Tag Archives: Ranbaxy

Pharma FDI: Damning Report of Parliamentary Panel, PM Vetoes…and Avoids Ruffling Feathers?

Posted on by
Reply

An interesting situation emerged last week. The Parliamentary Standing Committee (PSC) on Commerce proposed a blanket ban on all FDI in brownfield pharma sector. Just two days after that, the Prime Minister of India vetoed the joint opposition of the Department of Industrial Policy and Promotion (DIPP) and the Ministry of Health to clear the way for all pending pharma FDIs under the current policy.

On August 13, 2013, Department related Parliamentary Standing Committee on Commerce laid on the Table of both the Houses of the Indian Parliament its 154 pages Report on ‘FDI in Pharmaceutical Sector.’

The damning report of the Parliamentary Standing Committee flags several serious concerns over FDI in brownfield pharma sector, which include, among others, the following:

1. Out of 67 FDI investments till September 2011, only one has been in green field, while all the remaining FDI has come in the brown field projects. Moreover, FDI in brown field investments have of late been predominantly used to acquire the domestic pharma companies.

2. Shift of ownership of Indian generic companies to the MNCs also results in significant change of the business model, including the marketing strategy of the acquired entity, which are quite in sync with the same of the acquirer company. In this situation, the acquired entity will not be allowed to use flexibilities such as patent challenges or compulsory license to introduce new affordable generic medicines.

The withdrawal of all patent challenges by Ranbaxy on Pfizer’s blockbuster medicine Lipitor filed in more than eight countries immediately after its acquisition by Daiichi-Sankyo is a case in point.

3. Serial acquisitions of the Indian generic companies by the MNCs will have significant impact on competition, price level and availability. The price difference between Indian ‘generics’ and MNCs’ ‘branded generic’ drugs could  sometimes be as high as 80 to 85 times. A few more larger scale brownfield takeovers may even destroy all the benefits of India’s generics revolution.

4. FDI inflow into Research & Development of the Pharma Industry has been totally unsatisfactory. 

5. FDI flow into brown field projects has not added any significant fresh capacity in manufacturing, distribution network or asset creation. Over last 15 years, MNCs have contributed only 5 per cent of the gross fixed assets creation, that is Rs 3,022 crore against Rs 54,010 crore by the domestic companies. Further, through brownfield acquisitions significant strides have not been made by the MNCs, as yet, for new job creation and technology transfer in the country.

6. Once a foreign company takes over an Indian company, it gets the marketing network of the major Indian companies and, through that network, it changes the product mix and pushes the products, which are more profitable and expensive. There is no legal provision in India to stop any MNC from changing the product mix.

7. Though the drug prices may not have increased significantly after such acquisitions yet, there is still a lurking threat that once India’s highly cost efficient domestic capacity is crushed under the weight of the dominant force of MNCs, the supply of low priced medicines to the people will get circumvented.

8. The ‘decimation’ of the strength of local pharma companies runs contrary to achieving the drug security of the country under any situation, since there would be few or no Indian companies left having necessary wherewithal to manufacture affordable generics once a drug goes off patent or comply with a Compulsory License (CL).

9. Current FIPB approval mechanism for brownfield pharma acquisitions is inadequate and would not be able to measure up to the challenges as mentioned above.

The Committee is also of the opinion that foreign investments per se are not bad. The purpose of liberalizing FDI in pharma was not intended to be just about takeovers or acquisitions of domestic pharma units, but to promote more investments into the pharma industry for greater focus on R&D and high tech manufacturing, ensuring improved availability of affordable essential drugs and greater access to newer medicines, in tandem with creating more competition. 

Based on all these, The Committee felt that FDI in brown field pharma sector has encroached upon the generics base of India and adversely affected Indian pharma industry. Therefore, the considered opinion of the Parliamentary Committee is that the Government must impose a blanket ban on all FDI in brownfield pharma projects.

PM clears pending pharma FDI proposals:

Unmoved by the above report of the Parliamentary Committee, just two days later, on August 16, 2013, the Prime Minister of India, in a meeting of an inter-ministerial group chaired by him, reportedly ruled that the existing FDI policy will apply for approval of all pharmaceutical FDI proposals pending before the Foreign Investments Promotion Board (FIPB). Media reported this decision as, “PM vetoes to clear the way for pharma FDI.”

This veto of the PM includes US $1.6-billion buyout of the injectable facility of Agila Specialties, by US pharma major Mylan, which has already been cleared by the Competition Commission of India (CCI).

This decision was deferred earlier, as the DIPP supported by the Ministry of Health had expressed concerns stating, if MNCs are allowed to acquire existing Indian units, especially those engaged in specialized affordable life-saving drugs, it could possibly lead to lower production of those essential drugs, vaccines and injectibles with consequent price increases. They also expressed the need to protect oncology facilities, manufacturing essential cancer drugs, with assured supply at an affordable price, to protect patients’ interest of the country.

Interestingly, according to Reserve Bank of India, over 96 per cent of FDI in the pharma sector in the last fiscal year came into brownfield projects. FDI in the brownfield projects was US$ 2.02 billion against just US$ 87 million in the green field ventures.

Fresh curb mooted in the PM’s meeting:

In the same August 16, 2013 inter-ministerial group meeting chaired by the Prime Minister, it was also reportedly decided that DIPP  will soon float a discussion paper regarding curbs that could be imposed on foreign takeovers or stake purchases in existing Indian drug companies, after consultations with the ministries concerned.

Arguments allaying apprehensions:

The arguments allaying fears underlying some of the key apprehensions, as raised by the Parliamentary Standing Committee on Commerce, are as follows:

1. FDI in pharma brownfield will reduce competition creating an oligopolistic market:

Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands. Even after, all the recent acquisitions, the top ranked pharmaceutical company of India – Abbott enjoys a market share of just 6.6%. The Top 10 groups of companies (each belonging to the same promoter groups and not the individual companies) contribute just over 40% of the IPM (Source: AIOCD/AWACS – Apr. 2013). Thus, IPM is highly fragmented. No company or group of companies enjoys any clear market domination.

In a scenario like this, the apprehension of oligopolistic market being created through brownfield acquisitions by the MNCs, which could compromise with country’s drug security, needs more informed deliberation.

2. Will limit the power of government to grant Compulsory Licensing (CL):

With more than 20,000 registered pharmaceutical producers in India, there is expected to be enough skilled manufacturers available to make needed medicines during any emergency e.g. during H1N1 influenza pandemic, several local companies stepped forward to supply the required medicine for the patients.

Thus, some argue, the idea of creating a legal barrier by fixing a cap on the FDIs to prevent domestic pharma players from selling their respective companies at a price, which they would consider lucrative otherwise, just from the CL point of view may sound unreasonable, if not protectionist in a globalized economy.

3.  Lesser competition will push up drug prices:

Equity holding of a company is believed by some to have no bearing on pricing or access, especially when medicine prices are controlled by the NPPA guidelines and ‘competitive pressure’.

In an environment like this, any threat to ‘public health interest’ due to irresponsible pricing, is unlikely, especially when the medicine prices in India are cheapest in the world, cheaper than even Bangladesh, Pakistan and Sri Lanka (comment: whatever it means).

India still draws lowest FDI within the BRIC countries: 

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

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

Commerce Minister concerned on value addition with pharma FDI:

Even after paying heed to all the above arguments, the Commerce Minister of India has been expressing his concerns since quite some time, as follows:

“Foreign Direct Investment (FDI) in the pharma sector has neither proved to be an additionality in terms of creation of production facilities nor has it strengthened the R&D in the country. These facts make a compelling case for revisiting the FDI policy on brownfield pharma.”

As a consequence of which, the Department of Industrial Policy and Promotion (DIPP) has reportedly been opposing FDI in pharma brownfield projects on the grounds that it is likely to make generic life-saving drugs expensive, given the surge in acquisitions of domestic pharma firms by the MNCs.

Critical Indian pharma assets going to MNCs:

Further, the DIPP and the Ministry of Health reportedly fear that besides large generic companies like Ranbaxy and Piramal, highly specialized state-of-the-art facilities for oncology drugs and injectibles in India are becoming the targets of MNCs and cite some examples as follows:

  • Through the big-ticket Mylan-Agila deal, the country would lose yet another critical cancer drug and vaccine plant.
  • In 2009 Shantha Biotechnics, which was bought over by Sanofi, was the only facility to manufacture the Hepatitis B vaccine in India, which used to supply this vaccine at a fraction of the price as compared to MNCs.
  • Mylan, just before announcing the Agila deal, bought over Hyderabad based SMS Pharma’s manufacturing plants, including some of its advanced oncology units in late 2012.
  • In 2008, German pharma company Fresenius Kabi acquired 73 percent stake in India’s largest anti-cancer drug maker Dabur Pharma.
  • Other major injectable firms acquired by MNCs include taking over of India’s Orchid Chemicals & Pharma by Hospira of the United States.
  • With the US market facing acute shortage of many injectibles, especially cancer therapies in the past few years, companies manufacturing these drugs in India have become lucrative targets for MNCs.

An alternative FDI policy is being mooted:

DIPP reportedly is also working on an alternate policy suggesting:

“It should be made mandatory to invest average profits of last three years in the R&D for the next five years. Further, the foreign entity should continue investing average profit of the last three years in the listed essential drugs for the next five years and report the development to the government.”

Another report indicated, a special group set up by the Department of Economic Affairs suggested the government to consider allowing up to 49 per cent FDI for pharma brownfield investments under the automatic route.However, investments of more than 49 per cent would be referred to the Foreign Investment Promotion Board (FIPB).

It now appears, a final decision on the subject would be taken by the Prime Minister after a larger inter-mimisterial consultation, as was decided by him on August 14, 2013.

The cut-off date to ascertain price increases after M&A:

Usually, the cut off point to ascertain any price increases post M&A is taken as the date of acquisition. This process could show false positive results, as no MNC will take the risk of increasing drug prices significantly or changing the product-mix, immediately after acquisition.

Significant price increases could well be initiated even a year before conclusion of M&As and progressed in consultation by both the entities, in tandem with the progress of the deal. Thus, it will be virtually impossible to make out any significant price changes or alteration in the product-mix immediately after M&As.

Some positive fallouts of the current policy:

It is argued that M&As, both in ‘Greenfield’ and ‘Brownfield’ areas, and joint ventures contribute not only to the creation of high-value jobs for Indians but also access to high-tech equipment and capital goods. It cannot be refuted that technology transfer by the MNCs not only stimulates growth in manufacturing and R&D spaces of the domestic industry, but also positively impacts patients’ health with increased access to breakthrough medicines and vaccines. However, examples of technology transfer by the MNCs in India are indeed few and far between.

This school of thought cautions, any restriction to FDI in the pharmaceutical industry could make overseas investments even in the R&D sector of India less inviting.

As listed in the United Nation’s World Investment Report, the pharmaceutical industry offers greater prospects for future FDI relative to other industries.  Thus, restrictive policies on pharmaceutical FDI, some believe, could promote disinvestments and encourage foreign investors to look elsewhere.

Finally, they highlight, while the Government of India is contemplating modification of pharma FDI policy, other countries have stepped forward to attract FDI in pharmaceuticals. Between October 2010 and January 2011, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Need to attract FDI in pharma:

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

While India is publicly debating policies to restructure FDI in the ‘Brownfield’ pharma sector, other countries have stepped forward to attract FDI in their respective countries.  Between October 2010 and January 2011, as mentioned earlier, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Thus the moot question is, what type of FDI in the pharma brownfield sector would be good for the country in the longer term and how would the government incentivize such FDIs without jeopardizing the drug security of India in its endeavor to squarely deal with any conceivable  eventualities in future?

Conclusion:

In principle, FDI in the pharma sector, like in any other identified sectors, would indeed benefit India immensely. There is no question about it…but with appropriate checks and balances well in place to protect the national interest, unapologetically.

At the same time, the apprehensions expressed by the Government, other stakeholders and now the honorable members of the Parliament, across the political party lines, in their above report, should not just be wished away by anyone.

This issue calls for an urgent need of a time bound, comprehensive, independent and quantitative assessment of all tangible and intangible gains and losses, along with opportunities and threats to the nation arising out of all the past FDIs in the brownfield pharma sector.

After a well informed debate by experts on these findings, a decision needs to be taken by the law and policy makers, whether or not any change is warranted in the structure of the current pharma FDI policy, especially in the brownfield sector. Loose knots, if any, in its implementation process to achieve the desired national outcome, should be tightened appropriately.

I reckon, it is impractical to expect, come what may, the law and policy makers will keep remaining mere spectators, when Indian Pharma Crown Jewels would be tempted with sacks full of dollars for change in ownerships, jeopardizing presumably long term drug security of the country, created painstakingly over  decades, besides leveraging immense and fast growing drug export potential across the world.

The Competition Commission of India (CCI) can only assess any  possible adverse impact of Mergers & Acquisitions on competition, not all the apprehensions, as expressed by the Parliamentary Standing Committee and so is FIPB.

That said, in absence of a comprehensive impact analysis on pharma FDIs just yet, would the proposal of PSC to ban foreign investments in pharma brownfield sector and the PM’s subsequent one time veto to clear all pending FDI proposals under the current policy, be construed as irreconcilable internal differences…Or a clever attempt to create a win-win situation without ruffling MNC feathers?

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.

Is Fraud or Negligence in Drug Quality Standards Not a Fraud on Patients?

Posted on by
Reply

As we know, a substance is called a drug when it has scientifically proven and well documented efficacy and safety profile to reduce both mortality and morbidity of patients. Any fraud or negligence in the drug quality standards, for whatever may be the reasons or wherever these take place, is a fraud on patients and should warrant zero tolerance.

A perception survey on drug quality:

According to a poll released in 2010 by the ‘Pew Charitable Trusts’s Prescription Project’ of the United States:

  • More than three out of four voters are confident that prescription drugs made in the USA are free from contamination
  • While less than one in 10 feel confident about medications made in India or China.
  • 54 percent of Americans distrusted Indian drugs and 70 percent distrusted Chinese drugs.
  • “When you buy a shirt, it will say right on the label where it was made, but when you get a pharmaceutical, you don’t know.”

Despite all these, the survey points out that in 2007, 68 percent of the ingredients of all drugs sold worldwide came from India or China, as compared to 49 percent in 2004.

Experts comment that USFDA does not have either people or resources required to monitor manufacturing in the geographically widespread locations, as these are today.

Recent spate of charges against Indian pharmaceutical companies – a vindication?

Recent spate of charges against some top ranked Indian companies, will further dent the image of India not just in the United States or Europe, but also as a pharmacy of high quality yet low cost generic drugs for the developing countries of the world.

In May 2013, well known India-based pharma major Ranbaxy reported to have pleaded guilty to criminal charges of manufacturing and distributing some adulterated medicines, produced at its Paonta Sahib and Dewas, facilities and agreed to US$ 500-millon settlement. Can this be considered as a vindication of the above perception on the quality of ‘made in India’ drugs?

The view of WHO:

Interestingly the World Health Organisation (WHO) even after the above USFDA indictment has commented that at present it has no evidence that Ranbaxy manufactured medicines that are currently prequalified by WHO are of unacceptable quality.

Indian drug regulator initiates action:

It is good to know that the Drugs Controller General of India (DCGI) and the Ministry of Health will reportedly decide the way forward in this matter on completion of a fact-finding study initiated by the Central Drugs Standards Control Organization (CDSCO) on the subject.

Other incidents in India:

Following are examples of other reported serious regulatory violations involving the domestic pharmaceutical companies:

No.

Year

Company

Issue

Status
2009 Lupin USFDA warning for Mandideep plant Resolved in 2010
2010 Claris Life Sciences USFDA ban products for manufacturing norms violations Ban revoked in 2012
2011 Zydus Cadila USFDA warns Co. over Moraiya, Gujarat Facility Ban revoked in 2012
2011 Dr Reddy’s USFDA bans sale of drugs from Mexico facility Ban revoked in 2012
2013 Jubilant Life Sciences Gets USFDA warning for Canada facility Company taking corrective steps
2013 Wockhardt Banned from exporting products from its Aurangabad factory to the US due to quality concerns In discussion

Source: The Economic Times (May 22, 2013), Financial Express (May 25, 2013)

Though some other countries also have faced bans from exporting products, it cannot be taken, I reckon, as any consolation by anyone.

A Mumbai Hospital demonstrated the mood of zero tolerance:

The above expression of good intent should not just remain as a ‘lip service’. Indian drug regulator is expected to take a leaf out of all these allegations and initiate appropriate audit as required. Otherwise, exhibiting zero tolerance, like Jaslok Hospital of Mumbai, many other institutions will ask their doctors not to prescribe products of these companies to protect patients’ interest. More hospitals reportedly are mulling similar action against Ranbaxy.

IMA expresses apprehension:

Even ‘The Indian Medical Association (IMA)’ has reportedly asked the DCGI to investigate quality of medicines manufactured by Ranbaxy.

It happens in the ‘heartland’ too just as in the ‘hinterland’:

Contrary to the above poll released in 2010 by the ‘Pew Charitable Trusts’s Prescription Project’, pointing accusing fingers, in this respect, exclusively to India and China, may not be just fair. Incidents of such regulatory violations are not just restricted to Indian pharmaceutical companies either. Unfortunately, these happen with the global majors too.

None of these should be condoned in any way by anyone and attract as much global publicity, public wrath and zero tolerance, as all these would possibly deserve.

Following are some examples:

No

Company

Issues with USFDA

Consent decree signed (year)

Issue status

Penalty amount
Schering-Plough GMP violations affecting four manufacturing sites and 125 products

Yes (2002)

Closed (2007)

 $500 Mn.
GlaxoSmithKline Manufacturing deficiencies found at Puerto Rico facility

Yes (2005)

Pending

 $650 Mn. Bond
Wyeth GMP violations at plant in Pennsylvania and New York which were producing FluShield

Yes (2000)

Pending

 $297 Mn. Plus 18.5% of sales of FluShield
Abbott Labs Non-conformance with quality system regulations for in vitro diagnostic products at an Illinois facility

Yes (1999)

Pending

 $212 Mn.
Boehringer Ingelheim To bring its Ohio facility into compliance with regulatory requirements

Yes (2013)

Pending

 Not specified

Source: Financial Express (May 25, 2013)

Further, in December 1998 the US FDA reportedly had stopped shipments of Abbott Laboratories’ clot-busting drug Abbokinase till the company had resolved undisclosed manufacturing problems at its plant. Abbott subsequently resolved this to the satisfaction of the drug regulator.

Even end May 2011, the USFDA reportedly raised concerns about contamination of drugs of the American pharmaceutical major – Hospira, at its Indian manufacturing facility.This issue was highlighted as the latest in a string of manufacturing and quality problems dogging the company since 2010.

American lawmakers demand thorough review of USFDA oversight procedures:

Pressure has reportedly started mounting in the United States for a thorough review into the effectiveness of oversight procedures for all bulk drugs and formulations manufactured in foreign facilities.

Simultaneously, there is also a specific demand for an in-depth review of all actions of the US regulator for so many years, which allowed Ranbaxy’s ‘massive fraud to remain unchecked’.

Beyond regulatory oversight, need robust internal system driven model as a fire-wall:

To address such issues only drug regulators interventions may not be just enough, maintaining total integrity of ‘Supply Chain’ of an organization proactively in a well structured, fool-proof and a system-driven way, will continue to play the most critical role. This will help creating ‘fire-wall’, which will be difficult to breach.

The scope of Supply Chain:

The scope of ‘Supply Chain’, which is comprised of the entire network of entities from vendors who supply raw and packaging materials, manufacturers who convert these materials into medicines, together with warehouses, distributors, retailers and healthcare centers who will reach these medicines ultimately to patients exactly the way these will deserve.

Thus, just not in the manufacturing process, any breach of security at any place of the supply chain can cause serious problems to patients. 

Accordingly, pharmaceutical companies need to adequately invest along with appropriate staff training programs to ensure that the Supply Chain Integrity is maintained, always.

Supply Chain Security (SCS) is critical:

SCS, therefore, deserves to be of prime importance for the pharmaceutical companies across the globe. Recent high profile SCS related cases, as mentioned above, have exposed the vulnerability in addressing this global menace effectively.

All pharmaceutical players should realize that not just ‘show-off’, an effective integrated approach is of paramount importance to eliminate this crime syndicate, which is taking lives of millions of patients the world over.

Mixing-up counterfeit drugs with this menace may not be prudent:

Shouting for counterfeit drugs involving mainly intellectual property related issues, may be  important, but will in no way help resolving self-created menaces arising out of breach of supply chain integrity endangering million of lives, in another way.

Though an expensive process, can’t be compromised:

It is worth repeating, securing pharmaceutical supply chain on a continuous basis is of critical importance for all the pharmaceutical players across the globe. However, the process will no doubt be expensive for any company.

Like other industries, in the pharmaceutical sector, as well, cost effective procurement is critical, which entices many pharmaceutical players, especially, in the generic industry not to go for such expensive process just to maintain the SCS.

A serious SCS related tragedy:

I would like to reinforce my argument on the importance of SCS with the following example of the ‘Heparin tragedy’ where the supply chain integrity was seriously violated with ‘ingeneuity’.

In the beginning of 2008, there were media reports on serious adverse drug events, some even fatal, with Heparin, a highly sulfated glycosaminoglycan of Baxter International. Heparin is widely used as an injectable anticoagulant. Baxter voluntarily recalled almost all their Heparin products in the U.S. Around 80 people died from contaminated Heparin products in the U.S. The US FDA reported that such contaminated Heparin was detected from at least 12 other countries.

A joint investigation conducted by Baxter and the US FDA ascertained that the Heparin used in batches associated with the serious adverse drug events was contaminated with Over Sulfated Chondroitin Sulfate (OSCS). It was reported that Heparin Scientific Protein Laboratories, Changzhou, China supplied Heparin to Baxter.

The cost of OSCS is just a fraction of the ingredient used in Heparin. Being driven by the criminal profiteering motive the manufacturers in Changzhou, China had reportedly used OSCS for highly sulfated glycosaminoglycan, as the former could not be detected by the pharmacopeia test in use, until 2008. This is because OSCS mimics Heparin in the pharmacopeia test. Post this criminal event, at present, all over the world more specific pharmacopeia test methods have been adopted for Heparin.

Stakeholders need to be extremely vigilant:

Considering all these, pharmaceutical players and the drug regulators from across the world should put proper ‘fool proof’ systems in place to eliminate the growing menace of criminal adulteration of APIs, drug intermediates, excipients entering in the supply chain together with preventing any breach in their logistics support systems.

Apprehension against generic drugs as a class:

Taking advantage of the situation, one can possibly say, as some vested interests have already started propagating that generic equivalents of the branded drugs are really not quite the same in quality.

However, the point that cannot be ignored is the comment of a senior USFDA, who was quoted in the same article saying, “I have heard it enough times from enough people to believe that there are a few products that aren’t meeting quality standards.“

Generic drug manufacturers should make serious note of such comments and act accordingly to allay prevailing lurking fear on the use of generic medicines, in general, though small in number.

Conclusion:

Following the recent series of incidents including that of Ranbaxy, the image of India as a low cost generic drugs manufacturer of high quality could get adversely impacted. Although there are enough instances that such things happen in the developed world, as well, including the United States.

Moreover, in the backdrop of high decibel quality concerns raised by USFDA, the level of apprehension regarding effectiveness of generic drugs made in India may increase significantly, unless some tangible, well thought out and highly publicized remedial measures are taken forthwith.

The decision of Jaslok Hospital, Mumbai advising their doctors for not using Ranbaxy products to patients on the same ground, will further strengthen the public apprehension.

Whatever may be the reason, as long as any company is in the business of manufacturing medicines, there should be demonstrable zero tolerance on any compromise, fraud or negligence in the drug quality standards. Any fraud and negligence in drug quality, I reckon, is virtually a fraud against humanity.

That said, changing mindset towards a strong corporate governance by walking the talk, all pharmaceutical companies must guarantee safe and high quality medicines to the society, come what may.

This, I believe, could be achieved by putting in place a robust SCS system and ensuring that this is not compromised in any way… anywhere…ever… for patients’ sake…both globally and locally.

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.

 

 

Takes ‘Two to Tango’: Encashing Opportunities with Biologic drugs in India

Posted on by
Reply

Despite current ‘Patent Cliff’ ongoing research on biologics is now at the forefront of the Global Pharmaceutical Industry.  The bottom-line impact of a successful new biologic molecule to treat intractable ailments like, cancer, blood disorders, Parkinson’s, Myasthenia Gravis, Multiple Sclerosis, Alzheimer’s diseases, will be huge.

Currently, faster growth of this segment as compared to conventional small molecules is primarily driven by novel technologies and highly targeted approaches, the final outcome of which is being more widely accepted by both physicians and patients.

Lesser generic competition makes it more attractive:

After patent expiry, innovators’ small molecule brands become extremely vulnerable to cut throat generic competition with as much as 90% price erosion.This is mainly because  these small molecules are relatively easy to replicate by many generic manufacturers and the process of getting their regulatory approval is also not as stringent as biosimilar drugs in most of the markets of the world.

On the other hand biologic drugs involve difficult, complex and expensive processes for development. Such resource intensive scientific expertise together with stringent regulatory requirements for obtaining marketing approval, especially in the developed markets of the world like, EU and USA, help creating a significant market entry barrier for many players. That is why even after patent expiry, biologics enjoy significant brand protection from generic competition for quite some time, in many cases.

It is for this reason brands like the following ones are expected to go relatively strong even for some more time, without any significant competition from biosimilar drugs in many of the major markets of the world:

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

Global Market:

In 2011 the turnover of Biologic drugs increased to over US$ 175 billion in the total market of US$ 847 billion. The sale of Biosimilar drugs outside USA exceeded US$ 1 billion.

Six biologic drugs featured in the top 10 best selling global brands in 2012 with Humira of AbbVie emerging as the highest-selling biologics during the year.  Roche remained the top company by sales for biologics with anticancer and monoclonal antibodies.

According to IMS Health, by 2015, sales of biosimilars are expected to reach between US$ 1.9 – 2.6 billion, an increase from US$ 378 million for the year to the first half of 2011.

Attractiveness:

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

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

A 2012 report by PwC titled ‘From Vision to Decision: Pharma 2020’ states that “the next few years may look bleak for pharma, but we’re convinced that the following decade will bring a golden era of renewed productivity and prosperity.”

The document also points out that the global pharmaceutical industry is now focusing its R&D initiatives on biologics for the treatment of cancer and rare diseases. Nearly 30 percent of the 7,891 molecules currently in clinical testing cover cancer and autoimmune conditions.

Another emerging opportunity:

As stated above, unlike commonly used ‘small molecule’ drugs, ‘large molecule’ biologics are developed from living cells using very complex processes.

It is virtually impossible to replicate these protein substances, unlike the ‘small molecule’ drugs. One can at best develop a biologically similar molecule with the application of high degree of biotechnological expertise. These drugs are known as ‘Biosimilar Drugs’ and usually cost much less than the original ones.

Biosimilar drugs market is currently fast evolving across the world with varying degree of pace and stages of developments. The U.S currently holds the leadership status in the production of biologics, with around 45 percent of the total share. India’s share, now being at 7 percent is continuously increasing.

Biosimilar Monoclonal Antibodies (mAbs) in the Pipeline:

Company

Location

Biosimilar mAbs

Development Status
BioXpress

Switzerland

16

Preclinical
Gene Techno Science

Japan

6

Preclinical
Zydus Cadilla

India

5

Preclinical
PlantForm

Canada

3

Preclinical
BioCad

Russia

3

Preclinical
Celltrion

South Korea

2

Phase 3
LG Life Sciences

South Korea

2

Preclinical
Gedeon Richter

Hungary

2

Preclinical
Cerbios-Pharma

Switzerland

1

Preclinical
Hanwha Chemical

South Korea

1

Preclinical
PharmaPraxis

Brazil

1

Preclinical
Probiomed

Mexico

1

Phase 3
Samsung BioLogics

South Korea

1

Preclinical
Novartis

Switzerland

1

Phase 2
Teva

Israel

1

Phase 2
Zenotech

India

1

Phase 3
Spectrum

US

1

Preclinical
Biocon/Mylan

India/US

1

Preclinical

(Source: PharmaShare; as of September 10, 2011 from Citeline’s Pipeline database)

Future business potential with cost arbitrage of India:

In 2013, products like, Avonex of Biogen Idec, Humalog of Eli Lilly, Rebif of Merck KgaA, Nupugen of Amgen will go off-patent, paving the way of entry for lower priced biosimilar drugs. The sum total of revenue from all such drugs comes to over U.S$ 15 billion.

The report from the ‘Business Wire’ highlights that, ‘the manufacture and development of a biosimilar molecule requires an investment of about US$ 10 to 20 million in India, as compared to US$ 50 to 100 million in developed countries’, vindicates the emergence of another lucrative business opportunity for India for such drugs with significant cost arbitrage.

Government support in India:

In India, the government seems to have recognized that research on biotechnology has a vast commercial potential for products in human health, including biosimilars, diagnostics and immunobiologicals, among many others.

To give a fillip to the Biotech Industry in India the National Biotechnology Board was set up by the Government under the Ministry of Science and Technology way back in 1982. The Department of Biotechnology (DBT) came into existence in 1986. The DBT currently spends around US$ 300 million annually to develop biotech resources in the country and has been reportedly making reasonably good progress.

The DBT together with the Drug Controller General of India (DCGI) has now prepared ‘Regulatory Guidelines for Biosimilar Drugs’ in conformance to international quality and patient safety standards.

Currently, a number of both financial and non-financial incentives have been announced by the Central and the State Governments to encourage growth of the biotech industry in India, which include tax incentives, exemption from VAT and other fees, grants for biotech start-ups, financial assistance with patents, subsidies on investment from land to utilities and infrastructural support with the development of ten biotech parks through ‘Biotechnology Parks Society of India’.

A commendable DBT initiative:

Towards this direction, the Department of Biotechnology (DBT) of the Government of India has taken a commendable step to encourage the small and medium scale business outfits by setting-up ‘The Small Business Innovation Research Initiative (SBIRI)’. This scheme has been launched to boost ‘Public-Private-Partnership (PPP)’ projects in the country.

SBIRI supports ‘the high-risk pre-proof-of-concept research’ and ‘late stage development’ in small and medium size companies to get them involved in the development of biologics.

Some examples:

Examples of some among many of the PPP initiatives in the healthcare space under SBIRI are as follows:

No.

Company Name with Collaborator

Title of the Project Supported
1. IcubedG Ideas Private Limited, New Delhi Risk based Process Design for large scale Manufacturing of male injectable contraceptive
(Phase I)
2. Incozen Therapeutics Pvt. Ltd., Hyderabad Discovery and Development of Novel, Selective and Potent Dihydroorotate Dehydrogenase Inhibitors in Inflammatory Bowel diseases.
(Phase I)
3. Mediclone Biotech Private Limited, Chennai Commercial Production of Monoclonal Antibodies as an import substitute with special reference to Red Blood Cell Phenotyping (Phase II)
4. Orchid Chemicals & Pharmaceuticals Ltd., Chennai in collaboration with AU-KBC Research Center, Chennai Development and validation of a cell-tissue co-culture model for aiding liver specific studies and drug discovery applications. (Phase I)
5. Reliance Life Sciences Pvt. Ltd., Navi Mumbai An open label, multicenter, prospective clinical study to evaluate the safety and efficacy of tissue engineered R-STE-001 in patients with symptomatic cartilage defect of femoral condyle (Phase II)
6. USV Limited, Mumbai Development of a Vaccine capable for eliciting immunological memory for the prevention of Typhoid (Phase II)
7. Virchow Biotech Private Limited, Hyderabad Development of commercialization of a recombinant uricase for the prevention and treatment of tumor lysis syndrome associated with leukemia, lymphoma & solid tumor malignancies (Phase II)
8. Virchow Biotech Private Limited, Hyderabad Indigenous development of a recombinant Fuzeon for the treatment of AIDS (Phase II)
9. Zenotech Laboratories Limited., Hyderabad Development of humanized monoclonal antibodies against human epidermal growth factor receptor (Phase I)
10. Advanced Neuro-Science Allies Pvt. Ltd, Bangalore in collaboration with Vittal Mallya Scientific Research Foundation, Bangalore Pre-clinical studies of Human mesenchymal stem cells (MSCs) isolated and characterized from different sources in autoimmune disease, namely rheumatoid arthritis (RA) and type 1 diabetes (TIDM)(Phase I)
11. Avesthagen Ltd., Bangalore Hepatocyte-like cells generated from human embryonic stem cells (hESC) for hepatotoxicity screening of xenobiotics in the drug discovery process(Phase I)
12. Avesthagen Limited, Bangalore Scale-up and evaluation of high-value biosimilar product (Etanercept) aimed at providing cost-effective healthcare solutions to the emerging markets(Phase II)
13. Bharat Serum and Vaccines Limited, Mumbai Expression of recombinant proteins for development of synthetic pulmonary surfactant for Respiratory Distress Syndrome(Phase I)
14. Cadila Pharmaceuticals Ltd., Ahmedabad Development of Mycobacterium was an adjuvant for anti – rabies vaccine(Phase I)

Besides, Indian pharmaceutical majors like Dr. Reddy’s Laboratories (DRL), Reliance Life Science, Shantha Biotech, Ranbaxy, Biocon, Wockhardt and Glenmark have made good investments in biotech drugs manufacturing facilities keeping an eye on the emerging opportunities with Biosimilar drugs in the developed markets of the world.

Funding remains a critical issue:

That said, many industry experts do feel that R&D funding for the Biotech sector in the country is grossly inadequate. Currently, there are not many ‘Venture Capital’ funds for this sector and ‘Angel Investments’ almost being non-existent, Indian biotech companies are, by and large, dependent on Government funding.

Making India a global hub for biosimilar manufacturing:

However, with around 40 percent cost arbitrage, adequate government support and without compromising on the required stringent international regulatory standards, the domestic ‘biologic’ players should be able to establish India as one of the most preferred manufacturing destinations to meet the global requirements for particularly ‘biosimilar drugs’.

Experience in conforming to stringent US FDA manufacturing standards, having largest number of US FDA approved plants outside USA, India has already acquired a clear advantage in manufacturing high technology chemical based pharmaceutical products in India. Significant improvement in conformance to Good Clinical Practices (GCP) standards will offer additional advantages.

Conclusion:

With increasing support from the government and fueled by creative, scientific and technological inputs from various experts and entrepreneurs in the country, India has the potential to emerge as one of Asia’s best powerhouses in the field of biosimilars drugs by the end of this decade. It will take ‘two to tango’.

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.

 

 

 

 

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

Posted on by
Reply

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

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

Finer details are still not known:

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

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

The new system in CCI within six months:

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

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

Looking back:

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

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

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

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

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

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

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

India needs FDI in the Pharmaceutical sector:

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

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

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

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

FDI policy needs predictability and stability to attract more investments:

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

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

Conclusion:

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

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

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

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

‘Maira Committee’ has indeed delivered!

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.