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Digital Therapeutics: Unfolding A Disruptive Innovation In Healthcare

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On November 9, 2015, ‘The Wall Street Journal (WSJ)’ in an interesting article reported, “Your doctor may soon prescribe you a smartphone app in addition to drugs and physical therapy.”

The hospitals in the United States (US) are developing new mobile apps to help patients manage serious medical conditions, record symptoms and communicate back to their doctors between visits, often in real time, besides helping patients adhere to their therapy, WSJ highlighted. The real beauty in these apps is, in addition to sending messages, reminders and instructions, the apps can alert providers to developing clinical problems before they become a crisis.

For example, “a new app from the University of Michigan called ‘Breast Cancer Ally’ is offered to patients to help them manage the onslaught of information and instructions they get throughout their diagnosis and treatment. It allows patients to look up and record their symptoms and provides guidance on when to consult the doctor about complications or concerns.”

Quoting experts, the article states, “this is a technology that is in everyone’s pocket and makes patients feel engaged in their own care.”

The implication of this development is profound. It appears, there could be a near term possibility of the same, for better, comprehensive health monitoring, leading to better quality of life and undergoing lesser hassles, if not hassle-free, as compared to what it is today in doing so.

Immense value in management of chronic diseases:

Besides serious ailments, these customized digital apps for smartphone, could be used to derive therapeutic impact in the early stages of chronic diseases, such as diabetes and hypertension.

As is well-known, in the early onset of most of the non-infectious chronic diseases, self-management plays a critical role to prevent the progression of the disease, saving significant treatment costs, besides other serious and expensive physiological complications in the future.

To achieve this goal, there is a critical need to appropriately educate the patients through doctors, along with the active role of pharmaceutical players. This could well be a win-win situation for the manufacturers of these products to productively engage the patients, not just for disease management, but for the commercial success of their respective brands too, with a well crafted integrated business strategy.

Digital Therapeutics:

Thus, these health apps serve the role of ‘Digital Therapies (DT)’, as well, for patients, especially at the onset of chronic ailments and to prevent any sudden crisis in serious disease conditions.

DT has, therefore, been defined as web, mobile, wearable and other digital technologies combined into an intervention to support healthy behaviors and provide therapeutic impact.

As stated earlier, DT has the potential to offer immense opportunity for patient engagement and to bring in substantial change in their health behavior with remarkable both short and long term cost-effectiveness.

The opportunities:

Offering DT to patients in India may not be very challenging either, on the contrary, it is an area of opportunity for all the interested players, especially when we go by the following facts: 

  • According to the latest report from the Telecom Regulatory Authority of India (TRAI) mobile phone subscriber base in India recorded 6.71 percent YoY growth to 980.81 million users in Q2 2015.
  • There were approximately 82 million 3G subscribers in India by the end of 2014 and the number is projected to reach 284 million by end of year 2017.
  • SMS, email, messaging and social networking apps are the most popular ones.
  • The Indian Government has expressed its commitment to setting up a robust digital infrastructure and to promote adoption of mobile Internet and related products and services.
  • In 2014-15, the Government budgeted INR 500 crore for building infrastructure as per the National Rural Internet and Technology Mission.

Currently, as the smartphones enable individuals to access various types of information, suggestions and advice from anywhere 24×7, in the above emerging scenario, an increasing number of patients are likely to opt for digital therapeutic tools for self-management of health more effectively. 

This is a win-win situation for all, including the pharma companies, though with a contemporary and honed strategic business model.

In the foreseeable future:

An October 2013 paper of IMS Institute, titled “Patient Apps for Improved Healthcare” expects that over a period of time, the health app maturity model will see apps’ progress from being recommended on an ad hoc basis by individual physicians, to systematic use in healthcare, and ultimately to an end goal of being a fully integrated component of healthcare management.

The study makes the following important observations:

  • The patients are unlike to ever have the tools to replace the roles of the physician
  • Health apps may encourage patients to take a more active interest in their overall well being and understand the consequences of poor health in later life.
  • By having the patients aligned with the importance of wellness programs and sickness prevention, health systems can hope to realize savings, especially from a lower burden of multiple chronic conditions. 
  • The Governments may consider making patients aware of the need to take increasing responsibility for their own healthcare, by providing incentives to stay healthy, where health apps could play a major role.

The paper also underscores the following four key steps to move through on this process:

  • Recognition by payers and providers of the important role that apps can play in healthcare 
  • Security and privacy guidelines and assurances must be in place between providers, patients and app developers
  • Systematic curation and evaluation of apps that can provide both physicians and patients with useful summarized content about apps that can aid decision-making regarding their appropriate use 
  • Integration of apps with other aspects of patient care

“Underpinning all of this will be the generation of credible evidence of value derived from the use of apps that will demonstrate the nature and magnitude of behavioral changes or improved health outcomes,” the paper comments.

According to available information, currently in the United States, around 100 advanced health apps have been approved by the FDA. However, all these are not for the use of patients. Some of these are for the use of doctors. Other sets of apps are available to patients only against doctors’ prescriptions. The rest is mainly for fitness and general life style related, and are affordable only to a limited number of people.

Key benefits of ‘Digital Therapeutics’:

To summarize, the key benefits of digital therapeutics are as follows:

  • More cost-efficient, as compared to conventional alternatives.
  • Help doctors managing disease conditions through constant monitoring with digital technology 
  • Make patients more aware and even proactive with real time information in preventing many diseases, avoiding disease aggravation and improving quality of life.
  • Make sharing of information between doctors and patients easier and effective.

Some concerns:

In many countries, including India, many health apps do not have appropriate health regulatory approval. Hence, a number of key concerns, in general, have been raised in this area for speedy resolution, some of which are as follows:

  • Product and data quality
  • Reliability in treatment decisions
  • Privacy and security for patients

Not many pharma companies are engaged in ‘Digital Therapeutics’:

In my view, there is a solid reason why many global pharma companies are still not adequately engaged with digital therapeutics.

They are generally actively involved in the high voltage advocacy by encouraging innovation, which usually does not go beyond drug discovery. This championing does not talk much either, about charting the broader area of comprehensive disease prevention, treatment and management with the application of disruptive innovation, involving other non drug related digital technologies, which are cost effective to patients.

With the low hanging fruits of drug innovation, resulting into money-churning blockbuster drugs with huge margin and almost in no time, made most of these innovator drug companies comfortable with their current business model of only drug discovery.

This business model is now exhibiting enough signs of fatigue with research pipelines gradually drying out.

Nonetheless, there are some indications now of a few pharma players’ exploring this new area of digital therapeutics, but as an extension of the current business models. It still remains a challenging decision for most of them to shift the gear, moving towards a new horizon of a winning mix of new drugs and path breaking digital therapeutics. 

Conclusion:

These are still early days for the majority of the pharma players looking at commercially leveraging the potential of possible customized offerings of digital health apps as integrated digital therapeutics for patients’ self-care health benefits. What we have seen so far is the drug companies using health apps as a tool to market a drug and not much beyond that.

I discussed this issue in my article in this blog on March 30, 2015, titled, “Quantum Value Addition With Health Apps, Going Beyond Drugs”.

An April 17, 2014 article published in the ‘Forbes/Business’ epitomizes the relevance of digital therapeutics in the modern day healthcare, even in the countries like India, as follows:

“Three out of four Americans will die of a disease that could be avoided—if only they could re-route their unhealthy habits. A new category of medicine, digital therapeutics, wants to change the course of these conditions – and of history.”

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.

 

Is Drug Price Control The Key Growth Barrier For Indian Pharma Industry?

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The corollary of the above headline could well be: “Are drug price hikes the key growth driver for the Indian Pharmaceutical Market (IPM)?”

Whenever the first question, as appears in the headline of this article: “Is drug price control a key barrier to growth of the IPM?”, is asked to the pharma players, irrespective of whether they are domestic companies or multinationals (MNCs), the answer in unison would quite expectedly be a full-throated ‘yes’. Various articles published in the media, including some editorials too, also seem to be on the same page, with this specific view. 

Likewise, if the corollary of the above question: “Are drug price hikes the key growth driver for the IPM?”, is put before this same target audience, most of them, if not all, would expectedly reply that ‘in the drug price control regime, this question does not arise at all, as IPM has been primarily a volume driven growth story.’ This answer gives a feel that the the entire or a major part of the IPM is under Government ‘price control’, which in fact is far from reality

Recently, a pharma industry association sponsored ‘Research Study’, conducted by an international market research organization also became quite vocal with similar conclusion on drug price control in India. This study, released on July 2015, categorically highlights ‘price control is neither an effective nor sustainable strategy for improving access to medicines for Indian patients’. The report also underscores: “The consumption of price-controlled drugs in rural areas has decreased by 7 percent over the past two years, while that of non-price controlled products has risen by 5 percent.”

I argued on the fragility of the above report in this Blog on September 7, 2015, in an article titled, “Drug Price Control in India: A Fresh Advocacy With Blunt Edges”.

Nonetheless, in this article, going beyond the above study, I shall try to put across my own perspective on both the questions raised above, primarily based on the last 12 months retail data of well-respected AIOCD Pharmasofttech AWACS Pvt. Ltd. 

Pharma product categories from ‘Price Control’ perspective:

To put this discussion in right perspective, following AIOCD-AWACS’ monthly pharma retail audit reports, I shall divide the pharma products in India into three broad categories, as follows:

  • Products included under Drug Price Control Order  2013 (DPCO 2013), which are featuring in the National List of Essential Medicines 2011 (NLEM 2011) 
  • Products not featuring in NLEM 2011, but included in Price Control under Para 19 of DPCO 2013
  • Products outside the ambit of any drug price control and can be priced by the respective drug manufacturers, whatever they deem appropriate

The span of price controlled medicines would currently be around 18 percent of the IPM. Consequently, the drugs falling under free-pricing category would be the balance 82 percent of the total market. Hence, the maximum chunk of the IPM constitutes of those drugs for which there is virtually no price control existing in India.

According to the following table, since, at least the last one-year period, the common key growth driver for all category of drugs, irrespective of whether these are under ‘price control’ or ‘outside price control, is price increase in varying percentages: 

Value vs Volume Growth (October 2014 to September 2015):

Month DPCO Product      Gr% Non-DPCO Products Gr% Non-NLEM Para 19 Gr% IPM
2015 Value Volume Value Volume Value Volume Value Volume
September 2.8 1.2 10.9 1.1 11.5 9.0 9.9 1.4
August 3.3 (2.7) 14.5 2.4 15.2 13.7 13.0 1.6
July 5.1 (0.6) 14.2 4.1 11.8 9.9 12.9 3.3
June 5.6 (0.1) 16.2 6.2 14.6 11.7 14.8 5.0
May 5.3 (0.3) 12.1 3.4 7.2 4.3 11.0 2.6
April 11.1 5.3 18.4 9.6 11.9 9.6 17.2 8.7
March 17.6 9.5 21.7 13.0 15.6 13.2 20.9 12.2
Feb 13.9 7.6 20.0 10.1 14.4 9.9 18.9 9.6
Jan 6.9 1.8 14.0 3.7 NA NA 12.7 3.3
2014    
December 8.0 0.7 14.8 3.2 NA NA 13.6 2.7
November 3.1 (3.4) 12.6 0.3 NA NA 10.9 (0.4)
October (2.4) (5.7) 6.8 (1.7) NA NA 5.2 (2.6) 

Source: Monthly Retail Audit of AIOCD Pharmasofttech AWACS Pvt. Ltd 

Does ‘free drug-pricing’ help improving consumption?

I would not reckon so, though the pharma industry association sponsored above study virtually suggests that ‘free pricing’ of drugs would help improve medicine consumption in India, leading to high volume growth.

As stated earlier, the above report of IMS Health highlights, “The consumption of price-controlled drugs in rural areas has decreased by 7 percent over the past two years, while that of non-price controlled products has risen by 5 percent.”

On this finding, very humbly, I would raise a counter question. If only free pricing of drugs could help increasing volume growth through higher consumption, why would then the ‘price-controlled non-NLEM drugs under para 19’, as shown in the above table, have generally recorded higher volume growth than even those drugs, which are outside any ‘price control’? Or in other words, why is the consumption of these types of ‘price controlled’ drugs increasing so significantly, outstripping the same even for drugs with free pricing?

The right answers to these questions lie somewhere else, which I would touch upon now.

Are many NLEM 2011 drugs no longer in supply?

DPCO 2013 came into effect from from May 15, 2013. Much before that, NLEM 2011 was put in place with a promise that all the drugs featuring in that list would come under ‘price control’, as directed earlier by the Supreme Court of India.  Even at that time, it was widely reported by the media that most of the drugs featuring in the NLEM 2011 are either old or may not be in supply when DPCO 2013 would be made effective. The reports also explained its reasons. 

To give an example, a November 6, 2013 media report stated: “While the government is still in the process of fully implementing the new prices fixed for 348 essential medicines, it has realized that most of these are no longer in supply. This is because companies have already started manufacturing many of these drugs with either special delivery mechanism (an improved and fast acting version of the basic formulation) or in combination with other ingredients, circumventing price control.”

Just to give a feel of these changes, the current NLEM 2011 does not cover many Fixed-Dose Combinations (FDC) of drugs. This is important, as close to 60 percent of the total IPM constitutes of FDCs. Currently, FDCs of lots of drugs for tuberculosis, diabetes and hypertension and many other chronic and acute disease conditions, which are not featuring in the NLEM 201, are very frequently being prescribed in the country. Thus, the decision of keeping most of the popular FDCs outside the ambit of NLEM 2011 is rather strange.

Moreover, a 500 mg paracetamol tablet is under price control being in the NLEM 2011, but its 650 mg strength is not. There are many such examples.

These glaring loopholes in the NLEM 2011 pave the way for switching over to non-NLEM formulations of the same molecules, evading DPCO 2013. Many experts articulated, this process began just after the announcement of NLEM 2011 and a lot of ground was covered in this direction before DPCO 2013 was made effective.

Intense sales promotion and marketing of the same molecule/molecules in different Avatars, in a planned manner, have already started making NLEM 2011 much less effective than what was contemplated earlier. 

Some examples:

As I said before, there would be umpteen number of instances of pharmaceutical companies planning to dodge the DPCO 2013 well in advance, commencing immediately after NLEM 2011 was announced. Nevertheless, I would give the following two examples as was reported by media, quoting FDA, Maharashtra:

1. GlaxoSmithKline (GSK) Consumer Healthcare having launched its new ‘Crocin Advance’ 500 mg with a higher price of Rs 30 for a strip of 15 tablets, planned to gradually withdraw its conventional price controlled Crocin 500 mg brand costing around Rs 14 for a strip of 15 tablets to patients. GSK Consumer Healthcare claimed that Crocin Advance is a new drug and therefore should be outside price control.

According to IMS Health data, ‘Crocin Advance’ achieved the fifth largest brand status among top Paracetamol branded generics, clocking a sales turnover of Rs 10.3 Crore during the last 12 months from its launch ending in February 2014. The issue was reportedly resolved at a later date with assertive intervention of National Pharmaceutical Pricing Authority (NPPA).

2. Some pharmaceutical companies reportedly started selling the anti-lipid drug Atorvastatin in dosage forms of 20 mg and 40 mg, which are outside price control, instead of its price controlled 10 mg dosage form.

Why DPCO 2013 drugs showing low volume growth?

From the above examples, if I put two and two together, the reason for DPCO 2013 drugs showing low volume growth becomes much clearer.

Such alleged manipulations are grossly illegal, as specified in the DPCO 2013 itself. Thus, resorting to illegal acts of making similar drugs available to patients at a much higher price by tweaking formulations, should just not attract specified punitive measures, but may also be construed as acting against health interest of Indian patients…findings of the above ‘research report’, notwithstanding, even if it is accepted on its face value.

In my view, because of such alleged manipulations, and many NLEM 2011 drugs being either old or not in supply, we find in the above table that the volume growth of ‘Price Controlled NLEM drugs’ is much less than ‘Price Controlled non-NLEM Para 19’ drugs. Interestingly, even ‘Out of Price Control’ drugs show lesser volume growth than ‘Price Controlled non-NLEM Para 19 drugs’.

Government decides to revise NLEM 2011:

The wave of general concerns expressed on the relevance of NLEM 2011 reached the law makers of the country too. Questions were also asked in the Parliament on this subject.

Driven by the stark reality and the hard facts, the Union Government decided to revise NLEM 2011. 

For this purpose, a ‘Core Committee of Experts’ under the Chairmanship of Dr. V.M Katoch, Secretary, Department of Health Research & Director General, Indian Council of Medical Research (ICMR), was formed in May 2014.

The minutes of the first and second meetings of the ‘Core Committee of Experts’, held on June 24, 2014 and July 2, 2014, respectively, were also made public. 

On May 5, 2015, the Union Minister for Chemicals and Fertilizers Ananth Kumar said in a written reply to the ‘Lok Sabha’ that “The revised NLEM would form the basis of number of medicines which would come under price control.” This revision is taking place in the context of contemporary knowledge of use of therapeutic products, the Minister added.

Would pharma sector grow faster sans ‘price control’?

If ‘drug price control’ is abolished in India, would pharma companies grow at a much faster rate in volume with commensurate increase in consumption, than what they have recorded during ‘limited price control’ regime in the country? This, in my view, is a matter of conjecture and could be a subject of wide speculation. I am saying this primarily due to the fact that India has emerged as one of the fastest growing global pharmaceutical market during uninterrupted ‘drug price control regime’ spanning over the last 45 years.

Nevertheless, going by the retail audit data from the above table, it may not be necessarily so. The data shows that volume growth of ‘out of price control’ drugs is not the highest, by any measure. On the contrary, it is much less than ‘price controlled drugs under para 19 of DPCO 2013′, which are mainly prescribed for non-infectious chronic diseases on a large scale.

I am referring to AIOCD-AWACS data for just the last 12 months, because of space constraint, but have gone through the same for the entire DPCO 2015 period, till September’15. The reason for my zeroing in on DPCO 2015 is for the three simple reasons:

- The span of price control in this regime is the least, even lesser than DPCO 1995, which was 20 percent. 

- It is much more liberal in its methodology of ‘Ceiling Price (CP)’ calculation, over any other previous DPCOs

- It has also a provision, for the first time ever, of automatic price increases every year for price controlled drugs, based on WPI.

A safeguard for patients?

Medicines enjoy the legal status of ‘essential commodities’ in India. Thus, many believe that ‘drug price control’ is a ‘pricing safeguard’ for Indian patients, especially for essential medicines and ‘out of expenses’ for drugs being as high as over 60 percent.

In the prevailing health care environment of India, the situation otherwise could even be possibly nightmarish. The key reason for the same has been attributed to ‘market failure’ by the Government, for most of the pharmaceutical products, where competition does not work. I discussed this issue in my article titled, “Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?” of April 27, 2015, in this Blog.

In India, ‘drug price control’ has successfully passed the intense scrutiny of the Supreme Court, along with its endorsement and approval. Any attempt of its retraction by any Government, without facing a tough challenge before the Apex Court, seems near impossible.

Conclusion: 

The fundamental reasons for overall low volume growth, or in other words, price-increase driven value growth of the IPM, I reckon, lie somewhere else, which could be a subject matter of a different debate altogether.

As I said in the past, IPM grew at an impressive speed consistently for decades, despite ‘drug price control’, and grumbling of the industry for the same. This high growth came from volume increase, price increase and new product introductions, the volume growth being the highest.

Most of the top 10 Indian pharma players, came into existence and grew so fast during the ‘drug price control’ regime. The  home-grown promoter of the numero-uno of the IPM league table, is now the second richest person of India. These are all generic pharma companies.

Generally speaking, Indian pharma shares even today attract more investors consistently than any other sector for such a long time. Granted that these companies are drug exporters too, but they all gained their critical mass in partly ‘price controlled’ Indian market. The criticality of the need for consistent growth in the domestic market, by the way, still remains absolutely relevant to all the pharma players in India, even today, despite…whatever.

Growth oriented overall Indian pharma scenario remaining quite the same, ‘drug price control’ with a current span of just around 18 percent of the IPM, can’t possibly be a growth barrier. Otherwise, how does one explain the highest volume growth of ‘price controlled non-NLEM drugs’, which is even more than ‘out of price-control drugs’?

Be that as it may, in my view, implementation of public funded ‘Universal Health Care (UHC)’ by the Indian Government, in any form or calling it by any other name, can possibly replace DPCO. Similar measures have been adopted by all the member countries of the ‘Organization for Economic Co-operation and Development (OECD)’ in this area, though following different paths, but nevertheless to attain the same goal.

Lamentably enough, the incumbent Government too has not ‘walked the talk’ on its number of assurances related to this core issue of health care in India.

Still, the hope lingers!

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.

 

Drug Price Control in India: A Fresh Advocacy With Blunt Edges

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It is no-brainer that the advocacy initiatives to influence the new Government doing away with the ‘Drug Price Control’ in India has re-started by flooring the gas pedal. A fresh invigorating effort, apparently a pretty expensive one, has been initiated in July 2015 with an interesting study conducted on the subject by an international market research organization, sponsored by a multi-national pharma trade association in India.

Having gone through the report, it appears to me, as if the whole purpose of the study was to rationalize an ‘advance’ conclusion in mind, weaving plethora of data around it for justification.

The report presents an abundance of selective data, apparently to rubbish the very concept of ‘Drug Price Control’ in India. In that process, it reinforced the existence of a deep seated malady in the overall sales and marketing strategic framework of most of the pharma players, rather than failure of ‘Drug Price Control’ in India, meant for the essential drugs.

In this article, I shall dwell on this issue adding my own perspective. Although my views are different, I totally respect the findings and suggestions made in this report.

Drug price control in India:

From 1970, Drug Price Control Orders (DPCO) are being issued in India under the Essential Commodities Act, without any break, so far. The key intent of the DPCO is to provide quality essential medicines at a reasonably affordable price to the consumer. The DPCO has been amended four times since then, the latest one being DPCO 2013.

Unlike the previous ones, the span of price control of DPCO 2013 is restricted to essential medicines, as featured in the National List of Essential Medicines 2011 (NLEM 2011). The methodology of price control has also now changed to ‘marked-based’ pricing from earlier ‘cost-based’ pricing.

However, for the first time in July 2013, the National Pharmaceutical Pricing Authority (NPPA) extended ‘Drug Price Control’ beyond the Schedule Drugs, when by a notification it announced price fixation of ‘anti-diabetic and cardiovascular drugs in respect of 108 non-scheduled formulation packs under Paragraph 19 of DPCO, 2013’,

Paragraph 19 of DPCO, 2013, authorizes the NPPA in extraordinary circumstances, if it considers it necessary to do so in public interest, to fix the ceiling price or retail price of any drug for such period as it deems fit.

Although the pharma industry initially had supported the switch from ‘cost based’ price control to ‘market based’ price control and only for NLEM 2011 drugs, it took a tougher stand after the above notification. Some trade association reverted to the same good old genre, yet again, trying to establish that ‘Drug Price Control’ does not help at all. The brand new market research report under discussion in this article, appears to be a step in that direction.

‘Market failure in pharma’ where competition does not work:

In its price notification dated July 10, 2014, as mentioned above, the NPPA justified its action by underscoring ‘market failure’ for those anti-diabetic and cardiovascular drugs, where competition does not work. NPPA considered ‘market failure’ as one of the ‘extraordinary circumstances’ and explained the situation as follows:

  • There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure, as different brands of the same drug formulation, which are identical to each other in terms of active ingredient(s), strength, dosage, route of administration, quality, product characteristics, and intended use, vary disproportionately in terms of price
  • It is observed that, the different brands of the drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.
  • In India the market failure for pharmaceuticals can be attributed to several factors, but the main reason is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.
  • Market failure alone may not constitute sufficient grounds for government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals play in the area of public health, which is a social right, such intervention becomes necessary, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most and also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.

I discussed this subject in my bog post of April 27, 2015 titled, “Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?”

Are medicines cheapest in India, really?

It is quite often quoted that medicines are cheapest in India. In my view, it would be too simplistic, if we compare the prevailing Indian drug prices in Rupee, against prices of similar drugs in other countries, just by simple conversion of the foreign currencies, such as, US$ and Euro converted into Rupee. To make the comparison realistic and credible, Indian drug prices should be compared against the same in other countries only after applying the following two critical parameters:

  • Purchasing Power Parity and Per Capita Income
  • Quantum of per capita ‘Out of Pocket Expenditure’ on drugs

The Department of Pharmaceuticals (DoP) with the help of academia and other experts had earlier deliberated on this issue in one of its reports on patented drugs pricing. The report established that post application of the above two parameters, medicines in India are virtually as expensive as in the developed world, causing great inconvenience to majority of patients in the country.

Hence, common patients expectedly look for some kind of critical intervention by the Government, at least, on the prices of essential drugs in India.

A new study on drug price control:

Recently, I came across a ‘brand new’ research report that tries to justify the fresh stance allegedly taken by the pharma industry on the abolition of ‘Drug Price Control’ in India.

This new study of IMS Health released on July 2015, sponsored by a pharma MNC trade association in India, titled “Assessing the Impact of Price Control Measures on Access to Medicines in India”, categorically highlights ‘price control is neither an effective nor sustainable strategy for improving access to medicines for Indian patients’.

The key findings:

The following are the key findings of the report:

  • High income patient populations, rather than the low-income targets are the primary beneficiaries of the DPCO 2013.
  • The consumption of price-controlled drugs in rural areas has decreased by 7 percent over the past two years, while that of non-price controlled products has risen by 5 percent.
  • The DPCO 2013 has resulted in an increase in market concentration and a decrease in competitive intensity.
  • Price control has increased margin pressures for small and mid-sized companies, limiting both employment and investment opportunities in the sector.
  • Price controls negatively impact internal capability-building and expertise-building initiatives, discourage local talent and undermine the government’s ’Make in India’ initiative.

The suggestions made:

In my view, the report almost repeats the same old suggestions being made by the pharma industry over decades. However, while making recommendations, this new report selectively quotes, without clearly naming them, from the draft National Health Policy 2015 and ‘Jan Aushadhi’ initiative of the DoP. It also attempts to ride on the shoulder of Prime Minister Modi’s ‘Make in India’ campaign. The key recommendations of the study are, as follows:

  • Strengthen healthcare financing and extend universal health coverage across population segments with focus on providing cover for medicines
  • Invest in healthcare infrastructure and capability building
  • Promote joint and bulk procurement mechanisms, e.g. Tamil Nadu Medical Services Corporation
  • Levy a cess on the tobacco and liquor industries to fund the healthcare sector and subsidize essential medicines from taxes
  • Introduce mechanisms to ensure availability of generics at lower prices, to improve affordability for patients i.e. set up dedicated generic medicine stores.

An official of IMS Health was also quoted by the media that sounds to me almost like pontification:

“Price control has limited impact on improving patient access and, furthermore is not aligned with the requirements of a vibrant economy like India” and the “Government’s priority should be on strengthening India’s healthcare infrastructure and extending universal insurance coverage.”

The blunt edges in the report raise more questions than answers:

I wonder, whether another apparently expensive research, such as this, was at all necessary to reinvent the same old advocacy narratives on ‘Drug Price Control’ in India.

As I note, the report highlights, “The consumption of price-controlled drugs in rural areas has decreased by 7 percent over the past two years, while that of non-price controlled products has risen by 5 percent.” If this is true, one should try to fathom:

  • What does it really mean and what are its implications?
  • Can it happen, if it has happened, just because of ‘Drug Price Control’?

I am raising these two questions mainly because, price controlled drugs are prescription medicines. Thus, post DPCO 2013, when it happens to ‘prescription only medicines’, other critical questions that come at the top of mind are as follows:

  • Are the doctors now prescribing less of price controlled drugs? If so, why?
  • Price controlled drugs being essential drugs, are the doctors prescribing less of essential drugs? If so, why?
  • Do the doctors prefer prescribing expensive ‘non-schedule’ drugs to patients against their interest? if so, why?

Further, deliberately causing decline in consumption of these drugs, for margin or whatever may be the reasons, without intimating the NPPA as stipulated in the DPCO 2013, is a serious offense, attracting stringent penal action under the Essential Commodities Act.

Therefore, if the above finding of this study is correct and assuming that NPPA is not aware of such shortages or declining consumption of essential drugs in India, yet another critical question that needs to be answered:

  • By deliberately bringing down the consumption of essential medicines, are the concerned pharma players not taking the law in their own hands?

If yes, the Government would need to act forthwith. If not, the above finding of the report is just not correct.

The DoP, NPPA and other stakeholders would, therefore, need to ferret out, which one of the above two is correct.

Thus, I reckon, to wish away ‘Drug Price Control’ in India, the fresh advocacy initiative of the pharma trade association, keeping in the forefront a new study with blunt edges, raises more questions than answers. I have given just an example here, as above.

More marketing push on ‘free-pricing’ drugs is common:

It is not uncommon that the sales of ‘free-pricing’ drugs are usually more, as their margin is unlimited. Pharma players take increasing interest in those drugs and push them harder, almost totally controlling the ‘push-pull’ effect of drug marketing.

Globally, drug companies take increasing interest in such medicines. India is no exception. Here too ‘out of price control’ non-schedule drugs usually show higher growth, as the doctors are influenced to prescribe more of such drugs, though at the cost of consumer.

This practice may not be acceptable to many, but is a stark reality. This process is expected to continue, at least, till Uniform Code of Pharmaceutical Marketing Practices (UCPMP) is made mandatory with strict enforcement and strong punitive provisions for any violations.

Is the growth of price controlled drugs declining?

If the growth of price controlled medicines drastically comes down post DPCO 2013, that should get reflected on the declining overall sales and growth of those drugs. Similar pattern should also be visible in the growth of those types products marketed by most of the major pharma companies in India.

Let me now present the scenario of that space. The following analysis is based on the monthly retail audit data of AIOCD Pharmasofttech AWACS.

When I look at the growth of DPCO 2013 products based on NLEM 2011 and other price controlled drugs under ‘Para 19’ from January to July 2015 period in the following table, the scenario does not look as worrying just yet, as the above report has made it out to be.  

Product group-wise market growth (in Value):

Month (2015) DPCO products (%) DPCO  Para 19 Products (%) Non-DPCO Products (%) Total Market Growth (%)
July 5.1 11.8 14.2 12.9
June 5.6 14.6 16.2 14.8
May 5.3 7.2 12.1 11.0
April 11.1 11.9 18.4 17.2
March 1.6 15.6 21.7 20.9
February 13.9 14.4 20.0 18.9
January 6.9 NA 14.0 12.7

(Source: AIOCD Pharmasofttech AWACS )

Again, in the following table, when I look at the growth of DPCO 2013 products of some the very major pharma players in India, the conclusion still remains the same as above:

DPCO Products Growth (%) by major companies (Jan-July 2015):

Company July June May April March Feb Jan
Ranbaxy 20.5 31.9 29.5 17.3 27.6 20.7 53.7
Pfizer 13.0 17.4 5.7 16.7 25.6 21.1 18.6
Abbott 7.2 11.7 18.5 13.5 15.5 18.3 21.2
GSK -2.1 - 1.8 -1.2 12.2 12.2 NA NA

(Source: AIOCD Pharmasofttech AWACS )

The blunt edges fail to cut ice:

Quite expectedly, even a month after its release in July 2015, the blunt edges in the report seem to have cut no ice, especially at a very important place that matters most to the industry in this area. This observation gets vindicated by a credible media report.

On August 24, 2015 in an interview to a national business daily, V K Subburaj, the Secretary of the Department of Pharmaceuticals commented, “Price control on drugs a shot in the arm for health care” and “the Government cannot do away with it.”

He argued, “A large section of the population is poor. Suddenly, your system is disturbed if you have to spend more on drugs. Drugs are an important component of health care expenditure.”

Accepting the fact that in India, big and small companies investing in research would need more money, Mr. Subburaj said, “In India, we can’t afford to remove controls as the burden of disease is high.”

Conclusion:

With all due respect to all concerned, the above report appears to me palpably commercial, sans any worthy academic value or intellectual input that could trigger thinking for a change in the Government policy. The report apparently lacks in the required cutting edge to achieve the intended goal. The blunt edges are glaring, suggesting on the contrary, that the real action actually lies with the industry. Let me hasten to add, if any one has a different view on the subject, I would respect that with all humility.

The drug price control in India has been continuing since 1970, without any gap. The retail audit data clearly indicates that the growth of the Indian pharma industry did not get stunted or stifled during the period for this particular reason, as postulated in the above report of IMS Health. On the contrary, despite price control of drugs with all its ‘ill-effects’, as highlighted in the study, the growth of the Indian pharma industry in the last 4 decades has been nothing less than spectacular. This would consequently mean, increasing consumption of drugs, leading to improving access to medicines in India, including its hinterland, though may still not be good enough. I discussed this subject in my blog post of December 13, 2013, titled “Access to Medicine: Losing Track in Cacophony”.

Coincidentally, at the commencement of drug price control regime in India, almost all, if not all, the players in the ‘Top 10’ pharma league table of the country, were multi-national drug companies. Today the situation has just reversed. Out of ‘Top 10’, about 7 are home grown drug companies. Many of these companies were born post 1970. Without M&As by the pharma MNCs, this number could have been even higher today.

When it comes to profitability, it is worth mentioning, the soft-spoken and well-respected owner of the so called ‘low margin’ generic pharma company – Sun Pharma, is the second-richest person of the country. He created his initial wealth from India, despite ostensible ‘growth stunting’ price control – as elaborated in the above report.

By the way, what is the span of drug price control in India really – just around 18 percent of the total domestic pharma market now? More than 80 percent of the local drug market continue to remain in the ‘free-pricing’ and ‘high-profit’ zone. In that case, is the essence of the report not chanting… ‘yeh dil maange more’?

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.

India’s ‘National Health Policy 2015′ Needs Wings To Fly

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Ensuring ‘access to healthcare for all’ has remained a key well-articulated good intent of all the successive Governments in India, cutting across the political regimes, since 1983.

The Union Ministry of Health & Family Welfare published the first “National Health Policy (NHP)”, in 1983, which was endorsed by the Indian Parliament in the same year. The policy categorically enunciated the following:

“India is committed to attaining the goal of ‘Health for All by the Year 2000 A.D.’ through the universal provision of comprehensive primary healthcare services”.

For the first time after independence, this document captured the key directions and dimension of the national health policy such as, the creation of infrastructure for primary healthcare; close co-ordination with health-related services and activities (like nutrition, drinking water supply and sanitation); active involvement and participation of voluntary organizations; provision of essential drugs and vaccines; qualitative improvement in health and family planning services; provision of adequate training; and medical research aimed at the common health problems of the people. However, it did not elaborate much about the Universal Health Care (UHC).

Abysmal public expenditure to meet the key goal of NHP 1983:

The NHP 1983, which was revised in 2002, recommended an increase in public health expenditure to 2.0 percent of GDP in 2010.

The 12th Fiver Year Plan of the Government of India again acknowledged that the health sector expenditure by the central and state governments, both plan and non-plan will have to be substantially increased during the plan period. It also stated that the health expenditure was increased from 0.94 per cent of GDP in the 10th Plan to 1.04 per cent in 11th Plan and it should be increased to 2.5 per cent of GDP by the end of 12th Five Year Plan period.

That said, the bottom-line is, the current public spending on health is stagnating around 0.9 percent of the GDP. Leave aside implementation of the 1983 NHP goal of providing “Health for all by the year 2000 A.D”, even in 2015, India continues to grapple with the challenges for ensuring availability, accessibility, affordability and quality of comprehensive healthcare to all, though various governments have come and gone during this period. India’s rank in the Human Development Index (HDI) also remains at pitiful 136 out of 187 countries and despite improvements, India is likely to miss some key MDG targets in 2015.

Pockets of improvements – mostly grossly inadequate:

In the midst of gloom and doom in the health space of India, the 57 page draft NHP 2015 captures some of commendable improvements, as well, and very rightly so, which I am not going to repeat in this article.

A June 2013 report of IMS Institute also acknowledges that the extent of change and improvement in India’s healthcare system over the past decade is remarkable. The Government of India’s initiatives, as well as private sector actions and public-private-partnership programs, have contributed to this progress. Yet a lot more remains to be done.

The report highlights the following areas, which are worth taking note of:

  • The physical accessibility of public or private healthcare facilities is a challenge in rural areas. By contrast, in urban areas, accessibility is less of a challenge due to more facilities being available.
  • An increasing proportion of the population is using private healthcare 
facilities for both in-patient and out-patient treatments. Long waiting times and absence of diagnostic facilities are among the main reasons private healthcare facilities are chosen over public centers for in-patient treatment. For out-patient treatment, the availability or doctors and quality of care are cited as reasons for selecting a private healthcare facility. However, patients would readily switch to public healthcare centers if these issues were addressed, the research report states.
  • The cost of treatment at a public healthcare facility is much more affordable than at a private center. However, due to lack of physical reach, availability of quality treatment and other practices, patients are forced to use more expensive private facilities, thus exacerbating affordability challenges. The majority of Out of Pocket (OoP) expenses are due to medicines.
  • Overall, while there are pockets of improvements, significant healthcare access challenges continue to exist for the Indian population, especially in rural areas.

OoP expenses on health is one of the highest in India:

Out of Pocket (OoP) expenditure on health is one of the highest in India at 61.7 percent, as acknowledges by the draft NHP 2015, as well. This is against 35.3 of China, 30.6 of Brazil, 44.6 of Sri Lanka, 61.3 of Bangladesh, 14 of Thailand, 8.9 of United Kingdom and 11.8 of the United States. The reason being, due to lack of access to cheaper and quality public health facilities, a vast majority of the Indian population is forced to turn to expensive private healthcare providers, as confirmed by the IMS Institute in its above report..

Suggested framework for a comprehensive view of healthcare access:

The same June 2013 report of IMS Institute states that healthcare access has varying meaning in different countries, especially across developing and developed economies. In the developed economies, it is often equated to the access status of healthcare insurance, whereas in the developing economies, it is viewed primarily across two dimensions: the physical reach of a healthcare facility, and affordability to the patient.

Thus, it is important to build a framework that would provide a comprehensive view to healthcare access. The framework should be able to define healthcare access in the Indian context, aided by other parameters that are key in ensuring quality treatment to a patient.

The framework also allows understanding of each component of healthcare access separately, including inter-dependencies.

According to IMS Institute, healthcare access has 4 key dimensions as follows:

Physical Reach:

This component defines physical accessibility of a requisite healthcare facility, i.e. availability of a healthcare facility having an out-patient department (OPD) for common ailments, and an in-patient department (IPD) for hospitalization. These facilities may either be public or private in nature. Physical reach is defined as the ability to enter a healthcare facility within 5 kilometers (5km) from the place of residence or work.

Availability/Capacity:

This component defines availability of the requisite healthcare resources to provide patient treatment, i.e. doctors, nurses, in-patient beds, diagnostics, consumables, etc. The availability is governed by minimum specifications defined by the Government of India for public healthcare facilities, and international organizations such as W.H.O.

Quality/Functionality:

This component defines the quality of the healthcare resources available at the point of patient treatment.

Affordability:

This component defines the ability of a patient to afford complete treatment for the illness or disease.

Draft NHP 2015 – ‘Health is a fundamental right’:

Though the above parameters were not quite considered, as such, to define access to healthcare, the new government has done a good job with the draft NHP 2015, while updating NHP 2002. The new draft has evoked good interest among the stakeholders as healthcare has become very costly in India and continues to go north, steadily, as mentioned above.

The draft has covered lots of ground related to health, spanning across the change in the nature of the nation’s disease burden from communicable to non-communicable diseases, shortage of human resources in health sector and right up to the use of information and communication technology. It’s a hard fact that low investment in public health has been placing India consistently at the lower rungs of the development indices.

Against the backdrop of paltry public expenditure on health, the Union Ministry of Health and Family Welfare through its draft National Health Policy, 2015 (NHP 2015) has proposed making health a fundamental right, similar to denial of health an offence.

The draft policy reiterates, “Many industrialized nations have laws that do so. Many of the developing nations that have made significant progress towards universal health coverage, such as Brazil and Thailand, have done so, and … such a law is a major contributory factor. A number of international covenants to which we [India] are joint signatories give us such a mandate – and this could be used to make a national law. Courts have also rulings that, in effect, see health care as a fundamental right — and a constitutional obligation flowing out of the right to life.”

The draft NHP 2015 even states, “The Centre shall enact, after due discussion and on the request of three or more states a National Health Rights Act, which will ensure health as a fundamental right, whose denial will be justiciable.”

The new draft policy acknowledges that primary healthcare of date covers not more than 20 per cent of the health needs and that a very high OoP health expenditure (over 61 percent on medicines) is pushing nearly 63 million people into poverty every year.

One of the key features of the new draft policy is an universal medical insurance scheme that will be virtually free for the poor and affordable for the rest. The government expects the stakeholders to send their comments and suggestions on the draft policy by February 28, 2014.

However, the draft NHP 2015 does not deliberate on some other important areas, such as specific time-bound commitments on public investments, insurance cover on outpatient treatments & care and appropriate regulations for the private sector to contain healthcare costs.

Cut on current year health budget raises may eyebrows:

In the midst of the prevailing lackluster public healthcare scenario, just in the last month (December 2014), the government has reportedly ordered a US$ 948 million (20 percent) cut in its 2014-15 healthcare budget due to fiscal constraints.

It is worth mentioning that at 0.9 percent of GDP, India’s public health expenditure is already among the lowest in the world, as compared to compared to 2.7 percent in China, 4.2 percent in brazil, 1.4 percent in Bangladesh, 1.6 percent in Sri Lanka, 2.9 percent in Thailand and 8.5 percent in the United States.

In addition to the healthcare budget, the finance ministry has reportedly also ordered a spending cut this year for India’s HIV/AIDS program by about 30 percent to US$ 205.4 million.

A report from Reuters, quoting one of the health ministry officials, stated that this budget cut could crimp efforts to control the spread of diseases. More newborns die in India than in poorer neighbors such as Bangladesh, and preventable illnesses such as diarrhea kill more than a million children every year.

Needs wings to fly:

The draft NHP 2015 has come thirteen years after the previous NHP 2002 and following a 20 percent cut even on the paltry budgetary allocation on public health of this financial year. Thus, many skeptics ponder whether this well drafted NHP 2015, pregnant with many great promises, would ever see the light of the day.

The skepticism gets further reinforced, when the draft NHP 2015 says that to achieve its objectives the budgetary allocation on health would be increased to 2.5 percent of the GDP. The Government proposes to rely mostly on general taxation, besides creating a health cess similar to that of education cess, for effective implementation of this health policy. The draft indicates that 40 percent of this budget would come from central expenditure.

A quick reading of the following text from the Reuter’s report makes the scenario even more intriguing:

“The retrenchment (budget cut) could also derail an ambitious universal healthcare program that Modi wants to launch in April. The plan aims to provide all citizens with free drugs and diagnostic treatments, as well as insurance benefits.

The cost of that program over the next four years had been estimated at 1.6 trillion rupees (US$ 25 billion). The health ministry officials had been expecting a jump in their budget for the coming year, in part to pay for this extra cost.

‘Even next year we don’t think we’ll get a huge amount of money,’ said one official, adding that it was now unclear how the new program would be funded.”

Thus, the key point to ponder now: Would the NHP 2015 have wings to fly?

Is India just producing various documents on health without action?

Not too long ago, in October 2010, the Government of India constituted a ‘High Level Expert Group (HLEG)’ on Universal Health Coverage (UHC) under the chairmanship of the well-known international medical expert Prof. K. Srinath Reddy. The HLEG was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

The HLEG Report defined UHC as follows:

“Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”.

I discussed this subject in my blog post of December 12, 2011, titled “Health being a basic human right, the proposal for Universal Health Coverage augurs well for India”

Most probably, this excellent HLEG report on UHC has already become an archival material for the posterity to refer, if and when required.

Interestingly, despite governments of different political dispensation ruling the country since 1983, the key goal of the NHP 1983 to ‘provide healthcare to all by the year 2000’ continues to haunt us over the last three decades.

Public healthcare infrastructure, especially in rural India, still remains grossly inadequate.

In most of the villages in India, primary health facilities, if available, (except in some progressive states), continue to be shoddy, fragile and is gasping for breath, as it were. Recent examples of Bilaspur (Chhattisgarh) sterilization tragedy in November 2014, when 15 women died or the incident of last week in Chatra district of Jharkhand, where about 40 women allegedly underwent sterilization under torchlight, would vindicate this point.

Much hyped program of “free essential drugs for all, from the government hospitals” has not been universally implemented, just yet…again due to financial resource constraints and paucity of other wherewithal.

Conclusion:

Currently, none of the newer constitutional rights, such as right to food, education and employment, enacted by the lawmakers for the well being of the concerned people of the country, is functioning as desired for various financial and administrative reasons. Even making adequate budgetary provisions for all these projects continue to pose a great challenge, both for the central and the state Governments.

Overall, NHP 2015 is a well-drafted and comprehensive policy document. It analyses the successes and failures of the past quite well, with a proposal of making health as a fundamental right. However, the status and experience with the other fundamental right-based legislations in India, do not fuel much optimism in this critical area, at least, as of now.

Consequently, the draft NHP 2015 does not appear to be more than a lucid narration of good intents, just what the NHP 1983 and 2002 did. Next month’s Union budget allocation for the financial year 2015-16 for health, calculated as a percentage of India’s GDP, would hopefully bring more clarity in this area.

Additionally, other important areas such as, specific time-bound commitments on public investments for health; extensions of medical insurance cover to even outpatient treatments & care and appropriate regulations for the private sector to contain healthcare expenditure, are worth considering in the NHP 2015.

Shorn of all these, would the National Health Policy 2015 have its wings to fly?

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.

 

A Great News! But…Would This ‘Golden Goose’ Lay Golden Eggs?

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On December 9, 2014, international media flashed across the world a great news item from the Indian pharma industry:

“The first biosimilar of the world’s top-selling medicine Humira (adalimumab) of AbbVie has been launched in India by Zydus Cadila.”

This exhilarating news has undoubtedly got frozen in time flagging a well-cherished moment of pride for the Indian pharmaceutical industry. Along side, taking note of many contemporary factors in this area, a lurking apprehension too does creep in. It raises an awkward and uncomfortable question – would this ‘Golden Goose” born out of a laudable ‘reverse engineering’ effort be able to lay ‘Golden Eggs’, signaling its global commercial success for the company?

In this article, I shall try to dwell on on this important issue.

In one my earlier blog posts of August 25, 2014 titled, “Scandalizing Biosimilar Drugs With Safety Concerns”, I discussed another related concern in this area.

Born a ‘Golden Goose’:

Just to recapitulate, the original product Humira (Adalimumab) of Abbvie, a fully human anti-TNF alpha monoclonal antibody was first globally approved for marketing in 2002. Since then Humira has emerged as the most preferred therapy to reduce the signs and symptoms of patients suffering from moderate to severe rheumatoid arthritis, moderate to severe polyarticular juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, moderate to severe Crohn’s disease and moderate to severe ulcerative colitis. However, Humira is not available in the Indian market, at present.

Zydus Cadila has announced that its biosimilar version of Humira (Adalimumab), has been approved by the Drug Controller General of India (DCGI) and will be marketed under the brand name ‘Exemptia’ for the treatment of autoimmune disorders as indicated for Humira.

As claimed by the company, ‘Exemptia’ is a ‘fingerprint match’ with the original drug Humira in terms of purity, safety and potency. Zydus Cadila has also stated that the novel non-infringing process for Adalimumab and a novel non-infringing formulation have been researched, developed and produced by scientists in its own Research Centre.

With this the world took note of the ‘Golden Goose’, born out of brilliant ‘Reverse Engineering’ in India. However, the apprehension of many continued to linger: Would this ‘Golden Goose’ be able to lay ‘Golden Eggs’?

The product and the price:

According to an estimate, over 12 million patients in India suffer from the above chronic conditions of autoimmune disorders, which progressively deteriorate and lead to lifelong pain and in some cases, even disability. To treat these indications, Exemptia is recommended as a 40 mg subcutaneous injection once every alternate week. Patients normally would have to take the treatment for six months.

Media reports indicate that ‘Exemptia’ of Zydus Cadila will be priced in India equivalent to US$ 200 a vial against Humira price in the United States of US$ 1,000. Initial overall reaction for this local price does not seem to be quite favorable for India.

The global market:

A recent report from Thomson Reuters indicates, as blockbuster drugs with sales turnover of around US$100 billion lose patent protection, the global biosimilars market is expected to grow around US$ 25 billion by the end of the decade.

According to a 2013 report of the credit rating agency Fitch, eight of the current 20 top-selling global pharmaceuticals are biologics that will face patent expiry by 2020.

EvaluatePharma reported that the current the anti-rheumatics market makes up the second largest treatment area by sales, with worldwide revenues of US$ 41.1 billion, closely behind the oncology therapy area, which registered sales of US$68 billion in 2012 with a high growth rate.

The report also states, despite biosimilar entry Anti-rheumatics segment is expected to record a Compound Annual Growth Rate (CAGR) of 4 percent with a turnover of around S$52.1 billion in 2018.

The local potential:

Over the last several years, China and India have been emerging as the promising destinations for international outsourcing of biopharmaceutical manufacturing. In the recent times, China and India are reportedly showing promises to become the industry’s top potential destinations for offshoring over the next five years, ahead of traditional bio manufacturing hubs in the US and Western Europe.

More than 40 biosimilar products are now available in the Indian market. Over 10 pharma players are competing in this area with around 15 epoetin, 8 G-CSF and 4 insulin “biosimilars”, besides a few others.

Although India has the second largest USFDA approved drug manufacturing plants next to the United States, none of the products manufactured in these facilities can possibly be considered as “true biosimilars”.

Humira expected to remain strong:

EvaluatePharma also forecasts that Humira of AbbVie would continue to remain the best selling drug of the world at least till 2018 with sales of US$12.8 billion, despite its US patent expiry in 2016.

Moreover, to succeed Humira that will go off patent between end 2016 and 2018 (Europe), AbbVie reportedly has seven new drugs in clinical development for Rheumatoid Arthritis. These patented new drugs could also significantly cannibalize the sales of Humira.

Physicians’ attitude towards biosimilars:

According to an October 2014 Report of IMS Institute from Europe’s perspective, within each country’s health system, physicians display a range of attitudes and behaviors that influence their prescribing of biosimilars.

IMS observed three broad segments of prescribers as follows:

  • Conservative prescribers: These doctors tend to be late adopters of new technologies, are more likely to follow published clinical treatment guidelines, and may not be aware of or educated on the availability of potential use of biosimilars.
  • Open-minded prescribers: This archetype includes physicians who tend to be the most responsive to new information about treatment options, particularly where experience and knowledge of biologics may be low and educational program can be effective in impacting usage.
  • Enterprising prescribers: This segment of prescribers is most likely to search out information from all sources, and be open to trying different options for patient care including biosimilars as well as innovative treatments.

In addition to these archetypes, the report states, physicians’ attitudes and prescribing behavior may also be influenced or determined by prescribing guidelines, if any, the use of prescribing incentives, as well as the use of promotional activities by either originator or biosimilar manufacturers.

The US biosimilar challenge:

According to reports, despite two pharma players filing biosimilar applications at the USFDA, there are still many issues to be sorted out in this space by the drug regulator of the country.

Though an interchangeable biosimilar in the United States still appears to be several years away, there are initiatives in some American states to restrict interchangeable biosimilar for substitution against the reference product.

Moreover, USFDA’s draft guidance on clinical pharmacology of May 2014 has invited strong adverse comments from the innovator companies, lobby groups and the industry associations.

However, just in the last week, both the innovator companies and biosimilar manufacturers have reportedly agreed to support state legislation that allows pharmacies to automatically substitute biosimilars for corresponding branded biologics. But pharmacies must give prescribers a heads up afterward “within a reasonable time.”

For biosimilars makers, it’s a big improvement on the alternative, as the biotech developers wanted to require pharmacists to check with doctors before making the switch.

That said, the USFDA is yet to determine exactly how to classify biosimilars and their “reference products” as interchangeable. This guidance for classification would be necessary for the above mentioned pharmacy switches. This guidance is important especially for the statutory language, which dictates that interchangeability is proven for “any given patient”. This could also be construed as requiring studies in all the approved indications for a brand name biologic, i.e. Humira has around five different indications.

Thus, the path ahead still remains challenging for the biosimilar players in the United States, and more so for the Indian Companies, as compared to other global pharma majors with deep pockets.

Several other Humira biosimilars under development too:

As indicated earlier, the US and Europe patents of Humira with worldwide sales of US$ 11.02 billion in 2013 would expire by end 2016 and 2018, respectively. Thus, the product has become among the most sought-after biosimilar target prototypes for many pharma and biotech companies across the world.

The global biotech major Amgen has already indicated that its ABP 501 biosimilar has shown comparable efficacy and safety to Humira (adalimumab) in a late-stage trial in patients with moderate-to-severe plaque psoriasis after treatment duration of 16 weeks. The product, reportedly, has also matched Humira in stimulating immune response in patients.

Experts believe, Amgen could be in a position to compete directly with Humira when it loses patent protection, if similar results are obtained in the second phase III trial.

Moreover, according to available reports, Boehringer Ingelheim, Sandoz (Novartis) and Coherus are also progressing well with the development of Humira biosimilars.

Zydus Cadila expects that in 2019 it would be ready to launch the biosimilar of Humira (Adalimumab) in the United States.

Marketing challenges for biosimilars:

Today, the global biosimilars market is indeed in a nascent stage, even for the Indian players.

For successful commercialization of biosimilars, I envisage, a well-crafted hybrid marketing-model of small molecule generics on the one hand and large molecule biologics of the originators’ on the other would be appropriate, in the years ahead.

In the early marketing phase, biosimilar marketers are expected to follow the same branding, communication and detailing strategies of the originators, which ultimately would transform into a generic matrix as more players chip in with the price competition intensifying.

Unlike small molecule generics, affordable price of a biosimilar would be just one of the many critical considerations for its commercial success in the biologics market.

Sustained efforts and initiatives to allay safety concerns with biosimilars among both the doctors and also the patients would be a dire necessity. Providing in-depth medical, technical and domain knowledge to the sales team should never be compromised, though these would require additional initial investments. Post marketing surveillance or pharmacovigilance for biosimilars must be ongoing, even in India. Here too, Indian players do not seem to be very strong, as yet.

Thus, unlike small molecule generics, marketing a large molecule biosimilar would require clear, razor sharp and focused strategies across the value chain to unlock its true potential. Crafting impactful value propositions, avoiding complexities, for each stakeholder, would decide the commercial fate of the product.

‘Made in India’ issue for pharma needs to be addressed expeditiously:

High credibility clinical trial data and manufacturing quality standards would also play a decisive role, especially for India made biosimilars.

This is mainly due to widespread reports of frequent USFDA allegations related to falsification and doctoring of manufacturing data in several manufacturing plants of India.

Ethical and quality issues for drugs made in India, such as these, assumed even greater dimension, as the regulators in France, Germany, Belgium and Luxembourg reportedly suspended marketing approval for 25 drugs over the genuineness of clinical trial data from India’s GVK Biosciences. This is yet another blow to ‘Made in India’ image for medicines, which has arrested the global attention, for all the wrong reasons, just the last week. 

Conclusion:

Considering all the above points, let me now try to make a fair personal guess on whether or not the ‘Golden Goose’ would be successful enough to lay ‘Golden Eggs’, as required by the company.

Firstly, in the Indian perspective, the key point that strikes me is the cost of a treatment course with ‘Exemptia’ per patient in the country. On a rough calculation, it comes around Rs. 1,50,000 per course/per patient. This appears rather high according to the income level of an average Indian.

However, Zydus Cadila expects sales between Rs.1 billion (US$16.16 million) and 2 billion for ‘Exemptia’ only from the Indian market.

I reckon, with relatively high per course treatment cost with Exemptia, it may be quite challenging for the company to achieve this goal in the domestic market.

Thus, the global success of this biosimilar brand would mainly depend on its degree of success in the United States and Europe, post patent expiry of Humira.

Going by the possible availability of other Humira biosimilars from manufacturers with robust global marketing muscle, skill sets, experience and other wherewithal, the path of global success for Exemptia of Zydus Cadila, if the company decides to fly solo, appears to be strewn with many odds.

I would now stick my neck out to zero in with specificity in this area, while envisaging the possible future scenario.

Considering the evolving macro scenario together with the commercial success requirements in this space, I reckon, despite presence of several possible competitors of Humira biosimilars, including one from Zydus Cadila, the biotech domain expertise of Amgen, fuelled by its marketing muscle, would in all probability make its ABP 501 biosimilar the toughest competitor to Humira after its patent expiry in the US and Europe…and then…why doesn’t it try to succeed in India too?

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.

Moving Up The Generic Pharma Value Chain

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June 2014 underscores a significant development for the generic drug exporters of India. Much-delayed and highly expected launch of generic Diovan (Valsartan) is now on its way, as Ranbaxy has reportedly received US-FDA approval to launch the first generic version of this blood pressure drug in the United States.

As deliberated in my earlier blog titled “Big Pharma’s Windfall Gain From Indian Pharma’s Loss, Costs American Patients Dear”, delay in launch of the generic equivalent of Diovan caused a windfall gain for Novartis from US$ 1.7 billion US sales of this drug last year, instead of usual declining turnover of an innovative molecule post patent expiry.

The generic version of Diovan (Valsartan) is estimated to contribute around US$ 200 million to Ranbaxy’s sales and US$ 100 million to its profit after tax, during the exclusive sale period. Against these numbers, delay in the launch of generic Diovan has reportedly cost payers and consumers in America around US$ 900 million in the first 18 months.

Since four Ranbaxy manufacturing facilities in India are now facing US-FDA ‘import bans’ due to violations of ‘Good Manufacturing Practices’ of the American regulator, its Ohm Laboratories unit located in New Jersey has been allowed to make generic Valsartan for the US.

Go for gold: 

Hopefully, Ranbaxy would soon get similar approvals from the US drug regulator for its ‘first to launch’ generic versions of Nexium (AstraZeneca) and Valcyte (Roche), as well.

It is worth mentioning that around 90 percent price erosion would take place with intense competition, as soon the period of exclusivity for such ‘first to launch’ generics gets over.

Nonetheless, this is indeed a very interesting development, when the global generic pharmaceutical segment is reportedly showing signals of a tough chase for overtaking the branded pharmaceuticals sector in terms of sales turnover too.

India has a huge a stake in this ball game, as it supplies around 30 to 40 percent of the world’s generic medicines and is well poised to improve its pharma exports from around US$ 15 billion per year to US$ 25 billion by 2016. Since 2012, this objective has remained an integral part of the country’s global initiative to position India as the “pharmacy to the world.”

However, considering the recent hiccups of some Indian pharma majors in meeting with the quality requirements of the US-FDA, though this target appears to be a challenging one for now, the domestic pharma players should continue to make all out efforts to go for the gold by moving up the generic pharmaceutical value chain. In this context, it is worth noting that penetration of the generic drugs in the US is expected to increase from the current 83 percent to 86-87 percent very shortly, as the ‘Obamacare’ takes off with full steam.

Moving up the value chain:

In the largest pharma market of the world – the United States, global generic companies are increasingly facing cutthroat price competition with commensurate price erosion, registering mixed figures of growth. Even in a situation like this, some companies are being immensely benefited from moving up the value chain with differentiated generic product launches that offer relatively high margin, such as, specialty dermatologicals, complex injectibles, other products with differentiated drug delivery systems and above all biosimilars.

As a consequence of which, some Indian generic companies have already started focusing on the development of value added, difficult to manufacture and technology intensive generic product portfolios, in various therapy areas. Just to cite an example, Dr. Reddy’s Laboratories (DRL) is now reportedly set to take its complex generic drug Fondaparinux sodium injection to Canada and two other emerging markets.

Thus, those Indian pharma companies, which would be able to develop a robust product portfolio of complex generics and other differentiated formulations for the global market, would be much better placed in positioning themselves significantly ahead of the rest, both in terms of top and the bottom lines.

One such key opportunity area is the development of a portfolio of biosimilar drugs – the large molecule proteins.

Global interest in biosimilars:

According to the June 2014 report of GlobalData, a leading global research and consulting firm, the biosimilars industry is already highly lucrative. More than 100 deals involving companies focused on the development of biosimilars have been completed over the past 7 years, with a total value in excess of US$10.7 billion.

GlobalData further states, there are a number of factors driving the initiative toward global adoption of biosimilars, from austerity measures and slow economic growth in the US, to an aging population and increasing demand for healthcare in countries, such as Japan.

The costs of biosimilars are expected to be, at least, 20 to 30 percent lower than the branded biologic therapies. This still remains a significant reduction, as many biologics command hundreds of thousands of dollars for 1 year’s treatment.

According to another media report, biosimilars are set to replace around 70 percent of global chemical drugs over the next couple of decades on account of ‘safety parameters and a huge portion of biologic products going off patent’.

Biosimilar would improve patient access:

Although at present over 150 different biologic medicines are available globally, just around 11 countries have access to low cost biosimilar drugs, India being one of them. Supporters of biosimilar medicines are indeed swelling as the time passes by.

It has been widely reported that the cost of treatment with innovative and patented biologic drugs can vary from US$ 100,000 to US$ 300,000 a year. A 2010 review on biosimilar drugs published by the Duke University highlights that biosimilar equivalents of novel biologics would improve access to such drugs significantly, for the patients across the globe.

Regulatory hurdles easing off:

In the developed world, European Union (EU) had taken a lead towards this direction by putting a robust system in place, way back in 2003. In the US, along with the recent healthcare reform process of the Obama administration, the US-FDA has already charted the regulatory pathway for biosimilar drugs, though more clarifications are still required.

Not so long ago, the EU had approved Sandoz’s (Novartis) Filgrastim (Neupogen brand of Amgen), which is prescribed for the treatment of Neutropenia. With Filgrastim, Sandoz will now have at least 3 biosimilar products in its portfolio.

Key global players:

At present, the key global players are Sandoz (Novartis), Teva, BioPartners, BioGenerix (Ratiopharm) and Bioceuticals (Stada). With the entry of pharmaceutical majors like, Pfizer, Sanofi, Merck, Boehringer Ingelheim and Eli Lilly, the global biosimilar market is expected to be heated up and grow at a much faster pace than ever before. Removal of regulatory hurdles for the marketing approval of such drugs in the US would be the key growth driver.

Globally, the scenario for biosimilar drugs started warming up when Merck announced that the company expects to have at least 5 biosimilars in the late stage development by 2012.

Most recent global development:

A key global development in the biosimilar space has taken place, just this month, in June 2014, when Eli Lilly has reportedly won the recommendation of European Medicines Agency’s Committee for Medicinal Products for launch of a biosimilar version (Abasria insulin) of Sanofi’s Lantus insulin. This launch would pave the way for the first biosimilar version of Sanofi’s top-selling drug clocking a turnover of US$7.8 billion in 2013. Eli Lilly developed Abasria with Boehringer Ingelheim of Germany.

In May 2014, Lantus would lose patent protection in Europe. However, biosimilar competition of Lantus in the US could get delayed despite its patent expiry in February, as Sanofi reportedly announced its intention of suing Eli Lilly on this score.

Global Market Potential:

According to a 2011 study, conducted by Global Industry Analysts Inc., worldwide market for biosimilar drugs is estimated to reach US$ 4.8 billion by the year 2015, the key growth drivers being as follows:

  • Patent expiries of blockbuster biologic drugs
  • Cost containment measures of various governments
  • Aging population
  • Supporting legislation in increasing number of countries
  • Recent establishment of regulatory pathways for biosimilars in the US

IMS Health indicates that the US will be the cornerstone of the global biosimilars market, powering a sector worth between US$ 11 billion and US$ 25 billion in 2020, representing a 4 percent and 10 percent share, respectively, of the total biologics market.

The overall penetration of biosimilars within the off-patent biological market is estimated to reach up to 50 percent by 2020.

Challenges for India:

Unlike commonly used ‘small molecule’ chemical drugs, ‘large molecule’ biologics are developed from living cells using very complex processes. It is virtually impossible to replicate these protein substances, unlike the ‘small molecule’ drugs. One can at best develop a biologically similar molecule with the application of high degree of biotechnological expertise.

According to IMS Health, the following would be the key areas of challenge:

High development costs:

Developing a biosimilar is not a simple process but one that requires significant investment, technical capability and clinical trial expertise. Average cost estimates range from US$ 20-100 million against much lesser cost of developing traditional generics, which are typically around US$ 1-4 million.

Fledgling regulatory framework:

In most markets apart from Europe, but including the United States, the regulatory framework for biosimilars is generally still very new compared to the well-established approval process for NCEs and small-molecule generics.

Intricate manufacturing issues:

The development of biosimilars involves sophisticated technologies and processes, raising the risk of the investment.

Overcoming ‘Branded Mentality’:

Winning the trust of stakeholders would call for honed skills, adequate resources and overcoming the branded mentality, which is especially high for biologics. Thus, initiatives to allay safety concerns among physicians and patients will be particularly important, supported by sales teams with deeper medical and technical knowledge. This will mean significant investment in sales and marketing too.

Indian business potential:

The biosimilar drugs market in India is expected to reach US$ 2 billion in 2014 (Source: Evalueserve, April 2010).

Recombinant vaccines, erythropoietin, recombinant insulin, monoclonal antibody, interferon alpha, granulocyte cell stimulating factor like products are now being manufactured by a number of domestic biotech companies, such as, Dr. Reddy’s Laboratories, Lupin, Biocon, Panacea Biotech, Wockhardt, Glenmark, Emcure, Bharat Biotech, Serum Institute, Hetero, Intas and Reliance Life Sciences.

The ultimate objective of all these Indian companies is to get regulatory approval of their respective biosimilar products in the US and the EU either on their own or through collaborative initiatives.

Domestic players on the go:

Dr.Reddy’s Laboratories (DRL) in India has already developed Biosimilar version of Rituxan (Rituximab) of Roche used in the treatment of Non-Hodgkin’s lymphoma.  DRL has also developed Filgastrim of Amgen, which enhances production of white blood cell by the body and markets the product as Grafeel in India. DRL has launched the first generic Darbepoetin Alfa in the world for treating nephrology and oncology indications and Peg-grafeel, an affordable form of Pegfilgrastim, which is used to stimulate the bone marrow to fight infection in patients undergoing chemotherapy. The company reportedly sold 1.4 million units of its four biosimilars, which have treated almost 97,000 patients across 12 countries. Besides, in June 2012, DRL and Merck Serono, of Germany, announced a partnership deal to co-develop a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs). The partnership covers co-development, manufacturing and commercialization of the compounds around the globe, with some specific country exceptions.

Another Indian pharmaceutical major Cipla, has reportedly invested Rs 300 Crore in 2010 to acquire stakes of MabPharm in India and BioMab in China and announced in June 19, 2014 collaboration with Hetero Drugs to launch a biosimilar drug with Actroise brand name for the treatment of anemia caused due to chronic kidney disease. Actorise is a biosimilar of ‘Darbepoetin alfa’, which is marketed by US-based Amgen under the brand Aranesp.

In 2011, Lupin reportedly signed a deal with a private specialty life science company NeuClone Pty Ltd of Sydney, Australia for their cell-line technology. Lupin reportedly would use this technology for developing biosimilar drugs in the field of oncology. Again, in April 2014, Lupin entered into a joint venture pact with Japanese company Yoshindo Inc. to form a new entity that will be responsible both for development of biosimilars and obtaining marketing access for products in the Japanese market.

In November 2013, The Drug Controller General of India (DCGI) approved a biosimilar version of Roche’s Herceptin developed jointly by Biocon and Mylan.

In June 2014, Ipca Laboratories and Oncobiologics, Inc. of USA reportedly announced the creation of an alliance for the development, manufacture and commercialization of biosimilar monoclonal antibody products.

Many more such initiatives reportedly are in the offing.

Oncology becoming biosimilar development hot spot:

Many domestic Indian pharmaceutical companies are targeting Oncology disease area for developing biosimilar drugs, which is estimated to be the largest segment globally with a value turnover of around US$ 60 billion growing over 17 percent.

As per recent reports, about 8 million deaths take place all over the world per year due to cancer.

Indian Government support:

In India, the government seems to have recognized that research on biotechnology has a vast commercial potential for products in human health, including biosimilars, diagnostics and immune-biological, among many others.

To give a fillip to the Biotech Industry in India the National Biotechnology Board was set up by the Government under the Ministry of Science and Technology way back in 1982. The Department of Biotechnology (DBT) came into existence in 1986. The DBT currently spends around US$ 300 million annually to develop biotech resources in the country and has been reportedly making reasonably good progress.

The DBT together with the Drug Controller General of India (DCGI) has now prepared and put in place ‘Regulatory Guidelines for Biosimilar Drugs’ in conformance with the international quality and patient safety standards. This is a big step forward for India in the arena of biosimilar drugs.

In June 2014, under the advanced technology scheme of Biotechnology Industry Partnership Program (BIPP), the DBT has reportedly invited fresh proposals from biotech companies for providing support on a cost sharing basis targeted at development of novel and high risk futuristic technologies mainly for viability gap funding and enhancing existing R&D capacities of start-ups and SMEs in key areas of national importance and public good.

However, the stakeholders expect much more from the government in this area, which the new Indian government would hopefully address with a sense of urgency.

Conclusion: 

According to IMS Health, biosimilar market could well be the fastest-growing biologics segment in the next few years, opening up oncology and autoimmune disease areas to this category of drugs for the first time ever. Moreover, a number of top-selling biologic brands would go off patent over the next five years, offering possibilities of reaping rich harvest for the biosimilars players of the country. Critical therapy areas such as cancer, diabetes and rheumatoid arthritis are expected to spearhead the new wave of biosimilars.

While moving up the generic pharma value chain, Indian pharma players desiring to encash on the emerging global biosimilars opportunities would require to do a thorough analysis, well in advance, to understand properly the key success factors, core value propositions, financial upsides and risks attached to investments in this area.

Indian companies would also need to decide whether moving ahead in this space would be through collaborations and alliances or flying solo would be the right answer for them. Thereafter would come the critical market access strategy – one of the toughest mind games in the long-haul pharma marketing warfare.

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.

 

With Free Medicines In, Would The New Government Revisit ‘Universal Health Coverage’ Soon?

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Friday last, the new Union Health Minister Dr. Harsh Vardhan reportedly announced that the his ministry would soon start work on distributing free medicines through public hospitals across the country.

For this purpose the Minister would soon call a meeting of the State Health Ministers to integrate this policy with the National Health Mission (NHM). The said meeting will be held under the framework of the Central Council of Health (CCH), which also includes professional experts.

A commendable beginning:

This decision of Dr. Harsh Vardhan would revive a plan that the former Prime Minister Manmohan Singh had promised in his Independence Day speech to the nation in 2012, but could not be implement due to paucity of adequate fund. Implemented effectively, the above scheme has the potential to significantly reduce the Out-of-Pocket (OoP) expenditure on healthcare in India.

According to a 2012 study of IMS Consulting, expenditure on medicines still constitute the highest component of OoP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012.  Similarly for IP care, the share of medicines in total OoP has also marginally decreased from 46 percent in 2004 to 43 percent in 2012.

However, it is worth noting that still 46 percent of patients seeking healthcare in public channels purchase medicines from private channels for non-availability. The new scheme hopefully would resolve this issue with sincerity, care and a sense of purpose.

For early success in this area, experts recommend that up and running Tamil Nadu and Rajasthan models of this scheme, which are most efficient and cost effective, should be replicated in rest of the states.

Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation with the manufacturers, and distribution of those drugs free of cost from the Government hospitals and health centers to the patients efficiently, could further add value to the process.

The cost and span:

Planning Commission estimated that a countrywide free generic drug program would cost Rs 28,560 Crore (roughly around US$ 5 Billion) during the 12th Five-Year Plan period. The Centre will bear 75 percent of the cost while the states would provide the rest. Under the previous government plan, 348 drugs enlisted in the National List of Essential Medicines 2011 (NLEM 2011) were to be provided free at 160,000 sub-centers, 23,000 Primary Health Centers, 5,000 community health centers and 640 district hospitals.

“Universal Health Coverage” – Still remains the holistic approach:

That said, despite its immense importance, “distribution of free medicines” still remains just one of the key elements of Universal Health Coverage (UHC). It is expected that the new government would take a holistic view on the UHC agenda, sooner, to provide comprehensive healthcare services, including preventive care, to all citizens of the country.

According to another recent media report, the new Health Minister has already expressed a different viewpoint on this subject. Dr. Harsh Vardhan has reportedly said:

“I am not in favor of taxpayers’ money being used to push a one-size-fits-all health policy. From this morning itself, I have started contacting public health practitioners to know their minds on what should be the road ahead.”

Without deliberating much on the roll out of UHC as of now, the Minister promised that the government would work to provide ‘health insurance coverage for all’ through a National Insurance Policy for Health.

This statement is significant, because until recently, the ‘high level’ understanding was that the country, at least directionally, is in favor of public funded UHC, which was defined as follows:

“Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”.

The groundwork started with ‘The HLEG Report‘ :

Just to recapitulate, in October 2010, the Planning Commission of India constituted a ‘High Level Expert Group (HLEG)’ on UHC under the chairmanship of Dr. Prof. K. Srinath Reddy, President of the ‘Public Health Foundation of India (PHFI)’. The group was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

HLEG in its submission had suggested that the entire scheme would be funded by the taxpayers’ money for specified sets of healthcare services and for additional services commensurate health insurance coverage may be purchased by the individuals. Accordingly, to ensure a modest beginning of the UHC, in the 12th Five Year Plan Period, public expenditure on health was raised to 2.5 percent of the GDP.

UHC guarantees access to essential free health services for all:

Because of the uniqueness of India, HLEG proposed a hybrid system that draws on the lessons learnt from within India, as well as other developed and developing countries of the world.

The proposal underscored that UHC will ensure guaranteed access to essential health services for every citizen of India, including cashless in-patient and out-patient treatment for primary, secondary and tertiary care. All these services will be available to the patients absolutely free of any cost.

UHC provides options to patients:

Under the proposed UHC, all citizens of India would be free to choose between public sector facilities and ‘contracted-in’ private providers for healthcare services. It was envisaged that people would be free to supplement the free of cost healthcare services offered under UHC by opting to pay ‘out of pocket’ or going for private health insurance schemes.

What exactly is the new Health Minister mulling?

If the new Health Minister is mulling something different to provide similar healthcare coverage to Indians, let me now explore the other options adopted by various nations in this area.

As we know, UHC is a healthcare system where all citizens of a country are covered for the basic healthcare services. In many countries UHC may have different system types as follows:

  • Single Payer: The government provides insurance to all citizens.
  • Two-Tier: The government provides basic insurance coverage to citizens and allows purchase of additional voluntary insurance whenever a citizen wants to.
  • Insurance Mandate: The government mandates that insurance must be bought by all its citizens, like what happened in the USA in 2010 under ‘Obamacare’.

The Global scenario:

As per published reports, all 33 ‘developed nations’ (OECD countries) have UHC in place. America was the only exception, till President Barack Obama administration implemented its ‘path breaking’ healthcare reform policy in 2010 against tough political opposition.

India is already too late in providing UHC:

Based on an article titled, ‘ Analyzing our economy, government policy and society through the lens of cost-benefit’ published in ‘True Cost’, following is the list that states in which countries the UHC is currently in place and from when:

Country Start Date of Universal Health Care System Type
Norway 1912 Single Payer
New Zealand 1938 Two Tier
Japan 1938 Single Payer
Germany 1941 Insurance Mandate
Belgium 1945 Insurance Mandate
United Kingdom 1948 Single Payer
Kuwait 1950 Single Payer
Sweden 1955 Single Payer
Bahrain 1957 Single Payer
Brunei 1958 Single Payer
Canada 1966 Single Payer
Netherlands 1966 Two-Tier
Austria 1967 Insurance Mandate
United Arab Emirates 1971 Single Payer
Finland 1972 Single Payer
Slovenia 1972 Single Payer
Denmark 1973 Two-Tier
Luxembourg 1973 Insurance Mandate
France 1974 Two-Tier
Australia 1975 Two Tier
Ireland 1977 Two-Tier
Italy 1978 Single Payer
Portugal 1979 Single Payer
Cyprus 1980 Single Payer
Greece 1983 Insurance Mandate
Spain 1986 Single Payer
South Korea 1988 Insurance Mandate
Iceland 1990 Single Payer
Hong Kong 1993 Two-Tier
Singapore 1993 Two-Tier
Switzerland 1994 Insurance Mandate
Israel 1995 Two-Tier
United States 2010 Insurance Mandate

In-sync with the concept, probably with different means:

From the above statement of the new Health Minister, it appears that to provide healthcare coverage to all citizens of India, his ministry would work towards developing a National Health Insurance Policy. He also expressed that his ministry wants to focus on preventive healthcare.

Preventive healthcare being an integral part of UHC, it could well be that Dr. Harsh Vardhan wants to follow ‘Single Payer’ type of UHC system type.

Another school of thought:

However, another school of thought opines that a government owned efficient public healthcare system with adequate infrastructural facilities provides healthcare to patients almost free of cost as compared to the “insurance mandated” one.

This is mainly because, to address respective healthcare needs currently the patients have either or a mix of the following two choices:

  • Use public health facilities: Available virtually at free of cost if accessible, but quality is mostly questionable.
  • Use private health facilities: Virtually unregulated, much better services, though available mostly at high to very high cost.

Thus, these groups of experts believe that provision of universal health insurance for treatment at the expensive private facilities may not be cost effective even for the government, if these are not adequately regulated with appropriate stringent measures.

In absence of all those measures, the new Health Minister could consider taking a decision in favor of tax-funded UHC, with appropriate budgetary provisions and investments towards improving country’s healthcare infrastructure and its delivery mechanism for all.

Conclusion:

Be that as it may, there is not even an iota of doubt that India needs ‘Universal Health Coverage (UHC)’, like any OECD or other countries of the world for its citizens, sooner. Just distributing free medicines through public hospitals across the country for all, without a holistic approach such as UHC, may not yield desired results.

From the initial deliberations of Dr. Harsh Vardhan, it appears that UHC would soon not just be revisited, but receive a new thrust too, from the no-nonsense minister, probably leaning more towards private participation than with a public funded one, contrary to what was proposed by the HLEG.

Does it matter really? Well…

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.

Is The New ‘Market Based Pricing’ Model Fundamentally Flawed?

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After a long wait of close to two decades, when the Drug Price Control Order 2013 (DPCO 2013) followed the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) last year, it appeared that the new pharma price control regime is more acceptable to the industry than the previous, resulting in better over all implementation and compliance.

However, just within a year, the reality seems to be quite different. Not only the Ceiling Price (CP) calculation process of the National Pharmaceutical Pricing Authority (NPPA) based on DPCO 2013 appears to be fundamentally flawed, its misuse and abuse by some pharma players have also been the subject of great concern and consumer aghast.

The eternal ‘Cat and Mouse’ game continues:

Probably there would be many instances of pharmaceutical companies dodging the DPCO 2013. However, FDA, Maharashtra, has unearthed the following two instances, so far:

1. Favorable consumer expectations with well-hyped DPCO 2013 received a body blow for the first time, when the general public came to know through media reports, that too after almost a year, that GlaxoSmithKline (GSK) Consumer Healthcare having launched its new ‘Crocin Advance’ 500 mg with a higher price of Rs 30 for a strip of 15 tablets, has planned to gradually withdraw its conventional price controlled Crocin 500 mg brand costing around Rs 14 for a strip of 15 tablets to the patients . GSK Consumer Healthcare claims that Crocin Advance is a new drug and therefore should be outside price control.

According to IMS Health data, ‘Crocin Advance’ is currently the fifth largest brand among top Paracetamol branded generics, clocking a sales turnover of Rs 10.3 Crore during the last 12 months ending in February 2014.

2. The second instance of evading DPCO 2013 has also been reported by the media. In this case some other pharmaceutical companies have reportedly started selling the anti-lipid drug Atorvastatin in dosage forms of 20 mg and 40 mg, which are outside price control, instead of its price controlled 10 mg dosage form. Quoting the Maharashtra FDA, the report states: “Atorvastatin may face a similar kind of action from the state FDA as other overpriced brands of drugs as this drug has been overpriced five to 10 times more than the DPCO price. This kind of overcharging is a subject for investigation. Atorvastatin of 40 mg dosage is generally recommended for senior citizens.”

Tip of an Iceberg?

All these seem to be just the tip of an iceberg related to evasion of DPCO 2013 by some pharma black ships, raising costs of essential medicines for the patients. Ironically, what is happening now is an exact replica of the same old strategy that many pharma players got involved into to avoid price control under earlier DPCO 1995. Continuation of the same act of deceit with DPCO 2013 confirms that the ‘cat and mouse game’ to avoid price control is eternal in India, in the absence of any strong and exemplary deterrent.

Better late than never:

When Maharashtra FDA brought it to the notice of National Pharmaceutical Pricing Authority (NPPA), the later asked GSK to immediately reduce the market price of ‘Crocin Advance’, as there is no proven additional therapeutic efficacy for the product. The price regulator also sought confirmation of the action taken by the company in this regard. Additionally, GSK Consumer Healthcare now faces consequential punitive measures from the NPPA for price overcharging. This action on the part of NPPA, in all probability, would get lost in the quagmire of litigation, as usually happens in India.

Be that as it may, I expect NPPA taking similar action for Atorvastatin too and increasing its vigil for such scant respect on patient-centric laws and policies of the country.

A brief recapitulation:

Just to recapitulate, DPCO 2013 has been fundamentally different from its ‘predecessor’ DPCO 1995, mainly on the following two counts:

1. Methodology of Price Control:

This has changed from earlier ‘Cost Based Pricing (CBP)’ to ‘Market Based Pricing (MBP)’ based on simple average of all products having 1 percent or more market share.

2. Span of Price Control:

In DPCO 1995, all formulations of 74 bulk drugs, selected based on specified criteria, were under cost based price control, covering over 1700 formulations. Whereas, in DPCO 2013 all essential drugs as mentioned in the National List of Essential Medicines 2011 (NLEM 2011) come under price control applying the above new methodology of MBP. DPCO 2013 brings around 652 formulations of 348 drugs under 27 therapeutic segments of the NLEM 2011, under price control.

Significant benefits of DPCO 2013 to the industry:

DPCO 2013 offers following three key advantages to the industry, both in the short and longer term:

  • MBP methodology in DPCO 2013 is considered by the industry as more transparent and less ‘intrusive’ than CBP methodology.
  • Span of price control with DPCO 2013 came down to 18 percent of the total pharmaceutical market covering around 610 formulations, as against 20 percent in DPCO 1995 covering over 1700 formulations.
  • Opportunity for automatic annual price increase for controlled formulations based on WPI, which was not there in DPCO 1995, is now available to the industry. Thus, in keeping with the relevant provision of DPCO 2013, NPPA has recently allowed the drug companies to increase the Maximum Retail Price (MRP) of the price controlled medicines, contributing 18 percent of the total market, by 6.32 percent effective April 1, 2014, while prices of balance 82 percent of drugs, that are outside price control, can go up by 10 percent every year.

Check on essential drugs going out of market:

Interestingly, DPCO 2013 has tried to prevent any possibility of an essential drug going out of the market without the knowledge of NPPA by incorporating the following provision in the order:

“Any manufacturer of scheduled formulation, intending to discontinue any scheduled formulation from the market shall issue a public notice and also intimate the Government in Form-IV of schedule-II of this order in this regard at least six month prior to the intended date of discontinuation and the Government may, in public interest, direct the manufacturer of the scheduled formulation to continue with required level of production or import for a period not exceeding one year, from the intended date of such discontinuation within a period of sixty days of receipt of such intimation.”

However, it is still not clear, whether or not GSK Consumer Healthcare had followed this stipulated provision for price controlled conventional Crocin formulations. At least, I do not remember having come across any such public notice, as yet.

Key concerns expressed with DPCO 2013:

The MBP methodology seems to be unique to India as CBP is more common in countries that follow drug price control. Hence the following concerns were expressed with DPCO 2013.

  • Reduction in drug prices with market-based pricing methodology is significantly less than the cost based ones. Hence, consumers will be much less benefitted with the new system.
  • Earlier cost based pricing system was not more transparent only because a large section from the industry reportedly did not co-operate with the NPPA in providing cost details, as required by them.
  • Serious apprehensions have been expressed about the quality of outsourced market data lacking adequate confidence level across the board, which now forms the basis of CP calculations.
  • Additionally, outsourced data would provide details only of around 480 out of 652 NLEM formulations. How will the data for remaining products be obtained and with what level of accuracy?

It is, therefore, believed now by many that DPCO 2013 is more of an outcome of a successful lobbying efforts of the pharmaceutical industry in India, rather than a robust pricing policy supported by a flawless methodology for CP calculations.

DPCO 2013 faces challenge in the Supreme Court:

As a result of the above apprehensions, a Public Interest Litigation (PIL) is now pending before the Supreme Court for hearing challenging DPCO 2013.

Ground Zero of the quality of outsourced market data:

While assessing from the ‘Ground Zero’, keeping aside instances of hoodwinking DPCO 2013 with tweaked formulations, the core issue of the quality of outsourced market data forming the bedrock of CP calculation by the NPPA, undoubtedly becomes more fundamental, creating huge discomfort for many pharma players .

Unlike DPCO 1995, where NPPA used to calculate the CP based on its own audits, data provided by the concerned companies and from many other reliable market sources, the calculations to arrive at the CP for DPCO 2013 products are based predominantly on data outsourced from IMS Health, if not solely.

IMS data does not always capture correct brand prices:

As stated above, many leading pharmaceutical companies are now reportedly pointing out repeatedly that the CP fixation by the NPPA is not accurate, as the IMS Health data does not represent the real prices in many cases.

This is not a new issue either. I have been hearing similar complaints since ages in different forum, wearing different hats and also from various other reliable industry sources. Moreover, NPPA and the Department of Pharmaceuticals (DoP) have indicated several times in the past that IMS data do not capture the requisite details as needed for over 100 products featured in NLEM 2011.

According to Pharmabiz of April 2, 2014, some of the companies expressing the above apprehensions are Sun Pharma, Unichem Labs, Panacea Biotec, Win-Medicare, Albert David, Baxter (India), Indi Pharma and Gland Pharma.

Responding to such widespread complaints, the DoP has directed NPPA to revalidate the IMS data, now being used for CP calculations, for all notified medicines. Accordingly, NPPA has sought the relevant details from respective companies. However, till such data validation takes place, pharma players must comply with all CPs, as notified by the NPPA from time to time.

Difficulty in data validation:

In my view, it would not be easy for the NPPA to revalidate the IMS data due to the following reasons:

  • Those companies, whose prices are showing higher than the current ones in the IMS Health data, may not report to NPPA, as that could ultimately affect them adversely.
  • Pharma companies’ response, in general, to requests from NPPA for furnishing cost and price related information has traditionally been much less than encouraging.

The logjam to continue:

With this evolving scenario, I reckon, till the Supreme Court intervenes responding to the PIL on DPCO 2013 related issues, the dissatisfaction of the industry and the constraints of the NPPA would continue, patients being the primary sufferers.

Conclusion:

Despite the reported concern expressed in the 2014 National Trade Estimate (NTE) Report on Foreign Trade Barriers over the Indian drug price control mechanisms as a deterrent to foreign investments, government price control for essential medicines in India is here to stay for a long haul, to uphold the patients’ health interest.

That said, the final verdict of the Supreme Court related to the PIL on the NPPP 2012, based on which DPCO 2013 has been worked out, is yet to come. Any unfavorable decision of the Honorable Court on the subject may push both the NPPP 2012 and DPCO 2013 back to square one, yet again.

In this backdrop, considering the key fundamental flaw in the CP calculation process of DPCO 2013 with associated loud hiccups as evidenced by the GSK Consumer Healthcare episode and others, would a well-considered verdict of the Supreme Court on the subject be more desirable for greater access to more affordable essential drugs by the patients in 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.