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Indian Pharma: Optimism, Concern and Retaining Trust

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As many would know, the significance of trust is profound. It is virtually all-pervasive. Building trust is fundamental in retaining any relationship – be it in the family, society or even in business, such as pharmaceuticals. For long-term success and sustainability of any enterprise, trust is of strategic importance, and will continue to remain so.

In that sense, it is interesting to note that a growing number of Chief Executive Officers (CEOs) of a variety of corporate business entities, including pharmaceutical and also from India, have started experiencing a new challenge in a new paradigm, more than ever before. The rapid pace of evolution of the state of the art technology is further complicating the quagmire. CEOs, in general, are realizing the hard way that ‘in an increasingly digitalized world, it’s harder for businesses to gain and retain people’s trust’, keeping their nose to the grindstone of the conventional business process.

This feeling has been well-captured, among other issues, in the 20th CEO Survey titled, “Gaining from connectivity without losing trust”, conducted by PwC. The participating CEOs mostly believe that social media could have a negative impact on the level of trust in their industry over the next five years. With this trend, ‘as new technologies and new uses of existing technologies proliferate, they envisage new dangers emerging – and old ones getting worse.’ 1,379 CEOs were reportedly interviewed from 79 countries, including 106 from India in PwC’s 20th CEO Survey.

In the context of Indian pharma sector, the above finding is unlikely to raise many eyebrows, rather be construed as an obvious one. In this article, keeping the above as the backdrop, I shall discuss what the Indian CEOs recently expressed regarding their near-term business performance. After analyzing their confidence level on business growth, together with critical concerns, I shall try to gauge the quality of interconnection between the critical success requirements for business growth, and the optimism they voiced, drawing relevant data from PwC’s 20th CEO Survey, and other important sources.

Indian CEO confidence in business growth:

CEOs confidence, or optimism or pessimism about the business growth prospect of their companies is often used as a measure of ‘Business Confidence’. Financial Times defined ‘Business Confidence’ as “an economic indicator that measures the amount of optimism or pessimism that business managers feel about the prospects of their companies/organizations. It also provides an overview of the state of the economy.” A score above 50 indicates positive confidence while a score above 75 would indicate strong positive confidence.

According to published data, ‘Business Confidence’ in India increased to 64.10 in the first quarter of 2017 from 56.50 in the fourth quarter of 2016 with an. average 58.08 from 2005 until 2017, reaching an all-time high of 71.80 in the first quarter of 2007, and a record low of 45.70 in the third quarter of 2013.

More recently, as per Press Release dated September 22, 2017 of the National Council of Applied Economic Research (NCAER), ‘Business Confidence’ Index fell by 2.5 per cent in July 2017 over April 2017 on a quarter-on-quarter basis, for different reasons.

PwC’s 20th CEO Survey, by and large, captures similar optimism, as it says: “Nearly three quarters of India’s CEOs are very confident about their company’s prospects for revenue growth over the next 12 months as opposed to 64% in the previous year. In terms of optimism, CEOs in India surpass their global counterparts (38%) and their counterparts in China (35%) and Brazil (57%).”

Interestingly, as the report says, the motivation behind high CEO optimism is primarily driven by those factors, which are being widely discussed, at least, over a decade, such as favorable demographic profile, rising income levels and urbanization.

A mismatch:

Remarkably higher confidence level of the Indian CEOs on business growth, as compared to their global counterparts, is indeed encouraging. Nevertheless, while exploring the reasons behind the same, a glaring mismatch surface between high level of CEO optimism and their concern on uncertain economic growth, as PwC’s 20th CEO Survey indicates. 82 percent of Indian CEOs expressed concern about uncertain economic growth in the country, in this study.  A staggering 81 percent of them perceive over-regulation and protectionist policies and trends, as serious threats to their growth ambitions. Intriguingly, 64 percent of CEOs in India are concerned about protectionism as opposed to 59 percent globally, as the report flags.

The concern about uncertain economic growth in the country has also been voiced by many economists. For example, in an article, published by The Times of India on October 04, 2017, Ruchir Sharma – Chief Global Strategist and head of the Emerging Markets Equity team at Morgan Stanley Investment Management, wrote: “The global economy is enjoying its best year of the decade, with a worldwide pick up in GDP and job growth, and very few economies have been left behind. India is one of the outliers, with GDP growth slowing and unemployment rising.”

Sharma further added: “The Organization of Economic Cooperation and Development (OECD) says that all 45 economies that it tracks will grow this year, the first time this has happened since 2007, the year before the global financial crisis led to a worldwide recession. Moreover, three quarters of all the countries will grow faster this year than they did last year; India is in the slumping minority, with GDP growth now expected to decelerate this year.”

This mismatch throws more questions than answers.

Wherewithal required to meet expectation:

It goes without saying that Indian CEOs must have required wherewithal to achieve whatever growth they think is achievable in their respective businesses. Besides financial resources, this will also involve having both, soft skills – which are basically ‘people skills,’ and the hard skills – that include an individual’s technical skill set, along with the ability to perform specific tasks for the organization.

A. Soft skills:

Indian CEOs identified ‘leadership’, ‘creativity and innovation’, ‘adaptability’ and ‘problem solving’ as the four important soft skills required to achieve the key business goals, according to the 20th CEO Survey, as quoted above.

A mismatch:

Here again, a strong mismatch is visible between the ‘importance of the skill’ and ‘Difficulty in recruiting people with skill’, as experienced by the CEOs:

Skills Importance of the skill Difficulty in recruiting people with skill
Leadership

98

73
Creativity and innovation

95

74
Adaptability

98

66
Problem solving

99

64

(Source: PwC’s 20th CEO Survey)

B. Hard skills:

Adaptation of any technology involves people with required hard skill sets in any organization. Currently, various state of the art technology platforms and tools, including digital ones, are absolutely necessary not just in areas like, research and development or manufacturing, but also for charting grand strategic pathways in areas, such as sales and marketing.

This is quite evident from PwC’s 20th CEO Survey data. While 76 percent of Indian CEOs participating in the survey expressed concerns about rapidly changing customer behavior, 77 percent of them highlighted the need to create differentiation in their products and offerings, by managing data better. Both these can be well addressed by digital intervention. Interestingly, 81 percent of CEOs in India have stated that it is important to have digital skills, and 66 percent have already added digital training to their organizations’ learning programs.

A mismatch:

The intent of having adequate hard skill, such as digital technology, within an organization is indeed laudable. However, here too a key mismatch stands out regarding their overall perception of the digitizes word. This is evident when 73 percent of CEOs participating in this survey felt that it is harder for businesses to keep and gain trust in an increasingly digitized world.

On the contrary, a 2017 report of EY, titled ‘Reinventing pharma sales and marketing through digital in India’ says: “Digitization can not only enhance trust, transparency and brand equity, but also generate new revenue streams beyond the pill.”

The report further says: “Since 2000, digital disruption has demolished 52% of Fortune 500 companies. These companies have either gone bankrupt, been acquired or ceased to exist. The pace of transformation has increased, competition has intensified and business models have been profoundly disrupted. This shift is happening at breakneck speed across industries, and pharma can no longer be an exception. Customers have already embraced technological changes, through their many digital touch points, and pharma must look toward digital to re-imagine the customer experience. The urgency of acting is acute. It is time that pharma companies in India took a step back and re-envisioned digital as a core strategic enabler.”

I am, therefore, not quite sure about the thought process behind this perception of the CEOs in the digitized world. Instead, by increasing business process transparency, digitized world helps gaining and retaining trust not just of the customers, but all stakeholders, including the employees and the Government, further strengthening the relationship. This is now a well-established fact.

Conclusion:

While analyzing the optimism of Indian CEOs for business growth in the near future, alongside the key concerns, it appears, they are quite perturbed on retaining trust of the stakeholders, especially the customers. More importantly, a telltale mismatch is visible between their level of business confidence, and the reality on the ground – including wherewithal needed to translate this optimistic outlook into reality.

Such incongruity, especially in the Indian pharma sector, calls for a quick reconciliation. Ferreting out relevant facts for the same, I reckon, will be the acid test for evaluating the fundamental strength behind CEOs’ confidence for near-term business growth in India.

In tandem, reasonable success in creating a high degree of trust and transparency in the DNA of their respective organizations, will undoubtedly be pivotal for this optimism coming to fruition. The name of the game for business excellence in this complex scenario is – breaking status quo with lateral thinking.

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.

Rebalancing Skill Sets In Pharma Sales And Marketing

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A disturbing trend against much needed more job creation across the world, has been well captured in a May 2016 MIT article. It concluded through several complex mathematical models that: “As more tasks performed by labor are being automated, concerns that these new technologies will make labor redundant have intensified.”

However, despite well-hyped concerns in this area, ongoing rapid advancement of technology and other related innovation haven’t yet caused any alarming level of unemployment anywhere in the world, nor it possibly will. Several instances of gradual reduction in the number of routine and traditional jobs due to such automation, are generally related to a lesser level of hard skill sets. As we shall see below, many industries require doing so in the modern times, for long term sustainability of business.

In tandem, promising high tech jobs requiring state or the art hard skill sets are getting created too, though are fewer in number. Nevertheless, the number of brilliant startups has increased by manifolds, during the same period. This change is inevitable, mostly in any science and technology driven industry, e.g., banking sector, where most of human operated bank tellers have made way to ATM machines.

A recent vindication:

Vindicating this point, as it were, on May 18, 2017, Reuters reported that Swiss pharma major Novartis, as a part of its “ongoing global transformation” initiative launched last year to create a unified operating model, will cut around 500 traditional and routine jobs in Switzerland, and add 350 in high-tech areas. Immediately thereafter, for similar reasons, the company announced the elimination of another 250 jobs in the United States.

Jobs are important to all for a living. Any job loss, irrespective of the nature of business compulsion, is indeed unfortunate. That said, whether we like it or not, such evolving trends are the stark realities, and expected to continue or even accelerate in the years ahead for higher growth in productivity, especially involving the routine and traditional tasks.

Pharma industry, though a science-based one, loss of routine and traditional jobs due to technological advancement is fortunately still much less as compared to other similar industries. This is primarily due to the continuation of the traditional business models in the pharma sector, requiring a huge number of human intervention, which call for a different balance of soft and hard skill sets.

However, crystal gazing the future, it appears quite likely that there will be a strong need to rebalancing the required soft and hard skills in the drug industry. The contour of my discussion in this article will be on pharma sales and marketing. 

Skill – the ability to do something well:

The Oxford dictionary defines ‘skill’ as ‘the ability to do something well’. Similarly, the term ‘ability’ has been defined by it as ‘possession of the means’. Thus, ‘skill’ means ‘possession of the means to do something well’. It is an absolute must in all professions, including pharma sales and marketing.

Skills broadly fall into two categories – hard and soft skills. Hard skills involve specific knowledge and teachable abilities that can be defined and measured and are usually quantifiable.

Hard skills are individual proficiency in various scientific, technical, mathematical and even some artistic areas of creation, besides other related ones. In pharma sales and marketing arena of the near future, these include, among others, robust scientific knowledge-base to understand various aspects of drug molecules, content creation with astute market understanding, data generation and analysis through state of art analytics and research, software programing, digital savviness and social media expertise. Many of these skills are related to the Intelligent Quotient of an individual.

Soft skills, on the other hand, are less tangible and quantifiable, such as etiquette or personality development; work ethics, getting along with people, ability to listen patiently, overcoming objections, persuading others and a deep sense of accountability. Many of these skills are usually related to emotional intelligence of an individual.

Which one is more important?

Both hard or soft skills are useful, valuable and important. However, the mix of these two skills for high performance of any individual professional will generally depend on success requirements of a job in a specific macro business environment.

That said, it is important to note that most of the hard skills are taught and learnt mostly before a person’s entry into science, technology or various other craft or design based jobs. The related hard skills are essential for getting selected for specialized jobs. Whereas, softer skills are usually learned on the job, and through experience by all those who want to grow in the profession.

In this context, it may not be a bad idea for all pharma sales and marketing professionals to take a hard look at our own current soft and hard skill sets again, against rapidly changing demands of the business environment. Regardless of where we are now, it will be worth writing down on a piece of paper the type of each of these two skills, in order of their strengths, that we individually possess, which are good enough for achieving sustainable excellence in business performance and personal career progression. It may provide a broad sketch of where we stand today in the VUCA world.

The years ahead for pharma won’t be quite the same:

A strong wind of change has already started signaling that the years ahead for the pharma industry, won’t be quite the same as the bygone years nor like what it is today. Some, industry professionals have picked up this cue, while many are still in pursuit of replicating the traditional past with some digital tweaking here and there, whatever may be the reasons.

The current mix of skill sets of the sales and marketing professionals, quite perceptibly, tilts more towards sharpening the softer skills of the employees, as the traditional pharma business models prompt so.

Future need – rebalancing the skill sets:

To be a successful in the days ahead, pharma companies would need to dive deep into the cyberspace – just to be on the same wavelength with its important stakeholders, including, the Government.

Looking around, one witnesses many patients going digital at a faster pace than ever before. They enjoy the cyberspace while embracing the new ways of living life, such as – communicating digitally, chatting in WhatsApp sharing patient’s experience, interacting with online patient communities, and preferring data mining to know more about anything of interest. These activities also get them a sense of the differential advantages of various health care products, services and their cost, before or while consulting doctors and deciding what they can afford.

Similarly, many medical professionals are also not depending solely on the company representatives now to get relevant details on any medicinal product, device or services. Besides frequent interaction with their peer groups, they get such detail information from various websites run by independent, and credible expert groups.

Thus, one of the common arena for pharma stakeholder engagement and interaction would soon be the enigmatic Cyberspace. As the changing days come nearer, there is likely to be greater emphasis on the acquisition of talent having specialized hard skills in this area of sales and marketing.

This emerging scenario prompts rebalancing the mix of soft and hard skill sets with much greater care, and hire young sales and marketing professionals, accordingly to give shape to it. This process should commence now, as the present makes way for the future. This is so important because, the current trend of tweaking with many digital tools and devices mostly as interfaces, or for complementing in-person product detailing or for better field management, or even to draw up marketing and sales plans, may not yield the desired business results any longer, even for survival, as we move on.

Becoming digital natives?

According to the 2015 A.T. Kearney Report titled, “Time for Pharma to Dive into Digital”, pharma sales and marketing professionals must also become digital natives, providing content that is both up-to- date and appropriate for multiple digital channels. Moreover, they will have to be familiar with advanced analytics to monitor and measure actual consumption pattern, besides capturing in real time a huge sample of relevant data for deeper customer insights.

The new normal:

One of the biggest challenges would be in the approach to content development and management. Creating an interactive detailing toolbox for truly responsive customer engagement, requires a good deal of thought and quite complex coding. This would necessitate centralization of marketing content production, which is traditionally decentralized in many sales and marketing organizations. Similarly, the major focus of the sales force will shift from maximizing physician-call rates, to becoming a team of digital communication specialists, and coordinators who would ensure that the right channels are used at the right time.

As the November 2016 Accenture Report titled, ‘The Rebirth of The Pharmaceutical Sales Force’ underscores, the most successful pharmaceutical sales teams in the future will be those willing to define and servicing customers in new ways… and will use digital advances to change the conversation, and position themselves as committed to helping physicians improve health outcomes.

This expected change, I reckon, will put in place a new normal for pharma sales and marketing success in the years ahead.

In conclusion:

Young aspirants wanting to make a career in the pharma industry, may wish to take note of this evolving trend of inevitable changes. They may wish to get well-considered views on the same of a couple of experts’ having no conflict of interest, for a careful and independent personal assessment. These budding strivers should realize that the final actionable decision on developing requisite hard and soft skill sets for a successful take off in their respective working lives, should preferably be taken only by themselves, and none else.

An August 2015 article of McKinsey & Company titled, “The road to digital success in pharma” articulates that the pharma companies, though can play a central role in the digital revolution of healthcare, are running hard to keep pace with changes brought about by digital technology. But soon there may not be any other option left for achieving business excellence.

While the nation is taking strides to transform itself into ‘Digital India’, the pharma companies operating in the country can’t possibly afford to remain far behind. Willy-nilly, they will soon need to realign their business processes accordingly, as there may not be any further scope for individual pharma players to operate within the same old cocoon of tradition bound activities, and still survive.

To meet the new and tougher demands for excellence in pharma sales and marketing, the urgent need of the changing time lies squarely outside the box. To usher in a requisite transformation in the current business model, it calls for a series of well-calibrated, much researched, and bold steps – skillfully rebalancing the crucial soft and hard skill sets, achievable within a realistic and self-determined timeframe.

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.

Gilead: Caught Between A Rock And A Hard Place In India

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I had mentioned in my blog post of August 4, 2014, titled “Hepatitis C: A Silent, Deadly Disease: Treatment beyond reach of Most Indians” that in line with Gilead’s past approach to its HIV medicines, the company would offer to license production of sofosbuvir (brand name Sovaldi) to a number of rival low-cost Indian generic drug companies. They will be offered manufacturing knowhow, allowed to source and competitively price the product at whatever level they choose.

Sovaldi (sofosbuvir) is a once-a-day patented drug of Gilead for cure of chronic hepatitis C infection in most patients. Sovaldi has been priced at Rs 60,000 (US$ 1,000) per tablet in the developed markets with a three-month course costing Rs1.8 Crore (US$ 84,000), when it reportedly costs around U$130 to manufacture a tablet. This treatment cost is being considered very high even for many Americans and Europeans.

Gilead has also announced that it has set a minimum threshold price for Sovaldi of US$ 300 (Rs.18,000) a bottle, enough for a month. With three months typically required for a full course and taking into account the currently approved combination with interferon, the total cost of Sovaldi per patient would be about US$ 900 (Rs.54,000) for a complete treatment against its usual price of US$ 84,000 (Rs1.8 Crore). The company would offer this price to at least 80 countries.

Breaking-news in India:

On September 15, 2014, International media reported that Cipla, Ranbaxy, Strides Arcolab, Mylan, Cadila Healthcare, Hetero labs and Sequent Scientific are likely to sign in-licensing agreements with Gilead to sell low cost versions of Sovaldi in India.

It was also reported that these Indian generic manufacturers would be free to decide their own prices for sofosbuvir, ‘without any mandated floor price’.

Indian companies would require paying 7 per cent of their revenues as royalty to Gilead, which, in turn would ensure full technology transfer to them to produce both the Active Pharmaceutical Ingredients (API) and finished formulations. The generic version of Sovaldi is likely to be available in India in the second or third quarter of 2015, at the earliest.

Another reason of Gilead’s selecting the Indian generic manufacturers could possibly be, that of much of the global supply of generic finished formulations is manufactured in India, especially for the developing countries of the world.

Patent status, broad strategy and the possibility:

It is worth noting here that the Indian Patent Office (IPO) has not recognized Sovaldi’s (sofosbuvir) patent for the domestic market, just yet. This patent application has been opposed on the ground that it is an “old science, known compound.”

It is interesting that the Indian Pharmaceutical Association (IPA) and others, such as, Delhi Network of Positive People and Natco have reportedly opposed Sovaldi’s (sofosbuvir) patent application. If the patent for this drug does not come through, low priced generic versions of Sovaldi, without any licensing agreement with Gilead, would possibly capture the Indian market.

Conversely, due to unaffordable price of Sovaldi for most of the Hepatitis C patients, even if a patent is granted for this drug in India, the sword of Compulsory License (CL) on the ground of ‘reasonably affordable price’ looms large on this product.

To negate the possibility of any CL, in the best-case scenario of a patent grant, Gilead seems to have decided to enter into licensing agreement with seven other Indian generic manufacturers to create a sense of adequate competition in the market, as many believe.

However, if the IPO considers sofosbuvir not patentable in India, it would indeed be a double whammy for Gilead. Without any patent protection, all these in licensing agreements may also fall flat on the face, paving the way of greater access of much lesser priced generic sofosbuvir to patients, as indicated above.

The action replay:

If we flash back to the year 2006, we shall see that Gilead had followed exactly the same strategy for another of its patented product tenofovir, used in the treatment of HIV/AIDS.

1. Voluntary license:

At that time also Gilead announced that it is offering non-exclusive, voluntary licenses to generic manufacturers in India for the local Indian market, along with provision for those manufacturers to export tenofovir formulations to 97 other developing countries, as identified by Gilead.

Gilead did sign a voluntary licensing agreement with Ranbaxy for tenofovir in 2006.

The arrangement was somewhat like this. Gilead would charge a royalty of 5 percent on the access price of US$ 200 a year for the drug. Any company that signs a manufacturing agreement with Gilead to manufacture API of tenofovir would be able to sell them only to those generic manufacturers that have voluntary license agreements with Gilead.

Interestingly, by that time Cipla had started selling one of the two versions of tenofovir, not licensed by Gilead. Cipla’s generic version was named Tenvir, available at a price of US$ 700 per person per year in India, against Gilead’s tenofovir (Viread) price of US$ 5,718 per patient per year in the developed Markets. Gilead’s target price for tenofovir in India was US$ 200 per month, as stated above.

2. Patent challenge:

Like sofosbuvir (Sovaldi), Gilead had filed a patent application for tenofovir (Viread) in India at that time. However, the ‘Indian Network for People Living with HIV/AIDs’ challenged this patent application on similar grounds.

3. Patent grant refused:

In September 2009, IPO refused the grant of patent for tenofovir to Gilead, citing specific reasons  for its non-conformance to the Indian Patents Act 2005. As a result, the voluntary license agreements that Gilead had already signed with the Indian generic manufacturers were in jeopardy.

Current status:

In 2014, while planning the launch strategy of sofosbuvir (Sovaldi) for India, Gilead seems to have mimicked the ‘Action Replay’ of 2006 involving tenofovir, at least, in the first two stages, as detailed above. Only the patent status of sofosbuvir from the IPO is now awaited. If IPO refuses patent grant for sofosbuvir, Gilead’s fate in India with sofosbuvir could exactly be the same as tenofovir, almost frame by frame.

Gilead and the two top players in India:

Very briefly, I would deliberate below the strategic stance taken by two top generic players in india, from 2006 to 2014, in entering into voluntary licensing agreements with Gilead  for two of its big products, as I understand.

Ranbaxy:

In my view, the stand of Ranbaxy in Gilead’s India strategy of voluntary licensing in the last eight years has remained unchanged. It involves both sofosbuvir and tenofovir.Thus, there has been a clear consistency in approach on the part of Ranbaxy on this issue.

Cipla:

Conversely, an apparent shift in Cipla’s strategic position during this period has become a bone of contention to many. For tenofovir, Cipla did not sign any voluntary license agreement with Gilead. On the contrary, it came out with its own version of this product, that too much before IPO refused to grant patent for this drug.

However, unlike 2006, Cipla decided to sign a voluntary license agreement with Gilead for sofosbuvir (Sovaldi) in 2014, though no patent has yet been granted for this product in India.

Has Cipla changed its position on drug patent?

I find in various reports that this contentious issue keeps coming up every now and then today. Some die-hards have expressed disappointments. Others articulated that the new dispensation in Cipla management, has decided to take a different stance in such matter altogether.

In my view, no tectonic shift has taken place in Cipla’s position on the drug patent issue, just yet.

The owner of Cipla, the legendary Dr.Yusuf Hamied has always been saying: ‘I Am Not Against Patents … I Am Against Monopolies’

He has also reportedly been quoted saying: “About 70 per cent of the patented drugs sold worldwide are not invented by the owning companies”.

He had urged the government, instead of having to fight for CL for expensive lifesaving medicines by the generic drug makers, where voluntary licenses are not forthcoming, the government needs to pass a law giving the generic players “automatic license of rights” for such drugs, making these medicines affordable and thereby improving access to patients. In return, the local generic manufacturers would pay 4 percent royalty on net sales to patent holders. He was also very candid in articulating, if Big Pharma would come into the developing markets, like India, with reasonable prices, Cipla would not come out against it.

According to Dr. Hamied, “When you are in healthcare, you are saving lives. You have to have a humanitarian approach. You have to take into account what it costs to make and what people can pay.”

Considering all these, I reckon, the core value of Cipla and its stand on patents have not changed much, if at all, for the following reasons:

  • The voluntary license agreement of Cipla with Gilead for sofosbuvir (Sovaldi) along with six other generic manufacturers of India, unlike tenofovir, still vindicates its strong opposition to drug monopoly, respecting product patents.
  • Cipla along with manufacturing of sofosbuvir, maintains its right to market the product at a price that it considers affordable for the patients in India.

Conclusion:

Indian Patents Act 2005 has the requisite teeth to tame the most aggressive and ruthless players in drug pricing even for the most feared diseases of the world, such as, HIV/AIDS, cancer, Hepatitis C and others.

Many global drug companies, resourceful international pharma lobby groups and governments in the developed world are opposing this commendable Act, tooth and nail, generating enormous international political pressure and even chasing it in the highest court of law in India, but in vain. Glivec case is just one example.

Some pharma majors of the world seem to be attempting to overcome this Act, which serves as the legal gatekeeper for the patients’ interest in India. Their strategy includes not just voluntary licenses, but also not so transparent, though well hyped, ‘Patient Access Programs’ and the so called ‘flexible pricing’, mostly when the concerned companies are able to sense that the product patents could fail to pass the scrutiny of the Indian Patents Act 2005.

It has happened once with even Gilead in 2006. The drug was tenofovir. Following the same old strategy of voluntary licenses and relatively lower pricing, especially when its drug patent is pending with IPO post patent challenges, Gilead intends to launch Sovaldi in India now.

Carrying the baggage of its past in India, Gilead seems to have been caught between a rock and the hard place with sofosbuvir (Sovaldi) launch in the country. On the one hand, the risk of uncertain outcome of its patent application and on the other, the risk of CL for exorbitant high price of the drug, if the patent is granted by the IPO. Probably considering all these, the company decided to repeat its 2006 tenofovir strategy of voluntary licenses, yet again in 2014, for Sovaldi in India.

As of today, Sovaldi strategy of Gilead in India appears to be progressing in the same direction as tenofovir, the way I see it. However, the final decision of IPO on the grant of its patent holds the key to future success of similar high-voltage, seemingly benign, marketing warfare of pharma majors of the world.

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.

Buying Physicians’ Prescriptions in Cash or Kind: A Global (Dis)Order?

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Recently a European business lobby reportedly raised its voice alleging pharma Multinational Corporations (MNCs) in China have been ‘unfairly targeted’ by a string of investigations into bribery and price-fixing cases despite their generally ‘strong legal compliance’ and has suggested that China ‘must step back.’

Two comments of this European lobby group, presumably with full knowledge of its past records, appear indeed intriguing, first – ‘unfairly targeted’ and the second – ‘China must step back’, that too when a reportedly thorough state investigation is already in progress.

Reality is all pervasive:

However, while looking over the shoulder, as it were, an altogether different picture emerges and that reality seems to be all pervasive.

Over the past several decades, the much charted sales and marketing frontier in the pharmaceutical industry has been engagement into a highly competitive ‘rat race’ to create a strong financial transactional relationship, of various types and forms, with the physicians, who only take the critical prescription decisions for the patients. Most of the times such relationships are cleverly packaged with, among many others,  a seemingly noble intent of ‘Continuing Medical Education (CME)’ by the companies concerned.

Increasingly, across the globe, more questions are now being raised whether such pharmaceutical business practices should continue even today. These voices are gradually getting louder fueled by the recent moves in the United States to ‘separate sales and marketing related intents of the drug industry from the practice of medicine’, especially in large medical teaching hospitals, in tandem with the enactment and practice of ‘Physician Payment Sunshine Act 2010’.

A recent article titled, “Breaking Up is Hard to Do: Lessons Learned from a Pharma-Free Practice Transformation”, published in the ‘Journal of the American Board of Family Medicine’ deliberated on an interesting subject related to much talked about relationship between the doctors and the pharmaceutical players.

The authors argue in this paper that significant improvement in the quality of healthcare in tandem with substantial reduction in the drug costs and unnecessary medications can be ensured, if the decision makers in this area show some willingness to chart an uncharted frontier.

‘Questionable’ relationship in the name of providing ‘Medical Education’:

‘The Journal of Medical Education’ in an article titled “Selling Drugs by ‘Educating’ Physicians” brought to the fore the issue of this relationship between the pharma industry and individual doctors in the name of providing ‘medical education’.

The article flags:

“The traditional independence of physicians and the welfare of the public are being threatened by the new vogue among drug manufacturers to promote their products by assuming an aggressive role in the ‘education’ of doctors.”

It further elaborates that in the Congressional investigation in the United States on the cost of drugs, pharma executives repeatedly stated that a major expenditure in the promotion of drugs was the cost of ‘educating’ physicians to use their products.

The author then flagged questions as follows:

  • “Is it prudent for physicians to become greatly dependent upon pharmaceutical manufacturers for support of scientific journals and medical societies, for entertainment and now also for a large part of their ‘education’?”
  • “Do all concerned realize the hazards of arousing wrath of the people for an unwholesome entanglement of doctors with the makers and sellers of drugs?”

Financial conflicts in Medicine:

Another academic paper of August 13, 2013 titled, “First, Do No Harm: Financial Conflicts in Medicine” written by Joseph Engelberg and Christopher Parsons at the Rady School of Management, University of California at San Diego, and Nathan Tefft from the School of Public Health at the University of Washington, states:

“We explored financial conflicts of interest faced by doctors. Pharmaceutical firms frequently pay physicians in the form of meals, travel, and speaking fees. Over half of the 334,000 physicians in our sample receive payment of some kind. When a doctor is paid, we find that he is more likely to prescribe a drug of the paying firm, both relative to close substitutes and even generic versions of the same drug. This payment-for-prescription effect scales with transfer size, although doctors receiving only small and/or infrequent payments are also affected. The pattern holds in nearly every U.S. state, but it is strongly and positively related to regional measures of corruption.”

On this paper, a media report commented:

“The findings – based on recently released data that 12 companies have been forced to make public as a result of US regulatory settlements – will rekindle the debate over the limits of aggressive pharmaceutical marketing, which risks incurring unnecessarily costly medical treatment and causing harm to patients.”

A call for reform:

The first paper, as quoted above, titled “Breaking Up is Hard to Do” reiterates that even after decades, individual practitioner still remains the subject to undue influence of the pharmaceutical companies in this respect. It categorically points out:

“The powerful influence of pharmaceutical marketing on the prescribing patterns of physicians has been documented and has led to fervent calls for reform at the institutional, professional, and individual levels to minimize this impact.”

The rectification process has begun in America:

Interestingly, even in the United States, most physicians practice outside of academic institutions and keep meeting the Medical Representatives, accept gifts and drug samples against an expected return from the drug companies.

Many of them, as the paper says, have no other process to follow to become ‘pharma-free’ by shunning this hidden primitive barrier for the sake of better healthcare with lesser drug costs.

To achieve this objective, many academic medical centers in America have now started analyzing the existing relationship between doctors and the drug companies to limit such direct sales and marketing related interactions for patients’ interest.

This unconventional approach will call for snapping up the good-old financial transactional relationship model between the doctors and Medical Representatives of the Pharma players, who promote especially the innovative and more costly medicines.

An expensive marketing process:

The authors opine that this is, in fact, a very powerful marketing process, where the pharmaceutical players spend ‘tens of billions of dollars a year’. In this process more than 90,000 Medical Representatives are involved only in the United States, providing free samples, gifts along with various other drug related details.

The study reiterates that deployment of huge sales and marketing resources with one Medical Representative for every eight doctors in the United States, does not serve the patients interests in any way one would look into it, even in terms of economy, efficacy, safety or accuracy of information.

“But Don’t Drug Companies Spend More on Marketing?”

Yet another recent article, captioned as above, very interestingly argues, though the drug companies spend good amount of money on R&D, they spend much more on their marketing related activities.

Analyzing six global pharma and biotech majors, the author highlights that SG&A (Sales, General & Administrative) and R&D expenses vary quite a lot from company to company. However, in this particular analysis the range was as follows:

SG&A 23% to 34%
R&D 12.5% to 24%

SG&A expenses typically include advertising, promotion, marketing and executive salaries. The author says that most companies do not show the break up of the ‘S’ part separately.

A worthwhile experiment:

Removing the hidden barriers for better healthcare with lesser drug costs, as highlighted in the above “Breaking Up is Hard to Do” paper, the researchers from Oregon State University, Oregon Health & Science University and the University of Washington outlined a well conceived process followed by one medical center located in central Oregon to keep the Medical Representatives of the pharmaceutical companies at bay from their clinical practice.

In this clinic, the researchers used ‘a practice transformation process’ that analyzed in details the industry presence in the clinic. Accordingly, they educated the doctors on potential conflicts of interest and improved patient outcomes of the clinical practice. The concerns of the staff were given due considerations. Managing without samples, loss of gifts, keeping current with new drugs were the key concerns.

Based on all these inputs, various educational interventions were developed to help the doctors updating their knowledge of new drugs and treatment, even better, through a different process.

The experiment established, though it is possible to become “pharma free” by consciously avoiding the conflicts of interest, implementation of this entire process is not a ‘piece of cake’, at least not just yet.

Need for well-structured campaigns:

The researchers concluded that to follow a “pharma sales and marketing free” environment in the clinical practice, the prevailing culture needs to be changed through methodical and well-structured campaigns. Although, initiation of this process has already begun, still there are miles to go, especially in the realm of smaller practices.

One researcher thus articulated as follows:

“We ultimately decided something had to be done when our medical clinic was visited by drug reps 199 times in six months. That number was just staggering.”

Where else to get scientific information for a new drug or treatment?

The authors said, information on new drugs or treatment is currently available not just in many other forum, but also come with less bias and more evidence-based format than what usually are provided by the respective pharmaceutical companies with a strong motive to sell their drugs at a high price to the patients. 

The paper indicated that there are enough instances where the doctors replaced the process of getting information supplied by the Medical Representatives through promotional literature with monthly group meetings to stay abreast on the latest drugs and treatment, based on peer-reviews.

‘Academic detailing’:

In the process of ‘Academic detailing’ the universities, and other impartial sources of credible information, offer accurate information without bias, whenever sought for. In the United States, some states and also the federal government are reportedly supporting this move now, which is widely believed to be a step in the right direction.

Moves to separate sales and marketing of the drug industry from the practice of medicine:

As stated above, there are many moves now in the United States to ‘separate the sales and marketing influence of the drug industry from the practice of medicine’, especially in large medical teaching hospitals, as the paper highlights.

The study also reported that of the 800,000 physicians practicing in the United States only 22 percent practice in the academic settings and 84 percent of primary care physicians continue to maintain close relationships with the pharmaceutical companies.

Citing examples, the new report indicated various tangible steps that primary care physicians can possibly take to effectively mitigate these concerns.

Emerging newer ways of providing and obtaining most recent information on new drugs and treatment together with educating the patients will hasten this reform process.

A commendable move by the Medical Council of India:

Taking a step towards this direction, the Medical Council of India (MCI) vide a notification dated December 10, 2009 amended the “Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002″. This move was welcomed by most of the stakeholders, barring some vested interests.

The notification specified stricter regulations for doctors in areas, among others, gifts, travel facilities/ hospitality, including Continuing Medical Education (CME), cash or monetary grants, medical research, maintaining professional Autonomy, affiliation and endorsement in their relationship with the ‘pharmaceutical and allied health sector industry’. These guidelines came into force effective December 14, 2009.

With this new and amended regulation, the MCI, on paper, has almost imposed a ban on the doctors from receiving gifts of any kind, in addition to hospitality and travel facilities related to CMEs and others, from the pharmaceutical and allied health sector industries in India.

Moreover, for all research projects funded by the pharmaceutical industry and undertaken by the medical profession, prior approval from the appropriate authorities for the same will be essential, in addition to the ethics committee.

Although maintaining a cordial and professional relationship between the pharmaceutical industry and the doctors is very important, such relationship now should no way compromise the professional autonomy of the medical profession or any medical institution, directly or indirectly.

It is expected that the common practices of participating in private, routine and more of brand marketing oriented clinical trials would possibly be jettisoned as a pharmaceutical strategy input.

However, inability of the Indian regulator to get these guidelines effectively implemented  and monitored has drawn sharp flak from all other stakeholders, as many third party private vendors are reportedly coming up as buffers between the industry and the physicians to facilitate the ongoing illegal financial transactions, hoodwinking the entire purpose, blatantly.

No such government guidelines for the industry yet:

MCI under the Ministry of Health, at least, came out with some measures for the doctors in 2009 to stop such undesirable practices.

However, it is difficult to fathom, why even almost four years down the line, the Department of Pharmaceuticals of the Government of India is yet to implement its much hyped ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for the entire pharmaceutical industry in India.

‘Physicians payment induced prescriptions’ – a global phenomenon:

Besides what is happening in China today with large pharma MNCs alleged involvement in bribery to the medical profession soliciting prescriptions of their respective drugs, world media keep reporting on this subject, incessantly.

For example, The Guardian in its July 4, 2012 edition reported an astonishing story. Since quite some time many pharmaceutical giants are being reportedly investigated and fined, including out of court settlements, for bribery charges related to the physicians.

In another very recent article titled “Dollars for Docs Mints a Millionaire” the author stated as follows:

“The companies in Dollars for Docs accounted for about 47 percent of U.S. prescription drug sales in 2011. It’s unclear what percentage of total industry spending on doctors they represent, because dozens of companies do not publicize what they pay individual doctors. Most companies in Dollars for Docs are required to report under legal settlements with the federal government.”

In India, deep anguish of the stakeholders over this issue is also getting increasingly reverberated all across, without much results on the ground though. It has also been drawing attention of the patients’ groups, NGOs, media, Government and even the Parliament of the country. 

Another article titled, “Healthcare industry is a rip-off” published in a leading business daily of India states as follows:

“Unethical drug promotion is an emerging threat for society. The Government provides few checks and balances on drug promotion.”

Physician Payment Sunshine Act of 2010:

To partly address this issue under President Obama’s ‘Patient Protection Affordable Care Act’, ‘Physician Payment Sunshine Act’ came into force in the United States in 2010. 

Under this Act, any purchasing organization that purchases, arranges for, or negotiates the purchase of a covered drug, device, biological, or medical supply or manufacturer of a covered drug, device, biological, or medical supply operating in the United States, or in a territory, possession, or commonwealth of the United States is required to publicly disclose gifts and payments made to physicians.

Penalty for each payment not reported can be upto US$ 10,000 and the penalty for knowingly failing to submit payment information can be upto US$ 100,000, for each payment.

Centers for Medicare and Medicaid Services (CMS) has already released their ‘Physician Payment Sunshine Act’ reporting templates for 2013. The templates apply for reports dated August 1, 2013 – December 31, 2013.

Should the Government of India not consider enacting similar law in the country  without further delay?

Conclusion:

That said, these well-researched papers do establish increasing stakeholder awareness and global concerns on the undesirable financial influence of pharma players on the doctors. Product promotion practices of dubious value, especially in the name of ‘Continuing Medical Education (CME), seem to strongly influence the prescribing patterns of the doctors, making patients the ultimate sufferer.

The studies will help immensely to establish that achieving the cherished objective of a ‘pharma sales and marketing free’ clinic is not only achievable, but also sustainable for long.

The barriers to achieving success in this area are not insurmountable either, as the above article concludes. These obstacles can easily be identified and overcome with inputs from all concerned, careful analysis of the situation, stakeholder education and identifying most suitable alternatives.

Thus, I reckon, to effectively resolve the humongous ‘physician payment induced prescriptions’ issue for the sole benefit of patients, it is about time for the pharmaceutical players to make a conscientious attempt to shun the ‘road much travelled, thus far, with innovative alternatives. However, the same old apprehension keeps lingering:

“Will the mad race for buying physicians’ prescriptions in cash or kind, much against patients’ interest, continue to remain a global (dis)order, defying all sincere efforts that are being made today?  

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.