Impact of The Cost of Pharma Marketing Failure On Patients

Posted on September 12, 2022 by Tapan Ray

‘About half of all products launched over the past 15 years have underperformed pre-launch consensus forecasts by more than 20%.’ It’s one of the findings of a recent study by L.E.K. Consulting, going back to 2004. This number is besides the cost of failure while discovering a successful New Molecular Entity.

Adding this to the cost of the product innovation and development, clinical trials and other regulatory expenses, the wasteful expenditure becomes mind boggling – for any unsatisfactory launch performance. In such a situation, the probability of creating newer blockbuster therapies is not getting any easier.

As is believed by many – and vindicated by several studies, new drug marketing cost is more than its R&D cost. Which is why, ensuring success of a new drug launch is critical to fund new drug innovation – on an ongoing basis. Consequently, leadership focus on high ‘launch success’ rate is so important – as the good old saying goes – ‘well begun half done.’

In addition, prudent optimization of the success rate of new products may also help the company avoid irresponsible pricing, while improving the profit margin. In this article, I shall deliberate on the impact of the cost of marketing failure on patients, in general. Alongside, the avoidable ‘soft ground’ that marketers may wish to avoid while delivering unmet value to patients.

Big Pharma’s Sales and Marketing spend is more than R&D:

According to another recent study of October 27, 2021, ‘in most cases, more of the dollars spent by drug manufacturers go toward selling and marketing costs than toward research and development (R&D) for new treatments, cures, or expanded indications and uses of existing drugs.’ For example, as the paper highlights:

AbbVie, which manufactures branded drugs like Humira, spent $11 billion in sales and marketing in 2020, compared with $8 billion on R&D.

Bayer, which manufactures branded drugs like Xarelto (codeveloped with Johnson & Johnson) and Eylea, spent $18 billion in sales and marketing, compared to $8 billion on R&D.

Johnson & Johnson, which manufactures branded drugs like Xarelto (codeveloped with Bayer) and Stelara, spent $22 billion on sales and marketing, compared to $12 billion on research and development.

Therefore, just as R&D expenses have to be made more productive, so are the sales & marketing expenses, where the expenditure towards new product launches is a critical component.

Why a successful new product launch is important:

An analysis by Deloitte in this area, published on March 26, 2020, found that most new drugs continue with the revenue trajectory set at launch. It said, about 70 percent of products that miss expectations at launch continue doing so in subsequent years, and around 80 percent of products that meet or beat expectations continue to do so afterward. Thus, launch success of a new product is very important, both for the organizations and the patients.

A successful new product launch helps both the company and patients:

Correctly assessing and leveraging full commercial potential of a new product through its effective launch helps both the patients and the company. This subject was discussed in a recent article, published in the Fierce Pharma on October 25, 2021, in the context of many drug launch disasters. The areas of benefits, I reckon, include the following:

Patients’ unmet needs are met at a reasonable price
Manufacturer can recoup its research and development costs.
Fund future drug discoveries.
Satisfy investors with handsome returns.
Creating a sound brand performance base – as a strong launch is arguably the most critical step in a new drug’s lifecycle.

New product launch failure is across the disease areas – from Big Pharma to Startups:

As the above December 18, 2020, study by L.E.K. Consulting points out that new products’ launch failure is taking place across the disease areas. These include, Oncology, immunology, infectious disease, ophthalmology, blood disorders, brain diseases, and cardiovascular and metabolic disease. Similarly, the companies responsible for such failure span across global pharma majors to biotech startups.

Why many companies are failing in this process:

To help ascertain the depth of this issue, let me start with the key objective of a new product launch, which is effectively delivering the holistic value of the brand which consumers would appreciate. Several papers also acknowledge, to succeed in this area, pharma players need to prepare their data-based launch plan with cerebral power and ensure that the strategy is working and is being executed flawlessly.

A large number of studies find, ‘many companies fail in this process, due to a combination of factors.’ Some of these are uncontrollable, but many of which are very much within a marketer’s control.

Examples of uncontrollable and controllable variables:

Uncontrollable factors include post marketing approval drug safety issues. Reports indicate, ‘One-Third Of New Drugs Had Safety Problems After FDA Approval.’ This is being reported even in recent times, like, ‘new safety signals that cropped up after the approvals of Novartis’ eye drug Beovu and Sanofi’s dengue vaccine Dengvaxia.’

Whereas, controllable factors include, poor product differentiation and other management missteps, besides ‘limited market access, poor understanding of market needs or misjudgment of competitive threats.’ For example, poor product differentiation and other management missteps were, reportedly, ‘the cause of trouble for Clovis Oncology’s Rubraca in the PARP inhibitor space, and Merck & Co. and Pfizer’s Steglatro in the SGLT2 field.

Key success ingredients to focus on:

Since long, various research, including one by Bain & Co dated October 2017, has highlighted that over 50% of new product launches are underperforming. This situation can’t, in any way, be accepted as a ‘thumb rule’ by pharma marketers, any longer. Mainly because: ‘When a drug misses its launch projections, there’s a high likelihood that it will never recover that revenue,’ as their study findings underscore. From this perspective, listed below are some of the basic areas to focus on for greater launch success, as I have experienced:

Early launch planning – well before the regulatory approval for new products.

Data-based and well-tested target-audience identification, the target markets’ selection and key opinion leaders need to be selected for greater focus in effective stakeholder engagement.

Creating differentiated value-propositions that addresses targeted patients’ unmet needs, and, in tandem, offers scope for commensurate premium pricing, are vital.

Product pricing should be based on quality of value delivery to patients that they can perceive and would acknowledge. Misvaluing a brand, and just focusing on those who can pay, may attract negative publicity, creating a key barrier to success.

Current competition, their ongoing counter strategy, new market competitors and other launch challenges need to be carefully mapped, for strategic fine tuning or course correction, in time, wherever and whenever needed.

Execution of the launch plan must be accomplished with military precision, as it were.

Conclusion:

As the above Bain & Co paper articulated, ‘The most consistently undervalued factor contributing to a successful launch is the way leadership teams organize and the manage the launch process.’

It’s again not too difficult to understand that the net accountability of the cost of marketing failure, which is a major contributing factor to stifle the R&D funding, in many cases, squarely falls on pharma leadership.

Instead of taking corrective action in this critical area, most of them choose the easy path – increase new product pricing to achieve targeted revenue from a smaller unit sale of the brand. The net impact of which is on patients due to access barrier caused by high prices.

Such products, without clearly differentiated value propositions that patients would recognize, would further increase sales and marketing costs, and could even result in marketing malpractices. Under this backdrop, serious and thoughtful attempt in making all new product launches successful money spinners, as respective brands will merit, may help the pharma leadership to create a win-win situation for both the company and patients.

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.

What Have And Haven’t Changed In Pharma’s New Normal?

Posted on September 26, 2021 by Tapan Ray

While navigating through the challenge of disruptive changes, several pharma marketers are now focusing more on creating, connecting, and leveraging all market and customer related data, across the organization. Astute ones are using state-of-the-art tools, platforms, and techniques to gain actionable insights on new demands of pharma markets. I wrote about it in my article - ‘Data: the new ‘Magic Wand’ For Pharma Business Excellence,’ published in this blog on October 01, 2018.

This process is helping them to fathom what areas the pandemic has changed and what it hasn’t. Their aim is to draw cutting-edge strategies accordingly for market effectiveness – outperforming competition. This article will explore that space with contemporary examples. Let me start with a few illustrations of some hits and misses for the treatment of Covid – as the world started learning to live with this menacing virus. This was enviable, as the requisite scientific date wasn’t readily available at that moment of truth. But the time has changed now.

Some hits and misses:

As the pandemic overwhelmed the world, and no well-documented treatment for infection caused by the brand new virus – Covid-19 was available, many drug players were given quick emergency approval by country regulators for some repurposed drugs. But most of those weren’t found effective as fresh clinical data started pouring in. For example, the World Health Organization (WHO), have, reportedly, indicated that remdesivir, hydroxychloroquine, lopinavir/ritonavir and interferon regimens appeared to have little or no effect on 28-day mortality or the in-hospital course of COVID-19 among hospitalized patients.

More recently, Gilead Sciences Veklury – a failed Ebola drug, repurposed for hospitalized Covid-19 patients, suddenly became a blockbuster drug, according to a September 17, 2021 report. However, in less than a year, alongside more research data - a study from Europe, published in The Lancet Infectious Diseases, showed that Veklury has no real benefit. The report also highlights: ‘Aided by a ringing endorsement from then-president Donald Trump, Veklury rang up sales of $2.8 billion in 2020, including $1.9 billion in the final quarter. But those sales slid this year to $1.5 billion in the first quarter followed by $829 million in the second quarter.’

Similarly, there are several areas that are seemingly getting transformed, triggered by the pandemic and the time for resorting to a hit or miss approach, is now virtually over. From pharma marketers’ point of interest, it will now be at one’s own peril for not challenging the pre-Covid business traditions, rules, and well-tried strategies on customer relationships and brand building models. This brings us to the question on what specifically have changed in the new normal as the pharma industry navigates thorough the Covid pandemic – for close to two years now.

Pandemic-triggered changes in the pharma marketing area:

Changes are many and are being studied across the world. One such recent analysis, articulating how the pandemic triggered changes have redefined marketing, was published by the Harvard Business Review (HBR), on March 10, 2021. This paper came more than a year after the pandemic overwhelmed the world. This article listed some interesting macro-level changes, including the following:

Old normal: You are competing with your competitors.
New normal: You are competing with the last best experience your customer had.

Old normal: Customers hope you have what they want.
New normall: Customers expect you to have exactly what they want.

Old normal: Courting customers is just like dating.
New normal: Courting customers is just like online dating.

Old normal: Customers must sit at the heart of your marketing strategy.
New normal: Customers must sit at the heart of your customer journey.

Old normal: Agility is a technology process.
New normal: Agility is a modern marketing approach.

Old normal: Your brand should stand behind great products.
New normal: Your brand should stand behind great values.

To illustrate the point, let me now give a few examples of some micro-level changes in the same space.

Some transformation trends:

I am citing a few examples related to pharma’s traditional sales and marketing models. One such area is, quite a few companies are adopting connected data based and analytics-supported Omnichannel approach for customer engagement. The key objective is to deliver coherent and high-quality customer experience.

The need for new commercial models for the changing life sciences market, was also highlighted in an interesting article, published in the Pharmaceutical Executive on September 16, 2021. The authors identified six health care macro trends, demonstrating the value of transforming care delivery and shifting market behavior that prompt to reframe customer value propositions.

Taking a cue from this paper, I am listing below some of the current trends – as I see these and wrote before in this blog. Each one of these calls for well-connected data with analytics support:

Staying relevant to customers with a focus on customer experience.

‘Made to measure’ marketing for personalized care, as “one-size-fits-all” care regimens losing its relevance.

Fostering a new genre of ‘customer-brand relationship’ to drive more targeted go‑to‑market strategies, enhanced agility/mobility of resources and highly personalized customer interactions.

Augmenting pharma customers’ new value expectations for competitive advantages, besides dynamic forecasting, sales force performance analytics support and predictive pricing modeling.

Arriving at right and flexible customer value delivery models, as the health care sector shifts toward new sites of care – outside the traditional old normal models. For example, with more patients preferring Telehealth pharma marketing needs retooling to reap a rich harvest.

Meeting the growing demand for value‑based care with novel risk‑adjusted and outcome‑based Price-Value-Models, supported by ongoing innovation in this area and sophisticated approach to value, affordability and outcomes.

Interestingly, despite Herculean constraints, many pharma players continued creating and delivering value, as the customers were expecting with changing situations.

Drug-price sensitivity is increasing:

In the new normal, drug price sensitivity of customers is increasing manifold, for various reasons. A June 18, 2020 study, flags: ‘Nine in 10 Concerned About Rising Drug Costs Due to COVID-19.’ Although, this particular study (Gallup Poll) was conducted in the United States, general public apprehension is no different in other parts of the world, including India.

In my article of September 14, 2020, I also wrote that the concept of ‘fair pricing a drug’ is being deliberated by many experts around the world, since quite some time, till today. But it continues. Most recently, as reported on September 22, 2021, for different reasons related to its new Alzheimer’s drug - Aduhelm, including its hefty price tag of $56,000 annually per patient, ‘Biogen reps banned from D.C.-area neurology clinics.’

Regardless of such customer reactions, the pharma industry, as reported on September 17, 2021, continues to advocate – drug pricing pressure will stifle innovation, blocking patient access to needed medicines and dry up investment in important R&D on new therapies. Curiously, the Pharmaceutical Research and Manufacturers of America (PhRMA), is spending more than $1 million on TV ads as part of a massive lobbying and communications campaign emphasizing the potential harm to patients seeking cures for deadly diseases, as the report highlights.

Innovation – remained mostly unhindered from old to new normal:

Customers’ expectations can’t be ignored indefinitely. Interestingly, the world has also witnessed it with Covid drug and vaccine innovation continuing even during the most trying times during the pandemic, even in India. It is, therefore, quite understandable why unfettered access to drug innovation is considered an oxymoron, by many.

The good news is, despite shrill voices over pricing measures, the quest for adding meaningful value to the healthcare space continues unhindered. As reported on September 19, 2021, both Pfizer and Merck are advancing oral antiviral candidates targeting Covid-19 into late-stage testing. Thus, I reckon, regardless of jarring noise from pharma lobbyists, drug innovation, willy-nilly, has to satisfy the diverse demand of health care customers.

Innovation needs to satisfy demands of diverse healthcare customers:

That, increasingly, drug innovations will need to be based on their ability to satisfy the demands of life sciences companies’ diverse customer-perceived value-based, was also echoed by the Pharmaceutical Executive article of September 16, 2021.

While doing so, companies will need to structure innovation in terms of health outcomes, affordability, and personalization, as the paper emphasized. It further added, ‘broader definition of innovation means products are no longer the central driver of value.’ Instead, innovation will be powered by an increasingly diverse stream of data that resides outside the confines of the traditional health ecosystem.

Covid pandemic accelerated the transition of this process of innovation, drawing its new focus on providing a seamless and holistic customer experience in the disease treatment process – supported by advanced analytics and this deeper understanding of customer segments.

Conclusion:

Many pharma marketers have possibly undertaken a sophisticated and credible market scanning exercise in the new normal, to assess by themselves what have or haven’t changed in their customer preferences and market dynamics. If not, I would encourage them to initiate it, at least, now.

Equally noteworthy, as the above HBR article wrote, in the post pandemic period: ‘Beyond geography, marketing messages need to be personally relevant, aligned to an individual’s situation and values, as opposed to demographics, such as age and gender.’

The objective is to create a personal connection between the customer and the brand promotional content, aiming to influence the prescribing and purchasing behavior, based on their psychographic to attitudinal characteristics. This process would require creating and screening lots of customized data, supported by sophisticated analytics.

From the above perspective, I reckon, deep insight on what have or haven’t changed in the healthcare environment alongside its customers, would be of fundamental importance for pharma marketers, in the new normal.

By: Tapan J. Ray

Time For Predictive Rather Than Reactive Pharma Strategy

Posted on June 15, 2020 by Tapan Ray

Traditionally, pharmaceutical industry, across the world, is mostly reactive – rather than proactive or predictive in its strategic approach – spanning across all its business domains. A large number of pharma players – both innovators and generic drug makers, formulate their business strategy – generally reacting to competition, changing market dynamics and patient/ doctor /other stakeholder preferences. The same is being witnessed even during Covid-19 pandemic. However, this trend seems to be more prevalent in India – as one looks around.

For example, in R&D – be it a statin drug, proton pump inhibitors and right up to monoclonal antibodies or cancer immunotherapies – after a first-in-class molecule comes, a plethora of ‘me-too’ – but patented molecules soon follow. A comparable trend in the generic drug categories is also all-pervasive, including fixed-dose combinations (FDCs).

Similarly, even in the good old days of sales and marketing, we have seen – after the first product detailing folder was successfully introduced by a leading pharma company in India, how competition lapped the concept up – considering this change as a magic wand for brand demand generation!

In recent days, a similar trend is surfacing for ‘Digitalization’ of pharma business, mostly reacting to the changing practices of key competitors, or involving patients or doctors’ preferences. It gets reflected in other business domains, as well. With this perspective, in this article, I shall deliberate on this area, especially in view of the current situation.

Traditional ‘safe sailing’ is no longer an option:

The Coronavirus pandemic could be a stronger catalytic factor for the drug industry to initiate the much-desired transition from being reactive to predictive in its strategic business approach- faster. Interestingly, way back in June 2007, the PwC Whitepaper titled “Pharma 2020: The vision”, had also articulated: ‘The social, demographic and economic context in which the pharmaceutical industry (Pharma) operates is changing dramatically.’

Some drug players have already opted to transform their organizations in sync with the changes in the operating environment. But, a vast majority of them preferred to stick to the traditional reactive mindset, for a safe sail, as it were. However, this doesn’t seem to be an option, any longer. Be that as it may, there is nothing wrong in being reactive in strategic business practices, although formulating a predictive or proactive growth strategy demands more cerebral prowess and is much different from the reactive ones.

The difference, I reckon, is similar to that of a leader and the followers, with nearly similar impact on overall corporate image and performance, besides a prime-mover advantage of the latter. Nevertheless, there could be a predictive approach even within a reactive approach to competition. To illustrate the point, let me cite an example related to ‘me-too’ – patented-drug development.

Making an overall reactive strategic approach proactive in nature:

Among several examples of making a reactive strategic approach – proactive in nature with innovative goals, let me quote a very recent one. For decades, drug companies have been selling ‘me too’ but patented drugs, at prices similar to the original and ‘first-in-class’ drugs, which are successful and enjoying a market monopoly.

Moving away from this trend, a startup drug maker, reportedly, wants to disrupt the traditional pharma industry practices by delivering what most patients and healthcare stakeholders want. It has set a novel goal of becoming patient-centric in its offering by making innovative drugs available at affordable prices. The startup wants to achieve this objective ‘by changing long-held industry practices for developing, pricing, and selling slightly different versions of costly brand-name drugs.’

Accordingly, with a proactive or predictive approach within an overall ‘reactive’ trend, it wants to create a unique niche for itself. The entity ‘will focus on developing “me too” drugs, which imitate the biological functions of existing drugs, but use distinct molecular structures so they don’t infringe on existing drug patents.’

Evolving a new demand of value-based health care system:

During disruptive changes and uncertainties in the business environment, such as what is being experienced today, gaining actionable insight on how these changes will call for new strategies to excel, would require a predictive mindset. This is of critical importance, particularly when a new demand for a value-based health care system is fast unfolding. This subject was well deliberated also in the book – ‘Healthcare Disrupted: Next Generation Business Models and Strategies.’

About six years back what the authors of this book predicted, seems to be a reality today. They had said: The concept of “value” rules the day, undoubtedly. The transition from the old ‘fee-for-service’ to ‘fee for value’, is game changing. On the same subject, another article - Focus on Value 1: The “Tsunami of Change”, published in the ‘eye for pharma’ on March 22, 2026, quoted the authors of this book – explaining the scenario lucidly.

They said, today’s health care system is largely reactionary, as the health services react to the persistence of consumers, their phone calls, queuing for services, waiting in the waiting room and calls to healthcare insurers. Whereas, ‘tomorrow’s system would prompt the health care providers to answer a seemingly simple question: how will they become relevant to a customer group?

Even six years down the line, especially in the current global pandemic situation with an evolving demand of a value-based health care system, this concept remains so relevant, possibly more than ever before. That said, an unforeseen and unprecedented situation could also force a pharma player – already moving on a predictive strategic path, to choose a reactive path – mostly for survival and progress of business.

When a company moves into a ‘reactive’ path from a ‘predictive’ one:

Such instances are infrequent. But a major event like Covid -19 may give rise to such a situation. For example, in the Pharma and Biopharma R&D space, it happened and is still happening. As ‘Evaluate Vantage Covid-19 Report’ of April 16, 2020 highlighted, as follows:

‘Anyone thinking that 2020 might travel down a predictable path for the biopharma sector was swiftly disabused of this view in the opening weeks of the year. The Coronavirus pandemic has changed the focus for almost every drug developer, whether they are working on potential treatments or trying to keep their businesses on track – or both.’ Good or bad, this is the reality today.

However, many of these organizations are unlikely to jettison their well-thought out ‘predictive’ pathway and are expected to soon find ways to move back to it. Thus, the question that one may pose, how does a company move into a predictive pathway from a reactive one? And particularly considering, if Covid-19 pandemic has caused some irreversible changes, or even – a long-term change in the business environment.

Getting back to predictive strategic path from a reactive one:

This issue was also covered in the article – ‘Three Proactive Response Strategies to COVID-19 Business Challenges,’ published in the MIT Sloan Management Review, on April 17, 2020. It wrote, as organizations move from a reactive to a proactive approach to dealing with COVID-19, they should ask themselves the following three questions:

Can we offer a version of our products and/or services through an online channel? Going online is the closest equivalent to low-hanging fruit in the current environment.

Can we use our existing infrastructure to produce products and/or offer services that are in demand? Many organizations have allocated infrastructure to produce goods and services to support the fight against COVID-19, but some strategic companies would think beyond the crisis to future changes in consumer needs.

How can we rapidly increase our capacity to produce and distribute on-demand products and/or services? Turning to partnerships with other companies can boost capacity in a crunch situation, such as today.

The need for collaboration, in such extraordinary situation, has also been underscored by the European Pharmaceutical Review. It pointed out - how academia, government and the pharmaceutical industry can work together to potentially ‘repurpose drugs’ for the treatment of COVID-19. This is another example of formulating a predictive growth strategy to create a win-win situation, while being in the midst of a reactive one.

Conclusion:

Meanwhile, despite national Lockdowns at a very early stage on March 24, 2020, India has now climbed up to occupy the fourth highest position in terms of the number of Coronavirus infected cases. Continuing the steep ascending trend, as on June 14, 2020 morning, the recorded Coronavirus cases in the country reached 321,616 with 9,199 deaths.

During the current global pandemic of a humongous scale, drug companies are trying to respond to rapid challenges across their business operations, right from planned R&D programs to effectively maintaining supply chain, including manufacturing activities. If the current COVID-19 pandemic lasts for medium/long term, there could also be significant delays in the execution of various other ongoing projects/programs. This was the analysis of Deloitte in a paper, titled, ‘COVID-19 response for Pharma companies – Respond. Recover. Thrive’

While the full impact of the Coronavirus pandemic is still unknown, adopting a predictive strategy in the prevailing overall reactive environment, is expected to yield a significantly better business performance. As I said earlier, the core difference between adopting a ‘predictive’ and a ‘reactive’ business pathway, under the circumstances, is akin to the difference between a leader and a follower.

Unlocking the value innovation in all areas of pharma business is the name of the game, for excellence. Leveraging Artificial Intelligence (AI) based contemporary ‘predictive’ tools will help pharma players break the new ground, even in such trying times. Coming from this perspective, a ‘predictive’ strategy rather than a ‘reactive’ one, apparently, is the demand of time – where we all are in – today.

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.

Setting A Cost Of Time That Patients May Gain From A New Therapy

Posted on March 16, 2020 by Tapan Ray

Since quite some, an intense ongoing debate about setting a cost of time, often by a few months, that patients could possibly gain from a new therapy for complex diseases. The answer still remains elusive. Meanwhile, newer therapies for treating cancer, such as, Kymriah, priced at US$ 475,000, alongside several rare diseases, hit the market with jaw-dropping prices. The latest being - Zolgensma of Novartis, carrying a price tag of US$ 2.12 million – the most expensive treatment ever. This trend assumes greater significance as Bio – claimed as the world’s largest trade association representing biotechnology companies, and related organizations, across the United States and in more than 30 other nations, also makes some interesting points in this area.

This article will dwell on the relevance of this important issue, both in today’s and also in the future perspective. It will try to explore, why pharma and biotech companies are not keen to use a ‘transparent multi-factorial life-value calculator’, especially for prolonging life or curing an incurable disease, with a high-priced novel therapy.

Emotional ads to justify the trend, against tough practical questions:

A part of a sleek looking advertisement from Bio, depicting the power of new therapies to prolong life, carries a headline – ‘Time. The Currency of Life,” followed by three emotive lines and two equally emotive questions: “Another decade with a spouse. A few more years with your best friend. A rich, fuller life rather than one cut short. How do we place value on these?” It then asks: “What is more precious? What is more priceless?”

Turning this emotive question on its head to a rational one, an article published in the Stat News on February 25, 2016 questioned: “How much is an extra month of life worth?” It asked the drug makers to calculate the same. The same article also quoted a Yale University economist and practicing radiologist asking: “It’s all well and good to just say life is priceless, but the reality is we are paying for it.”

Emotive ads try to justify funding towards innovation for such drugs:

The same advertisement, as above, while trying to indirectly justify such exorbitant drug costs, used yet another emotive note in its playbook. It emphasized: “By continuing to fund the innovation pipeline that has served us so well, we will be able to reduce the costs associated with modern-day health care.”

Such claims are being scientifically challenged – head on, by many important studies. To illustrate this point, I shall quote the following two, both were published in the JAMA Network. The first one in the JAMA Otolaryngology-Head & Neck Surgery and the next one in JAMA Oncology.

The first article is the ‘John Conley Lecture’, carrying a title, ‘Unintended Consequences of Expensive Cancer Therapeutics—The Pursuit of Marginal Indications and a Me-Too Mentality That Stifles Innovation and Creativity,’ appeared on December 2014. On innovative drugs of such genre, the paper concluded: “The use of expensive therapies with marginal benefits for their approved indications and for unproven indications is contributing to the rising cost of cancer care. We believe that expensive therapies are stifling progress, by:

Encouraging enormous expenditures of time, money, and resources on marginal therapeutic indications and
Promoting a me-too mentality that is stifling innovation and creativity.

The second article is an ‘original investigation, titled ‘Assessment of Overall Survival, Quality of Life, and Safety Benefits Associated with New Cancer Medicines.’ It also underscored: ‘Although innovation in the oncology drug market has contributed to improvements in therapy, the magnitude and dimension of clinical benefits vary widely, and there may be reasons to doubt that claims of efficacy reflect real-world effectiveness exactly.’

Here again, the emotional appeal is being made by creating a ‘perfect World’ scenario. Whereas, scientific analysis of the innovative and high-priced drugs, reveals the reality for other stakeholders to take note of. Different pharma trade associations, although being a part of the same orchestrated effort, try differently to take the eyes off the humongous prices of new life-saving drugs. But many continue to believe that new cancer drug prices have long gone beyond control.

90 percent Biopharma companies do not earn a profit – A bizarre claim?

As is well-known, besides justifying high drug prices by highlighting ‘high R&D cost,’ drug manufacturers often say, as the Bio ad campaign makes an eyebrow raising claim – “Of the approximately 1,200 Biopharma companies in the United States, more than 90 percent do not earn a profit.”

Citing the example of the US market where drug prices are very high, it justifies, the general focus on list prices of the drugs is misplaced. This is because, the ‘manufacturers provide billions of dollars in rebates and discounts on their innovative therapies annually, to federal, state and private payors, in addition to offering direct assistance through patient assistance programs.’ It further added, these discounts vary but can result into a significant total of as much as 50 percent or greater depending on the program.

Experts have challenged even this claim that the list prices do matter, even in the US, for many, including uninsured population and those with co-payment arrangement, which are not based on the discounted prices. Leaving aside America, what happens in those countries, such as India, where out-of-pocket expenses on health care are considered the highest in the world?

With new cancer drug prices going beyond control, the price of postponing death is growing:

That the new cancer drug prices have long gone beyond control, isn’t a new realization. A research paper, published in the Journal of Clinical Oncology on May 06, 2013, also noted emphatically: ‘Allowing the producer-dominated market to set drug prices has spiraled the cost of cancer drugs out of control.’ So did another 2015 study, published in the Journal of Economic Perspective.

According to various studies, such as the one published in the JAMA Otolaryngology-Head & Neck Surgery, as quoted above, also found after studying over 70 of such new drugs that the median improvement in survival was around 2.1months. Some other reports indicated this number to be around 3.5 months on an average.

Interestingly, the 2015 study, published in the Journal of Economic Perspective found that ‘the price of postponing death is growing. In 2013, one extra year of life for cancer patients costs US$ 207,000, on average, nearly quadruple what it did in 1995.

Is it quality of life over the quantity of life, or vice versa?

The above findings may lead one to the critical question – what type of treatment choice would create the most desirable net impact on individual cancer patients? This evaluation should include all the three parameters – the extent of prolongation of the ‘Length of Life (LoL)’, the ‘Quality of Life (QoL)’ the patients experience during this period – and the additional drug cost that needs to be incurred.

It should ideally be up to patients whether they will choose quality over quantity of life or vice versa. To facilitate this process, an informed briefing by the doctor on the most likely scenario, vis-à-vis other available treatment alternatives, is expected to help individual cancer patient exercise the best affordable individual option.

This point was scientifically addressed in a research article - ‘Quality of life versus length of life considerations in cancer patients: A systematic literature review,’ published in the Journal of Psycho-Oncology on May 15, 2019. The study noted, ‘Patients with cancer face difficult decisions regarding treatment and also the possibility of trading the Quality of Life (QoL) for Length of Life (LoL).’ Little information is available on patients’ preferences in this regard, including ‘the personal costs they are prepared to exchange to extend their life.’

Another related question that also remains equally elusive, is the relationship between the cost of a medication and the amount of quality-time that it offers to patients. Quantifiable assessment of such nature could bring more transparency in drug pricing, especially for those that help treat life-threatening ailments, such as cancer.

Similar questions are raised on pricey therapy for rare diseases:

The cost of drugs for rare diseases is threatening the health care system – articulated an article, published in the Harvard Business Review (HBR) on April 07, 2017. The paper stated, in December 2016, US-FDA announced the market approval of nusinersen (sold as “Spinraza”), an effective Spinal Muscular Atrophy (SMA) treatment licensed to Biogen by Ionis Pharmaceuticals. SMA is considered the most common genetic cause of infant mortality.

As the author penned, “Patients and providers greeted the approval with near ecstasy, but the celebration was bittersweet. Five days after the FDA approved, the drug, Biogen announced each dose would cost US$ 125,000. Given that patients need six doses in the first year and three per year after that, it means the drug costs US$ 750,000 per patient in the first year and US$ 375,000 annually thereafter.”

A desperate father’s reaction for the price – and the economics behind it:

The HBR article captured the reaction of the father of an infant on this price, who is desperate to save the baby – in the following words – “Then there’s Will’s heartbreaking reaction, which I’m sure echoes the sentiments of many touched by SMA. – “The Biogen announcement of the cost of nusinersen floored me in every way possible,” he says. “Words cannot describe the sickening feeling I get when I think about it.” If this could be a father’s reaction in America, one can well imagine what happens in a similar situation to people in the developing world.

At that time, Zolgensma of Novartis, wearing a price tag of US$ 2.12 million for treatment of the same disease, was also shaping up for market launch. On this drug, the author of this HBR article who also happened to be a professor, vice chair of research, and chief of the Division of Neuromuscular Medicine at the University of Utah School of Medicine, wrote: “A very promising gene therapy for SMA is on the horizon, which would require only one dose and potentially render nusinersen obsolete. Did such mercenary economics influence Biogen’s pricing decision? We may never know; drug companies are not required to justify their prices.” On the contrary, as many believe, the concerned global CEOs, reportedly, get a hefty financial reward, for the same.

Conclusion:

It is not difficult to understand either, that some drugs, especially for rare diseases, will be used for treating a smaller number of patients. Hence, the optimal economies of scale in manufacturing can’t be attained. At the same time, the cost of R&D of the therapy needs to be recouped along with a reasonable profit, for investment towards future drugs. This is in addition to market exclusivity the drug will enjoy through patent thicket.

Nevertheless, despite the existence of several methods of a human life value calculation, such as in the insurance industry the use of a transparent and drug industry specific, multi-factorial live-value calculator is still not in vogue. As the drug industry often highlights, the ‘value of human life is priceless’ – regardless of the costs of drugs. In this situation, many industry experts, academics and patient groups advocate that the ongoing uncontrolled pricing mechanism for such medicines should be brought under a leash. This could come in the form of a tough price negotiation’ before the drug marketing approval, as was promised by the Government, or putting in place a stringent price regulatory system.

Be that as it may, the bottom line is to understand and find an answer to: ‘Why Does Medicine Cost So Much?’ This issue was analyzed by the Time Magazine in its April 09, 2019 edition. Quoting Dr. Aaron Kesselheim, an associate professor of medicine at Harvard Medical School, it emphasized: It all starts with the manufacturers. There are essentially no regulations governing how new drugs are priced – drug companies select a price what they “believe the market will bear.” Blockbuster first-in-class treatments, therefore, command a stratospheric price, like what happened with Gilead’s hepatitis medication – Sovaldi, way back in 2013. It was priced at US$ 1,000 a pill, or US $84,000 for the full course of treatment. From this perspective, although, setting a cost of time that patients may gain from a new therapy has a moral and ethical relevance – but actually, it doesn’t seem to be business-friendly in the drug industry.

By: Tapan J. Ray

Drug Pricing: Why Justify On R&D Cost Rather Than Precise ‘Customer Value’?

Posted on December 16, 2019 by Tapan Ray

While looking around, it won’t be difficult to spot many types of steep-priced highly innovative products, where high costs aren’t justified by high R&D expenditure, but for unique ‘customer value’ offerings. Many consumers evaluate those and decide to settle for one, instead of opting for cheaper variants – delivering the basic customer requirements in that product class or category. Although, both pharma and electronic goods belong to high tech-based knowledge industries, similar examples are in plenty of the latter, but hardly any in pharma.

Agreed that pharma is a highly regulated industry, unlike electronic goods. But so are banks, financial services, airlines, telecommunication, among many others. Interestingly, all these industries are building great brands without talking about their investment costs in R&D, while doing so.

In this article, I shall focus on – despite facing a formidable headwind, mostly for the same, pharma industry, in general, continue to lack in two critical areas of brand building. But, before doing that let me quote from some recent research papers wondering, how is this situation continuing unchanged, despite all concerned being aware of it.

Two opposing views:

Just to recap, let me put below, two diametrically opposing views that continue to clash with each one, since long:

New and innovative drug costs being excessive, globally, lowering their prices will not harm the progress of innovation.
Drug industry argues, any restriction of free pricing of innovative drugs, will seriously jeopardize innovation of newer medicines and treatments.

So much of divergence in the views of two key partners within the industry, can’t just continue any longer, without a serious intervention of governments across the world, including the United States.

Pharma does want to talk about ‘Cost & Value of Medicines’. But…

It’s not that pharma doesn’t want to talk about ‘Value of Medicines,’ but not, apparently, to create an ‘emotional connect’ with its stakeholders, including the patients. It appears, more as a general justification for the high cost of new drugs. For example, a pharma trade association’s communication, after acknowledging ‘that many are struggling to access the medicine they need,’ says upfront: ‘Discussions about costs are important.’ It follows a series of much-repeated common justifications, which are no- brainer, such as:

Medicines Help Patients Avoid Expensive Hospital Services,
Developing New Treatments and Cures is a Complex and Risky Undertaking,
Medicines are Transforming the Treatment of Devastating Diseases.

But, the reality is, these justifications are not working on the ground, as these are not quite in sync with ‘customers’ value’ expectations, both from the company as well from the brand. Moreover, instead of establishing an ‘emotional connect’, this approach probably is further alienating many stakeholders, as several governments are now broaching the issue of price control, or some other mechanism to set drug prices.

Pharma marketers need to be eclectic:

Instead of keep following the age-old marketing and communication models, young pharma marketers need to be empowered to be eclectic. They should look around and try to fathom how is ‘marketing,’ as a business domain, changing in other fast-growing industries, and act accordingly. As pharma is a high-tech knowledge industry, let me draw examples from other similar industries, such one that innovates and manufactures electronic products.

Unlike any high-priced, high-tech electronic product companies, such as Google, Apple or Microsoft – pharma marketing communications are more like ‘justification’ centric, for charging high prices for medicines. This approach, apparently, is not just a bit defensive, but virtually negative. Whereas, unlike drug manufacturers, the above tech companies are constantly focusing on the following two areas, for creating a robust ‘corporate brand’ that infuses consumer-trust in each of their products:

Establishing ‘emotional connects’ with customers
Focusing on the total value of unique value offerings, rather than the high cost of innovation to justify high prices

Let me deliberate briefly on each of the above two.

The importance of establishing ‘emotional connects’ with customers:

With the penetration of technology, almost in every household, with a varying degree, though, access to a gamut of information becomes increasingly easy, so are the options available to customers. This is impacting almost every industry, including pharma and healthcare.

Thus, for corporate performance excellence, customers are now creating a space for themselves at the core of the pharma business strategy. Consequently, a need arises for the pharma marketers to enhance end-to-end customer experience. Besides, brand value offerings, this includes both short and long-term customer service offerings to ensure an ongoing emotional connect with customers, for more intense and longer-lasting engagement with trust, both on the ‘corporate brand’ and also on individual products.

Therefore, creating effective ‘emotional connects’ with customers are assuming a cutting-edge strategic importance – in multiple facets of pharma business. More ‘emotionally connected’ customers also act as a force-multiplier to enhance corporate reputation. Although, it mostly happens through word of mouth, in recent days, value added omnichannel communication by respective companies, is playing a crucial role for success in this area.

In the good old days, reaching patients or patient groups directly, would have been a challenging proposition. Most communications on products, diseases and treatments, used to be through healthcare providers. But, this is no longer so, especially in the digital world, that opened a new spectacle of opportunities for crafting patient-centric strategies – as patients become more digital-savvy, too.

Focus on brand value offerings, not on cost of innovation to justify high prices:

To dwell in this area, a series of questions that one may possibly encounter, such as: ‘How do you define value? can you measure it? What are your products and services actually worth to customers?’ Way back, these points were deliberated in the article – ‘Business Marketing: Understand What Customers Value,’ published in the November-December 1998 issue of the Harvard Business Review (HBR). It said: ‘Value in business markets is the worth in monetary terms of the technical, economic, service, and social benefits a customer company receives in exchange for the price it pays for a market offering.’ From this paper let me pick up just two critical components of value, as follows, for better understanding:

Value in monetary terms: Such as, dollars per unit
Value for a customer: What the person gets in exchange for the price it pays

Nevertheless, the important point to note: As ‘market offering has two elemental characteristics: its value and its price, raising or lowering the price of a market offering does not change the value that such an offering provides to a customer. Rather, it changes the customer’s incentive to purchase that market offering.’

When applied in the pharma perspective:

When the above concept of value is applied in the pharma industry perspective, it vindicates an important. Which is, tangible value offerings of an exclusive, high-priced patented products, and the same in its off-patent low-priced avatar remains unchanged, regardless of significant change in its monetary value per unit. However, unlike a patent protected drug, options for generic equivalents will be many, with differing prices.

This brings out another important facet of ‘value’. As the above HBR paper states, considerations of value take place within some context. Even when no comparable market offerings exist, there is always a competitive alternative. For example, in the pharma business, one possible competitive alternative for patented products could well be – when the Government decides to issue a Compulsory License (CL) for make the product available at a cheaper price to patients.

The name of the new game:

Thus, for an exclusive new drug, instead of focusing on cost of innovation to justify high prices, a sharp focus on ‘total value offering’ of the brand would possibly be the name of the new game. It will entail persuading the ‘connected customers’ to realize the total value of both the tangible and intangible cost of each benefit that the product offers, rather than simply the cost of a pill. In doing so, a pharma marketer and his entire team, must have an accurate understanding of what its customers value, and also, would value. This calls for a painstaking research, and a mammoth real time data analysis.

Developing a unique ‘Customer Value’ model:

As the above HBR article reiterates, ‘customer value’ models are not easy to develop. Unfortunately, pharma’s ‘value delivery system’ is still tuned to a self-serving mode and not ‘customer value’ centric.Thus, marketers may wish to note some key points in this regard, as below:

Many customers understand their own requirements, but do not necessarily know what fulfilling those requirements is worth to them.
This leaves an opportunity to demonstrate persuasively, the total ‘customer value’ that the new brand provides, and how it fulfills their requirements.
The strategy makers would have to necessarily generate a comprehensive list of ‘customer value’ elements, based on robust data, on an ongoing basis.
The acquired insight on – what customers value, and would value, to gain marketplace advantages over competitors, would form the core of the business strategy.

The next stage would be a pilot study to validate the model and understand the variations, if any, in the estimates. It is also vital to note that an improvement in some functionality may appear important, but may not necessarily mean that customers are willing to pay for it. The aim should always be delivering superior value, and get an equitable return for it. Thus, enhancing end-to-end customer experience in this effort, becomes a critical ingredient to brand success.

Conclusion:

After the article – ‘Business Marketing: Understand What Customers Value,’ published in the November-December 1998 issue of the Harvard Business Review (HBR), in June 2000, a similar article was published in the ‘McKinsey Quarterly.’ The paper titled, ‘A business is a value delivery system,’ also emphasized the importance of a clear, well-articulated “value proposition” for each targeted market segment.

This means a simple statement of benefits that the company intends to provide to each segment, along with the approximate price the company will charge for each of those. The paper also underlined, the strength of the buying proposition for any customer is a function of the product value minus the price. In other words, the ‘surplus value’ that the customer will enjoy, once that product is paid for.

Over a period of time, high prices of new and innovative drugs are attracting negative headlines, like - ‘High cost of hepatitis drug reflects a broken pricing system.’ This continues, despite high decibel justification of the ‘exorbitant’ cost of innovation. Undaunted, Big Pharma and its large trade associations remain reluctant to jettison their old advocacy toolkit.

They seem to be still on a – ‘Listen and believe what we are saying’ mode. This is vindicated by the December 14, 2019 report that revealed: ‘The Pharmaceutical Research and Manufacturers of America, the drug industry’s top lobbying group, filed a lawsuit this week against the state of Oregon, claiming two laws it passed requiring greater transparency of drug prices are unconstitutional.’

Continuation of such approaches, on the contrary, is further alienating many stakeholders, especially the patients and the governments. Thus, time appears more than ripe today to focus more on delivering measurable ‘surplus value’ of new products, to well engaged and connected patients, both globally and locally.

By: Tapan J. Ray

On The Flip Side of Pharma Industry: A Saga of Perennial Contradictions

Posted on December 9, 2019 by Tapan Ray

Awesome contribution in the battle against multiple diseases, is obviously the primary facet of the pharma industry. However, on its flip side, one would witness a saga of numerous contradictions. Some of these exist perennially in well-protected opaque cocoons, regardless of what recent research data reveal. The consequences of which leaves a detrimental impact on the patient’s health interests, eventually turning into highly contentious issues, in the socio-political milieu of recent times.

While there are many such contradictions involving the pharma industry, this article will endeavor to understand just one inherent dispute. This is related to the impact of high R&D expenditure on drug prices. It assumes importance, especially at a time, when the world’s most influential pharma trade organization continues arguing in favor of the dictum – high new drug prices are driven by mind-boggling cost of drug innovation, as R&D spending keep shooting north. Incidentally, many others challenge this assertion backed by robust data, claiming it’s not so, actually.

Thus, the question that comes up, if high R&D cost prompts high drug prices, what happens when this major cost of new drug innovation comes down, as is, apparently, happening now. A proper resolution of this contradiction by ushering in transparency in this area, is important to safeguard a critical health interest of many patients. A recent research report, followed by several other important developments in this area, exposes this contradiction, probably more than ever before.

Some recent reports revealing the contradictions:

To drive home the point of contradictions, I shall cite a few references below, from a pool of many others. For example, one such report of September 26, 2019 unfolded: ‘The cost to bring a new drug to market has decreased to under US$ 2Billion’. This was announced by Clarivate Analytics plc while releasing the “2019 Centre for Medicines Research (CMR) International Pharmaceutical R&D Factbook.”

Interestingly, another article had sharply contradicted the above, presenting a different story altogether. Quoting the Tufts University Center for the Study of Drug Development, it highlighted that it costs US$ 2.6 billion growing at 8.5 percent annually. However, adding an estimate of post-approval R&D costs increases, the cost estimate to US$ 2870 million. Many estimated, it would take pharma companies more than 15 years of average sales to reach breakeven.

Curiously, a different research paper, titled ‘Comparison of Sales-Income and Research and Development Costs for FDA-Approved Cancer Drugs Sold by Originator Drug Companies,’ published by the JAMA Network Open on January 04, 2019 concluded quite in line with the ‘2019 CMR International Pharmaceutical R&D Factbook.’ It found, ‘Cancer drugs, through high prices, have generated incomes for the companies far in excess of research and development costs; lowering prices of cancer drugs and facilitating greater competition are essential for improving patient access, health system’s financial sustainability, and future innovation.’

Again, contradicting the above, one more article – ‘The Link Between Drug Prices and Research on the Next Generation of Cures,’ published ITIF (Information Technology & Innovation Foundation) on September 09, 2019, touted to: ‘Put simply, drug companies must make significant profits on their best-selling drugs in one generation in order to reinvest in the next generation.’

The saga of contradiction continues.

A glimpse at the current scenario:

While trying to understand the inherent contradiction in the space of cost of drug innovation by analyzing the available data, let us examine the current scenario, of course with reasons. Going by the oft-repeated justification that high R&D expenses drive the drug prices up, the converse scenario would be – a dip in the R&D expenditure should lead to a reduction in medicine prices, commensurately.

But this is unlikely to happen – drug prices won’t possibly come down due to voluntary measures of the drug manufacturers. As various recent developments indicate, it will be clear in the course of this discussion that the same justification won’t be jettisoned anytime soon.

Pharma CEOs do acknowledge that they have some role to play in helping lower drug prices. However, they continue defending prevailing high new drug prices by highlighting, their multibillion-dollar investments in R&D are responsible for advances in treatments of many serious ailments, such as cancer, hepatitis C, schizophrenia and autoimmune diseases.

This was again contradicted by another BMJ Research Study of October 23, 2019, which concludes: ‘A review of the patents associated with new drugs approved over the past decade indicates that publicly supported research had a major role in the late stage developments of at least one in four new drugs, either through direct funding of late stage research or through spin-off companies created from public sector research institutions. These findings could have implications for policy makers in determining fair prices and revenue flows for these products.’ Nevertheless, in the midst of it, signs of a shift in focus of many pharma companies in this area, is clearly discernible.

Signs of a shift in R&D focus are clearly discernible:

This gets well- reflected in the “2019 Centre for Medicines Research (CMR) International Pharmaceutical R&D Factbook.” As the report unfolds, one of the basic shifts is a change in focus on R&D targets. Until recently, the research focus of most companies was on Noncommunicable Diseases (NCD) such as, Parkinson’s disease, autoimmune diseases, strokes, most heart diseases, most cancers, diabetes, chronic kidney disease, osteoarthritis, osteoporosis, Alzheimer’s disease, and others. Whereas, today there has been an increased focus on rare diseases.

What does it signify?

It obviously signifies, most companies are now trying to launch steeply priced niche products for rare diseases. This includes complex biologic products, gene therapy, personalized medicine and the likes. Which is why, a majority of current new drug approvals, targets smaller patient populations. For example, between 2010 and 2018, the number of addressable patients per drug approval decreased by 15 percent, as the above report revealed.

The bottom-line, therefore, is with the low hanging fruits already been plucked, many pharma players don’t seem to consider targeting innovation of reasonably priced mass market products. It has already happened with antibiotics and would now probably happen with several NCDs.

Two main drivers for this shift:

The two main drivers for this shift, resulting an increase in drug approvals, and significant reduction in cost per new molecular entity (NME), may be summarized as follows:

Increased focus on rare diseases. Of the 57 NMEs launched in 2018, 22 had an orphan drug designation, indicating that they targeted rare disease area.

Increased activity of smaller pharmaceutical companies. In 2018, as high as 74 percent of drug launches were developed by companies with an R&D spend of US$ 700 million to US$2 billion. Major pharma companies (R&D spend of greater than US$2 billion) accounted for just 26 percent of drug launches.

A good news!

The increase in new drug approvals driven by smaller pharma companies is a good news and also encouraging. This suggests, becoming a big company with deep pocket is no longer a prerequisite to bring an innovative drug to the market. On the contrary, making R&D programs more efficient is the name of the game, today.

Changing pharma investment strategies:

As is evident from the CMR International Factbook, drug manufacturers’’ investment strategies are also undergoing a makeover. In the R&D domain, external innovation, in general, is now playing a more critical role. Perhaps, more than ever before. In the first half of 2019 alone, global spend for pharma M&A and licensing activities was, reportedly, around US$140 billion. Interestingly, it outpaced projected 2019 R&D spend by more than 60 percent.

Do high R&D cost impact drug prices and vice versa?

This brings us to the key question: Does the high cost of R&D impact drug prices and vice versa? Or, it is being over-hyped as a tool to justify high drug prices. There are umpteen instances to believe so – for example, the world’s best-selling drug – Humira of AbbVie. According to the Wall Street Journal (WSJ) of September 28, 2017, the initial U.S. patent for Humira expired in December 2016, but the additional patents expire in the 2020s.

Interestingly, according to other reports, AbbVie has collected more than US$115 billion in global Humira sales since 2010. In 2018 alone its sales amounted to US$ 19.9 billion. The report reiterates, ‘AbbVie has made and will continue to make a lot of money from Humira.’ From these facts, one can presume that AbbVie’s R&D expenditure or the product acquisition cost, has long been recovered, but still doesn’t seem to have any significant impact on the drug price.

Pharma CEOs continue to repeat the same argument:

While testifying at a hearing of the Senate Finance Committee, pharma CEOs had to confront with a Senators’ question - “Prescription drugs did not become outrageously expensive by accident, Drug prices are astronomically high because that’s where pharmaceutical companies and their investors want them.” However, acknowledging that their prices are high for many patients for high R&D expenditure, the company chiefs tried to deflect blame onto the insurance industry, government and middlemen known as pharmacy benefit managers.

The CEOs also highlighted the rebates given on list prices to benefit patients. However, the reality is, under the current system, savings from rebates are not consistently passed through to patients in any form. Interestingly, despite such scenario, pharma CEOs don’t want the government negotiating drug prices directly. It’s apparent that none of their reasonings were found to be the genuine reasons for high drug prices, even by the US Senators.

Thus, pharma’s points of justification for high drug prices have not changed, over a long period of time. On the contrary, shifting greater focus on the R&D of rare diseases, where the number of patients is much less, the CEOs seem to be bolstering their same argument on a different ground, despite reducing R&D costs.

Surfaces a glaring contradiction:

Presenting the current situation from the drug industry perspective, the article titled, ‘Drug Prices and Innovation’, published in the Forbes Magazine on June 20, 2019, emphasized on some interesting points.

It said: ‘In 2018 return on investment in drug discovery/development were 1.9 percent, far below the 10.5 percent cost-of-capital - the rate-of-return the industry must provide to compete for capital with similar investments.’ The article also emphasized: ‘Under the current pricing regime, the expected returns from drug discovery do not justify the investment. They have not done so since 2010 and are expected to turn negative by 2020.’ It further added, big pharma, despite one of the highest rates of R&D spending of any industry, chronically fails to fund research sufficient to support adequate growth and returns to the average drug don’t cover the cost of development.

On the other hand, according to a presentation by CVS Health that cited Macrotrends.net as its source,pharmaceutical manufacturers’ profit margins have reportedly exceeded 26 percent for the last three years and 22 percent for the past 10 years.

This brings out again, the glaring contradiction between what is being highlighted and what is actually happening in the pharma business. Lack of transparency in this area of the drug industry, is believed to be the root cause of this confusion among many.

Conclusion:

As it has been recognized the world over, the high new drugs prices are an issue over the contentious argument of ‘high R&D expenditure’ being the ‘root cause’. It is, therefore, imperative for the stakeholders to demand transparency in this area. If finding a solution to this health-related issue is considered critical, without further delay, this needs to be expeditiously addressed.

As the saying goes, once the disease is diagnosed accurately, zeroing in on an effective treatment becomes easier. Let me hasten to add, for new, innovative and patented drugs, the situation in India is generally no different. Thus, there is no scope for any contradiction in this area, whatsoever. As the saying goes, once the disease is diagnosed accurately, zeroing in on an effective treatment becomes easier.

Voluntary implementation of ‘responsible’ drug pricing policies, by pharma manufacturers themselves, has been given a long rope. Time is running out now. If this does not happen soon, government control of drug prices will be essential, just as is being contemplated in the United States – the ‘capital’ of the free-pricing world. Moreover, it has been well documented in several studies that price control won’t jeopardize drug innovation, as pharma manufacturers will have to come out with innovative new products and treatments – event for survival of the business.

Saving lives – more lives, alongside making reasonable profits in the business, remain the primary facet of the pharma industry. However, the flip side of it, revealing a perennial saga of contradictions, such as one we discussed above, raises concerns of their being perceived as profiteering with drug prices, by many. Such practices go not only against patients’ health interest, but also negates the core purpose of existence of the industry – surely, endangering long term survival of this business model – as the modern technology unleashes its mesmerizing power for all.

By: Tapan J. Ray

Dynamics of Cancer Therapy Segment Remain Enigmatic

Posted on October 14, 2019 by Tapan Ray

Currently, cancer is likely to occupy the center stage on any discussion related to the fastest growing therapy segments in the pharma or biotech industries. There are several reasons behind such probability, some of which include:

Cancer is not only the second leading cause of death globally, but also offer outstanding new drug treatment options, though, mostly to those who can afford.

Consequently, these drugs are in high demand for saving lives, but not accessible to a vast majority of those who need them the most.

Alongside, oncology is one of the fastest growing therapy segments in sales in many countries, including the largest and most attractive global pharma market - the United States.

New cancer drugs being complex, involves highly sophisticated cutting-edge technology – creating an entry barrier for many, and are generally high priced, fetching a lucrative profit margin.

These are only a few basic dynamics of the segment. Nevertheless, understanding these dynamics, in a holistic way, is indeed an enigma – caused mostly by directly conflicting arguments on many related issues, within the key stakeholders. Thus, I reckon, this issue will be an interesting area to explore in this article. Later in this discussion, I shall try to substantiate all the points raised, backed by credible data. Let me start with some causative factors, that may make comprehensive understanding of the dynamics of this segment enigmatic.

Some causative factors for triggering the enigma:

Close overlap of several contentious factors is associated with this head-scratcher. These come in a package of reasoning and counter reasoning, a few examples of which may be seen below:

When increasing incidence of cancer related deaths are a global problem, fast growing oncology segment, regularly adding novel drugs in its portfolio, ideally should be a signal for containing this problem. Whereas, the World Health Organization (W.H.O) reports, cancer drugs are beyond reach to millions, for high cost. Nonetheless, the cancer drug sales keep shooting north.

Nearer home, while Indian anti-cancer drug market growth has, reportedly, ‘outstripped that of all other leading countries in recent years and is set to go on doing so,’ another study report underscores, ‘Indians have poor access to essential anti-cancer drugs.’

Although, a 2019 report of W.H.O highlights: Expensive cancer drugs ‘impairing’ access to cure, innovator companies also have their counter argument ready. They claim, higher prices ‘are necessary to fund expensive research projects to generate new drugs.’

When innovator companies keep touting that many new therapies are path-breaking concepts, researchers don’t find these drugs much superior to the existing ones in outcomes, except jaw-dropping prices.

Despite the above argument of research-based drug players to justify unreasonable pricing, several studies have established that the development cost of new cancer drugs is more than recouped in a short period, and some companies are making even more than a 10-fold higher revenue than R&D spending.

While several pharma companies claim that they are providing patients with access to a wide variety of cancer medication through Patient Assistance Programs (PAPs), the findings of several published research on the same concluded, ‘the extent to which these programs provide a safety net to patients is poorly understood.’

Let me now briefly substantiate each of the above points raised in this article.

Incidence of cancer and the oncology market:

Now, while substantiating the above points, let me go back to where I started from. According to the W.H.O fact sheet of September 12, 2018, cancer is the second leading cause of death globally and is responsible for an estimated 9.6 million deaths in 2018 – about 1 in 6 deaths was due to cancer. Approximately 70 percent of deaths from cancer occur in low- and middle-income countries. The Indian Council for Medical Research (ICMR) estimated around 1.4 million new cancer cases in 2016, which is expected to rise to 1.7 million cases by 2020.

According to ‘World Preview 2019, Outlook to 2024’ of Evaluate Pharma, ‘Oncology prevails as the leading therapy segment in 2024, with a 19.4 percent market share and sales reaching USD 237bn.’ The report also highlights: ‘Oncology is the area with the largest proportion of clinical development spending with 40 percent of total pipeline expenditure.’

Similarly, the Indian Oncology market is found to be growing at 20 percent every year and is likely to remain so for the coming 3-5years. In 2012 the cancer market was valued at USD 172m (quoted from Frost & Sullivan). Another report also reiterates, the oncology market in India has outstripped that of all other leading countries in recent years and is set to go on doing so.

Poor access to cancer drugs:

Despite the impressive growth of oncology segment, ‘high prices for cancer medicines are “impairing the capacity of health care systems to provide affordable, population wide access,” emphasizes a recent ‘Technical Report’ of W.H.O. I shall further elaborate on this report in just a bit. However, before that, let me cite an India specific example of the same. The March 2019 study, published in the BMJ Global Health, also highlighted, the mean availability of essential anti-cancer medicines across all hospitals and pharmacies surveyed in India was less than the WHO’s target of 80 percent.

Cancer drug pricing conundrum:

The recent ‘Technical Report of W.H.O – ‘Pricing of cancer medicines and its impacts’ confronts this issue head on. It clearly articulates, the enduring debates on the unaffordability of cancer medicines and the ever-growing list of medicines and combination therapies with annual costs in the hundreds of thousands, suggests that the status quo is not acceptable. The global community must find a way to correct the irrational behaviors that have led to unsustainable prices of cancer medicines. Thus, correction of unaffordable prices is fundamental to the sustainability of access to cancer medicines. Further inertia on this issue and half-hearted commitments from all stakeholders, including governments and the pharmaceutical industry, will only invite distrust and disengagement from the public, the report emphasized.

Another 2019 WHO report says expensive cancer drugs ‘impairing’ access to cure. It pinpointed: “Pharmaceutical companies set prices according to their commercial goals, with a focus on extracting the maximum amount that a buyer is willing to pay for a medicine.” It also reiterated that the standard treatment for breast cancer can drain 10 years of average annual income in India. Unaffordable pricing of cancer medicines set by such intent often prevents their full benefits being realized by scores of cancer patients, the report adds. Yet another paper expressed similar concern about ‘the unsustainability of the high costs of cancer care, and how that affects not only individual patients, but also society at large.

What does the industry say?

The industry holds a different view altogether. According to another recent news, one such company quoted their 2017 Janssen U.S. Transparency Report,” which states: “We have an obligation to ensure that the sale of our medicines provides us with the resources necessary to invest in future research and development.” This is interesting, as it means that even higher pricing may be necessary to fund expensive research projects to generate new drugs for life threatening ailments, such as cancer.

What do research studies reveal?

There are several research studies often disputing the industry quoted claim of R&D spend of over a couple of billion dollar to bring a new molecule to the market. They also keep repeating, this is an arduous and time-intensive process, involving humongous financial risk of failure. One such ‘Original investigation’ titled, ‘Research and Development Spending to Bring a Single Cancer Drug to Market and Revenues After Approval,’ published by JAMA Internal Medicine in its November 2017 issue, presents some interesting facts.

The study brings to the fore: ‘The cost to develop a cancer drug is USD 648.0 million, a figure significantly lower than prior estimates. The revenue since approval is substantial (median, USD 1658.4 million; range, USD 204.1 million to USD 22 275.0 million). This analysis provides a transparent estimate of R&D spending on cancer drugs and has implications for the current debate on drug pricing.’ Thus, the cost of new cancer drug development is more than recovered in a short period, with as much as over 10-fold higher revenue than R&D spending, in many cases, as the analysis concluded.

Even top oncologists, such as Dr. Peter Bach, the Director of Memorial Sloan Kettering’s (MSK)Center for Health Policy and Outcomes, along with other physicians at MSK drew attention to the high price of a newly approved cancer drug. According to available reports, ‘two recently approved CAR-T cell drugs – one is USD 373,000 for a single dose, the other USD 475,000 - are benchmarks on the road to ever-higher cancer drug price tags.’

It happens in India too:

Although, on May 19, 2019, NPPA announced almost 90 percent price reduction of nine anti-cancer drugs, curiously even those cancer drugs, which are not patent protected, continued to be sold at a high price. For example, according to the September 2018 Working Paper Series, of the Indian Institute of management Calcutta (IIM C), the maximum price for Pemetrexed, a ‘not patented’ cancer product was Rs 73,660, though, it is also available at Rs 4,500. Similarly, the price of Bortezomib was between Rs 60,360 and Rs 12,500 and Paclitaxel between Rs 19, 825.57 and Rs 7,380.95. It is intriguing to note that no pricing policy for patented drugs, as promised in the current Drug Policy document, hasn’t been implemented, as yet.

Does Pharma’s ‘Patient Assistance Programs (PAPs) work?

Different pharma companies claim their addressing access to cancer care in developing countries. A report also mentions: ‘16 of the world’s largest pharmaceutical companies are engaged in 129 diverse access initiatives in low- and middle-income countries.’ Whereas, a research study, questioning the transparency of these initiatives, concluded, ‘our results suggest that numerous drug company sponsored PAPs exist to provide patients with access to a wide variety of medications but that many details about these programs remain unclear. As a result, the extent to which these programs provide a safety net to patients is poorly understood.’

During the famous Glivec patent case, which went against Novartis at the Supreme Court of India, the company’s PAP for Glivec in the country, also came under focus. Many articles, with mutually conflicting views of the company and independent experts were published regarding this program. One such write-up emphasized with eulogy, “Novartis provides Glivec free of charge to 16,000 patients in India, roughly 95 percent of those who need it via the Novartis – Glivec International Patient Assistance Program. The remaining 5 percent is either reimbursed, insured, or participate in a very generous co-payment program. Thus, not granting a patent for Glivec really hasn’t prevented patients from getting this life-saving medication.”

However, many were, reportedly, not convinced by Novartis’ claims and counter-argued: “Our calculation says there are estimated 20,000 new patients every year suffering from cancer, this means after ten years there will be two lakh (200,000) patients, hence the program is not enough.” The views of many independent global experts on the same are not very different. For example, even Professor Carlos M. Correa had articulated: “The reported donation of Glivec by Novartis to ‘eligible patients’ under the ‘Glivec International Patient Assistance Program’ (GIPAP) may be a palliative but does not ensure a sustainable supply of the product to those in need.” Be that as it may, new studies now question whether novel anti-cancer drugs are worth their extra cost.

Are novel cancer drugs worth the extra cost?

According to a September 26, 2019 report, the results of two studies investigating the links between clinical benefit and pricing in Europe and the USA, reported at the European Society for Medical Oncology (ESMO) Congress, September 2019, reveal an interesting finding. It found, many new anti-cancer medicines add little value for patients compared to standard treatment and are rarely worth the extra cost. Interestingly, in the midst of this imbroglio, the world continues taking a vow globally to mitigate the cancer patient related issues on February the fourth, every year.

A vow is taken globally on every 4^th February, but…:

On every February 04 – The World Cancer Day - an initiative of the Union for International Cancer Control (UICC), the world takes a noble vow. Everybody agrees on its broad goal that: ‘Life-saving cancer diagnosis and treatment should be equal for all – no matter who you are, your level of education, level of income or where you live in the world. By closing the equity gap, we can save millions of lives.’

UICC also noted, as many cancers are now preventable or can be cured, more and more people are surviving the disease. However, for the vast majority people, the chances of surviving cancer are not getting better. Socioeconomic status of individuals leaves a significant impact on whether one’s cancer is diagnosed, treated and cared for, in an appropriate and cost-effective manner. A customer-focused understanding of the dynamics of the cancer therapy segment, although may help effective ground action, but the status quo continues for various critical reasons. Even on the World Cancer Day 2019, the oncology pricing debate continued.

Conclusion:

The business dynamics for the cancer therapy segment, continues to remain enigmatic regardless of public emotion and sentiments attached to these drugs. Patients access and affordability to the most effective drug at the right time can save or take lives. Surprisingly, despite healthy growth of anti-cancer drugs, especially the newer and pricey ones, the number of deaths due to cancer is also fast increasing, and is the second largest cause of death today.

The pricing conundrum of cancer drugs remains the subject of a raging debate, globally. Nevertheless, the drug industry keeps justifying the mind-boggling prices, with the same sets of contentious reasons, even when various investigative research studies negate those claims. Moreover, when general public expects the drug industry to innovate both in the new drug discovery and also on making the drug prices affordable to a large section of the population, the industry doesn’t exhibit any interest to talk about the latter. Instead, they talk about PAP initiatives for improving access to such drugs. Notwithstanding independent research studies concluding that PAPs lack transparency, and is not an alternative for all those who want to fight the disease, in the most effective way.

The arguments and counterarguments continue. More effective cancer drugs keep coming with lesser number of cancer patients having access to those medicines, as patents prevail over the patients. The reverberation of the power of Big Pharma to stay in the chosen course – come what may, can also be felt from the reported statement of politically the most powerful person in the world – the President of the United States. In view of this, both the business and market dynamics of the cancer therapy segment is likely to remain enigmatic – at least, in the foreseeable future?

By: Tapan J. Ray

Spirit Behind Drug Patent Grant: Secondary Patents: Impact on Drug Access

Posted on September 9, 2019 by Tapan Ray

For more effective treatment against existing diseases, besides combating new or a more complicated form of existing ailments with precision, drug innovation is absolutely necessary and on an ongoing basis. This makes innovative drugs so important for the population, globally.

Besides academia, the pharma industry has remained in the forefront of the search for new drugs, for so long. What makes this process so crucial is, cheaper generic drugs flow from the innovative drugs, post market exclusivity period, which together form the bedrock of the pharma industry’s business model. Consequently, a robust patent protection for the new molecular entities, not only enable the drug innovators to make a reasonably good profit, but also encourage them to keep this virtuous circle moving, faster.

Although, the drug patents are granted for 20 years, after obtaining marketing approval from the respective drug regulators, a time period - ranging between 7 and 12 years, is available to the company to realize its maximum commercial benefits. Thereafter, the patent expires, paving the way of market entry of cheaper generic equivalents to make the drug accessible to a larger population. This is the playbook, which deserves to be accepted and respected by all, both in the letter and spirit.

Currently, the narrative has started changing, apparently, repudiating the spirit behind the grant of new drug patents, especially with the entry of a number of expensive, large molecule biopharmaceutical drugs. After obtaining a fixed-term market exclusivity, more intricate legal measures are being taken to extend the fixed-term market monopoly for an unknown period, delaying market entry of cheaper biosimilar equivalents, post patent expiry, as long as possible.

In this milieu, India appears to be the only country in the world, where the country’s ‘Patents Act’ provides enough safeguard to blunt those legal tools, effectively, to protect patients’ health interest. Quite expectedly, this new narrative of the drug innovators is yielding the best return in the Eldorado of the pharma world – the Unites States. It is also no secret that US vehemently opposes several provisions of the Indian Patents Act 2005, under pressure from the most powerful pharma lobby group, as many believe.

Using the spirit behind drug patent protection as the backdrop, I shall dwell in this article, how this so precious spirit is gradually losing its basic purpose, especially for blockbuster biopharma drugs. Is the key intent behind sacrificing the spirit behind drug patent grant to keep their brands money spinners and big – even after expiry of original patent – as long as possible – at the cost of patients’ health interest?

Despite the original patent expiry, biggest biologic drugs remain big:

The fact that original patent expiries have done little to halt sales of some of the industry’s biggest products – mostly biologic drugs, was clearly elucidated in an Evaluate Pharma article – “Biopharma’s biggest sellers – the oldies that just keep giving,” published on August 14, 2019. This gets vindicated, as we look at the ‘top ten pharma brands with biggest lifetime sales – from launch to 2018’, in the following Table I:

	Product	Company	Launch year	USD Billion
1.	Lipitor	Pfizer	1997	164.43
2	Humira	AbbVie	2003	136.55
3.	Rituxan	Genentech/Biogen	1997	111.50
4.	Enbrel	Amgen	1998	108.16
5.	Epogen	Amgen	1988	107.90
6.	Advair	GSK	1998	104.20
7.	Remicade	Janssen	1998	98.00
8.	Zantac	GSK	1981	97.42
9.	Plavix	Sanofi/BMS	1998	90.63
10.	Herceptin	Genentech/Roche	1998	87.97

(Adapted from Evaluate Pharma data of August 14, 2019)

The point to take note of:

The point worth noting here, with the exception of Advair, Zantac, Lipitor and Plavix, all others – among the top ten brands, are biologic drugs. Moreover, what is most striking in the Table I, despite the expiry of the original patents, a large number of biologic brands were able to expand their sales, pretty impressively, for well over two decades. As we shall see later, this situation is expected to continue, at least, till 2024. As the Evaluate Pharma article states, for various reasons, these multibillion dollar brands have been able to avoid the expected post patent expiry ‘onslaught from biosimilars in the key US market’, which is incidentally the most valuable pharma market in the world.

One of the key reasons that helps delaying cheaper biosimilar drug entry expanding patient access, is a crafty strategic measure adopted by these companies through the creation of a Patent Thicket with secondary patents. As I discussed in this Blog on April 22, 2019, this is a crafty way of ‘evergreening’ patent term beyond 20 years, legally. Whether such measures conform to the spirit of granting 20 years product patent, becomes a moral question, or an issue of probity for the concerned companies, at the most. Be that as it may, a concern over this situation has been raised in many countries, including the United States.

Barrier of secondary patents:

Biosimilar drug developers continue facing multiple non-financial challenges, such as, scientific, regulatory, pricing. I have already discussed some of these barriers in this blog on July 31, 2017. Instead, I shall focus in this article, with greater detail, on the intricate and a well-woven net of secondary patents. However,before delving into this area, it will be worthwhile to have a quick recap on the basic differences between original patents and secondary patents.

According to WIPO, “Patents on active ingredients are referred to as primary patents. In later phases of the drug development, patents are filed on other aspects of active ingredients such as different dosage forms, formulations, production methods etc. These types of patents are referred to as secondary patents.”

Another excellent paper, authored by two distinguished researchers from Columbia University and LSE, makes some important points on this subject. It says, secondary patents have become increasingly important to the pharma industry, especially in the U.S. and Europe over the past three decades. The basic purpose of ‘taking out multiple patents on different aspects of a drug in order to cordon off competitors is now standard practice in the pharmaceutical industry.’ As the authors further said, this is primarily because: ‘Secondary patents can protect market shares by extending periods of exclusivity beyond the dates in which patent protection would otherwise lapse.’

Interestingly. devising patent strategies to extend periods of market exclusivity is generally considered in the industry, as a key component of ‘product life cycle management,’ – not by the marketing whiz kids, but by astute patent attorneys. Nevertheless, as the paper articulates, critics of this practice often use the more pejorative – evergreening, to describe it.

Examples of impact of secondary patents:

Many research papers suggest, besides scientific complexity in biosimilar drug development being a key reason for their delayed market entry, secondary patents are even tougher barriers for the same. This was brought to light a few years ago in a ‘Review Article’ – ‘The Economics of Biosimilars’, published in the September/October 2013 issue of American Health & Drug Benefits.

Some of the key points made on this issue include,AbbVie plan to defend Humira (adalimumab) with more than 200 secondary patents, Merck’s giving up its biosimilar project on Enbrel when Amgen got its expanded patent life. There are many other such instances.

Its effect would last longer:

Experts believe, the effect of creating a strong secondary patent shield around blockbuster biologic would last much longer. As the above Evaluate Pharma article underscores: ‘This ability to fend off biosimilar competition is one of the reasons Humira is set to snatch Lipitor’s crown next year as the industry’s most successful drug.’

The Table II below that lists ‘top 10 pharma brands from their respective launch date, including estimated forecast till 2024’, vindicates its long-lasting impact:

	Product	Company	Launch year	USD Billion
1.	Humira	AbbVie	2003	240.05
2	Lipitor	Pfizer	1997	180.19
3.	Enbrel	Amgen	1998	139.83
4.	Rituxan	Genentech/Biogen	1997	136.07
5.	Revlimid	Celgene	2008	123.64
6.	Remicade	Janssen	1998	117.20
7.	Epogen	Amgen	1988	115.87
8.	Herceptin	Genentech/Roche	1998	114.89
9.	Avastin	Genentech/Roche	2004	114.27
10.	Advair	GSK	1998	113.61

(Adapted from Evaluate Pharma data of August 14, 2019)

Although, Zantac and Plavix no longer feature in this table, one drug that leapfrogged much of the competition to become one of the industry’s biggest future bestsellers is Revlimid. The projected sales of the drug over the next six years will actually outstrip its sales to date. However, much of this is dependent on whether generic competition will arrive ahead of Revlimid’s 2022 patent expiry, the paper indicated.

Concern expressed even in the US for the delay in biosimilar market entry:

Many big spending countries on health care, such as the United States expected that timely biosimilar drug entry will help contain health expenditure significantly. However, the article published in the Fierce Pharma on August 29, 2019, raises an alarm, but with a hope for the future. It says: “It’s no secret biosimilars haven’t made a big dent in U.S. drug spending. Some experts have even said it’s time to give up on copycat biologic.”

This hope gets resonated with what, ‘the former US-FDA commissioner Scott Gottlieb argues’. He feels, ‘It’s too soon for that’, while ‘calling on Congress to bolster the budding market.’ However, in my personal view, this will remain a difficult proposition to implement, as biologic drug players will continue using their relatively new, but powerful weapon of filing a number of complex ‘secondary patents.’ These will help extend the market exclusivity period of their respective brands, much beyond the original patent grant period, unless a counter legal measures are taken by the lawmakers of various countries, including the United States. But, India is an exception in this regard.

Indian patent law doesn’t encourage ‘secondary patents’:

The good news is, Indian Patent Act 2005, doesn’t encourage ‘secondary patent.’ This is because, section 3 (d) of the Indian Patent Act 2005 limits grant of ‘secondary pharmaceutical patents.’ An interesting study reported on February 08, 2018, discussed about 1,700 rejections for pharma patents at the IPO spanning over the last decade. But, there is a huge scope for improvement in this area.

Which is why, the not so good news is under-utilization of the same section 3.d by the Indian Patent Office (IPO), as are being voiced in many reports. One such paper of April 25, 2018 highlighted,72 per cent of pharma patent grants are secondary patents. These were granted for marginal improvements over previously known drugs for which primary patents exist. That said, despite such reported lapses, blocking of some crucial secondary patent grant has benefited a large number of patient population of India.

Blocking secondary patent grant has helped India immensely:

While US recognizes secondary patents, blocking secondary patent grant, especially for biologic drugs has helped Indian patients immensely, with expanded access to those medicines. This was also captured in the above study. Besides the classic case of Novartis losing its secondary patent challenge for Glivec in the Supreme Court of India in 2013, several other examples of secondary patent rejection are also available. This includes, among others, Glivec of Novartis and the world’s top selling drug for several years – Humira of AbbVie.Against a month’s therapy cost of ₹1,6o, ooo for Glivec in the US, its Indian biosimilar version costs for the same period ₹11,100. Similarly, while the treatment cost with Humira in the US is ₹85,000, the same with its biosimilar version in India is ₹ 13,500, as the above study finds.

Conclusion:

The core purpose of drug innovation, as widely touted by the R&D-based drug companies, is meeting the unmet needs of patients in the battles against diseases. Thus, drug innovation of this genre must not just be encouraged, but also be adequately protected and rewarded by granting product monopoly for a 20-year period from the date of the original patent grant. Curiously, piggybacking on this basic spirit behind the drug patent grant, pharma lobby groups are now vocal on their demand for giving similar treatment to secondary patents on various molecules. The tone of demand gets shriller when it comes to section 3. d of the Indian Patents Act, which doesn’t allow such ‘evergreening’ through secondary patents.

Thus, the key question that surfaces, while the original patent grant for innovative drugs help meeting unmet needs of some patients, whose unmet needs would a secondary patent grant meet, except making the concerned company richer? Further, for highly expensive biologic drugs, delayed market entry of cheaper biosimilars in that process, would deny their expanded access – failing to meet the unmet needs of scores of others.

Hopefully, India won’t give in to pressure of multinational pharma lobby groups, channeled through various powerful overseas government entities. At the same time, I hope, the government in power at the Eldorado of the pharma industry, will consider giving a fair chance of market entry to cheaper biosimilars, including those from India, to also grow their business globally, but in a win-win way.

The key objective of all stakeholders involved in this process, should be to uphold the basic spirit behind drug patent grant. It may even call for challenging the core intent behind secondary patent applications, the world over, that deny quicker market entry for cheaper biosimilars, sans heavy litigation expenses. This will help expand access to cheaper biologic medicines to all those who can’t afford those, otherwise.

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

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Spirit Behind Drug Patent Grant: Secondary Patents: Impact on Drug Access