Prescribing medicines by generic names…a good intent… but is it a practical proposition in India?

Parliamentary Standing Committee for Health and Family Welfare in their recommendation to the ‘Rajya Sabha’ of the Indian Parliament on August 4, 2010, recommended prescription of medicines by their generic names.

This recommendation appears to be based on the premises that the cost of ‘Brand Building’ exercise of the generic drugs in India, including varying degree of presumably ‘high sales and marketing expenditure’ incurred by the formulators towards such efforts, can be easily eliminated to make medicines available to the common man at much cheaper prices.

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

In the following paragraphs, let me try to deliberate on this important issue.

Generics and Branded Generics:

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

The prevailing situation in India:

In India, over 50% medicines prescribed by the physicians are for Fixed Dose Combinations (FDCs), spanning across almost all therapeutic categories. Thus, it could be difficult for them to prescribe such medicines in the generic name and could equally be difficult for the chemist to dispense such prescriptions.

Moreover, in case of any mistake of dispensing the wrong drug by the chemist inadvertently, the patients could face serious consequences. It is well known, the concentration of ingredients in the fixed dose combination of any two medicines, many a times, differs from manufacturer to manufacturer. There are over 50,000 odd formulations in the Indian pharmaceutical market and it would be almost impossible for any doctor to keep track of exact concentrations of each of these drugs and prescribe in their right strengths.

Current prescription practice:

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

Other Patients related issues:

Patients also could face other difficulties due to generic prescribing. As is known, different brands of FDCs may have different proportions of same active ingredients. If chemists do not know or have the exact combination prescribed by the doctor in their shops, thye would possibly substitute with a different combination of same drugs, which could well be less effective or even harmful to the patients.

Conclusion:

Prescriptions by generic names instead of brand names could likely to lead to substitution of the medicines at the chemists’ outlets because of the reasons, as mentioned above.

Thus, the major concern with generic prescriptions is that a chemist will then make the choice of the manufacturer while dispensing a medicine. There could only be one criterion for the choice of such medicines by a chemist i.e. to select what gives them highest margin of profit. In such a case, the ultimate decision making authority for the prescription medicines shifts from the physicians to the chemists, which could make the situation far worse for the patients. For the interest of the patients, it is, therefore, extremely important that the government, regulators, physicians, chemists and even the patients’ groups are aware of such risks.

Considering all these risk factors, in my view, if the prescriptions of medicines are made mandatory by their respective generic names in India, it could compromise with patients’ safety, very significantly.

By Tapan Ray

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

The traditional ‘Business Models’ of R&D focused Global Pharmaceutical majors are undergoing a metamorphosis

Mounting pressure on the P&L account, as the products go off patent:

Patented new products are the prime growth driver of the research based pharmaceutical companies of the world. Since last few years, because of various reasons, the number of launch of such products has been greatly reduced. To add fuel to the fire, 2010-12 will witness patent expiries of many blockbuster drugs, depleting the growth potential of the most of the research based pharmaceutical companies.

The existing model of growth engine needs a relook:

The blockbuster model of growth engine of the innovator companies effectively relies on a limited number of ‘winning horses’ to achieve the business goal and meeting the Wall Street expectations. In 2007, depleting pipeline of the blockbuster drugs hit a new low in the developed markets of the world. It is estimated that around U.S. $ 140 billion of annual turnover from blockbuster drugs will get almost shaves off due to patent expiry by the year 2016. IMS reports that in 2010 more than U.S. $ 30 billion will be adversely impacted because of patent expiry. Another set of blockbuster drugs with similar value turnover will go off patent the year after i.e. 2011. It will not be out of context to mention, that last year around U.S. $ 27 billion worth of patented drugs had gone off-patent.

Decline in R&D productivity is not related to investments:

The decline in R&D productivity has not been due to lack of investments. It has been reported that between 1993-2004, R&D expenditure by the pharmaceutical industry rose from U.S.$ 16 billion to around U.S.$ 40 billion. However, during the same period the number of applications for New Chemical Entities (NCEs) filed annually to the U.S. FDA grew by just 7%.

Total global expenditure for pharmaceutical R&D was reported to have reached U.S. $ 70 billion in 2007 and is expected to be around U.S. 90 billion in year 2010. 75% of this expenditure was incurred by the U.S alone. It is interesting to note that only 22 NMEs received marketing approval by the US FDA during this period against 53 in 1996, when R&D expenditure was almost less than half of what was incurred in 2007 towards R&D.

Be that as it may, the pressure on the P&L (Profit and Loss) accounts of these companies is indeed mounting.

The silver linings:

However, there seem to be following two silver linings in the present scenario, as reported by IMS:

1. Number of Phase I and Phase II drugs in the pipeline is increasing.

2. R&D applications for clinical trials in the U.S. rose by 11.6% to a record high of 662 last year.

Significant growth of generic pharmaceuticals is expected in near future, far surpassing the patented products growth:

Patent expiry of so many blockbusters during this period will fuel the growth of generic pharmaceutical business, especially in the large developed markets of the world. The market exclusivity for 180 days being given to the first applicant with a paragraph 4 certification in the U.S. is, indeed, a very strong incentive, especially for the generic companies of India.

Healthcare reform of March/April 2010 in the USA is expected to give a further boost to this trend.

Pressure on traditional Marketing strategies:
The marketing expenditure for pharmaceutical of the global pharmaceutical companies as reported by Scrip is U.S. $ 57.5 billion. However, an industry association reported that research based pharmaceutical companies in the U.S. spent $ 29.4 billion on R&D and $ 27.7 billion on promotional activities.

New Product Differentiation could be a big issue:

Products in R&D pipeline could face problems of ‘differentiation’ in terms of value offering to the patients, once they are launched. This issue is expected to surface especially with products in the oncology disease area. IMS Health reports that about 55 oncology projects are now in Phase III and 8 in the pre-registration stage. Thus about 50 new oncology products are expected to hit the market by end 2010. Many experts anticipate that there may not be significant brand differentiation between the brands of the ‘same basket’, leading to cut-throat competition and further pressure on expenditure towards marketing of brands.

The changing business strategy of global pharmaceutical companies during this trying time:

In this trying time, the global pharmaceutical companies are resorting to an interesting strategy, combing both old and the new ones. I shall touch upon the following seven strategies:

1. Mergers and Acquisitions (M&A):
Mega M&A strategies are still being actively followed by some large Pharmaceutical companies mainly to enrich R&D pipeline and achieve both revenue and cost synergies.
However, some of these large global companies have started realizing that ‘powerhouses’ created through past mega mergers and acquisitions have now become too large to manage effectively for various reasons. Mismatch between two different organization cultures also throws a great challenge to obtain desired output, many a times. Moreover, the merged R&D set up could become too large to manage, impacting the R&D productivity very adversely.

2. Extension of the Product Life Cycle and Effective Product Life Cycle Management:
Many global pharmaceutical companies are now engaged in ‘product life cycle management’ of their existing products by extending the ‘product life cycle’, effectively. In that process they are trying to maximize the brand value of these products in the international markets. For example, AstraZeneca has developed once daily treatment with their anti-psychotic drug Seroquel XR. This extended-release formulation of the same drug will help patients avoid 5 to 7-day titration required with the immediate-release version.
Towards similar initiative, Pfizer has also recently set up a dedicated “Established Product Business Unit” within worldwide pharmaceutical operations, to hasten business growth in the international markets.

3. OTC Switch:
Prescription to ‘Over the Counter’ (OTC) switch is another business strategy that many innovator companies are now imbibing, at a much larger scale.

This strategy is helping many global pharmaceutical companies, especially in the Europe and the U.S to expand the indication of the drugs and thereby widening the patients base.

Recent prescription to OTC switches will include products like, Losec (AstraZeneca), Xenical (Roche), Zocor (Merck), etc.

4. Emerging of Preventive Therapy, like Vaccines:
Many large global companies, like GSK, Sanofi Aventis and Merck are getting attracted by the emerging opportunities in the fast developing vaccines market. This trend has been triggered primarily by heightened awareness and greater focus on preventive medicines almost all over the world. It is estimated that in 2011, the vaccines market will grow from U.S.$ 13 billion to U.S.$ 30 billion registering a growth of 18% each year during this period. PricewaterhouseCoopers (PwC) estimates vaccine market to be U.S. $ 42 billion by year 2015 based on data of 245 pure vaccines and 11 combination vaccines currently under clinical development. It is interesting to note that 90 of these are therapeutic vaccines for cancer.

5. Entry into highly contentious market of Biosimilar drugs:
The Generic Pharmaceutical Association (GPhA) has estimated that it is possible to save US$ 10 billion – 108 billion over a period of 10 years with biosimilars in the top 12 categories of biological drugs. Some of these biological are already off patent and for others the patents will expire shortly.
Only a few biosimilar drugs have reached the global markets as on date because of their regulatory restrictions in most of the developed markets of the world. Even those biosimilar drugs, which have since been launched in Europe like, human growth hormone (HGH) Somatropin and Epoetin alfa for anemia, are yet to make a mark in the market place.

IMS Health reports that Omnitrope (somatropin) of Sandoz, the first biosimilar drug launched in the developed world, has registered less than 1% of the U.S. $ 831 million HGH market in Europe. Moreover, the launch of 3 more biosimilar versions of epoetin alfa in 2007, made almost negligible impact in the market. Such a low acceptance of biosimilars in the western world, so far, could well be due to lingering safety concern of the medical profession with such types of drugs.

Currently, Japan and USA are working on formal guidelines for biosimilar drugs, whereas Health Canada has already issued draft regulatory guidelines for their approval in Canada.

In April 2010, Reliance Life Science has already announced its intent to enter into the Biosimilar market of the EU in not too distant future.

6. Entry into Generic Markets:

Some large global pharmaceutical companies have already made a firm commitment to the generics market. Novartis paved the way for other innovator companies to follow this uncharted frontier, as a global business strategy. Last year the generic business of Novartis (under Sandoz) recorded 19% of their overall net sales, with turnover from generics registering U.S$ 7.2 billion growing at 20%.

Keen business interest of Sanofi Aventis to acquire Zentiva, the generic pharmaceutical company of Czechoslovakia; it’s very recent acquisition of the generic pharmaceutical company Laboratorios Kendrick of Mexico and Shantha Biotech in India and acquisition of Ranbaxy Laboratories of India by Daiichi Sankyo, will vindicate this point.

Pfizer has also maintained its generics presence with Greenstone in the U.S. and is using the company to launch generic versions of its own off patent products such as Diflucan (fluconazole) and Neurontin (gabapentin).

7. Collaboration with the Indian Companies:

Another emerging trend is the collaboration of MNCs with the Indian pharmaceutical companies to market generics in the global market, like, Pfizer with Aurobindo and Claris, GSK with Dr. Reddy’s Laboratories (DRL), Astra Zeneca with Torrent. I guess that similar trend will continue, in future, as well.

Conclusion:
Another ‘new pharmaceutical sales and marketing model’ is gradually emerging in the global markets. This model emphasizes partnership by bundling medicines with services. The key success factor, in this model, will depend on which company will offer better value with an integrated mix of medicines with services. PwC indicates that in this ‘new pharmaceutical marketing model’, besides required medicines, the expertise of a company to effectively deliver some key services like, patient monitoring and disease management could well be the cutting edge for future success.

By Tapan Ray

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

Generics’ Lobby, Innovators’ Lobby and the Pharmaceutical Data Protection in India – A Perspective

To meet the unmet needs of the patients and improve access to healthcare in India mere discovery of a new pharmaceutical entity is not enough. The journey from mind to market is indeed an arduous one.

For the patients’ sake:

From the viewpoint of patients, proper evaluation of the safety, quality and efficacy of medicines are critical. Towards this direction, substantial clinical data needs to be generated through extensive pre-clinical and clinical trials to satisfy the regulatory authorities for marketing approval of a New Molecular Entity (NME).

Reasons why the innovators data will need protection:

Irrespective of what has been indicated in Article 39.3 of TRIPS, Data Protection (DP) is justifiable on the following grounds:

a. Generation of data by the originator to ensure safety and efficacy of the drugs for the patients involves considerable cost, time and efforts.

b. Submission of detail clinical data is a regulatory requirement for the interest of the patients. Without such obligation to the Government, the data would have remained completely under control of the originator. It is, therefore, a reasonable obligation for the Government to respect confidentiality of the data in terms of non-reliance and non-disclosure.

c. Since the data is proprietary during the patent period, any access to such data for commercial use by the second applicant without the concurrence of the originator is unfair on grounds of propriety and business ethics.
d. Any failure by the Government to provide the required protection to the data would lead to “unfair commercial use”.

e. Without DP, the originator of the innovative drugs would be placed at an unfair commercial disadvantage as compared to their generic counterparts. Generic players do not incur similar huge costs for meeting the mandatory requirements of the regulatory authorities for NMEs.

Patent Protection and Data Protection – two different IPRs:

The distinctiveness of the two incentives, namely, Patent Protection and Data Protection or Data Exclusivity is recognized in countries which are leading in research and development in pharmaceuticals.

Data Protection will provide substantial benefits to the stakeholders:

Benefits to Patients:

DP ensures stringent evaluation of overall safety and efficacy of drugs launched in the market. Mere proving of Bioequivalence/ Bioavailability (sometimes on as low as 12 healthy volunteers in India) does not guarantee drug safety as the impurities profile of the duplicator’s drug is likely to be different than that of the originator.

Benefits to Doctors:

Doctors continuously seek scientific information. Clinical evaluation becomes valuable from this perspective. Once provisions for DP are made, comprehensive and quality data can be collected and the detail scientific information be provided to the doctors to update their knowledge for the ultimate benefits of the patients.

Benefits to Researchers:

Clinical researchers in India can win substantial share of this global market with DP as an effective driver in the evolving scenario. There will be increased R&D collaborations. India’s cost arbitrage, speed and skills in clinical trial and research could be leveraged more effectively.

An Expert Committee under the Chairmanship of Dr. R.A. Mashelkar, an eminent scientist, also highlighted the significance of DP, as follows:

“In order to ensure enabling environment, the regulatory division dealing with the applications concerning new drugs and clinical trials would be required to develop suitable mechanisms to ensure confidentiality of the submissions.”

Benefits to Pharmaceutical Industry:

Research is a key driver for the Pharmaceutical Industry. Scientists prefer to work in research laboratories in those countries which provide full-fledged protection to IPR. DP is one of the Intellectual Property Rights. Reversal of brain drain and retention of scientific talents will help the developing economies, like India intensify its R&D efforts. More Indian pharmaceutical companies, while globalizing the business, will engage themselves in partnerships and collaborations with research based global companies.

Indian scientists would need DP to protect their Intellectual Property as many Indian pharmaceutical companies have already started increasing their R&D budgets.

Benefits to Governments:

Once India moves from a stand-alone position to one which aligns itself with the world in terms of IPRs, including DP, India is likely to increase trade not only in ASEAN (Association of South-East Asian Nations), MERCOSUR countries (Argentina, Brazil, Paraguay & Uruguay) and NAFTA (North American Free Trade Agreement), but even in regulated markets like USA and Europe. There will be increase in scientific education, technology transfer and quality employment.

Could Data Protection affect the legal generics or delay their launch?

Unfortunately, a bogey is raised to create an impression that DP provisions will act as a barrier to the development of generics, adversely affecting the domestic and export business of the local players. Following facts will prove the irrelevance of the arguments propounded by this lobby:

• DP refers only to new products patented in India. It will not affect the generic drugs already in the market.

• USA is an outstanding example, which demonstrates that research based global companies and the generic industry can co-exist, offering dual benefits of innovative drugs and cheaper off-patent generic medicines to the patients.

• More number of patented medicines will ensure faster growth of the generic industry, after the former goes off-patent. In the USA which has a long standing DP regime, the market penetration of generics is amongst the highest in the world and stands at over half of all the prescriptions. After introduction of Hatch Waxman Act in 1984 that provided for a 5 year period of DP in the USA, there were spurt of development of New Drugs together with quicker entry of generics into the market.

• The apprehension that growth of the generic market will slow down with DP, is ill-founded. Indian companies, on the contrary, are aggressively seeking growth opportunities for generics in markets like the USA and Europe where DP is already in place.

• Domestic Indian companies will be dependent upon implementation of a fully compliant TRIPs regime, including DP for their business growth in these markets.

• DP does not prevent generic manufacturers from submitting their own pharmacological, toxicological and clinical data within the period of DP and thus gain marketing approval for their products.

DP controversy is based on a narrow perspective, as it is not an issue of “Generics vs. R&D based companies”. It is a much larger issue. DP and patents are important for all research based companies irrespective of their Indian or foreign origin.

Data Protection is not ‘Evergreening’:

DP is not ‘Evergreening’ either. In most of the cases, the period of patent protection and DP will run concurrently.

During the debate on the subject some people argue that DP and patents offer “double protection”. They do not. Fundamentally, these two forms of Intellectual Property are like different elements of a house which needs both a strong foundation and a roof to protect its inhabitants. DP cannot extend the life of a patent which is a totally separate legal instrument. While patent protects the invention underlying the product, DP protects the clinical Dossier submitted to the regulatory authority from their unfair commercial use. The duration of DP is typically half or less than that of a patent.

Most WTO member countries have Data Protection:

A review of National Laws relating to the protection of Registration Data in the major WTO Member-States reveals that most of the countries have recognized and appreciated the role of DP.
Although there is no uniform standard that is followed by the countries while enacting and implementing the Laws related to DP. The period of DP is typically between 5 to 10 years.

Conclusion:

Dr. Satwant Reddy Committee Report, dated November 30, 2006, submitted to the Government of India, very clearly recommends that DP will benefit India, as it has done in many other countries of the world, including China. Unfortunately, the report does not specify a timeline for its implementation. Thus having accepted the importance and relevance of the DP, the Government should implement the same in the country, without any further delay.

Data Protection should be provided by making an appropriate amendment in Schedule Y of the Drugs Act to bring India in conformity with the practices of other WTO Members of the developing and developed countries.

By Tapan Ray

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

The First Pharmaceuticals Census of India – a commendable initiative by the National Pharmaceutical Pricing Authority (NPPA)

Currently there is indeed a crying need for the pharmaceutical industry to generate a robust data base to formulate not only various healthcare related policies, but also to measure the level of their effective implementation. In the absence of such dependable and credible facts, most of the arguments, which take place between the government and other stakeholders, are mainly based on ‘your views’ versus ‘our views’.

An admirable initiative:

To address this critical need, more than a couple of years ago in February 2008, the National Pharmaceutical Pricing Authority (NPPA) announced their intent to initiate the first pharmaceuticals census of India (FPCI). The main purpose of this census is to create a structured, comprehensive and dependable pharmaceutical industry related database in the country to capture valuable information, which could be prudently used by the government towards effective planning, policy making and good governance. NPPA is also expected to publish this census data for all stakeholders and other ministries within the government for appropriate actions.

Create a ‘Common Thread’:

This ‘Pharmaceutical Map’, I guess, will be able to create a common thread for the Ministry of Health, Departments of Pharmaceuticals and Biotechnology, Ministry of Commerce & Industries and the Ministry of Finance based on which each of them will frame their respective healthcare related policies targeting the needs of a vast majority of the population of the country, for inclusive growth.

The ‘Methodology’ will be very important:

I understand that the FPCI is expected to cover over 10,000 manufacturing units in the country in a well-structured manner to produce an elaborate healthcare related credible data bank for India. The methodology that will be followed for this census will determine the credibility of the data thus generated.

My expectation from the FPCI is that, as announced, this will be able to provide credible details, among others, on the following ten key areas of the Pharmaceutical Manufacturing Units (PMUs) to enable the policy makers to frame policies based on the ground realities and at the same time measure the level of their effective implementations:

• Turnover by types and class (Micro, Small, Medium, and Large)
• Locations with separate details of Export Oriented Units (EOUs)
• Capacity installed, capacity utilized by major products
• Number of ‘own’ and ‘loan’ licenses units and by type of units, license issued by the respective state
drug controllers
• Types, class and pattern (plant & machinery, land & building) of investments
• Consumption of indigenous and imported inputs and utilities
• Adherence to GMP
• Product types and pricing
• Pattern of expenditure on R&D, clinical trials and quality control
• Employment generated in the country by the pharma sector

All these data will be available state-wise and district-wise by class and types of industry (API, formulations), among others.

It has been reported that NPPA has by now progressed quite a lot with the FPCI and the Final Report may be published soon.

Conclusion:

It would have been excellent, if FPCI would also have generated data on ‘Access to Modern Medicines’ in India.

Be that as it may, this is an admirable initiative by the NPPA. Data thus generated will be immensely useful to all stakeholders, if updated in every 3 to 5 years to maintain their relevance.

By Tapan Ray

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

Absence of appropriate and functional ‘Cold Chain’ infrastructure dedicated to pharmaceutical and bio-pharmaceutical products at the Indian airports and seaports – A serious concern

Drugs are complex entities and many of these are temperature sensitive in nature. This entails them requiring precise and continuous temperature conditions in transit in order to retain their potency and resultant efficacy. Many lifesaving drugs including biotech products and vaccines fall under such category. Any break in the cold chain process for such drugs can lead to immediate denaturing or deterioration in their quality parameters. It is imperative that a careful consideration is given by all concerned including government agencies at the sea port, airports while providing storage space at their warehouses for such drugs.
Current bottlenecks: Currently in India there are bottlenecks at the Airports that include authorities not being able to assure cold room space despite getting advance notices from the companies about the possible unloading of large consignments of temperature sensitive products. Some of the other gaps include improper training and refresher courses for some of the handling staff who handles such products at the Airport. Storage of Pharmaceutical products along with meat and food products is against the GMP norms.

Lack of special temperature control:

Cold Chain Medicines require special temperature controlled Cold storage. There are two commonly recommended temperatures specified on labels on cold chain products:

1. Products requiring temperature between 2 to 8 degree centigrade
2. Products requiring temperature around -10 to -20 degree centigrade

Cold Chain is an uninterrupted series of storage and distribution activities which maintains required temperature range of 2 to 8 degree centigrade or -10 to -20 degree centigrade as per product requirement.

Ensuring the right product quality:

Proper Cold Chain Management of pharmaceuticals will ensure that the right quality of such products is maintained not only during storage but during transportation also to meet right regulatory specifications. There is a greater focus and stringent regulatory guidelines and standards today in the developed markets around the world on strict adherence to right storage and transportation process for cold chain sensitive pharmaceuticals.

It should be kept in mind always that Cold Chain products are mostly sensitive biological substances that can become less effective or lose potency if not properly stored.
Some examples:

Products requiring 2 to 8 degree storage will not be effective if:

i. They are frozen or stored below 2 degree centigrade
ii. Exposed to temperatures above 8 degree centigrade
iii. Exposed to direct sunlight or fluorescent light

The loss of potency is cumulative and irreversible. If products are exposed to conditions outside the established range, the quality may be adversely affected, reducing their assigned shelf life, diminishing their effectiveness or making them ineffective. The exposed product may look the same – the loss of potency may not be visible.

Quality of storage is critical:

Quality of storage and handling of Cold Chain Pharmaceutical products at Airports and Seaports in the course of Export from or Import into India requires special care and attention. Since multiple products are stored and handled at Seaports/ Airports, personnel may not be able to appreciate the special need for Cold Chain Pharmaceuticals Storage & Handling. Thus, there should be Standard Operating Procedures (SOPs) for storage and handling of pharmaceuticals laid down by the Port Management authorities, so that the personnel handling pharmaceuticals strictly adhere to the pre-set norms.

Rapidly growing demand of cold-Chain facilities:

Pharmaceutical Products for which efficient Cold Chain facilities are required are rapidly growing in numbers. In its movement across the supply chain from the manufacturers to the patient, the medicines are handled and stored by various stakeholders like transporters, Airports, Sea ports, Distributors, Stockists, Retailers etc. Since the storage and handling of Cold Chain Pharmaceutical Products are unique, an uninterrupted Cold Chain is to be maintained in the entire supply chain network without any discontinuity, even for a short while, so that medicinal products of high quality reach the patients, always. Thus it is very important for all concerned stakeholders to ensure maintenance of proper Cold Chain facility.

Currently no ‘Pharma Zones’ in India:

At present there are no ‘Pharma Zones’ in India. However, Mumbai International Airport Private Limited (MIAL) has created 4 new cold rooms for pharmaceuticals and Delhi International Airports Limited (DIAL) has reported to have assured that the new Cargo Terminal, which is expected to be commissioned later in the year, will have around 4000 square metres of additional cold room capacity compared to the current cold room capacity of 400 square metres. Similarly, MIAL has agreed for a dedicated Cold Room facility for Pharmaceutical Products in the proposed new set–up.

The serious Concern continues:

Poor cold room storage facility at the country’s major airports and seaports is indeed an ongoing serious concern.

Unfortunately, even today, pharmaceuticals and bio-pharmaceuticals are, by and large, treated like just any other common product at our ports. It is high time, the authorities should note that due to inadequate storage and handling of these lifesaving drugs at ports, high dwell time and dispersed multiple authorities from whom clearances are required, the quality of these products may get adversely affected exposing the user patients at a great risk. The absence of a temperature monitoring mechanism in such facilities adds to the concern.

Recent Plan of “Pharma Zones” in India:

The DCGI has planned a separate dedicated controlled environment – ‘Pharma Zone’, within the cargo premises at Airports and Sea Ports for proper storage of Pharmaceutical products in line with Good Manufacturing Practices and Good Distribution Practices so as to assure the quality, safety and efficacy of Pharma products, which are to be either imported or exported.

Need for outsourcing Cold Chain services:

In the developed markets of the world there are private cold chain storage and third party logistics providers to offer contract logistics and storage services especially to cater to the growing demands Biopharmaceutical segment, which is the fastest growing manufacturing sector within global pharmaceutical industry.

Thus it is expected that spend of the Biopharmaceutical companies towards outsourcing of cold chain facilities will grow by over 10 – 15% for the next three to five years in the developed markets. India being the second largest producers of Biopharmaceuticals after China, similar opportunities exist in the country.

In India some renowned international courier companies like DHL and World Courier have been reported to have developed an efficient cold-chain management process, especially for the pharmaceutical companies to maintain the cold chain in their logistics network.

Conclusion:

An efficient cold chain infrastructure and its efficient management within the country will help immensely to Indian domestic pharmaceutical companies as they are exploring more and more opportunities to export pharmaceuticals in the global market. To achieve this objective modern cold chain warehouses, their efficient management as per regulatory guidelines will play a key role in ensuring right product quality standard.

Over a period of time cold-chain management practices of global standards will be required to achieve this goal. Currently for both import and export of cold-chain sensitive pharmaceuticals, as indicated, before, this area in particular poses to be one of the key challenges encountered by the industry to maintain high product quality during shipment. Individual pharmaceutical companies like Eli Lilly, India have their own vehicles equipped with cold-chain management systems for transportation of their cold chain sensitive products.

Greater initiative by the DCGI in this area in collaboration with the pharmaceutical industry as a whole, sooner, is absolutely essential, for the patients’ sake.

By Tapan Ray

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

Path-breaking medicines are just not enough… a comprehensive healthcare reform in India is long overdue

The Prime Minister of India, Dr. Manmohan Singh reiterated the following in his speech at the 30th Convocation of PGIMER, Chandigarh on November 3, 2009:

”As in economics, so as in medicine too, it is easy to get lost in high level research and forget the ground realities. A common perception among the public is that institutions running with public money end up as ivory towers. It is widely felt that the poor and under-privileged sections of our population do not have adequate access to the health care system. The system needs structural reforms to improve the quality of delivery of services at the grass-root level. It has to be more sensitive to the needs of our women and children. We must also recognize that a hospital centered curative approach to health care has proved to be excessively costly even in the advanced rich developed countries. The debate on health sector reforms is going on in US is indicative of what I have mentioned just now. A more balanced approach would be to lay due emphasis on preventive health care”.

Some key research findings on ‘Public Health’:

Interesting research studies on public health highlight two very interesting points:

- Health of an individual is as much an integral function of the related socio-economic factors as it is

influenced by the person’s life style and genomic configurations.
- Socio-economic disparities including the educational status lead to huge disparity in the space of healthcare.

WHO ranking of the ‘World’s Health Systems’:

The WHO ranking of the ‘World’s health Systems’ was last produced in 2000. This report is no longer produced by the WHO due to huge complexity of the task.

In this interesting report, the number one pharmaceutical market of the world and the global pioneer in pharmaceutical R&D, the USA features in no. 37, Japan in no. 10, UK in no.18 and France tops the list with no.1 ranking. Among emerging BRIC countries, India stands at no. 112, Russia in no.130 and China in no. 144.

In a relative yardstick, although India scored over the remaining BRIC countries in year 2000, one should keep in mind that China has already undertaken a major healthcare reform in the last year. Early this year, we all have seen how President Obama introduced a new healthcare reform for the USA, despite all odds. India’s major reform in its healthcare space is, therefore, long overdue.

Details of WHO ‘World’s Health Systems’ ranking of the countries are available at the following link:

http://www.photius.com/rankings/healthranks.html

No need to reinvent the wheel:

When we look at the history of development of the developed countries of the world, we observe that all of them had invested and are continuously investing to improve the social framework of the country where education and health get the top priority. Continuous reform measures in these two key areas of any nation have proved to be the key drivers of economic growth. This is a work in continuous progress. Recent healthcare reforms both in China and the USA will vindicate this argument. In India we, therefore, do not require to reinvent the wheel, any more.

It has been observed that reduction of social inequalities ultimately helps to effectively resolve many important healthcare issues. Otherwise, the minority population with adequate access to knowledge, social and monetary power will always have necessary resources available to address their concern towards healthcare, appropriately.

Path breaking medicines are just not enough:

Regular flow of newer and path breaking medicines in India to cure and effectively treat many diseases, have not been able to eliminate either trivial or dreaded diseases, alike. Otherwise, despite having effective curative therapy for malaria, typhoid, cholera, diarrhea/dysentery and venereal diseases, why will people still suffer from such illnesses? Similarly, despite having adequate preventive therapy, like vaccines for diphtheria, tuberculosis, polio, hepatitis and measles, our children still suffer from such diseases.

Reducing socio-economic inequalities is equally important:

All these continue to happen in India, over so many decades, because of socio-economic considerations, as well. Thus, together with comprehensive healthcare reform measures, time bound simultaneous efforts to reduce the socio-economic inequalities will be essential to achieve desirable outcome for the progress of the nation.

Proper focus on education is critical for a desirable health outcome:

Education is of key importance to make any healthcare reform measure to work effectively. Very recently we have witnessed some major reform measures in the area of ‘primary education’ in India. The right to primary education has now been made a fundamental right of every citizen of the country, through a constitutional amendment.

As focus on education is very important to realize the economic potential of any nation, so is equally relevant in the healthcare space of the country. India will not be able to realize its dream to be one of the economic superpowers of the world without a sharp focus and significant resource allocation in these two critical areas – Health and Education, simultaneously.

Progress in the healthcare space of India:

It sounds quite unfair, when one comments that nothing has been achieved in the area of healthcare in India, as is usually done by vested interests with a condescending attitude in various guises. Since independence, India has made progress, may not be highly significant though, with various government sponsored and private healthcare related initiatives, as follows:

- Various key disease awareness/prevention programs across the country, for both communicable and non-communicable diseases.
- Eradication of smallpox
- Excellent progress in polio eradication program
- Country wide primary vaccination program
- Sharp decline in the incidence of tuberculosis
- Significant decrease in mortality rates, due to water-borne diseases.
- Good success to bring malaria under control.
- The mortality rate per thousand of population has come down from 27.4 to 14.8 percent.
- Life expectancy at birth has gone up to 63 years of age.
- Containment of HIV-AIDS
- India has been recognized as the largest producers and global suppliers of generic drugs of all categories and types.
- India has established itself as a global outsourcing hub for Contract Research and Contract Manufacturing Services (CRAMS).
- The country has now been globally recognized as one of the fastest growing emerging markets for the pharmaceuticals

New healthcare initiatives in India:

There are various hurdles though to address the healthcare issues of the country effectively, but these are not definitely insurmountable. National Rural health Mission is indeed an admirable scheme announced by the Government. Similar initiative to provide health insurance program for below the poverty line (BPL) population of the country, is also commendable. However, effectiveness of all such schemes will warrant effective leadership at all levels of their implementation.

Per capita public expenditure towards healthcare is inadequate:

Per capita public expenditure towards healthcare in India is much lower than China and well below other emerging countries like, Brazil, Russia, China, Korea, Turkey and Mexico.

Although spending on healthcare by the government gradually increased in the 80’s overall spending as a percentage of GDP has remained quite the same or marginally decreased over last several years. However, during this period private sector healthcare spend was about 1.5 times of that of the government.

It appears, the government of India is gradually changing its role from the ‘healthcare provider’ to the ‘healthcare enabler’.

High ‘out of pocket’ expenditure towards healthcare in India:

According to a study conducted by the World Bank, per capita healthcare spending in India is around Rs. 32,000 per year and as follows:

- 75 per cent by private household (out of pocket) expenditure
- 15.2 per cent by the state governments
- 5.2 per cent by the central government
- 3.3 percent medical insurance
- 1.3 percent local government and foreign donation

Out of this expenditure, besides small proportion of non-service costs, 58.7 percent is spent towards primary healthcare and 38.8% on secondary and tertiary inpatient care.

Role of the government:

In India the national health policy falls short of specific and well defined measures.

Health being a state subject in India, poor coordination between the center and the state governments and failure to align healthcare services with broader socio-economic developmental measures, throw a great challenge in bringing adequate reform measures in this critical area of the country.

Healthcare reform measures in India are governed by the five-year plans of the country. Although the National Health Policy, 1983 promised healthcare services to all by the year 2000, it fell far short of its promise.

Underutilization of funds:

It is indeed unfortunate that at the end of most of the financial years, almost as a routine, the government authorities surrender their unutilized or underutilized budgetary allocation towards healthcare. This stems mainly from inequitable budgetary allocation to the states and lack of good governance at the public sector healthcare delivery systems.

Encourage deep penetration of ‘Health Insurance’ in India:

As I indicated above, due to unusually high (75 per cent) ‘out of pocket expenses’ towards healthcare services in India, a large majority of its population do not have access to such quality, high cost private healthcare services, when public healthcare machineries fail to deliver.

In this situation an appropriate healthcare financing model, if carefully worked out under ‘public – private partnership initiatives’, is expected to address these pressing healthcare access and affordability issues effectively, especially when it comes to the private high cost and high quality healthcare providers.

Although the opportunity is very significant, due to absence of any robust model of health insurance, just above 3 percent of the Indian population is covered by the organized health insurance in India. Effective penetration of innovative health insurance scheme, looking at the needs of all strata of Indian society will be able to address the critical healthcare financing issue of the country. However, such schemes should be able to address domestic and hospitalization costs of ailments, broadly in line with the health insurance model working in the USA.

The Government of India at the same time will require bringing in some financial reform measures for the health insurance sector to enable the health insurance companies to increase penetration of affordable health insurance schemes across the length and the breadth of the country.

A recent report on healthcare in India:

A recent report published by McKinsey Quarterly, titled ‘A Healthier Future for India’, recommends, subsidizing health care and insurance for the country’s poor people would be necessary to improve the healthcare system. To make the healthcare system of India work satisfactorily, the report also recommends, public-private partnership for better insurance coverage, widespread health education and better disease prevention.

Conclusion:

In my view, the country should adopt a ten pronged approach towards a new healthcare reform process:

1. The government should assume the role of provider of preventive and primary healthcare across the nation to ensure access to healthcare to almost the entire population of the nation.

2. At the same time, the government should play the role of enabler to create public-private partnership (PPP) projects for secondary and tertiary healthcare services at the state and district levels.

3. The issue of affordability of medicine can best be addressed by putting in place a robust model of healthcare financing for all sections of the population of the country. Through PPP a strong and highly competitive health insurance infrastructure needs to be created through innovative fiscal incentives.

4. These insurance companies will be empowered to negotiate all fees payable by the patients for getting their ailments treated including doctors/hospital fees and the cost of medicines, with the concerned persons/companies, with a key objective to ensure access to affordable high quality healthcare to all.

5. Create an independent regulatory body for healthcare services to regulate and monitor the operations of both public and private healthcare providers/institutions, including the health insurance sector.

6. Levy a ‘healthcare cess’ to all, for effective implementation of this new healthcare reform process.

7. Effectively manage the corpus thus generated to achieve the healthcare objectives of the nation through the healthcare services regulatory authority.

8. Make this regulatory authority accountable for ensuring access to affordable high quality healthcare services to the entire population of the country.

9. Make operations of such public healthcare services transparent to the civil society and cost-neutral to the government, through innovative pricing model based on economic status of an individual.

10. Allow independent private healthcare providers to make reasonable profit out of the investments made by them

By Tapan Ray

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

Abbott – Piramal deal: the way future is expected to shape up

In my view, these are still very early days for such acquisitions of large domestic Indian pharmaceutical companies by the Global Pharma majors to gain momentum in the country. However, there is no doubt that in the near future, we shall rather witness more strategic collaborations between Indian and Global pharmaceutical companies, especially in the generic space.

Squeezing margin due to cut-throat domestic and international competition may affect future valuation of the domestic companies:

I reckon, the number of such high profile mergers and acquisitions will significantly increase, as and when the valuation of domestic Indian companies appears quite attractive to the global pharma majors. This could happen, as the domestic players face more cut-throat competition both in Indian and international markets, squeezing their profit margin.
Abbott possibly has a well-structured game plan for seemingly high valuation of the deal:
Having said that let me point out, during Ranbaxy-Daiichi Sankyo deal, analysts felt that the valuation of the deal was quite high. US $ 3.7 billion Abbott – Piramal deal has far exceeded even that valuation. Does this deal not make any business sense? I do not think so. Abbott is a financially savvy seasoned player in the M&A space. It is very unlikely that they will enter into any deal, which will not have any strategic and financial business sense.

Big ticket Indian Pharma deals:

So far India has seen four such major deals starting from Ranbaxy – Daiichi Sankyo, Dabur Pharma – Fresenius, Matrix – Myalan and Orchid – Hospira, besides some global collaborative arrangements, such as, Pfizer with Aurobindo/Claris/Strides GSK with DRL, AsraZeneca with Torrent and again Abbott with Zydus Cadila.

Key drivers for these deals:

Such acquisitions and collaborations will be driven by following eight key factors:

1. R&D pipelines of the global innovative companies are drying up
2. Many blockbuster drugs will go off-patent in the near future
3. Cost containment pressure in the western world exerting pressure on the bottom lines
of the global pharma majors
4. Increasing demand of generics in high growth emerging and developing markets
5. The new Healthcare Reform in the US will promote increased usage of generic drugs.
6. The fact that India already produces 20% of the global requirement for generic drugs
increases the attractiveness.
7. The fact of domestic Indian companies account for 35% of ANDAs highlights the future
potential of the respective companies.
8. Highest number of US-FDA approved plants, next to the US, is located in India.

A strategic move by Abbott:

As announced by Abbott from its headquarter in Chicago that Abbott in India will increase its sales four times to around Rs. 11,000 Crores by 2020 with the acquisition of 350 brands of ‘Piramal Healthcare’ business.

Facing the stark reality of a ‘patent Cliff’, cost containment pressures especially in the US and EU, low single digit growth rate of the developed markets and high growth of branded generic dominated emerging markets, Abbott has taken a new global initiative aimed at the emerging markets with the creation of its global ‘Established Products’ Business’. This initiative started with worth US $ 6.2 billion acquisition of branded generic business of Solvay Pharma, which has a sizeable presence in the EU markets.
Recently announced licensing agreement of Abbott with Zydus Cadila to market 24 products initially in 15 emerging markets of the world is another step towards this direction.

Advantage Abbott India:

The asset based acquisition of ‘Piramal Healthcare’ by Abbott will help its Indian arm to increase its domestic market penetration, significantly, both for branded generic and patented products in urban, semi-urban and rural markets spearheaded by around 7000 strong sales force. This strategy perhaps will also help Abbott in India distancing itself from the number 2, in the Indian Pharma league table, probably with a handsome margin.

Global players want a risk-cover with the generic business and minimize tough competition:

Like Abbott, it is quite likely that other major global players are also planning to reduce their business risks by expanding the business from mainly high risk and expensive R&D intensive patented products to a more predictable and rapidly expanding branded generic business.

Will such move have any significant effect on competition?

Such M&A initiatives may seemingly minimize the cut throat competition from large generic players from India. However, I do not envisage any significant impact on over all competition between the generic players for such moves, as their will be mounting competition from more number of new entrants and emerging players, entry barrier in Indian generic pharmaceutical market being quite low.

Conclusion:

In the globalized economy where the ‘world is flat’ such types of business consolidation initiatives are inevitable. The domestic Indian companies across the industry are also in the prowl for suitable global targets, which are at times of world class ‘Crown Jewels’ like Arcelor, Chorus or Jaguar/Land Rover. Pharmaceutical industry is, therefore, no exception.

By Tapan Ray

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

Challenges for the Pharmaceutical Industry in the new paradigm – there are more questions than answers

To get insight into the future challenges of the pharmaceutical industry in general ‘Complete Medical Group’of U.K recently conducted a study with a sizeable number of senior participants from the pharmaceutical companies of various sizes and involving many countries. The survey covered participants from various functional areas like, marketing, product development, commercial, pricing and other important areas.
The study indicates that a paradigm shift has taken place in the global pharmaceutical industry, where continuation with the business strategies of the old paradigm will no longer be a pragmatic approach. Besides this finding, my experience also vindicates that today is not a mega yesterday, just as tomorrow will not be a mega today.
Learning from the results of the above study, which brought out several big challenges facing the pharmaceutical industry in the new paradigm, my submissions are as follows:

Gaining greater market access and increasing pressure of price containment:

The increasing power of payors in the developed world and the interventions of the Government in the developing countries are creating an all pervasive pricing pressure. This critical development together with the issues related to gaining greater market access remain a prime concern for the future.

Better understanding of the new and differential value offerings that the doctors and patients will increasingly look for beyond the physical pharmaceutical products, will indeed be the cutting edge for the winners, in this new ball game.

Questioning the relevance of the current business model:
Top managements of the pharmaceutical companies have already started evaluating the relevance of the current global pharmaceutical business model. They will now need to include in their strategy wider areas of healthcare value delivery system with a holistic disease management focus. Only treatment of diseases will not be considered just enough with an offering of various type medications. Added value with disease prevention initiatives and appropriately managing quality of life of the patients, especially in case of chronic ailments, will assume increasing importance in the pharmaceutical business process.

Greater innovation across the pharmaceutical value chain:
Greater and more frequent incremental innovation across the pharmaceutical Value Chain will be critical success factors. The ability to really harness new technologies, rather than just recognize their potential, and the flexibility to adapt to the fast changing and demanding regulatory environment together with patients’ newer value requirements, should be an important part of the business strategy of a pharmaceutical company in the new world order.

Well integrated decision making processes:
More complex, highly fragmented and cut throat competition, especially in the branded generic market, have created a need for better, more aligned and integrated decision making process across various functional areas of the pharmaceutical business. Avoiding silos and empire building have long been a significant issue, especially for big pharmaceutical companies. Part of better decision making will include more pragmatic and efficient investment decisions and jettisoning all those activities, which are duplications and will no longer deliver incremental intrinsic or extrinsic differential value to the stakeholders.

Customer engagement:
Growing complexity of the prevailing business environment, including most recent change in the MCI regulations for the doctors are making meaningful interactions with the customers and decision makers increasingly challenging. There is a greater need for better management of the pharmaceutical communications channels to strike a right balance between ‘pushing’ information to the doctors and patients and helping them ‘pull’ the relevant information whenever required.

Let me hasten to add, even in the new paradigm, the fundamental way the pharmaceutical industry has been attempting to address these critical issues over decades, has not changed much. To unleash the future growth potential the pharmaceutical companies are still moving around the same old issues like, innovative new product development, scientific sales and marketing, customer focus, application of information technology (IT) in all areas of strategy making process including supply chain, building mega product brands, continuing medical education, greater market penetration skills, to name just a few.

Such responses do ring an alarm bell to me. It is known to many that most of the pharmaceutical companies have been investing in all these areas since long and yet these are the very points being highlighted even in the new paradigm to meet the “Challenge of Change”. The moot question will therefore be, what have all investments in these areas achieved, so far? And why have we not been able to address the needs of the new world order focusing with these tools? More importantly, if we do not address these issues moving ‘outside the box’ and with ‘lateral thinking’ even now, one can well imagine what could the implications be in the times to come?

The future Business Model will need to different:
I believe, the underlying business model of large global organizations focused primarily on developing New Chemical/Molecular Entities (NCEs/NMEs) from initial product discovery through development and commercialization, is unlikely to continue to yield results in the new era. The issue of ‘Patent Cliff’ has already started haunting the research based companies and assuming larger dimensions day by day.
Global pharmaceutical businesses have started evolving beyond patented drugs and including generics to create more diversified and robust healthcare businesses. It is quite evident from the strategies of many larger global pharmaceutical companies that this process has already begun.

Will R&D be collaborative in nature in future?
Currently R&D cost to launch a new patented drug in the market is reported to be around US$ 1.8 – 2.0 billion with accompanying huge risk factors. Thus there is a need to re-evaluate the R&D model of the pharmaceutical companies to make it cost effective with lesser built-in risk factors.
Could there be a collaborative model for R&D, where multiple stakeholders will join hands to discover new patented molecules? In this model all involved parties would be in agreement on what will be considered as important innovations and share the risk and reward of R&D as the collaborative initiative progresses. The Translational Medicine Research Collaboration (TMRC) partnering with Pfizer and others, ‘Patent Pool’ initiative for tropical diseases of GSK and OSDD for Tuberculosis by CSIR in India are examples of steps taken towards this direction.
Surely such collaborative initiatives are not easy but they are not uncommon either, as we witness these, especially in areas like IT. So why cost effective collaborative R&D projects be not initiated to create a win-win situation for all stakeholders in the healthcare space?

Could building pharmaceutical mega brands go beyond just a product for better ROI?
Building brands involve creating equity around an entity that delivers value to the customer, over and above the key functional properties of product. Traditionally, the global pharmaceutical industry has been largely focusing on building mega product brands having specific product life cycle say about ten years, especially for patented products.

Could the core idea of building a mega pharmaceutical brand be substantially different, in future?
I reckon, yes. Instead of investing huge sums in building pharmaceutical product brands with very limited product life cycle (for patented products), a more dynamic, powerful and cost efficient brand building process could well entail focusing on the ‘Corporate franchise’ brands with a mix of both patented and generic products in different price bands for different customer segments within a specific therapy category or disease area.

So instead of consistently creating, building and watching the mega patented pharmaceutical brands grow, mature and die, pharmaceutical companies could well encash the real opportunity to build long term emotional equity into their brands, hopefully without the suffocating NPPA restrictions associated with the current product brands.

Who knows, tomorrow’s list of the world’s top mega brands will not be dominated by the likes of Lipitor, Nexium, Plavix or Advair, but perhaps by quite a different types of mega brands like for example, GSK Vaccines, Sanofi-aventis Endocrinology, Novo-Nordisk Diabetic Care, Abbott Nutrition or Pfizer Cardiac Care.

Serum Institute Vaccines could be considered as one such brand for vaccines as a category, created within the pharmaceutical arena in India, over a long period of time.

Conclusion:
It is indeed quite clear now that the pharmaceutical business models are undergoing a serious re-evaluation in the new paradigm. I get a sense that the change is inevitable due to a variety of trends that are squeezing both sales and margins, posing severe challenges towards R&D, product development, marketing and communications.

As I have deliberated, some kind of solutions are gradually emerging. However, the key questions of how profound will this change be and how well the pharmaceutical companies are prepared to counter these changes, still remain unanswered.

By Tapan Ray

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