Robust implementation of Biosimilar Guidelines could help India earn leadership status in ‘Biosimilar World’

Posted on November 5, 2012 by Tapan Ray

Across the world, biologic drugs, in general, have a successful record in treating many life threatening and other complicated ailments. Expiration of product patents of the first major group of originators’ biologic molecules has led to the development of products that are designed to be ‘similar’ to the originators’ products, as it is virtually impossible to replicate any protein substances, unlike the ‘small molecule’ drugs.

These are known as ‘Follow-on Biologics’ or more commonly ‘Biosimilar Drugs’, which rely in part, on prior information obtained from the innovators’ products and demonstration of similarity with the originator’s molecule based on detailed and comprehensive product characterization, for their marketing approval.

The bedrock:

India seems to have a good potential to become one of the key players in the development and manufacture of biosimilar drugs, not only to serve the needs of the local population, but also for exports to large developed and other developing markets. However, for this dream to materialize science-driven ‘Biosimilar Guidelines’ are absolutely necessary and should form the bedrock in the development process of all such drugs.

Paving the way:

These guidelines will provide a regulatory framework or pathway to ensure that biosimilar Drugs approved in India are of good quality and demonstrably similar in efficacy, safety and immunogenicity to the original reference products.

Paving the way for such regulatory framework in the country with comprehensive sets of guidelines is of utmost importance, especially in the light of prevailing sub-optimal pharmacovigilance system in India.

Setting ground rules:

Considerable developments have occurred across the globe in the scientific and regulatory understanding of biosimilar drugs. Nearly all developed nations and many developing countries have now defined or in the process of defining appropriate regulatory framework for the same.

However, due to lack of such guidelines in India, until recently, there have been instances of so called ‘biosimilar drugs’ being approved for marketing, reportedly with sub-optimal testing and dossiers, thereby putting into question the product quality, comparability and patient safety.

With the above backdrop, the Ministries of Health & Family Welfare and the Science and Technology have now set the ground rules and released India’s first “Guidelines on Similar Biologics: Regulatory Requirements for Marketing Authorization in India”. These Guidelines are already in place effective September 15, 2012.

A step in the right direction:

Long awaited new ‘Biosimilar Guidelines’ of India, demonstrating an overall similarity in the philosophy and approach with the those in the U.S and Europe, though a belated move by the Government, but certainly a step in the right direction.

The global potential:

In most of the developed countries, besides regulatory issues, biosimilar drugs are considered to be a threat to fast growing high value innovative global biotech industry.

At the same time, there is an urgent need to effectively address the global concern for cheaper and more affordable biologic medicines for patients across the world. To achieve this objective, relatively smaller biotech companies, given the required wherewithal at their disposal, could emerge as winners in this new ball game as compared to traditional generic pharmaceutical players.

Biosimilar drugs will, therefore, have immense global potential to improve access to life saving biologic medicines for the ailing population across the continents.

First ‘Biosimilar drug’ in the US:

In mid-2006, US FDA approved its first ‘Biosimilar drug’- Omnitrope of Sandoz (Novartis) following a court directive. Omnitrope is a copycat version of Pfizer’s human growth hormone, Genotropin. Interestingly, Sandoz had also taken the US FDA to court for keeping its regulatory approval pending for a while in the absence of a well-defined regulatory pathway for ‘Biosimilar drugs’ in the USA at that time.

Having received the US-FDA approval, the CEO of Sandoz had then commented, “The FDA’s approval is a breakthrough in our goal of making high-quality and cost-effective follow-on biotechnology medicines like Omnitrope available for healthcare providers and patients worldwide”.

Despite this event, very few people at that time expected the US FDA to put regulatory guidelines in place for approval of ‘Biosimilar drugs’ in the largest pharmaceutical market of the world.

Global initiatives:

Internationally most known companies in the biosimilar drugs space are Teva, Stada, Hospira and Sandoz. Other large research based global innovator pharmaceutical companies, which so far have expressed interest in the field of biosimilar drugs are Pfizer, Astra Zeneca, Merck and Eli Lilly.

Following are the examples of some relatively recent biosimilar drug related initiatives of the global players:

Merck announced its entry into the biosimilar drugs business on February 12, 2009 with its acquisition of Insmed’s portfolio for US$ 130 million in cash. The company also paid US$ 720 million to Hanwha for rights to its copy of Enbrel of Amgen
Samsung of South Korea has set up a biosimilars joint venture with Quintiles to create a contract manufacturer for biotech drugs.
Celltrion and LG Life Sciences have expressed global ambitions in biosimilar drugs.

According to Reuter (June 22, 2011), Merck, Sandoz, Teva and Pfizer are expected to emerge stronger in the global biosimilar market, as we move on.

In India:

Dr Reddy’s Laboratories (DRL) has already been marketing a biosimilar version of Rituxan of Roche since 2007.
Reliance Life Science is also a potential player in the biosimilar market, though it has reportedly faced a setback in Europe with the regulators asking for more data for its version of EPO prompting them to withdraw their application for now.

Many other developments are also taking place in tandem in the space of biosimilar drugs, the world over. To fetch maximum benefits out of this emerging opportunity, as mentioned above, India has already started taking steps to tighten its regulatory process for marketing approval of such drugs. This is absolutely necessary to allay general apprehensions on drug safety with inadequate clinical data for similar protein substances.

The global market:

According to Datamonitor the global market for biosimilars drugs is expected to grow from US$ 243 million in 2010 to around US $3.7 billion by 2015.

Another report points out that only in the top two largest pharmaceutical markets of the world, the USA and EU, sales of biosimilar drugs will record a turnover of US$ 16 billion in the next couple of years when about 60 biotech products will go off-patent.

Major Indian players:

Such a lucrative business opportunity in the western world is obviously attracting many Indian players, like, Biocon, Dr. Reddy’s Labs, Ranbaxy, Wockhardt, Shantha Biotech, Reliance Life Science etc., who have already acquired expertise in the development of biosimilar drugs like, erythropoietin, insulin, monoclonal antibodies, interferon-alpha, which are not only being marketed in India, but are also exported to other non/less-regulated markets of the world.

Ranbaxy in collaboration with Zenotech Laboratories is engaged in global development of Granulocyte Colony-Stimulating Factor (GCSF) formulations. Wockhardt is expected to enter into the global biosimilar drugs market shortly. Dr. Reddy’s Laboratories and Biocon are also preparing themselves for global development and marketing of insulin products, GCSF and streptokinase formulations.

The domestic market:

According to IMS Health March 2012, the biosimilar drugs market in India is around US$ 700 million with the main categories being as follows:

Therapy Area	US $ Million
Insulin	250
Hepatitis-B Vaccine	200
Heparin	70
Human Chorionic Gonadotropin	50

Moreover, as per available reports, till March 2012 about 91 clinical trials have been lined-up in India for 20 recombinant therapeutics, as approved by the Genetic Engineering Approval Committee.

Brand proliferation offering wider choices:

Currently there has been huge brand proliferation for biosimilar products in India with around 250 brands in 20 therapeutic areas. Some examples are as follows:

Therapy Area	No. of Brands
Insulin	40
Erythropoietin	55
Human Chorionic Gonadotropin	48
Streptokinase	33
Interferon	10
Heparin	10

Increasing demand:

The demand of such drugs even in India is increasing at a rapid pace. The focus of the government on various immunization programs is also getting sharper simultaneously. For example, during 2011-12, the government spent around US$ 115 million for routine immunization covering reportedly about 25 million pregnant women and children and nearly US$ 140 million towards pulse polio vaccination initiatives. This trend, though may not still be enough for the size and scale of a country like India, but praiseworthy nonetheless.

The focus on Oncology:

Within bio-pharmaceuticals many companies are targeting Oncology disease area, which is estimated to be the largest emerging segment with a value turnover of over US$ 55 billion in 2010 growing over 17%.

As per recent reports about 8 million deaths take place all over the world every year only due to cancer. May be for this reason, the research pipeline for NMEs is dominated by oncology with global pharmaceutical majors’ sharp R&D focus and research spend being on this particular disease 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 reportedly around US$ 75 million.

Biocon has launched its monoclonal antibody based drug BIOMAb-EGFR for treating solid tumors with intent to introduce this product in the western markets as soon as they can get necessary regulatory approvals. 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.

Government support:

It has been reported that the Department of Biotechnology (DBT) of the Government of India has proposed funding of US$ 68 million for biosimilar drugs through Public Private Partnership (PPP) initiatives, where soft loans will be made available to the Indian biotech companies for the same.

Currently DBT spends reportedly around US$ 200 million annually towards biotechnology related projects.

Areas of concern:

According to a research report from ‘The Decision Resources’, one of the key success factors for any such new biosimilar drugs, especially from India, will be how quickly the specialists accept them.

The report also noted a high level of concerns, if such drugs are not supported by robust sets of clinical data on the claimed treatment indications. To allay this concern robust implementation of the recent biosimilar guidelines in India will play a very critical role.

Conclusion:

As the R&D based global innovator companies are expanding into the biosimilar space, many Indian domestic pharmaceutical companies are also poised to invest on biosimilars drugs development to fully encash the emerging global opportunities in this area. It is quite prudent for the Indian players to focus on the oncology therapy area, as it has now emerged as the fastest growing segment in the global pharmaceutical industry.

With around 40 percent cost arbitrage and without compromising on the required stringent national and international regulatory standards, the domestic biosimilar players should be able to establish India as one of the most preferred manufacturing destinations to meet the global requirements for biosimilar drugs.

Experience in conformance to stringent US FDA manufacturing standards having largest number of US FDA approved plants outside U.S, India has already acquired a clear advantage in manufacturing high technology chemical based pharmaceutical products in India.

Having progressed thus far, with adequate additional investments for similar biologics and ensuring robust implementation of new ‘Biosimilar Guidelines’, India has the potential to earn the leadership status even in the global biosimilar segment, just as it did in the generic pharmaceutical space of the world.

By: Tapan J Ray

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

‘The Pharmacy of the Developing World’ keeps its eye on the ball to emerge as ‘The Pharmacy of the World’

Posted on October 28, 2012 by Tapan Ray

The incessant march of the home grown pharmaceutical companies of India in search of excellence, especially in the space of high quality low cost generic medicines for almost all disease areas, continues at a scorching space, probably more than ever before.

It has been recently reported that among the top 10 fastest-growing generic companies globally, three are now from India with Sagent Pharma of the U.S topping the league table. These ‘Crown Jewels’ of India are as follows:

Company	Global rank	Growth %
Glenmark pharmaceuticals	5	37
Dr. Reddy’s Laboratories (DRL)	6	34
Sun Pharma	8	29

In terms of country ranking, currently India is among the top 20 pharmaceutical exporting countries of the world. It exports high quality and very reasonably priced generic drugs to around 220 countries across the world, including highly regulated markets like USA and EU.

Today India contributes around 20 percent of the total volume of global generic formulations and has registered a CAGR of 21 percent between 2005 and 2011. It is, therefore, no wonder that India is popularly called ‘The Pharmacy of the Developing World’, despite many formidable challenges from various corners.

Focus on opportunities and less of moaning:

It is worth noting that Indian pharmaceutical players have been keeping their eyes on the ball always as they keep expanding their market access globally and do not seem to let go any opportunities untried, like:

Large number of blockbuster drugs going off- patent
Product portfolio strategy with many first-to-file products.

Unlike many others, these winners do not also seem to get engaged much in moaning, which could significantly dilute their operational focus.

Aiming the top:

Currently, more than a third of the Abbreviated New Drug Applications (ANDA) in the U.S is being filed by the domestic Indian players. Another industry estimate indicates that the Indian companies are filling on an average around 1000 ANDAs every year to reap a rich harvest out of the available opportunity, which will increase by manifold as about US$150 billion worth of drugs go off-patent between 2010 and 2015 as reported by the Crisil Research.

Similarly, India accounted for 45 percent in 2009 and 49 percent in 2010 of the total Drug Master Filing (DMF) for bulk drug in the US, which has reportedly increased to 51 percent in 2011.

The key trigger factor:

Experts opine that the reason for the domestic Indian pharmaceutical industry being able to be recognized as a global force to reckon with, especially in the generic pharma landscape, is due to the amendment of the Indian Patents Act in 1970 allowing only process patents for drugs and pharmaceuticals.

The Government of India had taken such a path-breaking decision in the 70’s to lay the foundation of a vibrant domestic pharmaceutical industry capable of manufacturing low cost and high quality modern medicines for the people of the country leveraging latest technology, including IT.

This decision was also directed towards creation of ‘drug security’ for the country as in the 70’s the country was very heavily dependent on drug imports and the domestic pharmaceutical industry was virtually non-existent.

The rich pay-off:

Though the country reverted to the product patent regime again in January 1, 2005, the critical mass that the home grown pharma industry had developed during almost thirty five years’ time in between, had catapulted India towards achieving today’s self-sufficiency in meeting the needs of affordable drugs for the ailing population of the country and perhaps including even those living beyond the shores of India.

The above ‘trigger factor’ has indeed paid a rich dividend to the country, by any yardstick. Currently India ranks third globally in terms of manufacturing of pharmaceutical products in volume.

Moreover, domestic pharmaceutical companies have now between themselves around 175 USFDA and approximately 90 UK-MHRA approved manufacturing units to cater to the needs of high quality and affordable pharma products across the world.

The Leading Indian Pharmaceutical ‘Crown Jewels’:

The following are the leading Indian Pharmaceutical players in terms of sales:

Company	Sales in US $Mn	Year End
Cipla	6,368.06	March 2011
Ranbaxy Lab	5,687.33	December 2010
Dr Reddy’s Labs	5,285.80	March 2011
Sun Pharma	1,985.78	March 2011
LupinLtd	4,527.12	March 2011
Aurobindo Pharma	4,229.99	March 2011
Piramal Health	1,619.74	March 2011
Cadila Health	2,213.70	March 2011
Matrix Labs	1,894.30	March 2010
Wockhardt	651.72	December 2011

(Source: India Biz News: April 13, 2012)

Domestic Indian pharmaceutical companies currently control not only over 75 percent of the total domestic market, but also export low cost and high quality drugs to over 220 countries, as mentioned above, including US, EU, Kenya, Malaysia, Nigeria, Russia, Singapore, South Africa, North Africa, Ukraine, Vietnam, and now Japan.

US accounts for 22 percent of the total Indian pharmaceutical exports, with Africa accounting for 16 percent and the Commonwealth of Independent States (CIS) eight percent, as reported by India Biz News: April 13, 2012.

Incessant growth story:

As reported by Dolat Capital, US generic market currently estimated at US $350 billion, is expected to grow by around 12 to13 per cent over 2011to15 period keeping the Indian pharmaceutical growth story intact, adding albeit more shin to it.

After the new healthcare reform brought in by President Barrack Obama, generic drugs now play a critical role in the US healthcare system, predominantly driven by the cost containment pressure of the government.

According to the Generic Pharmaceutical Association of US, generic medicines saved the healthcare system of the country over US$734 billion during 1999 to 2008 period. Expenditure on patented medicines being one of the fastest-growing components of healthcare costs, over a period of time, has now become a prime target for cost reduction by the US government.

‘The Guardian’ guards:

Some international experts do contemplate that potentially retarding global forces may attempt to cast their dark shadows over the well hyped ‘India Pharma Shining Story’ in the generic space of the industry from time to time, which needs to carefully guarded against and more importantly effectively negated.

In an interesting article, though in a different context, titled “Pharmaceutical companies putting health of world’s poor at risk: India makes cheap medicines for poor people around the world”, recently published in ‘The Guardian’, the author Hans Lofgren, an associate professor in politics at Deakin University, Melbourne articulates as follows:

“The EU, pharmaceutical firms and now the US are pressuring the ‘pharmacy of the developing world’ to change tack”.

Lofgren further commented: “We ought to be asking why governments in the rich world still seem happy to checkmate the lives of poor people to save their political skins. And why the pharmaceutical industry sees India as such a threat. Could it be that they detect the whiff of real competition?”

Conclusion:

Be that as it may, after gaining the required critical mass, the shining story of the home grown pharmaceutical industry of India seems to be irreversible now, despite possible challenges as they will emerge.

Paying kudos to the pharmaceutical ‘Crown Jewels’ of India, many industry watchers feel that the global industry is now keener than ever before to take extra steps to keep the domestic pharma industry, enjoying a mind boggling over 75 percent share of the Indian Pharmaceutical Market, in the forefront and in a good humor to achieve their India objectives.

‘The Pharmacy of the Developing World’ should, therefore, continue to keep its eye on the ball keeping the flocks together and try to effectively translate it into the ‘The Pharmacy of the World’, as the global community keeps looking at this great transformation as a ‘miracle’ with much admiration and probably blended with a dash of awe and envy.

By: Tapan J Ray

India: Too Enticing a Pharma Market to Ignore by the Global Players despite unhappiness

Posted on October 22, 2012 by Tapan Ray

A White-Paper, titled “Emerging Markets Today and Tomorrow: Insights on Healthcare, Pharmaceuticals and Future Trends in the BRIC Landscape”, released by a global technology and services company specializing in healthcare, Cegedim, in June, 2012 highlighted that 20 to 30 percent of the profit of the global pharmaceutical companies now comes from the emerging markets of Brazil, Russia, India and China (BRIC).

The paper also indicated that just five years ago these markets contributed a meager 5 percent of profits of the global pharma players. Hence, in the evolving paradigm getting the relationship right between these BRIC healthcare markets and the global pharmaceutical manufacturers will differentiate men from the boys.

Maintaining a flexible country-specific business strategy accompanied by a diverse product portfolio is going to be the name of the game in these potential eldorados, the authors articulated in the paper.

It is indeed absolute no-brainer for anyone to make out how critical the emerging markets are to the global pharmaceutical players in the rapidly evolving scenario, despite many tough legal and policy measures taken by the governments in these markets in favor of public health interest.

The Emerging Markets of the World:

Unlike developed markets, emerging pharmaceuticals market of the world, like, India, China, Brazil, Russia, Mexico, Turkey and Korea, are showing a robust growth rate, quite commensurate to the ascending GDP growth trend of these countries.

According to IMS, the CAGR trend of the developed and ‘Emerging Markets’ for the period of 2007–11, are as follows:

Mature Markets	CAGR 2007-11	Emerging Markets	CAGR 2007-11
USA	4-7%	China	13-16%
Canada	6-9%	Korea	8-11%
Japan	2-5%	Brazil	9-12%
Germany	3-6%	Russia	17-20%
France	2-5%	Mexico	6-9%
Italy	3-6%	India	11-14%
UK	4-7%	Turkey	9-12%
Spain	5-8%

(Source IMS)

Key growth drivers in the Emerging Markets:

It is worth noting, unlike the developed markets of the world, where high priced branded patented drugs drive the value growth of the industry, in the emerging markets, where investment towards R&D is relatively less, branded generic and the generic products are the key growth drivers.

Such an evolving situation has prompted large global majors like Pfizer, GSK, Sanofi, Daiichi Sankyo and Abbott Laboratories, to name a few, either to acquire large generic or biosimilar or nutraceutical drug companies or ink various interesting and win-win collaborative deals in India to maintain their global business growth.

‘Enticing factors’ for India:

Expected ‘Enticing Factors’ for India, in my views, will be as follows:

A country with 1.13 billion population and a GDP of US$ 1.8 trillion in 2011 is expected to grow at an average of 8.2 percent in the next five year period
Public health expenditure to more than double from 1.1 percent of the GDP to 2.5 percent of GDP in the Twelfth Five Year Plan period (2012-17)
Government will commence rolling out ‘Universal Health Coverage’ initiative
Budget allocation of US$ 5.4 billion announced towards free distribution of essential medicines from government hospitals and health centers
Greater plan outlay for NRHM, NUHM and RSBY projects
Rapidly growing more prosperous middle class population of the country
High quality, cost effective, fast growing domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets
Rising per capita income of the population and relative in-efficiency of the public healthcare systems will encourage private healthcare services of various types and scales to flourish
Expected emergence of a robust health insurance model for all strata of society as the insurance sector is undergoing reform measures
Fast growing Medical Tourism
World class local outsourcing opportunities for evolving combo-business model of global pharmaceutical companies with both patented and branded generic drugs

Many global players are still out of step with time in India:

It appears many global pharma companies are still quite out of step with time in India and are trying hard to get a less challenging environment to grow their business in the country.

However, I reckon, all these companies ultimately willy-nilly will require coming to terms with the following current pharmaceutical business environment in India formulating fresh innovative strategies, earlier the better:

Pricing pressure from the government or even from the Supreme Court, which may soon include patented and imported products under price regulation
Current Patent Law is unlikely to change, hence threat of Compulsory Licensing (CL) for patented products with exorbitant price tags will continue to loom large
Pressure may build-up for technology transfer/local manufacturing of patented products
Close government scrutiny on pharmaceutical marketing practices
More stringent drug regulatory norms, especially in areas of clinical trials

Indonesia has set an example:

Just to cite a relevant example in this context, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia had said, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “They can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It is not unlikely that India may also come out with similar requirements for the global players for more sustainable job creation.

However, U.S. Chamber of Commerce had registered a strong protest in this matter with the President of Indonesia and has urged a reversal of this decision. However, the country appears to have taken a firm stand in this matter. This is evident when in response to the report that some global pharmaceutical companies have threatened withdrawal of their business from Indonesia because of this reason, the Health Minister had retorted, “If they want to go away, go ahead.”

Challenging to avoid current patent regime in India:

It will be extremely challenging for the global players to avoid the current patent regime in India, even if they do not like it. This is mainly because of the following reasons:

If an innovator company decides not to file a product patent in India, it will pave the way for Indian companies to introduce copy-cat versions of the same in no time, as it were, at a fractional price in the Indian market. Further, there would also be a possibility of getting these copy-cat versions exported to the unregulated markets of the world from India at a very low price, causing potential business loss to the innovator companies.
If any innovator company files a product patent in India, but does not work the patent within the stipulated period of three years, as provided in the patent law of the country, in that case any Indian company can apply for CL for the same with a high probability of such a request being granted by the Patent Controller.

Five ‘New Strategic Changes’ envisaged:

Five new key strategic changes, in my view, are expected in the Indian pharmaceutical market over a period of time, as follows:

1. As the country will move towards an integrated and robust ‘Universal Health Coverage’ along with comprehensive health insurance systems:

Doctors may no longer remain the sole decision makers for the drugs that they will prescribe to the patients and the way they will treat the common diseases. Government, other healthcare providers/ medical insurance companies will start playing a key role in these areas by providing to the doctors well thought out treatment guidelines
For a significant proportion of the products that the pharmaceutical companies will sell, tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable
More sophisticated pricing methodologies like Health Technology Assessment (HTA) or outcomes based pricing may be followed by the drug price regulators like National Pharmaceutical pricing Authority (NPPA).

2. An integrated approach towards disease prevention may be considered as important as the treatment of diseases.

3. A shift from just product marketing to marketing of a bundle of value added comprehensive disease management processes along with the product may be the order of the day

4. Over the counter medicines, especially originated from natural products for common and less serious illnesses may carve out a larger share, as appropriate regulations are put in place

5. Pharmaceutical Marketing Practices will come under intense regulatory scrutiny

Some questions on long term lucrativeness of the emerging markets?

One school of thought does feel that in the long run, the emerging pharmaceutical markets, like India, may not remain as lucrative to the global pharmaceutical majors. However, that does not mean either that the companies will shut shops in india.

The key reason being, around 80 percent ‘out of pocket’ expenditure for healthcare in India, could be the key impediment to expanded access to higher priced innovative medicines, in general.

Such a situation could seriously limit the success of branded patented drugs in the country as compared to the developed markets of the world. The issue of affordability of such medicines will continue to be a key factor for their improved access in India, if the ground reality remains unchanged.

Top line business growth with Generics and Branded Generics in the emerging markets may not be sustainable enough, in the long run, for the innovator companies to adequately fund their R&D initiatives to create expected shareholders’ value.

The opposite school of thought:

The other school of thought, however, argues that ‘out-of pocket” characteristic of India is indeed more sustainable in terms of cost containment pressure, than those markets where the government or health insurance companies cover a large part of the medical expenses for the population.

Every year around 1 percent of population comes above the poverty line in India together with a growing ‘middle income’ segment with increasing purchasing power. This cycle, in turn, will keep fueling the growth of healthcare space, contributing significantly to the progress of the pharmaceutical industry of the country.

Conclusion:

Be that as it may, to excel in India global pharmaceutical companies will need to find out innovative win-win strategies for all the above India specific issues.

Drug pricing, public health oriented patent regime, technology transfer/local manufacturing of products and stringent regulatory requirements in all pharmaceutical industry related areas, in the interest of the general population, are expected to be the key areas to be expeditiously addressed in the business models of the global pharmaceutical companies for India.

That said, despite various tough measures taken by the government in favor of public interest, as mentioned above, India will continue to remain too enticing a pharmaceutical market to ignore by the global players probably for any time to come in future. If not, many experts believe, flourishing and dynamic domestic pharmaceutical industry will be delighted to have the whole cake and eat it too.

By: Tapan J Ray

“Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients”: Exploring the book to be released in the Indian context

Posted on October 15, 2012 by Tapan Ray

The title of today’s article could make some of the readers uncomfortable and angry, just as what I experienced while writing the same, being a long time follower and student of the pharmaceutical industry, both global and local.

Ethical business conduct and value standards, especially of medium, large to very large pharmaceutical corporations both in India and across the world are coming increasingly under stakeholders’ scrutiny, besides being severely criticized for non-compliance in many instances by the regulators, judiciary and public at large. We shall find many such examples over a long period of time even from within our own land.

There is no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ across the world, although there are some very strong common parameters that can be globally followed.

In many companies’ websites such standards are also available in their minutest details. Unfortunately, even some of those companies are also being reportedly held guilty for blatant violations of their own set standards of ethics and compliance.

This trend could prompt one to believe, sincere attempts are still lacking to ensure effective implementation of such well drafted ‘Business Ethics and Values’ in country-specific ways by many of these companies.

The most challenging obstacle to overcome in this area by the corporates, I reckon, would still remain ‘walking the talk’, owning the responsibility and taking sustainable remedial measures, at least when these violations are conclusively established followed by penal actions.

A new book with graphic details:

In this context, ‘The Economist’ in its September 29, 2012 reviewed a book titled ‘Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients’, written by Ben Goldacre, a British doctor and science writer. According to Amazon the book is due to be released on January 8, 2013.

In this book the author describes incidences of routine corruption in the healthcare system and brings out to the fore citing details of some of the following areas, how patients’ interests are being continuously and blatantly compromised by many pharmaceutical companies unabated, just for commercial gain:

Pharmaceutical companies bury clinical trials which show bad results for a drug and publish only those that show a benefit.
The trials are often run on small numbers of unrepresentative patients, and the statistical analyses are massaged to give as rosy a picture as possible.
Entire clinical trials are run not as trials at all, but as ‘under-the-counter advertising campaigns’ designed to persuade doctors to prescribe a company’s drug.

Dr. Ben Goldacre does not spare the drug regulators also as he writes, ‘drug regulators, who do get access to some of the hidden results, often guard them jealously, even from academic researchers, seeming to serve the interests of the firms whose products they are supposed to police.’

The author also writes that ‘many studies published in reputed medical journals are written by the commercial ghostwriters, who are paid by the pharmaceutical companies and are not written by those whose names appear as the author of those studies. He laments that based on such clinical trial reports blitzkrieg expensive marketing campaigns are conducted to influence doctors prescribing such drugs.

None of the above instances is unreported in India, may be in forms which are many shades worse than what has been described by Dr. Ben Goldacre in his above book.

‘The Economist’ recommends that ‘this is a book that deserves to be widely read, because anyone who does read it cannot help feeling both uncomfortable and angry’.

India can’t delay tightening its belt any further:

The concerns of Dr. Ben Goldacre are also being expressed in India quite vocally, almost in all the areas as mentioned above. Thus India needs to tighten its regulatory systems and ensure proper implementation of all its policies, and if required framing some new ones, so that the country can come out of this quagmire which severely hurts the patients’ interests at large.

Among many others, two critical areas where such alleged corporate malpractices are being continuously reported are as follows:

I. Clinical Trials

II. Marketing Practices

I. Ethical concerns over Clinical Trial in India are not getting mitigated:

Clinical trial system still remains a critical area of concern in India. The Bulletin of the World Health Organization (WHO) in an article titled, “Clinical trials in India: ethical concerns” reported as follows:

“Drug companies are drawn to India for several reasons, including a technically competent workforce, patient availability, low costs and a friendly drug-control system. While good news for India’s economy, the booming clinical trial industry is raising concerns because of a lack of regulation of private trials and the uneven application of requirements for informed consent and proper ethics review.”

Because of this reason, on October 8, 2012 the Supreme Court reportedly asked the government to provide details of clinical trials being conducted across the country, which will include drug side effects and clinical trial related deaths, in which case compensation, if any, paid to the victims or to their family members.

This direction came from the apex court of the country while hearing a Public Interest Litigation (PIL) alleging Indian citizens are being used as guinea pigs during clinical trials by the pharmaceutical companies all over the country, mainly due to lack of informed consent of the enrolled patients and thereafter short changing their interest citing various reasons.

Clinical-trials process of the country is now, therefore, under intense scrutiny of the government, NGOs and also of the judiciary after a number of scandals focusing on malpractices, somewhat similar to what Dr. Ben Goldacre has highlighted in his book, as mentioned above. These series of events have recently prompted the regulators to come out with proposals of reforms in this important area, for all concerned.

The Parliament intervened:

Recently the department related ‘Parliamentary Standing Committee (PSC)’ on Health and Family Welfare presented its 59^th Report on the functioning of the Indian Drug Regulator – the Central Drugs Standard Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

The PSC in its report made, the following critical findings, besides others:

“A total of 31 new drugs were approved in the period January 2008 to October 2010 without conducting clinical trials on Indian patients.

Thirteen drugs scrutinized by the panel are not allowed to be sold in the United States, Canada, Britain, European Union and Australia.

Sufficient evidence is available on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.

Due to the sensitive nature of clinical trials in which foreign companies are involved in a big way and a wide spectrum of ethical issues and legal angles, different aspects of clinical trials need a thorough and in-depth review.”

Regulators woke-up:

In response to the prevailing conundrum, ‘The Ministry of Health and Family Welfare’ of the Government of India issued a draft notification on 17th July, 2012 seeking stakeholders’ views on the ‘Permission to conduct Clinical Trial’.

The draft notification says that the licensing authority only after being satisfied with the adequacy of the data submitted by the applicant in support of proposed clinical trial, shall issue permission to conduct clinical trial, subject to compliance of specified stringent conditions.

However, some experts do apprehend that such stringent system could give rise to significant escalation in the costs of clinical trials for the pharmaceutical players.

Similarly to assess right compensation for clinical trial related injuries or deaths following parameters were mooted in the document:

Age of the deceased
Income of the deceased
Seriousness and severity of the disease, the subject was suffering at the time of his/her participation into the trial.
Percentage of permanent disability.

II. Ethical concerns on marketing malpractices in India:

This issue has no longer remained a global concern. Frequent reports by Indian media have already triggered a raging debate in the country on the subject, involving even the Government and also the Parliament. It has been reported that a related case is now pending with the Supreme Court for hearing in not too distant future.

In 2010, ‘The Parliamentary Standing Committee on Health’ expressed its deep concern that “the evil practice” of inducement of doctors continued because the Medical Council of India (MCI) had no jurisdiction over the pharma industry and it could not enforce the code of ethics on it.’

It was widely reported that the letter of the Congress Member of Parliament, Dr. Jyoti Mirdha to the Prime Minister Dr. Manmohan Singh, attaching a bunch of photocopies of the air tickets to claim that ‘doctors and their families were beating the scorching Indian summer with a trip to England and Scotland, courtesy a pharmaceutical company’, compelled the Prime Minister’s Office (PMO) to initiate inquiry and action on the subject.

The letter had claimed that as many as 30 family members of 11 doctors from all over India enjoyed the hospitality of the pharmaceutical company.

In addition Dr. Mirdha reportedly wrote to the PMO that “The malpractice did not come to an end because while medical profession (recipients of incentives) is subjected to a mandatory code, there is no corresponding obligation on the part of the healthcare industry (givers of incentives). Result: Ingenious methods have been found to flout the code.”

The report also indicated at that time that the Department of Pharmaceuticals (DoP) is trying to involve the Department of Revenue under the Ministry of Finance to explore the possibilities in devising methods to link the money trail to offending companies and deny the tax incentives.

Incidences of such alleged malpractices related to financial relationship between the pharmaceutical companies and the medical profession are unfolding reasonably faster now. All these issues are getting increasingly dragged into the public debate where government can no longer play the role of a mere bystander.

Taking the first step closer to that direction, Central Board of Direct Taxes (CBDT), which is a part of Department of Revenue in the Ministry of Finance has now decided to disallow expenses on all ‘freebies’ to Doctors by the Pharmaceutical Companies in India.

A circular dated August 1, 2012 of the CBDT that the any expenses incurred by the pharmaceutical companies on gifts and other ‘freebies’ given to the doctors will no longer be allowed as business expenses.

Conclusion:

Statistics of compliance to ‘The Codes of Business Ethics & Corporate Values’ are important to know, but demonstrable qualitative changes in the ethics and value standards of an organization should always be the most important goal to drive any business corporation, the pharmaceutical industry being no exception.

The need to formulate ‘Codes of Business Ethics & Values’ and even more importantly their compliance are gradually gaining importance and relevance in the globalized business environment.

However, quite in conflict with the above initiative, at the same time, many pharmaceutical corporations across the world are being increasingly forced to come to terms with the heavy costs and consequences of ‘unethical behavior and business practices’ by the respective governments and judiciary. Unfortunately the Juggernaut still keeps moving, perhaps arising out of intense pressure for corporate business performance.

I am not quite sure though, whether such an expectation for ‘Corporate Ethics and Values’ is ‘utopian’ for the pharmaceutical industry or can be translated into reality with some amount of sincere efforts and commitment. However, if it does not happen, sooner than later, the ‘Bad Pharma’ image of the pharmaceutical industry across the world, as enunciated by Dr. Ben Goldacre in his book, will continue to linger inviting increasingly fierce public wrath along with stringent government regulatory controls and judicial interventions.

By: Tapan J Ray

Supreme Court Intervened…But ‘Price Control’ needs striking a right balance between ‘Affordability’ and ‘Availability’ of medicines for Patients’ Sake

Posted on October 8, 2012 by Tapan Ray

On October 3, 2012, the Supreme Court bench of Justice GS Singhvi and Justice SJ Mukhopadhayareportedly asked the government not to disturb the existing price control mechanism while including all medicines featuring in the National List of Essential Medicines 2011 (NLEM 2011) therein and posted the matter for further hearing on October 11, 2012.

This happened during the hearing of a Public Interest Litigation (PIL) filed by All India Drugs Action Network (AIDAN) and others, way back in 2003, complaining that the span of price control of only 74 bulk drugs and their formulations under the existing Drugs Prices Control Order, 1995 (DPCO 95) does not include lot many essential medicines, making those drugs unaffordable to the general population.

It is worth mentioning that during earlier hearing on the subject the council of the petitioner had expressed apprehensions to the honorable Supreme Court that the proposed Drug Policy recommending Market Based Pricing may lead to a steep increase in prices of essential medicines in India.

The purpose of ‘Price Control’:

As we know, the key purpose of the Drug Price Control in India is to ensure adequate access to essential medicines for the common man. To achieve this objective meaningfully, the process that the price regulator should follow must always ensure that all such medicines are:

Adequately Available
Reasonably Affordable

Therefore, maintaining a right balance between ‘affordability’ and ‘availability’ of medicines, while framing any drug policy, is of critical importance.

DPCO 95 does not meet the above two criteria:

The prevailing price control mechanism has failed to meet the above two critical criteria. This is mainly because the following 26 out of 74 bulk drugs featuring in DPCO 95, though still very important, are not currently manufactured in India due to unremunerative pricing:

No	Molecule	Therapeutic Segment	No.	Molecule	Therapeutic Segment
	AMODIAQUIN	Anti-Malarial	14.	SULPHADIMIDINE	Anti-Infective
	CAPTOPRIL	Anti-Hypertensive	15.	SULPHAMOXOLE	Anti-Infective
	CHLORPROPAMIDE	Anti-Diabetic	16.	HALOGENATED HYDROXYQUINOLONE	Anti-Infective
	SALAZOSULPHAPYRINE	Gastrointestinal	17.	TRIMIPRAMINE	Anti-Depressant
	MEBHYDROLINE	Anti-Histamine	18.	LYNESTRANOL	Hormone
	CHLOROXYLENOLS	Anti-Infective	19.	METHENDIENONE	Steroid
	CEPHAZOLIN	Anti-Infective	20.	DIOSMINE	Anti- Haemorrhoidal
	PENICILLINS	Anti-Infective	21.	PYRANTEL	Anthelmintic
	NALIDIXIC ACID	Anti-Infective	22.	PYRITHIOXINE	Vitamin
	STREPTOMYCIN	Anti-Infective	23.	VITAMIN-B1 (THIAMINE)	Vitamin
	CHLORPROMAZINE	Anti-Psychotic	24.	VITAMIN-B2 (RIBOFLAVIN)	Vitamin
	BECAMPICILLIN	Anti-Infective	25.	PANTHONATES & PANTHENOLS	Vitamin
	SULPHADOXINE	Anti-Infective	26.	VITAMIN E	Vitamin

(Source: BDMA-26th May 2012)

This makes one to conclude that the honest attempt of the government to make the above drugs affordable to the patients through DPCO 95 has resulted into their non-availability, making ‘affordability’ irrelevant. Thus, such a mechanism defeats the core purpose of any drug price regulation and should not be continued with.

What happens when NLEM 2011 is included in DPCO 95?

As explained above, if all the essential medicines featuring in the NLEM 2011 are brought under DPCO 95, solely to make them more affordable to patients, there will be a high possibility that market factors, as stated above, may make many of these important medicines unavailable to the patients, as happened in case of so many bulk drugs covered under DPCO 95.

Search for a balancing formula:

To correct this imbalance between availability and affordability of essential medicines, there is an urgent need to first work out a balancing formula and then build that into the new price control mechanism, jettisoning DPCO 95.

This will help addressing the issue of improving access to essential medicines for the common man in India much more meaningfully.

Dr. Pronab Sen Committee Report vindicates the point:

In 2005, to explore this possibility, the government constituted a special taskforce, which is widely known as ‘Dr. Pronab Sen Committee’. This committee was mandated to recommend options other than existing methodology of price control (DPCO 95) for achieving the objective of making available life-saving and essential drugs at reasonable prices.

In its report, the committee did suggest an alternative measure at that time, concluding that the present price control system (DPCO 95) is inappropriate, inadequate, cumbersome and time consuming.

High transaction costs make essential medicines more expensive:

Current transaction costs of medicines in India are over 50 percent of their ex-factory cost, excluding Excise Duty (ED). The various components of the transaction cost include ED, VAT, CST etc. and distribution (trade) margin.

As the Honorable Supreme Court arrives at the final decision on price control measures for NLEM 2011, there is a need for the government to abolish all duties and taxes like ED, VAT, CST etc. levied on such medicines for the sole benefits of the patients.

For an important policy decision involving essential drugs, all ‘patient centric’ cost-cuts, in my considered view, should be shared by both the government and the Pharmaceutical Industry together.

‘Drug Price’ control alone cannot improve access to medicines significantly:

It is a recognized fact that to improve access to medicines, the Governments even in countries like, Germany, Spain, UK, Korea, Brazil and China have recently mulled strict price control measures in their respective countries.

However, it is equally important to note that in India, we have witnessed since almost the past four decades that drug price control alone could not improve access to modern medicines for the common man very significantly, especially in the current socioeconomic and healthcare environment of the country. Thus, there is a dire need to augment other healthcare access related initiatives in tandem for a holistic approach.

Recently the Government of India has taken ‘Public Health Interest’ oriented a landmark initiative of providing unbranded generic formulations of all essential drugs, featuring in the ‘National List of Essential Medicines 2011’, free of cost to all patients from the public hospitals and dispensaries, across the country. This laudable step could well address the issue of availability and affordability of essential drugs for a vast majority of the population in India.

Taming drug price inflation only has not helped improving access to medicines:

It is quite clear from the following table that food prices impact health more than medicine costs:

Year	Pharma Price Increases	Food Inflation
2008	1.1%	5.6%
2009	1.3%	8.0%
2010	0.5%	14.4%

(Source: CMIE)

Exploring a realistic approach:

Imbibing the direction, as provided in ‘Dr. Pronab Sen Committee Report’ and considering other pros and cons of the key methodologies of price control of formulations featuring in NLEM, I wouldreemphasize that a middle path with a win-win strategy to overcome the weaknesses of DPCO 95 effectively, would be in the best interest of both patients and the industry alike, in the current situation. This path, I reckon, may be explored as follows with a four step approach:

The inclusion criteria for price control in the new Drug Policy should be based on the ‘essentiality’ criteria of the drugs, which will mean all formulations featuring in the NLEM, as announced by the Ministry of Health from time to time, will come under price control.
Take ‘Weighted Average Price’ of each formulation featuring in the National List of Essential Medicines (NLEM) based on Maximum Retail Prices (MRP) of all brands of high, medium and low, above a certain cut-off point, if required.
Abolish all duties and taxes like ED, VAT, CST etc. as currently being levied on essential medicines and rationalize high trade margins of total 24 percent to further improve affordability of such drugs to the patients.
Put in place effectively enough checks and balances to ensure proper availability of NLEM drugs for all and also to avoid any possible situation of artificial shortages of such drugs.

Conclusion:

Come October 11, 2012, let us hope that the honorable Supreme Court of India will pass an order related to drug price control, which will help striking a right balance between ‘availability’ and ‘affordability’ of essential medicines in India and the government will rationalize the transaction costs of such medicines thereafter.

In that case, it will be a win-win solution both for the patients and the industry alike, paving the way for improving access to essential medicines for the entire population of India along with other related strategic initiatives towards this goal. Such measures are absolutely essential, especially when medicines contribute around 72 percent of the total ‘Out of Pocket Expenses’ of the common man of the country.

That said, it is important to realize that there is no single or only right way to arrive at the ‘affordable price’ of any medicine, essential or otherwise. However, how much the government or an apex court will allow the pharmaceutical manufacturers to charge for a drug to make the prices ‘reasonably affordable’, will continue to remain an important, complex and a difficult task, both locally and globally.

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.

Nine Major Challenges Constraining Indian Pharmaceutical Industry From Taking a Quantum Leap

Posted on October 1, 2012 by Tapan Ray

Among the developing nations of the world, India has already carved out a special niche for itself in many business verticals of the pharmaceutical industry and is currently being recognized as the ‘pharmacy of the world’ for the generic medicines.

Even over seven years after ushering-in of the product patent regime in India in January 2005, domestic pharmaceutical companies keep dominating the Indian market overwhelmingly in all respect. Nonetheless, rejuvenated interest of the global players on India, because of unignorable business potential in the country, can now be quite palpably felt, despite many formidable challenges all around.

In the post product patent regime, though Indian companies have started investing in R&D, the first ‘Made in India’ new and innovative drug is yet to receive marketing approval anywhere in the world, including India. Thus the much needed thrust on innovation should continue unabated.

Unfortunately, despite continuous growth of the Indian pharmaceutical market and that too at a reasonably brisk pace since over decades, quite a large number of small-scale pharmaceutical units were compelled to shut their operations since 2008, just for not being able to adequately cope with the tough business challenges and competitive pressure. As the country moves ahead, these challenges, coupled with fierce competitive pressure, could further escalate, if not attended to with crafty strategies by the individual companies ably supported by the robust healthcare-reform oriented policy measures by the government.

In this article, I shall flag nine such major challenges, not necessarily in the same sequence, that the industry and the government should jointly address to create a win-win situation for all – the industry, patients, government and all other stakeholders.

I. High ‘Out of Pocket (OoP)’ expenditure limiting access to medicines:

While India is making reasonably rapid strides in its economic growth, the country is increasingly facing constraints in providing healthcare benefits to a vast majority of its population with ballooning ‘Out of Pocket (OoP)’ expenditure of around 74 percent and 72 percent of which is the cost of medicines (Source: HLEG Report).

This is mainly because of the following key reasons:

Low public spending on healthcare at around just 1.1 percent of the GDP
Fragile healthcare infrastructure
Very low penetration of health insurance system for all strata of society
Poor healthcare delivery system
Absence of ‘Universal Health Coverage’

Government Share in Total Healthcare Spend is One of the Lowest in the World

Country	Brazil	China	Mexico	South Africa	Pakistan	Bangladesh	Sri Lanka	India
% of Healthcare Spend	47	62.5	49	44	33	34	45	29

(Source: data compiled)

Changing disease pattern increases healthcare expenditure, further limiting access

As the disease pattern is undergoing a shift from acute to non-infectious chronic illnesses, requiring longer duration of treatment, OoP expenditure on healthcare will increase even more, bringing greater misery to the population in general and creating even greater access barrier, if no action is taken immediately.

It is worth acknowledging that one finds some good initiatives though, especially for the population Below the Poverty Line (BPL) and hears about the success of ‘Rashtriya Swasthya Bima Yojna (RSBY)’ and other health insurance schemes through rural micro health insurance units. It has been reported that currently around 40 such schemes are active in the country, which is far from enough.

II. Public and government pressure to make drug prices more affordable:

Pharmaceutical companies in India have been constrained to live with continuing focus of the government and also of the civil society on ‘reasonably affordable medicines’ irrespective of the fact whether they are generic or patented.

The Department of Pharmaceuticals has reportedly started comparing Indian drug prices with their international equivalents in terms of the ‘purchasing power parity’ and ‘per capita income’ and not just their prevailing prices in various developed markets converted into rupees. With such comparisons the government has already started voicing that prices of medicines in India are not the cheapest but on the contrary one of the costliest in the world.

Thus, one of the critical challenges of the Indian Pharmaceutical Industry continues to be delivering affordable medicines for a large section of the population of the country, as expected by the government. Reported high profitability, at least, of the listed pharmaceuticals companies gives an impression to the stakeholders, including the government, that there is a scope for further reduction of pharmaceutical prices in India.

Pharmaceuticals being covered under the ‘Essential Commodities Act’, empower the government to announce the ‘administered price’ for essential medicines. Current debate and deliberations on the New Drug Policy both by the Supreme Court and the Group of Ministers is a case in point.

Be that as it may, the proposed pricing methodology and the span of price control in the long overdue New Drug Policy have just been announced by the Group of Ministers (GoM) on September 27, 2012, which is in line with what I had recommended in my article of May 21, 2012 in this blog.

In my view, the new proposal of the GoM is expected to improve both the availability and affordability of the essential medicines, significantly.

III. Inadequate penetration of current health insurance schemes:

Health insurance coverage is still very low in India as compared to, among many other countries, Brazil and South Africa and at-par with our neighboring island state Sri Lanka. The details are as follows:

Country	Brazil	South Africa	Sri Lanka	India
% of Healthcare Spend	21	39	10	10

(Source: data compiled)

Moreover, currently health insurance schemes only cover expenses towards hospitalization. Ideally, medical insurance schemes in India should also cover domiciliary or in-patient treatment costs and perhaps loss of income too, if India wants to bring down the OoP expenditure for its population or at least till such time the ambitious ‘Universal Health Coverage’ project gets translated into reality.

IV. Pricing of Patented Drugs:

Innovative pharmaceutical products patented in India are expected to facilitate access to latest modern medicines to the country’s population to meet their unmet needs, if available at a reasonably affordable price.

To respond to this important need of the patients, many innovator companies like, Merck, GlaxoSmithKline (GSK) have already announced a differential pricing mechanism for their patented medicines in India.

Recent grant of compulsory license of Bayer’s Nexavar to Natco, among other reasons on pricing issue by the Indian Patent Office, has raised serious concerns among the innovator companies across the world on their Intellectual Property Rights (IPR) in India, but not on their pricing strategy for the country, as of now.

It appears rather impractical to envisage that routine grant of compulsory license by the Indian Patent Office will be able to resolve the critical issue of improving access to patented medicines on a long term basis. Such decisions may be taken only after exhausting all other access improvement measures.

Moreover, to improve access of such medicines to the common man, the Government of India should have a robust procurement plan for these products, at a well negotiated price, for supply through Government hospitals and dispensaries.

Despite all these, it remains a hard reality that pressure on pricing of patented products, very likely, will continue to pose a challenge in India.

An innovative approach

To effectively address the challenge of pricing of patented medicines in India, Swiss drug major Roche, has reportedly entered into a ‘never-before’ technology transfer and manufacturing contract for biologics with a local Indian company, Emcure Pharma, for its two widely acclaimed Monoclonal Antibodies’ anti-cancer drugs – Herceptin and MabThera.

The report says that in the past, Emcure had signed licensing deals with US-based bio-pharmaceutical drug maker Gilead Life Sciences for Tenafovir and with Johnson and Johnson for Darunvir. Both are anti-HIV drugs.

In this regard, media reports further indicated that Roche would offer to Indian patients significantly cheaper, local branded versions of these two anti-cancer drugs by early next year. The same news item also quoted the Roche spokesperson from Basel, Switzerland commenting as follows:

“The scope is to enable access for a large majority of patients who currently pay out of pocket as well as to partner with the government to enable increased access to our products for people in need”.

Such ‘out of box’ strategies and initiatives by the global innovator companies could help keeping prices of patented products affordable to the Indian patients, improving their access significantly.

V. Fostering innovation and Intellectual Property Rights (IPR):

Innovation:

Many companies expect that ‘tomorrow’ will be a ‘mega today’ and prefer to continue to run their businesses more or less the same way, as what they are currently doing. At the same time the global market keeps sending, in very small measures though, but definite and continuous signals of changes. As we move on, we realize that ‘tomorrow’ will not be a ‘mega today’, just as ‘today’ is not a ‘mega yesterday’. To meet such challenges of change squarely and realistically, one will need to embrace a culture of ‘continuous innovation’ in all the fields of business processes in India.
Therefore, the name of the game, while competing within the globalized economy is “continuous innovation”, which is more than a novel idea or a set of novel ideas. It is, in fact, the process of translating the novel idea/ideas into reality.
Like other industries, the pharmaceutical sector in India will also have to innovate with cutting edge ideas, convert them to implementable business models and processes, which in turn would help these companies to remain competitive in the globalized market place. The innovation, which I am talking about, extends far beyond Intellectual Property Rights (IPR) for a product.
While innovation is an absolute must to remain and grow the business, having patented products and marketing these brands effectively are desirable, but not a ‘must do’ for the Indian pharmaceutical companies, just yet. Unfortunately, not much inclusive innovation is taking place within the industry as of now, which consequently poses a great challenge for a quantum leap of this knowledge based industry of the country.

IPR

From the perspective of the global innovator companies across the world, ‘lack of a robust innovation friendly ecosystem’ in India is still a major challenge. However, home grown companies feel otherwise. This is mainly because, before enactment of the Indian Patents Act (amended) 2005, it was widely reported that mainly for the interest of Public Health and probably also to ensure that the growth of the domestic pharmaceutical industry does not get very adversely impacted, the Parliament of India ensured inclusion of a number of ‘safeguards’ including checks on ‘ever-greening’ of pharmaceutical patents and broader provisions for the grant of ‘Compulsory License’ in the statute.

Such provisions in the Indian Patents Act throw a major challenge to the global innovator companies spreading across the continents to get many of their new molecules patented in India and subsequently launch in the country.

VI. Counterfeit Medicines:

India still needs to generate enough credible data to convince itself and then to establish that counterfeit drugs are posing a growing menace to the humanity. All stakeholders should join hands to address this public health issue, leaving aside petty commercial interests, be it generic pharmaceutical companies of India or research based pharmaceutical players across the world.

The other side of the coin is that counterfeit versions of high value and/or high volume brands of the pharmaceutical companies in India are adversely affecting their business performance posing another major challenge.

VII. Talent Pool:

As we know, access to healthcare comprises not just medicines but more importantly healthcare infrastructure like, doctors, paramedics, diagnostics, healthcare centers and hospitals. In India the demand for these services has outstripped supply. There is a huge short fall in ‘Healthcare Manpower’ of the country as demonstrated in the following table:

	Target	Actual	Shortfall %
Doctors	1,09,484	26,329	76
Specialists	58,352	6,935	88
Nurses	1,38,623	65,344	53
Radiographers	14,588	2,221	85
Lab Technicians	80,308	16,208	80

Source: Rural Health Statistics 2011 in 12^th Plan draft chapter

Besides above, other key challenge faced by the pharmaceutical industry in this area is dearth of industry-specific employable work force in important areas like, R&D, clinical research, pre-clinical and clinical studies, manufacturing, quality assurance, besides sales and marketing.

VIII. Requirement of Stringent Regulatory Practices:

In the increasingly globalized economy, strict conformance to high regulatory standards like, Good Manufacturing Practices (GMP), Good Clinical Practices (GCP) and Good Laboratory Practices (GLP) pose another major challenge for the pharmaceutical industry in India.

Those pharmaceutical companies who are involved in manufacturing and export of drugs and pharmaceuticals are required to meet standards set up not only by the Drug Controller General of India (DCGI) and/or the State Drug controllers, but also of the regulatory authorities of the respective countries, where their products will be exported.

IX. Ethics and Compliance:

We have been witnessing for quite some time that ethical concerns related to the pharmaceutical industry, spanning across clinical trials to ethical marketing practices, are hugely bothering a large section of the stakeholders, solely for the interest of the patients.

Such concerns are assuming greater proportion, as the pharmaceutical industry is increasingly facing stringent regulatory and media scrutiny in gradually expanding areas of business operations. Thus, to overcome this challenge, there is a dire need for the industry to move beyond its usual bottom-line centric model to a transparent, comprehensive and implementable ‘Ethics and Compliance Models’, which are well meshed with all other business processes.

The Department of Pharmaceuticals has not delivered yet:

To help the pharmaceutical industry overcoming all the above nine major challenges in India, even the Department of Pharmaceuticals (DoP), considered being the nodal department for the pharma sector does not seem to have delivered, as yet.

In 2008, when the DoP was formed, it was widely expected that the department will be able to address the following key pharmaceutical industry related issues, with an integrated approach, to strike a right balance between the growth fundamentals of the industry and the Public Health Interest:

A modern, both growth and access oriented, drug policy and pricing mechanism.
Continuous improvement of access to high quality and affordable modern medicines for all.
An efficient, transparent and non-discretionary drug price regulatory system.
An appropriate ecosystem to encourage R&D and foster pharmaceutical innovation.
Addressing the issue of high ‘Out of Pocket (OoP)’ expenditure of the general population towards medicines in particular and healthcare in general together with the Ministry of Health.
Facilitating fiscal and tax incentives required by the Micro-Small and Medium Enterprises (MSME) within the pharmaceutical industry of India to help driving their growth.

It is worth mentioning, all these will necessitate a close coordination and integration of work of various departments falling under different ministries of the government, DoP being the nodal department. Unfortunately, this is not happening today, the way it should.

Conclusion:

If remedial measures are not taken, sooner than later, to overcome these nine major challenges bothby the pharmaceutical industry and the government working in tandem, it will be difficult for the industry to take a quantum leap in the foreseeable future, as is being envisaged by many.

By: Tapan J Ray

Pharma industry requires striking a right balance between ethical obligations to shareholders and ethical obligations to patients

Posted on September 24, 2012 by Tapan Ray

On September 15, 2012, while delivering his keynote address in a pharmaceutical industry function, Dr. Sam Pitroda, the Chicago based Indian, creator of the telecom revolution in India and the Advisor to the Prime Minister on Public Information, Infrastructure & Innovations, made a profound comment, for all concerned to ponder, as follows:

“Everyone wants to copy the American model of development. I feel that this model is not scalable, sustainable, desirable and workable. We have to find an Indian Model of development which focuses on affordability, scalability and sustainability.”

The above comment assumes greater significance, as the U.S. has been the number one pharmaceutical market of the world over a long period of time, although currently growing at a snail’s pace, as compared to the emerging markets of the world or even in absolute numbers.

Being impressed by past success record of America in the pharmaceutical sector, many countries of the world are being influenced to imbibe the U.S. models in various areas of the industry like, R&D, product commercialization process, focus on the “Wall Street” and even the way America walks the talk in fulfilling its various ethical obligations.

As the popular saying goes ‘proof of the pudding is in the eating’, gradual drying-up of the R&D pipeline, significant decline in the pharmaceutical business growth rate with commensurate adverse impact on the “Wall Street” and regularly published media reports on ‘unethical marketing practices’, lead to pertinent questions on the longer-term sustainability of the U.S. model in all these areas.

It appears, prompted by the prevailing reality in the U.S since quite some time, Dr. Pitroda made the above comment in a wider context of the pharmaceutical industry, including very important scalability, sustainability, desirability and workability of the ethical values in the Indian pharmaceutical business operations.

A burning issue:

As stated above, even in areas related to ethical issues in the pharmaceutical industry, global media reports indicate, as Dr. Pitroda commented above, the American model has not been successful to set an example for others, as yet. Thus, here also India will possibly need to find an Indian model that works and is sustainable.

We have been witnessing, for quite some time from now, among many other burning issues, ethical concerns related to the pharmaceutical industry across the world, have been hugely bothering a large section of its stakeholders, solely for the interest of patients and India is no exception to this stark reality.

Such concerns emanate from widely circulated media reports on legal fines levied to large pharmaceutical companies or out of court settlements on such fines due to alleged ‘unethical’ business practices of some large companies in various parts of the world including India.

Civil Society and other stakeholders including governments do allege that the prescription decisions made by the doctors, having received expensive free products and services from the pharmaceutical companies may not entirely or always be in the best interest of the patients.

In a situation like this, overall robust and healthy bottom line of the pharmaceutical industry in general, may be a tad lesser now, calls for a proper balancing act between its ethical obligations to shareholders and the ethical obligations to patients of all class, creed and color together with the civil society, at large.

Unique situation for the patients:

Healthcare sector in general and the pharmaceuticals in particular is unique in many respects. The Department Related Parliamentary Committee on Health and Family Welfare in its 59^th Report clearly articulated that:

Medicines apart from their critical role in alleviating human suffering and saving lives, have very sensitive and typical dimensions for a variety of reasons. They are the only commodity for which the consumers have neither a role to play nor are they able to make any informed choices except buying and consuming whatever is prescribed or dispensed to them because of the following reasons:

Drug regulators decide which medicines can be marketed
Pharmaceutical companies either produce or import drugs that they can profitably sell
Doctors decide which drugs and brands to prescribe to their patients
Patients are totally dependent on and at the mercy of external entities to protect their interests.

Such a scenario gives rise to a situation where patients, by and large, are compelled to buy medicines at any price, which leads many to conclude that the pharmaceutical industry is ‘recession proof’.

The perspective of the Global Pharmaceutical industry:

The global pharmaceutical industry is primarily research driven, as the low cost generic drugs flow from the patent expiry of innovative drugs. Moreover, the R&D process is arduous, expensive (reportedly costs over US$ 1.8 billion), risky and quite lengthy involving, besides others:

Discovery and development process of the New Chemical Entity (NCE) or New Molecular Entity (NME)
Pre-clinical trials
Clinical trials, Phase I, II and III and IV
Stringent marketing approval process

Thus they believe that to foster innovation to meet the unmet needs of patients, the Intellectual Property Rights (IPR) of such products must be strongly protected by the governments of all countries putting in place a robust product patent regime.

Further, the industry strongly argues that to recover high costs of R&D and manufacturing of such products together with making a modest profit, the innovator companies set a product price, which at times may be perceived as too high for the marginalized section of the society, where government intervention is required more than the innovator companies.

Aggressive marketing activities, during the patent life of a product, are essential to gain market access to such drugs for the patients.

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

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

Marketing expenditure becoming more productive than R&D investments:

It is indeed interesting to note that expenditure towards marketing by the pharmaceutical companies is becoming more productive than the same towards R&D. This is vindicated by the article titled “R&D and Advertising Efficiencies in the Pharmaceutical Industry”, published in the International Journal of Applied Economics, 8(1), March 2011.

In this research study the authors stated that although advertising as a percentage of sales has not increased during the past twenty years, its effectiveness in generating sales has improved dramatically by way of the Direct-To-Consumers-Ads (DTCA) strategy, which encouraged patients asking their healthcare providers for brand name drugs rather than cheaper generics. The paper also supports the notion that advertising replaces R&D investments when those investments fail to live up to their promise.

Many experts opine that the above scenario is prevailing today, especially when the global innovator companies are passing through a ‘patent cliff’.

Marketing expenditure far exceeds investments in R&D:

Another article concludes through its research paper titled, “The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States” that pharmaceutical companies spend almost twice as much on promotion as they do on R&D, quite contrary to the claim by the industry.

The study endorses the public image of the pharmaceutical industry as a marketing-driven sector when it should invest more for research and development and much less for promotion, that too many a times is not ‘ethical’ in nature, as cited above.

Patients are the ultimate victims:

A relatively recent report on India dated January 11, 2011, published in ‘The Lancet’, which vindicates the fact, in a similar (though not the same) context, that the alleged ‘unholy relationships’ between many pharmaceutical companies and the doctors, as a result of such aggressive and alleged ‘unethical’ marketing practices, has resulted in over-prescribing and irrational use of injection and drugs causing hardships to the patients.

Conclusion:

As stated above, many experts have been arguing since long, based on available data, that the current business models of many pharmaceutical companies are heavily tilted towards their obligation to the shareholders. These thought leaders are increasingly raising their voices to put forth the view that the industry continues to live in a self-made and a fire-walled cocoon, always trying to change others and refusing to change itself, unfortunately, even for the patients’ sake.

Despite the experts making above comments, my personal view is that in this direction, we have been witnessing no better attitude from our own government either to usher in a much desirable and long pending change in the prevailing scenario, solely for the patients, which is indeed even more disappointing.

In a situation like this, to be ‘patient centric’ in a real sense, there is an urgent need for the industry to first walk the talk along with their respective voluntarily codes of ethical marketing practices both in the letter and spirit.

If voluntary mechanism fails to work, a legal or statutory mechanism should be implemented, like what the Department of Pharmaceuticals had articulated in its draft ‘Uniform Code of Pharmaceutical Marketing Practices’, last year.

Thus, I reckon, to enhance its image, the pharmaceutical industry in India, as advised by Dr. Sam Pitroda, should imbibe a transparent, workable, scalable, demonstrable and a sustainable business model to strike a right balance between its ethical obligations to shareholders and ethical obligations to patients of all class, creed and color together with the civil society, at large

Early Signal of Metamorphosis in the Global Pharmaceutical Product Patent Regime

Posted on September 17, 2012 by Tapan Ray

Before enactment of the Indian Patents Act (amended) 2005, it was widely reported that to protect ‘Public Health Interest’, the Parliament of India has ensured inclusion of a number of ‘safeguards’ including checks on ‘ever-greening’ of pharmaceutical patents and broader provisions for the grant of ‘Compulsory License’ in India.

Such provisions in the Patents Act of any country were almost non-existent at that time and eventually got translated into an eye of a storm spreading across the continents.

Most probably, none could fathom at that juncture, the magnitude of profound impact of the steps taken by the Indian Parliament on the global pharmaceutical product patent regime over a period of time, slowly but steadily. On the contrary, many expected that because of intense global pressure, at least, some of these ‘safeguards’ will subsequently be amended in favor of the innovators.

Instead and surprisingly, despite such intense pressure, especially from the U.S. and Europe, some countries gradually started following similar direction as India did in 2005.

Support of the Experts Group:

Similarly, support of the global expert groups on the above ‘safeguard’ provisions of the Indian Patent Act 2005 has now started surfacing.

This month, September 10, 2012 edition of ‘The Lancet’ featured an article titled, “India’s patent laws under pressure.” Supporting the above safeguard provisions the authors commented as follows:

“The TRIPS Agreement does not limit the grounds on which compulsory licenses can be granted, and does not prevent patent applicants from having to demonstrate enhanced efficacy for their allegedly new and useful inventions. There are many problems facing access to and rational use of medicines in India but the provisions within the country’s patent laws, if more extensively and properly applied, should help rather than hinder such access. India’s laws and experiences could provide a useful example for low-income and middle-income countries worldwide.

Interestingly, The Times of India dated September 14, 2012 in its editorial commented that

“Instead of being browbeaten by foreign multinationals and pressure from the US government, Indian drug policies should be designed to nudge them along this path, while protecting patients and the generic-drug industry. Indian pharma, like Chinese manufacturing, is a potent global force. In the 21st century we ought to move beyond rather than strengthen a system where brown and black people are denied access to life saving drugs.”

Even more recently on September 15, 2012, the business daily of India, The Hindu Business Line reported that dismissing the stay petition of Bayer on the Compulsory License (CL) granted for its Sorafenib Tosylate to Natco, the Intellectual Property Appellate Board (IPAB) comprising its Chairman, Justice Prabha Sridevan, and member D. P. S. Parmar, in the order passed on September 14, 2012 said that, “if stay is granted, it will jeopardize the interest of public who are in the need of the drug. The appellant has not made out any case for granting a stay.”

On the price of Bayer’s Nexavar, Justice Prabha Sridevan further stated that “Selling at Rs 2.80 lakh (US$ 5,100 approx.) can by no stretch of imagination satisfy the requirement of the public.”

Capturing an emerging trend with some examples:

This trend for all practical purpose started with India and may be captured as follows:

India:

Amendment of the India Patents Act in January, 2005, as mentioned above, may in all practical purpose be construed as the beginning of the changing process.

Philippines:

For a long time Philippines remained a market of the highest price medicines as compared to most other Asian countries. However, effective July 4, 2008, the country enacted a law known as “Universally Accessible Cheaper and Quality Medicines Act” reportedly to protect public health interest. The law:

Directed amendment of the Patent Act to limit the monopoly of the patent owners by expanding the scope for non-patentable inventions and redefining inventive step provision, similar to section 3(d) of Indian Patents Act 2005
Allowed parallel importation of drugs already released in the international market as limitation to patent rights
Provided for the use, by the government or its authorized third party, of the invention even without the agreement of the patent owner, in cases of national emergency, circumstances of extreme urgency, public non-commercial use or inadequately met demand
Added ‘inadequately met demand’ as a ground for the grant of Compulsory License.

Taiwan:

In 2009, ‘Taiwan’s Intellectual Property Office (TIPO)’ amended the Patent Act, again for public health interest, in the following areas, among others:

Patentability
Public health
Compulsory license

China:

The State Intellectual Property Office (SIPO) has announced that the revised version of ‘Measures for the Compulsory Licensing for Patent Implementation’ has already been made operational in China effective May 1, 2012.

Interestingly, for “reasons of public health”, such medicines can also be exported under ‘Compulsory License’ to other countries, including those members of the World Trade Organization, where life-saving treatments are unaffordable.

In tandem, China, reportedly, is in the process of further strengthening its legal framework for local manufacturing of generic equivalents of patented drugs in the country.

Argentina:

Recently Argentina reportedly has come out with an amendment in their patent law for public health interest and has put in place new guidelines for patents, which besides others, include stringent provisions on patentability quite similar to the Section 3(d) of Indian Patents Act 2005.

Another signal from Asia though disease specific:

From May 29 – 31, 2012, over 90 representatives of government, academia, civil society and the United Nations assembled at the Regional Consultation and Planning Workshop in Bangkok to deliberate on “Use of TRIPS Flexibilities and Access to Affordable ARVs in Asia.”

The participants felt that in the days ahead there may be several public health related issues where the governments will require making exceptions in form of sovereign decisions to Intellectual Property (IP) Rights to save millions of precious lives.

A close watch for Public Health Interest in South Africa:

It has recently been reported that in South Africa, health activists together with other stakeholders of the local pharmaceutical industry are maintaining close vigil over the possibly amendment of the country’s patent laws by the government. They argue that no such decision to be taken, which can jeopardize access to cheaper generic medicines by the marginalized section of the society.

A review by UNDP:

In a paper titled, “Five years into the Product Patent Regime: India’s response”, published by United Nations Development Program (UNDP), the authors reiterated that in compliance with TRIPS agreement, India re-introduced the product patent protection in pharmaceuticals from January 1, 2005 by amending its Patent Laws. This development led to serious concerns at that time about the continuing ability of Indian generic companies to supply low cost and high quality medicines across the world. However, these concerns were taken seriously by the Indian Parliament, which utilized flexibilities available under TRIPS to help securing the availability, affordability and accessibility of such medicines in an uninterrupted manner.

The authors concluded by re-emphasizing their views that the Indian patent law contains robust built-in safeguards to eliminate a significant amount of ‘patent barriers’ to reasonably affordable low cost and high quality generic medicines, especially for the poor.

Opposite school of thoughts:

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

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

Conclusion:

Currently, the issue of giving priority to the public health dimension of TRIPS has become a subject of a raging debate across the world.

As a result, most of the developing countries tend to feel the need of meeting only the minimum standard as specified in the TRIPS Agreement, despite strong opposition mainly from the developed countries of the world.

As indicated in the UNDP paper quoted above, many experts are increasingly highlighting that in order to protect public health interest across the world, the Doha declaration has been a watershed agreement within the global product patent regime. It effectively plugged many loop holes providing adequate flexibilities to the sovereign governments to ensure improved access to medicines, especially for the marginalized section of the society and still being able to encourage, protect and reward innovation in a true win-win situation for all.

The examples as cited above would possibly indicate that gradually many more countries will avail the flexibilities as provided in the Doha declaration, in the years ahead. Though these are very early days, the emerging sequence of global events does send a signal of metamorphosis in the global pharmaceutical product patent regime, paving the way of yet another paradigm shift in not too distant future.

PILMAN

A Tapan Ray Website

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