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Big Pharma Receives Another Body Blow: Would Indian Slumber End Now?

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On May 13, 2014, The New York Times reported, while major pharmaceutical companies have been facing increased scrutiny of their marketing practices from governments around the world, last Wednesday the Chinese authorities sent a strong warning to the pharmaceutical industry implicating Mark Reilly, the former head of Glaxo’s China operations, of ordering his subordinates to form a “massive bribery network” that resulted in higher drug prices and illegal revenue of more than US$150 million.  Mr. Reilly, a Briton, and two Chinese-born Glaxo executives, Zhang Guowei and Zhao Hongyan, had allegedly arranged to bribe government officials in Beijing and Shanghai.

The Chinese police has reportedly said that its 10-month investigation has found that under Mr. Reilly, Glaxo had pushed its staff to meet aggressive sales targets and that the company had conducted “false transactions” through its financial department to transfer “illegal gains” made in China to overseas companies. The authorities also said Mr. Reilly and other senior executives at Glaxo had bribed officials to stop investigations of wrongdoing at the company.

The report also states, although bribery is common in China, it is rare for foreign-born executives from MNCs to be prosecuted. In 2009, a Chinese-born Australian executive at the British-Australian mining giant Rio Tinto was arrested in a bribery and money-laundering case.

“Ethics Matter” – A Chinese warning to MNCs:

On May 16, 2014, Xinhua – the official news agency of China wrote in an editorial that Chinese probe into GSK’s local sales practices should send a warning to other foreign companies doing business in the country that “Ethics Matter”.

This stern action by China is indeed another body blow on the so called ‘ethical image’ of Big Pharma, despite its sophisticated global ‘Public Relations’ machinery working overtime under the respective pharma associations across the world.

Drug price manipulation:

While citing the example of a hepatitis B drug – Heptodin, Xinhua editorial said that GSK “manipulated prices to disguise real costs”, as Heptodin is declared as 73 Yuan to customs in China even though the actual cost is 15.7 Yuan and is sold at 26 Yuan in Canada or 30 Yuan in the U.K.

Quoting a Ministry of Public Security official at a briefing on May 14, it stated that Glaxo charged prices in China that in some cases were seven times as high as in other countries, and used the extra money to pay bribes.

According to this media report, in June last year, “Chinese authorities began investigating allegations that Glaxo had funneled money through local travel agencies to pay bribes to doctors in return for prescribing its drugs. They last year detained some executives on suspicion of economic crimes involving 3 billion Yuan of spurious expenses and trading in sexual favors.”

Not a first time allegation:

This is not the first of such cases and most probably won’t be the last also. Since quite some time many pharmaceutical giants are being reportedly investigated and fined, including out of court settlements, for bribery charges related to the physicians.

In this context July 4, 2012, edition of The Guardian reported a similar astonishing story on Big Pharma. When you click on this short video clipping, which was published on September 29, 2012 you would see that Big Pharma’s Medicaid fraud penalties had reached a record high with GlaxoSmithKline fined $3 Billion in the United States at that time.

It is widespread:

Following are a few more recent examples to help fathom the enormity of the problem:

  • In March 2014, the antitrust regulator of Italy reportedly fined two Swiss drug majors, Novartis and Roche 182.5 million euros (U$ 251 million) for allegedly blocking distribution of Roche’s Avastin cancer drug in favor of a more expensive drug Lucentis that the two companies market jointly for an eye disorder.
  • Just before this, in the same month of March 2014, it was reported that a German court had fined 28 million euro (US$ 39 million) to the French pharma major Sanofi and convicted two of its former employees on bribery charges.
  • In November 2013, Teva Pharmaceutical reportedly said that an internal investigation turned up suspect practices in countries ranging from Latin America to Russia.
  • In May 2013, Sanofi was reportedly fined US$ 52.8 Million by the French competition regulator for trying to limit sales of generic versions of the company’s Plavix.
  • In August 2012, Pfizer Inc. was reportedly fined US$ 60.2 million by the US Securities and Exchange Commission to settle a federal investigation on alleged bribing of overseas doctors and other health officials to prescribe medicines.
  • In April 2012, a judge in Arkansas, US, reportedly fined Johnson & Johnson and a subsidiary more than US$1.2 billion after a jury found that the companies had minimized or concealed the dangers associated with an antipsychotic drug.

There are many more of such examples.

The situation is alarming in India too:

Back home in India, deep anguish of the stakeholders over this issue is now being increasingly reverberated on every passing day, as it were. It has also drawn the attention of the patients’ groups, NGOs, media, Government, Planning Commission and even the Parliament.

An article titled, “Healthcare industry is a rip-off” published in a leading daily, the author highlighted that the absence of regulatory oversight in the healthcare industry needs urgent attention.

The quality of the pharmaceutical marketing in India has touched a new low, causing suffering to patients. Unethical drug promotion is increasingly becoming an emerging threat to society. The Government provides few checks and balances on drug promotion.

To counter the problem of ‘Unethical Drug Promotion’ to a great extent, the author broadly recommended the following:

  • Preparing treatment guidelines,
  • Conducting periodic prescription audits,
  • Generating consumer awareness and empowering consumer with relevant information in an user friendly way
  • Regulating entertainment of doctors in the garb of Continuing Medical Education (CME)

Moreover, the Department Related Parliamentary Standing Committee on Health and Family Welfare in its 58th Report strongly indicted the Department of Pharmaceuticals (DoP) on this score. It observed that the DoP should take prompt action in making the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ mandatory so that effective checks and balances could be brought-in on ‘huge promotional costs and the resultant add-on impact on medicine prices’.

Even the Planning Commission of India has reportedly recommended strong measures against pharmaceutical marketing malpractices as follows:

“Pharmaceutical marketing and aggressive promotion also contributes to irrational use. There is a need for a mandatory code for identifying and penalizing unethical promotion on the part of pharma companies. Disclosure by pharmaceutical companies of the expenditure incurred on drug promotion to be made mandatory, ghost writing in promotion of pharma products to attract disqualification of the author as well as penalty on the company, and vetting of drug related material in Continuing Medical Education (CME) should be considered.”

Unfortunately, nothing substantive has been done in India to effectively address such malpractices in a comprehensive manner, as yet, to protect patients’ interest.

A pending PIL:

Despite deplorable inaction by the government on the subject, frequent reporting by Indian media has triggered a national debate on this issue. A related Public Interest Litigation (PIL) is also now pending before the Supreme Court for hearing in the near future. Its judicial verdict is expected to usher in a breath of fresh air around a rather stifling environment for the patients.

Ethical marketing conduct in India – A Survey:

A survey report of Ernst and Young titled, “Pharmaceutical marketing: ethical and responsible conduct”, carried out in September 2011 on the UCMP and MCI guidelines, highlighted the following:

  • Two-third of the respondents felt that the implementation of the UCPMP would change the manner in which pharma products are currently marketed in India.
  • More than 50 percent of the respondents are of the opinion that the UCPMP may lead to manipulation in recording of actual sampling activity.
  • Over 50 percent of the respondents indicated that the effectiveness of the code would be very low in the absence of legislative support provided to the UCPMP committee.
  • 90 percent of the respondents felt that pharma companies in India should focus on building a robust internal controls system to ensure compliance with the UCPMP.
  • 72 percent of the respondents felt that the MCI is not stringently enforcing its medical ethics guidelines for the doctors.
  • 36 percent of the respondents felt that the MCI’s guidelines could have an impact on the overall sales of pharma companies.

 Conclusion:

Increasingly many companies across the world are reportedly being forced to pay heavily for ‘unethical behavior and business practices’ by the respective governments.

Intense quarterly pressure for expected business performance by stock markets and shareholders could apparently be the trigger-points for short changing such codes and values.

Be that as it may, I reckon, the need to announce and implement the UCPMP by the Department of Pharmaceutical under the new Modi Government, assumes critical importance in today’s chaotic pharmaceutical marketing scenario. At the same time, demonstrable qualitative changes in corporate ethics and value standards in this regard should always be important goals for any pharmaceutical business corporation in India.

Though late, China has at least started cracking down on the perpetrators of this alleged crime. As corruption conscious Modi-Government assumes office in the country, would India wake-up now to stop this growing menace by enacting and then strictly enforcing the rule of law?

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.

‘Gen Y’: Contemporary Mindset For Pharma Transformation

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Global Pharma industry, for various reasons, is still not adequately aligned with the legitimate needs and expectations of the civil society, which are some of the key purposes for its existence, across the world. Consequently, there seems to be a gradually increasing trust deficit between various governments and the pharma industry. This has been continuing over a long period of time, primarily due to opacity in the business conduct of the industry, spanning across a number of critical areas, especially related to R&D, Clinical Trials, Pricing, and Brand Marketing.

As a result, various stakeholders do not seem to be on the same page, when it comes to important issues and concerns related to patients’ interest.

A key differentiation for pharma consumers:

Ultimate consumers not being the purchase decision makers for prescription medicines, in general, unlike most other products, additionally, the market being highly monopolistic for many critical life-saving patented products, the argument of market force driven drug pricing does not hold much water. Even for branded generics in India, one can find a wide variation in retail prices within the same molecule and the higher priced brands in many cases, intriguingly, enjoy the brand leadership status too.

Thus, for prescription medicines, the following common question is reportedly being very often raised:

“If the one who decides, does not pay and the one who pays, does not decide and if the one who decides is ‘paid’, will truth stand any chance?”

This leads to a key question on one of the many important areas of opacity in the pharma industry, which is:

“If market forces decide product pricing, why do the doctors prescribe a particular company’s higher priced brand more often, instead of available replaceable brands of other pharma companies of equal repute, but with much lesser price?

Need for ‘fresh eyes’: 

It is imperative that such questions need effective resolution, sooner. However, this will require fresh pairs of eyes and not the existing ones.

Noting together various other similar examples, as well, of long unresolved growing discontent, as mentioned above, there is an urgent need for the industry to expedite a radical transformation in those areas with a new and contemporary vision for the interest of all – Pharma Players, the Governments and the Society at large.

‘Baby Boomers’ traditional mindset seems outdated:

Overall mindset of the senior leadership in the pharma sector, right from the country level up to their respective global headquarters, appears to have been insensitive to contemporary societal needs, too much self-serving, lacking innovativeness in problem solving approach, charting in a make- believe world with rigid views and suffering from an ‘Ostrich like Syndrome’, as it were.

One of the reasons of the above ‘Syndrome’ could well be that these leadership positions are still being driven by the ‘Pre-Baby Boomers’, ‘Baby Boomers’ and very few ‘Gen X’, including the one at the helm.  Interestingly, this is quite unlike other science driven sectors such as the ‘Digital Industry’ and their leaders like, Mark Zuckerberg of Facebook. Incidentally, Zuckerberg also tops 2013 charity giving list.

Consequently, the long standing important pharma issues with the outside world, though are much known to all concerned, have still remained mostly unresolved. One of its reasons could possibly be attributed to the traditional mindset of the senior leadership of the industry, predominantly cultivating values of the ‘Baby Boomers’, which override the fast changing societal aspirations, expectations and demands. 

A time for ‘Gen Y’ leadership:

In such a scenario, to trigger a transformation in the pharma industry, the ‘Gen Y’, who reportedly looks at ‘Work’, ‘Life’ and ‘Society’ very differently, quite in tune with the time, as deliberated below, should be put on the saddle of the key leadership positions, sooner.

Handing over the baton should follow a well thought out and structured time-bound process. This is quite feasible, as those of ‘Gen Y’ born in 1983. have become over 30 years old now.

Mindset of ‘Gen Y’ is different and contemporary:

Various studies have clearly shown that the interplay between ‘Work’, ‘Life’ and ‘Society’ has undergone a fundamental change from the era of ‘Baby Boomers’ to Gen Y, as follows:

  • The generation ‘prior to the Baby Boomers’ (born before 1946) worked to live.
  • The ‘Baby Boomers’ (born between 1946 and 1964) live to work, which also becomes a very important part of their social status, identity and pride.
  • ‘Gen X’ (born between 1965 and 1982) works along with other interests and aspirations too, seeking a balance between work and life.
  • ‘Gen Y’ (born between 1983 and 2001) wants work and life to merge. Besides, according to a recent study, around 92 percent of Gen Y believes that business should be measured by more than just profit, having a clear societal focus along with the changing needs and aspirations of the people. As stated above, ‘Gen Y’ like, Mark Zuckerberg has already demonstrated it.

‘Inclusive’ approach of ‘Gen Y’, different from ‘Baby Boomers’:

Leadership behavior, as we know, is predominantly driven by values, which may either be sustainable over a longer period of time or just situation specific, working wonders in a given situation and ineffective when the situation changes. Thus there is a greater need for the organizations to help nurturing and developing leadership behavior, which is sustainable and not just situation specific.

In today’s scenario, to catalyze a transformation in the pharma industry, persons in leadership roles, especially if these are held by ‘Baby Boomers’, need to change the way they usually behave, directly or indirectly, with their colleagues and subordinates, as a typical ‘Gen Y’ person would not be inclined to respond to formal authority, social status or even power.

For ‘Gen Y’, as studies indicate, much important ‘Innovation’ agenda would not be restricted to just products and services, they would explore more innovative ways of doing business, making it more inclusive for all.

They would not focus on ‘Excellence’ only at the place of work, mainly for career progression and increased remuneration. ‘Excellence’ for the ‘Gen Y’, would extend to social and personal lives, as work and life merge for them. 

Unlike ‘Baby Boomers’ and for that matter even ‘Gen X’, the terminologies like. ‘Socialistic’ or ‘Nationalistic’ are not bad words for ‘Gen Y’, only used for making condescending remarks, as the new generation would ensure that the purpose of ‘Work’, ‘Life’ and ‘Society’ flow in the same direction, seamlessly.

Conclusion: 

At least the ‘Baby Boomers’, born approximately between 1946 and 1956, who live to work making it a very important part of their social identity and are still holding the key pharma leadership positions, should decide to gradually fade away, instead of pulling all available levers and tricks to keep hanging-on to the job. This is absolutely essential to create enough room for the ‘Gen X’ and ‘Gen Y’ to take charge for much needed transformation in the pharma industry, 

The eternal tricks of many ‘Baby Boomers’ to keep the ‘Gen X’ and ‘Gen Y’ waiting under their wings and thus making them impatient, could ultimately prove to be self-defeating, if not demeaning, affecting both individual and corporate performance.

I reckon, given an opportunity in a systematic manner, sooner, the ‘Gen X’ and ‘Gen Y’ with their contemporary mindsets, would catalyze a meaningful transformation within the pharma industry ushering in much needed transparency for patients’ interest, aligning it well with the healthcare needs, aspirations and demands of the society and thereby, effectively bridging the trust deficit.

This is not just a wish. At least one younger top global pharma leader, probably belonging to ‘Gen X’, has started demonstrating the refreshing mindset of a change agent to the pharma world at large. As growing numbers of such pathfinders start taking charge, much awaited metamorphosis of the industry would help creating a glorious image that the sector so deserves for its otherwise yeomen contribution in the battle against diseases, the world over.

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.