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Impact of The Cost of Pharma Marketing Failure On Patients

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‘About half of all products launched over the past 15 years have underperformed pre-launch consensus forecasts by more than 20%.’ It’s one of the findings of a recent study by L.E.K. Consulting, going back to 2004. This number is besides the cost of failure while discovering a successful New Molecular Entity.

Adding this to the cost of the product innovation and development, clinical trials and other regulatory expenses, the wasteful expenditure becomes mind boggling – for any unsatisfactory launch performance. In such a situation, the probability of creating newer blockbuster therapies is not getting any easier.

As is believed by many – and vindicated by several studies, new drug marketing cost is more than its R&D cost. Which is why, ensuring success of a new drug launch is critical to fund new drug innovation – on an ongoing basis. Consequently, leadership focus on high ‘launch success’ rate is so important – as the good old saying goes – ‘well begun half done.’

In addition, prudent optimization of the success rate of new products may also help the company avoid irresponsible pricing, while improving the profit margin. In this article, I shall deliberate on the impact of the cost of marketing failure on patients, in general. Alongside, the avoidable ‘soft ground’ that marketers may wish to avoid while delivering unmet value to patients.

Big Pharma’s Sales and Marketing spend is more than R&D:

According to another recent study of October 27, 2021, ‘in most cases, more of the dollars spent by drug manufacturers go toward selling and marketing costs than toward research and development (R&D) for new treatments, cures, or expanded indications and uses of existing drugs.’ For example, as the paper highlights:

  • AbbVie, which manufactures branded drugs like Humira, spent $11 billion in sales and marketing in 2020, compared with $8 billion on R&D.
  • Bayer, which manufactures branded drugs like Xarelto (codeveloped with Johnson & Johnson) and Eylea, spent $18 billion in sales and marketing, compared to $8 billion on R&D.
  • Johnson & Johnson, which manufactures branded drugs like Xarelto (codeveloped with Bayer) and Stelara, spent $22 billion on sales and marketing, compared to $12 billion on research and development.

Therefore, just as R&D expenses have to be made more productive, so are the sales & marketing expenses, where the expenditure towards new product launches is a critical component.

Why a successful new product launch is important:

An analysis by Deloitte in this area, published on March 26, 2020, found that most new drugs continue with the revenue trajectory set at launch. It said, about 70 percent of products that miss expectations at launch continue doing so in subsequent years, and around 80 percent of products that meet or beat expectations continue to do so afterward. Thus, launch success of a new product is very important, both for the organizations and the patients.

A successful new product launch helps both the company and patients:

Correctly assessing and leveraging full commercial potential of a new product through its effective launch helps both the patients and the company. This subject was discussed in a recent article, published in the Fierce Pharma on October 25, 2021, in the context of many drug launch disasters. The areas of benefits, I reckon, include the following:

  • Patients’ unmet needs are met at a reasonable price
  • Manufacturer can recoup its research and development costs.
  • Fund future drug discoveries.
  • Satisfy investors with handsome returns.
  • Creating a sound brand performance base – as a strong launch is arguably the most critical step in a new drug’s lifecycle.

New product launch failure is across the disease areas – from Big Pharma to Startups:

As the above December 18, 2020, study by L.E.K. Consulting points out that new products’ launch failure is taking place across the disease areas. These include,  Oncology, immunology, infectious disease, ophthalmology, blood disorders, brain diseases, and cardiovascular and metabolic disease. Similarly, the companies responsible for such failure span across global pharma majors to biotech startups.

Why many companies are failing in this process:

To help ascertain the depth of this issue, let me start with the key objective of a new product launch, which is effectively delivering the holistic value of the brand which consumers would appreciate. Several papers also acknowledge, to succeed in this area, pharma players need to prepare their data-based launch plan with cerebral power and ensure that the strategy is working and is being executed flawlessly.

A large number of studies find, ‘many companies fail in this process, due to a combination of factors.’ Some of these are uncontrollable, but many of which are very much within a marketer’s control.

Examples of uncontrollable and controllable variables:

Uncontrollable factors include post marketing approval drug safety issues. Reports indicate, ‘One-Third Of New Drugs Had Safety Problems After FDA Approval.’ This is being reported even in recent times, like, ‘new safety signals that cropped up after the approvals of Novartis’ eye drug Beovu  and Sanofi’s dengue vaccine Dengvaxia.’

Whereas, controllable factors include, poor product differentiation and other management missteps, besides ‘limited market access, poor understanding of market needs or misjudgment of competitive threats.’ For example, poor product differentiation and other management missteps were, reportedly, ‘the cause of trouble for Clovis Oncology’s Rubraca in the PARP inhibitor space, and Merck & Co. and Pfizer’s Steglatro in the SGLT2 field.

Key success ingredients to focus on:

Since long, various research, including one by Bain & Co dated October 2017, has highlighted that over 50% of new product launches are underperforming. This situation can’t, in any way, be accepted as a ‘thumb rule’ by pharma marketers, any longer.  Mainly because: ‘When a drug misses its launch projections, there’s a high likelihood that it will never recover that revenue,’ as their study findings underscore. From this perspective, listed below are some of the basic areas to focus on for greater launch success, as I have experienced:

  • Early launch planning – well before the regulatory approval for new products.
  • Data-based and well-tested target-audience identification, the target markets’ selection and key opinion leaders need to be selected for greater focus in effective stakeholder engagement.
  • Creating differentiated value-propositions that addresses targeted patients’ unmet needs, and, in tandem, offers scope for commensurate premium pricing, are vital.
  • Product pricing should be based on quality of value delivery to patients that they can perceive and would acknowledge. Misvaluing a brand, and just focusing on those who can pay, may attract negative publicity, creating a key barrier to success.
  • Current competition, their ongoing counter strategy, new market competitors and other launch challenges need to be carefully mapped, for strategic fine tuning or course correction, in time, wherever and whenever needed.
  • Execution of the launch plan must be accomplished with military precision, as it were.

Conclusion:

As the above Bain & Co paper articulated, ‘The most consistently undervalued factor contributing to a successful launch is the way leadership teams organize and the manage the launch process.’

It’s again not too difficult to understand that the net accountability of the cost of marketing failure, which is a major contributing factor to stifle the R&D funding, in many cases, squarely falls on pharma leadership.

Instead of taking corrective action in this critical area, most of them choose the easy path – increase new product pricing to achieve targeted revenue from a smaller unit sale of the brand. The net impact of which is on patients due to access barrier caused by high prices.

Such products, without clearly differentiated value propositions that patients would recognize, would further increase sales and marketing costs, and could even result in marketing malpractices. Under this backdrop, serious and thoughtful attempt in making all new product launches successful money spinners, as respective brands will merit, may help the pharma leadership to create a win-win situation for both the company and patients.

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.

 

What Pays More: Creating ‘Innovative ‘Customer Experience’ Or ‘Innovative Drugs’?

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More innovative a drug is, the better is its business success rate. This was the general perception of around 92 percent pharma professionals in the past three years. Whereas the fact is: ‘Having the best product doesn’t guarantee sales anymore’. This was established by a research study of the ‘Bain & Company’ - covering multiple therapeutic areas, and was published on October 14, 2019.

It showed, when physicians prescribe a drug – its efficacy, safety and side-effect profile initially account for only 50 percent to 60 percent of the physician’s choice, with a declining trend over time. Interestingly, the other 40 percent to 50 percent of it, is based on a range of ‘physician and patient experience factors’, which pharma players need to target in innovative ways to differentiate their brands.

Many pharma companies are now experiencing the harsh reality that more innovative drugs, backed by traditional sales and marketing support are not yielding desirable financial returns. Head scratching has already started among astute pharma professionals to understand its reason for remedial measures. Thus, the number of executives who agreed with the above ‘Bain & Co’ study that: ‘Having the best product doesn’t guarantee sales anymore,’ increased to almost fourfold – from 8 percent to 28 percent in the next three years.

Thus, in this article, I shall explore whether innovation in creating a ‘unique patient experience’ during a disease treatment process, is as important, if not more than a ‘new drug innovation’. Curiously, high failure rate of most pharma players to innovate in this area, isn’t discussed as much as high failure rates in the development of innovative new drugs.

‘Customer service’ innovation – high failure rate – falling short of expectations:

Again, another article - ‘How Agile Is Powering Healthcare Innovation,’ published by ‘Bain & Company’ on June 20, 2019, brought out some interesting points related to this area. Let me quote a few of which as follows:

  • 65 percent of ‘customer-service innovation’ fall short of expectations of the target group.
  • The number of health care executives recognizing the need to respond quickly to changing customer-needs, has increased from 38 percent in the past three years to 60 percent for the next 3 years. But, most of them ‘lack the methodology, and even the language to implement it in practice.’
  • ‘Having the best product doesn’t guarantee sales anymore.’ Thus, healthcare companies face growing pressure to innovate in providing unique ‘customer experience’.
  • The critical point to note, customer needs evolve continuously, and leading companies respond rapidly with innovative new solutions catering to changing market demand.

As the core purpose of working for ‘customer-service innovation’ is linked with creating ‘brand loyalty’, let’s have a quick recap on ‘brand loyalty’ really means for pharmaceutical products, in today’s context.

‘Brand loyalty’ for pharmaceutical products in modern times:

There are many similar definitions of ‘brand loyalty’ for a pharmaceutical product. The research article – ‘Brand Loyalty as a Strategy for the Competition with Generic Drugs: Physicians Perspective,’ published in the Journal of Developing Drugs, on August 30, 2016, defined ‘brand loyalty,’ and articulated its advantages.‘ I am paraphrasing a few of which, as below:

  • The extent of the faithfulness to a particular brand, which is a major indicator of a long-term financial performance of companies.
  • The main advantages of brand loyalty can be defined as greater sales and revenue, a substantial entry barrier to competitors, increase in a company’s ability to respond to competitive threats and lower consumer price sensitivity.
  • ‘Brand loyalty’ can protect against price competition, including branded generics, as it gives confidence to physicians on the perceived effectiveness and safety of a brand – which they usually won’t be willing to compromise with for lower prices.

This brings us to a key question. Are traditional pharma methods of creating ‘brand loyalty’ getting replaced by the key consideration of creating a ‘unique customer experience’?

Creating ‘brand loyalty’ through ‘patient loyalty’ – a new equation:

It’s a fact today that traditional pharma methods of creating ‘brand loyalty’ is getting replaced by the key consideration of creating a ‘unique customer experience.’ This, in turn, is increasing the need of building ‘patient loyalty’, both for a pharma brand, as well as respective companies offering these brands. This is a new equation, where offering a ‘unique treatment experience’ to patients assumes a critical role more than ever before. This needs to be clearly understood by today’s pharma marketer, without any ambiguity.

In traditional pharma marketing, physicians remain, virtually, the sole focus of the branding exercise, as they appear to be the only decision makers of writing a brand prescription. Patients, in general, hardly used to have any role to play in that process. In this scenario, brand loyalty for the doctors – assuming the absence of any malpractices, is primarily driven by the following three much known factors:

  • Physicians’ unprejudiced buying-in a brand’s value offerings
  • Evaluation of opinion leaders and the doctors’ professional counterparts,
  • Quality of disease treatment outcomes.

Nevertheless, before getting into this area, let’s have a quick look at the primary drivers that pharma marketers have been using to boost financial performance of a brand.

Traditional sales boosters of a pharma brand:

The primary drivers that pharma marketers have been using to boost financial performance of a brand can broadly be classified as follows:

  • Multiple ways are followed to make important doctors write more prescriptions,
  • Increase the drug price, whenever an opportunity arises.

These factors still remain important, but aren’t just enough to deliver sustainable performance over a period of time. Thus, a new dimension needs to be added to it.

Add a new dimension to create brand and corporate loyalty:

With the emergence of increasingly more informed and demanding patients, there is a need to create a ‘loyal patient population’, by offering them primarily a ‘unique treatment experience’. And this is the new dimension.

For this purpose, off-the cuff approaches or strategies based on mere gut-feelings are unlikely to work. As I indicated in one of my articles, marketers need to acquire deep insights on their customers to make sales and marketing decisions more informed, than what it is today. Currently available state of the art technology can be a great enabler to facilitate this process.

This is easier said than done, because answering the question – how does a drug company create ‘brand loyalty’, is indeed a tough call. Nonetheless, many different industries have realized, since long, that offering a ‘unique customer experience’, is critical to create a pool of ‘loyal customers’.

I also had written earlier, pharma is still a late learner in accepting various new normal, in a holistic way. Accepting this reality, a sharp focus on creating ‘brand loyal doctors’ in various innovative ways, I reckon, will serve this purpose well. It’s only recently, a few companies have started working to offer such ‘experience’ to patients in the disease treatment process - end-to-end. Ironically, a large majority of them prefer to talk about it more than actually translating the same into reality.

Benefits of ‘brand loyalty’ through ‘unique customer experience’:

There are several advantages of building pharma ‘brand loyalty’ by offering ‘unique customer experience, without diluting the focus on ‘increasing prescription generation through doctors’. The benefits, I reckon, include, both new – innovative products and also branded generics. Let me give below one example of each:

  • Innovative new-products – positive word-of-mouth promotion: Satisfied patients having ‘unique end-to-end treatment experience’ with a new, innovative brand, are very likely to share it with others. This may be done by using different modes of communication, including various social-media platforms. This, in turn, may help both – add to take-off speed – post launch and create a snowballing impact on the brand adoption thereafter.
  • Branded generics – extend the product life cycle and increase growth: Patients who are loyal to a particular branded version of a generic molecule, are quite likely to refuse any change to a cheaper equivalent, even if recommended by the physician. Moreover, they will advocate for this brand to others, using different communication platforms, as indicated above. Continuation of this process will extend the life cycle of the branded-generic, with increasing growth and market share.

Conclusion:

Now, it’s time to get back to what we started with - What pays more: Creating ‘Innovative ‘Customer Experience’ Or ‘Innovative Drug?’ From the above perspective, it emerges that bringing innovative product to markets is, of course important. However, to ensure its sustainable financial success, other innovations, such as creating ‘a unique end-to-end patient experience’ with the brand, in all probability, would weigh more. This is an area which did not receive much attention for a long time, moving beyond the creation of increasing numbers of ‘brand loyal’ doctors, for business success.

Today, increasing consumerism in the health care space, besides pricing pressure, unfavorable perception and sinking image of the industry, is creating a strong headwind – impeding desirable growth of many pharma players. Such a challenging business scenario has prompted a few of them to innovate in designing a differentiated ‘customer experience’ – in a true sense.

Although, a large number of companies are talking about it, most are mere lip-services – a ground-swell in this area is yet to take place. The industry priority, in general, still weighs heavily in developing innovative products, and creating ‘brand loyal’ doctors, rather than cultivating ‘brand loyal patients’, alongside.

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.

2015: Pharma Industry Achieved Some, Could Achieve Some More

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Wish You And All Your Near And Dear Ones Peace, Happiness, Good Health And Prosperity in The Brand New Year 2016 

The year 2015 witnessed several noteworthy developments in the pharma industry, just as many other years before. That said, in my view, a few of these happenings were much more impactful, and probably took place for the first time ever, in the year just gone by.

Obviously, one such major development is the overall serious adverse impact on the image of the pharma industry, in general. 

During 2015, the image of the pharma industry got further tarnished by reports of high-profile alleged drug price manipulations. This avoidable saga culminated with the arrest of a pharma Chief Executive Officer (CEO) in the United States, amid a federal investigation, in December 2015.

However, I am not going to dwell on this issue in this article. Instead, I shall select some key strategic pharma business areas, which contribute to the largest chunk of the total overall cost, incurred by the global pharma industry, every year. These areas, as I see, are:

  • Drug discovery research
  • Sales and Marketing
  • Supply Chain
  • Development of new drug delivery systems
  • Patients care and engagements

I have put all these points in the above order, just for the convenience of my discussion in this article. 

With a few examples, I shall give my perspective on these areas of the global pharma industry, dividing them broadly into the following two sub-categories: 

  • Areas where the industry could have done a lot better
  • Areas where the industry made significant progress
The Pharma industry strategy continues to remain broadly traditional:

Pharma sector is globally considered as an industry, which appears to be more comfortable in maintaining and harnessing its traditional approaches, in almost all its field of activities. Although, some tweaking has certainly been taking place, which are primarily to automate or digitalize the same process, aimed at adding more speed together with virtually real time monitoring of operations.

Let me hasten to add here that, some major and newer types of modern tech based collaborative initiatives with large companies outside the pure pharma space, have also been reported, during the year.

I shall deliberate on both these areas, one after another, hereunder. 

A. Areas where the industry could have done a lot better:

Drug discovery research:

With the increasing impact of patent cliff and low productivity in drug discovery research, coming alongside big ticket generic threats, many pharma players seem to be still tweaking with its traditional blockbuster drug discovery model, in 2015.

Slightly changing from this traditional strategic focus, many of them have now started focusing more on ‘Orphan Drug’ research, though with indication of a life threatening disease with low prevalence, intending to go whole hog for very high pricing of these drugs.

By gradually adding more indications, these innovator companies plan to make the ‘Orphan drug’ molecule a money churning blockbuster drug. As a result, the number of venture capitalists, who invest in the early stages of such drug development, has increased significantly in 2015.

According to reports, over 40 percent of all approved orphan drugs are meant for high risk cancer sub-categories with low prevalence rate. Although these drugs are for lifetime treatment, the medicines are frightfully expensive, costing between US$200,000 and US$300,000 per year, for each patient. 

Intriguingly, still a very few drug companies are externalizing drug discovery research or even considering on a large scale, the use of the ‘Open Source’ drug discovery model, which is currently widely used in the Information Technology (IT) industry, as one of the main platforms to get new products.

Sales and Marketing:

Similarly, in the pharma sales and marketing space, there has been no game changing developments, during the last year.

Although, some initiatives that can at best be termed as tweaking on the traditional pharma methods, were visible, especially in the fields of digital marketing and e-detailing. The good old and much tried traditional tools, such as, Medical Representatives’ (MR) product detailing to individual doctors or a large number of ‘medical seminars’/ ‘continuing medical education’ events, of varying scale and dimensions, arranged for the medical practitioners, still ranked at the very top of this domain. 

Here, again, no signs of a paradigm shift were visible to me during the year, nor do I reckon, any game changer is likely to surface, any time soon.

Supply chain:

The immense importance of ‘Supply Chain’ in the overall pharma business does not appear to have been properly understood by the drug companies up until 2015. This has been well vindicated by various credible studies. I would refer below just two of those: 

The Chief Supply Chain Officer Report of September 2014, highlighted that just 39 percent of pharmaceutical respondents see the ‘Supply Chain’ as an equally important part of business success as R&D or sales and marketing. Whereas, 68 percent of consumer packaged goods’ respondents believe that leveraging the true potential of this domain, is one of the key requirements for business excellence.

This is noteworthy, as even ‘The McKinsey report’ of September 2013 stated that supply chains now account for around 25 percent of pharmaceutical costs. The annual spending on it is so staggering of around US$230 billion that even minor efficiency gains in this area could free up billions of dollars for investments elsewhere.

Instead of following its traditional approaches, if the pharma sector adopts even straightforward advances, well established in other industries, the total costs could fall by US$130 billion, ‘The McKinsey report’ estimates. 

Ideally, pharma ‘Supply Chain’ should be considered not just a means of getting the products at the right place, at the right time and in the right quantities, but also as a means of delivering additional value to the customers. This can be achieved with radical strategic intervention in this space with the application of the state of art technology, which was still broadly lacking in 2015. 

B. Areas where the industry made significant progress: 

In this section, by citing examples on two other important strategic business areas of the pharma industry, where significant progress has been reported during 2015, I would try to drive home my point. These two areas are new drug delivery systems and patient care/engagement.

New drug delivery systems:

On the development of new drug delivery systems, some interesting collaborative arrangements have been reported in 2015. As illustrative examples, I would cite just the following two: 

A. “Smart Inhaler”

I have picked up this important area of a new drug delivery system, out of many, as it fascinates me immensely. Here again, I would illustrate my point with just two examples – out of several others, as hereunder:

1. On December 2, 2015, the British drug major GlaxoSmithKline (GSK) reportedly entered into a technology deal with Wisconsin-based Propeller Health. Under this collaboration, Propeller will create a custom sensor for GSK’s Ellipta inhaler. The Propeller platform combines sensors, software, and care team services to improve patient outcomes by providing more insightful and efficient care. GSK is the second largest pharmaceutical company to partner with Propeller Health, which in December 2013 announced a deal with Boehringer Ingelheim to develop a custom sensor for BI’s Respimat device.

2. In September, 2015, Teva Pharmaceuticals reportedly acquired Cambridge, Massachusetts-based Gecko Health Innovations, a smart inhaler company.

Gecko’s main product is a platform for chronic respiratory disease management that also combines a sensor device that connects to most inhalers, a data analytics platform, an accessible user interface, and behavioral triggers to help asthma and COPD patients manage their condition, more effectively.

B. Sanofi and Medtronic strategic alliance in diabetes to improve patient experience and outcomes

Although not many large scale commercial ‘drug discovery’ initiatives based on the ‘Open Source’ model is still not known to me, in the ‘new drug delivery system’ area, a major global strategic alliance, between Sanofi and Medtronic in the diabetes therapy area, has been reported based on this model. This alliance is aimed at improving patient experience and outcomes for persons with diabetes, around the world. 

As I mentioned, the alliance structured as an ‘Open Innovation’ model, will initially focus on the following key priorities:

  • Development of drug-device combinations
  • Delivery of care management services to improve adherence and simplify insulin treatment
  • Help people with diabetes better manage their condition

Patient engagement and care:

Quite encouragingly, in the ‘patient engagement and care’ area too, some of the global pharma majors have taken notable tech-based strides during 2015. Some of these laudable ventures are as follows:

A. Novo Nordisk and IBM partner to build diabetes care solutions on the Watson Health Cloud

According to a Dec. 10, 2015 ‘Press Release’, Novo Nordisk and IBM Watson Health agreed to work together to create diabetes solutions, built on the Watson Health Cloud.

Under this agreement, by harnessing the potential of the Watson Health Cloud, Novo Nordisk aims to further advance its offerings to people living with diabetes and also their health care professionals.

B. Sanofi collaborates with Google to Improve diabetes health outcomes

Less than a couple of months before the Novo Nordisk – IBM partnership agreement, by a Press Release of August 31 2015, Sanofi and Google announced their collaboration to improve care and outcomes for people with type 1 and type 2 diabetes.

According to the release, this collaboration will explore how to improve diabetes care by developing new tools that bring together many of the previously siloed pieces of diabetes management and enable new kinds of interventions. This includes health indicators such as blood glucose and hemoglobin A1c levels, patient-reported information, medication regimens and sensor devices. 

Is the word “Innovation” also being used as a façade?

This important, though contentious issue, is being raised by many today, globally.

In my view, global pharma even in 2015, continued making the mistake of repeatedly highlighting, with high decibel sound bytes that the stakeholders do not understand the value, importance and necessity of innovation, which in any case is far from the truth. Nevertheless, It kept using, rather more misusing, this important word too often to cover up any action of theirs that faced government, general public or media scrutiny.

Additionally, many pharma players seemingly continued to remain contented with a very narrow definition of the word ‘innovation’, limiting its application mostly in the traditional space of drug discovery. While at the same time, many other smarter and more astute innovators, especially in the IT world, besides Google, IBM and Apple, started stepping into the vast healthcare arena, which otherwise could possibly have become pharma’s expanded market.

A am quoting below the names of just five of these amazing innovators, from the published data, just to give you a feel of this interesting area of ‘innovation’ in the health care arena:

  • Medivation: For finding the value of treatments that others ignored
  • Beijing Genomics Institute: For making DNA sequencing a mass-market
  • Medisafe: For using wireless and cloud technology to improve drug adherence
  • Ginger.IO: For harnessing behavioral data to save lives
  • Setpoint Medical: For creating a built-in pain-relief platform 
Epilogue:

Overall, the year 2015 was a mixed bag for pharma. Many pharma players, I reckon, displayed their self serving intent in a more glaring manner. Several captains of this industry generally talked all right things, which are music to many ears, but mostly acted quite differently, going against the public health interest, as reported by the global media.

Many pharma companies continued trying to woo the media cleverly during the year. Some of them, reportedly, even sponsored trips of a few Indian journalists to their respective overseas headquarters. As I understand, many newspaper readers too, had noticed the small print disclosures in this regard, at the bottom of their stories on those companies, written on the return.  I have no intention to be judgmental on such trips. Nevertheless, the global media, including the Indian media, by and large, reported all such deeds, with as much detail as possible, without slightest hesitation.

Encouragingly, a few global pharma majors, such as, Sanofi, Novo Nordisk, GlaxoSmithKline and AstraZeneca challenged this contusing status quo in 2015. They seem to dare to chart into the much uncharted frontier to squarely face the challenge of the changing demands of the changing world order. Probably not so much by trying to change others, but mostly by changing themselves. 

It appears, at least, the likes of the above global players have started accepting the new expectations of the aspiring customers and their fast transforming mindsets, including, the tougher governments enacting contemporary laws and regulations in many countries. In tandem, the exorbitantly high cost and usually low profile advocacy initiatives of drug companies seem to becoming lesser and lesser productive, as evident by the increasing number of avoidable issues that the pharma industry is now facing. Added to all this, a modern and major force-multiplier, in the form of social media, has now started unleashing its unfathomable power of shaping laws, regulations and even public opinion.

I wish this wind of change gaining more speed in 2016, and in that process, ushers in the long awaited dawn of a new paradigm. A paradigm of justice and equity in health care for all, across the world, and especially to my own country – 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.

No More Payment for Prescriptions: Pharma at A Crossroads?

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  • “ARE there different and more effective ways of operating than perhaps the ways we as an industry have been operating over the last 30, 40 years?”
  • “TRY and make sure we stay in step with how the world is changing.”

Those are some introspective outlooks of Sir Andrew Witty – the Chief Executive of GlaxoSmithKline (GSK) related to much contentious pharmaceutical prescription generation processes now being practiced by the drug industry in general, across the world.

The ‘Grand Strategy’ to effectively address these issues, in all probability, was still on the drawing board, when Sir Andrew reportedly announced on December 16, 2013 that GSK:

  • Will no longer pay healthcare professionals to speak on its behalf about its products or the diseases they treat to audiences who can prescribe or influence prescribing.
  • Will stop tying compensation of sales representatives to number of prescriptions the doctors write.
  • Will stop providing financial support to doctors to attend medical conferences.

These iconoclastic intents, apparently moulded in the cast of ethics and values and quite possibly an outcome of various unpleasant experiences, including in China, is expected to take shape worldwide by 2016, as the report indicates.

Acknowledgment of unbefitting global practices:

Reacting to this announcement, some renowned experts, as quoted in the above report, said, “It’s a modest acknowledgment of the fact that learning from a doctor who is paid by a drug company to give a talk about its products isn’t the best way for doctors to learn about those products.”

The world envisages a refreshing change:

A December 11 article in the Journal of American Medical Association (JAMA) stated that there exists a serious financial ‘Conflict of Interest (COI)’ in the relationship between many Academic Medical Centers (AMCs) and the drug and medical device industries spanning across a wide range of activities, including:

  • Promotional speakers
  • Industry-funded ‘Continuing Medical Education (CME)’ programs
  • Free access of sales representatives to its faculty, trainees and staff
  • The composition of purchasing and formulary committees

Such types of relationships between doctors and the pharmaceutical companies across the world, including in India, as studies revealed, have been custom crafted with the sole purpose of influencing prescription behavior of doctors towards more profitable costlier drugs, many of which offer no superior value as compared to already available cheaper generic alternatives.

Cracking the nexus is imperative:

Yet another report says, “Ghost-writing scandals, retracted journal papers, off-label marketing settlements, and a few high-profile faculty dust-ups triggered new restrictions at some schools.”

To address this pressing issue of COI, cracking the Doctor-Industry alleged nexus, which is adversely impacting the patients’ health interest, is absolutely imperative. An expert task force convened by the ‘Pew Charitable Trusts’ in 2012, made recommendations in 15 areas to protect the integrity of medical education/training and the practice of medicine within AMCs.

Some of those key recommendations involving relationships of medical profession with pharmaceutical companies are as follows:

  • No gifts or meals of any value
  • Disclosure of all industry relationships to institutions
  • No industry funded speaking engagement
  • No industry supported Continuing Medical Education (CME)
  • No participation at industry-sponsored lectures and promotional or educational events
  • No meeting with pharmaceutical sales representative
  • No industry-supported clinical fellowships
  • No ghostwriting and honorary authorship
  • No ‘Consulting Relationship’ for product marketing purpose

The above report also comments, “if medical schools follow new advice from a Pew Charitable Trusts task force, ‘No Reps Allowed’ signs will soon be on the door of every academic medical center in the United States.”

MNC pharma associations showcase voluntary ‘Codes of Marketing Practices’: 

Most of the global pharma associations have and showcase self-regulating ‘Codes of Pharmaceutical Marketing Practices’. However, the above GSK decision and hefty fines that are being levied to many large global companies almost regularly in different countries for marketing ‘malpractices’, prompt a specific question: Do these well-hyped ‘Codes’ really work on the ground or are merely expressions of good intent captured in attractive templates and released in the cyberspace for image building?

Global status overview:

In this context an updated article of December 11, 2013 states that Medical Faculty, Department Chairs and Deans continue to sit on the Board of Directors of many drug companies. At the same time, many pharma players support programs of various medical schools and teaching hospitals through financial grants.  Company sales representatives also enjoy free access to hospital doctors to promote their products.

In most states of the United States, doctors are required to take accredited CMEs. The pharmaceutical industry provides a substantial part of billions of dollars that are spent on the CME annually, using this support as marketing tools. This practice is rampant even in India.

The above article also highlights incidences of lawsuits related to ‘monetary persuasion’ offered to doctors. In one such incidence, two patients reportedly fitted with faulty hips manufactured by Stryker Orthopedics discovered that the manufacturer paid their surgeon between US$ 225,000 and US$ 250,000 for “consultation services,” and between US$ 25,000 and US$ 50,000 for other services.

However, since August 2013, ‘Physician Payment Sunshine Act’ of the United States demands full disclosure of gifts and payments made to doctors by the pharma players and allied businesses. Effective March 31, 2014, all companies must report these details to the Centers for Medicare & Medicaid Services (CMS), or else would face punitive fines as high as US$1 million per year. CMS would publish records of these payments to a public website by September 31, 2014. India needs to take a lesson from this Act to help upholding ethics and values in the healthcare system of the country.

Overview of status in India:

As reported by both International and National media, similar situation prevails in India too.

Keeping such ongoing practices in mind and coming under intense media pressure, the Medical Council of India (MCI) on December 10, 2009 amended the “Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002″ for the medical profession of India. 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’.

However, inability of the Indian regulator to get these guidelines effectively implemented and monitored, has drawn sharp flak from 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.

Moreover, it is difficult to fathom, why even 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. 

Learning from other self-regulatory ‘Codes of Pharma Marketing Practices’, in my view, a law like, ‘Physician Payment Sunshine Act’ of the United States, demanding public disclosure of gifts and all other payments made to doctors by the pharma players and allied businesses, would be much desirable and more meaningful in India.

Conclusion:

Research studies do highlight that young medical graduates passing out from institutions enforcing gift bans and following other practices, as mentioned above, are less likely to prescribe expensive brands having effective cheaper alternatives.

The decision of GSK of not making payments to any doctor, either for participating or speaking in seminars/conferences, to influence prescription decision in favor of its brands is indeed bold and laudable. This enunciation, if implemented in letter and spirit, could trigger a paradigm shift in the the prescription demand generation process for pharmaceuticals brands.

However, this pragmatic vow may fall short of stemming the rot in other critical areas of pharma business. One such recent example is reported clinical data fabrication in a large Japanese study for Diovan (Valsatran) of Novartis AG. Had patient records been used in their entirety, the Kyoto Heart Study paper, as the report indicates, would have had a different conclusion.

That said, if all in the drug industry, at least, ‘walk the line’ as is being demarcated   by GSK, a fascinating cerebral marketing warfare to gain top of mind brand recall of the target doctors through well strategized value delivery systems would ultimately prevail, separating men from the boys.

Thus, the moot point to ponder now:

Would other pharma players too jettison the decades old unethical practices of ‘paying to doctors for prescriptions’, directly or indirectly, just for the heck of maintaing ethics, values and upholding patients’ interest?

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.

 

Grant of Compulsory License for Bayer’s Nexavar in India raises more questions than answers

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On March 12, 2012, the Patent Office of India, in its landmark ruling, granted its first ever Compulsory License (CL) for Bayer’s patented kidney and liver cancer drug Nexavar (Sorafenib), to the generic pharma player Natco, broadly citing the following reasons:

  • Reasonable requirements of public under Section 84 have not been satisfied.
  • The Patented Drug was not available to the public at a reasonably affordable price as per Section 84 (1) (b).
  • Patented invention is not worked in the territory of India as per Section 84 (1) (c)

The 62 page order of the Controller General of Patents, Designs and Trade Mark (CGPDTM) granted the CL to Natco for the rest of patent life of sorafenib in India at the high end of the UNDP 2001 royalty guidelines at 6 percent.

Sorafenib:

Sorafenib was co-developed and co-marketed by Bayer and Onyx Pharmaceuticals  for the treatment of advanced  renal cell and hepatocellular carcinoma. The drug got its first regulatory approval from the US FDA for advanced renal cell carcinoma in 2005.

National Institute of Health and Clinical Excellence (NICE) of UK had indicated that the drug extends life of the kidney cancer patients by three months on an average.

As stated earlier, in March 2008, Indian patent for Sorafenib was granted to Bayer by the CGPDTM. Thereafter, in December 2010 Natco had requested for a voluntary license from Bayer, which was rejected by the patentee.

It has been reported that sorafenib was registered as an ‘orphan drug’ in the US. The R&D cost of sorafenib was partly subsidized by the US Orphan Drug tax credit.

Mixed reaction:

Though the research based pharmaceutical industry across the world expressed its disappointment over the judgment, many experts and NGOs from different parts of the globe have opined that CGPDTM has set a right precedence by granting a CL for sorafenib, which will ensure, in the times to come, that patent monopolies are kept limited, especially when the patented products are not “reasonably affordable”.

Many people, therefore, envisage that the grant of the first ever CL by the Indian Patent Office could ultimately open the door for other generics players of India to apply for the same on similar grounds and mainly for ‘non-working of patents’, as many patented medicines are now imported into India by the respective global players.

Granting CL should be the last resort:

While none can deny that all citizens of India should have access to innovative and lifesaving medicines, as will be required for their medical treatment, it appears rather impractical to envisage that routine issue of CL by the Indian Patent Office will be able to resolve this critical issue on a long term basis.  Grant of CL, if any, I reckon, should be taken only after exhausting all other access improvement measures.

Working of a patent:

In this particular case, it has been decided by the CGPDTM that working of a patent will require the concerned company to manufacture the drug in India in a reasonable quantity. The argument of the CGPDTM in this respect, many experts believe, is quite a stretch of an interpretation of the statute.

This is mainly because, as one of the signatories of TRIPS, India has a national commitment for adherence to this important international agreement. It is, therefore, widely believed, if importation is not considered as working of patent, the country could expose itself to the risk of  violation of the Article 27.1 of TRIPS, both in letter and spirit.

The Article 27.1 of TRIPS:

The Article 27.1 of TRIPS on ‘local working of patents’ indicates as follows:

“1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”

Thus as per Article 27.1 of TRIPS, if commercialization of products patented in India, is done locally either through imports or local manufacturing, should be considered as ‘local working of patents’.

Form 27 vindicates the fact:

Form 27 of the Indian Patents Act, which is a statement regarding the working of patented inventions on commercial scale in India, in its point number 3, under ‘if worked’ states as follows:

“If worked: quantum and value (in Rupees) of the patented product:

  1. Manufactured in India
  2. Imported from other countries (give country-wise details)”

Thus, when Form 27 itself accepts importation as ‘local working of patent’, it is indeed intriguing why was the decision to the contrary taken by the CGPDTM?

Moreover, it is worth noting that the term ‘manufacture in India’ was deleted from the earlier Section 90 (a) of the Patents Act.

A statutory requirement:

CGPDTM through a circular dated December 24, 2009, directed all Patentees and Licensees to furnish information in ‘Form No.27’ on ‘Local Working of Patents’ as prescribed under Section 146 of the Patents Act.

It will be interesting to know, whether CGPDTM in response to Form 27 submissions of Bayer had informed them earlier that the Nexavar Patent has not been worked in India. If not, what is then the sanctity of Form 27 filing?

Delhi High Court Judgment:

Further, it has been well reported that in the legal case of ‘Telemecanique & Controls (I) Limited Vs. Schneider Electric Industries SA 94(2001)DLT865’ on working of patents, the Delhi High Court had concluded that importation would amount to working of Patents.

India specific pricing for innovative drugs is not uncommon:

At this stage, it is worth mentioning that India specific pricing for innovative drugs are not uncommon in the country at all. Following are some good examples:

  • GlaxoSmithKline  Pharmaceuticals has already announced its differential pricing system for India and will sell its innovative drugs at prices 25% to 40% less than what those are in the US.
  • MSD  has already introduced its India specific price for patented products. Their patented cervical cancer drug Gardasil is being sold in India at 75% -80% less than the global prices.
  • Moreover, MSD’s patented anti-diabetic drug Januvia (sitagliptin phosphate) is locally sourced and marketed at one-tenth of the global price.
  • In 2008 Novartis  reportedly tied up with the domestic pharma major USV to market its patented anti-diabetic drug Galvus (Vildagliptin) by pricing it lower than Januvia. According to reports, Novartis markets Galvus in the metros, while USV markets the same brand in tier two and three cities of India.
  • Roche  has recently collaborated with the domestic pharma player Emcure Pharmaceuticals to manufacture its two well-known biologics Herceptin and MabThera not only to cater to the domestic needs, but also for export to other developing markets.

Manufacturing of a small quantity locally – an issue:

As quoted in the order of the CGPDTM there are around 8842 eligible patients for sorafenib in India. All these patients put together will require Nexavar ranging from 27000 (Bayer’s figure) to 70000 boxes (NATCO’s figure) per year.  Thus, the moot question remains: even for such small annual requirements, should global companies set up manufacturing facilities in all the countries like, India.

Another question: if other smaller markets of the world also make local manufacturing mandatory for any pharmaceutical products that will be sold in their respective countries, will the Indian players find those markets attractive enough to expand their business? In that case who will be the net losers?… Patients?

Conclusion:

If the issue of whether importation will be considered as ‘local working of patents’ or not is not answered conclusively under higher judicial scrutiny in conformity of Article 27.1 of TRIPS and CL is granted to local manufacturers for commercial benefits under similar situation, availability of life saving innovative products in the Indian market for the patients of India could be in a real jeopardy.

The objective of improving access to innovative medicines is a very desirable one for any country like ours. However, if India routinely starts granting CL for this purpose before exhausting all other avenues to achieve this goal, it would risk sending a very wrong signal to the outside world that the country is shirking its responsibilities to create an appropriate ecosystem to foster and support pharmaceutical innovation to offer better quality of lives to the citizens of the country in particular.

In the absence of both collaboration and foreign direct investments by the global innovators in the field of pharmaceutical research and development, India may feel handicapped, especially when our neighbor China is surging ahead in this field with longer strides.

Thus, routine grant of CL, as is being envisaged by many in India, on a similar situation could, on the contrary, make the issue of access to innovative medicines by the common man even more challenging, in the longer run.

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.

Maintaining Supply Chain Security in pharmaceuticals: The need is now more than ever before.

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In today’s globalized economy maintaining Supply Chain Security (SCS), especially in the pharmaceutical sector across the world, is more critical than ever before. We have many instances of SCS being seriously breached, not only in the emerging pharmaceutical markets but also in the developed markets of the world.

Global examples of serious SCS violations:

Following are some at random examples of serious SCS violations globally in the recent times:

  • In 2007, over 300 people died in Panama in Central America after consuming a cough medication containing diethylene glycol, which was labeled as glycerin. The adulterant diethylene glycol was sourced from China and was relabeled as glycerin by a middleman in Spain, as reported by the media.
  • In March 2008, the US FDA prompted by around 81 drug related deaths in the USA, announced a large scale recall of Heparin injection, a well-known blood thinner from Baxter Healthcare suspecting contamination of a raw material sourced from China. Standard technology used by Baxter could not detect the contaminant, which the regulator considered as a deliberate adulteration. The contaminant was eventually identified as an over sulfated derivative of chondroitin sulfate, which costs a fraction of original heparin derivative. The ‘Heparin tragedy’ raised, possibly for the first time, the need of working out an algorithm to put in place a robust system for ‘supply chain security’. This need has now become critical as many pharmaceutical players, including those in India, are increasingly outsourcing the API, other ingredients and almost entire logistics from third parties.
  • ‘Business Standard’ dated August 24, 2011 reported that Ranbaxy Laboratories and the US health regulator are negotiating a settlement to lift a ban on the sale of the drugs produced at 2 of the company’s plants in India, which could involve payments and fines exceeding $1 billion. This ban, as the report says, dates back to 2008, when the US regulator banned 30 generic drugs produced by the company at its Dewas (Madhya Pradesh) and Paonta Sahib and Batamandi unit in Himachal Pradesh, citing gross violations of approved manufacturing norms.
  • ‘Business Ethics’ – the Magazine of Corporate Responsibility reported, “GSK facility in Puerto Rico suffered from long standing problems of product mix-ups, which caused tablets of one drug type and strength to be commingled with tablets of another drug type and/or strength in the same bottle…the subsidiary’s manufacturing operations failed to ensure that Kytril, an anti-nausea medication, and Bactroban, a topical anti-infection ointment, were free of contamination from micro organisms.” As a result, the US Justice Department reportedly announced, “GlaxoSmithKline, PLC (GSK) and the subsidiary agreed to pay US$750 million to settle charges that between 2001 and 2005 they distributed adulterated drugs made at GSK’s now-closed manufacturing facility in Cidra, Puerto Rico”.
  • As reported by Reuter, on April 30, 2010 recalled over 43 children’s medicines involving 136 million units and 12 countries in response to complaints from regulators and customers.  This recall included liquid versions of Tylenol, Tylenol Plus, Mortin, Zyrtec and Benadryl, as they “may not fully meet the required manufacturing specifications.”

Despite presence of one of the most stringent drug regulators, the issue bothers even the US:

In the wake of all these, ‘The New York Times’ dated August 15, 2011 reported, despite the fact that US now imports more than 80% of APIs and 40% of finished drugs mainly from India, China and elsewhere, the agency conducts far fewer foreign inspections as compared to domestic inspections. The US FDA Commissioner Margaret Ann Hamburg was quoted saying, “Supply chains for many generic drugs often contain dozens of middlemen and are highly susceptible to being infiltrated by falsified drugs.”

At another conference Ms. Hamburg said, “I think people have no idea in this country and around the world about the vulnerability of things that we count on every day and that we have a system that has big gaps in our protective mechanisms.”

FDA inspects only a fraction of foreign drug plants in the global outsourcing wave:

The investigative arm of US Congress, the Government Accountability Office reported, while US FDA inspected 40% of domestic manufacturing facilities in 2009, it inspected just 11% of the foreign manufacturing facilities, as the later outnumbered the domestic sites since 2008.

INSPECTIONS BY FDA

ESTIMATED PLANTS IN FDA INVENTORY 2009

2007

2008

2009

 TOTAL
India

64

64

59

187

502
China

19

36

52

107

920
Germany

26

34

36

96

228
Italy

28

28

30

86

168
Canada

20

19

35

74

310
U.K.

16

17

32

65

191
France

24

14

26

64

188
Japan

22

17

20

59

207
Switzerland

17

15

18

50

100
Ireland

14

11

19

44

63
All others

83

69

97

249

888
Total

333

324

424

1,081

3,765

NOTE: Most frequently inspected foreign countries. SOURCE: Government Accountability Office.

US FDA’s Counterfeit Drug Initiative:

The initiative includes the following measures:

  • Secure the product and packaging
  • Secure the movement of drugs through the supply chain
  • Secure business transactions
  • Ensure appropriate regulatory oversight and enforcement
  • Increase penalties
  • Heighten vigilance and awareness
  • International cooperation.

If such instances are available from the developed markets of the world, especially from the US, one can well imagine what is happening in the emerging markets of the world. In the developed markets, at least these are detected and rectifying measures are taken. Unfortunately, in the emerging markets scores of such criminal instances go undetected taking innocent lives of the patients.

Fast growing global outsourcing initiatives have increased the risks by manifold:

Thus even the US FDA acknowledged that fast growth of globalization in drug manufacturing has outstripped the agency’s resource pool for effectively inspecting all overseas outsourcing facilities.

As a result of the outsourcing wave in the US, the number of US FDA approved local drug manufacturing sites in the country is gradually coming down since 2008, with a commensurate increase in the number of foreign sites.

2000

2002

2004

2006

2008a*

Domestic

Foreign

Domestic

Foreign

Domestic

Foreign

Domestic

Foreign

Domestic

Foreign

2625

1150

2700

1500

2900

2000

3000

2500

2480

3800

NOTE: US FDA-registered drug-manufacturing sites with at least one product listed in FDA database. *a Preliminary estimates. SOURCE: US FDA

Stakeholders need to be extremely vigilant:

Pharmaceutical players and the drug regulators from across the world should put proper ‘fool proof’ systems in place to eliminate the growing menace of criminal adulteration of APIs, drug intermediates, excipients entering in the supply chain together with preventing any breach in their logistics support systems.

Regulators fail to keep pace with the fast growth of global generic industry:

Many feel a shift in prescription towards generic drugs, especially in the largest pharmaceutical market of the world – the US, is making the regulatory task of the FDA to inspect all drug ingredient suppliers indeed quite challenging.

Currently, 70% of all prescriptions in the US are contributed by the generic drugs, which indeed play an important role to contain the health care cost. However, as an innovative drug goes off patent a single manufacture’s product gets transferred to multiple manufacturers located across the world, making the task of the drug regulator to ensure high quality and safety standard of the same drug extremely challenging.

Conclusion:

SCS, therefore, deserves to be of prime importance for the pharmaceutical companies across the globe. Recent high profile SCS related cases, as mentioned above, have exposed the vulnerability in addressing this global menace effectively. All pharmaceutical players should realize that an integrated approach is of paramount importance to eliminate this crime syndicate, which is taking lives of millions of patients the world over.

It is worth repeating, securing pharmaceutical supply chain on a continuous basis is of critical importance for all the pharmaceutical players across the globe. However, the process will no doubt be expensive for any company, especially when counterfeiters find ways to bypass any such system very quickly.

Like other industries, in the pharmaceutical sector, as well, cost effective procurement is critical, which makes many pharmaceutical players, especially, in the generic industry not to go for such expensive process just to maintain the SCS.

Thus a strong corporate governance mechanism in all pharmaceutical companies must ensure, come what may, putting in place a robust SCS system is not compromised in any way… ever… for patients’ sake.

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.

Restructure, reposition and empower the DoP to deliver more to the nation: Break the Silos

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A news item on July 25, 2011 reported, “DoP (Department of Pharmaceuticals) moots National Authority for Drugs & Therapeutics (NADT) with Central Drugs Standard Control Organization (CDSCO) under it”.

If I recall, some years ago, a Government of India (GoI) appointed taskforce had also suggested integration of the offices of the DCGI, CDSCO and NPPA along with all their powers and functions. However, nothing has fructified, as yet, not even the Central Drug Authority (CDA) Bill, which was mooted in 2007.

In the same context while taking a pause to look back, we note that in 2008 to help accelerating the growth momentum of the pharmaceutical industry of India through a more efficient government administrative and policy machinery, the GoI created a new department called the ‘Department of Pharmaceuticals’ under the MOC&F.

It was widely expected at that time that the DoP will be able to address the following key pharmaceutical industry related issues with an integrated approach to strike a right balance between the growth fundamentals of the industry and the Public Health Interest (PHI):

  • Drug policy and pricing
  • Providing access to high quality and affordable modern medicines to all
  • A facilitating drug regulatory system
  • An appropriate ecosystem to encourage R&D and protect Intellectual Property Rights (IPR)
  • Addressing the issue of high out of pocket expenses of the general population for healthcare
  • Fiscal and tax incentives required by the Micro-Small and Medium Enterprises (MSME) within the pharmaceutical industry of India.

As stated above, all these will necessitate close coordination and integration of work of various departments falling under the different ministries of the government. 

The key Objectives of the DoP: 

Following are the stated key objectives of the DoP:

1 Ensure availability of quality drugs at reasonable prices as per the Pharma Policy

2 Facilitate growth of Central pharma PSUs with required support

3 Develop Pharma Infrastructure and Catalyze Drug Discovery and Innovation

4 Launch and Position Pharma India Brand.

The moot questions:

Considering all these, the moot questions that could follow are as follows:

  1. Do the objectives of the DoP effectively address the need to improving access to quality and affordable medicines to the common man with an integrated approach between all concerned departments of MOC&F and MOH&FW?
  2. Is the nodal department of the pharmaceutical industry – the DoP currently placed in the right Ministry to contribute more effectively to achieve the ultimate national goal of ‘ affordable healthcare for all’ ?

Need for greater co-ordinated approach:

The issue of access to quality and affordability medicines, reaching patients in conformance to a strict regulatory framework, will need to be addressed with an integrated systems approach.

As is commonly believed, increasing access to modern medicines will depend mainly on the following key requirements:

  1. Creating an appropriate healthcare infrastructure and delivery system across the country.
  2. Making prices of medicines reasonable/affordable to a large section of the population.
  3. Reducing high (80%) ‘Out of Pocket’ healthcare expenses of the common man through a well-structured healthcare financing/health-insurance model for all strata of society.

All these measures will entail very closely working together between the DoP and the related departments of MOH&FW. This situation calls for consideration of repositioning the DoP by making it a part of MOH&FW and NOT of MOC&F.

Pharmaceutical Industry: The areas of key importance:

Be that as it may, let us now try to have a closer look at the other aspect – the key areas of importance of the pharmaceutical industry for its accelerated growth and development and try to ascertain, if DoP is made responsible for all these critical areas, which Ministry they will need to deal with, the most:

1. Drug Policy and Pricing:

Currently DoP is responsible for an inclusive growth oriented drug policy and drugs pricing (through National Pharmaceutical Pricing Authority, NPPA) under the MOC&F. This key activity of  the department has immense impact on the performance of the pharmaceutical industry of India.

2. ‘Access’ and ‘Availability’ of modern medicines across the country:
Availability of pharmaceutical products is intimately linked to the quality of access to pharmaceuticals by a vast majority of population of India, as indicated above, depends on availability of requisite healthcare infrastructure and the delivery systems, besides the prices of medicines.

‘Jan Aushadhi’ scheme – a praiseworthy initiative of the DoP now seems to be a near disaster in terms of the project implementation.  This scheme could have been more meaningful with the support of adequate health related infrastructural facilities and in tandem with the projects like, National Rural Health Mission (NRHM), National Urban Health Mission (NUHM), Rashtriya Swasthaya Bima Yojna (RSBY) targeted to offer better healthcare to the common man with a robust and integrated healthcare delivery initiative.

Ministry of Health and Family Welfare (MOH&FW) is responsible to create such healthcare related infrastructure and delivery system.

3. Drug Regulatory System:

The drug regulatory system of the country, which is so important to the pharmaceutical industry for its rapid growth and development, is now operating at a sub-optimal level for various reasons. The dissatisfaction of the industry with this key regulator reportedly has reached its nadir.

Almost the entire Drug Regulatory System in India is being run and governed by the office of the Drug Controller General of India (DCGI), which comes under the MOH&FW. DCGI’s office is responsible for effective and speedy implementation of the Drugs and Cosmetics Act of India (DCA), which includes world class and ethical clinical trial standards in the country, marketing approval of all new products including exports, implementation of Schedule M (cGMP), all pharmaceuticals site registrations and effectively addressing the issue of spurious and counterfeit drugs, just to name a few. DoP has hardly any direct or indirect control over any of these key activities falling under the purview of the MOH&FW.

4. Biopharmaceuticals:

The Department of Biotechnology under the Ministry of Science and Technology currently looks after this emerging area of pharmaceuticals sector. DoP has no direct control over these activities.

5. R&D and IPR:

R&D and IPR related issues in pharmaceuticals/biopharmaceuticals are very important areas of the pharmaceutical business in the country. Although IP Policy related areas are looked after by the Department of Industrial policy and Promotion (DIPP), some contentious and highly debated IP related issues like, Regulatory Data Protection (RDP), Patent Linkage etc. are currently within the domain of DCGI under MOH&FW. DoP has no direct role to play in these areas.

6. High out of pocket expenses for healthcare:

In India ‘Out of Pocket Expenses (OPE)’ towards healthcare is around 80%. Such high OPE, especially in case of very serious and life threatening illnesses, like cancer, cardiovascular emergencies etc. could make a middle class household poor and a poor household could even be pushed ‘Below the Poverty Line (BPL)’.

Thus high OPE is indeed a very serious issue of the country, which can only be addressed through policy initiatives by designing appropriate health insurance/healthcare financing scheme for all strata of society in India.

For a large section of the society, this issue can be addressed by MOH&FW in consultation with Ministry of Finance, just as they have come out with an innovative and praiseworthy RSBY scheme for the BPL families. DoP does not seem to have much role to play in this area, as well.

Thus the objective of GoI to have greater focus on healthcare in general and the pharmaceuticals in particular could be better achieved, if the DoP is made a part of MOH&FW by breaking the independent silos in form of the NPPA, CDSCO, DCGI etc., now operating, especially, in these two ministries.

Key issues of pharma industry versus key objectives of the DoP: From the above details, if one compares the key issues and success factors of the pharmaceutical industry of India versus the key objectives of the DoP, one will notice a dis-conformity.

If this is allowed to continue even the all-important first objective of the department, ”Ensuring availability of quality drugs at reasonable prices as per the Pharma Policy” will continue to remain an illusion. It is indeed surprising to note that this objective does not talk anything about improved access to modern medicines by the common man, either.

Over a period of over last four decades India has experienced that only through increased focus on affordability, the objective of increased access to medicines by the common man could not be achieved in India. Besides other healthcare infrastructure related factors, high OPE still remains a key barrier to access to modern medicines by the common man.

Why is  DoP trying to revive the loss making pharmaceutical Public Sector Units (PSUs)?

As stated above, the second objective of the DoP, which states, “Facilitate growth of Central pharma PSUs with required support” is equally intriguing. Everyone knows that all these PSUs created by spending tax payers’ money , miserably failed to perform and deliver even when the Indian pharmaceutical industry continues to register a CAGR growth of around 15% decade after decade. It is indeed difficult to fathom, which magic wand of the DoP will be able to bring these loss making and heavily bleeding PSUs out of continuous non-performance and governance failure in an era of fierce competitive pressure within the industry, by pouring even more from the national exchequer’s fund in the bottomless pits of losses of these PSUs?

I reckon, if these PSUs still attract interest of some good private buyers/investors with reasonable valuation, the government should unhesitatingly decide to unlock these values, sooner the better.

Conclusion:

In my view, if the DoP is expected to ensure improved “access to affordable and quality modern medicines to all”, as discussed above, the department should be repositioned and made a part of MOH&FW, rather than keeping it with the MOC&F, ignoring any possible political squabbles between the two concerned ministries, even in the coalition politics of India.

Such restructuring, repositioning and empowerment of the DoP in turn, will help achieving one of the key healthcare objectives of the nation, simultaneously fostering rapid growth of the industry making it a formidable global force to reckon with, both in the innovative and generic pharmaceutical business of the world.

This expected scenario, if gets translated into reality will justify the creation and existence of the DoP at the cost of huge amount of public fund.

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

Does China provide a more robust IPR environment than India?

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Soon after the Product Patent Act was reintroduced in India effective January 1, 2005, a raging global debate commenced focusing on the robustness of the Indian Patent system. Quite often, many participants in the debate continue to compare the adequacies of the Chinese patent system with the inadequacies of the same in India.

‘The Pharma Letter’ dated October 26, 2010 published an Article captioned, “Intellectual property concerns and domestic bias hold back R&D in Asia-Pacific.”

Asia-Pacific still lags behind in terms of global R&D investments:

Unlike the common perception in India that China is attracting a significant part of the global investments towards R&D, latest data of MedTRACK revealed that only 15% of all drugs development are taking place in Asia-Pacific despite the largest growth potential of the region in the world. The Pharma Letter also reported, “In December 2009, China unveiled that it would give domestic companies making innovative products an advantage in qualifying for government purchases. This measure is likely to further limit foreign investment in product development in China, and negatively affect growth of foreign brands.”

Such type of domestic bias and protectionist’s measures are yet to be witnessed in India.

Since US is a pioneering country in the field of global R&D and its commercial interest related to such initiatives spans across the globe, let me try to analyze this subject, in this article, quoting only from official US publications.

IPR environment in China – the US perspective:

So far as the current IPR environment in China is concerned, US Embassy based in that country has commented as follows:

“Despite stronger statutory protection, China continues to be a haven for counterfeiters and pirates. According to one copyright industry association, the piracy rate remains one of the highest in the world (over 90 percent) and U.S. companies lose over one billion dollars in legitimate business each year to piracy. On average, 20 percent of all consumer products in the Chinese market are counterfeit. If a product sells, it is likely to be illegally duplicated. U.S. companies are not alone, as pirates and counterfeiters target both foreign and domestic companies”.

In the same context the following remarks of Mr. Shaun Donnelly, Senior Director, International Business policy, National Association of Manufacturers (NAM) , USA, made at the Intenational Trade Commission on June 15, 2010 on IPR environment in China, is also quite interesting:

“Unfortunately China remains Ground Zero for international product counterfeiting and Piracy. Despite considerable efforts over many years by US Government agencies and other international partners as well as Chinese Government the Progress has been minimal…. China continued to be the number one source country for pirated goods seized in the US borders accounting for 79% of the total seizures…The top sectors of IPR infringing products seized included footwear, consumer electronics, apparel, computer hardware, pharmaceuticals…”

Patent enforcement in China – the US perspective:

Regarding product patent enforcement is concerned the US Embassy in China comments:

“Though we have observed commitment on the part of many central government officials to tackle the problem, enforcement measures taken to date have not been sufficient to deter massive IPR infringements effectively. There are several factors that undermine enforcement measures, including China’s reliance on administrative instead of criminal measures to combat IPR infringements, corruption and local protectionism, limited resources and training available to enforcement officials, and lack of public education regarding the economic and social impact of counterfeiting and piracy”.

“Notwithstanding the increased number of applications, many patent owners (both foreign and domestic) continue to experience problems with infringement in China. Counterfeiting and other infringing activities are rampant, and critics frequently complain of lax enforcement of intellectual property laws. As a result, any party considering introducing a patented (or patentable) technology into China – especially one that could be easily reverse engineered or duplicated – would be well advised to proceed with extreme caution, seek legal advice from the outset, and plan fastidiously”.

Regulatory Data Protection (RDP) in India:

Regulatory Data Protection (RDP) for Pharmaceutical Products is still not in place in India, as the Government of India has already articulated that RDP is a ‘TRIPS Plus’ requirement and is non-binding to the country. The Government further reiterated that if any or more interested parties will feel that it is not so, they can certainly go to the WTO forum for the redressal of their grievances in this matter.

RDP in China – the US perspective:

However, on this subject the US feels that though RDP for a 5 year period is now in place in China, ‘inadequacies in their current regulatory environment allow for unfair commercial use of safety and efficacy data generated by the global innovator companies.”

In such a scenario the sanctity of RDP gets significantly diluted and may prove to be a virtually meaningless exercise.

Conclusion:

R. Fernando and D. Purkayastha of ICMR Center for Management Research in their article titled, “Pfizer’s Intellectual Property Rights Battles in China for Viagra” had commented as follows:

“Though the foreign research-based pharmaceutical companies were not happy with the lax IPR regime, the booming Chinese pharmaceutical market provided enough incentive for these companies to stay put and fight it out with the local firms for a share in this emerging market”.

Under these circumstances, while recommending for a world class robust patent regime in India to foster innovation in the country, if anybody wants to draw examples from China on the subject, it would indeed be foolhardy.

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.