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Contract Research – a rapidly evolving business opportunity in India: Is the Pharmaceutical Industry making the best use of it?

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A quick perspective of the ‘new-era’ pharmaceutical R&D in India:
Since 1970 up until 2005, Indian pharmaceutical industry used to be considered as the industry of ‘reverse engineering’ and that too with an underlying disparaging tone… and also as the industry of ‘copycat’ medicines’.

However, it will be absolutely unfair on my part to comment that only domestic Indian pharmaceutical companies launched ‘copycat’ versions of patented products in India and no multinational companies (MNCs) resorted to this practice, during this period.

Long before Indian Product Patent regime was put in place, in January 1, 2005, around 1998/99 Dr. Reddy’s Laboratories (DRL) entered into a bilateral agreement with Novo Nordisk and Ranbaxy with Bayer of Germany to out-license two New Chemical Entities (NCEs) and a New Drug Delivery System (NDDS), respectively for further development.

Opened the new vistas of opportunities:

These research initiatives opened the new vistas of opportunities for the Indian pharmaceutical industry in terms of R&D, in the pharmaceutical science. The above new developments also brought in a sense of determination within the research oriented domestic pharmaceutical players to enter into the big ticket game of the global pharmaceutical industry called ‘product discovery research’.

The jubilation of the industry having demonstrated its initial capability of taking a leap into forthcoming new paradigm of that time, received a set back momentarily when Novo Nordisk terminated the development of both the NCEs of DRL, after a couple of years, because of scientific reasons. However, DRL continued to move on to its chosen path, undeterred by the initial set back.

Need to focus on R&D and create world class ‘Intellectual Properties’:

In a letter addressed to the shareholders of DRL in one of its recent annual reports, the founder and the chairman of the company Dr. Anji Reddy expressed his following vision:

“Excelling in the basic business operations will be necessary, but not sufficient. To maintain a long-term presence in the global pharmaceuticals markets and to grow profitably will require companies to be even more focused on R&D and creation of successful IPR’s [intellectual property rights].”

After India signed the World Trade Organization (WTO) agreement, Indian pharmaceutical companies were quick to make out that the ball game of doing pharmaceutical business in the new IPR regime will be quite different. Having pharmaceutical product patents will indeed be important in future, for the domestic R&D based pharmaceutical companies.

The Past versus Present R&D models in India:

Domestic research based pharmaceutical companies did realize in the early days that a radical shift in their focus from ‘process research’ to ‘product discovery research’ may not be prudent or practical either.

Some of these companies initiated step-wise approach from mid 90’s to meet the challenge of change, come year 2005. During the transition period of 10 years as given by the WTO to India from 1995 to 2005, some domestic companies wanted to make full use of their past R&D model.

The past model:

Before the product patent regime, Indian pharmaceutical companies used to manufacture and market generic equivalents of the patented drugs at a fraction of the price of the originators, with non-infringing process technology in the Indian domestic market and also for export to the other non-regulated markets. During the WTO transition period of 10 years, they increased the pace of utilization of this model and launched as many ‘copycat’ versions of the new products as possible to boost up their sales and profit.

The present model for regulated markets:

Following two strategies are followed:

1. Indian companies doing generic business in the regulated markets like the USA submit
“Abbreviated New Drug Application” (ANDA) to the drug regulator for approvals of drugs,
which will go off patent within the next few years, so that the generic products could be launched
immediately after patent expiry.

2. Many other companies follow the second avenue, simultaneously, which is though risky but very
remunerative. In this case, the generic market entry takes place by challenging the patents of the
innovators.

It is believed that this model is being used by the Indian pharmaceutical companies, primarily to raise financial resources to get more engaged in their drug discovery initiatives or to generate wherewithal for collaborative or contract research initiatives.

For short term business growth and to raise fund for discovery research, their non-infringing process research initiatives have been proved to be quite useful. These R&D based Indian pharmaceutical companies; seem to understand very well that discovery of NCEs/NMEs or getting involved in this process will ultimately be ‘the name of the game’ to fuel longer term business growth of their respective organizations.

Contract Research (CR) in India:

Contract research is another business model within the overall R&D space, where a significant part of the investments come from the collaborators. CR business model currently explore the following two key options:

Intellectual Property Rights (IPR) for the discovery will go to the global collabolator and the
Indian CR organization will get an upfront or milestone payments.

 Along with funding support to the CR organization, IPR is shared by both the companies
depending on the terms of agreement.

There could be many other terms/clauses in such CR agreements, which are not within the scope of this discussion.

Types of Contract Research (CR):

Frost & Sullivan in one of their studies on Indian R&D opportunities indicated following three models of contract research:

1. Joint research: Here two or more collaborators will work jointly

2. Collaborative research: In this type of research, scientists of different disciplines work together on a project e.g. Ranbaxy has recently entered into a collaborative research program with GlaxoSmithKline (GSK) or collaboration of Ranbaxy to develop an anti-malarial NCE Rbx 11160 with Medicines for Malaria Venture (MMV), Geneva.

3. Complete outsourcing: When an altogether different research organization is assigned a research project by another organization. Some Indian research based pharmaceutical companies have already got engaged in these types contract research activities. The market of contract research is expected to grow much faster in the near future.

India – an attractive contract research destination:

A global survey done by the Economist Intelligence Unit (EIU) couple of years ago on the preferred centres for overseas contract research, published as follows:

• 39% preference for China

• 28% preference for India

Attractiveness as preferred contract research center was based on the following criteria:

• A place where companies can tap into existing networks of scientific and technical expertise

• Has good links to academic research facilities

• Provides an environment where innovation is supported and easy to commercialize.

Many global pharmaceutical companies believe that China scores over India on the third point, as mentioned above.

Indian pharmaceutical companies have commenced targeting contract research opportunities:

Research based Indian pharmaceutical companies companies like, Piramal Healthcare, Ranbaxy, DRL, Zydus Cadilla, Glenmark etc are now actively targeting international companies for contract research in custom synthesis, medicinal chemistry and clinical studies.

A medium-sized pharma company Shasun Chemicals and Drugs has been reported to have defined its business as an “integrated research and manufacturing solutions provider”. Similarly Divi’s Laboratories, a pharmaceutical company of similar size has collaborated with global multinational companies for both custom synthesis and contract research projects.

Some international CROs, like Quintiles have its establishments in Ahmedabad, Bangalore and Mumbai with great expectations and a robust business model.

New contract research opportunities in Biopharmaceuticals:

Besides pure pharmaceutical companies, an emerging opportunity is seen within the biotech companies in India, which are mostly engaged in a contract model. Novartis has inked a three year deal with Synergene (Biocon) for various research projects primarily in the early stages of development in cardiovascular and oncology therapy areas.

Likewise, Reliance Life Sciences are involved in chemistry, biology and contract clinical research activities.

Another research process outsourcing company, Avesthagen is engaged in collaborative research in metabolics, proteomics, genomics and sequencing. The company shares the IPR with the collaborators.

Jubilant Biosys of India, which has already partnered in a drug development deal with Eli Lilly has recently entered into another research and development deal with AstraZeneca, estimated to be worth up to US$220 million. This research collaboration will be funded by AstraZeneca for five years and they will own the patent of any neuroscience molecule that will come out of this collaborative agreement.

Contract research – a lucrative business model:

A UBS Warburg study indicated that around 20% to 25% of R&D investments in the US go towards contract research. This percentage is expected to increase as the pressure to contain R&D expenses keeps mounting, especially in the US and EU.

Currently the cost of bringing an NCE/NME to market from its R&D stage is estimated to be around US$ 1.7 billion. Across the world efforts are being generated to bring down these mounting expenses towards R&D.

Many experts believe that cost of innovation in India will be almost half of what it will be in the US and EU. A report from Zinnov Management Consulting forecasts that towards outsourcing by the global pharmaceutical companies, India has the potential to earn about US$2.5 billion by 2012.

Conclusion:

Currently, within CR space India is globally considered as a more mature venue for chemistry related drug-discovery activities than China. However, in biotech space China is ahead of India. Probably, because of this reason, companies like, Divi’s Laboratories, Avesthagen, Ranbaxy, Synergene, Jubilant Biosys, Reliance Life Science, DRL, Zydus Cadilla, Glenmark and Piramal Healthcare could enter into long-term collaborative arrangements with Multinational Companies (MNC)to discover and develop New Chemical Entities (NCEs).

As I said earlier quoting Korn/Ferry that in the CR space China’s infrastructure is better than India, primarily due to firm commitment of the Chinese government to derive maximum benefits of the globalization process in the country.

Prudent policy reforms and other measures as expected from the new UPA Government will hopefully help bridging the gap between the Chinese and Indian pharmaceutical industry in the space of overall CR business including biotechnology, as Indian R&D based pharmaceutical companies will start realizing and encashing the potential of this important business model.

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.

Tackling the menace of counterfeit medicines – vested interests or petty sentiments should not make the pressing public healthcare issue irrelevant.

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There are following three clearly emerging views on the global issue of counterfeit drugs:1. The innovator companies feel that the generic pharmaceutical industry and the drug regulators are
not really very keen to effectively address and resolve this global public health issue.2. The generic companies and the drug regulators feel that the problem is not as acute as it is
projected to be and the innovator global pharmaceutical companies through their intense advocacy
campaign are trying to exploit the situation to fight against generic medicines and parallel imports.

3. Some other group, including a section of NGOs claim that an important public health sentiment is
being used by the R&D based global pharmaceutical companies to extend intellectual property rights
(IPR) to patients’ safety issue, allegedly for vested interest. These organizations have taken their arguments
to various international platforms like Anti-Counterfeiting Trade Agreement (ACTA) and
International Medical Products Anti-Counterfeiting Taskforce (IMPACT) of the World
Health Organization (WHO), for effective resolution of their grievances.

Addressing some of these concerns:

• IPR being extended to the definition of counterfeit medicines:

Even in India, ‘misbranding’ though an integral part of IPR, is considered as a public health issue and is an offence under Section 17 of the Drugs and Cosmetics Acts, 1940. Albany Law Journal of Science and Technology, 2006 has estimated a loss to the industry towards such counterfeit medicines of US$ 30 billion, which is about 6% of the turnover of the global pharmaceutical industry.

• Magnitude of problem with counterfeit medicines has been inflated:

In the industrialized and developed nations of the world with effective regulatory control, the problem perhaps, may not be as acute. A study done by IMPACT in 2006 indicates that in countries like, the USA, EU, Japan, Australia, Canada and New Zealand the problem is less than 1%.

Similar study, on the other hand, indicated that in the developing nations like parts of Asia, Latin America and Africa more than 30% of the medicines are counterfeits. It has also been reported that in South East Asia, estimated prevalence of counterfeit artesunate for malaria is 33-53%.

• Apprehension from some section of the generic pharmaceutical industry:

Apprehensions from some section of the generic pharmaceutical industry that attempts are being made by the interested groups within the industry to bring generic drugs under the purview of counterfeit medicines, is indeed unfounded. As from no developed countries around the world, there has been any threat to non-patent infringing legal generic medicines. And why there should be any such threat at all, when the world is witnessing the global pharmaceutical companies scaling up their generic business operations?

On the contrary generic pharmaceutical business, in almost all developed markets across the world, is growing at a much faster pace than the patented products of the innovator companies and this trend is expected to continue at least in short to medium term.

An unexplained similarity:

From the above details one will be tempted to draw a conclusion that in all those countries where access to modern medicines is poor, incidences of counterfeit medicines are higher. IMPACT has reported counterfeit versions of all types of medicines ranging from anti-malarial, anti-hypertensives, anti-tubercular, anti-retroviral to cardiovascular and other life saving and life style drugs, from these countries.

Various types of counterfeit medicines:

WHO has indicated following types of counterfeit medicines:

• Without active ingredients: 32%

• Wrong ingredients: 21.4%

• Incorrect quantities of active ingredients: 20.2%

• Right quantities of active ingredients but in fake packaging: 15.6%

• High levels of impurities and contaminants: 8.5%

• “Substituted ingredients of anything from paracetamol to boric acid, talcum powder, rat poison or
road paint”

• Medicines purchased online from illegal internet sites: 50%

Factors influencing flourishing trade of counterfeit medicines:

WHO IMPACT has reported following key factors:

• Low manufacturing costs, thus higher profit margin

• Albany Law Journal reports that high pricing ratio of counterfeit medicines compared to a branded
product attracts counterfeiters

• In countries like India the risk of detection of fake medicines is quite low where the penalties for such
heinous crime even today is very lenient, as the amended anti-counterfeit law, for some strange
reasons, has not been made operational, as yet.

Global sales forecast for counterfeit medicines:

The sales of counterfeit medicines across the world as estimated by the ‘Centre for Medicine in Public Interest’ will be around US$75 billion by the end of 2010. This is an increase of over 90% as compared to 2005.

Incidence of detection of counterfeit medicines:

A report from the WHO’s Executive Board in its 124th session indicated that the detection of counterfeit medicines in 2007 had increased to more than 1,500. This reflects an increase of around 20% over 2006 and ten times more compared to year 2000.

Volume of counterfeit seizures, the world over:

WHO indicated that in 2005-06 the volume of counterfeit drug seizures included 2.7 million articles and the main countries where these articles originated from, were reported as follows:

• India: 31%
• UAE: 31%
• China: 20%

Conclusion:

We have, therefore, enough data to establish that counterfeit drugs are posing a growing menace to the humanity. All stakeholders should join hands to address this public health issue, leaving aside petty commercial interests, be it generic pharmaceutical companies or research based pharmaceutical companies, across the world and India is no exception. Otherwise, thugs and criminals who are running to their banks, more often than ever before, with sacks full of money from this illicit trade, at the cost of the innocent patients, will keep going almost scot free, forever.

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.

Innovative use of the new-age ‘Social cyber-media’ as a pharmaceutical marketing tool has the potential to open a goldmine of opportunities.

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The new-age marketing tool:
With more and more doctors not giving adequate time and even showing reluctance to meet the medical representatives and the important hospitals following suit, the global pharmaceutical companies are now in search of new marketing tools.

To get the marketing communications across to important target audiences, many of them have started experimenting, quite seriously, with the digital world. Effective networking media like ‘Facebook’ , ‘YouTube’, ‘MySpace’ and ‘Twitter’ are showing promises to become powerful online pharmaceutical marketing tools. Recent report of Pfizer’s new RSS feed and the plan for a unique ‘Pfacebook’ site for internal communication perhaps is an important step towards this direction.

Global pharmaceutical companies have already started ‘testing the water’:

Some global pharmaceutical giants who have already started using this new age media for pharmaceutical marketing are as follows:

1. Bayer uses ‘Facebook’ page to promote its Aspirin for women

2. Merck is using ‘Facebook’ to promote its cervical cancer vaccine, Gardasil

3. GlaxoSmithKline is using ‘YouTube’ for ‘restless-legs syndrome’ awareness film. The popularity of this video spot perhaps has prompted the company to come out with its own ‘YouTube’ channel last year with a name, ‘GSKvision’.

4. AstraZeneca is also using ‘YouTube’ for their anti-asthma drug Symbicort

5. Johnson & Johnson and Novartis use ‘blog’s, ‘YouTube’ and ‘Twitter’ to channel patient groups and deliver news.

Why have these pharmaceutical companies started using the social media as a marketing tool?

This is because social media like, ‘Facebook’, ‘Twitter’, ‘YouTube’ etc. provide a very important platform towards patients’ outreach efforts of the pharmaceutical companies exactly in a format, which will be preferred by the target group.

With the new-age social media these companies are now joining communities to begin a dialogue with the important stakeholders. It has been reported that some of these companies have already created un-branded sites like, silenceyourrooster.com or iwalkbecause.org, to foster relationship with patients’ group through online activity, the contents of which have been generated by the users themselves of the respective social medium. With the help of click-through links these sites lead to the branded sites of the concerned companies.

As reported by TNS Media Intelligence, internet media spending of the global pharmaceutical companies had increased by 36% to US$137 million, in 2008, which is significantly higher than their spending in Television advertisements.

Why is the entry of pharmaceutical companies in the new-age social media so slow?

Pharmaceutical companies are currently delving into marketing through cyber media with a very cautious approach, though the new social media will become more central to many global marketing strategies in not too distant future. The cautious approach by the pharmaceutical companies is primarily due to evolving regulatory requirements in this new space

In the USA, very recently the FDA cautioned the major players in the industry to refrain them from publishing any misleading communication through social media. This is primarily because of absence of any published guidelines for online pharmaceutical marketing. How to use this powerful social media for maximum marketing and other benefits will indeed be quite a challenging task, at this stage. Many pharmaceutical companies are, therefore, slow to use the social media to the fullest extent.

Not only in the USA, there are no specific regulatory guidelines to promote a pharmaceutical brand or create brand awareness through these media in most of the countries of the world, including Europe and Japan. In this much uncharted territory, as there are not enough foot-steps follow, the pharmaceutical companies are now just ‘testing the water’. Most probably to fathom how far regulatory authorities will allow them to explore with this new media.

Effective use of social media is expected to be financially attractive:

Low costs associated with creating internet promotional inputs will make social media quite attractive to pharmaceutical and biotechnology companies, not only as a marketing tool, but also in their other outreach program for the stakeholders. The role and power of social media are expected to play a significant and cost effective role in creating pharmaceutical brand awareness and brand marketing to appropriate target segments.

‘Proof of the pudding is in the eating’:

A recent report indicates that in 2007, well reputed computer maker Dell’s ‘Twitter’ activity brought in US$ half-million in new business to the company.

Thus the innovative use of the new-age social cyber-media indeed has immense potential to open a goldmine of opportunities for the global pharmaceutical industry.

By Tapan Ray

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

Ensuring ‘health outcomes’ based drugs prescriptions will be more beneficial for the patients in India than just ‘price control’ of drugs

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Currently the global pharmaceutical market is undergoing a metamorphosis. The concept of ‘evidence-based medicine’ is gaining ground in the developed markets of the world, making the pharmaceutical companies generate requisite ‘health outcomes’ data using similar or equivalent products. Cost of incremental value that a product will deliver is of key significance. Some independent organizations like, the National Institute for Health and Clinical Excellence (NICE)in the UK have taken a leading role in this matter.Global pharmaceutical companies using more ‘health outcomes’ data to set pricing strategies:In early 2009, reported agreements between Sanofi-Aventis, Procter & Gamble and Health Alliance as well as Merck and Cigna vindicate this point. These agreements signify a major shift in the global pharmaceutical industry’s approach to gathering and using ‘health outcomes’ data

In the Sanofi-Aventis/Procter & Gamble-Health Alliance agreement, the concerned companies agreed to reimburse health insurance companies expenses incurred for patients suffering from non-spinal bone fracture while undergoing treatment with their drug Actonel.

In the Merck/Cigna agreement, Cigna will have the flexibility to price two diabetes drugs based on ‘health outcomes’ data.

‘Outcomes-based’ pricing strategies are expected to become the order of the day, in not too distant future, all over the world.

The ground realities in India:

Medicines constitute a significant cost component of modern healthcare systems, across the world. In India, overall healthcare system is fundamentally different from many other countries, even China. In most of those countries around 80% of expenses towards healthcare including medicines are reimbursed either by the Governments or through health insurance or similar mechanisms. However, in India situation is just the reverse, about 80% of overall healthcare costs including medicines are private or out of pocket expenses incurred by the individuals/families.

Since 1970, the Government of India (GoI) has been adopting various regulatory measures like cost based price control and price monitoring to make medicines affordable to the common man. For those products, which are patented in India, it has now been reported that GoI is mulling the approach of price negotiation with the respective companies.

However, we should keep in mind that making drugs just affordable in India, where about 65% of population does not have access to modern medicines, is indeed not a core determinant of either healthcare value or proven health outcomes or both.

Cost-effective ‘health outcomes’ based doctors’ prescriptions are more important:

Spending on medicines can be considered as an investment made by the patients to improve their health. To maximize benefits from such spending will require avoidance of products, which will not be effective and the use of lowest cost option with comparable ‘health outcomes’.

For this reason many countries have started engaging the regulatory authorities to come out with head to head clinical comparison of similar or equivalent drugs keeping ultimate ‘health outcomes’ of patients in mind. A day may come in India when the regulatory authorities will also concentrate on ‘outcomes-based’ pricing. However, in Indian context these appear to be very early days.

Till then…

1. Get Standard Treatment Guidelines (STG) prepared for the diseases more prevalent in India, based on, among other data, ‘health outcomes’ studies.

2. Put the STG in place for all government establishments and private hospitals to start with.

3. Gradually extend STG in private medical practices.

4. Make implementation of STG a regulatory requirement.

Thus we need to discuss first what these STGs are.

Standard Treatment Guidelines (STG):

STG is usually defined as a systematically developed statement designed to assist practitioners and patients in making decisions about appropriate cost-effective treatment for specific disease areas.

For each disease area, the treatment should include “the name, dosage form, strength, average dose (paediatric and adult), number of doses per day, and number of days of treatment.” STG also includes specific referral criteria from a lower to a higher level of the diagnostic and treatment requirements.

For a developing country like India formulation of STGs will ensure cost-effective healthcare benefits to a vast majority of population.

In India STGs have already been developed for some diseases by the experts in those areas. These are based on review of current published scientific evidence towards acceptable way forward in diagnosis, management and prevention of various disease conditions

STGs, therefore will provide:

- Standardized guidance to practitioners.
- Cost-effective ‘health outcomes’ based services.

GoI should encourage the medical professionals/institutions to lay more emphasis and refer to such ‘heath-outcomes’ based evidences while prescribing medicines. This will ensure more cost effective ‘health outcomes’ for their patients.

Conclusions:

Such an approach for drug usage will help both the doctors and the patients, significantly, to contain the cost of treatment in general and the cost of medicines in particular. Encouraging and implementing ‘health outcomes’ based medicines prescription in India will require, above all, a change in the mindset of all concerned. The use of an expensive drug with no significant improvement in ‘health outcomes’ should be avoided by the prescribers, initially through self regulation and if required through an appropriate regulation.

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.

Is the revised Mashelkar Committee Report a ‘please all’ report, without taking any chance to ‘rock the boat’?

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After repeated request and persuasion by the Government of India (GoI) in general and the Department of Industrial Policy and Promotion (DIPP) in particular ‘The Mashelkar Committee’re-submitted its reports to the GoI under the following terms of references:
Terms of Reference of the ‘The Technical Expert Group (TEG)’ Group:Following were the terms of references of the TEG:

1. Whether it would be TRIPS compatible to limit the grant of patent for pharmaceutical substance to new chemical entity or to new medical entity involving one or more inventive steps.

2. Whether it would be TRIPS compatible to exclude micro-organisms from patenting.

Today I shall restrict my comments only on the point 1 of the terms of reference. Keeping this mind, let me try to analyze what various stakeholders had expected from the report. Against those expectations, what the report has actually articulated. And how have all these comments/ recommendations been able to keep almost all the stakeholders, with widely varying expectations, reasonably happy.

Why is the revised report a ‘please all’ report?

The key stakeholders who were interested in the revised report are as follows:

A. Research-based pharmaceutical companies who expressed concerns on the patentability of ‘incremental innovation’.

B. The Government of India (GoI) who may not be keen to revisit section 3(d) of the Indian Patents Act 2005, at least for now.

C. All voices supporting price regulations for patented products, in some form, the Department of Pharmaceuticals (DoP) being one of them.

D. Domestic generic pharmaceutical companies who want safeguards within Indian Patents Act 2005 against ‘ever greening’ of patents to ensure that there is no delay in launching generics after patent expiry.

Well crafted and well reasoned revised report from the TEG has been able to please all these stakeholders, to a great extent, which I shall analyze hereunder:

A. Expectations of the Research-based pharmaceutical companies from the report:

The research-based pharmaceutical companies seem to have expected that the report will recommend in specific terms that Section 3(d) of the Patents Act 2005 is not TRIPS compliant, as it restricts patentability of ‘incremental innovation’.

What the report actually says:

- “The Technical Expert Group (TEG) concludes that it would not be TRIPS compliant (Article 27 of TRIPS) to limit granting of patents for pharmaceutical substance to New Chemical Entities only, since it prima facie amounts to a statutory exclusion of a field of technology”.

- “The process of innovation is continuous and progressive leading to an ever extending chain of knowledge. Innovative incremental improvements based on existing knowledge and existing products is a ‘norm’ rather than an ‘exception’ in the process of innovation.”

“The TEG carefully examined the flexibilities allowed under the TRIPS Agreement to the member states (especially Articles 7 & 8 ) and also as a consequence of the Doha Declaration. The detailed analysis and reassessing provided in the report has led TEG to conclude that it is debatable as to whether national interest or the flexibility allowed under the agreement to member states would be accommodated by such ‘statutory exclusion’ of an entire class of (incremental)inventions.”

Very cleverly dodging the section 3(d) issue, the report supported the argument of the research-based pharmaceutical companies that ‘incremental innovation’ in pharmaceuticals cannot summarily be kept out of the criteria of patentability.

B. Government of India (GoI):

The GoI wanted to keep section 3(d) unchanged, till some sort of stakeholders’ consensus is arrived at in favor of its amendment, if at all.

What the report actually says:

“The TEG was not mandated to examine the TRIPS compatibility of Section 3(d ) of the Indian Patents Act or any other existing provision in the same Act. Therefore, the committee has not engaged itself with these issues.”

The TEG with this comment keeps the GoI satisfied, as the lawmakers are of the view that section 3(d) is not against incremental innovation. They believe, section 3(d) helps to avoid ‘frivolous’ innovation and ‘evergreening’ of patents by ensuring that all patentable ‘incremental innovations’ have ‘properties leading to incremental efficacy’. The revised TEG report, some people argue, vindicates this important point.

C. All voices supporting some form of price regulations of patented products, which include the DoP.

Both the DoP and other stakeholders want to keep the price of patented products under GoI control.

What the report actually says:

“Every effort must be made to provide drugs at affordable prices to the people of India”.

Thus the report satisfies the proponent of ‘affordable prices’ for patented products

D. Domestic generic pharmaceutical industry:

A large majority of the domestic generic pharmaceutical companies is of the opinion that most ‘incremental innovations’, are usually attempts to ‘evergreen’ patents for sustained commercially monopoly over the products for a much longer period of time than what it should have been otherwise. Hence patentability for ‘incremental innovation’ is to be restricted by law.

What the report says:

“TEG recommends that every effort must be made to prevent the practice of ‘ever greening’ often used by some of the pharma companies to unreasonably extend the life of the patent by making claims based sometimes on ‘trivial’ changes to the original patented product. The Indian patent office has the full authority under law and practice to determine what is patentable and what would constitute only a trivial change with no significant additional improvements or inventive steps involving benefits. Such authority should be used to prevent ‘evergreening’, rather than to introduce an arguable concept in the light of the foregoing discussion (paras 5.6 – 5.8 and paras 5.12 – 5.29) above of ‘statutory exclusion’ of incremental innovations from the scope of patentability.”

Many will believe, with the above recommendations in their revised report, the TEG also meets the expectations of the domestic generic pharmaceutical industry, on this contentious issue.

Conclusion:

The revised report of ‘The Mashelkar committee’ has definitely addressed its terms of references, pretty well. However, being ‘advisory’ in nature, the report was expected to be more specific, unambiguous and directional. Unfortunately, the comments/recommendations are neither specific without any ambiguity nor directional in nature; unless, between the lines the ‘please all’ report suggests its agreement with all stakeholders in unison, with perfect balance and elan, without making even a slightest attempt to ‘rock the boat’ in any manner, whatsoever.

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.

Is rural India emerging as the new ‘Eldorado’ for the Indian pharmaceutical industry?

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“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative consumers, a whole new world of opportunity will open up,” wrote the management guru C K Prahalad in his well known book titled, “The Fortune at the Bottom of the Pyramid”.I am not sure whether the above profound observation is encouraging the pharmaceutical companies to spread their wings, at a much organized way, in rural India, where over 70% of the Indian population live and most of them are poor.Rural reforms have commenced in India at a much faster pace than ever before. Even many die-hard skeptics will now agree that the “Rural India has started Shining”. The shine, however, may not be as much as it ought to be. But surely, it is happening. The result of recent General Election in India perhaps will vindicate this point.

Is rural India the new growth opportunity for the pharmaceutical industry?

Decent business prospects in largely un-tapped rural India are making the pharmaceutical companies to move into this uncharted frontier. Reaching out to about 65% of the population who do not have access to modern medicines, could prove to be the new ‘Eldorado’ for the industry. Some well organized but small preparatory steps are already being taken towards this direction, which ultimately could lead to taking a giant leap towards this new frontier.

Some companies have started charting in a new way in this much uncharted frontier:

Possibly as a testimony to this new business approach we can now see:

1. Novartis with its “Arygoya Parivar” initiative working out a tailor-made program for rural areas of seven selected states, to start with. They have developed special packs of essential medicines with special prices to reach out to the rural marketing population.

2. Novo Nordisk screening patients suffering from diabetes in the rural areas of Goa with mobile clinics.

3. Eli Lilly developing a program along with the Self-Employed Women’s Association in Ahmedabad to educate and encourage rural patients suffering from tuberculosis to go for treatment.

4. Ahmedabad based Cadila Pharma setting up a dedicated rural marketing arm called ‘Explora’, which has already clocked a reported annual turnover of Rs. 50 crore.

5. Vadodara based Alembic Chemicals creating a rural business unit called ‘Maxis’.

6. Piramal Healthcare launching a pilot project in Rajasthan to take its products to rural areas where there is no proper public health system.

These are just a few illustrations and not an exhaustive list. However, the question is whether the rural marketing initiatives will continue to remain an illusion to the pharmaceutical companies in India or will get translated into a decent strategic move?

Going by various published reports, it appears that fortune still exists at the bottom of the pyramid.
In 2007 the rural markets registered a growth of over 40% over the previous year. This scorching pace of rural market growth is expected to continue in the next decades.

Moreover, according to McKinsey Report, rural markets will contribute about 27% of the total consumption of India by 2020 and by 2015, rural India will account for over 24% of the domestic pharmaceutical market from its current level of 17%.

Rural market size:

The rural markets currently contribute about 17% of U.S$8.1 billion pharmaceutical market in India. As reported in ‘India Pharma 2015’ of McKinsey,” by 2015 rural pharma market size is expected to reach U.S$4.8 billion from U.S$1.2 billion in 2005.”

Key growth drivers, as McKinsey indicated in this report, will be as follows:

• Income growth: 40%
• Medical infrastructure: 20%
• Health insurance penetration: 15%

Rural markets are currently dominated by ailments related to various types of infections. This disease pattern is expected to change by the next decade to non-infectious chronic illness, like diabetes, cardiac diseases, cancer, hypertension etc.

The opportunities in the rural markets:

‘The Fortune at the Bottom of the Pyramid’, the famous observation of the management guru C.K. Prahalad is equally apt for the pharmaceutical industry of India, where the just 35% of the population has access to affordable modern medicines.

Further, 20 million middle class households living in about 6,00,000 villages, which is almost the same as the number of middle class households residing in urban India, is currently instrumental to significant increase towards healthcare spending in rural India.

Rural market entry strategy:

Instead of transplanting the urban marketing strategy into rural India, some companies like, Novartis, Novo Nordisk and Eli Lilly, as mentioned above, have taken the community-welfare route to make the rural population aware of particular disease segments like, tuberculosis, diabetes, waterborne diseases etc together with the treatments available for such ailments.

These value added marketing strategies offer benefits to both the patients and the company concerned. The local medical practitioners, in turn, are also benefitted as they get increasing number of patients in their clinics through such disease awareness community program by the pharmaceutical companies.

Key challenges:

There are some key challenges, as well, for effective rural penetration by the Indian pharmaceutical industry, which are as follows:

• Inadequate basic healthcare infrastructure. Only 20% of total healthcare infrastructure of the country is in rural areas where over 70% population lives.

• Density of doctors per 10,000 populations in India is just 6. About seven lakh villages in India do not have doctors. As per AC Neilsen study, an average rural Indian has to travel about 6 km to visit a doctor. A Medical Representative will require travelling about 250 to 300 km every day just to meet about 10 doctors and 4 dealers.

• Villages are not well connected by proper all season roads.

• Lack of appropriate supply chain network and logistics support.

National Rural Health Mission (NRHM) – a key facilitator:

Be that as it may, greater focus of the new UPA Government on NRHM will help immensely to overcome many of these challenges in various different ways.

In the interim budget 2009, the Government has allocated U.S$ 2.35 billion for the NRHM. It is expected that this initiative, if implemented well, will help improving not only the healthcare infrastructure in rural India, but also supply of affordable medicines, in these long neglected areas.

Conclusion:

With required infrastructural support and tailor made value added marketing strategies for rural India, simultaneously delivering both preventive and curative therapies under one umbrella, it may not be difficult for the Indian pharmaceutical companies to discover ‘The Fortune at the Bottom of the Pyramid’ – a win-win situation indeed for both the ‘haves’ and a vast majority of ‘have nots’ living in India.

By Tapan Ray

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

The Professor, Counterfeit Drugs, CDA Bill and the New Health Minister

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Just a couple of days ago, I met Professor Sam Gupta, an American professor of Indian origin. Prof. Gupta has specialized in nuclear medicine and hails from a well reputed North American University. Dr. Gupta, like many others, had left the shores of India decades ago when he was just a student. During his long arduous journey on the beaten path of life, he almost lost contacts with his roots in India.
An incident that triggered intense passion in Prof. Gupta:

When I met him just the other day, I heard him passionately speaking about the menace of substandard and counterfeit medicines, in the world in general and India, in particular. He was reminiscing how had he decided to wage a war, as it were, against this injustice against humanity. Despite having a nuclear medicine background, Prof. Gupta is fighting this crusade against evil with an intense passion, as intense as it could possibly be.

The professor still teaches and researches on nuclear medicine in North America… but he spends all his balance time driven by this passion, to bring home some change in the uncertain treatment environment, involving well being of a large number of patients, especially in India. What then triggered this ‘burning desire’ in the mind of a seemingly quite and extremely polite Prof. Gupta?

Not a very long ago, a person, very dear and near to the professor, while visiting India became a tragic victim of a counterfeit medicine. Professor lost his dear one, in India. Intense sadness due to loss of this otherwise healthy individual, that too so suddenly, got converted into a potent rage in him… and… the rage into a passion… a passion to stop the menace of substandard and counterfeit medicines, in whatever way he possibly can.

Professor’s dear one is not the sole victim of spurious, substandard and counterfeit medicines in India. Such tragedy strikes many hundreds and thousands of Indians every year. We come to know very seldom and very little about such instances, for various reasons. Real reasons of most of these tragic deaths, usually remain unknown to the civil society, at large… but the ‘merchants of death’ keep making fast bucks with their cash counters constantly ringing. Heart rending cries for loss of human lives, because of their mischief, do not mean anything to them. To the regulators, ironically, price of medicines appears to be more important than the quality of medicines.

Minimum acceptable quality standards for medicines:

Though medicines should offer and promise maximum possible quality standards, in India we are satisfied with the ‘minimum acceptable quality standards’ even for medicines and of varying degree of quality, just as any other commodities. It is not unknown to many that in India, we have broadly two types of quality – one type of quality exists for the domestic consumption and use and the other type of quality is for people living outside India and mainly in the western world, which is termed as ‘exports quality’. ‘Exports quality’ products attract a premium in India to the common man, even in the 21st. century.

Varying degree of acceptable drug quality in India:

Just like ‘domestic’ and ‘exports’ quality, for medicines we have many acceptable quality standards, in India: GMP quality, WHO GMP quality, US-FDA quality just to name a few. It appears that our regulators are just satisfied in ensuring availability of cheaper priced medicines with ‘minimum acceptable’ or ‘varying’ quality standards. If not, why is there no concerted effort by the drug regulator to strike at the root cause of proliferation of substandard and counterfeit medicines in India? When we see so many regulators working so well to ensure ‘affordability’ of medicines, why is the drug regulator failing to stop proliferation of substandard and counterfeit medicines in the country, in a systematic way? Who is accountable, when a patient takes affordable medicines of poor quality and suffer from undesirable consequences? Some estimates indicate that at least 10% of medicines produced in India are substandard.

Some good initiatives were implemented and some equally good initiatives were stalled – why?

A major amendment in the Drugs & Cosmetics Act, 1940, proposed in October 2007 and enacted into a law in 2008, has increased the minimum jail term for counterfeit drug offenders from 5 to 10 years and the minimum fine for such offenses increased from Rs. 10,000 (about U.S$ 220) to Rs. 10 lakh (about U.S$ 22,000).

However, the amendment of the Drugs & Cosmetics Act, 1940 to create a Central Drug Authority (CDA) has not seen the light of the day, as yet, due to various vested interests. The CDA, if created, would have been responsible for the entire drug regulatory mechanism in India including all marketing approvals and uniform quality standards of medicines, across the country.

What happens today for manufacturing and marketing approval of drugs in India?

Currently, although the Drug Controller General of India (DCGI) gives marketing approval of all new drugs, imported or domestic, the manufacturing permission of these drugs in India is granted by concerned state drug regulatory authorities. It is believed that there is a perceptible variation within the states in quality of inspection, monitoring and enforcement of various regulatory systems and maintenance of uniform drug quality standards.

It is worth noting that ‘new drug’ status of a formulation type, remains for four years. After this period the state drug authorities can grant marketing approval of such products. Huge regulatory quagmire created with unabated proliferation of Fixed Dose Combination products (FDC) in India, is a testimony of how the drug regulatory systems works in India.

Despite existence of such variation in standard from state to state, it is indeed an irony that drugs approved and produced in any state are allowed to be marketed and sold across India or even be exported outside the country. It is quite possible that substandard drug producers can locate themselves in states with weaker regulatory controls and make their cheaper substandard products available for sales across the country, making hundreds and thousands of innocent citizens vulnerable to a possible life threatening risk.

Drug regulatory mechanism deserves a revamp in India without further delay:

Some people believe that hectic efforts by politicians and vested interests from the states with weaker regulatory controls have prevented the CDA bill from getting translated into reality, showing scant respect to the need of patients who may not have any other option but to use these substandard drugs.

How does the western world care for their patients with high quality medicines?

In the western world, drug regulators have taken specific measures to ensure availability of highest quality of medicines for their citizens. It is for that reason Food and Drug Administration of the United States of America (US-FDA) has opened its establishment in India to ensure that the drugs, which are manufactured in India and exported to the USA, are of highest quality standards.

Lackadaisical approach of the Indian drug regulatory authorities has created an environment within the country where many pharmaceutical manufacturers, including some large ones have allegedly placed themselves in a peculiar ‘comfort zone’ by not following prescribed procedures of generating required essential documents, while manufacturing drugs of high quality standards.

Continuous living in such comfort zones led to the largest pharmaceutical company of India, facing ban of 30 of their product formulations in the USA in 2008, against the charge of ‘falsifying’ the product manufacturing documents – a stigma on the pride of India in general and the Indian pharmaceutical industry, in particular, which will remain till the issue is sorted out. As if this was not enough, close on its heel some more incidents came into light with the names of other top Indian companies falling under the scanner of US FDA for not conforming to their regulatory requirements related to drugs manufactured for use in the US market.

When regulators of other countries are so active, why then are our own drug regulators failing to clean up the menace of spurious, substandard and counterfeit medicines in India? Why important bills like CDA are being stalled by the vested interests with the help of politicians, exposing a large number of patients to medical risks?

Will the new government be any different?

I sincerely hope that our new Minister of Health, Shri Ghulam Nabi Azad will sincerely address this very pressing health issue for the country. I also believe that under his astute leadership, the menace of spurious, substandard and counterfeit medicines will receive due consideration of the cabinet and the CDA bill will soon be a law.

Till then…crusade of Prof. Gupta continues:

If it happens, just as Dr. Gupta, the Indian American professor of Nuclear Medicine will get a huge sense of accomplishment, after fighting a long and arduous battle to save patients from the danger of substandard and counterfeit medicines in India, the civil society of our country will at the same time feel a unique sense freedom… the freedom from fear… the fear of substandard and counterfeit medicines.

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.

New Drug Policy 2009 – suggesting key elements for a strategic shift in the policy framework

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The new drug policy of the Government of India (GoI) is long overdue. Despite so many reform measures taken by various Governments over last two decades, Indian Pharmaceutical Industry has not seen a new ‘drug policy’since 1995.As an individual who has been closely observing the pharmaceutical industry during this period, I would expect the new UPA Government to work out a new ‘drug policy’, without further delay, after having a fresh look at the current policy, which has outlived its time. The new ‘drug policy’should be aimed at achieving inclusive growth, keeping pace with the progressive outlook and aspirations of young India.Broad policy objectives:

The broad objective of the new ‘Drug Policy’ should undoubtedly be ‘ensuring access to affordable modern medicines to all’, clearly addressing the following key elements, in detail:

1. Affordability:

• The new policy should ensure adequate availability of all ‘National List of Essential Medicines’ (NLEM) at affordable prices.

• ‘Jan Aushadhi’ initiative of the Department of Pharmaceuticals (DoP) should be strengthened further through public-private-partnership (PPP) initiatives, using strong public distribution outlets like ration shops and post offices for effective rural penetration of the scheme.

2. Access:

• Around 65% of the Indian population does not have access to affordable modern medicines even today, against 47% in Africa and 15% in China.

• GoI should make effective use of its existing initiatives, take some new initiatives and dovetail them as follows:

- ‘National Rural Health Mission’ (NRHM): to create rural healthcare infrastructure.

- ‘Jan Ausadhi’ scheme: to extend the reach of affordable medicines to a vast majority of
rural population.

- Innovative ‘Health Insurance Schemes’ to be worked out for all sections of the society through PPP, like for example, ‘Yashasvini’, pioneered by Dr. Devi Shetty of Bangalore and the Government of Karnataka, which is possibly the world’s cheapest comprehensive Health Insurance scheme, at Rs.5 (11 cents) per month, for the poor farmers of the state.

3. Research & Development:

• Patents (Amendment) Act, 2005 ushered in a new paradigm for the pharmaceutical industry of India. There is a great opportunity for the domestic Indian pharmaceutical companies to discover, develop and market their own New Molecular Entities (NMEs) throughout the world. The new policy should plan to provide adequate fiscal incentives for R&D initiatives taken by the pharmaceutical industry of India.

• R&D in India costs almost a fraction of equivalent expenditure incurred in the west. Because of availability of highly skilled manpower with proficiency in English together with cost advantages, the country has the potential to become the largest global hub for ‘Contract Research’ and other R&D related work being outsourced by the global Pharmaceutical Companies.

• As India is poised to be a global hub for Clinical Trials, the new policy should extend adequate support to companies carrying out clinical studies in India not only to help them record a healthy growth, but also to attract more ‘foreign direct investments’ (FDI) for the country.

4. Exports:

• The Ministry of Chemicals & Fertilizers reported in its ‘Annual Report of 2006-07′ that exports of Drugs & Pharmaceuticals have doubled during the last four years. To give greater boosts to exports PHARMEXIL should be further strengthened to act as an effective nodal centre for all pharmaceutical exports, together with the responsibilities for conducting extensive promotional activities to accelerate growth for this sector.

• It is estimated that in the next three years sales of over U.S.$ 60 billion being generated by some blockbuster pharmaceutical products patented in the western countries and not in India, will go off patent. This will open the door of significant opportunities for Indian pharmaceutical exports. GoI should help the domestic pharmaceutical companies to encash this opportunity through adequate financial measures and other support, wherever required.

5. Employment generation:

• Indian pharmaceutical industry with its encouraging pace of growth is making good contribution towards employment generation initiatives of the country, both within skilled and unskilled sectors of the population.

• With projected CAGR of around 14%, the employment opportunity, especially for the qualified professionals is expected to increase significantly in the coming years, across the industry, from core pharmaceutical sectors, right through to contract research, manufacturing services (CRAMS) and clinical trials space.

• Recommendations to be provided in the new drug policy should further accelerate such employment generation opportunity by the industry.

6. Contribution to Economic Growth of the Country:

• The new ‘drug policy’ should also address how will the pharmaceutical industry in India contribute more to the economic development of the country through various reform measures, in areas like, R&D, CRAMS, Clinical Trial (CT) and also towards health insurance, for all strata of society.

Innovative new ‘drug policy’ initiative of the new government will not only ensure a stimulating inclusive growth for the industry, but also will help attract adequate FDI for the country.

Broad Strategic shift towards ‘Access to affordable modern medicines for all’:

Ensuring ‘access to affordable modern medicines for all’ should be made one of the key objectives of the DoP. Resorting to populist measures like ‘drugs price control’ may sound good. Unfortunately at the ground level, it has not helped a vast majority of 650 million population of India, thus far.

Therefore, ‘Drugs Price Control’ since 1970 has not been able to ensure ‘access to affordable modern medicines’ to more than just 35% of Indian population. The new ‘drug policy’ should, therefore, shift its focus from ‘Price Control’ to ‘Price Monitoring’, which has been proved to be of great success to keep medicines affordable to the common man, as indicated by the ‘National Pharmaceutical Pricing Authority’ (NPPA). However, for government purchases, made to address the healthcare needs of the ‘common man’ there should always be room for price negotiation with the concerned companies, as is being practiced in many countries of the world.

Conclusion:

To achieve the proposed ‘new drug policy objective’ of ‘ensuring access to affordable modern medicines for all’, the policy makers should try to think ‘outside the box’. ‘The old wine in a new bottle’ policy will just not be 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.