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Uniting Pharma With Business Ethics: A Bridge Too Far?

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Operating ethically not only is the right thing to do but also is fundamental to success in business. Poor governance and poor ethical business practices can lead to fines, public scrutiny and distrust – overshadowing good performance, destroying reputation, and undermining the morale and engagement of employees. …We must act in ways that build and maintain the trust of patients, healthcare professionals, governments and society. This was articulated in the Novartis Corporate Responsibility Report 2017, highlighting how important it is to unite pharma operations with business ethics for each company. But is it happening in reality?

The same question haunts yet again with the announcement of a new Code of Marketing Practice by the International Federation of Pharmaceutical Manufacturers and Associations’ (IFPMA),effective January 2019. The pronouncement prescribes ‘a global ban on gifts and promotional aids for prescription drugs wherever the association’s member companies operate.’

However, the overall scenario gets more complex to comprehend, when on January 03, 2019  Bloomberg Law reported: ‘The change is causing concern among both U.S.-based and multinational companies like Astra Zeneca, Bristol-Myers Squib, Johnson & Johnson, and Pfizer Inc. about how to balance appropriate business behavior with respect for cultural norms in other countries.’ Interestingly, the IFPMA membership virtually covers all MNC drug companies, operating across the world. Thus, any concern on its implementation, especiallyamong some of the bigger names, raises more questions than answers about its effectiveness. What exactly has been the outcome of all such actions being taken, especially by the multinational pharma industry associations, from time to time. Have the patients been benefited – at all?

Keeping this recent development as the backdrop, I shall try to gauge in this article, is the bridge still too far to mitigate the widening gap between overall pharma operations and the standard of business ethics -voluntary code of practices of pharma associations notwithstanding?

Why pharma ‘business-practices’ and ‘business-ethics’ are so important?

Before charting onto the sensitive areas of ‘business practices’ and ‘business ethics’, let me recapitulate the meaning of these two terminologies to fathom why these are so important in pharma to protect patient health interest.

  • Business practice is defined as a method, procedure, process, or rule employed or followed by a company in pursuit of achieving its objectives. Itmay also refer to these collectively.
  • Similarly, Business ethics is defined as a form of professional ethics that examines the ethical and moral principles and problems that arise in a business environment. It applies to all aspects of business conduct on behalf of both individuals and the entire company.

Thus, ethical business policies and practices for pharma industry, when worked out both by an industry association or an individual company, aims at addressing potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate responsibility and fiduciary responsibilities.

Ironically, despite well-hyped announcements of voluntary codes of practices from time to time, no commensurate changes in patients’ health interest are visible in real life. Thus, the very relevance of such edicts is now being seriously questioned by many.

What do reports reflect on ongoing pharma business practices?

To get an idea in this area, let me quote below from three reports, out of which one is specifically on the Indian scenario, which has not changed much even today:

“The interaction between physicians and medical representatives (MRs) through gift offering is a common cause for conflicts of interest for physicians that negatively influence pre- scribing behaviors of physicians throughout the world.” This was articulated in an article titled, “Gift Acceptance and Its Effect on Prescribing Behavior among Iraqi Specialist Physicians”, published by Scientific Research Publishing (SCIRP) in June 2014.

A couple of years before that, on September 07, 2012, Reuters also published an article with the headline: “In India, gift-giving drives drug makers’ marketing.” Thereafter, many similar articles were published in various newspapers and magazines, possibly to trigger remedial action by the regulators in the country.

Very recently, on January 18, 2019, The New York Times (NYT) came out with a mind boggling headline – “Study Links Drug Maker Gifts for Doctors to More Overdose Deaths.” Elaborating on this JAMA study, the NYT wrote: “Counties where the doctors got more meals, trips and consulting fees from opioid makers had higher overdose deaths involving prescription opioids.”

The point I want to drive home here is that freebies in the form of gifts, travel to exotic places with free meals and stay, fees of various types clubbed under a mysterious nomenclature ‘consulting fees’, purported to influence doctor’s prescribing behavior, are now rampant. These are adversely impacting patients, as they are often compelled to buy high-priced drugs, unnecessary drugs, including antibiotics, sedatives and opioids, to name a few.

Are big pharma companies following the codes – both in letter and spirit?

The doubt that surfaces, are these changes just for displaying to the stakeholders how well and with stringent measures, drug companies are self-regulating themselves, on an ongoing basis? Before jumping to any conclusion, let us try to make out whether, at least the big pharma players are following these codes in both letter and spirit.

To establish the point, instead of providing a long list of large pharma settlements with governments for various malpractices, I shall cite just the following two relatively recent ‘novel’ examples related two top global pharma companies, for you to have your own inferences.

  • The first one is related to reports that flashed across the world in May 2018 related to Novartis. One such article described, “Congress demands info from Novartis about its USD 1.2m in outflows to Michael Cohen, just as it was negotiating payments for its cancer drug.” The report further elaborated, Novartis’ USD 1.2 million payment was made in the shell company of Michael Cohen, President Donald Trump’s personal lawyer and so-called ‘fixer’.
  • The second one is the September 13, 2018 report of The New York Times. It revealed: ‘Dr. José Baselga, the chief medical officer of Memorial Sloan Kettering Cancer Center, resigned on Thursday amid reports that he had failed to disclose millions of dollars in payments from health care companies in dozens of research articles.”

The report also stated: “Dr. Baselga, a prominent figure in the world of cancer research, omitted his financial ties to companies like the Swiss drugmaker Roche and several small biotech startups in prestigious medical publications like The New England Journal of Medicine and The Lancet. He also failed to disclose any company affiliations in articles he published in the journal Cancer Discovery, for which he serves as one of two editors in chief.”

Indian companies aren’t trailing far behind, either:

Many Indian companies are, apparently, sailing on the same boat. Let me illustrate this point by citing an example related to India’s top ranked domestic pharma player.

What it said: Way back on November 13, 2010, Sun Pharmain a communication expressed its concern by saying: ‘Over four decades since Independence, the government nurtured a largely self-sufficient pharma industry. But the entry of MNCs is putting most drugs beyond the reach of millions.’

The communique further added: ‘Even as the domestic industry begins to feel the heat of an unprotected market, public health experts are examining why drug prices in India are higher than in Sri Lanka, which imports most of its drugs. The MNC takeover raises the specter of an MNC-dominated pharma sector selling drugs at un-affordable prices, a throw ‘back to the scenario just after Independence, which the government painstakingly changed over four decades. Are we setting the clock back on the country’s health security?’

The reality thereafter: It’s a different story that today, the same Sun Pharma, despite alleged ‘high price drugs of MNCs’, occupies the top ranking in the Indian pharmaceutical market. Be that as it may, the point to note that the same company is now facing similar charges from other countries, almost a decade after. On March 2017, a media report came with a headline: ‘Sun Pharma, Mylan face price fixing probe in US.’

Incidentally,the company is mired with allegation on governance related issues, as well. A media report dated November 20, 2018 carried a headline: ‘Governance cloud over Sun Pharma, stock at 6-month low.’ This example is quite relevant to this discussion, as well, for its link with ethical business practices, as discussed earlier.

Additionally, class-action lawsuits in the United States for alleged business malpractices, including ‘pay for delay conspiracies’, against Indian pharma companies are also on the rise – Sun Pharma and Dr. Reddy’s top the list in terms of those who face most class-action litigation, reported a leading Indian business daily on September 02, 2017.

Pharma malpractices continue, DOP is still to make UCPMP mandatory: 

In this quagmire, where self-regulation doesn’t work, the government usually steps in, as happened in the United States and Europe. Whereas, in India, no decisive government action is yet visible to curb this menace, especially for protection of patients’ health interest. Let me try to illustrate this point with the following chronology of four key events:

  • On May 08, 2012, the Parliamentary Standing in its 58th Report, strongly indicted the DoP for not taking any tangible action in this regard to contain ‘huge promotional costs and the resultant add-on impact on medicine prices’.
  • Ultimately, effective January 01, 2015, the Department of Pharmaceuticals (DOP) put in place the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) for voluntary implementation, despite knowing it has not worked anywhere in that format.
  • When voluntary UCPMP did not work, on September 20, 2016, the then secretary of the DoP reportedly said, the mandatory “UCPMP is in the last leg of clearance with the government. The draft guidance has incorporated suggestions of the pharma industry and other stakeholders.”
  • After another year passed by, on April 16, 2018, a news report reconfirmed: ‘4 years on, code to punish pharma firms for bribing doctors still in works.’ Its status remains unchanged till date.

Conclusion:

Even after Prime Minister Modi’s comment on April 2018 regarding the alleged nexus between doctors and pharmaceutical firms and doctors attending conferences abroad to promote these companies, decision paralysis of DOP continues on this important issue.

Pharma companies continue practicing what they deem necessary to further their business interest, alongside, of course, announcing their new and newer voluntary codes of practices. But, patients keep suffering, apparently for the apathy of the DOP to curb such malpractices forthwith.

Coming back to where I started from, when the malice is so deeply rooted, would any global ban ‘brand-reminders’, such as gifts, even if implemented religiously, work? Thus, the doubt lingers, for uniting pharma operations with corporate business ethics is the bridge still too far?

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.

Data Manipulation: Leapfrogging Dangerously Into Clinical Trial Domain

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Over the last several years, repeated allegations of gross data manipulative practices, detected by global drug regulatory agencies, such as USFDA and MHRA, have shaken the Indian pharma exporting companies hard.

This has been hurting the overall business performance of most of these players, considerably, besides other consequential fallouts

Significant numbers of pharma manufacturing facilities of different scale and size have been receiving ‘Import Alerts/Warning Letters’, at regular intervals, from the overseas drug regulators. All such steps have resulted in refusal of entry of medicines manufactured in those plants into the importing countries. As on date, most of these bans are for the United States (US), some for the United Kingdom (UK) and now a fresh one that covers all the 28 countries of the European Union (EU).

Consequently, the drug export performance of the country has started moving south, as I indicated in my blog post of September 29, 2014, titled “Make in India…Sell Any where in The World”: An Indian Pharma Perspective.

While looking at the future, the situation seems to be even more concerning than what is generally envisaged today, as it involves many homegrown local pharma behemoths, including the topper of the Indian pharma league table – Sun Pharma.

Time to take the bull by the horns:

These are regular and serious episodes of allegedly deliberate wrong doings involving life saving medicines. It is about time that without further delay the Indian Government and the country’s drug regulators accept unequivocally that there is something fundamentally wrong in this area that needs to be set right urgently.

To come out of this peril soon, competent authorities need to first ascertain without squandering much time on the utopian “conspiracy theory”, whether this seemingly uncontrollable issue falls under:

  • Technical incompetence
  • Inadequate resource deployment
  • Or just an outcome of generally all pervasive and a very Indian “Jugaad” mindset

It could well be a mix of all the three above factors in different proportions.

‘Data manipulation’ dangerously leapfrogging into clinical trial domain:

So far, incidences of alleged data falsification were restricted mostly to drug manufacturing activities. Alarmingly, it has now leapfrogged into the immensely important domain of ‘Clinical Trials’, based on which the drug regulators decide on the ‘Marketing Approval’ of medicines for patients’ consumption, wherever required.

If the Government does not nip it in the bud, ruthlessly and now, it has the potential to heavily impact the innocent patients even costing their precious lives.

What it means commercially?

According to Pharmaceutical Export Promotion Council (Pharmexcil), the Indian pharmaceutical industry could lose around US$1 – US$1.2 billion worth of exports due to the latest decision of the European Union to ban 700 generic drugs that earlier received European Union (EU) clearance for sale in their member countries.

According to Pharmexcil, Europe accounts for US$3 billion out of total Indian pharma exports of US$15.4 billion, which includes both APIs and formulations. This is the first time, when there has been a negative growth in pharma exports to the EU.

Unrolling the GVK Bio saga:

On July 22, 2015 Federal Institute for Medicines and Medical Products of Germany reportedly posted the notice (in German language) of ban of 700 generic drugs effective August 21, 2015. This ban would be applicable to all 28 EU member nations.

Accordingly, from the above date, all these drugs of both the Indian and multinational companies for which clinical trials were done by India’s Hyderabad based GVK Biosciences, cannot be distributed or sold by pharma companies, wholesalers, drug stores and other outlets in the EU, as indicate in the above notice. This would be the largest ban of generic drugs imposed by the European Union, as it comes into effect.

This ban is reportedly the ultimate outcome of an inspection in 2014 by the French authorities of the GVK site that handled the clinical trials for those 700 drugs. The French inspectors found that a number of electrocardiograms were falsified by GVK Bio employees as part of 9 approval studies between 2008 and 2014.

Following this finding, earlier on January 23, 2015, by a Press Release, the European Medicines Agency (EMA) had announced that a number of medicines for which authorization in the European Union (EU) was primarily based on clinical studies conducted at GVK Biosciences in Hyderabad, India, should be suspended.

Though GVK Bio has disputed the claims, it has reportedly set aside up to US$6.5 million for new studies on these drugs.

Indian Government blames ‘vested interests supporting Big Pharma’!

Interestingly, on July 23, 2015, The Financial Express reported, “the Modi government has asked the heads of India’s diplomatic missions in EU member countries and at the European Commission (EC)-level to take up the issue with the concerned authorities and ensure that it is not ‘blown out of proportion’ by ‘vested interests’ supporting the Big Pharma (innovator drug companies).”

However, it is even more interesting that earlier on April 16, 2015, quoting the CEO of GVK Biosciences Private Limited Reuters reported, “India may go to the World Trade Organization (WTO) if the European Union does not reconsider a decision to suspend the sale of about 700 generic drugs that were approved based on clinical trials by GVK Biosciences.”

It is noteworthy, despite the above public announcement, between April and July 2015, India has not lodged any complaint to the WTO on this mega ban in EU, involving clinical trials conducted by GVK Biosciences.

In my view, any tangible immediate outcome of the Indian diplomatic move, particularly on this ban in the EU, as reported above, appears rather unlikely, if at all.

The rigmarole continues:

The narrative of alleged gross falsification of sensitive clinical trial data does not end here. Almost replicating what happened earlier with frequent incidences of drug manufacturing data manipulation, the same rigmarole now leapfrogs into another important domain with similar intensity.

On June 30, 2015, close on the heels of the above GVK Biosciences saga, the World Health Organization issued a ‘Notice of Concern’ after inspection of Chennai-based Contract Research Company, Quest Life Sciences facility.

It also brought to light, critical deviations from GCP (Good Clinical Practices), over data integrity, subject safety and quality assurance and in gross violation of procedures during clinical trials for HIV drugs, such as, Lamivudine, Zidovudine and Nevarapine dispersible tablets from Micro Labs.

WHO inspectors reportedly found that “two-thirds of electrocardiograms performed on patients were duplicates with dates and names changed by the company”.

The WHO letter also underscored, “These issues appear to be systemic in nature and occurring many times over a significant period of time, and not only as a one-time incident for the study submitted to WHO.”

Again, almost depicting the past, there does not seem to be any perceptible and strong regulatory interventions in India in this regard, event after the above ‘Notice of Concern’ from the WHO.

Could assume a snowballing effect:

This situation may eventually assume a snowballing effect, when data related malpractices in clinical trials would catch up with drug manufacturing related data manipulation detected by the foreign drug regulators in India. I have just given an example of its continuation in the clinical trial domain.

The following are a few examples of just the last six months of 2015 of the continuation of the same in the drug manufacturing area:

Cadila Pharmaceuticals Limited:

In a letter dated February 25, 2015 to Cadila Pharmaceuticals Limited, the USFDA wrote that in the pharma manufacturing facility of the company, located at 294 GIDC Industrial Estate, Ankleshwar, Gujarat, their (USFDA) investigator identified significant deviations from current good manufacturing practice (CGMP) for the manufacture of Active Pharmaceutical Ingredients (APIs). Those deviations cause the APIs manufactured there to be adulterated, in that the methods used in, or the facilities or controls used for, their manufacture, processing, packing, or holding do not conform to, or are not operated or administered in conformity with CGMP.

Emcure Pharmaceuticals Ltd.:

On July 13, 2015, by an ‘import alert’ posted on its website, the USFDA announced that the regulatory agency had barred imports from Hinjewadi manufacturing plant in Maharashtra of Emcure Pharmaceuticals Ltd., after their inspection revealed the company was not meeting manufacturing quality standards.

Aurobindo Pharma Ltd.:

Again, according to a July 22, 2015 media report, “Hyderabad-based Aurobindo Pharma is the latest addition to an expanding list of Indian drug firms that have come under the scanner of the US health regulator.” In this case also the USFDA reportedly raised issues related to the quality management systems of the company.

Business sustainability could be in jeopardy:

There are ample evidences that manipulations of specified drug quality standards, are making even the large home grown pharma companies to pay through the nose. In fact, it has already cost some of these companies an arm and a leg, at times jeopardizing even their very existence. One such company is Ranbaxy. The issues related to data fudging of Ranbaxy have been so complex and widespread that its recent acquirer Sun Pharma has already started struggling to keep its neck above water with this brand new acquisition.

According to July 27, 2015 media reports, GVK Biosciences are also in parleys to sell the business, following EU drug regulators’ serious allegations of clinical trial data manipulation at its Hyderabad facility.

Again, media reports of July 30, 2015 indicated that hit by the USFDA imposing import ban on three of its manufacturing facilities, Ipca Laboratories reported 86 per cent decline in net profit for first quarter ended June 30, 2015.

Though, some domestic pharma companies are still out of it, with grace, if this overall menace remains unchecked and not intervened by the Government, it could cost the nation dear, at least when it comes to near term exports business growth and global disrepute for the delinquency.

Are medicines for domestic consumption safe and effective?

When such rampant data manipulation can take place for ‘export quality’ of drugs, what about the quality standards of medicines, which are manufactured for consumption of local patients?

Despite intense furore on this subject, Indian drug regulators at the Central Drugs Standard Control Organization (CDSCO), very strangely, do not seem to be much concerned on this critical issue, at least, as perceived by majority of the stakeholders. It appears from the precedents, our drug regulators seem to act promptly, mostly when the Supreme Court of the country directs them for any specific action for public interest.

Considering blatant violations of GMP and GCP standards that are increasingly coming to the fore related to ‘export quality’ drugs in India, and that too only after the inspections by the foreign drug regulators, the following questions float at the top of my mind:

  • Why no such warnings are forthcoming at all from the Indian drug regulators?
  • Does it mean that the level of conformance to GMP and GCP is hundred percent for all medicines manufactured and clinically evaluated in India for the consumption of local patients?
  • If yes, why such incidences are not uploaded to the CDSCO website, just like USFDA?
  • If not, why?

Conclusion:

Increasing incidences of repeated GMP and GCP violations by the Indian drug exporters, as enunciated mostly by the USFDA, MHRA and now EMA are, in turn, fueling the apprehensions of many Indian stakeholders on the quality manufacturing and clinical evaluation of those drugs in the country.

In the critical public health safety area, there does not seem to be any room for diplomatic maneuvering by the Government, whatever is its financial impact on the drug exports performance of India.

This can be corrected, only if the Indian pharma industry and the Government, in tandem, wish to move in the right direction. Searching for justifications within imaginary ‘vested interests’ and self-created ‘conspiracy theory’ would be futile and counterproductive.

Making the wrongdoers swallow strong bitter pills would help salvaging the seemingly uncontrollable regulatory situation. Additionally, it would stop inviting disrepute to the country that the world was referring to, even until recently, as the ‘pharmacy of world’.

Any attempt to trivialize the situation, could meet with grave consequences  and prove to be foolhardy. The emerging scenario ultimately may even compel the local doctors and hospitals to avoid prescribing drugs of those companies involved in such wrong doings against patients’ interests. This actually happened earlier with Ranbaxy, though briefly. It is also possible that many erudite patients on their own may request the doctors to prescribe equivalent drugs of pharma MNCs, enjoying better brand equity in this regard.

Drug quality related avoidable malpractices and attempted hoodwinking to regulators, are taking place at a time when Prime Minister Modi is going global to give a boost to his much publicized ‘Make in India’ campaign.

In the current aspirational business climate of the country, it is an irony that alleged ‘Data Manipulation’, which was so far confined to pharma manufacturing activities in India, instead of getting mitigated, is now leapfrogging into the related clinical trial domain too, with utter disregard to patients’ health safety interest and the reputation of the country.

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 & Healthcare: Where The Healers Turn Looters?

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Two news reports of the last week, though no longer shocking, made me think exactly the same way as the headline of this article epitomizes.

These reports are not just two isolated instances, but an integral part of a similar chain of events that I partly addressed in one of my earlier blog posts titled, “Is The Core Purpose of Pharma Business Much Beyond Profit Making?” of November 10, 2014.

With the fist clenching media reports of just the last week, I shall try to dwell upon that in absence of good governance how two of the greatest healers and the medical care givers in the arena of healthcare – the doctors and the hospitals, are being increasingly perceived by the common citizens as nothing less than looters.

The doctors:

A November 21, 2014 report highlights that the Medical Council of India (MCI) has summoned over three hundred doctors from various parts of India, based on an anonymous complaint, for taking lakhs of rupees as bribes from an Ahmedabad based pharmaceutical company. All those 300 doctors have been told to bring copies of their Income Tax returns and bank statements.

Just a year ago, in September 2013, the Chief Vigilance Commissioner reportedly received a letter alleging that doctors were taking bribes from Pharma companies. The complaint was forwarded to the Health ministry. The MCI took over the case in December 2013 and formed a subcommittee to investigate the doctors.

The complaint details that the Ahmedabad-based pharma company has been paying to the doctors not just huge cash, but also gifting them cars and flats, besides sponsoring foreign trips for the family.

In return, the involved doctors are allegedly prescribing that Ahmedabad based pharma company’s products that are priced 15 to 30 percent higher than those of well-established other pharma players.

In addition, according to reports, the doctors would also air on the Television sets placed at their respective clinics, advertisements of the pharma company products against hefty cash or equivalent in kind.

Although, the allegations of unholy nexus between pharma players and the doctors are continuity of a good old saga, the risk taking incentives that it provides to the wrong doers are very significant. The anonymous letter alleged that the concerned pharma company’s profit zoomed from zero to Rs. 400 Crore in a period of just 5 years.

According to available reports, the MCI has already questioned 166 doctors, out of which 7 are senior doctors from Maharashtra, including 3 physicians from Mumbai.

The hospital:

Another report on the subject that appeared yesterday is related to overcharging for an oncology medicine of Novartis – Sandostatin LAR, over the last nine months by the well-known Tata Memorial Hospital of Mumbai.

According to the report, even when Novartis revised the price of Sandostatin LAR from Rs. 65,499 for a 20mg vial to Rs 32,000 during Oct-Dec 2013 and the chemists in the hospital’s vicinity were selling the same vial for Rs 32,000, Tata Memorial continued to sell it at Rs 48,296.

The report also states that patients could have saved much more, if the hospital had prescribed an Octreotide generic of the same strength, Octride Depot 20mg by Sun Pharma with an MRP of Rs 17,800 is sold at Tata Memorial for Rs 12,157, instead of Sandostatin LAR 20mg.

However, the newspaper claims, “DNA was the first to report about the price disparity at the hospital on Nov 5. Tata Memorial Hospital has decided to reimburse cancer patients who were overcharged for a Novartis-branded oncology medicine over the last nine months.”

Interestingly, we get to know only about a few of such instances, only when these are reported either anonymously or by some employees or through rare impartial investigative journalism of international standard.

Treatment of dreaded diseases like Cancer also not spared:

The above hospital case assumes immense importance, as it is related to a dreaded disease and an expensive cancer drug. In real every day life, many such cases of various hues and colors are taking place in India incognito, at the cost of patients.

A scary scenario:

According to the ‘Fact-Sheet 2014′ of the World Health Organization (WHO), cancer cases would rise from 14 million in 2012 to 22 million within the next two decades. It is, therefore, no wonder that cancers figured among the leading causes of over 8.2 million deaths in 2012, worldwide.

A reflection of this scary scenario can also be visualized while analyzing the growth trend of various therapy segments of the global pharmaceutical market.

A recent report of ‘Evaluate Pharma (EP)’ has estimated that the worldwide sales of prescription drugs would reach US$ 1,017 Bn. by 2020 with a Compounded Annual Growth Rate (CAGR) of 5.1 percent between 2013 and 2020.

Interestingly, oncology is set to record the highest sales growth among the major therapy categories with a CAGR of 11.2 percent during this period, accounting for US$ 153.4 Bn. of the global pharmaceutical sales.

High incidence of cancer in India:

A major report published in ‘The Lancet Oncology’ states that in India, around 1 million new cancer cases are diagnosed each year, which is estimated to reach 1.7 million in 2035.

The report also highlights, though deaths from cancer are currently 600,000 -700,000 annually, it is expected to increase to around 1.2 million during this period.

The Lancet Oncology study showed, while incidence of cancer in the Indian population is only about a quarter of that in the United States or Europe, mortality rates among those diagnosed with the disease are much higher.

Experts do indicate that one of the main barriers of cancer care is its high treatment cost that is out of reach for millions of Indians.

Breast cancer is the most common type of cancer, accounting for over 1 in 5 of all deaths from cancer in women, while 40 percent of cancer cases in the country are attributable to tobacco.

Cancer drug price – a global issue to address:

As the targeted therapies have significantly increased their share of global oncology sales, from 11 percent a decade ago to 46 percent last year, increasingly, both the Governments and the payers, almost all over the world, have started feeling quite uncomfortable with the rapidly ascending drug price trend.

In the top cancer markets of the world, such as, the United States and Europe, both the respective governments and also the private insurers have now started playing hardball with the cancer drugs manufacturers.

There are several instances in the developed markets, where the stakeholders, such as, National Institute for Health and Care Excellence (NICE) of the United Kingdom and American Society of Clinical Oncology (ASCO) are expressing their concerns about manufacturers’ charging astronomical prices, even for small improvements in the survival time.

Following examples would give an idea of global sensitivity in this area:

After rejecting Roche’s breast cancer drug Kadcyla as too expensive, NICE reportedly articulated in its statement: “A breast cancer treatment that can cost more than US$151,000 per patient is not effective enough to justify the price the NHS is being asked to pay.”

In October 2012, three doctors at Memorial Sloan-Kettering Cancer Center announced in the New York Times that their hospital wouldn’t be using Zaltrap. These oncologists did not consider the drug worth its price. They questioned, why prescribe the far more expensive Zaltrap? Almost immediately thereafter, coming under intense stakeholder pressure Sanofi reportedly announced 50 percent off on Zaltrap price.

Similarly, ASCO in the United States has reportedly launched an initiative to rate cancer drugs not just on their efficacy and side effects, but prices as well.

Developments in India:

India has already demonstrated its initial concern on this critical issue by granting Compulsory License (CL) to the local player Natco to formulate the generic version of Bayer’s kidney cancer drug Nexavar and make it available to the patients at a fraction of the originator’s price. As rumors are doing the rounds, probably some more patented cancer drugs would come under Government scrutiny to achieve the same end goal.

I indicated in my earlier blog post that the National Pharmaceutical Pricing Authority (NPPA) of India by its notification dated July 10, 2014 has decided to bring, among others, some anticancer drugs too, not featuring in the National List of Essential Medicines 2011 (NLEM 2011), under price control. These prices have already in force.

Not too long ago, the Indian government reportedly contemplated to allow production of cheaper generic versions of breast cancer drug Herceptin in India. Roche – the originator of the drug ultimately surrendered its patent rights in 2013, apprehending that it would lose a legal contest in Indian courts, according to media reports.

Biocon and Mylan thereafter came out with biosimilar version of Herceptin in the country with around 40 percent lesser price.Herceptin,

Hence, affordable pricing of cancer drugs would continue to remain a key pressure point, as it just happened yet again.

The government to intervene again:

According to a media report of the last week, the new government in India is planning to control prices of anti-cancer drugs to address this critical issue.

As the current National List of Essential Medicines (NLEM) does not include many important anti-cancer medication, Tata Memorial Centre of Mumbai has recommended to the government that oncology drugs, such as Trastuzumab, Erlotinib, Irinotecan, Lenalidomide, Capecitabine, All Trans Retinoic Acid (ATRA), Bendamustine, Rituximab, Temozolomide (TMZ), Zoledronic acid, Megestrol acetate and Letrozole, should be added to the NLEM.

As a first step towards this direction the National Pharmaceutical Pricing Authority (NPPA) has invited comments on the same from the pharmaceutical industry and other stakeholders to bring these drugs under price control.

Quoting NPPA the report states, “the recommendations are based on factors such as the ability of the drug to improve the overall survival chances of the patient. The other factors include higher priority to drugs that have the potential to cure a fraction of patients versus those that have been proven to only prolong lives; the number of patients potentially impacted in India based on data from population based cancer registries of the National Cancer Registry Program; the non-availability of alternative medications of the same or other pharmacological class that can act as a reasonable ‘substitute’; and price of the drug to patients and the differential in price between various brands.”

Although this is a welcome move to most of the patients, the pharma industry would certainly not be happy with this development, because of very obvious reasons and is expected to strongly oppose this initiative of the government. Let us wait and watch how this scenario unfolds further.

Conclusion:

In pursuit of the Eldorado to generate more and more wealth, shorn of least concerns for majority of patients, quite a few companies are not sparing even the dreaded diseases, such as cancer, pushing many patients to abject poverty, if not untimely death.

Increasingly, many healthcare players across the world are reportedly being forced to pay heavily for ‘unethical behavior and business practices’ by the respective governments. Unfortunately, no such steps are being taken in India, not just yet.

At least on paper, for errant doctors and hospitals there is MCI to take prompt remedial measures. For implementation of Drug Price Control Order (DPCO) there is NPPA, though effectiveness of these two seemingly powerful bodies are far from the expectations of the stakeholders, occasional reported jingoism notwithstanding.

Currently in India, there are no legally binding ‘codes of pharma marketing practices’ in place. Even the Department of Pharmaceutical does not seem to have any legal jurisdiction for taking penal action against the errant pharma players for marketing malpractices or misdemeanor.

In this chaotic scenario, is it not quite challenging to fathom how would the government possibly discourage any healthcare or pharma player from turning looter instead of playing the expected role of a healer, ensuring beyond doubt that there is no wolf in sheep’s clothing?

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.

 

 

“Make in India…Sell Anywhere in The World”: An Indian Pharma Perspective

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In his Independent Day speech from the ramparts of the Red Fort on August 15, 2014, Indian Prime Minister Modi gave a clarion call to all investors of the world, “Come, make in India”, “Come, manufacture in India”, “Sell in any country of the world, but manufacture here”.

The Prime Minister did not stop there. In his inimitable style, following it through on September 25, 2014 he gave an official status to ‘Make in India’ slogan and launched a global campaign.

“My definition of FDI for the people of India is First Develop India. This is also a responsibility for the people of India,” he further clarified.

An Indian perspective:

If I juxtapose this vision of the Prime Minister in the Indian pharmaceutical industry perspective, one finds that many small, medium and large size local domestic manufacturers are currently manufacturing drugs not just for the domestic market, but are also exporting in large quantities to various countries of the world, including, North America, South America and Europe.

The United States (US) is one of the most critical markets for majority of the Indian drug exporters. This transaction was taking place without any major regulatory hitches since quite some time. Unfortunately, over the last few years, mostly the Federal Drug Administration of the US (USFDA) and the United Kingdom (UK)’s Medicines and Healthcare Products Regulatory Agency (MHRA) have started raising serious doubts on the quality of medicines manufactured in India, making a significant impact on the drug exports of the country.

Most of these quality issues are related to ‘Data Integrity’ in the dug manufacturing and its documentation processes.

The impact:

According to industry data, in 2013-14, Indian drug exports registered the slowest growth in nearly the last 15 years. In this fiscal year, pharma exports of the country with a turnover of US$ 14.84 billion grew at a meager 1.2 percent. Pharmexcil attributed its reason to USFDA related regulatory issues and increasing global competition.

US accounts for about 25 percent of India’s pharma exports and its Federal Drug Administration (USFDA) has been expressing, since quite a while, serious concerns on ‘Data Integrity’ at the agency’s  previously approved production facilities of a large number of Indian pharma players.

The issue is causing not just a serious concern to USFDA and some other overseas drug regulatory agencies, but also posing a huge threat to future growth potential of Indian drug exports.

It is worth noting that Indian government had set an objective, in its strategy document, to register a turnover of US$ 25 billion for pharma exports in 2014-15. In all probability, it would fall far short of this target at the end of this fiscal, predominantly for related reasons.

Why is so much of ‘fuss’ on ‘Data Integrity’?

Broadly speaking, ‘Data Integrity’ in pharmaceutical manufacturing ensures that finished products meet pre-established specifications, such as, for purity, potency, stability and sterility. If data integrity is breached in any manner or in absence of credible data, the product becomes of dubious quality in the eyes of drug regulators.

Manufacturing related ‘Data Integrity’ is usually breached, when data from a database is deliberately or otherwise modified or destroyed or even cooked.

Over the last several years, ‘Data Integrity’ related issues in India are attracting enormous attention of both the USFDA and the MHRA, UK. As a result, concerned pharma manufacturing facilities are receiving Import Alerts/Warning Letters from the respective overseas drug regulators, refusing entry of those medicines mostly in the United States and some in the UK.

Recent warning letters:

Just over a year – from May 2013 to July 2014, around a dozen ‘Warning Letters’ have been sent to the Indian drug manufacturers by the USFDA on ‘Data Integrity’ related issue, as follows:

Recent ‘Warning Letter’ issued to: Date of issue
1. Marck Biosciences Ltd. 08. 07. 2014
2. Apotex Pharmachem India Pvt Ltd. 17. 06. 2014
3. Sun Pharmaceutical Industries 07. 05. 2014
4. Canton Laboratories Private Limited 27. 02. 2014
5. USV Limited 06. 02. 2014
6. Wockhardt Limited 25. 11. 2013
7. Agila Specialties Private Limited 09. 09. 2013
8. Posh Chemicals Private Limited 02. 08. 2013
9. Aarti Drugs Limited 30. 07. 2013
10. Wockhardt Limited 18. 07. 2013
11. Fresenius Kabi Oncology Ltd 01. 07. 2013
12. RPG Life Sciences Limited 28. 05. 2013

(Source: RAPS, 19 August 2014)

Another report states that USFDA has, so far, banned at least 36 manufacturing plants in India from selling products in the US.

Importance of US for Indian generic players:

Generic drugs currently contribute over 80 percent of prescriptions written in the US. Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are sold there, come from India. Almost all of these are cheaper generic versions of patent expired drugs. Hence, India’s commercial stake in this area is indeed mind-boggling.

The ‘Data Integrity’ issue is not restricted to just US or UK:

A report quoting researchers led by Roger Bate, an American Enterprise Institute scholar and funded by the The Legatum Institute and the Humanities Research Council of Canada, concluded that many Indian pharma companies follow double manufacturing standards, as they are sending poor quality drugs to Africa compared to the same pills sold in other countries. This study was based on tests of 1,470 samples produced by 17 Indian drug manufacturers.

Besides India, the researchers took drug samples from pharmacies in Africa and middle-income countries, including China, Russia and Brazil.

According to this paper, the researchers found that 17.5 percent of samples of the tuberculosis therapy rifampicin sold in Africa tested substandard, which means the drug has less than 80 percent of the active ingredient than what it should otherwise. Against this number, in India, 7.8 percent of the medicine sampled was found substandard.

Moreover, Almost 9 percent of samples of the widely used antibiotic ciprofloxacin sold in Africa tested substandard, as compared to 3.3 percent in India.

Thorny issues around golden opportunities:

Much reported breach in manufacturing ‘Data Integrity’ detected at the manufacturing sites in India, are throwing fresh doubts on the efficacy and safety profile of generic/branded generic medicines, in general, produced in the country and more importantly, whether they are putting the patients’ health at risk.

A new analysis by the U.S. National Bureau of Economic Research pointed out some thorny issues related to ‘Data Integrity’ of drugs produced by the Indian pharmaceutical companies, which supply around 40 percent of the generic drugs sold in the United States, as stated above.

The researchers examined nearly 1,500 India-made drug samples, collected from 22 cities and found that “up to 10 percent of some medications contained insufficient levels of the key active ingredients or concentrations so low, in fact, that they would not be effective against the diseases they’re designed to treat.”

The report also highlighted that international regulators detected more than 1,600 errors in 15 drug applications submitted by Ranbaxy. The Bureau Officials commented that these pills were “potentially unsafe and illegal to sell.”

Frequent drug recalls by Indian pharma majors:

The above findings came in tandem with a series of drug recalls made recently by the Indian pharma companies in the US.

Some of the reported recent drug recalls in America, arising out of manufacturing related issues at the facilities of two well-known Indian pharma majors, which are going to merge soon, are as follows:

  • Sun Pharmaceuticals recalled nearly 400,000 bottles of the decongestant cetirizine (Zyrtec) and 251,882 of the antidepressant venlafaxine (Effexor) this May, because the pills failed to dissolve properly. The drugs were distributed by the drug maker’s US subsidiary Caraco Pharmaceutical Laboratories, but were manufactured in India.
  • In the same month – May, Ranbaxy recalled 30,000 packs of the allergy drugs loratadine and pseudo-ephedrine sulphate extended release tablets because of manufacturing defects in packaging.
  • In March, Sun Pharma recalled a batch of a generic diabetes drug bound for the US after an epilepsy drug was found in it. A patient discovered the error after noticing the wrong medication in the drug bottle.
  • Again in March, Ranbaxy recalled nearly 65,000 bottles of the statin drug atorvastatin calcium (Lipitor) after 20-milligram tablets were found in sealed bottles marked 10-milligrams. A pharmacist in the U.S. discovered the mix up.

Indian media reinforces the point:

Indian media (TNN) also reported that there is no quality control even for life-saving generic drugs and the government is apathetic on ensuring that the quality protocol of these drugs is properly observed.

This happens, as the report states, despite government’s efforts to push generic drugs, as they are more affordable. The report gave an example of a life-saving drug, Liposomal Amphotericin B, which is used to treat fungal infections in critically ill patients.

Are all these drugs safe enough for Indian Patients?

Though sounds awkward, it is a fact that India is a country where ‘export quality’ attracts a premium. Unintentionally though, with this attitude, we indirectly accept that Indian product quality for domestic consumption is not as good.

Unfortunately, in the recent years, increasing number of even ‘export quality’ drug manufacturing units in India are being seriously questioned, warned and banned by the overseas drug regulators, such as USFDA and MHRA, UK, just to ensure dug safety for the patients in their respective countries.

Taking all these into consideration, and noting increasing instances of blatant violations of cGMP standards and ‘Data Integrity’ requirements for ‘export quality’ drugs, one perhaps would shudder to think, what could possibly be the level of conformance to cGMP for the drugs manufactured solely for the consumption of local patients in India.

A cause of concern, as generic drugs are more cost effective to patients:

It has been widely recognized globally that the use of generic drugs significantly reduces out-of-pocket expenditure of the patients and also payers’ spending.

The findings of a study conducted by the Researchers from Brigham and Women’s Hospital (BWH), Harvard Medical School and CVS Health has just been published in the Annals of Internal Medicine on September 15, 2014. In this study the researchers investigated whether the use of generic versus brand name statins can play a role in medication adherence and whether or not this leads to improved health outcomes. The study concluded that patients taking generic statins were more likely to adhere to their medication and also had a significantly lower rate of cardiovascular events and death.

In this study, the mean co-payment for the generic statin was US$10, as against US$48 for brand-name statins. It is generally expected that the generic drugs would be of high quality, besides being affordable.

I deliberated on a related subject in one of my earlier blog posts of November 11, 2013 titled, “USFDA” Import Bans’: The Malady Calls For Strong Bitter Pills”.

Conclusion:

According to USFDA data, from 2013 onwards, about 20 drug manufacturing facilities across India attracted ‘Import Alerts’ as against seven from China, two each from Australian, Canadian and Japanese units and one each from South African and German facilities.

Unfortunately, despite intense local and global furore on this subject, Indian drug regulators at the Central Drugs Standard Control Organization (CDSCO), very strangely, do not seem to be much concerned on the ‘Data Integrity’ issue, at least, not just yet.

In my view, ‘Data Integrity’ issues are mostly not related to any technical or other knowledge deficiency. From the “Warning Letters” of the USFDA to respective Indian companies, it appears that these breaches are predominantly caused by falsification or doctoring of critical data. Thus, it basically boils down to a mindset issue, which possibly pans across the Indian pharma industry, irrespective of size of operations of a company.

Indian Prime Minister’s passionate appeal aimed at all investors, including from India, to “Make in India” and “Sell Anywhere in The World”, extends to pharma industry too, both local and global. The drug makers also seem to be aware of it, but the ghost keeps haunting unabated, signaling that the core mindset has remained unchanged despite periodic lip service and public utterances for corrective measures by a number of head honchos.

Any attempt to trivialize this situation, I reckon, could meet with grave consequences, jeopardizing the thriving pharma exports business of India, and in that process would betray the Prime Ministers grand vision for the country that he epitomized with, “Make in India” and “Sell Anywhere in The World”.

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.

Drugs From The Same Indian Plant: Safe For Europe, Unsafe For America, Why?

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Good number of stories on US-FDA banning several drug manufacturing facilities of major domestic players of India over serious quality related issues, have been doing the rounds since about a year and almost at a regular interval.

The quagmire has snowballed into serious apprehensions on the quality of Indian generic drugs, across the globe. Various statements of US-FDA Commissioner Margaret Hamburg, during her much talked about maiden visit to India, in February 2014, added further credence to the issue.

“If you want our market, meet our standards”:

During Hamburg’s India visit, her reported candid warning to the Indian drug exporters to America added further fuel to the above concern in India. She clearly underscored:

“If you want our market, meet our standards.”

Even in the face of this stern warning, when major drug manufacturers of India, such as, Ranbaxy, Wockhardt, Sun Pharma and some others continued to fail in meeting US-FDA drug quality standards in their respective plants, I wrote the following in one of my earlier blog posts titled, “Does India Believe in Two Different Drug Quality Standards?”:

“In a situation like this, especially when many Indian manufacturers are repeatedly failing to meet the American quality standards, the following questions come up:

  • Is the US-FDA manufacturing requirement too troublesome, if not oppressive?
  • If not, do the Indian and other patients too deserve to have drugs conforming to the same quality standards?

Answers to these questions are absolutely vital to convince ourselves, why should Indian patients have access to drugs of lower quality standards than Americans, with consequential increase in their health risks?”

The first question on ‘troublesomeness’ now partly answered?

This is because another recent media report brought to the fore that, having completed their assessment of drug manufacturing violations at Ranbaxy’s facility in Toansa, European regulators have said although deficiencies were found, they pose no risk to public health. The regulators said they were satisfied by corrective measures put in place by the company after U.S. regulators found deviations in January.

The report also highlights that this assessment of the European regulators stands in stark contrast to the response of US regulators to the deficiencies found at the same plant.

It is worth noting that US-FDA continues to restrict Ranbaxy from making and selling pharmaceutical ingredients from the Toansa facility “to prevent substandard quality products from reaching US consumers.”

The same plant meets drug safety standards of Europe, but ‘unsafe’ for America!

Quite contrary to the above stern statement of US-FDA, according to the above report from Reuters, European drug regulators commented as follows:

“The inspection team concluded that there was no evidence that any medicines on the EU market that have an active pharmaceutical ingredient manufactured in Toansa were of unacceptable quality or presented a risk to the health of patients taking them.” 

The further added, “This conclusion was supported by tests of samples of these medicines, all of which met the correct quality specifications.”

Regulatory audit standards were the same for both EU and US regulators:

It is also interesting to note from the report that according to a statement from the US-FDA:

“EMA and FDA inspected the Toansa facility using similar quality standards and underlying principles of current good manufacturing practices.”

Was the decision of US-FDA ‘import ban’ subjective?

This critical question arises because of another US-FDA statement that states as follows:

“While inspections were similar, the two regulatory authorities applied their own, differing, regulatory and legal standards to address the violations.”

Subjectivity in decision-making could encourage “Conspiracy Theory”:

Generic drugs currently contribute over 80 percent of prescriptions written in the US. Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are now sold in the United States come from India. Almost all of these are cheaper generic versions of patent expired drugs. Total annual drug export of India, currently at around US$ 15 billion, is more than the domestic turnover of the pharma industry. Hence, India’s commercial stake in this area is indeed mind-boggling.

In a situation like this, the apprehension of subjectivity in the decision making process of US-FDA related to ‘import bans’, if linked with, say for example, even the missed opportunities for ‘first to launch’ generic versions of several patent-expired blockbuster drugs in the United States by Ranbaxy, could lead to much undesirable ‘Conspiracy Theory’, further souring the relationship between India and America.

As I mentioned in one of my earlier blog posts titled “Loss of Ranbaxy Gain of Big Pharma…And Intriguing Coincidences”, when the emerging dots associated with the missed opportunities for ‘first to launch’ generic versions of drugs like, Lipitor (Pfizer), Diovan (Novartis) and Nexium (AstraZeneca) are connected, an uncomfortable pattern could emerge favoring Big Pharma and obviously adversely affecting Indian companies like Ranbaxy.

The First Dot: Uncertainty over Lipitor generic launch:

Like many other large Indian players, ‘first to launch’ strategy with the new generic drugs has been the key focus of Ranbaxy since long, much before its serious trouble with the US-FDA begun in 2008. ‘Import Bans’ on two of its manufacturing facilities by the US regulator in that year created huge uncertainty in its launch of a generic version of Pfizer’s anti-lipid blockbuster drug Lipitor in 2011. On time launch of a generic version of Lipitor was estimated to have generated a turnover of around US$ 600 million for Ranbaxy in the first six months and commensurate loss to Pfizer for the generic entry.

Despite its neck deep trouble with the US-FDA at that time, Ranbaxy ultimately did somehow manage to launch generic Lipitor, after partnering with Teva Pharmaceutical of Israel.

The Second Dot: Indefinite delay in Diovan generic launch:

Lipitor story was just the beginning of Ranbaxy’s trouble of not being able to translate its ‘first to launch’ advantage of patent-expired blockbuster drugs into commercial success, thus allowing the Big Pharma constituents to enjoy market monopoly with their respective blockbuster drugs even after patent expiry.

Despite Ranbaxy holding the exclusive rights to market the first generic valsartan (Diovan of Novartis and Actos of Takeda) for 180 days, much to its dismay, even after valsartan patent expiry in September 2012, a generic version of the blockbuster antihypertensive is yet to see the light of the day. However, Mylan Inc. has, now launched a generic combination formulation of valsartan with hydrochlorothiazide.

US-FDA drug ‘Import Ban’ from the concerned manufacturing facility of Ranbaxy gave rise to this hurdle favoring the Big Pharma, as discussed above.

As a result, Novartis in July 2013 reportedly raised its guidance announcing that the company now expects full-year sales to grow at a low single-digit rate, where it had earlier predicted net sales to turn up flat. It also guided for core earnings to decline in the low single digits, revising guidance for a mid-single-digit drop.

The Third Dot: Delay in Nexium generic launch:

Ranbaxy had earlier created for itself yet another opportunity to become the first to launch a generic version of the blockbuster anti-peptic ulcerant drug of AstraZeneca – Nexium in the United States, as the drug went off patent on May 27, 2014. However, due to recent US-FDA import ban from its Toansa plant, this opportunity too seems to be fading away for Ranbaxy.

Delay in the launch of generic Nexium, which incidentally is the second-biggest seller of AstraZeneca, would make a big impact on the predator-chased company’s profit.

With the global sales of Nexium at US$ 3.87 billion and US sales at US$ 2.12 billion in 2013, retaining its monopoly status in the all-important US market beyond the end of May would not only limit a forecast decline in AstraZeneca’s 2014 earnings, but would also protect bonuses for top management of the British pharma giant, as the above report says.

Conclusion:

Let me hasten to add yet again, while highlighting the stark differences of interpretations on drug quality standards of the same plant between the European and American regulators and connecting the dots of significant missed opportunities of the Indian drug manufacturers, I do not intend to postulate any ‘Machiavellian Hypothesis’.

I just wanted to establish that both alleged ‘subjective’ decision making process of the US-FDA and coincidences of a series of missed opportunities encountered by the Indian drug manufacturers related to first to launch generics in America are now realities, which if remain unaddressed could germinate into a ‘Conspiracy Theory’, at least in some corners. This could further sour existing Indo-US relationship.

While, I am confident that the new government of India with its, so far, well demonstrated ‘Can Do’ spirit would take these critical issues up in the ensuing bilateral ministerial level meetings, an immediate and in-depth study should also be initiated with valuable inputs from the independent experts to ferret out the real reasons behind these facts, including:

  • Why are the cGMP related issues in India repeatedly arising mainly with the US-FDA?
  • Are  the requirements of the US-FDA though too onerous for the Indian drug manufacturers, yet reasonable as per global norms?
  • If so, how come the drugs manufactured in the same Indian plant though declared unsafe by the US-FDA, considered safe by the European regulators?

By: Tapan J. Ray

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

 

 

 

Is Sun Pharma Sailing In The Same Boat As Ranbaxy?

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A ‘Warning Letter’ of May 7, 2014 from the USFDA to Sun Pharmaceuticals – the no.1 pharma major by market capitalization in India has nailed its Karkhadi, Vadodara, Gujarat based plant in India for similar data deletions as found at Ranbaxy.

Such data manipulation reportedly got Ranbaxy into so much trouble that it last year paid U$ 500 million and agreed to plead guilty to 7 felony charges.

The concerned Gujarat based plant of Sun pharma manufacturers the antibiotic cephalosporin.

This development came to the fore just weeks after Sun Pharmaceutical announced a US$ 3.2 billion deal to buy the much troubled, yet the largest generic drug company of India – Ranbaxy.

My earlier apprehensions on this deal:

At that time in my blog post of April 14, 2014, I expressed my apprehensions on this deal on four key areas, with as many words as follows:

1. Sun Pharma too is under USFDA radar:

As we know that along with Ranbaxy, Wockhardt and some others, Sun Pharma also had come under the USFDA radar for non-compliance of the Current Good Manufacturing Practices (cGMPs).

Under the prevailing circumstances, I apprehended, it would indeed be a major challenge for Sun Pharma to place its own house in order first and simultaneously address the similar issues to get USFDA ‘import bans’ lifted from four manufacturing plants of Ranbaxy in India that export formulations and API to the United States.

This could be quite a task indeed for Sun Pharma.

 2. Pending Supreme Court case on Ranbaxy:

Prompted by a series of ‘Import Bans’ from US-FDA on product quality grounds, the Supreme Court of India on March 15, 2014 reportedly issued notices to both the Central Government and Ranbaxy against a Public Interest Litigation (PIL) seeking not just cancellation of the manufacturing licenses of the company, but also a probe by the Central Bureau of Investigation (CBI) on the allegation of supplying adulterated drugs in the country.

Ranbaxy/ Sun pharma would, therefore, require convincing the top court of the country that it manufactures and sells quality medicines for the consumption of patients in India.

 3. CCI scrutiny of the deal:

Out of the Top 10 Therapy Areas, the merged company would hold the highest ranking in 4 segments namely, Cardiac, Neuro/CNS, Pain management and Gynec and no. 2 ranking in two other segments namely, Vitamins and Gastrointestinal.

Noting the above scenario and possibly many others, the Competition Commission of India (CCI), after intense scrutiny, would require taking a call whether this acquisition would adversely affect market competition in any of those areas. If so, CCI would suggest appropriate measures to be completed by the two concerned companies before the deal could take effect.

This would also be a task cut out for the CCI in this area.

 4. SEBI queries:

Securities and Exchange Board of India (SEBI), has already sought information from Sun Pharmaceutical on stock price movement and the deal structure.

According to reports, it is due to “Ranbaxy shares showing good movement on three occasions: first in December, then in January and subsequently in March 2014, just before the deal was announced.” This has already attracted SEBI’s attention and has prompted it to go into the details.

The matter is now subjudice.

The current scenario:

Out of my four identified areas of challenges, Sun Pharma has already started feeling the heat in the following two areas:

1. Quality issues with FDA:

The issue is extremely important, as to turn around Ranbaxy, this has to be addressed to the complete satisfaction of the USFDA. Otherwise, the game is a non-starter.

2. SEBI queries on stock price movement and the deal structure:

In this area, just today the Supreme Court reportedly refused to stay the Andhra Pradesh High Court order that stalled the US$ 4 billion Sun Pharma merger with Ranbaxy. Daiichi Sankyo and Ranbaxy had approached the Supreme Court seeking vacation of the stay of the status quo order by the High Court, which on April 25, 2014 directed the BSE and NSE not to approve the merger while admitting a petition by retail investors alleging insider trading in the US$ 4 billion deal.

The vacation bench comprising of Justices B S Chouhan and A K Sikri also directed the High Court to decide on Sun Pharma’s application seeking vacation of the status quo order within two days and posted the matter for further hearing on May 29. The judges observed that the Andhra High Court has no territorial jurisdiction over the merger process.

The outcome of this case would indeed be interesting and crucial for Sun Pharma.

Conclusion:

Even if one keeps aside the three issues out of above four as the legal ones, the very first challenge related to USFDA on drug quality, would continue to remain as the ‘make or break’ area, for this deal to be commercially successful for Sun Pharma.

When USFDA reportedly nailed Sun Pharma’s Karkhadi , Vadodara, Gujarat based plant for similar data deletions as found at Ranbaxy, it may give a feeling that the acquirer Sun Pharma possibly is also sailing in the same boat as the acquiree Ranbaxy.

If this apprehension makes any sense, the moot question that comes up:

“Can one blind man show the right direction to another blind man sailing in the same boat in the midst of a storm?”

Let us wait for the eternal time to tell us the answer.

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 Takeover Magician To Tango Again On A Bold New ‘Sunny’ Tune

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The consolidation process of the Indian pharmaceutical industry continues in its own pace. Most recently, the homegrown pharma takeover magician is all set to tango yet again with a bold ‘Sunny’ tune. The low profile creator of high value ‘Sun Pharmaceuticals’, that he painstakingly built from the scratch facing many turbulent weather over nearly three decades, is ready to go for the gold, yet again.

The cool, composed and the decisive business predator is now in the process of gobbling up, quite unexpectedly, the much ailing prey – Ranbaxy. This acquisition of a distressed asset, would make Sun Pharmaceuticals a pharma behemoth not just in India with a jaw-dropping 9.33 percent share of the Indian Pharma Market (IPM), but also would help catapulting the company to become the 5th largest generic pharmaceutical company globally.

Ranbaxy – A sad example of value destruction:

It is worth recapitulating that in 2008, Daiichi Sankyo paid reportedly US$ 4.6 billion to acquire 63.8 percent stake in Ranbaxy.

After Sun Pharma’s acquisition of Ranbaxy with US$ 3.2 billion in 2014, Daiichi Sankyo will hold just 9 per cent of Sun Pharma, which is currently worth US$ 2 billion. Such an example of value erosion of a pharma giant in a little over 5 year period is not just unique, but very sad indeed.

Keeping the “Sunny” side up”:

It is expected that post acquisition, Sun Pharma would continue to keep its ‘Sunny Side’ up, maintaining the corporate name of the merged entity as ‘Sun Pharma’.

Ranbaxy name, in any case, is not so popular, either inside or outside India after the US-FDA fiasco, casting aspersions on the quality of products that it manufactures.

Moreover, the history indicates that this is exactly what happened when Abbott acquired Piramal Healthcare, Zydus bought over Biochem or even Torrent took control of Elder.

Ranbaxy name could probably exist as a division of Sun pharma in future, if at all.

Post acquisition IPM league table:

According to AIOCD AWACS, extrapolating the post acquisition scenario on the league table (MAT February 2014) of the Top 10 Pharma majors in India, it looks as follows:

Rank Company Value Rs. Crore Market Share % Growth %
1 Sun Pharma Group 6,741 9.33 8.8
2 Abbott Group 4,758 6.59 4.6
3 Cipla 3,493 4.84 8.5
4 Zydus Group 3,116 4.31 9.7
5 GSK 2,727 3.78 -14.7
6 Lupin 2,457 3.40 12.4
7 Alkem Group 2,433 3.37 10.1
8 Mankind 2,257 3.12 7.6
9 Pfizer + Wyeth 2,150 2.98 3.0
10 Emcure Group 2,048 2.83 15.5
Total IPM 72,236 100.00 6.0

(Source: AIOCD AWACS)

Distancing from No. 2 by a mile:

With the above unprecedented chunk of the IPM, Sun Pharma would distance itself from the (would be) second ranking Abbott with a whopping 2.74 percent difference in market share, which would be equivalent to the turnover of the 10th ranking pharma player in the domestic pharma market.

In its pursuit of corporate excellence, Sun Pharma has made 13 acquisitions between 1990s and 2012.  Post merger, the revenue of the combined entity is estimated to be around US$ 4.2 billion with EBITDA of US$ 1.2 billion for the 12-month period that ended on December 31, 2013.

Merger consolidates ‘Domestic Pharma’ market share:

This acquisition would also tilt the balance of ‘Domestic Pharma’ Vs. ‘Pharma MNC’ market share ratio in the IPM very significantly, as follows:

Current Market Share Ratio

Post Acquisition Market Share Ratio

Domestic Pharma Vs. Pharma MNC

73.4 : 26.6

77.2 : 22.8

(Source: AIOCD AWACS)

Further, this trend is also expected to allay the lurking fear of many about the robustness and future growth appetite of the domestic pharma industry, thus becoming an easy prey of pharma MNC predators.  It is believed that such an apprehension was prompted by a series of large ‘Brownfield FDIs’ coming into the Indian pharma industry to acquire a number of important local assets.

The key challenges:
1. Sun Pharma too is under US-FDA radar:
As we know that along with Ranbaxy, Wockhardt and some others, Sun Pharma has also come under the USFDA radar for non-compliance of the Current Good Manufacturing Practices (cGMPs).

Under the prevailing circumstances, it would indeed be a major challenge for Sun Pharma to place its own house in order first and simultaneously address the similar issues to get US-FDA ‘import bans’ lifted from four manufacturing plants of Ranbaxy in India that export formulations and API to the United States. This is quite a task indeed.

2. Pending Supreme Court case on Ranbaxy:

Prompted by a series of ‘Import Bans’ from US-FDA on product quality grounds, the Supreme Court of India on March 15, 2014 reportedly issued notices to both the Central Government and Ranbaxy against a Public Interest Litigation (PIL) seeking not just cancellation of the manufacturing licenses of the company, but also a probe by the Central Bureau of Investigation (CBI) on the allegation of supplying adulterated drugs in the country.

Ranbaxy/ Sun pharma would now require convincing the top court of the country that it manufactures and sells quality medicines for the consumption of patients in India. No doubt, all these issues were factored-in for relatively cheap valuation of Ranbaxy.

3. CCI scrutiny of the deal:

Out of the Top 10 Therapy Areas, the merged company would hold the top ranking in 4 segments namely, Cardiac, Neuro/CNS, Pain management and Gynec and no. 2 ranking in two other segments namely, Vitamins and Gastrointestinal.

Noting the above scenario and possibly many others, the Competition Commission of India (CCI), after intense scrutiny, would require to take a call whether this acquisition would adversely affect market competition in any of those areas. If so, CCI would suggest appropriate measures to be completed by these two concerned companies before the deal could take effect. This would also be a task cut out for the CCI in this area.

4. SEBI queries:

Securities and Exchange Board of India (SEBI), has sought information from Sun Pharmaceutical on stock price movement and the deal structure.

According to reports, this is due to “Ranbaxy shares showing good movement on three occasions: first in December, then in January and subsequently in March 2014, just before the deal was announced.” This has already attracted SEBI’s attention and has prompted it to go into the details.

The opportunities:

That said, there are many opportunities for Sun Pharma to reap a rich harvest out of this acquisition. The most lucrative areas are related to Ranbaxy’s missed opportunities for ‘first to launch’ generic versions of two blockbuster drugs – Diovan (Novartis) and Nexium (AstraZeneca).

Diovan (Novartis):

Despite Ranbaxy holding the exclusive rights to market the first generic valsartan (Diovan of Novartis and Actos of Takeda) for 180 days, much to its dismay, even after valsartan patent expired on September 2012, a generic version of the blockbuster antihypertensive is still to see the light of the day. However, Mylan Inc. has, now launched a generic combination formulation of valsartan with hydrochlorothiazide.

Nexium (AstraZeneca):

Ranbaxy had created for itself yet another opportunity to become the first to launch a generic version of the blockbuster anti-peptic ulcerant drug of AstraZeneca – Nexium in the United States, as the drug goes off patent on May 27, 2014. However, due to recent US-FDA import ban from the concerned plant of Ranbaxy, it now seems to be a distant reality. Unless…

Sun Pharma has reportedly 10 manufacturing plants in India and 8 in the US, besides having other production facilities in Israel, Mexico, Hungary, Canada, Bangladesh and Brazil. Post acquisition, the combined entity will have operations in 65 countries with 47 manufacturing facilities spanning across 5 continents, providing a solid platform to market specialty and generic products globally. With all these, the above key issues would perhaps be addressed expeditiously.

Leaving aside those two big opportunities, post merger, Sun Pharma is expected to have around 629 ANDAs waiting for approval, including first-to-file opportunities in the United States, besides the current ongoing businesses of the merged company.

What about cost synergy?

Though Sun pharma promoters have given an indication about the revenue synergy, nothing is known, as yet, about the targeted details of cost synergy after this acquisition.

Conclusion:

I reckon, the consolidation process in the Indian pharmaceutical industry would continue, though with a different pace at different times, involving both the domestic pharma and MNCs as the predators.

Even before ‘The Breaking News’ of this brand new well hyped acquisition came from Reuters, in the ‘Corporate World’ of India, Dilip Shanghvi used to be known as an unassuming and astute self-made business tycoon blessed with a ‘magic wand’ deeply concealed in between his two ears, as it were. Folks say, at an opportune time, wielding this ‘wand’, he confidently turns distressed pharma assets into money-spinners and has proved it time and again with grit, grace and élan in equal measures.

Can he do it again? Well…Why not?

Thus, while acquiring the ailing Ranbaxy with a value for money, the takeover magician, prepares for his best shot ever, wielding the same magic wand yet again, to steer the new company from an arduous, dark and complex path, hopefully, to a bright frontier of sustainable excellence.

Let’s hope for the best, as the ‘Tango’ begins…on a bold new ‘Sunny’ tune.

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.

 

Loss of Ranbaxy, Gain of Big Pharma…And Two Intriguing Coincidences

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In March 2014, the largest pharma player of India by market capitalization, Sun Pharma, became the latest of the large Indian pharma exporters facing the US-FDA ‘Import Ban’ for drugs manufactured at its Gujarat-based plant. This news came as a shocking surprise to many, including the stock market, as the home grown company has now attained an international stature being governed by a professional management team and steered by a Board that is chaired by a well-regarded non-Indian with decades of experience in the global pharmaceutical industry.

Just before that in January 2014, being slapped with the US-FDA drug ‘Import Ban’ of Active Pharmaceutical Ingredients (API) manufactured in its Toansa Plant of Punjab, the pharmaceutical business of Ranbaxy in the United States, with the products manufactured in its approved manufacturing facilities in India, came to a screeching halt.

It is worth noting that similar ‘Import Bans’ are already in place for the same company’s Dewas, Paonta Sahib, and Mohali production facilities. The combined impact of these bans now makes Ohm Laboratories plant of Ranbaxy, located in New Jersey, its sole generic drug manufacturing facility for the US market.

Considering that the US sales of Ranbaxy reportedly used to be around 57 percent of its total global turnover even in 2012, these import bans are undoubtedly a huge blow to the company, both financially as well as in terms of its business reputation.

Thus, the top priority of Ranbaxy under this situation is effectively addressing all the issues as raised by the US-FDA, especially in the area of documentation, as in the buyers’ market sellers cannot be the choosers.

A ‘Double Whammy’:

Meanwhile, prompted by theses ‘Import Bans’ on product quality ground and adding further woes to the company, the Supreme Court of India on March 15, 2014 reportedly issued notices to both the Central Government and Ranbaxy on a Public Interest Litigation (PIL) seeking not just cancellation of the manufacturing licenses of the company, but also a probe by the Central Bureau of Investigation (CBI) on the allegation of supplying adulterated drugs in the country.

Thus, it is a double whammy for Ranbaxy. The company would now require convincing the top court of the country that it manufactures and sells quality medicines for consumption of the patients in India.

However, Ranbaxy reportedly insisted that the drugs sold by it in the Indian market are safe and effective and that the company complies with all regulations of the country.

Could the situation now get even murkier?

During the process of judicial scrutiny, if the Supreme Court gets convinced with the above reply of Ranbaxy on this issue, the question that could possibly emerge is, how come the same company produces high quality drugs for the patients in India and allegedly substandard quality drugs for the patients of the United States? This could make the subject more complicated, if not murkier, internationally.

Two intriguing coincidences:

In the midst of all these, while connecting various similar looking and important dots, emerged during the last few years, a couple of clear coincidences comes to the fore, as follows:

1. Is the drug quality issue in India for exports limited only to US-FDA?

This brings us to the first interesting coincidence of drug ‘Import Bans’, involving large Indian drug exporters, coming mostly, if not only, from the US-FDA, although there are so   many other drug importing countries, including rest of the developed world.

Moreover, none of the Indian domestic companies had ever faced similar number of USFDA ‘Import Bans’ in the past, though they have been exporting to the United States from their FDA approved and inspected plants since quite a while. Therefore, it is worth figuring out why has it started happening now, that too repeatedly, and involving some of the largest global generic drug manufacturers from India.

Ranbaxy too is a large global player for generic pharmaceutical products. Besides India and the United States, the company markets its products both in East and West Europe, Latin America, Africa, Middle East, South Asia, South-East Asia and Asia-Pacific regions. Interestingly, though its saga related to US-FDA cGMP conformance in the four plants, culminating into drug ‘Import Bans’ in the United States, commenced as early as 2008, the company does not seem to have any issue with any other drug regulator anywhere in the world, not just yet.

According to the media report, UK and Australian drug regulators had commented that they are assessing the impact of the US action on Ranbaxy products sold in their countries. However, as on date Ranbaxy’s drug export to all those countries continue to remain as normal as before.

If over a period of time, it is proved that other foreign drug regulators do not have any similar quality related issues with Ranbaxy manufactured products, a serious joint evaluation of the entire chain of events related to Ranbaxy and others by the global regulatory experts would perhaps be warranted to provide a lasting solution on the subject.

2. Missed opportunities for ‘first to launch’ generic versions of blockbuster drugs:

The second coincidence is related to a series of missed opportunities, especially for Ranbaxy, related to ‘first to launch’ generic versions of several patent expired blockbuster drugs in the United States.

When the emerging dots associated with such lost opportunities for drugs like, Lipitor (Pfizer), Diovan (Novartis) and Nexium (AstraZeneca) are connected, a clear pattern emerges favoring Big Pharma and obviously adversely affecting companies like Ranbaxy.

Saga started with uncertainty over Lipitor generic Launch:

Like many other large Indian players, ‘first to launch’ strategy with new generic drugs has been the key focus of Ranbaxy since long, much before its serious trouble with the US-FDA begun in 2008. ‘Import Bans’ on two of its manufacturing facilities by the US regulator in that year created huge uncertainty in its launch of a generic version of Pfizer’s anti-lipid blockbuster drug Lipitor in 2011. On time launch of a generic version of Lipitor was estimated to have generated a turnover of around US $ 600 million for Ranbaxy in the first six months.

Despite its neck deep trouble with the US-FDA at that time, Ranbaxy ultimately did manage to launch generic Lipitor, after partnering with Teva Pharmaceutical of Israel.

The story continued with indefinite delay of Diovan generic launch:

Lipitor story was just the beginning of Ranbaxy’s trouble of not being able to translate its ‘first to launch’ advantage of patent-expired blockbuster drugs into commercial success, thus allowing the Big Pharma constituents to enjoy the market monopoly with their respective blockbuster drugs even after patent expiry.

Despite Ranbaxy holding the exclusive rights to market the first generic valsartan (Diovan of Novartis and Actos of Takeda) for 180 days, much to its dismay, even after valsartan patent expiry in September 2012, a generic version of the blockbuster antihypertensive is yet to see the light of the day. However, Mylan Inc. has, now launched a generic combination formulation of valsartan with hydrochlorothiazide.

US-FDA drug ‘Import Ban’ from the concerned manufacturing facility of Ranbaxy gave rise to this hurdle favoring the Big Pharma, as discussed above.

As a result, Novartis in July 2013 reportedly raised its guidance announcing that the company now expects full-year sales to grow at a low single-digit rate, where it had earlier predicted net sales to turn up flat. It also guided for core earnings to decline in the low single digits, revising guidance for a mid-single-digit drop.

Would it also delay the launch Nexium generic?

Ranbaxy had earlier created for itself yet another opportunity to become the first to launch a generic version of the blockbuster anti-peptic ulcerant drug of AstraZeneca – Nexium in the United States, as the drug goes off patent on May 27, 2014. However, due to another recent US-FDA import ban from the concerned plant of Ranbaxy, it now seems to be a distant reality.

That said, it has now been reported that Ranbaxy is in talks with at least two companies on sourcing ingredients for the generic version of Nexium to be able to launch its generic formulations in the United States immediately after the patent expiry.

In this context, any delay in the launch of generic Nexium, which incidentally is the second-biggest seller of AstraZeneca, would have a big impact on the company’s profit.

With the global sales of Nexium at US$ 3.87 billion and US sales at US$ 2.12 billion in 2013, retaining its monopoly status in the all-important US market beyond the end of May would not only limit a forecast decline in AstraZeneca’s 2014 earnings, but would also protect bonuses for top management of the British pharma giant, the above report says.

No Machiavellian Hypothesis:

By highlighting these coincidences, I have no intention to even attempting to postulate something like a ‘Machiavellian Hypothesis’. I just want to establish that intriguing coincidences do exist whatever may be the reasons.

Probably an in-depth study by independent experts in this field would be able to ferret out the real reasons behind these coincidences, including, why are the cGMP issues repeatedly arising only with the US-FDA?

Conclusion:

Be that as it may, delayed generic launches of Nexium (AstraZeneca) with US sales of US$ 2.12 billion, together with the same for Actos (Takeda) and Diovan (Novartis) recording a combined sales for US$ 8.55 billion, have indeed created almost a wind-fall gain for the respective ‘Big Pharma’ constituents and consequent huge losses for Ranbaxy. The first-to-file bonus on Actos alone was estimated to be more than US$ 200 million.

Though the US-FDA Commissioner Margaret Hamburg has reportedly clarified that the United States is ‘not targeting’ Indian pharma companies but just following a strict quality control regime for all products being imported into America, the following critical questions still float at the top of mind:

- Are all these missed opportunities of Ranbaxy, which favored Big Pharma immensely, just sheer coincidences of clash in timings between USFDA ‘Import Bans’ from four of its manufacturing facilities and the respective launch dates in the United States for the first generic versions of the three blockbuster drugs?

- When Indian generic drug manufacturers continue to export across the world without any problem thus far, why is a series of unprecedented ‘Import Bans’ on quality grounds now coming from the US-FDA in a quick succession decimating the image of Indian generic drug manufacturers?

At the end of the narrative, some wise men could well say that I am trying to connect the dots that do not exist at all. These are all imaginary or at best, sheer coincidences. It could well be just that, who knows? But…

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.