Does branding of generic drugs offer value to the patients in India?

Posted on November 7, 2011 by Tapan Ray

It appears that the government has accepted the submission of the ‘Parliamentary Standing Committee for Health and Family Welfare’ made to the ‘Rajya Sabha’ of the Indian Parliament on August 4, 2010, recommending prescription of medicines by their generic names.

It has now been reported that the Drugs Technical Advisory Board (DTAB) has already considered the proposal to amend the rules of the Drugs and Cosmetics Act of India for approval of all drug formulations containing single active ingredient only in the generic names by the State Licensing Authorities. The proposal to publish the draft rules has been forwarded to the Ministry of Health for necessary approval. The Fixed Dose Combinations (FDC) will be kept out of the purview of this amendment.

This recommendation of the ‘Parliamentary Standing Committee for Health and Family Welfare’ appears to be based on the premises that the ‘Brand Building’ exercise of the generic drugs in India, includes ‘very high sales and marketing expenditure’, which can easily be eliminated to make medicines available to the common man at much cheaper prices. ‘Jan Aushadhi’ scheme of the Government is often cited as an example to drive home this point.

This recommendation, on the face of it, makes immense sense. However, the moot question remains, “Is it a practical proposition to implement in India?”

The generics and the branded-generic drugs and their value proposition: As we know generic name is the actual chemical name of a drug. The brand name is selected by the producer of a formulation and is built on various differential value parameters for its proper position in the minds of health professionals as well as the patients. Thus, brand names offer a specific identity to a chemical name in their value proposition.

Some other countries are also taking similar steps:

Just to cite an example, as reported by ‘The Guardian” on August 23, 2011, the Spanish government recently enacted a law compelling the doctors of Spain to prescribe generic drugs rather than more expensive patented and branded pharmaceuticals, wherever available. This move is expected to help the Spanish government to save €2.4 billion (£2.1billion) a year, as in Spain the drugs are partly reimbursed by the government.

As a result, the doctors in Spain will now have to prescribe only in the generic or chemical names of the respective drugs. Consequently the pharmacies will be obliged to dispense ‘the cheapest available versions of drugs, which will frequently mean not the better-known brand names sold by the big drugs firms’.

Quality standards of both generic and branded generic drugs are no different:

Drugs and Cosmetics Act of India requires all generic or branded generic drugs to have the same quality and performance. Thus when a generic drug is approved by the drug regulator, one should logically accept that it has met the required standards with respect to identity, strength, quality, purity and potency. It is not uncommon that there could be some variability taking place during manufacturing process for both branded generic and generic drugs and for that matter it is applicable to all drugs. However, all formulations of both types of these drugs manufactured by different manufacturers do not need to contain the same inactive ingredients.

In any case, all formulations of both generic and branded drugs must be shown to be bioequivalent to the reference drugs with similar blood levels to the respective reference products. Regulators even in the USA believe that if blood levels are the same, the therapeutic effect will be the same.

A recent study:

As reported by the US FDA, ‘A recent study evaluated the results of 38 published clinical trials that compared cardiovascular generic drugs to their brand-name counterparts. There was no evidence that brand-name heart drugs worked any better than generic heart drugs. [Kesselheim et al. Clinical equivalence of generic and brand-name drugs used in cardiovascular disease: a systematic review and meta-analysis. JAMA. 2008;300(21)2514-2526]‘.

Prescriptions for generic medicines were a record high in America in 2010:

As per published reports, last year i.e in 2010, generic medicines accounted for more than 78% of the total prescriptions dispensed by retail chemists and long-term care facilities in the US. This is a record high and is four percentage points more than what it was in 2009 and came up from 63% as recorded in 2006.

Points to ponder and resolve in the current Indian situation:

While the intention of the Government is indeed good, some practical issues must be considered before its implementation, which are as follows:

1. Increased chances of error while dispensing:

Chemical names of medicines are complex. In case of any mistake of dispensing the wrong drug by the chemist inadvertently, the patients could face serious consequences.

2. There could be differences even within single ingredient formulations:

Different brands of even single ingredient medicines may have inherent differences in their formulations like, in the drug delivery systems (controlled/sustained release), kind of coatings allowing dissolution in different parts of alimentary canal, dispersible or non-dispersible tablets, chewable or non-chewable tablets etc. Since doctors are best aware of their patients’ conditions, they may wish to prescribe a specific type of formulation based on specific conditions of the patients, which may not be possible by prescribing only in generic names.

3. Price differences between branded generics and generic generics may not exist:

It is intriguing to fathom, just for a switch over from the brand name to the generic name how will the Maximum Retail Price (MRP) of a single ingredient formulation, bearing only the generic name, come down. Currently, MRPs printed on the product packs of generic formulations without any brand name, as available in the retail outlets, are similar to comparable branded generic formulations. In that case, what benefits that Government will expect a patient to get out of this well hyped change?

4. Manufacturers may switch from single ingredient formulations to FDCs:

There is a theoretical possibility that to retain brand names, the pharmaceutical companies may be encouraged to change their formulations from single ingredient to FDCs. In that situation, single ingredient formulations may not be available and comparable FDCs could cost more to the patients.

5. The key decision will shift from physicians to retail chemists:

The major issue with prescriptions by the chemical/generic names is that retail chemists will then be the sole decision makers to choose the prescribed product from within a whole lot of over 30 to 40 manufacturers for a particular product.

What then will prompt the retailers to buy, store and sell different generic formulations of various companies and what could possibly be the key selection criteria for such drugs by them?

I reckon, there could only be one criterion for the choice of such medicines by a chemist i.e. to select only those which will give them highest margin of profits.

In such a case, the ultimate decision making authority for the prescription medicines shifts from the physicians to the chemists. This could make the situation far worse for the patients.

In interest of the patients, it is, therefore, extremely important that the government, regulators, physicians, chemists and even the patients’ groups are aware of such risks and ensure that patients are not adversely impacted in any way.

Conclusion: Viewing purely from the Indian perspective, while the generic drugs per se are not bad for the patients, weighing all the above issues and possible risk factors against expected benefits, I reckon, without effectively addressing the above issues to start with, if the prescriptions of single ingredient formulations are made mandatory only in generic names, it could seriously jeopardize patients’ safety and interest.

In any case, when single ingredient formulations contribute just around 30% of the total prescriptions in India, how could then prescriptions of all single ingredient formulations only in generic names address the stated concern of the government, in a holistic way?

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 follow the US way to regulate all types of lobbying in the country?

Posted on October 31, 2011 by Tapan Ray

Currently, India is one of the fastest-growing economies of the world along with China. Even during the recent global financial meltdown process both India and China could register a very impressive average GDP growth of around 7% consistently during the last so many years. This growth is over three times more than that of the developed countries like the US, which has been growing just around 2% in the recent years.

India growth story, I reckon, is now attracting a large number of companies across the industries from all over the world including India to lobby hard and participate in the process of spectacular growth across many industry sectors. Such lobbying activities in India are expected to increase by manifold in the years ahead.

As per newspaper reports the large corporations involved with these activities, besides pharmaceuticals, include the world’s largest retailers, the coffee shop giants, financial services, insurance companies and technology majors in addition to chemicals, telecom, defense and aerospace giants.

Currently, many US-based companies, as reported in the lobbying disclosure reports filed by them with the US Senate, are lobbying for various issues ranging from facilitating the market access to easing of foreign direct investment caps in retail, insurance and other financial services sectors in India to facilitate their business expansion in the country.

Indian Pharmaceutical sector is becoming more and more attractive to many:

Keeping pace with other high growth industries of the country, Indian Pharmaceutical Market (IPM) with the current domestic turnover of around US$ 12.1 Billion has been registering a scorching pace of CAGR growth of around 15%, since over a decade. The domestic pharmaceutical industry now caters to about 20% of global requirements of high quality and affordable generic medicines of all types.

IPM is, therefore, a global success story and India has already established itself as a major force to reckon with, especially in the development and manufacturing of high quality generic pharmaceuticals, as well as in Contract Research and Manufacturing Services (CRAMS), in the pharmaceutical industry of the world.

IPM is creating newer jobs:

As per reports, in roughly around 20,000 pharmaceutical organizations and its ancillary units over one million people are currently employed by the Industry. As mentioned above, though India has globally established itself as a producer of high-quality medicines available at reasonable prices, predominantly due to a very high of around 80% ‘Out of Pocket’ expenses towards healthcare in India, ‘common man’ still finds it extremely difficult to bear the cost of illness. Such critical public health interests India can ill afford to ignore.

Spectacular progress of the Indian Pharmaceutical Industry:

India, during its independence on August 15, 1947 inherited the patent system of its British colonial masters. Drugs and Pharmaceuticals used to be largely imported from the developed world in that period with local production being absolute minimal.

This abysmal trend and pattern of the IPM of pre-independent India took another 20 years to make any significant change worth mentioning. It will be quite difficult even for the staunchest skeptics to brush aside the fact that the Indian pharmaceutical industry started blossoming since 1970, mainly due to abolition of product patent act and government encouragement with various fiscal and tax incentives paving the way for the emergence of a vibrant high quality drug manufacturing sector in the country. However, that was the need of the 70’s and certainly not for now.

It is good to know that so far as national self-sufficiency in pharmaceuticals is concerned, as per Indian Drug Manufacturers Association (IDMA), it is far above 70% despite many tough challenges.

Patent regime of many ‘developed economies’ had a stormy beginning:

While deliberating on product patents, it should be noted that in many industrial nations of the world, the protection of inventions through patents started taking place in around the last 40 years.

For example, pharmaceuticals product patents in Switzerland came into effect only since 1978. History tells us that at the fag end of the 19^th century the pharmaceutical industry in Switzerland fought vehemently against the enactment of a patent law to be able to imitate foreign drugs, such as Aspirin of Bayer. Mainly because of this reason, at that time, Germany used to consider Switzerland a ‘state of robber barons’. Similarly, France used to be known as a ‘country of counterfeiters’.

Some historians have written that exactly in the same way like India, as mentioned above, the economies of Korea, Taiwan and the ‘land of the rising sun’ – Japan were able to thrive in their formative years due to absence of patent protection in those countries.

Young India is possibly crossing, if not has already crossed that stage much sooner than many others.

Innovation is the ‘Wheel of Progress’ of any nation:

However, it is an undeniable fact that ‘innovation’ is the wheel of progress of any nation. Without innovation, it is virtually impossible for any country to make significant economic progress. The Prime Minister of India has thus termed the current decade of 2010 as the ‘decade of innovation’ for India.

It has been well established by now that ‘Technology Transfer’ from the developed nations not only brings profit to those countries from patent protection and shields them from low-cost competition, but also helps the developing nations to add requisite speed to their growing economy.

However, most developing nations want access to such technological innovations at an affordable and lesser cost without any possible future risk of oligopoly and ‘technological recolonisation’.

New Product Patent regime in India came much after China and Brazil:

India signed the WTO agreement to become its member in January 1, 1995 and following a 10-year transition period, on January 1, 2005 the country amended its national patent legislation to usher in the product patent regime. The lose knots, if any, in the amended Patents Act of India are widely expected to get strengthened as the domestic innovators will feel the need for the same and possibly not due to any extraneous pressure.

Compared to India, product patent came much earlier in China and Brazil. China enacted its first patent law on March 12, 1984. However, it provided little protection to pharmaceutical and chemical inventions. In 1992, China amended the 1984 patent law in compliance with an agreement between China and the United States, as well as to join the WTO. Similarly, the new patent law came into force in Brazil way back on October 6,1999, which also has the provision of issuing Compulsory Licenses (CL).

International independent domain experts feel that it will take some more time for India to gauge the real benefits of product patents for the country.

Public interest for ‘Health and Nutrition’:

The philosophy of India since decades has been to ‘promote the principle of relying on one’s own strength’, especially in the critical and a very sensitive areas of public interest for ‘Health and Nutrition’. Many independent experts in this field both from India and abroad have opined that India seems to be following this path without compromising on its TRIPS compliance status. However, there are some dissenting voices in this area, who feel that a more rigorous and robust patent regime in India is in the best interest of the country.

Should the government regulate lobbying activities?

Considering the fast emerging environment, as mentioned above and arising out of some recent very sensational lobbying related financial/policy scams in India, the moot question, as is being raised by many across the country is: “Should the government regulate the lobbying activities in India?”.

Even in the Pharmaceutical Industry, some instances of lobbying activities carried out both within and outside India, had led to raging debates and controversies.

To cite an example, not so very long ago, some consumer activists from the civil society vehemently protested against the ‘Intellectual Property Conferences’ held in India, which were allegedly sponsored by some interested groups in a guise to influence the policy makers and the judiciary of India.

It was widely reported that the consumer activists viewed these IP summits, organized by the George Washington University Law School of USA as ‘attempts to influence sitting judges on patent law enforcement issues that are pending in Indian courts.’

In a letter dated February 26, 2010 addressed to Shri Anand Sharma, Minister of Commerce and Industry of India, over 20 NGOs demanded transparency and more information on such meetings and wanted the government of India ‘to put a stop to such industry sponsored lobbying with Indian judges and policymakers to promote their own requirements for intellectual property and to lobby for either law amendments or even to plead their cases currently pending before, various courts and the Indian Patent Office,”

In raising their concerns, the civil society groups argued that the posture adopted by the lobbyists and their supporters is to “force India to adopt greater standards” of IP protection “beyond the mandatory levels” required by the WTO, which may go against public health interest in India.

Lobbying activities are expected to gain further momentum:

It is quite logical to expect that lobbying activities in such and many other areas both ‘for’ and ‘against’ are expected to gain momentum in the times to come. However, it is widely believed that long-term interest of India is expected to ultimately prevail in this closely watched ball game.

Lobbying is legal in many countries like the US with the government ground rules firmly in place:

We all know that in many countries like the US, lobbying is a legal activity. Many Indian companies, including the government of India have been lobbying in the US since so many years to present their cases and argument with the American law and policy makers.

When President Obama came to power in the US, it was reported: ‘one of the first acts of the Obama administration in office was to have an executive order which prohibited the Obama Administration either from hiring lobbyists – those who had lobbied within two years of joining the administration or allowing people who had left the Obama administration to service lobbyists for two years. The idea is that you want to break the chains where there is undue influence of special interest groups upon the government’.

However, there are no government ground rules still in place for lobbying in India either for the local or the global companies and their lobbyists, across the industry sectors.

Surrogate lobbying:

It was discussed somewhere about ‘surrogate lobbying’ in many industries from various parts of the world. I have really no idea about what these are and the legality of such activities without appropriate well-drafted government specified disclosures in place, for public interest.

Conclusion:

Be that as it may, in the US such activities are required to be intimated to the US senate by the companies concerned and their lobbyists highlighting their activities in form of a quarterly disclosure reports detailing not only the issues, but also the concerned government departments and institutions and the related expenses.

Let me hasten to add that despite a long history with regulated and legalized lobbying in the US, still there has been severe criticism in that country of the way lobbying has worked there in the past so many years. India has plenty to learn from such experiences.

Thus, as a part of following the global ‘public interest best practices’, a large section of the civil society in India has been voicing in so many ways, mainly after the recent financial and policy related mega scams, that it may be a good idea, if the government also puts system driven adequate checks and balances in place for lobbying activities in India, sooner.

It is believed by many that such regulations will ensure perfectly legal lobbying initiatives in India always maintain complete transparency and follow appropriate processes/procedures of disclosures to maintain a right balance between long-term public interest and the growing requirements of a healthy business ecosystem to accelerate the inclusive economic growth of the nation.

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.

‘Maira Committee’ delivers: Resolves 100% FDI issue in the pharma sector of India

Posted on October 17, 2011 by Tapan Ray

On October 10, 2011, Dr Man Mohan Singh, the Prime Minister of India accepted the recommendation of the ‘Maira Committee’ on Foreign Direct Investment (FDI) in the Pharmaceutical Sector of India and decided that the Competition Commission of India (CCI) will continue to scrutinize all Mergers and Acquisitions (M&A) in this area to avoid any possible adverse impact on Public Health Interest arising out of such deals.

Finance Minister Mr. Pranab Mukherjee, Health Minister Mr. Ghulam Nabi Azad, Commerce and Industry Minister Mr. Anand Sharma, Deputy Chairman of the Planning Commission Mr. Montek Singh Ahluwalia and the head of the ‘Maira Committee’ Mr. Arun Maira were reported to be present in the meeting.

Finer details are still not known:

Although the details of the ‘Maira Committee Report’ nor the discussion with the Prime Minister are not known, as yet, the key recommendation, as reported by the press was to be in relaxation of the threshold limits of CCI scrutiny for pharmaceutical M&As, which under the current law involve target companies with a turnover of above Rs 750 Crore (Rs 7.5 billion) and assets worth more than Rs 250 Crore (Rs 2.5 billion).

The CCI will now be strengthened and directed to set up a standing advisory committee especially to look into M&A in the pharmaceutical sector of India to address the concerns of the stakeholders in this matter.

The new system in CCI within six months:

The new system will be put in place within a period of six months. By the time CCI equips itself to handle the recommendations of the ‘Maira Committee’, as an interim measure, all brownfield pharma M&A proposals will be routed through Foreign Direct Investment Promotion Board (FIPB) for a period not exceeding six months.

A press note from the commerce & industry ministry announced at the same time that “India will continue to allow FDI without any limits (100 per cent) under the automatic route for Greenfield investments in the pharma sector. This will facilitate the addition of manufacturing capacities, technology acquisition and development.”

Looking back:

While looking back, the consolidation process within the Pharmaceutical Industry in India started gaining momentum since 2006 with the acquisition of Matrix Lab by Mylan. 2008 witnessed one of the biggest mergers in the Industry till that period, when Daiichi Sankyo of Japan acquired Ranbaxy of India for USD 4.6 billion.

Key apprehensions and counter arguments ‘for and against’ FDI cap:

Last year, Abbott’s acquisition of Piramal Healthcare with USD 3.72 billion followed several media reports on the Government’s keen interest in instituting new restrictions on Foreign Direct Investment (FDI) in the pharmaceutical sector for the following apprehensions:

The first apprehension of some stakeholders was that such FDI will create ‘Oligopolistic Market’ with adverse impact on ‘Public Health Interest’. It was argued by others that Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands. Consolidated Abbott, being the largest domestic player, enjoys a market share of just 6.1% in a highly fragmented market. Thus, the apprehension that an ‘Oligopolistic Market’ will be created through acquisitions by the MNCs is unfounded.

The second apprehension was on limiting the power of government to grant Compulsory License (CL). With a CL, the Government, under the Indian Patents Act can authorize any pharmaceutical company to manufacture any medicine required by the country in an emergency situation for ‘Public Health Interest’. On this point the argument put forth was that with more than 20,000 registered pharmaceutical manufacturing companies operating in India, many of them with high skill sets, there will always be skilled manufacturers willing and be able to make needed medicines in an emergency situation, as happened during H1N1 influenza pandemic.

Creation of a legal barrier by putting a cap on FDI to prevent domestic pharma players from voluntarily selling their respective companies at a lucrative price, just from the CL point of view, others argued, sounds highly protectionist in the globalized economy.

The third apprehension was that lesser competition will push up drug prices. The counter-argument was that equity holding of a company has no bearing on prices or access, especially when prices are governed by the National Pharmaceutical Pricing Authority (NPPA) and competition pressure. Thus, prices of medicines of Ranbaxy, Shantha Biotechnics and Abbott have reportedly remained stable even after their acquisition.

India needs FDI in the Pharmaceutical sector:

Both ‘Greenfield’ and ‘Brownfield’ FDI contribute not only to the creation of high-value jobs for the country, but also improve access to high-tech equipment and capital goods. Technology cooperation with the MNCs stimulates growth in manufacturing and R&D spaces of the domestic industry. It was articulated that any restriction to FDI in the pharmaceutical industry could make overseas investment even in the R&D sector less attractive. India has already suffered a 40% drop in FDI between 2009 and 2010 with a 17% drop in pharmaceutical FDI.

Foreign investors look up to India for cost arbitrage and expertise in Contract Research and Manufacturing Services for improved market access. Thus, it is believed by many that FDI can lead to increased domestic pharmaceutical exports by India, as happened in countries like China and Brazil, where they have programs to encourage partnerships with MNCs to bolster their domestic industry, helping the nation to benefit more from FDI.

India is against protectionist measures by other countries – Safeguards are in place:

Moreover India as a country, is known to be quite vocal and against any form of protectionist measures by other countries which will adversely impact the trade and commerce of our nation. It was perhaps felt by the ‘Maira Committee’ that any policy decision to do away with the current practice of allowing 100% FDI will be taken by the international community as a ‘protectionist measure’ in the pharmaceutical sector of India. It was reportedly felt by them that any possible adverse impact of M&A on competition could be effectively scrutinized by the Competition Commission. At the same time, it is a known fact that any unreasonable price increase is currently being effectively addressed by the NPPA. Thus it appears, effective safeguards to protect ‘Public Health Interest’ arising out of any M&A in the pharmaceutical sector of India, have been put well in place.

FDI policy needs predictability and stability to attract more investments:

Pharmaceutical sector was opened up for 100% FDI through automatic route only in 2002 as a part of the financial reform process, positioning India as an attractive investment destination for pharmaceuticals. This reform process, investors feel, needs stability, as by partnering with MNCs local drug companies have begun to gain access to international expertise, technology, resources, good manufacturing practices and markets.

It now appears that the ‘Maira Committee’, some key ministers present in the meeting and the Prime Minister himself felt that any move, at this stage of economic progressive of the country to restrict FDI in the pharmaceutical sector, especially when appropriate safeguards are in place, will be a retrograde step in the financial reform process of India. This could adversely impact FDI not only in the Pharmaceutical sector but possibly far beyond it.

Conclusion:

The final decision of the PM is a victory to all participants in this raging debate. All stakeholders seem to be satisfied with the decision, as their concerns have been well taken care of by the ‘Maira Committee’.

The issue of 100% FDI in the pharmaceutical sector, without putting any cap on it, has now been finally resolved, as it has come from the highest decision making authority of the country.

Both ‘Greenfield’ and ‘Brownfield’ FDI in the pharmaceutical industry of India, I reckon, will continue to contribute not only to high-value job creation, improving access to high-tech equipment and capital goods, boosting global technology cooperation in manufacturing and R&D spaces of the domestic industry, but will also make a significant contribution to the overall progress of the pharmaceutical industry of India.

The decision taken by the PM on the ‘Maira Committee’ report on October 10, 2011, therefore, seems to be a right step towards a long term nation building process without compromising with the ‘Public Health Interest’ of our country in any form.

‘Maira Committee’ has indeed delivered!

A National Regulatory Standard is necessary for MRs of the Indian Pharmaceutical Industry

Posted on October 3, 2011 by Tapan Ray

Medical Representatives (MR) form the bedrock of business success, especially for the pharmaceutical industry in India. The Job of MRs is tough and high voltage one, laced with moments of elation and sprinkles of frustration, while generating prescription demand for selected products in an assigned business territory. Though educational qualifications, relevant product and disease knowledge, professional conduct and ethical standards vary widely among them, they are usually friendly, mostly wearing a smile even while working in an environment of long and flexible working hours.

Currently, there is a huge challenge in India to strike a right balance between the level and quality of sales pitch generated for a brand by the MRs, at times even without being armed with required scientific knowledge and following professional conduct/ ethical standards, while doing their job.

It is critical for the MRs to understand scientific details of the products, its mode of action in a disease condition, precautions and side-effects in order to be fair to the job and be successful. As MRs are not just salesmen, they must always be properly educated in their respective fields and constantly hone their knowledge and skills to remain competitive.

A qualitative study:

Indian J Med Ethics, 2007 Apr-June; 4(2) reported a qualitative study to determine a wide range of pharmaceutical promotional practices by the MRs influencing prescription of medicines in Mumbai. The study highlighted:

“An unholy alliance: Manufacturers, chemists and doctors conspire to make profits at the expense of consumers and public health, even as they negotiate with each other on their respective shares of profits”.

The paper identified misleading information, incentives and unethical trade practices as methods to increase the prescription and sale of drugs. It reported, besides other points that MRs provide incomplete medical information to influence prescribing practices.

‘Code of Pharmaceutical Marketing Practices’ is necessary, but just not enough:

Gift-giving, ethical vs. unethical promotion, transparency and self-regulation appear to be the main issues in the pharmaceutical industry right across the globe. Owing to inadequate national legislation and the lack of universally accepted self-regulatory codes, the pharmaceutical industry in India has yet to tackle the problem of alleged “Unethical drug marketing practices”.

After a protracted debate on this subject by the pharmaceutical companies, in May 2011, the Department of Pharmaceuticals (DoP) came out with a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCMP)’ to address this issue squarely and effectively in India.

This decision of the government is the culmination of a series of events, covered widely by the various sections of the media, since 2004. Be that as it may, the UCMP, in my view, is just not enough to address the issue of alleged, “Unethical drug marketing practices” holistically.

A mandatory ‘accreditation/certification’ program for MRs is the need of the hour:

Countries like United Kingdom (UK) and Australia with much longer experience of dealing with pharmaceutical industry than India, have appropriate mechanisms, safeguards and legislation in place to deal with the pharmaceutical marketing practices. Even the pharmaceutical industry in the UK and Australia have controlling authorities with comprehensive standards in place to deal with proper education, professional conducts and ethics for the MRs. Similar mandatory ‘accreditation/certification’ program for MRs, in my view, is also necessary in India without any further delay.

India should learn from others to work out a robust process:

Even with such systems and regulations in place, both in the UK and Australia, some ethical issues still remain unresolved. In Australia the largest consumer organization highlights, “that it is a conflict of interest for the Code to be administered by the industry peak body.” and “it is also concerned that the sanctions available in the Code do little to prevent breaches”. United Kingdom is no exception in this regard.

Other markets are fast catching up:

Very recently in Turkey, Turkish Ministry of Health published a new pharmaceutical promotion regulation, which specifies for the first time a certification obligation for the MRs.

In Philippines, ‘MR Accreditation Program (MRAP)’ started about 8 to10 years ago. MRAP is administered by the Pharmaceutical and Healthcare Association of Philippines. The certifying examination is accredited by the Professional Regulation Commission (PRC) under its Board of Pharmacy of the Government of Philippines.

In Japan there is a certification program for the MR since 1997, which is administered by the MR Education and Accreditation Center of Japan, a public service corporation. One has to receive over 450 hours education and training in Japan to be qualified for the examination. Even after being qualified in the certification examination, at least 50 hours of continuing education is required every year to keep the certification updated that expires after 5 years.

In Germany, under German law and practice, MRs have either the status of “pharma advisors” (“Pharmaberater”) as specified in German Drugs Act or they have to pass the examination for certified MRs (“Pharmareferent”), which is accessible online.

“Pharma Advisors” have science background as a pharmacist, chemist, physician, veterinarian etc. whereas other MRs are required to obtain scientific and medicinal knowledge through suitable education and training program, which will lead to an examination for certification by the German authorities. All MRs are required to start the program within 6 months of employment in the industry and complete the five modules within 2 years.

In Canada ‘the Code of Ethical Practices’ requires the MRs to complete an accreditation course offered by the Council for Continuing Pharmaceutical Education within two years of commencing their employment.

In USA, there is no official MR certification program.

In Hungary, the MR certification program is administered officially by the Health Authority of the country.

In Indonesia, this is administered officially by the state/ governmental bodies or by the industry through an outside consulting organization, which issues certificates after successful completion of the examination.

In Argentina, MR Certification Program is required by the law of the land. In order to include the name in the ‘Registry of MR’, a qualifying degree as medical sales representative, issued by a tertiary educational institution and/or officially acknowledged training institutions, is essential.

In South Africa, they have certification only for marketing code training, which is administered by an independent Marketing Code Authority.

In Sweden, this course is administered by an external course organizer on behalf of LIF Sweden.

However, Swedish companies nowadays prefer to employ pharmacists, who do not need to take the examination.

A National regulatory standard for MRs is necessary in India:

India is now one of fastest growing emerging pharmaceutical markets of the world with 3rd global ranking in volume of production and 13th in value terms. Domestic turnover of the industry is around US$ 12.1 billion in June 2011 (IMS) representing just over 1% of the global pharmaceutical industry turnover of US$ 850 billion (IMS). Since 1970, Indian pharmaceutical Industry has rapidly evolved from almost a non-entity to meeting around 20% of the global requirements for high quality and low cost generic medicines.

Unfortunately, despite a fast evolving scenario, appropriate regulations in various areas of the industry in India have not been worked out, as yet, to derive the best mileage out of this scorching pace of growth of the industry. India still does not have a national code of conduct or regulatory standards applicable to MRs.

Only the clause 4 of ‘The Magic Remedies (Objectionable Advertisement) Act, 1954’ deals with misleading advertisements. It is about time to formulate not just a national code on pharmaceutical marketing practices, but also a mandatory accreditation program and qualifying criteria for the MRs for entire pharmaceutical industry in India, like many other countries of the world.

Central Drugs Standard Control Organization (CDSCO) of the Ministry of Health and Family Welfare of the Government of India in its website lists the “Laws Pertaining to Manufacture and Sale of Drugs in India”. However, it does not specify any regulation for the MRs nor does it recommend any standard of qualification and training for them, which is so critical for all concerned.

Conclusion:

In the above scenario, the moot question is without any comprehensive and formalized uniform national standards of educational qualification, knowledge, ethics and professional conduct being in place for the MRs, are they getting right uniform inputs, across the board, to appropriately interact with the medical profession in a manner that will benefit the patients and at the same remain within the boundary of professional conduct and medical ethics?

Thus, a National regulatory standard for MRs, I reckon, is absolutely necessary in India… sooner the better.

FDI in ‘Brownfield’ Pharma acquisitions and the growth of ‘Greenfield’ projects in India

Posted on September 17, 2011 by Tapan Ray

Just when global multinational companies are inking deals to get more and more drugs manufactured in India, because of various financial and other considerations, giving a fillip to the domestic manufacturing capacity, recent media reports are carrying news items expressing apprehensions on possible declining trend of pharmaceutical manufacturing activities in the country due to ‘brownfield’ acquisitions of the domestic pharmaceutical companies by large multinationals.

Almost around this time, the Bureau of Labor Statistics data (USA) of May 2010 reported that the number of employees engaged in “pharmaceutical and medicine manufacturing” in the US went down by 5% from what it was about two years ago with around 35000 layoffs in the first half of 2010.

According to ‘New York Times’, there has been around 15,000 manufacturing job loss in Europe around this period.

Where the global manufacturing capacity has started shifting then?

As compared to above, the Department of Pharmaceuticals of the Government of India, as reported by Fierce Pharma, have indicated that pharmaceutical manufacturing industry of the country employed 340,000 people during April 2008 to March 2009 period with a sizable increase in number compared to the previous period. Overall, the industry provides employment to over 4.2 million persons directly or indirectly in India (Source: IDMA). This is happening despite a series of large to medium brownfield acquisitions in the country.

Moreover, a study by the Organization of Pharmaceutical Producers of India and Ernst & Young, based on 50 survey respondents from 30 pharmaceutical companies in the US, Europe and Asia, projects growth of formulations manufacturing and intermediate drugs in India at a rate of 43%, which is three times more than the projected global rate.

Growth in manufacturing through global collaborations:

With a large number of the world class manufacturing facilities conforming to cGMP requirements of various regulatory authorities across the globe, India is fast emerging as a global hub for pharmaceutical manufacturing services.

Emerging pharmaceutical manufacturing environment in the country, no doubt, is attracting a large number of global pharma majors to ink contract manufacturing deals, as mentioned above, with their Indian counterparts. Such collaborative arrangements with global partners are giving a further thrust to the pharmaceutical manufacturing activities of the country. To cater to the growing demand in manufacturing, some domestic companies are setting up ‘greenfield’ projects, while others are getting engaged in major expansion of their existing manufacturing facilities.

As per Frost & Sullivan, contract manufacturing market in India registered a turnover of around US$ 2.3 billion with a CAGR of 33% on 2010. RNCOS, an Industry Research solution company estimates that this sector will grow at a CAGR of over 45% during 2011-2013, in India.

Large global pharma companies like, Eli Lilly, AstraZeneca, Abbott, Merck, GSK and Pfizer have already inked collaborative arrangements with Indian Pharmaceutical companies related to manufacturing.

Eisai Co. Ltd of Japan inaugurated its second largest active pharmaceutical ingredient (API) production facility (after their Kashima plant in Japan) at Visakhapatnam on December 2009. The company is also to start a Research & Development (R&D) center for formulation development around the same place starting with four to five projects.

In the recent past the following predominantly manufacturing collaborative agreements have been signed by the MNCs in India:

Collaborative Deals
Year	Multinational Companies	Indian Companies
2009	GSK	Dr. Reddy’s Lab
2009	Pfizer	Aurobindo Pharma
2010	AstraZeneca	Torrent
	Abbott	Cadila Healthcare
	Pfizer	Strides Arcolab
	AstraZeneca	Aurobindo Pharma
	Pfizer	Biocon
2011	Bayer	Cadila Healthcare
2011	MSD	Sun Pharma

This is happening mainly because of inherent cost arbitrage, other factors being the same:

Comparison of Cost Advantage in India (%)
Costs in the Western Countries	100.0
Production Costs	50.0
R&D Costs	12.5
Clinical Trials Costs	10.0
Source: Pharmexcil Research

ANDAs and DMFs are manufacturing growth boosters:

Large portfolios of ANDAs and DMFs of domestic pharmaceutical players will also spur manufacturing in India:

ANDA approval by country:

Final ANDA Approvals by Country (2007) (figs. in Nos.)
Country	Numbers
USA	169
India	132
Israel	40
Germany	25
Canada	24
Switzerland	19
Iceland	14
Jordan	11
Other	25
Source: Thomson Scientific

DMF approval by country:

Comparison of Drug Master Filings (Type II) by India, China & World (1998-2007) (Figs. in Nos.)
Year	India	China	World Total
1998	32	27	316
1999	26	6	199
2000	33	9	201
2001	47	6	238
2002	55	20	264
2003	115	19	360
2004	160	25	435
2005	233	70	615
2006	267	78	627
2007	274	90	656
Source: Thomson Scientific,

Patent challenge to boost manufacturing for exports:

To further boost manufacturing, especially for exports, Indian pharmaceutical players have also started challenging global patents. In fact in patent challenge, India ranks just next to USA with a share of 21% of the total:

Country-wise Number of Patent Challenges (As on March 2008)
Country	Numbers
USA	200
India	113
Israel	89
Canada	43
Switzerland	34
Iceland	17
Germany	10
Other	32
Source: Thomson Scientific,

Boosting up domestic manufacturing with overseas acquisitions and collaborations:

At the same time, domestic Indian companies are also on a spree of overseas acquisition and collaborative deals. The following details from the Ministry of Commerce are a testimony to this fact:

Selected International Acquisitions and Foreign tie-ins by the Indian Pharmaceutical Industry
Company	International Acquisition (s)	Foreign Alliances, JVS, and other tie-ins
Nicholas Piramal	Pfizer-Morpeth (UK), Avecia Pharmaceutical (UK), Dobutrex brand acquisition (US), Rhodia’s inhalation business (UK), Biosyntech (NPIL Pharmaceutical) (Canada), Torcan Chemical (Canada), 51 percent of Boots (S. Africa), Biosyntech	Ethypharm (France), Genzyme (US), Eli Lilly (US), Biogen Idec (US), Chiese Farmaceutici (Italy), Minrad (US), Pierre Fabre (France), Gilead Sciences (US), Allergan (US), Hoffmann-La Roche (Switzerland)
Ranbaxy	Terapia (Romania), Allen-GSK (Spain & Italy), Ethimed (Belgium), Betapharm (Germany), RPG Aventis (France), 40 percent stake in Nihom Pharmaceuticals (Japan), Brand-Veratide (Germany), Efarmes (Spain), Be-Tabs (S. Africa), Akrikhin (Russia), Basic (Germany), Ohm Labs (US)	GlaxoSmithKline (UK), Janssen-Ortho (Canada), IPCA Labs (US), Zenotech (India), Sonkel (S. Africa), Cephalon (US), Gilead Sciences (US), Schwartz (Germany)
Dr. Reddy’s	Betapharm Group (Germany), Trigenesis (US), BMS Laboratories and Meridian Healthcare (UK), Roche’s active ingredients business (Mexico), BMS Labs (UK)	Novo Nordisk, Bayer AG (Germany), Par (US), Novartis (Switzerland), Merck (Germany), Clin Tech, Pharmascience (Canada), ICICI (India), Merck (Germany), Schwartz
Marksans	Nova Pharmaceuticals (Australia)	NA
Aurobindo	Milpharm (UK), Pharmacin (Netherlands)	Gilead Science (US), Citadel (India)
Sun Pharmaceutical	Able Lab (US), Caraco (US), Valeant Pharmaceuticals (US & Hungary), ICN (Hungary), Caraco (US), MJ Pharmaceutical	Dyax
Dishman	Amcis (Switzerland), Solutia’s Pharma (Switzerland)	Azzurro (Japan)
Orchid	Bexel Pharma (US)	Stada, Alpharma, Par, Apotex
Biocon	Nobex (US)	Centre of Molecular Immunology (Cuba)
Wockhardt	Wallis Labs (UK), CP Pharmaceutical (UK), Esparma (Germany), Pinewood Laboratories (Ireland), Dumex (India)	Pharmaceutical dynamics (S. Africa)
Cadila	Alpharma (France-formulations), Dabur Pharma Redrock (UK)	Schering (Germany), Boehringer Ingelheim (Germany), Vitaris (Germany), Novopharm (Canada), MCPC (Saudi Arabia), Cilpharm (Ivory Coast), Geneva (US), GSK (UK), Ranbaxy (India), Mallinckrodt (US), Mayne (Australia), Shinjuki (Japan), Zydus Atlanta
Jubliant Organosys	Target Research Association (US), PSI (Belgium), Trinity Laboratories (US)	NA
Matrix Labs	22 percent controlling stake in Docpharma (Belgium), Explora Lab (Switzerland), MCHEM (China), Fine Chemicals (S. Africa), API (Belgium)	Aspen, Emchem, Docpharma, Explora Labs
Glenmark	Kinger Lab (Brazil), Uno-Ciclo (Brazil), Srvycal (Argentina), Medicamenta (Czech), Bouwer Bartlett	Forest Labs (US), Lehigh Valley Technologies (US), Shasun (India), KV, Apotex (US)
Source: Source: Ministry of commerce, Government of India .(IBEF, Ernst & Young, The Economic Times, Individual company web pages)

Conclusion:

M&A is a natural business processes in any country with appropriate safeguards for any possible adverse effect on competition. India has already put similar safeguards in place with the scrutiny of the Competition Commission before acquisition and continuous price monitoring by the National Pharmaceutical Pricing Authority (NPPA) after the acquisition is over.

It is worth mentioning, just on September 16, 2011, the Competition Commission of India, after stringent scrutiny on the impact of competition, cleared the proposal of Danone Asia Pacific to acquire the nutrition business of Wockhardt Ltd.

In the wake of all these, the apprehension that the ‘brownfield’ pharmaceutical acquisitions will retard the growth of ’greenfield’ pharmaceutical projects or have adverse impact on competition in the country, does not seem to hold much water. To a great extent FDI in ‘brownfield’ pharmaceutical acquisitions and the growth of ‘greenfield’ pharmaceutical projects in India, are unrelated.

Be that as it may, India should perhaps not expect that the country will continue to remain one of the pharmaceutical manufacturing hotspots for any indefinite period mainly because of cost arbitrage, which, in any case is not sustainable over a long period of time by any country.

As we have seen above, with the emergence of Asia, USA and EU are gradually but surely losing their pharmaceuticals manufacturing hubs’ status to China (API) and India (formulations). Who knows, some time in future, with the awakening of sleeping Africa, Asia will also not have the same fate?

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.

Sanofi’s acquisition of Universal Medicare could redefine nutraceuticals business in India

Posted on September 12, 2011 by Tapan Ray

The Economic Times in its August 24, 2011 edition reported that Sanofi-Aventis has acquired the nutraceuticals business of Universal Medicare to scale up their business operations in the ‘wellness’ space of the healthcare sector in India.

What are ‘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 being commonly used in marketing such drugs/substances but has no regulatory definition.

It is often claimed that nutraceuticals are not just dietary supplements, but also help prevention and/or treatment of disease conditions.

Besides diseases, nutrition related risk factors contributing to more than 40% of deaths in the developing countries like India, nutraceutical products do show a promise as an emerging business opportunity within the healthcare space of the country.

The 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 2008 Indian nutraceuticals market was around US$ 1.0 billion, 54% of which being functional foods.

The prices of most nutraceuticals products, being outside government price regulations in India, are usually high.

Although current market share of India in the global nutraceuticals market is less than even 1%, a report from PwC predicts that India will join the league of top 10 by 2020. Increasing discretionary spending, changing lifestyles and growing awareness among Indians about healthy living, coupled with current overall low market penetration of high priced nutraceuticals products in India, could create a powerful trigger for the market growth.

Sanofi could sniff the opportunity in India:

Sniffing the market opportunity in this segment, especially in India, the Sanofi group’s Aventis Pharma, as mentioned above, has acquired the nutraceuticals business of Universal Medicare Private Ltd of worth Rs.110 Crore, in August, 2011. The nutraceuticals product portfolio of Universal Medicare consists of more than 40 brands, which include cod liver oil capsules, vitamins/ mineral supplements, antioxidants and liver tonics to name a few.

It will be interesting to watch whether Sanofi takes these nutraceutical products to other markets of the world, especially in Japan, Europe and the US.

Currently most global pharma companies are engaged in evidence based therapeutic substances:

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

Evidence-Based Medicine (EBM):

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/user. EBM also seeks to assess the strength of evidence of the risks and benefits of any particular treatment claim. This is mainly because increasingly the users are looking to authentic scientific evidence in clinical/wellness practice.

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.

The span of nutraceuticals ranges from prescription to OTC Products:

In India, nutraceuticals are being used/prescribed even by the medical profession, not only as nutritional supplements but also for the treatment of disease conditions, like arthritis, osteoporosis, cardiology, diabetes, pain management etc.

The challenge: Some experts believe, robust clinical data support is essential to substantiate ‘wellness’ claim with nutraceuticals:

Therapeutic efficacy in the treatment of a disease condition is established with pharmaceutical, pharmacokinetic and pharmacodynamics studies of the substances concerned. Some experts believe that these studies are very important also for nutraceuticals, as they are involved in a series of various reactions within the body, especially while making any therapeutic claims, directly or indirectly.

Similarly, to establish any long term toxicity problem with such products, generation of credible 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 experts, therefore, quite often say, “A lack of reported toxicity problems with any nutraceutical should not be interpreted as evidence of safety.”

The status 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 to 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.

The Point to ponder: What happens if nutraceuticals are regulated as pharmaceuticals?

It is worth mentioning, if generation of clinical data, though albeit less than the pharmaceuticals, ever becomes mandatory regulatory requirements for getting marketing approval of nutraceutical products in India, commensurate increase in price for such products could indeed push their commercial survival in jeopardy.

Conclusion:

Nutraceuticals bearing a tag of promise, in a conducive regulatory environment, to provide desirable therapeutic benefits with less or no side effects as compared to conventional medicines, is growing well with reasonably good financial success, across the world. India is no exception.

In India, many nutraceuticals products, which are currently in the market, do not seem to have been adequately tested to generate robust clinical data, leave aside being peer reviewed and published in the reputed international journals for either safety or efficacy. Entry of global majors, like Sanofi, with a sharp focus on EBM, brings in a hope and promise to get these loose knots, in this very important area, tightened very significantly, while driving their business growth in the country.

Under this backdrop, it is widely expected that Sanofi, with its well proven global marketing and technical leadership, would change the ball game of nutraceutical products business in the healthcare space of India.

State funded ‘Universal Healthcare’ in India: A laudable initiative of the Government

Posted on August 29, 2011 by Tapan Ray

January 11, 2011 edition of ‘The Lancet’, in the article authored by Prof. K. Srinath Reddy et al titled, “Towards achievement of universal health care in India by 2020: a call to action”, proposed creation of an Integrated National Health System in India through provision of universal health insurance, establishment of autonomous organizations to enable accountable and evidence-based good-quality health-care practices and at the same time reduce the high out-of-pocket expenditure on health care through a well regulated integration of the private sector within the national health-care system of India, by 2020.

About six months later, in its August 16, 2011 issue ‘The Times of India’ reported that the Planning Commission of India is currently framing up the blue print for a universal health insurance scheme which would provide a minimum cover to everyone in the country. It is expected that a surcharge will be levied for this Universal Health Care (UHC) initiative.

Though UHC is indeed a very commendably initiative for India as a nation, some dubious and self-styled ‘healthcare crusaders’ have already started raising the bogey of ‘the inadequacy’ of the scheme as a diversionary measure to misguide the easily vulnerable common man of the country.

Efforts being made to sensationalize the current status of the Indian healthcare system:

Even in the backdrop of UHC initiative, the following sensational headlines could be fallacious at times, which more often than not are being misused by the vested interests:

“About 1.8 million children under age of 5 die in India every year; 68,000 mothers die due to maternal causes, and 52 million children in the country are stunted”.
“With 70% people living in more than 600,000 villages across rural India, not more than an estimated 30% have access to modern medicine”.

It is unfortunate that many key stakeholders, interested in improved healthcare system, are continuously engaged in an eternal blame game of ‘it is not my monkey’. At the same time, taking advantage of this confused situation, some other groups plan to facilitate their vested interests by projecting a ‘weaker India’ with contentious planted reports both overtly and covertly.

In this prevailing scenario, which has been continuing since the last several decades, there is no dearth of people who would attempt to hijack the health interest of the nation to harvest mega commercial benefits.

While all concerned should keep a vigil on such sinister design, let me now try to place some hard facts before you on the current healthcare scenario in India in the context of UHC.

The facts on access to ‘round the year’ healthcare facilities in India:

As reported by the Government of India in 2004, access to healthcare infrastructure and services for the rural villages in terms of percentages were as follows (Source: India Health Report 2010) :

Primary Health Centers: 68.3
Sub-Centers: 43.2
Government Dispensaries: 67.9
Government hospitals in urban areas: 79
Private Clinics: 62.7
Private Hospitals: 76.7

I reckon, after implementation of National Rural Health Mission (NRHM) and National Urban Health Mission (NRUM), this situation prevailing in 2004 has improved. However, the scope for further improvement in all these areas still remains very high. UHC could be a key facilitator.

In any case, the shrill voice highlighting around 65% of population of India does not have access to healthcare or medicines seem to be highly misplaced.

‘Access to Modern Medicines’ is improving in India, slowly but surely:

Contrary to the above propaganda, in the real life situation the access to modern medicines by the common man in the country even in the rural India is steadily increasing.

This is evidenced by the facts, CAGR (volume) of the pharmaceutical industry since the last ten years has been around 13%, leaving aside another robust growth factor being contributed through the introduction of newer brands, every year. Encouraging growth of the Indian Pharmaceutical Market (IPM), since the last decade, both from the urban and the rural areas, certainly signals towards significant increase in the domestic consumption of medicines in India.

IPM maintained a scorching pace of 16.5% growth in 2010. A recent forecast of IMS highlights near similar growth trend in 2011, as well.

In addition, extension of focus of the Indian pharmaceutical Industry, in general, to the fast growing rural markets, which are currently growing at a much faster pace than ever before, clearly supports the argument of increasing ‘Access to Modern Medicines’ even in rural India. The improvement in access may not exactly be commensurate to the volume growth of the industry during this period, but a major part of the industry growth could certainly be attributed towards increase in access to modern medicines in India.

For arguments sake, out of this rapid growth of the IPM, year after year consistently, if I attribute just 5% growth per year, for even the last nine years over the base year of 1998 (as reported in 2004 by WHO) to improved access to medicines, it will indicate, at least, 57% of the population of India currently has access to modern medicines and NOT just 35%, as I wrote in my blog earlier, quoting the numbers from the above WHO report of 2004.

Unfortunately, even the Government of India does not seem to be aware of this gradually improving trend. Official communications of the government still quote the outdated statistics, which states that 65% of the population of India does not have ‘Access to Modern Medicines’ even today. No wonder, why many of us still prefer to live on to our past.

Be that as it may, around 43% of the population will perhaps still not have ‘Access to Modern Medicines’ in India. This issue needs immediate attention of the policy makers and can be resolved with a holistic approach. UHC initiative together with improvement of healthcare infrastructure and delivery systems are the needs of the hour.

So called ‘Diseases of the Poor’ are no longer the ‘Leading Causes of Death’ in India:

As stated above, the disproportionate diversionary focus on the diseases of the poor by the vested interests, being the leading causes of death in India, should be re-validated with the data available with the office of the Registrar General of India (2009). This report highlights a totally different scenario, where the top five leading causes of death in terms of percentage, have been reported as follows:

Cardiovascular diseases: 24.8
Chronic Obstructive Pulmonary Disease (COPD): 10.2
Tuberculosis: 10.1
Cancer: 9.4
Ill-defined conditions: 5.3

Thus the diseases of the developed world, like cardiovascular diseases, COPD and Cancer cause over 45% of the total deaths in India, whereas Tuberculosis, Malaria, Diarrhea and digestive diseases cause around 23% deaths in the country. I reckon, UHC will take care of this emerging disease pattern in India.

The key reasons for not seeking medical treatment are not always poor ‘Access to Healthcare’:

While promoting the UHC, the government should take note of the key reasons for not seeking medical treatment, across socioeconomic milieu in the country. These reasons are not predominantly due to ‘Poor Access to Healthcare ‘. The following data will vindicate this point:

Reason	Rural Poorest 20%	Rural Richest 20%	Urban Poorest 20%	Urban Richest 20%
*Financial Reasons*	39.7	21.2	37.2	2.3
*Ailments not considered serious*	27.2	45.6	44.3	84.4
No Medical facilities	12.8	10.0	1.6	_
Others	20.3	23.2	16.9	13.3
Total	100	100	100	100

(Source: India Health Report 2010)

All these are happening probably because we do not have, as yet, any ‘well-structured healthcare financing system’ for all section of the society. The UHC initiative could well be a very significant part to the solution of this long standing problem together with other specific important measures, some of which I have already deliberated above.

While addressing the healthcare financing issue of India, January 11, 2011 edition of ‘The Lancet’ in its article titled, “Financing health care for all: challenges and opportunities” commented:

“India’s health financing system is a cause of and an exacerbating factor in the challenges of health inequity, inadequate availability and reach, unequal access, and poor-quality and costly health-care services. The Government of India has made a commitment to increase public spending on health from less than 1% to 3% of the gross domestic product during the next few years…. Enhanced public spending can be used to introduce universal medical insurance that can help to substantially reduce the burden of private out-of-pocket expenditures on health.”

I reiterate in this context, UHC initiative brings a breadth of fresh air to the prevailing rather gloomy healthcare financing scenario in India.

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

Look at it from, any angle, the general population of India is most burdened with high’ out of pocket healthcare expenses’ compared to even all of our neighboring countries:

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)

This factor itself, in case of just one or couple of serious illnesses, could make a middle class household of India poor and a poor could be pushed even Below the Poverty Line (BPL). UHC initiative of the Government is expected to change this scenario significantly in the years ahead.

The key unresolved issue of ‘affordability’ will get partially unresolved with UHC:

The above edition of ‘The Lancet’ highlighted that outpatient (non-hospitalization) expenses in India is around 74% of the total health expenses and the drugs account for 72% of this total outpatient expenditure. The study has also pointed out that 47% and 31% hospitalization in rural and urban areas respectively, are financed by loans and sell off assets.

This critical issue of ‘affordability’ of modern medicines is expected to get, at least partially resolved with the UHC scheme of the Government.

Around 32% of Indian BPL population can’t afford to spend on medicines:

While framing the UHC scheme, the government should keep in mind that a population of around 32% in India, still lives below the poverty line (BPL) and will not be able to afford any expenditure, however minor it may be, towards medicines. Proper implementation of the RSBY scheme with military precision, will be the right approach to this marginalized section of the society.

National Health Entitlement Card:

According to the Planning Commission, to enable the citizens availing the facilities provided by the ‘Universal Healthcare,’ the government will issue a ‘National Health Entitlement Card’, which will guarantee free access to relevant healthcare packages designed for the primary, secondary and tertiary healthcare for all. This scheme will be fully funded by the Central Government and cover both inpatient and outpatient services.

Conclusion:

Thus in the current scenario, the initiative of ‘Universal healthcare’ to provide access to healthcare to all citizens of India by addressing the critical issue of high incidence of ‘out of pocket’ expenses towards health care, is indeed a laudable initiative and ushers in a breadth of fresh air, despite all motivated comments against it.

We need also to keep in mind, although the ‘Universal healthcare’ is a fascinating mega initiative by the Planning Commission of India, this may not resolve all health related maladies of the country in one stroke.

Even in the changed scenario, a large section of the population both rich and poor and from both urban as well as rural India, may continue to not seek medical treatment assuming initially many of their ailments are not serious enough. Such a situation will definitely not materially improve the healthcare scenario of India, quite adversely affecting the economic progress of the country.

Such a situation, if continues, will necessitate continuous disease awareness campaigns with active participation of all stakeholders, including the civil society across the country, sooner than later, in tandem with all other measures as may deem necessary from time to time.

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.

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.

PILMAN

A Tapan Ray Website

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