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Global ‘Contract Research and Manufacturing Services’ (CRAMS) – a new growth opportunity for mid-cap Indian pharmaceutical companies… Are we ready?

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Intense competition within global pharmaceutical industry, patent expiries of blockbuster drugs, ballooning R&D costs together with low R&D productivity, more and more stringent regulatory standards coupled with intense cost containment measures are exerting intense pressure on the bottom lines of the global pharmaceutical companies. The situation, which is continuing for quite some time from now has triggered two important strategic business considerations:1. A rapid consolidation process through ‘mega mergers’ and ‘mega acquisitions’ while medium to smaller M&As continued mostly with an intent to bridge strategic business gaps.2. Increase in interest towards ‘Business Processes Outsourcing’ initiatives of various scales and types, which include contract manufacturing and contract research to lower cost countries with clear objectives of saving both cost and time.

Such a situation has given rise to the evolution of Contract Research and Manufacturing Services, popularly known as CRAMS, especially in countries like India and China.

India is fast emerging as one of the key outsourcing hubs for contract research and global formulations manufacturing activities by improving its manufacturing standards through global benchmarking and simultaneously honing its competitive edge.

CRAMS market – Global and Local:

In 2006 the global market for CRAMS was reported to be of US$52 billion, which is expected to grow to US$76 billion by 2010.

However, the CRAMS market in India was just around US$1.00 billion in 2006, which is expected to grow to around US$3.50 billion by 2010, with an estimated CAGR of around 38% during the period.

Contract Research Market:

In 2006, including clinical trials with data management, contract research market in India was estimated to be around US$370 million with an annual growth of around 45%. In that year out of total contract research market, clinical trials activities contributed over 50%, closely followed by pre-clinical trials with a contribution of around 30%. Custom synthesis together with chemistry and biology related R&D activities contributed balance 18% of the contract research market.

Contract Manufacturing market:

In 2007, the global market for contract manufacturing was around U.S$26 billion. The market is estimated to be of U.S$40 billion in 2011 registering a CAGR of around 12%.

Contract manufacturing market in India was reported to be of U.S$ 660 million with an annual growth of 48% in 2007. However, both India and China are expected to grow faster during this period with a CAGR of around 20% because of availability of skilled human resource and world class manufacturing facilities.

The global market for contract manufacturing is highly fragmented. The market share of top 10 companies in this field is just around 30%. As Catalent Pharma Solutions, USA is the largest contract manufacturer of the world with a turnover of U.S$1.8 billion in 2007; Piramal Healthcare is the largest contract manufacturer in India, which has registered a growth of over 30% in 2007-08. In the field of biotechnology Lonza of Switzerland is the largest contract manufacturer with a growth of over 75% in 2007.

Key Services provided by the CRAMS in India:

Contract Manufacturing Organizations:

They provide mainly:

• Manufacturing capacities to the global pharmaceutical companies
• Formulations development
• Value-added services like process development and process optimization

Contract Research Organizations:

They provide services mainly related to:

• Drug discovery
• Pre-clinical and clinical trial management

The Growth Divers for CRAMS business:

• Collaboration with global pharmaceutical companies in various areas of manufacturing, like local country-specific packaging of finished formulations from bulk packs imported from the originator, to complete manufacturing of the finished formulations, including supply of indigenously made raw material as per originators specifications.

• Outsourcing of formulations of off-patent molecules by the global companies to effectively compete with generics, as has happened between Pfizer and Aurobindo Pharma of Hyderabad, India.

• Expertise in cost-effective custom synthesis for global innovator companies of various scales of operation.

• Clear and sharp focus on CRAMS business by constantly improving manufacturing and supply chain management efficiencies. As is currently being practised by Piramal Healthcare. They have already spun off their R&D activities into a separate legal entity to unleash its commercial potential.

• Anytime readiness for audit of the approved site/s by any global regulator.

CRAMS space in India offers an emerging growth opportunity of global scale, especially to mid-cap domestic pharmaceutical companies. Many of these companies are still engaged in their old business model of the old paradigm of pre-IPR regime – manufacturing and marketing of generic brands and Active Pharmaceutical Ingredients (API). This business model can still work. But not without its huge inherent risk of continuous heavy pressure on the bottom lines due to intense cut-throat competition.

A strategic shift in the business model by those mid cap Indian pharmaceutical companies, who have wherewithal of creating world class CRAMS facilities for their global collaborators, would, to a great extent, be able to insulate their current high risk generic brands or API manufacturing and marketing business. At the same time, it will be quite possible for them to register a decent business growth by availing the emerging opportunities of the new paradigm of post IPR regime-CRAMS.

By Tapan Ray

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

Is rural India emerging as the new ‘Eldorado’ for the Indian pharmaceutical industry?

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“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative consumers, a whole new world of opportunity will open up,” wrote the management guru C K Prahalad in his well known book titled, “The Fortune at the Bottom of the Pyramid”.I am not sure whether the above profound observation is encouraging the pharmaceutical companies to spread their wings, at a much organized way, in rural India, where over 70% of the Indian population live and most of them are poor.Rural reforms have commenced in India at a much faster pace than ever before. Even many die-hard skeptics will now agree that the “Rural India has started Shining”. The shine, however, may not be as much as it ought to be. But surely, it is happening. The result of recent General Election in India perhaps will vindicate this point.

Is rural India the new growth opportunity for the pharmaceutical industry?

Decent business prospects in largely un-tapped rural India are making the pharmaceutical companies to move into this uncharted frontier. Reaching out to about 65% of the population who do not have access to modern medicines, could prove to be the new ‘Eldorado’ for the industry. Some well organized but small preparatory steps are already being taken towards this direction, which ultimately could lead to taking a giant leap towards this new frontier.

Some companies have started charting in a new way in this much uncharted frontier:

Possibly as a testimony to this new business approach we can now see:

1. Novartis with its “Arygoya Parivar” initiative working out a tailor-made program for rural areas of seven selected states, to start with. They have developed special packs of essential medicines with special prices to reach out to the rural marketing population.

2. Novo Nordisk screening patients suffering from diabetes in the rural areas of Goa with mobile clinics.

3. Eli Lilly developing a program along with the Self-Employed Women’s Association in Ahmedabad to educate and encourage rural patients suffering from tuberculosis to go for treatment.

4. Ahmedabad based Cadila Pharma setting up a dedicated rural marketing arm called ‘Explora’, which has already clocked a reported annual turnover of Rs. 50 crore.

5. Vadodara based Alembic Chemicals creating a rural business unit called ‘Maxis’.

6. Piramal Healthcare launching a pilot project in Rajasthan to take its products to rural areas where there is no proper public health system.

These are just a few illustrations and not an exhaustive list. However, the question is whether the rural marketing initiatives will continue to remain an illusion to the pharmaceutical companies in India or will get translated into a decent strategic move?

Going by various published reports, it appears that fortune still exists at the bottom of the pyramid.
In 2007 the rural markets registered a growth of over 40% over the previous year. This scorching pace of rural market growth is expected to continue in the next decades.

Moreover, according to McKinsey Report, rural markets will contribute about 27% of the total consumption of India by 2020 and by 2015, rural India will account for over 24% of the domestic pharmaceutical market from its current level of 17%.

Rural market size:

The rural markets currently contribute about 17% of U.S$8.1 billion pharmaceutical market in India. As reported in ‘India Pharma 2015’ of McKinsey,” by 2015 rural pharma market size is expected to reach U.S$4.8 billion from U.S$1.2 billion in 2005.”

Key growth drivers, as McKinsey indicated in this report, will be as follows:

• Income growth: 40%
• Medical infrastructure: 20%
• Health insurance penetration: 15%

Rural markets are currently dominated by ailments related to various types of infections. This disease pattern is expected to change by the next decade to non-infectious chronic illness, like diabetes, cardiac diseases, cancer, hypertension etc.

The opportunities in the rural markets:

‘The Fortune at the Bottom of the Pyramid’, the famous observation of the management guru C.K. Prahalad is equally apt for the pharmaceutical industry of India, where the just 35% of the population has access to affordable modern medicines.

Further, 20 million middle class households living in about 6,00,000 villages, which is almost the same as the number of middle class households residing in urban India, is currently instrumental to significant increase towards healthcare spending in rural India.

Rural market entry strategy:

Instead of transplanting the urban marketing strategy into rural India, some companies like, Novartis, Novo Nordisk and Eli Lilly, as mentioned above, have taken the community-welfare route to make the rural population aware of particular disease segments like, tuberculosis, diabetes, waterborne diseases etc together with the treatments available for such ailments.

These value added marketing strategies offer benefits to both the patients and the company concerned. The local medical practitioners, in turn, are also benefitted as they get increasing number of patients in their clinics through such disease awareness community program by the pharmaceutical companies.

Key challenges:

There are some key challenges, as well, for effective rural penetration by the Indian pharmaceutical industry, which are as follows:

• Inadequate basic healthcare infrastructure. Only 20% of total healthcare infrastructure of the country is in rural areas where over 70% population lives.

• Density of doctors per 10,000 populations in India is just 6. About seven lakh villages in India do not have doctors. As per AC Neilsen study, an average rural Indian has to travel about 6 km to visit a doctor. A Medical Representative will require travelling about 250 to 300 km every day just to meet about 10 doctors and 4 dealers.

• Villages are not well connected by proper all season roads.

• Lack of appropriate supply chain network and logistics support.

National Rural Health Mission (NRHM) – a key facilitator:

Be that as it may, greater focus of the new UPA Government on NRHM will help immensely to overcome many of these challenges in various different ways.

In the interim budget 2009, the Government has allocated U.S$ 2.35 billion for the NRHM. It is expected that this initiative, if implemented well, will help improving not only the healthcare infrastructure in rural India, but also supply of affordable medicines, in these long neglected areas.

Conclusion:

With required infrastructural support and tailor made value added marketing strategies for rural India, simultaneously delivering both preventive and curative therapies under one umbrella, it may not be difficult for the Indian pharmaceutical companies to discover ‘The Fortune at the Bottom of the Pyramid’ – a win-win situation indeed for both the ‘haves’ and a vast majority of ‘have nots’ living in India.

By Tapan Ray

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

The Professor, Counterfeit Drugs, CDA Bill and the New Health Minister

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Just a couple of days ago, I met Professor Sam Gupta, an American professor of Indian origin. Prof. Gupta has specialized in nuclear medicine and hails from a well reputed North American University. Dr. Gupta, like many others, had left the shores of India decades ago when he was just a student. During his long arduous journey on the beaten path of life, he almost lost contacts with his roots in India.
An incident that triggered intense passion in Prof. Gupta:

When I met him just the other day, I heard him passionately speaking about the menace of substandard and counterfeit medicines, in the world in general and India, in particular. He was reminiscing how had he decided to wage a war, as it were, against this injustice against humanity. Despite having a nuclear medicine background, Prof. Gupta is fighting this crusade against evil with an intense passion, as intense as it could possibly be.

The professor still teaches and researches on nuclear medicine in North America… but he spends all his balance time driven by this passion, to bring home some change in the uncertain treatment environment, involving well being of a large number of patients, especially in India. What then triggered this ‘burning desire’ in the mind of a seemingly quite and extremely polite Prof. Gupta?

Not a very long ago, a person, very dear and near to the professor, while visiting India became a tragic victim of a counterfeit medicine. Professor lost his dear one, in India. Intense sadness due to loss of this otherwise healthy individual, that too so suddenly, got converted into a potent rage in him… and… the rage into a passion… a passion to stop the menace of substandard and counterfeit medicines, in whatever way he possibly can.

Professor’s dear one is not the sole victim of spurious, substandard and counterfeit medicines in India. Such tragedy strikes many hundreds and thousands of Indians every year. We come to know very seldom and very little about such instances, for various reasons. Real reasons of most of these tragic deaths, usually remain unknown to the civil society, at large… but the ‘merchants of death’ keep making fast bucks with their cash counters constantly ringing. Heart rending cries for loss of human lives, because of their mischief, do not mean anything to them. To the regulators, ironically, price of medicines appears to be more important than the quality of medicines.

Minimum acceptable quality standards for medicines:

Though medicines should offer and promise maximum possible quality standards, in India we are satisfied with the ‘minimum acceptable quality standards’ even for medicines and of varying degree of quality, just as any other commodities. It is not unknown to many that in India, we have broadly two types of quality – one type of quality exists for the domestic consumption and use and the other type of quality is for people living outside India and mainly in the western world, which is termed as ‘exports quality’. ‘Exports quality’ products attract a premium in India to the common man, even in the 21st. century.

Varying degree of acceptable drug quality in India:

Just like ‘domestic’ and ‘exports’ quality, for medicines we have many acceptable quality standards, in India: GMP quality, WHO GMP quality, US-FDA quality just to name a few. It appears that our regulators are just satisfied in ensuring availability of cheaper priced medicines with ‘minimum acceptable’ or ‘varying’ quality standards. If not, why is there no concerted effort by the drug regulator to strike at the root cause of proliferation of substandard and counterfeit medicines in India? When we see so many regulators working so well to ensure ‘affordability’ of medicines, why is the drug regulator failing to stop proliferation of substandard and counterfeit medicines in the country, in a systematic way? Who is accountable, when a patient takes affordable medicines of poor quality and suffer from undesirable consequences? Some estimates indicate that at least 10% of medicines produced in India are substandard.

Some good initiatives were implemented and some equally good initiatives were stalled – why?

A major amendment in the Drugs & Cosmetics Act, 1940, proposed in October 2007 and enacted into a law in 2008, has increased the minimum jail term for counterfeit drug offenders from 5 to 10 years and the minimum fine for such offenses increased from Rs. 10,000 (about U.S$ 220) to Rs. 10 lakh (about U.S$ 22,000).

However, the amendment of the Drugs & Cosmetics Act, 1940 to create a Central Drug Authority (CDA) has not seen the light of the day, as yet, due to various vested interests. The CDA, if created, would have been responsible for the entire drug regulatory mechanism in India including all marketing approvals and uniform quality standards of medicines, across the country.

What happens today for manufacturing and marketing approval of drugs in India?

Currently, although the Drug Controller General of India (DCGI) gives marketing approval of all new drugs, imported or domestic, the manufacturing permission of these drugs in India is granted by concerned state drug regulatory authorities. It is believed that there is a perceptible variation within the states in quality of inspection, monitoring and enforcement of various regulatory systems and maintenance of uniform drug quality standards.

It is worth noting that ‘new drug’ status of a formulation type, remains for four years. After this period the state drug authorities can grant marketing approval of such products. Huge regulatory quagmire created with unabated proliferation of Fixed Dose Combination products (FDC) in India, is a testimony of how the drug regulatory systems works in India.

Despite existence of such variation in standard from state to state, it is indeed an irony that drugs approved and produced in any state are allowed to be marketed and sold across India or even be exported outside the country. It is quite possible that substandard drug producers can locate themselves in states with weaker regulatory controls and make their cheaper substandard products available for sales across the country, making hundreds and thousands of innocent citizens vulnerable to a possible life threatening risk.

Drug regulatory mechanism deserves a revamp in India without further delay:

Some people believe that hectic efforts by politicians and vested interests from the states with weaker regulatory controls have prevented the CDA bill from getting translated into reality, showing scant respect to the need of patients who may not have any other option but to use these substandard drugs.

How does the western world care for their patients with high quality medicines?

In the western world, drug regulators have taken specific measures to ensure availability of highest quality of medicines for their citizens. It is for that reason Food and Drug Administration of the United States of America (US-FDA) has opened its establishment in India to ensure that the drugs, which are manufactured in India and exported to the USA, are of highest quality standards.

Lackadaisical approach of the Indian drug regulatory authorities has created an environment within the country where many pharmaceutical manufacturers, including some large ones have allegedly placed themselves in a peculiar ‘comfort zone’ by not following prescribed procedures of generating required essential documents, while manufacturing drugs of high quality standards.

Continuous living in such comfort zones led to the largest pharmaceutical company of India, facing ban of 30 of their product formulations in the USA in 2008, against the charge of ‘falsifying’ the product manufacturing documents – a stigma on the pride of India in general and the Indian pharmaceutical industry, in particular, which will remain till the issue is sorted out. As if this was not enough, close on its heel some more incidents came into light with the names of other top Indian companies falling under the scanner of US FDA for not conforming to their regulatory requirements related to drugs manufactured for use in the US market.

When regulators of other countries are so active, why then are our own drug regulators failing to clean up the menace of spurious, substandard and counterfeit medicines in India? Why important bills like CDA are being stalled by the vested interests with the help of politicians, exposing a large number of patients to medical risks?

Will the new government be any different?

I sincerely hope that our new Minister of Health, Shri Ghulam Nabi Azad will sincerely address this very pressing health issue for the country. I also believe that under his astute leadership, the menace of spurious, substandard and counterfeit medicines will receive due consideration of the cabinet and the CDA bill will soon be a law.

Till then…crusade of Prof. Gupta continues:

If it happens, just as Dr. Gupta, the Indian American professor of Nuclear Medicine will get a huge sense of accomplishment, after fighting a long and arduous battle to save patients from the danger of substandard and counterfeit medicines in India, the civil society of our country will at the same time feel a unique sense freedom… the freedom from fear… the fear of substandard and counterfeit medicines.

By Tapan Ray

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

To reap rich harvest from emerging global opportunities, Indian Biotech sector needs a ‘lifeline’ from the new Government… Now.

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Growth of Biotech Industry in India took a dip in 2008. It registered a turnover of U.S $2.56 billionwith a growth of 20%, over the previous year. The industry was clocking an annual growth of over 30%, before this period.According to the Association of Biotech Led Enterprises (ABLE)this growth rate can still be considered as encouraging. Some industry experts endorsed this view by commenting that 10% drop in the growth rate was mainly due to exchange rate variations impacting exports earning.However, many other do not subscribe to this explanation. They argue that global financial meltdown has caused an all-round liquidity crisis and lower demand in the biotech sector, leading to sharp decline in income generation.

It appears that even 2009 will continue to be a challenging year for the Biotech sector. As is known to many, continuous innovation is the growth driver of this sector and the main fuel for this growth driver is continuous infusion of capital, the pipeline of which is drying up during the current period of global financial crisis.

ABLE Survey on Biotech sector:

A recent survey, conducted by ABLE, reported as follows for the biotech sector:

1. 56% of revenue (U.S$ 1.44 billion) was generated from exports

2. Bio-pharma accounted for about 70% of exports

3. Bio-services are about 26% of exports with an encouraging growth of 46% followed by bio-informatics with 31% growth rate

4. The top 20 Indian firms accounted for 48 % of the total biotech market

5. Last year investments in Biotech were reported to have grown by around 21%.

ABLE expects a decent growth of the bio-pharma segment over the next five years. Bio-services and bio-generic exports to the regulated markets are expected to be the key growth drivers during this period. However, the moot question is: will the current global financial crisis act as a dampener to such bullish expectations?

Market forecast for Biotech sector:

‘Bio-spectrum’, in one of its recent reports, highlighted that with the new biotech policy of the Government of India (GoI), the sector is expected to grow to U.S$ 13-$16 billion by 2015. Serum Institute of Pune is at the top of the league table with a turnover of Rs. 9.87 billion followed by Biocon and Panacea Biotech.

Some analysts feel that the Indian biotech sector has the potential to register a turnover of U.S$5 billion by 2010 and U.S$20 billion by 2020. This is mainly due to increasing global demand for more affordable medicines in general and biotech medicines in particular. Recent introduction of ‘The Promoting Innovation and Access to Life-Saving Medicine Act’ in the US House of Representatives vindicates this point.

It is envisaged that this bill will enable the US Food and Drug Administration (USFDA) to create regulatory pathways for marketing approval of ‘bio-similar’ drugs in the USA. Many Indian biotech companies, analysts feel, are preparing themselves to make full use of this golden opportunity as soon as it comes.

How is the ‘Global Financial Meltdown’ affecting the Biotech sector?

The impact of ‘Global Financial Meltdown’ is all pervasive in the Biotech sector, all over the world, India is no exception.

Because of global liquidity crunch, availability of capital to fund the growth of this sector has become scarce, leading to most of the growth plans, if not all, are being put on hold. Fear among the Indian Biotech companies of turning an easy prey for the predators in search of a good biotech portfolio, is looming large. It was recently reported in the media that GlaxoSmithKline and Sanofi-Aventis are interested to acquire a majority stake of Shantha Biotech of Hyderabad.

In abroad, we have witnessed such instances when Roche acquired Genentech, Astra Zeneca bought MedImmune, Eli Lilly acuired Imclone and Merck took over Serno.

Why is the impact of global ‘liquidity crunch’ more on the Biotech sector?

The impact on ‘liquidity crunch’ on the Biotech sector is more pronounced because all over the world this sector is dominated mainly by much smaller companies, engaged in the drug discovery and development research. Continuous flow of fund is of utmost importance not only to fund growth of these organizations, but for their survival, as well. Private equity funding is also dwindling up pretty fast.

GoI initiatives to encourage growth of Biotechnology sector:

Mr. Kapil Sibal outgoing Minister of Science and technology of the erswhile UPA government, not too long ago, announced the plan of the GoI to build 20 more biotech parks in India, in order to provide the required infrastructural facilities to this sector and promote high quality R&D initiatives related to biotechnology.

It is indeed encouraging to note that the Department of Biotechnology (DBT) has already signed a 10-year contract with the Welcome Trust towards developing human resources of high quality, for the sector.

Emerging outsourcing opportunities:

Despite such pessimistic scenario, Indian biotech sector is bullish on the business opportunities from various types of emerging outsourcing opportunities being offered by the global pharmaceutical companies, because of their business compulsions, particularly in Contract Research and Manufacturing services (CRAMS) space.

Zinnov management consulting recently reported that outsourcing opportunities of over U.S. $ 2.5 billion will come to the Indian Pharmaceutical Industry, including its Biotech sector by 2012. This will indeed help the domestic pharmaceutical companies in a big way, as many players are now finding the transition from manufacturing ‘copy cat’ generic drugs to devising new therapies, pretty difficult.

Conclusion:

To reap a rich harvest from of all these emerging global and local opportunities, the biotech sector of India now needs a ‘lifeline’ from the new Government. Ensuring easy availability of capital will be the ‘lifeline’, at this moment of global financial crisis.

In the battle against disease let the Biotech parks of India be seen as the ‘Armageddon’, as it were, global hub to cater to the needs of poor and needy – a symbol of scientific supremacy.

By Tapan Ray

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

‘Patent Pool’ – is GSK setting a new trend for the global pharmaceutical industry?

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On February 13, 2009, The Guardian reported that Andrew Witty, CEO of GlaxoSmithKline (GSK) announced some significant changes to the way his company will operate in the developing countries of the world.

GSK, as Witty said, will:

• “Cut its prices for all drugs in the 50 least developed countries to no more than 25% of the levels in the UK and US – and less if possible – and make drugs more affordable in middle- income countries such as Brazil and India.

• Put any chemicals or processes over which it has intellectual property rights that are relevant to finding drugs for neglected diseases into a “patent pool”, so they can be explored by other researchers.

• Reinvest 20% of any profits it makes in the least developed countries in hospitals, clinics and staff.

• Invite scientists from other companies, NGOs or governments to join the hunt for tropical disease treatments at its dedicated institute at Tres Cantos, Spain.”

Quoting Andrew Witty, The Guardian reported, “his stance may not win him friends in other drug companies, but he is inviting them to join him in an attempt to make a significant difference to the health of people in poor countries”.

“We work like crazy to come up with the next great medicine, knowing that it’s likely to get used an awful lot in developed countries, but we could do something for developing countries. Are we working as hard on that? I want to be able to say yes we are, and that’s what this is all about – trying to make sure we are even-handed in terms of our efforts to find solutions not just for developed but for developing countries,” Witty envisioned.

“I think the shareholders understand this and it’s my job to make sure I can explain it. I think we can. I think it’s absolutely the kind of thing large global companies need to be demonstrating, that they’ve got a more balanced view of the world than short-term returns,” he expressed Knowing full well that his comments will be considered as quite radical within the global pharmaceutical Industry.

The unorthodox young CEO of GSK continued, “I think it’s the first time anybody’s really come out and said we’re prepared to start talking to people about pooling our patents to try to facilitate innovation in areas where, so far, there hasn’t been much progress.”

Definition of ‘Patent Pool’:

The ‘Patent Pool’ is defined as, “an agreement between different owners, including companies, governments and academic bodies to make available patent rights on non-exclusive basis to manufacturers and distributor of drugs against payment of royalties”

Thus one of the often repeated key benefits of the ‘Patent Pool’, as considered by its proponent, is that the system enables the use of innovation against payment of royalties, without the risk of patent infringement.

The rationale for ‘Patent Pool’ system:

Many experts in this area feel that the conventional patent system does not really work for the diseases of the poor, all over the world. Though the concept of ‘Patent Pool’ is quite new in the global pharmaceutical industry, this system is being very successfully and widely practised within the Information Technology (IT) industry. ‘Patent Pool’ system, if effectively used, can also help the global pharmaceutical companies to improve their access to many more developing countries of the world.

GSK appears to have kick started the process:

Andrew witty of GSK is undoubtedly the first CEO of a global pharmaceutical company to announce a ‘Patent Pool’ system for research on 16 neglected tropical diseases like, tuberculosis, malaria, filariasis leprosy and leishmaniasis. GSK has, in a real sense, kick started the process by putting more than 500 granted pharmaceuticals patents and over 300 pending applications in the ‘Patent Pool’.

Key requirements for the ‘Patent Pool’:

Careful identification of various patents, which will be essential for the pool, will be one of the key requirements to initiate a ‘Patent Pool’ system. It makes the need to obtain individual patents, required in the process of a drug discovery, less important.

Key issues with the ‘Patent Pool’ concept:

It has been reported, from a WHO conference held in April, 2006 ‘Innovation Strategy Today’ worked out that the start-up costs of a ‘Patent Pool’ for vaccines will be economically viable only if more than 25 participants holding relevant patents join the initiative.

Moreover, various types of litigations, related to patents, which we are currently witnessing within the global pharmaceutical industry, could also be impediment in getting more patents in the pool.

Conclusion:

The initiative to create a ‘Patent Pool’ system in the global pharmaceutical industry, especially for the diseases of the poor, as enunciated by the CEO of GSK, is indeed a path breaking one. Such initiatives are likely to have very positive contribution in solving the problem of access to affordable medicines, especially in the developing world.

In fact, the Council of Science and Industrial Research of the Government of India, lead by its Director General, Dr. Samir Brahmachari has already undertaken similar initiatives in the country where global experts including academia are actively participating.

Though ‘Patent Pool’ is still an untested model in the global pharmaceutical industry, the recent announcement of GSK towards this direction does appear to offer a realistic and practical approach to address the critical global issue of improving ‘access to affordable innovative modern medicines’ to a vast majority of population in the developing countries of the world.

By Tapan Ray

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

Growing menace of counterfeit drugs in India: why is the domestic pharmaceutical industry still so apprehensive with the new Amendments of the ACT?

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The growing menace of Counterfeit drugs has remained a serious threat to the healthcare space of India.
Do we have any credible data to assess the magnitude of this menace in India?

No we do not have, as yet. At this stage, the magnitude of the problem is anybody’s guess. Earlier a study sponsored by the World Health Organization (WHO) and conducted by SEARPharm reported that only 0.3% drugs were spurious and 3% of drugs were counterfeits.

Government of India has initiated the largest study in the world to quantify the problem:

To scientifically assess the magnitude of the problem in terms of real size of counterfeit drugs market in India , the Drugs Controller General of India (DCGI) India’s, for the first time ever, has initiated one of the largest studies in the world, as reported by the Times of India May 14, 2008.

The study has already identified 61 popular drug brands from nine therapeutic categories for testing 24000 samples. These include drugs prescribed for tuberculosis, malaria, allergic disorders, diabetes cardiovascular conditions, vitamins etc. This study is expected to cost 50 million rupees or about U.S$1.0 million and is expected to be published, soon.

Making provisions for stricter penalties through amendment of the Drugs and Cosmetics Act, 1940:

To bring into effect stricter penalties for those involved in counterfeit drugs, the process of amendment of the Drugs and Cosmetics Act, 1940 was proposed by the Ministry of Health in October, 2007. These amendments are expected to make the drug-related offences, cognisable and non-bailable.

The latest amendment to the Drugs and Cosmetics Act, 1940 became a law in 2008. The punishment for selling or distributing spurious drugs, which are likely to cause death and grievous hurt to the patients, is now imprisonment for a term not less than 10 years and fine not less than Rs 10 lakh or three times the value of drugs confiscated, whichever is more.

The Minister of Health of India announced in November 2008, that with this amendment the Government of India will “go all out to do away with spurious drugs.”

India working closely with WHO Anti-counterfeiting Taskforce:

India being a part of ‘International Medical Products Anti-Counterfeiting Taskforce’ (IMPACT), established under WHO in 2006, decided to work together to combat the growing menace of counterfeit medicines.

The Drugs Controller General of India (DCGI) was reported to have several discussions with the convenor of the IMPACT to effectively address the issue of such serious threats to the patients at large. Many people believe that China and India are the main source of counterfeit drugs in the world.

Apprehensions of the Indian Pharmaceutical Industry with new Amendments in the Law:

Indian Pharmaceutical Industry although welcomed the stricter punitive provisions in the law, expressed its apprehensions due to lack of clear demarcation between the definitions of spurious drugs and those which can lose their original potency because of improper transportation and storage.

If the law-enforcing authorities pick up such medicines from retail outlets, those can easily get categorised as spurious medicines under Section 17A and 17B of the Drugs and Cosmetics Act, 1940. Consequently the concerned manufacturers could be put behind bars with, presumably, no fault at their end.

While stringent punishment is essential for those involved in such heinous crime, the Government should take enough measures to ensure that genuine drug manufacturers are not harassed by the law enforcing authorities, as the courts will have no judicial discretion to award less than minimum punishment, as prescribed under this Act.

Need for clear guidelines for implementation of the amended ACT:

To allay the major apprehension of the industry regarding possible misuse of some provisions of the Act, the Ministry of Health is expected to work out and quickly announce clear guidelines for implementation of the act by the law enforcement agencies in different parts of India.

Will this amendment help to win the fight against counterfeit drugs?

Only time will be able to give that answer. However, by amending the Act, the Government of India has demonstrated its resolve to address the threat of counterfeit drugs with iron hand. Through enunciation of above guidelines, all concerned are expected to be taken on board to effectively curb, if not totally eliminate this growing menace, for the sake of humanity.

By Tapan Ray

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

We need to encourage the new product patent regime

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Ushering in the Product Patent Regime in India heralds the dawn of a new era. The era that vindicates not only the need to encourage, protect and reward innovation for the rapid progress of our nation but also to compete effectively, in the knowledge economy with the best in the world to establish India as a leading country with a significant share of the global economy.However, it is quite unfortunate that the patents that protect today’s innovations and drive research and development to create tomorrow’s life-saving treatments are under criticism from some quarters.India chose to follow an alternative to Product Patent regime for many years. In 1970, the Government of India amended its IP laws with a clear objective in mind to reduce the prices of medicines to improve their access to the ailing population of the country.

As a result, some drugs were made cheaper. However, the moot question that we need to address now: was it a panacea? While looking back, it does not really appear so. On the contrary, the situation remained as gloomy thereafter, so far as the access of medicines is concerned. After almost 4 decades of continuation with the above policy, around 65% of Indian population still do not have access to cheaper off-patent medicines against comparative figures of 47% in Africa and 15% in China (Source: International Policy Network, November 2004).

Children still go without routine vaccinations, though the Government has made the primary vaccination programs free in our country, for all. Even in a situation like this, where affordability is no issue, only about 44% of infants (12 – 23 months) are fully vaccinated against six major childhood diseases – tuberculosis, diphtheria, pertussis, tetanus, polio and measles.

Moreover, as we know, despite distribution of cheaper generic HIV-AIDS drugs by the Government and others mostly free for years, only 5% of India’s AIDS patients were receiving any drugs by the end of 2006.

The above two important examples prove the point very clearly that, addressing the issue of price alone will not help our country to solve the issue of poor access of medicine to the ailing population of India. Only a sharp focus on rejuvenation of our fragile healthcare system, healthcare financing and rapid development of healthcare infrastructure of the country by the Government or through Public Private Partnership (PPP), will help address this pressing issue.

Indian Patent Act 2005 has paved the way for innovation and hi-tech research and development within the country. Contrary to adverse forecasts from some quarters, prices of medicines have not gone up.

However, while medicines play a relatively small role in rising overall health care spending including hospitalization, it is important to ensure that individuals with large healthcare expenses have affordable access to their medicines. Thus a good affordable insurance coverage (both Government and Private) available to all Indians belonging to various socio-economic strata, together with the above measures, will help address the key issues of both access and affordability of medicines for all, in a holistic way.

The attack on patents is not really a defense of patients or the poor. Such attacks help diverting attention from the core healthcare issues, as mentioned above, which are healthcare system, healthcare financing and healthcare infrastructure. Health of our nation will depend on how well these key issues are being addressed by the policy and decision makers. Our country cannot afford to ignore that Intellectual Property is one of the keys to prosperity of a great nation like India and it should be encouraged, protected and rewarded under a robust Patent Act of the country for inclusive growth.

By Tapan Ray

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