Tag Archives: New

Challenges for the Pharmaceutical Industry in the new paradigm – there are more questions than answers

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To get insight into the future challenges of the pharmaceutical industry in general ‘Complete Medical Group’of U.K recently conducted a study with a sizeable number of senior participants from the pharmaceutical companies of various sizes and involving many countries. The survey covered participants from various functional areas like, marketing, product development, commercial, pricing and other important areas.
The study indicates that a paradigm shift has taken place in the global pharmaceutical industry, where continuation with the business strategies of the old paradigm will no longer be a pragmatic approach. Besides this finding, my experience also vindicates that today is not a mega yesterday, just as tomorrow will not be a mega today.
Learning from the results of the above study, which brought out several big challenges facing the pharmaceutical industry in the new paradigm, my submissions are as follows:

Gaining greater market access and increasing pressure of price containment:

The increasing power of payors in the developed world and the interventions of the Government in the developing countries are creating an all pervasive pricing pressure. This critical development together with the issues related to gaining greater market access remain a prime concern for the future.

Better understanding of the new and differential value offerings that the doctors and patients will increasingly look for beyond the physical pharmaceutical products, will indeed be the cutting edge for the winners, in this new ball game.

Questioning the relevance of the current business model:
Top managements of the pharmaceutical companies have already started evaluating the relevance of the current global pharmaceutical business model. They will now need to include in their strategy wider areas of healthcare value delivery system with a holistic disease management focus. Only treatment of diseases will not be considered just enough with an offering of various type medications. Added value with disease prevention initiatives and appropriately managing quality of life of the patients, especially in case of chronic ailments, will assume increasing importance in the pharmaceutical business process.

Greater innovation across the pharmaceutical value chain:
Greater and more frequent incremental innovation across the pharmaceutical Value Chain will be critical success factors. The ability to really harness new technologies, rather than just recognize their potential, and the flexibility to adapt to the fast changing and demanding regulatory environment together with patients’ newer value requirements, should be an important part of the business strategy of a pharmaceutical company in the new world order.

Well integrated decision making processes:
More complex, highly fragmented and cut throat competition, especially in the branded generic market, have created a need for better, more aligned and integrated decision making process across various functional areas of the pharmaceutical business. Avoiding silos and empire building have long been a significant issue, especially for big pharmaceutical companies. Part of better decision making will include more pragmatic and efficient investment decisions and jettisoning all those activities, which are duplications and will no longer deliver incremental intrinsic or extrinsic differential value to the stakeholders.

Customer engagement:
Growing complexity of the prevailing business environment, including most recent change in the MCI regulations for the doctors are making meaningful interactions with the customers and decision makers increasingly challenging. There is a greater need for better management of the pharmaceutical communications channels to strike a right balance between ‘pushing’ information to the doctors and patients and helping them ‘pull’ the relevant information whenever required.

Let me hasten to add, even in the new paradigm, the fundamental way the pharmaceutical industry has been attempting to address these critical issues over decades, has not changed much. To unleash the future growth potential the pharmaceutical companies are still moving around the same old issues like, innovative new product development, scientific sales and marketing, customer focus, application of information technology (IT) in all areas of strategy making process including supply chain, building mega product brands, continuing medical education, greater market penetration skills, to name just a few.

Such responses do ring an alarm bell to me. It is known to many that most of the pharmaceutical companies have been investing in all these areas since long and yet these are the very points being highlighted even in the new paradigm to meet the “Challenge of Change”. The moot question will therefore be, what have all investments in these areas achieved, so far? And why have we not been able to address the needs of the new world order focusing with these tools? More importantly, if we do not address these issues moving ‘outside the box’ and with ‘lateral thinking’ even now, one can well imagine what could the implications be in the times to come?

The future Business Model will need to different:
I believe, the underlying business model of large global organizations focused primarily on developing New Chemical/Molecular Entities (NCEs/NMEs) from initial product discovery through development and commercialization, is unlikely to continue to yield results in the new era. The issue of ‘Patent Cliff’ has already started haunting the research based companies and assuming larger dimensions day by day.
Global pharmaceutical businesses have started evolving beyond patented drugs and including generics to create more diversified and robust healthcare businesses. It is quite evident from the strategies of many larger global pharmaceutical companies that this process has already begun.

Will R&D be collaborative in nature in future?
Currently R&D cost to launch a new patented drug in the market is reported to be around US$ 1.8 – 2.0 billion with accompanying huge risk factors. Thus there is a need to re-evaluate the R&D model of the pharmaceutical companies to make it cost effective with lesser built-in risk factors.
Could there be a collaborative model for R&D, where multiple stakeholders will join hands to discover new patented molecules? In this model all involved parties would be in agreement on what will be considered as important innovations and share the risk and reward of R&D as the collaborative initiative progresses. The Translational Medicine Research Collaboration (TMRC) partnering with Pfizer and others, ‘Patent Pool’ initiative for tropical diseases of GSK and OSDD for Tuberculosis by CSIR in India are examples of steps taken towards this direction.
Surely such collaborative initiatives are not easy but they are not uncommon either, as we witness these, especially in areas like IT. So why cost effective collaborative R&D projects be not initiated to create a win-win situation for all stakeholders in the healthcare space?

Could building pharmaceutical mega brands go beyond just a product for better ROI?
Building brands involve creating equity around an entity that delivers value to the customer, over and above the key functional properties of product. Traditionally, the global pharmaceutical industry has been largely focusing on building mega product brands having specific product life cycle say about ten years, especially for patented products.

Could the core idea of building a mega pharmaceutical brand be substantially different, in future?
I reckon, yes. Instead of investing huge sums in building pharmaceutical product brands with very limited product life cycle (for patented products), a more dynamic, powerful and cost efficient brand building process could well entail focusing on the ‘Corporate franchise’ brands with a mix of both patented and generic products in different price bands for different customer segments within a specific therapy category or disease area.

So instead of consistently creating, building and watching the mega patented pharmaceutical brands grow, mature and die, pharmaceutical companies could well encash the real opportunity to build long term emotional equity into their brands, hopefully without the suffocating NPPA restrictions associated with the current product brands.

Who knows, tomorrow’s list of the world’s top mega brands will not be dominated by the likes of Lipitor, Nexium, Plavix or Advair, but perhaps by quite a different types of mega brands like for example, GSK Vaccines, Sanofi-aventis Endocrinology, Novo-Nordisk Diabetic Care, Abbott Nutrition or Pfizer Cardiac Care.

Serum Institute Vaccines could be considered as one such brand for vaccines as a category, created within the pharmaceutical arena in India, over a long period of time.

Conclusion:
It is indeed quite clear now that the pharmaceutical business models are undergoing a serious re-evaluation in the new paradigm. I get a sense that the change is inevitable due to a variety of trends that are squeezing both sales and margins, posing severe challenges towards R&D, product development, marketing and communications.

As I have deliberated, some kind of solutions are gradually emerging. However, the key questions of how profound will this change be and how well the pharmaceutical companies are prepared to counter these changes, still remain unanswered.

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.

National Non-Communicable Disease (NCD) prevention program of the government needs a new thrust to contain the burden of disease in India.

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The disease pattern in India is showing a perceptible shift from the age old ‘Infectious Diseases’ to ‘Non-infectious Chronic Illnesses’. As reported by IMS, incidence of chronic ailments in India has increased from 23 percent in 2005 to 26 percent in 2009. It is estimated that chronic illnesses will be the leading cause of both morbidity and mortality by the next decade.As a consequence of such changing disease pattern, healthcare needs and related systems of the country should undergo a paradigm shift together with the emergence of a carefully planned concept of ‘Preventive Healthcare’ for the entire population of the nation.
It is a myth that non-infectious illnesses are more prevalent in higher socio-economic strata:

There is a common perception that non-communicable diseases are more prevalent within higher socio-economic strata of the society. However, a national survey done in India shows that diseases related to misuse of alcohol and tobacco are higher in the poorest 20 percent quintile of our society.

Current healthcare system in India:

Currently with appropriate disease treatment measures, alleviation of acute symptoms of the disease that a particular patient is suffering from, is the key concern of all concerned starting from the doctors to the patients and their family. The process of the medical intervention revolves round treatment protocols and procedures based on the diagnosis of the current ailments and not so much on preventive measures for other underlying diseases, except with the use of vaccines for some specific diseases.

Developing a protocol for ‘Preventive Healthcare’ for non-communicable diseases is very important:

In the above process, while addressing the acute problems of the patients’ current ailments is very important, proper risk assessment of other underlying diseases, if any, which the patient could suffer from in future, for various reasons, do not attract any organized attention. As a result the important advice on preventive healthcare from the doctors, properly highlighting its importance, is not available to most of the patients to enable them to significantly reduce, if not eliminate, their future burden of disease.

Keeping such common practices in view and noting that ‘Preventive Healthcare’ is significantly different from ‘Curative Healthcare’, developing an appropriate protocol for ‘Preventive Healthcare’ has become a crying need of the hour.

‘Preventive Healthcare’ in India should attract high priority of the healthcare policy makers with a care vigil on its effective implementation at the ground level:

All said and done, the ‘Preventive Healthcare’ system in India is in its very nascent stage. If appropriate measures are taken in this area, like learning to reduce the impact of mental and physical stress, avoiding sedentary life style, taking healthy diet, avoidance of tobacco and alcohol consumption, leading healthy sex life etc., it can in turn immensely help the population to remain disease free and healthy, thereby contributing to improvement of their respective work productivity in a very substantial way.

The Medical Council of India should also step in:

Thus the role of medical professionals in the disease prevention process is also very important. The interaction of the patients with the doctors when they meet to address any ailment provides huge opportunity to the doctors to advise those patients about various measures of underlying disease prevention, for which different patients have different types of exposures.

Keeping all these points in view, through regulatory initiatives, the Medical Council of India (MCI) should consider making ‘Preventive Healthcare’ an integral part of each interaction of a patient with a doctor.

Include the civil society in the healthcare improvement process of the nation:

The risk factors of many of the diseases like, cancer, chronic respiratory disorders, cardiovascular, diabetes, and hypertension can be identified well in advance and appropriately assessed. Therefore, such diseases can be prevented effectively, to a great extent, provided the healthcare policy of the country supports the ‘Disease Prevention’ process, program and initiatives through adequate resource allocation, improving awareness of the civil society and above all including them in this healthcare improvement process of the nation.

Need to raise general awareness towards ‘Preventive Healthcare’:

Raising the level of awareness of ‘Preventive Healthcare’ is indeed very important. It requires a change in the mindset of the community in general, together with the healthcare policy makers, medical profession, employers, patients and their families.

National Non-Communicable Disease (NCD) prevention program of the government:

As per the planning commission, the government of India has initiated the following structured measures for the prevention of NCD:

• “Health education for primary and secondary prevention of NCDs through mobilizing community action;
• Development of treatment protocols for education and training of physicians in the prevention and management of NCDs:
• Strengthening/creation of facilities for the diagnosis and treatment of CVD and stroke, and the establishment of referral linkages;
• Promotion of the production of affordable drugs to combat diabetes, hypertension, and myocardial infarction;
• Development and support of institutions for the rehabilitation of people with disabilities;
• Research support for: Multispectral population-based interventions to reduce risk factors;
• The role of nutrition and lifestyle-related factors;
• The development of cost effective interventions at each level of care”.

Conclusion:

Many diseases in India, with proper ‘Disease Prevention’ measures can be effectively averted. It is worth repeating that some common measures which can be easily practiced through community initiatives are maintenance of proper hygiene, sanitation, adequate physical activities, moderation in alcohol and tobacco consumption, healthy sexual activities, avoidance of unhealthy food etc.

Besides, the government should spearhead the paradigm change towards ‘Preventive healthcare’ by including the civil society as a part of this process along with appropriate regulations wherever necessary, generating increased awareness within all concerned and through mobilization of adequate resources. All these will ultimately help all of us to translate the well-known dictum into reality, ‘Prevention is better than cure’.

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.

Indian Patent office (IPO) asks for details of ‘working of patents’ in India – does it herald the beginning of a new chapter in the IPR regime of the country or it could trigger another raging debate

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A Public Notice dated 24/12/2009 issued by the Controller General of Patents, Design & Trade Marks, directing all Patentees and Licensees to furnish information in Form No.27 on ‘Working of Patents’ as prescribed under Section 146 of the Patents Act (as amended) read with Rule 131 of the Patents Rule 2003 ( as amended). The notice also draws attention to penalty provisions in the Patent Act, in case of non-submission of the aforesaid information.The Last date for filing the information is March 31, 2010. Only history will tell us about the possible future impact of this notification.Why is this information needed by the IPO?

Indian Patent Law specifies a provision for submission of information in Form 27 regarding the details of ‘working of a patent’ granted in India, which is a statutory requirement.

The information sought by the IPO in Form 27 can be summarized as follows:

A. For not ‘working of patent’: the reasons for not working and steps being taken for ‘working of the invention’ to be provided by the patentee.

B. In case of establishing ‘working of a patent’, the following yearly information needs to be provided:

1. The quantity and value of the invention worked; which includes both local manufacturing and importation.
2. The details to be provided if any licenses and/or sub-licenses have been granted for the products during the year.
3. A statement as to whether the public requirements have been met partly/adequately to the fullest extent at a reasonable price.

NB:

• A fine of up to (USD $25,000 may be levied for not submitting or refusing to submit the required information by the IPO.
• Providing false information is a punishable offence attracting imprisonment of up to 6 months and/or a fine.

What would amount to ‘Local Working of Patent’ in India?

Obviously, the question will arise what then would constitute ‘working of patent’ in the country. It is generally believed that ‘commercial exploitation’ of patented products in India will mean local ‘working of patent’ in the country.

This is still a controversial issue as some experts claim that ‘local working of patent’ can be established only through local manufacturing and thus importation of such products will not be considered as ‘local working of patent’ in India.

However, other groups of experts opine, as a signatory of article 21 (1) of TRIPS, India is under clear obligation to accept importation of a locally patented product as ‘local working of patent’.

How affordable is affordable?

Besides, ‘local working of patent’ issue, section 84.1 of the patent Act 2005 under ‘Compulsory licenses’ says:

“At any time after the expiration of three years from the date of the (grant) of a patent, any person interested may make an application to the controller for grant of compulsory license on patent on any of the following grounds, namely:

a. that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
b. that the patented invention is not available to the public at a reasonably affordable price, or
c. that the patented invention is not worked in the territory of India.”

The question, therefore, will arise, who will determine whether a patented product is available to the public at a reasonably affordable price or not? Moreover, what will be the measure, formula or yard to stick to decide reasonably affordable price? The next question could be – reasonably affordable price for whom … for the rich minority… or for around 300 million middle class population of the country… or for another 713 million lower middle class or poorer section of the society?

How ‘affordable’ then will be considered as ‘affordable’ in such cases?

Conclusion:

Whatever may be the case, it would be interesting to know, how the Indian patent Office (IPO) would deal with these details. In any case, such information will not remain a secret. ‘The Right to Information Act’ will help ferret all these details out in the open.

Thus, when the ‘moment of truth’ comes, one will be quite curious to note how the proponents of ‘compulsory licensing (CL)’ would try to push their envelope hard enough on this score to establish their view points… And on the other hand how would the innovator companies establish that the price is indeed a function of the value that the product would offer… and in that process would gear themselves up with relevant and credible, possibly ‘Health Technology Assessment (HTA)’ details to establish the price premium of patented products in India to meet the ‘unmet needs of the ailing patients.’

Striking a right balance in this matter by the IPO between rewarding fruits of expensive, risky and time consuming innovation, on the one hand, and help improving access to affordable modern medicines to a vast majority of the population of the country, on the other, will indeed be a daunting task.

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.

Biosimilars: Creating new vistas of opportunities for Indian Bio Pharmaceutical players in the global market.

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Biosimilar or follow-on biologic drugs market is fast evolving across the world with varying degree of pace and stages of developments. The global market for Bio-pharmaceuticals was around US$ 120 billion in 2008, as reported by IMS. However, total turnover of Biosimilar drugs in the regulated markets during the same period was just US$ 60 million.

Currently about 25% of New Molecular Entities (NMEs) under development are of biotech origin. Indian pharmaceutical majors like Dr. Reddy’s Laboratories (DRL), Reliance Life Science, Shantha Biotech, Ranbaxy, Biocon, Wockhardt and Glenmark have made good investments in biotech drugs manufacturing facilities keeping an eye on the emerging opportunities with Biosimilar drugs in the developed markets of the world.

International Scenario:

Internationally most known companies in the Biosimilar drugs space are Teva, Stada, Hospira and Sandoz.

The first R&D focused global pharmaceutical company that expressed interest in this space is Merck & Co. In December 2008 Merck announced creation of ‘Merck Bio Venture’ for this purpose with an investment commitment of around US$ 1.5 billion by 2015.

Other large research based global innovator pharmaceutical companies, which so far have expressed interest in the field of Biosimilar drugs are Pfizer, Astra Zeneca and Eli Lilly.

Future market Potential:

IMS Health, July 2009 reports that only in the US from 2009 to 2013 about 8 major biologic products like for example, Enbrel (Amgen/J&J), Lovenox (Sanofi-Aventis), Zoladex (AstraZeneca), Mabthera (Roche), Humalog (Eli Lilly) and Novorapid (Novo Nordisk) are expected to go off patent. The sum total of revenue from these drugs will be over U.S$ 15 billion.

This throws open immense opportunities for the Indian companies working on Biosimilar drug development initiatives.

Regulatory pathway for Biosimilar drugs:

Currently EU is the largest Biosimilar market in the world. Immense healthcare cost containment pressure together with a large number of high value biologics going off patent during next five years, especially in the developed western markets like US and EU, are creating a new vista of opportunities in this field to the potential players.

Regulatory pathway for Biosimilar drugs exists in the European Union (EU) since 2005. In the USA President Barak Obama administration has already expressed its clear intention to have similar pathway established in the country through the US-FDA, which is expected to come by 2010.

Steps taken by the Indian pharmaceutical companies towards this direction:

Biosimilar version of Rituxan (Rituximab) of Roche used in the treatment of Non-Hodgkin’s lymphoma has already been developed by DRL in India. Last year Rituxan clocked a turnover of over US$ 2 billion. DRL also has developed filgastrim of Amgen, which enhances production of white blood-cell by the body, and markets the product as Grafeel in India. Similarly Ranbaxy has collaborated with Zenotech Laboratories to manufacture G-CSF. Meanwhile Biocon of Bangalore has commenced clinical trial of Insugen for the regulated markets like EU.

On the other hand Glenmark is planning to come out with its first biotech product by 2010 from its biological research establishment located in Switzerland.

Within Biopharmaceuticals the focus is on Oncology:

Within Biopharmaceuticals many of these domestic Indian pharmaceutical companies are targeting Oncology disease area, which is estimated to be the largest segment with a value turnover of over US$ 55 billion by 2010 growing over 17%. As per recent reports about 8 million deaths take place all over the world per year due to cancer. May be for this reason the research pipeline of NMEs is dominated by oncology with global pharmaceutical majors’ sharp R&D focus and research spend on this particular therapy area. About 50 NMEs for the treatment of cancer are expected to be launched in the global markets by 2015.

Indian market for oncology products:

Current size of the Indian oncology market is around US$ 18.6 million, which is expected to be over US$ 50 million by the end of 2010; the main reason being all these are and will be very expensive products. Biocon has just launched its monoclonal antibody based drug BIOMAb-EGFR for treating solid tumours with an eye to introduce this product in the western markets, as soon as they can get regulatory approval from these countries. Similarly, Ranbaxy with its strategic collaboration with Zenotech Laboratories is planning to market oncology products in various markets of the world like Brazil, Mexico, CIS and Russia.

Conclusion:

As the R&D based global innovator companies are now expanding into the Biosimilar space, many Indian domestic pharmaceutical companies are also poised to leverage their R&D initiatives on Biosimilars drugs development to fully encash the emerging global opportunities in this space. It is quite prudent for the Indian players to focus on the Oncology therapy area, as it is now the fastest growing segment in the global pharmaceutical industry.

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.

Collaborative commercialization of inexpensive smaller incremental innovation in Chemistry will play an important role in bringing affordable new drugs or new drug delivery systems

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It started in the 17th century:

Alchemy, a medieval chemical science and speculative philosophy aiming to achieve the transmutation of the base metals into gold, searching for a universal cure for disease and indefinitely prolonging life, not considered a science by many, gradually became the basis for the development of chemistry into the 17th century. However, perceivable impact of chemistry on humanity, through its smaller incremental innovation, started being felt only in the second half of the 19th century.

Chemistry – an interface between the physical world and humanity:

Experts in this field often opine that the current form of human civilization has been made possible, to a great extent, through significant advancement of such innovation in chemistry and its role in modern technology. Chemistry is indeed an interface between the physical world on the one hand and the humanity on the other.

Getting a perspective of resource and time requirements for such initiatives:

Is there any similarity between development of pharmaceutical chemistry and IT software?

Now a days, one finds a striking similarity between small incremental innovation in IT software and the same in pharmaceutical chemistry. Both are creative and belong to the knowledge economy. Scientists in both the communities try to generate innovative ideas, which can lead to their effective commercialization.

Resource requirements for these two are strikingly different:

However, the nature of the commercialization process of these two sciences, though seemingly similar in terms of innovativeness, is indeed quite different. In the software community, two people can implement an idea with minimal resource requirement and could end up with a profitable commercialized product, without much difficulty. In contrast, two chemists may come up with a brilliant idea, which in many cases, may require significant investment of resources much before to even think to get the initial product commercialized. Subsequent steps of scaling up will be a separate issue altogether, with more resource commitment.

The process of commercialization of smaller incremental innovation in pharmaceutical chemistry is much longer:

As we all know, the process of commercialization of incremental innovation in chemistry takes a much longer time scale, as these are not usually spare time projects, unlike computer softwares. The cost involved in testing out and implementing a new idea in chemistry is very high and may not even be possible without any robust institutional backing.

Target inexpensive smaller incremental innovation in pharmaceutical chemistry:

Some illustrative examples of such smaller incremental innovation in chemistry are as follows:

1. Development of pharmaceutical co-crystals

2. Merger of chemistry of traditional and modern medicines for synergy in both efficacy and safety

3. Chemical technology switch: taking technology of one field and transferring it to a different field to get a new drug substance

4. Application of polymorphic chemistry in drug discovery.

The process has begun:

International experience:

The chemistry department of Oxford University, U.K, which is incidentally the biggest chemistry department of the western world, has made significant advances in commercializing incremental innovation in chemistry. Among many, they created and commercialized the following three entities through such incremental innovation:

• Medisense

• Oxford Molecular

• Oxford Assymetry

The Indian experience:

Despite all challenges, in India, as well, the commercialization process of smaller incremental innovation in chemistry has already begun. The Chemistry Department of the University of Delhi has developed 11 patentable technologies for improved drug delivery system using nano-particles. One of such technologies was development of ‘smart’ hydrogel nano-particles for encapsulating water-soluble drugs. This technology was sold to Dabur Research Foundation in 1999.

Another nano-particle drug delivery technology in opthalmogy area was also commercialized by transferring it to Chandigarh based Panacea Biotech Ltd.

Conclusion:

This process is expected to gain momentum in our country too, contributing significantly to the progress of the healthcare sector of the nation. “Commercializing smaller incremental innovation in Pharmaceutical Chemistry”, I reckon, will play a key role in providing affordable modern medicines to a vast majority of the population, as India transforms itself into a knowledge superpower.

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.

China has recently unfolded the blueprints of its new healthcare reform measures, when will India do so?

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Early April, 2009, China, a country with 1.3 billion people, unfolded a plan for a new healthcare reform process for the next decade to provide safe, effective, convenient and affordable healthcare services to all its citizens. A budgetary allocation of U.S $124 billion has been made for the next three years towards this purpose.
China’s last healthcare reform was in 1997:

China in 1997 took its first reform measure to correct the earlier practice, when the medical services used to be considered just like any other commercial product, as it were. Very steep healthcare expenses made the medical services unaffordable and difficult to access to a vast majority of the Chinese population.

Out of pocket expenditure towards healthcare services also increased in China…but…:

The data from the Ministry of Health of China indicate that out of pocketl spending on healthcare services had doubled from 21.2 percent in 1980 to 45.2 percent in 2007. At the same time the government funding towards healthcare services came down from 36.2 percent in 1980 to 20.3 percent in the same period.

A series of healthcare reforms was effectively implemented since then like, new cooperative medical scheme for the farmers and medical insurance for urban employees, to address this situation.

The core principle of the new phase of healthcare reform in China:

The core principle of the new phase of reform is to provide basic health care as a “public service” to all its citizens. This is the pivotal core principle of the new wave healthcare reform process in China where more government funding and supervision will now play a critical role.

The new healthcare reform process in China will, therefore, ensure basic systems of public health, medical services, medical insurance and medicine supply to the entire population of China. Priority will be given for the development of grass-root level hospitals in smaller cities and rural China and the general population will be encouraged to use these facilities for better access to affordable healthcare services. However, public, non-profit hospitals will continue to be one of the important providers of medical services in the country.

Medical Insurance and access to affordable medicines:

Chinese government plans to set up diversified medical insurance systems. The coverage of the basic medical insurance is expected to exceed 90 percent of the population by 2011. At the same time the new healthcare reform measures will ensure better health care delivery systems of affordable essential medicines at all public hospitals.

Careful monitoring of the healthcare system by the Chinese Government:

Chinese government will monitor the effective management and supervision of the healthcare operations of not only the medical institutions, but also the planning of health services development, and the basic medical insurance system, with greater care.

It has been reported that though the public hospitals will receive more government funding and be allowed to charge higher fees for quality treatment, however, they will not be allowed to make profits through expensive medicines and treatment, which is a common practice in China at present.

Drug price regulation and supervision:

The new healthcare reform measures will include regulation of prices of medicines and medical services, together with strengthening of supervision of health insurance providers, pharmaceutical companies and retailers.

As the saying goes, ‘proof of the pudding is in its eating’, the success of the new healthcare reform measures in China will depend on how effectively these are implemented across the country.

Healthcare scenario in India:

Per capita public expenditure towards healthcare in India is much lower than China and well below other emerging countries like, Brazil, Russia, China, Korea, Turkey and Mexico.

Although spending on healthcare by the government gradually increased in the 80’s, overall spending as a percentage of GDP has remained quite the same or marginally decreased over last several years. However, during this period private sector healthcare spend was about 1.5 times of that of the government.

It appears, the government of India is gradually changing its role from the ‘healthcare provider’ to the ‘healthcare enabler’.

High ‘out of pocket’ expenditure towards healthcare in India:

According to a study conducted by the World Bank, per capita healthcare spending in India is around Rs. 32,000 per year and as follows:

- 75 per cent by private household (out of pocket) expenditure
- 15.2 per cent by the state governments
- 5.2 per cent by the central government
- 3.3 percent medical insurance
- 1.3 percent local government and foreign donation

Out of this expenditure, besides small proportion of non-service costs, 58.7 percent is spent towards primary healthcare and 38.8% on secondary and tertiary inpatient care.

Role of the government:

Unlike, recent focus on the specific key areas of healthcare in China, in India the national health policy falls short of specific and well defined measures.

Health being a state subject in India, poor coordination between the centre and the state governments and failure to align healthcare services with broader socio-economic developmental measures, throw a great challenge in bringing adequate reform measures in this critical area of the country.

Healthcare reform measures in India are governed by the five-year plans of the country. Although the National Health Policy, 1983 promised healthcare services to all by the year 2000, it fell far short of its promise.

Underutilization of funds:

It is indeed unfortunate that at the end of most of the financial years, almost as a routine, the government authorities surrender their unutilized or underutilized budgetary allocation towards healthcare. This stems mainly from inequitable budgetary allocation to the states and lack of good governance at the public sector healthcare delivery systems.

Health insurance in India:

As I indicated above, due to unusually high (75 per cent) ‘out of pocket expenses’ towards healthcare services in India, a large majority of its population do not have access to such quality, high cost private healthcare services, when public healthcare machineries fail to deliver.

In this situation an appropriate healthcare financing model, if carefully worked out under ‘public – private partnership initiatives’, is expected to address these pressing healthcare access and affordability issues effectively, especially when it comes to the private high cost and high quality healthcare providers.

Although the opportunity is very significant, due to absence of any robust model of health insurance, just above 3 percent of the Indian population is covered by the organised health insurance in India. Effective penetration of innovative health insurance scheme, looking at the needs of all strata of Indian society will be able to address the critical healthcare financing issue of the country. However, such schemes should be able to address both domestic and hospitalization costs of ailments, broadly in line with the health insurance model working in the USA.

The Government of India at the same time will require bringing in some financial reform measures for the health insurance sector to enable the health insurance companies to increase penetration of affordable health insurance schemes across the length and the breadth of the country.

Conclusion:

It is an irony that on one side of the spectrum we see a healthcare revolution affecting over 33 percent population of the world. However, just on the other side of it where around 2.4 billion people (about 37 percent of the world population) reside in two most populous countries of the world – India and china, get incredibly lesser public healthcare support and are per forced to go for, more frequently, ‘pay from pocket’ pocket type expensive private healthcare options, which many cannot afford or just have no access to.

In both the countries, expensive ‘pay from pocket’ healthcare service facilities are increasing at a greater pace, whereas public healthcare services are not only inadequately funded, but are not properly managed either. Implementation level of various excellent though much hyped government sponsored healthcare schemes is indeed very poor.

Moreover, despite various similarities, there is a sharp difference between India and China at least in one area of the healthcare delivery system. The Chinese Government at least guarantees a basic level of publicly funded and managed healthcare services to all its citizens. Unfortunately, the situation is not the same in India, because of various reasons.

Over a period of time, along with significant growth in the respective economies of both the countries, with China being slightly ahead of India for many reasons, life expectancy in both India and China has also increased significantly, which consequently has lead to increase in the elderly population of these countries. The disease pattern also has undergone a shift in both the countries, mainly because of this reason, from infectious to non-infectious chronic illnesses like, hypertension, diabetes, arthritis etc. further increasing the overall burden of disease.

High economic growth in both the countries has also lead to inequitable distribution of wealth, making many poor even poorer and the rich richer, further complicating the basic healthcare issues involving a vast majority of poor population of India.

A recently published report indicates that increasing healthcare expenditure burden is hitting the poor population of both the countries very hard. The report further says that considering ‘below the poverty line’ (BPL) at U.S$ 1.08 per day, out of pocket healthcare expenditure has increased the poverty rate from 31.1 percent to 34.8 percent in India and from 13.7 percent to 16.7 percent in China.

To effectively address this serious situation, the Chinese Government has announced its blueprint for a new healthcare reform measures for the coming decade. How will the Government of India respond to this situation? It will indeed be interesting to watch.

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.

Changing pharmaceutical marketing environment demands a change in mindset for a new strategic direction.

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Will the Tsunami of change hit India too?
In the matured markets of the global pharmaceutical industry, individual doctors are no longer the prime target customers. Healthcare providers, patient advocacy groups, pharmacy benefit managers, clinical assessment authorities etc have already emerged as key decision makers for use of various branded or generic medicines and other kind of healthcare facilities/ support for the patients.In India even today individual doctors are the prime target customers for the pharmaceutical companies as, by and large, they are the key decision makers for usage of medicines and other healthcare facilities for the patients.

However, a distinct change, albeit slowly though, is now noticeable within healthcare financing system in India. Slow but gradual emergence of healthcare providers with medical insurance and other related products, patient advocacy groups, standard treatment guidelines etc, are expected to bring in a radical change the way current pharmaceutical marketing strategy is formulated, which continue to revolve round the doctors, mainly. The small ripples of change, blessed by adequate dose of the Government’s financial policy reform measures, may soon get converted into a Tsunami of change, destroying the current pharmaceutical business strategy directions of majority of the companies. Rapid increase in the number of healthcare providers and other related stakeholders with attractive schemes for various strata of the civil society, will herald the emergence of very powerful groups of negotiators for products’ price and other healthcare related services. These groups will be capable to very strongly and significantly influence doctors’ products and other treatment choices.

Marketing will be a ‘composite value delivery system’:

In addition, during the coming years of post product patent regime in the country, pipelines of the domestic Indian companies for new ‘copycat’ versions of patented products are expected to completely dry up, making the price competition in the market place even more ‘cut throat’. In such type of environment Indian pharmaceutical companies will be under tremendous pressure to provide additional composite value, not just the physical products, as differential offerings to the patients, doctors, healthcare providers and other stakeholders, in and around the related disease areas. Ability to deliver such composite differential value along with the product will enable a company to acquire the competitive cutting edge.

Required leadership and managerial skill sets will be quite different:

In the new environment required skill sets of both the leaders and the managers of the Indian pharmaceutical companies will be quite different from what it is today. This will not happen overnight though, but surely gradually.

Skill requirements:

Leaders and managers with only individual functional expertise like, R&D, manufacturing, marketing, regulatory, finance etc will no longer be successful in the new paradigm. To handle new types and groups of customers, the leaders and managers will need to ensure:

• Multi-functional expertise by rotating right people across the key functional areas

• Knowledge of ‘Pharmaco-economics’ and/or ‘health technology assessment’ (HTA)

• Ability to interpret patients’ clinical benefits against cost incurred by the payors to achieve the targeted clinical outcome, especially in the areas of new products

• Insight about the thought pattern of the healthcare providers and other customers or influencers groups

• Speed in decision making and more importantly ability to take ‘first time right’ on the spot decision, which can make or mar a commercial deal.

Managing the phase of transition:

During the ensuing phase of transition in India, pharmaceutical companies should:

• Clearly identify, acquire and hone the new skill sets, which would drive the changing scenario

• Get strategically engaged with the existing public/private healthcare providers and health insurance companies like, Mediclaim, ICICI Lombard, large corporate hospital chains, retail chain chemists and others, proactively

• Drive the change, instead of waiting for the change to take place

• Ensure that appropriate balance is maintained in both types of marketing strategies, in innovative ways.

Conclusion:

Indian pharmaceutical industry has been trapped in a difficult to explain ‘strategic inertia’, as it were, since long. It is high time now to come out of it and face the change upfront boldly and squarely to translate this challenge into a possible growth opportunity. Global pharmaceutical companies are now gaining expertise in the new ball game in the developed markets of the world. If majority of the Indian pharmaceutical companies, who are not yet used to handling such change, are caught unaware of this possible future trend, the tsunami of change could spell a commercial disaster to them. However, I strongly hope that this new and yet another challenge of change will be met with a clear and well thought out strategic initiatives to give a further boost to the growth engine of the industry.

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.

Changing recipe for growth in the new paradigm of Indian Pharmaceutical Industry… for its effective implementation there appears to be more questions than answers:

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India, the world’s largest democracy with its economy on a sustained growth track is creating an overall environment for high performance for all key sectors, including pharmaceuticals. In terms of GDP growth India is second only to China and is expected to become the fifth largest economy by 2017.
Dawn of a New Era:
Over a period of time, India has emerged as a fast growing pharmaceutical industry through various policy measures taken by the government of India (GoI). Such policy measures have been very supportive to the domestic companies. The absence of product patents from 1970 to 2005 enabled the Indian pharmaceutical companies to become world’s leading producers of ‘copycat’ versions of patented drugs. Lower cost base and expertise in ‘reverse engineering’ immensely helped the domestic industry to sustain its competitive edge during this period.

New product patent regime in 2005 heralded the dawn of a new era triggering a transformation of the industry. Return of large global companies like, MSD, Roche, Eli Lilly and entry of other company’s like Biogen, Genzyme, Allergan, Astellas, Eisai etc together with the emergence of many Indian companies to become research-based multinationals, are making this transformation more interesting.

Generic pharmaceuticals will continue to play a significant role:

Even with all these changes, generic pharmaceutical products will continue to play a significant role towards the growth of the industry. While being major global generic players, some large Indian companies like Dr. Reddy’s laboratories (DRL), Glenmark, Ranbaxy, Piramal Healthcare etc have commenced their journey on the long road of product discovery research with reasonable amount of initial success. There are now several new drug development programs by many of these Indian pharmaceutical companies, which will hopefully result in global product launches in not too distant future. India’s emphasis on research and development and new drug discovery is indeed growing since the country signed WTO agreement for product patent in 1995.

An industry with high success quotient:

Currently India is the world’s fourth largest producer of pharmaceuticals by volume and directly employs about 5 lakh people. The market is crowded with 20,000 pharmaceutical firms, 60,000 distributors and 700,000-800,000 retailers. Although there are around 5,600 licensed generics players, in reality around 3,000 of them are engaged in pharmaceutical production. The domestic pharmaceutical companies now cater to about 70% of the country’s requirements for medicines. The top 10 companies control about 30% and 250 companies control around 70% of the market.

Key determinants of success:

Following in my view are the key determinants, which will decide the extent of success of the Indian pharmaceutical industry as a whole:

• Healthcare delivery and infrastructure

• Access and affordability of modern medicines

• IPR environment

• Domestic R&D success

• Speed of regulatory reform process

• Disease trends and prescription patterns

• Public and private healthcare spending

• Penetration of health insurance

Domestic companies adopting different business model:

In this changing scenario different domestic companies are adopting different business models, as follows:

1. Penetration to the regulated generics markets:

- With partnership agreements with established generic companies

- Setting up own sales and marketing organisations both greenfield and also through acquisitions

- With acquisition of manufacturing facilities

2. Contract Research and Manufacturing Services (CRAMS):

Ballooning costs for research and development and low productivity have prompted the research-based global pharmaceutical companies to outsource part of their research and manufacturing activities to lower-cost, developing nations like, India and China.

India is gradually emerging as a competitive hub for CRAMS. The country is playing a significant role in manufacturing Active Pharmaceutical Ingredients (APIs) and intermediates for the global pharmaceutical industry. We have also seen the global pharmaceutical companies signing-up long-term outsourcing contracts with the Indian manufacturing and contract research organizations.

Generic pharmaceuticals produced in India are increasingly being accepted all over the world, excepting some recent US-FDA related issues. Many Indian companies like Piramal Healthcare, Aurobindo, DRL etc are taking up global generic manufacturing contracts for the global players like, Allergan, Pfizer and GSK, in addition to marketing generic pharmaceuticals themselves. Outsourcing of such business processes to India has undoubtedly been proved to be not only effective in saving costs, but also in saving valuable developmental time for the Multinational companies (MNCs).

Besides all these, India is emerging as the preferred destination for outsourcing clinical trials because of its both high quality and lower cost facilities of global standards.

3. Operating in domestic generic market

4. Investing more in R&D for discovery of NCE/NME

Key growth drivers:

A recent study jointly undertaken by the Organization of Pharmaceutical Producers of India (OPPI) and Yes Bank identified following key growth drivers for the domestic pharmaceutical Industry:

• Consolidation leading to better pricing

• Population growth, changing demographics and urbanization

• Increasing per capita income leading to higher penetration

• Access to quality healthcare through health insurance schemes

• Robust product patent regime, although generics will continue to grow

The questions to ponder:

1. Whether domestic Indian pharmaceutical companies will make large-scale investments in R&D to compete effectively with the global companies across the world?

2. Whether global pharmaceutical companies will be successful in marketing drugs patented in India?

3. Whether the government, physicians and patients keep supporting the generics?

4. How will the new Drug Policy be?

5. How will the government go about improving access to modern medicines from the current level of 35% to 100% of the Indian population?

Conclusion:

It is not quite easy to gauge the rate of progress of the Indian pharmaceutical industry in the new paradigm, at this stage. One of the key growth drivers of the domestic pharmaceutical industry has been the launch of a slew of new products of various types. The pipe line of such products has already started drying up in a comparative yardstick, in post product patent regime. Consequently, as already launched such new products reach the maturity stage from the growth phase of their ‘product life cycle’, a possible slowdown in the rate of growth of the respective companies in the domestic market is well anticipated.

There are other growth drivers though, for the industry, but how will these drivers actually drive the industry growth will, to a large extent, depend on proper answers to the above five questions. Thus, in the new paradigm though the growth recipe is ready, in its effective implementation there are more questions than answers.

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.