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

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

C. Reduction in transaction costs of Medicines

D. Incentivising R&D

E. Reduction in tax burden

A. Infrastructure building:

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

B. Improving access to medicines:

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

C. Reduction in transaction costs of Medicines:

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

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

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

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

D. Incentivising R&D:

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

E. Reduction in tax burden:

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

• Abolition of Fringe Benefit Tax (FBT)

• Extension of tax holidays for exporters upto 2011

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

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

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

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

By Tapan Ray

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

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.

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.

Are pharmaceuticals related more to chemicals than health?

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I received a call from Professor Sam Gupta yesterday.

(please refer to my article at: http://www.tapanray.in/profiles/blogs/the-professor-counterfeit)

He is returning to the US next week. Before that, he felt, it will be nice if he and I can manage some time to have a leisurely chat on various issues related to the pharmaceutical industry in India.

Sam had time, so did I on the following Sunday. We agreed to meet and discuss the subject while going for a long drive through the ‘Western Ghats’, leaving Mumbai early morning.

On the ‘D day’, I took the wheel. We fastened our seat belts and soon were on the highway. While leaving behind ‘aamchi Mumbai’ and taking the first ‘ghat road’, our Sam deviated from his usual humorous chat on America’s ‘Uncle Sam’ and fired his first salvo, “the Government of India (GoI) just created a new department called the ‘Department of Pharmaceuticals’, presumably to have greater focus on the pharmaceutical Industry. Why is that the department has still been kept under the Ministry of Chemicals & Fertilizers and not under the Ministry of Health?” Taking a short breather, professor quipped, ‘does GoI consider pharmaceuticals related more to chemicals rather than health?’

What a first salvo!…indeed thought-provoking, at least to me. I soon lost myself to the question, diving deep into my memory lane, at the same time keeping both my right and left brain active to ponder over this interesting subject. Professor’s inquisitive chat gradually faded away from my ears…

Creation of the Department of Pharmaceuticals (DoP):

I had a quick recap on this subject.

In mid 2008, GoI had set up a new department under the Ministry of Chemicals & Fertilisers (MC&F), called the ‘Department of Pharmaceuticals (DoP)’. The department was created primarily to have a greater focus on the pharmaceutical sector.

Historically, issues and policies related to pharmaceuticals used to be handled by the Department of Chemicals and Petrochemicals. A separate Department of Fertilisers still handles all issues related to fertilizers in India. Both the departments were within the MC&F.

The then Minister of MC&F probably felt that the pharmaceuticals sector has very complex issues, besides others, related to pricing, access and availability, IPR, and other international commitments that necessitate integration of work with other ministries. A separate department for pharmaceuticals was, therefore, necessary to do justice to the pharmaceuticals industry of India. The proposal, I reckon, was there for quite some time though.

Which Ministries the DoP will have to co-ordinate with…the most?

As stated above let us have a look at the key areas of focus of the DoP, one by one and try to ascertain which Ministry currently deals with each one of these issues, as follows:

1. Pricing:

Currently DoP looks after ‘drugs pricing’ under the MC&F. This activity will remain unchanged in the new scenario.

2. ‘Access’ and ‘Availability’:

Availability of pharmaceuticals is intimately linked to access to pharmaceuticals… and access to pharmaceuticals to a vast majority of population of India depends on availability of requisite healthcare infrastructure. ‘Jan Aushadhi’ scheme of the DoP will be more meaningful in terms of its purpose and objectives, when adequate health related infrastructural facilities will be made available, in tandem, to the common man as a part of integrated healthcare initiative. Ministry of Health is responsible to create such healthcare related infrastructure.

3. IPR:

To give some examples, for the researched-based pharmaceutical companies, there are some burning pharmaceuticals related Intellectual Property Rights (IPR) issues, pending since long, like ‘Patent Linkage’ and ‘Regulatory Data Protection’ along with pharmaceuticals related other regulatory issues. All these are again currently looked after by the Ministry of Health.

4. International commitments:

International debate on ‘Counterfeit drugs’, ‘clinical trials’ etc is now spearheaded by the Ministry of Health.

Thus the objective of GoI to have greater focus on pharmaceuticals will be better achieved, if the DoP becomes a part of the Ministry of Health.

What should be the key objectives of the DoP?

The key objective of the DoP should be to “ensure access to affordable modern medicines to all”. To achieve this objective the mindset of the ministers and especially beaurocrats, should change from ‘empire building’ to serving the ‘common man’ with right earnest. With this change in the mindset, I hope that the DoP would try to align itself more with health than just chemicals.

If this happens, the newly created DoP will be able to deliver far more to the ‘common man’ and justify its creation and existence by spending huge amount of taxpayers’ money.

Yes Professor… you have a point:

A steep climb ahead on the ‘ghat’, compelled me to focus on driving. Meanwhile, noticing a long pause at my end, probably professor Gupta thought initially that I was inattentive to his first question… and like a thorough gentleman that he is, remained quiet. Time passed by, in pregnant silence, till I replied, “Yes professor you have a point” and then continued driving through the meandering ‘ghat’ road, in the sweltering heat of summer…still pondering why on earth our politicians still relate pharmaceuticals more to chemicals rather than health?

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.

Leverage Information Technology (IT), Health Insurance and ‘Jan Aushadhi’ initiatives to address the burning issue of ‘Access to Affordable Integrated Healthcare to all’ in India.

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Despite so much of general focus, stringent Government control, debate and activism on the affordability of modern medicines in India, a vast majority of Indian population still do not have access to basic healthcare facilities.The degree of poor access to healthcare in general may vary from state to state depending on economic resources and the quality of governance. However, despite the success of the Government to make medicines available in India cheaper than even Pakistan, Bangladesh and Sri Lanka, it has been reported that about 65% of Indian population still do not have access to affordable modern medicines compared to 15% in China and 22% in Africa.Lack of adequate healthcare infrastructure:

One of the key reasons of such poor access is lack of adequate healthcare infrastructure. As per the Government’s own estimate of 2006, India records a shortage of:

1. 4803 Primary Health Centres (PHC)
2. 2653 Community Health Centres (CHS)
3. Almost no large Public Hospitals in rural areas where over 70% of the populations live
4. Density of doctors in India is just 0.6 per 1000 population against 1.4 and 0.8 per 1000 population in China and Pakistan respectively , as reported by WHO.

Moreover, doctors themselves do not want work in rural areas, probably because of lack of basic infrastructural facilities. We have witnessed public agitation of the doctors on this issue, in not so distant past.

National Health Policy and Healthcare Expenditure:

Two key primary focus areas of the Government, everybody agrees, should be education and health of its citizens. Current National Health Policy also planned an overall increase in health spending as 6% of GDP by 2010. However India spent, both public and private sectors put together, an estimated 5% of GDP on healthcare, in 2008.

If we look at only the spending by the Government of India towards healthcare, it is just 1.2% of GDP, against 2% of GDP by China and 1.6% of GDP by Sri Lanka, as reported in the World Health Report 2006 by WHO.

During the current phase of global and local financial meltdown, as the government will require to allocate additional resources towards various economic stimulus measures for the industrial and banking sectors, public healthcare expenditure is destined to decline even further.

The silver lining:

However we have seen the United Progressive Alliance (UPA) Government allocating around US$2.3 billion for the National Rural Health Mission (NRHS). The Government announced that NRHS aims to bring about uniformity in quality of preventive and curative healthcare in rural areas across the country.

Inefficient healthcare delivery system:

Despite above silver lining of additional resource allocation, the net outcome does not appear to be so encouraging even to an eternal optimist, because of prevailing inadequacy within the system.

The reasons for such inadequacies do not get restricted to just rampant corruption, bureaucratic delay and sheer inefficiency. The way Government statistics mask inadequate infrastructural facilities is indeed equally difficult to apprehend. A recent report from ‘The Economist’, which reads as follows, will vindicate this point:

‘…around 20% of the 600,000 inhabited villages in India still have no electricity at all. This official estimate understates the extent of the problem, as it defines an electrified village—very generously—as one in which at least 10% of households have electricity’.

Leveraging the strength of Information Technology (IT) to considerably neutralize the system weaknesses:

One of the ways to address this problem is to utilize the acquired strengths of India wherever we have, to neutralize these weaknesses. Proficiency in ‘Information Technology’ (IT) is one of the well recognized key acquired strengths that India currently possesses. If we can optimally harness the IT strengths of India, this pressing healthcare issue could possibly be addressed to a significant extent.

One such IT enabled technology that we can use to address rural healthcare issues is ‘cyber healthcare delivery’ for distant diagnosis and treatment of ailments. Required medicines for treatment could be made available to the patients through ‘Jan Aushadhi’ initiative of the Department of Pharmaceuticals (DoP), by utilising the Government controlled distribution outlets like, public distribution system (ration shops) and post offices, which are located even in far flung and remote villages of India.

Please use the following links to read more about these subjects:

http://www.tapanray.in/profiles/blogs/healthcare-services-in-india

http://www.tapanray.in/profiles/blogs/jan-aushadhi-medicines-for

Sources of Healthcare financing in India:

Currently the sources of healthcare financing are patchy and sporadic as follows, with over 70% of the population remaining uncovered:

1. Public sector: comprising local, State and Central Governments autonomous public sector bodies for their employees

2. Government health scheme like:

• ‘Rashtriya Swasthya Bima Yojana’: for BPL families to avail free treatment in more than 80 private hospitals and private nursing homes.
• ‘Rajiv Gandhi Shilpi Swasthya Bima Yojana’ by Textile Ministry: for weavers.
• ‘Niramaya’ by Ministry of Social Justice and Empowerment: for BPL families.

3. Private sector: directly or through group health insurance for their employees.

4. ‘Karnataka Yeshavini co-operative farmers’ health insurance scheme: championed by Dr. Devi Shetty without any insurance tie-up.

5. ‘Rajiv Aarogyasri’ by the Government of Andhra Pradesh for BPL families: a Public Private Partnership initiative between Government, Private insurance and Medical community.

6. Individual health insurance policies.

7. External Aid like, Bill & Melinda Gate Foundation, Clinton Foundation etc.

Grossly inadequate health care financing in India, out of pocket expenses being over 70%:

Proportion of healthcare expenditure from financing source in India has been reported as follows:

• Central Government: 6%
• State Government: 13%
• Firms: 5%
• Individual Health Insurance: 3.5%
• Out of pocket by individual household: 72.5%

Need for Health Insurance for all strata of society to address the issue of affordability:

Even after leveraging IT for ‘cyber healthcare diagnosis’ and having low priced quality medicines made available from ‘Jan Aushadhi’ outlets of DoP, healthcare financing to make healthcare delivery affordable to a vast majority of the population will be an essential requirement.

According to a survey done by National Sample Survey Organisation (NSSO), 40% of the people hospitalised in India borrow money or sell assets to cover their medical expenses. A large number of populations cannot afford to required treatment at all.

Hence it is imperative that the health insurance coverage is encouraged in our country by the government through appropriate incentives. Increasing incidence of lifestyle diseases and rising medical costs further emphasise the need for health insurance. Health insurance coverage in India is currently estimated at just around 3.5% of the population with over 70% of the Indian population living without any form of health coverage.

Conclusion:

Therefore, in my view an integrated approach by leveraging IT, appropriately structured Health Insurance schemes for all strata of society, supported by well and evenly distributed ‘Jan Aushadhi’ outlets, deserves consideration by the Government. A detail and comprehensive implementable plan is to be prepared towards this direction to address the pressing issue of improving ‘Access to Affordable Integrated Healthcare’ to a vast majority of population in India, if not to ALL.

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.

Global API manufacturers are poised to penetrate the Indian market in a bigger way – will the API ‘marketing warfare’ be even more intense, in future?

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India currently plays a relatively dominant role in the Global Active Pharmaceutical Ingredient (API) Market with China being ahead of India. While this is the current scenario, many experts in this field contemplates that important players from the regulated markets will soon start making significant inroads in India.Current API Market situation in India:In 2007 the API output value in India was around US $4.1 billion registering a 5 year CAGR of around 19% and ranking fourth in the world API output. According to the Tata Strategic Management Group, Indian API export value is expected to increase to US $12.75 billion in 2012.

Currently in India about 400 different types of APIs are manufactured in around 3000 plants, Ranbaxy Laboratories, Lupin, Shasun Chemicals, Orchid Chemicals, Aurobindo Pharma, Sun Pharmaceuticals Ipca Laboratories and USV being the top API manufacturers of the country. Indian domestic companies source almost 50 percent of their API requirements from China, because of lower cost in that country.

In terms of global ranking, India is now the third largest API producers of the world just after China and Italy and by 2011 is expected to be the second largest producer after China. However, in Drug Master File (DMF) filings India is currently ahead of China.

In addition, India scores over China in ‘documentation’ and ‘Environment, Health and Safety (EHS)’ compliance. All these have contributed to India having around 100 US FDA approved world class manufacturing facilities, which is considered the largest outside the USA.

Indian API manufacturers are facing a cut throat competition from their Chinese counterparts mainly because of lower costs in China. Considerably higher economies of scale and various types of support that the Chinese API manufacturers receive from their Government are the main reasons for such cost differential.

Growing competiton from the regulated markets:

We now observe a new trend within the API space in India. Many of the global innovators and generic companies are keen to enter into the API space of India.

It is known that API manufacturers from the regulated markets are already selling their products in India. However, at present, the numbers of Indian registrations for API applied by some of the large global companies, as reported by ‘Thomson Reuters Newport Horizon Premium’, are quite significant, which are as follows:

1. Novartis, Switzerland:20
2. Pfizer, USA:16
3. Sanofi-Aventis, France: 26
4. Teva, Israel: 45
5. Schering-Plough, USA:39
6. BASF: 37
7. DSM: 26
8. E.ON AG: 16
9. Kyowa Hakko: 23

All these companies who are entering into the API business space in India, I am sure, have worked out a grand design to compete not only with the the low cost domestic API manufacturers, but also with the cheaper imports, particularly from China.

What will then be the competitive edge of these companies in India?

It appears that each of these companies has weighed very carefully the existing strategic opportunities in the API sectors of India, both in terms up technology and also in terms of domestic demand.

Strategic gap in API manufacturing technology:

India, undeniably, is one of the key global hubs in the API space, with competitive edge mainly in ‘non-fermentation technology’ product areas. This leaves a wide and perceptible technological gap in the areas of products requiring ‘fermentation technology‘.

Significant demand from domestic formulations manufacturing :

India is much ahead of China in pharmaceutical formulations manufacturing, especially in the area of exports to the regulated markets like, the USA and EU. Over 25 domestic Indian companies are currently catering to exports demand of the U.S market. However, it is interesting to note that the global manufacturers like Sandoz, Eisai, Watson, Mylan have already set up their formulations manufacturing facilities in India and some more are expected to follow suit over a period of time. Hence, fast growing domestic demand for APIs, especially for exports, will drive the business plan of the global API players for India.

Is the cost advantage in India sustainable?

Indian API manufacturers although currently have a cost advantage compared to their counterparts in the regulated market, this advantage is not sustainable over a period of time because of various reasons. The key reason being sharp increase in cost related to more stringent environmental and regulatory compliance, besides spiralling manpower and other overhead costs.

Indian regulatory requirements for the global API players:

To sell their APIs into India, global companies are now required to obtain the following regulatory approvals from the Indian authorities:

1. Foreign manufacturing sites for the concerned products
2. APIs which will be imported in the country

The Drug Controller General of India (DCGI) has stipulated a fee of U.S$1,500 to register the manufacturing premises and U.S$1,000 to register each individual API. Since January 2003, around 1,200 registration certificates have been issued in India. Large number of Indian registrations is attributed by many to the strategic technology gap in India, as stated above, demand of high-quality API for finished formulations required by the regulated markets like the U.S and EU, and relatively cheaper product registration process.

As we see above Teva has gone for maximum number of Indian registrations, so far and most probably selling the APIs to their contract formulations manufacturers in India. Similarly, Schering-Plough and Sanofi-Aventis, if not Pfizer are perhaps catering to the API demand of their respective formulations manufacturing plants in the country.

Whatever may be the reasons, these global players are now exporting APIs at a much larger scale to India and in that process have started curving out a niche for themselves in the Indian API market. Impressive growth of the domestic pharmaceutical formulations manufacturing market fueled by increasing domestic consumption and exports to the regulated markets, coupled with gradual improvement in the regulatory environment of the country, is expected to drive the growth of API business of the global players.

However, the moot question is how significant will this competition be?

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.

Fixed Dose Combination’ drugs market in India is growing faster – are there enough regulatory checks and balances to prevent market entry of ‘irrational combinations’ to ensure patients’ safety?

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The WHO Model of FDCs:The 2005 ʹProcedure to update and disseminate the WHO Model List of Essential Medicines, Criteria for Selection‘ includes the following statement regarding fixed dose combination products (FDCs):ʺMost essential medicines should be formulated as single compounds. Fixed‐dose combination products are selected only when the combination has a proven advantage over single compounds administered separately in therapeutic effect, safety, and adherence or in delaying the development of drug resistance in malaria, tuberculosis and HIV/ AIDS.ʺ

FDCs need to demonstrate clinical efficacy and safety beyond that for the individual drugs given alone. They would also need to ‘demonstrate bioequivalence of the single combined dose unit with the components administered in the same doses separately but concomitantly’.

‘Adherence’ aspect of WHO Model for FDCs is also important. Problems with ‘adherence’ could lead to inadequate and inconsistent dosing, which in turn could lead to development of drug resistance. FDCs, therefore, are expected to improve compliance reducing the risk of development of drug resistance.

However, one of the major disadvantages with the FDCs is lack of flexibility in adjusting dose of individual ingredients, even if it is required for some patients. Internationally, most popular example is the FDCs of antiretroviral drugs for HIV infected patients like, Combivir, Trzivir, Kaletra etc. Besides, there are FDCs for various other disease areas, like, infections, respiratory and cardiovascular disorders etc.

New FDCs are patent protected in the USA:

In the western world, like the USA, new FDCs may also get patent protection. A company may obtain marketing exclusivity for a new FDC even when individual active ingredients go off patent. However, in India FDCs cannot be patented as per Patent Acts of India 2005.

Market attractiveness for FDCs in India:

In India the market for FDCs is very large and growing much faster, in sharp contrast to the western world. Because of growing market demand, pharmaceutical companies in India tend to market FDCs of all different permutations and combination, at times even crossing the line of a ‘sound medical rationale’. For this reason, we find in the website of ‘Central Drugs Standard Control Organization’ (CDSCO), the banned list of so many FDCs.

Lack of regulatory compliance has created a messy situation with FDCs in India:

Introduction of new FDCs does not only warrant a ‘sound medical rationale’ but also ‘strict conformance to all prescribed regulatory requirements’ for the sake of patents’ safety.

To check unfettered market introduction of potentially harmful FDCs, the Ministry of Health issued a Notification in September 1988, including FDCs in Rule 122 E of the Drugs & Cosmetics Rules (D&CR) 1945. In effect, it removed the powers of the State FDAs to give manufacturing or marketing approval of FDCs. After the notification was issued, all manufacturers/marketers of all FDCs are required to apply only to the Drug Controller General of India (DCGI) under Rule 122E of the D&CR 1945 as a new drug, along with the stipulated fees by way of a Treasury Challan.

Since this entire process entails relatively more regulatory data generation, besides the time and expenses involved, the above Rule was continuously and deliberately broken and manufacturing and marketing approvals were routinely sought and obtained from the State FDAs. Many believe that the State FDAs were equally responsible for knowingly flaunting the Law, as were the pharmaceutical companies.

Patients’ safety – the key concern:

This complicity resulted in the market being flooded with ‘irrational combinations’ which posed a real threat to patients’ safety. The state FDAs were reminded of the Notification by the earlier DCGI. 294 FDCs got caught in this dispute. The important issue of patients’ safety in that process got converted into a legal issue, as many FDC manufacturers chose to go to the court of law to redress their grievances in this matter.

Untangling the messy knot:

As the issue got trapped into various prolonged litigations, the current DCGI took initiative of resolving this contentious issue with the help of an expert committee, involving the manufacturers.

This subcommittee cleared 48 FDCs under ‘similar FDCs already approved’, after discussing the merits and demerits, including pharmacodynamics, pharmacokinetics, side effects, dosage, medical rationale etc. of each ingredient and the combinations. The decision of the Sub Committee was then submitted to the Drug Technical Advisory Board (DTAB).

After formal approval of DTAB, a notification is expected to be issued subsequent to which each of these combinations will be construed to be a new drug and any company wishing to market/manufacture the formulation will require submitting its Application in Form 44 to the DCGI to get approval in Form 45. The process will be completed after the balance 142 FDCs, which need further examination, are individually approved.

This issue sends a clear signal to all concerned that resorting to any form of shortcuts to bypass strict adherence to prescribed regulatory requirements, could seriously jeopardise the patients’ safety. The number of FDCs banned by CDSCO and also ban of those FDCs agreed and accepted by the industry without any challenge during the above process, will vindicate this point.

Solving the current logjam is not enough:

Solving the current logjam on FDCs by the DCGI is a onetime exercise and will perhaps clear a serious mess-up created over a long period of time. It can definitely not be an ongoing process. Neither will it be desirable. There is an absolute and urgent need to follow the WHO Model for FDCs, in India, as indicated above, through appropriate regulatory processes. At the same time, the DCGI should ensure strict compliance of the Notification issued by Ministry of Health on FDCs, in September 1988. Otherwise, unchecked entry of FDCs of all possible permutations and combinations could pose a serious threat to patients’ interest and safety.

Meeting unmet needs of the patients with high quality drugs of scientifically proven high efficacy and safety profile should always define the purpose of existence of the pharmaceutical industry. Any patients’ safety related issue deserves no scope for any compromise.

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.

Unlike China, IPR issues in India are being hijacked by the issue of ‘Access to Affordable Modern Medicines’.

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‘Incremental innovation’, related to the pharmaceutical industry, has become a point of raging debate in India. Over a period of time ‘not really a breakthrough’ but ‘incremental inventive steps’ to discover New Chemical Entities (NCE), which would offer significant benefits to the patients, are being considered as of critical importance by the stakeholders of the pharmaceutical industry, the world over. Such types of innovations are being termed as ‘incremental innovation’ , with underlying implied meaning of ‘frivolous’ nature of the innovation, to some section of people.

Most innovations in the pharmaceutical industry have always been ‘incremental’ in nature:

We have been observing such ‘incremental innovation’ from ‘Penicillin era‘ with different derivatives of penicillins, right through to ‘Quinolone era’ with ciprofloxacin, ofloxacin, sparfloxacin etc to ‘H2 receptor antagonists’ with cimetidine, ranitidine, roxatidine to ‘proton pump inhibitors’ with omeprazole, esomeprazole, rabeprazole etc.

We see such important ‘incremental innovation’ with many successful drugs across various disease areas. How many different varieties of ‘statins’, ‘betablockers’, ‘ace inhitors’ etc we have been prescribed by the medical profession over so many years with amazing results? This trend continues to offer better and better treatment options to the patients through the medical profession, across the world.

Unfortunately ‘incremental innovation’ has become a contentious issue in India. Section 3d of the Indian Patents Act 2005 has become a key barrier to continue with this process of innovation, in search of better and better medicines. ‘Breakthrough innovations’, which are very important though, are not as frequent in the pharmaceuticals industry, just as in many other industries, including Information technology (IT). ‘Incremental innovations’ are, therefore, the bedrock to improve the types of medications to treat various disease conditions.

A quick comparison with China:

As reported by the Department of Commerce of the U.S Government, domestic consumption of medicines both in India and China is around 70% of the domestic productions of the respective countries. These medicines are available at a very reasonable price to the local populations.

Fuelled by strong domestic demand, coupled with exports to other countries, the pharmaceutical industry in both India and China are showing impressive growth, China being ahead of India in both pace of growth, as well as in terms of market size.

Why some key IPR issues, like ‘incremental innovation’, are facing stiff opposition in India when it is not so in China?

Intellectual Property Regime (IPR) is now in place in both the countries. However, criteria of ‘patentability’, as mentioned above, still remain a contentious issue in India. The issue of ‘access to affordable modern medicines’ is being unnecessarily dragged into the discussion of IPR related issues, where resolution of each of these two issues warrants totally different types of approaches.

The issue of ‘access’ and ‘affordability’ of medicines must be addressed with all earnestness by all concerned, but surely, I repeat, with a different kind and sets of measures. Mixing IPR issues with the issue of ‘access to affordable modern medicines’ sends a wrong message, which would mean that IPR is the cause of this problem in India or in other words, IPR has aggravated this problem since January 1, 2005, the day the new Patents Act came into force in India. This definitely is not the reality in our country.

As I have been saying repeatedly, why then from 1972 to 2005, when pharmaceutical products patents were not being granted, the access to affordable modern medicines were denied to 650 million population of India? The solution to this problem, in my view, lies in effectively addressing the issue of healthcare infrastructure, healthcare delivery and healthcare financing (health insurance for all strata of society) with an integrated approach and in tandem through Public Private Partnership (PPP) initiatives.

Is this issue cropping up because of intense pressure and public opinion created by over 20,000 small to medium scale producers of generic drugs, who have grown within the industry in a much protected environment created by the Government of India and had thrived in business by introducing copycat versions of innovators drugs for over three decades, during the old paradigm?

Large Indian companies are by and large in favour of IPR:

The large Indian Pharmaceutical Companies like Piramal Healthcare support the new IPR regime, envisaging the benefits that it will bring to the country in general and the domestic pharmaceutical industry in particular, in medium to longer term. These benefits will not only come from the fruits of their R&D initiatives, but also through various emerging opportunities of business collaboration in areas of their respective strengths, with the Multi National Corporations (MNCs) across the globe.

The Indian pharmaceutical industry, which had registered a double digit CAGR growth rate over the past decade, is poised to record a turnover of U.S$ 20 billion by 2015, as reported by Mckinsey & Co. Even at that time patented products are expected to contribute just about 10% of the total market and balance 90% of the market will continue to be dominated by low cost branded generic drugs.

Indian Pharmaceutical Industry has potential to emerge as an international force to reckon with. But will it..?

Within knowledge based industries, after meteoric success of the Information Technology (IT), Indian pharmaceutical industry armed with its fast growing biotech sector, has all the potential to be a major global force to reckon with. It just needs to foster the culture of innovation. One will feel happy to note that the Department of Pharmaceuticals (DoP) of the Government of India has started taking, at least, some initiatives towards this direction.

The key issues of ‘patentability‘ together with lack of a strong regulatory framework for effective patent enforcement and data protection are becoming barriers to development of international collaboration in the space of pharmaceutical research and development in India.

Why is China different?

From the beginning of 90’s China initiated its reform processes in the IPR area, which may not be perfect though, as yet. However, since 1998 with stricter regulations on pharmaceutical manufacturing and introducing Drug Management Law, China to a great extent regulated entry of ‘fringe players’ in the pharmaceutical business. It enacted TRIPS compliant patent laws in 2002, extending pharmaceutical product patent for 20 years and regulatory data protection (RDP) for 6 years.

Currently China is focusing more on biotech drugs and has wheezed past India in terms of success in this important sector of the healthcare industry, though they have still miles to go to catch up with the developed world in this space. With the creation of innovative environment within the country, China is fast getting international recognition and collaboration, in genomic and stem cell research and technology.

In the pharmaceutical sector also China has brought in significant regulatory reforms since 2001. Because of its stronger IPR regime than India and other important regulatory reform measures that the country has been undertaking, China is racing past India to become one of the largest markets of the global pharmaceutical industry. In this process, China is attracting far more foreign direct investments (FDI) than India, almost in all verticals of the pharmaceutical industry, from R&D, clinical trials to contract research and manufacturing.

Where India scores over China:

Quality of co-operation and relationship between global pharmaceutical companies and the domestic Chinese pharmaceutical industry is believed to be not as good as what is prevailing in the Indian pharmaceutical industry. There are many reasons for such difference, language being the key reason. In China, English is still not a very popular language, in sharp contrast to India. This limits effective human interaction with the foreigners in China. In the area of, especially, pharmaceutical chemistry, Indian scientists are considered to have a clear edge over their Chinese counterparts.

Chinese policy makers are gradually trying to shed off their protectionist’s attitude in the globalization process.

Steps taken by China to encourage innovation are far more encouraging than what is being done in India. Global pharmaceutical companies are finding China more attractive than India to expand their business. As the saying goes, ‘proof of pudding is in its eating’, predominantly because of this reason, FDI for the pharmaceutical sector is coming more in China than in India.

Instead of creating drivers, is India creating barriers to innovation?

It is indeed unfortunate that the Indian law differentiates innovation based on its types and denies grant of patent for ‘incremental innovation’, which is the bedrock of progress for the pharmaceutical industry. For this reason section 3d of Indian Patent Acts 2005 does not consider the ‘salts, esters, polymorphs and other derivatives of known substances unless it can be shown that they differ significantly in properties with regard to efficacy’, patentable.

Strong propaganda campaign unleashed by the vested interests alleging rampant violation of section 3d by the Indian Patent Office (IPO) is another case in point. Interestingly the aggrieved parties decided to fight this issue through media, avoiding the legal route for redressal of their grievances. They on record cited a hilarious reason for the same that no lawyer in India is coming forward to fight their cases, at the behest of the MNCs.

The way forward:

To encourage innovation within a TRIPS compliant IPR regime, as one sees in China,
stereotyping innovations as ‘breakthrough’ or ‘incremental’ will dampen the spirit of innovative culture within the country. Inventive steps in an innovative process of a pharmaceutical product are directed to satisfy some important needs of the patients. As I said before, most innovations, which are an integral part of the progress of this industry, have been ‘incremental’ in nature. Thus ignoring ‘incremental innovation’ in India could be counterproductive, in more than one way.

Investments required towards R&D that a ‘breakthrough type’ innovation would warrant are very high. Indian pharmaceutical industry will have a serious limitation in that direction. The path of ‘incremental innovation’ ably backed by a strong IPR enforcement process, would, I reckon, be the best way forward for the Indian players to compete effectively with global innovator companies, leave aside their Chinese counterparts.

Any innovation, which has gone through inventive steps, even if it is ‘incremental’ in nature, should not be considered ‘frivolous’. It demeans the very process of innovation.

Raising various public sensitive and emotive issues on product patents and combining it with issues of ‘access’ and ‘affordability’ of modern medicines, some powerful lobby of vested interests may seriously retard the progress of India. The Government of India should recognize that it will very adversely affect the country in its pursuit of excellence in the field of research and development, in medium to longer term.

Such emotive misconceptions are compelling the policy makers to divert their attention from the root cause, which I have enumerated above, of the issue of ‘access to affordable modern medicines’ to the vast majority of Indian population.

In my earlier article, I suggested a public private partnership (PPP) model to address these critical healthcare issues. Examples of such PPP are already there in India in states like Tamil Nadu, Andhra Pradesh and Karnataka.

Astute policy makers of the Government of India, I am sure, will soon realize that encouraging, rewarding and protecting patents through a robust TRIPS compliant IPR framework would enable India to place itself ahead of China, as the choicest destination 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.