Tag Archives: sustainability

Effective Change Management – The Magic Wand For Business Success And Sustainability

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Change – just as it’s an integral part of our life, so is for any business, including pharmaceutical or healthcare. Interestingly, the phase of transition of such changes isn’t always slow and gradual. In many cases, especially for business, or for a lifestyle too, these transitions could also be faster and disruptive.

The speed of many such changes is now driven by rapidly evolving technology. Or these could often be triggered by some unanticipated event, like the Covid-19 pandemic that we all experienced, very recently. Such changes may impact people working in different functions, in different ways. Which is why, organizations need to be all-time ready, with a robust process in place – known as Change Management.

In this article, I shall focus on the relevance of putting in place a well-validated system driven Change Management process within, especially, the Indian pharmaceutical organizations. Let me start with my understanding on what is the Change Management, so that all of us be on the same page in this regard. 

To be on the same page on what is Change Management:

There are several definitions of the change management process expressed differently, but it’s core concept remains unchanged. One such illustration comes from The TechTarget network. It says:“Change management is a systematic approach to dealing with the transition or transformation of an organization’s goals, processes, or technologies. The purpose of change management is to implement strategies for effecting change, controlling change, and helping people to adapt to change.”

Why many pharma majors are considering it now, more than ever before:

Being amid a technological revolution, encompassing almost all aspects of life and then in the post-pandemic area, change is being expected as a way of life and business, more than ever in the past. Although pharma industry a late learner - and is also traditionally late to change – these can’t be now pushed to the back burner, any longer, as was happening in the pre-pandemic era.

‘Change Management’ can’t be pushed to the back burner, any longer:

This process has now attracted a sense of urgency for many pharma players, as we read and look around. Several big companies have already started addressing the leadership challenges to manage and leverage the evolving changes, as I wrote in my article of October 3, 2022, in this blog.

To be in sync with both customers and employee expectations on an ongoing basis, the change management process in an organization has assumed a priority. User friendly state of the art technology is facilitating to effectively address the growing intricacies of today’s field staff role by infusing leadership mindset change in the organizational culture. Emphasizing this point in my article on July 19, 2021, I underscored that such change should necessarily reflect the company’s vision for the future, unambiguously.

Most companies have changed over a period of time in varying degree:

Most companies have changed over a period of time. Nonetheless, today’s need, pace and the process of change demand a data science based customized approach. The good news is several pharma majors have also started feeling that they require not just to change with time, but also need to put more data science based cerebral input to fathom why and how it changed to be more effective in the future.

An insightful understanding is essential to put in place and kick start a right change management process. To give a sense of it, let me cite a contemporary example of one of the successful global pharma majors – GSK. This case study was prepared by the Project Management Institute.

Achievement of a key milestone could make all the difference:

When GSK initiated this process in 2009, the organization realized that an important milestone in the implementation of the company’s change initiative must be to gain the trust and belief of leadership—many of whom were neutral or cynical about it.

To achieve this goal a custom made ‘Accelerating Delivery and Performance (ADP) program; was found to be quite effective for the company. It delivered both hard business benefits as well as softer organizational development benefits. This approach allowed the team to gain the attention of those leaders who wanted both.

Five principles formed the bedrock of the ADP approach:

The following ADP principles are time-tested, contemporary, and several of these were practiced by GSK in their change management process when it started in 2009.

  • Changes should begin with the initiator of change and focusing on greater customer satisfaction.
  • Active support of all stakeholders in the process of change is critical.
  • Include all staff who will be impacted by the change – while defining, explaining, and ensuring accountability and continuously measuring the time bound shared goals, especially the business and financial ones.
  • Make sure they all share ownership for the outcome of change, through seamless teamwork.
  • Make a pilot study before pan organization implementation.

The change management process continues:

That the change management process needs to be ongoing even for successful drug majors – such as GSK, is particularly evident from their Press Release on June 23, 2021.

The communique giving details of the organization’s strategic and other transformation pathways, also highlighted, “New GSK to deliver step-change in growth and performance over the next ten years driven by high-quality Vaccines and Specialty Medicines portfolio and late-stage pipeline.” 

Specific areas of change, as the pandemic wanes:

There are several studies in this area, such as the one published in the Growth Faculty Learn, published on February 07, 2023. Let me paraphrase its summary as follows:

  • Although the pace of change in different businesses may vary but will certainly keep changing. The leaders should, therefore, act proactively to lead their teams through a well validated change management process to gain a competitive edge.
  • Full preparedness for the change and garnering change management skills before the process begins are critical.
  • Advance planning for employee wellbeing, well structured individual and collective communication strategy, deciding on specifics of a hybrid work culture – all based on data-science, are of great importance.
  • To ensure the effectiveness of the change management process a positive workplace environment is a must, which will stand on five pillars - Trustworthiness, Empathy, Genuineness, Self-awareness, and a Learning mindset.

Thus, it’s high time for all to realize that the pharma business ball game is now changing fast for all, creating an urgent need to focus on the critical areas of change.

Conclusion:

It now boils down to an important point, which was also echoed in an article on this area published in the Pharma IQ on November 23, 2022. It underscored just as any living being keeps moving on the pathway of change, pharma and healthcare industry should proactively follow a similar path.

External environmental factors would play a catalytic role to accelerate the speed of change. These include fast evolving consumer friendly digital applications and health apps - newer, better, and more targeted drugs and treatment processes, or even unprecedented disruptions of lives and livelihoods, just what we all have recently experienced.

A study published in the Pharma Marketing Network on October 27, 2021, also reiterated that the main goal of any change management approach is to foster support of all concerned that leads to good outcomes within an organization. It found that an effective way to implement a change is by engaging and inspiring employees to adopt new (and improved) ways of working.

Against the above backdrop, putting a structured change management process in place by Indian pharma players, I reckon, is now essential. This approach seems to be a Magic Wand, as it were, for ongoing business success and sustainability in today’s rapidly evolving paradigm.

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.

 

Deliver Patient-Perceived Value – Not Incrementally But In Quantum Measure

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Many critical functional areas of most drug companies, such as, marketing, manufacturing, supply chain, medical affairs, human resource, R&D, quality assurance, information technology – traditionally work in silos. It doesn’t mean, though, that there isn’t any interaction between them. Nevertheless, a large majority of them don’t work as a team with a purpose or to achieve a shared goal of delighting customers with value delivered. Such a silo-mindset could often be detrimental to smooth and sustainable business operations. This was also vindicated during the recent pandemic.

Having gone through the harrowing experience of recent disruptions in the lifesaving pharma business operations, a fresh realization has dawned on many leaders’ mind. This point also came to the fore in many studies. One such is the article on ‘Overcoming industry obstacles with a cross-functional strategy’, published by the strategy&, which is a part of PwC network.

The paper came out with some thought-provoking findings. It said, while in the pre-Covid days, mostly competing business pressures used to drive the operational strategies, today the drivers are quite different. ‘Factors such as the COVID-19 pandemic, inflation, geopolitics, new therapeutic modalities, and new ways of working make it vital’ for pharma players to make such transformational operational overhaul for long term excellence.

The spotlight needs to shift from continuous incremental improvement, such as, cost savings, quality assurance, and readiness to deliver—to long-term external challenges. ‘These include high inflation and an increase in complexity and risk, as well as the compounding effects these forces have on each other.”

Several studies have underscored that this approach can ‘make sure operations can protect enterprise continuity while still delivering to patients.’ this article will venture to simplify this complex, yet critical issue. The aim is to achieve a quantum increase in value offering to customers that this strategic approach can potentially deliver to accelerate growth momentum the pharma business.

Some see pharma business as usual, astute leaders see a unique opportunity for change:

An interesting point to note. As the disruptions caused by the Covid pandemic are fading away, some critical health safety norms are also being eased by the authorities. Apparently, the overall daily working-life seems to be limping back to normal. Many pharma leaders are, therefore, considering that the industry operations are going back to pre-pandemic normal, and the business operations will soon revert to the old normal mode soon.

On the other hand, we find some astute leadership who could derive a long-term lesson from the above disruptions and are already in the process of executing those operational changes. This leadership mindset gets reflected in two recent media reports related to two pharma majors – Sanofi and GSK.

On November 28, 2022, it was reported, ‘Sanofi moves into swanky new Paris HQ designed around hybrid work and sustainability.’ Again, on December 12, 2022, another media headline flashed as ‘GSK embraces hybrid work for the long haul at new London HQ.’

To me these are interesting examples to convert problems into opportunities for long-term business success and sustainability, in the new normal. These tasks entail the transformation of business infrastructure alongside its operational strategies.

The need for re-strategizing reverberates across several recent studies:

The need for such an action, as captured by researchers, is prompted by more waves of innovation coming in various operations and functions of pharma business, mostly triggered by the pandemic. The spectrum of innovation, as reports reveal, ranges ‘from new treatment modalities, to smart machines, advanced analytics, and digital connectivity.’

Hence, the future of pharma operations strategy needs to be different now from the past. This finding was also published by the McKinsey & Company on October 10, 2022. It reiterated, as pharma companies are emerging from two years of intense firefighting, now is exactly the right time for their renewed emphasis on a new operations strategy. It emphasized: ‘Succeeding in pharma under these new and challenging conditions will require succeeding in operations.’

This point was further vindicated by the results of the latest McKinsey Global Survey, which states:‘Less than one-third of the surveyed respondents, all of whom had been part of a transformation in the past five years, said their companies’ transformations had achieved a sustained performance improvement.’

Another study very specific to India:

Another survey on ‘Indian consumer sentiment during the coronavirus crisis,’ published by theMcKinsey & Company on October 13, 2022, also reconfirms the subtle changing trend in Indian consumer behavior. Its findings include some of the following areas:

  • More than 70 percent consumers are engaging in modified out-of-home behavior, even as social gathering returning to almost normalcy.
  • Digital continues to hold sway with more than 75 percent consumers using either digital or omnichannel while purchasing across categories.
  • Social media continues to be an important influence while shopping.
  • Gen Z and millennial are leading in new shopping behavior, with value being the top reason and sustainability as an emerging factor.

Hence, to engage with such healthcare consumers and deliver the value as they perceive, pharma operational strategies may call for a rejig – for longer term success and sustainability. That said, a key point to remember is that the marketing function is central while redrawing new operational strategy.

The marketing function is central while redrawing new operational strategy:

The need for the above was well articulated in another study published by ResearchGate in May 2020. It pointed out that many drug companies invest lots of funds to be more productive in various key operational areas, like R&D, manufacturing, or supply chain. However, if marketing strategies are not in sync with contemporary market dynamics and customer behavioral trends, despite game changing improvements in those areas, achieving business growth objectives will be challenging.

Based on the study, the researchers concluded, “an effective marketing in the organization has significant impact in achieving Organizational goals and Operational Excellence in Pharmaceuticals.” The study further emphasized, ‘Operational Excellence and marketing are always interlinked. Therefore, marketing plays a vital role in achieving Operational Excellence in Pharmaceuticals or any other industry.”

Conclusion:

As we know, market dynamics keep changing with time. Generally, some strong trigger factors, such as, Covid related disruptions of lives and livelihoods, may hasten the process of this crucial change. Such changes necessitate long-term transformation of pharma operational strategies, as initiated, for example, by GSK and Sanofi.

As McKinsey & Company articles have articulated, the transformation process and scale may differ from company to company with common long-term challenges remaining the same. Such operating model transformations – involving digital tools, data science with analytics capabilities across the company, often ‘help companies interact with healthcare professionals and other stakeholders more effectively’.

Consequently, the company garners greater capabilities to deliver new patient-perceived value – not just for incremental, but quantum business growth. This, I reckon, could be a game changer for long-term success and sustainability in the pharma business.

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.

 

Any Threat To Current Commercial Model Of ‘Gene Therapy’?

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Wish All My Readers A Very Happy, Healthy, Peaceful and Prosperous 2020

 

One of the most complex areas in disease management, is the ailments related to genetic disorders. As these were incurable, over the last four decades, medical researchers are engaged in understanding the complex and intricate process to modify human DNA, using viruses for treatment. This painstaking initiative led to the evolution of ‘gene therapy’ which, according to Mayo Clinic, ‘involves altering the genes inside human body’s cells in an effort to treat or stop the disease.’ In that process, ‘gene therapy’ replaces a faulty gene or adds a new gene, to cure a disease or improve the human body’s ability to safely and effectively treat dreaded ailments, such as cancer, cystic fibrosis, heart disease, diabetes, hemophilia and AIDS, it further added.

Several studies, e.g., one titled ‘Gene therapy on the move,’ published in the EMBO Molecular Medicine highlighted, the first gene therapy clinical trials were initiated more than two decades ago. However, initially many of these were impeded by the occurrence of severe side effects in a few treated patients. Nevertheless, over a period of time, ‘highly efficient gene targeting strategies and site-directed gene editing technologies have been developed and applied clinically.’ With over hundreds of clinical trials to date, gene therapy has moved from a vision to clinical reality – offering a powerful treatment option for the correction of monogenic disorders.

It is believed that in the new millennium, ‘gene therapy’ has emerged as one of biotech’s momentous success stories for curing many genetic disorders, which were once considered incurable. But, the cost of ‘gene therapy’ treatment is indeed jaw-dropping – ranging ‘from about US$ 500,000 to US$ 1.5m. And for treatment over a lifetime, some drugs can cost as much as US$ 750,000 in the first year, followed by US$ 375,000 a year after that – for life.

Since, I have already deliberated on ‘gene therapy’ price and associated moral dilemma that it causes, in this article, I shall focus on different concerns that could pose a threat to its ongoing commercial model. Nevertheless, let’s start with the current scenario on ‘gene therapy,’ for better understanding of the issue.

The current scenario:

According to McKinsey & Company’s October 2019 article - ‘Gene therapy coming of age’ - till 2019, the primary focus in development of ‘gene therapy’ has been on monogenic rare diseases with all currently approved therapeutics falling into this category. It is worth noting, rare diseases tend to have clear genomic targets, as well as, high unmet need in a very small patient population, who have generally been under-served by other, more traditional, therapeutic modalities (including monoclonal antibodies)—making them ideal targets for gene therapies.

More than 150 investigational new drug applications were filed for gene therapy in 2018 alone. With this in mind, McKinsey & Company expects this market to grow significantly, with ten to 20 cell and gene therapy approvals per year over the next five years.

Major ‘gene therapy’ launched:

If one takes a broad look at the ‘gene therapy’ treatments launched so far, which I have compiled from different sources, it may appear as follows.

Gene Therapy Company Country Launch Year Indication Price ($M) Current status
Glybera UniQure Europe(EMA) 2012 Pancreatitis caused by absence of a gene - lipoprotein lipase, affecting about 14 people per year in Europe 1.0 Withdrawn (unaffordable)
Strimvels GSK Europe (EMA) 2016 To treat ADA-SCID patients (rare disease) 0.665 Sold to Orchard Therapeutics. Only 5 patients were treated.
Kymriah(CAR-T therapy) Novartis USA 2017 Acute lymphoblastic leukemia 0.475
Yescarta(CAR-T therapy) Kite Pharma USA 2017 Diffuse large B-cell lymphoma 0.373 Gilead acquired Kite Pharma in August 2017 for 11.9 billion dollars
Luxturna  Spark   2017 Rare disease called RPE65 mutation-associated retinal dystrophy. 0.850 for both eyes Novartis is paying $105M up front for the ex-US rights.

The latest being Zolgensma of Novartis. It was approved by USFDA on May 24, 2019 for ‘patients less than 2 years of age with spinal muscular atrophy (SMA) with bi-allelic mutations in the survival motor neuron 1 (SMN1) gene.’ It costs US$ 2.125 million in the US for a one-time treatment.

However, to get a better idea on the industry focus in this area, let us look at the current ‘gene therapy’ pipeline.

Current ‘gene therapy’ pipeline:

To fathom the extent of industry interest in ‘gene therapy’ let’s have a glance at the depth of its pipeline – both in terms of phase-wise clinical study, as well as therapy areas covered. This will help understand the concerns that could pose a threat to its ongoing commercial model.

Clinical Trial Phase Total by phase    Therapy Areas:HematologyOncologySensory OrgansInternal MedicinesOthers
I 574
II 520
III 205
Filed/Approved/Marketed 237
Total 1536

Adapted from: McKinsey article – ‘Gene therapy coming of age’, October 2019

Both large and small companies are entering into the fray:

Besides Novartis and GSK, as mentioned above, other Big Pharma constituents, such as Pfizer, Roche, Gilead and Bristol-Myers Squibb - are also putting their money in developing ‘gene therapy.’ This includes Mergers and Acquisitions too. For example:

Alongside, newer ‘gene therapy’ platforms continue to come up, many funded by venture capitals – further enriching the ‘gene therapy’ pipeline. In tandem, fresh concerns that could pose a serious threat to the ongoing commercial model of ‘gene therapy’ are also being realized. Mainly, the impact of the one-time or curative version of such avant-garde therapy on current pharma business models.

Also facilitates a giant leap towards personalized medicine:

‘Gene therapy’ is also believed to be a giant leap of medical science towards personalized medicine. This is because, in addition to repairing and replacing defective or missing genes of a human body, this therapy can use body’s own cellular immune system to treat the disease. This is because, CAR-T cell therapy can fall in the category of personalized medicine, where a patient’s T cells are changed in the laboratory, empowering them to attack cancer cells.

Concerns that could threaten its ongoing commercial model:

Despite its significant patient-value offerings with long-term benefits, ‘gene therapies’ that have been approved and are already in the market had to confront with tough unforeseen challenges, both from fresh regulatory questions - to therapy withdrawal for commercial reasons. These developments, coupled with a very low and difficult to identify patient population, and affordability related low market access, prompt the need of a transformed marketing model for novel ‘gene therapy.’ This is important for financial sustainability of current ‘gene therapies’ in most pharma markets, globally, including the United States.

Some critical areas:

An article on ‘gene therapy’ by the Managing Directors of L.E.K Consulting, published by Cell & Gene on May 16, 2019, also pointed to some of these critical areas. Even this paper articulated, the fundamental value proposition of ‘gene therapy’, its long-term efficacy with a single-dose treatment, gives rise to a number of unique challenges for its manufacturing companies. Let me paraphrase below just three of those, as I understand, to drive home this point.

Declining number of eligible patients for most doctors: 

The promise of a functional cure is expected to limit ‘gene therapies’ to a single dose per patient, in most cases. Thus, inability to re-treat would lead such therapies to deplete their addressable prevalent populations, for most doctors. This is primarily because, as the number of treated patient accumulates – the number of potential patients who could be treated in a given year is reduced. This leads to demand that would peak early before steadily declining. Once the prevalent population is depleted, the demand for a gene therapy would be driven by incident patients.

However, research has now been initiated targeting larger populations – e.g., those suffering from leukemia and lymphomas. But, the greatest revenue potential for ‘gene therapy’, is expected to be its success in delivering life-changing treatment outcomes in multiple myeloma. When such patients will get to experience better outcomes from cell and gene therapies, the incremental approach the industry has been taking in this area, will be more than justified.

Till then, it could pose a challenge to business sustainability:

As discussed, the ‘gene therapy’ sales curve with an early peak and then steady decline, caused by a depleted addressable patient population within a few years after launch, could pose a serious challenge to business sustainability. This would require launching, possibly another ‘gene therapy’ product before the revenue of the first ‘gene therapy’ starts waning. Consequently, the timing of its life cycle management efforts and subsequent launches would be a critical success factor.

Intricacy of market access dynamics:

Optimal market access of ‘gene therapy’ will call for working in unison with virtually all stakeholders, including regulators, governments, and at the same time, effectively disseminating the real-life treatment-success stories. However, both in the developed countries and also in the emerging markets, such as India, its treatment cost will continue to remain a key barrier, sans some disruptive pricing strategy.

How this tough task remains unresolved, can be sensed from the Wall Street Journal (WSJ) report of December 19, 2019 titled, ‘Novartis to Offer World’s Most Expensive Drug for Free Via Lottery.’ For this purpose, Novartis launched a lottery-style program to provide doses of its pricey gene therapy for Zolgensma, a one-shot ‘gene therapy’ cure, for free of charge. But, this approach drew criticism from patient groups that called it – an inappropriate way to distribute a lifesaving treatment aimed at babies for a deadly inherited disease whose victims cannot control their muscles. At a price of US$ 2.1 million, Zolgensma, is the world’s most expensive drug.

Conclusion:

As I discussed above, ‘gene therapy’, also known as ‘human gene transfer,’ has been one of biotech’s momentous success stories in the new millennium, paving the way for a cure of many genetic disorders – once considered incurable. However, the number of patients on ‘gene therapy’ remains small compared to other therapeutic regimens, mainly because of two factors. One – this therapy, mostly targets rare diseases, and the second – even among those small patient populations, only very few can afford such pricey therapy.

Nevertheless, current research in this complex area, is now targeting larger populations – suffering from leukemia, lymphomas and multiple myeloma. Success in these areas will open the door of significantly greater revenue potential for ‘gene therapy’ by delivering life-changing treatment outcomes. Till then, its current business model, I reckon, would continue to pose a high commercial risk to this venture.

By: Tapan J. Ray   

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

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

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

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

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

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

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

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

Under increasing scrutiny in the developed world:

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

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

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

The scope of ‘ethics and propriety’:

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

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

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

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

‘Business Ethics and Values’ in the globalized economy:

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

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

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

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

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

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

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

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

A dichotomy exists with ‘Grease Payment’:

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

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

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

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

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

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

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

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

‘Practice as you preach’:

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

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

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

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

Criminal drug regulatory manipulation:

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

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

Compensation for deaths related to Clinical Trials not paid:

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

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

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

Alleged marketing malpractices:

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

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

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

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

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

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

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

Fraud fines: 

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

Denigrating generics:

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

Drug overcharging: 

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

Bribing doctors:

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

 Concealment of important facts:

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

Off-label marketing:

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

Other illegal marketing practices:

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

‘Illegal’ Clinical Trials: 

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

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

Middle and lower management becomes the ‘fall guy’: 

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

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

Public perception is not encouraging:

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

Government apathy in India:

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

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

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

Walking the talk:

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

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

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

Conclusion:

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

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

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

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

By: Tapan J. Ray

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

 

 

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

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

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

A vindication:

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

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

Some experts have gone even further:

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

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

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

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

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

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

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

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

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

In the same article the authors strongly commented as follows:

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

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

 Another perspective to the “R&D Factor”:

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

  • Money
  • Time
  • Risk

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

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

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

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

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

Even reengineered R&D model may not be sustainable:

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

The areas identified are as follows:

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

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

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

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

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

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

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

Company

2012

US$ Bn.

2011

US$ Bn.

% Change

% of Sale
Roche

10.10

8.81

13.7

21.0
Novartis

9.33

9.58

(3.0)

16.4
Merck

8.16

8.46

(4.0)

17.0
Pfizer

7.90

9.10

(13.0)

13.3
J&J

7.66

7.54

1.5

11.6
Sanofi

6.40

6.24

2.5

14.1
GSK

5.95

6.01

(1.0)

15.0
Eli Lilly

5.30

5.00

5.0

23.4
AstraZeneca

5.24

5.52

(5.0)

18.8
Abbott Labs

4.32

4.12

4.7

10.8
Total

70.36

70.38

 

 

Source: Fierce Biotech, March 18, 2013

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

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

Towards greater sustainability of the R&D model: 

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

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

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

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

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

“Open Innovation” is very successful in IT industry:

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

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

Issues involved:

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

▪   Who will fund the project and how much?

▪   Who will lead the project?

▪   Who will coordinate the project and find talents?

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

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

Conclusion: 

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

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

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

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

By: Tapan J. Ray 

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