on WIPO PCT applications)

Impact of FDI on the Indian Pharmaceutical Sector:

Some important FDI in India from 2006 to 2011

Year	Indian Companies	Multinational Companies	Value ($Mn)	Type
2006
	Matrix Labs	Mylan	736	Acquisition
	Dabur Pharma	Fresenius Kabi	219	Acquisition
	Ranbaxy Labs	Daiichi Sankyo	4,600	Acquisition
	Shantha Biotech	Sanofi-aventis	783	Acquisition
2009
	Orchid Chemicals	Hospira	400	Business Buyout
	Aurobindo Pharma	Pfizer	Not disclosed	Generic Development and Supply
	Dr Reddy’s Labs	GlaxoSmithKline	Not disclosed	Generic Development and Supply
2010
	Piramal Healthcare	Abbott	3,720	Business Buyout
	Paras Pharma	Reckitt Benkiser	726	Acquisition
	Claris Lifesciences	Pfizer	Not disclosed	Generic Development and Supply
	Biocon	Pfizer	350	Insulin Marketing Deal
2011
	Cadila Healthcare	Bayer	Not disclosed	Marketing Joint Venture
	Sun Pharma	Merck & Co.	Not disclosed	Marketing, Manufacturing Joint Venture

There is no published data, as yet, to justify that the inflow of FDI in the pharmaceutical sector of India, including acquisition of large domestic pharmaceutical players like, Ranbaxy, Piramal Healthcare etc., had any adverse impact whatsoever on the country.

However, the reality is that such apprehension, especially the acquisition of some ‘Pharma Crown Jewels’ of India by the Multinational Companies (MNCs), though not fact-based, are apparently getting reverberated as a ‘sinister and sordid design’ even in the corridors of power ranging from the Ministry of Commerce, Cabinet Committee of Economic Affairs (CCEA), Planning Commission of India to Joint Parliamentary committee for Commerce.

It appears that the government is adopting a ‘wait and watch’ policy in this area for now, presumably because of the fact that the newly formed ‘Competition Commission of India (CCI)’ from now onwards will keep a careful vigil on such mega acquisitions.

Poor healthcare coverage could be a key barrier:

As indicated above, relative size and growth of the domestic pharmaceutical market together with healthcare coverage and delivery mechanism of a country could well be the most critical factor to influence foreign investment decision of the global pharmaceutical companies.

In global ranking, China is currently the seventh (India: 14) largest pharmaceutical market and is expected to be the fifth (India: 10) largest market by 2015 and the third largest by 2020. Chinese pharmaceutical market is expected to grow by over 15% per annum in the next five years, which is higher than India, even without considering the current base of both the countries.
Even in Health Insurance space, “India ranks 136th on penetration levels and lags behind China (106), Thailand (87), Russia (86), Brazil (85), Japan (61) and the US (9),” reported ‘Indo-Asian News Service (IANS)’ on July 21, 2009, in a paper titled, “India’s insurance penetration lower than world average”, jointly prepared by Crisil and Assocham.

Moreover, ‘out of pocket’ healthcare expenditure in India is one of the highest in the world at around 80% against 61% in China.

Country Attractiveness Index (CAI):

‘A.T. Kearney’ developed a CAI for clinical trials, for the use of, especially, the pharmaceutical industry executives to make more informed decision on offshore clinical trials. As per this study, the CAI of China is 6.10 against 5.58 of India. This could mainly be due to prevailing lackadaisical regulatory environment in India.
Other reasons to influence FDI:
I would reckon, all foreign direct investments (FDI) by the global pharmaceutical companies are driven by a combination of key business factors, as mentioned above, IPR ecosystem in the country is just one of them. This is vindicated by a recent report, which is as follows:

“Novartis has signed an agreement to build a pharmaceutical manufacturing facility in St. Petersburg, Russia. The plant is part of a $500 million Novartis investment in infrastructure, health care initiatives, and R&D in Russia over the next five years”.

The reason behind this investment was reported as follows:
“The announcement follows a pledge late last year by Russian Prime Minister Vladimir Putin of some $4 billion in federal funding for pharmaceutical industry development over the next 10 years. The government has set a goal for local industry to produce 90% of Russia’s “essential medicines”—about half of the country’s total pharmaceutical sales—by 2020.”
Other recent examples of FDI made by the global majors in other countries, which will support my above statement, are as follows:

1. Novo Nordisk: US $100 million in Russia 2. Sanofi-Aventis: a plant in Saudi Arabia. 3. Eisai: relocated global Aricept manufacturing facility to India for worldwide export.

Conclusion:

‘The Journal of International Business Studies’ (1999) 30, 1–24 based on the results from an econometric analysis of 136 laboratory investments reconfirms that relative market size, growth and the strength of science base of a country would ultimately influence FDI in pharmaceutical research and development in an emerging market. The study also reiterated that these factors hold good for even Japanese, European and U.S. pharmaceutical companies.

Thus, to attract more FDI in the pharmaceutical sector and effectively compete with China, India should primarily focus in creating a vibrant and large domestic pharmaceutical product and services market reflecting sustainable high inclusive growth. A comprehensive ecosystem to provide healthcare to all, efficient regulatory mechanism, effective well balanced IP environment and a robust legal and financial framework will further hasten the process.

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.

Missing the woods for the trees – Yet another golden opportunity to rewrite the Drug Policy of India

Posted on May 30, 2011 by Tapan Ray

Long overdue the new ‘Drug Policy’ of India, since a long while, has been languishing as the ‘prisoner of indecision’ of the policy makers, while the outdated ‘1995 Drug Policy’ continues to remain operational since over a decade and half, by now.

The need for putting a new, robust, comprehensive, holistic and reform oriented ‘Drug Policy’ in place, sooner, is absolutely critical for the fast evolving pharmaceutical industry of India.
The ‘Drug Policy 1986’ clearly enunciated the basic policy objectives relating to drugs and pharmaceuticals in India, as follows:-

Ensuring abundant availability of medicines at reasonable price and quality for mass consumption.
Strengthening the domestic capability for cost effective, quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
Strengthening the system of quality control over drug and pharmaceutical production and distribution.
Encouraging R&D in the pharmaceutical industry in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an conducive environment.
Creating an incentive framework for the pharmaceutical and drug industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.

After having completed around 25 years since then, it is high time for the government to ponder and assess whether the successive drug policies have delivered to the nation the desirable outcome, as enunciated above.
‘Missing the woods for the trees’:

The overall objective of the ‘Drug Policy’ is indeed to help accelerating the all-round inclusive growth of the Indian pharmaceutical industry to make it a force to reckon with in the global pharmaceutical arena. At the same time, the policy should help creating an appropriate ecosystem to improve access to quality medicines at an affordable price to the entire population of the nation.

Just one pronged approach of drug price control mechanism for drugs and pharmaceuticals is in no way can be considered as a holistic approach to achieve the set objectives. Isolated initiative of price regulation could at best be treated as just one such important measures, out of very many, at the very best. This initiative may justifiably be construed as ‘missing the woods for the trees’.

Financial cover towards medical expenses for all, is very important:

One of the major issues in the healthcare space of the country is high out of pocket expenses by majority of the population. Financial protection against medical expenditures is far from universal in India with around 15% of the population having some sort of medical financial cover.

January 11, 2011 edition of ‘The Lancet’ in its article titled, “Financing health care for all: challenges and opportunities” commented as follows:

“India’s health financing system is a cause of and an exacerbating factor in the challenges of health inequity, inadequate availability and reach, unequal access, and poor-quality and costly health-care services. The Government of India has made a commitment to increase public spending on health from less than 1% to 3% of the gross domestic product during the next few years…. Enhanced public spending can be used to introduce universal medical insurance that can help to substantially reduce the burden of private out-of-pocket expenditures on health.”

A comparison of private (out of pocket) health expenditure:

1. Pakistan: 82.5% 2. India: 78% 3. China: 61% 4. Sri Lanka: 53% 5. Thailand: 31% 6. Bhutan: 29% 7. Maldives: 14%

(Source: The Lancet)

Food prices impact health more than medicine costs:

Year	Pharma Price Increases	Food Inflation
2008	1.1%	5.6%
2009	1.3%	8.0%
2010	0.5%	14.4%

Source: CMIE

The key affordability issue still remains unresolved:

The above edition of ‘The Lancet’ highlighted that outpatient (non-hospitalization) expenses in India is around 74% of the total health expenses and the drugs account for 72% of this total outpatient expenditure. The study has also pointed out that 47% and 31% hospitalization in rural and urban areas respectively, are financed by loans and sell of assets.

Around 35% of Indian population can’t afford to spend on medicines:

While framing the ‘Drug Policy’, the government should keep in mind that a population of around 35% in India, still lives below the poverty line (BPL) and will not be able to afford any expenditure towards medicines.

Adding more drugs in the list of essential medicines and even bringing them all under stringent price control will not help the country to resolve this critical issue.

Successive ‘Drug Policies’ of India focused on affordability and access just through ‘price control’:

There is no ‘One Size Fits All’ type of definition for affordability of medicines, just like any other essential commodities, especially when around 80% of healthcare expenditure is ‘out of pocket’ in India. Any price point, thus, may be affordable to some and unaffordable to some others.

The initiatives taken by the government in the successive drug policies, since the last four decades, have certainly been able to make the drug prices in India one of the lowest in the world.

However, very unfortunately, despite such price control, even today, 47% and 31% of hospitalization in rural and urban areas, respectively, are financed by private loans and selling of assets by individuals, as stated earlier.

Multi-dimensional approach to improve access to healthcare and affordable medicines:

Access to healthcare and affordable medicines can be improved through an integrated and comprehensive approach of better access to doctors, diagnostics and hospitals, along with price monitoring mechanism for each component of healthcare cost, including medicines.

Healthcare infrastructure in India is now constrained by a lack of trained healthcare professionals, limited access to diagnostics and treatment and availability of quality medicines. Moreover, while around 80% of Indians pay out of pocket for healthcare, the Government of India spends less than 1% of GDP on health.

Consequently, the supply of healthcare services falls significantly short of demand. The current figure of 9 beds per 10,000 in India is far from the world average of 40 beds per 10,000 people. Similarly, for every 10,000 Indians, there are just 6 doctors available in the country, while China has 20 doctors for the same number of Chinese population.

Access to affordable medicines still remains a key challenge for the ‘Drug Policy’ makers:

Over 46% of patients in India travel beyond 100 km. to seek medical care.

(Source: Technopak & Philips (2010) Accessible Healthcare: Joining the Dots Now, New Delhi).

Many places in rural India, lack of availability of good quality medicines such as antibiotics poses even a greater challenge than their affordability. The national immunization program provides 6 vaccines free of cost, yet just around 60% of the country’s population is covered by it. The National AIDS Control Organization (NACO) provides free ARV (Anti-Retroviral) treatment to the poor, yet the drugs do not reach more than 10% of those in need of the same.

Without proper equipment and doctors to diagnose and treat patients, medicines are of little value to those who need them most. Drug price regulation alone, though important, cannot increase access to healthcare without creation of adequate infrastructure required to ensure effective delivery and administration of the medicines, together with appropriate financial cover for health.

The Government won’t be able to do it all alone:

The Government needs to partner with the private sector to address India’s acute healthcare challenges through Public-Private-Partnership (PPPs) initiatives.

Recent examples of successful PPPs in the health sector include outsourcing ambulance services, mobile medical units, diagnostics and urban health centers in several states to private NGOs, hospitals and clinics. PPPs in India should adequately cover primary and specialty healthcare, including clinical and diagnostic services, insurance, e-healthcare, hospitals and medical equipment.

A golden opportunity for a new beginning:

Many of us may know that the modified Drug Policy of 2002 was challenged under a Public Interest Litigation (PIL) in the Karnataka High Court in the same year. The honorable High Court in its order had directed the Central Government to consider and formulate appropriate criteria to ensure that the essential and lifesaving drugs do not fall out of price control. The court, at that time, also directed the Government to review the drugs which are essential and lifesaving in nature.

The above matter came up before the honorable Supreme Court of India on March 31, 2011, when the Union of India made a statement that the Central Government has not implemented and is not going to implement the 2002 Policy and a new Drug Policy is being framed.

In view of the submissions made on behalf of Government of India, the appeal was disposed of as infructuous by the Supreme Court of India.

Expectations from the ‘New Drug Policy’:

In view of the above and especially when a new Drug Policy is being worked out, adequate and immediate policy measures, with an absolutely fresh look, are essential to address the root cause of the country’s failure to ‘Improve Access to Quality Medicines at Affordable Prices’ to ensure ‘Health for all’.

The Government has already signaled increasing allocation of resources towards the health sector by doubling the funding available for the National Rural Health Mission (NRHM) along with plans to extend ‘Rashtriya Swasthya Bima Yojna (RSBY)’ scheme to provide out-patient coverage to low income groups.

As has been demonstrated by many countries of the world, healthcare financing offers an enduring mechanism for reducing the out-of-pocket expenses of the poor and improve access to healthcare. Government and the private sector need to pool resources to expand health insurance coverage initially to at least 40% of the population who are below the poverty line. Positive developments are being reported in this area, as well, albeit slowly.

Allocating resources from national welfare schemes towards health insurance coverage is a step in the right direction. For example, a portion of the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) funds could be spent on health insurance premia for labors engaged in such work.

Thus to achieve the objective of ‘Improving Access to Quality Medicines at Affordable Prices’, there is a pressing need for the policy makers to put in place a robust healthcare financing model for all strata of the society, sooner than later. This initiative will significantly reduce high overall ‘out of pocket expenses’ towards healthcare in India by the common man.

Encourage healthy competition among healthcare providers:

Simultaneously, by encouraging tough competition within healthcare providers, like health insurance companies, all elements of healthcare expenditure like physicians’ fees, diagnostic tests, hospital beds, medicines etc. will be kept under tight leash by themselves, just to be more cost-effective in their businesses along with ensured patients’ satisfaction.

In such a competitive environment, the patients will be the net gainers, as we have seen in other knowledge based industries, like in the telecom sector with incredible increase in teledensity within the country.

Effective penetration of various types of innovative health insurance schemes will thus be one of the key growth drivers not only for the Indian pharmaceutical industry, but also for its inclusive growth, as desired by many in India.

The policy should also include an equally transparent system to ensure that errant players within the healthcare sector, who will be caught with profiteering motives, under any garb, at the cost of precious lives of the ailing patients, are brought to justice with exemplary punishments, as will be defined by law.

Conclusion:

I have no doubt that the presence of an effective drug price regulator in the country is absolutely necessary to keep a careful vigil on the drug prices.

At the same time one should realize that the good old routine approach in formulating the long overdue ‘New Drug Policy’, even if it includes all drugs featuring in the ‘National List of Essential Medicines (NLEM)’, would not suffice anymore to ‘improve access to quality medicines at an affordable price’ to the common man.

The real answer to affordable healthcare in India, including medicines, unlike the developed countries of the world, lies in the expertise of the policy makers in innovatively addressing the vexing issue of ‘around 80% out of pocket expenses towards healthcare’ by the ordinary citizens of the country.

This factor itself, in case of just one or couple of serious illnesses, could make a middle class household in India poor and a poor could be pushed even Below the Poverty Line (BPL).

Inadequate access to modern medicines in India, after 40 years of stringent drug price control and despite essential medicines being available in the country at the lowest price even as compared to Sri Lanka, Pakistan, Bangladesh and Nepal, will vindicate this critical point.

However, ‘The Economic Times’ dated May 23, 2011 has reported yet again, quoting Shri Srikant Jena, the Minister of State for Chemicals and Fertilizers, who oversees the pharmaceutical sector, that the Government ‘is putting together a host of policy changes to reduce the cost of medicines’.

This time around, let us sincerely hope that the drug policy makers do not repeat the same old folly of ‘missing the woods for the trees’.

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 quagmire of Pharmaceutical Pricing

Posted on May 16, 2011 by Tapan Ray

Pricing of Pharmaceutical Products has now become one of the most complex and sensitive areas of the business, like never before. This is mainly because of the concern on the impact of medicine prices to access of medicines, especially, in the developing markets, like India and the cost containment pressure of the governments as well as the healthcare providers in the developed markets of the world.

It is widely believed that invaluable pharmaceuticals products, which play a central role in keeping the population of a nation healthy and disease free to the extent possible, should not be exploited in efforts to make unreasonable profits by anyone.

Pharmaceutical companies are often criticized in this area by those stakeholders who are concerned with the well-being of ailing poor and underprivileged population globally. The debate of access to medicines continues to revolve round pharmaceutical pricing in almost all countries of the world. India is no exception.

Current scenario in some major countries:

Early April, 2009, China, a nation of 1.3 billion people, unfolded a plan for a new healthcare reform process for the next decade to provide safe, effective, convenient and affordable healthcare services to all its citizens. A budgetary allocation of U.S $124 billion was made for the next three years for this purpose.

Similarly, 2010 is also be remembered as yet another significant year in recent times to improve access to medicines to a large number of population by encouraging usage of low cost generics. In this year:

- With contentious new healthcare reform, President Obama expanded access to Health Insurance to additional around 40 million Americans and encouraged prescription of low cost generic medicines.

- The Governments in UK and European Union, including the largest market in the EU – Germany, introduced stringent cost containment measures for pharmaceutical products.

India and Japan signed a Comprehensive Economic Partnership Agreement (CEPA) in February 2011 where Japan will gain access to low cost Indian generic medicines by extending similar facilities, like Japanese, for drug registration and release to the Indian pharmaceutical players.

How much to charge for a brand of medicine?

While there is no single or right way to arrive at the price of a medicine, how much the pharmaceutical manufacturers will charge for a pharmaceutical brand still remains an important yet complex and difficult task, both locally and globally.

Pharmaceutical pricing model is changing: Pharmaceutical pricing mechanism has undergone significant changes across the world. The old concept of pharmaceutical price being treated as almost given and usually determined only by the market forces with very less regulatory scrutiny is gradually but surely giving away to a new regime.

Currently in many cases, the prices of even patented medicines differ significantly from country to country across the globe, reflecting mainly the differences in healthcare systems and delivery along with income status and conditions.

Global pharmaceutical majors, like GSK and Merck (MSD) have already started following the differential pricing model, based primarily on the size of GDP and income status of the people of those countries. This strategy includes India.

If this trend continues, a win-win situation could be created, when unmet needs of a large number of patient groups could be met with innovative medicines, paving the way for the innovator companies to register a healthy, both top and bottom line, business growth in these emerging markets of the world to effectively fund their R&D projects, besides other areas of business.

Four common pharmaceutical pricing models:

Following are the four common methods, which are usually followed to decide prices of medicines.

Cost-plus pricing (CPP): This is a method of arriving at a selling price where a pre-determined percentage is added to the cost price to cover profit.
Target return pricing (TRP): This method of pricing estimates the desired return on investment to be achieved from the fixed and working capital investment and includes the same in the price of a product.
Reference Pricing: In this method a product is sold at a price close to its main competing brand. The idea behind “reference pricing” is that certain drugs are interchangeable in terms of their therapeutic effectiveness within a disease group and reimbursement is based on the least expensive option. The concept started taking hold in Europe and has driven down pharmaceutical prices significantly in Germany.

Both the governments and patients save money in ‘Reference Pricing’ mechanism. However, all patients are free to choose a more expensive brand within the therapeutic group by paying the difference between the cost of those two drugs for reimbursement purpose.

Pharmacoeconomics based or Value-based pricing (PBP/VBP): Pharmacoeconomics, as we know, is a scientific model of setting price of a medicine commensurate to the economic value of the drug therapy. Pharmacoeconomics principles, therefore, intend to maximize the value obtained from expenditures towards medicines through a structured evaluation of products costs and disease outcomes.

PBP/VBP basically offers the best value for money spent. It ‘is the costs and consequences of one treatment compared with the costs and consequences of alternative treatments’.

Let me hasten to add that some shortcomings in PBP/VBP system have already been highlighted by some experts and are being debated. The key question that is being asked now is how to quantify the value of saved life or relief of intense agony of patients while arriving at a price of a drug based on PBP/VBP model.

PBP/VBP concept is gaining ground: The concept of ‘evidence-based medicine’, is gaining ground in the developed markets of the world, prompting the pharmaceutical companies generate requisite ‘health outcome’ data using similar or equivalent products. Cost of incremental value that a product will deliver is of key significance. Some independent organizations like, the National Institute for Health and Clinical Excellence (NICE) in the UK have taken a leading role in this area. PBP/VBP could help in ‘freeing-up’ resources to go to front-line healthcare: On November 11, 2010 ‘Pharma Times’ in a news item titled, “Government (UK) to consult on drug pricing in December” reported that newly-published business plan of the Department of Health for 2011-15 sets out the coalition government’s structural reform priorities for healthcare as follows:

Create a patient-led NHS
Promote better healthcare outcomes
Revolutionize NHS accountability
Promote public health
Reform social care

As per the Department of Health, UK, these reforms ‘will help to create a world-class NHS that saves thousands more lives every year by freeing up resources to go to the front line, giving professionals power and patients choice, and maintaining the principle that healthcare should be delivered to patients on the basis of need, not their ability to pay’. Global pharmaceutical companies using more ‘health outcomes’ data to set pricing strategies: Some global pharmaceutical companies have already taken pro-active measures on the subject. In early 2009, reported agreements between Sanofi-Aventis, Procter & Gamble and Health Alliance, as well as between Merck and Cigna, vindicate this point. These agreements signify a major shift in the approach of the global pharmaceutical industry to gather and use ‘health outcomes’ data.

In the Sanofi-Aventis/Procter & Gamble-Health Alliance agreement, concerned companies reported to have agreed to reimburse the expenses incurred by the Health Insurance companies for patients suffering from non-spinal bone fracture, while undergoing treatment with their drug Actonel.

In the Merck/Cigna agreement, Cigna will have the flexibility to price two diabetes drugs based on ‘health outcomes’ data. ‘Outcomes-based’ pricing strategies are expected to become the order of the day, in not too distant future, across the world.

The ground realities in India are very different: Medicines are very important and constitute a significant cost component of modern healthcare systems, globally. In India, overall healthcare system is fundamentally different from many other countries, including China. In many of those countries around 80% of expenses towards healthcare including medicines are reimbursed either by the Governments or through Health Insurance or similar other mechanisms.

However, in India the situation is just the reverse, about 80% of overall healthcare costs including medicines are private or out of pocket expenses incurred by the individuals/families. The corresponding figures for the same in China is 61%, Sri Lanka 53%, Thailand 31% and Bhutan 29% (Source: TOI, May 8, 2011).

What’s happening in India now?

Currently in India CPP is being followed by the Government for all those pharmaceutical products which are under ‘Price Control’. However, for products which are outside price control, pharmaceutical manufacturers, by and large, follow the TRP model.

National Pharmaceutical Pricing Authority (NPPA) of the country still remains far behind in this respect and is almost groping in the dark to appropriately address this critical issue.

Many believe that NPPA has been taking arbitrary, non-pragmatic, non-transparent and populist pricing decisions since decades and has not been able to improve access to medicines significantly to a vast majority of population of the country even today. A pragmatic and modern approach in this area is the crying need of the time.

Conclusion:

PBP/VBP pricing models will be able to help yielding true benefits to the civil society only when its healthcare system and pharmaceutical coverage are integrated and made universally available to all, without any exception.

In India, before considering this approach, long overdue healthcare reform process should first be initiated to ensure universal healthcare coverage, together with a robust and comprehensive health insurance model for all strata of society, without further delay.

It is widely believed, without universal coverage of healthcare supported by clearly assigned, organized and well-integrated healthcare providers, the use of PBP/VBP models could prove to be counterproductive with further aggravation of inequities and inefficiencies in the healthcare system of the country.

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.

e-healthcare: A new vista to improve access to quality and affordable healthcare in India

Posted on May 9, 2011 by Tapan Ray

The concept of e-healthcare started germinating in India since 1999, when the ‘Indian Space Research Organization (ISRO)’ initiated its pioneering step towards telemedicine in the country by deploying a SATCOM-based telemedicine network. This network is currently playing a key role in the evolution and development of e-healthcare in the country. ISRO, with its fine blending of application of world class satellite communication technology with modern medical science and information technology (IT), has engaged itself very seriously to ensure availability of quality and affordable specialty healthcare services right at the doorsteps of a vast majority of population living even in the distant and remote places of the rural India.

However, despite telemedicine gaining slow momentum in India, there is no law in place for ethical, affordable and patient friendly use of e-healthcare facilities in the country. Considering its vast scope of improving access to healthcare, cost effectiveness and a convenient ways to deliver e-healthcare services to a very large number of patients, especially, located in the distant locations of the country, the law makers should urgently ensure that this important healthcare service is not misused or abused by unscrupulous elements, in any way.

Very recently, taking into consideration this critical legal requirement the Medical Council of India (MCI) has decided to soon forming a panel to address the ethical issues related to e-healthcare in India.

Delivery of e-healthcare through telemedicine:

The World Health Organization (WHO) has defined telemedicine as follows: “The delivery of healthcare services, where distance is a critical factor, by all healthcare professionals using information and communication technologies for the exchange of valid information for diagnosis, treatment and prevention of disease and injuries, research and evaluation, and for continuing education of healthcare providers, all in the interests of advancing the health of individuals and their communities.”

As stated above, telemedicine is gradually gaining popularity in India, like in many other countries of the world. This emerging e- healthcare service has the potential to meet the unmet needs of the patients located in the far flung areas, by providing access to medical specialists for treatment of even tertiary level of their ailments, without requiring traveling outside their villages or small towns where they reside.

The key objectives of e-healthcare:

1. To provide affordable quality healthcare services even to those places where these are not available due to lack of basic healthcare infrastructure and delivery issues.

2. Speedy electronic transmission of clinical information of both synchronous and asynchronous types, involving voice and data transfer of patients to distantly located experts and get their treatment advice online.

3. To effectively train the medics and the paramedics located in distant places and proper management of healthcare delivery/service systems.

4. Disaster management.

The Process:

The process can be: – ‘Real time’ or synchronous when through a telecommunication link real time interaction between the patients and doctors/experts can take place. This technology can be used even for tele-robotic surgery. – ‘Non-real time’ or asynchronous type when through a telecommunication link, stored diagnostics/medical data and other details of the patients are transmitted to the specialists for off-line assessment and advice at a time of convenience of the specialists.

These processes facilitate access to specialists’ healthcare services by the rural patients and the medical practitioners alike by reducing avoidable travel time and related expenses. At the same time, such interaction would help upgrading the knowledge of rural medical practitioners and paramedics to hone their skill sets.

The Promise:

e-healthcare is capable of taking modern healthcare to remote rural areas using Information Technology (IT), as specialists are mostly located in the cities. As majority of the diseases do not require surgery, e-healthcare would prove to be very conducive to such patients and economical too.

Relevance of e-healthcare in India:

With its over 1.2 billion population and equally huge disease burden, spreading across distant semi-urban and rural areas, where over 70 per cent of the population of the country lives, India should focus on e-healthcare to meet unmet healthcare needs of the common man, at least, located in far-flung areas. e-healthcare, therefore, is very relevant for the country, as it faces a scarcity of both hospitals and medical specialists. In India for every 10,000 of the population just 0.6 doctors are available.

According to the Planning Commission, India is short of 600,000 doctors, 1 million nurses and 200,000 dental surgeons. It is interesting to note that 80 percent of doctors, 75 percent of dispensaries and 60 percent of hospitals, are situated in urban India.

Progress of e-healthcare in India:

Equitable access to healthcare is the overriding goal of the National Health Policy 2002. e-healthcare has a great potential to ensure that the inequities in the access to healthcare services are adequately addressed by the country.

Very encouragingly, a good number of even super-specialty hospitals like, Apollo Group of Hospitals have unfolded the launch plan of ‘Healthcare India Pharmaceutical Registry (HIPAAR)’, which is an electronic drug database for reference by the doctors and patients. Apollo Group feels that HIPAAR module will enable the patients to know whether right medications have been used or not to treat the ailment that the concerned patient is suffering from along with the information of possible adverse effects of the medicines prescribed to them.

Currently, in the dedicated e-healthcare centers of ‘Narayana Hrudayalaya group’ pioneered by Dr Devi Shetty, patients from far-flung areas can have consultations with doctors in Bangalore.

Similarly, Asia Heart Foundation (Kolkata) and Regional Institute of Medical Science (Imphal, Manipur) are currently providing multi-specialty e-healthcare through telemedicine to 10 district hospitals, which will be extended to 75 District Hospitals, shortly. At the same time, some Government hospitals also have started extending e-healthcare through telemedicine facilities, which among others will handle e-transfer of medical data of patients like, X-ray, CT scan and MRI for not only diagnosing the disease, but also for treatment and medical consultation. Department of telemedicine of Sir Ganga Ram Hospital of New Delhi is one such example.

Well reputed cancer hospital of India, Tata Memorial Hospital (TMH) of Mumbai is now well connected with B.Barooah Cancer Institute of Guwahati, Assam and K.L Walawalkar Cancer Center of Chiplun, Maharashtra. Over a short period of time TMH plans to connect with 19 such regional cancer institutes.

Today the Center for Health Market Innovations (CHMI), a global network of partners that seeks to improve the functioning of health markets in developing countries to deliver better results for the poor, profiles more than 55 telemedicine programs globally including 24 in India.

Public Private Partnership:

As the Ministry of Health and Family welfare has now constituted a ‘National Telemedicine Taskforce’, some private healthcare institutions, as mentioned above, and various State Governments like, Tamil Nadu, Andhra Pradesh, Kerala and West Bengal have started taking admirable initiatives to translate the concept of e-healthcare into reality, especially for the rural India. Subsequently, private e-healthcare solution providers have also started coming-up, though in a sporadic manner. Active participation of the civil society and meaningful Public Private Partnership (PPP) projects are essential not only to get engaged in creating awareness for e-healthcare within India, but also to ensure that required blend of a high quality technical and medical manpower that the country currently possesses are effectively utilized to establish India as a pioneering nation and a model to emulate, in the field of e-healthcare.

The market of e-healthcare in India:

Frost & Sullivan (2007) estimated the e-healthcare (telemedicine) market of India at US$3.4 million is expected to record a CAGR of over 21 percent between 2007 and 2014.

More fund required for e-healthcare:

e-healthcare shows an immense potential within the fragile brick and mortar public healthcare infrastructure of India to catapult rural healthcare services, especially secondary and tertiary healthcare, to a different level altogether. Current data indicate that over 278 hospitals in India have already been provided with telemedicine facilities. 235 small hospitals including those in rural areas are now connected to 43 specialty hospitals. ISRO provides the hospitals with telemedicine systems including software, hardware, communication equipment and even satellite bandwidth. The state governments and private hospitals are now required to allocate adequate funds to further develop and improve penetration of Telemedicine facilities in India.

Issues with e-healthcare in India:

– Telemedicine will not be immune to various complicated legal, social, technical and consumer related issues.

- Some government doctors could feel that for e-healthcare they need to work extra hours without commensurate monetary compensation

- The myth created that setting up and running any e-healthcare facility is expensive, needs to be broken, as all the related costs can be easily recovered by a hospital through nominal charges to a large number of patients, who will be willing to avail e-healthcare facilities, especially from distant parts of India.

- Inadequate and uninterrupted availability of power supply could limit proper functioning of the e-healthcare centers.

- High quality of telemedicine related voice and data transfer is of utmost importance. Any compromise in this area could have a significant impact on the treatment outcome of a patient.

- Lack of trained manpower for e-healthcare services needs to be addressed quickly by making it a part of regular medical college curriculum, just as the University of Queensland in Australia has it for their Graduate Certificate in e-Healthcare (GCeH). A pool of competent professionals for e-healthcare services in the country will be a step in the right direction.

- Reimbursement procedure of e-healthcare treatment costs by the medical insurance companies needs to be effectively addressed.

Conclusion:

For an integrated and sustainable healthcare delivery model covering the entire population of the country, a robust e-healthcare strategy is absolutely essential. Three critical success factors for e-Healthcare initiatives may be considered as follows:

A comprehensive government policy
Increasing level of literacy
Power and telecommunications infrastructure

Unlike common perception, for greater effectiveness and better acceptance of any sustainable e-healthcare service project, the focus should be the same or rather a little more on non-technological areas like consumer mindset and competent healthcare providers than technological factors such as biomedical engineering or information technology.

A very large rural population of India living in remote areas could get access to affordable and quality health related services through e-healthcare facilities, which, I reckon, should be made to play a very special and critical role to address the healthcare needs of the common man. With its gradually increasing coverage, it is imperative that required regulatory standards and guidelines for e-healthcare are put in place across the country, sooner. Technological expertise to make e-healthcare successful is already available in India. The pioneering role that ISRO has been playing in this field is still not known to many.

Thus, to make e-healthcare successful, the country needs to create an appropriate groundswell for the same. All powerful and effective ‘Fourth Estate’ of the country should demonstrate greater interest to initiate a healthy discussion on e-healthcare by all stakeholders and play the role of a facilitator to ensure access to quality and affordable healthcare to all the people of India.

By: Tapan J Ray

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

Deadly ‘Superbugs’: The larger issues

Posted on April 11, 2011 by Tapan Ray

Every year, April 7 is observed as ‘World Health Day’ across the globe. This year, 2011, is no exception. However, interestingly considering the increasing debate on the antibiotic resistance ‘Superbug’, the theme of this year has been very aptly coined as “No action today, no cure tomorrow”.

April 2011 issue of ‘The Lancet’ reported again the presence of drug-resistant bacteria NDM-1 in the public water system of Delhi.

Some observers in this area commented that this report is clearly aimed at raising alarm by recycling an old claim that has been found to be contentious, clearly suggesting indirectly that foreigners who visit India for medical and cosmetic treatments may carry back the deadly microbes with them to their respective countries.

The new report attempts to establish that the ‘Superbug NDM-1′ is no longer a hospital-born infection but can also spread through contaminated water and food. Understandably, this has raised a hue and cry in India.

Ministry of Health ridicules ‘The Lancet’ April study:

Last week the Ministry of Health rejected the above study observing that it was not only conducted with “motivated intentions”, but is illegal too. As transport of water samples for such study out of the country requires prior permission from regulatory authorities. The authenticity of the samples also appears to be questionable, as these were reportedly to have been collected by a TV reporter.

However, just a day after the government rejected ‘The Lancet’ report, it formed a committee to look into the findings of the study, as announced by Dr R K Srivastava, Director General of Health Services, Government of India.

However, ‘The Lancet’ stands by this study report.

August 2010 report of ‘The Lancet’:

One will perhaps recall that on August 11, 2010, “The Lancet” published similar article highlighting that a new antibiotics-resistant “Superbug” originating from Pakistan has taken its first life. This happened when a patient brought to a hospital in Belgium died in June 2010 after having met with a car accident in Pakistan, where from the person got infected with this “Superbug”.

The above article was written by a team of international researchers including an Indian. The study elaborated that a new variety of enzyme named after India’s national capital New Delhi, called, “New Delhi Metallo beta lactamase” in short “NDM 1” turns any bacteria into a deadly “Superbug”, making it resistant to all types of antibiotics, leaving virtually no cure in sight. This deadly “Superbug” was reported to have already reached the United Kingdom through patients who acquired it from the hospitals in India and has the potential to precipitate serious health issues across the world. “The New Delhi Superbug” was discovered even earlier: The ‘The Lancet’ report generated a sharp reaction in India and from some of its authors regarding its authenticity. Some experts even termed this study as the ‘Western plot to undermine medical tourism in India’. A leading daily of India reported, “Indian medical journal first documented Superbug”. It stated that that the first ever formal documentation of this ‘Superbug’ was made in 2009 at the P.D. Hinduja National Hospital and Medical Research Centre located in Mumbai. This finding was published in the ‘Journal of the Association of Physicians in India (JAPI’) in March 2010. The reason for the emergence of the ‘Superbug’ was attributed to the ‘worrisome outcome of the indiscriminate use of antibiotics’. “Unfair to blame the country for the ‘New Delhi’ Superbug”: Reacting to the August article, Indian health authorities opined at that time, “It is unfortunate that this new bug, which is an environmental thing, has been attached to a particular country.” The reasons being, “Several superbugs are surviving in nature and they have been reported from countries like Greece, Israel, the U.S., Britain, Brazil and there is no public health threat and no need to unnecessarily sensationalize it”.

Some experts, however, feel, “such drug resistant pathogens, is a global phenomenon and is preventable by sound infection prevention strategies which are followed in any good hospital.”

Based on this report the ‘National Center for Disease Control of India’ started working on guidelines for appropriately recording these types of nosocomial (hospital acquired) infections.

“Superbug Hype” and Medical Tourism:

Many people of both India and Pakistan felt since then that in absence of an effective response by the health authorities, especially in India, the fast evolving Medical Tourism initiatives providing medical services ranging from complicated cardiovascular, orthopedic and cerebrovascular surgery to other life-threatening illnesses, may get adversely impacted.

The ‘blame game’: Experts have opined that overuse, imprudent or irrational use of antibiotics without any surveillance protocol is the root cause for emergence of “Superbugs”, though some Indian parliamentarians had termed the August article as the propaganda by some vested interests.

It has been alleged that the study was funded by the Wellcome Trust and Wyeth, the two global pharmaceutical companies who produce antibiotics to treat such conditions, together with the European Union.

In this context it is worth mentioning that ‘The Lancet’ article of August 2010 in its disclosures says:

“Kartikeyan K Kumarasamy has received a travel grant from Wyeth… David M Livermore has received conference support from numerous pharmaceutical companies, and also holds shares in AstraZeneca, Merck, Pfizer, Dechra, and GlaxoSmithKline, and, as Enduring Attorney, manages further holdings in GlaxoSmithKline and Eco Animal Health. All other authors declare that they have no conflicts of interest.” Not a first time reported incidence: This type of situation has indeed some precedents. When ‘MRSA’ was reported for the first time, it caused similar scare. However, this time many experts feel that it is too early to conclude whether or not ‘NDM-1’ will eventually prove to be more dangerous than ‘MRSA’. Several such “Superbugs”, as stated earlier, have already been reported from countries like Greece, Israel, USA, UK, and Brazil. As I know, in the battle against infectious diseases involving both the scientists and the bacteria, the later had to succumb mostly, in the long run. ‘NDM-1′ perhaps will be no exception. All concerned must continue to make it happen, not by mere wishful thinking but by establishing a strong procedural mechanism to keep a careful vigil on the reasons for emergence of drug resistant bacterial strains in the country.

The World Health Organization (WHO) perspective:

On Saturday, August 21, 2010 the WHO commented, “while multi-drug resistant bacteria are not new and will continue to appear, this development requires monitoring and further study to understand the extent and modes of transmission, and to define the most effective measures for control”.

International Cooperation:

US based Center for Disease Control and Prevention (CDC), which is known as one of the world’s best-known institute for handling ‘Superbugs’, will help India in its capacity building efforts to better detect pathogens like NDM-1.

In India, the National Center for Disease Control (NCDC) with state of art facilities is expected to commence working from the next year. The facility is expected to be equipped with highly-advanced bio-safety level-II and BSL-III laboratories and would cost around Rs 382.41 Crore.

The larger issue:

The larger issue is that antibiotic resistance is fast becoming a global health concern as drug-resistant bacteria can turn a simple infection life threatening. According to the World Health Organization, ‘some 440,000 new cases of tuberculosis resistant to different types of drugs were detected last year in 60 countries across the world.’

Thus the emergence of drug-resistant ‘Superbug’ is being seen by many experts as a natural process of evolution of organisms. However, it goes without saying that indiscriminate use of antibiotics is hastening this deadly process.

R&D focus shifted more towards chronic illnesses:

Besides the reasons attributed to emergence of such “Superbugs”, as discussed earlier, one more important issue I could foresee in today’s environment compared to the past decades.

This issue possibly lies in the drastic shift in focus of pharmaceutical R&D from discovery of novel drugs for short term treatment of infectious diseases to discovery of potentially greater money spinner drugs for life-long treatment of non-infectious chronic illnesses like, metabolic disorders (diabetes), hypertension, cardiovascular diseases, psychiatric disorders, cancer, vaccines etc. This shift in the R&D focus has obviously been prompted by the tilt in the prevalence of the disease pattern towards the same direction. As a consequence, one notices hardly any significant and novel molecules in the research pipelines of either global or local pharmaceutical companies to treat antibiotic-resistant infections.

As reported by the ‘Infectious Diseases Society of America’ between 1983 and 1987 sixteen new patented antibiotics were approved by the US FDA, while from 2003 to March 2011 only seven patented antibiotics were launched in the international market.

It is understandably not an ‘either/or’ situation so far as R&D target molecules are concerned. However, as we all know, in life-threatening conditions both types of drugs have their respective places to save precious lives.

Conclusion:

Let the global innovators ponder over the issue for newer antibiotics to counter the emerging ‘Superbugs’.

In India, the Ministry of Health should consider strictly implementing the measures suggested by the task force set up last year to prevent indiscriminate use of antibiotics. Such measures include a ban on sale of antibiotics without prescriptions and simultaneously regular audits of prescriptions of the doctors to stop irrational use of such drugs.

The need of the hour is a well-orchestrated effort by the Government, members of the civil society and the medical fraternity to have full control on this growing menace, through tangible, prudent and truly patient-friendly action .

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.

Explore the Emerging Markets with the ‘Wings of Courage’.

Posted on March 7, 2011 by Tapan Ray

Overall growth rate of the global pharmaceutical industry is currently hovering around 5%. Similar situation has been prevailing since last several years. There is no indication of acceleration of growth rate from any of the top 3 regions of the world namely the USA, EU and Japan, at least in the near future.

According to IMS, the global pharmaceutical market is expected to grow around 5%-7% in 2011 to US$ 880 billion, as compared to around 4%-5% of 2010.

The reasons of the slowdown, I have discussed several times in the past through this column and do not intend to dwell on that, at least, in this Article.

The Emerging Markets of the World:

Unlike developed markets, emerging pharmaceuticals market of the world, like, India, China, Brazil, Russia, Mexico, Turkey and Korea, are showing a robust growth rate, quite commensurate to the ascending GDP growth trend of these countries.

According to IMS, the projected CAGR trend of the developed and Emerging Markets for the period of 2007–11, are as follows:

Mature Markets	CAGR 2007-11	Emerging Markets	CAGR 2007-11
USA	4-7%	China	13-16%
Canada	6-9%	Korea	8-11%
Japan	2-5%	Brazil	9-12%
Germany	3-6%	Russia	17-20%
France	2-5%	Mexico	6-9%
Italy	3-6%	India	11-14%
UK	4-7%	Turkey	9-12%
Spain	5-8%

(Source IMS)

Branded Generics/Generics are now key growth drivers in the Emerging Markets:

It is worth noting, unlike the developed markets of the world, where high priced branded patented drugs drive the value growth of the industry, in the emerging markets, where investment towards R&D is relatively less, branded generic and the generic products are the key growth drivers.

Such an evolving situation has prompted large global majors like Pfizer, GSK, Sanofi-aventis, Daiichi Sankyo and Abbott Laboratories, to name a few, either to acquire large generic or Biosimilar drug companies or ink various interesting and win-win collaborative deals, in these markets, to maintain their respective business growth with the branded generic and generic products in the fast growing emerging markets of the world.

Will Emerging Markets be lucrative enough only with Generic and Branded Generic products, in the long run?

Some experts do feel that, in the long run, the emerging pharmaceutical markets, like India, may not prove to be as lucrative to the global pharmaceutical majors.

The key reason being, around 80% ‘out of pocket’ expenditure for medicines in India, could be the key impediment to expanded access to higher priced innovative medicines, in general. Such a situation could seriously limit the success of branded patented drugs in India following their global strategy, compared to the developed markets of the world. The issue of affordability of such medicines will continue to be a key factor for their improved access in India, if the ground reality remains unchanged. Top line business growth only with Generics and Branded Generics in the emerging markets may not be sustainable enough, in the long run, for the innovator companies to adequately fund their R&D initiatives to meet the unmet needs of the patients.

The other school of thought:

The other school of thought, however, argues that ‘out-of pocket” characteristic of India is indeed more sustainable in terms of cost containment pressure, than those markets where the government or health insurance companies cover a large part of the medical expenses for the population.

Every year around 1% of population comes above the poverty line in India together with a growing ‘middle income’ segment with increasing purchasing power. This cycle, in turn, will keep fueling the growth of healthcare space, contributing significantly to the progress of the pharmaceutical industry of the country.

‘One size fits all’ global strategy unlikely to succeed in the ‘Emerging Markets’:

In my view ‘One size fits all’ type of strategy, especially in the area of pricing, is unlikely to succeed in the emerging markets of the world. Pharmaceutical Companies will need to have different types of ‘tailor made’ strategic approaches for markets like Brazil, Russia, India, China, South Africa, Mexico, Korea and Turkey.

Pricing Strategy will be a key determinant to success:

For better access to medicines, ‘differential pricing strategy’ has been the stated policy of large global companies like, GSK and MSD. If this trend continues, a win-win situation could be created, when unmet needs of a large number of patient groups could be met with innovative medicines, paving the way for the innovator companies to register a healthy, both top and bottom line, business growth in these markets to effectively fund their R&D projects, besides others.

The most successful brand launch in India, so far:

The credit for the most successful new patented product launch (launched in 2008) in the recent times, I reckon, should go to Januvia (Sitagliptin), an oral anti-diabetic molecule from the global major MSD. The reported global sales of Januvia in 2008 was US $1.4 billion and the sales reported in India was around Rs. 77 Crore (around US $17 million) in just over two years with around 2.4% market share in the large and fragmented Oral Ant-Diabetic segment (IMS, MAT March 2010). This could happen, in my view, not only due to a brilliant business strategy executed with military precision but also because of a differential pricing strategy adopted by the company for this particular product in India.

In recent times, it has not been difficult to record a turnover of around US $ 20 – 25 million by a large pharmaceutical brand either in India or China.

Conclusion:

If this does not happen, due to one reason or the other, it would arguably be quite challenging for the global innovators to be able to keep engaged in the high-cost and high-risk R&D initiatives, by driving their business growth mainly with generic and branded generic medicines in the fast growing emerging markets of the world.

Thus the name of the game for the global innovator companies will be to Explore the Emerging Markets with the ‘Wings of Courage’.

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.

Dissapointing: No proposal of ‘Healthcare Reform’ in the Union Budget of India for 2011-12: China rolled it out in 2009.

Posted on February 28, 2011 by Tapan Ray

January 15, 2011 issue of ‘The Lancet’ in an article titled, “Learning from others” states the following:

“Having universal coverage through a public commitment does have costs, including public costs. The proportion of national expenditure on health that is met by the government is 26% in India and 45% in China. Or, to look at a related contrast, while government expenditure on health care in India is only around 1·1% of its GDP, it is around 1·9% in China. One need not be a genius to see that if the government of a country is ready to spend more on health, it could expect better results in terms of the health of the people.”

While comparing India with China, I reckon, one should take into account of larger disease burden in India as compared to China and the cost that India pays due to slow progress of reform processes in a democratic framework with open and free society and the vibrant outspoken media in the country. Further, the healthcare reform processes in China started over a decade earlier than India, resulting in a significant difference in the healthcare infrastructure, healthcare delivery and the healthcare financing systems of both the countries, over a period of time.

Access to safe drinking water and sanitation:

Access to safe drinking water in India may be comparable to other emerging economies, but sanitation condition in India needs radical improvement. According to World Health Organization (WHO, 2009) the Access to potable water and improved sanitation in those countries are as follows:

Country	Drinking Water (% population)	Sanitation (% population)
India	89	28
Brazil	91	77
China	88	65
Mexico	95	81
South Africa	93	59

Key issues in the Public Hospitals:

The ethical issues, which the patients face, especially, in the hospitals of India, I reckon, have not been reported for China by the Transparency International.

Transparency International India (2005) had reported the following seven key issues and irregularities experienced by the patients at the Government Hospitals in India:

Medicines unavailable: 52%
Doctors suggest a visit to their private clinic: 37%
Doctors refer to private diagnostic centers: 31%
Over-prescription of medicines: 24%
Bribes demanded by staff: 20%
Diagnostics tests done even when unnecessary: 18%
Doctors are absent: 13%

All these continue to happen in India, with no respite to patients, despite ‘Hippocratic Oath’ being taken by the medical profession and the new MCI guidelines for the doctors being in place within the country. Moreover, a miniscule spend of 1% of the GDP by the Government of India towards public healthcare of the nation, is indeed a shame.

Healthcare Reform in China:

Early April, 2009, China, a country with 1.3 billion people, unfolded a plan for a new healthcare reform process for the next decade to provide safe, effective, convenient and affordable healthcare services to all its citizens. A budgetary allocation of U.S $124 billion has been made for the next three years towards this purpose.
China’s last healthcare reform was in 1997:
China in 1997 took its first reform measures to correct the earlier practice, when the medical services used to be considered just like any other commercial product. Very steep healthcare expenses made the medical services unaffordable and difficult to access to a vast majority of the Chinese population.
Out of pocket expenditure towards healthcare services also increased in China:
The data from the Ministry of Health of China indicates that out of pocket spending on healthcare services more than doubled from 21.2 percent in 1980 to 45.2 percent in 2007. At the same time the government funding towards healthcare services came down from 36.2 percent in 1980 to 20.3 percent in the same period.
Series of healthcare reforms were effectively implemented since then like, new cooperative medical scheme for the farmers and medical insurance for urban employees, to address the situation prevailing at that time.
The core principle of the new phase of healthcare reform in China:
The core principle of the new phase of the healthcare reform process in China is to provide basic health care as a “public service” to all its citizens, where more government funding and supervision will assume a critical role.
The new healthcare reform process in China will, therefore, ensure basic systems of public health, medical services, medical insurance and medicine supply to the entire population of China. Priority will be given to the development of grass-root level hospitals in smaller cities and rural China and the general population will be encouraged to use these facilities for better access to affordable healthcare services. However, public, non-profit hospitals will continue to be one of the important providers of medical services in the country.
Medical Insurance and access to affordable medicines in China:
Chinese government plans to set up diversified medical insurance systems. The coverage of the basic medical insurance is expected to exceed 90 percent of the population by 2011. At the same time the new healthcare reform measures will ensure better health care delivery systems of affordable essential medicines at all public hospitals.
Careful monitoring of the healthcare system by the Chinese Government:
Chinese government will monitor the effective implementation and supervision of the healthcare operations of not only the medical institutions, but also the planning of health services development, and the basic medical insurance system, with greater care.
It has been reported that though the public hospitals will receive more government funding and be allowed to charge higher fees for quality treatment, however, they will not be allowed to make profits through expensive medicines and treatment, which is a common practice in China at present.
Drug price regulation and supervision in China:
The new healthcare reform measures will include regulation of prices of medicines and medical services, together with strengthening of supervision of health insurance providers, pharmaceutical companies and retailers.
As the saying goes, ‘proof of the pudding is in the eating’, the success of the new healthcare reform measures in China will depend on how effectively these are implemented across the country.

Besides Democracy, China has something to learn from India too:

The article, as mentioned above, from ‘The Lancet’ concludes by saying that unlike China, the real progress in India has come out of public discussion and demonstration within the democratic set-up in India. One such program is distribution of cooked mid-day meals to school children and selected interventions in child development in pre-school institutions. Such programs are currently not available in China for development of proper physical and mental health of, especially, the children of the marginalized section of the society

Conclusion:
There exists a sharp difference between India and China in the critical healthcare delivery system. The Chinese Government at least guarantees a basic level of public funded and managed healthcare services to all its citizens. Unfortunately, the situation is not quite the same in India, because of various reasons.
High economic growth in both the countries has also led to inequitable distribution of wealth, making many poor even poorer and the rich richer, further complicating the basic healthcare issues involving a vast majority of poor population of India.
To effectively address the critical issues related to health of its population, the Chinese Government has already announced a blueprint outlining its new healthcare reform measures for the next ten years. How will the Government of India respond to this situation for the new decade that has just begun?

It was very dissapointing to learn from the Union Budget speech of the Finance Minister of India for 2011-12 that the perspective of our Government on the importance of healthcare for the fellow citizens of India, still remains indifferent.

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.

Are Indian patients victims of “unnecessary tests and procedures, rewards for referrals and irrational use of drugs?” A perspective

Posted on January 24, 2011 by Tapan Ray

Since quite some time, serious concerns have been expressed by the media, government and the civil society at large about the means adopted by the pharmaceutical industry in general to get their respective brands prescribed by the doctors and why do some of the doctors prescribe what they prescribe to the patients out of multiple available choices.
The MCI Guidelines:
Being concerned mainly by the media outcry, the Medical Council of India (MCI), a year ago, amended their related guidelines for the doctor, clearly articulating what they can and cannot do during their interaction and transaction with the pharmaceutical and related industries.
The Ministry of Health believes that these guidelines, if strictly enforced, would severely limit what the doctors can receive from the pharmaceutical companies in terms of free gifts of wide ranging financial values, entertainments, free visits to exotic locations under various commercial reasons, lavish lunch and dinner etc. in exchange of prescribing specific brands of the concerned companies more…more…and more.
“The Lancet” report:
Let me now combine this scenario with a recent report on India dated January 11, 2011, published in ‘The Lancet’, which states in a similar, though not the same context, as follows:
1. “Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.”
2. “Most people accessed private providers for outpatient care – 78% in rural areas and 81% in urban areas.”
3. “India’s private expenditure of nearly 80% of total expenditure on health was much higher than that in China, Sri Lanka and Thailand.”
Considering the above three critical issues of India, as reported by ‘The Lancet’, the need to follow a transparent code of pharmaceutical marketing practices by the entire pharmaceutical industry is of utmost importance. Recently amended MCI guidelines for the doctors are welcome steps in the right direction.
Are patients just the pawns?
In the absence of all these, the patients of all socio-economic strata will continue to be exploited as pawns by some unscrupulous healthcare players to satisfy their raw greed for making fast bucks at the cost of the intense agony of the ailing patients and their near and dear ones.
As stated earlier, this phenomenon is not new at all. Over a period of time, many stakeholders of the pharmaceutical industry and the public at large have been raising the issue of physicians being influenced in their prescription decisions by various types of payments made to them by the pharmaceutical companies. Such types of significant and seemingly avoidable expenditures, presumed to be considered by the respective companies as a part of their ‘marketing costs’, are believed to be included in the maximum retail price (MRP) of medicines, making them more expensive to the patients.
On the other hand, most physicians believe that free entertainment, gifts, their travel costs and seminar sponsorships in no way influence their prescription decision for the patients.
This is not a just India specific issue. Some skeptics believe that it has now become an all pervasive global scandal.
Self-regulation by the industry is most desirable:
To address this issue effectively, some national and international pharmaceutical associations have come out with their own codes of ethical marketing practices along with appropriate stakeholder grievance redressal mechanism, effectively.
Despite all these, it is an undeniable fact that overall perceptual image of the pharmaceutical industry in this respect to the stakeholders, in general, is not as good as it should have been.
The Government intervened in India:
Being alarmed by various media reports on the alleged pharmaceutical marketing (mal) practices in the country, the Department of Pharmaceutical (DoP) had advised the pharmaceutical industry to develop an ‘Uniform Code of Marketing Practices (UCMP)’, which will be applicable to the entire pharmaceutical industry in India.
It has been reported that the said UCMP with its stakeholder grievance redressal mechanism in a transparent procedural format, was submitted to the government by the major pharmaceutical industry associations in India. However, because of dissent of some section of the industry, the UCMP has not received the ‘green signal’ of the government, as yet. It was expected that all stakeholders will help maintaining the sanctity of the UCMP to address this sensitive global and local issue, effectively.
An emerging trend of public disclosure:
Around third quarter of 2008, in an industry first step, Eli Lilly announced its intent of full disclosure of payments that the company made to the physicians for various commercial reasons. Eli Lilly indicated disclosure of payments of more than US $500 to the physicians for advice and speaking at the seminars. Over a period of time, the company indicated that it will expand such disclosure to include other forms of payments to the physicians like gifts, various entertainment and travel.
Eli Lilly was soon followed in this direction by global pharmaceutical majors like, Merck and GlaxoSmithKline (GSK).
However, in India, such instances have not been reported, as yet.
Skepticism with voluntary disclosure:
Some are still skeptical about announcements of such ‘voluntary disclosure of payment to the physicians’ by the global pharmaceutical majors to bring in better transparency in the functioning of the industry.

This section of people believes, there are hundreds and thousands of other pharmaceutical companies, who will not follow such precedence of voluntary disclosure in the absence of any properly enforced regulation.
Conclusion:
In all the countries and India is no exception, pharmaceutical companies, by and large, try to follow the legal ways and means to maximize turnover of their respective brands. Many follow transparent and admirable stringent self-regulations, stipulated either by themselves or by their industry associations.
‘Self-regulation with pharmaceutical marketing practices’ and ‘voluntary disclosure of payment to the physicians’ by some leading global pharmaceutical companies are laudable steps to address this vexing issue. However, the moot question still remains, are all these good enough for the entire industry?
It is about time that all players in the healthcare space realize, in case these voluntary measures of the industry and the guidelines of the regulators like MCI, do not work effectively for any reason, there will be no other option but for the government to step in with iron hand and ‘fool proof’ regulations.
The popular dictum, especially, used in the healthcare industry, “all these are for the patients’ interest” should not be allowed to be misused or abused, any further, by some unscrupulous elements and greedy profiteers, to squeeze out even the last drop of financial resource from the long exploited population of ailing patients of India.

By: Tapan J Ray

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

PILMAN

A Tapan Ray Website

Tag Archives: Government

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Deadly ‘Superbugs’: The larger issues

Explore the Emerging Markets with the ‘Wings of Courage’.

According to IMS, the global pharmaceutical market is expected to grow around 5%-7% in 2011 to US$ 880 billion, as compared to around 4%-5% of 2010.

The reasons of the slowdown, I have discussed several times in the past through this column and do not intend to dwell on that, at least, in this Article.

The Emerging Markets of the World:

Unlike developed markets, emerging pharmaceuticals market of the world, like, India, China, Brazil, Russia, Mexico, Turkey and Korea, are showing a robust growth rate, quite commensurate to the ascending GDP growth trend of these countries.

Dissapointing: No proposal of ‘Healthcare Reform’ in the Union Budget of India for 2011-12: China rolled it out in 2009.

Are Indian patients victims of “unnecessary tests and procedures, rewards for referrals and irrational use of drugs?” A perspective