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Shifting Pharma Supply Chain Strategy From Global To Local

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Alongside large-scale disruptions of many critical industrial operations, Covid-19 global pandemic took the wind out of the sail of pharma supply chain, as well, at the very onset of lockdowns. This happened in many countries around the world, including the largest global pharma market – the United States, and also in ‘the pharmacy of the world’ – India.

That there were such disruptions in India, both in procurement and logistics, during the national lockdown, was widely reported in the media. Besides product non-availability, cost of goods also went up significantly in several cases.

From this perspective, I shall deliberate in this article, how different countries are contemplating to respond to any similar crisis in the future, primarily to safeguard patients’ health interest, despite some opposition, though. To drive home the points, I shall cite examples from India and the United States, as specified above.

Supply Chain vulnerability of the ‘largest pharma market of the world’:

There are several examples to vindicate such vulnerability, both for the US and also India. From the US perspective, the country’s supply of generic and branded medicines are, reportedly, heavily rely on emerging markets, like India and China.

This point has now ‘come under close scrutiny of the American policy makers, as COVID-19 sends shockwaves through the industry. According to the US Food and Drug Administration, China and India represent 31 percent of the plants that are registered with the US to supply Active Pharmaceutical Ingredients (API), as of August 2019. The details are as hereunder:

Place

United States

European Union

India

China

Rest of the world

Canada

%

28

26

18

13

13

2

It is worth noting, the number of facilities in China supplying APIs has, reportedly, more than doubled since 2010 – to 13 percent of all those serving the US market.

Examples from India:

The outbreak of Coronavirus had just not shut factories in China - impacting supplies and leading to fears of a shortage of drugs and medicines. It happened in India, too. Several critical supply chain issues were reported during this period. For example,  a major Indian drug manufacturing hub - Baddi,reportedly, was either shut down or operated with reduced capacity, since COVID-19 pandemic related national lockdown.

Its impact also got captured by the twitter handle of the former USFDA Commissioner – Scott Gottlieb. He twitted, “Drug supply chain at risk as Asia’s largest pharmaceutical manufacturing hub in Baddi (an industrial town in southwestern Solan district of Himachal Pradesh, India) is declared a #COVID19 containment zone – forcing many pharma units to slow or stop operations.”

Supply Chain vulnerability of the ‘pharmacy of the world’:

Supply Chain vulnerability related to the domestic issues in India, can possibly be sorted out by the country’s decision-making authorities. However, the country’s vulnerability arising out of the reasons originating in the other countries, needs a greater priority focus of the nation.

As is widely known – India caters to about 20 percent of the world’s generic drug supply. However, according to Bloomberg, 70 percent of the country’s imports of APIs come from China, ‘totaling US$ 2.4 billion of India’s US$ 3.56 billion in import spending for those products each year.

Consequently, ‘pharma companies in the country are dependent on China for two-thirds of the chemical components needed to make them.’ Exposures of such nature are now coming on to the center table – mostly triggered by Covid-19 pandemic, both in India, as well as in the United States.

India is reevaluating its import dependence from China:

To illustrate this point, let me begin with some related recent developments. While reevaluating the import dependence, India has taken both immediate and medium to long term measures – at the policy level.

The immediate reaction of India to Covid-19 outbreak, was to shift focus on local with restricted export of common medicines, such as paracetamol and 25 other pharmaceutical ingredients and drugs made from China. Curiously, prior to the national lockdown, on March 17, 2020 by a written reply the Government had informed the Indian Parliament about the import of APIs /drugs and the extent of the country’s dependence on China for the same.

Be that as it may, to protect the local interest, the above ban was followed by another export ban of the age-old malarial drug - hydroxychloroquine, ‘touted by President Trump as a possible weapon in the fight against Covid-19,’ but has been in short supply, globally. Interestingly, India produces around 47 percent of the U.S. supply of hydroxychloroquine. Thus, understandably, Indian Government had to partially lift this ban after the U.S. President Donald Trump sought supplies for the United States.

For medium longer-term measures, while announcing a ₹20 lakh crore stimulus package, Prime Minister Narendra Modi articulated that Covid-19 pandemic had taught India to ramp up domestic production and create supply chains to meet internal demands. Earlier, for safeguarding ‘national healthcare security’, the Government had allocated US$ 1.2 billion for the pharma industry to be self-reliant, by reducing its import dependence, especially for APIs. The government also wants to finance the construction of three bulk drugs with an investment of ₹300 Crores.

The United States is reevaluating import dependence from one region:

The Fierce Pharma article of June 03, 2020 also reported a shifting focus of supply chain from global to local, as the United States seeks to ‘onshore’ drug production, with the fallout of Covid-19 pandemic looming large on its drug supply chain.

U.S. legislators have argued that ‘U.S. reliance on drugs made or sourced outside the country has created a security issue that could be addressed by erecting parallel supply chains stateside and eliminating reliance on potential bad actors abroad.’ Accordingly, they have put forward ‘a raft of legislation’ that would seek to “onshore” drug manufacturing at the expense of major producers abroad.

Its biggest obstacle could be the pharma industry and its lobbyists:

Nevertheless, the same article also underscores that the biggest obstacle to that plan could be the pharmaceutical industry and its lobbyists on Capitol Hill. This is because, PhRMA - the industry’s biggest lobbying group, has pushed back against Congressional support for a supply chain shake-up. It said, “Policymakers must take a long-term, more holistic look at global pharmaceutical manufacturing supply chains before jumping to rash proposals that may cause significant disruptions to the U.S. supply of medicines.”

Will it happen in India?

My article, published in this blog on February 03, 2020, also focused on this issue. There I had emphasized, about five years back - the Government of India had also announced on February 25, 2015 – terming ‘2015 – Year of Active Pharmaceutical Ingredients’ (API). This came after ascertaining that over-dependence on imports of bulk drugs or API, especially from China, is detrimental to India’s health interest. This decision was also in sync with the freshly announced, and well-publicized government objective regarding ‘Make in India’, I wrote.

Two years down the line from the above date, on July 15, 2017, eHEALTH publication also deliberated on this issue in an article – ‘Why over dependence on APIs imported from China is harmful for India?’ However, not much change has been witnessed till date, in this regard. The same vow is now being taken afresh. Nonetheless, let me hasten to add, Covid-19 has changed the life of all – in several respects. Thus, no one can possibly vouch with a high degree of certainty what can happen hereafter, as we move on.

Conclusion:

As the ‘Lockdown. 05’ or ‘Unlock down. 01’ begins in India – the ‘pharmacy of the world, as on June 02, 2020 morning, the recorded Coronavirus cases in the country reached 247,040 with 6,946 deaths. India is now racing ahead with its number Covid-19 cases, surpassing Italy and Spain, occupying the global fifth rank, in this regard. Whereas, the top ranked pharma market in the world – the United States, where Covid-19 struck hard before India, recorded 1,988,545 cases with 112,096 deaths, on the same day.

Thus, the need to have a fresh look at the strategic design of pharma supply chain is being felt in both these countries. The requirement for becoming less global and more local is attracting a priority focus of Governments in both countries. With an increasing State-push for safeguarding the health security of the country, the need to reshape pharma supply chain – call it transient or otherwise, is now more palpable than ever before.

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.

 

Will ‘Patent Thicket’ Delay Biosimilar Drug Entry in India?

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Do pharma and biotech investors encourage companies indulging in ‘patent thicket?’ This question recently grabbed media headlines. On April 02, 2019, one such report brought out: AbbVie investors are calling for the Chair-CEO power split, flagging the CEO’s USD 4 million bonus payout, fueled by the company’s Humira ‘patent thicket’ strategy related aggressive price hikes. It prolonged the brand’s market monopoly, blocking entries of its cheaper biosimilar equivalents.

I have discussed some related issues in this blog, previously. As the issue is gaining relevance also in the Indian context, this article will deliberate the ill-effects of ‘patent thicket’ on patient health-interest. The sole beneficiaries for the creation of this self-serving labyrinth are the manufacturers of high-priced patented drugs, as reported above. Before I proceed further, let me recapitulate what exactly is a ‘patent thicket.’

‘Patent Thicket’:

The dictionary definition of patent thicket is: ‘A group of patents in a field of technology which collectively impede a party from commercializing its own patents or products in that field.’In the current context, it means a dense web of overlapping patent rights that restrict a generic or a biosimilar drug maker from commercializing its cheaper equivalents post expiry of the original patent.

This scenario has been well-captured by the above media report, which states: “AbbVie leadership has also been accused of creating a ‘patent thicket’ in its battle to stave off biosimilar competitors to Humira.” Boehringer Ingelheim is among the few still fighting AbbVie’s ‘patent thicket’ hoping to launch its Humira biosimilar - Cyltezo, even after receiving US-FDA approval on August 29, 2017. ‘Top biosimilar makers, including Novartis’ Sandoz unit and Mylan, have settled their own Humira patent fights with deals that put off launches until 2023,’ the report indicated.

In its favor: AbbVie says, Cyltezo infringes about 70 patents the company currently holds for Humira. Whereas, ‘Boehringer’s lawyers say AbbVie’s copious patents overlapped in an attempt to exclude competitors from the market.’ Notably, in March this year, New York’s UFCW Local 1500 Welfare Fund, reportedly, also accused AbbVie of using overlapping patents to exclude biosimilars.

‘Patent thicket’ – a way of ‘evergreening’ beyond 20 years patent term:

Much concern is being raised about various ploys of especially by the drug MNC and their lobby groups – directly or under a façade, to delay entry of cheaper generic drugs for greater patient access. Mostly the following two ways are followed for patent ‘evergreening’ beyond the term of 20 years:

  • ‘Incremental innovation’ of the existing patented drugs through molecular manipulation, with its clinical performance and safety profile remaining similar to the original one. As the cost benefits of such drugs are not shared with patients, cannibalizing the sales of the older molecular version with the newer one highlighting its newness, the sales revenue can be protected. With this approach, coupled with marketing muscle power with deep-pocket the impact of generic entry of the older version can almost be made redundant. For example: Omeprazole was first marketed in 1989 by AstraZeneca, under the brand name Losec (later changed to Prilosec at the behest of the US-FDA). When Prilosec’s US patent expired in April 2001, AstraZeneca introduced esomeprazole (Nexium) as a patented replacement drug. Both are nearly identical in their clinical efficacy and safety.
  • ‘Patent thicket’ is yet another tool for ‘evergreening’, delaying launch of similar drugs, or resorting to ‘pay for delay’ sort of deals. As another recent report reiterates, AbbVie’s ‘patent thicket’ for Humira, has deterred other potential challengers, such as Amgen, Samsung Bioepis and most recently Mylan, each of which struck settlements with AbbVie to delay their biosimilar challenges in the United States.

Goes against patients’ health interest:

On May 09, 2018, the Biosimilars Council reported, just as generic medicines saved Americans USD 1.67 trillion in the last decade, biosimilars are poised to do the same – ‘if they aren’t thwarted by delaying tactics instituted by some pharmaceutical companies.’ Echoing similar concern, the outgoing US-FDA Commissioner Scott Gottlieb also, reportedly said, ‘some drugmakers are using unacceptable tactics such as litigation and rebate schemes to stall the entry of cheaper copies.’

‘Of the nine biosimilars the FDA has approved to date, only three have made it into the hands of patients – an alarmingly small number. Patients can’t access the six others due to barriers thrown in their way by pharmaceutical companies that want to protect their monopolies and keep prices high,’ highlights the Biosimilars Council report. Net sufferer of this self-serving ‘patent thicket’ strategy of pharma and biotech players to extend product patents beyond 20 years, are those patients who need these drugs the most – to save their lives.

Despite law, patent ‘evergreening’ still not uncommon in India:

With section (3d) on the Indian Patents Act 2005 in place, the country is expected to protect itself from patent ‘evergreening’ through ‘incremental innovation.’ This section articulates:“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.”

On this ground, Indian Patent Office (IPO) rejected Novartis’ drug Glivec (imatinib mesylate) patent application, which was ultimately upheld by the Supreme Court in 2013. Nevertheless, a study report of April 30, 2018 emphasized: ‘Though the law with regard to anti-evergreening, upheld and clarified by Indian courts, remains on the books, its application by the IPO has been far from satisfactory.’

The esteemed author of the report, after analyzing about 2,300 drug patents, granted between 2009 and 2016 concluded that evergreening practices may be rampant in India. The report pointed out, ‘the IPO could be operating with an error rate as high as 72 percent for secondary patents, despite provisions to keep them in check.’

Are these IPO’s mistakes, or due to external pressure?

As the paper, published in the January 2016 edition of the Journal of Intellectual Property Rights (JIPR) said,‘The multi-national pharma companies (MNCs) and the US-India Business Council (USIBC) have suggested in their report for elimination of Section 3 (d) so that drug patents can be granted in India for incremental improvement and modification. As per US 301 report, India is listed among countries with inadequate IP regime.’ Keeping all these aspects into consideration, the article expressed some key concerns pertaining to the impact of Section 3 (d) with special emphasis on its interpretation. Does it mean any possibility of wilting under such extraneous and high impact pressure?

A fresh pressure from drug MNC on the DCGI:

Since long drug MNCs have been attempting to delay the entry of even those generics, which are fully compliant with the Indian Patent Law 2005. One such effort was their demand for ‘patent linkage’ with the marketing approval of new generic drugs. However, it could not pass through legal scrutiny – first by the Delhi High Court in the Bayer Cipla case in 2010, and then by the Supreme Court – on the same case. The Court, reportedly, ‘noted the Indian patent system was distinct from the drug regulatory system with no linkage between them and so Bayer can’t prevent DCGI from granting marketing approval to generic versions of patented drugs.’

According to another recent media report of April 04, 2019, in a fresh endeavor ‘to delay launch of low priced generic medicine, multinational drug makers have asked the government to create a registry providing information about all drug applications pending manufacturing and marketing approval. The proposal, which is still pending with the Department of Pharmaceuticals (DoP), if accepted, could involve the generic players into expensive and time-consuming litigations, delaying early market entry of the cheaper generic or biosimilar equivalents.

To date, the health ministry has opposed the proposal, as it will be “unfair to local drug manufacturers to disclose their product strategy” and also has “the potential to substantially increase health care costs for the public.” The government further argued, “such information about product applications filed for approval are not disclosed anywhere in the world.”

India encourages new drug innovation, but not at any cost:

Despite shrill and disparaging comments of MNC lobbyists and the strong vested interests, that India’s Patent Law 2005, doesn’t encourage innovation, many independent international experts do praise the same for the following reasons:

  • Does encourage new drug innovation
  • Does extend product exclusivity for twenty years
  • Strikes a right balance with patients’ health interest
  • Indian judicial system deals with patient infringements and disputes, just as any other developed countries
  • Even 14 years after the enactment of patent laws, just one compulsory license has been granted, which is much less than other countries, including the United States.

What India doesn’t legally allow is, unfettered profit making through ‘evergreening of drug patents’ – at the cost of millions of patients-lives. Nonetheless, powered by deep pockets, the pharma and biotech players are unlikely to cease from this practice, anytime soon. Only patient-awareness, and stringent counter-legal measures can contain this unfair game of drug monopoly practices – in the name of ‘encouraging innovation’.

Conclusion:

The article titled, ‘Over patented, overpriced: How Excessive Pharmaceutical Patenting is Extending Monopolies and Driving up Drug Prices’ revealed:“Top grossing drugs have on average 125 patent applications, which are filed with a strategic intent to extend the commercial monopolies far beyond the intended twenty years of protection.” It also quoted American President Donald Trump as saying, “Our patent system will reward innovation, but it will not be used as a shield to protect unfair monopolies.”

Coming back to ‘patent thicket’ and the same classic case, another report of March 20, 2019 indicated, a new class action lawsuit filed by New York’s largest grocery union has accused AbbVie of violating antitrust and consumer protection laws, which AbbVie has defended by saying that its patent strategy for Humira has protected the investments that are necessary to “advance healthcare.”

Pharma and biotech companies’ maintaining patent monopolies far beyond twenty years has significant consequences on India’s healthcare system. Only patent lawyers and experts can possibly answer whether or not the Indian Patent Law 2005 can effectively deal with the practice of ‘evergreening’ with patent thicket. Intriguingly, taking a cue from recent developments, it seems many pharma and biotech investors too, deem ‘patent thicket’ rather distracting for longer-term undiluted focus on new product development, and sustainable investors’ return.

That apart, the question also comes, whether just as ‘antitrust and consumer protection laws’ in the US, the Competition Law of India will be able to do contain such unfair practices? Otherwise, with MNC lobbyists’ renewed activities in this area, ‘patent thicket’, especially for expensive biologic drugs, will delay market-entry of their cheaper biosimilar versions in India, as well, just as what is happening in the developed nations.

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.