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Innovative ‘Medicines Too Damn Expensive’: Health Risk For Billions of People

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Most ‘medicines are too damn expensive. And a key part of the problem is the lack of consistent information about drug pricing. It’s not often that the Trump administration and the anti-poverty NGO Oxfam find themselves singing from the same hymn sheet.’ This was articulated in the article carrying a headline, ‘No One Knows The True Cost Of Medicines, And Blaming Other Countries Won’t Help,’ published by Forbes on March 03, 2019.

In the oldest democracy of the world, on the eve of the last Presidential election, Kaiser Health Tracking Poll, September 2016 captured the public anger on skyrocketing cost of prescription drugs, which they ranked near the top of consumers’ health care concerns. Accordingly, politicians in both parties, including the Presidential candidates, vowed to do something about it.

Ironically, even so close to General Election in the largest democracy of the world, no such data is available, nor it is one of the top priority election issues. Nevertheless, the discontentment of the general public in this area is palpable. The final push of election propaganda of any political party is now unlikely to include health care as one of the key focus areas for them. This is because, many seemingly trivial ones are expected to fetch more votes, as many believe.

In this area, I shall dwell on the ‘mystic’ area of jaw dropping, arbitrary drug pricing, especially for innovative lifesaving drugs – drawing examples from some recent research studies in this area.

High drug prices and associated health risks for billions of people:

New Oxfam research paper, titled: ‘Harmful Side Effects: How drug companies undermine global health,’ published on September 18, 2018, ferreted out some facts, which, in general terms, aren’t a big surprise for many. It highlighted the following:

  • Abbott, Johnson & Johnson, Merck and Pfizer – systematically hide their profits in overseas tax havens.
  • By charging very high prices for their products, they appear to deprive developing countries more than USD 100 million every year – money that is urgently needed to meet health needs of people in these countries.
  • In the UK, these four companies may be underpaying around £125m of tax each year.
  • These corporations also deploy massive lobbying operations to influence trade, tax and health policies in their favor and give their damaging behavior greater apparent legitimacy.
  • Tax dodging, high prices and political influencing by pharmaceutical companies exacerbate the yawning gap between rich and poor, between men and women, and between advanced economies and developing ones.

The impact of this situation is profound and is likely to further escalate, if left unchecked, the reason being self-regulation of pharma industry is far from desirable in this area.

As discussed in the article, titled ‘Why Rising Drug Prices May Be the Biggest Risk to Your Health,’ published in Healthline on July 18, 2018, left unchecked, the rising cost of prescription drugs could cripple healthcare, as well as raise health risks for millions of people. Although this specific article was penned in the American context, it is also relevant in India, especially for lifesaving patented drugs, for treating many serious ailments, such as cancer.

Is pharma pricing arbitrary?

The answer to this question seems to be no less than an emphatic ‘yes’. Vindicating this point, the above Forbes article says: ‘It’s a myth that the costs of medicines need to be high, to cover the research & development costs of pharmaceutical companies.’

Explaining it further, the paper underscored, ‘Prices in the pharma industry aren’t set based on a particular acceptable level of profit, or in relation to the cost of production. They’re established based on a calculation of the absolute maximum that enough people are willing to pay.’

The myth: ‘High R&D cost is the reason for high drug price’: 

Curiously, ample evidences indicate that this often-repeated argument of the drug companies’, is indeed a myth. To illustrate the point, I am quoting below just a few examples, as available from both independent and also the industry sources that would bust this myth:

  • Several research studies show that actual R&D cost to discover and develop a New Molecular Entity (NME) is much less than what the pharma and biotech industry claims. Again, in another article, titled ‘The R&D Factor: One of the Greatest Myths of the Industry,” published in this blog on March 25, 2013, I also quoted the erstwhile CEO of GlaxoSmithKline (GSK) on this subject. He clearly enunciated in an interview with Reuters that: “US $1 billion price tag for R&D was an average figure that includes money spent on drugs that ultimately fail… If you stop failing so often, you massively reduce the cost of drug development… It’s entirely achievable.”
  • In addition, according to the BMJ report: ‘More than four fifths of all funds for basic research to discover new drugs and vaccines come from public sources,’ and not incurred by respective drug companies.
  • Interestingly, other research data reveals that ‘drug companies spend far more on marketing drugs – in some cases twice as much – than on developing them.’ This was published by the BBC New with details, in an article, titled ‘Pharmaceutical industry gets high on fat profits.’

World Health Organization (WHO) recommends transparency in drug pricing:

The report of the United Nations Secretary-General’s High-Level Panel on ‘Access to Medicines’ released on September 14, 2016 emphasized the need of transparency in this area of the pharma sector. It recommended, governments should require manufacturers and distributors to disclose to drug regulatory and procurement authorities information pertaining to:

  • The costs of R&D, production, marketing and distribution of health technology being procured or given marketing approval to each expense category separated; and
  • Any public funding received in the development of any health technology, including tax credits, subsidies and grants.

But the bottom-line is, not much, if any, progress has been made by any UN member countries participating in this study. The overall situation today still remains as it has always been.

Conclusion:

The Oxfam report, as mentioned above, captures how arbitrarily fixed exorbitant drug pricing, creates a profound adverse impact on the lives of billions of people in developing and underdeveloped countries. Let me quote here only one such example from this report corroborating this point. It underlined that the breast cancer drug trastuzumab, costing around USD 38,000 for a 12-month course, is almost five times the average income for a South African household. The situation in India for such drugs, I reckon, is no quite different.

To make drug pricing transparent for all, the paper recommends, “attacking that system of secrecy around R&D costs is key.” Pharma players have erected a wall around them, as it were, by giving reasons, such as, ‘commercial secret, commercial information, no we can’t find out about this’…if you question intellectual property, it’s like you’re questioning God.” The report adds.

In India, the near-term solution for greater access to new and innovative lifesaving drugs to patients, is to implement a transparent patented drug pricing policy mechanism in the country. This is clearly enshrined in the current national pharma policy document, but has not seen the light of the day, just yet.

In the battle against disease, life-threatening ailments are getting increasingly more complex to treat, warranting newer and innovative medicines. But these ‘drugs are too damn expensive’.

In the midst of this complicated scenario, billions of people across the world are getting a sense of being trapped between ‘the devil and the deep blue sea.’Occasional price tweaking of such drugs by the regulator are no more than ‘palliative’ measures. Whereas, a long-term solution to this important issue by the policy makers are now absolutely necessary for public health interest, especially in a country like 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.

Protect Generic Drug Margin Moving Up The Value Chain

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As an innovative drug molecule goes off-patent, it paves the way for market-entry of cheaper generic equivalents of the same. It benefits not just the patients, but all generic drug players awaiting this opportunity. But, in case of even those generic drugs enjoying 180-day exclusivity in the United States, the price erosion would still be significant, at least, 20 percent to 30 percent. Post 180-day exclusivity, intense competition between different formulations of the same molecule can bring the price down by even 85 percent or more, as compared to the original one.

While looking at the world’s largest pharma market, one sees an interesting scenario unfolding in this area. The Generic Access and Savings Report in the United States 2018 released on July 10, 2018 by the Association for Accessible Medicines, captures it well. Some of the key findings of which on generic drugs are as follows:

  • In 2017, generic medicines account for nine out of every 10 prescriptions filled in the United States.
  • Patients fail to fill their prescriptions for brand-name drugs at a rate 2-3 times higher than for generics.
  • 93 percent of generic prescriptions are filled at $20 or less.
  • Average patient copay for a generic prescription is $6.06.
  • Generic medicines generated a total of $265 billion in savings.

That’s a good story for the patients in general, and specifically for those who are in the United States. That said, there is a business aspect of this story, as well. In this article, I shall focus on that, venturing into the way forward. However, before proceeding further, for the understanding of all, let me briefly explain, what is this 180-day exclusivity period as described by the FDA in the United States (USFDA).

180-day exclusivity period for generic drug:

USFDA may grant some exclusivity to Abbreviated New Drug Applications (ANDAs) for generic drugs. For this purpose, under the Drug Price Competition and Patent Term Restoration Act, or the Hatch-Waxman Act, a company can seek approval from the FDA to market a generic drug before the expiration of a patent relating to the brand name drug upon which the generic is based. The first company to submit an ANDA with the FDA has the exclusive right to market the generic drug for 180 days. This is called 180-day exclusivity and:

  • Provides an incentive of 180 days of market exclusivity to the “first” generic applicant who challenges a listed patent by filing a paragraph IV certification and running the risk of having to defend a patent infringement suit.
  • Begins either from the date the sponsor begins commercial marketing of the generic drug product, or from the date of a court decision finding the patent invalid, unenforceable or not infringed, whichever is first.
  • In some circumstances, an applicant who obtains 180-day exclusivity may be the sole marketer of a generic competitor to the innovator product for 180 days
  • FDA does not send letters to the sponsor indicating the grant of exclusivity. The Orange Book is the official vehicle for dissemination of this information.

It is worth noting that some drugs have both patent and exclusivity protections while others have just one or none. Patents and exclusivity may or may not run concurrently and may or may not encompass the same claims.

Increasing pressure on margin:

Nevertheless, after 180-day exclusivity period or as in most other cases, cut-throat price competition starts among product proliferation. On the other hand, even after patent expiry, the prices of original brand name drugs keep attracting a substantial premium. According to another study: “Brand-name drugs have been shown to be priced 20 percent higher than generic drugs in the Netherlands, 30 percent higher in Germany, 50 percent higher in Canada, 50–90 percent higher in the US, and 80 percent higher in the UK.”

In today’s environment, generic drugs are under severe cost pressure also because of direct government interventions in many large markets, such as the United States. A couple of other factors also play a major role in squeezing the generic drug margin in several countries, such as:

  • Large wholesalers while fighting with each other to get the pharmacy business, often exert tough pressure on generic manufacturers to lower the price.
  • Other bulk buyers also do the same making the margin wafer-thin.

Its cumulative impact leads to commoditization of generic drugs.

Commoditization of generic drugs:

As is known to many, for a commodity there are many suppliers mostly without any tangible differentiating features and benefits. The same thing happens to generic medicines of the same molecule without any worthwhile difference in efficacy, quality and safety standards. Thus, the price of a generic formulation generally includes its total cost, plus a margin, and depends market demand and supply for products outside any price control. Intense competition within many players with more supply of the same molecule, often squeezes the margin out to a dangerous level.

This scenario was well captured in an 2018 article published in the Journal of Bioequivalence & Bioavailability (volume 10(3): 48-49 (2018) –48). It reiterated, cutthroat competition and public pressure pose challenges for ethical and generic pharma companies. 7 to 10 percent annual price erosion, increased competition coupled with other pressure push margins lower leading to decreased profitability.

Major costs did not change much:

Moreover, the major fixed costs involving raw materials, packing materials, labor and conversion expenditure did not change commensurately. The manufacturing process and yield improvement measures did help. But up to a certain point and not beyond that, to keep the quality of finished formulations within the accepted regulatory requirements of the respective countries, such as the United States.

The trend prevails in 2018: 

The above trend prevails even in 2018, in continuation with the previous year. One may recall that in August 2017, due to serious price erosion, several billion dollars in market value were wiped out for some top generic companies. These names include India’s homegrown Dr. Reddy’s Lab., besides Teva and Mylan.

The article titled, ‘Opportunities and Obstacles for Generic Drugs,’ published in PharmTechalso emphasized: ‘Continued pressure on generic-drug prices may reduce product development and limit manufacturing in the US. Numerous state officials have filed lawsuits against generic-drug makers for alleged price-fixing, and debate continues over brand vs. generic product labeling to warn consumers about safety issues. All these trends will shape generic-drug production and costs in the coming months.’

In this situation, the ability of the generic companies to find ways to increase their margin will be the key to success in this business, if not for a long-term survival too.

Ways to achieve it:

One of the novel ways to achieve this goal is entry into ‘Complex Generics’ business.

According to Market Realist – an independent investment research organization, ‘Complex Generics’ are attractive due to high margins. Unlike, commoditized generic formulations, ‘complex generics’ are not easy to manufacture and are generally used in specialty care, namely for treating serious chronic diseases or several life-threatening ailments, such as cancer, HIV or hepatitis C. To some extent complex generics create a market entry barrier for many generic players, due to higher manufacturing cost and complex processes involved in developing this genre of drugs.Complex generics may be classified into several categories, such as:

  • Complex Active Ingredients: like, peptides
  • Complex Formulations: like, liposomes, iron colloids
  • Complex Delivery System: like, locally acting drugs
  • Complex Drug-Device Combinations: like respiratory metered dose inhalers, transdermal system or a medicated adhesive patch
  • Biosimilar drugs

On October 09, 2018, a statement from USFDA Commissioner Scott Gottlieb highlighted a new effort to advance the development of generic copies of complex drugs to improve patient access to medicines. Gottlieb said, complex generics “aredrugs that, by nature of their formulation or delivery systems for example, are harder to ‘genericize’ under our traditional approaches. As a result, these drugs often face less competition. Today, we’re announcing a series of guidance documents that will advance the development of generic transdermal and topical delivery systems (TDS).”

This is an interesting development in the world’s largest pharma market.

Lucrative prices of complex generics:

Prices of complex generics are much higher than conventional generic drugs. According to Market Realist a complex generic could cost around US$ 6,000 per month to patients, but would still remain way below the cost of related original brand. Hence, it is a win-win situation – both for patients and also the generic drug manufacturers. Additionally, alongside benefiting patients in terms of cost, complex generics show potential to fetch higher profitability with a reasonable product differentiation.

The ball has started rolling:

It happened in a big way this year, when due to intense price pressure on generics, Sandoz division of Novartis took a major step. On September 6, 2018 - Novartis announced that it has agreed to sell selected portions of its Sandoz US portfolio, specifically the Sandoz US dermatology business and generic US oral solid portfolio, to Aurobindo Pharma USA Inc. It also said, ‘this transaction supports the Sandoz strategy of focusing on complex-generics, value-added medicines and biosimilars to achieve sustainable and profitable growth in the US over the long-term.’

Indian generic drug manufacturers have also sniffed this opportunity. Several Indian players, such as Sun Pharma, Cipla, Lupin, Reliance Life Science, Dr. Reddy’s Laboratories, Glenmark, Biocon and Aurobindo Pharma, to name a few, have made forays into complex generics, including biosimilars. All put together Indian companies have filed around 50 ANDAs in the United States. This number is good, but may not guarantee success for all the applicants. Only the quality of these ANDAs will determine how soon, or how late, or how expensive would be the process of getting marketing approval for complex generics in the United States.

Conclusion:

As ‘The Lancet Oncology’ editorial of June 2015 noted: ‘In recent years, generics manufacturers have increased investment in the development of complex generics.” I reckon, this won’t include a large number of drug exporters from India – not just yet.

The development process of complex generics isn’t everybody’s cup of tea. Thus, venturing into this area by any generic player of all sizes and scale, would call for greater commitment from the company concerned. This path is arduous as compared to conventional generics. If not navigated properly, cost may also be high in certain circumstances. For example, if and when the regulator asks more elaborate trial, or repeat trials, or even the marketing approval process itself could be tough to conform with. That said, complex generics are expected to eventually contribute a significant percentage of the generic market, as their approval challenges are overcome.

Be that as it may, to improve, if not for protecting the profitability of the generic drug business, transacted especially in the developed world, there doesn’t seem to be much option left now, but to move up the value chain.

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.

 

Improving Patient Access To Biosimilar Drugs: Two Key Barriers

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Novel biologic medicines have unlocked a new frontier offering more effective treatment for a host of chronic and life-threatening diseases, such as varieties of cancer, rheumatoid arthritis and diabetes, to name just a few. However, these drugs being hugely expensive, many patients do not have any access, or adequate access, to them. According to the Biosimilar Council of GPhA, only 50 percent of severe Rheumatoid Arthritis patients receive biologic medicines, even in the United States, Europe and Japan, leave aside India.

Realizing the gravity of this situation, a need to develop high quality, reasonably affordable and similar to original biologic brands, was felt about ten years ago. These were intended to be launched immediately after patent expiry of the original biologic. Such medicines are termed as biosimilar drugs. It is worth noting, even biosimilar drug development involves complex manufacturing processes and handling, while dealing with derivatives of highly sensitive living organisms.

The regulatory approval process of these drugs is also very stringent, which demands robust clinical data, demonstrating high similarity, both in effectiveness and safety profile, to original biologic brands, known as the reference product. The clinical data requirements for all new biosimilars include data on patients switching from the originator’s brand, and also between other biosimilars. Clinical evidences such as these, are expected to provide enough confidence to physicians for use of these products.

An article published in the PharmaTimes magazine in January 2016, reiterated that over the last couple of years, a wealth of supporting data has been published in medical journals and presented at global congresses, including real-world data of patients who have been switched to the new drug from the originator. This has led to a positive change in physician and patient attitudes towards biosimilars.

The good news is, besides many other regulated markets, as of May 2017, five biosimilar drugs have been approved even by the US-FDA, and several others are in the pipeline of its approval process.

That said, in this article I shall mainly focus on the two key barriers for improving patient access to biosimilar drugs, as I see it.

Two major barriers and their impact:

As I see it, there appear to be the following two key barriers for more affordable biosimilar drugs coming into the market, improving patients’ access to these important biologic medicines:

  • The first barrier involves fierce legal resistance from the original biologic manufacturers of the world, on various grounds, resisting entry of biosimilar varieties of their respective brands. This compels the biosimilar drug manufacturers incurring heavy expenditure on litigation, adding avoidable cost. A glimpse of this saga, we are ‘privy’ to witness even in India, while following Roche versus Biocon and Mylan case related to ‘Trastuzumab’. This barrier is one of the most basic types, that delays biosimilar drug entry depriving many new patients to have access to lower priced effective biologic for the treatment of serious diseases.
  • The other major barrier that exists today, involves ‘interchangeability’ of original biologic with biosimilar drugs. It simple means that in addition to being highly similar, a biosimilar drug manufacturer would require producing indisputable clinical evidence that it gives the same result for any given patient just as the original biologic. We shall discuss the reason behind this regulatory requirement later in this article. However, this is an expensive process, and the absence of it creates a barrier, making the physicians hesitant to switch all those existing patients who are on expensive original biologic drugs with less expensive available biosimilar alternatives.

The first or the initial barrier:

The first or the initial barrier predominantly involves patent related legal disputes, that can only be settled in a court of law and after incurring heavy expenditure towards litigation. Provided, of course, the dispute is not mutually resolved, or the law makers do not amend the law.

An interesting case in India:

Interestingly, in India, a similar dispute has knocked the doors of both the high court and the Competition Commission of India (CCI). From a common man’s perspective, it appears to me that the laws under which these two institutions will approach this specific issue are seemingly conflicting in nature. This is because, while the patent law encourages no market competition or a monopoly situation for a patented product, competition law encourages more market competition among all related products. Nonetheless, in this specific case CCI is reportedly investigating on the alleged ‘abuse of the regulatory process’, as it has opined ‘abuse of regulatory process can constitute an abuse of dominance under the (CCI) Act.’                                                                                            

The second barrier:

I am not going to discuss in this article the relevance of this barrier, in detail. Nevertheless, this one is also apparently equally tough to comply with. The very fact that none out of five biosimilar drugs approved in the United States, so far, has been considered ‘interchangeable’ by the US-FDA, vindicates the point.

That this specific regulatory demand is tough to comply with, is quite understandable from the requirements of the US-FDA in this regard, which goes as follows:

“To support a demonstration of interchangeability, the data and information submitted to FDA must show that a proposed interchangeable product is biosimilar to the reference product and that it can be expected to produce the same clinical results as the reference product in any given patient. Also, for products that will be administered more than once, the data and information must show that switching a patient back and forth between the reference product and the proposed interchangeable product presents no greater risk to the patient in terms of safety or diminished efficacy when compared to treating them with the reference product continuously.”

The reasoning of innovative biologic drug makers:

On this subject, the stand taken by different innovative drug makers is the same. To illustrate the point, let me quote just one of them. It basically sates, while biosimilar drugs are highly similar to the original medicine, the patient’s immune system may react differently due to slight differences between the two medicines when they are alternated or switched multiple times. This phenomenon, known as immunogenicity, is not a common occurrence, though. But there have been rare instances when very small differences between biologic medicines have caused immune system reactions that changed the way a medicine was metabolized, or reduced its effectiveness.

It further reiterates, the US-FDA requirements to establish ‘interchangeability’ between a biosimilar drug and the original one, or between biosimilars may seem like nuances, but are important because ‘interchangeability’ allows pharmacists to substitute biosimilars without consulting the doctor or patient first.

It may, therefore, indicate to many that innovative biologic drug manufacturers won’t want substitution of their expensive biologic with more affordable biosimilar drugs, on the ground of patient safety issues related to immunogenicity, though its instances are rather uncommon.

Some key players in biosimilar drug development:

Having deliberated on the core subject of this article, let me now very briefly name the major players in biosimilar drug development, both in the developed world, and also in India.

The first biosimilar drug was approved by the US-FDA in 2006, and the product was Omnitrope (somatropin) of Novartis (Sandoz). It was the same in the European Union (EU), as well. Subsequently, many other companies reportedly expressed interest in this field, across the globe, including Pfizer, Merck, Johnson and Johnson, Amgen, AbbVie, Hospira, AstraZeneca and Teva, among many others.

Similarly, in India, the major players in this field include, Biocon, Sun Pharma, Shantha Biotech, Dr. Reddy’s Lab, Zydus Cadila, Panacea Biotech and Reliance Life Sciences.

As featured on the Amgen website, given the complexity and cost of development and manufacturing, biosimilars are expected to be more affordable therapeutic options, but are not expected to generate the same level of cost savings as generics. This is because, a biosimilar will cost US$100 to US$200 million and take eight to ten years to develop. Whereas, a small molecule generic will cost US$1 to US$5 million and take three to five years to develop.

The market:

According to the 2017 report titled “Biosimilar Market: Global Industry Analysis, Trends, Market Size & Forecasts to 2023” of Research and Markets, the market size of the global biosimilar market was valued over US$ 2.5 billion during 2014, and it surpassed US$ 3.30 billion during 2016. The global biosimilar market is projected to surpass US$ 10.50 billion by 2023, growing with a CAGR between 25.0 percent and 26.0 percent from 2017 to 2023.

According to this report, gradually increasing awareness, doctors’ confidence and the lower drug cost are expected to boost the demand and drive the growth of the global biosimilar market during the forecast period. Segments related to diabetes medicine and oncology are expected to attain faster growth during the forecast period. Patent expiry of several blockbuster drugs is a major basic factor for growth of the global biosimilar market, as it may encourage the smaller manufacturers to consider producing such biologic drugs in those segments.

Conclusion:

Biosimilar drugs are expected to benefit especially many of those patients who can’t afford high cost biologic medicines offering better treatment outcomes than conventional drugs, in the longer term. These drugs are now being used to effectively manage and treat many chronic and life-threatening illnesses, such cardiac conditions, diabetes, rheumatoid arthritis, psoriasis, multiple sclerosis, Crohn’s disease, HIV/AIDS and cancer.

However, improving patient access to high quality biosimilar drugs, at an affordable price, with increasing competition, could be a challenge, as two key barriers are envisaged to attain this goal. Overcoming these meaningfully, I reckon, will involve choosing thoughtfully a middle path, creating a win-win situation, both for the patients, as well as the industry.

Adequate competition in the biologic drug market is essential – not only among high-priced original biologic brands and biosimilars, but also between biosimilar drugs. This is so important to increase patient access to biologic drugs, in general, across the world, including India.

The current situation demands a sense of urgency in searching for a middle path, which may be created either through a legal framework, or any other effective means as would deem fair and appropriate, without compromising with patient safety, at least, from where it is today.

By: Tapan J. Ray

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

Do Consumers Perceive Pharma Industry Innovative?

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One of the world’s richest and most powerful American pharma associations, having an equally strong indirect global presence, apparently, expects all concerned to give an emphatic affirmative answer to the above question.

Vindication of this thought gets reflected in the self-description of the association claiming, it “represents the country’s leading innovative biopharmaceutical research companies. Our members are devoted to discovering and developing medicines that enable patients to live longer, healthier and more productive lives. New medicines are an integral part of the health care system, providing doctors and patients with safe and effective treatment options, and improving quality of life.”

Nearer home, the reverberations of the same could be felt when Novartis lost the Glivec patent case in the Supreme Court of India. At that time, the Wall Street Journal quoted Eric Althoff – a spokesman of Novartis saying, “If innovation is rewarded, there is a clear business case to move forward. If it isn’t rewarded and protected, there isn’t.”

In sync with this self-belief, all pharma trade associations, located across the world, intensely lobbying for the ‘research-based’ global drug companies, together with their individual members, also expect the stakeholders to believe, as if, innovation is the middle name of the pharma industry. This process continues unabated, though, is expensive, and costing millions of dollars every year.

This core intent of doing so, may well be a statement of fact to some, and a contentious one to many, for various reasons. Be that as it may, as the proof of the pudding lies in eating, it is worth ferreting out how successful these efforts have been with the consumers of pharma products. Do they generally buy this concept, and if not, why?

In this article, I shall try to explore the overall scenario in this area.

A recent study:

A recent study results released on June 12, 2017, based on a survey on this issue, and that too conducted in the homeland of pharma innovation – America, brings to the fore a startling fact. In the absence of any other, better and more credible recent study, I shall draw upon some relevant facts from this report.

Klick Health Health – reportedly one of the world’s largest independent health marketing and commercialization agency headquartered in Toronto, Ontario, conducted this survey. As the agency reports, this is an online omnibus survey, conducted between May 19 and May 21, 2017 among 1,012 randomly selected American adults. The margin of error is +/- 3.1 percent. To ensure that the findings are representative of the entire adult population of America, the results have been statistically weighted according to education, age, gender, region, and ethnicity. Discrepancies in or between totals are due to rounding, the report says.

Consumer perception on pharma innovation:

Some of the major findings on consumers’ perception regarding the innovativeness of the pharma industry, are as follows:

  • Consumers do not believe that healthcare-related industries are particularly innovative today.
  • Only 17 percent of consumers polled perceive pharmaceuticals & biotech, health & wellness, and hospital sectors as the most innovative, ranking in the 4th place after consumer electronics (72 percent), telecommunications (87 percent), and media & entertainment (90 percent).
  • Among health-related industries, respondents ranked health & wellness first in terms of the industry that should be the most innovative (17 percent), quickly followed by pharmaceuticals & biotech (14 percent), and hospitals (9 percent) trailing behind the top 5.

Some other interesting findings:

On innovation and technology, general consumer perceptions are as follows:

  • 91 percent of consumers believe that innovation will positively impact health care over the next five years.
  • 90 percent of respondents say that technology will have a positive impact on their health in the future.
  • 70 percent believe that technology will have the biggest impact in helping them personally manage their own health.nology
  • Top five technologies predicted to have the biggest impact on people’s health in next five years:

-       Health and fitness wearables (21 percent)

-       Robotics (15 percent)

-       3D printing (10 percent)

-       Smart home devices (9 percent)

-       Artificial intelligence (9 percent)

  • The survey reflects a shift in the consumer mindset from being passive recipients of healthcare to more active and autonomous individuals who appear eager to try more creative and innovative approaches to managing their health.

Another study reflects a similar perception:

Similar negative perception gets reflected in the January 17, 2017 Harris Poll, which reported only nine percent of American consumers believe that pharma and biotechnology drug makers put patients over profits.

January 17, 2017 Harris Poll, while comparing consumers’ perception among different entities in the health care space, found that only insurers have an overall worse reputation than the pharmaceutical industry.

An important area worth exploring:

When consumers do not perceive the pharma industry as innovative as the sector wishes to be, what could possibly be its reasons? While that could be a part of another discussion, it is worth exploring another important area in this article – Do the majority of global pharma CEOs have desired background to lead innovation?

Do the majority of global pharma CEOs have desired background to lead innovation?

This is yet another interesting question. A research article titled “Many CEOs Aren’t Breakthrough Innovators (and That’s OK)”, published in the Harvard Business Review on September 04, 2015 discussed this issue, well-supported by some interesting research data, while coming to a logical conclusion.

The authors indicated that they looked at the background and performance data of 297 CEOs leading the largest companies in three different industries which are widely regarded as innovative: pharmaceuticals, high-tech, and fashion retail. The data captured a 20-year period, from 1995 to 2014 (and includes both current and former CEOs).

The study highlighted, though innovation is widely regarded as important to long-term business performance, CEOs of big pharmaceutical companies, are more likely to have a background as company lawyers, salespeople, or finance managers than in medicine or pharma R&D.

A direct comparison of the same, with the other two industries in the study, which are also widely regarded as innovative, vindicates the above point, as illustrated in the following table:

CEO Background

Pharma   (%)    (85 CEOs)

High-tech (%)     (137 CEOs)

Fashion Retail (%)      (75 CEOs)
Specialist background to lead innovation

26

61

60
Industry experience in other management function, e.g. Sales, Production

48

33

29
Background in support functions, e.g. Finance, Legal

26

6

11

In this study, the researchers found that, for pharmaceutical industry CEOs, there is a statistically significant relationship between a CEO’s specialist background and the firm’s performance. A specialist background to lead innovation is worth a 4 percent better shareholder return every year for 20 years, compared to other pharma CEOs in their sample.

Innovations are mostly ‘me-too’, so is the consumer perception:

As the above article reiterates, shorter patent lives of prescription drugs mean companies must continually look for not just any new drugs to fill their pipelines, but more often with breakthrough ones, which are significantly better than what’s already on the market.

Further, the article titled “How to Revive Breakthrough Innovation in the Pharmaceutical Industry”, which is linked to publications on ResearchGate, also indicates, over more than two decades, therapeutics discoveries of pharmaceutical companies more often than not yielded compounds that are only marginally better than existing therapies, rather than breakthrough molecules.

This could well be another contributing factor in the general ‘not so positive’ consumer perception about the global pharma industry, today.

Conclusion:

There may not be a hell of a lot of argument on the fact that the drug industry has a consumer perception problem today. Even the August 2016 Gallup Poll rated pharma as one of the worst industries in the current times.

Is the collective internal effort of continuously trying to associate innovation with the global pharma industry, the right answer for the same? May be, may well be not, though, the global drug industry is incessantly trying to project, as if ‘innovation’ is its middle name, as it were.

Is it working? The obvious answer is available from various recent research studies, as enumerated above. Still, in January 2017, reportedly to rescue the image of its member companies, the Pharmaceutical Research and Manufacturers of America, unveiled a campaign,  again basically focusing on innovation, called “Go Boldly.” It reportedly tries to communicate that the pharma industry develops life-saving medicines, and that they help keep medical costs down, because new medicines often reduce hospital stays and chronic illnesses. Is the campaign cost intensive? – Of course, yes. Is it productive? – possibly not. But who cares?

Be that as it may, today’s health care consumers perceive the global pharma industry neither as innovative nor caring, despite all its efforts. Thus, there is an important need for the pharma players to effectively bridge this perception gap in different and more innovative ways.

However, all that one can witness today, is the global pharma industry charting the same beaten path, yet again – with no further innovation in its communication – neither in content nor in its delivery platforms. That said, only time will be able to tell, whether similar efforts, renewed again and again, can reverse the consumer perception on pharma – making it seen as highly innovative and a caring industry for all.

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.

 

Does the Landmark Glivec Judgment Discourage Innovation in India?

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No, I do not think so. The 112 pages well articulated judgment of the Supreme Court of India delivered on April 1, 2013, does not even remotely discourage innovation in India, including much talked about ‘incremental innovation’. This landmark judgment reconfirms the rules of the game for pharmaceutical innovation, as captured in the Indian Patents Act 2005.

When one reads the judgment, point 191 in page number 95 very clearly states as follows:

“191. We have held that the subject product, the beta crystalline form of Imatinib Mesylate, does not qualify the test of Section 3(d) of the Act but that is not to say that Section 3(d) bars patent protection for all incremental inventions of chemical and pharmaceutical substances. It will be a grave mistake to read this judgment to mean that section 3(d) was amended with the intent to undo the fundamental change brought in the patent regime by deletion of section 5 from the Parent Act. That is not said in this judgment.”

Thus all ‘incremental innovations’, which some people always paint with a general broad brush of ‘evergreening’, should no longer be a taboo in India. The judgment just says that Glivec is not patentable as per Section 3(d) of Indian Patents Act based on the data provided and arguments of Novartis.

To me, the judgment does also not signal that no more Glivec like case will come to the Supreme Court in future. It vindicated inclusion of Section 3(d) in the amended Indian Patents Act 2005.

It is interesting to note that honorable Supreme Court itself used the terminology of ‘incremental innovation’ for such cases.

That said, I find it extremely complex to imagine what would have happened, if the judgment had gone the opposite way.

A critical point to ponder:

The judgment will also mean that all those products, having valid product patents abroad, if fail to meet the requirements of Section 3(d), will not be patentable in India, enabling introduction of their generic equivalents much sooner in the country and at the same time causing a nightmarish situation for their innovators.

However, this again, in no way, is an outcome of this judgement or a new development, as stated above. It is just vindication of the intent behind inclusion of Section 3(d) in the amended Indian Patents Act, when it was enacted by the Parliament of India in 2005.

Patentability of ‘Incremental Innovations’ in India:

Patentability criteria for any ‘incremental innovations’ has been defined in the Section 3(d) of the Indian statute as follows:

“The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.”

Supreme Court interpretation of the term “Efficacy” in Section 3(d): 

The Honorable Supreme Court in page 90 of its above order under point 180 stated that in case of medicines, efficacy can only be “therapeutic efficacy”, which must be judged strictly and narrowly. The interpretation goes as follows:

180. “What is “efficacy”? Efficacy means ‘the ability to produce a desired or intended result’. Hence, the test of efficacy in the context of section 3(d) would be different, depending upon the result the product under consideration is desired or intended to produce. In other words, the test of efficacy would depend upon the function, utility or the purpose of the product under consideration. Therefore, in the case of a medicine that claims to cure a disease, the test of efficacy can only be “therapeutic efficacy”.

The Honorable Court under the same point 180 further elaborated:

“With regard to the genesis of section 3(d), and more particularly the circumstances in which section 3(d) was amended to make it even more constrictive than before, we have no doubt that the “therapeutic efficacy” of a medicine must be judged strictly and narrowly…Further, the explanation requires the derivative to ‘differ significantly in properties with regard to efficacy’. What is evident, therefore, is that not all advantageous or beneficial properties are relevant, but only such properties that directly relate to efficacy, which in case of medicine, as seen above, is its therapeutic efficacy.” 

Based on this interpretation of Section 3(d), the Honorable Supreme Court of India ordered that Glivec does not fulfill the required criteria of the statute.

The rationale behind Section 3(d):

A report on ‘Patentability of the incremental innovation’ indicates that the policy makers keeping the following points in mind formulated the Indian Patents Act 2005:

  • The strict standards of patentability as envisaged by TRIPS pose a challenge to India’s pharmaceutical industry, whose success depended on the ability to produce generic drugs at much cheaper prices than their patented equivalents.
  • A stringent patent system would severely curtail access to expensive life saving drugs to a large number of populations in India.
  • Grant of a product patents should be restricted only to “genuine innovations” and those “incremental innovations” on existing medicines, which will be able to demonstrate significantly increased efficacy over the original drug.

IPA challenges: 86 pharmaceutical patents granted by IPO fall under Section 3(d):

A study by the ‘Indian Pharmaceutical Alliance (IPA)’ indicates that 86 pharmaceutical patents granted by the IPO post 2005 are not breakthrough inventions but only minor variations of existing pharmaceutical products and demanded re-examination of them.

Possible implications to IPA challenge:

If the argument, as expressed above in the IPA study, is true by any stretch of imagination, in that case, there exists a theoretical possibility of at least 86 already granted product patents to get revoked. This will invite again another nightmarish situation for innovators.

Examples of revocation of patents in India:

On November 26, 2012, the Intellectual Property Appellate Board (IPAB) reportedly denied patent protection for AstraZeneca’s anti-cancer drug Gefitinib on the ground that the molecule lacked invention.

The report also states that AstraZeneca suffered its first setback on Gefitinib in June 2006, when the Indian generic company Natco Pharma opposed the initial patent application filed by the global major in a pre-grant opposition. Later on, another local company, GM Pharma, joined Natco in November 2006.

After accepting the pre-grant opposition by the two Indian companies, the Indian Patent office (IPO) in March 2007 rejected the patent application for Gefitinib citing ‘known prior use’ of the drug. AstraZeneca contested the order through a review petition, which was dismissed in May 2011.

Prior to this, on November 2, 2012 the IPAB revoked the patent of Pegasys (Peginterferon alfa-2a) – the hepatitis C drug of the global pharmaceutical giant Roche.

Though Roche was granted a patent for Pegasys by the Indian Patent Office (IPO) in 2006, this was subsequently contested by a post-grant challenge by the large Indian pharma player – Wockhardt and the NGO Sankalp Rehabilitation Trust (SRT) on the ground that Pegasys is neither a “novel” product nor did it demonstrate ‘inventiveness’, as required by Section 3(d) of Patents Act of India 2005.

It is worth noting, although the IPO had rejected the patent challenges by Wockhardt and SRT in 2009, IPAB reversed IPO’s decision revoking the patent of Pegasys.

Similarly the patent for liver and kidney cancer drug of Pfizer – Sutent (Sunitinib) granted by IPO in 2007, was revoked by the IPAB in October, 2012 after a post grant challenge by Cipla and Natco Pharma on the ground that the claimed ‘invention’ does not involve inventive steps.

Patent challenges under section 3(d) may come up even more frequently in future:

Some observers in this field have expressed, although ‘public health interest’ is the primary objective for having Section 3(d) in the Indian Patents Act 2005, many generic companies, both local and global, have already started exploiting this provision as a part of their ‘business strategy’ to improve business performance in India, especially when an  injunction is usually not being granted by the honorable Courts for such cases on public health interest ground.

Thus, as stated above, there is likely to be many more cases like, Glivec coming before the Supreme Court in the years ahead.

Another related development of the last week:

It has been reported that American pharma major MSD has last week filed a suit in the Delhi High Court against Indian pharma major – Glenmark for alleged patent violation of its leading anti-diabetic drugs Januvia and Janumet. In this case also no interim injunction has reportedly been granted to MSD by the Honorable Delhi High Court.

Glenmark has stated through a media report, “It is a responsible company and has launched the products after due diligence and research.” The company has also announced that their version of the molecule named Zita and Zita Met will be available to patients at a 20 percent discount to MSD’s price.

Hence, once again, the Indian court to decide, the balance of justice would now point to which direction.

Government has no role to play – patent challenge is a legal process across the world:

The proponents of ‘no change required in the Section 3(d)’ argue, ‘Patent Challenge’ is a legal process all over the world, the Government has hardly got any role to play in settling such disputes. The law should be allowed to take its own course for all disputes related to the Patents Act of the country, including Section 3(d).

They also opine that India must be allowed to follow the law of justice without casting aspersions on the knowledge and biases of the Indian judiciary for vested interests.

That said, there is certainly an urgent need to add speed to this legal process by setting up ‘Fast-track Courts’ for resolving all Intellectual Property (IP) related disputes in a time bound manner.

Arguments against Section 3(d):

Opposition to the Section 3(d) counter-argues by saying, this is a critical period for India to help fostering an appropriate ecosystem for innovation in the country. This group emphasizes, “Providing the right incentives for incremental pharmaceutical innovation can move India forward on this path and encourage the development of drug products that meet the needs of Indian patients. Reforming Section 3(d) to encourage and protect incremental pharmaceutical innovation would create such incentives and help India become a true powerhouse of innovation.”

Another group says that the main reason in favor of Section 3(d) being the provision will prevent grant of frivolous patents, the ultimate fallout of which will result in limited access to these drugs due to high price, is rather irrelevant today. This, they point out, is mainly because the Government is now actively mulling a structured mechanism of price negotiation for all patented drugs to improve their access to patients in India.

Importance of ‘Incremental Innovation’ in India:

Incremental innovations are indeed very important for the country and have been benefiting the patients immensely over decades, across the world.

A report titled, “The Value Of Incremental Pharmaceutical Innovation” highlighted as follows:

  • As per the National Knowledge Commission, while 37.3% of Indian companies introduced breakthrough innovations in recent years, no fewer than 76.4% introduced incremental innovations.
  • 60 percent of the drugs on the World health Organization’s essential Drug list reflect incremental improvements over older drugs.

The report indicates some of the benefits of ‘Incremental Pharmaceutical Innovation’ for India as follows:

  1. Improved quality of drug products, including products that are better suited to India’s climate.
  2. Development of treatments for diseases that are prevalent in India for which new drug discovery is currently limited or otherwise inadequate.
  3. Increasing likelihood that for every therapeutic class, there is a treatment to which an Indian patient will respond.
  4. Development of the R&D capacity and expertise
 of Indian pharmaceutical companies.
  5. Reduction of healthcare and other social costs in India through improved drug quality and selection.
  6. Increased access to medicine as a result of price competition.

The study concluded by saying that Section 3(d) potentially precludes the patenting of hundreds of incremental pharmaceutical innovations that Indian companies are attempting to patent and commercialize outside India.

There are umpteen numbers of examples that can ably demonstrate, ‘incremental innovation’ of the pharmaceutical innovators help significantly improving the efficacy and safety of existing drugs. All such innovations should in no way be considered “frivolous” as they have very substantial and positive impact in improving conditions of the ailing patients.

Be that as it may, the Supreme Court judgment has categorically mentioned that all ‘Incremental innovations’ should conform to the requirement of the Section 3(d) of the statute.

“West should learn from India’s high patent standards”

An article appeared just yesterday written by a well-regarded Indian economist recommended, “West should learn from India’s high patent standards”. It observed that    over-liberal patent system of the West is now broken and it should learn from India’s much tougher patent system.

Patent monopolies needs to be given only for genuine innovations, as defined in the Indian Patents Act 2005, where the public benefits clearly exceed the monopoly cost.

The author concluded by saying, “This means setting a high bar for innovation. High standards are desirable for patents, as for everything else.”

View of the Glivec inventor: 

In another interview titled, “If you erode patents, where will innovations come from?” Dr Brian Druker, whose work resulted in the development of Glivec, re-emphasizing the need for R&D by the pharmaceutical industry, commented,  “I’m going to stay away from the legal judgment … but as a physician, I do recognize that the advances will come from new products, not modifications.”

Are discordant voices out of step with time?

The interpretation of the Section 3(d) of the statute by the Honorable Supreme Court of India is the last word for all, despite a few voices of discord from within and mostly outside India. These voices, many would reckon, could well be out of step with time, especially in relatively fast growing, modern, independent, thinking and assertive young  India.

Conclusion:

In my view, nothing materially has changed on the ground before and after the Supreme Court judgment on the Glivec case so far as the Indian Patents Act is concerned and also in its interpretation.

While encouraging all types of innovations, including incremental ones and protecting them with an effective IPR regime are very important for any country. No nation can afford to just wish away various socioeconomic expectations, demands and requirements not just of the poor, but also of the growing middle class intelligentsia, as gradually getting unfolded in many parts of the globe.

Available indicators do point out that the civil society would continue to expect in return, just, fair, responsible and reasonably affordable prices for the innovative medicines, based on the overall socioeconomic status of the local population.

This critical balancing factor is essential not only for the progress of the pharmaceutical industry, but also to alleviate sufferings of the ailing population of the country, effectively.

For arguments sake, in an ideal scenario, if the Central and State Governments in India decide to buy such drugs to supply to all patients free of cost, just like any ‘welfare state’, will even the Government be able to afford these prices and fund such schemes in India?

It is, therefore, now widely expected that innovator pharmaceutical companies, which play a pivotal role in keeping population of any nation healthy and disease free to the extent possible, should also proactively find out ways to help resolving this critical issue in India, working closely with the Government of 1.2 billion Indians, including other concerned stakeholders.

In that context, the landmark Supreme Court judgment on the Glivec case has vindicated the need of striking a right balance between encouraging and protecting innovation, including incremental ones and the public health interest of India.

By: Tapan J. Ray

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

Creating an IPR friendly robust ‘Echo-System’ and ‘Improving Access to Affordable Medicines’ are not either/or situation in India

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Last year, though the growth of the Global Pharmaceutical Industry with a turnover of US$ 752 billion significantly slowed down to just 6.7% due to various contributing factors, the Indian Pharmaceutical Industry continued to maintain a robust of growth of 18% with a turnover of US$ 8.1 billion (IMS 2009).

Need to invest more in R&D:

On a longer term perspective, the domestic industry growth will be significantly driven by the newer products, which will be the outcome of painstaking innovative research and development initiatives. Keeping this point in mind, the fact that today India accounts less than one per cent of over US$130 billion of the worldwide spending on research and development for pharmaceuticals, despite its known strength in process chemistry and abundant talent pool, has started attracting attention of the government.

Robust IPR regime and addressing the needs of the poor both are equally important:

The Prime Minister of India, Dr Manmohan Singh in his address at the Fortune Global Forum in New Delhi in October, 2007 clearly enunciated, “We have affirmed our commitment to the protection of intellectual property rights. But, the global economy, the global community cannot afford the complete privatization of research, of knowledge generation, especially in fields like medicine. We need to evolve mechanisms that protect intellectual property and at the same time, address the needs of the poor”.

Thus encouragement, reward and protection of IPR and addressing the crying needs of the poor are definitely not an either/or situation. The country needs to address both with equal importance and focus.

‘Vision 2020’ of the Department of Pharmaceuticals:

It is encouraging to note that the Department of Pharmaceuticals (DoP) of the Government of India through its ‘Vision 2020’ initiatives is planning to create a new echo-system in the country to promote new drug discovery platforms. This is expected to catapult the country as one of the top five global pharmaceutical hubs, by 2020 attracting additional investments of around US$ 20 billion to the GDP of the country.

The Primary role of the Pharmaceutical Industry in India, like in many other countries of the world, is to make significant contribution to the healthcare objectives of the nation by meeting the unmet needs of the ailing patients, with innovative affordable medicines. This role can be fulfilled by developing newer medicines through painstaking, time-consuming, risky and expensive basic research initiatives. To help translate this vision into reality appropriate echo-system needs to be created in the country, urgently, for the Pharmaceutical Industry in India to commit themselves to its one of the prime functions of discovering and developing newer medicines not only for the patients in India but for all across the world.

Ongoing efforts in Research & Development (R&D) would require a robust national policy environment that would encourage, protect and reward innovation. Improving healthcare environment in partnership with the Government remains a priority for the Research based Pharmaceutical Companies in India.

Need to tighten the loose knots:

However, in the new paradigm, which has been designed to foster innovation in the country, there are still some loose knots to be tightened up to achieve the set objectives for the nation, in the longer term perspective.

Uncertainty over weak enforcement of patent in the country should be dispelled, with efficient administration of the new patent regime. Regulatory Data Protection should be introduced to spur R&D investment and global collaborative opportunities. This will, in turn, help improving the competitiveness of India vis-à-vis countries like China to attract appreciable investments towards R&D of pharmaceutical and bio-pharmaceutical products. It is believed that the capacity of our judiciary should be expanded and specialized courts that can enforce Pharmaceutical patents be provided with requisite technical expertise.

How to address the core issue of ‘availability of quality medicines at affordable prices’?

India needs to address the root cause of the ‘pricing issue’ affecting ‘access to quality medicines at affordable prices’ to a vast majority of its population, in a holistic way, rather than superficially with a piecemeal approach, as is being done since long.

The policy of ‘stringent price control of medicines’ of the government since 1970, has certainly enabled India to ensure availability of medicines at the lowest price in the world, lower than even the neighbouring countries like, Pakistan, Bangladesh and Sri Lanka. However, the core issue of ‘affordability of medicines’ has still remained elusive and will remain so, if we continue to tread this much beaten path, though not so successful in the perspective of the core issue, even today.

This is mainly because, around 40% of our population still costitutes of ‘Below the Poverty Line (BPL)’ families, who, very unfortunately, will not be able to afford any price of medicines. This is vindicated by the WHO report, quoted by even our government that 65% of Indian population has no access to modern medicines, as against 15% in China and 47% in Africa, despite medicines prices being the cheapest in India.

In such a situation, even if prices of all drugs featuring under the National List of Essential Medicines (NLEM), anti-cancer and other drugs are brought under stringent price control, the same ‘affordability of medicines’ issue will continue to linger.

Moreover, the recent announcement by the National Pharmaceutical Pricing Authority (NPPA), “as per the Secondary Stock Audit Report of ORG-IMS for the month of April 2010, which covers 60,000 packs, in the non-schedule category, the percentage of packs whose prices have increased on monthly basis during 2009-10, is only in the range of 0.0003 to 4.75%, while the remaining have shown stable to declining prices,” clearly vindicates that unusual price increase of medicines is also not a problem either, in India.

Considering all these points, as I have been suggesting since long, the government should, at least now, allocate adequate fund to cover all BPL families under “Rashtriya Bima Yojona’ and ensure its effective implementation by creating adequate healthcare infrastructure and measurable/transparent delivery systems. Similarly, the rest of the population of the country should be covered by encouraging opening-up and deep penetration of a variety of medical insurance products to suit all pockets together with appropriate tax incentives, as is currently being extended to the ‘Mediclaim’ policy holders.

In all developed countries and many emerging markets like China (where about 85% of the population are covered by different types of healthcare expenditure reimbursement schemes), the issue of ‘affordability of medicines’ has been addressed with such type of approach and other social security measures by their respective governments.

 

“Employers must take health cover for staff or lose tax gains”: Montek Singh Ahluwalia

It is indeed quite encouraging to note from the report of The Hindu Business Line dated September 9, 2010, as this critical issue is being regularly deliberated through this column, the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, has “mooted denial of tax deductibility on wage payment if the employer in the organised sector does not take steps to enrol the employee in a group health insurance scheme. Mr Ahluwalia said employers in the organised sector should be encouraged to make it compulsory for their employees to join a group health insurance scheme, in which the employer and the employee make contributions. As an incentive for this, the insurance premium that is paid can be exempt from tax as India will never be able to expand insurance for which people pay unless an element of incentive-cum-compulsion is introduced”. Mr. Ahuluwalia further commented, “If you leave it to people, only rich people will buy insurance, even middle class people will not buy insurance,” He insisted that “his proposal is feasible and the Government should give it a very serious consideration”.
High incidence of mortality and morbidity burden of India can only be addressed by improving ‘Access to Healthcare’:

Therefore, improving access to healthcare in general and medicines in particular should be on the top priority agenda of the policy makers in our country. High incidence of mortality and morbidity burden in a country like ours can only be addressed by improving Access to healthcare through a concerted partnership oriented strategy. Thus, Pharmaceutical Industry in India should be committed to actively support all efforts from all corners towards this direction to improve Access to Medicines to a vast majority of population in India. Although sporadic, efforts to this direction are being made through various laudable Corporate Social Responsibility (CSR) Initiatives by both local and global pharmaceutical companies within the country.

Pharmaceutical Industry also needs to behave as a responsible corporate citizen:

Another area of focus should be on good corporate governance. This encompasses adherence to high ethical standards in clinical trials, regulatory and legal compliance, working to prevent corrupt activities, high ethical standard in promotion of medicines and addressing all other issues that support good healthcare policies of the Government. In addition, the Pharmaceutical Industry should take active measures to involve all concerned to fight the growing menace of counterfeit and spurious medicines which significantly harm the patients all over the country.

Conclusion:

It is obvious that the Pharmaceutical Industry alone will have a limited role to address the key healthcare issues of our nation. All stakeholders like the government, corporate and the civil society in general must contribute according to their respective capabilities, obligations and enlightened societal interests to effectively address these pressing issues.

However, it is worth reiterating that the Pharmaceutical Industry in India should continue to act responsibly and demonstrate commitment to work closely in collaboration with all stakeholders to make newer innovative medicines both preventive and therapeutic available and accessible adequately at an affordable price to the ailing population of the nation. Thus, in my view, for the progress of the nation, creating a robust IPR friendly ‘Echo System’ and ‘Improving Access to Quality Medicine at an Affordable Price’, are certainly not an either/or situation for the astute policy makers in India, as is being made out to be at some quarters.

By Tapan Ray

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

Create, Deliver and Realize maximum value from a new product launch with an innovative Supply Chain Management system

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Like in many other industries, effective supply-chain management (SCM) in the pharmaceutical industry involves a systematic process, spanning from procurement of raw, packaging and other related materials, converting those materials into finished goods stock keeping units (SKUs), inventory management of both raw and packaging material, as well as finished goods and finally the distribution of these SKUs to wholesalers/ stockists/ distributors, C&F Agents.Now a days, with intense cost containment pressure all around, effective SCM is gaining a critical importance in the overall business process of the pharmaceutical companies. Besides all these, SCM also plays a very important role in maintaining regulatory compliance and help preserving product quality and safety standards.Key deliverables of a good SCM system:

The key deliverables of a good SCM system are to ensure availability to the customers:

Of RIGHT Product
At RIGHT Time
In RIGHT Quantity
At RIGHT Place
At RIGHT Price and
Of RIGHT Quality

However, in this article, I shall not dwell on these well known and basic parameters. Instead I shall deliberate on three other very important aspects of the supply chain management for your consideration:

1. What will a great SCM system mean?
2. What is the emerging role of SCM system in launching a new product
3. Innovation and measuring SCM effectiveness

1. What will a great SCM system mean?

In my opinion this will cover three important points:

- The SCM system should have an excellent feel of demand fluctuations and its robust measurement system.
- The cost of running an efficient SCM system should be kept at its minimum.
- The SCM structure should always be without any organizational flab.

I repeat, to be effective, a good SCM System must always be demand driven. Customer demand must be ascertained and quantified first and only then company specific supply chain requirements to be worked out and not the other way.

Various research studies confirm that there are certain common qualities for the demand-driven companies, namely:

- Reaction time to gauge and respond to the customer needs and demand is very quick
- A robust IT infrastructure is in place to facilitate delivery of the key Supply Chain
deliverables

SCM helps in value creation, value delivery and the value realization process:

As we know that value creation is the first step for a demand driven organization, followed by value delivery and value realization.

Pfizer Inc ranked high towards these efforts with Lipitor. If by any chance Lipitor gets out of stock, doctors usually do not switch over to other statins; the patient may possibly come back to the Pharmacy next day and hope he/she will get Lipitor. Such type of value creation for the product had made Lipitor over US$14 billion brand today despite the presence of other newer statins in the market and a very efficient SCM system of Pfizer Inc.

In an ideal scenario there should be an overlap between product management, demand management and the SCM systems.

Need for interaction between SCM and Product Development/Management Teams:

In my view, some sort of close interaction between the Supply Chain with Product Development and Management teams is very important for any innovative company to succeed in the market place. This I reckon will be unavoidable in not so distant future. Currently there could be some such link, as mentioned above, existing in some organization, but certainly not what it ought to be.

A robust IT system is a major requirement:

A robust IT system is a major requirement for such interaction process between Product Management, Demand Management and the SCM. Those companies, which will be unwilling to invest in a robust and rapidly scalable IT infrastructure that provides process integrity, transaction reliability, data visibility and intelligence for decision making may find it difficult to implement such an important business process.

2. The role of SCM System in launching a New Product:

In the twenty first century, as we all are aware that quality of innovation determines the sharpness of the competitive edge of any company in the marketplace. This aspect of competitiveness will be increasingly more and more important. Unfortunately, despite having this cutting edge many highly innovative companies have been experiencing great problems while launching their innovative new products in the market.

As we have seen from the recent media reports, two examples indeed stand out:

- Delays in the launch of Airbus 380 wiped off five billion euros of the value of its parent
company.
- Another important example was the enormous problem that Sony faced to make adequate
number of Play Station 3 consoles for the holiday season.

These illustrations indicate that conceptualizing, developing and finally launching new products is becoming increasingly more and more difficult. It is now widely believed that the key issue is inadequate understanding of the critical role that the supply chain plays in the innovative process of an organization.

SCM – a key success factor for a new product launch:

In most of the companies, the world over, the marketing team decides on the product launch decisions. Fortunately now we have started understanding though gradually but surely that the success of a new product launch very heavily dependent on effective co-ordination on all aspects of the supply chain from design to sourcing to manufacturing to distribution.

Therefore, in order to succeed with a new product launch, concerned company will need to ensure that Product development, Sales and Marketing, operations planning and supply chain work very closely together as a coherent team. Such co-ordination between these functions is now an absolute imperative. Close co-ordination even within the various activities of SCM systems play a critical role on the quality and nature of an innovative product or services and thereafter for an effective logistic support to the finished new products.

3. Innovation and measuring SCM effectiveness:

Quality of innovative ideas implemented in various levels of the SCM process along with the operational excellence will determine the ultimate effectiveness of a SCM system of a company.

Operational excellence is usually measured through the effectiveness of various parameters set for the same like. These parameters may include order fill rate, cost of the SCM process followed and the speed that it adds right from the material procurement process to the delivery of required SKU’s right up to the retail chemists.

Similarly effectiveness of innovative steps taken in the SCM process is measured by many on parameters like, the return on new product development and the speed of launch.

Conclusion:

To make a new product launch successful, companies will increasingly require to work out not only an effective process for launch, but will also need to ensure that marketing, finance, operations and SCM with innovative steps built into it, work very closely together to help create, deliver and realize both tangible and intangible value of a new product, most effectively, to contribute significantly to the stakeholders’ value.

By Tapan Ray

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

Innovative Public Private Partnership (PPP) in Healthcare Financing is the way forward to improve ‘Affordability’ and ‘Access’ to Healthcare’ in India

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Despite various measures taken by the Government of India (GoI), around 65% of the population do not have access to modern medicines in the country. Such medicines do not include treatment just for ‘Tropical Diseases’ like, Malaria, Tuberculosis, Filariasis or Leishmaniasis or even anaemia in women. These medicines, in fact, cover much wider spectrum of the primary healthcare needs of the country and include antibiotics, anti-hypertensive, anti-diabetics, anti-arthritic, anti-ulcerants, cardiovascular, oncology. anti-retroviral etc. Many stakeholders in the country, including the policy makers feel that the reason for poor access to medicines to a vast majority of Indian population is intimately linked to the affordability of medicines.

A bold public measure to achieve the dual objectives:                           To make medicines affordable to the common man and at the same time to create a robust domestic pharmaceutical industry in the country, the Government took a bold step in early 1970 by passing a law to abolish product patent in India.

The changed paradigm, encouraged domestic pharmaceutical companies to manufacture and market even those latest drugs, which were protected by patents in many countries of the world, at that time. This policy decision of the GoI enabled the domestic players to specialize in ‘reverse engineering’ and launch the generic versions of most of the New Chemical Entities (NCEs) at a fraction of the innovators price, in India.
Simultaneously other low cost ‘essential medicines’ continued to be produced and marketed in the country.

‘Reverse Engineering’ – a huge commercial success in India:
From 1972 to 2005 domestic Indian pharmaceutical companies were replicating most, if not all the blockbuster drugs of the world, to their low price generic substitutes, just within a year or two from the date of their first launch in the developed markets of the world. These innovative drugs include quinolones. H2 Receptor anatagonists, proton pump inhibitors, calcium channel blockers, ace inhibitors, Cox2 inhibitors, statins, anti-coagulants, anti-asthmatic, anti-cancer, anti-HIV and many more.

In 1970, the Market share of the Indian domestic companies, as a percentage of turnover of the total pharmaceutical industry of India, was around 20%. During the era of ‘reverse engineering’, coupled with many top class manufacturing and marketing strategies, domestic Indian pharmaceutical companies wheezed past their multinational (MNCs) counterparts in the race of market share, exactly reversing the situation in 2010.

‘Reverse engineering’ was indeed one of the key growth drivers of domestic pharmaceutical industry. In its absence, during this period, the growth rate of branded generic industry may not be as spectacular.

India – now the ‘Eldorado’ of the pharmaceutical world:
This shift in the Paradigm in 1970, catapulted the Indian domestic pharmaceutical industry to a newer height of success. India in that process, over a period of time, could establish itself as a major force to reckon with in the generic pharmaceutical market of the world. Currently, the domestic pharmaceutical industry in India caters to around one third of the global requirement of generic pharmaceuticals and is a net foreign exchange earner for the country.

Currently, within top ten pharmaceutical companies of India, eight are domestic companies. All those global pharmaceutical companies who had left the shores of India and many more, have returned to the country after India signed the WTO agreement in January 1995 with great expectations.

Government feels quite confident and exudes a sense of accomplishment with its pharmaceutical policies:
The government therefore believes that a combination of these policy measures resulting in the stellar success of the domestic pharmaceutical companies since last four decades has helped the country earning the global recognition as one of the most attractive emerging pharmaceutical markets of the world, with commensurate and sustainable ascending growth trend.

Has stringent Price Control/Monitoring of Medicines worked in India?
Be that as it may, from 1970 to 2005, India could produce and offer even the latest NCEs at a fraction of their international price, to the Indian population. There are as many as 40 to over 60 Indian branded generic versions for each successful blockbuster drug of the world. Competition has been intense and cut-throat, which keeps the average price well within the reach of common man. Average price of medicines in India is even lower than that of Pakistan, Bangladesh and Sri Lanka. Thus the combination of price control, price monitoring, fear of price control and cut throat competition within branded generics have been able to drive down the prices of medicines in India.

Has the focus mostly on ‘Price’ been able to resolve the issue of poor access to modern medicines by the common man?                       Although the GoI should be complemented for the above measures and putting in place the Product Patents Act in India effective January 1, 2005, the issue of access to modern medicines to the common man has still remained unanswered in the country. Why then access to medicines in India is confined to just to 35% of the population even after 62 years of Independence of the country? Comparable figures of access for Africa and China are 53% and 85%, respectively. This is indeed an abysmal failure on the part of the government to achieve the core healthcare objective of the nation.

Strategy adopted to address the core issue of ‘affordability’ and ‘access’ to healthcare and medicines are grossly inadequate:
Despite the stellar success of the pharmaceutical industry in India thus far, there is a pressing need for the government to address this vexing problem without further delay. The situation demands from the policy makers to put in place a robust healthcare financing model in tandem with significant ‘capacity building’ exercise, initially in our primary and then in the secondary and tertiary healthcare value chain.

Towards this direction, the Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested to the Government for an investment of around US$ 80 billion to create over 2 million hospital beds.

Government changing its role from ‘Healthcare Provider’ to ‘Healthcare Facilitator’:
Frugal budget allocation (0.9%) by the GoI towards healthcare as % of GDP of the country and its other healthcare related policy statements suggest that government is changing its role in this area from a healthcare provider to a healthcare facilitator for the private sectors to develop the healthcare space of the country adequately.

In such a scenario, it is indeed imperative for the government to realize that the lack of even basic healthcare financing model and primary healthcare infrastructure in many places across the country, leave aside other fiscal incentives, will impede the penetration of private sectors into semi-urban and rural areas. Innovative PPP model should be worked out to address such issues, effectively.

Laudable projects like NRHM and ‘Jan Aushadhi’ must deliver:
Over 70% of Indian population are located in rural India. A relatively recent study indicates that despite some major projects undertaken by the Governments, like National Rural Health Mission (NRHM), about 80% of doctors, 75% dispensaries and 60% of hospitals are located in urban India.

Another recent initiative taken by the Department of Pharmaceuticals (DoP) called ‘Jan Aushadhi’ is also orientated towards urban and semi-urban India. Unfortunately even in those areas the scheme has failed to deliver against the objectives set by the department of pharmaceuticals (DoP) themselves.
The net result of such a lack of firm intent to deliver by all concerned denies 65% of Indian population from having access to modern medicines and other basic healthcare services within the country.

Address the issue of ‘Affordability’ and ‘Access’ to medicines and healthcare with a robust ‘Health Insurance’ model for all:
While trying to find out a solution to these critical issues, by restricting the focus only on the ‘prices of medicines’ for several decades from now, the Government is doing a great disservice to the common man.
Let me hasten to add that I am in no way suggesting that the prices of medicines have no bearing on their ‘Affordability’. All I am suggesting here is that the issue of ‘Affordability’ and ‘Access’ to modern medicines could be better and more effectively addressed with a robust ‘Health Insurance’ model for all, in the country.

Sporadic initiatives towards this direction:

We find some sporadic initiatives in this direction for population below the poverty line (BPL) with Rashtriya Swasthya Bima Yojana (RSBY) and other health insurance schemes through micro health insurance units, especially in rural India. It has been reported that currently around 40 such schemes are active in the country. Most of the existing micro health insurance units run their own independent insurance schemes.

Some initiatives by the State Governments:

Following initiatives, though quite limited, are being taken by the state governments:

1. The Government of Andhra Pradesh has planned to offer health insurance cover under ‘Arogya Sri Health Insurance Scheme’ to 18 million families who are below the poverty line (BPL).

2. The Government of Karnataka has partnered with the private sector to provide low cost health insurance coverage to the farmers who previously had no access to insurance, under “Yeshaswini Insurance scheme”. This scheme covers insurance cover towards major surgery, including pre-existing conditions.

3. Some other state governments have also started offering public health insurance facilities to the rural poor, but not in a very organized manner. In fact, some private health insurers like Reliance General Insurance and ICICI Lombard General Insurance have been reported to have won some projects on health insurance from various state governments.
Covering domiciliary treatment through health insurance is important:

Currently health insurance schemes mostly cover expenses towards hospitalization. However, medical insurance schemes should also cover domiciliary treatment costs and loss of income, along with hospitalization costs.

Government policy reforms towards health insurance are essential:
Currently Indian health insurance segment is growing over 50% and according to PHD Chamber of Commerce and Industries the segment is estimated to grow to US$ 5.75 billion by 2010. Even this number appears to be much less than adequate for a country like India.

It is high time that the Government creates a conducive environment for increased penetration of health insurance within the country through innovative policy measures. One such measure could be by making health insurance cover mandatory for all employers, who provide provident fund facilities to their employees.

Conclusion:
It is a pity that the concept of health insurance has not properly taken off in our country, as yet, though shows immense growth potential in the years to come. Innovative policies of the government towards this direction along with increasing the cap on Foreign Direct Investment (FDI) for health insurance will encourage many competent and successful global players to enter into this market.

With the entry of efficient and successful global players in health insurance segment, one can expect to see many innovative insurance products to satisfy the needs of a large section of Indian population. Such an environment will also help increasing the retail distribution network of health insurance with a wider geographic reach, significantly improving the affordability and access to healthcare in general and medicines in particular, of a large number of population of the country.

By Tapan Ray

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