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

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Last week (July 19, 2012), most of the leading English business dailies of India reported that much-awaited “Uniform Code of Pharmaceutical Marketing Practices (UCPMP)” authored by the Department of Pharmaceuticals, quite in line with the amended guidelines for the Medical Profession by the Medical Council of India (MCI), is expected to be notified by the government next month for implementation by the entire pharmaceutical industry on a voluntary basis, to start with.

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

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

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

The series of events:

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

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

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

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

The discontentment still growing:

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

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

The issue:

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

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

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

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

A global phenomenon:

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

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

The Guardian further commented:

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

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

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

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

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

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

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

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

‘The Physician Payment Sunshine Act’:

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

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

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

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

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

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

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

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

India Today: 

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

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

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

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

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

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

Ministry of Health blinked first by amending the MCI Guidelines:

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

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

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

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

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

Some Key features of the DoP Code are as follows:

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

The quality of UCPMP:

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

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

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

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

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

Skepticism with the UCPMP:

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

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

Conclusion:

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

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

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

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

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

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

By: Tapan J Ray

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 Kaleidoscope of Drug Price Control Spanning Across the World and Its Relevance to India

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How much to charge for a drug?

While there is no single or only right way to arrive at the price of a medicine, how much the pharmaceutical manufacturers will charge for a drug still remains an important, yet complex and difficult task, 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 the de facto market price. Moreover, some OECD governments regularly cut prices of even those drugs, which are already in the market.

An evolving rational system of drug pricing:

The values of health outcomes and pharmacoeconomic analysis are gaining increasing importance for drug price negotiations/control by the healthcare regulators even in various developed markets of the world.

In countries like, Australia and  within Europe in general, health outcomes data analysis is almost mandatory to establish effectiveness of a new drug over the existing ones.

Even in the US, where the reimbursement price is usually negotiated with non-government payors, many health insurers have now started recognizing the relevance of such data.

Such price negotiations at times take a long while and may also require other concessions by manufacturers, for example:

  • In the UK, a specified level of profitability may constrain the manufacturers.
  • Spain would require a commitment of a sales target from the manufacturers, who are made responsible to compensate for any excess sales by paying directly to the government either the incremental profit or by reducing the product price proportionately.

Pharmacoeconomic Based or Value-Based Pricing (PBP/VBP):

Pharmacoeconomics, as we know, is a scientific model of setting price of a medicine commensurate to the economic value that the drug/therapy would offer.  Pharmacoeconomic principles, therefore, intend to maximize the value obtained from expenditures towards medicines through a structured evaluation of products costs and disease outcomes.

PBP/VBP is widely considered to offer the ‘best value for money’ spent to buy a medicine, as it is ‘the costs and consequences of one treatment compared with the costs and consequences of alternative ones’.

A contrarian view:

Let me hasten to add that some shortcomings in PBP/VBP system have already been highlighted by some experts and are being debated threadbare. The key question that is being mooted now is, how to quantify the value of a saved life or relief of intense agony of patients while arriving at a price of a drug based on PBP/VBP model.

PBP/VBP could help ‘freeing-up’ resources to go to front-line healthcare: 

As per the Department of Health, UK, ‘Value-Based Pricing (VBP)’ ‘will help creating a world-class NHS that saves thousands more lives every year by freeing up resources to go to the front line, giving professionals power and patients choice, and maintaining the principle that healthcare should be delivered to patients on the basis of need, not their ability to pay’.

Pharmaceutical Price Control has assumed global importance:

Pricing of pharmaceutical products has now become one of the most complex and a very sensitive area of the business, like never before. This is mainly because of the concerns on the impact of medicine prices to access of medicines, especially, in the developing markets, like India and the cost containment pressure of the governments as well as the healthcare providers in the developed markets of the world.

Evolving Pharmaceutical pricing models:

Pharmaceutical pricing mechanism has undergone significant changes across the world. The old concept of pharmaceutical price being treated as almost given and usually determined only by the market forces with very less regulatory scrutiny is gradually but surely giving away to a new regime.

Currently in many cases, the prices of even patented medicines differ significantly from country to country across the globe, reflecting mainly the differences in their healthcare systems and delivery, along with income status and economic conditions.

Global pharmaceutical majors, like GSK and Merck (MSD) have already started following the differential pricing model, based primarily on the size of GDP and income status of the people of the respective countries. This strategy includes India, as well.

Reference pricing model is yet another such example, where the pricing framework of a pharmaceutical product will be established against the price of a reference drug in the reference countries.

The reference drug may be of different types, for example:

  1. Another drug in the same therapeutic category
  2. A drug having the same clinical indications available in the country of interest e.g, Canada fixes the drug prices with reference to prices charged for the same drug in the US and some European Union countries.

A Kaleidoscope of Drug Price Control across the world:

In most of the countries around the world drug price control in some form or the other has been put in place by the respective governments. Following are just a few examples:

Price Control in Germany:

In not so distant past pharma companies operating in Germany could fix any price for both patented and generic medicines. As a result, the drug prices in Germany have since long been among the highest in Europe.

‘The Act on the Reform of the Market for Medicinal Products (AMNOG)’ that came into effect in January 2011 to regulate the price of new prescription drugs in Germany, is expected to assist in the overall effort to curb in exploding costs for the country’s public health insurance system.

Under the new law, as reported by ‘InPharm’ dated November 12, 2010, pharmaceutical manufacturers in Germany, after the launch of a new drug, will have a one-year window to negotiate prices with health insurers. In case there happens to be no positive outcome of such negotiations, German Health Ministry would set a maximum price for the drug, which would then undergo a cost/benefit analysis by Germany’s ‘Health Technology Assessment (HTA)’ body IQWiG. Thereafter, the price will be fixed for the said new drug accordingly.

Price Control in Spain:

In Spain the local law has made HTA mandatory to ascertain the efficacy, cost, efficiency, effectiveness, safety, and therapeutic utility of different alternatives for the treatment of a disease condition.

After marketing approval of a new drug, either by the European Medicines Agency (EMEA) or the Spanish Medicine Agency (AEMPS),  the Ministry of Health (MSC) invites the manufacturer to provide all relevant information to allow the ‘Inter-Ministerial Pricing Commission (CIPM)’, chaired by the MSC, to decide the right price of the product. After negotiation, if the outcome is positive for inclusion of the product in the national reimbursement list, the decision is implemented across the country.

Effective June 2010, price cuts have been imposed by Spain on reimbursed patented drugs with rebates of 7.5% of sales, under the National Health System (NHS).

Effective July 2010, an average 25% cut has also been implemented for generic medicines in the country.

New Price Control mechanism in the UK:

Quite like US, UK has been one of those western countries, which allows pharmaceutical manufacturers to set their own prices. However, after the expiry of the current ‘Pharmaceutical Price Regulation Scheme (PPRS)’ in 2013, despite many concerns, as decided by the ‘National Institute of Health and Clinical Excellence (NICE)’,  ‘Value-based pricing (VBP)’ is expected to be followed for pharmaceutical product pricing in the UK.  VBP will be worked out ‘by the maximum affordable cost per ‘Quality Adjusted Life Years (QALY)’ generated by the use of new medicines.’

To arrive at VBP for a new product, pharmaceutical manufacturers will require furnishing enough evidence, based on clinical trial, to establish superiority of a new drug over the ones already available in the market.

However, VBP will be followed only for the new prescription drugs and not for the existing ones or generic medicines, with the main regulatory focus being on profit rather than on price control of drugs.

Price Control in France:

As per ISPOR, in France the price control of pharmaceutical products is implemented as follows:

“All registered pharmaceuticals are subjected to Evaluation of Therapeutic Benefit (Amelioration du Service Medical Rendu, or ASMR) by ‘Commission de Transparence (Transparency Commission)’, which is expressed as a classification between 1 & 6, as follows:

  1. Innovative product of significant therapeutic benefit
  2. Product of therapeutic benefit, in terms of efficacy and/or reduction in side effect profile
  3. Already existing product, where equivalent pharmaceuticals exist; moderate improvement in terms of efficacy and/or reduction in side effect profile
  4. Minor improvement in terms of efficacy and/or utility
  5. No improvement but still granted recommendations to be listed
  6. Negative opinion regarding inclusion on the reimbursement list

The ASMR evaluation is based on the expert judgment of the Transparency Commission of the Pharmaceutical Agency ‘(Agence du Medicament)’. Subsequently, a reimbursement price negotiated with ‘Comité Economique du Médicament (CEM)’. The price negotiated with CEM becomes the price at which the drug is sold throughout the country, even for private prescriptions.”

As a part of the 2011 Social Security Budget Bill, France has decided to significantly reduce its healthcare cost by enforcing price cuts including parallel import of drugs.

Price Control in Australia:

Just as many OECD countries, Australia also use drug price control mechanisms to contain its healthcare expenditure. The Australian government manages their healthcare expenditure through the Pharmaceutical Benefits Scheme (PBS), where the pharma companies are required to prove the cost-effectiveness of their drugs for subsequent pricing negotiations with the government.

Price Control in China:

In China, since 2007, ”The National Development and Reform Commission (NDRC)’ controls drug prices in the country. There was, however, a significant re-engineering of the system in  November 2010, when NDRC drastically reduced the prices of essential drugs manufactured locally in partnership with global pharma majors like, Novartis, Pfizer and Roche. In March 2011 prices were slashed for over 1,000 drugs in China.

Patented and imported products enjoyed relatively free-market pricing in China, for some time. However, recently to increase the coverage of ‘Universal Healthcare’, the Chinese pricing authorities have initiated price control measures for many pharmaceutical products in the country.

Pricing mechanism in Singapore:

Singapore also follows a free-market pricing approach for pharmaceutical products, which is, reportedly, to recognize the value and importance of patented products in the country. Though Singapore Government provides ‘Universal Healthcare’ to its residents, individuals are required to share the costs of healthcare services they consume.

This has made the cost of healthcare in Singapore rather expensive, especially for the retired persons and low-income citizens of the country. As a consequence of which, many individuals who would require regular treatment with medicines, very often go to nearby Malaysia to buy those medicines at much lesser prices, probably causing a revenue loss to the Singapore market.

Price control in Japan:

In Japan, the Ministry of Health, Labor, and Welfare (MHLW) follows a system of pricing where the new drugs prices are determined based on those comparable drugs, which are already available in the country. However, in those cases where MHLW cannot find any comparable drug for assessment ‘cost based pricing’ system is followed. The new drugs which are assessed as innovative by the MHLW may attract a premium based on pre-determined criteria.

Price Control in Brazil:

In Brazil, the government controls the drug prices through designated agencies. The ‘Agência Nacional de Vigilância Sanitária (ANVISA)’ is responsible for the marketing approval of new drugs and the ‘Câmara de Regulação do Mercado de Medicamentos (CMED)’ is responsible not only for determining the prices of new drugs, but also for any subsequent price changes for all drugs in the market.

Price Control in Russia:

Currently pricing regulations are applicable to only ‘essential drugs’ in Russia. However, ‘thepharmaletter’ in its January 25, 2011 edition reported that ‘Federal Commission on Safety of Medical Business (FCSMB)’ of Russia has proposed a quick introduction of the government control over prices of all drugs in the domestic market costing more than 100 Roubles (US$3.34).

FCSMB believes that the current system of drug pricing in Russia offers a distinct advantage to the global pharmaceutical players. Hence, the agency feels, the state regulation on all drug prices is necessary in the country.

A damning article from “Los Angeles Times”:

Though United States of America (USA) still remains a free-market even for pharmaceutical product pricing, increasing number of voices are now being heard in favor of pharmaceutical price control even in that country.

‘Los Angeles Times’ in its October 10, 2009 edition commented, “Healthcare reform without drug price controls? That’s sick”.

While, acknowledging high cost of pharmaceutical research, the article continued to state, ”In fact, the companies’ actual research costs are one of the industry’s most closely guarded secrets. In the 1970s and 1980s, pharmaceutical companies waged a decade-long legal battle to keep even government auditors from reviewing those costs, leaving it unclear whether they include non- scientific costs such as promotion”.

The article stated that the bigger issue that has largely escaped public scrutiny is that “Over the last 30 years, the industry hasn’t focused its efforts on discovering those truly amazing innovations that can change the practice of medicine. Instead, the companies have taken the easy path, ordering their scientists to turn out mostly rehashes of medicines already being sold. It’s far cheaper to copy a medicine — tweaking a molecule just enough so it gets its own patent — than it is to do the years of work needed to find new and better cures”.

The author further highlighted, “This focus on copycat medicines is apparent in the list of drugs approved by the Food and Drug Administration. Of the medicines approved between 1990 and 2004, only 16% were what government reviewers deemed to be actually new and significant. The rest were medicines we were already using in a slightly different form. This explains why our pharmacies are stocked with a multitude of medicines that reduce cholesterol in the same exact way. With no price controls, the industry gets away with charging exorbitant amounts — even for drugs that barely work.”

High out-of-pocket expenses for health makes price control relevant in India: 

Medicines are essential for all and constitute a significant cost component of modern healthcare systems, globally. However, in India, overall healthcare system is fundamentally different from many other countries, including China.

Around 80% of expenses towards healthcare, including medicines, are reimbursed either by the Governments or through Health Insurance or similar other mechanisms in many countries.

However, in India the situation is just the reverse, more than 70% of overall healthcare costs are private or out-of-pocket expenses, incurred by the individuals/families. In addition, out of the total 70% out-of-pocket expenses, medicines contribute around 71%, making the life more difficult for many. (Reference: ‘High Level Expert Group Report on Universal Health Coverage for India’ Instituted by Planning Commission of India).

Thus the issue of price control of ‘Essential medicines’ is extremely relevant in the country, more so when pharmaceuticals come under its Essential Commodities Act.

Conclusion:

It is now widely believed that pharmaceutical products, which play a pivotal role in keeping the population of any nation healthy and disease free to the extent possible, should not be exploited by anyone.

Pharmaceutical companies are often criticized in this area by those stakeholders who are genuinely concerned with the well-being of particularly ailing poor and underprivileged population across the world.

While looking through the ‘Kaleidoscope of Drug Price Control’ spanning across the world, it appears quite obvious that the raging debate on improving access to modern medicines will continue to revolve round the pharmaceutical pricing mechanism in almost all countries of the world. India is no exception, in any way.

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.

India and China…Practical relevance of ‘Priority Watch List (PWL)’ status in ‘Special 301 Reports’ of America…and the REAL ‘Game Changers’

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Many stakeholders around the world believe that Intellectual Property Rights (IPR) environment in China is far better than what we have in India. Interestingly “2010 Special 301 Report” of the United States of America dated April 30, 2010, paints a totally different picture.

The priority watch list (PWL)’ countries:

The Office of The United States Trade Representative, in the Press Release of ’2010 Special 301 report’, mentioned the names of PWL countries as follows:
“Trading partners on the Priority Watch List (PWL) do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection. China, Russia, Algeria, Argentina, Canada, Chile, India, Indonesia, Pakistan, Thailand, and Venezuela are on the Priority Watch List. These countries will be the subject of particularly intense engagement through bilateral discussion during the coming year”.

It is, therefore, quite clear that so far as IPR environment is concerned both China and India feature in the PWL of America. This totally breaks the perceived myth, as is being very often made out to be by many, that China is a better implementer of IPR than India.
Reasons for featuring in the ‘Priority Watch List’ (PWL):
“2010 Special 301 Report” makes the following comments for China and India being in the PWL of the USA:

China:
1. China will remain on the Priority Watch List in 2010 and will remain subject to Section 306 monitoring. China’s enforcement of IPR and implementation of its TRIPS Agreement obligations remain top priorities for the United States…the overall level of IPR theft in China remains unacceptable.
2. The United States is heartened by many positive steps the Chinese government took in 2009 with respect to these issues, including the largest software piracy prosecution in Chinese history, and an increase in the numbers of civil IP cases in the courts.
3. The United States is also deeply troubled by the development of policies that may unfairly disadvantage U.S. rights holders by promoting “indigenous innovation” including through, among other things, preferential government procurement and other measures that could severely restrict market access for foreign technology and products.
4. China’s IPR enforcement regime remains largely ineffective and non-deterrent.
5. The U.S. copyright industries report severe losses due to piracy in China.
6. Counterfeiting remains pervasive in many retail and wholesale markets.
7. China maintains market access barriers, such as import restrictions and restrictions on wholesale and retail distribution, which can discourage and delay the introduction into China’s market of a number of legitimate foreign products that rely on IPR.
8. China’s market access barriers create additional incentives to infringe products.
9. China adopts policies that unfairly advantage domestic or “indigenous” innovation over foreign innovation and technologies.
10. Draft Regulations for the Administration of the Formulation and Revision of Patent-Involving National Standards, released for public comment in November 2009 by the Standardization Administration of China (SAC), raise concerns regarding their expansive scope, the feasibility of certain patent disclosure requirements, and the possible use of compulsory licensing for essential patents included in national standards.
11. With respect to patents, on October 1, 2009, the Third Amendment to China’s Patent Law, passed in December 2008, went into effect. While many provisions of the Patent Law were clarified and improved, rights holders have raised a number of concerns about the new law and implementing regulations, including the effect of disclosure of origin requirements on patent validity, inventor remuneration, and the scope of and procedures related to compulsory licensing, among other matters. The United States will closely follow the implementation of these measures in 2010.
12. The United States encourages China to provide an effective system to expeditiously address patent issues in connection with applications to market pharmaceutical products.
13. The United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.
14. Generally, IPR enforcement at the local level is hampered by poor coordination among Chinese government ministries and agencies, local protectionism and corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, and inadequate and non-transparent processes. As in the past, the United States will continue to review the policies and enforcement situation in China at the sub-national levels of government.

India:
1. India will remain on the Priority Watch List in 2010.
2. India continues to make gradual progress on efforts to improve its legislative, administrative, and enforcement infrastructure for IPR.
3. India has made incremental improvements on enforcement, and its IP offices continued to pursue promising modernization efforts.
4. Among other steps, the United States is encouraged by the Indian government’s consideration of possible trademark law amendments that would facilitate India’s accession to the Madrid Protocol.
5. The United States encourages the continuation of efforts to reduce patent application backlogs and streamline patent opposition proceedings.
6. Some industries report improved engagement and commitment from enforcement officials on key enforcement challenges such as optical disc and book piracy.
7. However, concerns remain over India’s inadequate legal framework and ineffective enforcement.
8. Piracy and counterfeiting, including the counterfeiting of medicines, remains widespread and India’s enforcement regime remains ineffective at addressing this problem.
9. The United States continues to urge India to improve its IPR regime by providing stronger protection for patents.
10. One concern in this regard is a provision in India’s Patent Law that prohibits patents on certain chemical forms absent a showing of increased efficacy. While the full import of this provision remains unclear, it appears to limit the patentability of potentially beneficial innovations, such as temperature-stable forms of a drug or new means of drug delivery.
11. The United States also encourages India to provide protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products.
12. The United States encourages India to improve its criminal enforcement regime by providing for expeditious judicial disposition of IPR infringement cases as well as deterrent sentences, and to change the perception that IPR offenses are low priority crimes.
13. The United States urges India to strengthen its IPR regime and will continue to work with India on these issues in the coming year.

Responses and reactions in India:
‘Special 301 Reports’ have always been received with skepticism both by the Government of India and the domestic media. Even in the past, PWL status has hardly bothered either India or China to bring in a radical change in the IPR environment of the respective countries, as desired by the USA.

A recent article on the ‘Special 301 Report 2010’ that appeared in ‘Business Standard’, Sunday, May 2, 2010 comments as follows:

“India, in fact, continues to be on the ‘priority watch list’ of the USTR’s ‘Special 301’ report, despite a detailed submission of the intellectual property rights (IPR) compliance measures initiated by it in 2009”.

Many stakeholders in India feel and have also articulated that despite the country taking important steps to improve implementation of IPR within the country, the position of India in ‘Special 301 Reports’ has not changed much since last so many years. India, therefore, envisages no harsh measures by the US Government as a result of being continuously in the PWL of the ‘Special 301 Reports’.

Why then China attracts more Foreign Direct Investments (FDI) than India in the Pharmaceutical space?

In my view, this has got not much to do with the IPR environment in these two countries. The key ‘Game Changers’ for China, I reckon, are as follows:

1. Larger market size due to greater access to medicines:
Access to medicine in China covers 85% of their 1.2 billion population, against 35% of 1.1 billion population of India.

2. Larger market size due to better affordability of medicine:

Around 85% of the population in China is covered through various medicine price reimbursement schemes. Whereas in India around 78% of such expenditure is ‘out of pocket’ expenses. Conversely, not more than 22% of the population is currently covered by drug price reimbursement schemes in India.

3. Strong signals to the Government that ‘innovative companies’ are contributing to the ‘Economic Progress’ of the country:

In such a booming pharmaceutical market scenario, it is essential for the business to keep the government engaged to help create a more ‘innovative pharmaceutical business’ friendly environment, where even a slight improvement in the prevailing IPR conditions will give a significant boost to their business performance.

IMS forecasts that by 2013 China is going to be the third largest pharmaceutical market in the world with an estimated turnover of US $66.7 billion against 13 ranking of India in the same league table, with an estimated turnover of US $15.5 billion.

Similar trend was observed in the immediate past, as well. As reported by IMS MAT September 2009, China registered a turnover of US $24 billion with 27.1% growth against US $7.7 billion with 12.9% growth of India, during the same period. IMS, based on their research data forecasts that during 2008-13 period, China will contribute 36% of the growth of the Asia Pacific Region, against 12% of India.

Under this situation, it appears quite prudent for the ‘innovative pharmaceutical companies’ to send signals to the Chinese Government that they are contributing to the ‘Economic Progress’ of the nation by making significant direct investments, obviously with an expectation to get more business friendly environment in that country.

Recent ‘Healthcare Reform’ in China has further improved its market attractiveness.

Thus the business attractiveness of China as a pharmaceutical market scores much higher than India, fetching more FDIs for them, prevailing IPR environment and PWL status in the ‘Special 301 Reports’ for the country not withstanding.

Conclusion:

Overall IPR environment in India, many experts strongly believe, does not seem to be much different from China, if not a shade better. While interacting with Chinese experts recently in that part of the world, I understand, ‘Data Protection’ is just ‘on paper’ in China, causing a huge issue for the innovator companies in that country. Similar situation prevails so far as the effectiveness of patent enforcement mechanism is concerned, where innovator companies are fighting and required to fight such infringement cases in the provincial level and in so many provinces of the country, posing a huge challenge to the patent holders.

So far as PWL status in ‘Special 301 Reports’ is concerned, it seems to have almost lost its relevance, as both India and China become stronger economies with increasing global dependence on them, consistently registering double digit or near double digit GDP growth.

In china, the pharmaceutical market attractiveness, its size and growth are driven by two key factors as mentioned above, viz, huge domestic market access/ penetration and better affordability of medicines through various effective medicine price re-imbursement schemes, across the country. The recent ‘Healthcare Reform’ of the country has added further momentum to this progress.

So long as India does not take robust policy measures, followed by their effective implementation to address, much ignored, the access and affordability issues of medicines for the common man, the country will continue to be a laggard, compared to China in the race of market leadership within the global pharmaceutical industry.

By Tapan Ray

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

The relevance of the Indian version of the Bayh-Dole Act – the country needs all stakeholders’ open debate on the proposed bill.

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The Bayh-Dole Act is an American legislation, which was originally sponsored by two US senators named Birch Bayh and Bob Dole. This Act deals with Intellectual Property (IP) arising out of US government funding. Bayh-Dole Act is also known as University and Small Business Patent Procedure Act. In December 12, 1980 this was enacted into a law by the US Congress.
What it does:
Under this Act, IP rights over government funded inventions for further development, license to other parties or direct commercialization are transferred to the universities and small businesses operating with government contracts. The government though retains its right to license the invention to any third party without any consent from the IP right owner or the licensee, if it feels that on a reasonable basis the public is being denied of the benefits of the invention.

The Indian version of the Bayh-Dole Act:

The Utilization of the Public Funded Intellectual Property Bill 2008, which has been formulated in line with the US Bayh-Dole Act, has already been approved by the Union Cabinet of India. This bill ensures both utilization and protection of the IP arising out of government funded research initiatives. Currently government funded academic institutions and research institutes cannot commercialize the inventions.

The proposed bill will not only allow them to patent such inventions but will also reward the inventors and the institutes with a share of its commercialization proceeds as per specific guidelines.
The bill has attracted a mixed response from the stake holders.

The relevance of Bayh-Dole Act in India:

Relevance of Indian version of the Bayh-Doll Bill in the post product patent regime in India is
significant. The core concept of the bill encourages innovation and ensures protection of patents and other forms of IP rights of the government funded R&D outcomes, where the owner of the intellectual property will be the government grant receipients or the government.

This bill is expected to offer to various research institutions, universities, small businesses and non-profit organizations, the IP rights on their inventions, resulted from the government funding. Overall environment towards innovation within the country is expected to get a boost in that process.

Is the ownership and protection of R&D a real remedy to make government academic institutions and universities self sustainable?

This is certainly not the only remedy, but an important one. This process will have significant potential to effectively facilitate technology transfer from government funded research laboratories or universities to the user industry to make these establishments self-sustainable.

What are the main implications of the bill if enacted in its current form?

Although the fine prints of the bill are not yet clearly known, the bill in its current form raises more questions than answers. Some of the concerns with the bill in its current form are as follows:

- This law could effectively transfer the decision making process about
publications of the research papers from the researchers and academia to
the bureaucrats in the government establishments, making the R&D
environment quite stifling for the researchers and the initiative
counterproductive.

- Academia at times will be compelled to incur significant expenditures
towards different types of IPR related litigation, which could have been
otherwise productively spent by these institutions towards research
initiatives.

- The learning and research may get transformed into another kind of
businesses activity, as such a law could change the research focus on to
the issues, which will be of greater commercial interest to various
industries and will offer immediate financial benefits to the
institutions. As a result vital non-commercial research, which could be of
critical interest to the nation as such, may take a back seat.

Conclusion:

The country will therefore need an extensive public debate on this bill, which has not taken place, as yet. The loose knots of the bill need to be tightened and the concerns of the stakeholders need to be adequately addressed before its enactment into a law.

By Tapan Ray

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