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Innovative ‘Medicines Too Damn Expensive’: Health Risk For Billions of People

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Most ‘medicines are too damn expensive. And a key part of the problem is the lack of consistent information about drug pricing. It’s not often that the Trump administration and the anti-poverty NGO Oxfam find themselves singing from the same hymn sheet.’ This was articulated in the article carrying a headline, ‘No One Knows The True Cost Of Medicines, And Blaming Other Countries Won’t Help,’ published by Forbes on March 03, 2019.

In the oldest democracy of the world, on the eve of the last Presidential election, Kaiser Health Tracking Poll, September 2016 captured the public anger on skyrocketing cost of prescription drugs, which they ranked near the top of consumers’ health care concerns. Accordingly, politicians in both parties, including the Presidential candidates, vowed to do something about it.

Ironically, even so close to General Election in the largest democracy of the world, no such data is available, nor it is one of the top priority election issues. Nevertheless, the discontentment of the general public in this area is palpable. The final push of election propaganda of any political party is now unlikely to include health care as one of the key focus areas for them. This is because, many seemingly trivial ones are expected to fetch more votes, as many believe.

In this area, I shall dwell on the ‘mystic’ area of jaw dropping, arbitrary drug pricing, especially for innovative lifesaving drugs – drawing examples from some recent research studies in this area.

High drug prices and associated health risks for billions of people:

New Oxfam research paper, titled: ‘Harmful Side Effects: How drug companies undermine global health,’ published on September 18, 2018, ferreted out some facts, which, in general terms, aren’t a big surprise for many. It highlighted the following:

  • Abbott, Johnson & Johnson, Merck and Pfizer – systematically hide their profits in overseas tax havens.
  • By charging very high prices for their products, they appear to deprive developing countries more than USD 100 million every year – money that is urgently needed to meet health needs of people in these countries.
  • In the UK, these four companies may be underpaying around £125m of tax each year.
  • These corporations also deploy massive lobbying operations to influence trade, tax and health policies in their favor and give their damaging behavior greater apparent legitimacy.
  • Tax dodging, high prices and political influencing by pharmaceutical companies exacerbate the yawning gap between rich and poor, between men and women, and between advanced economies and developing ones.

The impact of this situation is profound and is likely to further escalate, if left unchecked, the reason being self-regulation of pharma industry is far from desirable in this area.

As discussed in the article, titled ‘Why Rising Drug Prices May Be the Biggest Risk to Your Health,’ published in Healthline on July 18, 2018, left unchecked, the rising cost of prescription drugs could cripple healthcare, as well as raise health risks for millions of people. Although this specific article was penned in the American context, it is also relevant in India, especially for lifesaving patented drugs, for treating many serious ailments, such as cancer.

Is pharma pricing arbitrary?

The answer to this question seems to be no less than an emphatic ‘yes’. Vindicating this point, the above Forbes article says: ‘It’s a myth that the costs of medicines need to be high, to cover the research & development costs of pharmaceutical companies.’

Explaining it further, the paper underscored, ‘Prices in the pharma industry aren’t set based on a particular acceptable level of profit, or in relation to the cost of production. They’re established based on a calculation of the absolute maximum that enough people are willing to pay.’

The myth: ‘High R&D cost is the reason for high drug price’: 

Curiously, ample evidences indicate that this often-repeated argument of the drug companies’, is indeed a myth. To illustrate the point, I am quoting below just a few examples, as available from both independent and also the industry sources that would bust this myth:

  • Several research studies show that actual R&D cost to discover and develop a New Molecular Entity (NME) is much less than what the pharma and biotech industry claims. Again, in another article, titled ‘The R&D Factor: One of the Greatest Myths of the Industry,” published in this blog on March 25, 2013, I also quoted the erstwhile CEO of GlaxoSmithKline (GSK) on this subject. He clearly enunciated in an interview with Reuters that: “US $1 billion price tag for R&D was an average figure that includes money spent on drugs that ultimately fail… If you stop failing so often, you massively reduce the cost of drug development… It’s entirely achievable.”
  • In addition, according to the BMJ report: ‘More than four fifths of all funds for basic research to discover new drugs and vaccines come from public sources,’ and not incurred by respective drug companies.
  • Interestingly, other research data reveals that ‘drug companies spend far more on marketing drugs – in some cases twice as much – than on developing them.’ This was published by the BBC New with details, in an article, titled ‘Pharmaceutical industry gets high on fat profits.’

World Health Organization (WHO) recommends transparency in drug pricing:

The report of the United Nations Secretary-General’s High-Level Panel on ‘Access to Medicines’ released on September 14, 2016 emphasized the need of transparency in this area of the pharma sector. It recommended, governments should require manufacturers and distributors to disclose to drug regulatory and procurement authorities information pertaining to:

  • The costs of R&D, production, marketing and distribution of health technology being procured or given marketing approval to each expense category separated; and
  • Any public funding received in the development of any health technology, including tax credits, subsidies and grants.

But the bottom-line is, not much, if any, progress has been made by any UN member countries participating in this study. The overall situation today still remains as it has always been.

Conclusion:

The Oxfam report, as mentioned above, captures how arbitrarily fixed exorbitant drug pricing, creates a profound adverse impact on the lives of billions of people in developing and underdeveloped countries. Let me quote here only one such example from this report corroborating this point. It underlined that the breast cancer drug trastuzumab, costing around USD 38,000 for a 12-month course, is almost five times the average income for a South African household. The situation in India for such drugs, I reckon, is no quite different.

To make drug pricing transparent for all, the paper recommends, “attacking that system of secrecy around R&D costs is key.” Pharma players have erected a wall around them, as it were, by giving reasons, such as, ‘commercial secret, commercial information, no we can’t find out about this’…if you question intellectual property, it’s like you’re questioning God.” The report adds.

In India, the near-term solution for greater access to new and innovative lifesaving drugs to patients, is to implement a transparent patented drug pricing policy mechanism in the country. This is clearly enshrined in the current national pharma policy document, but has not seen the light of the day, just yet.

In the battle against disease, life-threatening ailments are getting increasingly more complex to treat, warranting newer and innovative medicines. But these ‘drugs are too damn expensive’.

In the midst of this complicated scenario, billions of people across the world are getting a sense of being trapped between ‘the devil and the deep blue sea.’Occasional price tweaking of such drugs by the regulator are no more than ‘palliative’ measures. Whereas, a long-term solution to this important issue by the policy makers are now absolutely necessary for public health interest, especially in a country like India.

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.

Wide Gap Between Health Care Needs, And Delivery: Is The Bridge Still Too Far?

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“Health inequities which abound in India must be corrected through investments in a robust primary health care system,” said Professor K Srinath Reddy, chairman, Public Health Foundation of India (PHFI), not too long ago.

The equity gap between health care needs and delivery for the general population of India continues to widen.

As the next Union Budget of India is coming nearer, the question in this regard that comes at the top of mind is:

Would adequate resources be allocated by the Union Finance Minister to bridge this gap effectively now or the elusive bridge continue to remain too Far?

The growing challenges: 

Up until now, despite making some progress in improving access to health care, India continues to face the growing challenges of:

  • Gross inequalities in this area by socioeconomic status, geography and gender. 
  • High out-of-pocket health expenditure pushes its ever increasing financial burden overwhelming on the private households, that accounts for over three-quarters of health spending in India.
  • Exorbitant out-of-pocket health spending is also responsible for mercilessly driving into poverty more than half of Indian households, or around 39 million Indians, each year.

The paper titled, “Health care and equity in India”, published by ‘The Lancet’ on February 05, 2011, well deliberated on this issue. 

The paper identifies 3 key challenges to equity in health care:

  • In service delivery
  • In financing
  • In financial risk protection

In the article titled, “My Expectations From The Union Budget (2016-17)”, written in this Blog on December 07, 2015, I also suggested that adequate resource deployment be made by the Government now in power, in all these three areas, while presenting the forthcoming Union Budget on February 28, 2016.

The root cause of inequity in healthcare:

I reckon, there are, at least, the following three key reasons that can be attributed to this failure, on the part of various Governments in power, till today:

  • Inability, primarily on the part of the central government, to effectively integrate healthcare with socioeconomic, social hygiene, education, nutrition and sanitation related issues of the nation. 
  • Health being a state subject, not much of coordinated and robust planning has so far been taken place in this area, between the Central and the State Governments, to effectively address the pressing health care related growing inequity across the country, in general.
  • Budgetary allocation and other fiscal measures towards health care, both by the central and most of the state governments, are grossly inadequate. 

As I said before, in another article published by this blog titled, “With Highest Billionaire Wealth Concentration, India Tops Malnutrition Chart in South Asia” on January 26, 2015, it is a well accepted fact that reduction of social inequalities ultimately helps to effectively resolve many important health care issues.

Otherwise, only a much smaller population of the country having adequate access to knowledge, social and monetary power, will continue to have the necessary resources to address their health care needs, appropriately.

UNICEF highlights stark inequalities in India:

According to UNICEF, every year, 1 million children below the age of five years die, due to malnutrition related causes in India. This number is worrisome as it is far higher than the emergency threshold, according to the World Health Organization (WHO) classification of the severity of malnutrition.

Highlighting stark inequality in India, the report says, “The net worth of a household that is among the top 10 per cent can support its consumption for more than 23 years, while the net worth of a household in the bottom 10 percent can support its consumption for less than three months.”

Are so called “patient centric approaches” real?

Patients are also bearing a different kind of brunt altogether, from several other corners, on their health related issues.

Today, most of the important stakeholders of the health care industry, in general, seem to be using various facades of ‘patient centric approaches’, just for petty commercial gains, or for gaining some key strategic commercial advantages.

Such entities could well be pharmaceutical industry, doctors, hospitals, diagnostic centers, politicians or any other stakeholders.

It is unfortunate that most of them, at various different times, either pontificate about following ‘patient centric approaches’ or use the patients cleverly just to achieve their respective commercial or political goals, solely driven by vested interests. While on the ground, growing inequity in health care keeps marching north.

A recent paper of NITI Ayog:

In a discussion paper of July 18, 2015 titled, “Health System in India: Bridging the Gap Between Current Performance and Potential”, The National Institution for Transforming India Aayog (NITI Aayog), the policy think tank of the new Indian Government, has also accepted the following 3 critical realities, currently prevailing in the health care environment of India: 

  • India’s progress in health outcomes has been slower in comparison to other countries with comparable incomes and at similar stages of development. 
  • Impressive gains in per capita income should match with an increase in life expectancy or health status. 
  • Out of pocket expenditure in India is high (70 percent of total health expenditure). This is catastrophic for the poor and pushes an estimated 37 million into poverty every year. 

The NITI Ayog paper also emphasized, although health is a subject allotted to the State List, under the Seventh Schedule of the Indian Constitution, the Central Government is jointly responsible for items in the Concurrent List. 

Conclusion:

Currently, India is the global numero uno in the GDP growth rate. Thus, there cannot probably be any better time for the nation to leapfrog in the health care space, with a quantum increase in public financial commitments, to radically revamp the fragile public health system in the country. 

I repeat, incremental progress in the public health care system is just not enough for the country, extensive application of cutting edge Information Technology (IT) effectively, dovetailing with the creation of modern brick and mortar public health care infrastructure, top class human resource namely, doctors, nurses and related skill development process, on an ongoing basis.                                                                             

The Government should also ensure that the domestic health care industry comes forward to shoulder higher responsibility to enable the country in offering greater equity in health care, in tandem with the Union Ministry of Health and the State Governments.

This path, in my view, would help building a more equitable health system with a strong foundation of public health for more than 1.2 billion Indians. In that process the fast widening gap in equity, between health care needs and availability, could be bridged much sooner, and in a sustainable way.

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.

India: Too Enticing a Pharma Market to Ignore by the Global Players despite unhappiness

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A White-Paper, titled “Emerging Markets Today and Tomorrow: Insights on Healthcare, Pharmaceuticals and Future Trends in the BRIC Landscape”, released by a global technology and services company specializing in healthcare, Cegedim, in June, 2012 highlighted that 20 to 30 percent of the profit of the global pharmaceutical companies now comes from the emerging markets of Brazil, Russia, India and China (BRIC).

The paper also indicated that just five years ago these markets contributed a meager 5 percent of profits of the global pharma players. Hence, in the evolving paradigm getting the relationship right between these BRIC healthcare markets and the global pharmaceutical manufacturers will differentiate men from the boys.

Maintaining a flexible country-specific business strategy accompanied by a diverse product portfolio is going to be the name of the game in these potential eldorados, the authors articulated in the paper.

It is indeed absolute no-brainer for anyone to make out how critical the emerging markets are to the global pharmaceutical players in the rapidly evolving scenario, despite many tough legal and policy measures taken by the governments in these markets in favor of public health interest.

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 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)

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, Daiichi Sankyo and Abbott Laboratories, to name a few, either to acquire large generic or biosimilar or nutraceutical drug companies or ink various interesting and win-win collaborative deals in India to maintain their global business growth. 

‘Enticing factors’ for India:

Expected ‘Enticing Factors’ for India, in my views,  will be as follows:

  • A country with 1.13 billion population and a GDP of US$ 1.8 trillion in 2011 is expected to grow at an average of 8.2 percent in the next five year period
  • Public health expenditure to more than double from 1.1 percent of the GDP to 2.5 percent of GDP in the Twelfth Five Year Plan period (2012-17)
  • Government will commence rolling out ‘Universal Health Coverage’ initiative
  • Budget allocation of US$ 5.4 billion announced towards free distribution of essential medicines from government hospitals and health centers
  • Greater plan outlay for NRHM, NUHM and RSBY projects
  • Rapidly growing more prosperous middle class population of the country
  • High quality, cost effective, fast growing domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets
  • Rising per capita income of the population and relative in-efficiency of the public healthcare systems will encourage private healthcare services of various types and scales to flourish
  • Expected emergence of a robust health insurance model for all strata of society as the insurance sector is undergoing reform measures
  • Fast growing Medical Tourism
  • World class local outsourcing opportunities for evolving combo-business model of global pharmaceutical companies with both patented and branded generic drugs

Many global players are still out of step with time in India:

It appears many global pharma companies are still quite out of step with time in India and are trying hard to get a less challenging environment to grow their business in the country.

However, I reckon, all these companies ultimately willy-nilly will require coming to terms with the following current pharmaceutical business environment in India formulating fresh innovative strategies, earlier the better:

  • Pricing pressure from the government or even from the Supreme Court, which may soon include patented and imported products under price regulation
  • Current Patent Law is unlikely to change, hence threat of Compulsory Licensing (CL) for patented products with exorbitant price tags will continue to loom large
  • Pressure may build-up for technology transfer/local manufacturing of patented products
  • Close government scrutiny on pharmaceutical marketing practices
  • More stringent drug regulatory norms, especially in areas of clinical trials

Indonesia has set an example:

Just to cite a relevant example in this context, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia had said, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “They can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It is not unlikely that India may also come out with similar requirements for the global players for more sustainable job creation.

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

Challenging to avoid current patent regime in India:

It will be extremely challenging for the global players to avoid the current patent regime in India, even if they do not like it. This is mainly because of the following reasons:

  • If an innovator company decides not to file a product patent in India, it will pave the way for Indian companies to introduce copy-cat versions of the same in no time, as it were, at a fractional price in the Indian market. Further, there would also be a possibility of getting these copy-cat versions exported to the unregulated markets of the world from India at a very low price, causing potential business loss to the innovator companies.
  • If any innovator company files a product patent in India, but does not work the patent within the stipulated period of three years, as provided in the patent law of the country, in that case any Indian company can apply for CL for the same with a high probability of such a request being granted by the Patent Controller. 

Five ‘New Strategic Changes’ envisaged:

Five new key strategic changes, in my view, are expected in the Indian pharmaceutical market over a period of time, as follows:

1. As the country will move towards an integrated and robust ‘Universal Health Coverage’ along with comprehensive health insurance systems:

  • Doctors may no longer remain the sole decision makers for the drugs that they will prescribe to the patients and the way they will treat the common diseases. Government, other healthcare providers/ medical insurance companies will start playing a key role in these areas by providing to the doctors well thought out treatment guidelines
  • For a significant proportion of the products that the pharmaceutical companies will sell, tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable
  • More sophisticated pricing methodologies like Health Technology Assessment (HTA) or outcomes based pricing may be followed by the drug price regulators like National Pharmaceutical pricing Authority (NPPA).

2. An integrated approach towards disease prevention may be considered as important as the 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 may be the order of the day

4. Over the counter medicines, especially originated from natural products for common and less serious illnesses may carve out a larger share, as appropriate regulations are put in place

5. Pharmaceutical Marketing Practices will come under intense regulatory scrutiny 

Some questions on long term lucrativeness of the emerging markets?

One school of thought does feel that in the long run, the emerging pharmaceutical markets, like India, may not remain as lucrative to the global pharmaceutical majors. However, that does not mean either that the companies will shut shops in india.

The key reason being, around 80 percent ‘out of pocket’ expenditure for healthcare 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 the country as 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 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 create expected shareholders’ value. 

The opposite 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 percent 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. 

Conclusion:

Be that as it may, to excel in India global pharmaceutical companies will need to find out innovative win-win strategies for all the above India specific issues.

Drug pricing, public health oriented patent regime, technology transfer/local manufacturing of products and stringent regulatory requirements in all pharmaceutical industry related areas, in the interest of the general population, are expected to be the key areas to be expeditiously addressed in the business models of the global pharmaceutical companies for India.

That said, despite various tough measures taken by the government in favor of public interest, as mentioned above, India will continue to remain too enticing a pharmaceutical market to ignore by the global players probably for any time to come in future. If not, many experts believe, flourishing and dynamic domestic pharmaceutical industry will be delighted to have the whole cake and eat it 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.