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

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

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

Reality is all pervasive:

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

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

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

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

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

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

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

The article flags:

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

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

The author then flagged questions as follows:

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

Financial conflicts in Medicine:

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

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

On this paper, a media report commented:

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

A call for reform:

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

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

The rectification process has begun in America:

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

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

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

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

An expensive marketing process:

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

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

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

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

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

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

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

A worthwhile experiment:

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

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

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

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

Need for well-structured campaigns:

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

One researcher thus articulated as follows:

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

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

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

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

‘Academic detailing’:

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

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

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

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

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

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

A commendable move by the Medical Council of India:

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

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

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

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

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

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

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

No such government guidelines for the industry yet:

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

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

‘Physicians payment induced prescriptions’ – a global phenomenon:

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

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

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

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

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

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

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

Physician Payment Sunshine Act of 2010:

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

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

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

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

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

Conclusion:

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

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

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

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

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

By: Tapan J. Ray

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

 

 

Two Paintings on the Same Canvas: ‘Truth About Drug Companies’ and ‘Protecting Access to Medicines’

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As the saying goes, “Great people think alike”, many thought leaders of very high credibility across the globe, seem to think almost in similar lines when it comes to improving access to medicines for a large section of the global population.

In this article, I shall briefly focus on two such instances, both revolving around the same centerpiece – one from India and the other from the land of ‘pharmaceutical innovation’ – America.

An interesting article written recently by the well-regarded Indian expert of global stature Dr. K. Srinath Reddy, President, Public Health Foundation of India (PHFI), reiterates emphatically,  “India must protect access to medicine”.

In a more focused context related to EU-FTA, the author wrote about possible adverse impact of more stringent product patent and regulatory data protection related issues on access to generic medicines in India and other developing countries. Thus, he argued that EU-FTA should be well negotiated by India and cautioned as  follows:

“It must be remembered that India needs to protect its vital interests in any trade agreement, just as other nations strive to. Our interest lies in protecting the lives and safeguarding the health of Indians, without permitting unreasonable restrictions on our ability to produce, use and even export, generic versions of drugs the patents of which have lapsed (or where compulsory licensing has been invoked to protect public health).

India needs to tread carefully while negotiating the FTA with the EU, so that the health of the Indian people is not compromised through provisions that shackle our generic drug industry.”

The debate has assumed a global dimension:

Such raging debates on a critical public health issue, like access to medicines, are also taking place in many other countries, as I write, including America, irrespective of the fact whether these are generic or patented drugs.

Marcia Angell, M.D, a faculty of Harvard Medical School and a former Editor in Chief of the world’s leading medical journal ‘The New England Journal of Medicine’ wrote an interesting book.

In this book titled “The Truth About the Drug Companies: ‪How They Deceive Us and What to Do About It”, she makes many interesting comments on the American pharmaceutical industry on access to medicines and the kind of pharmaceutical innovations that they are involved in.

The world noticed it:

This book arrested global attention and was extensively reviewed. Since, the author wrote more specifically about the American pharmaceutical industry, following are some excerpts quoted from her book reviews in the USA:

New York Times: “A scorching indictment of drug companies and their research and business practices…tough, persuasive and troubling.”

Boston Globe: “A sober, clear-eyed attack on the excesses of Drug Company power…a lucid, persuasive, and highly important book.”

Washington Post: “Always authoritative…[this book] delivers the message—that drug-company money and power is corrupting American medicine—in a convincing, no-nonsense manner.”

Some key issues raised in the book:

Like the above article of Dr. Reddy, here also the author raises some interesting issues related to the American drug companies. I am penning below some of those issues exactly as expressed by the author (verbatim):

  • “The magic words, repeated over and over like an incantation, are research, innovation, and American. Research. Innovation. American. It makes a great story.”
  • “R&D is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits.”
  • “The great majority of ‘new’ drugs are not new at all but merely variations of older drugs already on the market. These are called ‘me-too’ drugs.”
  • “If I’m a manufacturer and I can change one molecule and get another twenty years of patent rights, and convince physicians to prescribe and consumers to demand the next form of Prilosec, or weekly Prozac instead of daily Prozac, just as my patent expires, then why would I be spending money on a lot less certain endeavor, which is looking for brand-new drugs?”
  • “Over the past two decades the pharmaceutical industry has moved very far from its original high purpose of discovering and producing useful new drugs. Now primarily a marketing machine to sell drugs of dubious benefit, this industry uses its wealth and power to co-opt every institution that might stand in its way, including the US Congress, the FDA, academic medical centers, and the medical profession itself. (Most of its marketing efforts are focused on influencing doctors, since they must write the prescriptions.)”
  • “Now universities, where most NIH-sponsored work is carried out, can patent and license their discoveries, and charge royalties. Similar legislation permitted the NIH itself to enter into deals with drug companies that would directly transfer NIH discoveries to industry.”
  • “Many medical schools and teaching hospitals set up “technology transfer” offices to help in this activity and capitalize on faculty discoveries. As the entrepreneurial spirit grew during the 1990s, medical school faculty entered into other lucrative financial arrangements with drug companies, as did their parent institutions.”
  • “One of the results has been a growing pro-industry bias in medical research—exactly where such bias doesn’t belong.”
  • “In the 1990s, Congress enacted other laws that further increased the patent life of brand-name drugs. Drug companies now employ small armies of lawyers to milk these laws for all they’re worth—and they’re worth a lot. The result is that the effective patent life of brand-name drugs increased from about eight years in 1980 to about fourteen years in 2000.”
  • “The biggest single item in the budget is neither R&D nor even profits but something usually called ‘marketing and administration – a name that varies slightly from company to company.”
  • “The industry is fighting these efforts—mainly with its legions of lobbyists and lawyers. It fought the state of Maine all the way to the US Supreme Court, which in 2003 upheld Maine’s right to bargain with drug companies for lower prices, while leaving open the details. But that war has just begun, and it promises to go on for years and get very ugly.”
  • “The fact that Americans pay much more for prescription drugs than Europeans and Canadians is now widely known.”
  • “There are very few drugs in the pipeline ready to take the place of blockbusters going off patent. In fact, that is the biggest problem facing the industry today, and its darkest secret. All the public relations about innovation is meant to obscure precisely this fact.”
  • “Of the 78 drugs approved by the FDA in 2002, only 17 contained new active ingredients, and only seven of these were classified by the FDA as improvements over older drugs.”
  • “While there is no doubt that genetic discoveries will lead to treatments, the fact remains that it will probably be years before the basic research pays off with new drugs. In the meantime, the once-solid foundations of the big pharma colossus are shaking.”
  • “Clearly, the pharmaceutical industry is due for fundamental reform. Reform will have to extend beyond the industry to the agencies and institutions it has co-opted, including the FDA and the medical profession and its teaching centers.”
  • “The me-too market would collapse virtually overnight if the FDA made approval of new drugs contingent on their being better in some important way than older drugs already on the market.”
  • “A second important reform would be to require drug companies to open their books. Drug companies reveal very little about the most crucial aspects of their business.”
  • “But the one thing legislators need more than campaign contributions is votes. That is why citizens should know what is really going on. Contrary to the industry’s public relations, they don’t get what they pay for. The fact is that this industry is taking us for a ride, and there will be no real reform without an aroused and determined public to make it happen.”

An opposite view:

On this an article in Forbes Magazine commented as follows:

“The problem with Angell’s arguments is that they are rife with inaccuracies and fallacies. Furthermore, she makes no accounting for changes in the industry that have occurred over the last decade.”

“It is time for those in the medical profession to spur a more truthful and factual discussion about the pharmaceutical industry and its role in the discovery and development of new medicines. The pharmaceutical industry is a key player in the evolution of healthcare and this needs to be recognized if the industry is to operate effectively.”

Conclusion:

One of the key counter arguments that very often comes up in this area, including in India is, the protection of Intellectual Property Rights (IPR) is the responsibility of the Government concerned at any cost, even if such protective measures severely restrict access to these drugs to a large population of the society across the globe, due to ‘affordability’ considerations.

It is also claimed that, to come out with innovative medicines, large pharmaceutical companies invest a huge amount of money and time towards R&D related activities.

Thus, the global innovator companies, by and large, with a few exceptions though, believe that stricter enforcement of stringent patent laws by the Governments is the only answer to foster innovation within the industry. Such stringent measures, as they argue, will help them keep investing in R&D to meet the ‘unmet needs’ of patients on a continuous basis.

However, as we have seen above, many experts, like Harvard faculty Marcia Angell and Dr. K. Srinath Reddy have strong and quite different view points. It is certain that the debate on access to affordable medicines is not going to die down, at least any time soon.

Despite all these, it is not difficult, I reckon, to identify an emerging but a clear trend indicating, the priority of the Governments to protect public health interest in the longer term, will ultimately prevail in most parts of the world, including India.

Consequently, the world will probably witness more and more new government policies and legal frameworks in this area striking a right balance between improving access to medicines and fostering innovation, as the countries move on.

That said, taking note of the above two paintings, as it were, painted on the same canvas of ‘improving access to medicines for all’, is it not amazing to note a striking similarity in the thought pattern between two highly credible and independent think tanks, belonging to the oldest and largest democracies of the planet earth, to ensure affordable medicines 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.

“New drug prices are Astronomical, Unsustainable and Immoral” – Anatomy of Unique Protests

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Yes. The quoted sentiment captured in the headline was reportedly voiced recently by many cancer specialists, including researchers and that too in the heartland of pharmaceutical innovation of the world– the United States of America.

These specialist doctors argued:

“High prices of a medicine to keep someone alive is profiteering, akin to jacking up prices of essential goods after a natural disaster”

Thus, not just in India, high prices of new drugs have started prompting large-scale protests in various types and forms across the world. This time the above unique protest assumed an extra-ordinary dimension, with the eye of the storm being in America.

The news item highlighted quite a different type of public protest by the top doctors, originated at a major cancer center located in New York and actively supported by over 120 influential cancer specialists from more than 15 countries spanning across five continents. These crusaders, though reportedly are working in favor of a healthy pharmaceutical industry, do think, especially the cancer drug prices are beyond the reach of many.

About 30 of these doctors hail from the United States and work closely, as mentioned earlier, with pharmaceutical companies engaged in R&D, including clinical trials.

As the cost of many life saving cancer drugs are now exceeding US$ 100,00 per year, all these doctors and researchers involved in the patients’ fights against cancer, are now playing a pivotal role in resisting such high drug prices vigorously.

Examples of astonishingly high drug prices:

In the area of treating rare diseases, the situation in every sense is mind-boggling. When a drug to treat such ailments comes with a price tag of over US$ 400,000 just for a year’s treatment, it is indeed astonishingly high by any standard. Some protestors even described the cost of these drugs as ‘obvious highway robbery’ in the guise of high R&D cost, while some others would continue to wonder as to why is not there a regulatory intervention for the same?

Here below are the top 10 most expensive drugs of the world…and just hold your breath:

World’s Most Expensive Medicines

No. Name Disease

Price US$ /Year
1. ACTH Infantile spasm

13,800,00
2. Elaprase Hunter Syndrome

657,000
3. Soliris Paroxysmal nocturnal hemoglobinuria

409,500
4. Nagalazyme Maroteaux-Lamy Syndrome

375,000
5. Folotyn T-Cell Lymphoma

360,000
6. Cinryze Hereditary Angioedema

350,000
7. Myozyme Pompe

300,000
8. Arcalyst Cold Auto-Inflammatory Syndrome

250,000
9. Ceredase / Cerezyme Gaucher Disease

200,000
10. Fabrazyme Fabry Disease

200,000

(Source: Medical Billing & Coding, February 6, 2012)

The good news is protests against such ‘immoral pricing’ have started mounting.

Protests against high drug prices for rare diseases:

Probably due to this reason, drugs used for the treatment of rare diseases are being reported as ‘hot properties for drug manufacturers’, all over the world.

The above report highlighted a changing and evolving scenario in this area.

In 2013, the Dutch Government had cut the prices of new enzyme-replacement therapies, which costs as high as US$ 909,000. Similarly, Ireland has reduced significantly the cost of a cystic fibrosis drug, and the U.K. rejected a recommendation to expand the use of a drug for blood disorders due to high costs.

Soon, the United States is also expected to join the initiative to reduce high prices of orphan drugs as both the government and private insurers increasingly come under the cost containment pressure.

Yet another protest prompted cancer drug price reduction by half:

Another report highlights that last year physicians at the Memorial Sloan-Kettering Cancer Center in New York refused to use a new colon cancer drug ‘as it was twice as expensive as another drug without being better’.

After this protest, in an unusual move, the manufacturer of this colon cancer drug had cut its price by half.

Even developed countries with low out of pocket expenditure can’t sustain such high prices:

With over one million new cancer cases reportedly coming up every year in India, there is an urgent need for the intervention of the Government in this area, especially for poor and the middleclass population of the country.

Further, it is worth noting that in countries like India, where out of pocket expenditure towards healthcare is very high, as public health system is grossly inadequate, such ‘astronomical prices’ will perhaps mentally knock-down many patients directly, well before they actually die.

That said, even in those countries where out-of-pocket expenditure towards healthcare is nil or very low, respective health systems, by and large, be it public or run by other payors, will still require paying for these high cost drugs, making the systems unsustainable.

Moreover, patients on assistance program of the pharmaceutical companies, reportedly also complain that these ‘Patient Access Programs’ are always not quite user friendly.

Protests spreading beyond cancer and rare disease treatment:

The concern for high drug prices is now spreading across many other serious disease areas, much beyond cancer. It has been reported that the issue of drug prices for various other disease areas was discussed in October 2012 at the Cowen Therapeutic Conference in New York. Many doctors in this conference felt that the drugs with no significant benefit over the existing therapy should not be included in the hospital formulary.

Pressure on diabetic and cardiac drug prices:

Various Governments within the European Union (EU) are now reportedly exerting similar pressures to reduce the costs of drugs used for the treatment of diabetes and cardiac disorders. These measures are now reportedly ‘putting the brakes on an US$ 86 billion sector of the pharmaceutical industry that’s been expanding twice as fast as the market as a whole’.

It is worth noting that each nation within EU is responsible for deciding the price of a new drug, though the European Commission approves drugs for all 27 members of the EU.

Flip side of the story – Commendable initiatives of some global companies:

There is another side of the story too. To address such situation some global companies reportedly are increasing drug donations, reinvesting profits in developing countries and adopting to a more flexible approach to intellectual property related issues. However, as per media reports, there does not seem to be any unanimity within the global companies on country-specific new drug pricing issue, at least not just yet.

To encourage pharmaceutical companies to improve access to affordable drugs for a vast majority of population across the world, an independent initiative known as Access to medicine index ranks 20 largest companies of the world. This ranking is based on the efforts of these companies to improve access to medicine in developing countries.

As indicated by the World Health Organization (WHO), this Index covers 20 companies, 103 countries, and a broad range of drugs, including vaccines, diagnostic tests and other health-related technologies required for preventing, diagnosing and treating disease.

The index covers 33 diseases, including maternal conditions and neonatal infections. The top 10 companies in ‘Access to Medicine Index’ ranking for 2012 are as follows:

No. Company

Index
1. GlaxoSmithKline plc 3.8
2. Johnson & Johnson 3.6
3. Sanofi 3.2
4. Merck & Co. Inc. 3.1
5. Gilead Sciences 3.0
6. Novo Nordisk A/S 3.0
7. Novartis AG 2.9
8. Merck KGaA 2.5
9. Bayer AG 2.4
10. Roche Holding Ltd. 2.3

Source: http;//www.accesstomedicineindex.org/ranking

How high is really the high R&D cost?

A recent article published this month raises some interesting points on this subject, which I am quoting below:

  • No direct and transparent details are available from the industry for public scrutiny on the total cost of innovation.
  • What one does have access to are studies on the issue funded by pharmaceutical MNCs themselves.
  • For most NCEs, public-funded programs in the U.S largely invest in drug discovery.
  • In industry sponsored studies there is lack of transparency on the real costs of drug research and development.
  • Various tax benefits allowed under U.S. law are also ignored by industry studies.
  • Researching new drugs gives one Tax breaks to the extent of 50 per cent in the U.S. If one researches and markets an orphan drug for rare diseases, again, tax breaks are available to the tune of half the expenditure.

Further, a 2011 study by Donald W. Light and Rebecca Warburton published by the London School of Economics and Political Science indicates, “based on independent sources and reasonable arguments, one can conclude that R&D costs companies a median of US$ 43.4 million per new drug.”

It is interesting to note, the above cost estimate is a fraction of what is available from the industry source (over US$ 1.2 billion).

An interesting pricing model prescribed:

Another article recently published in the Harvard Business Review (HBR) commented, while pharmaceutical companies reportedly spend billions on research, the actual cost of manufacturing a treatment (such as a pill) is minimal. This cost structure enables pricing flexibility.

The author suggests:

  • Adopt a smarter pricing model, where a company can charge the highest price that each customer is willing to pay.
  • To implement smarter pricing that saves more lives, and brings in more revenue, the pharmaceutical industry should create a straightforward grid that specifies the annual maximum a patient should pay out of pocket on drug expenses.
  • Key variables that determine this maximum include income, family size, and their other drug costs. Patients can submit this data to a third party agency to avail discounts based on these criteria.

However, implementability of this model, especially in the Indian scenario, seems to be challenging.

Conclusion:

Despite this gloom and doom, as ‘Access to Medicine Index 2012′ indicates, some pharmaceutical companies do want to become an integral part in finding out a solution to the access problem in general. Though, there are still many more miles to cover, some companies, though small in number, are demonstrably trying to improve access to health care in the developing countries of the world.

Rising prices of new drugs in general and for dreaded disease like cancer and other rare disorders in particular have now started reaching a crescendo, not just India, but in many other countries across the world and in various forms. Probably due to this reason, currently in Europe, regulators tend to be depending more and more in the concept of cost to efficacy ratios for new drugs.

It is interesting to note, the world is witnessing for the first time and that too in the developed world that a large number of specialist doctors are protesting against this trend, unitedly and with strong words.

The anatomy of initial phase of this groundswell, many would tend to believe, signals ushering in a new era of checks and balances to set right ‘astronomical, unsustainable and immoral new drug prices’ in the patients’ fights especially against dreaded 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.

 

 

 

A Ten Step Strategy Prescribed

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In India, there are various hurdles to address the healthcare issues in a comprehensive way. Though, these do not seem to be insurmountable, the country needs a clear time-bound grand strategy to squarely address this vexing concern, which also has its consequent socioeconomic fallout.

If we look at the history of development of the industrialized countries of the world, we shall easily be able to fathom that all of them not only had heavily invested, but even now are investing to improve the socioeconomic framework of the country where education and health are the center pieces. Continuous reform measures in these two key areas are proven key drivers of economic growth of any nation.

Just as focus on education is of utmost importance to realize the economic potential of any country, so is the healthcare. It will be extremely challenging for India to realize its dream of becoming one of the economic superpowers of the world, without a sharp strategic focus and significant resource allocation in these two areas.

The World Health Statistics:

As reported by the ‘World Health Statistics 2011′, India spends around 4.2 percent of its Gross Domestic Product (GDP) on health, which is quite in line with other BRIC countries like, China and Russia.This has been possible mainly due to increasing participation of the private players in the healthcare sector and not so much by the government.  The following table on ‘Health Expenditure’ will highlight this point:

 

Type Brazil Russia India China
Exp. on Health (% of GDP)

8.4

4.8

4.2

4.3
Govt. Exp. on Health(% of Total Exp. on Health)

44

64.3

32.4

47.3
Pvt. Exp. on Health (% of Total Exp. on Health)

56

35.7

67.6

52.7
Govt. Exp. on Health (% of Total Govt. Exp.)

6

9.2

4.4

10.3
Social Security Exp. on Health (% of General Govt. Exp. on Health)

-

38.7

17.2

66.3

Key healthcare goals:

As articulated in a recent paper titled ‘Meeting the Challenges of Healthcare Needs in India: Paths to Innovation’, the key healthcare goals of any country have been described as follows:

  •  Improved quality of care and population health as measured by life expectancy and other measures of wellness
  • Cost containment and pooled risk-sharing by the population to allow financial access to care as well as avoid catastrophic ruin
  • Provide access to care in an equitable manner for all citizens

Specifically to India one of the key challenges to healthcare is ‘Universal Access’ to care and health equity. However, in terms of pure concept the country has a universal healthcare system, where theoretically any citizen is entitled to avail the public health facilities irrespective of socioeconomic status. Unfortunately, the reality is far out of the line.

Health is a ‘State subject’:

In Indian system, health is primarily a state subject and the Central Government deals with:

  •  Health related policies
  • Health related regulations
  • Initiatives related to identified disease prevention and control

Whereas, each state needs to take care of:

  • Healthcare administration
  • Healthcare delivery
  • Healthcare financing
  • Training of personnel related to healthcare

The system:

Primary Health Centers (PHCs) of India located in the cities, districts or rural villages are expected to provide medical treatment free of cost to the local citizens. The focus areas of these PHCs, as articulated by the government, are the treatment of common illnesses, immunization, malnutrition, pregnancy and child birth. For secondary or tertiary care, patients are referred to the state or district level hospitals.
The public healthcare delivery system is grossly inadequate and does not function, by and large, with an optimal degree of efficiency, though some of the government hospitals like, All India Institute of Medical Science (AIIMS) are among the best hospitals in India.

Most essential drugs, if available, are dispensed free of cost from the public hospitals/clinics. Outpatient treatment facilities available in the government hospitals are either free or available at a nominal cost. In AIIMS an outpatient card is available at a nominal onetime fee and thereafter outpatient medical advice is free to the patient.

However, the cost of inpatient treatment in the public hospitals though significantly less than the private hospitals, depends on the economic condition of the patient and the type of facilities that the individual will require. The patients who are from Below Poverty Line (BPL) families are usually not required to pay the cost of treatment. Such costs are subsidized or borne by the government.

Private sector is expensive:

That said, in India health facilities in the public sector being inadequate, generally under-staffed and under-financed, a large section of population still does not have access to affordable modern healthcare. As a result, more often than not, common patients are compelled to go to expensive private healthcare providers. Majority of the population of India cannot afford such high cost private healthcare, though comes with a much better quality.

Thus, as things stand today the public sector actually provides just about 20% of actual care services. The balance is catered by the private sector.

A great potential:

A 2012 report  on ‘Indian Healthcare Industry’ indicates that in 2010 the size of the industry was around US$ 50 billion and is expected to register a turnover of US$ 140 billion in 2017 with a CAGR of 15 percent. This growth momentum, despite all these, positions India as one of the most lucrative markets within the developing countries of the world. On a global perspective as well, healthcare industry is one of the fastest growing segments clocking a turnover of US$ 5.5 trillion in 2010.

Growth drivers:

The main drivers of growth for the Indian healthcare industry are considered as follows:

  • Second highest growing economy in the world
  • Changing demographic profile
  • Increasing disposable income
  • Higher incidence of Non-infectious Chronic Diseases (NCD)
  • New investment avenues
  • A large talent pool
  • Cost-effective human resource

Besides above, other growth drivers are as follows:

  • Increased penetration of pharmaceuticals in the rural markets
  • Increased export potential for low cost and high quality generic pharmaceuticals, as a large number of patents are going to expire in the next 5 years
  • Emergence of various health cities and also single specialty clinics offering quality healthcare
  • Health insurance portability is expected to increase the penetration of insurance, improve quality of service and raise competition among insurers to retain customers
  • Telemedicine: E-healthcare in rural areas is gaining popularity with the involvement of both
    public and private players like, ISRO, Mazumdar Shaw Cancer Center and Narayana Hrudayalaya. Some telecom companies like, Nokia and BlackBerry are also contemplating to extend the use of mobile phones for remote disease monitoring as well as diagnostic and treatment support. Introduction of 3G and in the near future 4G telecom services will
    further enhance opportunities of e-healthcare through mobile phones, expanding the field of healthcare.

Promising sectors:

Within the healthcare industry, the most promising sectors are:

  • Pharmaceuticals
  • Hospitals and Nursing Homes
  • Medical equipment
  • Pathological labs and other diagnostic service providers

According to the Investment Commission of India, the healthcare sector of the country has registered a robust CAGR of over 12 percent during the last four years and the trend is expected to be ascending further.

Quite in tandem, other important areas of the healthcare sector, besides pharmaceuticals, have also recorded impressive performance as follows:

Areas Growth %
Hospitals/Nursing Homes 20
Medical Equipment 15
Clinical Lab Diagnostics 30
Imaging Diagnostics 30
Other Services (includes Training & Education; Aesthetics & Weight loss; Retail Pharmacy, etc.) 40

                                                                                                                            Government initiatives:

On its part, the Indian government is also in the process of giving a thrust to the healthcare sector as a whole by:

  • Increasing public expenditure on healthcare from 1 percent to 2.5 percent of GDP in the 12th Five Year Plan Period
  • Encouraging public-private partnerships (PPP) in hospital infrastructure and R&D
  • Encouraging medical tourism
  • Attracting Indian and foreign players to invest in Tier-II and Tier-III cities with huge untapped market potential. For example:

-  Expansion of major healthcare players in tier-II and tier-III cities of India like, Apollo, Narayana Hrudayalaya, Max  Hospitals, Aravind Eye Hospitals and Fortis

- BCG Group will reportedly open shortly a multidisciplinary health mall that would provide a one-stop solution for all healthcare needs starting from doctors, hospitals, ayurvedic centers, pharmacies including insurance referral units at Palarivattom in Kochi, Kerala.

BCG’s long-term plan, as reported in the media, is to set up a health village spanning across an area of a 750,000 sq. ft. with an estimated cost of US$ 88.91 million. Along the same line, to set up more facilities for diagnostic services in India, GE Healthcare reportedly has planned to invest US$ 50 million for this purpose

  •  Introduction of the ‘National Commission for Human Resources for Health Bill 2011( NCHRH Bill 2011)’, which will bring all independent bodies like the Medical Council of India (MCI), the Dental Council of India (DCI), the Pharmacy Council of India (PCI) and the Nursing Council of India (NCI) under a centralized authority for a more cohesive action.

Attracting FDI:

According to the Department of Industrial Policy & Promotion (DIPP), the healthcare sector is undergoing significant transformation and attracting investments not only from within the country but also from overseas.

The Cumulative FDI inflow in the healthcare sector from April 2000 to October 2012, as per DIPP publications, is as follows:

Sector FDI   inflow (US$ million)
Hospital and diagnostic centers 1482.86
Medical and surgical appliances   571.91
Drugs and pharmaceuticals  9775.03

(Source: Fact Sheet on FDI – April 2000 to October 2012, DIPP)

Job creation:

The trend of new job creation in the healthcare sector of India is also quite encouraging, as supported by the following facts:

The Healthcare sector in India recorded a maximum post-recession recruitment to a total employee base of 36, 21,177 with a new job creation of 2, 73, 571, according to ‘Ma Foi Employment Trends Survey 2012’.

  •  Despite slowdown in other industries, in the healthcare sector the new job creation continues at a faster pace.
  • With many new hospital beds added and increasing access to primary, secondary and tertiary / specialty healthcare, among others, the ascending trend in job creation is expected to continue in the healthcare sectors of India in the years ahead.

A Strategy Prescribed:

Though the report of the High Level Expert Group (HLEG) on the ‘Universal Health Coverage (UHC)’ is already in place, without going into the implementability issues of the report in this article, I would like to propose a ten pronged approach towards a new healthcare reform process to achieve the national healthcare objectives:

1. The government should focus on its role as provider of preventive and primary healthcare to all, through public hospitals, dispensaries and PHCs, including free distribution of essential medicines.

2. In tandem, the government should play the role of enabler to create Public-Private partnership (PPP) projects for secondary and tertiary healthcare services at the state and district levels with appropriate fiscal and other incentives.

3. PPP also may be extended to create a robust health insurance infrastructure urgently.

4. The insurance companies will be empowered to negotiate with concerned doctors, hospitals and other organizations, all fees payable by the patients to doctors, hospitals, for diagnostic services etc., including cost of medicines for both inpatients and outpatients treatment, with the sole objective to ensure access to affordable high quality healthcare to all.

5. Create an independent regulatory body for healthcare services to regulate and monitor the operations of both public and private healthcare providers/institutions, including the health insurance sector.

6. Levy a ‘healthcare cess’ to all, for effective implementation of this new healthcare reform process.

7. Effectively manage the corpus thus generated to achieve the healthcare objectives of the nation through the Healthcare Services Regulatory Authority (HSRA).

8. Make HSRS accountable for ensuring access to affordable high quality healthcare to the entire population of the country together with a grievance redressal mechanism.

9. Make HSRS accountable, its operation transparent to the civil society through HSRS website and cost-neutral to the government, through innovative pricing model based on economic status of an individual.

10. Allow independent private healthcare providers to make reasonable profit out of the investments made by them

Conclusion:

All the ten steps prescribed as above, will help ensure a holistic approach to healthcare needs of India and reduce prevailing socioeconomic inequalities within the healthcare delivery systems of the country.

Rapidly growing urban centric five-star private healthcare initiatives are welcome but these are now just catering to the privileged few, perpetuating the pressing healthcare issues unanswered.

Only a well-orchestrated, comprehensive, time-bound and holistic approach is capable of addressing the humongous healthcare needs of India and at the same time providing much required growth momentum to the Indian healthcare industry, positioning India as one of the most lucrative healthcare hubs within the emerging economies of the world.

By: Tapan J Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

Hysteria on Corporate Lobbying in India

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The ‘hysteria’ on ‘Corporate Lobbying’ influencing the key policy decisions of India, reverberated in the corridors of power of the Indian Parliament last week with consequent media attraction and triggering a raging public debate.

On Monday, December 10, 2012 the Upper House of the Indian Parliament reportedly expressed itshuge concern over a lobbying disclosure in the United States related to a contentious government policy decision India.

Taking part in the debate a distinguished Member of the Parliament and an eminent lawyer Mr.Ravishankar Prasad reportedly articulated, “Lobbying is illegal in India and is a kind of bribe. If Wal-Mart has said that hundreds of crores of rupees were spent on India, then it is a kind of bribe.Government should tell who was given this bribe.”

Responding to the opposition demand on this subject, the Government has already ordered a judicial probe on this allegation.

Corporate Lobbying:

The term ‘Lobbying’ has been defined  as “a form of advocacy with the intention of influencing decisions made by the government by individuals or more usually by Lobby groups; it includes all attempts to influence legislators and officials, whether by other legislators, constituents, or organized groups”.

April 21, 2012 edition of ‘The Economist’ in an article titled. “The Chamber of Secrets - The biggest business lobby in the United States is more influential than ever”, reported that ‘Americas first chamber of commerce was founded in Charleston in 1773.

Many a times the key issues of corruption, morality and ethics are being used with ‘lobbying’ activity. However, following two different perceptions remain generally associated with this terminology:

  • Corporates or people with mighty socioeconomic power, by themselves or through their industry bodies, corrupt the laws to serve a self-serving agenda by bending or deflecting them away from general fairness to majority of the population. 
  • It gives an opportunity to defend minority interest against corruption and tyranny of the majority.

An article published in the ‘The Washington Post’ on August 14, 2011 argued that “Blame for financial mess starts with the corporate lobby” in America.

In a recent book titled, “Time to Start Thinking – America and the Specter of Decline”, the author described how the big money in America has almost completely bought over the political process along with a pen picture of the organized lobbying group continuing to wield their mighty power despite reported ban of this activity in the ‘White House’ by President Barrack Obama.

Lobbying is legal in many countries:

It is worth mentioning that lobbying is a legal activity in many countries, such as, the United States of America, Europe and Canada. In the US, many Indian companies, including the government of India have been lobbying since so many years to present their cases and argument with the American law and policy makers.

When President Obama came to power in the US, it was reported: ‘one of the first acts of the Obama administration in office was to have an executive order which prohibited the Obama Administration either from hiring lobbyists – those who had lobbied within two years of joining the administration or allowing people who had left the Obama administration to service lobbyists for two years. The idea is that you want to break the chains where there is undue influence of special interest groups upon the government’.

‘Disclosure’ required in the US:

In the US, lobbying being recognized as a legitimate business activity, the companies are required to inform all such activities through quarterly disclosure reports to the US Senate.

In America, in 2012 alone and only in Washington DC there were  reportedly 12,016 active registered lobbyists, who spent a whopping US$ 2.45 Billion for lobbying activities . Similarly, as per publishedreports, there are currently an estimated 15,000 individual lobbyists and 2,500 lobbyist organizations in Brussels to seek favorable business decisions through the legislative process of the European Union.

It has been reported that in the U.S. lobbying is a huge and established industry. This is quite contrary to Indian situation, where lobbying has not been legalized and the activity, going by general perception, ‘smacks of illegal gratification and is ravished by corruption scandals like 2G scams”.

 Indian corporates also lobby in the US:

Records with the US House of Representatives reportedly show that around 27 Indian companies have spent money on lobbying in the US. Some examples are as follows:

  • Reliance Industries (RIL): Unspecified issue
  • Tata Sons:
  • Ranbaxy Lab,
  • The National Association of Software and Service Companies (Nasscom )
  • Wipro
  • Gems and Jewellery Export Promotion Council, among others.

 Some sensational recent reports:

Following are some sensational recent reports on Corporate Lobbying:

The ‘Pharma Letter’ in its in its March 29, 2012 edition reported that “New research reveals that the pharmaceutical industry lobby is spending more than 40 million Euros (US$ 53.5 million) annually to influence decision making in European Union.”

Back home ‘Live Mint  (The wall Street Journal)’ reported on October 6, 2011 as follows:

“Wal-Mart has disclosed earlier, “discussion related to India FDI (Foreign Direct Investment)” as one of the issues in its lobbying with the US lawmakers in the first two quarters of 2011, during which it spent nearly US$ 4 million on various lobbying activities.”

On December 13, 2012, ‘The Telegraph‘ reported that in a recent regulatory disclosure in the United States, Walmart has stated that it spent US$ 25 million in the last four years on lobbying for, among other its hopes for “enhanced market access for investment in India”.

Not legalized in India:

As stated above, though Lobbying is considered a legal business activity in many countries, in India it is still not considered as a legally and recognized business activity. However, many industrial sectors have formed their respective associations primarily for lobbying with the government, which is generally termed as ‘advocacy’.

A recent article published in the India Law Journal titled, ‘Corporate Lobbying and Corruption-Manipulating Capital’ articulates that “lobbying is the preferred means for exerting political influence in developed countries and corruption the preferred one in developing countries. However, lobbying and corruption are symbiotic in nature as both are ways of obtaining help from the public sector in exchange for favors.”

The article further states that corporate lobbying or advocacy has expanded in India mostly as intensive briefings and presentations to the ministers and senior bureaucrats, though it is not yet recognized in a statutory or non-statutory form in the country.

Thus, right from the debate on Bofors Guns to the telephone tapes of high profile lobbyist Niira Radia related to 2G telecom scam and then Tatra trucks scam of the Indian Army and now on Walmart debate in the Parliament, one gets a clear feel that corporate lobbying falls in a grey zone under the Indian law.

Difference between ‘Lobbying’ and ‘Advocacy’:

According to the article titled, ‘Lobbying and Advocacy—Similarities and Differences, published by Charity Lobbying for the Public Interest’, when nonprofit organizations advocate on their own behalf, they seek to positively affect majority of the society, whereas lobbying refers specifically to advocacy efforts that attempt to influence policy or legislation of a country by interested groups, irrespective of its best outcome to the society.

More debate:

In a very recent reported debate published on December 15, 2012 titled, “Is lobbying an acceptable business practice? “, one distinguished professional said, ‘While lobbying can be considered routine, the response to it should not be, as it can be deeply harmful to our country’.

In the same debate, another equally distinguished person commented, ‘Lobbying may be a legitimate activity subject to strict regulatory oversight in the US. But in India, it a sophisticated alibi for the more brazen bribe-giving, what with cash still ruling the roost with its subterranean links lubricating all sections of the economy.”

More controversy:

Not so very long ago, some consumer activists from the civil society vehemently protested against the ‘Intellectual Property Conferences’ held in India, which were allegedly sponsored by some interested groups in a guise to influence the policy makers and the judiciary of India.

It was widely reported that the consumer activists viewed these IP summits, organized by the George Washington University Law School of USA as ‘attempts to influence sitting judges on patent law enforcement issues that are pending in Indian courts.’

In a letter dated February 26, 2010 addressed to Shri Anand Sharma, Minister of Commerce and Industry of India, over 20 NGOs demanded transparency and more information on such meetings and wanted the government of India ‘to put a stop to such industry sponsored lobbying with Indian judges and policymakers to promote their own requirements for intellectual property and to lobby for either law amendments or even to plead their cases currently pending before, various courts and the Indian Patent Office.”

In raising their concerns, the civil society groups argued that the posture adopted by the lobbyists and their supporters is to “force India to adopt greater standards” of IP protection “beyond the mandatory levels” required by the WTO, which may ‘go against public health interest of India’.

 The need for a middle path:

 In the current volatile scenario, it is quite reasonable to expect that lobbying activities in India, especially after the current uproar in the Parliament, may come under greater scrutiny both by the media and the government. The intervention of the courts against ‘Public Interest Litigation  (PIL)’ cannot also be ruled out.

However, it is also believed by many that long-term interest of India is expected to ultimately prevail in this closely watched raging debate with the acceptance of a middle path.

A strong argument in favor of lobbying/advocacy:

As stated above, there is also a strong argument in support of lobbying or advocacy, based on the following grounds:

  • In a democratic country like India, people from across the spectrum, including the industries and its associations, should have the right to convey their views to policy makers.
  • Lobbying should be regarded as a “fundamental basis to express a point of view”, industry included.
  • Trying to influence the government is a natural process by all, including the civil society, other stakeholders and the industry alike.

 Regulating lobbying activities – An option:

Considering the fast changing environment and arising out of some recent very sensational lobbying related financial/policy scams in India, as mentioned above, the moot question, as is being raised by many across the country is: “Should the government regulate lobbying activities in the country with appropriate regulations?”

Surrogate lobbying:

The instances of ‘surrogate lobbying’ by the industries with funds coming from various parts of the world are also being raised by the civil society, media and recently by the Government. The contentious issue became the subject of a heated debate related to ‘Kudankulam Nuclear Power Plant’ in Tamil Nadu.

In February 2012, Prime Minister Manmohan Singh’s reportedly charged that foreign NGOs for stoking protests with foreign funds at the ‘Kudankulam Nuclear power Plant’ for vested interests and ordered further investigation by the Ministry of Home Affairs to track the trails of funds.

As a result of all these developments, the Government is reportedly becoming increasingly more vigilant against direct or indirect ‘foreign hand’ through surrogate lobbying in the policy related issues of the country, against majority interest of the society. The ‘Walmart saga’ is a case in point, at this stage.

Industry observers have opined, probably many other forms of surrogate lobbying are currently operational in India, which needs to be thoroughly probed and in case of any illegal activity, the perpetrators must be brought to justice, sooner than later, whether it is related to ‘Kundamkulam Nuclear Power Plant’ or any other .

Examples of political fall-out of lobbying activities:

On June 1, 2012, FiercePharma  reported as follows:

“The cat is out of the bag so to speak with the disclosure of memos today detailing the level of drug industry support for passage of President Obama’s prized healthcare reform”

It continued to state, “Big Pharma came around to support the original bill, trading about $80 billion in additional taxes and some price rebates to federal programs for an expanded pool of insured.”

Back home in India, The Outlook Magazine reported on June 6, 2010 on the political fall-out of lobbying related to 2G telecom spectrum allocation scam in India as follows:

“Since Outlook  published extracts from the CD of Radia’s phone conversations (submitted to the court) taped by the I-T department and put the 140 conversations up on its website, there has been a raging debate on what they tell us about the role of lobbyists in the 2G spectrum allocation scam, how the media interplays in such a system, and how our political class and retired bureaucrats are more often than not willing partners in the game.”

“These debates do not detract from the aim of punishing the guilty behind the 2G scam; rather they raise disturbing questions we all have to answer. Who is this woman who can speak to the “highest and mightiest” in this country in this way? From where does she draw her power? And what does it tell us about our society? When ‘Outlook’ asked her, whether she would like to give her version of these recent events, Radia SMSed back: “No. Thank You.” This is her story..”

Conclusion:

Despite a long history of regulated and legalized lobbying in the US, there are still severe criticisms even in that country about the way lobbying activities have worked there in the past so many decades. India has plenty to learn from such experiences.

In the prevailing situation within India many experts often question, whether the economic/ other critical policy decisions of the country are mostly based on what the local population would require or depend on the money power of vested interests or business houses within and outside the country to influence such decisions.

To eliminate any possibility of illegal gratification, directly or indirectly or in any other manner or form, the process of lobbying or advocacy should be made absolutely transparent for all through appropriate rules and regulations, legally acceptable lobbyists and an appropriate disclosure mechanism for all such related expenses, just as exists in the United States of America.

In absence of these transparent and robust measures, lobbying or advocacy will continue to be perceived not just as an illegitimate activity, but also an ignoble and dubious profession in the eyes of majority living in India.

The fantastic vocabulary of ‘Good Governance’ should not be used just for others to practice. It is a time to ‘walk the talk’ for all stakeholders, including the government to douse histrionics of various kinds like, what happened last week on ‘Corporate Lobbying in India’.

By: Tapan J Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

A NEW Study on Ballooning Pharma R&D Cost: Exploring a Sustainable Model for Greater Patients’ Access

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The high-decibel debate on increasing prices for patented drugs affecting patients’ access to innovative medicines gets a new fuel. A brand new study dated December 2012 carried out by the Office of Health Economics (OHE), UK, which was partly supported by a grant from AstraZeneca, estimated that the cost of developing new medicine has risen by ten times from US$100 million in the 1970s to as high as US$ 1.9 billion in 2011.

The study identifies the following key reasons for a galloping increase in the cost of research and development:

  • Inflation-adjusted investments
  • Sharp increase in the rate of failure
  • Stringent regulatory demands together with scientific complexity
  • Longer time for clinical development
  • Significant increase in the cost of capital

 Another recent study goes even beyond:

Many experts have gone even further on this subject, arguing that pharmaceutical R&D expenses are over stated and the real cost is much less.

An article titled “Demythologizing the high costs of pharmaceutical research”, published by the London School of Economics and Political Science in 2011 indicates that the total cost from the discovery and development stages of a new drug to its market launch was around US$ 802 million in the year 2000. This was worked out in 2003 by the ‘Tuft Center for the Study of Drug Development’ in Boston, USA.

However, in 2006 the same figure increased by 64 per cent to US$ 1.32 billion, as reported by a pharmaceutical industry association. Maintaining similar trend, if one assumes that the R&D cost will increase by another 64 per cent by 2012, the cost to bring a new drug to the market through its discovery and development stages will be around US $2.16 billion. This will mean a 2.7 times increase from its year 2000 estimate, the article articulates.

The important caveat:

The authors also mentioned that the following factors were not considered while working out the 2006 figure of US$ 1.32 billion:

  •  The tax exemptions that the companies avail for investing in R&D.
  • Tax write-offs amount to taxpayers’ contributing almost 40% of the R&D cost.
  • The cost of basic research (should not have been included), as these are mostly done in public funded universities or laboratories.

The article commented that ‘half the R&D costs are inflated estimates of profits that companies could have made if they had invested in the stock market instead of R&D and include exaggerated expenses on clinical trials’.

The authors alleged that “Pharmaceutical companies have a strong vested interest in maximizing figures for R&D as high research and development costs have been the industry’s excuse for charging high prices. It has also helped generating political capital worth billions in tax concessions and price protection in the form of increasing patent terms and extending data exclusivity.”

The study concludes by highlighting that “the real R&D cost for a drug borne by a pharmaceutical company is probably about US$ 60 million.”

 A positive side of the story:

The book  titled “Pharmaceutical R&D: Costs, Risks, and Rewards”, published by the government of USA states that the three most important components of R&D investment are:

  • Money
  • Time
  • Risk

Money is just one component of investment, along with a long duration of time, to reap benefits of success intertwined with a very high risk of failure. The investors in the pharmaceutical R&D projects not only take into account how much investment is required for the project against expected financial returns, but also the timing of inflow and outflow of fund with associated risks.  It is thus quite understandable that longer is the wait for the investors to get their return, greater will be their expectations for the same.

This publication also highlights that the cost of bringing a new drug from ‘mind to market’ depends on quality and sophistication of science and technology involved in a particular R&D process together with associated investment requirements for the same. In addition, regulatory demand to get marketing approval of a complex molecule for various serious disease types are also getting more and more stringent, significantly increasing their cost of clinical development simultaneously. All these factors when taken together make the cost of R&D not only very high, but unpredictable too.

Thus to summarize from the above study, high pharmaceutical R&D costs involve:

  •  Sophisticated science and technology dependent high up-front financial investments
  • A long and indefinite period of negative cash flow
  • High tangible and intangible costs for acquiring technology with rapid trend of obsolescence
  • High risk of failure at any stage of product development

 The ground reality: R&D productivity is going south

 That pharmaceutical R&D productivity is fast declining has been vindicated by ‘2011 Pharmaceutical R&D Factbook’ complied by Thomson Reuters, the key highlights of which are as follows:

  •  21 new molecular entities (NMEs) were launched in the global market in 2010, which is a decrease from 26 NMEs of the previous year.
  • 2010 saw the lowest number of NMEs launched by major Pharma players in the last 10 years
  • The number of drugs entering Phase I and Phase II clinical trials fell 47% and 53% respectively during the year.

 According to findings of the latest review of ‘Pharmaceutical R&D returns performance’ by Deloitte and Thomson Reuters of December 2012, the R&D Internal Rate of Return (IRR) of leading pharmaceutical companies has fallen for a second successive year to 7.2 percent in 2012 from 7.7 percent in 2011.

High cost of failure:

By challenging the status quo, Andrew Witty, the global CEO of GlaxoSmithKline (GSK) in his speech  in Mumbai on September 27, 2011 to the members of the Indian pharmaceutical industry commented that the cost of over a billion dollar to bring a new molecule to the market through its discovery and development stages is “unacceptable.” He attributed such high R&D expenses to the ‘cost of failure’ by the industry.

Witty said, “High in-house failure rates are slowing progress on pricing affordability… We need to fail less and deliver more”.

He commented during his deliberation that success in reducing the R&D cost to make innovative drugs more affordable to the patients of all income levels, across the globe, will be the way forward in the years ahead.

 Conventional thinking and an unsustainable model:

Research scientists have already articulated that sharp focus in the following areas may help containing the R&D expenditure to a great extent and the savings thus made, in turn, can fund a larger number of R&D projects:

  •  Early stage identification of unviable new molecules and jettisoning them quickly
  • Newer cost efficient R&D models, like one implemented by GSK
  • Significant reduction in drug development time. 

Unfortunately, sustainability of the above model still remains a wishful thinking and a question mark to many for various other reasons.

 Exploring a seemingly ‘Sustainable Model’:

Should Pharmaceutical R&D move from the traditional models to a much less charted frontier?

Perhaps towards this direction, in November, 2010 a report of Frost & Sullivan titled, “Open Source Innovation Increasingly Being Used to Promote Innovation in the Drug Discovery Process and Boost Bottom-line”, underscored the urgent need of the global pharmaceutical companies to respond to the challenges of high cost and low productivity in their respective Research and Development initiatives, in general.

‘Open Innovation’ model, they proposed, will be most appropriate in the current scenario to improve not only profit, but also to promote more innovative approaches in the drug discovery process.  Currently, on an average it takes about 8 to 10 years to bring an NCE/NME to market with a cost of around U.S$ 1.9 billion.

The concept of ‘Open Innovation’ is being quite successfully used by the Information Technology (IT) industry since nearly three decades all over the world, including India.  Web Technology, the Linux Operating System (OS) and even the modern day ‘Android’ – the open source mobile OS, are excellent examples of commercially successful ‘Open innovation’ in IT.

In the sphere of Biotechnology Human Genome Sequencing is another remarkable outcome of such type of R&D model.

On May 12, 2011, in an International Seminar held in New Delhi, the former President of India Dr. A.P.J. Abdul Kalam commented, “Open Source Drug Discovery (OSDD) explores new models of drug discovery”. He highlighted the need for the scientists, researchers and academics to get effectively engaged in ‘open source philosophy’ by pooling talent, patents, knowledge and resources for specific R&D initiatives from across the world. In today’s world ‘Open Innovation’ in the pharmaceutical R&D has a global relevance, especially, for the developing world of many ‘have-nots’.

 ‘Open Innovation’:

As the name suggest, ‘Open Innovation’ or the ‘Open Source Drug Discovery (OSDD)’ is an open source code model of discovering a New Chemical Entity (NCE) or a New Molecular Entity (NME). In this model all data generated related to the discovery research will be available in the open for collaborative inputs. The licensing arrangement of OSDD where both invention and copyrights will be involved, will be quite different from any ‘Open Source’ license for a software development.

In ‘Open Innovation’, the key component is the supportive pathway of its information network, which is driven by three key parameters of:

  •  Open development
  • Open access
  • Open source

As stated earlier, ‘Open Innovation’ concept was successfully used in the ‘Human Genome Project’ where a large number of scientists, and microbiologists participated from across the world to sequence and understand the human genes. However, this innovation process was first used to understand the mechanics of proteins by the experts of the biotech and pharmaceutical industries.

Making innovative drugs affordable through ‘Open Innovation’:

The key objective of ‘Open Innovation’ in pharmaceuticals is to encourage drug discovery initiatives at a reasonably cheaper price, especially for Non-infectious Chronic Diseases (NCD) or the dreaded ailments like Cancer, Parkinson’s, Alzheimer, Multiple Sclerosis etc. and also many neglected diseases of the developing countries, to make innovative drugs affordable even to the marginalized people of the world.  

 Multiple benefits:

According to the above report of Frost & Sullivan on the subject, the key benefits of ‘Open Innovation’ in pharmaceuticals will include:

  •  Bringing together the best available minds to tackle “extremely challenging” diseases
  • Speed of innovation
  • Risk-sharing
  • Affordability

 The key barrier: Shared IPR

Industry observers feel that the key barrier to ‘Open Innovation’ is that IPR needs to be shared. Hence, large innovator companies, by and large, have not evinced much commercial interest in this initiative as yet. Other issues for ‘Open Innovation’ model are:

  •  Who will fund the project and how much?
  • Who will lead the project?
  • Who will coordinate the project and find talents?
  • Who will take it through clinical development and regulatory approval process?

However, the experts feel that all these do not seem to be an insurmountable problem at all, as the saying goes, ‘where there is a will, there is a way’.

 The Global initiatives on ‘Open Innovation’:

  •  In June 2008, GlaxoSmithKline announced that it was donating an important slice of its research on cancer cells to the cancer research community to boost the collaborative battle against this disease. With this announcement, genomic profiling data for over 300 sets of cancer cell lines was released by GSK to the National Cancer Institute’s bioinformatics grid. It has been reported that over 900 researchers actively contribute to this grid from across the industry, research institutes, academia and NGOs. Many believe that this initiative will further gain momentum to encourage many more academic institutions, researchers and even smaller companies to add speed to the drug discovery pathways and at the same time make the NCE/NME coming through such process much less expensive and affordable to a large section of the society, across the globe.
  •  The Alzheimer Disease Neuroimaging Initiative (ADNI) is another example of a Private Public Partnership (PPP) project with an objective ‘to define the rate of progress of mild cognitive impairment and Alzheimer’s disease, develop improved methods for clinical trials in this area and provide a large database which will improve design of treatment trials’.   
  •  Recently announced ‘Open invitation’ strategy of GlaxoSmithKline (GSK) to discover innovative drugs for malaria is yet another example where GSK has collaborated with European Bioinformatics Institute and U.S. National Library of Medicine to make the details of the molecule available to the researchers free of cost with an initial investment of US$ 8 million to set up the research facility in Spain involving around 60 scientists from across the world to work in this facility. 

 Indian initiative:

In India, Dr. Samir Brahmachari, the Director General of the Council of Scientific and Industrial Research (CSIR) is the champion of the OSDD movement. CSIR believes that for a developing country like India OSDD will help the common people to meet their unmet medical needs in the areas of neglected tropical diseases.

‘Open Innovation’ project of CSIR is a now a global platform to address the neglected tropical diseases like, tuberculosis, malaria, leishmaniasis by the best research brains of the world working together for a common cause.

To fund this initiative of the CSIR the Government of India has allocated around U.S$ 40 million and an equivalent amount of funding would be raised from international agencies and philanthropists.

 Conclusion:

Currently pharmaceutical R&D is an in-house initiative of innovator global companies. Mainly for commercial security reasons, only limited number of scientists working for the respective innovator companies will have access to the projects.

‘Open Innovation’ on the other hand, is believed to have the potential to create a win-win situation, bringing in substantial benefits to both the pharmaceutical innovators and the patients.

According to available reports, the key advantage of the ‘Open Innovation’ model will be substantial reduction in the costs and time of R&D projects, which could be achieved through voluntary participation of a large number of Researchers/Scientists/Institutions in key R&D initiatives. This in turn will significantly reduce ‘mind-to-market’ time of more affordable New Chemical/Molecular Entities in various disease areas making innovative medicines affordable to all.

Thus, many experts argue, high prices of new patented drugs, giving rise to low access to majority of patients, at least, in the developing world, should by and large be attributed to high R&D cost. They feel, such ballooning increase in research and development expenditures is commercially unsustainable even in the medium term.

Many thought leaders now believe, despite hard commercial consideration related to IPR, which perhaps has to be amicably sorted out willy-nilly in the long run, ‘Open Innovation’ concept could well be an important commercial model for tomorrow’s global R&D initiatives. This sustainable model would possibly address the issue of improving access to innovative affordable Medicines to a larger number of patients of the world, meeting their unmet medical needs, more effectively and with greater care.

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 and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

Revocation and Denial of Patents on Patentability Ground in India: The Fallout and the Road Ahead

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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. Interestingly Pegasys was granted patent protection across the world.

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 the Patents Act of India.

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), which was 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.

A twist and turn:

However, on November 26, 2012 in a new twist to this case, the Supreme Court of India reportedlyrestored the patent for Sutent. Interestingly, at the same time the court removed the restraining order, which prevented Cipla from launching a copy-cat generic equivalent of Sunitinib.

The key reason:

All these are happening, as the amended Patents Act 2005 of India includes special protections for both patients and generic manufacturers by barring product patents involving ‘incremental’ changes to existing drugs. This practice is called “evergreening” by many.

It is worth noting, such ‘incremental innovations’ qualify for the grant of patents across the world including, Europe, Japan and the USA and that reason prompted initiation of a raging debate throwing strong arguments both in favor and against of this issue, though the subject conforms to the law of the land.

‘Incremental innovation’ still a contentious issue in India:

As on today in the Indian Patents Act 2005, there is virtually no protection for ‘incremental innovation’, as the section 3(d) of the statute states 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.”

The apprehension:

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

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

Is it ‘MNC Interest’ versus ‘Indian Interest’ issue?

Many domestic stakeholders reportedly are looking at this particular subject as  ‘MNC Interest’ versus ‘Indian Interest’ in the realm of intellectual Property Rights (IPR). While others holding opposite view-points counter it by saying, this is a narrow and unfair perspective to address the much broader issue of fostering innovation within the Indian pharmaceutical industry helping capacity building, attracting talent and investments, while creating an IPR friendly ecosystem for the country in tandem.

Incidentally many MNCs, as reported by a section of the media, have demonstrated proven long-standing commitment to India, as they have been operating in the country with impeccable repute for a much longer period than most of the domestic pharmaceutical players, if not all, spanning across all scale and size of operations.

Are the patent challenges under section 3(d) being used as a ‘business strategy’?

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.

This game seems to have just begun and may probably assume unhealthy dimension, if not openly debated and appropriate remedial actions are taken, as will deem necessary by the law makers keeping in view the long term, both global and local, implications of the same.

The beginning of the dispute:

As we know, way back in 2006 IPO refused to grant patent to the cancer drug Glivec of Novartis on the ground that the molecule is a mere modification of an existing substance known as imatinib. However, Novartis challenged the decision in the Supreme Court of India and in September, 2012, the final arguments in the Glivec case commenced. The matter is now sub judice.

Experts have opined that this interesting development has put Section 3(d) of the Indian Patents Act 2005 to an ‘Acid Test’ and the final verdict of the apex court will have the last say on the interpretation of this much talked about section of the statute.

Industry observers from both schools of thought – pro and against, are now waiting eagerly for the final outcome of this long standing dispute with bated breath, as it were.

Differing view points on impact:

Though the domestic stakeholders, including the local pharmaceutical industry, by and large, have expressed satisfaction with the law having taken its own course, the adversely affected companies articulated their strong disappointments with the developments. These companies argue, since valid patents were granted across the world for all these products, they had deployed significant financial and other resources starting from the regulatory approval process to market launch of such products in India with reasonable confidence.

Now with the such revocation and denial of patents, the concerned companies feel that  they will have to suffer significant financial losses besides high ‘Opportunity Costs’ for these molecules in India.

Interestingly, neutral observers have reportedly opined that this contentious issue, if not addressed appropriately and sooner by the government keeping in view the global business climate, will ultimately leave a lasting negative impression on the global community regarding the quality of IP ecosystem and investment climate in India, which consequently could lead to far reaching economic consequences extending even beyond the pharmaceutical industry of the country.

However, most of the local stakeholders advocate that there is no need to have a relook at it, in any way.

Opposition from the domestic industry:

It has been reported that a detailed study commissioned by the ‘Indian Pharmaceutical Alliance (IPA)’ and authored by Mr. T. C. James, Director, National Intellectual Property Organization, and a former bureaucrat in the ‘Department of Industrial Policy and Promotion (DIPP)’, articulated as follows:

“There is no clinching evidence to show that without a strong patent protection regime innovations cannot occur, that minor incremental innovations in the pharmaceutical sector do not require patent protection and that Section 3(d) of the Patents Act is not a bar for patenting of significant incremental innovations.”

In his report Mr. James also criticized large ‘Multinational Companies (MNCs)’ for “exploring strategies to extend their hold on the market, including through obtaining patents on minor improvements of existing drugs.”

The author continues to argue in favor of the section 3(d) the as follows:

  • It will be incorrect to conclude that Section 3 (d) is not compatible with TRIPS Agreement.
  • It has stood the test of time and does not introduce any unreasonable restrictions on patenting.
  • It is a major public health safeguard as it blocks extension of patent period through additional patents on insignificant improvements paving the way for introduction of generics on expiry of the original patent.
  • Pharma companies need to be given incentives for undertaking more research and development, but removing section 3(d) will be counterproductive.
  • A good marketing strategy for the companies would be to concentrate on R & D in diseases which are endemic to countries like Brazil, China and India which are fast emerging as major economies.

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 indeed be a nightmarish situation for innovators of all caste, creed and colors, irrespective of national or multinational background.

Recapitulation of ‘Revised Mashelkar Committee Report’:

In August 2009, the Government accepted the revised report of the ‘Mashelkar Committee’, which observed the following:

1. “It would not be TRIPS compliant to limit granting of patents for pharmaceutical substance to New Chemical Entities only, since it prima facie amounts to a statutory exclusion of a field of technology.”

2. “Innovative incremental improvements based on existing knowledge and existing products is a ‘norm’ rather than an ‘exception’ in the process of innovation. Entirely new chemical structures with new mechanisms of action are a rarity. Therefore, ‘incremental innovations’ involving new forms, analogs, etc. but which have significantly better safety and efficacy standards, need to be encouraged.”

Could it have an impact on FDI?

Keen observers of these developments have reportedly expressed that revocation of granted patents or denial of patents on patentability criteria for the molecules, which hold valid patents elsewhere in the world, is sending a very negative signal to the global community and vitiating, among others, the Foreign Direct Investment (FDI) climate in the country. However, many local experts interpret this observation as mere ‘posturing’ at the behest of the MNCs’ interest.

The point to ponder:

The innovator companies have been arguing since quite some time that innovation involving any New Chemical Entity (NCE) never stops just after its market launch. Scientists keep working on such known molecules to meet more unmet needs of the patients within the same therapeutic class.

They substantiate their argument by citing examples like, after the discovery of beta-blockers, incremental innovation on this drug continued. That is why, from non-cardio-selective beta-blockers like Propranolol, the world received cardio-selective beta-blockers like Atenolol, offering immense benefits and choices to the doctors for the well being of patients.

Thus, global innovators reiterate very often that such examples of high value ‘incremental innovation’ are important points to ponder in India.

Patent challenge is a legal process, but…:

The proponents of ‘no change required in the Section 3(d)’ argue with gusto that ‘Patent Challenge’ is a legal process and the law should be allowed to take its own course.

However, the opposition counter-argues that the main reason in favor of Section 3(d) being that the provision will prevent grant of frivolous patents and the ultimate fallout of which will result in limited access to these drugs due to high price, is rather difficult to accept. 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.

Conclusion:

The spirit of ‘public health interest’ and avoidance of frivolous patents behind Section 3(d) of the Indian Patents Act is indeed commendable.

However, exclusion of almost all kinds of ‘incremental innovation’ for not meeting the very subjective and highly discretionary ‘efficacy’ criterion in the above section could prove to be counterproductive in the long run, even for the domestic players. The reason being, many such innovations will help enhancing safety, efficacy and compliance, besides other properties, of already existing molecules meeting various unmet needs of the patients.

Looking from a different perspective altogether, restrictive provisions in Section 3(d) could well go against the public health interest in the longer term, especially when the government is considering a mechanism of price negotiation for the patented drugs in India, as stated above.

Thus weighing pros and cons of both the arguments, in the finer balance of probability in terms of net gain to India as a nation, I reckon, appropriate legislative amendment in the section 3(d) of the Indian Patents Act 2005 will give a much required boost and incentive to pharmaceutical research and development in India.

This long overdue course-correction, if dealt with crafty win-win legal minds, will be able to protect not only high value “incremental innovations” of all innovators, global or local, in pursuit of significantly better and better drugs for the patients of India, but at the same time will effectively address the genuine apprehensions of ‘evergreening’ through frivolous patents.

…Or else should we wait till the final verdict of the Supreme Court comes on the Glivec case of Novartis?… Keeping my fingers crossed.

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 and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

The Conundrum of Stringent IPR Regime in India: Responsible Pricing still remains ‘The Final Frontier’

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In his management classic named, ‘The Practice of management’, published in 1954, the universal management guru Peter Drucker postulated that any successful business is driven by only the following two fundamental functions:

  • Marketing
  • Innovation

…and all the rests are costs. Drucker’s above postulation is as valid today as it has been in the past for so many decades. Cutting edge expertise in managing innovation, which may not necessarily mean the Intellectual Property Rights (IPR), and marketing the same better than competition will continue to remain the name of the game for business excellence, perhaps in all time to come, across the world and India is no exception. No doubt, for the same reason the current decade has been termed as ‘the decade of innovation’ by none other than the Prime Minister of India.

The innovators’ financial and non-financial claims on the fruits of value-adding creations following the prescribed inventive steps is epitomized in the IPR, which confers a legal protection to the innovator based on the relevant national IP Act of individual countries. Any successful innovation will give rise to meeting an unmet need with innovative products or services for doing things more efficiently and effectively than ever before.

Excellence in the financial performance of business organizations driven by innovation is expected to keep this wheel of progress moving with optimal speed in perpetuity. Thus, innovation must be encouraged through appropriate legal protection of IP, creating a win-win socioeconomic environment for a country.

Why protect patent? 

The pharmaceutical major Eli Lilly had very aptly summarized the reason for patent protection in their website called ‘LillyPad’, as follows:

“Pharmaceutical companies continue to invest in innovation not only because it is good for business, but it is what patients expect. If we want to continue to have breakthrough products, we need patent protection and incentives to invest in intellectual property.  The equation is simple, patents lead to innovation – which help lead to treatments and cures”.

Positive impact of an IPR regime:

In a paper  titled “Strengthening the Patent Regime: Benefits for Developing countries – A Survey”, published in the Journal of Intellectual Property Rights, the authors concluded that innovativeness of developing countries has now reached a stage where it is positively impacted by a robust Intellectual Property regime. The authors further stated that a robust patent ecosystem is among other important policy variables, which affect inflow of Foreign Direct Investments (FDI) in the developing nations.

Another paper titled, “The Impact of the International Patent system in the Developing Countries”, published by the ‘World Intellectual Property Organization (WIPO)’, though a bit dated of October 2003, states that a robust national patent system in developing countries contributes to their national socioeconomic development.  The paper also highlights the experience of some developing nations, which found usefulness of a strong patent system in creation of wealth for the nation.

IPR debate is not non product exclusivity: 

It is important to understand, though a raging debate is now all pervasive related to the level of IPR protection for drugs, across the world, there has not been many questions raised by most stakeholders on the exclusive rights on patents by the innovators. The center piece of the arguments and counter-arguments revolves predominantly around responsible pricing of such IPR protected medicines affecting patients’ access.

Need to go beyond IPR: 

Echoing similar sentiments in the Indian context the Global CEO of GSK commented in October 18, 2012 that while intellectual property protection is an important aspect of ensuring that innovation is rewarded, the period of exclusivity in a country should not determine the price of the product. Witty said, ‘At GSK we will continuously strive to defend intellectual property, but more importantly, defend tier pricing to make sure that we have appropriate pricing for the affordability of the country and that’s why, in my personal view, our business in India has been so successful for so long.’

Is this view shared by all in the global pharma industry? 

Not really. All in the global pharmaceutical industry does not necessarily seem to share the above views of Andrew Witty and believe that to meet the unmet needs of patients, the Intellectual Property Rights (IPR) of innovative products must be strongly protected by the governments of all countries putting in place a robust product patent regime and the pricing of such products should not come in the way at all.

The industry also argues that to recover high costs of R&D and manufacturing of such products together with making a modest profit, the innovator companies set a product price, which at times may be perceived as too high for the marginalized section of the society, where government intervention is required more than the innovator companies. Aggressive marketing activities, the industry considers, during the patent life of a product, are essential to gain market access for such drugs to the patients.

In support of the pharmaceutical industry the following argument was put forth in a recent article:

“The underlying goal of every single business is to make money. People single out pharmaceutical companies for making profits, but it’s important to remember that they also create products that save millions of lives.”

IPR, product price and patients’ access: 

In the paper titled ‘TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond’, published in ‘Chicago Journal for International Law, Vol. 3(1), Spring 2002’, the author argues, though the reasons for the lack of access to essential medicines are manifold, there are many instances where high prices of drugs deny access to needed treatments for many patients. Prohibitive drug prices, in those cases, were the outcome of monopoly due to strong intellectual property protection.

The author adds, “The attempts of Governments in developing countries to bring down the prices of patented medicines have come under heavy pressure from industrialized countries and the multinational pharmaceutical industry”.

While the ‘Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS)’ of the World Trade Organization (WTO) sets out minimum standards for the patent protection for pharmaceuticals, it also offers adequate safeguards against negative impact of patent protection or its abuse in terms of extraordinary and unjustifiable drug pricing. The levels of these safeguards vary from country to country based on the socioeconomic and political requirements of a nation. 

The Doha Declaration:

Many independent experts in this field consider the Doha Declaration as an important landmark for recognizing the primacy to public health interest over private intellectual property and the rights of the members of WTO to use safeguards as enumerated in TRIPS, effectively. To protect public health interest and extend access to innovative medicines to majority of their population whenever required, even many developed/OECD countries do not allow a total freehand for the patented products pricing in their respective countries. 

How much then to charge for an IPR protected drug? 

While there is no single or only right way to arrive at the price of an IPR protected medicine, how much the pharmaceutical manufacturers will charge for such drugs still remains an important, yet complex and difficult issue to resolve, both locally and globally.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce, after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals. The report also indicated that the reimbursement prices in these countries are often treated as de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market. 

An evolving rational system for responsible pricing of IPR protected drugs:

The values of health outcomes and pharmacoeconomics analysis are gaining increasing importance for drug price negotiations/control by the healthcare regulators even in various developed markets of the world to ensure responsible pricing of IPR protected medicines.

In countries like, Australia and within Europe in general, health outcomes data analysis is almost mandatory to establish effectiveness of a new drug over the existing ones.

Even in the US, where the reimbursement price is usually negotiated with non-government payors, many health insurers have now started recognizing the relevance of these data.

Such price negotiations at times take a long while and may also require other concessions by manufacturers, just for example:

  • In the UK, a specified level of profitability may constrain the manufacturers.
  • Spain would require a commitment of a sales target from the manufacturers, who are made responsible to compensate for any excess sales by paying directly to the government either the incremental profit or by reducing the product price proportionately. 

Metamorphosis in Pharmaceutical pricing models:
Pharmaceutical pricing mechanism is undergoing significant metamorphosis across the world. The old concept of pharmaceutical price being treated as almost given and usually determined only by the market forces with very less regulatory scrutiny is gradually but surely giving away to a new regime. Currently in many cases, the prices of patented medicines differ significantly from country to country across the globe, reflecting mainly the differences in their healthcare systems and delivery, along with income status and economic conditions.

Global pharmaceutical majors, like GSK and Merck (MSD) have already started following the differential pricing model, based primarily on the size of GDP and income status of the people of the respective countries. This strategy includes India, as well.

Reference pricing model is yet another such example, where the pricing framework of a pharmaceutical product will be established against the price of a reference drug in reference countries.

The reference drug may be of different types, for example:

  1. Another drug in the same therapeutic category
  2. A drug having the same clinical indications available in the country of interest e.g. Canada fixes the drug prices with reference to prices charged for the same drug in the US and some European Union countries. 

Responsible pricing in the changing paradigm:

Taking note of the above scenario, while looking at the big picture, the global pharmaceutical players, experts believe, should take note of the following factors while formulating their India-specific game plan to be successful in the country without worrying much about invocation of Compulsory License (CL) for not meeting ‘Reasonably Affordable Price’ criterion, as provided in the Patents Act of the country:

  • While respecting IPR and following Doha declaration, the government focus on ‘reasonably affordable drug prices’ will be even sharper due to increasing pressure from the Civil Society, Indian Parliament and also from the Courts of the country triggered by ‘Public Interest Litigations (PIL)’
  • India will continue to remain within the ‘modest-margin’ range for the pharmaceutical business with marketing excellence driven volume turnover.
  • Although innovation will continue to be encouraged with IPR protection, the amended Patents Act of India is ‘Public Health Interest’ oriented, including restrictions on patentability, which, based on early signals, many other countries are expected to follow as we move on.
  • This situation though very challenging for many innovator companies, is unlikely to change in the foreseeable future, even under pressure of various “Free Trade Agreements (FTA)”.  

Many global companies are still gung-ho about India:

Despite above scenario, many global companies like GSK are reportedly still quite gung-ho about India as evident in the following recent statement of their Global CEO, Andrew Witty:

“I am a huge bull on India and I have a very strong sense of optimism about the future potential of this country. Of course, there continues to be policy uncertainties in certain areas of government decision-making, particularly in pharma. While there are the areas under question, but the overall picture makes you feel positive about India.”

Late 2011, echoing similar sentiment the Global CEO of Sanofi and now the ‘President Elect’ of the European Pharmaceutical Association EFPIA commented as follows:

“I do not want us to be a colonial company with a colonial approach where we say we decide on the strategy and pricing. If you have to compete locally then the pricing strategy cannot be decided in Paris but will have to be in the marketplace. People here will decide on the pricing strategy and we have to develop a range of products for it.”

Recognition of national healthcare priorities:

It may be prudent to recognize and accept that a paradigm change is taking place, slowly but surely, in the way pharmaceutical businesses are conducted in India, where replication of any western business model could be counterproductive. The strategy has to be India specific, accepting the priorities of the countries. 

Be a part of the solution process:

To achieve excellence in the pharmaceutical market of India, there is a dire need for all stakeholders to join hands with the Government, without further delay, to contribute with their global knowledge, experience and expertise to help resolving the critical issues of the healthcare sector of the nation. This will help demonstrating that the global pharmaceutical industry is extending its hands to be a part of the healthcare solution process of India, like:

  • Creation and modernization of healthcare infrastructure leveraging IT
  • In the implementation of ‘Universal Health Coverage’ project
  • Reaching out to help formulate win-win regulatory policies
  • Help Creating employable skilled manpower
  • Ensure availability of reasonably affordable medicines for the common man through a robust government procurement and delivery system

Right attitude of all stakeholders to find a win-win solution for all such issues, instead of adhering to the age-old blame game in perpetuity, as it were, without conceding each others’ ground even by an inch, is of utmost importance at this hour.

In this rapidly changing scenario, the name of the game for all players of the industry, both global and local, I believe, is recognition of the changing socioeconomic environment and market dynamics of India, active engagement in its paradigm changing process and finally adaptation to the countries changing aspirations and priorities to create a win-win situation for all. 

Government should reach out:

It is high time for the Government of India, I reckon, to also reach out for reaping a rich harvest from the emerging lucrative opportunities, coming both from within and the outside world in the healthcare space of the country. Effective utilization of these opportunities, in turn, will help India to align itself with the key global healthcare need of providing reasonably affordable healthcare to all, despite a robust IPR protected regime across the world. 

Conclusion:

While encouraging innovation and protecting it with an effective IPR regime is 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 powerful growing middle class intelligentsia, as gradually getting unfolded in many parts of the globe.

At the same time, it should be recognized by all that there should be full respect, support and protection for innovation and the IPR system in the country. This is essential not only for the progress of the pharmaceutical industry, but also to alleviate sufferings of the ailing population of the country, effectively.

Having said that, 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. It is, therefore, now widely believed that pharmaceutical products, which play a pivotal role in keeping the population of any nation healthy and disease free to the extent possible, should not be exploited by anyone.

Pharmaceutical companies are often criticized in this area by those stakeholders who claim to be genuinely concerned with the well-being of particularly the underprivileged population across the world.

Some experts have already opined that prices of IPR protected drugs will no longer remain ‘unquestionable’ in increasing number of countries. In that scenario, responsible pricing may, therefore, emerge as the ‘Final Frontier’ to address the conundrum of a robust IPR protected regime in India.

By: Tapan J. Ray

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