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‘India Taskforce’ takes the first step in an arduous task to bridge the trust deficit.

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To prepare a comprehensive long term strategy to unleash the growth potential of the Pharmaceutical Industry of India considering all its current issues, the Ministry of Health and Family Welfare announced constitution of a taskforce on March 15, 2011 involving all the stakeholders, as mentioned below. As per reports, the first meeting of the committee was held on June 6, 2011 to deliberate on the mandated goals.

Within 3 months the taskforce, under the chairmanship of V.M. Katoch, Secretary, Department of Health Research and Director-General, Indian Council of Medical Research (ICMR), is expected to work out and submit a short, medium and long term strategic path and goals to the Government, highlighting the key and specific policy measures required to achieve these objectives.

The taskforce will have members drawn from:

  1. National Pharmaceutical Pricing Authority,
  2. Department of Industry Policy and Promotion,
  3. Indian Drug Manufacturers Association, Mumbai,
  4. Indian Pharmaceutical Alliance, Mumbai,
  5. Organization of Pharmaceutical Producers of India, Mumbai,
  6. Federation of Pharmaceutical Entrepreneurs, Gurgaon,
  7. Confederation of Indian Pharmaceutical Industry,
  8. Bulk Drug Manufacturers’ Association, Hyderabad,
  9. SME Pharma Industry Confederation, New Delhi
  10. Drug Controller General of India as the Member Secretary.

The focus areas:

The report has been mandated to cover the following critical areas:

  1. Evolving a short, medium and long-term policy and strategy to make India a hub for drug discovery, research and development.
  2. Evolving strategies to further the interests of Indian pharma industry in the light of issues related to intellectual property rights and recommend strategies to capitalize the opportunity of $60 to $80 billion drugs going off-patent over the next five years.
  3. Evolve policy measures to assure national drugs security by promoting indigenous production of bulk drugs, preventing takeover of Indian pharma industry by multi-national corporations, drug pricing, promotion of generic drugs
  4. Recommend measures to assure adequate availability of quality generic drugs at affordable prices.
  5. Recommend measures to tackle the problem of spurious drugs and use of anti-counterfeit technologies.

Estimates and Perspectives:

  • The pharma industry is growing at around 1.5-1.6 times the Gross Domestic Product growth of India
  • Currently, India ranks third in the world of volume of manufacturing pharmaceutical products
  • The Indian pharmaceutical industry is expected to grow at a rate of around 15 % till 2015
  • The retail pharmaceutical market in India is expected to cross US$ 20 billion by 2015
  • According to a study by FICCI-Ernst & Young India will open a probable US$ 8 billion market for MNCs selling patented drugs in India by 2015
  • The number of pharmaceutical retailers is estimated to grow from 5,50,000,  to 7,50,000 by 2015
  • At least 2,00,000 more pharma graduates would be required by the Indian pharmaceutical industry by 2015
  • The Indian drug and pharmaceuticals sector attracted Foreign Direct Investments to the tune of US$ 1.43 billion from April 2000 to December 2008 (Ministry of Commerce and Industry), which is expected to increase significantly along with the policy reform measures and increased Government investment (3%-4%) as a percentage of GDP towards healthcare, by 2015
  • The Minister of Commerce estimates that US$ 6.31 billion will be invested in the domestic pharmaceutical sector
  • Due to low cost of R&D, the Indian pharmaceutical off-shoring industry is expected to be a US$ 2.5 billion opportunity by 2012

Key growth drivers: Local and Global:

Local: • Rapidly growing middle class population of the country with increasing disposable income. • High quality and cost effective domestic generic drug manufacturers are achieving increasing penetration in local, developed and emerging markets. • Rising per capita income of the population and inefficiency of the public healthcare system will encourage private healthcare systems of various types and scales to flourish. • High probability of emergence of a robust healthcare financing/insurance model for all strata of society. • Fast growing Medical Tourism. • Evolving combo-business model of global pharmaceutical companies with both patented and generic drugs is boosting local outsourcing and collaboration opportunities. Global: Global pharmaceutical industry is going through a rapid process of transformation. The moot question to answer now is how the drug discovery process can meet the unmet needs of the patients and yet remain cost effective.

Cost containment pressure due to various factors is further accelerating this process. CRAMS business, an important outcome of this transformation process, will be the key growth driver for many Indian domestic pharmaceutical players in times to come. Bridging the ‘Trust Deficit’ is one of the key Challenges:

Like all other industries, Pharmaceutical Industry in India has its own sets of challenges and opportunities under which it operates. Some of the challenges the industry faces are:

  • Unfortunate “Trust Deficit” between the Government and the Industry to improve access to affordable modern medicines.
  • Regulatory red tape and lack of initiative towards international harmonization.
  • Inadequate infrastructure and abysmal public delivery system.
  • Lack of adequate number of qualified healthcare professionals.
  • Inadequate innovation friendly ecosystem to encourage R&D and other non-product related innovation in the pharmaceutical value chain.
  • Myopic Drug Policies have failed to deliver.
  • Addressing needs of over 350 million BPL families who cannot afford to buy any healthcare products and services.
  • ‘80% out of pocket expenditure’ of the common man towards healthcare.
  • Inadequate Public Private Partnership (PPP) initiatives in most of the critical areas of healthcare.

Urgent need to bridge the ‘Trust Deficit’ and improve public perception of the Industry:

Like many other countries of the world, in India too there is a negative public perception about the pharmaceutical industry. Recent reports on ‘clinical trials related patient’s compensation’ or the government intervention on allegedly gross ‘unethical’ marketing practices by the pharmaceutical companies, further strengthen such belief.  Unfortunately, despite meteoric success of the generic pharmaceutical industry of India in the global arena, public perception of the industry still remains as one, which is being driven by profiteering motive at the cost of the precious lives of ailing common population of the country. This is indeed acting as a strong retarding force. As a result the regulators are also compelled to introduce more of growth stifling measures at a fairly regular pace.

A new ‘Harris Poll’ conducted in the US between November 8 and 15, 2010 reports as follows:

Top industries that largest numbers of people believe should be more regulated

Industry % of respondents
Oil

47
Pharmaceuticals

46
Health Insurance

42
Tobacco

38
Banks

34
Managed Care

34

That an overwhelming 46% respondent in the US feels that the Pharmaceutical Industry should be regulated, only reflects a poor public perception of the industry in the USA.

Industries trusted by the fewest people

Industry % of respondents
Tobacco

2
Oil

4
Telecommunication

7
Managed Care

7
Life Insurance Companies

10
Pharmaceuticals

11

(Source: Harris Poll 2010) 

It is indeed an irony that a miniscule 11% respondents trust pharmaceutical industry in the USA.

Thus in the prevailing scenario globally, the Indian Pharmaceutical Industry should take more demonstrable self-regulatory measures to improve its public perception and make its growth more inclusive, in the best possible way that it can. Without active support of the government, media and other stakeholders, through conscious efforts to improve its image, all the efforts of the taskforce may ultimately get converted into a zero sum game.

Job Creation by the industry is of critical importance: Pharmaceutical sector in India has created employment for approximately 3 million people from 23,000 plus units. Accelerated growth in job creation, will not only open up more opportunities to pharmaceutical professionals, but will also fuel growth opportunities in allied business segments like Laboratory, Scientific instruments, Medical Devices and Pharma machinery manufacturing sectors.

Despite all these, it is worth noting that a major challenge still remains in getting employable workforce with the required skill sets. This issue will grow by manifold, as we move on, if adequate vocational training institutes are not put in place on time to generate employable workforce for the industry.

Government Initiatives, thus far, are still less than adequate: The government of India has started working out some policy and fiscal initiatives, though grossly inadequate, for the growth of the pharmaceutical business in India. Some of the measures adopted by the Government are follows:

  • Pharmaceutical units are eligible for weighted tax reduction at 175% for the research and development expenditure obtained.
  • Two new schemes namely, New Millennium Indian Technology Leadership Initiative and the Drugs and Pharmaceuticals Research Program have been launched by the Government.
  • The Government is contemplating the creation of SRV or special purpose vehicles with an insurance cover to be used for funding new drug research
  • The Department of Pharmaceuticals is mulling the creation of drug research facilities which can be used by private companies for research work on rent

Pharmaceutical Export going North: In recent years, despite economic slowdown in the global economy, pharmaceutical exports in India have registered a commendable growth. Export has emerged as an important growth driver for the domestic pharmaceutical industry with over 50 % of their total revenue coming from the overseas markets. For the financial year 2008-09 the export of drugs is estimated to be around US $8.25 billion as per the Pharmaceutical Export Council of India (Pharmexil). A survey undertaken by FICCI reported 16% growth in India’s pharmaceutical export during 2009-2010.

This trend needs to be encouraged and be given further boost.

Conclusion:

The newly formed taskforce will hopefully be able to address all these issues in an integrated way to guide this life-line industry to a much higher growth trajectory  to compete effectively not only in the global generic space, but also with the global innovator companies, sooner than later.

So the ball game for the taskforce is to recommend strategy and policy measures to improve access to modern medicines by reducing ‘out of pocket’ expenses significantly through public/private health insurance initiatives, protect public health interest and foster a climate for innovation, simultaneously, and certainly not one at the cost of the other.

By: Tapan J Ray

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

In the cacophony of FDI in the pharmaceutical sector of India

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It is a widely accepted fact that Foreign Direct Investment (FDI) in the Pharmaceutical industry, just like in any other industry, is important for an emerging economy like India, mainly because of various important benefits that the country would derive out of such investments, like for example:

  • Job creation
  • World class infrastructure development
  • Transfer of modern technology
  • Help creating a talent pool through international training and development
  • Meeting unmet needs of patients through innovative medicines
  • Help imbibing the best practices of the world

Types of FDIs in the Pharmaceutical sector of India:

There are mainly three types of FDIs that we have witnessed so far in India:

  1. Green field investment: Like, setting up new manufacturing facility at Vizag by Eisai of Japan
  2. Brown field investment: Like, acquisition of Ranbaxy by Daiichi Sankyo of Japan, Piramal Healthcare by Abbott USA or Shantha Biotech by Sanofi Aventis of France.
  3. Joint venture: Like, Bayer Healthcare and Cadila Healthcare or Sun Pharma and MSD etc.

Besides these, as mentioned below, there have been some collaborative arrangements, as well, between global and Indian Pharmaceutical companies in the last five years like, GSK with Dr. Reddy’s Laboratories (DRL), Pfizer with Biocon etc.

Key drivers for FDI:

Following are the key factors, which attract FDI in the pharmaceutical sector, especially in an emerging market like India:

  1. Domestic market size, prospects for future market growth,
  2. Cheaper operating cost
  3. Cheaper input and English-speaking skilled manpower cost
  4. Regulatory environment
  5. Pricing environment
  6. Robust IT infrastructure
  7. Legal, IPR and financial framework

Relationship between FDI and Intellectual Property (IP) Environment:

Some recent media reports in various parts of the world including India had highlighted that China attracts more investment from foreign drug makers due to more robust Intellectual Property (IP) laws in that country.

US Trade Representatives (USTR) is one such agency which evaluates the adequacy and effectiveness of protection of Intellectual Property Rights (IPR) with US trading partners in various countries of the world through annual release of their ‘Special 301 Report’.

The report of US Trade Representatives (USTR 2011 Special 301) rates IPR regime of both China and India as unsatisfactory, so far as law enforcement, piracy prevention and transparency are concerned. The two main categories in the report are the ‘Priority Watch List’ and the ‘Watch List’. Both India and China fall under ‘Priority Watch List’ of this report.

An apparent contradiction:
The key question, in this context, that is being raised for quite some time now is, whether the decisions of foreign drug makers to invest in the emerging markets, like India and China are predominantly dependent on the IPR scenario in the respective countries.

If it is so, some would obviously like to know whether or not the ‘USTR 2011 Special 301 Report’ contradicts the above hypotheses.

Notwithstanding ‘USTR Special 301 Reports’ and being featured in their ‘Priority Watch List’ year after year, China continues to attract more and more FDI in pharmaceuticals over a long period of time. In any case, the FDI from USA in China was just around 12% of the total FDI that the country attracted in 2008. The same trend continues even today.

However, without going into the details of any report, relative robustness of IPR regime could at best be just one of the several key factors for a research based global pharmaceutical company to decide on FDI in any emerging market of the world.

Relatively speaking:

China is certainly attracting more FDI in the Pharma space than India. According to “The Survey of Foreign Investments in China’s Medicine Industry” of the Government of China, the FDI in the pharmaceutical industry of the country for a three year period commencing from 2006 to 2008 was around US $ 1772 million. The percentage of total investments made by the major countries is as follows:

Country wise pharmaceutical FDI % in China in 2008

 

Rank

Country

%

1.

Hong Kong

39.69

2.

United States

11.95

3.

British Virgin Island

11.64

4.

Bermuda

6.45

5.

Singapore

4.91

(Source: Invest in China 2009, Ministry of Commerce of the People’s Republic of China)

Whereas, as per Mr. Jyotiraditya Scindia, Minister of State, Ministry of Commerce and Industry, from the year 2006-07 up to September 2009, India attracted FDI of US $ 817.39 million, as follows:

FDI ( US$ million)

Sector

2006-07

2007-08

2008-09

2009-10 (upto Sept.09)

Cumulative

DRUGS & PHARMACEUTICALS

214.84

334.09

181.61

86.85

817.39

These figures would change significantly if FDI through M&A is taken into consideration.

In any case, this trend should not necessarily be exclusively correlated to the relative robustness of the IPR regime in India and China, notwithstanding the fact that 5.5% of all global pharmaceutical patent applications named one inventor or more located in India as against 8.4% located in China (Based on WIPO PCT applications)

Impact of FDI on the Indian Pharmaceutical Sector:

Some important FDI in India from 2006 to 2011

Year

Indian Companies

Multinational Companies

Value ($Mn)

 Type
2006
Matrix Labs Mylan

736

 Acquisition
Dabur Pharma Fresenius Kabi

219

 Acquisition
Ranbaxy Labs Daiichi Sankyo

4,600

 Acquisition
Shantha Biotech Sanofi-aventis

783

 Acquisition
2009
Orchid Chemicals Hospira

400

 Business Buyout
Aurobindo Pharma Pfizer

Not disclosed

 Generic Development and Supply
Dr Reddy’s  Labs GlaxoSmithKline

Not disclosed

 Generic Development and Supply
2010
Piramal Healthcare Abbott

3,720

 Business Buyout
Paras Pharma Reckitt Benkiser

726

 Acquisition
Claris Lifesciences Pfizer

Not disclosed

 Generic Development and Supply
Biocon Pfizer

350

 Insulin Marketing Deal
2011
Cadila Healthcare Bayer

Not disclosed

 Marketing Joint Venture
Sun Pharma Merck & Co.

Not disclosed

 Marketing, Manufacturing Joint Venture

There is no published data, as yet, to justify that the inflow of FDI in the pharmaceutical sector of India, including acquisition of large domestic pharmaceutical players like, Ranbaxy, Piramal Healthcare etc., had any adverse impact whatsoever on the country.

However, the reality is that such apprehension, especially the acquisition of some ‘Pharma Crown Jewels’ of India by the Multinational Companies (MNCs), though not fact-based, are apparently getting reverberated as a ‘sinister and sordid design’ even in the corridors of power ranging from the Ministry of Commerce, Cabinet Committee of Economic Affairs (CCEA), Planning Commission of India to Joint Parliamentary committee for Commerce.

It appears that the government is adopting a ‘wait and watch’ policy in this area for now, presumably because of the fact that the newly formed ‘Competition Commission of India (CCI)’ from now onwards will keep a careful vigil on such mega acquisitions.

Poor healthcare coverage could be a key barrier:

As indicated above, relative size and growth of the domestic pharmaceutical market together with healthcare coverage and delivery mechanism of a country could well be the most critical factor to influence foreign investment decision of the global pharmaceutical companies.

In global ranking, China is currently the seventh (India: 14) largest pharmaceutical market and is expected to be the fifth (India: 10) largest market by 2015 and the third largest by 2020. Chinese pharmaceutical market is expected to grow by over 15% per annum in the next five years, which is higher than India, even without considering the current base of both the countries.
Even in Health Insurance space, “India ranks 136th on penetration levels and lags behind China (106), Thailand (87), Russia (86), Brazil (85), Japan (61) and the US (9),” reported ‘Indo-Asian News Service (IANS)’ on July 21, 2009, in a paper titled, “India’s insurance penetration lower than world average”, jointly prepared by Crisil and Assocham.

Moreover, ‘out of pocket’ healthcare expenditure in India is one of the highest in the world at around 80% against 61% in China.

Country Attractiveness Index (CAI):

‘A.T. Kearney’ developed a CAI for clinical trials, for the use of, especially, the pharmaceutical industry executives to make more informed decision on offshore clinical trials. As per this study, the CAI of China is 6.10 against 5.58 of India. This could mainly be due to prevailing lackadaisical regulatory environment in India.
Other reasons to influence FDI:
I would reckon, all foreign direct investments (FDI) by the global pharmaceutical companies are driven by a combination of key business factors, as mentioned above, IPR ecosystem in the country is just one of them. This is vindicated by a recent report, which is as follows:

“Novartis has signed an agreement to build a pharmaceutical manufacturing facility in St. Petersburg, Russia. The plant is part of a $500 million Novartis investment in infrastructure, health care initiatives, and R&D in Russia over the next five years”.

The reason behind this investment was reported as follows:
“The announcement follows a pledge late last year by Russian Prime Minister Vladimir Putin of some $4 billion in federal funding for pharmaceutical industry development over the next 10 years. The government has set a goal for local industry to produce 90% of Russia’s “essential medicines”—about half of the country’s total pharmaceutical sales—by 2020.”
Other recent examples of FDI made by the global majors in other countries, which will support my above statement, are as follows:

1. Novo Nordisk: US $100 million in Russia 2. Sanofi-Aventis: a plant in Saudi Arabia. 3. Eisai: relocated global Aricept manufacturing facility to India for worldwide export.

Conclusion:

‘The Journal of International Business Studies’ (1999) 30, 1–24 based on the results from an econometric analysis of 136 laboratory investments reconfirms that relative market size, growth and the  strength of science base of a country would ultimately influence FDI in pharmaceutical research and development in an emerging market. The study also reiterated that these factors hold good for even Japanese, European and U.S. pharmaceutical companies.

Thus, to attract more FDI in the pharmaceutical sector and effectively compete with China, India should primarily focus in creating a vibrant and large domestic pharmaceutical product and services market reflecting sustainable high inclusive growth. A comprehensive ecosystem to provide healthcare to all, efficient regulatory mechanism, effective well balanced IP environment and a robust legal and financial framework will further hasten the process.

By: Tapan J Ray

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

Missing the woods for the trees – Yet another golden opportunity to rewrite the Drug Policy of India

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Long overdue the new ‘Drug Policy’ of India, since a long while, has been languishing as the ‘prisoner of indecision’ of the policy makers, while the outdated ‘1995 Drug Policy’ continues to remain operational since over a decade and half, by now.

The need for putting a new, robust, comprehensive, holistic  and reform oriented ‘Drug Policy’ in place, sooner, is absolutely critical for the fast evolving pharmaceutical industry of India.
The ‘Drug Policy 1986’ clearly enunciated the basic policy objectives relating to drugs and pharmaceuticals in India, as follows:-

  • Ensuring abundant availability of medicines at reasonable price and quality for mass consumption.
  • Strengthening the domestic capability for cost effective, quality production and exports of pharmaceuticals by reducing barriers to trade in the pharmaceutical sector.
  • Strengthening the system of quality control over drug and pharmaceutical production and distribution.
  • Encouraging R&D in the pharmaceutical industry in a manner compatible with the country’s needs and with particular focus on diseases endemic or relevant to India by creating an conducive environment.
  • Creating an incentive framework for the pharmaceutical and drug industry which promotes new investment into pharmaceutical industry and encourages the introduction of new technologies and new drugs.

After having completed around 25 years since then, it is high time for the government to ponder and assess whether the successive drug policies have delivered to the nation the desirable outcome, as enunciated above.
‘Missing the woods for the trees’:

The overall objective of the ‘Drug Policy’ is indeed to help accelerating the all-round inclusive growth of the Indian pharmaceutical industry to make it a force to reckon with in the global pharmaceutical arena. At the same time, the policy should help creating an appropriate ecosystem to improve access to quality medicines at an affordable price to the entire population of the nation.

Just one pronged approach of drug price control mechanism for drugs and pharmaceuticals is in no way can be considered as a holistic approach to achieve the set objectives. Isolated initiative of price regulation could at best be treated as just one such important measures, out of very many, at the very best. This initiative may justifiably be construed as ‘missing the woods for the trees’.

Financial cover towards medical expenses for all, is very important: 

One of the major issues in the healthcare space of the country is high out of pocket expenses by majority of the population. Financial protection against medical expenditures is far from universal in India with around 15% of the population having some sort of medical financial cover.

January 11, 2011 edition of ‘The Lancet’ in its article titled, “Financing health care for all: challenges and opportunities” commented as follows:

“India’s health financing system is a cause of and an exacerbating factor in the challenges of health inequity, inadequate availability and reach, unequal access, and poor-quality and costly health-care services. The Government of India has made a commitment to increase public spending on health from less than 1% to 3% of the gross domestic product during the next few years…. Enhanced public spending can be used to introduce universal medical insurance that can help to substantially reduce the burden of private out-of-pocket expenditures on health.”

A comparison of private (out of pocket) health expenditure:

1. Pakistan: 82.5% 2. India: 78% 3. China: 61% 4. Sri Lanka: 53% 5. Thailand: 31% 6. Bhutan: 29% 7. Maldives: 14%

(Source: The Lancet)

Food prices impact health more than medicine costs:

Year

Pharma Price Increases

Food Inflation

2008

1.1%

5.6%

2009

1.3%

8.0%

2010

0.5%

14.4%

Source: CMIE

The key affordability issue still remains unresolved: 

The above edition of ‘The Lancet’ highlighted that outpatient (non-hospitalization) expenses in India is around 74% of the total health expenses and the drugs account for 72% of this total outpatient expenditure. The study has also pointed out that 47% and 31% hospitalization in rural and urban areas respectively, are financed by loans and sell of assets.

Around 35% of Indian population can’t afford to spend on medicines:

While framing the ‘Drug Policy’, the government should keep in mind that a population of around 35% in India, still lives below the poverty line (BPL) and will not be able to afford any expenditure towards medicines.

Adding more drugs in the list of essential medicines and even bringing them all under stringent price control will not help the country to resolve this critical issue.

Successive ‘Drug Policies’ of India focused on affordability and access just through ‘price control’:

There is no ‘One Size Fits All’ type of definition for affordability of medicines, just like any other essential commodities, especially when around 80% of healthcare expenditure is ‘out of pocket’ in India.  Any price point, thus, may be affordable to some and unaffordable to some others.

The initiatives taken by the government in the successive drug policies, since the last four decades, have certainly been able to make the drug prices in India one of the lowest in the world.

However, very unfortunately, despite such price control, even today, 47% and 31% of hospitalization in rural and urban areas, respectively, are financed by private loans and selling of assets by individuals, as stated earlier. 

Multi-dimensional approach to improve access to healthcare and affordable medicines:

Access to healthcare and affordable medicines can be improved through an integrated and comprehensive approach of better access to doctors, diagnostics and hospitals, along with price monitoring mechanism for each component of healthcare cost, including medicines.

Healthcare infrastructure in India is now constrained by a lack of trained healthcare professionals, limited access to diagnostics and treatment and availability of quality medicines. Moreover, while around 80% of Indians pay out of pocket for healthcare, the Government of India spends less than 1% of GDP on health.

Consequently, the supply of healthcare services falls significantly short of demand. The current figure of 9 beds per 10,000 in India is far from the world average of 40 beds per 10,000 people. Similarly, for every 10,000 Indians, there are just 6 doctors available in the country, while China has 20 doctors for the same number of Chinese population.

Access to affordable medicines still remains a key challenge for the ‘Drug Policy’ makers:

Over 46% of patients in India travel beyond 100 km. to seek medical care.

(Source: Technopak & Philips (2010) Accessible Healthcare: Joining the Dots Now, New Delhi).

Many places in rural India, lack of availability of good quality medicines such as antibiotics poses even a greater challenge than their affordability. The national immunization program provides 6 vaccines free of cost, yet just around 60% of the country’s population is covered by it. The National AIDS Control Organization (NACO) provides free ARV (Anti-Retroviral) treatment to the poor, yet the drugs do not reach more than 10% of those in need of the same.

Without proper equipment and doctors to diagnose and treat patients, medicines are of little value to those who need them most.  Drug price regulation alone, though important, cannot increase access to healthcare without creation of adequate infrastructure required to ensure effective delivery and administration of the medicines, together with appropriate financial cover for health.

The Government won’t be able to do it all alone:

The Government needs to partner with the private sector to address India’s acute healthcare challenges through Public-Private-Partnership (PPPs) initiatives.

Recent examples of successful PPPs in the health sector include outsourcing ambulance services, mobile medical units, diagnostics and urban health centers in several states to private NGOs, hospitals and clinics.  PPPs in India should adequately cover primary and specialty healthcare, including clinical and diagnostic services, insurance, e-healthcare, hospitals and medical equipment.

A golden opportunity for a new beginning:

Many of us may know that the modified Drug Policy of 2002 was challenged under a Public Interest Litigation (PIL) in the Karnataka High Court in the same year. The honorable High Court in its order had directed the Central Government to consider and formulate appropriate criteria to ensure that the essential and lifesaving drugs do not fall out of price control. The court, at that time, also directed the Government to review the drugs which are essential and lifesaving in nature.

The above matter came up before the honorable Supreme Court of India on March 31, 2011, when the Union of India made a statement that the Central Government has not implemented and is not going to implement the 2002 Policy and a new Drug Policy is being framed.

In view of the submissions made on behalf of Government of India, the appeal was disposed of as infructuous by the Supreme Court of India.

Expectations from the ‘New Drug Policy’:

In view of the above and especially when a new Drug Policy is being worked out, adequate and immediate policy measures, with an absolutely fresh look, are essential to address the root cause of the country’s failure to ‘Improve Access to Quality Medicines at Affordable Prices’ to ensure ‘Health for all’.

The Government has already signaled increasing allocation of resources towards the health sector by doubling the funding available for the National Rural Health Mission (NRHM) along with plans to extend ‘Rashtriya Swasthya Bima Yojna (RSBY)’ scheme to provide out-patient coverage to low income groups.

As has been demonstrated by many countries of the world, healthcare financing offers an enduring mechanism for reducing the out-of-pocket expenses of the poor and improve access to healthcare. Government and the private sector need to pool resources to expand health insurance coverage initially to at least 40% of the population who are below the poverty line. Positive developments are being reported in this area, as well, albeit slowly.

Allocating resources from national welfare schemes towards health insurance coverage is a step in the right direction.  For example, a portion of the MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) funds could be spent on health insurance premia for labors engaged in such work.

Thus to achieve the objective of ‘Improving Access to Quality Medicines at Affordable Prices’, there is a pressing need for the policy makers to put in place a robust healthcare financing model for all strata of the society, sooner than later. This initiative will significantly reduce high overall ‘out of pocket expenses’ towards healthcare in India by the common man.

Encourage healthy competition among healthcare providers:

Simultaneously, by encouraging tough competition within healthcare providers, like health insurance companies, all elements of healthcare expenditure like physicians’ fees, diagnostic tests, hospital beds, medicines etc. will be kept under tight leash by themselves, just to be more cost-effective in their businesses along with ensured patients’ satisfaction.

In such a competitive environment, the patients will be the net gainers, as we have seen in other knowledge based industries, like in the telecom sector with incredible increase in teledensity within the country.

Effective penetration of various types of innovative health insurance schemes will thus be one of the key growth drivers not only for the Indian pharmaceutical industry, but also for its inclusive growth, as desired by many in India.

The policy should also include an equally transparent system to ensure that errant players within the healthcare sector, who will be caught with profiteering motives, under any garb, at the cost of precious lives of the ailing patients, are brought to justice with exemplary punishments, as will be defined by law.

Conclusion:

I have no doubt that the presence of an effective drug price regulator in the country is absolutely necessary to keep a careful vigil on the drug prices.

At the same time one should realize that the good old routine approach in formulating the long overdue ‘New Drug Policy’, even if it includes all drugs featuring in the ‘National List of Essential Medicines (NLEM)’, would not suffice anymore to ‘improve access to quality medicines at an affordable price’ to the common man.

The real answer to affordable healthcare in India, including medicines, unlike the developed countries of the world, lies in the expertise of the policy makers in innovatively addressing the vexing issue of  ‘around 80% out of pocket expenses towards healthcare’ by the ordinary citizens of the country.

This factor itself, in case of just one or couple of serious illnesses, could make a middle class household in India poor and a poor could be pushed even Below the Poverty Line (BPL).

Inadequate access to modern medicines in India, after 40 years of stringent drug price control and despite essential medicines being available in the country at the lowest price even as compared to Sri Lanka, Pakistan, Bangladesh and Nepal, will vindicate this critical point.

However, ‘The Economic Times’ dated May 23, 2011 has reported yet again, quoting Shri Srikant Jena, the Minister of State for Chemicals and Fertilizers, who oversees the pharmaceutical sector, that the Government ‘is putting together a host of policy changes to reduce the cost of medicines’.

This time around, let us sincerely hope that the drug policy makers do not repeat the same old folly of ‘missing the woods for the trees’.

By: Tapan J Ray

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

Deadly ‘Superbugs’: The larger issues

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Every year, April 7 is observed as ‘World Health Day’ across the globe. This year, 2011, is no exception. However, interestingly considering the increasing debate on the antibiotic resistance ‘Superbug’, the theme of this year has been very aptly coined as “No action today, no cure tomorrow”.

April 2011 issue of ‘The Lancet’ reported again the presence of drug-resistant bacteria NDM-1 in the public water system of Delhi.

Some observers in this area commented that this report is clearly aimed at raising alarm by recycling an old claim that has been found to be contentious, clearly suggesting indirectly that foreigners who visit India for medical and cosmetic treatments may carry back the deadly microbes with them to their respective countries.

The new report attempts to establish that the ‘Superbug NDM-1′ is no longer a hospital-born infection but can also spread through contaminated water and food. Understandably, this has raised a hue and cry in India.

Ministry of Health ridicules ‘The Lancet’ April study:

Last week the Ministry of Health rejected the above study observing that it was not only conducted with “motivated intentions”, but is illegal too. As transport of  water samples for such study out of the country requires prior permission from regulatory authorities. The authenticity of the samples also appears to be questionable, as these were reportedly to have been collected by a TV reporter.

However, just a day after the government rejected ‘The Lancet’ report, it formed a committee to look into the findings of the study, as announced by Dr R K Srivastava, Director General of Health Services, Government of India.

However, ‘The Lancet’ stands by this study report.

August 2010 report of ‘The Lancet’:

One will perhaps recall that on August 11, 2010, “The Lancet” published similar article highlighting that a new antibiotics-resistant “Superbug” originating from Pakistan has taken its first life. This happened when a patient brought to a hospital in Belgium died in June 2010 after having met with a car accident in Pakistan, where from the person got infected with this “Superbug”.

The above article was written by a team of international researchers including an Indian. The study elaborated that a new variety of enzyme named after India’s national capital New Delhi, called, “New Delhi Metallo beta lactamase” in short “NDM 1” turns any bacteria into a deadly “Superbug”, making it resistant to all types of antibiotics, leaving virtually no cure in sight. This deadly “Superbug” was reported to have already reached the United Kingdom through patients who acquired it from the hospitals in India and has the potential to precipitate serious health issues across the world. “The New Delhi Superbug” was discovered even earlier: The ‘The Lancet’ report generated a sharp reaction in India and from some of its authors regarding its authenticity. Some experts even termed this study as the ‘Western plot to undermine medical tourism in India’. A leading daily of India reported, “Indian medical journal first documented Superbug”. It stated that that the first ever formal documentation of this ‘Superbug’ was made in 2009 at the P.D. Hinduja National Hospital and Medical Research Centre located in Mumbai. This finding was published in the ‘Journal of the Association of Physicians in India (JAPI’) in March 2010. The reason for the emergence of the ‘Superbug’ was attributed to the ‘worrisome outcome of the indiscriminate use of antibiotics’. “Unfair to blame the country for the ‘New Delhi’ Superbug”: Reacting to the August article, Indian health authorities opined at that time, “It is unfortunate that this new bug, which is an environmental thing, has been attached to a particular country.” The reasons being, “Several superbugs are surviving in nature and they have been reported from countries like Greece, Israel, the U.S., Britain, Brazil and there is no public health threat and no need to unnecessarily sensationalize it”.

Some experts, however, feel, “such drug resistant pathogens, is a global phenomenon and is preventable by sound infection prevention strategies which are followed in any good hospital.”

Based on this report the ‘National Center for Disease Control of India’ started working on guidelines for appropriately recording these types of nosocomial (hospital acquired) infections.

“Superbug Hype” and Medical Tourism:

Many people of both India and Pakistan felt since then that in absence of an effective response by the health authorities, especially in India, the fast evolving Medical Tourism initiatives providing medical services ranging from complicated cardiovascular, orthopedic and cerebrovascular surgery to other life-threatening illnesses, may get adversely impacted.

The ‘blame game’: Experts have opined that overuse, imprudent or irrational use of antibiotics without any surveillance protocol is the root cause for emergence of “Superbugs”, though some Indian parliamentarians had termed the August article as the propaganda by some vested interests.

It has been alleged that the study was funded by the Wellcome Trust and Wyeth, the two global pharmaceutical companies who produce antibiotics to treat such conditions, together with the European Union.

In this context it is worth mentioning that ‘The Lancet’ article of August 2010 in its disclosures says:

“Kartikeyan K Kumarasamy has received a travel grant from Wyeth… David M Livermore has received conference support from numerous pharmaceutical companies, and also holds shares in AstraZeneca, Merck, Pfizer, Dechra, and GlaxoSmithKline, and, as Enduring Attorney, manages further holdings in GlaxoSmithKline and Eco Animal Health. All other authors declare that they have no conflicts of interest.” Not a first time reported incidence: This type of situation has indeed some precedents. When ‘MRSA’ was reported for the first time, it caused similar scare. However, this time many experts feel that it is too early to conclude whether or not ‘NDM-1’ will eventually prove to be more dangerous than ‘MRSA’. Several such “Superbugs”, as stated earlier, have already been reported from countries like Greece, Israel, USA, UK, and Brazil. As I know, in the battle against infectious diseases involving both the scientists and the bacteria, the later had  to succumb mostly, in the long run. ‘NDM-1′ perhaps will be no exception. All concerned must continue to make it happen, not by mere wishful thinking but by establishing a strong procedural mechanism to keep a careful vigil on the reasons for emergence of drug resistant bacterial strains in the country.

The World Health Organization (WHO) perspective:

On Saturday, August 21, 2010 the WHO commented, “while multi-drug resistant bacteria are not new and will continue to appear, this development requires monitoring and further study to understand the extent and modes of transmission, and to define the most effective measures for control”.

International Cooperation:

US based Center for Disease Control and Prevention (CDC), which is known as one of the world’s best-known institute for handling ‘Superbugs’, will help India in its capacity building efforts to better detect pathogens like NDM-1.

In India, the National Center for Disease Control (NCDC) with state of art facilities is expected to commence working from the next year. The facility is expected to be equipped with highly-advanced bio-safety level-II and BSL-III laboratories and would cost around Rs 382.41 Crore.

The larger issue:

The larger issue is that antibiotic resistance is fast becoming a global health concern as drug-resistant bacteria can turn a simple infection life threatening. According to the World Health Organization, ‘some 440,000 new cases of tuberculosis resistant to different types of drugs were detected last year in 60 countries across the world.’

Thus the emergence of drug-resistant ‘Superbug’ is being seen by many experts as a natural process of evolution of organisms. However, it goes without saying that indiscriminate use of antibiotics is hastening this deadly process.

R&D focus shifted more towards chronic illnesses:

Besides the reasons attributed to emergence of such “Superbugs”, as discussed earlier, one more important issue I could foresee in today’s environment compared to the past decades.

This issue possibly lies in the drastic shift in focus of pharmaceutical R&D from discovery of novel drugs for short term treatment of infectious diseases to discovery of potentially greater money spinner drugs for life-long treatment of non-infectious chronic illnesses like, metabolic disorders (diabetes), hypertension, cardiovascular diseases, psychiatric disorders, cancer, vaccines etc. This shift in the R&D focus has obviously been prompted by the tilt in the prevalence of the disease pattern towards the same direction. As a consequence, one notices hardly any significant and novel molecules in the research pipelines of either global or local pharmaceutical companies to treat  antibiotic-resistant infections.

As reported by the ‘Infectious Diseases Society of America’ between 1983 and 1987 sixteen new patented antibiotics were approved by the US FDA, while from 2003 to March 2011 only seven patented antibiotics were launched in the international market.

It is understandably not an ‘either/or’ situation so far as R&D target molecules are concerned. However, as we all know, in life-threatening conditions both types of drugs have their respective places to save precious lives.

Conclusion:

Let the global innovators ponder over the issue for newer antibiotics to counter the emerging ‘Superbugs’.

In India, the Ministry of Health should consider strictly implementing the measures suggested by the task force set up last year to prevent indiscriminate use of antibiotics. Such measures include a ban on sale of antibiotics without prescriptions and simultaneously regular audits of prescriptions of the doctors to stop irrational use of such drugs.

The need of the hour is a well-orchestrated effort by the Government, members of the civil society and the medical fraternity to have full control on this growing menace, through tangible, prudent and truly patient-friendly action .

By: Tapan J Ray

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

Fostering ‘Innovation’ and protecting of ‘Public Health Interest’: A formidable task for the new TF (taskforce)

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‘The Lancet’, March 19, 2011 in its article titled “India: access to affordable drugs and the right to health”, where the authors reiterated:

‘The right to health is a fundamental right in India, judicially recognized under article 21 of the Constitution…Access to affordable drugs has been interpreted to be a part of right to health’.

Keeping in view of this ‘fundamental right’ of the citizens, public health related issues will continue to be treated as a subject of ‘Public Interest’ in the country.

At the same time, no one can wish away the fact that unmet medicinal needs of the ailing patients can only be met through discovery of innovative drugs. Hence, an innovation friendly ecosystem must necessarily be created in the country, simultaneously. This throws open the dual challenge to the government in the healthcare space of the nation – charting an appropriate pathway to foster a climate for innovation and at the same time protecting ‘Public Health Interest’ of its citizens.

The recent admirable response of the Ministry of Health:

Considering this dual healthcare related needs of the country, on March 15, 2011, Mr Ghulam Nabi Azad, the Minister of Health and Family Welfare, announced the formation of a 12-member task force that will evolve the following strategies under the chairmanship of V.M. Katoch, Secretary, Department of Health Research and Director-General, ICMR and will submit its report within three months.

  1. Evolving a short, medium and long-term policy and strategy to make India a hub for drug discovery, research and development.
  2. Evolving strategies to further the interests of Indian pharma industry in the light of issues related to intellectual property rights and recommend strategies to capitalise the opportunity of $60 to $80 billion drugs going off-patent over the next five years.
  3. Evolve policy measures to assure national drugs security by promoting indigenous production of bulk drugs, preventing takeover of Indian pharma industry by multi-national corporations, drug pricing, promotion of generic drugs
  4. Recommend measures to assure adequate availability of quality generic drugs at affordable prices.

Indian Pharmaceutical Industry is on a growth spree:

The pharmaceutical industry of India is currently playing a key role in promoting and sustaining development in the healthcare space of India. Due to significant cost arbitrage, educated and skilled manpower and cheap labor force among others, the industry is set to establish itself as a global force to reckon with, especially in the areas of generic formulations business, Contract Research and Manufacturing Services (CRAMS).

Estimates and Perspectives:

  • The pharma industry is growing at around 1.5-1.6 times the Gross Domestic Product growth of India
  • Currently, India ranks third in the world in terms of volume of manufacturing pharmaceutical products
  • The Indian pharmaceutical industry is expected to grow at a rate of around 15 % till 2015
  • The retail pharmaceutical market in India is expected to cross US$ 20 billion by 2015
  • According to a study by FICCI-Ernst & Young India will open a probable US$ 8 billion market for MNCs selling patented drugs in India by 2015
  • The number of pharmaceutical retailers is estimated to grow from 5.5 lakh to 7.5 lakhs by 2015
  • At least 2 lakh more pharma graduates would be required by the Indian pharmaceutical industry by 2015
  • The Indian drug and pharmaceuticals sector attracted foreign direct investment to the tune of US$ 1.43 billion from April 2000 to December 2008 (Ministry of Commerce and Industry), which is expected to increase significantly along with the policy reform measures and increased Government investment (3%-4%) as a percentage of GDP towards healthcare, by 2015
  • The Minister of Commerce estimates that US$ 6.31 billion will be invested in the domestic pharmaceutical sector
  • Due to low cost of R&D, the Indian pharmaceutical off-shoring industry is expected to be a US$ 2.5 billion opportunity by 2012

Key growth drivers: Local and Global:

Local:

• Rapidly growing middle class population of the country with increasing disposable income.
• High quality and cost effective domestic generic drug manufacturers are achieving increasing penetration in local, developed and emerging markets.
• Rising per capita income of the population and inefficiency of the public healthcare system will encourage private healthcare systems of various types and scales to flourish.
• High probability of emergence of a robust healthcare financing/insurance model for all strata of society.
• Fast growing in Medical Tourism.
• Evolving combo-business model of global pharmaceutical companies with both patented and generic drugs is boosting local outsourcing and collaboration opportunities.
Global:
Global pharmaceutical industry is going through a rapid process of transformation. The moot question to answer now is how the drug discovery process can meet the unmet needs of the patients and yet remain cost effective.

Cost containment pressure due to various factors is further accelerating this process. CRAMS business, an important outcome of this transformation process, will be the key growth driver for many Indian domestic pharmaceutical players in times to come. 

Key Challenges:

Like all other industries, Pharmaceutical Industry in India has its own sets of Challenges and opportunities under which it operates. Some of the challenges the industry faces are:

  • Unfortunate “Trust Deficit” between the Government and the Industry, especially in pharmaceutical pricing area
  • Regulatory red tape and lack of initiative towards international harmonization
  • Inadequate infrastructure and abysmal public delivery system
  • Lack of adequate number of qualified healthcare professionals
  • Inadequate innovation friendly ecosystem to encourage R&D
  • Myopic Drug Policies have failed to deliver. The needs of over 350 million BPL families who cannot afford to buy any healthcare products and services, have not been effectively addressed, as yet
  • Inability of the government to address the critical issue of ‘80% out of pocket expenditure’ of the common man towards healthcare
  • Inadequate Public Private Partnership (PPP) initiatives in most of the critical areas of healthcare

Job Creation:

Pharmaceutical sector in India has created employment for approximately 3 million people from 23,000 plus units. Accelerated growth in job creation, will not only open up more opportunities to pharmaceutical professionals, but will also fuel growth opportunities in allied business segments like Laboratory, Scientific instruments, Medical Devices and Pharma machinery manufacturing sectors.

Despite all these, it is worth noting that the Indian pharmaceutical industry is confronting with a major challenge in getting employable workforce with the required skill sets. This issue will grow by manifold, as we move on, if adequate vocational training institutes are not put in place on time to generate employable workforce for the industry.

Government Initiatives are inadequate:

The government of India has started working out some policy and fiscal initiatives, though grossly inadequate, for the growth of the pharmaceutical business in India. Some of the measures adopted by the Government are follows:

  • Pharmaceutical units are eligible for weighted tax reduction at 175% for the research and development expenditure obtained.
  • Two new schemes namely, New Millennium Indian Technology Leadership Initiative and the Drugs and Pharmaceuticals Research Program have been launched by the Government.
  • The Government is contemplating the creation of SRV or special purpose vehicles with an insurance cover to be used for funding new drug research
  • The Department of Pharmaceuticals is mulling the creation of drug research facilities which can be used by private companies for research work on rent

Encouraging Pharmaceutical Export:

In the recent years, despite economic slowdown being witnessed in the global economy, pharmaceutical exports in India have registered an appreciable growth. Export has emerged as an important growth driver for the domestic pharmaceutical industry with more than 50 % of their total revenue coming from the overseas markets. For the financial year 2008-09 the export of drugs is estimated to be around US $8.25 billion as per the Pharmaceutical Export Council of India (Pharmexil). A survey undertaken by FICCI reported 16% growth in India’s pharmaceutical export during 2009-2010.

Five ‘Strategic Changes’ envisaged:
Five new key strategic changes, in my view, will be as follows:
1. As the country will move towards an integrated and robust healthcare financing system:
• Doctors will no longer remain the sole decision makers for the drugs that they will prescribe to the patients and also the way they will treat the common diseases. Healthcare providers/ medical insurance companies would play a key role in these areas by providing to the doctors well thought out treatment guidelines. • Tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable for a significant proportion of the products that the pharmaceutical companies will sell related to these areas.

• Health Technology Assessment (HTA) or outcome based pricing will play an important role in pricing a healthcare product.
2. An integrated approach towards disease prevention will emerge as equally important as treatment of diseases.
3. A shift from just product marketing to marketing of a bundle of value added comprehensive disease management processes along with the product will be the order of the day
4. More affordable innovative medicines will be available with increasing access to a larger population, as appropriate healthcare financing model is expected to be in place.

5. Over the counter medicines, especially originated from rich herbal resources of India, will curve out a larger share of market, as appropriate regulations will be put in place.

Conclusion:

With the all these evolving trends in the healthcare sector of India, the ball game of the successful domestic Indian pharmaceutical industry is expected to undergo a rapid metamorphosis, as they will require to  compete with the global players on equal footing. Those Indian Pharmaceutical companies, who are already global players in their own rights, are already well versed with the nuances of this new game and are expected to offer a tough competition to the global players, especially, in the branded generic space, initially.

However, for some domestic players, the new environment could throw a major challenge and make them vulnerable to the consolidation process, already set in motion within Indian pharmaceutical industry.

The newly formed taskforce will hopefully be able to address all these issues in an integrated way to guide this life-line industry to a much higher growth trajectory to compete effectively not only in the global generic space, but also with the global innovator companies, sooner than later.

So the name of the game is to ‘Foster Innovation’ and protect ‘Public Health Interest’ simultaneously and not one at the cost of the other.

By: Tapan J Ray

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

A time to keep our nose to the Grindstone – Competition Act will take care of M&As, come June 2011

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Full control of powers on Mergers and Acquisitions of the Competition Commission of India (CCI) effective June 1, 2011, has now been notified.

In this evolving scenario, it is indeed difficult to understand, why is the FDI issue on M&A in the Pharmaceutical space of India is still catching headlines of both national and international media. Instead, should we not now keep our nose to the grindstone and take strategic measures to accelerate the inclusive growth of this life-line industry of the nation?

Stipulations for M&As under the Competition Act:

Section 6(1) of the Act prohibits any person or enterprise from entering into a combination which has an “appreciable adverse effect” on competition in India. It also stipulates that any enterprise which intends to enter into such M&A, shall give notice to the CCI furnishing details of the proposed M&A within thirty days of:

(i)  Approval of the merger by the Board of Directors of the concerned enterprise

or

(ii) Execution of any agreement relating to acquisitions referred to in clause 5(a) & (b) of the Act. S.6(2A) provides a period of 210 days to the CCI to complete the investigation relating to such combinations (if the CCI is unable to come to any conclusion within this period then the combination is deemed to be approved)

S.5 of the Act lays down the transactions which will qualify as combinations for the purposes of the Act. The following is the threshold limit for Mergers and Acquisitions:
• Transactions among Indian companies with combined assets of Rs. 1000 Crores or Rs 3000 Crores in turnover of the merged entity
• Cross-border transactions involving both Indian and foreign companies with combined assets of US $500 million or US $1.5 billion in turnover

• Transactions that have a territorial nexus with India, where the acquirer has US $125 million in assets or US $375 million in turnover in India.

Once any transaction reaches the threshold limit as specified in S.5, the enterprise has to take recourse to the procedure as specified in the Competition Act.

A time to keep our nose to the Grindstone:

Last year, though the growth of the Global Pharmaceutical Industry with a turnover of US$ 752 billion significantly slowed down to just 6.7% due to various contributing factors, the Indian Pharmaceutical Industry continued to maintain a robust of growth of 19% with a turnover of US$ 10.1 billion (IMS October, 2010).

R&D will fuel future growth:

However, on a longer term perspective, the domestic industry growth will be significantly driven by the newer products, which will be the outcome of painstaking innovative research and development initiatives. Keeping this point in mind, the fact that today India accounts less than one per cent of over US$130 billion of the worldwide spending on research and development for pharmaceuticals, despite its known strength in process chemistry and abundant talent pool, has started attracting attention of the government.

Government taking appropriate measures:

It is encouraging to note that the Department of Pharmaceuticals of the Government of India through its ‘Vision 2020’ initiatives is planning to create a new echo-system in the country to promote new drug discovery platforms. This is expected to catapult the country as one of the top five global pharmaceutical hubs, by 2020 attracting additional investments of around US$ 20 billion to the GDP of the country.

Primary role of the industry:

The Primary role of the Research based Pharmaceutical Industry in India, like in many other countries of the world, is to make significant contribution to the healthcare objectives of the nation by meeting the unmet needs of the ailing patients, with innovative medicines. This role can be fulfilled by developing newer medicines through painstaking, time-consuming, risky and expensive basic research initiatives. The research based Pharmaceutical Industry in India is committed to its prime function of discovering and developing new medicines not only for the patients in India but all over the world.

Encouraging innovation will be critical:

Despite immense progress made over the past decades in developing new medicines for numerous acute and chronic illnesses, innovation still remains critically important in the continuous and ever complex battle between disease and good health. Ongoing efforts in Research & Development (R&D) would require a robust national policy environment that would encourage, protect and reward innovation. Improving healthcare environment in partnership with the Government remains a priority for the Research based Pharmaceutical Companies in India, both global and local.

Continuous improvement in ‘Access to Medicines’ is critical:

Therefore, improving access to healthcare in general and medicines in particular should be on the top priority agenda of the policy makers in our country. High incidence of mortality and morbidity burden in a country like ours can only be addressed by improving Access to healthcare through a concerted partnership oriented strategy.

Some concerns still linger:

However, in the new paradigm, which has been designed to foster innovation in the country, there are still some loose knots to be tightened up to achieve the set objectives for the inclusive growth of the nation, in the longer term perspective.

These measures, in turn, will help improving the competitiveness of India vis-à-vis countries like China to attract appreciable investments towards R&D related to pharmaceutical and bio-pharmaceutical products. The Government has already initiated measures to expand the capacity of Indian judiciary and setting- up of fast-track specialized courts that can more effectively enforce Pharmaceutical patents with requisite technical expertise.

Industry should set examples in ‘Good Corporate Governance’ and ‘Global Good Manufacturing Practices’:

Another area of focus should be on corporate good governance. This encompasses adherence to high ethical standards in clinical trials, regulatory and legal compliance, working to prevent corrupt practices, high ethical standard in promotion of medicines and addressing all other issues that support good healthcare policies of the Government. In addition, Pharmaceutical Industry should take active measures to involve all concerned to fight the growing menace of counterfeit and spurious medicines, which significantly affect the lives of the ailing patients, all over the country.

All stakeholders should work in tandem:

It is obvious that the Pharmaceutical Industry alone will have a limited role to address key healthcare issues of our nation, especially when around 400 million Below the Poverty Line (BPL) population will not be able to afford any expenses towards healthcare, at all. All stakeholders like the government, corporate and the civil society in general, must work together according to their respective abilities, obligations and enlightened societal interests to effectively address such pressing issues.

Let us move ahead from ‘Price Control’ to ‘Price Monitoring’:

Despite Medicine Prices in India being one of the lowest in the world, mainly because of stiff competition within the industry and watchful eye of an effective price regulator, 100% of the Pharmaceutical market in the country is currently being price regulated by the Government even with the growth restrictive and ‘draconian’ ‘Third Schedule’ of the DPCO 95.

To enable the Industry to be globally competitive in all aspects of its operations, the government should move ahead from ‘Price Control’ to effective ‘Price monitoring’ mechanism and scrap the growth restrictive measures like, ‘third schedule’ of the current DPCO.

Transaction costs of medicines are too high:

Current transaction costs (all taxes) on medicines in India including trade margins is as high as over 50% of the ex-factory cost of a product.

This cost has been further increased in 2011-12 Union Budget proposal. The government should reduce exorbitantly high transaction costs to make medicines even more economical to the common man.

Conclusion:

I am confident, the entire Pharmaceutical Industry in India would continue to act responsibly with demonstrable commitment to help achieving the healthcare objectives of the nation.

Global players will keep on searching for their suitable targets in the emerging markets like India, just as Indian players are searching for the same in the global markets. This is a process of consolidation in any industry and will continue to take place across the world. Adverse impact of M&A on competition, if any, will now be effectively taken care of by the CCI.

So far as the ‘Financial Reform’ process is concerned, India has always been a slow starter, but it never walked backwards. This tradition, I reckon, will continue in the vibrant democracy of the country, in future too.

By: Tapan J Ray

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

Explore the Emerging Markets with the ‘Wings of Courage’.

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Overall growth rate of the global pharmaceutical industry is currently hovering around 5%. Similar situation has been prevailing since last several years. There is no indication of acceleration of growth rate from any of the top 3 regions of the world namely the USA, EU and Japan, at least in the near future.

According to IMS, the global pharmaceutical market is expected to grow around 5%-7% in 2011 to US$ 880 billion, as compared to around 4%-5% of 2010.

The reasons of the slowdown, I have discussed several times in the past through this column and do not intend to dwell on that, at least, in this Article.

The Emerging Markets of the World:

Unlike developed markets, emerging pharmaceuticals market of the world, like, India, China, Brazil, Russia, Mexico, Turkey and Korea, are showing a robust growth rate, quite commensurate to the ascending GDP growth trend of these countries.

According to IMS, the projected CAGR trend of the developed and Emerging Markets for the period of 2007–11, are as follows:

Mature Markets

CAGR 2007-11

Emerging Markets

 CAGR 2007-11
USA 4-7% China 13-16%
Canada 6-9% Korea 8-11%
Japan 2-5% Brazil 9-12%
Germany 3-6% Russia 17-20%
France 2-5% Mexico 6-9%
Italy 3-6% India 11-14%
UK 4-7% Turkey 9-12%
Spain 5-8%

(Source IMS)

Branded Generics/Generics are now key growth drivers in the Emerging Markets:

It is worth noting, unlike the developed markets of the world, where high priced branded patented drugs drive the value growth of the industry, in the emerging markets, where investment towards R&D is relatively less, branded generic and the generic products are the key growth drivers.

Such an evolving situation has prompted large global majors like Pfizer, GSK, Sanofi-aventis, Daiichi Sankyo and Abbott Laboratories, to name a few, either to acquire large generic or Biosimilar drug companies or ink various interesting and win-win collaborative deals, in these markets, to maintain their respective business growth with the branded generic and generic products in the fast growing emerging markets of the world.

Will Emerging Markets be lucrative enough only with Generic and Branded Generic products, in the long run?

Some experts do feel that, in the long run, the emerging pharmaceutical markets, like India, may not prove to be as lucrative to the global pharmaceutical majors.

The key reason being, around 80% ‘out of pocket’ expenditure for medicines in India, could be the key impediment to expanded access to higher priced innovative medicines, in general. Such a situation could seriously limit the success of branded patented drugs in India following their global strategy, compared to the developed markets of the world. The issue of affordability of such medicines will continue to be a key factor for their improved access in India, if the ground reality remains unchanged. Top line business growth only with Generics and Branded Generics in the emerging markets may not be sustainable enough, in the long run, for the innovator companies to adequately fund their R&D initiatives to meet the unmet needs of the patients.

The other school of thought:

The other school of thought, however, argues that ‘out-of pocket” characteristic of  India is indeed more sustainable in terms of cost containment pressure, than those  markets where the government or health insurance companies cover a large part of the medical expenses for the population.

Every year around 1% of population comes above the poverty line in India together with a growing ‘middle income’ segment with increasing purchasing power. This cycle, in turn, will keep fueling the growth of healthcare space, contributing significantly to the progress of the pharmaceutical industry of the country.

‘One size fits all’ global strategy unlikely to succeed in the ‘Emerging Markets’:

In my view ‘One size fits all’ type of strategy, especially in the area of pricing, is unlikely to succeed in the emerging markets of the world. Pharmaceutical Companies will need to have  different types of ‘tailor made’ strategic approaches for markets like Brazil, Russia, India, China, South Africa, Mexico, Korea and Turkey.

Pricing Strategy will be a key determinant to success:

For better access to medicines, ‘differential pricing strategy’ has been the stated policy of large global companies like, GSK and MSD. If this trend continues, a win-win situation could be created, when unmet needs of a large number of patient groups could be met with innovative medicines, paving the way for the innovator companies to register a healthy, both top and bottom line, business growth in these markets to effectively fund their R&D projects, besides others.

The most successful brand launch in India, so far:

The credit for the most successful new patented product launch (launched in 2008) in the recent times, I reckon, should go to Januvia (Sitagliptin), an oral anti-diabetic molecule from the global major MSD. The reported global sales of Januvia in 2008 was US $1.4 billion and the sales reported in India was around Rs. 77 Crore (around US $17 million) in just over two years with around 2.4% market share in the large and fragmented Oral Ant-Diabetic segment (IMS, MAT March 2010). This could happen, in my view, not only due to a brilliant business strategy executed with military precision but also because of a differential pricing strategy adopted by the company for this particular product in India.

In recent times, it has not been difficult to record a turnover of around US $ 20 – 25 million by a large pharmaceutical brand either in India or China.

Conclusion:

If this does not happen, due to one reason or the other, it would arguably be quite challenging for the global innovators to be able to keep engaged in the high-cost and high-risk R&D initiatives, by driving their business growth mainly with generic and branded generic medicines in the fast growing emerging markets of the world.

Thus the name of the game for the global innovator companies will be to Explore the Emerging Markets with the ‘Wings of Courage’.

By: Tapan J Ray

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

Dissapointing: No proposal of ‘Healthcare Reform’ in the Union Budget of India for 2011-12: China rolled it out in 2009.

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January 15, 2011 issue of ‘The Lancet’ in an article titled, “Learning from others” states the following:

“Having universal coverage through a public commitment does have costs, including public costs. The proportion of national expenditure on health that is met by the government is 26% in India and 45% in China. Or, to look at a related contrast, while government expenditure on health care in India is only around 1·1% of its GDP, it is around 1·9% in China. One need not be a genius to see that if the government of a country is ready to spend more on health, it could expect better results in terms of the health of the people.”

While comparing India with China, I reckon, one should take into account of larger disease burden in India as compared to China and the cost that India pays due to slow progress of reform processes in a democratic framework with open and free society and the vibrant outspoken media in the country. Further, the healthcare reform processes in China started over a decade earlier than India, resulting in a significant difference in the healthcare infrastructure, healthcare delivery and the healthcare financing systems of both the countries, over a period of time.

Access to safe drinking water and sanitation:

Access to safe drinking water in India may be comparable to other emerging economies, but sanitation condition in India needs radical improvement. According to World Health Organization (WHO, 2009) the Access to potable water and improved sanitation in those countries are as follows:

Country Drinking Water  (% population) Sanitation                     (% population)
India 89 28
Brazil 91 77
China 88 65
Mexico 95 81
South Africa 93 59

Key issues in the Public Hospitals:

The ethical issues, which the patients face, especially, in the hospitals of India, I reckon, have not been reported for China by the Transparency International.

Transparency International India (2005) had reported the following seven key issues and irregularities experienced by the patients at the Government Hospitals in India:

  1. Medicines unavailable: 52%
  2. Doctors suggest a visit to their private clinic: 37%
  3. Doctors refer to private diagnostic centers: 31%
  4. Over-prescription of medicines: 24%
  5. Bribes demanded by staff: 20%
  6. Diagnostics tests done even when unnecessary: 18%
  7. Doctors are absent: 13%

All these continue to happen in India, with no respite to patients, despite ‘Hippocratic Oath’ being taken by the medical profession and the new MCI guidelines for the doctors being in place within the country. Moreover, a miniscule spend of 1% of the GDP by the Government of India towards public healthcare of the nation, is indeed a shame.

Healthcare Reform in China:

Early April, 2009, China, a country with 1.3 billion people, unfolded a plan for a new healthcare reform process for the next decade to provide safe, effective, convenient and affordable healthcare services to all its citizens. A budgetary allocation of U.S $124 billion has been made for the next three years towards this purpose.
China’s last healthcare reform was in 1997:
China in 1997 took its first reform measures to correct the earlier practice, when the medical services used to be considered just like any other commercial product. Very steep healthcare expenses made the medical services unaffordable and difficult to access to a vast majority of the Chinese population.
Out of pocket expenditure towards healthcare services also increased in China:
The data from the Ministry of Health of China indicates that out of pocket spending on healthcare services more than doubled from 21.2 percent in 1980 to 45.2 percent in 2007. At the same time the government funding towards healthcare services came down from 36.2 percent in 1980 to 20.3 percent in the same period.
Series of healthcare reforms were effectively implemented since then like, new cooperative medical scheme for the farmers and medical insurance for urban employees, to address the situation  prevailing at that time.
The core principle of the new phase of healthcare reform in China:
The core principle of the new phase of the healthcare reform process in China is to provide basic health care as a “public service” to all its citizens, where more government funding and supervision will assume a critical role.
The new healthcare reform process in China will, therefore, ensure basic systems of public health, medical services, medical insurance and medicine supply to the entire population of China. Priority will be given to the development of grass-root level hospitals in smaller cities and rural China and the general population will be encouraged to use these facilities for better access to affordable healthcare services. However, public, non-profit hospitals will continue to be one of the important providers of medical services in the country.
Medical Insurance and access to affordable medicines in China:
Chinese government plans to set up diversified medical insurance systems. The coverage of the basic medical insurance is expected to exceed 90 percent of the population by 2011. At the same time the new healthcare reform measures will ensure better health care delivery systems of affordable essential medicines at all public hospitals.
Careful monitoring of the healthcare system by the Chinese Government:
Chinese government will monitor the effective implementation and supervision of the healthcare operations of not only the medical institutions, but also the planning of health services development, and the basic medical insurance system, with greater care.
It has been reported that though the public hospitals will receive more government funding and be allowed to charge higher fees for quality treatment, however, they will not be allowed to make profits through expensive medicines and treatment, which is a common practice in China at present.
Drug price regulation and supervision in China:
The new healthcare reform measures will include regulation of prices of medicines and medical services, together with strengthening of supervision of health insurance providers, pharmaceutical companies and retailers.
As the saying goes, ‘proof of the pudding is in the eating’, the success of the new healthcare reform measures in China will depend on how effectively these are implemented across the country.

Besides Democracy, China has something to learn from India too:

The article, as mentioned above, from ‘The Lancet’ concludes by saying that unlike China, the real progress in India has come out of public discussion and demonstration within the democratic set-up in India. One such program is distribution of cooked mid-day meals to school children and selected interventions in child development in pre-school institutions. Such programs are currently not available in China for development of proper physical and mental health of, especially, the children of the marginalized section of the society

Conclusion:
There exists a sharp difference between India and China in the critical healthcare delivery system. The Chinese Government at least guarantees a basic level of public funded and managed healthcare services to all its citizens. Unfortunately, the situation is not quite the same in India, because of various reasons.
High economic growth in both the countries has also led to inequitable distribution of wealth, making many poor even poorer and the rich richer, further complicating the basic healthcare issues involving a vast majority of poor population of India.
To effectively address the critical issues related to health of its population, the Chinese Government has already announced a blueprint outlining its new healthcare reform measures for the next ten years. How will the Government of India respond to this situation for the new decade that has just begun?

It was very dissapointing to learn from the Union Budget speech of the Finance Minister of India for 2011-12 that the perspective of our Government on the importance of healthcare for the fellow citizens of India, still remains indifferent.

By: Tapan J Ray

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