The Concept of Orphan Drugs for Orphan Diseases is Orphan in India

Posted on September 10, 2012 by Tapan Ray

Though the percentage of patients suffering from ‘Rare Diseases’ in India is reportedly higher than the world average, unfortunately even today such cases get little help from our government.

According to experts, diseases manifesting patients representing maximum 6 to 8 percent of the world population are defined as ‘Rare Diseases’ and most of such diseases being ‘Orphaned’ by the global pharmaceutical industry, mainly because of commercial considerations, are termed as ‘Orphan Diseases’. Consequently when any drug is developed specifically to treat an ‘Orphan or a Rare Disease’ condition is called an ‘Orphan Drug’.

According to SanOrphan SA, Geneva, Switzerland, around 65 percent of rare diseases are serious and disabling. More interestingly, about 250 new rare diseases are discovered each year, corresponding to five new rare diseases per week.

However, without appropriate ecosystem being in place, developing a new drug (Orphan Drug) specifically to treat a very small number of patient populations suffering from any particular type of rare disease through highly cost intensive R&D initiatives, generating a low return on investments, has been extremely challenging for any pharmaceutical company.

The challenge and the need:

Public awareness drives for ‘Orphan Diseases’ first originated in the USA with the formation of a rare disease support group representing around 200,000 patients suffering from such ailments.

However, very limited market especially for those ‘Orphan Drugs’ , which are meant for the treatment of a single rare disease, has been discouraging the large pharmaceutical players to make major R&D investments for such molecules, as mentioned above.

In response to the public awareness campaigns and at the same time understanding the commercial imperatives of the pharmaceutical companies in developing “Orphan Drugs’, a path breaking legislation was formulated by the U.S government way back in 1983, known as ‘Orphan Drugs Act (ODA)’. The key purpose of ODA was to incentivize R&D initiatives for such drugs to treat around 25 million Americans suffering from ‘Orphan Diseases’.

Though similar legal and policy interventions are of utmost importance to allay the sufferings of millions of patients fighting rare diseases in India, precious little has been initiated in this direction by the government, thus far.

Orphan Drugs in the USA:

U.S Food and Drug Administration (US-FDA) provides orphan status to drugs and biologics which are defined as:

Those intended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people in the U.S.
Or, those affect more than 200,000 persons but are not expected to recover the costs of developing and marketing a treatment drug.

India perspective:

For the first time in India, to increase awareness for the rare diseases, Rare Diseases Day was observed in New Delhi on February 28, 2010. Subsequently 2nd and the 3^rd ‘Rare Disease Days’ were observed in Chennai and Mumbai in 2011 and 2012, respectively.

About 6000 to 8000 rare diseases, mostly genetic in nature have been identified in India. It was initially estimated that over 31 million Indians are suffering from rare diseases in the country, many of these diseases still do not have any cure.

However, The Hindu in April 2012 reported, “Taking the lower limit of global prevalence estimate, populous nations like India and China should have more than 70 million rare disease cases each.”

Inaction in India:

The report further highlights that enough awareness has still not been created in India to address this challenge, despite publication of several rare disease case reports in the peer reviewed journals and existence of a number of support groups, though with inadequate resources.

Use of ‘Social Media’ to increase awareness:

Even in the developed markets, leave aside India, it is still hard to get required health related information for individuals suffering from rare diseases. In many countries, finding no better alternatives, such patients decide to be virtual experts on the diseases they are suffering from, making full use of social media, like Facebook.

Interaction through social media often makes it easier for such patients not only to find each other, but also to share expertise and experience eventually to get proper medical care with affordable drugs.

‘Orphan Drugs Act’ must come with adequate incentives:

ODA, when enacted in India, should not be a half-hearted approach or be a zero-sum game for all. It should come with adequate financial and other incentives to create a sound business sense in this new ball game for the pharmaceutical players in India.

Just for example, the incentives of the ODA in the U.S include:

Funding towards investigation for “Orphan Disease’ treatment
Tax credit for Clinical Research
Waiver of fees for New Drug Application (NDA)
Offering more lucrative incentive than product patent (product patent requires the drug to be novel), as the orphan designation of the product by the US FDA and product approval by them are the only requirements for 7 year market exclusivity of an ‘Orphan Drug’ for the specified indication
Market exclusivity of ‘Orphan Drugs’ become effective from the date of regulatory approval, unlike product patent, product development time remains outside this period
The drugs, which are not eligible for product patent, may be eligible for market exclusivity as an ‘Orphan Drug’ by the US-FDA

Proof of the pudding is in the eating:

Thanks to this Act, currently around 230 ‘Orphan Drugs’ are available in the U.S for the treatment of around 11 million patients suffering from rare diseases. With the help of ‘Human Genome Project’ more orphan diseases are expected to be identified and newer drugs will be required to treat these rare ailments of human population.

‘Orphan Drugs Act’ encourages ‘Orphan Drugs’ development:

It is now a reasonably well accepted fact that ‘Orphan Drugs Act’ encourages ‘Orphan Drugs’ development.

In an article titled, “What the Orphan Drug Act has done lately for children with rare diseases: a 10-year analysis”, published by the National Center for Biotechnology Information (NCBI), U.S, National Library of Medicine, the authors articulated that in the U.S. 1138 orphan drugs were designated and 148 received marketing approval, of which 38 (26%) were for pediatric diseases, from 2000 to 2009. The percentage of approvals for pediatric products increased from 17.5 (10 of 57) in the first half of the decade, as compared to 30.8 (28 of 91) in the second half.

Based on the data the paper concluded that incentives provided in the ‘Orphan Drugs Act (ODA)’ of the United States of America, have led to increased availability of specific drugs for the treatment of ‘Rare Diseases’ in the country.

Others followed… but when will India…?

As stated above, 1983 signaled the importance of ‘Orphan Drugs’ with the ‘Orphan Drugs Act (ODA) in the U.S. A decade after, in 1993, Japan took similar initiative followed by Australia in 1999. Currently, Singapore, South Korea, Canada and New Zealand are also having their country specific ODAs.

Following similar footsteps, India should also encourage its domestic pharmaceutical industry to get engaged in research to discover drugs for rare diseases by putting an ‘Orphan Drugs Act’ in place, extending financial support, tax exemptions and regulatory concessions like smaller and shorter clinical trials, without further delay.

Every day millions of Indians will continue to suffer from ‘Orphan Diseases’ without affordable treatment, in the absence of an appropriate policy framework in the country for ‘Orphan Drugs’.

Another vindication of the argument:

It is worth repeating that an ODA with proper incentives has been the key motivating factor for the development of many drugs and treatment for a large number of rare diseases, since 1983.

Looking at the increasing number of approvals, it appears that CAGR of ‘Orphan Drugs’ will now be far greater than other drugs. Even in 2011 as many as 11 ‘Orphan Drugs’ have been approved by the US-FDA, as stated below:

Company	Brand Name	Generic Name	Type of Approval	Indication	Month in 2011
Bristol-Myers Squibb	YERVOY	Ipilimumab	New biologic licence application	Metastatic Melanoma	March
IPR Pharmaceuticals	CAPRELSA	Vandetanib	New molecular entity	Advance medullary thyroid cancer	April
Bristol-Myers Squibb	NULOJIX	Belatacept	New biologic licence application	Prevent organ transplant rejection	June
Seattle generics	ADCETRIS	Brentuximab vedotin	New biologic licence application	Hodgkin lymphoma and systemic anaplastic large cell lymphoma	August
Roche	ZELBORAF	Vemurafenib	New molecular entity	Metastatic melanoma	August
Shire	FIRAZYR	Icatibant acetate	New molecular entity	Hereditary angioedema	August
Pfizer	XALKORI	Crizotinib	New molecular entity	Late stage lung cancer	August
ApoPharma	FERRIPROX	Deferiprone	New molecular entity	Thalassemia	October
Lundbeck	ONFI	Clobazam	New molecular entity	Seizures associated with Lennox-Gastaut syndrome	October
Incite	JAKAFI	Ruxolitinib	New molecular entity	Myelofibrosis	November
EUSA Pharma	ERWINAZE	Asparaginase Erwinia chrysanthemi	New biologic licence application	Acute lymphoblastic leukemia	November

(Source: Ernst & Young, FDA and company website. 2012)

The above facts, once again, vindicate the argument that the ODA of the kind of the U.S, broadly speaking, is worth emulating by India with appropriate modifications as relevant to the country.

The global Market:

A new report from Thomson Reuters indicate that the global market for ‘Orphan Drugs’ was over US$50 billion in 2011.

It has also been reported that ‘Orphan Drugs’ contribute 6 percent of US$ 880 billion global pharmaceutical market with a CAGR of 25.8 percent as compared to 20.1 percent for ‘Non-Orphan Drugs’ during 2001 to 2010 period.

High price of ‘Orphan Drugs’ is an issue:

The most challenging part in the fight against ‘Orphan Diseases’ is access to an affordable treatment, especially to affordable ‘Orphan Drugs’.

For obvious reasons, the prices of ‘Orphan Drugs’ are usually very high, some even costs as high as US$ 400,000 annually and thus beyond affordability of many who are outside the purview of any drug price reimbursement scheme.

Most of such drugs are rarely available in India and there is no reasonably affordable ‘rupee’ price for these drugs. Indian patients suffering from rare diseases will currently have no other alternative but to import these drugs directly in US$ term, unless Indian policy makers wake-up some day and take appropriate measures in this important area.

Additional commercial opportunities could be available with appropriate ODA:

Thomson Reuters reported additional commercial opportunities with an appropriate ODA, which are as follows:

15 percent of the ‘Orphan Drugs’ analyzed by them had subsequent launches for other rare illnesses.
6 out of the top 10 ‘Orphan Drugs’ had more than one rare disease indication with an average peak sales of US$ 34.3 billion in overall sales potential against around US$ 8.1 billion of the same for drugs with single indication.
Time taken for Clinical Trials (CT) focused on orphan drugs is significantly shorter with a quicker review time than trials involving non-orphan drugs.

Conclusion:

It is interesting to note that some of the ‘Orphan Diseases’ are now being diagnosed also in India. As the nation takes rapid strides in the medical science, more of such ‘Orphan Diseases’ are likely to be diagnosed in our country. Thus the moot question is how does India address this pressing issue with pro-active measures, now?

One of the ways to properly address this issue in India could well be to follow the model of our very own the Council of Scientific and Industrial Research (CSIR) for an ‘Open Source Drug Discovery’ (OSDD) program with global partnerships, wherever necessary.

Thus in my view, with an appropriate ODA in place, leveraging the knowledge of OSDD acquired by CSIR and framing a robust win-win Public Private Partnership (PPP) model to discover and commercialize the ‘Orphan Drugs’, India could well demonstrate that the concept of Orphan Drugs for Orphan Diseases is really not Orphan in India.

By: Tapan J Ray

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

Replication of ‘Old Paradigm’ of the developed pharmaceutical markets is unlikely to yield results in the evolving new paradigm of India

Posted on September 3, 2012 by Tapan Ray

“Health leaps out of science and draws nourishment from the society around it”

- Gunnar Myrdal (Swedish Nobel Laureate Economist)

The success concoction of the global pharmaceutical industry for India, by and large, still remains to be sustained attempts in various forms of replication of the ‘Old Paradigm’ of the developed world, even when a ‘Public Health Interest’ oriented new paradigm has started evolving in the country, faster than ever before.

Very interestingly, efforts to arrest this paradigm change still continue, even when healthcare related government policies are getting more and more ‘Public Health Interest’ oriented under increasingly assertive public opinion, together with healthcare cost containment initiatives of various governments also in the OECD (Organization for Economic Co-operation and Development) countries.

Commercial and public relations strategies for replication or recreation of more or less similar business excellence environment of the developed pharmaceutical markets of the world now in India, though some may say is possible and would work, but in my view is highly improbable, at least in the foreseeable future. To be equally successful in India, creation of India centric robust and differentiated business models, broadly aligning with the new evolving paradigm of the country, could probably make more commercial sense for all concerned.

“See things as they are, not way you want them to be”:

“Maintain and sharpen your intellectual honesty so that you’re always realistic. See things as they are, not way you want them to be”, wrote the Management Guru – Mr. Ram Charan in his book titled, ‘Execution: The Discipline of Getting Things Done’ co-authored by Larry Bossidy. In the same book the authors deliberated on ‘The 10 Greatest CEOs Ever’.

One of these 10 greatest CEOs ever, George Merck of the global pharmaceutical giant Merck & Co articulated his vision for the Company way back in 1952 as follows:

“Medicine is for people, not for the profits.”

George Merck believed, the purpose of a corporation is to do something useful, and to do it well, which also ensures decent profits.

I have personally witnessed the Merck (MSD) employees to start their business presentations quoting the above famous vision, even today. George Merck’s vision, I reckon, is more relevant today than any time in the past.

In the same context, another very senior official of a global pharmaceutical major was quoted in the Harvard Business Review in its April 28, 2010 edition saying:

“As western pharmaceutical companies consider how to be successful in emerging markets, they must address two key questions:

How will we bring high-quality health care to patients wherever in the world they may live?
How do we effectively manage the transformation of the traditional pharmaceutical business model to one that meets the diverse range of needs of the emerging markets?”

He further said, “Our approach to providing patients with access to our medicines is evolving. We have extended a flexible-pricing strategy for middle-income countries to improve the affordability of our medicines and increase access for patients with lower income levels, while remaining profitable.”

Though some companies have been able to carefully pick up this important signal and strategize accordingly, many others still prefer to follow ‘their own ways’.

Increasing healthcare consumption of India attracting global players:

Along with the economic progress of India, healthcare consumption of the population of the country is also increasing at a reasonably faster pace. According to McKinsey India Report, 2007, the share of average household healthcare consumption has increased from 4 per cent in 1995 to 7 per cent in 2005 and is expected to increase to 13 per cent in 2025 with a CAGR of 9 per cent, as follows:

Share of Average Household Consumption (AHC) (%)


	Household Consumption	1995	2005 E	2015 F	2025 F	CAGR %
1.	Healthcare	4	7	9	13	9
2.	Education & Recreation	3	5	6	9	9
3.	Communication	1	2	3	6	12
4.	Transportation	11	17	19	20	7
5.	Personal Products and Services	4	8	9	11	8
6.	Household Products	2	3	3	3	5
7.	Housing & Utilities	14	12	12	10	5
8.	Apparel	5	6	5	5	5
9.	Food, Beverages & Tobacco	56	42	34	25	3

(Source; McKinsey India Report 2007)

From this study, it appears that among all common household consumption, the CAGR of ‘healthcare’ at 9 percent will be the second highest along with ‘education’ and ‘communication’ topping the growth chart at 12 percent.

As per this McKinsey study, in 2025, in terms of AHC for ‘healthcare’ (13 percent) is expected to rank third after ‘Food & Beverages’ (25 percent) and ‘transportation’ (20 percent).

Thus, AHC for ‘healthcare’ shows a significant growth potential in India, over a period of time. Hence, this important area needs to attract as much attention of the policymakers, as it is attracting the pharmaceutical players from all over the world, to help translate the potential into actual performance with requisite policy, fiscal support and incentives.

Such a scenario in the pharmaceutical space is difficult to ignore by any player with an eye for the future.

Sectoral break-up of the Healthcare Industry:

Even while looking at the sectoral break-up of the healthcare industry, the significant share of the pharmaceutical industry should be quite enticing to many global companies.

According to IDFC Securities 2010, the sectoral break-up of the US$ 40 billion healthcare industry is as follows:

Industry	%
Hospitals	50
Pharma	25
Diagnostics	10
Insurance & Medical Equipment	15

(Source: IDFC Securities Hospital Sector, November 2010)

A promising market:

Pharmaceutical market of India holds an immense future promise already being globally recognized as one of the fastest growing healthcare markets of the world. All components in the healthcare space of the country including hospital and allied services are registering sustainable decent growth, riding mainly on private investments and now fueled by various government projects, such as:

National Rural Health Mission (NRHM)
National Urban Health Mission (NUHM)
Rashtriya Swasthya Bima Yojana (RSBY)
Universal Health Coverage (UHC)
Free Medicine from the Government hospitals
Centralized procurement by both the Central and the State Governments

Supported by newer, both public and private initiatives, like:

Increase in public spending on healthcare from 1.0 per cent to 2.5 per cent of GDP in the 12th Five Year Plan period
Increasing participation of the private players in smaller towns and hinterland of the country
Wider coverage of health insurance
Micro-financing
Greater spread of telemedicine
More number of mobile diagnosis and surgical centers

Need to strike a right balance:

The pharmaceutical companies need to strike a right balance between ‘Public Health Interest’ and their expectations for a high margin ‘free market-like’ business policies in India.

Pharmaceuticals come under the ‘Essential Commodities Act’ in India, where government administered pricing for all drugs featuring in the ‘National List of Essential Medicines 2011’ is expected and cannot be wished away, at least, for now.

Despite all these concerns, India still remains a promising market for the pharmaceutical players, both global and local. McKinsey & Company in its report titled, “India Pharma 2020: Propelling access and acceptance realizing true potential” estimated that the Indian Pharmaceutical Market (IPM) will grow to US$ 55 billion by 2020 and the market has the potential to record a turnover of US$ 70 billion with a CAGR of 17 per cent during the same period.

Domestic Pharmaceutical Industry has come a long way:

Domestic pharmaceutical companies have positioned themselves as formidable forces to reckon with, not just locally but in the global generics market too.

Currently India:

Ranks 3rd in the world in terms of pharmaceutical sales volume.
Caters to around a quarter of the global requirements for generic drugs.
Meets around 70 per cent of the domestic demand for Active Pharmaceutical Ingredients (API).
Has the largest number of US FDA approved plant outside USA
Files highest number of ANDAs and DMFs
One of most preferred global destinations for contract research and manufacturing services (CRAMS)

Patients are still being exploited:

Unfortunate and deplorable incidences of exploitation of patients, mainly by the private players, are critical impediments to foster growth in quality healthcare consumption within the country.

In this context, ‘The Lancet’, January 11, 2011 highlighted as follows:

“Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.”

Prevailing situation like this calls for urgent national regulations for provider-standards and treatment-protocols, at least for the common diseases in India and more importantly their stricter implementation across the country by both the global and local players.

Pharmaceutical key business processes in India are almost a ‘free-for-all’ type:

Despite many challenges and damning reports of the Indian Parliamentary Standing Committees, overall key business processes in India are something like ‘free-for-all’ types, mainly because of the following reasons:

No pan-India voluntary or mandatory code exists for ethical Sales and Marketing practices
Many regulatory controls and standards are reportedly below par
Regulatory control on clinical trials done in India is reportedly sub-standard. In many cases even adequate compensation towards trial related deaths is reportedly not paid to the victims families by the companies, mostly fixing responsibilities to the ‘Ethics Committees’.

Key factors to take note of in the changing paradigm:

While looking at the big picture, the global pharmaceutical players, I reckon, should take note of the following factors while formulating their India- specific game plan to be successful in the country without moaning much:

At least in the short to medium term, it will be unrealistic to expect that India will be a high margin / high volume market for the pharmaceutical sector in general, unlike many other markets, across the world.
India will continue to remain within the ‘modest-margin’ range with marketing excellence driven volume turnover.
The government focus on ‘reasonably affordable drug prices’ may get extended to patented products, medical devices / equipment and other related areas, as well.
Although innovation will continue to be encouraged in the country, the amended Patents Act of India is ‘Public Health Interest’ oriented and different from many other countries. This situation though very challenging for many innovator companies, is unlikely to change in the foreseeable future, even under pressure of various “Free Trade Agreements (FTA)”.

Government no longer accepts that medicine prices are cheapest in India:

Pharmaceutical companies in India will be constrained to live with the 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 the Indian drug prices with international equivalents in terms of the ‘purchasing power parity’ and ‘per capita income’ and not just their prevailing prices in various developed markets converted to 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.

The above argument though interesting, worth taking note of, by all concerned to successfully chart-out their respective game plans for India.

A recent media report highlighted that an inter-ministerial group constituted for regulating prices of patented medicines in India has recommended using a per capita income-linked reference pricing mechanism for such products.

The above news item also mentions that Tarceva, a Roche lung cancer drug, costs Rs 1.21 lakh in Australia and France while it costs Rs 35,450 in India. But when adjusted for per capita income, which is significantly more in these countries compared with India, the price falls to Rs 10,309 and Rs 11,643, respectively, for both countries as indicated below:

Country	India	France	Australia
Per capita gross national income (PCGNI) (US$)	3260	33940	38510
Ratio of PCGNI of other countries to India	1	10.4	11.8
Eriotnib (Tarceva) 100 mg price in India (Rs.)	35450	121085	121650
Eriotinib (Tarceva) 100 mg Price in terms of weighted PCGNI (Rs)	35450	11643	10309
Sunatinib (Stutent) capsule 50 mg (Rs)	46925	363216	310384
Sunatinib (Stutent) 50 mg price in terms of weighted PCGNI (Rs)	46925	34925	26303

(Source: The Economic Times, August 16, 2012)

Government encouraging R&D Focus on the diseases of the poor:

Many in India, including ‘Council of Scientific & Industrial Research (CSIR)’ feel that the pharmaceutical R&D activities should also focus on the diseases of the poor, which constitute the majority of the global population.

However, global pharmaceutical companies argue that greater focus on the development of new drugs for the diseases of the poor should not be considered as the best way to address and eradicate such diseases in the developing countries. On the contrary, strengthening basic healthcare infrastructure along with education and the means of transportation from one place to the other could improve general health of the population of the developing world quite dramatically.

The counterpoint to the above argument articulates that health infrastructure projects are certainly very essential elements of achieving longer-term health objectives of these countries, but in the near term, millions of unnecessary deaths in the developing countries can be effectively prevented by offering more innovative drugs at affordable prices to this section of the society.

Recognition of India’s healthcare priorities is important:

Despite chaos in many areas, as mentioned above, a paradigm change in the way pharmaceutical business to be conducted in India, is slowly but surely taking place, where replication of any western business model could be counterproductive. The strategy has to be India specific, accepting the priorities of the countries, even with all its ‘warts and moles’

Participative strategies should yield better results:

To achieve excellence in the pharmaceutical market of India, there is a dire need for all stakeholders to join hands with the Government, without further delay, to contribute with their global knowledge, experience and expertise to help resolving the critical issues of the healthcare sector of the nation, like:

Creation and modernization of healthcare infrastructure leveraging IT
Universal Health Coverage
Win-Win regulatory policies
Creation of employable skilled manpower
Innovation friendly ecosystem
Reasonably affordable healthcare services and medicines for the common man through a robust government procurement and delivery system

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

It is high time for the Government of India, I reckon, to reap a rich harvest from the emerging lucrative opportunities, coming both from within and the outside world in the healthcare space of the country. Effective utilization of this opportunity, in turn, will help India to align itself with the key global healthcare need of providing reasonably affordable healthcare to all.

Conclusion:

Thus in my view, just replication of the ‘Old Paradigm’ of the developed pharmaceutical markets is unlikely to yield results in the new evolving paradigm of India.

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

By: Tapan J Ray

Nutraceuticals with Therapeutic Claims: A Vulnerable Growing Bubble Protected by Faith and Hope of Patients

Posted on August 27, 2012 by Tapan Ray

Today a growing number of particularly the aging population wants to live a healthy life without consuming much of chemical drugs, which in turn is becoming a key growth driver for nutraceutical products across the world. Further, increasing interest towards preventive healthcare and self-medication with ‘Over The Counter (OTC)’ products are the additional factors boosting the growth of the nutraceutical products market in India.

It has been reported that by 2020, the number of senior citizens (60 plus age group) is expected to exceed 1.0 billion, with around 70% of them living in the developing world. This further highlights the growth potential of the nutraceutical industry in countries like India with rising per capita income.

Evolution of the terminology ‘Nutraceuticals’:

Dr. Stephen DeFelice of the ‘Foundation for Innovation in Medicine’ coined the term ‘Nutraceutical’ from “Nutrition” and “Pharmaceutical” in 1989. The term nutraceutical is now being commonly used in marketing for such products but has no regulatory definition, other than dietary or nutritional supplements.

It is interesting to note that the dietary supplement industry defines nutraceuticals as, “any nontoxic food component that has scientifically proven health benefits, including disease treatment and prevention.”

Perhaps because of this reason, it is very often claimed by the manufacturers of nutraceutical products that these are not just dietary supplements, but also help prevention and/or treatment of many disease conditions.

In India, nutraceuticals are being promoted to and even prescribed by the medical profession, not just as nutritional supplements but also with off-label claims for the treatment of disease conditions, like arthritis, osteoporosis, cardiology, diabetes, pain management etc.

Are nutraceuticals then ‘Nutritional Supplements’ or ‘Medicines’?

When for any nutraceutical, claims are made either for cure of a specific disease condition or for prevention of a particular ailment, the product assumes the status of a drug substance, which needs to be approved by the drug regulator with undisputed and demonstrable evidence of efficacy and safety on patients.

Thus, the questions that may be very appropriately raised, whether or not such product claims are backed by robust clinical data for efficacy and safety on long term use and whether or not such data have also been published in the peer review journals? The answer will probably be an unambiguous ‘No’.

Unfortunately, clinical trial data proving efficacy and safety are not required for nutraceutical products to get their marketing approval in India, as long as the manufacturers do not put any medicinal or therapeutic claims both on the product label and also in their promotional literature.

However, in practice, making off-label therapeutic claims for nutraceutical products in general, though illegal, are more a routine than exceptions in India.

Relaxed regulatory process for marketing approval of Nutraceutical Products:

As stated above, nutraceutical products do not go through the rigors of stringent regulatory process as followed for the marketing approval of any drug with similar claims. Due to this reason, nutraceutical products currently fall within a grey zone, which has not yet gone through intensive scientific scrutiny for their safety and efficacy on patients, in general.

Ethical issues:

As a result of such relaxed regulatory framework, the nutraceutical products industry also prompts to flag many ethical issues, which include concerns over inadequate disclosure of science based information particularly on the surrogate therapeutic claims based merely on anecdotal evidence, as a part of intensive off-label sales and marketing efforts on their part.

Off-label therapeutic claims for any product are even otherwise illegal in India, like in many other countries.

Appropriate measures by the Government need to be put in place sooner, not only to plug the regulatory loopholes for off-label therapeutic claims, but also to ensure that marketing malpractices are not followed by their manufacturers to boost the sales turnover. This is necessary keeping especially the health outcomes and safety of the patients in mind.

How effective and safe are the nutraceuticals?

As stated above, currently many nutraceuticals are being directly promoted just like any other modern medicines, in the garb of nutritional supplements, to the medical profession, but with illegal claims and intent without being supported by data that can pass through scientific or regulatory scrutiny.

Thus the questions that one can raise logically are as follows:

What happens when the nutraceutical products fail to live up to the tall claims made by the respective manufacturers on their efficacy and safety profile?
Are these substances safe, just because not enough data has been generated on their toxicity profile?

The New Zealand Medical Journal (Vol. 118 No 1219 ISSN 1175 8716) in an article titled, “Lead poisoning due to ingestion of Indian herbal remedies” reported about dangerous and life threatening lead poisoning as follows:

“We believe that our cases of lead poisoning was predominantly due to ingestion of lead contaminated Indian herbal medicines, and it is the first such case to be reported in New Zealand.”

Similarly, Times Health in its March 15, 2010 reported that dangerous “lead poisoning in Indian children in the Boston area were linked to consumption of Indian spices.”

Taking lessons from all these, incidence like ‘Tylenol tragedy’ must not be allowed to be repeated in India, the risk of which primarily lies within inadequate quality and safety standards arising out of overall gross deficiency in the product security measures for many of such substances.

Importance of robust clinical data for therapeutic claims:

Therapeutic efficacy of a drug in the treatment of a disease condition is established with pharmacokinetic, pharmacodynamics, other pre-clinical and clinical studies. Some experts believe that these studies are very important for nutraceutical products, as well, especially when therapeutic claims are made on them, directly or indirectly, as these substances are also involved in a series of reactions within the body.

Similarly, to establish any long term toxicity problem with such products, generation of credible clinical data including those with animal reaction to the products, both short and long term, using test doses several times higher than the recommended ones, is critical. These are not usually followed for nutraceutical products in India, even when therapeutic claims are being made.

The experts, therefore, quite often say, “A lack of reported toxicity problems with any nutraceutical should not be interpreted as evidence of safety.”

Should Nutraceuticals also follow ‘Evidence-Based Medicine (EBM)’ standards?

The term and concept of EBM originated at McMaster University of Canada in early 1990 and has been defined as “the integration of best research evidence with clinical expertise and patient values” (Sackett, 2000).

EBM is thus a multifaceted process of systematically reviewing, appraising and using clinical research findings to aid the delivery of optimum clinical care to patients. EBM also seeks to assess the strength of evidence of the risks and benefits of any particular treatment claim.

Thus many global pharmaceutical companies believe that EBM offers the most objective way to determine and maintain consistently high quality and safety standards of healthcare products in the healthcare practice.

EBM concept, I reckon, is important in the context of nutraceuticals too, because over a period of time more and more users of nutraceuticals will tend to look for authentic scientific evidence within a clinical set up for such products. It is about time that EBM standards are followed for nutraceutical products, as well, by the regulators.

Global pharma companies focus on EBM:

So far, the large global pharmaceutical players have been focusing mainly, if not only on EBM. Companies like, GlaxoSmithKline (GSK), were reported to have discontinued marketing those products, which do not fall under ‘Evidence Based Medicines (EBM)’, even in India.

Nutraceuticals market:

The global nutraceuticals market is currently estimated to be around US$ 117 billion and expected to reach US$ 177 billion by 2013 with a CAGR of 7%, driven mainly by ‘functional foods’ segment with a CAGR of 11%. The top countries in this category are Japan, USA and Europe with the former two together enjoying around 58% market share of the total nutraceuticals consumption of the world.

In 2009 Indian nutraceuticals market was around US$ 1.0 billion growing at 5% (IMS), around 55% of which being functional foods. As per IMS about 2800 brands were competing in the nutritional market in 2009.

The prices of most nutraceuticals products with off-label therapeutic claims, being outside government price regulations in India, are usually quite high.

Although India’s current market share of the global nutraceuticals market is around 1%, a report from PwC predicts that India will join the league of top 10 by 2020, primarily driven by the ‘functional foods’.

The status of nutraceuticals in the USA:

In the USA, Congress passed the ‘Dietary Supplement Health and Education Act’ in 1994. This act allows ‘functional claims’ to Dietary supplements without drug approval, like “Vitamin A promotes good vision” or “St. Johns Wort maintains emotional well-being”, as long as the product label contains a specific disclaimer that the said claim has not been evaluated by the FDA and that the product concerned is not intended to diagnose, treat, cure or prevent disease.

The above Act bestows some important responsibility on the doctors in particular, who are required to provide specific and accurate scientific information for nutraceutical products to their patients. This process assumes critical importance as the patients would expect the doctors to describe to them about the usefulness of nutraceutical products as alternatives to approved drugs. In such cases, if any doctor recommends a dietary supplement instead of pharmaceutical products, the doctor concerned must be aware of the risk that the patient’s health may suffer, for which the affected patient could sue the doctor for malpractice.

It is difficult to understand why is the Indian regulator not following, at least, the above practices in the country.

Only ‘Patented Traditional Medicines’ will soon require mandatory clinical trials:

Here comes possibly the beginning of a refreshing change in the drug regulatory mindset for nutraceuticals in the country.

It has recently been reported that all new traditional medicines will need to undergo clinical trials before their regulatory marketing approval in India.

However, it has also been clarified that “such products will include only the new patented drugs and not the classical formulations that find mention in India’s ancient texts, some of which are 5,000 years old.”

However, it defies scientific logic, when one argues that anecdotal evidence of last 5,000 years should be accepted as robust data for proven efficacy and safety of nutraceutical products on patients, especially during their longer term use, for the reasons as mentioned above.

Thus, this initiative of the government though commendable, will by no means ensure safety and efficacy of existing nutraceutical products making therapeutic claims – off-label or otherwise in their sales and marketing promotion to the medical profession.

An immediate action:

Nutraceutical products, wearing a tag of providing desirable therapeutic benefits with less or no side effects as compared to conventional medicines, is showing just a moderate growth in India, despite being within a favorable pricing and a relaxed regulatory environment.

As deliberated above, it may take some time for the drug regulator to grant marketing approval of nutraceutical products with therapeutic claims based only on robust clinical data for efficacy and safety. Till such time this happens, the Drugs Controller General of India (DCGI) without fail should make a statement, something like the following, mandatory on the packaging of all nutraceutical products, just as what has been done by the US-FDA:

“All claims made for this product have not been evaluated by the DCGI and the product is not intended to diagnose, treat, cure or prevent any disease.”

Conclusion:

I reckon, the nutraceutical products segment with surrogate or off-label therapeutic claims, is just a growing bubble, as it were, which continues to be well protected by faith and hope of the patients, in the absence of stringent drug regulatory measures for substantiation of specific medicinal claims with predictable efficacy and safety profile.

This bubble could easily burst… decisively, if generation of clinical data on safety and efficacy ever becomes mandatory regulatory requirements for getting marketing approval of nutraceutical products in India claiming therapeutic benefits, off-label or otherwise. In which case, to meet those stringent drug regulatory requirements, commensurate increase in price for such products could indeed make commercial survival of this industry extremely challenging.

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.

Should India allow use of Compulsory License as a common tool to improve access to medicines?

Posted on August 20, 2012 by Tapan Ray

Compulsory License (CL) is generally considered a very important provision in the Patent Act of a country to protect public health interest not only by the governments, but also by a large number of experts across the globe and the intelligentsia within the civil society.

The key objectives:

The key objectives of the CL provisions in the statute are to:

Rectify any type of market failure

Discourage abuse of a patent in any form by the patent holder

WHO hails CL provisions:

‘The World Health Organization (WHO)’ says that ‘the provision for Compulsory Licenses (CL) is a critical element in a health-sensitive patent law’. It emphasized that CL constitutes an effective mechanism to:

- Promote competition

- Increase affordability of drugs, while ensuring that the patent owner obtains compensation

for the use of the invention

- Lack or insufficiency of working of patent

- Remedy of anti-competitive practices

- National emergency

- Government use for non-commercial purpose

- Other public interest grounds

WHO also recommends the use of CL for any “abuse of patent rights”. This is primarily to ensure that drug prices remain consistent with local purchasing power.

Even ‘UNAIDS’ have recommended the use of CL, as provided under the TRIPS Agreement, where countries have the right to issue such licenses.

Views of R&D based pharma companies:

It is well known that the provisions for the grant of CL other than national emergencies have been generally opposed by the research-based pharmaceutical industry on the grounds that they discourage investments on R&D.

Despite such opposition, most developed countries have CL provisions in their law, which the respective governments can use to promote competition and access to medicines.

Provisions for CL in TRIPS Agreement:

While TRIPS agreement does not limit the grounds or reasons for granting CL, countries can only use those grounds which are allowed by their own national legislation. The development of appropriate national legislation is therefore crucial.

TRIPs further states that the conditions under which a compulsory license is granted should be regulated in accordance with the TRIPs Agreement (Article 31), under a number of conditions aimed at protecting the legitimate interests of the right holder.

Examples of CL provisions in some important countries:

China: Quite close on the heel of grant of Compulsory License (CL) to Bayer AG’s expensive Kidney and Liver cancer drug Sorafenib Tosylate to the domestic Indian manufacturer Natco by the Indian Patent Office, as provided in the Indian Patent Law, China amended its own Patent Law allowing Chinese pharmaceutical manufacturers to make cheaper generic equivalent of patented medicines in the country not only during ‘state emergencies’, but also in ‘unusual circumstances’ or ‘in the interests of the public’.

U.S: Patent law does not provide for CL, which is allowed under the antitrust law. US has been granting CL to remedy anti-competitive practices and for governmental use, including national security.

Canada: The country introduced CL for drugs, way back in 1923. Canada has granted number of CLs and a robust generic pharmaceutical industry exists in that country.

France: French law authorizes CL when medicines are “only available to the public in insufficient quantity or quality or at abnormally high prices”.

Israel: In Israel a CL can be granted, “if it is necessary to assure the public of a reasonable quantity of a product capable of being used as a medicament, to manufacture a medicament or a patented process for manufacturing a medicament.”

Brazil: The country will grant CL in cases of “national emergency or public interest, declared by the Federal Executive Authorities. A temporary nonexclusive compulsory license can be granted if necessary. Brazil defines Public Health interest to include “public health protection, satisfying nutritional requirements, protection of the environment and other areas of fundamental importance to the technological or social and economic development of the country.”

Very few CLs granted between 1995-2012:

Despite having the provisions for the grant of CL in many countries, not many CLs have been granted across the world from 1995 to date. The details are as follows:

Country	Medicine	CL granted in
Israel	Hepatitis B Vaccine	October 1995
Italy	Imipenem (antibiotic)	June 2005
Italy	Sumatripan Succinate (migraine)	February 2006
Canada	Oseltamivir (influenza)	July 2006
Brazil	Efavirenz (HIV/AIDS)	May 2007
Thailand	Erlotinib, Docetaxel (cancer)	January 2008
India	Sorafenib Tosylate (cancer)	March 2012

Source: DNA, March 9, 2012

India joins the league in 2012:

Indian Patent Office granted a Compulsory License (CL) for Sorafenib Tosylate (Nexavar of Bayer Corporation) to Hyderabad based Natco Pharma Limited under the provisions of Section 84 of the Indian Patents Act. Nexavar is used for treatment for liver and kidney cancer.

The Compulsory License, first of its kind granted in India, enables Natco to sell the drug at a price not exceeding Rs. 8880 (US$ 178 approx.) for a pack of 120 tablets (one month’s therapy) against Rs. 284,428 (US$ 5,690 approx.) being the cost of Nexavar sold by Bayer before the CL was granted to Natco. The license is valid till the expiry of the patent on 2021.

The order on CL also makes it obligatory for Natco to supply the drug free of cost to at least 600 needy and deserving patients per year.

The grant of CL generated adverse impact from many developed nations of the world, as was expected by many.

However, welcoming the order Natco reportedly commented, “This opens up a new avenue of availability of life savings drugs at an affordable price to the suffering masses in India.”

Does grant of CL for non-NLEM products make sense in India?

Currently all government healthcare initiatives in India are focused on ‘The National List of Essential Medicines 2011 (NLEM 2011)’, be it drug price control, free distribution of medicines to all through government hospitals/health centers or even much hyped, ‘Universal Health Coverage’ proposal.

In this situation, another school of thought says that by granting CL to Natco for Sorafenib Tosylate (Nexavar of Bayer), which does not fall under NLEM 2011, hasn’t India diluted its focus on essential drugs? More so, when NLEM 2011 features quite a good number of anti-cancer drugs, as well.

The other side of the argument: Is CL a viable solution to improve access in the developing nations?

International Policy Network (IPN) in an article titled, “Compulsory licensing no solution to health problems in poor countries – say experts from India, Argentina, Canada and South Africa” stated that patents and other forms of Intellectual Property (IP) are an essential component in economic development of any emerging economy, which needs to be well protected by the governments.

The article further opines that any form of interference with IP by the grant of CL or even price controls will undermine investments and cause more harm than good. The paper, therefore, calls for stronger protection of IP across the world.

Yet another paper titled, “The WTO Decision on Compulsory Licensing – Does it enable import of medicines for developing countries with grave public health problems”, states that flexibility of innovator companies to adjust prices according to purchasing power of the people of different countries is constrained by the following two reasons:

A genuine risk that medicines sold at lower prices in the developing countries will be re-exported to high income markets.

Many high income developed countries also regulate the prices of medicines at the national level. There is a high risk that these countries will use prices in the developing markets as external reference pricing.

Thus, the author argues, in both the above situations, patented medicine prices will be undermined in the most important markets, making it difficult for the research-based companies to use prices only of high income countries to fund R&D costs for the discovery of new medicines.

Fostering innovation in India:

The healthcare industry in general and the pharmaceutical sector in particular have been experiencing a plethora of innovations across the world, not only to cure and effectively manage ailments to improve the quality of life, but also to help increasing overall disease-free life expectancy of the population with various types of treatment and disease management options.

Innovation being one of the key growth drivers for the knowledge economy, the creation of an innovation friendly ecosystem in India calls for a radical change in our mind-set.

From process innovation to product innovation, from replicating molecules to creating new molecules- a robust ecosystem for innovation is the wheel of progress of any nation, and India is no exception. It is encouraging to hear that the Government of India is working towards this direction in a more elaborate manner its 12^th 5 year plan.

However, the question that is being raised now: will frequent grant of CL vitiate the attempt of the government to create an innovative culture within the pharmaceutical industry in India.

CL will not arrest increasing ‘OoP’ for healthcare in India:

While India is making reasonable strides in its economic growth, the country is increasingly facing constraints in proving healthcare benefits to a vast majority of its population with ballooning ‘Out of Pocket (OoP)’ expenditure of around 78 per cent of its population.

This is mainly because of the following reasons:

Absence of ‘Universal Health Coverage’
Lack of proper healthcare financing and insurance system for all strata of society
Difficulty in managing the cost of healthcare even when the country is providing generic drugs for a sizable part of the world market

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

As the disease pattern is undergoing a shift from acute to chronic non-infectious diseases, OOP on healthcare will increase further.

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, along with hospitalization costs, if India wants to bring down the OoP for its population or at least till such time the ambitious ‘Universal Health Coverage’ project gets translated into reality.

Greater focus of the Government in these areas, many believe, will help increasing access to essential medicines very significantly in India, rather than frequently granting CL, as is being envisaged by many, especially for drugs, which are outside NLEM 2011.

Access to patented medicines unlikely to be addressed effectively despite frequent grant of CL:

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

Thus, there is an urgent need to have a holistic approach with the ‘Universal Healthcare’ in developing adequate healthcare infrastructure, efficient delivery system for medical supplies and creation of a talent pool of healthcare professionals and paramedics, to ensure access to healthcare for all the citizens of the country.

Without all these how will the diseases be diagnosed and the patients be treated for ailments, frequent grant of CL not withstanding?

Conclusion:

Be that as it may, the prices of medicines in general and the patented drugs in particular will continue to remain highly sensitive in most parts of the world, if not all, which some astute Global CEOs of the pharmaceutical majors have already contemplated.

One of these Global CEOs very aptly commented, “Pharmaceutical industry, too, on its part, needs to metamorphose to strike a balance in delivering affordable and innovative medicines. It is unacceptable to hear of the US$1billion cost to develop a drug, which includes the cost of failure. We need to fail less often and succeed more often.”

He reiterated, “Pharma companies need to understand that just because you have a patent, people don’t suddenly have money in their pockets, or can afford American prices.”

In the same context another Global CEO said, “Our strategy is really to have affordable medicines because in emerging markets you do not have government reimbursement. So you have to have medicines that people can afford to pay for.…I do not want us to be a colonial company with a colonial approach where we say we decide on the strategy and pricing. If you have to compete locally then the pricing strategy cannot be decided in Paris but will have to be in the marketplace. People here will decide on the pricing strategy and we have to develop a range of products for it.”

Keeping all these developments in view, as I said before, the contentious issue of the price of medicines cannot just be wished away across the world, which is perhaps more relevant now than ever before.

This is irrespective of the fact whether the country provides likes of ‘Universal Health Coverage’ or is driven by OoP expenditure by the majority of its population. Gone are those days, as articulated by the above Global CEOs, when a single global price for a product will be acceptable by all the nations across the world. India seems to be moving to this direction cautiously but steadily.

It appears, responsible pricing and effective working of patents are the only answers to respond to the CL issue in India.

Thus, I reckon, it does make sense for India to have the relevant provisions of CL in its Patent Act, not just to rectify any type of market failure, but also to discourage any possible abuse of a patent in any form by the patent holder in the country, as mentioned above.

However, it is also important for India to examine the potential negative impact of CL to foster innovation in the country and the global ramification of the same, including attraction of more ‘Foreign Direct Investments (FDI)’, which has been universally proved to be so important for the economic progress of any country, like India and China.

That said, while none can deny that all citizens of India should have access to affordable life-saving essential medicines, it appears rather impractical to envisage that routine grant of CL by the Indian Patent Office, as enumerated above by Natco et al, will be able to resolve the critical issue of improving access to essential medicines on a longer term basis in India.The decision for grant of CL, I reckon, should be taken in India only after exhausting all other access improvement measures.

As enumerated above, the use of CL as a common tool to improve access to medicines could prove to be counterproductive in the long run for India.

By: Tapan J Ray

The ruckus over Clinical Trials in India compels Government tightening regulations before flooring gas pedal for regional leadership

Posted on August 13, 2012 by Tapan Ray

The subject of Clinical Trials in India has created a huge ruckus, mainly for wide spread alleged malpractices, abuse and misuse of the fragile regulations of the country by the players in this field. The issue is not just of GCP or other clinical trial related standards but more of ethical mind-set and reported rampant exploitation of uninformed patients even in case of trial related injuries or death.

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.”

Damning report of the Parliamentary Standing Committee:

Recently the Department Related ‘Parliamentary Standing Committee (PSC)’ on Health and Family Welfare presented its 59^th Report of 118 pages in total 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 report begins with the following observations:

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 to buy and consume 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
Consumers are totally dependent on and at the mercy of external entities to protect their interests.

In this prevailing condition, the committee felt that effective and transparent drug regulation, free from all commercial influences, is absolutely essential to ensure safety, efficacy and quality of drugs keeping just one objective in mind, i.e., welfare of patients.

Some critical findings on the Drug Approval Process:

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.”

Proper Auditing of Clinical Trials are lacking:

It is sad that that adequate focus on the ‘Clinical Trial Registry’ and even ‘Auditing of Clinical Trials’ is currently lacking in India, which are considered so important not only to maintain the credibility of the studies, but also to demonstrate their scientific integrity and ethical values.

Unfortunately, there seems to be many loose knots in the current clinical trial policy, practices and guidelines in the country, which require to be tightened by the Government to make the system efficient and transparent in the national endeavor of establishing India as one of the most favored destinations for global clinical trials.

Health Ministry recently responded:

Facing this stark reality and pressured by the Parliament, the government has recently demonstrated its intention of tightening the loose knots in the following two critical areas:

Permission to conduct Clinical Trial
Compensation of the Clinical Trial victims

A. “Permission to conduct Clinical Trial in India’ – the draft notification:

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 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 the following conditions:

Clinical trial shall be conducted in compliance to the approved GCP Guidelines.
Approval of the ‘Ethics Committee’ shall be obtained before initiation of the study.
Ethical aspects of the clinical trial as described in the “Ethical Guidelines for Biomedical Research on Human Participants” published by the Indian Council of Medical Research (ICMR), shall be fully complied with.
Clinical trial shall be registered at Clinical Trials Registry of India (CTRI) before enrolling the first patient in the study.
Annual status report on clinical trial viz. ongoing or completed to be communicated to the said Licensing Authority.
Any ‘Suspected Unexpected Serious Adverse Reaction (SUSAR)’ occurring during clinical trial shall be communicated within fourteen calendar days to the Licensing Authority and to the other investigator(s) participating in the study.
In case of study related injury or death, the applicant will provide complete medical care, as well as, compensation for the injury or death and statement to this effect shall be incorporated in the Informed Consent Document. The details of compensation provided shall also be intimated to the licensing authority.
The premises of sponsor/Clinical Research Organization (CRO) and clinical trial sites shall be open to inspection by the officer of Central Drugs Standard Control Organization (CDSCO), who may be accompanied by an officer of the concerned ‘State Drug Control Authority’ to verify compliance to the requirements of Schedule Y, GCP guidelines and other applicable regulation.
The sponsor/ CRO, investigators shall allow officers of CDSCO who may be accompanied by an officer of the concerned ‘State Drug Control Authority’, to enter with or without prior notice, any premises of sponsor/ CRO, clinical trial site to inspect, search and seize any record, data, document, books, investigational drugs etc. related to clinical trials and provide adequate replies to any queries raised by the inspecting authority in relation to the conduct of clinical trial.

This area of the clinical trial regulations will be finalized after taking into consideration of all the comments received from the stakeholders within the specified period.

B. ‘Compensation of the Clinical Trial victims’:

To address the pressing issues in this area Central Drugs Control Organization (CDSCO) in August 3, 2012, published an interim “GUIDELINES FOR DETERMINING QUANTUM OF FINANCIAL COMPENSATION TO BE PAID IN CASE OF CLINICAL TRIAL RELATED INJURY OR DEATH”

The document articulates as follows:

“Presently there is no specific provision under Drugs and Cosmetics Rules for payment of compensation in case of clinical trial related injury or death of the subject. However, the Good Clinical Practice (GCP) Guidelines for Clinical Trials of India under para 2.4.7 provides that the research subject who suffers physical injury as a result of their participation in clinical trials are entitled to financial or other assistance to compensate them equitably for any temporary or permanent impairment or disability subject to confirmation from Ethics Committee. In case of death, their dependents are entitled to material compensation. Guidelines further provide that it is the obligation of the sponsor to pay the compensation.”

Such concerns were also raised in the Parliament and other forums regarding payment of compensation in the cases of injury or death, related to clinical trials.

CDSCO’s interim guidelines now prescribe an interesting formula, which will be used to arrive at the financial compensation for all clinical trial related injuries and deaths.

To assess right compensation for clinical trial related injuries or deaths following parameters have been 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.

Prior to the above new interim guidelines of the CDSCO, there was no standardization for the financial compensation either for clinical trial injuries or for that matter even death. In the past, such compensation was expected to be decided by the ‘Ethics Committee’ on case to case basis.

As stated above, the above formula has been indicated to be an interim measure before the final notification comes into force after taking into consideration all stakeholders’ comments and suggestions on this very important subject.

Drawing a comparison with China:

Driven by the stellar economic growth together with its booming pharmaceutical industry have enabled China to position itself as an emerging hub for global clinical trials. Following are some examples of the key growth drivers in the clinical research space of China:

A large diverse treatment naive patient population
Significant cost arbitrage
Recent improvements in the regulatory standards
Reverse brain drain of Chinese-born scientists educated in the west
Changing disease profile
Incentives to conduct clinical research in the country

However, linguistic and cultural barriers that affect patient reporting, enrollment and other medical practices in China could work as major barriers to the growth of Chinese clinical trial sector.

Clinical Trials: A ‘China – India’ comparison

It has already been reported that India is ahead of China as most favored destination for global clinical trials, although the latter is quite close and breathing on the neck of India and could well even zoom past the former, if appropriate robust regulations and their effective implementation are still not ensured in India.

I. Majority of the Top 10 Pharma Companies conduct higher number of trials in India

Sr. No.	Company	Clinical Trials in India	Clinical Trials in China
1	Astra Zeneca	10	10
2	BMS	17	6
3	Eli Lilly	17	12
4	GSK	22	14
5	J&J	20	13
6	Merck	8	5
7	Novartis	9	6
8	Pfizer	16	5
9	Roche	5	14
10	Sanofi	15	13
	Total	139	98

(Source: clinicaltrials.gov, 26 Oct 2007)

II. India leads China and Russia in Cardiology and Diabetes trials

Therapy	India (%)	China (%)	Russia (%)
Cardiology	5.38	4.93	4.48
Diabetes	3.05	2.09	2.65
Neurology	0.90	0.90	3.62
Oncology	1.59	1.01	2.32

With the highest number of diabetic patients in the World and a very large population of patients with cardiovascular disorders, India has the potential to be the destination of choice for clinical trials in these two therapy areas, as we move on.

(Source: clinicaltrials.gov, 26 Oct 2007)

III. India has a greater % of phase II and III trials while China has more of Phase I and IV

Clinical Trials in India		Clinical Trials in China
Phase I	4%	Phase I	7%
Phase II	16%	Phase II	9%
Phase III	65%	Phase II	51%
Phase IV	15%	Phase IV	33%

(Source: clinicaltrials.gov, 26 Oct 2007)

IV. Of the total Industry sponsored trials only 3.5% are carried out in India and 2.63% in China

Company	Global Trials	India + China
Astra	231	20
BMS	148	23
Eli Lilly	238	29
GSK	347	36
J&J	461	33
Merck	213	13
Novartis	440	15
Pfizer	389	21
Roche	302	19
Sanofi	209	28
Total	2978	237

India	3.50%
China	2.63%
Global	93.87%

India and China’s share in the Industry sponsored Global clinical trial market is miniscule

Source: clinicaltrials.gov

Overall increasing trend of Clinical Trials Initiated in India:

The following table will substantiate the above point:

Year	No. Of Clinical Trials
1999	1
2000	0
2001	6
2002	6
2003	11
2004	26
2005	141
2006	206
2007	220
2008	295
2009	189

(Source: U.S. NIH, Pharmexcil Research)

India has the potential to accelerate its pace of growth significantly:

If robust regulatory measures are put in place, addressing serious concerns on the inadequacy of clinical trial regulations in India, together with uniform requirements for informed patients’ consent and appropriate ethics review, global pharmaceutical majors can be easily attracted to India for several reasons like:

Technically competent and English speaking workforce,
Patient availability and huge pool of naive patients
Low costs and an improving drug-control system.

Thus, quite a number of criteria, as stated above, favor India to establish itself as a global hub for clinical research. Besides, availability of a number of government-funded medical and pharmaceutical institutions with state-of-the-art facilities could be very useful for mufti-centered clinical trials in the country.

Moreover, the cost to conduct a trial in India is lower by almost 50% – 75% than in the United States or in the EU. In addition, a good communication link favors quick recruitment of patients and faster regulatory approvals. Thus, clinical trials in India could be concluded faster, offering a sharp cutting edge for effective competition.

Due to all these reasons, India is gradually attracting more collaborative contract clinical research proposals in the country. Even many global Clinical Research Organizations (CRO) have already started establishing their set up in India. This pace can be accelerated significantly with the regulatory measures, as stated above.

Conclusion:

Clinical trials are the core of research-based pharmaceutical industry. No new drug can come into the market without clinical trials, which involve both potential benefits and risks to the participants. All clinical trials are conducted with the primary aim of bringing to patients new medicines with a favorable benefit–risk ratio.

Global clinical trials being relatively new to India, no wonder there are several misconceptions on the subject. The companies conducting research need to proactively publicize their commitment to protecting the rights, safety and well-being of trial participants.

All concerned must ensure that the proposals for clinical trials are approved by the government regulatory authorities before commencement and the trials must strictly follow the prescribed norms and procedures. For Phase I-IV human trials, the rights and privileges of the participants must be explained and the trials should commence only after their informed consent. The regulatory authorities, at the same time, should also ensure that any attempt of shortcuts or to bend the system by any means is met with severe consequences.

Although the Ministry of Health has already started initiating some action, as stated above, there is an urgent need for the players in this field to reassure the public, in general, about the high ethical standards that the pharmaceutical companies and Clinical Research Organizations require to comply with and continuously practice, while conducting clinical research.

It is therefore, high time for the Government to tighten the loose knots of the Clinical Trial regulations in the country before flooring the gas pedal to help India surging ahead as a major hub in the clinical trials space of the world, significantly distancing itself from China.

By: Tapan J Ray

Draft National Pharmaceutical Pricing Policy 2011: A flawed recipe

Posted on November 28, 2011 by Tapan Ray

The ‘Drug Price’ has always remained one of the critical factors to ensure greater access to medicines, especially in the developing economies like India, where predominantly individuals are the payers. This point has also been widely accepted by the international community, except perhaps the diehard ‘self-serving’ vested interests.

Just to cite some key examples, in the “ACCESS TO MEDICINES” report, the ‘Swiss Agency for Development and Cooperation (SDC)’ of ‘Swiss Centre for International Health’ has highlighted, “Affordability is one core issue at the center of debates about medicine use in international health.”

An article appeared on “This is Africa”, a new publication from the ‘Financial Times’ dated November 11, 2011 wrote: “The BRIC countries have redefined affordable drugs, making access to medicines possible for millions in low income regions. Yet changing priorities for major generic drug producers, such as India, could reshape the African pharmaceutical landscape. Access to medicines has improved dramatically over the last decade, driven by the rise of cheap pharmaceuticals from Asia, domestic efforts by governments of developing countries, commitment from donors, and price cuts from brand producers.”

Even the Director General Pascal Lamy of the World Trade Organization (WTO) in his address to the 11th Annual International Generic Pharmaceutical Alliance Conference in Geneva on 9 December 2008, said that since the 2001 Doha Declaration on the TRIPS Agreement and Public Health, “access to medicines has been improved through a major reduction of prices, enhanced international funding, a greater recognition of the need to find a balance within the intellectual property system, as well as the use of some of the TRIPS flexibilities by certain WTO Members”.

Similarly, the global pharmaceutical major GlaxoSmithKline (GsK) in its 2010 ‘Corporate Responsibility Report’ indicated: “Pricing is one factor that impacts on access to medicines and vaccines.”

Echoing similar sentiment the Swiss Pharma giant Novartis in its website articulated: “The issue of access to medicines is complex, involving factors such as development and health policies, health system infrastructure and best practices, pricing, rational use of drugs and adequate funding.”

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

As we have seen above, drug price is indeed one of the critical factors to improve access to modern medicines. It is for this reason, Governments in countries like Germany, Spain, UK, Korea and China have recently mulled strict price control measures in their respective countries.

Thus, I reiterate, drug price is certainly an important factor to improve access to modern medicines, but definitely not the only factor to focus on, as is being done in India by its successive governments.

In India, we have witnessed through almost the past four decades that drug price control alone would do little to improve access to modern medicines to the common man significantly, especially in the current socio-economic and healthcare environment of the country. Continuation of poor access to modern medicines even after 40 years of stringent drug price control vindicates this point.

Draft NPPP 2011:

A reform-oriented ‘Drug Policy’ of India, was languishing as a ‘prisoner of indecision’ of the policy makers, since quite a while.

Draft National Pharmaceutical Pricing Policy 2011 (NPPP 2011) has just been announced by the government with the ‘essentiality’ criteria for price control. The stakeholders have been requested to give their views on the same.

The draft policy seems to have taken some bold initiatives in terms of criteria and mechanics of price control, especially, moving away from the age old and non-transparent ‘Cost Based Pricing (CBP)’ to a more transparent ‘Market Based Pricing (MBP)’ model of Pronab Sen Committee of 2005.

However, in my view, NPPP 2011 has failed yet again to go beyond price control by effectively addressing other key issues for inadequate access to modern medicines by the common man, in a comprehensive and holistic way.

HSPH article of 2007 echoes the basis of Draft NPPP 2011:

‘Harvard School of Public Health’ in an article of July 2007 titled, ‘How Effective Is India’s Drug Price control Regime?’ had commented that in the present form, DPCO 1995 is inadequate in its coverage and does not serve the purpose that it had intended to.

The article recommends that there is an urgent need to replace the existing criteria for price control using monopoly and market dominance measures with the criteria of ‘essentiality’ of drugs, which would have a maximum spill-over effect on the entire therapeutic category.

In addition the paper says that this critical change is also ‘likely to prevent the present trend of circumventing price controls through non-standard combinations and at the same time would discourage producers moving away from controlled to non-controlled drugs’.

Just as mentioned in the draft NPPP 2011, the ‘Harvard School of Public Health’ article of 2007 reiterates that direct price control should be applied on formulations rather than basic drugs, which is likely to minimize intra-industry distortion in transaction.

The paper also points out, “Huge trade margins are a rule rather than exceptions in Indian drug industry. In view of this, there is a need to fix ceiling on trade margins which could lead to significant downward influence on medicine prices. Finally, we argue that to ensure drug security in India, a strong regulatory institutions need to be established.”

It is interesting to note that NPPP 2011 draws so much similarity with the ‘Harvard School of Public Health’ article published way back in 2007.

Basic objectives of a Drug Policy:

The ‘Drug Policy 1986’ clearly enunciated the basic policy objectives relating to drugs and pharmaceuticals in India, as follows:

Ensuring abundant availability of medicines at reasonable price and quality for mass consumption.
Strengthening the domestic capability for cost effective, quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
Strengthening the system of quality control over drug and pharmaceutical production and distribution.
Encouraging R&D in the pharmaceutical industry in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an conducive environment.
Creating an incentive framework for the pharmaceutical and drug industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.

After having completed around 25 years since then, it is high time for the government to ponder and assess whether the successive drug policies have delivered to the nation the desirable outcome as enunciated above.

Even the draft NPPP 2011 does not seem to have made any conscious attempt to make any amend in these areas either.

The draft NPPP 2011 offered another opportunity for a robust beginning:

Many of us will know that the 2002 Drug Policy was challenged in the Karnataka High Court, which by its order dated November 12, 2002 issued stay on the implementation of the Policy. This order was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 but observed as follows:

“We suspend the operation of the order to the extent it directs that the Policy dated 15.2.2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and life saving drugs not to fall out of the price control and further directed to review drugs, which are essential and life saving in nature till 2nd May, 2003”.

When nothing tangible happened thereafter, in October 2011, the honorable Supreme court against another Public Interest Litigation (PIL) asked the Ministry of Health (MoH) and the Department of Pharmaceuticals (DoP) to submit separate affidavits to the court on November 17, 2011 explaining their seriousness to bring the essential drugs under price control.

As a result of the November 17, 2011 order of the Supreme Court, it now appears that to put a new pharmaceutical policy in place in an unprecedented hurry, with the ‘essentiality’ criteria for price control, the Government lost another golden opportunity for a new and robust beginning with a comprehensive and well thought out national drug policy.

Draft NPPP 2011: Is it just to satisfy the Supreme Court of India?

The overall objective of any ‘Drug Policy’ is indeed to help accelerating all-round inclusive growth of the Indian pharmaceutical industry and to make it a force to reckon with, in the global pharmaceutical arena. At the same time, the policy should help creating an appropriate ecosystem to improve access to quality medicines at an affordable price by the entire population of the nation.

As stated above, in NPPP 2011, fixing Ceiling Price (CP) based on ‘Market Based Pricing (MBP)’ approach for 348 drugs falling under National List of Essential Medicines 2011 (NLEM 2011) and not beyond, could make sense, especially keeping in mind the direction given by the honorable Supreme Court of India on March 2003 and October 2011 on the subject, as indicated above.

However, just one pronged approach with the drug price control mechanism to address the issue of improving access to modern medicines in no way can be considered as a holistic approach to achieve objectives of a Drug policy. Isolated and incoherent initiatives of price control (though important) in the draft NPPP 2011, without taking the big picture into consideration, appears to be foolhardy.

A lurking fear creeps in though, has NPPP 2011 been drafted by the Government just to satisfy the Supreme Court of India with the incorporation of ‘essentiality’ criteria for price control medicines?

12^th Five Year Plan increases public spending towards health:

In the 12^th Five Year Plan of India commencing 2013, the country is expected to spend 2.5% of its GDP for health. Currently, public spending on health as a percentage to the GDP being at 0.9% is among the lowest in the world and against 1.8% of Sri Lanka, 2.3% of China and 3.3% of Thailand, just to name a few.

Recently another expert committee under the chairmanship of Dr. Srinath Reddy suggested that high ‘out of pocket’ healthcare expenditure of the people of India, should be significantly reduced by doubling the public spending on health. The committee also commented, “Increasing public health spending to our recommendations will result in a five-fold increase in real per capita health expenditures by the government from Rs 670 in 2011-12 to Rs 3,432 by 2021-22.”

Health coverage for ‘outpatient treatment’ in India is a necessity:

It is important to note from the above report that outpatient treatment in India accounts for around 78% of the ‘out-of-pocket’ expenses, with medicines accounting for 72% of the total outpatient health expenditure. Unfortunately, there is hardly any cover available to the common man for outpatient treatment in India, even by those holding some form of health insurance coverage.

A comparison of private (out of pocket) health expenditure:

Following is a comparison between ‘out of pocket’ expenses between India and its closer neighbors:

1. Pakistan: 82.5% 2. India: 78% 3. China: 61% 4. Sri Lanka: 53% 5. Thailand: 31% 6. Bhutan: 29% 7. Maldives: 14%

(Source: The Lancet)

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

It is quite clear from the following 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

Over one third of Indian population can’t afford to spend on medicines:

While framing the draft NPPP 2011, the Government should have kept in mind that a population of around 35% in India, still lives Below the Poverty Line (BPL) and will not be able to afford any expenditure even towards essential medicines.

Adding more drugs in the list of essential medicines and even bringing them all under stringent price control will not help the country to resolve this critical issue.

Why 40 years of stringent price control failed to make medicines ‘affordable’?

In my view, there is no ‘one size fits all’ type of definition for affordability of medicines, just like any other essential commodities, especially when around 78% of healthcare expenditure is ‘out of pocket’ in our country. Any particular price point may appear affordable to some, but will still remain unaffordable to many, especially in a country like India.

The initiatives taken by the government for price control of medicines since the last four decades have certainly been able to make the drug prices in India one of the lowest in the world coupled with intense cut throat market competition.

Unfortunately, this solitary measure has failed to improve access to modern medicines to the common man significantly due to various other critical reasons, which we hardly discuss and deliberate upon with as much passion as price control.

Despite so many drug price control orders, even today 47% and 31% of hospitalization in rural and urban areas, respectively, are financed by private loans and selling of assets by individuals.

Multi-dimensional approach to improve access to affordable medicines:

Access to healthcare and affordable medicines can be improved through an integrated and comprehensive approach of better access to doctors, diagnostics and hospitals, along with an efficient price regulatory mechanism for each component of healthcare cost including medicines. We should not forget that in India over 46% of patients travel beyond 100 km to seek medical care even today. (Source: Technopak & Philips (2010) Accessible Healthcare: Joining the Dots Now, New Delhi).

Healthcare infrastructure in India is severely constrained by lack of trained healthcare professionals, limited access to diagnostics/treatment and availability of quality medicines. Consequently, the supply of healthcare services falls significantly short of demand.

The current figure of 9 beds per 10,000 population in India is far from the world average of 40 beds per 10,000 people. Similarly, for every 10,000 Indians, there are just 6 doctors available in the country, while China has 20 doctors for the same number of population. Without proper equipment and doctors to diagnose and treat patients, medicines are of little value to those who need them most.

Thus, drug price control alone, though important, cannot improve access to healthcare without creation of adequate infrastructure required to ensure effective delivery and administration of medicines, together with appropriate financial cover for health.

Encourage healthy competition among healthcare providers:

Effective penetration of various types of innovative health insurance schemes will be one of the key growth drivers for the inclusive growth of the Indian pharmaceutical industry, as desired by many in India.

Simultaneously, there is a need to promote tough competition within those healthcare providers to make them more and more cost-efficient while providing greater patients’ satisfaction. In that process, all elements of healthcare expenditure like physicians’ fees, diagnostic tests, hospital beds and medicines could be made affordable to the common man.

In such competitive environment, the patients will be the net gainers, as we have seen in other knowledge based industries, like the telecom sector with incredible increase in the tele-density of the country.

The drug policy should also include an equally transparent system to ensure that errant players within the healthcare sector, who will be caught with profiteering motives for manipulation of drug formulations and dosage forms to avoid price control, are brought to justice with exemplary punishments, as will be defined by law.

The Government won’t be able to do it all alone:

The Government needs to partner with the private sector to address India’s acute healthcare challenges through various Public-Private-Partnership (PPPs) initiatives.

Recent examples of successful PPP in the health sector include outsourcing ambulance services, mobile medical units, diagnostics and urban health centers to private NGOs. PPP should adequately cover both primary and specialty healthcare, including clinical and diagnostic services, insurance, e-healthcare, hospitals and medical equipment.

Conclusion:

‘Drug price’ is universally recognized as one of the important elements, though not the sole element, to improve access to modern medicines. India is no exception.

This time around, the draft NPPP 2011 has come out in the public domain again with a flawed recipe, though the policy makers have tried to include some welcoming changes in it. The authors of the draft policy seem to be still preoccupied and obsessed with addressing the symptoms of ‘affordability of medicines’ rather than focusing on the larger issue of ‘access to modern medicines’ in a holistic way.

By not addressing the all important ‘access’ related critical issues in the draft NPPP 2011 rather comprehensively, dismantling the operational ‘silos’ and inter-ministerial administrative boundaries, the architects of NPPP 2011 seem to have missed the bus, yet again, in their endeavor to help achieving a significant dimension of the long overdue ‘health for all’ objective of the nation.

Credible role of CCI and NPPA should allay fear of possible ill effects of FDI in Pharmaceuticals

Posted on August 8, 2011 by Tapan Ray

On August 3, 2011, ‘The Hindu Business Line’ reported, “Domestic drug-makers worried by side-effects of MNC buyouts.” It opined, “Acquisitions in the pharma industry came in for sharp focus, after several domestic drug-makers sold their operations partially or entirely to overseas companies – raising concerns of, among other things, increase in medicine prices.”

However, on August 4, 2011 the same business daily retorted, “MNC drug-makers allay fears of rise in prices.” It asserted, “Multinational drug-makers have stressed that they are committed to achieving the country’s healthcare goals”.

March 18, 2011 issue of ‘Export Import News’ wrote, “FDI in pharma sector comes down during current financial year as debate on ‘Take-Overs’ rages on”.

The Union Health Minister Mr. Ghulam Nabi Azad is reportedly arguing in favor of putting a cap on the FDI limit for pharmaceuticals in India. This is based on an apprehension that such FDI would have an overall adverse impact on the health care scenario of the country, especially, on pricing and availability of medicines to the common man.

It has also been reported that the Commerce Ministry is in favor of reviewing the situation after taking into consideration of the report to be submitted to them by an international consulting firm. This seems to have been prompted by the request of the Department of Pharmaceuticals (DoP) based on the recent takeovers of Indian companies by the Multi National Pharmaceutical Corporations. It appears that the recommendations of the Ministry of commerce, prepared in consultation with the DoP, will then be forwarded to the Economic Advisory Council to the Prime Minister for a final direction on the much hyped and talked about issue.

Views of the Planning Commission of India:

Meanwhile, most of the daily business papers of India reported that on July 12, 2011, the Deputy Chairman of the Planning Commission of India Mr. Montek Singh Ahluwalia commented, “I don’t think there is any move anywhere to prevent the expansion of existing 100% foreign owned pharmaceutical companies or to prevent green field investment by foreign companies.”

A reasonable comment:

This comment of Mr. Ahluwalia seems quite reasonable, considering the fact that full control of powers on Mergers and Acquisitions of the Competition Commission of India (CCI) effective June 1, 2011, has already been notified.

CCI to address all possible adverse impact on competition due to M&A:

The Competition Commission of India (CCI) will now carefully scrutinize the possibilities of the market being less competitive due to Mergers and Acquisitions (M&A) of companies across the industry in the country. This concern becomes even greater, especially, in the horizontal mergers and acquisitions between the comparable competitors in the same products or geographic markets, as we have been witnessing also in the pharmaceutical sector of India, over a period of time.

However, the country is yet to notice any quantifiable ill effects of such horizontal or vertical M&A. Neither is there any major case pending with the CCI in this regard for the pharmaceutical sector.

Competition related scrutiny is nothing new in the developed markets:

Competition related scrutiny during M&A is nothing new in the developed markets of the world and is already being followed in the USA, the countries within the European Union (EU) and elsewhere.

Key concerns with M&A in pharmaceuticals:

Many believe that M&A even in the oligopolistic nature of pharmaceutical market in any country, if not abused will not do any harm to competition. Possibly for this reason, it will be rather difficult to cite many examples, the world over, where companies have been stopped from merging by the regulators because of anti-competitive reasons.

Another school of thought, however, believes that large M&A could ultimately lead to oligopolistic nature of the pharmaceutical industry with adverse impact on competition. Thus M&A regulations are very important for this sector.

Moreover, we need to remember that competition no longer depends only on the number of players in any given field. To explain this point many people cite the example of two large global players in the field of brown liquid beverages, Coke and Pepsi, where despite being limited competition, consumers derive immense value added economic benefits due to cut throat competition between these two large players.

It goes without saying, CCI must ensure that in any M&A process, even within the pharmaceutical industry of India, such rivalry does not give way to an absolute monopoly, directly or indirectly.

M&A activity in India:

In India, the consolidation process within the Pharmaceutical Industry started gaining momentum way back in 2006 with the acquisition of Matrix Lab by Mylan. 2008 witnessed one of the biggest mergers in the Pharmaceutical Industry of India, when the third largest drug maker of Japan, Daiichi Sankyo acquired 63.9% stake of Ranbaxy Laboratories of India with US $4.6 billion.

Last year, in May 2010, Chicago based Abbott Laboratories acquired the branded generics business of Piramal Healthcare with US$3.72 billion. This was soon followed by the acquisition of Paras Pharma by Reckit Benkiser.

The ground realities:

In India, if we look at the ground reality, we find that the market competition is extremely fierce with each branded generic/generic drug (constituting over 99% of the Indian Pharmaceutical Market, IPM) having not less than 50 to 80 competitors within the same chemical compound. Moreover, 100% of the IPM is price regulated by the government, 20% under cost based price control and the balance 80% is under stringent price monitoring mechanism.

In an environment like this, the apprehension of threat to ‘public health interest’ due to irresponsible pricing will be rather imaginary. More so, when the medicine prices in India are the cheapest in the world, cheaper than even our next door neighbors like, Bangladesh, Pakistan and Sri Lanka.

CCI and NPPA will play a critical role:

One of the key concerns of the stakeholders in India is that M&A will allow the companies to come together to fix prices and resort to other anti competitive measures. However, in the pharmaceutical industry of the country this seems to be highly unlikely because of effective presence of the strong price regulator, National Pharmaceutical Pricing Authority (NPPA), as mentioned above.

Thus even after almost three years of acquisition, the product prices of Ranbaxy have remained stable, some in fact even declined. As per IMS MAT June data, prices of Ranbaxy products grew only by 0.6% in 2009 and actually fell by 1% in 2010. Similarly post acquisition of Piramal Healthcare by Abbott USA and Shantha Biotech by Sanofi of France, average product price increases of these two Indian subsidiaries were reported to be just around 2% and 0%, respectively.

However, even if there is any remote possibility of M&A having adverse effect on competition, it will now be taken care of effectively by the CCI, as it happens in many countries of the world, Israel being a recent example involving an Indian company.

‘Competition Commission’ does intervene:

In the process of the acquisition of Taro Pharma of Israel by Sun Pharma of India in 2008, being concerned with the possibility of price increases due to less competitive environment in three generic carbamazepine formulations, the Competition Commission in Israel intervened, as happened in many other countries. As a result, Sun Pharma was directed by the regulator to divest its rights to develop, manufacture and market of all these three formulations to Torrent Pharma or another Commission approved buyer.

There are many such examples, across the world, of Competition Commission playing a key role to negate any possible ill effect of M&A.

Will the new Competition Law delay the M&A process?

Some apprehensions have been expressed that the new competition law could delay the process of a Mergers and Acquisitions (M&A) . However, it is worth noting, in case the CCI will require raising any objection after the voluntary notification has been served, they will have to do so within 90 working days, otherwise the M&A process will deem to be solemnized.

Conclusion:

I reckon, in the M&A process, the entire Pharmaceutical Industry in India would continue to act responsibly with demonstrable commitment to help achieving the healthcare objectives of the nation.

Global players will keep on searching for their suitable targets in the emerging markets like India, just as Indian players are searching for the same in the global markets. This is a process of consolidation in any industry and will continue to take place across the world.

Adverse impact of M&A on competition, if any, will now be effectively taken care of by the CCI. In addition, the apprehension for any unreasonable price increases post M&A will be addressed by the National Pharmaceutical Pricing Authority (NPPA).

Thus, there are enough checks and balances already being in place to avoid any possible adverse impact due to M&A activities in India.In this evolving scenario, it is indeed difficult to understand, why the FDI issue related to M&A in the Pharmaceutical space of India is still catching headlines of both in the national and international media.

Be that as it may, it goes without saying that as we move on, the role of CCI in all M&A activities within the Pharmaceutical Industry of India will be keenly watched by all concerned, mainly to ensure that the vibrant competitive environment is kept alive within this sector.

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.

Tapan Ray in ‘Focus Reports’, March 2011

Posted on April 4, 2011 by Tapan Ray

FR: Our last report on India dates back to 2006, right after the Patent Law was passed. What developments have you seen happening in the industry since then?

TR: There has been a paradigm shift with the Product Patent Regime coming in place in 2005. The era from 1970 to 2005 has been a very successful era of reverse engineering, when Indian manufacturers were copying and marketing innovative products in India at a fraction of their international price. Nevertheless, this also required talent, for which India had brilliant process chemists. However, the country eventually realized that reverse engineering model would not truly serve the longer term advancement of the economy in creating a conducive ecosystem to foster innovation. This realization process started in 1990 and was reinforced after signing the WTO Agreement in 1995. After the ten-year transition period, the patent law came into force in January 2005.

Since around 2005 Indian companies, which had mainly been relying on cost efficient processes, started investing in the drug discovery research. There are now at least 10 Indian companies engaged in basic research, while around 32 New Chemical Entities (NCEs) are at various stages of development.

This significant step that the country has taken so far, could not have been possible without a conscious decision to move away from the paradigm of replication to the new paradigm of innovation. More importantly, this shift has not happened at the cost of fast growing generic pharmaceutical industry in the country. Branded generics continue to grow rapidly in the new paradigm.

Today, branded generics constitute over 99% of the domestic pharmaceutical market. Of course, according to McKinsey (2007), the share of patented medicines is expected to increase to 10% by 2015. Even in that scenario 90% of the market will still constitute with branded generics in value terms.

FR: At the same time, companies are still only spending some 4% of their revenues on R&D, while internationally these numbers amount up to 12%. Many of the people in the industry seem to still see the future of India for the next 10 years to remain in manufacturing. Is innovation really the story of India right now?

TR: As I mentioned earlier, around 32 NCEs are at various stages of development from pre-clinical to Phase III. Thus, what Indian companies have achieved since 2005, is, indeed remarkable. If you now look at the investments made by the Indian pharmaceutical companies in R&D, as a percentage of turnover, you will notice an ascending trend. Though the R&D ecosystem in India cannot be compared with the developed world just yet, India is catching up.

FR: In some previous interviews we have conducted, concerns were raised over the Indian industry, saying that the local companies are selling off to international players. What is your take on this?

TR: In India, we all express a lot of sentiments and are generally emotional in nature. These are not bad qualities by any standard. However, such expressions should ideally be supported by hard facts. Otherwise these expressions cannot be justified.

Consolidation process within the industry is a worldwide phenomenon and is also taking place in India. One of the apprehensions of such consolidation process in India is that drug prices would go up, as a consequence. In my view, all such apprehensions should be judged by what has already happened in our country by now, in this area.

One example we can cite is the Ranbaxy-Daiichi-Sankyo deal, an acquisition which has not at all led to an increase in Ranbaxy’s product prices. Similarly, the acquisition of India-based Shantha Biotech by the French pharmaceutical major, Sanofi-Aventis did not lead to any increase in product prices either. It is difficult to make out how could possibly the drug prices go up when we have an effective national price regulator called National Pharmaceutical Pricing Authority (NPPA) in India? Currently, 100% of the pharmaceutical market in the country is regulated by NPPA in one way or the other.

India is currently having a drug policy which came into force way back in 1995. As per this drug policy, any company which increases its product price which are outside price control, by more than 10% in a year, will be called for an explanation by the NPPA. Without a satisfactory explanation, the concerned product – not the product category – will be brought under price control, that too for good. In addition, intensive cut-throat competition has made pharmaceutical product prices in India the cheapest in the world, even lower than in the neighboring countries such as Bangladesh, Pakistan and Sri Lanka. Moreover, if the potential to increase prices exists, why would any company wait for an acquisition in a highly fragmented pharmaceutical market in India?

Many of the concerns are, therefore, difficult to justify due to lack of factual data. In fact, on the contrary, the presence of multinational pharmaceutical companies in India is good for the country. These companies with their international expertise and resources would help India to build capacity in terms of training and creating a world-class talent pool. Indian companies, therefore, should consider to take more and more initiatives to partner and collaborate with these MNCs to create a win-win situation for India.

Another key advantage is in the area of market penetration. Market penetration through value-added innovative marketing has happened and has been happening all over the world; India should not let go this opportunity.

FR: In that case, how do you feel about some of the proposed protectionist measures such as a 49% cap on Foreign Direct Investment (FDI)?

TR: This may, once again, be related to the strong local sentiments. India needs financial reforms and wants to attract more and more FDI. The country wants to liberalize the process of FDI and, to the best of my knowledge, any step to move backward in this area should not be contemplated.

It is also worth mentioning that the acquisitions that have taken place were not of any hostile nature. Both Indian companies and MNCs have their own sets of skills, competencies and best practices. Both cost revenue and value synergy through such consolidation process could be made beneficial for the country.

Without commenting on any specific cases, I believe India has taken significant steps to encourage and protect innovation by putting in place the product patent Act in 2005. However, there are some additional steps that the Government should take to further strengthen the process, such as fast-track courts that can quickly decide on the cases of patent infringements. Another example is that when any company will apply for marketing approval for a product, the regulator will upload the same on its website. This is an easy way for other players to detect patent infringement and start taking counter-measures at an early stage. These are examples of steps that can be taken to create a proper ecosystem without amending the law.

FR: You mentioned the paradigm shift towards innovation earlier, to some extent a similar path as China. How innovative has India become in this respect and is it sufficient in terms of clinical trials and other related aspects of the sector?

TR: With regards to attracting FDI in areas such as R&D and clinical trials, India at present is far behind China. The reason for this, as said earlier, is that the country should try to analyse why the innovator companies are not preferring India to China in these areas. Simultaneously, there is a need to assess the expectations of the innovative companies from India in various areas of IPR. One such factor that is bothering the global innovative companies is the absence of regulatory data protection in India. The Government should seriously ponder over this need and take active steps towards this direction as was proposed by ” Satwant Reddy Committee in 2007.”

FR: In your view, what is the industry going to look like in the coming years?

TR: I do not expect a radical shift in the way the Pharmaceutical Industry will be operating in the next few years. Changes will take place gradually and, perhaps, less radically. The increase of the share of patented medicines to 10% of the market share by 2015 as was forecasted by McKinsey in 2007, in my opinion, is rather ambitious. We will certainly see more and more patented products in the market, but it will be slow and gradual unless corrective measures are taken to tighten the loose knots in the Patent Amendment Act 2005, as stated earlier. As more and more Indian companies will start embracing an innovation-driven business model, the strengths and the international experience of the MNCs in this area should be leveraged to catapult the Indian pharmaceutical industry to a much higher growth trajectory.

The interview is available at the following link:

http://www.pharma.focusreports.net/#state=Interview&id=0

By: Tapan J Ray

PILMAN

A Tapan Ray Website

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Tapan Ray in ‘Focus Reports’, March 2011