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‘Prevention is better than cure’: Such a healthcare policy focus could effectively reduce the disease burden in India

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First National Health Policy was passed by the Parliament of India in 1983 and was last updated in 2002. How much of the policy intent has seen the light of the day is anybody’s guess.
Healthcare issues are not being effectively addressed:
Even after six decades of independence only one in three Indians has access to basic sanitation facility like toilets, exposing a large number of population to various types of ailments. World Health Organization (WHO) reports that around 9 lakh Indians die every year breathing polluted air and drinking contaminated water. Maternal mortality rate is the highest in India. Almost half of the children in our country are grossly underweight and this phenomenon is growing at a rate which is nearly double the rate of even Sub-Saharan Africa. One third of the world’s tuberculosis patients live in India. It is indeed an irony that even today India belongs to one of those four countries of the world where polio has not been successfully eradicated, as yet.

Increasing incidences of chronic ailments are exerting further pressure on the disease burden:

Along with diseases originating due to poor hygienic conditions and life style, new challenges are coming up with rapid emergence of non-infectious chronic diseases like, diabetic, cardiovascular and psychosomatic disorders.

Chronic diseases could soon become the most critical issue in the Indian healthcare system, if these are not prevented and successfully managed. It has been reported that population suffering from, for example, diabetes could generate health care costs which are almost double of those without this ailment.

All these factors together are leading to an abnormally high disease burden in the country where very unfortunately over 65% of the population are not having access to modern medicines, either due to lack of infrastructural facilities or the people just cannot afford the basic costs of healthcare.

Most of the diseases are preventable:

Many of these chronic ailments ascribe to common preventable risk factors. Poor hygienic conditions, unhealthy nutrition, lack of proper physical activity, alcohol and tobacco abuse are the major risk factors for these diseases. An integrated approach towards disease prevention, though challenging for the nation, is the need of the hour. It is a pity that our healthcare systems do not support this process. India as a whole carries an abysmally poor track record for a well thought out and structured healthcare promotion and disease prevention policies and strategies.

Indian healthcare system is highly skewed towards disease treatment rather than disease prevention:

Current healthcare systems of India, which offer access to modern medicines just to 35% of the population, are aimed mostly towards responding to urgent needs of patients.

Relieving symptoms of the disease with an expectation of curing the ailment are the basic pattern of healthcare in our country, wherever it is available and in whatever scales and proportion. Preventive health care is quite different from the above approach.

Australia has shown a way:

Australian National Health and Hospitals Reforms Commission report titled, “A healthier future for all Australians”, published in July 2009 recommends the establishment of an independent National Health Promotion and Prevention Agency, with a significant budget for creating a robust evidence base to find out what exactly works in prevention of a disease. Like for example , the report highlights “comparison of the relative efficacy of a medical intervention (gastric bypass), a pharmaceutical intervention (an anti-obesity drug), an allied health intervention (an exercise and diet program) and a population health intervention ( a community walking program) in reducing obesity.”

The report clearly articulates that just collecting evidence on prevention will not be enough; disease prevention should be put on the same footing as the treatment of the disease.

Are we listening?

The way forward in India:

As many diseases are preventable, every interaction with a healthcare professional should include advice and follow-up on the preventive measures. When with an integrated and systematic approach, patients will be provided with information and practices to reduce health risks, it is quite likely that they will then try to maintain a healthy and hygienic life style with regular exercise, drinking safe water, eating healthy food which they can afford, practicing safe sex, avoiding tobacco and alcohol abuse.

Such integrated and systematic preventive healthcare measures can significantly help reducing the disease burden of individuals and families, besides improving vastly the quality of life. To promote prevention in healthcare, the very basic requirement is the change in mindset of both the policy makers and the civil society. A collaborative or partnership approach involving all concerned to create mass awareness is absolutely essential to ensure commitment of the common man towards such an important healthcare initiative.

Important areas for action:

• Effective use of persuasive communication tools to establish that preventive health care can help avoiding expensive disease burden and improve quality of life

• Mass awareness and demonstration program to help creating a positive attitude and required skill sets in disease prevention activities within the community

• Motivate healthcare professionals to make prevention an integral part of every interaction with the patients

• Medical insurance and healthcare policies to offer adequate incentives for preventive healthcare through innovative means

What the government of India is doing towards preventive healthcare:

The Planning Commission of India reports as follows:

• Health education for primary and secondary prevention of Non Communicable Diseases (NCDs) through mobilization of community action

• Development of treatment protocols for education and training of physicians in the prevention and management of NCDs

• Research support for: Multi-sectoral population-based interventions to reduce risk factors

• Explanation of the role of nutrition and lifestyle-related factors

• The development of cost effective interventions at each level of care.

All these are very appreciable statements of intent. However, how much of these intents are getting translated into reality will be very difficult fathom by the common mortals.

Conclusions:

Most of the serious types of ailments of a vast majority of the population of India can be prevented and the disease related complications can be effectively avoided, if we all have a will to do that. Can we take a leaf out of the formation of “National Health Promotion and Prevention Agency” in Australia?

Healthcare costs of the nation and utilization of its scarce resource can be successfully optimized by properly focusing on disease prevention related activities. In my view, effective measures towards preventive healthcare can quite efficiently address many pressing healthcare issues of the nation.

By Tapan Ray

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

An image makeover is in progress in the global pharmaceutical industry.

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At the beginning of 2009, Andrew Witty, the young head honcho of Glaxo SmithKline (GSK) initiated a one CEO tirade to recognize the global poor as a stakeholder of the global pharmaceutical industry. The industry that has been much maligned over a period of time, despite its yeoman contribution to the mankind, for aiming its drug discovery and delivery more often at the rich patients and not at the sick poor of mostly the developing and underdeveloped nations of the world.
Walking the talk:
Witty perhaps wondered and questioned why the poor population must share disproportionately the disease burden of the world. As the saying goes, ‘the proof of the pudding is in the eating’. Witty walked the talk and announced:

1. GSK medicines will be available in the least developed countries (LDC) of the world at 25% of their price in the United Kingdom (U.K).

2. 20% of profits from these medicines will be re-invested for various projects in those countries.

3. GSK will put 800 potential drug patents in a ‘patent pool’ to find cures of neglected, mainly, tropical diseases.

4. Scientists will be able to share the Research Center of GSK located at Tres Cantos in Spain for this purpose.

Will other global pharmaceutical players join in?

Andrew Witty, it appears, nurtures a very keen and very real desire to change the public image of the global pharmaceutical industry through transformation of its decade long culture and setting some of these path breaking examples, which only bravehearts can follow. However, many still feel, “Improving the greedy and uncaring image of the pharmaceutical industry is indeed a tough call.”

It has been reported in the media, during his announcement for the ‘patent pool’, the GSK CEO, in fact threw a challenge to other global pharmaceutical players to join him. What resulted thereafter was a bit of an anti-climax though with a very lukewarm response from others and Andrew with a sense of perhaps despair commented, “It has caught them a bit by surprise because we didn’t go around talking to people at the time, and they’ve had to come up this curve from zero.”

The Guardian in a very recent article on Andrew Witty, quoted him in the same context of extending access to modern medicines to the poor of LDCs, “he’s encouraging Indian companies to knock off its on-patent meds for sale in poor countries, as long as they make quality products and asks GSK for a license, which it will give royalty-free.”

In the same article, The Gurdian wrote, “He’s calling on every foreign company that makes profits in Uganda to cut its prices there”. “I don’t just mean drug companies,” Witty told the newspaper -”everybody.”

It does not cost much:

The GSK CEO admits that he is not losing much on his price cuts in the least developed countries. Uganda market of GSK is very small with turnover of about £9 million a year. The total profit from the LDCs is less than £5 million. “Those sorts of sums are like the 1p coins people don’t trouble to pick up off the pavement for a company with revenue of £24bn and a stock market valuation of £60bn,” he commented.

Conclusion:

Despite not too many encouraging responses being forthcoming from others, it is indeed admirable that a top global pharma company head honcho is setting such tough goals for himself in particular and the industry in general. The question that flows from here, even reading all these:

Are you kidding Andrew Witty? Do you really mean all these? Or it is another smart global pharma CEO hankering for just cheap publicity?

Seeing you Andrew Witty, though long ago, in flesh and blood, my heart says, you are possibly not made of that stuff to befool the world on this pressing issue of the world, being at your wit’s end.

Tapan Ray

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

‘Prescription-brand’ loyalty and engaged field force – exploring the direct relationship.

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Well known English writer and one of the most prominent members of the famous ‘Huxley family’, Aldous Huxley once said in the context of nature, “Everything has a cause and the same cause usually produces same effect. The law of cause and effect is fixed.”
‘Cause and effect’ relationship between ‘employee satisfaction’ and ‘customer satisfaction’:Following such ‘cause and effect’ relationship, there are many studies, which establish a direct correlation between ‘customers satisfaction’ and ‘satisfied employees’. Within the pharmaceutical industry, it has now been well established that there is a cause-and-effectrelationship between Doctors’ prescription-brand loyalty and a satisfied or properly engaged sales & marketing staff.

For most organizations, the objective of improving the satisfaction level or increasing the degree of engagement of an employee in the organization is an article of faith. Research studies on this subject indicate that building customer loyalty has a significant impact on profitability of the organization. A study based on 46,000 business-to-business surveys reports that a “totally satisfied” customer contributes 2.6 times more revenue than a “somewhat satisfied” customer.

‘Walking the talk’ is the name of the game:

It is extremely difficult if not impossible to create a critical mass of loyal doctors’ base for a brand or brands without a creating a team of satisfied, engaged or loyal sales & marketing team. The best employees usually prefer to work for companies where managers ‘walk the talk’, set examples and deliver superior values.

Acid test of leadership:

A work environment of such kind helps to create employee satisfaction, loyalty and engagement, which ultimately gets translated into building customer loyalty. Ensuring employee loyalty and creating employee satisfaction is, therefore, considered widely as the acid test of leadership.

Creating a positive psyche within employees is important, usual skill training is just not enough:

To create employee loyalty the organization will need to understand the mind of its employee and always try to have a positive influence on their psyche. Usual skill training will not help to achieve it.
Just as sowing a seed is no guarantee that it will grow into a plant, a highly skilled sales person is no guarantee that it will contribute to the growth of the organization. Just as one will need to create an environment for the seed grow into a plant, the organization will need to create an environment for employee satisfaction to enable them contributing towards the growth of the organization.

In HR invest resources where the mouth is:

It is very important for the managers to devote more resources both in terms of money and time to play the role of a mentor to each one of his or her direct reports to improve their satisfaction level with the organization. These satisfied employees will in turn help create a core group of prescription brand loyal doctors for the organization.

‘Charity begins at home’:

However, ironically most of these managers do not realize that attempts at their end towards this objective, many a times, are just cosmetic in nature. As the saying goes, “charity begins at home”…real enhancement in the level of customer services, indeed starts from extending superior services, support and satisfaction level to the sales force, the bedrock for generation of prescription demands for the prescription brands.

Facing the ‘moments of truths’ of every day positively:

Pursuit of an organization in providing great services to the patients through doctors ultimately depends on the people who provide those services…the sales force. It can only happen through one’s willingness to go beyond what is required of people who serve on the front lines.

Excellence in organizational performance takes place through efforts of frontline employees who make up their minds to face the “moments of truth” of every day, as positively as they possibly can. Such enthusiasm, loyalty, or devotion none will be able to impose on any one. These ordinary people are transformed into ‘brave hearts’ and highly satisfied top performers only through well articulated “shared values”, which take their deep roots within the organizational environment. In a situation like this one can easily make out the visible passion and pride of the frontline staff, emanating from deep within, of each one of them.

Some research findings:

Following are some examples from various research findings, which reinforce the hypotheses that there is a ‘cause and effect’ relationship between ‘customers satisfaction’ and ‘satisfied employees’:

• “For every one percent increase in internal service climate there is a two percent increase in
revenue”.

• “In cardiac care units where nurses’ moods were depressed, patient death rates were four times
higher than in comparable units”.

• Emotional commitment of the sales force and sense of identity with the company are key factors in
providing excellent service to the doctors.

• The reason of poor prescription demand of a company’s products is related to the degree of its sales
staff turnover.

Conclusion:

Therefore, one tends to believe that “a company’s external customer service is only as strong as the company’s internal leadership and the culture of commitment that this leadership creates”.

To transform one’s organization from “Good to Great” it is of utmost importance to build a team of loyal and satisfied ‘internal customers’ by creating a commensurate organizational culture, work environment, ethics and values. Various training & development programs or seminars, aiming only at employee ‘skill development’, are just not enough.

By Tapan Ray

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

Europe: now emerging as a more preferred market for the domestic Indian Pharmaceutical Industry

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Since almost last 30 years the Pharmaceutical Industry of India has been a net foreign exchange earner. Deutche Bank Researchindicates that over the last ten years the export surplus has widened from EUR 370 million to EUR 2 billion.Around 80% of these pharmaceuticals manufactured in India are sold to the US and Europedriven by higher purchasing power of the people in those countries and also due to recent regulatory changes towards greater cost containment initiatives by the respective governments.
Europe – a preferred destination for Indian Pharmaceutical companies:

In the quagmire of global recession, prompted by increasing pricing pressure with consequent pressure on the bottom-line, many Indian pharmaceutical companies have started increasing their focus on Europe. The European generics market is now growing faster than overcrowded US generics market.

Top domestic Indian pharmaceutical Companies like Ranbaxy, Sun Pharma, Dr. Reddy’s Laboratories (DRL), Glenmark, Wockhardt and Aurobindo whose performance is highly dependent on their revenues from the US and Europe perhaps will need to have a sharper look at both western and eastern Europe.

It has been reported that because of higher volume penetration of over 55% of generics pharmaceuticals in Europe, which is significantly higher than US, Europe offers an attractive and better growth opportunities to the Indian pharmaceutical companies in the medium to longer term. Companies like Ranbaxy, Wockhardt and Aurobindo have already reported to have started showing higher revenue growth in Europe than USA.

Major merger and Acquisition (M&A) initiatives of the Indian pharmaceutical companies in Europe augur well towards this direction. Ranbaxy has already acquired companies in France, Belgium, Romania and Zydus Cadila in France. DRL purchased Betapharm in Germany.

Inorganic growth will demand a more cautious approach:

However, the path of M&A by Indian pharmaceutical companies should be treaded with more caution. The case in point is Wockhardt, which grew with a scorching pace of over 30% on an average for several years in the recent past driven by its inorganic growth strategy. In 2006-07 Wockhardt acquired two companies in Europe, one in Ireland and the other in France. Unfortunately, the company could not manage its rapid growth through such M&A as efficiently for long and got entangled in a debt trap of around Rs. 34,000 crore in that process.

Converting problems into opportunities:

Global financial meltdown throws open an opportunity for the Indian pharmaceutical companies to acquire the distressed specialty pharmaceutical companies at a very competitive price in Europe. Many small pharmaceutical companies in Europe are now looking to sell their facilities because of difficulty in maintaining their business arising out of higher operating costs.

In such a scenario after acquiring a company in those countries, the Indian acquirer will have an opportunity to transfer the manufacturing operations to India, where the costs are much lower, keeping just the marketing operations there.

A report from The Economic Times (ET) indicates that Pharmaceutical majors like Zydus Cadilla are looking for acquisition in Spain and Italy and Glenmark in the Eastern Europe. Kemwell of Bangalore has recently acquired the manufacturing plant of Pfizer located in Sweden and has expressed intention to shift their manufacturing operations to India to concentrate only on marketing with the acquired local infrastructure.

Just at the same time and for the same reasons many global pharmaceutical companies plan to outsource their manufacturing requirements from India and China retaining the R&D and marketing operations with them.

Increasing attention on Eastern Europe:

According to PMR, the Polish Market Research company, countries like Ukraine, Bulgaria, Turkey, Russia and Romania are quite attractive for pharmaceuticals business in the Eastern Europe.

In that part of the world, Russia, Romania and Ukraine have been dominating in terms of sustained high growth since last five years. Acquisition of a local company will provide the best option for quick entry into these markets, recommends PMR.

Conclusion:

Global financial meltdown has thrown open many doors of opportunities for rapid entry into both eastern and western European markets by the Indian pharmaceutical companies for better future growth potential. I am sure the domestic pharmaceutical companies will carefully evaluate these opportunities to take appropriate action to catapult themselves to a higher business growth trajectory in the years to come by.

Tapan Ray

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

Patent Linkage: an important step yet to be taken by the Government of India for proper enforcement of product patents granted in the country

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The process of Patent Linkage establishes a desirable communication process between the Health Ministry and the Patent Offices to prevent marketing approval of generic drugs before expiration of patents granted in India. It also ensures that one Government Department / Ministry does not impair the efforts of another Government Department / Ministry to provide effective intellectual property protection as required by Article 28 of the WTO TRIPS Agreement.
The system of Patent Linkage exists around the world:Following are some examples:

Australia – Health Authorities do not provide marketing approval for a generic copy which would infringe an existing patent.

Brazil – As of 2006, no copies of products still under patent have been launched in the market place. However, the Brazilian Health Agency (ANVISA), grants registration to copy products, based only on the merits of the case from the regulatory point of view, whether or not a patent has been granted for the same.

Canada – Health Regulatory Authorities do not provide marketing approval for pharmaceutical products protected by patents listed in the equivalent of the US FDA Orange Book.

China – The State Food & Drugs Administration (SFDA) must be satisfied that no patent is being infringed before it will issue marketing approval. If there has been litigation over a patent, SFDA will wait until the appeals process has been exhausted before acting.

Jordan – Marketing approval for a pharmaceutical product is not permitted during the period of patent protection.

Mexico – Applicants seeking marketing approval for generic pharmaceutical products in Mexico must certify that their patent rights are not infringed. The Health Regulatory Authorities then check with the Patent Office, which must respond within ten days to confirm whether a patent is involved. While Health Authorities will accept an application of marketing approval during the patent period, grant of marketing approval will be delayed until the patent expires.

Singapore – Applicants seeking marketing approval for generic pharmaceutical products in Singapore must declare that the application does not infringe any patent.

U.A.E – The Health Regulatory Authorities do not provide marketing approval for pharmaceutical products that remain under patent protection in the country.

U.S.A – U.S. FDA maintains a listing of pharmaceutical products known as the Orange Book. The Electronic Orange Book is also available via the internet at: http://ww.fda.gov/cder/ob The U.S. FDA does not authorize the marketing approval for a generic copy of a pharmaceutical product protected by a patent listed in the Orange Book.

Europe – Instead of Patent Linkage, the period of data exclusivity is for 10/11 years.

The Patent Linkage System is in progress in countries like Bahrain, Chile, Dominican Republic – Central America FTA (DR-CAFTA), Morocco and Oman.

Some people question why should India follow Patent Linkage system in the regulatory approval process?

In India ground realities in the patent enforcement process are quite unique. Thus there is an urgent need for having a Patent Linkage system in place for the following reasons:

1. The Government is granting product patent to encourage, protect and reward innovation in India, it will not be in the best interest of the innovators if the same Government grants marketing approval for a generic equivalent of the patented molecule during the patent life of the product.

2. Unlike many other countries, the Indian Patent Law has provision for both pre-grant and post-grant oppositions. Therefore, if anyone wants to challenge the patent, enough time will be available for the same.

3. After patent is granted for a product in India, if marketing approval is given to a generic equivalent of the same molecule, a dispute or patent infringement may arise. As per the Patents Act 2005, such disputes regarding patent infringement have to be challenged in a High Court. The judicial process is a long drawn one and it is quite possible that the patent life of the concerned molecule would expire during the dispute settlement period, which in turn, would raise doubts about the sanctity of granting a product patent to an innovator in our country.

Conclusions:

I therefore submit the following recommendations to ensure proper enforcement of products patent in India:

 The status of the grant of patent should be reviewed, through appropriate drug regulatory mechanism, before granting marketing permission to generic formulations and if the concerned innovative product is already patented in India, marketing permission for the generic formulation should be withheld.

 Appropriate mechanism/system should soon be worked out in co-ordination with other Ministries to avoid cases of infringement of product patents in India.

 The procedure (Patent Linkage) of checking the patent status of a product before granting marketing approval already exists in the Form 44. This procedure needs to be implemented.

India has instances where marketing permission has been granted by the DCGI for a generic product even when a product patent already exists for the same molecule in India. Such instances put the patent holder in a hardship and avoidable litigation involving huge resources both in terms of time and money. Situation like this can be effectively avoided by ascertaining the patent status before granting marketing permission to a generic manufacturer through an appropriate drug regulatory system, as indicated above.

By Tapan Ray

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

Changing recipe for growth in the new paradigm of Indian Pharmaceutical Industry… for its effective implementation there appears to be more questions than answers:

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India, the world’s largest democracy with its economy on a sustained growth track is creating an overall environment for high performance for all key sectors, including pharmaceuticals. In terms of GDP growth India is second only to China and is expected to become the fifth largest economy by 2017.
Dawn of a New Era:
Over a period of time, India has emerged as a fast growing pharmaceutical industry through various policy measures taken by the government of India (GoI). Such policy measures have been very supportive to the domestic companies. The absence of product patents from 1970 to 2005 enabled the Indian pharmaceutical companies to become world’s leading producers of ‘copycat’ versions of patented drugs. Lower cost base and expertise in ‘reverse engineering’ immensely helped the domestic industry to sustain its competitive edge during this period.

New product patent regime in 2005 heralded the dawn of a new era triggering a transformation of the industry. Return of large global companies like, MSD, Roche, Eli Lilly and entry of other company’s like Biogen, Genzyme, Allergan, Astellas, Eisai etc together with the emergence of many Indian companies to become research-based multinationals, are making this transformation more interesting.

Generic pharmaceuticals will continue to play a significant role:

Even with all these changes, generic pharmaceutical products will continue to play a significant role towards the growth of the industry. While being major global generic players, some large Indian companies like Dr. Reddy’s laboratories (DRL), Glenmark, Ranbaxy, Piramal Healthcare etc have commenced their journey on the long road of product discovery research with reasonable amount of initial success. There are now several new drug development programs by many of these Indian pharmaceutical companies, which will hopefully result in global product launches in not too distant future. India’s emphasis on research and development and new drug discovery is indeed growing since the country signed WTO agreement for product patent in 1995.

An industry with high success quotient:

Currently India is the world’s fourth largest producer of pharmaceuticals by volume and directly employs about 5 lakh people. The market is crowded with 20,000 pharmaceutical firms, 60,000 distributors and 700,000-800,000 retailers. Although there are around 5,600 licensed generics players, in reality around 3,000 of them are engaged in pharmaceutical production. The domestic pharmaceutical companies now cater to about 70% of the country’s requirements for medicines. The top 10 companies control about 30% and 250 companies control around 70% of the market.

Key determinants of success:

Following in my view are the key determinants, which will decide the extent of success of the Indian pharmaceutical industry as a whole:

• Healthcare delivery and infrastructure

• Access and affordability of modern medicines

• IPR environment

• Domestic R&D success

• Speed of regulatory reform process

• Disease trends and prescription patterns

• Public and private healthcare spending

• Penetration of health insurance

Domestic companies adopting different business model:

In this changing scenario different domestic companies are adopting different business models, as follows:

1. Penetration to the regulated generics markets:

- With partnership agreements with established generic companies

- Setting up own sales and marketing organisations both greenfield and also through acquisitions

- With acquisition of manufacturing facilities

2. Contract Research and Manufacturing Services (CRAMS):

Ballooning costs for research and development and low productivity have prompted the research-based global pharmaceutical companies to outsource part of their research and manufacturing activities to lower-cost, developing nations like, India and China.

India is gradually emerging as a competitive hub for CRAMS. The country is playing a significant role in manufacturing Active Pharmaceutical Ingredients (APIs) and intermediates for the global pharmaceutical industry. We have also seen the global pharmaceutical companies signing-up long-term outsourcing contracts with the Indian manufacturing and contract research organizations.

Generic pharmaceuticals produced in India are increasingly being accepted all over the world, excepting some recent US-FDA related issues. Many Indian companies like Piramal Healthcare, Aurobindo, DRL etc are taking up global generic manufacturing contracts for the global players like, Allergan, Pfizer and GSK, in addition to marketing generic pharmaceuticals themselves. Outsourcing of such business processes to India has undoubtedly been proved to be not only effective in saving costs, but also in saving valuable developmental time for the Multinational companies (MNCs).

Besides all these, India is emerging as the preferred destination for outsourcing clinical trials because of its both high quality and lower cost facilities of global standards.

3. Operating in domestic generic market

4. Investing more in R&D for discovery of NCE/NME

Key growth drivers:

A recent study jointly undertaken by the Organization of Pharmaceutical Producers of India (OPPI) and Yes Bank identified following key growth drivers for the domestic pharmaceutical Industry:

• Consolidation leading to better pricing

• Population growth, changing demographics and urbanization

• Increasing per capita income leading to higher penetration

• Access to quality healthcare through health insurance schemes

• Robust product patent regime, although generics will continue to grow

The questions to ponder:

1. Whether domestic Indian pharmaceutical companies will make large-scale investments in R&D to compete effectively with the global companies across the world?

2. Whether global pharmaceutical companies will be successful in marketing drugs patented in India?

3. Whether the government, physicians and patients keep supporting the generics?

4. How will the new Drug Policy be?

5. How will the government go about improving access to modern medicines from the current level of 35% to 100% of the Indian population?

Conclusion:

It is not quite easy to gauge the rate of progress of the Indian pharmaceutical industry in the new paradigm, at this stage. One of the key growth drivers of the domestic pharmaceutical industry has been the launch of a slew of new products of various types. The pipe line of such products has already started drying up in a comparative yardstick, in post product patent regime. Consequently, as already launched such new products reach the maturity stage from the growth phase of their ‘product life cycle’, a possible slowdown in the rate of growth of the respective companies in the domestic market is well anticipated.

There are other growth drivers though, for the industry, but how will these drivers actually drive the industry growth will, to a large extent, depend on proper answers to the above five questions. Thus, in the new paradigm though the growth recipe is ready, in its effective implementation there are more questions than answers.

By Tapan Ray

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

Union Budget 2009-10: there is something to cheer for the Pharmaceutical Industry

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Union Budget 2009-10 has reflected the intention of the new UPA Government to sharpen its focus on healthcare through various budgetary/fiscal measures and support. Although general expectations were more for a significant increase in the healthcare expenses as a % of GDP, the union budget proposals have satisfactorily addressed the key issues in the following five key areas of healthcare, to the extent possible by the Government at this stage:A. Infrastructure buildingB. Improving access to medicines

C. Reduction in transaction costs of Medicines

D. Incentivising R&D

E. Reduction in tax burden

A. Infrastructure building:

The Finance Minister has rightly focused on improvement of healthcare infrastructure of the country by increasing allocation under National Rural Health Mission (NRHM) by Rs.2,057 crore over interim budget 2009-10 of Rs.12,070 crore.

B. Improving access to medicines:

The budget proposal of covering all BPL families under Rashtriya Swasthya Bima Yojana (RSBY) with an increase in allocation by 40% is expected to help improving healthcare access. This is an increase over previous allocation of Rs. 350 crore.

C. Reduction in transaction costs of Medicines:

Reduction of Customs Duty for drugs used for cardiovascular diseases, influenza vaccine, breast cancer, hepatitis B, rheumatic arthritis and also for bulk drugs used for the manufacture of such drugs from 10% to 5% and total exemption of Excise and Countervailing Duty for these drugs will help in reduction of transaction costs of these medicines.

The drugs in question are Abatacept, Daptomycin, Entacevir, Fondaparinux Sodium, Influenza Vaccine, Ixabepilone, Lapatinib, Pegaptanib Sodium injection, Suntunib Malate, Tocilizumab.

Basic Custom duty on specified heart devices, namely Artificial Heart (left ventricular assist device) and Patent Ductus Arteriosus(‘PDA’)/Atrial Septal Occlusion device has also been reduced from 7.5% to 5%. Drugs and Pharmaceutical products of Chapter 30 and medical equipment continue to attract central excise duty of 4%.

However, the Industry expected that Government will take similar action for all life-saving drugs.

D. Incentivising R&D:

Extension of scope of current weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses except for a small negative list, is a welcome step.

E. Reduction in tax burden:

Following tax proposals of the Finance Minister will benefit the pharmaceutical Industry:

• Abolition of Fringe Benefit Tax (FBT)

• Extension of tax holidays for exporters upto 2011

• Tax incentives for the business of setting up and operating “Cold Chain” which is an integral part in the logistics for vaccines and many biotech products.

The Economic Survey 2008-09 highlights that the economy of the country has grown by 6.67% despite global economy meltdown. It indicates a sign of revival in domestic investment and the return of a climate of optimism. For the Pharmaceutical Industry, the Economic Survey comments as follows:

“The drugs price control should be limited to essential drugs in which there are less than 5 producers. All others should have been decontrolled”.

This issue I hope will be addressed in subsequent policy announcements by the Government.

By Tapan Ray

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

Managing expectations of the emerging markets of the world, proactively, will differentiate winners from the rest, in the Global Pharmaceutical Industry.

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Change or Perish:In Mid 2007, PricewaterhouseCoopers (PwC) recommended to the research-based global pharmaceutical companies that for sustainable business performance they should move a part of their expenditure from marketing to research. They also recommended that the drug prices should be related to incremental efficacy that the products would provide. That global pharmaceutical business model is “economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets” as a challenge of change, was forecasted in 2007 by PwC in their ‘Pharma 2020: The vision’, report.Fast evolving scenario:

The global pharmaceutical industry scenario is fast evolving. More drugs are going off patent than what the innovator companies can replace with the new products. The research is undoubtedly failing to deliver.

At the same time, the business growth in the developed markets of the world has been declining over a period of time. The growth in the top two pharmaceutical markets of the world viz, USA and Japan has gone negative. IMS predicted in their recent ‘CEO Conclave’ in Mumbai that negative trends in these markets will continue even beyond 2013.

In the same conclave IMS predicted that ‘Pharmerging’ markets and Venezuela will drive the growth of the global pharmaceutical industry in the next five year period. Within ‘Pharmerging’ markets, China is expected to record highest CAGR growth of over 25%, followed by India and Turkey around 12-14% each. With such a scorching pace of growth China is expected to become third largest pharmaceutical market in the world in 2013 with India holding its 2008 ranking of no. 13. Venezuela is expected to register highest CAGR growth of around 40% during this period placing itself as the eleventh largest pharmaceutical market of the world, comfortably overtaking India.

Emerging markets will drive global growth:

IMS health reported that last year the global pharmaceutical market recorded a turnover of US$712 billion, which is an increase of US$178 billion over last five years. However, the growth rate has come down to 6.4% compared to 11.8% in 2001. Emerging markets like India, China, Russia, Turkey and South Korea have recorded a growth of 13%, 25.7%, 20.2%, 17.2% and 10.7%, respectively against just 3.8% growth of the US market.

Making up sales revenue of world’s top 10 products:

World’s 10 top selling prescription drugs, as reported by IMS, which will be difficult to replace in terms of single-product value turnover after they go off patent, are as follows:

- Lipitor, US$13.5 billion (Pfizer)

- Plavix, US$7.3 billion (Sanofi-Aventis)

- Nexium, US$7.2 billion (AstraZeneca)

- Seretide/Advair, US$7.1 billion (GlaxoSmithKline)

- Enbrel, US$5.3 billion (Amgen and Wyeth)

- Zyprexa, US$5 billion (Eli Lilly)

- Risperdal, US$4.9 billion (Johnson & Johnson)

- Seroquel, US$4.6 billion (AstraZeneca)

- Singulair, US$4.5 billion (Merck)

- Aranesp, US$4.4 billion (Amgen)

Focus on the emerging markets and other measures are expected to more than offset the loss of revenue and profit for these products.

Key business issues in the emerging markets:

Governments of many of these emerging markets expect some local benefits out of the evolving growth opportunities of the global pharmaceutical companies from their respective countries. Various reports indicate that there will be mainly the following two key issues in these markets:

• Local manufacturing of products
• Pricing

Local manufacturing:

Out of these emerging markets, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia has said, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “they can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It has been reported that India and China may also come out with similar requirements for their respective countries.

U.S. Chamber of Commerce has registered a strong protest in this matter with the President of Indonesia and has urged a reversal of this decision. However, the country appears to have taken a firm stand in this matter. This is evident when in response to the report that some global pharmaceutical companies have threatened withdrawal of their business from Indonesia because of this reason, the Health Minister retorted, “If they want to go away, go ahead.”

Pricing:

Anticipating such moves in the emerging markets, GlaxoSmithKline (GSK) has already started reducing the prices of its products in the emerging markets.

The visionary CEO of GSK, Andrew witty strongly believes that such price reduction will enable more patients in the emerging markets to afford GSK products. Consequently the increased sales volume will not only be able to offset the price loss but will also create a substantial goodwill for the company in these markets.

Quoting Andrew Witty the ‘Wall Street Journal’ (WSJ) reported that in Philippines, GSK has reduced the price of 28 products by 30% to 50%. In other emerging markets in Asia including India, Malaysia and Thailand the company has reduced the prices of Cervarix, its cervical cancer vaccine, substantially.

Price reductions made by GSK in Philippines in March have started paying rich dividends to the company with 15% to 40% increase in sales revenue.

Conclusion:

To achieve the growth objectives in the emerging markets of the world, global pharmaceutical companies will need to find out a win-win solution. Andrew Witty of GSK has set examples in this area with various path breaking initiatives. Pricing and local manufacturing of products, in that order, are expected to be the key issues in the business model for emerging markets of the global pharmaceutical companies. Witty has responded to such expectations proactively and in an exemplary way. His vision is widely expected to be emulated by many others, as we move on, in the interest of all stakeholders.

By Tapan Ray

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