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

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

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

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

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

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

Focus on opportunities and less of moaning:

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

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

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

Aiming the top: 

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

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

The key trigger factor:

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

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

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

The rich pay-off:

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

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

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

The Leading Indian Pharmaceutical ‘Crown Jewels’:

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

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

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

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

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

Incessant growth story:

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

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

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

‘The Guardian’ guards:

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

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

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

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

Conclusion: 

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

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

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

By: Tapan J Ray  

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.

Finance Ministry Disallows Expenses on ‘Freebies’ to Doctors by Pharma Companies in line with MCI Guidelines: A Possible Game Changer?

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

Last month, around middle of July, most of the leading English business dailies of India reported that much-awaited “Uniform Code of Pharmaceutical Marketing Practices (UCPMP)” authored by the Department of Pharmaceuticals, quite in line with the amended guidelines for the medical profession by the Medical Council of India (MCI), is expected to be notified by the government by August, 2012 for implementation by the entire pharmaceutical industry on a voluntary basis for six months, to start with.

Department of Revenue now steps in:

Closely following the recent series of events, it now appears that there is a good possibility of framing a robust financial regulation by the Government of India to make the disclosure of all payments made to the physicians by the pharmaceutical companies’ mandatory, like the ‘Physician Payments Sunshine Act in the USA’.

I reckon, this is just a matter of time that similar steps are taken in India, perhaps in stages.

CBDT disallows expenses on all ‘freebies’ to Doctors:

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

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

MCI Guidelines are the basis:

The above decision of the CBDT is based on the notification of the Medical Council of India (MCI) dated December 10, 2009 amending the “Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002”, prohibiting the medical practitioners and their professional associations from taking any gift, travel facility, hospitality, cash or monetary grant from the pharmaceutical and allied health sector Industries. Amended guidelines of the MCI came into force with effect from December 14, 2009.

Areas of stricter MCI regulations: The above notification of MCI clearly specifies stricter regulations for doctors in their relationship with the ‘pharmaceutical and allied health sector industry and associations’ in the following areas: 1. Gifts 2. Travel facilities 3. Hospitality 4. Cash or Monetary grants 5. Medical Research 6. Maintaining Professional Autonomy 7. Affiliation 8. Endorsement

Tax Assessing Officers have also been instructed:

Based on this amendment, CBDT has now decided that all claims related to expenses incurred in providing the above mentioned or similar ‘freebies’ in violation of the provisions of Regulations 2002 of the MCI on ‘Professional Conduct, Etiquette and Ethics’ of the doctors, shall now be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law.

This disallowance shall be made in the hands of all such pharmaceutical or allied health sector industries or other assesses which have provided the ‘freebies’ mentioned above and claimed it as deductible business expenses in their respective accounts against income.

CBDT has directed its assessing officers, with the above circular, to follow this new practice.

CBDT Circular:

“INADMISSIBILITY OF EXPENSES INCURRED IN PROVIDING FREEBEES TO MEDICAL PRACTITIONER BY PHARMACEUTICAL AND ALLIED HEALTH SECTOR INDUSTRY

CIRCULAR NO. 5/2012 [F. NO. 225/142/2012-ITA.II], DATED 1-8-2012

It has been brought to the notice of the Board that some pharmaceutical and allied health sector Industries are providing freebees (freebies) to medical practitioners and their professional associations in violation of the regulations issued by Medical Council of India (the ‘Council’) which is a regulatory body constituted under the Medical Council Act, 1956.

2. The council in exercise of its statutory powers amended the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the regulations) on 10-12-2009 imposing a prohibition on the medical practitioner and their professional associations from taking any Gift, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector Industries.

3. Section 37(1) of Income Tax Act provides for deduction of any revenue expenditure (other than those failing under sections 30 to 36) from the business Income if such expense is laid out/expended wholly or exclusively for the purpose of business or profession. However, the explanation appended to this sub-section denies claim of any such expense, if the same has been incurred for a purpose which is either an offense or prohibited by law.

Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 shall be inadmissible under section 37(1) of the Income Tax Act being an expense prohibited by the law. This disallowance shall be made in the hands of such pharmaceutical or allied health sector Industries or other assesse which has provided aforesaid freebees and claimed it as a deductible expense in its accounts against income.

4. It is also clarified that the sum equivalent to value of freebees enjoyed by the aforesaid medical practitioner or professional associations is also taxable as business income or income from other sources as the case may be depending on the facts of each case. The Assessing Officers of such medical practitioner or professional associations should examine the same and take an appropriate action.

This may be brought to the notice of all the officers of the charge for necessary action.”

The turning point:

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

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

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

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

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

Conclusion:

Be that as it may, it now appears that the new ball game of working out winning pharmaceutical marketing strategies and practices will no longer be driven by more of a ‘deep pocket’ syndrome and less of ‘cerebral power’, by all concerned.

If the new regulations are implemented effectively by the Government, I shall not be surprised to witness a dramatic change in the prescription share of various companies in the next 3 to 5 years, thereby impacting the ranking of these companies in the Indian pharmaceutical industry league table significantly, separating men from the boys.

Thus, the name of the game in the pharmaceutical marketing space, in not too distant future, is expected to be decided by the winning innovative ideas, whose time has just become ripe.

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.

Bollywood Matinee Idol Pontifies on Pharma FDI with Razzmatazz: Exploring Facts

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It has been widely reported  by the media that Bollywood matinee idol Aamir Khan was invited by the Parliamentary Standing Committee  (PSC) on commerce to express his views on Foreign Direct Investments (FDI) in the pharmaceutical sector of India on June 21, 2012.

The actor reportedly has suggested regulations on FDI in the pharma sector to protect the domestic pharmaceutical companies, as well as, any consequent adverse impact on the patients in terms of availability of cheaper generic medicines.

There is absolutely nothing wrong or surprising in the actor’s deposition to the PSC or for that matter in his expressing views on the subject from any platform of his choice. Every citizen of India has got the full right to express his/her views on any matter to the public in general, law or policy makers or any other august body as the person will deem necessary, for the best interest of the country. It is up to the astute individual members or the institutions to extract the essence of the key issues out of all such deliberations based on hard facts and help the nation to move in the right direction for its economic progress with inclusive growth.

That said, one also expects that just charismatic persona of a matinee idol with well-articulated and perfectly modulated pontification, in an expertly manner, on the “do’s and don’ts” of the FDI in Pharma, should not overwhelm anyone, without appropriate substantiation with intimately related hard facts and examples.

From my own perspective, let me now explore the facts on this highly contentious issue for you to judge.

Pharma industry is going through a consolidation process:

Like in many other countries, the consolidation process within the Pharmaceutical Industry in India has also started gaining momentum. Post amendment of the Indian Products Patent Act in January 1, 2005, first major M&A activity took place in 2006 with Mylan acquiring Matrix Lab.

2008 witnessed one of the biggest acquisition in the Pharmaceutical Industry of India, when the third largest drug maker of Japan, Daiichi Sankyo acquired 63.9% stake of Ranbaxy Laboratories for USD 4.6 billion.

This M&A activity was widely believed to be a win-win deal, with Daiichi Sankyo leveraging the cost arbitrage of Ranbaxy, while Ranbaxy benefiting from the innovative product range of Daiichi Sankyo.

In May 2010, Chicago (USA) based Abbott Laboratories acquired the branded generic business of Piramal Healthcare with USD 3.72 billion. This particular acquisition reportedly triggered the Government’s thinking in instituting newer restrictions on FDI in the pharmaceutical sector of the country.

However, I reckon, any such move will be a retrograde step in the financial reform process of India and could adversely affect foreign investments not only in the Pharmaceuticals sector, but possibly far beyond it.

Key Acquisitions of Indian companies:

Following are the details of M&As (Mergers & Acquisitions) in India from 2006 to 2011:

Year Indian Companies Multinational Companies

Value ($Mn)

 Type
2006 Matrix Labs Mylan 736 Acquisition
2008 Ranbaxy Labs Daiichi Sankyo 4,600 Acquisition
Dabur Pharma Fresenius Kabi 219 Acquisition
2009 Shantha Biotech Sanofi-aventis 783 Acquisition
2010 Orchid Chemicals Hospira 400 Business Buyout
Piramal Healthcare Abbott 3,720 Business Buyout
Paras Pharma Reckitt Benckiser 726 Acquisition
2011 Universal Medicare Sanofi 110 Acquisition

It is worth mentioning that all these acquisitions were voluntary in nature, which considerably helped shifting the investment focus of the MNCs into India. This is mainly because the country offers a good science and technology base with a significant cost arbitrage along with a thriving, yet inadequately penetrated, domestic pharmaceutical market.

Key apprehensions on FDI in pharma and the facts:

The Department of Industrial Policy and Promotion (DIPP) of the Ministry of Commerce and Industries in its ‘Discussion Paper’ dated August 24, 2010, which was primarily on Compulsory Licensing (CL), also expressed some of the following apprehensions towards foreign acquisitions of the Indian pharmaceutical companies:

I would like to address these key apprehensions as stated below:

Apprehension 1. Oligopolistic Market will be created with adverse impact on ‘Public Health Interest’

The dictionary defines ‘Oligopolistic Market’ as ‘a market condition in which sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors’.

Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands (Source: IMS 2011). Even after, all the recent acquisitions, the top ranked pharmaceutical company of India – Abbott enjoys a market share of just 6.2% (Source: AIOCD/AWACS, March 2011). The Top 10 groups of companies (each belonging to the same promoter groups and not the individual companies) contribute just over 40% of the IPM.

Thus, IPM is highly fragmented. No company or a group of companies enjoys any clear cut market domination. In a scenario like this, the apprehension of an ‘Oligopolistic Market’ being created through acquisitions by the MNCs is indeed unfounded.

Apprehension 2. ‘Oligopolistic’ situation will severely limit the power of the government to face the challenge of Public Health Interest (PHI) by granting CLs:

With a CL, the Indian Government can authorize any pharmaceutical company to make any medicine needed by the country on an emergency basis. With more than 20,000 registered pharmaceutical manufacturing companies operating in India,[1] there will always be enough skilled and able manufacturers willing to make needed medicines during any type of emergency situations. The country has already witnessed this during the H1N1 influenza pandemic, when several domestic and global pharmaceutical companies stepped forward to supply medicines in adequate quantity to meet the urgent need of the ailing patients.

The very thought of creating a legal barrier by fixing a cap on the FDI to prevent the domestic pharma players from selling their respective companies at a market driven price, which they would consider lucrative, just from the CL point of view, as mentioned in the ‘Discussion Paper’ of DIPP, sounds unreasonable, prejudiced and highly protectionist in the globalized economy.

Apprehension 3.  Lesser competition will push up drug prices:

Equity holding of a company has no bearing on the pricing or access to drugs, especially when medicine prices are controlled strictly by the NPPA guidelines and a highly competitive market condition.

That competition within the pharmaceutical market is extremely fierce in India is vindicated by the following facts:

  1. Each branded generic/ generic molecule (constituting over 99% of the IPM) has not less than 50 to 60 competitors within the same chemical compound.
  2. 100% of the IPM is price regulated by the government, around 20% under cost based price control as per DPCO 95 and the balance 80% is under stringent price monitoring mechanism with a maximum annual price increase cap being effectively in place.

In an environment like this, any apprehension or threat to ‘Public Health Interest’ due to irresponsible pricing, will be highly imaginary in nature, especially when the medicine prices in India are cheapest in the world, cheaper than even our next door neighbors like, Bangladesh, Pakistan and Sri Lanka.

As stated above, Ranbaxy was the first major Indian drug company to be acquired by the Japanese MNC Daiichi Sankyo in June 2008. Two years later, the prices of medicines of Ranbaxy did remain 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.

Similar trend has been observed even for other acquisitions, as well.

Investments through ‘Collaborative deals’:

Following are some important collaborative deals in the pharmaceutical sector of India from 2009 to 2011:

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

Bayer

Cadila Healthcare

MSD

Sun Pharma

Such deals help the domestic pharmaceutical industry to reap a rich harvest in many other ways.

Positive fall outs of acquisitions/collaborations:

Mergers and Acquisitions (M&A) or ‘Brownfield’ investments and collaborative deals contribute significantly not only to create high-value jobs for Indians[2] but also enable access to high-tech equipment and capital goods for the country.

Technology cooperation from the global pharmaceutical industry also stimulates growth in the manufacturing and R&D space of the domestic industry and positively impacts patients’ health with increased access to breakthrough medicines and vaccines. 

In this process, with adequate stimulus to the pharmaceutical R&D, India too could fast evolve as a country with a strong research-based pharmaceutical industry capable of developing innovative medicines and inventing new drugs for the world at large.

Many countries, including India, have instituted programs and policy reforms to attract FDI in the pharmaceutical sector. These programs include substantial efforts to build up the R&D infrastructure and create a pool of qualified and talented work force.

Currently, there is a strong global competition for such investments. Countries recognize that pharmaceutical companies bring high-paying jobs, technology know-how and significant economic spill-over effects. As per reports, in the United States, each job in the research-based pharmaceutical industry supports an additional 3.7 additional jobs in the U.S.[3]

By attracting high quality FDI in the pharmaceutical sector, India can further improve its sectoral capabilities and help honing skills of its talent pool. All these, in turn, will also give rise to increasing  global penetration of pharmaceutical exports of the country.[4]

India still draws lowest FDI within the BRIC countries:

A new study of the United Nations has recently reported that large global companies still consider India as their third most favored destination for FDI, after China and the United States.

However, with the attraction of FDI of just US$ 32 billion in 2011, against US$ 124 billion of China, US$ 67 billion of Brazil and US$ 53 billion of Russia during the same period, India still draws the lowest FDI among the BRIC countries.

At a time when the Global Companies are sitting on a huge cash pile and waiting for the euro zone crisis to melt away before investing overseas, any retrograde steps by India related to FDI in its pharmaceutical sector may not augur well for the nation.

Many countries are trying hard to attract FDI:

While our Government has been publicly debating policies to discourage foreign investment, other countries have stepped forward to attract FDI in their respective countries.  Between October 2010 and January 2011, more than 27 countries and economies have adopted policy measures to attract foreign investment.[6]

Access to generic medicines cannot be improved by restricting FDI:

The Pharmaceutical sector in India was opened up for 100% FDI through automatic route, only in the year 2002. This reformed FDI policy regime has been helping India as an attractive investment destination for pharmaceuticals.

Access to generic medicines cannot be improved by restricting FDI. Following measures and many more are required to address this critical issue in the country:

  • The Government has already signaled increasing allocation of resources towards the health sector by doubling the funding available for the National Rural Health Mission (NRHM).
  • It is also planning to extend the Rashtriya Swasthya Bima Yojana (RSBY) scheme to provide out-patient coverage to low income groups.
  • Currently the government seems to be quite poised to distribute all essential drugs to the patients free of cost through public hospitals and dispensaries.
  • Effective implementation of the ‘Universal Healthcare’ project in India will also help improving access to healthcare, including medicines, significantly.
  • Increase in allocation of expenditure towards health from 1.1% of the GDP in the 11th Five Year Plan Period to proposed 2.5% in the 12th Five Year Plan Period is a step in the right direction.
  • Healthcare financing will offer an enduring mechanism for reducing the Out-of-Pocket expenses of the poor, versus short term ‘knee jerk’ measures.
  • Allocating resources from national welfare schemes towards health insurance coverage would be a step in the right direction.  For example, a portion of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) funds could be spent on health insurance premium for workers engaged in such work.

“ Protectionism is harmful”:

It is worth mentioning that our Government has been publicly expressing its views against the concept of ‘Protectionism in Business’ over a period of time.

“Protectionism is harmful” was very aptly commented by Mr. Pranab Mukherjee, the then Finance Minister and now one of the Presidential nominees of India. This comment was in context of “US moves to hike visa fees and clamp down on outsourcing”.

India now needs to ‘Walk the Talk’.

Unfortunately, even recently, on July 3, 2012 Indian media  reports indicate that the Government is still mulling proposals to restrict FDI in India.  It stated, “The new rules will require the foreign investor to give an undertaking that if the company is investing in producing an essential drug, as mentioned in the government list of such drugs, then it will continue to produce that medicine”.

99% of the total pharmaceutical market in India constitutes of generic/branded generic medicines with over 23,000 manufacturers and 60,000 brands. In such a scenario, apprehensions that generic medicines, including those featuring in the National List of Essential of Medicines 2011 (NLEM 2011) will not be produced in India, is indeed intriguing.

Conclusion:

In the light of ‘2010 Economic Survey of India’, the nation acknowledges the need to attract foreign investors in the country.  Increasing foreign investments due to liberalization of FDI policies over the past two decades have benefited the Indian companies in terms of technology cooperation (technology transfer), greater resource mobilization and new market access opportunities.

Collaborative deals with the MNCs are enabling the local pharmaceutical companies to gain access to international expertise, increasing resources and world class manufacturing practices.

Any possible adverse impact of M&A on competition can now be effectively taken care of by the ‘Competition Commission of India (CCI)’. In addition, apprehension for any unreasonable price increases will appropriately be addressed by the ‘National Pharmaceutical Pricing Authority (NPPA)’, as is the current practice.

Thus, in my view, limiting FDI in the pharmaceutical sector of India, at this stage, without any substantive reason and just based on unfounded apprehensions, even when the Government is debating to open up the retail and the insurance sectors to foreign investors, will be a retrograde step in the reform process of the country, pontification with razzmatazz of a Bollywood Matinee Idol notwithstanding.

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.

Healthcare Tourism: India needs to step on the gas

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Healthcare Tourism or Medical Tourism are the terminologies initially coined by the travel agents and the media when patients travel outside their national boundaries to seek either more specialized and/or cheaper but high quality healthcare available in other countries.

World Health Organization (WHO) defines Healthcare Tourism as an activity that covers:

  • Medical care
  • Sickness & well-being
  • Rehabilitation & recuperation

The reasons:

The main reasons of healthcare tourism are:

  1. High medical costs, especially for those patients who are under-insured or uninsured
  2. Long waiting period for elective surgery
  3. To avail technologically more advanced medical treatment and care

For example, USA though globally recognized as one of the technologically most advanced countries in providing high quality healthcare to the patients, the cost of comprehensive healthcare in the country is often beyond reach of many Americans.

In not too distant past (2000), the World Health Organization (WHO) ranked USA as the country with most expensive healthcare systems in the world. Moreover, it has also been reported that in the US, the fees paid to doctors for medical services are usually much higher for an ‘uninsured’ patient than one who is ‘insured’.

Such a scenario has given rise to situation where many Americans travel out of the country for a lower cost medical care, if not adequately insured.

‘Time Health’ in an article titled ‘A Brief History of Medical Tourism’ stated as follows:

-       In 2006: 150,000 US citizens underwent medical treatment abroad

-       In 2007: the number grew to an estimated 750,000

-       In 2008: it increased to 1.3 million

-       In 2010: the figure further swelled to an estimated 6 million citizens.

The article commented that “Patients are packing suitcases and boarding planes for everything from face lifts to heart bypasses to fertility treatments.”

The key influencers and preferred destinations:

The most common influencer for healthcare tourism globally, as stated earlier, is lack of or inadequate health insurance and the most common emerging destinations for healthcare tourism in the world are Thailand, Singapore, Costa Rica, Panama, Brazil, Mexico, Malaysia and India. This is mainly because of fact that the costs of availing high quality healthcare services in these countries are much cheaper- on an average around 80%. For example, a cardiac surgery, which will cost more than US$ 50,000 in the US, can be availed for US$ 20,000 in Singapore, US$ 12,000 in Thailand and between US$ 3,000 and US$ 10,000 in India.

Other factors influencing Healthcare Tourism, particularly in India, besides significant cost advantages, are:

  1. High quality treatment and hospital stay with world class medical technological support
  2. Rigid compliance with international treatment standards
  3. No language barrier with the western world
  4. Government taking active steps and interest in the medical tourism sector

In all these four areas significant advantages that India offers will need to be adequately leveraged in a sustainable manner by the country.

Most popular treatment areas:

The most popular treatment areas are as follows:

  1. Alternative medicines
  2. IVF treatment
  3. Bone-marrow transplant
  4. Cardiac bypass
  5. Eye surgery
  6. Dental care
  7. Cosmetic surgery
  8. Other areas of advanced medicine

Evolving scenario:

Since last several years healthcare tourism is fast evolving as one of the key growth drivers of the global healthcare sector as a whole.

Dr. Fred Hansen in his article titled, ‘A Revolution in Healthcare’, highlighted that increasing number of high-quality healthcare facilities in the developing coun­tries are attracting medical tourists from the developed countries like the US and the European Union (EU).

Apprehension in the US about growing Healthcare Tourism of India:

India Knowledge@Wharton in its June 2, 2011 issue reported as under:

  • In the past, US President Barack Obama had singled out India for what he sees as the country usurping American jobs and business.
  • In May 2009, he removed some tax incentives for US companies who allegedly preferred to outsource rather than create domestic jobs. “Buffalo before Bangalore” was his rallying call at the time.
  • In April 2011, he told a town hall gathering in Virginia that Americans shouldn’t have to go to India or Mexico for “cheap” health care. “I would like you to get it right here in the U.S.,” he said.
  • In January 2012, President Obama reiterated the same intent in the run up to the forthcoming US presidential election for his second term.

The Global Market:

In 2006 the global market for healthcare tourism was around US$ 60 billion. According to McKinsey & Company, this market is expected to expand to over US$110 billion by 2012.

India – a contender for supremacy:

Healthcare tourism in India, despite being smaller compared to the western world, is surging ahead both at the national and the regional levels with enormous potential for future growth, if explored appropriately with a carefully charted strategic game plan in its evolution process.

Currently India is emerging as one of the preferred destinations for global health tourists. The country received 150,000 medical tourists in 2004, which grew by 33% to 200,000 in 2008, mainly from the USA, UK and the Gulf countries, primarily due to low-priced and high quality healthcare in wide ranging disease areas. More and more people from these countries are finding the prospect of high quality and value added medical care in India financially attractive.  As per estimates, India will receive over 500,000 medical tourists per year come 2015.

While visiting India for healthcare, patients not only get treated by the best medical professionals with western medical training, but also are able to stay in deluxe accommodations fully equipped with the latest television set, refrigerator and in some cases even a personal computer, without facing any language barrier and that too by paying just around 1/10th of the price charged in the developed nations.

Moreover, according to John Lancaster of ‘The Washington Post’ (October 21, 2004) Indian private hospitals have a better mortality rate for heart surgery than American hospitals.

With over 8,500 beds ‘Apollo Hospitals’ chain runs 53 different hospitals across the country, followed by “Max Healthcare” that runs 8 medical centers in the National Capital Region (NCR) in India.

Indian Market:

Economic Times, in its January 6, 2009 edition reported, “Indian medical tourism to touch Rs 9,500 Crore (around US $ 2.1 billion) by 2015”.  Another report titled “Booming Medical Tourism in India”, published in December 2010 estimated that the medical tourism industry will generate revenues of around US$ 3 billion by 2013, though with a market share of just around 3% of the of global healthcare tourism industry.  Thus, in healthcare tourism, India still remains a smaller player with enormous growth potential.

New job creation:

Both Public and private sector studies estimate that healthcare tourism in India could attract around US$ 3 billion to the country by 2013 with around 40 million direct and indirect job opportunities.

Cost advantage in India:

Cost Comparison: India vs UK:

Nature of Treatment

Treatment Approximate Cost in India ($) *

Cost in other Major Healthcare Destination ($) *

Approximate Waiting Periods in USA / UK    (in months)

Open heart Surgery

4,500

> 18,000

9 – 11

Cranio-facial Surgery and skull base

4,300

> 13,000

6 – 8

Neuro-surgery with Hypothermia

6,500

> 21,000

12 – 14

Complex spine surgery with implants

4,300

> 13,000

9 – 11

Simple Spine surgery

2,100

> 6,500

9 – 11

Simple Brain Tumor -Biopsy -Surgery

1,000 4,300

> 4,300 > 10,000

6 – 8

Parkinson -Lesion -DBS

2,100 17,000

> 6,500 > 26,000

9 – 11

Hip Replacement

4,300

> 13,000

9 – 11

* These costs are an average and may not be the actual cost to be incurred.

(Source: Health Line)

The key components:

The following four basic components constitute the healthcare tourism industry: • Healthcare Providers: Hospitals, mainly corporate hospitals and doctors • Payers: Medical/ Health insurance companies • Pharmaceutical Companies: for high quality affordable medicines • IT Companies: operating in the healthcare space

Growth drivers and barriers:

Following are the key growth drivers:

  1. Government support through policies and initiatives
  2. High quality, yet low cost care
  3. Much less or no waiting time
  4. World class private healthcare infrastructure
  5. Rich source of natural and traditional medicines. Ministry of Tourism is  promoting the traditional systems of medicines, like,  Ayurveda, Siddha, and Yoga to project India as a the destination of choice for spiritual wellness and healing

In future, the world class and low cost private sector healthcare services are expected to drive the growth of the medical tourism in India.

However, any shortages in the talent pool and inadequacy in other basic infrastructural support like roads, airports and power could pose to be barriers to growth of this sector, if not addressed immediately.

Government Assistance:

The government of India is now supporting the hospitals to get the Joint Commission International (JCI) accreditation.

In 2009 the government announced a revised guidelines for ‘Marketing Development Assistance (MDA)’ scheme for approved Medical Tourism service providers like, representatives of hospitals accredited by Joint Commission for International Accredited Hospitals (JCI) and National Accreditation Board of Hospitals (NABH) and Medical Tourism facilitators (Travel Agents/Tour Operators approved by Ministry of Tourism, Government of India and engaged in Medical Tourism (MTSP) and to the approved Wellness Centers i.e. representatives of the Wellness Centers accredited by the State Governments.

All these measures are expected to accelerate the growth of healthcare Tourism industry in India.

List of JCI Accredited Hospitals in India:

Following are the JCI Accredited Hospitals in India till 2007:

Name and Place Accredited on
1. Indraprasta Apollo Hospital, New Delhi June 18, 2005
2. Wockhardt Hospital, Mumbai August 25, 2005
3. Apollo Hospitals, Chennai January 29, 2006Disease- or Condition-Specific Care (DCSC)Certification for Acute Stroke: 29 April 2006
4. Shroff Eye Hospital, Mumbai February 18, 2006
5. Apollo Hospitals, Hyderabad April 28, 2006
6. Asian Heart Institute, Mumbai October 20, 2006
7. Satguru Pratap Singh Apollo Hospital, Punjab February 3, 2007
8. Fortis Hospital, Mohali June 15, 2007

Source: Joint Commission International, 2007

The challenges:

Following are the key challenges that India will need to address to emerge as a healthcare tourism hub of the world:

  • Improving the infrastructure
  • Adequate training of the staff
  • Enhancement of the image of India as a corruption-free country
  • Continuous improvement of overall service to the patients

Conclusion:

While encountering the global economic meltdown many corporate business houses, even in the developed nations of the world, are under a serious cost containment pressure, which includes medical expenses for their employees. Such cost pressure has already started prompting many companies to send their employees to low cost destinations for treatment, without compromising on the quality of their healthcare needs. This trend could offer an additional growth opportunity in the healthcare tourism sector in India.

According to the ‘Medical Tourism Climate Survey 2010’ report, the leading medical tourism destinations are currently India, Thailand, Hungary and Malaysia and the leading source of patients being again the USA, UK and Russian Federation.

The survey rates Thailand, India and Singapore as the best in terms of quality of overall patients’ care. Insurance and liability issues for the patients from some major markets of the world could pose to be a challenge for speedy growth of this industry.

Countries like, Thailand, Singapore and Malaysia, located in quite closer proximity to India, will continue to offer a tough competition in the healthcare tourism space of the country.

In an increasingly heated-up fast evolving competitive scenario, the name of the game for India will be to ‘step on the gas’, sooner and effectively.

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.

Biologic Drugs: The hunt for the ‘Magic Bullets’ is on

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The global pharmaceutical industry is now navigating its way through very cautiously while negotiating an unprecedented ‘patent cliff’, simultaneously with gradually drying-up R&D pipelines. This unique situation has triggered off several global mega Mergers and Acquisitions (M&A) not only involving better protected biologic drugs business, but also in the large generic space mostly in the emerging markets of the world, which used to be ignored by many before the turn of the new century.

Patent Expiry in next 12 months:

According to an article published in the ‘FiercePharma’ dated October 24, 2011 titled, ‘10 largest U.S patent losses’, over the next 12 months the following best-selling drugs, ranked not by US sales volume but by their weight in each company’s US revenue stream, will face patent expiry:

Company Brand
1 Forest Laboratories Lexapro
2 Takeda Pharmaceuticals Actos
3 Bristol-Myers Squibb Plavix
4 AstraZeneca Seroquel
5 Eli Lilly Zyprexa
6 Pfizer Lipitor*
7 Merck Singulair
8 Novartis Diovan
9 Teva Pharmaceuticals Provigil
10 Abbott Laboratories TriCor

* Patent expired on November 30, 2011

Opening a new vista of opportunity:

In the midst of such a critical situation within the global pharmaceutical industry, application of biotechnology in the drug discovery process opened up a new vista of a broad range of new class of therapies. These include monoclonal antibodies, therapeutic protein hormones, cytokines tissue growth factors, cell or gene therapies and vaccines, just to name a few.

A recent report of the Organization for Economic Cooperation and Development (OECD) predicts that 80% of the total biotech products, which are expected to be commercialized by 2030, will be medicines and medical diagnostics.

Old business model signals a diminishing return:

Over a period of decades, the business model of small-molecule based blockbuster drugs has successfully catapulted the global pharmaceutical business to a high-margin, dynamic and vibrant industry. However, a time has now come when the golden path from the ‘mind to market’ of the drug discovery process is becoming increasingly arduous and prohibitively expensive.

Deploying expensive resources to discover a New Chemical Entity (NCE) with gradually diminishing returns in the milieu of ‘me too’ types of new drugs, does no longer promise a strong commercial incentive.

A shift in focus from ‘small molecules’ to ‘large molecules’:

Since last several years, the success of biologic drugs compared to conventional small-molecule chemical drugs, has been changing the area of focus of pharmaceutical R&D altogether, making the biotech companies interesting targets for M&A.

As per published data, although the market capitalization of the top ten large pharmaceutical companies dropped more than US$ 700 billion since 2001, the same for the biotech companies, on the other hand,  has gone up by more than 50% during this period. This trend signifies proliferation of biotech drugs in the years ahead for meeting unmet needs of the patients.

To keep pace with the biotech led growth of the global pharmaceutical industry, many companies have started imbibing biotech-like R&D structure within their respective organizations. For examples, the pharmaceutical majors GsK and Pfizer have already articulated the strategic intent to restructure their respective large monolithic R&D set-ups to smaller independent drug discovery units.

Such restructuring is expected to foster ‘can do’ spirit of the biotech entrepreneurs within the recreated smaller units of large R&D setups to accelerate overall R&D productivity for enrichment of the new product pipelines. However, future will be the best judge to evaluate the success of this experiment.

As if to vindicate this emerging scenario, on November 30, 2011 Bloomberg reported, “U.K.’s largest drug maker has broken up research into competitive teams and put scientists back at the center of the process. But freedom carries a price: researchers who don’t adapt must go. Scientists now ‘live or die with their project.’ This month, Glaxo (GsK) completed the first appraisal of its new model. The company is now deciding which teams deserve more funding and which ones don’t. The conclusions will probably be made public in February when Glaxo (GsK) reports full-year earnings.”

Biologic drugs offer greater promise to meet more unmet needs:

Unlike conventional chemical drugs, most genetically modified biologic drugs work with a very high degree of precision and accuracy on the cells of the diseased organ. Many clinical studies have amply demonstrated that such drugs not only ensure faster recovery, but also help saving incremental treatment cost because of their excellent safety profile.

As we see today, more and more of those global pharmaceutical companies, who used to spend around 15% to 20% of their annual sales for R&D projects are channelizing a large part of the same to effectively compete in the fast evolving market of biologic drugs mainly through M&A. This strategy well justifies their strategic intent to make good the loss of income from the blockbuster drugs going off-patent quite in tandem with their fast dwindling R&D pipeline, as it were.

The bottom-line impact of a successful well targeted new biologic molecule to treat intractable ailments like, various types of cancer and blood disorders, auto-immune and Central Nervous System (CNS) related diseases, neurological disorders such as Parkinson’s, Myasthenia gravis, Multiple Sclerosis and Alzheimer’s disease, are expected to be huge.

Faster growth of biologic drugs:

Despite patent cliff, large molecule biologic drugs like Enbrel, Remicade, Avastin, Rituxan and Humira continue to contribute more than the small molecule drugs of chemical origin to overall growth of the large global pharmaceutical majors. Many of these drugs were sourced by them either through acquisitions or collaborative arrangements.

Cash strapped biotech companies with molecules ready for human clinical trials or with target molecules falling in the well sought after growth areas like, monoclonal antibodies, vaccines, cell or gene therapies, therapeutic protein hormones, cytokines and tissue growth factor are becoming attractive acquisition targets of the small molecules dominated large pharmaceutical companies having deep pockets.

Global Market Scenario:

According to IMS Health, biologics contribute around 17% of global pharmaceutical sales and generated a revenue of US$ 120 billion during MAT March 2009

In 2010 Biologic drugs increased their turnover to US$ 140 billion in the total market of US$ 850 billion. The sale of Biosimilar drugs outside USA exceeded US$ 1 billion.

Six biologic drugs featured in the top 12 and eight in the top 20 best selling global brands. Remicade emerged as the highest-selling biologics in 2010, ahead of Enbrel. Roche remained the top company by sales for biologics with anticancer and monoclonal antibodies. (source: Knol 2010)

Major acquisitions from 2005-2011 for Biologic drugs:

The opportunity of meeting the unmet needs of the patients with effective biologic drugs, especially in high-growth therapy areas, has given the M&A activities in the pharma-biotech space an unprecedented thrust in the recent times.

Following are the major acquisitions in the field of biologic drugs from 2005 to 2011:

Company

Target company

The deal: $billion

Products
Roche Genentech 47 Rituxan, Avastin, Herceptin, MoAbs, Oncology
Sanofi Aventis Genzyme 20 Orphan biologicsCerezyme, Fabrazyme, Renagel, Synvisc
AstraZeneca MedImmune 15.6 Monoclonal Antibodies
Merck Serono 13.5 Biologics
Takeda Millennium 8.8 Velcade, Oncology
Lilly ImClone 6.0 Erbitux, Oncology
Novartis Chiron 5.8 Vaccines
Teva Cephalon 6.2 Nuvigil, Provigil, Treanda CNS, Oncology
Abraxis American BioScience 4.2 Oncology
Astellas OSI Pharma 4.0 Tarceva, oncology
Eisai MGI Pharma 3.9 Aloxi, Salagen, Hexalen, Oncology
Celgene Pharmion 2.9 Oncology
Celgene Abraxis 2.9 Oncology
Gilead Myogen 2.5 Biotechnology
BMS Medarex 2.4 Monoclonal antibodies
J&J Crucell 2.3 Vaccines
Amgen Abgenix 2.2 Monoclonal antibodies
Boehringer Ingelheim MacroGenics 2.1 Monoclonal antibodies
Gilead CV Terapeutics 1.4 Cardiovascular
Genzyme Osiris 1.4 Prochymal, Stem cells
GSK ID Biomed 1.3 Biologics
AstraZeneca Cambridge Antibody Technology 1.3 Monoclonal Antibodies
Merck Sirna 1.1 RNAi
Amgen BioVex 1 OncoVex

(Source: Mergers and Acquisitions Review2005-2011 Pharma Biotech by Knol)

Why do so many companies want to enter into the biotech space?

The answer to the key question of why do so many companies want to enter into the biotech space of the business, in summary, could lie in the following:

  1. Truly innovative small molecule discovery is becoming more and more challenging and expensive with the low hanging fruits already being plucked.
  2. More predictable therapeutic activity of biologics with better safety profile.
  3. A higher percentage of biologic drugs have turned into blockbuster drugs in the recent past.
  4. Market entry barrier for biosimilar drugs, after patent expiry of the original molecule, is much tougher than small molecule generics.
  5. A diverse portfolio of both small and large molecules will reduce future business risks.

A recent study:

In one of their recent collaborative studies published in an article titled, “Is R&D Earning its Investment?” Deloitte and Thomson Reuters (2009) have reported that the top 12 global pharma majors have 21% to 66% biologic drugs in their late stage product pipeline with the average being at 39%.

Another interesting trend:

Besides mega acquisitions, relatively smaller pharmaceutical players have started acquiring venture-backed biotech companies to enrich their product pipelines with early-stage drugs at a much lesser cost. For example, with the acquisition of Calistoga for US $ 600 million and venture-backed Arresto Biosciences and CGI Pharmaceuticals, Gilead known for its HIV drugs, expanded into blood cancer, solid tumor and inflammatory disease segments. In 2009 the same Gilead acquired CV Therapeutics for US $1.4billion to build a portfolio for cardiovascular drugs. In November 2011, Gilead acquired ‘Pharmasset’ for US$ 11 billion to include in its product pipeline a future Hepatitis C drugs offering 95% cure rates.

Smaller biotech companies usually do not get engaged in very large deals unlike the top pharma players, but make quick, decisive and successful smaller deals more effectively.

Much less generic competition for biologic space:

After patent expiry of NCEs, innovators’ brands become extremely vulnerable to cut throat generic competition with as much as 90% price erosion. This happens as the small molecules are relatively easier to replicate by the generic manufacturers. Moreover, the process of getting regulatory approval of NCEs is also not as stringent as biosimilar drugs in most of the markets of the world.

On the other hand biosimilar drugs involving difficult, complex and expensive processes for development with stringent regulatory requirements for getting their marketing approval in the developed markets of the world like the EU and the USA, offer significant brand protection from generic competition for quite some time, even after the patent expiry.

Mainly due to this reason, brands like the following are expected to go strong for some more time without any significant competition from the biosimilar drugs:

Brand Company Launch date
Rituxan Roche/Biogen idec 1997
Herceptin Roche 1998
Remicade Centocor/J&J 1998
Enbrel Amgen/Pfizer 1998

Smaller biotech companies to be the prime targets:

In my view, the voracious appetite of large pharmaceutical companies for inorganic growth through mega M&A, will ultimately subside due to various compelling reasons.  Instead, smaller biotech companies, especially with products in Phase I or II of clinical trials, without wherewithal to take them to subsequent stages of development, will be the prime targets for acquisition by the pharma majors at an attractive valuation.

Cost of treatment:

Despite so many positives, high priced biologic drugs do raise a critical concern about the incremental load on already ballooning healthcare costs to the patients.

The Wall Street Journal (WSJ) in its September 29, 2010 issue highlighted that biologic drugs can cost as much as $1.5 million annually to the user. Similarly Forbes.com on April 12, 2009 reported, “Biologic drugs can cost up to 22 times more than traditional medications – some as much as $400,000 a year”.

This is indeed a very serious issue that needs to be resolved sooner. Speedy entry of biosimilar drugs will partly address this critical issue.

Conclusion:

Although the large pharma majors have already started experimenting to work with the pure biotech companies in terms of M&A and strategic alliances, it will be interesting to watch the long term ‘DNA Compatibility’ of the business models, organization/ work/employee culture and market outlook of these two different types of organizations while improving the global business performance of the overall entity, significantly.

Only future will tell us whether or not just restructuring of the R&D set up of companies like, Pfizer, Merck, Roche and perhaps Sanofi at a later date, helps synergizing the overall R&D productivity of the merged entities.

Be that as it may, despite serious cost concern, experts still believe that biologic drugs have all the potential to deliver the ‘magic bullets’ in the fight against many intractable diseases of mankind in not too distant future.

Hence the hunt is on.

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.

Why does the Government divert focus on to fringe issues to address critical healthcare concerns of the nation?

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The Department of Industrial Policy and Promotion (DIPP) of the Ministry of Commerce and Industry of the Government of India has recently initiated a public debate through a ‘Discussion Paper on Compulsory Licensing (CL) of Patented Pharmaceutical Products’.

The key intent of the discussion is presumably to improve access to quality medicines at an affordable price to the people of the country.

Could such debate serve any meaningful purpose?

Since the issue of CL involves only patented products, I wonder, whether this debate would in any way help sorting out the issue of poor access to modern medicines in our country or this is just another ‘hog wash’ or ‘diversion ploy’ of the decision makers to divert the attention of the stakeholders from the core issues of poor access to healthcare for the common man of India.

Will CL be able to address abysmally poor access to medicines issues in India?

A quick analysis of the prevailing situation related to access to modern medicines in India suggests that the usage of patented pharmaceutical products account for much less than 1% of the sum total of all medicines consumed in India in value terms. In volume terms it will be even more miniscule in terms of percentage.

As per IMS (MAT July, 2010) Indian Pharmaceutical Market size is Rs. 44,476 Crore, even 1% market share of the patented pharmaceutical products will mean Rs. 445 Crore, which is quite far from reality.

Thus, CL of patented medicines would have no sustainable and meaningful impact on improving access to modern medicines for the common man of the country. Moreover, around 40% of the population of India live below the poverty line (BPL). These ‘Children of a lesser God‘ very unfortunately, will not be able to afford any price of medicine, however cheap these could be. Vast majority of the such population who lack the financial capability to pay for even the cheapest off-patent generic medicines, which comprise more than 99% of the total medicines consumed within the country, will continue to be left in the lurch.

65% of Indians do not have access to WHO list of essential medicines, which surpasses even the African countries:

Our government also admits that 65% of Indians do not have access to even WHO list of essential medicines, none of which holds a valid patent in the country. This should be the key concern in the country. Moreover, the World Health Organization (WHO) reported that during 2000-2007, India had poorer access to essential medicines than even many African countries. It is worth noting that many of these African countries has a patent life for pharmaceuticals for around 30 years, against of 20 years in India. What are we then talking about?

Provisions of CL in the Indian Patents Acts are robust enough:

In any case, the provisions of CL in the Indian Patents Acts are not only quite clear and well articulated, but also at the same time offer flexibility in the decision making process to the Indian Patent Offices (IPOs) to invoke CL in a justifiable situation. Thus proposed guidelines related to CL would possibly invite more questions than answers. Consequently, it will be an extremely complicated process for the IPOs to categorize all the situations related to CL. Therefore, in my view, such initiatives, as initiated by the DIPP to frame guidelines for CL could prove to be totally counterproductive, as such guidelines, as stated above, would seriously limit the flexibility of the IPOs to take appropriate action, even when it would require to do so.

Moreover, it is absolutely imperative for the Government to ensure that the primacy of the patent statutes is not disturbed in any way, as such guidelines related to CL would only be consistent with the appropriate provisions within the statute and cannot be used beyond the Patent Law of the land. It goes without saying that any dispute between the parties related to the interpretation of the provisions within the statute related to CL, should only be resolved by the judiciary.

Conclusion:

How could then CL possibly offer answers to the vexing healthcare access issues of the nation? Is the Government not wasting its precious little time, instead of trying to ‘take the bull by the horns’ and resolve the critical ‘access to affordable quality medicines’ issue of India through Public Private Partnership (PPP) initiatives?

By Tapan Ray

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

Hype on “Superbug” – national pride – rational mind

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Since around last fortnight Indian media of all types and forms, have been fiercely competing with each other to attract the ‘eye balls’ of the viewer/readers through ‘alarming’ news items starting from the situation in the J&K to the ‘rampant corruption’ involving the Commonwealth Games, with of course their usual (over)dose of sensationalism.

In a situation like this to prove ‘enough is JUST NOT enough’, as it were, on August 11, 2010, the well-known medical journal of repute “The Lancet” published a routine article, which further added to the ‘media sensationalism’ in India. The report highlighted that a new ALL antibiotics-resistant “Superbug” originating from Pakistan, appears to have taken its first life. This happened when a patient who was brought to a hospital in Belgium and died in June this year after having met with a car accident in Pakistan, where the diseased was infected by this ‘Superbug”.

This article in ‘The Lancet’ written by a team of international researchers including an Indian, elaborated that a new variety of enzyme named after India’s national capital New Delhi, called, “New Delhi Metallo beta lactamase” in short “NDM 1” turns any bacteria into a deadly “Superbug”, making it resistant to ALL types of antibiotics, leaving virtually no cure in sight.

It was also reported that this deadly “Superbug” has already reached the United Kingdom through patients who acquired it from the hospitals in India. The article reported that the deadly “Superbug” originated from the hospitals of Pakistan and India has the potential to precipitate serious health issues across the world.

“The New Delhi Superbug” was discovered even earlier:

This report generated a sharp reaction in India and from some of its authors regarding its authenticity. Some experts even termed this study as the ‘Western plot to undermine medical tourism in India’.

A leading daily of India reported, “Indian medical journal first documented Superbug”. It stated that that the first ever formal documentation of this ‘Superbug’ was made last year at the P.D. Hinduja National Hospital and Medical Research Centre located in Mumbai. This finding was published in the ‘Journal of the Association of Physicians in India (JAPI’) in March 2010. The reason for the emergence of the ‘Superbug’ was attributed to the ‘worrisome outcome of the indiscriminate use of antibiotics’.

“Unfair to blame the country for the ‘New Delhi’ superbug”:

Reacting to this article, Indian health authorities opined, “It is unfortunate that this new bug, which is an environmental thing, has been attached to a particular country.” The reasons being, “Several superbugs are surviving in nature and they have been reported from countries like Greece, Israel, the U.S., Britain, Brazil and there is no public health threat and no need to unnecessarily sensationalize it”. Some experts, however, feel, “such drug resistant bacteria is a matter of chance, is a global phenomenon and is preventable by sound infection prevention strategies which are followed in any good hospital.”

It has been reported that the ‘National Center for Disease Control of India’ is working on guidelines for appropriately recording these types of nosocomial (hospital acquired) infections.

“Superbug” Hype and Medical Tourism:
Many people of both India and Pakistan have felt since then that in absence of an effective response by the health authorities, especially, in India the fast evolving Medical Tourism initiatives, providing medical services ranging from complicated cardiovascular, orthopedic and cerebrovascular surgery to other life-threatening illnesses, may get adversely impacted.

The root cause and the ‘blame game’:

Experts have opined that overuse and imprudent or irrational use of antibiotics without any surveillance protocol are the root cause for emergence of such ‘Superbugs”, though some Indian parliamentarians have termed this article as the propaganda by some vested interests. It has been alleged that the study was funded by the Wellcome Trust and Wyeth, the two global pharmaceutical companies who produce antibiotics to treat such conditions, together with the European Union.

In this context it is worth mentioning that ‘The Lancet’ article in its disclosures says:

“Kartikeyan K Kumarasamy has received a travel grant from Wyeth… David M Livermore has received conference support from numerous pharmaceutical companies, and also holds shares in AstraZeneca, Merck, Pfizer, Dechra, and GlaxoSmithKline, and, as Enduring Attorney, manages further holdings in GlaxoSmithKline and Eco Animal Health. All other authors declare that they have no conflicts of interest.”

Such a situation has not been reported for the first time:

This type of situation has indeed some precedents. When ‘MRSA’ was reported for the first time, it caused similar scare. However, this time many experts feel that it is too early to conclude whether or not ‘NDM-1’ will eventually prove to be more dangerous than ‘MRSA’.

Several such “Superbugs”, as stated earlier, have already been reported from countries like Greece, Israel, USA, UK, and Brazil. However, as I know, in the battle against infectious diseases involving both the scientists and the bacteria, the later had always to succumb, in the long run.

‘NDM-1′, as well, perhaps will be no exception. All concerned MUST continue to make it happen, not by mere wishful thinking but by establishing a strong procedural mechanism to keep a careful vigil on the reasons for emergence of drug resistant bacterial strains in the country.

The World Health Organization (WHO) perspective:

On Saturday, August 21, 2010 the WHO commented, “while multi-drug resistant bacteria are not new and will continue to appear, this development requires monitoring and further study to understand the extent and modes of transmission, and to define the most effective measures for control”.
Conclusion:

The hype created and motives attributed by the media and the politicians over one such routine scientific papers published in a medical journal of international repute, in my view are unwarranted. There are built in systems within the scientific discourse for raising questions and even challenge any findings. Remarks made by one of the authors of the article to the media, perhaps added more fuel to the fire. Politicians seem to have joined the bandwagon to politicize even a benign medical issue captured in the said article. In an era where news items mean “sensationalism” and ‘politicization’ of most such news items is the order of the day, the civil society should be helped to understand the core issues behind all such raging debates.

Besides the reasons, as discussed earlier, attributed to repeated emergence of such “Superbugs”, one more issue I could foresee in today’s environment compared to the same in the past. This issue possibly lies in the shift in focus of pharmaceutical R&D from discovery of novel drugs for infectious diseases to discovery of drugs for non-infectious chronic illnesses like, metabolic disorders (diabetes), hypertension, cardiovascular diseases, psychiatric disorders, cancer, vaccines etc. This shift in the R&D focus has obviously been prompted by the tilt in the prevalence of the disease pattern towards the same direction.

Perhaps for this reason, one notices hardly any significant and novel molecules in the research pipelines of either global or local pharmaceutical companies to treat such antibiotic-resistant infections. It is understandebly not an ‘either/or’ situation. However, as we all know, in life-threatening conditions both types of drugs have their respective places to save precious lives. Let us ponder over it.

By Tapan Ray

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

My thoughts on the world IPR day, April 24

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Ushering in the Product Patent Regime in India, effective January 1, 2005, heralds the dawn of a new era… an era that is expected to add speed to the wheels of progress of the nation. The new paradigm vindicates the importance of encouraging, protecting and rewarding innovation to meet the unmet needs of the population. At the same time this change instills new hope in our mind that India will now compete with the bests in the world, more innovatively and effectively, to curve out a significant share of the global economy.

Criticism continues, unfortunately though…

However, it is quite unfortunate that the pharmaceutical product patents that protect today’s innovations and drive research and development to create tomorrow’s life-saving treatments, are under criticism from some quarters. India chose to follow an alternative to Product Patent regime for many years. In 1970, the Government of India amended its IP laws with a clear objective in mind to reduce the prices of medicines to improve their access to the ailing population of the country.

A panacea:

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

Children still go without routine vaccinations, though the Government has made the primary vaccination programs free in our country, for all. Even in a situation like this, where affordability is no issue, only about 44% of infants (12 – 23 months) are fully vaccinated against six major childhood diseases – tuberculosis, diphtheria, pertussis, tetanus, polio and measles. Moreover, as we know, despite distribution of cheaper generic HIV AIDS drugs by the Government and others mostly free for years, only 5% cent of India’s AIDS patients were receiving any drugs by the end of 2006.

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

 

Paving way for innovation…issues of affordability and access need to be addressed differently :

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

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

IPR regime…is it more robust in China?

India is continuously compared with China in various parameters both within and outside the country. It is known to all that China is now attracting more Foreign Direct Investments (FDIs), be it Pharmaceutical R&D or Clinical developments of the new drugs. The moot question is why?

India restricts incremental innovation with section 3(d) of the Patents Act, but China has no such restrictive provisions. India does not protect regulatory data of the innovators, but China does. India does not have any patent linkage system with the marketing approval of the generic versions of the patented molecules, but China has put in place such system in their country.

With all these has India been able to improve affordability and access to medicines better than China or as even much as China? No, unfortunately, it has not. In China about 85% of the population has access to medicines, in India the equivalent figure will read as just 35%. Why then are such restrictions in the Patents Act of India? Have the drug prices gone up disproportionately in India post 2005? No… Not really. Unfortunately, the share of voice of the generic industry on these issues being much shriller, the voice of the innovator companies, be it Indian or global, is getting lost in the din, on all these important issues.

Conclusion:

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

By Tapan Ray

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