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Data Manipulation: Leapfrogging Dangerously Into Clinical Trial Domain

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Over the last several years, repeated allegations of gross data manipulative practices, detected by global drug regulatory agencies, such as USFDA and MHRA, have shaken the Indian pharma exporting companies hard.

This has been hurting the overall business performance of most of these players, considerably, besides other consequential fallouts

Significant numbers of pharma manufacturing facilities of different scale and size have been receiving ‘Import Alerts/Warning Letters’, at regular intervals, from the overseas drug regulators. All such steps have resulted in refusal of entry of medicines manufactured in those plants into the importing countries. As on date, most of these bans are for the United States (US), some for the United Kingdom (UK) and now a fresh one that covers all the 28 countries of the European Union (EU).

Consequently, the drug export performance of the country has started moving south, as I indicated in my blog post of September 29, 2014, titled “Make in India…Sell Any where in The World”: An Indian Pharma Perspective.

While looking at the future, the situation seems to be even more concerning than what is generally envisaged today, as it involves many homegrown local pharma behemoths, including the topper of the Indian pharma league table – Sun Pharma.

Time to take the bull by the horns:

These are regular and serious episodes of allegedly deliberate wrong doings involving life saving medicines. It is about time that without further delay the Indian Government and the country’s drug regulators accept unequivocally that there is something fundamentally wrong in this area that needs to be set right urgently.

To come out of this peril soon, competent authorities need to first ascertain without squandering much time on the utopian “conspiracy theory”, whether this seemingly uncontrollable issue falls under:

  • Technical incompetence
  • Inadequate resource deployment
  • Or just an outcome of generally all pervasive and a very Indian “Jugaad” mindset

It could well be a mix of all the three above factors in different proportions.

‘Data manipulation’ dangerously leapfrogging into clinical trial domain:

So far, incidences of alleged data falsification were restricted mostly to drug manufacturing activities. Alarmingly, it has now leapfrogged into the immensely important domain of ‘Clinical Trials’, based on which the drug regulators decide on the ‘Marketing Approval’ of medicines for patients’ consumption, wherever required.

If the Government does not nip it in the bud, ruthlessly and now, it has the potential to heavily impact the innocent patients even costing their precious lives.

What it means commercially?

According to Pharmaceutical Export Promotion Council (Pharmexcil), the Indian pharmaceutical industry could lose around US$1 – US$1.2 billion worth of exports due to the latest decision of the European Union to ban 700 generic drugs that earlier received European Union (EU) clearance for sale in their member countries.

According to Pharmexcil, Europe accounts for US$3 billion out of total Indian pharma exports of US$15.4 billion, which includes both APIs and formulations. This is the first time, when there has been a negative growth in pharma exports to the EU.

Unrolling the GVK Bio saga:

On July 22, 2015 Federal Institute for Medicines and Medical Products of Germany reportedly posted the notice (in German language) of ban of 700 generic drugs effective August 21, 2015. This ban would be applicable to all 28 EU member nations.

Accordingly, from the above date, all these drugs of both the Indian and multinational companies for which clinical trials were done by India’s Hyderabad based GVK Biosciences, cannot be distributed or sold by pharma companies, wholesalers, drug stores and other outlets in the EU, as indicate in the above notice. This would be the largest ban of generic drugs imposed by the European Union, as it comes into effect.

This ban is reportedly the ultimate outcome of an inspection in 2014 by the French authorities of the GVK site that handled the clinical trials for those 700 drugs. The French inspectors found that a number of electrocardiograms were falsified by GVK Bio employees as part of 9 approval studies between 2008 and 2014.

Following this finding, earlier on January 23, 2015, by a Press Release, the European Medicines Agency (EMA) had announced that a number of medicines for which authorization in the European Union (EU) was primarily based on clinical studies conducted at GVK Biosciences in Hyderabad, India, should be suspended.

Though GVK Bio has disputed the claims, it has reportedly set aside up to US$6.5 million for new studies on these drugs.

Indian Government blames ‘vested interests supporting Big Pharma’!

Interestingly, on July 23, 2015, The Financial Express reported, “the Modi government has asked the heads of India’s diplomatic missions in EU member countries and at the European Commission (EC)-level to take up the issue with the concerned authorities and ensure that it is not ‘blown out of proportion’ by ‘vested interests’ supporting the Big Pharma (innovator drug companies).”

However, it is even more interesting that earlier on April 16, 2015, quoting the CEO of GVK Biosciences Private Limited Reuters reported, “India may go to the World Trade Organization (WTO) if the European Union does not reconsider a decision to suspend the sale of about 700 generic drugs that were approved based on clinical trials by GVK Biosciences.”

It is noteworthy, despite the above public announcement, between April and July 2015, India has not lodged any complaint to the WTO on this mega ban in EU, involving clinical trials conducted by GVK Biosciences.

In my view, any tangible immediate outcome of the Indian diplomatic move, particularly on this ban in the EU, as reported above, appears rather unlikely, if at all.

The rigmarole continues:

The narrative of alleged gross falsification of sensitive clinical trial data does not end here. Almost replicating what happened earlier with frequent incidences of drug manufacturing data manipulation, the same rigmarole now leapfrogs into another important domain with similar intensity.

On June 30, 2015, close on the heels of the above GVK Biosciences saga, the World Health Organization issued a ‘Notice of Concern’ after inspection of Chennai-based Contract Research Company, Quest Life Sciences facility.

It also brought to light, critical deviations from GCP (Good Clinical Practices), over data integrity, subject safety and quality assurance and in gross violation of procedures during clinical trials for HIV drugs, such as, Lamivudine, Zidovudine and Nevarapine dispersible tablets from Micro Labs.

WHO inspectors reportedly found that “two-thirds of electrocardiograms performed on patients were duplicates with dates and names changed by the company”.

The WHO letter also underscored, “These issues appear to be systemic in nature and occurring many times over a significant period of time, and not only as a one-time incident for the study submitted to WHO.”

Again, almost depicting the past, there does not seem to be any perceptible and strong regulatory interventions in India in this regard, event after the above ‘Notice of Concern’ from the WHO.

Could assume a snowballing effect:

This situation may eventually assume a snowballing effect, when data related malpractices in clinical trials would catch up with drug manufacturing related data manipulation detected by the foreign drug regulators in India. I have just given an example of its continuation in the clinical trial domain.

The following are a few examples of just the last six months of 2015 of the continuation of the same in the drug manufacturing area:

Cadila Pharmaceuticals Limited:

In a letter dated February 25, 2015 to Cadila Pharmaceuticals Limited, the USFDA wrote that in the pharma manufacturing facility of the company, located at 294 GIDC Industrial Estate, Ankleshwar, Gujarat, their (USFDA) investigator identified significant deviations from current good manufacturing practice (CGMP) for the manufacture of Active Pharmaceutical Ingredients (APIs). Those deviations cause the APIs manufactured there to be adulterated, in that the methods used in, or the facilities or controls used for, their manufacture, processing, packing, or holding do not conform to, or are not operated or administered in conformity with CGMP.

Emcure Pharmaceuticals Ltd.:

On July 13, 2015, by an ‘import alert’ posted on its website, the USFDA announced that the regulatory agency had barred imports from Hinjewadi manufacturing plant in Maharashtra of Emcure Pharmaceuticals Ltd., after their inspection revealed the company was not meeting manufacturing quality standards.

Aurobindo Pharma Ltd.:

Again, according to a July 22, 2015 media report, “Hyderabad-based Aurobindo Pharma is the latest addition to an expanding list of Indian drug firms that have come under the scanner of the US health regulator.” In this case also the USFDA reportedly raised issues related to the quality management systems of the company.

Business sustainability could be in jeopardy:

There are ample evidences that manipulations of specified drug quality standards, are making even the large home grown pharma companies to pay through the nose. In fact, it has already cost some of these companies an arm and a leg, at times jeopardizing even their very existence. One such company is Ranbaxy. The issues related to data fudging of Ranbaxy have been so complex and widespread that its recent acquirer Sun Pharma has already started struggling to keep its neck above water with this brand new acquisition.

According to July 27, 2015 media reports, GVK Biosciences are also in parleys to sell the business, following EU drug regulators’ serious allegations of clinical trial data manipulation at its Hyderabad facility.

Again, media reports of July 30, 2015 indicated that hit by the USFDA imposing import ban on three of its manufacturing facilities, Ipca Laboratories reported 86 per cent decline in net profit for first quarter ended June 30, 2015.

Though, some domestic pharma companies are still out of it, with grace, if this overall menace remains unchecked and not intervened by the Government, it could cost the nation dear, at least when it comes to near term exports business growth and global disrepute for the delinquency.

Are medicines for domestic consumption safe and effective?

When such rampant data manipulation can take place for ‘export quality’ of drugs, what about the quality standards of medicines, which are manufactured for consumption of local patients?

Despite intense furore on this subject, Indian drug regulators at the Central Drugs Standard Control Organization (CDSCO), very strangely, do not seem to be much concerned on this critical issue, at least, as perceived by majority of the stakeholders. It appears from the precedents, our drug regulators seem to act promptly, mostly when the Supreme Court of the country directs them for any specific action for public interest.

Considering blatant violations of GMP and GCP standards that are increasingly coming to the fore related to ‘export quality’ drugs in India, and that too only after the inspections by the foreign drug regulators, the following questions float at the top of my mind:

  • Why no such warnings are forthcoming at all from the Indian drug regulators?
  • Does it mean that the level of conformance to GMP and GCP is hundred percent for all medicines manufactured and clinically evaluated in India for the consumption of local patients?
  • If yes, why such incidences are not uploaded to the CDSCO website, just like USFDA?
  • If not, why?

Conclusion:

Increasing incidences of repeated GMP and GCP violations by the Indian drug exporters, as enunciated mostly by the USFDA, MHRA and now EMA are, in turn, fueling the apprehensions of many Indian stakeholders on the quality manufacturing and clinical evaluation of those drugs in the country.

In the critical public health safety area, there does not seem to be any room for diplomatic maneuvering by the Government, whatever is its financial impact on the drug exports performance of India.

This can be corrected, only if the Indian pharma industry and the Government, in tandem, wish to move in the right direction. Searching for justifications within imaginary ‘vested interests’ and self-created ‘conspiracy theory’ would be futile and counterproductive.

Making the wrongdoers swallow strong bitter pills would help salvaging the seemingly uncontrollable regulatory situation. Additionally, it would stop inviting disrepute to the country that the world was referring to, even until recently, as the ‘pharmacy of world’.

Any attempt to trivialize the situation, could meet with grave consequences  and prove to be foolhardy. The emerging scenario ultimately may even compel the local doctors and hospitals to avoid prescribing drugs of those companies involved in such wrong doings against patients’ interests. This actually happened earlier with Ranbaxy, though briefly. It is also possible that many erudite patients on their own may request the doctors to prescribe equivalent drugs of pharma MNCs, enjoying better brand equity in this regard.

Drug quality related avoidable malpractices and attempted hoodwinking to regulators, are taking place at a time when Prime Minister Modi is going global to give a boost to his much publicized ‘Make in India’ campaign.

In the current aspirational business climate of the country, it is an irony that alleged ‘Data Manipulation’, which was so far confined to pharma manufacturing activities in India, instead of getting mitigated, is now leapfrogging into the related clinical trial domain too, with utter disregard to patients’ health safety interest and the reputation of the country.

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.

 

Booming Sales Of Unapproved Drugs: Do We Need “Safe In India” Campaign For Medicines?

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“To sin by silence when they should protest makes cowards of men”                      - Abraham Lincoln

Not just the Federal Drug Administration of the United States (USFDA), global concerns are being expressed regularly about the laxity of drug regulatory and clinical trial standards in India, exposing patients to health safety related risks.

The problem is significantly more with the Fixed Dose Combination (FDC) Drugs for various reasons. This is worrisome because; the domestic market for FDCs is very large and growing much faster, in sharp contrast to the western world. For example, in 2011-12 FDCs accounted for more than half of all NSAID and oral anti-diabetic drug sales, and one-third and one-fifth of anti-psychotic and anti-depressant/benzodiazepine sales, respectively, according to a recent study.  Both the domestic and multi-national pharma players market FDCs in India

Alarmingly, a plethora of FDCs unapproved by the drug regulators of India on their rationality, efficacy and safety, have flooded the domestic pharma market, in large quantities.

All such drugs are being actively promoted by the respective pharma players, widely prescribed by the doctors, openly sold by the chemists and freely consumed by the patients without any apprehension or having no inkling of the magnitude of the possible health hazards that such drugs might cause, both in short and long term.

Public health safety hazard arising out of this scenario does not seem to have ever been estimated by the Indian drug regulators, despite indictments even by the Parliamentary Standing Committee, nor is there any properly functional system in place to capture such data for meaningful analysis.

As the saying goes ‘better late than never’, a credible report on this menace has just been published on May 12, 2015 by independent experts, which I shall discuss in this article.

Is the situation out of control?

On the ground, the situation seems to be out of control of even the Central Drugs Standard Control Organization (CDSCO).

This is vindicated by a March 2013, written reply of the Minister for Health and Family Welfare, where the Government reportedly informed the Lok Sabha (the lower House of the Parliament) that in twenty three cases of new FDC, licenses have been granted by the State Licensing Authorities (SLAs) without the mandatory approval of the DCGI and action will be taken in all these cases.

However, no one seems to know, as yet, what action the Government has taken against those errant officials.

The latest investigative report on the criticality of the situation:

The May 12, 2015 issue of “PLOS Medicine” – a Peer-Reviewed Open-Access Journal, published the results of an investigation on CDSCO approval for and availability of oral FDC drugs in India from four therapeutic areas – analgesia (non-steroidal anti-inflammatory drugs (NSAIDs), diabetes (metformin), depression/anxiety (anti-depressants/benzodiazepines), and psychosis (anti-psychotics).

This study was done based on the Department Related Parliamentary Committee on Health and Family Welfare’s 2012 Report, stating that manufacturing licenses for large numbers of FDCs had been issued by state authorities without prior approval of the CDSCO in violation of rules, and considered that some ambiguity until 1 May 2002 about states’ powers might have contributed to this worrying consequences.

I shall also discuss the above Parliamentary Committee report in this article.

Booming sales of unapproved drugs: 

‘PLOS Medicine’ report highlighted the following:

A. They obtained information on FDC formulations approved between1961 and 2013 in each therapeutic area from the CDSCO.

B. FDC sales details were obtained for the period 2007 to 2012 from PharmaTrac database of drug sales in India. Over the five years included in the time-trend analysis, FDCs accounted for an increasing proportion of total sales volumes. By 2011–2012, FDCs accounted for more than half of all NSAID and oral anti-diabetic drug sales, and one-third and one-fifth of anti-psychotic and anti-depressant/benzodiazepine sales, respectively.

C. Of the 175 FDC formulations marketed in India in the therapeutic areas studied, only 60 (34 percent) were approved. 

Out of these, percentages of approved formulations are as follows:

-       80 percent of 25 marketed metformin FDC formulations

-       27 percent of 124 NSAID FDC formulations

-       19 percent of 16 anti-depressant/benzodiazepine FDC formulations

-       30 percent of 10 anti-psychotic FDC formulations

D. In 2011–2012, percentages of FDC sales volumes arising from unapproved formulations was:

-       43 percent for anti-psychotics

-       69 percent for anti-depressants/benzodiazepines

-       28 percent for NSAIDs

-       0.4 percent for metformin

E. Formulations including drugs of which use is banned or restricted internationally accounted for 13.6 percent and 53 percent of NSAID and anti-psychotic FDC sales, respectively.

F. While “ambiguity” in the rules prior to 2002 was advanced as a reason for some FDCs having been marketed without a record of central approval, the researchers identified no ambiguity, and in fact, following an amendment to the rules in May 2002 that extended the requirements on approval applicants, new FDCs continued to be marketed without a record of central approval.

The suggestions:

The ‘PLOS Medicine’ report concluded with the following suggestions:

Unapproved formulations should be banned immediately, prioritizing those withdrawn or banned internationally, and undertaking a review of benefits and risks for patients.

To ensure long-term safety and effectiveness of new medicines marketed in India, as well as transparency of the approval process, amendments in India’s regulatory processes and drug laws are called for. A review should be undertaken of the safety and effectiveness of FDCs currently available in India.

Indian lawmakers too pointed out this embarrassing regulatory laxity:

This saga of drug regulatory laxity in general and for the FDCs in particular, is continuing since quite a while. This is despite the fact that the Department Related Parliamentary Committee on Health and Family Welfare presented its 59th Report of 118 pages in total on the functioning of the Indian Drug Regulator – the Central Drug Standards Control Organization (CDSCO) in both the houses of the Parliament on May 08, 2012.

The report begins with a profound observation:

Medicines apart from their critical role in alleviating human suffering and saving lives have very sensitive and typical dimensions for a variety of reasons. Prescription drugs are the only commodities for which the consumers have no role to play. Nor are they able to make any informed choices, except to buy and consume whatever is prescribed or dispensed to them, because of the following reasons:

  • Drug regulators decide which medicines can be marketed
  • Pharma companies either produce or import drugs that they can profitably sell
  • Doctors decide which drugs and brands to prescribe
  • Consumers are at the mercy of external entities to protect their interests

The ‘Mission Statement’ of CDSCO is ‘Industry Oriented’ and not ‘Patient Focused:

Very interestingly, the lawmakers’ report highlights, citing the following examples, how out of line the ‘Mission Statement’ of CDSCO is, as compared to the same of other countries, by being blatantly industry oriented instead of safeguarding Public Health and Safety interests :

Drug Regulator

The ‘Mission Statement’
1.

CDSCO, India

 Meeting the aspirations…. demands and requirements of the pharmaceutical industry.
2.

USFDA, USA

 Protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs.
3.

MHRA, UK

 To enhance and safeguard the health of the public by ensuring that medicines and medical devices work, and are acceptably safe.
4.

TGA, Australia

 Safeguarding public health & safety in Australia by regulating Medicines…

Consequently, the Parliamentary Committee took a strong exception for such utter disregard and continued neglect of patients’ interest by the Drug Regulator of India. It recommended immediate amendment of the ‘Mission Statement’ of CDSCO incorporating in very clear terms that the existence of the organization is solely for the purpose of protecting the best interest of patients and their safety. It is needless to say, thereafter it would call for its stringent conformance with high precision.

A scathing remark against CDSCO:

The parliamentary Committee report made the following scathing remarks on CDSCO in its point 2.2:

“The Committee is of the firm opinion that most of the ills besetting the system of drugs regulation in India are mainly due to the skewed priorities and perceptions of CDSCO. For decades together it has been according primacy to the propagation and facilitation of the drugs industry, due to which, unfortunately, the interest of the biggest stakeholder i.e. the consumer has never been ensured.”

Allegation of possible collusion:

The report also deliberates not only on the utter systemic failure of CDSCO along with the DCGI’s office to enforce the drug regulations effectively, but also towards a possible collusion between CDSCO and the pharmaceutical industry to implement a self-serving agenda by hoodwinking the system. This is a very serious allegation, which needs to be thoroughly probed and the findings of which should be made public for everybody’s satisfaction.

The committee, therefore, felt that effective and transparent drug regulation, free from all commercial influences and callous enforcement of rules and laws, are absolutely essential to ensure safety, efficacy and quality of drugs keeping just one objective in mind, i.e., welfare of patients.

Do we need “Safe in India” campaign for drugs?

Do we need a well-hyped “Safe in India” campaign for drugs? Looking around, at least conceptually, the answer is probably ‘yes’…Seriously…I am not joking!

The reason being, despite scathing remarks of the Parliamentary Standing Committee in 2012, apparently no systematic enquiry has been undertaken by the CDSCO to ascertain the reason for continuation and the veracity of this menace, just yet.

A very significant number of unapproved medications still remain undetected by the drug regulators and continue to be abundantly available, frequently prescribed, openly sold and freely consumed by the patients without even an iota of doubt regarding possible health safety hazards that these prescription drugs might cause.

May 2015 ‘PLOS Medicine’ Report helps unraveling the underbelly of the drug regulatory scenario in India, along with its systemic decay, which fails to halt the possible serious health safety hazards that Indian patients are exposed to.

India’s image as an emerging ‘pharmacy of the world’ for cheaper generic drugs has already been dented with a number of ‘import bans’ from the US and UK for flouting the specified drug manufacturing quality standards.

The saga of ‘import bans’ for Indian drugs, together with this critical health safety related menace, probably necessitates an effective launch of a “Safe in India” campaign for medicines, in general, by the Government.

This initiative gains additional importance, as painstakingly developed reputation of the Indian drug exporters, including the largest domestic players, has now been dented. It needs to be revamped, sooner.

I addressed a related issue in my blog post of February 3, 2014, titled “FDA ‘Import Bans: Valuing Drug Supply Chain Security For Patients’ Safety.”

Conclusion:

Effective resolution of this critical issue demands high priority at the highest level of the decision making process of the Government, with commensurate sense of urgency.

Keeping that in mind, would it be a bad idea, if just like “Make in India” campaign of the Prime Minister; “Safe in India” campaign for medicines is also undertaken with equal gusto and monitored by the top echelon of the country’s rejuvenated governance machinery?

This initiative would probably help sending the very contextual ‘shape up or ship out’ signal to the drug regulators, both at the Center and also in the States to erase the prevailing menace for good.

In that process, it would eventually allay the public health safety concern with the ‘Made in India’ drugs, coming out of ‘Make in India’ campaign, not just in the country, but also beyond its shores.

The speed of action in this situation is the essence. Otherwise, the following golden words of wisdom as enunciated by Abraham Lincoln would keep haunting us, till the remedial measures taken by the Government become palpable on the ground:

“To sin by silence when they should protest makes cowards of men”

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.

Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?

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On April 20, 2015, a panel of 31 lawmakers of the Standing Committee on Chemicals and Fertilizers tabled its report in the Indian Parliament. The committee emphasized that patients in India should have access to all medicines, including life saving drugs, at affordable prices. Accordingly, it recommended expansion of the scope of price control to all medicines available in the country.

The Committee wondered why all medicines are still not listed in the ‘National List of Essential Medicines (NLEM)’ and is of the view that drugs of all kinds are essential and are required by the patients for treatment of various disease conditions.

Currently, the National Pharmaceutical Pricing Authority (NPPA) has fixed prices of 509 formulation packs, covering 348 drugs, based on NLEM, as specified in the Drugs Price Control Order (DPCO) 2013. Such price controlled essential drugs currently contribute less than 18 percent of the total pharmaceutical market of India in value terms. Whereas, according to reports, total number of formulation packs in India would be much over 60,000.

The panel noted that the ceiling prices of even all those medicines, which should come under price control under DPCO 2013, are yet to be announced by the NPPA. Accordingly, it advised the Government to expedite the process of notifying ceiling prices for all the remaining medicines featuring in the NLEM, without further delay.

The Parliamentary Standing Committee observed that Rs 17,944 Crore was spent in 2013-14 to import medicinal and pharmaceutical products. It expressed dissatisfaction on the Department of Pharmaceuticals’ (DoP) explanation that imports were made on quality and economic considerations and not necessarily because the products were unavailable at home.

“The Committee is of the strong view that to realize the dream of ‘Make in India’ concept in pharmaceutical sector, the government should boost and incentivize domestic bulk drug industry and discourage Indian pharmaceutical firms from importing”, the report said.

It also observed that to make India self-reliant in this area, revival of sick public sector units was necessary to create capacity of bulk drugs. The Committee urged the DoP to expedite formulation of ‘Make in India’ policy for APIs (active pharmaceutical ingredients) in India.

Indictment against the DoP:

The committee reportedly came down heavily on the DoP for its inability to utilize funds allocated for various purposes, which clearly speaks about “the poor performance of the department in utilization of its plan allocation.”

The report clearly mentions, “The committee therefore feels that department could not achieve its avowed objectives and targets set for various scheme/programs unless the funds are utilized by the department optimally and efficiently.”

Stating that the department “should make earnest efforts for optimum utilization of funds allocated to them”, the committee expressed it would “like to be apprised of the initiatives undertaken by the department in this regard”.

A quick recapitulation:

In may 2012, the Department Related Parliamentary Standing Committee on Health and Family Welfare in its 58th Report also expressed great concern on rampant prescription of irrational and useless drugs by many doctors with ‘ulterior motives’ and expressed the need of inclusion of the essential and lifesaving drugs under strict price regulation.

As it usually takes a very long time to effect any perceptible change in India, the above critical observations, as well, remained virtually unattended, even today.

Does ‘Competition’ impact Branded generic pricing?

I am personally a strong believer of ‘free-market economy’, driven by ‘market competition’, for the industrial sectors in general. It ensures rapid economic progress and growth, creating much needed wealth to cater to the growing needs of various kinds for the citizens of a nation.

However, I would strongly argue that Indian pharma industry is one of the key exceptions in this regard; as it is basically a branded generic market contributing over 90 percent to the total domestic pharmaceutical retail market.

Although, domestic market of branded generic drugs is quite crowded with a large number of respective ‘brands’ of exactly the same off-patent molecule/molecules available at widely different price ranges, patients do not derive any economic benefit out of such intense competition in a ‘free-market economy’. This happens, as the patients have no say or role in the brand selection process of the doctors to choose a price of their likings and affordability, especially when the basic drug/drugs are the same for all those brands.

Examples of huge rice variation in branded generics of the same drug:

A Research Paper published in The Indian Journal of Applied Research’ of May 2014, titled, “Cost Variation Study of Anti-diabetics: Indian Scenario” observed as follows:

“In Single drug therapy, among sulfonylurea group of drugs, Glimepiride (2 mg) shows maximum price variation of 829.72%, while Glipizide (10mg) shows minimum variation. In Meglitinides groups of drugs Repaglinide (0.5mg) shows maximum price variation 194.73% and Nateglinide (120mg) shows Minimum price variation. In Biguanides & Thizolidinediones groups of drugs, Metformin (500 mg) & Pioglitazone (15 mg) show maximum price variation of 384.18% & 600 % respectively. In α-glucosidase inhibitor group of drugs, Voglibose (0.2mg) shows maximum price variation of 387.17%, while Miglitol (25mg) shows minimum price variation.”

“In combination therapies, Glimepiride+Metformin (1+500mg) combination shows the maximum variation up to 475 %. In case of Insulin Premixed 30/70 100IU/ml shows maximum price variation of 1881.24%, while minimum variation is found with short acting 40IU/ml.”

Similar scenario prevails virtually in all therapy categories in India.

No qualms on branding:

It is understandable that generic drugs are branded o create differentiation even within exactly identical drugs. There are no qualms on branding per se, which comes at a reasonably high cost though. However, the question is, who pays for this branding exercise and for what additional tangible value/values?

If no additional tangible value is added to a generic medicine through branding, why should most of the patients sweat to pay significantly extra amount, just to help the pharma companies fighting with each other to increase their respective pies of revenue and profit?

Why drug price control in a ‘Free Market Economy’?

It is indeed a very pertinent question. Equally pertinent answers are also available in a 2014 paper titled, “Competition Issues in the Indian Pharmaceuticals Sector” of Delhi School Economics (DSE). The paper deals with issues related to failure of ‘Free Market Economy’, despite intense competition, especially for branded generic drugs in India.

In an ideally free-market economic model, for each of these brands of identical drugs, having similar regulatory approvals from the Indian drug regulator on efficacy, safety and quality standards, competitive forces should have prompted uniform or at least near uniform prices for all such products.

Any brand of the same drug/drugs charging more, should generally have attracted lesser customers, if consumers would have exercised their purchase decisions directly; efficacy, safety and quality standards being the same, as certified by the drug regulator.

Interestingly, for prescription medicines, the much proven process of consumers exercising their free choice to select a brand, influenced by advertising, does not happen at all.

Branded generics pricing paradox:

In the pharmaceutical market place, the scenario is almost just the reverse of what should happen in a highly competitive ‘free market’ model.

This means, highest priced branded varieties of identical drugs, mostly enjoy highest market share too. This in turn proves that competition within the pharma brands do not bring down the prices, benefiting the consumers/patients.

Branding of generic drugs:

Unlike many developed nations, in India, even the off-patent generic drugs are branded and differentiated on flimsy perception based intangibles to the prescribers, along with other contentious and dubious sales tools, decrying unbranded generics.

This is done in the guise of so-called pharma ‘sales and marketing’ strategies, which are sometimes shrewd and many times equally blatant, if not crude.

The DSE paper, very clearly says, ‘head to head’ competition between undifferentiated (non-branded) products would certainly cause a precipitous fall in prices.

However, it is generally believed, the prescription demand of branded generic drugs is basically created by influencing the prescribing behavior of the medical practitioners. Not just by personal selling through medical representatives, medical advertising and publicity of different types, but also through a chain of processes that many stakeholders, including the Government and law-makers generally consider as grossly unethical.

In January 2015, the Government directive for implementation of the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ by the pharma industry in India, further reinforces the point.

 ‘Dorfman-Steiner’ condition vindicated:

The above paper from the DSE underscores the old and well-established ‘Dorfman-Steiner’ condition that mathematically proves that the price-cost margin is positively related to the ratio of advertising expenditure to sales revenue.

Quoting a practicing surgeon, the DSE article states:

“Sometimes it could be just plain ignorance about the availability of a cheaper alternative that makes doctors continue to prescribe costlier brands. But one cannot ignore the role of what are euphemistically called marketing “incentives”, which basically mean the inappropriate influence pharmaceutical companies exert on doctors. This runs deep. Hospitals choose to stock only certain drugs in their in-house pharmacies and insist that hospitalized patients buy drugs only from the hospital pharmacy. Drug companies sell drugs to hospitals at a price much lower than what the patient is charged, further incentivizing the hospital to stock their products. The cheaper brands often get left out in this game.”

Reasons for success of high-priced branded generics:

Low priced non – branded cheaper generics have been systematically made to perceive as of low quality. In several media reports, including some recent ones even some well-known doctors castigated the low priced non- branded cheaper generics. Pharma industry lobby groups, in tandem, has been strongly resisting various Government initiatives of un-branding the generic drugs.

Over a long time, a common public perception has been painstakingly created that high-priced branded generics are more of high quality; MNC brands are of better quality than their ‘Desi’ counterparts and branded generics are more reliable than their non-branded equivalents.

This perception is fuelled by poor enforcement of the Drugs and Cosmetics Act of India that also regulates drug-manufacturing standards in the country, besides the prevailing overall drug regulatory scenario in the country.

The New Government attributes “Market Failure for pharmaceuticals”:

In its price notification dated July 10, 2014, the NPPA has categorically stated the following:

  • There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure, as different brands of the same drug formulation, which are identical to each other in terms of active ingredient(s), strength, dosage, route of administration, quality, product characteristics, and intended use, vary disproportionately in terms of price.
  • It is observed that, the different brands of the drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.
  • In India the market failure for pharmaceuticals can be attributed to several factors, but the main reason is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.
  • Market failure alone may not constitute sufficient grounds for government intervention, but when such failure is considered in the context of the essential role of pharmaceuticals play in the area of public health, which is a social right, such intervention becomes necessary, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most and also puts huge financial burden in terms of out-of-pocket expenditure on healthcare.

Civil Society echoed the same sentiment:

In this context, it is important to note that in a letter dated August 20, 2014 written by seven large Civil Society Organizations to Mr. Ananth Kumar, the present Minister of Chemicals and Fertilizers with a copy to Prime Minister Modi, articulated similar view, as follows:

“Limiting all price regulation only to a list of 348 medicines and specified dosages and strengths in the DPCO 2013 goes against the policy objective of making medicines affordable to the public. The National List of Essential Medicines, a list of 348 rational and cost-effective medicines, is not the basis for production, promotion and prescription in India. In reality the most frequently prescribed and consumed medicines are not listed in the NLEM.”

I broached on a similar issue in my blog post of April 6, 2015 titled, “Would Affordable ‘Modicare’ Remain Just A Pipe Dream In India?”

An opposite view: ‘Bad Medicine’

On April 23, 2015, an Editorial with the above headline, articulating exactly opposite viewpoint, was published in a leading English business daily.

With all due respect to the concerned editor, it appeared quite funny, if not ‘hilarious’ to me for several reasons. One of which is seemingly total lack of understanding on the issue by the concerned editor.

I am quoting below some of the most obvious ones, just to cite as examples:

A. Quoting the above recommendation of the Parliamentary Standing Committee on drug price control the Editorial states:

“Not only will this make investors from other countries look at India with suspicion – Japanese pharma firm Daiichi just exited its disastrous investment in Ranbaxy (later taken over by Sun Pharma) – it will ensure Indian patients are deprived of good quality medicines.”

It is known to everybody that drug price control in India had got nothing to do with the exit of Daiichi. It was primarily due to import bans by the USFDA, caused by alleged falsification of GMP related data in Ranbaxy’s manufacturing plants selling drugs to America.

B. The Editorial continues:

“So much for Make-in-India—the other problem with price controls is that, with little incentive to invest in fraud-prevention, between a fourth and a third of India’s pharmaceuticals production is estimated to be spurious. Also, price caps have resulted in a situation where R&D expenses are very low, and there is little research on drugs of particular relevance to India.”

Again, it is much known fact that over 82 percent of Indian pharmaceutical market is currently outside price control, offering free-pricing opportunity. What does then prevent the drug companies to come out robust ‘fraud-prevention’ measures for all those free-pricing drugs?

C. The Editor stated:

“Since Indian prices are amongst the lowest in the world, it is not clear what exactly the committee had in mind, more so since costs of medicine are not, in any case, the most expensive part of medical treatment.”

Of course, all concerned knows that lowest range of generic drug prices in India, are perhaps the cheapest in the world. However, the point is, should it be considered in isolation? Not in relation to per capita income of the Indians? Not in terms of Purchasing Power Parity? In drug pricing context, one Committee Report of the DoP had shown, when adjusted against these two factors, drug prices in India are as high, if not more, as compared to the developed countries of the world.

I hasten to add that I fully resect all different view points. If I have made any mistakes in understanding this piece of bizarre editorial, I am more than willing to stand corrected with all humility, as this a very serious issue of ‘what is right’ and NOT ‘who is right’.

Conclusion:

India is a market of branded generics, where brand differentiation process involves creation of mostly unsubstantiated perceptions.

As the stakeholders, media and even the Indian Government have alleged, drug companies exert a strong influence in the brand prescription decision of the doctors, even at the cost of patients who cannot afford the same.

Even in a free-market economy with cutthroat competition, patients do not have any means to exercise their price preferences even within identical branded generic drugs. They are compelled to buy high priced brands, as prescribed by their doctors, even where low priced identical equivalents are available.

This condition gives rise into ‘Market Failure’, especially for branded generics in India. The NPPA has unequivocally enunciated it, which I have quoted above.

Being a strong believer and votary of ‘free-market economy’ and ‘market competition’, I find this pharma scenario unique. It is a rare example of failure of otherwise so successful free-market economy model, especially in the branded generic pharma space of India.

Around a decade ago, the ‘Indian Journal of Medical Ethics’ (IJME, January – March 2004 issue) captured the very essence of this deliberation, epitomized in the following sentence:

“If the one who decides, does not pay and the one who pays, does not decide and if the one who decides is ‘paid’, will truths stand any chance?”

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.

 

“Make in India” Image of Pharma Needs An Early Makeover

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“It is never too late to be what you might have been” - George Elliot

The chronicle of events since the last couple of years or so, related to ‘Make in India’ image of the local drug industry, have been instrumental to significantly slowing down the scorching pace of pharma exports growth of the country.

The Union Ministry of Commerce estimates that India’s export of drugs and pharmaceuticals may hardly touch US$16 billion in 2014-15, against US$14.84 billion of last financial year. This would mean that pharma exports growth would just be around 5 percent, against the projected number of 10 percent for the year. This is a significant concern, as pharma exports contribute around 40 percent to the total value turnover of the sector.

Despite this fact and couple of other important reasons, as I shall discuss below, about 45 percent of listed pharma stocks in India have reportedly more than doubled in the past one year. The current tail wind in the domestic pharma market could possibly have contributed to this aberration.

According to AIOCD Pharmasofttech AWACS, the last financial year started in April 2014 with 7.3 percent domestic retail pharma growth, which accelerated to 20.9 percent in March 2015, as the year ended.

High level of optimism and positive sentiments, thus generated in this process, possibly prompted many to ignore even some of the critical storm signals for the domestic pharma industry in its totality.

Declining pharma exports growth – A key challenge:

In 2014, pharmaceutical exports contributed 39 percent to the sector’s total value turnover. Consistently strong export performance over the last few decades, has catapulted the local drug industry in the not so common trajectory of the net foreign exchange earner for India. It is worth noting, though pharma exports grew at a rate of just 1.2 per cent to reach in 2013-14, it registered a CAGR of 21 percent over the last decade.

Some analysts estimate, the chances of Indian pharma exports touching even US$16 billion in 2014-15 are indeed challenging, especially considering low growth recorded by some of the large Indian pharma companies, including Ranbaxy, Dr. Reddy’s Laboratories and Lupin, especially in the US market.

Mounting pricing pressure:

Consolidation process of pharmacy players in the US market is also affecting the profit margins of the Indian drug exporters.

Some key examples are:

  • Global alliance among three large pharmacy distributors – Walgreen, Alliance Boots and Amerisource –Bergen, in early 2013
  • Joint venture between the second largest US wholesale distributor, Cardinal Health, and CVS Caremark in December 2013
  • US pharmacy McKesson’s announced acquisition of US distributor Celesio in January 2014.
  • On April 9, 2015, Bloomberg reported that Walgreens Boots Alliance Inc.’s acting Chief Executive Officer Stefano Pessina has expressed his intent to do more deals, just months after being on the saddle of the biggest US drugstore chain.

As a result, a few dominant pharmacy players emerged with hard bargaining power, exerting tough pricing pressures on the generic drug companies and that too in a market that has been facing already facing cutthroat generic price competition.

Consequently, according to published reports, the prices of generic drugs, in general, declined by around 20 to 30 per cent over the past 19 months, in the US.

Vulnerability in the key market:

According to IBEF March 2015, the United States (US) has been the prime importer of pharmaceuticals from India, accounting for over 25 per cent of Indian pharmaceutical exports, followed by the European Union and Africa at second and third positions, respectively.

India exports over US$4 billion of pharmaceutical products to the US, out of its annual exports of around $15 billion. Large domestic companies, such as Ranbaxy, Sun Pharma and Lupin account for around US$3 billion of exports to the US and the balance comes from a large number of other Indian pharma players.

Government sites 3 reasons:

According to the Union Ministry of Commerce, there are reportedly three key reasons for the pharma export falling short of target in the financial year 2014-15, namely:

-       Delayed regulatory approvals

-       Consolidation of pharmacy players in North America (discussed above)

-       Steep depreciation of currencies in emerging markets such as, Russia, Ukraine and Venezuela

A major controllable concern seems to be out of total control:

While articulating the above three factors, the Union Ministry of Commerce seems to have missed out a very important one that has been instrumental in perpetuating the recent slow down of Indian pharma exports, significantly. It is very much a controllable too, unlike the other three, though appears to be virtually out of total control of the domestic pharma companies.

Fortunately, media kept harping on it. PTI News of January 11, 2015 reported, while Indian pharma exports expected to touch a turnover US$16 billion in 2014-15, many Indian pharmaceutical companies continue to face regulatory action by the USFDA for alleged violation of ‘Good Manufacturing Practices (GMP)’ and other irregularities at the respective drug manufacturing facilities in different parts of the country.

This report observed, a number of Indian drug-makers, including Ranbaxy, Sun Pharma, IPCA Labs, Wockhardt and Dr. Reddy’s Laboratories faced sanctions of the USFDA over different issues ranging from hygiene levels in the plant and concealment of data on failed tests to even fabrication of records. As a result, in several cases, these companies have been barred from selling their drugs in the US and other countries.

The issue involves the very top:

Sun Pharma, post acquisition of Ranbaxy, tops the pharma league table in India with around 9 percent of domestic market share.

It is much well known though, that the US drug regulator has already imposed a ban on import of medicines into the US, produced at its key constituent Ranbaxy’s India-based factories. Earlier, certain drugs produced at its Dewas plant of Ranbaxy were also barred from export to the entire EU region for non-compliance to GMP norms.

On its own, the acquirer – Sun Pharma has also faced USFDA ban on import of products made at its Karkhadi plant in Gujarat.

Taking all these into consideration, one can probably argue that the ‘Make in India’ issue for Indian pharma is humongous and quite a widespread one. Its adverse impact is very much palpable even at the very top.

The root cause:

The root cause of non-conformance of specified GMP standards probably dwells deep within the mindset of the concerned companies, as comes in the narrative of a whistleblower. In that case, the speed of progress of Indian pharma exports’ revival, alongside the industry image makeover, would possibly face a strong and silent headwind.

Pharma sector needs a health check:

On April 16, 2015, ET Intelligence Group commented that “High-flying pharma sector may be in need of a health check”, further reinforcing the case for re-rating of, especially, the export-oriented pharma sector.

The report underscored, that foreign brokerages Bank of America Merrill Lynch and CLSA have flagged concerns about valuations in pharma priced to perfection leaving little room for error. According to data from Bloomberg, since last week, ‘buy’ recommendations by analysts have dropped in stocks like Sun Pharma, Lupin, Cipla, Ipca Labs, Cadila Healthcare, Aurobindo Pharma and Torrent Pharma.

Smacks of irrational exuberance?

The article emphasized that the pharma growth story has now moved to being one that ‘smacks of irrational exuberance’.

The unprecedented interest in the sector has had the effect of shirking off negatives, like regulatory clamps by US FDA, price control, and currency fluctuations in the emerging markets and delay in drug approvals in the US.

The saga still continues:

Triggered by a whistleblower report and confirmed by a number of different adverse plant audit findings, the USFDA has stepped up scrutiny of India make generic drugs, over the last two years. It is worth noting that Indian generic drug players supply round 40 percent of such medicines sold in the United States.

As we discuss the subject, Indian pharma players continue to receive the warning letters from the USFDA, related to breach of GMP standards.

Lamentably enough, significant parts of the same continue to be the data integrity issues. Even in 2014, some large domestic players including, Sun Pharmaceuticals, Cadila Pharma and Orchid Pharma came under scrutiny of the US drug regulator.

Most recently in March 2015, USFDA banned most imports from the Ipca plants, in Pithampur in Madhya Pradesh and Silvassa in Dadra and Nagar Haveli, for non-compliance of GMP standards. Earlier, in January 2015, the US regulatory agency reportedly banned imports from another Indian manufacturing plant of Ipca.

India tops the list on the US import alerts:

According to USFDA data, from 2013 onwards, over 20 drug manufacturing facilities across India attracted ‘Import Alerts’ as against seven from China, two each from Australian, Canadian and Japanese units and one each from South African and German facilities.

Unfortunately, despite intense local and global furore on this subject, the Central Drugs Standard Control Organization (CDSCO) of India, very strangely, do not seem to be much concerned on this critical issue, at least noticeably enough, besides making some occasional public statements on its working together with the USFDA in this regard.

I discussed similar subject in my blog post of September 29, 2014 titled “Make in India…Sell Anywhere in The World: An India Pharma Perspective.

Conclusion:

As it appears to me, the USFDA import bans related to breach of GMP standards, including ‘Data Integrity’, are mostly unrelated to knowledge deficiency of any kind – technical or otherwise, in the teams handling large drug manufacturing plants of India.

The details, as listed in the USFDA website, indicate that a large number of such incidents are related to falsification of data in the critical documentation process.

Earlier in this article, I termed the problem as very much controllable with the right kind of mindset to set things right, without probably resorting to cost-saving short cuts.

Prime Minister Modi, even during his very recent trips to France, Germany and Canada, passionate appealed to all, including pharma investors both local and global, to “Make in India” and “Sell Anywhere in The World” (exports). This call deserves to be responded with the right spirit and mindset and not just with lip services.

Failure to effectively address the patients’ safety requirements related issues of the foreign drug regulators, such as USFDA, and any direct or indirect attempt to categorize this plight as international ‘conspiracy’ of any kind, could jeopardize India’s interest in pharma exports, for a much longer while.

There is not even an iota of doubt today that “Make in India” image of Indian pharma has suffered a huge set back, at least in the largest and most valuable pharmaceutical market of the world.

As the well acclaimed English novelist George Elliot once said, “It is never too late to be what you might have been”, Indian pharma industry urgently needs an image makeover in this critical area…through a demonstrable change in mindset for doing things right…in every occasion and situation, always.

This is critical, as loss of credibility and reputation too frequently can push a pharma company virtually out of major international business for good… its current clout, might and financial power, not withstanding.

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.

Pharma Outlook 2015: A Glimpse Of Some Drivers and Barriers

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Looking ahead, the brand new year 2015 appears quite interesting to me both from the global and also from the local pharmaceutical industry perspective. In this article I shall try to give a glimpse of some of the important drivers and barriers for success of the industry as the year unfolds, based on recent and ongoing developments.

Let me start with the global outlook of 2015, where in the midst of all gloom and doom of the past years, I notice formation of a distinct and new silver lining, mainly due to the following two reasons:

1. Record number of new drugs approval in 2014 spanning across10 therapy areas:

As indicated in its website, USFDA has approved 41 novel medicines in 2014, which is 14 more than the previous year and is the second highest after 1996 that witnessed 53 approvals. Many of these new drugs are with blockbuster potential.

According to another report, the European Medicines Agency (EMA) has also recommended 82 new medicines in 2014, which though includes generic drugs in its list. However, this number too shows an increase from 79 in 2013 and 57 in 2012.

According to January 02, 2014 report from Forbes, very interestingly, infectious diseases dominated with 12 approvals (27 percent), cancer with 8 approvals (18 percent), followed by rare diseases with 5 (11 percent). Just two of these new approvals are for Hepatitis treatment and the rest are for bacterial, fungal, viral, and parasitic infections.

AstraZeneca received the highest number of 4 approvals followed by Eli Lilly with 3.

2. Patent expired blockbuster drugs in 2015 would have low generic impact:

Though drugs worth sales turnover of US$ 44 billion would go off patent in 2015, patent expiries will have minimal impact on the top line as 2015 sales will grow close to four times that of patent losses. Following are the top 10 drugs among those:

No. Brand Company Disease Sales2013 (US$ Bn) Patent Expiry
1. Lantus Sanofi Diabetes 7.9 Feb 2015
2. Abilify Otsuka/Bristol-Myers Squibb Schizophrenia/ Other neurological conditions 7.8 April 2015
3. Copaxone Teva Multiple sclerosis 4.33 Sept 2015
4. Neulasta Amgen Infection reduction in cancer patients on chemotherapy 4.4 Oct 2015
5. Tracleer Actelion Pulmonary arterial hypertension 1.57 Nov 2015
6. Namenda Actavis Alzheimer’s disease 1.5 April 2015
7. Avodart/Jalyn GSK Benign prostatic hypertrophy 1.34 Nov 2015
8. Zyvox Pfizer Gram-positive bacterial infections 1.35 May 2015
9. AndroGel Abbvie Low testosterone  1.03 Early 2015
10. Synagis AstraZeneca Monoclonal antibody to prevent respiratory syncytial virus infection in infants  1.1 Oct 2015

(Compiled from FiercePharma data)

As a significant number of these drugs are biologics, such as Lantus, Abilify, Neulasta and Synagis, the generic impact on those large brands, post patent expiry, would be minimal, at least, for several more years.

However, Lantus sales could soon be impacted, as its biosimilar versions from Boehringer Ingelheim and Eli Lilly have already received approval in Europe, and may be launched in the United States, as well.

Biosimilar versions of other drugs that will go off patent in 2015, do not seem to be anywhere near launch soon to make immediate dent in the sales of the original biologics. I had deliberated on various possible reasons for delay in biosimilar entry, especially in the US, in my earlier blog post of August 25, 2014, titled “Scandalizing Biosimilar Drugs With Safety Concerns”

Taking all these into consideration, EvaluatePharma has estimated that out of patent expiry related sales turnover of US$44 billion, just around US $16 billion would get impacted in 2015 by their generic equivalents.

Global market outlook 2015:

According to IMS Health, spending on medicines will reach nearly $1,100 billion in 2015 with a growth rate of 3-6 percent over the last five-year period.

According to EvaluatePharma, the overall outlook of the global pharma industry in 2015 and beyond is expected to be as follows:

  • A dozen products launched in 2015 are forecast to achieve blockbuster sales by 2020
  • Drugs treating high cholesterol and heart failure will dominate the field with a combined 2020 sales forecast of US$8 billion
  • Sovaldi and its combination product Harvoni will take the number one worldwide seller spot with forecasted sales of $15.3 billion in 2015
  • Patent expiries will have minimal impact on the top line as 2015 sales will grow close to four times that of patent losses
  • Financing climate appears friendly and deals will continue at a steady pace but M&A activity unlikely to match the frenzy of 2014

Moreover, Oncology therapy area brings a huge promise with novel immuno-oncology drugs. As Reuters have reported, Merck & Co’s Keytruda and Bristol-Myers Squibb’s Opdivo, which work by blocking a protein called Programmed Death receptor (PD-1), are the first in a coming wave of immuno-therapies that analysts believe could generate annual sales of more than US$30 billion a year.

Indian pharma industry outlook 2015:

Indian pharmaceutical industry, dominated by branded generic drugs, is estimated to register a turnover of around US$ 33.8 billion with an average growth of 10.3 percent in 2014 – 2018 period, according to Deloitte. Increasing number of diagnosis and treatment of chronic ailments, fuelled by ascending trend in the per capita income, would be the key factors to drive this double-digit growth rate.

In 2013-14, pharma exports of the country with a turnover of US$ 14.84 billion grew at a meager 1.2 percent, which is the slowest growth in nearly the last 15 years. Pharmexcil attributed its reason to USFDA related regulatory issues and increasing global competition. India still stands exposed in this area, unless meaningful corrective measures are taken forthwith. It is worth noting, although India exports drugs to over 200 countries in the world, the United States (US) alone accounts for about 25 percent of India’s pharma exports.

Key issues and challenges in ‘The Exports Front’:

Generic drugs currently contribute over 80 percent of prescriptions written in the US. Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are sold there, come from India and account for around 10 per cent of finished dosages in the US.

Almost all of these are cheaper generic versions of patent expired drugs, which are mainly produced in around 200 USFDA approved drug-manufacturing facilities located in India. Hence, India’s commercial stake in this space is indeed mind-boggling.

Indian drug exports were taking place satisfactorily without any major regulatory hitches since quite some time. Unfortunately, over the last few years, mostly the Federal Drug Administration of the US (USFDA) and the United Kingdom (UK)’s Medicines and Healthcare Products Regulatory Agency (MHRA) have started raising serious doubts on the quality of medicines manufactured in India, creating an uncertainty on drug exports in those countries.

To overcome this critical issue and keep marching ahead with distinction in the drug exports front, Indian pharma would require to successfully dealing with the following two areas:

A. Data integrity:

Since quite a while, USFDA has been raising serious concerns on ‘Data Integrity’ in their previously approved production facilities of a large number of Indian pharma players. The details of each of these concerns are available in the USFDA website.

This worrying development is now posing a huge threat to future growth potential of Indian drug exports, as in this area the Indian government had set an objective, in its strategy document, to register a turnover of US$ 25 billion in 2014-15. In all probability, it would fall far short of this target at the end of this fiscal, predominantly for related reasons. However, the good news is, considering the criticality of the situation, the Indian government is now working with the USFDA to resolve this problem.

I discussed a part of this area in my Blog Post of September 29, 2014 titled “Make in India…Sell Any Where in The World”: An Indian Pharma Perspective

B. Credibility of Clinical Trial Data from India:

Credibility of ‘Clinical Trial Data’ generated by the domestic players in India, has also become a cause of great concern, as the regulators in France, Germany, Belgium and Luxembourg suspended marketing approval for 25 drugs over the genuineness of clinical trial data from India’s GVK Biosciences.

Key issues and challenges in ‘The Domestic Front’:

Though 2015 would also witness the following important issues and challenges, meeting with this challenge of change should not be difficult with a proper mindset and right strategies:

A. The Drug Price Control Order 2013 (DPCO 2013):

Change in the mechanism of drug price control from earlier ‘cost based’ to newer ‘market based’ one and the specified provisions to neutralize inflationary impact of the input costs on the bottom line, based on the WPI, have already been considered as welcoming changes for the industry. As a result, despite implementation of the DPCO 2013, the pharma shares continued to do well in 2014 despite doomsayers’ predicaments, not just in the past, but even today.

I believe, the DPCO 2013 would not cause any significant negative impact further in 2015 on the performance of pharma companies, as the price controlled drugs would in all probability continue to be around 20 percent of the total pharma market. Moreover, now annual price increases are linked to the WPI for the controlled products and the companies can increase prices of remaining 80 percent of decontrolled products, upto 10 percent every year, irrespective of inflationary trend.

That said, due to huge inter-brand price differences, in July 2014 the National Pharmaceutical Pricing Authority (NPPA) had brought under price control 50 more cardiovascular and anti-diabetic drugs in addition to 348 drugs that featured under price control in the DPCO 2013.

If the pharma players do not take note of such abnormal inter-brand price variation of the same drugs without meaningful reasons, there could possibly be further move by the NPPA in this direction.

Additionally, any mechanism for patented products’ pricing, if announced in 2015, would have far-reaching impact, especially on the MNCs marketing such drugs.

B. Unethical practices in Clinical trial:

In the Clinical Trial arena of India, responding to a Public Interest Litigation (PIL), the Supreme Court of the country and separately the Parliamentary Standing Committee had indicted the drug regulator and charted out some action areas. The Parliamentary Committee in its report had even mentioned about a nexus existing between the drug regulator and the industry in this area.

Driven by the directives of the Apex Court of the country, the union ministry of health of the government of India has already strengthened some areas of past laxity in drug regulatory control, such as mandatory registration of clinical trials, constitution of committees to oversee the trial approval, its execution and above all ethical treatment of patients, including compensation.

Although, these are all requisite measures to create an appropriate longer-term eco-system for clinical trials in India, it has reportedly ruffled many feathers, such as CROs in the country who work mainly for pharma MNCs and some global pharma players too. This is mainly because of inordinate delays in drug approvals during the regulatory rectification process, besides cost of clinical trials going up. An orderly drug regulatory environment must prevail, instead of allegedly ‘free for all’ clinical trial environment in the country, costing many innocent lives and livelihoods.  Responding to this changing clinical trial environment, some MNCs have already articulated that they are reconsidering their drug trial strategy in India and some Indian players, possibly with vested interests and echoing similar sentiments, are also saying that they would shift their clinical trial projects out of India, which would adversely impact the country’s clinical trial industry.

Be that as it may, it appears now that under the directive of the Supreme Court of the country, the decisions taken by the government in clinical trial area are irreversible, for the long-term interest of the country.

C. Intellectual Property (IP) issues:

Reacting to some well-justified measures taken by India in the IP area to make healthcare affordable to all, the US and its some key allies, continuously pressured by their powerful pharma lobby groups, continue to push India hard to broaden the IP protections. ‘Big Pharma’ lobbyists are reportedly trying to compel India to amend its IP laws that would suit their business interest at the cost of patients.

Fortunately, many stakeholders, including media, have started raising their voices against such strong-arm tactics, further fueling the credibility erosion of ‘Big Pharma’ and creating important pressure groups for the government.

Simultaneously, concerned pharma MNCs are also seeking legal recourse over issues mainly related to the section (3d) and Compulsory Licensing of the Indian Patents Act. However, most of the judicial verdicts vindicate the quality of decisions taken by the Indian Patent Office (IPO) in these areas.

Though very unlikely, any amendment or tweaking of the existing patent laws of India in 2015 would provide an unfair advantage to MNCs with negative impact on public health interest.

D. Uniform Code of Pharmaceutical Marketing Practices:

Compared to the actions that are now being taken by the law enforcers overseas against pharmaceutical marketing malpractices, India has been showing a rather lackadaisical attitude in these areas, until recently. It astonishes many that unlike even China; no pharmaceutical company has been investigated thoroughly and hauled up by the government for alleged bribery and other serious allegations of corrupt practices.

However, frequent reporting by the Indian media had triggered a debate in the country on the subject. A Public Interest Litigation (PIL) on this subject is now pending before the Supreme Court for hearing in the near future. It is worth noting that in 2010, ‘The Parliamentary Standing Committee on Health’ also had expressed its deep concern by stating that the “evil practice” of inducement of doctors by the pharma companies is continuing unabated as the revised guidelines of the Medical Council of India (MCI) have no jurisdiction over the pharma industry.

The Government, until recently, has shown no active interest in this area either, though the new Union Health Minister, J.P. Nadda decried the unethical nexus between the doctors and pharma companies, amounting violations of medical ethics in the country. He reportedly has stated that in majority of the cases, the pharma companies are luring the doctors by giving gifts and other benefits for prescribing the brand of medicines of their choice to the patients.

As the saying goes, ‘better late than never’, on December 12, 2014, the Department of Pharmaceuticals (DoP) of the Government of India announced details of the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’, which would be effective across the country from January 1, 2015 for all pharma players to implement, across India.

However, I reckon, the document in its current form is rather weak in its effective implementation potential. Meaningful and transparent deterrent measures to uphold public health interest are also lacking. The entire process also deserves a well-structured monitoring mechanism and digital implementation tools that can be operated with military precision. I discussed this issue in my Blog Post of December 29, 2014, titled “India’s Pharma Marketing Code (UCPMP): Is It Crafted Well Enough To Deliver The Deliverables?”

On UCPMP a survey done by E&Y has highlighted the following points, besides other areas:

  • More than 50 percent of the respondents are of the opinion that the UCPMP may lead to manipulation in recording of actual sampling activity.
  • Over 50 percent of the respondents indicated that the effectiveness of the code would be very low in the absence of legislative support provided to the UCPMP committee.
  • 90 percent of the respondents felt that pharma companies in India should focus on building a robust internal controls system to ensure compliance with the UCPMP.

In my view as well, the self-regulatory measures prescribed in the UCPMP of the DoP are unlikely to make any significant impact in 2015, unless pharma companies start focusing on building robust internal controls system to ensure compliance with the UCPMP.

Conclusion:

I would now put on the balance of probabilities, the new ‘Silver Linings’ of the Global pharmaceutical industry as discussed above, the issues and challenges of 2015 for the Indian pharma and also other important factors that I have not been able to discuss in this article. The overall emerging picture depicts that the pharma industry, both global and local, would fare much better than what it did in the recent past, provided the industry, as a whole, does not continue to ignore the storm signals outright.

Thus, based on the available data, the year 2015, as appears to me, would provide an enormous opportunity with promises of an interesting time ahead that the pharmaceutical industry should try to leverage on…and then cherish it for a long while…most probably as a turning point of the same ball game with different success requirements.

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 Great News! But…Would This ‘Golden Goose’ Lay Golden Eggs?

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On December 9, 2014, international media flashed across the world a great news item from the Indian pharma industry:

“The first biosimilar of the world’s top-selling medicine Humira (adalimumab) of AbbVie has been launched in India by Zydus Cadila.”

This exhilarating news has undoubtedly got frozen in time flagging a well-cherished moment of pride for the Indian pharmaceutical industry. Along side, taking note of many contemporary factors in this area, a lurking apprehension too does creep in. It raises an awkward and uncomfortable question – would this ‘Golden Goose” born out of a laudable ‘reverse engineering’ effort be able to lay ‘Golden Eggs’, signaling its global commercial success for the company?

In this article, I shall try to dwell on on this important issue.

In one my earlier blog posts of August 25, 2014 titled, “Scandalizing Biosimilar Drugs With Safety Concerns”, I discussed another related concern in this area.

Born a ‘Golden Goose’:

Just to recapitulate, the original product Humira (Adalimumab) of Abbvie, a fully human anti-TNF alpha monoclonal antibody was first globally approved for marketing in 2002. Since then Humira has emerged as the most preferred therapy to reduce the signs and symptoms of patients suffering from moderate to severe rheumatoid arthritis, moderate to severe polyarticular juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, moderate to severe Crohn’s disease and moderate to severe ulcerative colitis. However, Humira is not available in the Indian market, at present.

Zydus Cadila has announced that its biosimilar version of Humira (Adalimumab), has been approved by the Drug Controller General of India (DCGI) and will be marketed under the brand name ‘Exemptia’ for the treatment of autoimmune disorders as indicated for Humira.

As claimed by the company, ‘Exemptia’ is a ‘fingerprint match’ with the original drug Humira in terms of purity, safety and potency. Zydus Cadila has also stated that the novel non-infringing process for Adalimumab and a novel non-infringing formulation have been researched, developed and produced by scientists in its own Research Centre.

With this the world took note of the ‘Golden Goose’, born out of brilliant ‘Reverse Engineering’ in India. However, the apprehension of many continued to linger: Would this ‘Golden Goose’ be able to lay ‘Golden Eggs’?

The product and the price:

According to an estimate, over 12 million patients in India suffer from the above chronic conditions of autoimmune disorders, which progressively deteriorate and lead to lifelong pain and in some cases, even disability. To treat these indications, Exemptia is recommended as a 40 mg subcutaneous injection once every alternate week. Patients normally would have to take the treatment for six months.

Media reports indicate that ‘Exemptia’ of Zydus Cadila will be priced in India equivalent to US$ 200 a vial against Humira price in the United States of US$ 1,000. Initial overall reaction for this local price does not seem to be quite favorable for India.

The global market:

A recent report from Thomson Reuters indicates, as blockbuster drugs with sales turnover of around US$100 billion lose patent protection, the global biosimilars market is expected to grow around US$ 25 billion by the end of the decade.

According to a 2013 report of the credit rating agency Fitch, eight of the current 20 top-selling global pharmaceuticals are biologics that will face patent expiry by 2020.

EvaluatePharma reported that the current the anti-rheumatics market makes up the second largest treatment area by sales, with worldwide revenues of US$ 41.1 billion, closely behind the oncology therapy area, which registered sales of US$68 billion in 2012 with a high growth rate.

The report also states, despite biosimilar entry Anti-rheumatics segment is expected to record a Compound Annual Growth Rate (CAGR) of 4 percent with a turnover of around S$52.1 billion in 2018.

The local potential:

Over the last several years, China and India have been emerging as the promising destinations for international outsourcing of biopharmaceutical manufacturing. In the recent times, China and India are reportedly showing promises to become the industry’s top potential destinations for offshoring over the next five years, ahead of traditional bio manufacturing hubs in the US and Western Europe.

More than 40 biosimilar products are now available in the Indian market. Over 10 pharma players are competing in this area with around 15 epoetin, 8 G-CSF and 4 insulin “biosimilars”, besides a few others.

Although India has the second largest USFDA approved drug manufacturing plants next to the United States, none of the products manufactured in these facilities can possibly be considered as “true biosimilars”.

Humira expected to remain strong:

EvaluatePharma also forecasts that Humira of AbbVie would continue to remain the best selling drug of the world at least till 2018 with sales of US$12.8 billion, despite its US patent expiry in 2016.

Moreover, to succeed Humira that will go off patent between end 2016 and 2018 (Europe), AbbVie reportedly has seven new drugs in clinical development for Rheumatoid Arthritis. These patented new drugs could also significantly cannibalize the sales of Humira.

Physicians’ attitude towards biosimilars:

According to an October 2014 Report of IMS Institute from Europe’s perspective, within each country’s health system, physicians display a range of attitudes and behaviors that influence their prescribing of biosimilars.

IMS observed three broad segments of prescribers as follows:

  • Conservative prescribers: These doctors tend to be late adopters of new technologies, are more likely to follow published clinical treatment guidelines, and may not be aware of or educated on the availability of potential use of biosimilars.
  • Open-minded prescribers: This archetype includes physicians who tend to be the most responsive to new information about treatment options, particularly where experience and knowledge of biologics may be low and educational program can be effective in impacting usage.
  • Enterprising prescribers: This segment of prescribers is most likely to search out information from all sources, and be open to trying different options for patient care including biosimilars as well as innovative treatments.

In addition to these archetypes, the report states, physicians’ attitudes and prescribing behavior may also be influenced or determined by prescribing guidelines, if any, the use of prescribing incentives, as well as the use of promotional activities by either originator or biosimilar manufacturers.

The US biosimilar challenge:

According to reports, despite two pharma players filing biosimilar applications at the USFDA, there are still many issues to be sorted out in this space by the drug regulator of the country.

Though an interchangeable biosimilar in the United States still appears to be several years away, there are initiatives in some American states to restrict interchangeable biosimilar for substitution against the reference product.

Moreover, USFDA’s draft guidance on clinical pharmacology of May 2014 has invited strong adverse comments from the innovator companies, lobby groups and the industry associations.

However, just in the last week, both the innovator companies and biosimilar manufacturers have reportedly agreed to support state legislation that allows pharmacies to automatically substitute biosimilars for corresponding branded biologics. But pharmacies must give prescribers a heads up afterward “within a reasonable time.”

For biosimilars makers, it’s a big improvement on the alternative, as the biotech developers wanted to require pharmacists to check with doctors before making the switch.

That said, the USFDA is yet to determine exactly how to classify biosimilars and their “reference products” as interchangeable. This guidance for classification would be necessary for the above mentioned pharmacy switches. This guidance is important especially for the statutory language, which dictates that interchangeability is proven for “any given patient”. This could also be construed as requiring studies in all the approved indications for a brand name biologic, i.e. Humira has around five different indications.

Thus, the path ahead still remains challenging for the biosimilar players in the United States, and more so for the Indian Companies, as compared to other global pharma majors with deep pockets.

Several other Humira biosimilars under development too:

As indicated earlier, the US and Europe patents of Humira with worldwide sales of US$ 11.02 billion in 2013 would expire by end 2016 and 2018, respectively. Thus, the product has become among the most sought-after biosimilar target prototypes for many pharma and biotech companies across the world.

The global biotech major Amgen has already indicated that its ABP 501 biosimilar has shown comparable efficacy and safety to Humira (adalimumab) in a late-stage trial in patients with moderate-to-severe plaque psoriasis after treatment duration of 16 weeks. The product, reportedly, has also matched Humira in stimulating immune response in patients.

Experts believe, Amgen could be in a position to compete directly with Humira when it loses patent protection, if similar results are obtained in the second phase III trial.

Moreover, according to available reports, Boehringer Ingelheim, Sandoz (Novartis) and Coherus are also progressing well with the development of Humira biosimilars.

Zydus Cadila expects that in 2019 it would be ready to launch the biosimilar of Humira (Adalimumab) in the United States.

Marketing challenges for biosimilars:

Today, the global biosimilars market is indeed in a nascent stage, even for the Indian players.

For successful commercialization of biosimilars, I envisage, a well-crafted hybrid marketing-model of small molecule generics on the one hand and large molecule biologics of the originators’ on the other would be appropriate, in the years ahead.

In the early marketing phase, biosimilar marketers are expected to follow the same branding, communication and detailing strategies of the originators, which ultimately would transform into a generic matrix as more players chip in with the price competition intensifying.

Unlike small molecule generics, affordable price of a biosimilar would be just one of the many critical considerations for its commercial success in the biologics market.

Sustained efforts and initiatives to allay safety concerns with biosimilars among both the doctors and also the patients would be a dire necessity. Providing in-depth medical, technical and domain knowledge to the sales team should never be compromised, though these would require additional initial investments. Post marketing surveillance or pharmacovigilance for biosimilars must be ongoing, even in India. Here too, Indian players do not seem to be very strong, as yet.

Thus, unlike small molecule generics, marketing a large molecule biosimilar would require clear, razor sharp and focused strategies across the value chain to unlock its true potential. Crafting impactful value propositions, avoiding complexities, for each stakeholder, would decide the commercial fate of the product.

‘Made in India’ issue for pharma needs to be addressed expeditiously:

High credibility clinical trial data and manufacturing quality standards would also play a decisive role, especially for India made biosimilars.

This is mainly due to widespread reports of frequent USFDA allegations related to falsification and doctoring of manufacturing data in several manufacturing plants of India.

Ethical and quality issues for drugs made in India, such as these, assumed even greater dimension, as the regulators in France, Germany, Belgium and Luxembourg reportedly suspended marketing approval for 25 drugs over the genuineness of clinical trial data from India’s GVK Biosciences. This is yet another blow to ‘Made in India’ image for medicines, which has arrested the global attention, for all the wrong reasons, just the last week. 

Conclusion:

Considering all the above points, let me now try to make a fair personal guess on whether or not the ‘Golden Goose’ would be successful enough to lay ‘Golden Eggs’, as required by the company.

Firstly, in the Indian perspective, the key point that strikes me is the cost of a treatment course with ‘Exemptia’ per patient in the country. On a rough calculation, it comes around Rs. 1,50,000 per course/per patient. This appears rather high according to the income level of an average Indian.

However, Zydus Cadila expects sales between Rs.1 billion (US$16.16 million) and 2 billion for ‘Exemptia’ only from the Indian market.

I reckon, with relatively high per course treatment cost with Exemptia, it may be quite challenging for the company to achieve this goal in the domestic market.

Thus, the global success of this biosimilar brand would mainly depend on its degree of success in the United States and Europe, post patent expiry of Humira.

Going by the possible availability of other Humira biosimilars from manufacturers with robust global marketing muscle, skill sets, experience and other wherewithal, the path of global success for Exemptia of Zydus Cadila, if the company decides to fly solo, appears to be strewn with many odds.

I would now stick my neck out to zero in with specificity in this area, while envisaging the possible future scenario.

Considering the evolving macro scenario together with the commercial success requirements in this space, I reckon, despite presence of several possible competitors of Humira biosimilars, including one from Zydus Cadila, the biotech domain expertise of Amgen, fuelled by its marketing muscle, would in all probability make its ABP 501 biosimilar the toughest competitor to Humira after its patent expiry in the US and Europe…and then…why doesn’t it try to succeed in India 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.

An Aggressive New Drug Pricing Trend: What It Means To India?

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A new class and an aggressive drug-pricing trend is now evolving in the global pharmaceutical industry, exerting huge financial pressure on the patients and payers, including governments, especially, in the developed nations of the world.

Another aspect of this issue I deliberated in one of my earlier blog posts of August 18, 2014 titled, “Patented Drug Pricing: Relevance To R&D Investments.”

Let me start my deliberation today by citing an example. According to 2013 Drug Trend Report of the pharmacy benefits manager Express Scripts, the United States will spend 1,800 percent more on Hepatitis C Virus (HCV) medications by 2016 than it did last year. This is largely attributed to new Hepatitis C cure with Sovaldi of Gilead, priced at Rs 61,000 (US$ 1,000) per tablet with a three-month course costing around Rs. Million 5.10 (US$ 84,000), when it reportedly costs around U$130 to manufacture a pill.

In a Press Release, Express Scripts stated, “Never before has a drug been priced this high to treat a patient population this large, and the resulting costs will be unsustainable for our country…The burden will fall upon individual patients, state and federal governments, and payers who will have to balance access and affordability in a way they never have had to before.”

The magnitude of impact – an example:

According to another report from the Centers for Medicare and Medicaid of the US, the cost to treat all Americans, who have hepatitis C, with Sovaldi would cost US$227 billion, whereas it currently costs America US$260 billion a year for all drugs bought in the country. According to Express Scripts, no major therapy class has experienced such a hefty increase in spending over the last 21 years.

This gives us a feel of the net impact of the evolving new aggressive drug pricing strategy on the lives of the patients and payers of one of the richest nations of the world.

Three critical parts of the evolving pricing strategy:

In an era, when new drug pricing has come under great scrutiny of the stakeholders globally, this strategy seems to have three critical components as follows:

1. Strategy for the developed countries: Set the launch price as high as possible and generate maximum profit faster from wealthy minority who can afford to pay for the drug.

It helps establishing the base price of the product globally, despite all hue and cries, maintaining a very healthy top and bottom line business performance, amidst ‘Wall Street cheering’.

Implementing this strategy meticulously and with precision, Gilead has reportedly registered US$ 5.8 billion in sales for Sovaldi in the first half of 2014. That too, in the midst of huge global concerns on alleged ‘profiteering’ with an exorbitantly priced HCV drug.

At that time, the company noted on its earnings call that it believes 9,000 people have been cured of HCV so far with Sovaldi, which means that the 6-month turnover of Sovaldi of US$ 5.8 billion was generated just from the treatment of 9000 patients. If we take the total number of HCV infected patients at 150 million globally, this new drug benefited less than one percent of the total number of HCV patients, despite clocking a mind-boggling turnover and profit.

2. Strategy for the developing countries: Create a favorable optic for the stakeholders by lowering the drug price significantly, in percentage term from its base price, earning still a decent profit. However, in reality the discounted price would continue to remain high for a very large number of patients.

Gilead is now in the process of implementing this strategy for 80 developing countries. For these markets, it has already announced a minimum threshold price of US$ 300 a bottle, enough for a month. With three months typically required for a full course and taking into account the currently approved combination with interferon, the total cost per patient would be about US$ 900 for a complete treatment against its usual price of US$ 84,000.

If we convert the discounted treatment cost, it comes down to around Rs. 55,000 from the base price of around Rs. Million 5.10. This discounted price, which is significantly less than the base price of the drug, creates an extremely favorable optic. No one discusses how many Hepatitis C patients would be able to afford even Rs. 55,000, say for example in a country like India? Thus, setting a high base price in the developed market for a new drug could make many in the developing world perceive that the treatment cost of Rs. 55,000 is very reasonable for majority of not so privileged patients.

Under the second strategy, Gilead has targeted mostly the world’s poorest nations, but also included some middle income ones such as Egypt, which has by far the highest prevalence of HCV in the world.

A ‘Financial Times’ report, also states, “At the US price, Gilead will recoup its Sovaldi development investment  . . . in a single year and then stand to make extraordinary profits off the backs of US consumers, who will subsidize the drug for other patients around the globe.”

If other global pharma companies also follow this differential strategy, one for the developed markets and the other for the developing markets, it could be a masterstroke for the Big Pharma. This would help address the criticism that its constituents are facing today for ‘obscene’ pricing of important new life saving drugs, as they target mostly the creamy layer of the society for business performance.

However, many in the United States are also articulating that they understand, the countries getting steep discounts from Gilead have high levels of poverty, but clearly points out that the disease affects lower-income patients in America, as well. To substantiate the point, they reiterate, according to the World Health Organization (WHO) about 150 million people worldwide have HCV, out of which around 2.7 million HCV diagnosed people live in the US. They highlight that currently even less than 25 percent of Americans with chronic HCV have had or are receiving treatment. In Europe, just 3.5 percent of patients of are being treated.

Thus, keeping in view of the increasing number of voices in the developed countries against abnormally high prices of the new drugs, the moot questions that come up are as follows:

  • Is Strategy 1 sustainable for the developed markets?
  • If not, would Strategy 2 for the developing market could ever be broader based?

3. Strategy for Voluntary License (VL) in those countries, where grant of product patent is   doubtful.

Thanks to the Indian patent regime, global companies would possibly consider following this route for all those products that may not be able to pass the ‘Acid Test’ of Section 3(d) of the Indian Patents Act 2005. Gilead has followed this route for Sovaldi and before that for tenofovir (Viread).

In this context, it is worth noting that the Indian patent office has not recognized Sovaldi’s patent for the domestic market, just yet. Thus, following this strategy Gilead announced, “In line with the company’s past approach to its HIV medicines, the company will also offer to license production of this new drug to a number of rival low-cost Indian generic drug companies. They will be offered manufacturing knowhow and allowed to source and competitively price the product at whatever level they choose.”

Accordingly, on September 15, 2014, international media reported that Cipla, Ranbaxy, Strides Arcolab, Mylan, Cadila Healthcare, Hetero labs and Sequent Scientific are likely to sign in-licensing agreements with Gilead to sell low cost versions of Sovaldi in India.

It was also reported that these Indian generic manufacturers would be free to decide their own prices for sofosbuvir, ‘without any mandated floor price’.

Indian companies would require paying 7 per cent of their revenues as royalty to Gilead, which, in turn would ensure full technology transfer to them to produce both the Active Pharmaceutical Ingredients (API) and finished formulations. The generic version of Sovaldi is likely to be available in India in the second or third quarter of 2015, at the earliest.

However, the final decision of the Indian Patent Office on the patent grant for Sovaldi holds the key to future success of similar high-voltage, seemingly benign, VL based game plan of the global pharma majors.

The new trend:

In April 2014, Merck and Co. announced that its two HCV drug candidates had a 98 percent cure rate in a mid-stage trial. In addition, AbbVie is also expected to launch a high-end hepatitis C drug within the next year. The prices for these drugs are yet to be announced.

However, a new report of October 2014 states that USFDA has approved this month a new drug named Harmony, a ledipasvir/sofosbuvir combo formulation, again from Gilead for curative treatment of chronic HCV genotype 1 infection in adults. Harmony, which is called the son of Sovaldi, would cost a hopping US$ 94,500 for a 12-week regimen, as against US$ 84,000 for Sovaldi.

Hence, I reckon, similar aggressive pricing strategy for new drugs would gain momentum in the coming years and at the same time.

Is this pricing model sustainable?

Though Gilead pricing model for patented drugs works out better than what is prevailing today in India, the question that comes up yet again, whether the new model is sustainable for various reasons as mentioned above or would it be followed by majority of the global drug innovators?

In a situation like this, what then could be a sustainable solution in India?

The desirable pathway:

A transparent government mechanism for patented drugs pricing, as followed by many countries in the world, would be quite meaningful in India. The Department of Pharmaceuticals (DoP) of the Government of India could play a constructive role in this area, as already provided in the Drug Policy 2012 of the country.

This measure assumes greater urgency, as the astronomical prices of patented drugs, especially for life-threatening illnesses, such as cancer, have become a subject of great concern in India too, just as it has become a critical issue across the world.

DoP is in inactive mode:

It is not difficult to fathom that CL for all patented life-saving drugs would not be a sustainable measure for all time to come. Thus, the need for a robust mechanism of price negotiation for patented drugs was highlighted in the Drug Policy 2012.

The DoP first took up the issue for consideration in 2007 by forming a committee. After about six years from that date, the committee produced a contentious report, which had hardly any takers.

Today, despite the new government’s initiative to inject requisite energy within the bureaucracy, administrative lethargy and lack of sense of urgency still lingers with the DoP, impeding progress in this important subject any further.

Intense lobbying on this issue by vested interests from across the world has further pushed the envelope in the back burner. Recent report indicates, the envelope has since been retrieved for a fresh look with fresh eyes, as a new minister is now on the saddle of the department.

According to reports, a new inter-ministerial committee was also formed by the DoP under the chairmanship of one of its Joint Secretaries, to suggest a mechanism to fix prices of patented drugs in the country.
The other members of the committee are Joint Secretary, Department of Industrial Policy and Promotion (DIPP); Joint Secretary, Ministry of Health and Family Welfare; and Member Secretary, National Pharmaceutical Pricing Authority (NPPA).

Unfortunately, nothing tangible has been made known to the stakeholders on this matter, just yet. I sincerely hope that the new government expedites the process now.

Three critical factors to consider:

While arriving at the patented products price in India, three critical factors should be made note of, as follows:

  • The discussion should start with the prices adjusted on the Purchasing Power Parity factor for India.
  • Any price must have a direct relationship with the per capita income of the population of the country.
  • Details of other public healthcare measures that the government would undertake, by increasing its healthcare spends as a percentage of GDP, should also be clearly articulated.

Conclusion:

The evolving and aggressive new product-pricing trend has three following clearly identifiable facets:

One, the base price of the drugs would be established at a very high level to help increase both the turnover and profit of the companies significantly and quickly. This measure would consequently make the drug bills of the developed world even more expensive, which could limit healthcare access wherever co-payment exists or the expenditures are Out of Pocket (OoP) in nature.

Two, against intense global criticism for aggressive drug pricing strategy, to create a favorable optic, the concerned companies would launch these products at a deep discount on the base price in the developing world. However, the net price would still remain high in absolute terms, considering per capita income in those countries.

Three, for many of these new products, Section 3(d) of the Indian Patents 2005 would place India at an advantage. Thus, in absence of evergreening type of product patents, to salvage the situation, many of these companies would prefer to offer Voluntary License (VL) to Indian generic manufacturers under specific terms and conditions. However, such VL may not have any potential value, if IPO refuses to grant patents to those products, which would fall under the above section. In that case, generic competition would further bring down the prices.

No doubt, the above pricing model for patented drugs works out better than what is prevailing today in India. However, the question that comes up, whether the new model is sustainable or would be followed by majority of the global drug innovators in the same way? Considering all these, it does not seem to be the most desirable situation. Moreover, the current patent regime is a deterrent mostly to evergreening of patents.

Thus, the Indian government should play a more specific and proactive role in this game by first putting in place and then effectively implementing a country specific mechanism to tame the spiraling patented drug prices in India, for the interest of patients.

The world has taken serious note of this fast evolving aggressive new drug-pricing trend, as different countries are in the process of addressing the issue in various country-specific ways. Unfortunately, the DoP still remains in a deep slumber, having failed once to half-heartedly put a clumsy mechanism in place to address the issue.

As India is now under a new political regime, let us sincerely hope, the new minister in charge succeeds to make it happen, sooner, reducing vulnerability of a vast majority of patients during many life threatening ailments and…of course, in tandem, ensuring justifiable profit margin for the innovator drug companies…the evolving aggressive new drug pricing trend notwithstanding.

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.

Does Drug Pricing Freedom Benefit Patients in A Free-Market Economy?

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A 2010 USFDA update titled ‘Generic Competition and Drug Prices’ highlighted that generic competition is intimately associated with lower drug prices, and the entry of the second generic competitor is associated with the largest price reduction.

The agency found that on an average, the first generic competitor prices its product only slightly lower than the brand-name manufacturer. However, the appearance of a second generic manufacturer reduces the average generic price to nearly half the brand name price. As additional generic manufacturers market the product, the prices continue to fall, but more slowly. For products that attract a large number of generic manufacturers, the average generic price falls to 20 percent of the branded price or even lower.

USFDA came to this conclusion based on an analysis of IMS retail sales data for single-ingredient brand name and generic drug products sold in the United States from 1999 through 2004.

Thus, the scope of any significant price increase, especially under cutthroat competition in the generic space of the US, used to be considered almost impractical until recently.

The ‘Myth’ busted:

Just over four years down the line, a ‘Press Release’ of the Committee on Oversight and Government Reform shattered this myth, when on October 2, 2014, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, and Senator Bernard Sanders, Chairman of the Subcommittee on Primary Health and Aging, Senate Committee on Health, Education, Labor and Pensions, sent letters to 14 drug manufacturers, which reportedly include India’s Sun Pharma, Dr. Reddy’s Laboratories and Zydus Cadila, requesting for detail information about the escalating prices for generic drugs that they have started charging.

The letters:

The complete letters written to each of the 14 drug manufactures are linked below:

Actavis plc

Apotex Corp.

Dr. Reddy’s Laboratories

Endo International plc

Global Pharmaceuticals

Heritage Pharmaceuticals Inc.

Lannett Company, Inc.

Marathon Pharmaceuticals, LLC

Mylan Inc.

PAR Pharmaceuticals Companies Inc.

Sun Pharmaceutical Industries, Inc

Teva Pharmaceutical Industries Ltd.

West-Ward Pharmaceutical Corp.

Zydus Pharmaceuticals USA Inc.

Summary findings of apparently ‘obscene’ price hike:

The following statements of Rep. Cummings and Senator Sanders capture the core sentiment of the probe:

“When you see how much the prices of these drugs have increased just over the past year, it’s staggering, and we want to know why,” Cummings said.

“Generic drugs were meant to help make medications affordable for the millions of Americans who rely on prescriptions to manage their health needs. We’ve got to get to the bottom of these enormous price increases,” Sanders added.

In the above letters, Cummings and Sanders quoted data from the Healthcare Supply Chain Association on recent purchases of 10 generic drugs by group purchasing organizations over the past two years.  For example:

  • Albuterol Sulfate used to treat asthma and other lung conditions, increased 4,014 percent for a 100’s bottle of 2 mg tablets.
  • Doxycycline Hyclate, an antibiotic used to treat a variety of infections, increased 8,281 percent for a 500’s bottle of 100 mg tablets.
  • Glycopyrrolate, used to prevent irregular heartbeats during surgery, increased 2,728 percent for a box of 10 of 0.2 mg/mL, 20 mL vials.

Click here for a table of price increases for the ten drugs examined.

The information sought by lawmakers:

The Lawmakers requested the companies to provide detail relevant information from 2012 to the present, including:

  • Total gross revenues from sales of the drugs,
  • Prices paid for the drugs,
  • Factors that contributed to decisions to increase prices,
  • The identity of company officials responsible for setting drug prices.

The trigger factor:

This probe by the US lawmakers was triggered by the National Community Pharmacists Association (NCPA) 2013 survey of drug prices. Subsequently in 2014, the NCPA had requested the US Senate to investigate into staggering increases of 390 – 8200 percent in the procurement prices of ten generic drugs, in just one year.

Immediate financial impact:

Reacting to this news, in the early afternoon on October 8, 2014, the scrip of Sun Pharma reportedly declined by 3.91 percent to Rs 804.10 and Dr. Reddy’s Laboratories slipped by 3.29 percent to Rs 2,996.90 while Cadila Healthcare was down by 1.84 percent to Rs 1,313.85 on the Bombay Stock Exchange (BSE).

It is too early to speculate on the ultimate outcome of this probe. However, it may not be prudent to rule out the possibility of a far-reaching consequence, besides levying of commensurate penalties to the respective drug manufacturers.

India too acted upon, but withdrew hastily:

For products falling outside Drug Price Control Order 2013 (DPCO), which account for around 82 percent of the total Indian Pharmaceutical Market (IPM) and are eligible for free pricing, India has a similar, yet slightly different problem.

The National Pharmaceutical Pricing Authority (NPPA) had addressed this issue recently, but was compelled to withdraw its internal guidelines on the subject rather hastily, coincidentally just prior to Prime Minister Modi’s visit to America. Pharma industry and its lobbyists had projected this move of NPPA as a regressive step in the free pricing space.

The above measure of the NPPA was related to arbitrary and wide price variation within the same non-schedule drug molecules, manufactured by different pharma companies. This was important, as unlike many other non-drug products, patients buy medicines based on what the doctors’ prescribe for them. Moreover, patients undergoing medical treatment or their relatives usually have no inkling about the availability of lesser price equivalents of the same molecule/molecules as recommended by their doctors.

For example, Glimeperide, an anti-diabetic drug, sold by the market leader at ₹133 for a pack of 10 tablets, despite other equivalent brands being available at or below ₹40 or the MRP for a pack of 10 tablets (40 mg) of Telmisartan, used to treat hypertension varies from a low of ₹25 to as high as ₹385.

More volume sales of many of these high price drugs, despite availability of their low price equivalents, manufactured by equally well reputed companies, are primarily driven by various differentiated activities of the pharma companies to influence the doctors in favor of their respective products, as believed by many. Such type of free market encouraging free drug pricing, devoid of any possibility for the patients to exercise informed choices on the medicine price, defeats its core purpose.

Thus, absurd price variation within the same formulation of the same product molecules, even after accounting for all imaginable reasons for the price differences, was construed by the NPPA as ‘market failure’, as consumers cannot use their choice in product selection.  In a market situation like this, intervention of the government is warranted for the sake of public health interest.

I hope, the Supreme Court of India would take note of this situation, in its next hearing.

A critical Question:

Based on ‘The New York Times’ report, I twitted (#@tapan_ray) on October 8, 2014 as follows:

“It happens in the US too? Government Demands Reasons For Rising Generic Drugs Costs, Otherwise Industry To Face New Regulation. http://nyti.ms/1vMi4No”

Subsequently, on October 9, 2014, Indian media flashed headlines like:

  • “Sun, Dr Reddy’s, Zydus Cadila named in US Congress price probe” or
  • “Sun Pharmaceutical Industries, Dr. Reddy’s face US action on price hikes up to 8,000 percent”

In this scenario, where prices of some generic drugs sky rocket by 390 to 8,200 percent just in a year, the following basic question comes up for all stakeholders to ponder:

Does free pricing of drugs, even in free markets, work at all to protect patients’ health interest?

Conclusion:

In my view, quite unlike most other products, pricing freedom for medicines does not work in a free market due to a number of factors, even where intense competition exists from equivalent products placed in different price bands. This is mainly because, despite availability of lower price equivalents of the same or similar drugs, patients cannot exercise their pricing choice even within the same molecule, in any way, and is totally bound by what is prescribed by the doctors. This happens in India too and in all those countries where product substitution is illegal.

Moreover, it is an open secret that the pharma players heavily influence most of the heavy prescribers in their choice of drugs following various means. As a result, in many cases highest priced products become the category leader too, despite availability of lower price equivalents from equally reputed companies. This scenario makes many people believe that in a stable market situation drug prices skyrocket primarily due to dubious business practices giving rise to gross market manipulation

I reckon, just on drug pricing issue, many pharma players, both global and local, are inviting much avoidable business risks, not just in the developing markets such as India, but also in the largest free market economy of the world – the United States… or wherever opportunities for free drug pricing exist, irrespective of what it means to the patients. This mindset needs an urgent introspection, as the past would possibly not be replicated in the future.

Expectations from the civil society are now high that governments, both in the developing and also in the developed world, would keep a careful vigil to ensure that the process of earning a decent profit by the pharma players does not transgress into a limitless fetish for profiteering under any facade, pushing majority of patients succumb to life threatening ailments without having access to appropriate medicines. This defeats even the very purpose of drug innovation, as its access gets highly restricted mostly to the creamy layer of the society.

Many would consider this situation as grossly devoid of equity, unfair, unjust and in no away be allowed to continue. It is not an issue of taking moral high grounds either or scoring brownie points in a debate, but more importantly a critical ingredient to uphold ethics and values in pharma business, while re-creating its well-deserved public image, as it takes rapid strides towards inclusive growth.

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.