Tag Archives: R&D

Pioglitazone Conundrum: Should The Drug Regulator Step Over The Line?

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Recent order of the Indian drug regulator to withdraw all formulations of the well known, yet controversial, anti-diabetic drug – Pioglitazone from the domestic market has created a flutter in the country, ruffling many feathers at the same time.

Withdrawal of any drug from the market involves well-considered findings based on ongoing robust pharmacovigilance data since the concerned product launch. To ascertain long-term drug safety profile, this process is universally considered as important as the processes followed for high quality drug manufacturing and even for R&D.

A paper titled, “Withdrawing Drugs in the U.S. Versus Other Countries” brings to the fore that one of the leading causes of deaths in the United States is adverse drug reaction. Assessing enormity and impact of this issue, the United Nations General Assembly for the first time in 1979 decided to publish a list of banned pharmaceutical products that different countries may use for appropriate decisions keeping patients’ safety in mind, as they will deem necessary from time to time.

An interesting finding:

Quite interestingly, the paper also highlights:

“There are a number of pharmaceuticals on the market in the USA that have been banned elsewhere and similarly, there are some drug products that have been banned in the United States, but remain on the market in other countries.”

Different policies in different countries:

The reason for the above finding is mainly because, various countries follow different policies to address this important health related issue. For example, though the United States will withdraw drugs based on the decision taken by its own FDA, it will also compare the action taken by countries like, UK, Japan, Australia and Sweden on the same subject.

However, many experts do believe that United Nations must take greater initiative to make all concerned much more aware about the UN list of dangerous drugs, which should be continuously updated to expect the least.

Need transparency in pharmacovigilance:

Pharmacovigilance has been defined as:

“The task of monitoring the safety of medicines and ensuring that the risks of a medicine do not outweigh the benefits, in the interests of public health.”

An article on Pharmacovigilance by A.C. (Kees) van Grootheest and Rachel L. Richesson highlights as follows:

“The majority of post marketing study commitments are never initiated, and the completion of post marketing safety studies (i.e., phase IV studies) declined from 62% between 1970 and 1984 to 24% between 1998 and 2003.”

Thus, in many countries, due to lack of required transparency in the pharmacovigilance process, harmful drugs continue to remain in the market for many years before they are withdrawn, for various reasons.

The above paper strongly recommends, “While there might be monetary benefits for each country in keeping these drugs on the market, the U.N. must step up the visibility of the withdrawal of dangerous drugs list.”

Recent Pioglitazone withdrawal in India:

Recently in India, the Ministry of Health under Section 26A of the Drugs and Cosmetics Act, 1940 has suspended the manufacture and sale of Pioglitazone, along with two other drugs, with immediate effect, through a notification issued on June 18, 2013.

As per the Drugs and Cosmetic Rule 30-B, import and marketing of all those drugs, which are prohibited in the country of origin, is banned in India. Just as in the United States, the Ministry of health, while taking such decisions in India, compares long-term safety profile of the concerned drugs in countries like, USA, UK, EU and Australia.

A Parliamentary Standing Committee of India has already indicted the drug regulator for not taking prompt action on such issues to protect patients’ treatment safety.

Pioglitazone: the risk profile:

In India:

A leading medical journal (JAPI) cautions:

“Given the possible risk of bladder cancer, physicians have to be extremely careful about using pioglitazone indiscriminately in the future.”

The JAPI article continues to state:

“We require more robust data on the risk of bladder cancer with pioglitazone and Indian studies are clearly needed. Till that time, we may continue the use of this drug as a second or third line glucose-lowering agent. In all such cases, the patient should be adequately informed about this adverse effect and drug should be used in as small a dose as possible, with careful monitoring and follow up.”

In the USA:

In 2011 The US FDA as a part of its ongoing safety review of pioglitazone informed physicians and the public that use of this drug for more than 12 months is linked to an increased risk of bladder cancer.

The USFDA review is reportedly based on “an ongoing 10-year observational cohort study as well as a nested, case-control study of the long-term risk of bladder cancer in over 193,000 patients with diabetes who are members of the Kaiser Permanente Northern California (KPNC) health plan.”

Based on this finding US FDA directed that physicians should:

  • Not use pioglitazone in patients with active bladder cancer.
  • Use pioglitazone with caution in patients who have a prior history of bladder cancer, adding, “The benefits of blood sugar control with pioglitazone should be weighed against the unknown risks for cancer recurrence.”
  • Tell patients to report any signs or symptoms of “blood in the urine, urinary urgency, pain on urination, or back or abdominal pain, as these may be due to bladder cancer.”
  • Urge patients to read the pioglitazone medication guide.
  • Report adverse events involving pioglitazone medicines to the FDA MedWatch program.

The moot point:

Considering the above US FDA directives in the Indian context, the moot point therefore is, whether it will be possible for the drug regulator to ensure that physicians and the patients in India follow such steps for drug safety with pioglitazone?

In Canada:

Another new Canadian study has again reportedly linked Pioglitazone with risks of bladder cancer and cautioned, “physicians, patients and regulatory agencies should be aware of this association when assessing the overall risks and benefits of this therapy.”

Pioglitazone and its combinations banned in France and Germany:

After a government-funded study, tracking diabetics from 2006 to 2009, concluded that Pioglitazone increases bladder cancer risk, the French Medicines Agency (FMA) announced withdrawal of Pioglitazone along with its fixed-dose combination with Metformin, as well.

FMA also advised doctors to stop prescribing Pioglitazone, plain or in combination, and asked patients, who are on this drug to consult their doctors immediately.

Simultaneously, German health authorities also acted on similar lines.

An intriguing comment by the Indian drug regulator:

Keeping all these in view, it is indeed intriguing to note that the Indian drug regulator is reportedly open to re-examine the case of pioglitazone and revoking its ban in India, if strong scientific evidences emerge in support of safety and efficacy of the drug.

However, the question then comes up is what more new scientific evidences that the Indian drug regulator is now expecting, especially when the pharmacovigilance studies are almost non-existent in India?

Moreover, such comments of the drug regulator not only prompt raising doubts about the fragility and hastiness of his own decision of banning Pioglitazone in India, but also amply demonstrate lack of seriousness in his part on this extremely important decision on drug safety?

‘Drug Product Liability Claims’ in India virtually non-existant:

In most of the developed countries, appropriate regulations are in place for product liability claims.

Under this law, if any patient suffers injury in any form while administering  a pharmaceutical drug, the patient concerned is eligible to make pharmaceutical-drug-based product liability claims, which usually involve a huge amount of money by any imaginable standard.

These claims are based on:

  • Improperly marketed pharmaceutical drugs. This category includes:

- Failure to provide adequate or accurate warnings regarding a dangerous side effect.

- Failure to provide adequate instructions on safe and appropriate use of the drug.

- The “bad advice”, which may have been given by the manufacturer or by a doctor, pharmacist, sales rep, or some other medical provider.

In the United States drug safety and effectiveness related litigations reportedly also include:

-        Criminal and civil complaints brought by the U.S. Department of Justice.

-        Lawsuits brought by state Attorney Generals and private plaintiffs under state consumer protection acts and other causes of action.

In India, closer to the above system there is a law in paper, named as “Products Liability”. This law deals with the liability of manufacturers, wholesalers, distributors, and vendors for injury to a person or property caused by dangerous or defective products. The aim of this law is to help protecting consumers from dangerous or defective products, while holding manufacturers, distributors, and retailers responsible for putting into the market place products that they knew or should have known were dangerous or defective. However, in reality, there are hardly any damages slapped by consumers on to the manufacturers in India under this ‘Product Liability’ law.

It may sound however bizarre, but is a hard fact that many drugs in Fixed Dose Combinations (FDCs) had never even gone through any form clinical trials on human volunteers before they were for the first time allowed to be marketed in India by the drug regulators.

In absence of any active steps taken by the government to educate and encourage patients to make use of this law, patients, by and large, would continue to pay a heavy price for their ignorance, keeping their mouth shut all the way, while using:

- Defectively manufactured pharmaceutical drugs.

- Pharmaceutical drugs with dangerous side effects.

- And even improperly marketed pharmaceutical drugs.

As stated before, it is worth repeating, neither is their any functional pharmacovigilance system in place in India.

Drug product liability suit for Pioglitazone in the United States:

Just to cite an example, one report indicates:

“According to court filings, all of the Actos (Pioglitazone) lawsuits pending in the Western District of Louisiana allege Takeda Pharmaceuticals failed to provide adequate warnings to doctors and patients regarding the drug’s association with an increased risk of bladder cancer. Last month (April, 2013), the nation’s first trial involving Actos bladder cancer allegations ended with a Los Angeles Superior Court jury awarding $6.5 million to a plaintiff who was diagnosed with the disease after taking the drug for four years”. However, the judge overseeing the case granted Takeda Pharmaceuticals’ request to set aside the verdict.

The report also indicates, ‘more than 1,200 Actos bladder cancer claims are pending in the Louisiana litigation. Additional Actos lawsuits have been filed in state litigations in California and Illinois.’

Indian doctors and manufacturers protest together against Pioglitazone ban:

It is equally intriguing to note, despite serious life threatening side-effect and restricted usage profile of Pioglitazone, as established internationally through robust and large clinical studies, both the doctors and the Pioglitazone manufacturers in India are urging the government to lift ban on this drug immediately, keeping the silent patient community in the front line, as usually happens all over.

A news report highlighted that ‘doctors flayed the ban on anti-diabetes drug Pioglitazone and requested the Centre to reverse its decision in interest of patients.’

Another media report highlighted, major drug makers are strongly opposing the move of the government to ban Pioglitazone, in India.

Conclusion:

Without generating another set of robust evidence proving contrary to what has been already concluded in the United States and EU based on strong supporting pharmacovigilance data, if the Indian drug regulator revokes the ban of Pioglitazone, it will be construed as a huge compromise with patients’ safety interest with this drug.

This issue assumes even greater importance, when the ‘drug product liability’ system is almost dysfunctional in India.

The other alternative of the drug regulator is to revoke the ban, wilting under combined pressure of the manufacturers and doctors and ask for safety warnings trying to emulate, as it were, what has been done by the US FDA.  

In which case, with full knowledge that it is virtually impossible for any one to comply with the above US FDA requirements in India, will the drug regulator not step over the line, yet again?

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.

Beyond ‘The Magic Moment’ of New Drug Marketing Approval

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“Uncontrolled clinical trials are causing havoc to human life. There are so many legal and ethical issues involved with clinical trials and the government has not done anything so far.”

This is exactly what the Supreme Court of India observed while responding to a Public Interest Litigation (PIL) on the subject in January 2013.

While Indian regulators with the active intervention of the Supreme Court are trying to grapple with, besides others, the basic ‘human rights’ aspect of the Clinical Trial (CT), many countries in different parts of the world are moving much ahead at a brisker pace. They have started thinking and putting in place more patient centric newer drug approval systems and also, in tandem, hastening the process of bringing new drugs to the market.

Current general scenario in CT:

Currently, after pre-clinical studies and before applying for regulatory approval, a new drug has to be tested on volunteers in randomized studies to prove its efficacy and safety on patients. Relatively short duration of new drug trials can hardly establish long-term safety and efficacy, which are now arrived at through extrapolation of data collected during CT period.

It is worth noting, the overall situation changes dramatically after launch of these products, as their usage expands from a relatively smaller number of CT volunteers to millions of real-world patients.

In a situation like this, unrealistic expectation of patients’ safety in perpetuity based primarily on extrapolation of very limited CT data is being increasingly questioned today.

That is why, on going post-marketing surveillance, which is also known as a Phase IV CT, is considered as a much more effective process to gauge relative superiority of the drug against the existing ones in terms of both efficacy and safety on a longer term.

That said, today one reads and hears umpteen number of accusations for almost lack of any meaningful response on the part of the pharmaceutical companies, in general, towards revelations of post-marketing surveillance data. This could, in turn, expose the patients to various types of risks, including wasteful healthcare expenditure.

The ‘Magic Moment’ in the present regulatory process:

A recent paper highlights a single “Magic Moment” between pre and post-licensing processes in the current drug-approval model in many countries. In this system, the use of a drug is tightly controlled in a narrowly defined pre-licensing population. Thus, CTs are also conducted on such pre-defined and relatively homogeneous volunteers, who are generally free from complicating conditions.

However, after ‘The Magic Moment’ of marketing approval, a large number of heterogeneous patient population, with many of them on multiple therapy, also use these new products in uncontrolled settings. Situations as these had led to post-marketing major drug withdrawals like, Vioxx and Avandia due to patients’ safety.

These grave concerns have led to a strategic shift in the drug regulatory approval scenario throwing open new ideas in the drug approval process.

Adaptive Licensing:

To find the right answer to this vexing issue the drug regulators in many countries are  reportedly seriously contemplating to imbibe a process that will continuously help analyzing information through ongoing post-marketing surveillance data. Continuous medical data analysis like this will enable the regulators to modify their earlier decisions on marketing approval and also medical reimbursements related to pricing reasons.

This new process is called ‘Adaptive Licensing (AL)’, which is expected to benefit the overall healthcare system, by not allowing medical reimbursement of treatments with those drugs, which will provide negligible benefit over existing low cost therapies.

Difference between current mechanism and AL:

According to a ‘Health Canada’ paper titled, “The Path to Adaptive Drug Regulation”, the difference between the two is as follows:

Current system:

As explained above, post-licensing i.e. after ‘The Magic Moment’ of regulatory approval, treatment population grows rapidly and treatment experiences do not contribute to evidence generation.

Adaptive Licensing:

After initial license, treated patients grow more slowly due to regulatory restrictions. Patient experience is captured to contribute to real-world information. The marketing license is also modified accordingly from time to time.

Most desirable for many drugs:

Experts in this field opine that AL will help bringing in alignment of all required processes so important for a new drug seen from patients’ perspective like, R&D, regulatory approval and market access with the active involvement of all stakeholders like, the pharmaceutical companies, the drug regulator, payors/insurance companies and also the researchers.

In the AL system, a transparent drug development process will provide enough data on risk-benefit profile of the concerned drug to satisfy the drug regulator for its quick marketing authorization on pre-determined types of patients.

Such approval will follow real-life monitoring of efficacy and safety for modification of the drug license accordingly, wherever and whenever required.

Thus, AL is expected to strike a right balance balance between timely access to new drugs for the patients and the need to evaluate real time evolving information on safety and efficacy leading to a well-informed patient centric decisions by the drug regulators.

A continuous regulatory evaluation and decision-making process:

AL intends to evaluate a drug through its entire life span.  It has been reported that during this long period, clinical and other data will “Continue to be generated on the product through various modalities, including active surveillance and additional studies after initial and full licensing. The artificial dichotomy of pre vs. post licensing stages (‘The Magic Moment’) will be replaced by graded, more tightly managed, but more timely and potentially more cost-effective market entry and market stability.”

Not necessary for all drugs in the near term:

It is worth noting that AL system may not perhaps be required for all pharmaceutical or biologic products and will not totally replace the current system of drug licensing process, at least in the near term.

AL process may immediately be followed only for those products with a favorable risk-benefit drug profile as demonstrated in the initial data and there is a robust reason for early market entry of this drug to meet unmet needs, simultaneously with ongoing studies.

The ‘Magic Moment’ freezes in India…in perpetuity:

As per the Drugs and Cosmetics Act of India, after obtaining drug marketing approval from the regulators, concerned pharmaceutical companies are required to follow the pharmacovigilance system in the country to own the responsibility and liability of the drugs as enunciated in the Schedule Y of the Act. Unfortunately, this is hardly being followed in India, ignoring patients’ safety blatantly.

With the plea that most products launched in India are already being marketed in many developed markets of the world, the concerned companies prefer to depend on clinical experiences in those markets. This attitude totally bypasses the regulatory requirement to follow a robust pharmacovigilance system in India. Indian drug regulators also do not seem to be much concerned about this important patients’ safety related requirements, very surprisingly not even for biosimilar drugs.

However, the current ground realities are quite different. As we witness today, there does not seem to be much difference in time between international and India launch of innovative products. Thus, the argument of gaining medium to long-term experience on safety and efficacy from international data related to these drugs, does not seem to hold any water at all.

On the contrary, some drugs withdrawn from the international markets on safety grounds are still available in India, despite ire and severe indictment even from the Indian Parliamentary Standing Committee.

In a situation like this, AL process of Marketing approval for selected newer and innovative drugs may be considered by the Indian Drug Regulators, just not to be more patient centric, but also to help evaluating  pricing decisions of innovative drugs failing to demonstrate significantly better treatment outcomes as compared to the existing ones.

A recent example of AL:

One of the latest drugs, which reportedly will undergo such regulatory scrutiny of USFDA is Tacfidera (dimethyl fumarate) used for the treatment of multiple sclerosis, approved in April 2013 and costing US$ 54,900 per patient per year.  Interestingly, Tacfidera, before the drug can find itself on a formulary, will need to demonstrate its effectiveness in the real world.

The report indicates, “the first six months after a drug launch are always about educating payers about its benefits, and while most large payers are likely to make a decision to reimburse the drug in the next twelve months, data collection will continue and changes in policies might be made at a later date.”

Thus, in the years ahead, whether a new drug will become a blockbuster or not will very largely be decided by the ongoing real world data. If the promise of a drug diminishes at any point of time through clinical data, it will certainly going to have consequential financial and other adverse impacts.

Another interesting recent development:

Under new pharmacovigilance legislation in Europe, the European Medicines Agency has reportedly announced the list of over 100 drugs that soon will bear the “black triangle” logo. This initiative is directed to encourage both the doctors and patients to report side effects to enable close monitoring of drug safety.

Criteria to include drugs under additional monitoring are:

  • Medicines authorized after January 1, 2011 that contain a new active substance.
  • Biologics for which there is limited post-marketing experience.
  • Medicines with a conditional approval or approved under exceptional circumstances.
  • Medicines for which the marketing-authorization holder is required to carry out a post-authorization safety study (PASS).
  • Other medicines can also be placed under additional monitoring, based on a recommendation from the European Medicines Agency’s Pharmacovigilance Risk Assessment Committee (PRAC).

Conclusion:

Global regulatory experts do believe that in the concept of AL, there are still some loose knots to be tightened expeditiously to make it a fully implementable common drug marketing authorization process.  Appropriate pilot projects need to be undertaken in this area to establish beyond any doubt that AL will be decisively more preferable to the current regulatory process.

As and when AL will become the preferred drug-licensing pathway across the world, it is expected to offer greater real benefits of new drug development to the patients for their optimal use at an affordable price.

That said, some other experts do opine as follows:

“No matter how fast the authorization process operates, the merits of innovation will not be felt until they reach patients. And the barrier between authorization and patient access remains, in most of Europe, the issue of reimbursement.”

While all these are fast developing in the global CT scenario, in the jangle of Clinical Trials‘ in India, ‘Adaptive Licensing’ has still remained a critical missing ingredient even to encourage a wider debate.

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.

Pharma Marketing in India: 10 Chain Events to Catalyze a Paradigm Shift

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In the matured markets of the world pharmaceutical marketing is quite different in many respect as compared to India. Besides doctors, different sets of customer groups like, healthcare providers, patient advocacy groups, pharmacy benefit managers, clinical assessment authorities play various critical roles for use and consumption of branded or generic pharmaceutical products and related healthcare services.

Quite in contrast, even today, individual doctors have continued to remain almost the sole target customers for the pharmaceutical players in India. This is mainly because, by and large, they are the only decision makers for usage of medicines and other healthcare facilities for most of the patients in the country.

Heralding a new paradigm:

As indicated above, though the current pharmaceutical marketing strategies continue to revolve mostly around the doctors, a distinct change, albeit slowly though, is now anticipated within the pharmaceutical marketing space in India.

Gradual emergence of healthcare providers with medical insurance and other related products, patient advocacy groups and standard treatment guidelines, just to name a few, are expected to facilitate heralding a new paradigm in the strategy dynamics of the Indian Pharmaceuticals Market (IPM) in the coming years. These changes will not be incremental in any way, but disruptive and radical in nature, as they will fully evolve.

This process of transformation, mainly driven by Government policy reform measures like, ‘Universal Health Coverage (UHC)’, ‘Free distribution of medicines’, mandatory prescriptions in generic names, could make the current pharmaceutical business strategy models of majority of companies irrelevant and obsolete, in not too distant future.

It is worth noting that the Government will spend around Rs.14,000 Crores (US$ 2.60 billion, approximately) from the year 2014 to 2017 just on medicine purchases at highly negotiated/discounted prices for free distribution to all through Government hospitals and dispensaries.

10 Chain events envisaged: 


In the evolving scenario, following chain events, taking place almost in tandem, in my view, will gradually usher in a new pharmaceutical marketing paradigm in India:

1. In addition to ‘Universal Health Coverage’, there will be a rapid increase in the number of other healthcare providers with innovative, tailor-made and value added schemes for various strata of the society.

2. This will trigger emergence of very powerful groups of negotiators for adopting treatment guidelines, pharmaceutical products usage and other healthcare related services.

3. These groups will have the wherewithal to strongly and significantly influence the doctors in their prescription and other treatment choices.

4. A significant proportion of the products that the pharmaceutical companies will market, a tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable.

5. Consequently, doctors will no longer be the sole decision makers for prescribing drugs and also the way they will treat the common diseases.

6. Pharmaco-economics or Health Technology Assessment (HTA) or outcome based pricing will gradually play an important role in pricing a healthcare products. Drug Price Control Order (DPCO 2013) has already signaled to this direction for a class of products.

7. An integrated approach towards disease prevention will emerge as equally important as treating diseases.

8. A shift from just product marketing to marketing a bundle of value added comprehensive disease management processes along with the product would be the order of the day.

9. More regulatory control measures on pharmaceutical sales and marketing are expected to be put in place by the Government to prevent alleged widespread sales and marketing malpractices in the country.

10. Over the counter (OTC) medicines, especially those originated from natural products to treat common and less serious illnesses, will carve out a sizable share of the market, as appropriate regulations would be put in place, adequately supported by AYUSH. This will be fueled by overall increase in general health awareness of the population.

Trapped in an ‘Archaic Strategy Cocoon’:

Over a long period of time, Indian pharmaceutical industry seems to have trapped itself in a difficult to explain ‘Archaic  Strategy Cocoon’. No holds bar sales promotion activities, with very little of marketing, continue to dominate the ball game of hitting the month-end numbers, even today.

It is high time to come out of this cocoon and confront the ‘writing on the wall’ upfront, if not try to hasten the process of the evolving changes, boldly and squarely. This will require a strategic long term vision to be implemented in an orderly way to effectively convert all these challenges into possible high growth business opportunities.

A differentiated composite value delivery system:

Moreover, in today’s post product patent regime in the country, product pipelines of the domestic Indian companies with new ‘copycat’ versions of patented products have almost dwindled into nothing, making price competition in the market place even more ‘cut throat’.

In such type of changing environment, all pharmaceutical companies will be under tremendous pressure to create and deliver additional, well differentiated and composite value offerings, beyond physical products, to attract more patients, doctors, healthcare providers and others, in and around related disease areas, for business excellence.

Thus, ability to create and effectively deliver well-differentiated composite value offerings, along with the physical products, will separate men from the boys in the high growth pharmaceutical market of India, in the long run.

This could also possibly create an ‘Alibaba Effect’ for the successful ones in search of pots of gold in the pharmaceutical space of India.

New leadership and managerial skill set requirements:

In the new environment, required skill sets for both the leaders and the managers of Indian pharmaceutical companies will be quite different from what they are today. This will not happen overnight though, but surely will unfold gradually.

New skills:

Leaders and managers with knowledge in just one functional area like, R&D, manufacturing, marketing, regulatory, finance are unlikely to be successful without a broad-based knowledge in the new paradigm. To really understand and handle new types and groups of customers, they will need to break the operational silos and be proficient in other key areas of business too.

These professionals will require ensuring:

• Multi-functional expertise by rotating right people across the key functional areas, as far as possible, even with a stretch.

• Ability to fathom and correctly interpret patients’ clinical benefits against cost incurred to achieve the targeted clinical outcomes, especially in areas of new products.

• Insight into the trend of thought pattern of healthcare providers and other customers or influencers groups.

• Speed in decision-making and delivery…more importantly ability to take ‘first time right’ decisions, which can make or mar an important initiative or a commercial deal.

IPM growing fast, can grow even faster: 

India is now one of fastest growing emerging pharmaceutical markets of the world with 3rd global ranking in the volume of production and 13th in value terms. Domestic turnover of the industry is over US$ 13.1 billion in 2012 (IMS) representing around 1 percent of the global pharmaceutical industry turnover of US$ 956 billion (IMS 2011).

Since 1970, Indian pharmaceutical Industry has rapidly evolved from almost a non-entity to meeting around 20 percent of the global requirements of high quality and low cost generic medicines.

Financial reforms in the health insurance sector and more public investments (2.5% of the GDP) in the healthcare space during the 12th Five Year Plan Period will have significant catalytic effect to further boost the growth of the industry.

Stringent regulations and guidelines of the Government in various areas of pharmaceutical business in India are expected to be in place soon. Ability to ensure system-based rigid organizational compliance to those changing business demands in a sustainable way. will determine the degree of success for the pharma players in India.

One such area, out of many others, is the professional interaction of the Medical Representatives with the doctors and other customer groups.

Require a ‘National Regulatory Standard’ for Medical Representatives in India:

Medical Representatives (MRs) currently form the bedrock of business success, especially for the pharmaceutical industry in India. The Job of MRs is a tough and high voltage one, laced with moments of both elation and frustration, while generating prescription demand for selected products in an assigned business territory.

Though educational qualifications, relevant product and disease knowledge, professional conduct and ethical standards vary widely among them, they are usually friendly, mostly wearing a smile even while working in an environment of long and flexible working hours.

There is a huge challenge in India to strike a right balance between the level and quality of sales pitch generated for a brand by the MRs, at times even without being armed with required scientific knowledge and following professional conduct/ ethical standards, while doing their job.

Straying from the right course:

A recent media report highlighted that ‘Indian subsidiary of a Swiss pharma major has run into trouble with some executives allegedly found to be inflating and presenting fabricated sales data for an anti-diabetic drug.’

The report also indicated that officials from mid-management ranks to sales representatives were allegedly involved in those unethical practices. The company has responded to this incidence by saying that the matter is still under investigation.

It is critical for the MRs not just to understand scientific details of the products, their mode of action in disease conditions, precautions and side effects, but also to have a thorough training on how to ‘walk the line’, in order to be fair to the job and be successful.

As MRs are not just salesmen, they must always be properly educated in their respective fields and given opportunities to constantly hone their knowledge and skills to remain competitive. The role of MRs is expected to remain important even in the changing scenario, though with additional specialized skill sets.

Unfortunately, India still does not have a ‘National Code of Conduct or Regulatory Standards’ applicable to the MRs.

Only the clause 4 of ‘The Magic Remedies (Objectionable Advertisement) Act, 1954’ deals with misleading advertisements. It is about time to formulate not only a ‘National Code on Pharmaceutical Marketing Practices’, but also a mandatory ‘Accreditation program’ and transparent qualifying criteria for the MRs for the entire pharmaceutical industry in India, just like many other countries of the world.

‘Central Drugs Standard Control Organization (CDSCO)’ of the Ministry of Health and Family Welfare of the Government of India in its website lists the “Laws Pertaining to Manufacture and Sale of Drugs in India”. However, it does not specify any regulation for the MRs nor does it recommend any standard of qualification and training for them, which is so critical for all concerned.

There are currently no comprehensive national standards for educational qualification, knowledge, ethics and professional conduct for the MRs. In the absence of all these, it is difficult to fathom, whether they are receiving right and uniform inputs to appropriately interact with the medical profession and others in a manner that will benefit the patients and at the same remain within the boundary of professional ethics and conduct.

Thus, a ‘National Regulatory Standard’ for MRs, I reckon, is absolutely necessary in India… sooner the better.

Global pharmaceutical players:

Facing a huge patent cliff, global pharmaceutical companies are now fast gaining expertise in the ball game of generic pharmaceuticals, especially in the developing markets of the world.

In the emerging markets like India, where branded generic business dominates, global pharmaceutical players seem to be increasingly finding it lucrative enough for a sustainable all round business growth.

However, to outpace competition, they too will need to capture the changing dynamics of the market and strategize accordingly without moaning much about the business environment in the country.

On the other hand, if majority of Indian pharmaceutical companies, who are not yet used to handling such changes, are caught unaware of this evolving scenario, the tsunami of changes, as they will come, could spell a commercial disaster, endangering even very survival of their business.

Managing transition:

During ensuing phase of transition in India, pharmaceutical companies would require to:

• Clearly identify, acquire and continuously hone the new skill sets to effectively manage the evolving challenge of change.

• Get engaged, having clarity in the strategic content and intent, with the existing public/private healthcare providers and health insurance companies like, Mediclaim, ICICI Lombard, large corporate hospital chains, retail chain chemists and others, proactively.

• Drive the change, instead of waiting for the change to take place.

• Ensure that appropriate balance is maintained between different types of marketing strategies with innovative ways and means.

Conclusion:

It may not be easy for the local Indian players to adapt to the new paradigm sooner and compete with the global players on equal footing, even in the branded generic space, with strategies not innovative enough and lacking required cutting edges.

In my view, those Indian Pharmaceutical companies, who are already global players in their own rights and relatively well versed with the nuances of this new ball game in other markets, will have a significant competitive edge over most other domestic players.

If it happens, the global-local companies will offer a tough competition to the local-global players, especially, in the branded generic space with greater cost efficiency.

So far as other domestic players are concerned, the fast changing environment could throw a new challenge to many, accelerating the consolidation process further within the Indian pharmaceutical industry.

As the new paradigm will herald, catalyzed by the above 10 chain events, there will be a metamorphosis in the way pharmaceutical marketing is practiced in India. A well-differentiated composite value delivery system would then, in all probability, be the name of the winning game.

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.

 

Pharma Innovation Absolutely Critical: But NOT Shorn from Ethics, Propriety, Compliance and Values

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Significant value added innovation is the bedrock of progress of the pharmaceutical industry and is essential for the patients. This is a hard fact.

However, this current buzzword – ‘innovation’ can in no way be shorn from soft business necessities like, ethics, propriety, compliance and values… not just for longer term sustainability of business, but more in the larger interest of patients and patient groups.

Most importantly, ‘ethics, propriety, compliance and values’ are not meant for mere display  in the corporate websites like, any other business showpieces. These should neither be leveraged to create a false positive impression in the minds of the stakeholders with frequent PR blitzkriegs.

The creators of these soft ‘X factors’ are now being increasingly hauled up for gross violations of the same by the Governments in various parts of the world .These are not just legal issues. The net impact of all such acts goes much beyond.

In this article, I shall deliberate on these continuing and annoying issues both in global and local perspectives, quoting relevant examples at random.

The sole purpose of my argument is to drive home that all such repeated gross violations, as reported in the media, go against patients’ interests, directly or indirectly. None of these incidents, in any way, can be negated with stories of great innovations or with any other make of craftily designed shields.

Under increasing scrutiny in the developed world:

Ethics, propriety and business value standards of big pharma, besides various types of legal compliance, are coming under increasing stakeholders’ scrutiny, especially in the developed markets of the world.

Very frequently media reports from across the world, highlight serous indictments of the Government and even judiciary for bribery, corrupt business practices and other unbecoming conduct, aimed at the the global mascot for healthcare.

It is indeed flabbergasting to note that more and more corporates, with all guns blazing at the same time, publicize with equal zest various initiatives being taken by them to uphold high ethical standards and business practices, if not propriety, as the juggernaut keeps on moving forward, unabated.

The scope of ‘ethics and propriety’:

The scope of ‘ethical business conducts, propriety and value standards’ of a company usually encompasses the following, among many others:

  • The employees, suppliers, customers and other stakeholders
  • Caring for the society and environment
  • Fiduciary responsibilities
  • Business and marketing practices
  • R&D activities, including clinical trials
  • Corporate Governance
  • Corporate espionage

That said, such scope should not be restricted to the top management, but must be allowed to percolate downwards in a structured manner, looking beyond the legal and regulatory boundaries.

Statistics of compliance to ‘codes of business ethics and corporate values’ are important to know, but the qualitative change in the ethics and value standards of an organization should always be the most important goal to drive any corporation and the pharmaceutical sector is no exception.

‘Business Ethics and Values’ in the globalized economy:

Globalization of business makes the process of formulating the ‘codes of ethics and values’ indeed very challenging for many organizations in many ways. This is mainly because, the cultural differences at times create a conflict on ethics and values involving different countries.

For this purpose, many business organizations prefer to interact with the cultural and religious leaders in the foreign countries, mainly to ascertain what really drives culturally diverse people to act in certain ways.

With the wealth of knowledge of the local customs and people, the cultural and religious leaders can help an organization to unify the code of ethics and values of the globalized business.

Such leaders can also help identifying the ‘common meeting ground of minds’ from a specific country perspective, after carefully assessing the cultural differences, which are difficult to resolve in the near term.

The ‘common meeting ground of minds’ within a given society, thus worked out, could form the bedrock to initiate further steps to strengthen global business standards of ethics and values of an organization.

OECD with USA started early enacting ‘Foreign Corrupt Practices Act (FCPA)’: 

To prevent bribery and corrupt practices, especially in a foreign land, in 1997, along with 33 other countries belonging to the ‘Organization for Economic Co-operation and Development (OECD)’, the United States Congress enacted a law against the bribery of foreign officials, which is known as ‘Foreign Corrupt Practices Act (FCPA)’.

This Act marked the early beginnings of ethical compliance program in the United States and disallows the US companies from paying, offering to pay or authorizing to pay money or anything of value either directly or through third parties or middlemen. FCPA currently has significant impact on the way American companies are required to run their business, especially in the foreign land.

A dichotomy exists with ‘Grease Payment’:

OECD classified ‘Grease payment’ as “facilitating one, if it is paid to government employees to speed up an administrative process where the outcome is already pre-determined.”

In the FCPA of the US, ‘Grease Payment’, has been defined as “a payment to a foreign official, political party or party official for ‘routine governmental action,’ such as processing papers, issuing permits, and other actions of an official, in order to expedite performance of duties of non-discretionary nature, i.e., which they are already bound to perform. The payment is not intended to influence the outcome of the official’s action, only its timing.”

Many observers opine, ‘Grease Payments’ is an absolute dichotomy to the overall US policy for ethical standards and against corruption.

Currently besides US, only Canada, Australia, New Zealand and South Korea are the countries that permit ‘Grease payments’.

Notwithstanding, the governments of the US and four other countries allow companies to keep doing business without undue delay by making ‘Grease Payments’ to the lower government officials, such payments are considered illegal in most other countries, in which they are paid, including India.

In India such a business practice is viewed as bribery, which is not only perceived as unethical and immoral, but also a criminal offense under the law of the land. Even otherwise, right or wrong, ‘Grease Payments’ are viewed by a vast majority of the population as a morally questionable standard of ‘business conduct’.

Many companies are setting-up the ethical business standards globally:

While visiting the website of especially the large global and local companies, one finds that all these companies, barring a very few exceptions, have already put in place a comprehensive ‘code of business ethics and values’. Some of these companies have also put in place dedicated code compliance officers across the globe.

‘Practice as you preach’:

Despite all these commendable initiatives towards establishing corporate codes of business ethics and values, the moot question that keeps haunting many times and again: “Do all these companies ‘practice what they preach’ in real life?”

Instances are too many for breach in ethics, propriety and value standards:

The media is now increasingly reporting such instances of violations both locally and globally.

Some Indian examples: (At random, not in a chronological order)

Criminal drug regulatory manipulation:

One of India’s top pharma players reportedly will pay a record fine of US$ 500 million in the US for lying to officials and selling badly made generic drugs.

The company has pleaded guilty to improper manufacturing, storing and testing of drugs, closing a year long civil and criminal investigation into the matter.

Compensation for deaths related to Clinical Trials not paid:

In 2011 the Drug Controller General of India (DCGI) reportedly summoned nine pharma companies on June 6 to question them on the amount of compensation they have decided to pay the ‘victims of their clinical trials’, which is a mandatory part of any clinical trial, or else all other trials of these nine companies going on at that time or yet to start, will not be allowed.

Clinical Trial is another area of pharmaceutical business, especially in the Indian context, where more often than not, issues related to ethics and values are being raised. In an article titled, ‘Clinical trials in India: ethical concerns’ published by the World Health Organization (WHO) following observations have been made:

“The latest developments in India reflect a concerted effort on the part of the global public health community to push clinical trials issues to the fore in the wake of several high-profile cases in which pharmaceutical companies were shown to be withholding information from regulators.”

Alleged marketing malpractices:

In 2010, the Parliamentary Standing committee on Health reportedly expressed concern that the “evil practice” of inducement of doctors by the pharma players continues.

Congress MP Jyoti Mirdha sent a bunch of photocopies of air tickets to Prime Minister Manmohan Singh to claim that doctors and their families were ‘beating the scorching Indian summer’ with a trip to England and Scotland, courtesy a pharmaceutical company.

30 family members of 11 doctors from all over the country reportedly enjoyed the hospitality of the concerned company.

Department of Pharmaceuticals reportedly roped in the Revenue Department under Finance Ministry to work out methods to link the money trail to offending companies.

Some global examples: (At random, not in a chronological order)

United States Government sues a Swiss pharma major for alleged multi-million dollar kickbacks:

The United States Government very recently reportedly announced its second civil fraud lawsuit against a Swiss drug major accusing the company of paying multimillion-dollar kickbacks to doctors in exchange for prescribing its drugs.

Fraud fines: 

Two largest drug makers of the world reportedly paid US$ 8 billion in fraud fines for repeatedly defrauding Medicare and Medicaid in the USA over the past decade.

Denigrating generics:

Another global pharma major reportedly has been recently fined US$ 52.8 million for denigrating generic copies.

Drug overcharging: 

Another global drug major reportedly stirred an ethics scandal and paid US$ 499 million towards overcharging the US government for medicines.

Bribing doctors:

  • A top global pharma player reportedly paid total US$ 60.2 million to settle a federal investigation on alleged bribing overseas doctors and other health officials to prescribe medicines. 
  • Another European pharma group reportedly was fined US$ 3bn after admitting bribing doctors and encouraging the prescription of unsuitable antidepressants to children.

 Concealment of important facts:

A judge in USA reportedly ordered a large pharma company to pay more than $1.2 billion in fines after a jury found that the company had minimized or concealed the dangers associated with an antipsychotic drug.

Off-label marketing:

  • A Swiss pharma major reportedly agreed to pay US$ 422.5 million to resolve an investigation into alleged off-label promotion of a drug, as well as civil allegations relating to five other products.
  • The U.S. Justice Department reportedly hit an American drug major with a US$ 322 million penalty for illegally promoting a drug before it received approval by the Food and Drug Administration for that condition.

Other illegal marketing practices:

Yet another European pharma group was reportedly fined USD 34 million by a court in the United States for illegal marketing practices for its medicine.

‘Illegal’ Clinical Trials: 

It was revealed on May 17, 2013 that global pharmaceutical companies reportedly paid millions of pounds to former communist East Germany to use more that 50,000 patients in state-run hospitals as unwitting guinea pigs for drug tests in which several people died.

All these are some random examples of alleged malpractices associated with ‘ethics, propriety, compliance and values’ in the pharma world, both local and global.

Middle and lower management becomes the ‘fall guy’: 

It is interesting to note that whenever, such incidents take place, the fingers are usually pointed towards the middle or lower management cadre of the corporations concerned for violations and non-compliance.

Corporate or top management ownership of such seemingly deplorable incidents still remains confined within a ‘black box’ and probably a distant reality.

Public perception is not encouraging:

In the pharmaceutical sector all over the world, many business practices have still remained very contentious, despite many well-publicized attempts of self-regulation by the industry. The flow of complaints for alleged unethical business practices have not slowed down either, across the world, even after so many years of self-regulation, penalty and severe indictments.

Government apathy in India:

Nearer home, the Government apathy, despite being pressured by the respective Parliamentary Committees and sometimes including judiciary in repose to Public Interest Litigations (PIL), has indeed been appalling, thus far.

The Department of Pharmaceuticals of the Government of India has already circulated a draft ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for stakeholders to comment on it. The final UCPMP, when it comes into force, if not implemented by the pharmaceutical players in its ‘letter and spirit’, may attract government’s ire in form of strong doses of regulatory measures. However, the moot question remains, will the UCPMP come at all?

Similar issues are there in drug regulatory areas falling under the Ministry of Health, especially in the clinical trial area. In this matter, very fortunately Supreme Court has intervened against a Public Interest Litigation (PIL). Thus, one can expect to witness some tangible steps being taken in this area, sooner than later.

Walking the talk:

The need to formulate and more importantly effectively implement ‘Codes of Business Ethics & Values’ should gain increasing relevance in the globalized business environment, including in India.

It appears from the media reports, many companies across the world are increasingly resorting to ‘unethical behavior, impropriety and business malpractices’ due to intense pressure for business performance, as demanded primarily by the stock markets.

There is no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ across the world. However, even if these are implemented in a country-specific way, the most challenging obstacle to overcome by the corporates would still remain ‘walking the talk’ and owning responsibility at the top.

Conclusion:

Pharmaceutical innovation will continue to remain the launch pad for the industry growth in the battle against diseases of all types, forms and severity. However, that alone should in no way deserve to receive encouragement from any corner shorn from Ethics, Propriety, Compliance and Values.

Balancing pharmaceutical innovation with Ethics, Propriety, Compliance and Values, I reckon, will in turn help striking a right balance, to a considerable extent, between pharmaceutical innovation and public health interest for everyones’ satisfaction, mostly the patients.

Being equipped with the wherewithal to bring new drugs for the global population and being the fundamental source of growth momentum for the generic drug industry of the world, the innovator companies are expected to lead by setting examples in this area too. After all, as the saying goes:

“Caesar’s wife ought to be above suspicion. ‥Caesar himself ought to be so too”.

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.

 

 

“New drug prices are Astronomical, Unsustainable and Immoral” – Anatomy of Unique Protests

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Yes. The quoted sentiment captured in the headline was reportedly voiced recently by many cancer specialists, including researchers and that too in the heartland of pharmaceutical innovation of the world– the United States of America.

These specialist doctors argued:

“High prices of a medicine to keep someone alive is profiteering, akin to jacking up prices of essential goods after a natural disaster”

Thus, not just in India, high prices of new drugs have started prompting large-scale protests in various types and forms across the world. This time the above unique protest assumed an extra-ordinary dimension, with the eye of the storm being in America.

The news item highlighted quite a different type of public protest by the top doctors, originated at a major cancer center located in New York and actively supported by over 120 influential cancer specialists from more than 15 countries spanning across five continents. These crusaders, though reportedly are working in favor of a healthy pharmaceutical industry, do think, especially the cancer drug prices are beyond the reach of many.

About 30 of these doctors hail from the United States and work closely, as mentioned earlier, with pharmaceutical companies engaged in R&D, including clinical trials.

As the cost of many life saving cancer drugs are now exceeding US$ 100,00 per year, all these doctors and researchers involved in the patients’ fights against cancer, are now playing a pivotal role in resisting such high drug prices vigorously.

Examples of astonishingly high drug prices:

In the area of treating rare diseases, the situation in every sense is mind-boggling. When a drug to treat such ailments comes with a price tag of over US$ 400,000 just for a year’s treatment, it is indeed astonishingly high by any standard. Some protestors even described the cost of these drugs as ‘obvious highway robbery’ in the guise of high R&D cost, while some others would continue to wonder as to why is not there a regulatory intervention for the same?

Here below are the top 10 most expensive drugs of the world…and just hold your breath:

World’s Most Expensive Medicines

No. Name Disease

Price US$ /Year
1. ACTH Infantile spasm

13,800,00
2. Elaprase Hunter Syndrome

657,000
3. Soliris Paroxysmal nocturnal hemoglobinuria

409,500
4. Nagalazyme Maroteaux-Lamy Syndrome

375,000
5. Folotyn T-Cell Lymphoma

360,000
6. Cinryze Hereditary Angioedema

350,000
7. Myozyme Pompe

300,000
8. Arcalyst Cold Auto-Inflammatory Syndrome

250,000
9. Ceredase / Cerezyme Gaucher Disease

200,000
10. Fabrazyme Fabry Disease

200,000

(Source: Medical Billing & Coding, February 6, 2012)

The good news is protests against such ‘immoral pricing’ have started mounting.

Protests against high drug prices for rare diseases:

Probably due to this reason, drugs used for the treatment of rare diseases are being reported as ‘hot properties for drug manufacturers’, all over the world.

The above report highlighted a changing and evolving scenario in this area.

In 2013, the Dutch Government had cut the prices of new enzyme-replacement therapies, which costs as high as US$ 909,000. Similarly, Ireland has reduced significantly the cost of a cystic fibrosis drug, and the U.K. rejected a recommendation to expand the use of a drug for blood disorders due to high costs.

Soon, the United States is also expected to join the initiative to reduce high prices of orphan drugs as both the government and private insurers increasingly come under the cost containment pressure.

Yet another protest prompted cancer drug price reduction by half:

Another report highlights that last year physicians at the Memorial Sloan-Kettering Cancer Center in New York refused to use a new colon cancer drug ‘as it was twice as expensive as another drug without being better’.

After this protest, in an unusual move, the manufacturer of this colon cancer drug had cut its price by half.

Even developed countries with low out of pocket expenditure can’t sustain such high prices:

With over one million new cancer cases reportedly coming up every year in India, there is an urgent need for the intervention of the Government in this area, especially for poor and the middleclass population of the country.

Further, it is worth noting that in countries like India, where out of pocket expenditure towards healthcare is very high, as public health system is grossly inadequate, such ‘astronomical prices’ will perhaps mentally knock-down many patients directly, well before they actually die.

That said, even in those countries where out-of-pocket expenditure towards healthcare is nil or very low, respective health systems, by and large, be it public or run by other payors, will still require paying for these high cost drugs, making the systems unsustainable.

Moreover, patients on assistance program of the pharmaceutical companies, reportedly also complain that these ‘Patient Access Programs’ are always not quite user friendly.

Protests spreading beyond cancer and rare disease treatment:

The concern for high drug prices is now spreading across many other serious disease areas, much beyond cancer. It has been reported that the issue of drug prices for various other disease areas was discussed in October 2012 at the Cowen Therapeutic Conference in New York. Many doctors in this conference felt that the drugs with no significant benefit over the existing therapy should not be included in the hospital formulary.

Pressure on diabetic and cardiac drug prices:

Various Governments within the European Union (EU) are now reportedly exerting similar pressures to reduce the costs of drugs used for the treatment of diabetes and cardiac disorders. These measures are now reportedly ‘putting the brakes on an US$ 86 billion sector of the pharmaceutical industry that’s been expanding twice as fast as the market as a whole’.

It is worth noting that each nation within EU is responsible for deciding the price of a new drug, though the European Commission approves drugs for all 27 members of the EU.

Flip side of the story – Commendable initiatives of some global companies:

There is another side of the story too. To address such situation some global companies reportedly are increasing drug donations, reinvesting profits in developing countries and adopting to a more flexible approach to intellectual property related issues. However, as per media reports, there does not seem to be any unanimity within the global companies on country-specific new drug pricing issue, at least not just yet.

To encourage pharmaceutical companies to improve access to affordable drugs for a vast majority of population across the world, an independent initiative known as Access to medicine index ranks 20 largest companies of the world. This ranking is based on the efforts of these companies to improve access to medicine in developing countries.

As indicated by the World Health Organization (WHO), this Index covers 20 companies, 103 countries, and a broad range of drugs, including vaccines, diagnostic tests and other health-related technologies required for preventing, diagnosing and treating disease.

The index covers 33 diseases, including maternal conditions and neonatal infections. The top 10 companies in ‘Access to Medicine Index’ ranking for 2012 are as follows:

No. Company

Index
1. GlaxoSmithKline plc 3.8
2. Johnson & Johnson 3.6
3. Sanofi 3.2
4. Merck & Co. Inc. 3.1
5. Gilead Sciences 3.0
6. Novo Nordisk A/S 3.0
7. Novartis AG 2.9
8. Merck KGaA 2.5
9. Bayer AG 2.4
10. Roche Holding Ltd. 2.3

Source: http;//www.accesstomedicineindex.org/ranking

How high is really the high R&D cost?

A recent article published this month raises some interesting points on this subject, which I am quoting below:

  • No direct and transparent details are available from the industry for public scrutiny on the total cost of innovation.
  • What one does have access to are studies on the issue funded by pharmaceutical MNCs themselves.
  • For most NCEs, public-funded programs in the U.S largely invest in drug discovery.
  • In industry sponsored studies there is lack of transparency on the real costs of drug research and development.
  • Various tax benefits allowed under U.S. law are also ignored by industry studies.
  • Researching new drugs gives one Tax breaks to the extent of 50 per cent in the U.S. If one researches and markets an orphan drug for rare diseases, again, tax breaks are available to the tune of half the expenditure.

Further, a 2011 study by Donald W. Light and Rebecca Warburton published by the London School of Economics and Political Science indicates, “based on independent sources and reasonable arguments, one can conclude that R&D costs companies a median of US$ 43.4 million per new drug.”

It is interesting to note, the above cost estimate is a fraction of what is available from the industry source (over US$ 1.2 billion).

An interesting pricing model prescribed:

Another article recently published in the Harvard Business Review (HBR) commented, while pharmaceutical companies reportedly spend billions on research, the actual cost of manufacturing a treatment (such as a pill) is minimal. This cost structure enables pricing flexibility.

The author suggests:

  • Adopt a smarter pricing model, where a company can charge the highest price that each customer is willing to pay.
  • To implement smarter pricing that saves more lives, and brings in more revenue, the pharmaceutical industry should create a straightforward grid that specifies the annual maximum a patient should pay out of pocket on drug expenses.
  • Key variables that determine this maximum include income, family size, and their other drug costs. Patients can submit this data to a third party agency to avail discounts based on these criteria.

However, implementability of this model, especially in the Indian scenario, seems to be challenging.

Conclusion:

Despite this gloom and doom, as ‘Access to Medicine Index 2012′ indicates, some pharmaceutical companies do want to become an integral part in finding out a solution to the access problem in general. Though, there are still many more miles to cover, some companies, though small in number, are demonstrably trying to improve access to health care in the developing countries of the world.

Rising prices of new drugs in general and for dreaded disease like cancer and other rare disorders in particular have now started reaching a crescendo, not just India, but in many other countries across the world and in various forms. Probably due to this reason, currently in Europe, regulators tend to be depending more and more in the concept of cost to efficacy ratios for new drugs.

It is interesting to note, the world is witnessing for the first time and that too in the developed world that a large number of specialist doctors are protesting against this trend, unitedly and with strong words.

The anatomy of initial phase of this groundswell, many would tend to believe, signals ushering in a new era of checks and balances to set right ‘astronomical, unsustainable and immoral new drug prices’ in the patients’ fights especially against dreaded diseases, the world over.

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.

 

 

 

Patent Conundrum: Ignoring India Will Just Not be Foolhardy, Not An Option Either

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The recent verdict of the Supreme Court against Novartis, upholding the decision of the Indian Patent Office (IPO) against grant of patent to their cancer drug Glivec, based on Section 3(d) of the Indian Patents Act, has caused a flutter and utter discontentment within the global pharmaceutical industry across the world.

However, on this verdict, the Director General of the World Trade Organization (WTO), Pascal Lamy has reportedly opined, “Recent decisions by the courts in India have led to a lot of protest by pharmaceutical companies. But decisions made by an independent judiciary have to be respected as such.”

The above decision on Glivec came close on the heels of IPO’s decision to grant its first ever Compulsory License (CL) to the Indian drug manufacturer Natco, last year, for the kidney cancer drug Nexavar of Bayer.

Interestingly, no member of the World Trade Organization has raised any concern on these issues, as the Head of WTO, Lamy recently confirmed, “No country has objected to India issuing compulsory license or refusing patent for drugs.” He further added, “TRIPS provides flexibilities that allow countries to issue compulsory licenses for patented medicines to address health urgencies.”

That said, simmering unhappiness within innovator companies on various areas of Indian patent laws is indeed quite palpable. Such discontent being expressed by many interested powerful voices is now reverberating in the corridors of power both in India and overseas.

Point and Counterpoint:

Although experts do opine that patent laws of India are well balanced, takes care of public health interest, encourage innovation and discourage evergreening, many global innovator companies think just the opposite. They feel, an appropriate ecosystem to foster innovation does not exist in India and their IP, by and large, is not safe in the country. The moot question is, therefore, ‘Could immediate fallout of this negative perception prompt them to ignore India or even play at a low key in this market?’

Looking at the issue from Indian perspective:

If we take this issue from the product patent perspective, India could probably be impacted in the following two ways:

  1. New innovative products may not be introduced in India
  2. The inflow of Foreign Direct Investments (FDI) in the pharma sector may get seriously restricted.

Let us now examine the possible outcome of each of these steps one at a time.

Will India be deprived of newer innovative drugs?

If the innovator companies decide to ignore India by not launching such products in the country, they may take either of the following two steps:

  1. Avoid filing a patent in India
  2. File a patent but do not launch the product

Keeping the emerging scenario in perspective, it will be extremely challenging for the global players to avoid the current patent regime in India, even if they do not like it. This is mainly because of the following reasons:

1. If an innovator company decides not to file a product patent in India, it will pave the way for Indian companies to introduce copy-cat versions of the same in no time, as it were, at a fractional price in the Indian market.

2. Further, there would also be a possibility of getting these copycat versions exported to the unregulated markets of the world from India at a very low price, causing potential business loss to the innovator companies.

3. If any innovator company files a product patent in India, but does not work the patent within the stipulated period of three years, as provided in the patent law of the country, in that case any Indian company can apply for CL for the same with a high probability of such a request being granted by the Patent Controller. 

A market too attractive to ignore:

India as a pharmaceutical market is quite challenging to ignore, despite its ‘warts and moles’ for various reasons. The story of increasing consumption of healthcare in India, including pharmaceuticals, especially when the country is expected to be one of the top 10 pharmaceutical markets in the world, is too enticing for any global player to ignore, despite unhappiness in various areas of business.

Increasing affordability of the fast growing middle-class population of the country will further drive the growth of this market, which is expected to register a value turnover of US$50 billion by 2020, as estimated by PwC.

PwC report also highlights that a growing and increasingly sophisticated pharmaceutical industry of India is gradually becoming a competitor of global pharma in some key areas, on the one hand and a potential partner in others, as is being witnessed today by many.

Despite urbanization, nearly 70 percent of the total population of India still lives in the rural villages. Untapped potential of the rural markets is expected to provide another boost to the growth momentum of the industry.

Too enticing to exit:

Other ‘Enticing Factors’ for India, in my views, may be considered as follows:

  • A country with 1.13 billion populations and a GDP of US$ 1.8 trillion in 2011 is expected to grow at an average of 8.2 percent in the next five-year period.
  • Public health expenditure to more than double from 1.1 percent of the GDP to 2.5 percent of GDP in the Twelfth Five Year Plan period (2012-17)
  • Government will commence rolling out ‘Universal Health Coverage’ initiative
  • Budget allocation of US$ 5.4 billion announced towards free distribution of essential medicines from government hospitals and health centers.
  • Greater plan outlay announced for NRHM, NUHM and RSBY projects.
  • Rapidly growing more prosperous middle class population of the country.
  • Fast growing domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets.
  • Rising per capita income of the population and relative in-efficiency of the public healthcare systems will encourage private healthcare services of various types and scales to flourish.
  • Expected emergence of a robust health insurance model for all strata of society as the insurance sector is undergoing reform measures.
  • Fast growing Medical Tourism.
  • World-class local outsourcing opportunities for a combo-business model with both patented and branded generic drugs.

Core issues in patent conundrum:

I reckon, besides others, there are three core issues in the patent conundrum in India as follows, other issues can be sorted out by following:

1. ‘Pricing’ strategy of patented products: A large population across the globe believes that high prices of patented products severely restrict their access to many and at the same time increases the cost of healthcare even for the Governments very significantly.

2. To obtain a drug patent in India, passing the test of inventive steps will not just be enough, the invention should also pass the acid test of patentability criteria, to prevent evergreening, as enshrined in the laws of the land. Many other countries are expected to follow India in this area, in course of time. For example, after Philippines and Argentina, South Africa now reportedly plans to overhaul its patent laws by “closing a loophole known as ‘ever-greening’ used by drug companies to extend patent protection and profits”. Moreover, there does not seem to be any possibility to get this law amended by the Indian Parliament now or after the next general election.

3. Probably due to some legal loopholes, already granted patents are often violated without following the prescribed processes of law in terms of pre or post – grant challenges before and after launch of such products. There is a need for the government to plug all such legal loopholes, after taking full stock of the prevailing situation in this area, without further delay.

Some Global CEOs spoke on this issue:

In this context the Global CEO of GSK commented in October 18, 2012 that while intellectual property protection is an important aspect of ensuring that innovation is rewarded, the period of exclusivity in a country should not determine the price of the product. Witty said, ‘At GSK we will continuously strive to defend intellectual property, but more importantly, defend tier pricing to make sure that we have appropriate pricing for the affordability of the country and that’s why, in my personal view, our business in India has been so successful for so long.’

Does all in the global pharma industry share this view? 

Not really. All in the global pharmaceutical industry does not necessarily seem to share the above views of Andrew Witty and believe that to meet the unmet needs of patients, the Intellectual Property Rights (IPR) of innovative products must be strongly protected by the governments of all countries putting in place a robust product patent regime and the pricing of such products should not come in the way at all.

The industry also argues that to recover high costs of R&D and manufacturing of such products together with making a modest profit, the innovator companies set a product price, which at times may be perceived as too high for the marginalized section of the society, where government intervention is required more than the innovator companies. Aggressive marketing activities, the industry considers, during the patent life of a product, are essential to gain market access for such drugs to the patients.

In support of the pharmaceutical industry the following argument was put forth in a recent article:

“The underlying goal of every single business is to make money. People single out pharmaceutical companies for making profits, but it’s important to remember that they also create products that save millions of lives.”

How much then to charge for a patented drug? 

While there is no single or only right way to arrive at the price of an IPR protected medicine, how much the pharmaceutical manufacturers will charge for such drugs still remains an important, yet complex and difficult issue to resolve, both locally and globally.

A paper titled, “Pharmaceutical Price Controls in OECD Countries”, published by the US Department of Commerce after examining the drug price regulatory systems of 11 OECD countries concluded that all of them enforce some form of price controls to limit spending on pharmaceuticals. The report also indicated that the reimbursement prices in these countries are often treated as de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market. 

Should India address ‘Patented Products’ Pricing’ issue with HTA model?

Though some people hate the mechanism of Health Technology Assessment (HTA) to determine price of a patented drug, I reckon, it could be a justifiable and logical answer to price related pharmaceutical patent conundrum in India.

Health Technology Assessment, as many will know, examines the medical, economic, social and ethical implications of the incremental value of a medical technology or a drug in healthcare.

HTA, in that process, will analyze the costs of inputs and the output in terms of their consequences or outcomes. With in-depth understanding of these components, the policy makers decide the value of an intervention much more precisely.

Companies like, Merck, Pfizer and GSK have reportedly imbibed this mechanism to arrive at a value of the invention. National Pharmaceutical Pricing Authorities (NPPA) may well consider this approach for a well judged, scientific and transparent pricing decision mechanism in India, especially for innovative new drugs.

Could local manufacturing be an option?

Considering relatively higher volume sales in India, to bring down the price, the global companies may consider manufacturing their patented products in India with appropriate technology transfer agreements being in place and could even make India as one of their export hubs, as a couple of their counterparts have already initiated.

Accepting the reality responsibly:

In view of the above, the global pharmaceutical players, as experts believe, should take note of the following factors. All these could help, while formulating their India-specific game plan to be successful in the country, without worrying much about invocation of Compulsory License (CL) for not meeting ‘Reasonably Affordable Price’ criterion, as provided in the Patents Act of the country:

  • While respecting IPR and following Doha declaration, the government focus on ‘reasonably affordable drug prices’ will be even sharper due to increasing pressure from the Civil Society, Indian Parliament and also from the Courts of the country triggered by ‘Public Interest Litigations (PIL)’
  • India will continue to remain within the ‘modest-margin’ range for the pharmaceutical business with marketing excellence driven volume turnover.
  • Although innovation will continue to be encouraged with IPR protection, the amended Patents Act of India is ‘Public Health Interest’ oriented, including restrictions on patentability, which, based on early signals, many other countries are expected to follow as we move on.
  • This situation though very challenging for many innovator companies, is unlikely to change in the foreseeable future, even under pressure of various “Free Trade Agreements (FTA)”.  

Sectors Attracting Highest FDI Equity inflows:

When one looks at the FDI equity inflow from April 2000 to March 2013 period as follows, it does not appear that FDI inflow in Drugs and Pharmaceuticals had any unusual impact due to ‘Patent Conundrums’ in the country at any time:

Ranks Sector

US$ Million

1. Service Sector

37,151
2. Construction Development:(Township, Housing, Built-up infrastructure)

22,008
3 Telecommunication(Radio paging, Cellular mobile,Basic telephone services)

12,660
4 Computer Software &Hardware

11,671
5 Drugs & Pharmaceuticals

10,309
6 Chemical

8,861
7 Automobile Industry

8,061
8 Power

7,828
9 Metallurgical Industries

7,434
10 Hotel & Tourism

6,589

Further, if we look at the FDI trend of the last three years, the conclusion probably will be similar.

Year

US$ Million.
2010-11

177.96
2011-12

2,704.63
2012-13

1,103.70

(Source: Fact Sheet on Foreign Investments, DIPP, Government of India)

Conclusion:

In search of excellence in India, global pharmaceutical companies will need to find out innovative win-win strategies adapting themselves to the legal requirements for business in the country, instead of trying to get the laws changed.

India, at the same time, should expeditiously address the issue of blatant patent infringements by some Indian players exploiting the legal loopholes and set up fast track courts to resolve all IP related disputes without inordinate delay.

Responsible drug pricing, public health oriented patent regime, technology transfer/local manufacturing of patented products and stringent regulatory requirements in all pharmaceutical industry related areas taking care of patients’ interest, are expected to be the key areas to address in the business models of global pharmaceutical companies for India.

Moreover,it is worth noting that any meaningful and long term FDI in the pharmaceutical industry of India will come mostly through investments in R&D and manufacturing. Such FDI may not be forthcoming without any policy compulsions, like in China. Hence, many believe, the orchestrated bogey of FDI for the pharmaceutical industry in India, other than brownfield acquisitions in the generics space, is just like dangling a carrot, as it were, besides being blatantly illusive.

Even with all these, India will continue to remain too lucrative a pharmaceutical market to ignore by any. Thus, I reckon, despite a high decibel patent conundrum, any thought to ignore or even be indifferent to Indian pharmaceutical market by any global player could well be foolhardy.

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.

 

A Force Multiplier: An “Armageddon”: A Contender for Supremacy in the Generic Pharma World

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It is very important for any country to ensure access to most appropriate medicines for the patients as and when they require. In many disease areas such access can be remarkably improved through affordable generic drugs, which offer significant savings in cost for absence of monopolistic situation and intense competitive pressures.

In many countries like, India and China to further augment this process, the Government price control on essential medicines is already in force.

A paper titled, “Generic Medicines: Essential contributors to the long-term health of society” highlights the following facts on such drugs:

• Provide an affordable, gold standard medication for many major illnesses

• Allow access to medicines for a greater proportion of the population

• Stimulate healthy competition with the branded sector

• Deliver savings to national health bills

• Are high quality products

Generic companies also innovate:

The same paper also highlights, though innovation has been traditionally perceived as the domain of the research-based originator companies, generic medicine companies often spend significant sums on innovating and improving formulations, enhancing delivery systems and finding solutions to patient compliance issues.

It also says, the generics medicine industry spent 7 percent of revenues on R&D alone, in 2007 and created 150, 000 jobs only in the EU.

Continuous growth of generic drug industry is critical:

Taking all these factors into consideration, continuous growth of the generic drug industry is critical in ensuring broad access to medicines to the population of any country at an affordable price. Nothing else can achieve this objective.

In the developed countries like, Canada, Denmark, Germany, Netherlands, UK and even USA, large volume of generic medicines are prescribed. Most of these countries have put in place appropriate regulations that facilitate market entry of generic drugs soon after patent expiry. All of them, by and large, encourage even more prescriptions of generic medicines.

Of course, there are many instances of deliberate attempts to slow down generic entry, which I shall deal with separately at some other time.

Quality perception for generic drugs:

In many countries the general perception of efficacy and safety standards of generic drugs is still not satisfactory. In many occasions, these are reportedly prompted by well orchestrated campaigns by interested private stakeholders in this area.

However, in markets, like the EU, Canada and the USA Governments do take public awareness measures to dispel such doubt. Unfortunately not enough similar initiatives have been taken in India with tangible results. The reason could probably lie in the existence of a powerful branded generic lobby in the country, unlike many other markets of the world.

The market:

A report of Frost & Sullivan titled, “Generic Pharmaceuticals Market – A Global Analysis” stated, the global generic pharmaceuticals market registered a revenue of US$ 135.85 billion in 2010 with a growth rate of 11 percent. The top eight global markets, namely the United States, Germany, France, the United Kingdom, Canada, Italy, Spain and Japan account for 80 percent of the total generics market. The United States will continue to remain the largest market in the world for generic pharmaceuticals in value terms.

It is estimated, the global generic drug market will grow to US$ 231.02 billion by 2017 with a CAGR 9.3 percent from 2010. The key growth drivers being:

  • Patent expiration of some blockbuster drugs
  • Entry of more biosimilars
  • High growth of emerging markets
  • Cost containment measures of governments and healthcare service providers in various countries

BRIC Countries strongly defend generic drugs:

Allegation of attacks on the generic industry by the patent holders of various drugs is also heard quite frequently.

It was reported that in a TRIPS Council meeting in mid 2012 held at the World Trade Organization (WTO), India, Brazil and China defended the right of access to cheap generic medicines by poor countries, strongly resisting attempts by the US, Japan and some other developed countries to club counterfeits or copies of patented drugs with fake or spurious ones.

They also argued that infringing intellectual property rights should not be confused with sub-standard products.

Many believe that because of the reported ‘clout of India, China and Brazil’ in the WTO, this attempt may not fructify despite such attempts.

India is surging ahead:      

It is interesting to note that out of top 10 fastest growing generic companies of the world, 4 are of Indian origin namely Glenmark, DRL, Sun Pharma and Taro (owned by Sun Pharma) and 3 definitely are home grown Indian companies, as follows:        

Top 10 Fastest Growing Generic Companies of the World:

No. Company Country Sales US$ Million Growth 2011 (%) Growth 2010 (%)
1. Sagent Pharmaceuticals USA 152 106 153
2. Perrigo USA 620 80 45
3. Nichi-Iko Pharmaceutical Japan 1300 79 25
4. Watson Pharmaceuticals USA 3320 46 38
5. Glenmark India 778 37 17
6. Dr. Reddy’s Laboratories (DRL) India 1480 34 15
7. Taro Pharmaceutical Israel 436 33 11
8. Sun Pharmaceuticals India 1650 29 52
9. Veropharm Russia 156 24 28
10. Polpharma Poland 580 22 20

(Source: FiercePharma)

India the pharmacy of the developing world:

According to a recent report India is now emerging as the ‘Pharmacy of the Developing World’, as it produces a large volume of high-quality, affordable generic medicines.

The study also highlights, “as a result of tough competition from the generic players of India, the price of first-line ARVs dropped from more than US$ 10,000 per person per year in 2000 to around $150 per person per year today. This significant price decrease has helped to facilitate the massive expansion of HIV treatment worldwide: more than 80 percent of the HIV medicines used to treat 6.6 million people in developing countries come from Indian producers, and 90 percent of pediatric HIV medicines are Indian-produced.”

Another study indicates, as a result of phenomenal success of the homegrown pharmaceutical companies:

  • 67 percent of medicines exports from India go to developing countries.
  • Main procurement agencies for developing countries’ health programs purchase their 
medicines in India, where there are quality products at low prices.
  • Approx. 50 percent of the essential medicines that UNICEF distributes in developing countries 
come from India.
  • 75-80 percent of all medicines distributed by the International Dispensary Association (IDA) to 
developing countries are manufactured in India. (IDA is a medical supplier operating on a 
not-for-profit basis for distribution of essential medicines to developing countries.)
  • In Zimbabwe, 75 percent of tenders for medicines for all public sector health facilities come from 
Indian manufacturers,
  • The state procurement agency in Lesotho, NDSO, states it buys nearly 95 percent of all ARVs 
from India.

This situation is going to further improve at a galloping pace in the years ahead with proper encouragement from the Government of India.

India tops the chart for ANDAs:

India, with its rapidly growing homegrown generic players, continues to top the Chart for Abbreviated New Drugs Applications (ANDAs) with USFDA by increasing its share year after year, as follows:

Year

Global

India

India’s Share %

2007

492

133

24.1

2008

483

143

27.9

2009

419

132

31.3

2010

419

142

34.0

2011

431

144

33.4

2012

476

178

37.4

Source: Pharmabiz, January 7, 2013 / US FDA

India tops the Chart in DMFs also:

Similarly, India continues to top the Chart with its Drug Master Files (DMF) for Active Pharmaceutical Ingredients (APIs), as follows:

No. Countries Filing Type II DMF
 1. India 2759
 2. USA 1323
 3. China 870
 4. Italy 644
 5. Japan 270
 6. Spain 268
 7. Germany 266
 8. France 170
 9. Israel 170
 10. Switzerland 136

Source: Pharma Times, August 2012

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

India not loosing its R&D Focus:

Discovery of new drugs being the bedrock for the pharmaceutical industry, domestic Indian companies are also not loosing focus on R&D activities. The New Chemical Entity (NCE) pipeline of the homegrown companies as on 2012 is as follows:

Piramal Healthcare 23
Suven Life Sciences 14
Zydus Cadila 11
Glenmark 8
Biocon 7
Torrent Pharma 6
Sun Pharma 5
Wockhardt 5
Ranbaxy 2
Dr Reddy’s Lab 2
Others 5

Source: Citeline Intelligence Services: Pharma R&D Annual Review 2013

Is the “west pressurizing India to change tack?”

In an interesting article published in ‘The Guardian’, the author observed that the western Pharmaceutical companies are putting health of world’s poor at risk. It commented that India makes cheap medicines for poor people around the world, but the EU, pharmaceutical firms and now the US are pressuring the ‘pharmacy of the developing world’ to change track. The same sentiment was echoed in another article published in Pharma Times.

However, the experts do feel that the Government of India, mostly due to intense public pressure, is well prepared to address any such situation, come what may. Thus, despite any retarding forces coming into play, the incessant march of the home grown pharmaceutical companies in search of excellence, especially in this space, is expected to continue even at a brisker pace.

The triggering factor:

Experts opine that the reason for excellence of the domestic Indian pharmaceutical industry, especially in the generic pharma landscape, is due to the amendment of the Indian Patents Act in 1970 allowing only process patents for drugs and pharmaceuticals.

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

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

Conclusion:

Paying kudos to the pharmaceutical ‘Crown Jewels’ of India, many industry watchers feel that the global pharma players are now keener than ever before to work with the domestic pharma industry, in various areas of business. This augurs well for all, as it will help creating a win-win situation to add further momentum to the growth of the pharmaceutical industry of India.

Be that as it may, taken in entirety and strengthened by its well-balanced patent laws, India  will continue to have a significant force multiplier effect to emerge as a global force to reckon with, particularly in this important space.

In tandem, with other significant cutting edges, as mentioned above, India is now well poised to be an “armageddon” – a contender of supremacy as a “pharmacy of the developing economies” despite selective allegations and  detrimental efforts by some vested interests.

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.

 

 

The R&D Factor: “One of the Great Myths of the Industry”

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Yes, that is what the global CEO of one of the Pharmaceutical giants of the world commented in a very recent interview with Reuters. Adding further to this comment he said, “US $1 billion price tag for R&D was an average figure that includes money spent on drugs that ultimately fail… If you stop failing so often, you massively reduce the cost of drug development  … It’s entirely achievable.”

Therefore, he concluded his interview by saying that the pharmaceutical industry should be able to charge much less for new drugs by passing on efficiencies in R&D to the customers.

A vindication:

The above comment does not seem to be a one off remark. A recent study on R&D productivity of 12 top pharmaceutical companies of the world by Deloitte and Thomson Reuters highlighted that the average cost of developing a new medicine is now US$ 1.1 billion with the most successful company in the group studied incurred an average cost of just US$ 315 million, while at the other extreme, another company spent US$ 2.8 billion.

How much of it then covers the cost of failures and who pays for such inefficiencies?

Some experts have gone even further:

Some experts in this area have gone even further arguing that pharmaceutical R&D expenses are over stated and the real costs are much less.

An article titled “Demythologizing the high costs of pharmaceutical research”, published by the London School of Economics and Political Science in 2011 indicates that the total cost from the discovery and development stages of a new drug to its market launch was around US$ 802 million in the year 2000. This was worked out in 2003 by the ‘Tuft Center for the Study of Drug Development’ in Boston, USA.

However, in 2006 this figure increased by 64 per cent to US$ 1.32 billion, as reported by a large overseas pharmaceutical industry association.

The authors of the above article also mentioned that the following factors were not considered while working out the 2006 figure of US$ 1.32 billion:

▪    The tax exemptions that the companies avail for investing in R&D.

▪   Tax write-offs amount to taxpayers’ contributing almost 40% of the R&D cost.

▪   The cost of basic research should not have been included, as these are mostly         undertaken by public funded universities or laboratories.

The article commented that ‘half the R&D costs are inflated estimates of profits that companies could have made if they had invested in the stock market instead of R&D and include exaggerated expenses on clinical trials’.

“High R&D costs have been the industry’s excuses for charging high prices”:

In the same article the authors strongly commented as follows:

“Pharmaceutical companies have a strong vested interest in maximizing figures for R&D as high research and development costs have been the industry’s excuse for charging high prices. It has also helped generating political capital worth billions in tax concessions and price protection in the form of increasing patent terms and extending data exclusivity.”

The study concludes by highlighting that “the real R&D cost for a drug borne by a pharmaceutical company is probably about US$ 60 million.”

 Another perspective to the “R&D Factor”:

A book titled “Pharmaceutical R&D: Costs, Risks, and Rewards”, published by the government of USA gives another perspective to the “R&D Factor”. It articulates that the three most important components of R&D investments are:

  • Money
  • Time
  • Risk

Money is just one component of investment, along with a long duration of time, to reap benefits of success, which is intertwined with a very high risk of failure. The investors in the pharmaceutical R&D projects not only take into account how much investment is required for the project against expected financial returns, but also the timing of inflow and outflow of fund with associated risks.  It is thus quite understandable that longer is the wait for the investors to get their real return, greater will be their expectations for the same.

This publication also highlights that the cost of bringing a new drug from ‘mind to market’ depends on the quality and sophistication of science and technology involved in a particular R&D process together with associated investment requirements for the same.

In addition, regulatory demand to get marketing approval of a complex molecule for various serious disease types is also getting more and more stringent, significantly increasing their cost of clinical development in tandem. All these factors when taken together, the authors argue, make the cost of R&D not only very high, but unpredictable too.

Thus to summarize from the above study, high pharmaceutical R&D costs involve:

  • Sophisticated science and technology dependent high up-front financial investments
  • A long and indefinite period of negative cash flow
  • High tangible and intangible costs for acquiring technology with rapid trend of obsolescence
  • High risk of failure at any stage of product development

Even reengineered R&D model may not be sustainable:

Many research scientists have already highlighted that sharp focus in some critical areas may help containing the R&D expenditure to a considerable extent and also would help avoiding the cost of failures significantly. The savings thus made, in turn, can fund a larger number of R&D projects.

The areas identified are as follows:

  • Early stage identification of unviable new molecules and jettisoning them quickly.
  • Newer cost efficient R&D models.
  • Significant reduction in drug development time. 

Unfortunately, sustainability of the above model too still remains in the realm of a wishful thinking and raises a serious question mark to many for various other reasons.

Should Pharmaceutical R&D move away from its traditional models?

Thus the critical point to ponder today, should the Pharmaceutical R&D now move from its traditional comfort zone of expensive one company initiative to a much less charted frontier of sharing drug discovery involving many players? If this overall approach gains acceptance sooner by all concerned, it could lead to increase in R&D productivity significantly at a much lesser cost, benefiting the patients community at large.

Finding right pathway in this direction is more important today than ever before, as the R&D productivity of the global pharmaceutical industry, in general, keeps going south and that too at a faster pace, prompting major cuts in the absolute R&D expenditure by many, as compared to the previous year.

A global R&D spend comparison (2011 and 12):

R&D expenditures in absolute terms of the following global companies in 2011 and 2012, without drawing any relationship to their respective R&D productivity, were reportedly as follows:

Company

2012

US$ Bn.

2011

US$ Bn.

% Change

% of Sale
Roche

10.10

8.81

13.7

21.0
Novartis

9.33

9.58

(3.0)

16.4
Merck

8.16

8.46

(4.0)

17.0
Pfizer

7.90

9.10

(13.0)

13.3
J&J

7.66

7.54

1.5

11.6
Sanofi

6.40

6.24

2.5

14.1
GSK

5.95

6.01

(1.0)

15.0
Eli Lilly

5.30

5.00

5.0

23.4
AstraZeneca

5.24

5.52

(5.0)

18.8
Abbott Labs

4.32

4.12

4.7

10.8
Total

70.36

70.38

 

 

Source: Fierce Biotech, March 18, 2013

This particular table points out that five out of the reported ten companies had to spend less towards R&D in 2012 as compared to 2011 and four out of the remaining five players were able to increase their R&D spend just marginally.

Thus the same question comes at the top of mind yet again: is the current pharmaceutical R&D model sustainable and working with optimal productivity and cost efficiency for  the benefits of patients?

Towards greater sustainability of the R&D model: 

A July 2010 study of Frost & Sullivan reports, “Open source innovation increasingly being used to promote innovation in the drug discovery process and boost bottom-line”.

It underscores the urgent need for the global pharmaceutical companies to respond to the challenges of high cost and low productivity in their respective R&D initiatives, in general.

The ‘Open Innovation’ model assumes even greater importance today, as we have noted above, to avoid  huge costs of R&D failures, which are eventually passed on to the patients through the drug pricing mechanism.

‘Open Innovation’ model, as they proposed, will be most appropriate to even promote highly innovative approaches in the drug discovery process bringing many brilliant scientific minds together from across the world.

The key objective of ‘Open Innovation’ in pharmaceuticals is, therefore, to encourage drug discovery initiatives at a much lesser cost, especially for non-infectious chronic diseases or the dreaded ailments like Cancer, Parkinson’s, Alzheimer, Multiple Sclerosis, including many neglected diseases of the developing countries, making innovative drugs affordable even to the marginalized section of the society.  

“Open Innovation” is very successful in IT industry:

The concept of ‘Open Innovation’ is being quite successfully used in the Information Technology (IT) industry since nearly three decades across the world, including India. Web Technology, Linux Operating System (OS) and even the modern day ‘Android’ are excellent examples of commercially successful ‘Open innovation’ model in IT,

In the sphere of Biotechnology ‘Human Genome Sequencing’ is another remarkable outcome of such type of R&D model. Therefore, why not a similar model be actively pursued in a much larger scale to discover newer and innovative drugs at a much lesser cost for greater access to patients?

Issues involved:

In the evolving process of ‘Open Innovation’ in pharma there are some issues to be addressed and at the same time some loose knots to be tightened to make the process increasingly more user friendly and robust. Many experts feel that the key issues for the ‘Open Innovation’ model are as follows:

▪   Who will fund the project and how much?

▪   Who will lead the project?

▪   Who will coordinate the project and find talents?

▪   Who will take it through clinical development and regulatory approval process?

That said, all these issues do not seem to be insurmountable problems at all to add greater speed and efficiency to the process, as the saying goes, ‘where there is a will, there is a way’.

Conclusion: 

Having deliberated on this issue as above, I reckon, there is a dire need to make the process of offering innovative drugs at affordable prices to the patients sustainable over a long period of time, for the sake of all.

This can happen only when there will be a desire to step into the uncharted frontier, coming out of much beaten and a high cost tract of R&D, especially after having picked-up the low hanging fruits. Dove tailing the passion for business excellence with the patients’ interest, dispassionately, will then be the name of the game.

As the Reuters article quoting the CEO of a global pharma major points out, in addition to improvements in research, increasing global demand for medicines and the explosion in the volume of products sold in emerging markets should also contribute to lower unit costs of the innovative drugs ensuring their greater access to patients.

This process, in turn, will help fostering a win-win situation for all stakeholders, exploding “one of the great myths of the industry” – The ‘R&D Factor’.

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.