‘Havoc’ and its ‘Aftermath’: Clinical Trials in India

Posted on January 14, 2013 by Tapan Ray

Just as the New Year dawned, on January 3, 2013, in an embarrassing indictment to the Government, the bench of honorable justices R.M Lodha and A.R Dave of the Supreme Court reportedly observed that uncontrolled Clinical Trials (CT) are creating ‘havoc’ to human life causing even deaths to patients.

In an interim order, the bench directed to the Government that CTs can be conducted only under the supervision of the Health Secretary of India. Holding the Government responsible, the bench further observed, “You (Government) have to protect health of citizens of the country. It is your obligation. Deaths must be arrested and illegal trials must be stayed,”

Responding to this damning stricture by the Supreme Court, the Government has now reportedly decided that appropriate rules laying down guidelines for pharma companies and other organizations engaging in drug trials in India would be notified within January 2013. It is envisaged that thereafter, the government will also amend the Drugs and Cosmetics Act of India making any violation of prescribed rules and guidelines a punishable offense under the law.

It is worth mentioning that these guidelines have been reportedly worked out after due consideration of around 300 comments received from the stakeholders on the draft proposal circulated by the Ministry of Health in July 2011, couple of rounds of discussion with the members of the Civil Society, expert groups and against reported ‘stiff opposition from the drug companies’.

Better late than never:

In conformance to the well known saying – “better late than never”, it appears that after reportedly around 2,242 deaths related to CT and under immense pressure from the civil society and the Supreme Court, the Government has now left with no options but to bring US$ 500 million CT segment of the country, which is expected to cross US$ 1 Billion by 2016, under stringent regulations.

Experts believe that the growth of the CT segment in India is driven mainly by the overseas players for easy availability of a large patient population with varying disease pattern and demographic profile at a very low cost, as compared to many other countries across the world.

Clinical trial related deaths in India:

As per the Ministry of Health following are the details of deaths related to CTs registered in India from 2008 to August 2012:

Year	Total no of deaths	CT related deaths	Compensation paid to:
2012 (up to August)	272	12	NA
2011	438	16	16
2010	668	22	22
2009	737	NA	NA
2008	288	NA	NA

It is estimated that over the last four years, on an average, 10 persons have died every week in India related to CT.

However, looking at the above reported numbers it appears that financial compensation was paid for all registered death related cases however meager such amounts may be.

A huge ruckus:

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

The Bulletin of the World Health Organization (WHO) in an article titled, “Clinical trials in India: ethical concerns” reported as follows:

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

Inadequate auditing:

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

Unfortunately, there seems to be many loose knots in the current CT policy, practices, rules and guidelines. All these require to be adequately tightened by the Government to make the system efficient and transparent in the national endeavor of establishing India as a preferred destination for global CT without compromising safety and the health interest of the volunteers.

Indian Parliament intervened:

On May 8, 2012, the department related ‘Parliamentary Standing Committee (PSC)’ on Health and Family Welfare presented its 59th Report on the functioning of the Indian Drug Regulator – the Central Drugs Standard Control Organization (CDSCO) in both the houses of the Parliament.

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

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

Thirteen drugs scrutinized by the panel are not sold in the United States, Canada, Britain, European Union and Australia, as instructed by their respective regulatory authorities.

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

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

Jolted drug regulator initiates action:

In response to the high-pitched conundrum and media glare, The Ministry of Health and Family Welfare of the Government of India issued a draft notification on 17th July 2012 seeking stakeholders’ views on:

Permission to conduct CT
Compensation of the CT victims

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

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

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

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

Further, unlike current practices, the government is expected to set up independent registered Ethics Committees under medical institutions for effective and smooth conduct of CTs in India.

Poor patient compensation:

Absolutely unacceptable level of compensation, by any standard, paid by the concerned companies for the lives lost during CTs are mainly attributed to the lackadaisical attitude of the drug regulators to frame rules and laws for patient compensation for such cases in India.

Information reportedly gathered through the ‘Right To Information (RTI) Act’ reveals that one pharmaceutical company paid just Rs. 50,000 each to the families of two patients who died during CT of its cancer drug. Another Ahmedabad-based Clinical Research Organization (CRO) paid a compensation of exactly the same amount to another patient for a CT related death.

The report points out that in 2011 out of 438 CT related deaths in India only 16 families of such patients received any compensation, the quantum of which varied from Rs. 50,000 to Rs. L 3.0 with one exception being of Rs. L 5.

In 2012 till August, 272 more CT related deaths have already been reported.

Higher patient compensation expected:

It has been alleged that currently the pharmaceutical companies are “getting away with arbitrary payments” sometimes as meager as Rs. 50,000, as stated above, in case of loss of life during CT, as there are no set norms for calculating compensation to those patients.

It is expected that the new rules will help putting in place a transparent formula for providing a respectable compensation for CT related serious adverse events like deaths, along with a prescribed provision for minimum compensation amount to such patients.

Increasing public scrutiny:

Over the last few years, CTs in India are increasingly coming under intense public and media scrutiny. As a result, both the concerned pharmaceutical companies as well as the CROs are facing the wrath of various stakeholders including the Supreme Court.

Following are the reported numbers of registered CTs in India from 2009 to 2011:

Year	Total Number
2009	181
2010	313
2011	513

Although the total number of CTs registered in India from 2007 to 2011, as per available records, was around 1875, the number of new trials registered in the country had reportedly sharply declined in 2011 over 2010, mainly due to time-consuming regulatory approvals and increasing public scrutiny on alleged unethical practices.

According to www.clinicaltrials.gov – the website of the U.S Government, out of 118,804 human trials conducted in 178 countries, less than 2,000 or 2%, are carried out in India as compared to 9,352 or 8% in China.

It appears, all concerned players now seem to be either willingly or grudgingly waiting for the CT regulatory system to function the way it should.

Conclusion:

Although the Ministry of Health has already started taking some positive measures, as stated above, there is an urgent need for the players in this field to reassure the Civil Society, in general, and the Government in particular about the high ethical standards that the pharmaceutical companies and CROs would comply with and continuously practice, while conducting clinical research in India.

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

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

That said, the bottom line is, without any selfish interest or pressure to the Government in any form, from within the country or outside, all concerned must ensure that CTs of all types must strictly adhere to the prescribed norms and well laid down procedures of India, as soon as these are put in place.

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 and also do not contribute to any other blog or website with the same article that I post in this website. Any such act of reproducing my articles, which I write in my personal capacity, in other blogs or websites by anyone is unauthorized and prohibited.

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

Posted on October 1, 2012 by Tapan Ray

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

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

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

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

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

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

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

This is mainly because of the following key reasons:

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

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

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

(Source: data compiled)

Changing disease pattern increases healthcare expenditure, further limiting access

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

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

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

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

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

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

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

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

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

III. Inadequate penetration of current health insurance schemes:

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

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

(Source: data compiled)

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

IV. Pricing of Patented Drugs:

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

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

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

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

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

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

An innovative approach

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

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

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

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

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

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

Innovation:

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

IPR

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

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

VI. Counterfeit Medicines:

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

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

VII. Talent Pool:

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

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

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

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

VIII. Requirement of Stringent Regulatory Practices:

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

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

IX. Ethics and Compliance:

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

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

The Department of Pharmaceuticals has not delivered yet:

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

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

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

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

Conclusion:

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

By: Tapan J Ray

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.

Early Signal of Metamorphosis in the Global Pharmaceutical Product Patent Regime

Posted on September 17, 2012 by Tapan Ray

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

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

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

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

Support of the Experts Group:

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

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

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

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

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

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

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

Capturing an emerging trend with some examples:

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

India:

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

Philippines:

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

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

Taiwan:

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

Patentability
Public health
Compulsory license

China:

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

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

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

Argentina:

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

Another signal from Asia though disease specific:

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

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

A close watch for Public Health Interest in South Africa:

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

A review by UNDP:

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

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

Opposite school of thoughts:

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

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

Conclusion:

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

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

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

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

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

Posted on September 3, 2012 by Tapan Ray

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

- Gunnar Myrdal (Swedish Nobel Laureate Economist)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Increasing healthcare consumption of India attracting global players:

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

Share of Average Household Consumption (AHC) (%)


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

(Source; McKinsey India Report 2007)

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

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

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

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

Sectoral break-up of the Healthcare Industry:

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

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

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

(Source: IDFC Securities Hospital Sector, November 2010)

A promising market:

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

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

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

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

Need to strike a right balance:

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

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

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

Domestic Pharmaceutical Industry has come a long way:

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

Currently India:

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

Patients are still being exploited:

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

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

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

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

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

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

Key factors to take note of in the changing paradigm:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Recognition of India’s healthcare priorities is important:

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

Participative strategies should yield better results:

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

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

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

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

Conclusion:

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

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

By: Tapan J Ray

“Pharmaceutical Marketing Malpractices are Barriers to Healthcare Access” – The Relevance of Government Code of Ethical Marketing Practices in India

Posted on July 23, 2012 by Tapan Ray

Last week (July 19, 2012), 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 next month for implementation by the entire pharmaceutical industry on a voluntary basis, to start with.

This is only because the draft UCPMP has already specified the following:

“This is a voluntary code of Marketing Practices for Indian Pharmaceutical Industry, for the present and its implementation will be reviewed after a period of six months from the date of its coming into force and if it is found that it has not been implemented effectively by the Pharma Associations/Companies, the Government would consider making it a statutory code.”

This decision of the government is the culmination of a series of events, covered widely by the various sections of the media, at least, since 2004.

The series of events:

Way back, in its January – March, 2004 issue, ‘Indian Journal of Medical Ethics (IJME)’ in the context of marketing practices for ethical pharmaceutical products in India commented: “If the one who decides, does not pay and the one who pays, does not decide and if the one who decides is ‘paid’, will truth stand any chance?” Three years later in 2007, the situation remained unchanged when IJME (April – June 2007 edition) once again reported: “Misleading information, incentives, unethical trade practices were identified as methods to increase the prescription and sales of drugs. Medical Representatives provide incomplete medical information to influence prescribing practices; they also offer incentives including conference sponsorship. Doctors may also demand incentives, as when doctors’ associations threaten to boycott companies that do not comply with their demands for sponsorship.”

‘The Times of India’ also reported the following in its December 15, 2008 edition:

“1. More drugs a doctor prescribes of a specific company, greater are the chances of his/ her winning a car, a high-end fridge or a TV set. 2. Drug companies dole out free trips with family to exotic destinations like Turkey or Kenya. 3. In the West, unethical marketing practices attract stiff penalties. 4. In India, there are only vague assurances of self-regulation by the drug industry and reliance on doctors’ ethics”.

Thus, it has been quite a while from now, serious concerns are being expressed by the media, government and the civil society at large about the means adopted by the pharmaceutical industry in general to get their respective brands prescribed by the doctors.

The discontentment still growing:

Many within the civil society feel, as a result of fast degradation of ethical standards, moral and the noble values, just in many other areas of public life, in the healthcare space as well, the patients in general have started losing their absolute faith and trust both on the medical profession and the pharmaceutical companies, by and large. However, health related multifaceted compulsions do not allow them, either to avoid such a situation or even raise a strong voice of protest against the vested interests.

Growing discontentment of the patients both in the private and public healthcare space in the country, is being regularly and very rightly highlighted by the media all over the world, including reputed medical journals like, ‘The Lancet’ to help arrest this moral and ethical decay with demonstrable and tangible proactive measures.

The issue:

The entire issue arises out of the key factor that the patients do not have any say on the use/purchase of a medicine brand/brands that a doctor will prescribe.

It is generally believed by the civil society that doctors predominantly prescribe mostly those brands, which are promoted to them by the pharmaceutical companies in various ways. Thus, in today’s world and particularly in India, the degree of commercialization of the noble healthcare services, as reported quite often by the media, has reached a new high, sacrificing the ethics and etiquette both in medical and pharmaceutical marketing practices at the altar of unlimited greed, want and conspicuous consumption.

A credible international report: Let me now combine this scenario with a relatively recent report on India dated January 11, 2011, published in ‘The Lancet’, which states in a similar (though not the same) context, as follows:

1. “Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.” 2. “Most people accessed private providers for outpatient care – 78% in rural areas and 81% in urban areas.” 3. “India’s private expenditure of nearly 80% of total expenditure on health was much higher than that in China, Sri Lanka and Thailand.” Considering the above three critical issues of India, as reported in ‘The Lancet’, the need to follow a transparent code of pharmaceutical marketing practices by the entire pharmaceutical industry is of utmost importance.

A global phenomenon:

Since quite some time, this issue has indeed become a global phenomenon. Many countries, including India, are taking note of such examples of socioeconomic decay, that too in the healthcare sector.

Just the other day, the July 4, 2012 edition of ‘The Guardian’, while reporting that GlaxoSmithKline has agreed to pay $3bn (£1.9bn) to settle a series of old criminal and civil investigations by the US authorities into the sales and marketing of some of its best-known products, commented, “GlaxoSmithKline’s bribes are evidence that Big Pharma isn’t working – the inadequacies of relying solely on market forces for our drugs are clearer than ever. This scandal should prompt a rethink.”

The Guardian further commented:

“After all, this has happened before. All the giants – AstraZeneca, Bristol-Myers Squibb, Merck, Eli Lilly, Pfizer – have been investigated for bribery. One of the most notorious episodes of misconduct involved Merck’s anti-inflammatory drug Vioxx, withdrawn in 2004 after the company persistently played down its risk of causing cardiovascular problems.”

The New York Times (NYT) in its April 12, 2010 edition in an article titled, “Data on Fees to Doctors is Called Hard to Parse”, reported that though some big pharmaceutical companies have started disclosing payments to doctors who act as consultants or speakers, many still find it far too difficult to follow the money trail.

NYT reported in the same article, “Senate researchers have found that some prominent doctors at academic medical centers have failed to disclose millions of dollars in drug company payments, despite university requirements that they do so. Federal prosecutors say some payments are really kickbacks for illegal or excessive prescribing”.

General scenario was not much different even in the US until recently:

‘The New England Journal of Medicine’, April 26, 2007 reported that virtually, all doctors in the US take freebies from drug companies, and a third take money for lecturing, and signing patients up for trials. The study conducted on 3167 physicians in six specialties (anesthesiology, cardiology, family practice, general surgery, internal medicine and pediatrics) reported that 94% of the physicians had ‘some type of relationship with the pharmaceutical industry’, and 83% of these relationships involved receiving food at the workplace and 78% receiving free drug samples. 35% of the physicians received re-reimbursement for cost associated with professional meetings or Continuing Medical Education (CME). And the more influential a doctor was, the greater the likelihood that he or she would be benefiting from a drug company’s largess. As a result of some strict regulatory measures, the situation in the US has presumably started changing now.

However, such issues are not related only to physicians. ‘Scrip’ dated February 6, 2009 published an article titled: “marketing malpractices: an unnecessary burden to bear”. The article commented:

“Marketing practices that seem to be a throwback to a different age continues to haunt the industry. Over the past few months, some truly large sums have been used to resolve allegations in the US of marketing and promotional malpractices by various companies. These were usually involving the promotion of off-label uses for medicines. One can only hope that lessons have been learnt and the industry moves on.”

“As the sums involved in settling these cases of marketing malpractices have become progressively larger, and if companies do not become careful even now, such incidents will not only affect their reputation but financial performance too.”

‘The Physician Payment Sunshine Act’:

As the financial relationship between the pharmaceutical companies and the physicians are getting increasingly dragged into the public debate, disclosure of all such payments made to the physicians by the pharmaceutical companies has been made mandatory by the Obama administration, as a part of the new US healthcare reform process.

As a result, ‘The Physician Payment Sunshine Act’, originally proposed in 2009 by Iowa Republican Charles Grassley and Wisconsin Democrat Herb Kohl, became a part of the US healthcare law in 2010. This Act came as an integral part of the healthcare reform initiatives of President Obama to reduce healthcare costs and introduce greater transparency in the system.

The Act requires all pharmaceutical and medical device companies of the country to report all payments to doctors above US $10. As stated earlier, the industry’s gifts to physicians in the US, reportedly, can range from expensive hospitality/dinner in exotic locations, pricey golfing vacations in various places of interest to consulting and speaking fees. As the Act came into force with all its rules in place, failure to provide such details will attract commensurate penal provisions.

Australia sets another example: The Australian Competition and Consumer Commission (ACCC) has decided to grant authorization for five years to Medicines Australia’s 16th edition of its Code of Conduct. The Code sets standards for the marketing and promotion of prescription pharmaceutical products in Australia. The Code provides, among other measures, a standard to address potential conflicts of interest from unrestricted relationships between pharmaceutical companies and the doctors, which may harm the consumers through inappropriate prescriptions. The Code also prohibits the pharmaceutical companies from providing entertainment and extravagant hospitality to doctors with the requirement that all benefits provided by companies should be able to successfully withstand public and professional scrutiny. “The requirement for public disclosure was imposed by the ACCC as a condition of authorization of the previous version of Medicines Australia’s Code and was confirmed on appeal by the Australian Competition Tribunal.” Edition 16 of the Code fully incorporates the public reporting requirements.

“Market malpractices are barriers to healthcare access”: The WHO report of 2006:

A 2006 report of the ‘World Health Organization (WHO) and ‘The Ministry of Health and Family Welfare, Government of India’ titled ‘Options for Using Competition Law/Policy Tools in Dealing with Anti-Competitive Practices in Pharmaceutical Industry and Health Delivery System, states:

“The right to health is recognized in a number of international legal instruments. In India too, there are constitutional commitments to provide access to healthcare. However despite the existence of any number of paper pledges assuring the right to health, access to health remains a problem across the world”.

“There are several factors that are responsible for such deprivation. Market malpractices in general, and in particular, anti-competitive conduct in the pharmaceutical industry and the health delivery system are also among them.”

India Today:

The current scenario in India though not very much different, in terms of seriousness of the issue, from what is being reported in the US, the evolving regulatory standards in the US in this matter are definitely more robust and far superior to what we see in our country.

In India, over 20, 000 pharmaceutical companies of varying size and scale are currently operating. It has been widely reported in the media that the lack of regulatory scrutiny is prompting many of these companies to adapt to ‘free-for-all’ types of aggressive sales promotion and cut-throat marketing warfare involving significant ‘wasteful’ expenditures. Such practices reportedly involve almost all types of their customer groups, excepting perhaps the ultimate consumer – the patients.

It has been well reported that industry’s gifts to physicians in India can range from expensive cars, dinners in exotic locations, pricey vacations at various places of interest of the world and sometimes with the doctors’ families, to hefty consulting and speaking fees.

Unfortunately in India there is no single government agency, which is accountable to take care of the entire healthcare needs of the patients and their well-being, in a holistic way.

The pharmaceutical industry in India, in general, has already expressed its desire for self-regulation of marketing practices, instead of any regulatory compulsion by the Government.

However, many activists groups and NGOs still feel that the bottom-line in this scenario is the demonstrable transparency by the pharmaceutical companies in their dealings with various customer groups, especially the physicians/doctors.

Ministry of Health blinked first by amending the MCI Guidelines:

Being concerned with the media outcry, MCI, in 2009, amended their guidelines of ‘Professional Conduct, Etiquette and Ethics’ for the doctors, clearly articulating what they can and cannot do during their interaction and transaction with the pharmaceutical and related industries.

MCI, through amendment of the “Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation 2002” introduced a new code of conduct for doctors and their professional associations in their relationship with the pharmaceutical and allied industry in India. The amended regulations are known as the “Indian Medical Council (Professional Conduct, Etiquette and Ethics) (Amendment) Regulations, 2009 – Part-I”, which prohibit the doctors from accepting, among many others, any travel facility or hospitality, including gifts of any value, from any pharmaceutical companies.

The Ministry of Health believes that these guidelines, if strictly enforced, would severely limit what the doctors can receive from the pharmaceutical companies in terms of free gifts of wide ranging financial value, entertainments, free visits to exotic locations under various commercial reasons, lavish lunch and dinner etc. in exchange of prescribing specific pharmaceutical brands of the concerned companies.

‘Draft Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ from the DoP:

In May 2011, the Department of Pharmaceuticals (DoP) released a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for the Pharmaceutical Industry of India for comments by the stakeholders.

Some Key features of the DoP Code are as follows:

All promotional material must be consistent with the requirements of this Code.
Brand names of products of other companies must not be used for comparison without prior consent of the concerned companies.
Paid or arranged publication of promotional material in journals must not resemble editorial matter.
The names or photographs of healthcare professionals must not be used in promotional material.
Audio-visual material must be accompanied by all appropriate printed material to ensure compliance of the Code.
Samples should be provided directly to prescribing authority and be limited to prescribed dosages for three patients and in response to a signed and dated request from the recipient. Each sample pack shall not be larger than the smallest pack presented in the market.
Medical and Educational events for doctors should be organized in the appropriate venue in India and all expenses must be incurred only for the events held in India.
Outline of a detailed Complaint Lodging and Redressal mechanism (Committee for Code of Pharma Marketing) to ensure compliance of the marketing code.

The quality of UCPMP:

The UCPMP draft document is well written, balanced and by and large fair. The DoP should indeed be commended on the great work that they have done in putting all details of pharmaceutical marketing practices together in this document in a very comprehensive manner.

Draft UCPMP does not seem to pose any major extra restrictions to the pharmaceutical companies as compared to the MCI guidelines. All concerned should welcome this decision of the DoP, as the same ethical standards will now be applicable to all small, mid-sized and large pharma players, equally. The main focus of the DoP should be in ensuring that all companies across the pharmaceutical industry follow these well-defined standards in their marketing practices and interactions with the doctors.

The draft UCPMP also states that companies must maintain a detailed record of expenditures incurred on these events. It is not quite clear though, as to what extent the pharmaceutical companies are expected to keep these detail records and how long? It is also not clear whether such records have to be maintained on file by the individual companies and supplied to the DoP only on specific requests for the same or all these details are expected to be disclosed on a regular basis to the regulator.

The draft UCPMP indicates that industry associations must upload full details of received complaints on their respective websites. Although this provision could help making the system transparent, the DoP should clearly articulate the details about the specific information that will require to be disclosed in cases of any proven breach of the marketing code.

It is interesting to note that the draft UCPMP states that media reports and published letters alleging that a company has breached the UCPMP will be treated as complaints.

Skepticism with the UCPMP:

Some are quite skeptical about the effectiveness of UCPMP in containing unethical marketing practices within the Indian Pharmaceutical Industry.

This section of people believes, with thousands of pharmaceutical companies operating in India, just self-control with UCPMP without any properly enforceable stringent Government regulation, will simply not work.

Conclusion:

In all countries and India is no exception, pharmaceutical companies, by and large, have been articulating that they try to follow the legal ways and means to maximize turnover of their respective brands. Many of them do follow transparent and admirable stringent self-regulations, stipulated either by themselves or by their industry associations.

‘Self-regulation with pharmaceutical marketing practices’ and ‘voluntary disclosure of payment to the physicians’ by some leading global pharmaceutical companies are laudable steps to address this vexing issue. However, the moot question still remains, are all these good enough for the entire industry in India?

It appears, immediately after the Department Related Parliamentary Standing Committee on Health and Family Welfare presented its 58th Report on the action taken by the DoP on the recommendations / observations contained in the 45th report to both the Lower and the Upper houses of the Parliament on May 08, 2012, the DoP has reportedly taken an extra step forward towards this direction last week. The amended MCI regulations for the doctors coupled with the notified UCPMP for the entire pharmaceutical industry should make the financial transactional relationship between the physicians and the pharmaceutical industry in India clean and transparent.

It was also reported last week that Government will soon decide whether there will be an independent industry appointed ‘Ombudsman’ for the enforcement of UCPMP across the country or the implementation of the code will strictly be monitored under the Government control.

It is worth reiterating that the draft UCPMP very categorically warns, in case the self-control with UCPMP by the industry appointed independent ‘Ombudsman’ does not work effectively, the Government would seriously consider making it statutory for the entire pharmaceutical industry of India. This is indeed quite a strong signal from the government to the industry for ‘Shaping Up’… sooner the better.

The popular dictum, especially used by the healthcare industry, “patients’ interest come first”, should not be allowed to be misused or abused, any further, by some unscrupulous elements and greedy profiteers, to squeeze out even the last drop of financial resource from the long exploited population of ailing patients of India, as “Pharmaceutical Marketing Malpractices are Proven Barriers to Healthcare Access”.

By: Tapan J Ray

Increasing Healthcare Consumption in India with equity

Posted on May 14, 2012 by Tapan Ray

Share of Average Household Consumption (AHC) (%)


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

(Source; McKinsey India Report 2007)

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

Thus, over a period of time AHC for ‘healthcare’ shows a very significant growth potential in India. Hence, this important area needs much greater attention of the policymakers to help translate the potential into actual performance with requisite policy and fiscal support/incentives.

Sectoral break-up of the Healthcare Industry:

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

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

(Source: IDFC Securities Hospital Sector, November 2010)

Therefore, as per this above report, the top two sectors of the healthcare industry are hospitals with 50 percent share and pharmaceuticals at 25 percent.

Public sector drives the healthcare expenditure in the developed countries:

Almost all OECD countries now provide universal or near-universal health coverage for a core set of health services, which are primarily funded by the public sector.

The report titled, ‘Health at a Glance 2011’ indicates that adjusted for purchasing power parity United States of America (USA) at US$ 7290 per capita expenditure on health in 2007, which is almost two and a half times more than the OECD average of US$ 2984, towers above other OECD countries. However, the same for Turkey and Mexico was less than one-third of the OECD average.

India and South East Asia are different:

Unlike OECD countries, according to the World Health Organization (WHO), in South East Asia, except Thailand and Indonesia, healthcare is primarily driven by private expenditure, as seen in the following table:

Public and Private Expenditure on Health as % of Total

Country	Public %	Private %
Laos	17.60	82.40
Cambodia	23.80	76.20
India	32.40	67.60
Philippines	34.70	65.30
Vietnam	38.50	61.50
Malaysia	44.10	55.90
Indonesia	54.40	45.60
Thailand	74.30	25.70

Source: World Health Statistics 2011, World Health Organization (WHO)

In India, the critical healthcare industry is heavily dependent on private sector investments, where the total public expenditure on health is just around one third of the country’s total expenditure for the same, though in the 12th Five Year Plan period the the government is likely to increase its health expenditure as a percentage to GDP to 2.5 percent.

Healthcare – a more sensitive sector in India:

According to an article titled, ‘Financing health care for all: challenges and opportunities’, published in ‘The Lancet’ dated February 19, 2011 ‘Out of Pocket’ expenditure on health in India (78 per cent) is one of the highest as compared to its neighboring, except Pakistan (82.5 percent). The details are as follows:

	Country	‘Out of Pocket’ expenses (%)
1.	Pakistan	82.5
2.	India	78
3.	China	61
4.	Sri Lanka	53
5.	Thailand	31
6.	Bhutan	29
7.	Maldives	14

Such a high out of pocket expenditure for health in India, makes ‘affordability’ of healthcare products and services so sensitive to all concerned.

Just Hospital oriented health insurance plans are not adequate enough:

The above article from ‘The Lancet ‘also indicates that 74 per cent of the total healthcare expenditure goes for only outpatient or in-clinic treatment of the patients. Only 26 per cent of healthcare expenditure goes for inpatient treatment in the hospitals.

Thus coverage of only expenditure towards hospitalization by the health insurance companies will not be able to provide significant benefits to most of the citizens of India.

Further, the article says that from 1986 to 2004, there has been three times increase in the average real expenditure per hospital admission, both in the government and private hospitals.

Threefold increase in the drug prices from 1993-94 to 2006-07 was mentioned as the key factor for cost escalation in the medical care in India.

Private healthcare sector needs more fiscal incentives and lesser cost of capital:

As indicated above, private healthcare players will increasingly play a very significant role to increase healthcare consumption with equitable span across the population of India. To encourage them to spread their wings in the semi-urban and rural areas of the country effectively, lucrative fiscal/ financial incentives along with the availability of low cost capital, are absolutely necessary.

It is worth mentioning that the growth of rural middle class population is now faster than ever before and much more than their urban counterpart.

Exploitation of the patients must stop:

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

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

“Reported problems (which patients face while getting treated at a private doctor’s clinic) include unnecessary tests and procedures, rewards for referrals, lack of quality standards and irrational use of injection and drugs. Since no national regulations exist for provider standards and treatment protocols for healthcare, over diagnosis, over treatment and maltreatment are common.” Prevailing situation like this calls for urgent national regulations for provider-standards and treatment-protocols, at least for the common diseases in India and more importantly their stricter implementation across the country.

UHC will significantly improve healthcare consumption:

In October 2010, the Planning Commission of India constituted a ‘High Level Expert Group (HLEG)’ on Universal Health Coverage (UHC) under the chairmanship of the well-known medical professional Prof. K. Srinath Reddy. The HLEG was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

UHC will guarantee access to essential free health services to all. However, because of the uniqueness of India, HLEG proposed a hybrid system that draws on the lessons learnt not only from within India, but also from other developed and developing countries of the world.

UHC is expected to ensure guaranteed access to essential health services to every Indian, including cashless in-patient and out-patient treatment for primary, secondary and tertiary care. All these services will be available to the patients absolutely free of any cost.

Under UHC all citizens of India will be free to choose between Public sector facilities and ‘contracted-in’ private providers for healthcare services.

It is envisaged that the people would be free to supplement the free of cost healthcare services offered under UHC by opting to pay ‘out of pocket’ or going for private health insurance schemes, as per their individual requirements.

Conclusion:

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

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

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

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

All these interesting developments adequately fueled by rising income levels and improving access to healthcare though albeit slowly at present, equitable consumption of healthcare in India, I reckon, is expected to improve by manifold in the years ahead, despite shrill voices of naysayers of vested interests, orchestrated many a times from beyond the shores of India.

By: Tapan J Ray

Chasing the “Holy Grail”: Reasonably affordable healthcare for all

Posted on April 23, 2012 by Tapan Ray

The Healthcare industry of the world as a whole with a size of several trillion US$ is growing at a fast pace in many countries for various reasons. The industry can be broadly divided into six categories as follows:

Managed Health Care, like the US and many other OECD countries providing ‘Universal Health Coverage’
Medical Equipment and Devices
Pharmaceuticals
Bio-pharmaceuticals
Health Insurance
Health Support Services

Though BRIC countries and other emerging markets are showing promising growth potential, United States of America (USA) still remains the largest entity within the global healthcare industry, followed by European Union (EU) and Japan.

Success requirements:

The most important success requirements for the Global healthcare industry may be listed as follows:

Proficiency in early capturing of the key market trends
Leveraging technology in all areas of business
Continuous product and service innovation
Meeting customer needs even before they feel for the same
Cutting-edge, well-differentiated and well-executed market and marketing strategies
Always in touch with customers with win-win business objectives
Outpacing competition with continuous proactive moves

India:

The success factors for excellence in the healthcare sector of India are no different from other emerging markets. However, some key components of this sectoral space, like optimal infrastructure and efficient delivery mechanisms, especially in the hinterland and rural areas of the country, are still in ‘Work In Progress (WIP)’ stages of development.

Healthcare growth drivers in India:

According to the Investment Commission of India, the healthcare sector of the country has registered a robust CAGR of over 12 percent during the last four years and the trend is expected to be ascending further.

Quite in tandem, other important areas of the healthcare sector have also recorded impressive performance as follows:

Areas	Growth %
Hospitals/Nursing Homes	20
Medical Equipment	15
Clinical Lab Diagnostics	30
Imaging Diagnostics	30
Other Services (includes Training & Education; Aesthetics & Weight loss; Retail Pharmacy, etc.)	40

In addition, from the allocation made for health (2.5 percent of the GDP) in the 12^th Five Year Plan Document of India, it appears that the country will clock a mid to high-teen growth in its healthcare spending during this period, mainly due to the following reasons:

Economy to turn stronger
Massive public healthcare expansion through projects like Universal Health Coverage (UHC), expanded National Rural Health Mission (NRHM), new National Urban Health Mission (NUHM)
Expanded Rashtriya Swasthya Bima Yojojana (RSBY) for Below Poverty Line (BPL) population
Growing middle income households both in the urban and rural areas
Increasing life-style related health issues
Improving penetration of Health Insurance

Key Challenges:

The path ahead will not really be strewn with the beds of roses. The rural healthcare infrastructure will continue to pose a key challenge, at least in the near term, some of the facts being as follows:

A. Status of Rural Healthcare Infrastructure in India:

Infrastructure and Services	Villages [%]
Connected with Roads	73.9
Having any Health Provider	95.3
Having trained birth attendant	37.5
Having ‘Anganwadi’ Worker (Child Care Center in rural areas)	74.5
Having a doctor	43.5

(Source: Ministry of Health and Family Welfare)

B. Hospital Beds per 1000 of population:

Country	Hospital Beds Per 1000 Population
India	> 0.7 [Urban: 2.2 and Rural 0.1]
Russia	9.7
Brazil	2.6
China	2.2
World Average	3.96

(Source: Kshema)

Needs more innovative business models:

Being supported by the monetary and other fiscal incentives of the Government, Tier II and III cities of India will continue to attract more investors for their future growth potential. At the same time, anticipated lower profit margins from these areas, predominantly due to relatively lower affordability threshold of the local population and inadequate health insurance penetration in these areas, is expected to make these healthcare providers to plan for no-frill innovative business models, like much talked about ‘the hub-and-spoke model’, as practiced in many other industries.

Some of the key players of the healthcare industry of India like, Apollo and Fortis have already started expanding into tier-II and tier-III cities of the country, prompted by increasing demand for high-quality specialty healthcare services at reasonably affordable prices in the smaller towns of the country.

Meanwhile, Frontier Lifeline Hospital is reportedly in the process of setting up India’s first Special Economic Zone (SEZ) for healthcare, ‘Frontier Mediville’ at Elavoor, near Chennai.

Areas of caution:

While looking at the big picture, the following factors should also be taken note of:

At least in the short to medium term, it will be unrealistic to expect that India will be a high margin / high volume market for the healthcare sector in general.
The market will continue to remain within the modest-margin range with marketing excellence driven volume turnover.
The government focus on reasonably affordable drug prices may get extended to medical devices / equipment and other related areas, as well.

India is taking strides:

I. According to the Rural Health Survey Report 2009 of the Ministry of Health and Family

Welfare, in rural India during the last five years:

The number of primary health centers has increased by 84 per cent to 20,107.
Around 15,000 health sub-centers and 28,000 nurses and midwives have been added.

II According to RNCOS December, 2010 report:

Indian health insurance market is currently not only the fastest growing, but also second largest non-life insurance segment in the country.
The health insurance premium in India is expected to grow at a CAGR of over 25 per cent from 2009-10 to 2013-14.
By end 2013 India is expected to curve out a share over 3 per cent in the global medical tourism industry with a CAGR in the number of medical tourists to over 19 per cent, during 2011-2013 period.

III. According to PwC, the medical technology industry of India is expected to grow from US$

2.7 billion in 2008 to US$ 14 billion by 2020.

IV. Leveraging cutting edge technology, digital bio-surveillance projects are being initiated to

generate data on the prevalence of various diseases and to create actionable databases on healthcare needs in rural India by several private players like, Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre.

V. Major healthcare players of India like, Manipal Group, Max Healthcare and Apollo are now

reportedly venturing into new segments such as primary care and medical diagnostics.

Job creation  in healthcare sector:

The trend of new job creation in the healthcare sector of India is also quite encouraging, as supported by the following details:

The Healthcare sectors in India recorded a maximum post recession recruitment to a total employee base of 33,66,000 with a new job creation of 2,95,000, according to ‘Ma Foi Employment Trends Survey 2010’.
Despite slowdown in other industries, in the healthcare sector the new job creation continues at a faster pace.
With many new hospital beds added and increasing access to primary, secondary and tertiary / specialty healthcare, among others, the ascending trend in job creation is expected to continue in the healthcare sector of India in the years ahead.

Pharmaceutical Industry:

McKinsey & Company in its report titled, “India Pharma 2020: Propelling access and acceptance realizing true potential” estimated that the Indian Pharmaceutical Market (IPM) will grow to US$ 55 billion by 2020 and the market has the potential to record a turnover of US$ 70 billion with a CAGR of 17 per cent.

Currently India:

Ranks 4th in the world in terms of pharmaceutical sales volume.
Caters to around a quarter of the global requirements for generic drugs.
Meets around 70 per cent of the domestic demand for Active Pharmaceutical Ingredients (API).
Has the largest number of US FDA approved plant outside USA
Files highest number of ANDAs and DMFs
One of most preferred global destinations for contract research and manufacturing services (CRAMS)

Conclusion:

Despite all these, the healthcare Industry of India is still confronted with many challenges while striking a right balance between public health interest and expectations for a high margin ‘free market’ business policies by a large section of players in the healthcare sector of India, across its sub-sectors, both global and local, quite unlike many other emerging sectors, like telecom and IT.

Moreover, pharmaceuticals come under the ‘Essential Commodities Act’ of the country, where government administered pricing is common.

That said, without further delay, all stakeholders, along with the Government, should now join hands, to collectively resolve the critical issues of the healthcare sector of the nation, like:

Creation and modernization of healthcare infrastructure leveraging IT
Universal Health Coverage
Win-win regulatory policies
Creation of employable skilled manpower
Innovation friendly ecosystem
Reasonably affordable healthcare services and medicines for the common man through a robust government procurement and delivery system
Right attitude of all stakeholders to find a win-win solution for all issues, instead of adhering to the age-old blame game in perpetuity, as it were, without conceding each other’s ground even by an inch.

Now is the high time for India, I reckon, to reap a rich harvest from the emerging lucrative opportunities, coming both from India and across the world in its healthcare space. This, in turn, will help the country to effectively align itself with the key global healthcare need of providing reasonably affordable healthcare to all.

In pursuit of this ‘Holy Grail’, the nation has all the success ingredients in its armory, as mentioned above, to play a key role in the global healthcare space, not just as a facilitator to help achieving reasonable corporate business objectives of the healthcare players, but more importantly to alleviate sufferings of a vast majority of the ailing population, living even beyond the shores of India.

By: Tapan J Ray

In the Pharmaceutical Space: The Dragon breathes fire

Posted on April 9, 2012 by Tapan Ray

Currently both China and India, the two most populous nations of the world are also the front runners of the global economy in terms of the pace of GDP growth. The economies of the two countries are greatly influenced by their respective sociopolitical environment. However, the economy of China is more robust ranking second in the world, against eleven of India. The dragon is indeed breathing fire.

A comparison of the economy of the two countries, as reported by ‘MapsofIndia.com’ updated in July 2011, is as follows:

Facts	India	China
GDP	US$1.31 trillion	US$ 4.90 trillion
GDP growth	8.90%	9.60%
Per capital GDP	US$1124	US$7,518
Inflation	7.48 %	5.1%
Labor Force	467 million	813.5 million
Unemployment	9.4 %	4.20 %
Fiscal Deficit	5.5%	21.5%
Foreign Direct Investment	US$12.40 billion	US$9.7 billion
Gold Reserves	15%	11%
Foreign Exchange Reserves	US$2.41 billion	US$2.65 trillion
World Prosperity Index	88th Position	58th Position
Mobile Users	842 million	687.71 million
Internet Users	123.16 million	81 million.

Global pharmaceutical ranking:

As reported by IMS, in global ranking, China was ninth largest pharmaceutical market against thirteenth of India in 2004, became fifth largest in 2009 against thirteenth of India and is expected to be the third largest by 2014 against tenth of India, growing at a much faster pace.

	2004 Rank		2009 Rank		2014 Rank
1	United States	1	United States	1	United States
2	Japan	2	Japan	2	Japan
3	France	3	Germany	3	China
4	Germany	4	France	4	Germany
5	Italy	5	China	5	France
6	United Kingdom	6	Italy	6	Brazil
7	Canada	7	Canada	7	Italy
8	Spain	8	Spain	8	Canada
9	China	9	United Kingdom	9	Spain
10	Brazil	10	Brazil	10	India
11	Mexico	11	Russia	11	Russia
12	Australia	12	Mexico	12	United Kingdom
13	South Korea	13	India	13	Venezuela
14	India	14	Australia	14	Turkey
15	Netherlands	15	Turkey	15	South Korea

Source: IMS Health MIDAS, Market Prognosis September 2010; Market size ranking in constant US$

Healthcare coverage:

In China, out of a population of 1.3 billion, 250 million are covered by health insurance, another 250 million are partially covered by insurance and balance 800 million are not covered by any insurance.

Against these statistics of China, in India total number of population who have some sort of healthcare financing coverage will be around 200 million and penetration of health insurance will be just around 3.1% of the population. India is fast losing grounds to China in this respect mainly due to better response to healthcare infrastructure and regulatory challenges by China.

Commitment to globalization:

A very high level of commitment of the Chinese Government to make China a regional global hub for pharmaceutical R&D and contract research and manufacturing (CRAM) activities within next seven to ten years is now paying rich dividends.

Department of Pharmaceuticals (DoP) of the Government of India (GoI) also expressed its intention to make India a R&D hub in not too distant future. Unfortunately, this cannot be achieved with just good intent of investments of couple of million US$ through Public Private Partnership (PPP) initiatives, as announced by the DoP earlier.

A strong commitment of the GoI to hasten regulatory reform processes with visible action will be the deciding success factor. IPR regime in the pharmaceutical industry has been put in place, but an appropriate to foster innovation in the country is yet to be created.

Healthcare Infrastructure:

Korn/Ferry International has reported that China’s infrastructure in the pharmaceutical space is better than India, primarily due to firm commitment of the Chinese government to accelerate reform measures to fetch maximum benefits of globalization process in the country.

It has been reported that China has not only better healthcare infrastructure as compared to India, but they are also more open to of foreign trade and investments to improve these further in their country.

R&D Comparison:

Talent Pool and no. of Patents granted:

According to WIPO, China has better R&D talent pool and grants more patent per year than India as follows:

	India	China
R&D Talent Pool	45,000	56,000
Patents Granted (2008-09)*	16,061	48,814

*Patent Granrted in India during 2009-10:6168

Source: FE Bureau / WIPO / IPO

Scientific Publications:

India also lags behind China in the number of scientific publications as follows:

	Pre 2000 (A)	Post 2000 (B)	B/A*
India	3,04,737	4,98,394	1.64
China	2,30,154	19,94,706	8.67

*Multiple of Post-2000 over Pre 2000

Between pre-2000 and post-2000 era, China’s count of scientific publications rose more than eight times compared to India’s 1.6 times. (Source: Search on Scopus Sciverse (Database from Elsevier)

Based on ‘WIPO PCT’ applications, it has been reported that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India as against 8.4% located in China.

Biology Research:

China is taking faster strides in the Biology Research area as follows:

INDIA	CHINA
1. Only about five companies with proven skills in basic molecular biology and protein expression

2. Innovative research focused on bioinformatics and bio-chips

3. Limited biology talent pool owing to historic focus on generics1. Established skills in basic molecular biology and protein expression

2. Innovative research in stem cells, bio-chips, and gene sequencing

3. Expanding biology talent pool

(Source: BCG report, Looking Eastward)

Clinical trials:

In the area of clinical trial, though by amending the Schedule Y of the Drugs and Cosmetics Act in line with ICH GCP, India has already put in place the Good Clinical Practices (GCP), China has, on the other hand, brought its GCP, GLP, and GMP standards in line with ICH guidelines.

May be because of all these reasons ‘A.T. Kearney’ in its ‘Country Attractiveness Index’ (CAI) for clinical trials has given 6.10 to China against 5.58 to India.

BCG compared India with China in the Clinical Trial space as follows:

INDIA	CHINA
1. Experienced CROs with full service range and output of similar quality to that of developed markets.

3. Limited FDA approved hospitals

4. Shorter trial approval times than in China

5.Uneven infrastructure and shortage of clinical research assistants

Experienced CROs and growing vendor pool providing full spectrum of services
High quality FDA-approved hospitals
Low-cost and efficient enrollment compared to the US and Europe
Trial approvals lengthy and complex

(Source: BCG report, Looking Eastward)

Despite all these, both India and China pose challenges to both global and the local pharmaceutical players in dealing with subjects of wide cultural diversity within the country besides illiteracy and poverty. Many cases of conflict between ethics and natural justice have been reported from both countries during recruiting process of the subjects for clinical trial.

Pharmaceutical outsourcing:

In terms of attractiveness for outsourcing among the emerging pharmaceutical markets of the world, India and China are outpacing others with their cutting edge offering of high quality services at lower cost together with large pool of skilled manpower.

India has the potential to be a contender of supremacy for Pharmaceutical outsourcing of all types with all the required success ingredients. However, putting these ingredients together for effective use to make it happen has indeed become a real challenge.

On the other hand China is racing ahead to effectively avail the global opportunities and in that process fast distancing itself from India, widening the competitive performance gap between the two countries. Brain drain:

Korn/Ferry International has reported that more and more Indian talent is being pulled to China to fill key roles, especially in the API sector, signaling ‘brain drain’ from India to China.

Where India is a high flier:

Chemistry Research:

India is globally considered as a more mature place for chemistry related drug-discovery activities than China. Probably, because of this reason, companies like, Aurigene, Advinus, Divis Lab and Jubilant Organosys could enter into long-term collaborative arrangements with Multinational Companies (MNC) to discover and develop New Chemical Entities (NCEs).

BCG report, ‘Looking Eastward’ compared India with China in the Chemistry Research area as follows:

INDIA	CHINA
1. Large pool of vendors with full services and track record of strong capabilities

2. Generally better IP protection than in China

3. Trend toward project based alliances and emerging build-operate-transfer (BOT) contracts

4. Vast pool of skilled and low cost chemists

Capabilities residing mostly with government institutes; only a few small private companies with a track record
Established basic chemistry skills moving to more complex offerings, but no end to end capabilities
Large and growing pool of raw talent, but limited English language skills still an issue

(Source: BCG report, Looking Eastward)

Earlier reform in China: It is important to mention that healthcare reform process started much earlier in China. The Product Patent regime in India was reintroduced in January 1, 2005. Well before that time China started creating and encouraging a large number of independently funded pharmaceutical R&D institutions to create an environment of innovation within the country. Many of these institutions are now viable profit centers, creating wealth for the country.

At the same time, focusing on economies of scale, Chinese pharmaceutical players have now become globally competitive, may be a shade better than India. Clear dominance of China in the business of ‘Active Pharmaceutical Ingredient (API)’ among many others, will vindicate this point.

On other hand in the formulations business, India is miles ahead of China, catering to over 20 percent of global requirements for the generic pharmaceuticals. Even in ANDA and DMF filings, India is currently ahead of China.

Conclusion:

While comparing India with China one should also take into consideration that not only the sociopolitical structure of India and China are quite different, but the difference exists also in their commerce and industry related political decision making process.

Moreover, the average age of Chinese population is much more than Indians and continues to increase rapidly. The factor of aging population may have an adverse impact on the overall productivity of their people in the coming years constraining the economic growth of China. In contrast, the percentage of young working people in India is expected to keep increasing through 2030, offering a very critical demographic advantage to the country in the years ahead.

Though China will continue to have aging population and India the younger ones, both countries will have to deploy greater resources to cater to the growing healthcare needs for altogether different reasons. The net gainer will indeed be the pharmaceutical industry in both the countries.

That said, just a wishful thinking of the Government of India, sans expeditious and prudent regulatory and other related policy reforms, will helplessly make India watching the gap between the pharmaceutical industry of the two countries fast widening, making the dragon keep breathing fire, unabated.

By: Tapan J Ray

PILMAN

A Tapan Ray Website

Tag Archives: pharmaceutical

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Chasing the “Holy Grail”: Reasonably affordable healthcare for all

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