The Takeover Magician To Tango Again On A Bold New ‘Sunny’ Tune

Posted on April 14, 2014 by Tapan Ray

The consolidation process of the Indian pharmaceutical industry continues in its own pace. Most recently, the homegrown pharma takeover magician is all set to tango yet again with a bold ‘Sunny’ tune. The low profile creator of high value ‘Sun Pharmaceuticals’, that he painstakingly built from the scratch facing many turbulent weather over nearly three decades, is ready to go for the gold, yet again.

The cool, composed and the decisive business predator is now in the process of gobbling up, quite unexpectedly, the much ailing prey – Ranbaxy. This acquisition of a distressed asset, would make Sun Pharmaceuticals a pharma behemoth not just in India with a jaw-dropping 9.33 percent share of the Indian Pharma Market (IPM), but also would help catapulting the company to become the 5^th largest generic pharmaceutical company globally.

Ranbaxy – A sad example of value destruction:

It is worth recapitulating that in 2008, Daiichi Sankyo paid reportedly US$ 4.6 billion to acquire 63.8 percent stake in Ranbaxy.

After Sun Pharma’s acquisition of Ranbaxy with US$ 3.2 billion in 2014, Daiichi Sankyo will hold just 9 per cent of Sun Pharma, which is currently worth US$ 2 billion. Such an example of value erosion of a pharma giant in a little over 5 year period is not just unique, but very sad indeed.

Keeping the “Sunny” side up”:

It is expected that post acquisition, Sun Pharma would continue to keep its ‘Sunny Side’ up, maintaining the corporate name of the merged entity as ‘Sun Pharma’.

Ranbaxy name, in any case, is not so popular, either inside or outside India after the US-FDA fiasco, casting aspersions on the quality of products that it manufactures.

Moreover, the history indicates that this is exactly what happened when Abbott acquired Piramal Healthcare, Zydus bought over Biochem or even Torrent took control of Elder.

Ranbaxy name could probably exist as a division of Sun pharma in future, if at all.

Post acquisition IPM league table:

According to AIOCD AWACS, extrapolating the post acquisition scenario on the league table (MAT February 2014) of the Top 10 Pharma majors in India, it looks as follows:

Rank	Company	Value Rs. Crore	Market Share %	Growth %
1	Sun Pharma Group	6,741	9.33	8.8
2	Abbott Group	4,758	6.59	4.6
3	Cipla	3,493	4.84	8.5
4	Zydus Group	3,116	4.31	9.7
5	GSK	2,727	3.78	-14.7
6	Lupin	2,457	3.40	12.4
7	Alkem Group	2,433	3.37	10.1
8	Mankind	2,257	3.12	7.6
9	Pfizer + Wyeth	2,150	2.98	3.0
10	Emcure Group	2,048	2.83	15.5
Total	IPM	72,236	100.00	6.0

(Source: AIOCD AWACS)

Distancing from No. 2 by a mile:

With the above unprecedented chunk of the IPM, Sun Pharma would distance itself from the (would be) second ranking Abbott with a whopping 2.74 percent difference in market share, which would be equivalent to the turnover of the 10th ranking pharma player in the domestic pharma market.

In its pursuit of corporate excellence, Sun Pharma has made 13 acquisitions between 1990s and 2012. Post merger, the revenue of the combined entity is estimated to be around US$ 4.2 billion with EBITDA of US$ 1.2 billion for the 12-month period that ended on December 31, 2013.

Merger consolidates ‘Domestic Pharma’ market share:

This acquisition would also tilt the balance of ‘Domestic Pharma’ Vs. ‘Pharma MNC’ market share ratio in the IPM very significantly, as follows:

	Current Market Share Ratio	Post Acquisition Market Share Ratio
Domestic Pharma Vs. Pharma MNC	73.4 : 26.6	77.2 : 22.8

(Source: AIOCD AWACS)

Further, this trend is also expected to allay the lurking fear of many about the robustness and future growth appetite of the domestic pharma industry, thus becoming an easy prey of pharma MNC predators. It is believed that such an apprehension was prompted by a series of large ‘Brownfield FDIs’ coming into the Indian pharma industry to acquire a number of important local assets.

The key challenges:

1. Sun Pharma too is under US-FDA radar:

As we know that along with Ranbaxy, Wockhardt and some others, Sun Pharma has also come under the USFDA radar for non-compliance of the Current Good Manufacturing Practices (cGMPs).

Under the prevailing circumstances, it would indeed be a major challenge for Sun Pharma to place its own house in order first and simultaneously address the similar issues to get US-FDA ‘import bans’ lifted from four manufacturing plants of Ranbaxy in India that export formulations and API to the United States. This is quite a task indeed.

2. Pending Supreme Court case on Ranbaxy:

Prompted by a series of ‘Import Bans’ from US-FDA on product quality grounds, the Supreme Court of India on March 15, 2014 reportedly issued notices to both the Central Government and Ranbaxy against a Public Interest Litigation (PIL) seeking not just cancellation of the manufacturing licenses of the company, but also a probe by the Central Bureau of Investigation (CBI) on the allegation of supplying adulterated drugs in the country.

Ranbaxy/ Sun pharma would now require convincing the top court of the country that it manufactures and sells quality medicines for the consumption of patients in India. No doubt, all these issues were factored-in for relatively cheap valuation of Ranbaxy.

3. CCI scrutiny of the deal:

Out of the Top 10 Therapy Areas, the merged company would hold the top ranking in 4 segments namely, Cardiac, Neuro/CNS, Pain management and Gynec and no. 2 ranking in two other segments namely, Vitamins and Gastrointestinal.

Noting the above scenario and possibly many others, the Competition Commission of India (CCI), after intense scrutiny, would require to take a call whether this acquisition would adversely affect market competition in any of those areas. If so, CCI would suggest appropriate measures to be completed by these two concerned companies before the deal could take effect. This would also be a task cut out for the CCI in this area.

4. SEBI queries:

Securities and Exchange Board of India (SEBI), has sought information from Sun Pharmaceutical on stock price movement and the deal structure.

According to reports, this is due to “Ranbaxy shares showing good movement on three occasions: first in December, then in January and subsequently in March 2014, just before the deal was announced.” This has already attracted SEBI’s attention and has prompted it to go into the details.

The opportunities:

That said, there are many opportunities for Sun Pharma to reap a rich harvest out of this acquisition. The most lucrative areas are related to Ranbaxy’s missed opportunities for ‘first to launch’ generic versions of two blockbuster drugs – Diovan (Novartis) and Nexium (AstraZeneca).

Diovan (Novartis):

Despite Ranbaxy holding the exclusive rights to market the first generic valsartan (Diovan of Novartis and Actos of Takeda) for 180 days, much to its dismay, even after valsartan patent expired on September 2012, a generic version of the blockbuster antihypertensive is still to see the light of the day. However, Mylan Inc. has, now launched a generic combination formulation of valsartan with hydrochlorothiazide.

Nexium (AstraZeneca):

Ranbaxy had created for itself yet another opportunity to become the first to launch a generic version of the blockbuster anti-peptic ulcerant drug of AstraZeneca – Nexium in the United States, as the drug goes off patent on May 27, 2014. However, due to recent US-FDA import ban from the concerned plant of Ranbaxy, it now seems to be a distant reality. Unless…

Sun Pharma has reportedly 10 manufacturing plants in India and 8 in the US, besides having other production facilities in Israel, Mexico, Hungary, Canada, Bangladesh and Brazil. Post acquisition, the combined entity will have operations in 65 countries with 47 manufacturing facilities spanning across 5 continents, providing a solid platform to market specialty and generic products globally. With all these, the above key issues would perhaps be addressed expeditiously.

Leaving aside those two big opportunities, post merger, Sun Pharma is expected to have around 629 ANDAs waiting for approval, including first-to-file opportunities in the United States, besides the current ongoing businesses of the merged company.

What about cost synergy?

Though Sun pharma promoters have given an indication about the revenue synergy, nothing is known, as yet, about the targeted details of cost synergy after this acquisition.

Conclusion:

I reckon, the consolidation process in the Indian pharmaceutical industry would continue, though with a different pace at different times, involving both the domestic pharma and MNCs as the predators.

Even before ‘The Breaking News’ of this brand new well hyped acquisition came from Reuters, in the ‘Corporate World’ of India, Dilip Shanghvi used to be known as an unassuming and astute self-made business tycoon blessed with a ‘magic wand’ deeply concealed in between his two ears, as it were. Folks say, at an opportune time, wielding this ‘wand’, he confidently turns distressed pharma assets into money-spinners and has proved it time and again with grit, grace and élan in equal measures.

Can he do it again? Well…Why not?

Thus, while acquiring the ailing Ranbaxy with a value for money, the takeover magician, prepares for his best shot ever, wielding the same magic wand yet again, to steer the new company from an arduous, dark and complex path, hopefully, to a bright frontier of sustainable excellence.

Let’s hope for the best, as the ‘Tango’ begins…on a bold new ‘Sunny’ tune.

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.

Loss of Ranbaxy, Gain of Big Pharma…And Two Intriguing Coincidences

Posted on March 17, 2014 by Tapan Ray

In March 2014, the largest pharma player of India by market capitalization, Sun Pharma, became the latest of the large Indian pharma exporters facing the US-FDA ‘Import Ban’ for drugs manufactured at its Gujarat-based plant. This news came as a shocking surprise to many, including the stock market, as the home grown company has now attained an international stature being governed by a professional management team and steered by a Board that is chaired by a well-regarded non-Indian with decades of experience in the global pharmaceutical industry.

Just before that in January 2014, being slapped with the US-FDA drug ‘Import Ban’ of Active Pharmaceutical Ingredients (API) manufactured in its Toansa Plant of Punjab, the pharmaceutical business of Ranbaxy in the United States, with the products manufactured in its approved manufacturing facilities in India, came to a screeching halt.

It is worth noting that similar ‘Import Bans’ are already in place for the same company’s Dewas, Paonta Sahib, and Mohali production facilities. The combined impact of these bans now makes Ohm Laboratories plant of Ranbaxy, located in New Jersey, its sole generic drug manufacturing facility for the US market.

Considering that the US sales of Ranbaxy reportedly used to be around 57 percent of its total global turnover even in 2012, these import bans are undoubtedly a huge blow to the company, both financially as well as in terms of its business reputation.

Thus, the top priority of Ranbaxy under this situation is effectively addressing all the issues as raised by the US-FDA, especially in the area of documentation, as in the buyers’ market sellers cannot be the choosers.

A ‘Double Whammy’:

Meanwhile, prompted by theses ‘Import Bans’ on product quality ground and adding further woes to the company, the Supreme Court of India on March 15, 2014 reportedly issued notices to both the Central Government and Ranbaxy on a Public Interest Litigation (PIL) seeking not just cancellation of the manufacturing licenses of the company, but also a probe by the Central Bureau of Investigation (CBI) on the allegation of supplying adulterated drugs in the country.

Thus, it is a double whammy for Ranbaxy. The company would now require convincing the top court of the country that it manufactures and sells quality medicines for consumption of the patients in India.

However, Ranbaxy reportedly insisted that the drugs sold by it in the Indian market are safe and effective and that the company complies with all regulations of the country.

Could the situation now get even murkier?

During the process of judicial scrutiny, if the Supreme Court gets convinced with the above reply of Ranbaxy on this issue, the question that could possibly emerge is, how come the same company produces high quality drugs for the patients in India and allegedly substandard quality drugs for the patients of the United States? This could make the subject more complicated, if not murkier, internationally.

Two intriguing coincidences:

In the midst of all these, while connecting various similar looking and important dots, emerged during the last few years, a couple of clear coincidences comes to the fore, as follows:

1. Is the drug quality issue in India for exports limited only to US-FDA?

This brings us to the first interesting coincidence of drug ‘Import Bans’, involving large Indian drug exporters, coming mostly, if not only, from the US-FDA, although there are so many other drug importing countries, including rest of the developed world.

Moreover, none of the Indian domestic companies had ever faced similar number of USFDA ‘Import Bans’ in the past, though they have been exporting to the United States from their FDA approved and inspected plants since quite a while. Therefore, it is worth figuring out why has it started happening now, that too repeatedly, and involving some of the largest global generic drug manufacturers from India.

Ranbaxy too is a large global player for generic pharmaceutical products. Besides India and the United States, the company markets its products both in East and West Europe, Latin America, Africa, Middle East, South Asia, South-East Asia and Asia-Pacific regions. Interestingly, though its saga related to US-FDA cGMP conformance in the four plants, culminating into drug ‘Import Bans’ in the United States, commenced as early as 2008, the company does not seem to have any issue with any other drug regulator anywhere in the world, not just yet.

According to the media report, UK and Australian drug regulators had commented that they are assessing the impact of the US action on Ranbaxy products sold in their countries. However, as on date Ranbaxy’s drug export to all those countries continue to remain as normal as before.

If over a period of time, it is proved that other foreign drug regulators do not have any similar quality related issues with Ranbaxy manufactured products, a serious joint evaluation of the entire chain of events related to Ranbaxy and others by the global regulatory experts would perhaps be warranted to provide a lasting solution on the subject.

2. Missed opportunities for ‘first to launch’ generic versions of blockbuster drugs:

The second coincidence is related to a series of missed opportunities, especially for Ranbaxy, related to ‘first to launch’ generic versions of several patent expired blockbuster drugs in the United States.

When the emerging dots associated with such lost opportunities for drugs like, Lipitor (Pfizer), Diovan (Novartis) and Nexium (AstraZeneca) are connected, a clear pattern emerges favoring Big Pharma and obviously adversely affecting companies like Ranbaxy.

Saga started with uncertainty over Lipitor generic Launch:

Like many other large Indian players, ‘first to launch’ strategy with new generic drugs has been the key focus of Ranbaxy since long, much before its serious trouble with the US-FDA begun in 2008. ‘Import Bans’ on two of its manufacturing facilities by the US regulator in that year created huge uncertainty in its launch of a generic version of Pfizer’s anti-lipid blockbuster drug Lipitor in 2011. On time launch of a generic version of Lipitor was estimated to have generated a turnover of around US $ 600 million for Ranbaxy in the first six months.

Despite its neck deep trouble with the US-FDA at that time, Ranbaxy ultimately did manage to launch generic Lipitor, after partnering with Teva Pharmaceutical of Israel.

The story continued with indefinite delay of Diovan generic launch:

Lipitor story was just the beginning of Ranbaxy’s trouble of not being able to translate its ‘first to launch’ advantage of patent-expired blockbuster drugs into commercial success, thus allowing the Big Pharma constituents to enjoy the market monopoly with their respective blockbuster drugs even after patent expiry.

Despite Ranbaxy holding the exclusive rights to market the first generic valsartan (Diovan of Novartis and Actos of Takeda) for 180 days, much to its dismay, even after valsartan patent expiry in September 2012, a generic version of the blockbuster antihypertensive is yet to see the light of the day. However, Mylan Inc. has, now launched a generic combination formulation of valsartan with hydrochlorothiazide.

US-FDA drug ‘Import Ban’ from the concerned manufacturing facility of Ranbaxy gave rise to this hurdle favoring the Big Pharma, as discussed above.

As a result, Novartis in July 2013 reportedly raised its guidance announcing that the company now expects full-year sales to grow at a low single-digit rate, where it had earlier predicted net sales to turn up flat. It also guided for core earnings to decline in the low single digits, revising guidance for a mid-single-digit drop.

Would it also delay the launch Nexium generic?

Ranbaxy had earlier created for itself yet another opportunity to become the first to launch a generic version of the blockbuster anti-peptic ulcerant drug of AstraZeneca – Nexium in the United States, as the drug goes off patent on May 27, 2014. However, due to another recent US-FDA import ban from the concerned plant of Ranbaxy, it now seems to be a distant reality.

That said, it has now been reported that Ranbaxy is in talks with at least two companies on sourcing ingredients for the generic version of Nexium to be able to launch its generic formulations in the United States immediately after the patent expiry.

In this context, any delay in the launch of generic Nexium, which incidentally is the second-biggest seller of AstraZeneca, would have a big impact on the company’s profit.

With the global sales of Nexium at US$ 3.87 billion and US sales at US$ 2.12 billion in 2013, retaining its monopoly status in the all-important US market beyond the end of May would not only limit a forecast decline in AstraZeneca’s 2014 earnings, but would also protect bonuses for top management of the British pharma giant, the above report says.

No Machiavellian Hypothesis:

By highlighting these coincidences, I have no intention to even attempting to postulate something like a ‘Machiavellian Hypothesis’. I just want to establish that intriguing coincidences do exist whatever may be the reasons.

Probably an in-depth study by independent experts in this field would be able to ferret out the real reasons behind these coincidences, including, why are the cGMP issues repeatedly arising only with the US-FDA?

Conclusion:

Be that as it may, delayed generic launches of Nexium (AstraZeneca) with US sales of US$ 2.12 billion, together with the same for Actos (Takeda) and Diovan (Novartis) recording a combined sales for US$ 8.55 billion, have indeed created almost a wind-fall gain for the respective ‘Big Pharma’ constituents and consequent huge losses for Ranbaxy. The first-to-file bonus on Actos alone was estimated to be more than US$ 200 million.

Though the US-FDA Commissioner Margaret Hamburg has reportedly clarified that the United States is ‘not targeting’ Indian pharma companies but just following a strict quality control regime for all products being imported into America, the following critical questions still float at the top of mind:

- Are all these missed opportunities of Ranbaxy, which favored Big Pharma immensely, just sheer coincidences of clash in timings between USFDA ‘Import Bans’ from four of its manufacturing facilities and the respective launch dates in the United States for the first generic versions of the three blockbuster drugs?

- When Indian generic drug manufacturers continue to export across the world without any problem thus far, why is a series of unprecedented ‘Import Bans’ on quality grounds now coming from the US-FDA in a quick succession decimating the image of Indian generic drug manufacturers?

At the end of the narrative, some wise men could well say that I am trying to connect the dots that do not exist at all. These are all imaginary or at best, sheer coincidences. It could well be just that, who knows? But…

By: Tapan J. Ray

Is Credibility Erosion of Pharma Accelerating?

Posted on March 10, 2014 by Tapan Ray

‘Big Pharma’ now seems to be desperately trying to gain the long lost high moral ground by pushing hard its gigantic image makeover juggernaut, maintaining a strong pitch on the relevance of stringent Intellectual Property Rights (IPR) in the lives of the patients. However, even more alert media, by reporting a number of unethical and fraudulent activities of some of its constituents on the ground, is taking much of the steam out of it. As a result, the pace of erosion of all important pharma credibility is fast accelerating.

Innovation – A critical need for any science-based business:

Innovation, which eventually leads to the issue of IPR, is generally regarded as extremely important to meet the unmet needs of patients in the battle against diseases of all types, especially the dreaded ones. Thus, it has always been considered as the bedrock of the global pharmaceutical industry. As we all know, even the cheaper generic drugs originate from off-patent innovative medicines.

At the same time, it is equally important to realize that just as the pharmaceutical or life-science businesses, innovation is critical for any other science based businesses too, such as IT, Automobile, Aviation, besides many others. Since many centuries, even when there were no ‘Patents Act’ anywhere in the world, leave aside robust ones, pharmaceutical industry has been predominantly growing through innovation and will keep becoming larger and larger through the same process, acrimonious debate over stringent IPR regime not withstanding.

India has also amply demonstrated its belief that innovation needs to be encouraged and protected with a well-balanced Intellectual Property regime in the country, when it became a member of the World Trade Organization and a part of the TRIPS Agreement, as I had discussed in my earlier blog post.

Simultaneously, a recent research report is worth noting, as well. The study reveals, though the pharmaceutical companies in the United States, since mid 2000, have spent around US$ 50 billion every year to discover new drugs, they have very rarely been able to invent something, which can be called significant improvement over already existing ones. This is indeed a matter of great concern, just as a very ‘stringent IP regime’ prompts ‘evergreening’ of patents, adversely impacting the patients’ health interest.

Though innovation is much needed, obscene pricing of many patented drugs is limiting their access to majority of the world population. On top of that, business malpractices net of fines, wherever caught, are adding to the cost of medicines significantly.

Key reasons for acceleration of credibility erosion:

I reckon, following are the three main factors accelerating credibility erosion of pharma in general and Big Pharma in particular:

Large scale reported business malpractices affecting patients’ health interest
Very high prices of patented medicines in general, adversely impacting patients’ access and cost of treatment
Attempts to influence IP laws of many countries for vested interests

1. Accelerating credibility erosion due to business malpractices:

In the pharmaceutical sector across the world, including India, the Marketing and Clinical Trial (CT) practices have still remained very contentious issues, despite many attempts of so called ‘self-regulation’ by the industry associations. Incessant complaints as reported by the media, judicial fines and settlements for fraudulent practices of some important pharma players leave no breather to anyone.

To illustrate the point, let me quote below a few recent examples:

Global:

In March 2014, the antitrust regulator of Italy reportedly fined two Swiss drug majors, Novartis and Roche 182.5 million euros (U$ 251 million) for allegedly blocking distribution of Roche’s Avastin cancer drug in favor of a more expensive drug Lucentis that the two companies market jointly for an eye disorder. According to the Italian regulator Avastin costs up to 81 euros, against around 900 euros for Lucentis. Out of the total amount, Novartis would require to pay 92 million euros and Roche 90.5 million euros. Roche’s Genentech unit and Novartis had developed Lucentis. Roche markets the drug in the United States, while Novartis sells it in the rest of the world. Quoting the Italian regulator, the report says that the said practices cost Italy’s health system more than 45 million euros in 2012 alone, with possible future costs of more than 600 million euros a year.

Just before this, in the same month of March 2014, it was reported that a German court had fined 28 million euro (US$ 39 million) to the French pharma major Sanofi and convicted two of its former employees on bribery charges. An investigation of those former employees of Sanofi unearthed that they had made illicit payments to get more orders from pharma dealer.

In November 2013, Teva Pharmaceutical reportedly said that an internal investigation turned up suspect practices in countries ranging from Latin America to Russia.

In May 2013, Sanofi was reportedly fined US$ 52.8 Million by the French competition regulator for trying to limit sales of generic versions of the company’s Plavix.

In August 2012, Pfizer Inc. was reportedly fined US$ 60.2 million by the US Securities and Exchange Commission to settle a federal investigation on alleged bribing overseas doctors and other health officials to prescribe medicines.

In July 2012, GlaxoSmithKline was reportedly fined US$ 3 bn in the United States after admitting to bribing doctors and encouraging the prescription of unsuitable antidepressants to children. According to the report, the company encouraged sales reps in the US to ‘mis-sell’ three drugs to doctors and lavished hospitality and kickbacks on those who agreed to write extra prescriptions, including trips to resorts in Bermuda, Jamaica and California.

In April 2012, a judge in Arkansas, US, reportedly fined Johnson & Johnson and a subsidiary more than US$1.2 billion after a jury found that the companies had minimized or concealed the dangers associated with an antipsychotic drug.

Not so long ago, after regulatory authorities in China cracked down on GlaxoSmithKline for allegedly bribing of US$490 million to Chinese doctors through travel agencies, whistleblower accusations reverberated spanning across several pharma MNCs, including Sanofi. The company reportedly paid ¥1.7 million (US$277,000) in bribes to 503 doctors around the country, forking over ¥80 to doctors each time a patient bought its products.

All these are not new phenomena. For example, In the area of Clinical Trial, an investigation by the German magazine Der Spiegel reportedly uncovered in May, 2013 that erstwhile international conglomerates such as Bayer, Hoechst (now belongs to Sanofi), Roche, Schering (now belongs to Bayer) and Sandoz (now belongs to Novartis) carried out more than 600 tests on over 50,000 patients, mostly without their knowledge, at hospitals and clinics in the former Communist state. The companies were said to have paid the regime the equivalent of €400,000 per test.

India:

Compared to the actions now being taken by the law enforcers overseas, India has shown a rather lackadaisical attitude in these areas, as on date. It is astonishing 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 Indian media has now triggered a debate in the country on the subject. It has been reported that a related Public Interest Litigation (PIL) 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, so far, has shown no active interest in this area, either.

In an article titled, “Healthcare industry is a rip-off”, published in a leading business daily of India, states as follows:

“Unethical drug promotion is an emerging threat for society. The Government provides few checks and balances on drug promotion.”

In the drug manufacturing quality area, USFDA and MHRA (UK) has recently announced a number of ‘Import Bans’ for drugs manufactured in some facilities of Ranbaxy and Wockhardt, as those medicines could compromise with the drug safety concerns of the patients in the US and UK. Even as recent as in late March 2014, the USFDA has reportedly issued a warning letter to another domestic drug maker USV Ltd on data integrity-related violations in good manufacturing practices occurred at the company’s Mumbai facility. This is indeed a cause of added concern.

Similarly, in the Clinical Trial area of India, responding to a PIL, the Supreme Court of the country and separately the Parliamentary Standing Committee also had indicted the drug regulator. The Committee in its report had even mentioned about a nexus existing between the drug regulator and the industry in this area.

2. Accelerating credibility erosion due to high patented drugs pricing:

On this subject, another March 2014 report brings to the fore the problems associated with access to affordable newer medicines, which goes far beyond India, covering even the wealthiest economies of the world.

The report re-emphasizes that the monthly costs of many cancer drugs now exceed US$ 10,000 to even US$ 30,000. Recently Gilead Sciences fixed the price of a breakthrough drug for hepatitis C at US$ 84,000 for a 12- week treatment, inviting the wrath of many, across the world.

Why is the drug price so important?

The issue of pricing of patented drugs is now a cause of concern even in the developed countries of the world, though the subject is more critical in India. According to a 2012 study of IMS Consulting Group, drugs are the biggest component of expenditure in the total Out Of Pocket (OOP) spend on healthcare, as follows:

Items	Outpatient/Outside Hospital (%)	Inpatient/Hospitalization (%)
Medicines	63	43
Consultation/Surgery	-	23
Diagnostics	17	16
Minor surgeries	01	-
Private Consultation	14	-
Room Charge	-	14
Others	05	04

Probably for the same reason, recently German legislators have reportedly voted to continue until the end of 2017 the price freeze on reimbursed drugs, which was introduced in August 2010 and originally set to expire at end of 2013.

However in India, only some sporadic measures, like the Drug Price Control Order (DPCO 2013) for essential drugs featuring in the National List of Essential Medicines (NLEM 2011), that covers just around 18 percent of the total domestic pharmaceutical market, have been taken. On top of this, unlike many other countries, there is no negotiation on price fixation for high cost patented drugs.

If caught, insignificant fine as compared to total profit accrued, has no impact:

Many stakeholders, therefore, question the business practices of especially those players who get exposed, as they are caught and fined by the judiciary and the regulatory authorities.

Do such companies prioritize high profits ahead of patients’ lives, creating a situation for only those with deep pockets or a good health insurance cover to have access to the patented medicines, and the rest of the world goes without?

It is also no surprise that highly secretive and well hyped so called “Patient Access Programs” of many of these companies, are considered by many no more than a sham and a façade to justify the high prices.

3. Accelerating credibility erosion due to unreasonable IP related demands:

Despite some well-justified measures taken by countries like, India in the IP area, the US and to a great extent extent Europe and Japan, continuously pressured by the powerful pharma lobby groups, are still pushing hard to broaden the IP protections around the globe through various Free Trade Agreements (FTAs). At the same time, Big Pharma lobbyists are reportedly trying to compel various governments to enact IP laws, which 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.

Conclusion:

In the midst of all these, patients are indeed caught in a precarious situation, sandwiched between unethical practices of many large pharma players and very high prices of the available life saving patented medicines, beyond the reach of majority of the global population.

That said, accelerating credibility erosion of pharma in general and the Big Pharma in particular could possibly lead to a stage, where it will indeed be challenging for them to win hearts and minds of the stakeholders without vulgar display or surreptitious use of the money power.

To avoid all these, saner voices that are now being heard within the Big Pharma constituents should hopefully prevail, creating a win-win situation for all, not by using fear of sanctions as the key in various interactions, not even raising the so called ‘trump card of innovation’ at the drop of a hat and definitely by jettisoning long nurtured repulsive arrogance together with much reported skulduggery, for patients’ sake.

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.

Threats to Indian Generics: Failing in US Inspections is Just Half The Story

Posted on February 26, 2014 by Tapan Ray

At a recent event of the American Enterprise Institute, Dr. Harry Lever, a senior cardiologist at the Cleveland Clinic in Ohio, reportedly expressed his concern based on his personal experience regarding inconsistent quality among Indian generics. As a result, he requires switching patients off them, almost routinely, for desired therapeutic effects.

Many reasons may be attributed to such medical concerns on Indian generics in the United States, however limited those may be, the core issue can nevertheless be wished away.

Back home in India, many doctors reportedly have also expressed similar apprehensions on the quality of many generic formulations produced by over 10,000 pharmaceutical manufacturers in the country.

US-FDA on its part has taken action to protect health safety of the patients in the United States through import bans of drugs manufactured in all those facilities, which failed to meet its cGMP standards during inspection.

Not an old story:

Not so long ago, just in 2013, quality related concerns with generic drugs exported by India came to the fore after Ranbaxy reportedly pleaded guilty and paid a hefty fine of US$ 500 million for falsifying clinical data and distributing ‘adulterated medicines’ in the United States.

Thereafter, US-FDA banned drug imports from Ranbaxy and Wockhardt, manufactured in all those facilities that failed to conform to its cGMP quality standards.

Those are the stories for generic formulations. Most recently, following yet another ‘import ban’ and this time for Active Pharmaceutical Ingredients (API) manufactured at its Toansa plant, Ranbaxy has suspended all shipments of APIs pending review. With this step, Ranbaxy would virtually have no access to the top pharmaceutical market of the world.

A not very responsible remark either:

Unfortunately, in the midst of such a scenario, instead of taking transparent and stringent measures, the Drug Controller General of India (DCGI) was quoted as saying, “We don’t recognize and are not bound by what the US is doing and is inspecting. The FDA may regulate its country, but it can’t regulate India on how India has to behave or how to deliver.”

The DCGI made this comment as the US-FDA Commissioner Margaret Hamburg was wrapping up her over a weeklong maiden trip to India in the wake of a number of ‘Import Bans’ arising out of repeated cGMP violations by some large domestic generic drug manufacturers. Whereas, Hamburg reiterated the need for the domestic drug makers of India to make sure that that the medicines they export are safe for patients, the DCGI’s above comment appears rather arrogant and out of tune, to say the least.

Just recently, on the above comments of the DCGI, the American Enterprise Institute reportedly commented, “Indian drug regulator is seen as corrupt and colliding with pharma companies…”

Failing in US-FDA inspection is just half of the story:

Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are now sold in the United States come from India. All most all of these are cheaper generic versions of patent expired drugs. Total annual drug export of India, currently at around US$ 15 billion, is more than the domestic turnover of the pharma industry. Hence, India’s commercial stake in this area is indeed mind-boggling.

It is now well known, if such ‘Import Bans’ continue or grow due to shoddy compliance of required cGMP standards, there could be a serious challenges for the Indian drug exporters to salvage their reputation on drug quality for a long time to come. Consequently, this will offer a crippling blow not just to their respective organizational business outlook, but also to future drug exports of India. It is worth mentioning that drugs and pharmaceuticals are currently a net foreign exchange earner for the country.

The other half of the story:

Threats related to export of Indian generic drugs on quality parameters, as flagged by the US-FDA in India, is just half the story. The other half of the story begins in the US, instead of in India, and is related to stringent new measures taken by the same regulator in its own land to have a check on the quality of imported generic drugs consumed by the patients in America.

A recent report highlights that around twelve academic centers of the United States are now involved in the firstever widespread safety and quality evaluation of generic drugs. This program is run by the US-FDA and would continue through 2017.

This initiative has been prompted by the fact that generic drugs currently contribute over 80 percent of prescriptions written in the US. In 2014, the said program will reportedly focus on cardiovascular drugs, ADHD treatments, immune-suppressants, anti-seizure medicines, and antidepressants. The grand plan is highlighted to project the priority emphasis of the US-FDA on the quality of generic drugs, especially after it banned medicine import from four India-based facilities over a period of last nine months.

Some Examples:

- A widespread testing program of USFDA followed its 2012 finding that generic copies of antidepressant medication Wellbutrin XL did not work as good as the original. This study eventually led the largest generic drug player of the world -Teva to withdraw its generic version from the market in 2012.

- According to the report, US-FDA is now reviewing a 2013 study done by a Boston-based researcher that found widespread impurities in the generic version of Pfizer’s anti- cholesterol drug Lipitor manufactured outside of the US. The research reportedly found that some generic versions of Lipitor produced overseas were rendered ineffective as a result of manufacturing impurities. However, US-FDA action on the same is not known, as yet.

Thus, the other half of the story unfolds the reality that, even if any exporter escapes USFDA inspection in India, there is a fair chance now that the generic formulations could be tested in the US itself under the above program and if found wanting in quality parameters, concerned generic formulation could face a ban in the United States.

Conclusion:

There is nothing like tightening all loose knots in the required cGMP process for all drugs manufactured in India, without bothering much about their testing in the US. If the drug quality consciousness becomes robust in the shop floor, well before the products leave the shores of India, there is no reason why the country would face similar embarrassing incidents in future, along with a strong global furore.

The US-FDA Commissioner’s recent calling on the DCGI to join hands with the US to enforce more rigorous oversight of drug manufacturing facilities, needs to be followed up with due earnest, the above avoidable comment of the DCGI not withstanding.

The Commissioner reportedly reiterated that the US would increase the number of FDA inspectors in India from 11 to 19 as it intensifies inspections of drug manufacturing plants, simultaneously with arranging cGMP compliance related workshops for the drug exporters. The DCGI also made an announcement that India intends to increase its inspectors from 1,500 to 5,000 over the next five years.

A deepening economic spat over cheaper generic drugs, not withstanding, all these good intents to maintain a robust drug quality standard need to be translated into reality.

Trying to find ghosts nurturing dubious intentions against India, especially in areas pertaining to drug quality standards, may not augur well for the patients at large, not just of the United Stated, but for our own homeland too.

By: Tapan J. Ray

FDA ‘Import Bans’: Valuing Drug Supply Chain Security for Patients’ Safety

Posted on February 3, 2014 by Tapan Ray

To strengthen patients’ health and safety requirements, there is a growing need to first work out and then maintain a robust Drug Supply Chain Security (DSCS) mechanism by the pharmaceutical product manufacturers located anywhere in the world.

It is, therefore, often believed that the broader objective of cGMP encompasses DSCS for the same reason.

Over a period of time DSCS has assumed enormous complexity, as it often extends beyond the geographical territory of a country, spanning across a large number of vendors and vendors’ vendors of different kinds.

A robust DSCS, besides many others, would be able to address effectively, including sourcing of finished goods from third party manufacturers, the following:

Health and safety concerns of patients
Fraudulent activities leading to drug counterfeiting
Stringent global regulatory scrutiny
Check on sourcing of unapproved or substandard material

Most common threats to DSCS:

Counterfeit goods are most common threats to DSCS mechanism of any company. According to a report of the World Health Organization (WHO) on the types of counterfeits and their magnitude, such products can be grouped into six categories:

Products without active ingredients: 32.1 percent
Products with incorrect quantities of active ingredients: 20 percent
Products with wrong ingredients: 21.4 percent
Products with correct quantities of active ingredients but with fake packaging: 15.6 percent
Copies of an original product: 1 percent
Products with high levels of impurities and contaminants: 8.5 percent.

Globalization enhances the need of DSCS:

In today’s globalized business environment, the dual need to reducing costs significantly and in tandem minimizing the risks associated with the procurement activities of the business, have compelled many pharma companies to extend their ‘Supply Chain’ related activities spreading across different parts of the globe, instead of just confining to the local space.

At the same time, a new trend is evolving with the emergence of world class outsourcing service providers in the Contract Research And Manufacturing Services (CRAMS) space, especially from the countries like India and China.

Though cost arbitrage both in India and China is a key-motivating factor, the outsourcing services encompass integrated value propositions of high order for the overseas customers, such as, desired quality including cGMP, speed in delivery process and suppliers’ integrity together with overall reliability of end products and services. Nothing in this value chain is mutually exclusive and would be left to chance. More importantly, DSCS also must go through a set of complex algorithms striking a right balance between all agreed parameters.

Examples of serious DSCS security violations:

Following are a few at random examples of serious DSCS violations globally, at various times in the past:

In 1982, seven people in the Chicago area died after ingesting Extra-Strength Tylenol laced with potassium cyanide.

In 2007, over 300 people died in Panama of Central America after consuming a cough medication containing diethylene glycol, which was labeled as glycerin. The adulterant diethylene glycol was sourced from China and was relabeled as glycerin by a middleman in Spain, as reported by the media.

In March 2008, prompted by around 81 drug related deaths in the United States, the US-FDA announced a large scale recall of Heparin injection, a well-known blood thinner from Baxter Healthcare, suspecting contamination of a raw material sourced from China. Standard technology used by Baxter could not detect the contaminant, which the regulator considered as a deliberate adulteration. The contaminant was eventually identified as an over sulfated derivative of chondroitin sulfate, which costs a fraction of original heparin derivative.

The ‘Heparin tragedy’ raised, possibly for the first time, the need of working out an algorithm to put in place a robust system for DSCS, as stated above. This need has now become more critical as many pharmaceutical players, including those in India, are increasingly outsourcing the API, other ingredients and almost entire logistics from third parties.

The front-runner:

USFDA is globally recognized as the most efficient in this area having a sharp focus on patients’ health and safety interest. However, even a front-runner like this has some manpower related issues to make its global vigilance system almost watertight. due to In this context, ‘The New York Times’ dated August 15, 2011 reported, despite the fact that US now imports more than 80 percent of APIs and 40 percent of finished drugs mainly from India, China and elsewhere, the agency conducts far fewer foreign inspections as compared to domestic inspections.

The US FDA Commissioner was quoted saying, “Supply chains for many generic drugs often contain dozens of middlemen and are highly susceptible to being infiltrated by falsified drugs.”

In another conference the FDA Commissioner said, “I think people have no idea in this country and around the world about the vulnerability of things that we count on every day and that we have a system that has big gaps in our protective mechanisms.”

Import bans of Indian drugs are related to DSCS:

In India, all may not be fully aware of intense health and safety concerns, as stated above, of the US drug regulator, when reports of repeated ‘import bans’ shake the domestic industry hard. Many even would painstakingly try to invent ‘other reasons’ behind such shameful ‘bans’, which are totally prompted by breach in DSCS going against patients’ interest of the importing country.

Stringent regulatory inspections of Indian manufacturing plants by the US-FDA and UK-MHRA, as reported by the media with great concerns are, therefore, for the same reasons.

The latest in this saga is the Toansa manufacturing facility of Ranbaxy, where USFDA reportedly detected, among others, presence of flies in sample storage room, un-calibrated instruments in its laboratory and non-adherence to sample analysis procedure, prompting yet another ‘import ban’ of drugs made at this facility by the drug regulator of the United States.

Is DSCS in place for all drugs manufactured and consumed in India?

The question therefore floats at the top mind, if for breach of DSCS the drugs manufactured in all those Indian pharma plants, that have faced ‘import bans’ from the US and UK, are unsafe for patients in those countries, how come the medicines manufactured in the same plants for domestic consumption are accepted as safe for the patients in India by the DCGI?

However, the good news is that the DCGI has, at last, taken cognizance of the unfortunate regulatory developments in India and is reportedly planning to initiate a system of sudden inspections of manufacturing facilities of all pharmaceutical players, both domestic and MNCs and would take stringent action against any non-compliance to standards. Let us hope that this is not just a knee-jerk reaction of the Indian drug regulator coming under intense pressure from all corners, the good intent would get translated into reality sooner.

Brinkmanship has failed:

That said, even after witnessing how clumsily the concerned Indian pharma players had prepared themselves for inspections by the overseas drug regulators, many other manufacturers still today continue to take the priority need of DSCS of the importing countries for granted up until critical situations arise, such as, drug import ban orders by the overseas regulators. The mindset of ‘managing things on the stage’ has not worked. The brinkmanship has miserably failed, repeatedly in so many occasions.

Interestingly, global pharma majors, by and large, have recognized this area as a center piece of their procurement and manufacturing operations and are continuously honing their skills in this domain to avoid any unpleasant surprises on product quality and safety issues leading to loss in business, besides of course quantum damage in reputation and goodwill of the affected companies.

Conclusion:

Strategic prioritization to maintain DSCS is a relatively a new focus area, which prompts the need to continuously nurturing material suppliers of high reliability and simultaneously explore possibilities of application of newer technologies primarily to avoid any breach in the entire supply chain, right from procurement, manufacturing to end products logistics support.

The process of ensuring a robust DSCS would undoubtedly add to overall cost of operation, especially when the industry is facing a growth challenge in the large developed markets of the world with much higher profit potential.

However, not mitigating the risk of breach in DSCS, could invite a nightmare of unsustainability in the business operations at any given point of time, as has been happening with some pharma majors in India, such as, Ranbaxy and Wockhardt.

Thus, weighing pros and cons, even if this integrated process adds to the cost of business, the option of not going for DSCS system would be foolhardy. At the same time, other operational measures like, improving order fill rate, more efficient inventory management and better buying, could help negating the adverse cost impact significantly.

That said, the bottom-line is: FDA ‘import bans’ are critical manifestations of not valuing, adequately enough,the DSCS for health and safety of patients, not just of the US and UK, but of our homeland too.

By: Tapan J. Ray

NDDS as New Drug: Good for Patients, Great for Pharma

Posted on January 13, 2014 by Tapan Ray

The Ministry of Health of India has reportedly decided to amend Rule 122 (E) of the Drugs and Cosmetics Rules, 1945 to categorize the New Drug Delivery Systems (NDDS), including ‘Controlled Release (CR)’ or ‘Modified Release (MR)’ formulations, whether a copy of studied and approved drugs or a new one, as ‘New Drugs’.

After the amendment, all vaccines and recombinant DNA (r-DNA) derived drugs would also fall under this nomenclature. Accordingly, to obtain ‘Marketing Approval’, such formulations would be subjected to requisite studies, including ‘Clinical Trials (CT), as specified for ‘New Drugs’ under the Drugs and Cosmetics Act of India.

It has however been clarified though, that these applications will not be treated as Investigational New Drugs (IND) and the Central Drugs Standard Control Organization (CDSCO) shall prepare appropriate regulatory guidelines for all NDDS formulations.

The main reason for the amendment is possibly much late realization of CDSCO that such formulations are vastly different from each other with respect to both efficacy and toxicity.

Besides, it has been widely alleged that some pharma companies in India, mainly to hoodwink the Drug Price Control Orders (DPCO) in the past, used to switch over from ‘Immediate Release (IR)’ formulations to products with CR/MR technology of the same molecule. However, that loophole has since been plugged in DPCO 2013, creating almost a furore in the industry.

A long overdue decision for patients’ health safety:

As stated earlier, this is indeed a long overdue decision of the Indian drug regulatory policy makers, solely considering patients’ health interest.

The primary reason being, any NDDS formulation with CR/MR technology is designed to release the drug substance in a controlled manner with high precision to achieve desired efficacy and safety, quite unlike its IR equivalent, if available in the market. It is important to note that inappropriate release of the drug in any CR/MR formulation would result in lesser efficacy or increased toxicity, jeopardizing patients’ health.

Process followed by US-FDA for CR/MR formulations:

In the United States, for marketing approval of such products, FDA usually requires submission of New Drug Applications (NDAs) providing details based on the evidence of adequate drug exposure expressed by blood levels or dose, and the response framework validated by clinical or surrogate endpoint(s).

US-FDA has three types of NDAs for MR drug products:

IR to CR/MR switch
MR/CR to MR/CR switch with unequal dosing intervals
MR/CR to MR/CR switch with equal dosing intervals

For switching from an IR to a CR/MR product, which is more common in India, the key requirement is to establish that the new CR/MR product has similar exposure course of the drug as compared to the previously approved IR product, backed by well-documented efficacy and safety profile. If not, one efficacy and/or safety trial would be necessary, in addition to three clinical pharmacology studies.

Good for patients:

The good news for patients is that, being categorized as ‘New Drugs’, all NDDS formulations, without any exceptions whatsoever, would henceforth obtain marketing approval only from the Drug Controller General of India (DCGI), after having passed through intense data scrutiny, instead of State Drug Authorities where getting a manufacturing license of such formulations is alleged to be a ‘child’s play’. Thus, with the proposed amendment, efficacy and safety concerns of CR/MR formulations are expected to be addressed adequately.

Great for Pharma:

Currently, while fixing the ‘Ceiling Prices (CP)’ under DPCO 2013, National Pharmaceutical Pricing Authority (NPPA) treats CR/MR formulations at par with IR varieties of the same molecules having the same dosage strength.

Thus, categorization of all NDDS formulations as ‘New Drugs’, irrespective of the fact whether these are copies of studied and approved drugs or new ones, would be lapped up by the manufacturers from product pricing point of view. All these formulations, after the proposed amendment, would go outside the purview of drug price control under Para 32 (iii) of DPCO 2013, which categorically states that the provisions of this order shall not apply to:

“A manufacturer producing a ‘new drug’ involving a new delivery system developed through indigenous Research and Development for a period of five years from the date of its market approval in India.”

A similar past issue still haunts:

Similar callousness was exhibited in the past, while granting marketing approval for a large number of highly questionable Fixed Dose Combination (FDC) drugs by the same drug regulators. Unfortunately, that saga is still not over, not just yet.

All these irrational FDC formulations, even after being identified so by the Drug Technical Advisory Board (DTAB), have been caught in the quagmire of protracted litigations. Consequently, such dubious products are still being promoted by the respective pharma players intensively, prescribed by the doctors uninhibitedly, sold by the chemists freely and consumed by patients ignorantly. With ‘pharmacovigilance’ being almost non-functional in India, the harmful impact of these drugs on patients’ health cannot just be fathomed.

Conclusion:

With the above examples, it is quite clear that technological precision of high order is absolutely imperative to manufacture any effective CR/MR formulation. In addition, stark regulatory laxity in the marketing approval process for these drugs is a matter of great concern.

In such a scenario, one could well imagine how patients’ health interests are being compromised by not formalizing and adhering to appropriate regulatory pathways for marketing approval of such drugs in the country, since decades.

That said, as the saying goes “Better Late, Than Never”. The ‘New Drug’ nomenclature of all CR/MR formulations or for that matter entire NDDS as a category, including vaccines and recombinant DNA (r-DNA) derived drugs, would now hopefully be implemented in India, though rather too late, a much welcoming decision nevertheless.

By: Tapan J. Ray

Sets 2013, Dawns 2014: Top 7 Pharma Developments

Posted on December 31, 2013 by Tapan Ray

Wish You Good Health, Happiness, Success and Prosperity in 2014

In this article I shall focus on ‘Top 7 Pharma Developments’, both while ‘Looking Back to 2013′ and also during my ‘Crystal Gazing 2014′.

Looking Back to 2013:

While looking back, the ‘Top 7 Pharma Developments’ unfolded in India during 2013, in my opinion, are as follows:

1. Supreme Court judgment on Glivec:

The landmark Supreme Court judgment on the Glivec case has vindicated, though much to the dismay of pharma MNCs, the need to strike a right balance between encouraging and protecting innovation, including incremental ones, and the public health interest of India.

2. DPCO 2013:

Following the National Pharmaceutical Pricing Policy (NPPP) of December 2012, the new Drug Price Control Order 2013 (DPCO 2013) signaled a significant departure from the decades old systems of arriving at both the ‘span’ and also the ‘methodology’ of drug price control in India. However, its implementation has been rather tardy as on today.

As a result, at the very beginning of the process of its effective roll-out, the new DPCO faltered badly. It created unprecedented complications and dead-locks not just for the pharmaceutical companies and the trade, but for the National Pharmaceutical Pricing Authority (NPPA), as well, which has not been able to announce the new ceiling prices for at least 100 essential drugs, even 8 months after notification of this order.

The pharma companies and the NGOs have already taken this policy to the court, though for different reasons. The rationale for the National List of Essential Medicines (NLEM) 2011 has also been questioned by many along with a strong demand for its immediate review.

Thus much awaited DPCO 2013 is still charting on a slippery ground.

3. India, China revoked 4 pharma patents:

In the Intellectual Property Rights (IPR) arena many National Governments have now started asserting themselves against the prolonged hegemony of the Western World pressing for most stringent patent regime across the globe, at times even surreptitiously. Such assertions of these countries signal a clear tilt in the balance, favoring patients’ health interest rather than hefty gains in business profits, much to the delight of majority of world population.

Revocation of four drug patents by India and China within a fortnight during July-August 2013 period has thus raised many eyebrows, especially within the pharma Multinational Corporations (MNCs). In this short period, India has revoked three patents and China one.

While these unexpected and rather quick developments are probably double whammy for the pharma MNCs operating in India and China, a future trend would possibly emerge as soon as one is able to connect the evolving dots.

4. Supreme Court intervened in Clinical trials (CT):

With a damning stricture to the Indian Drug Regulator, the Supreme Court, in response to a PIL filed by the NGO Swasthya Adhikar Manch, came out heavily on the way Clinical Trials (CTs) are approved and conducted in the country.

Breaking the nexus decisively between a section of the powerful pharma lobby groups and the drug regulator, as highlighted even in the Parliamentary Committee report, the Ministry of Health, as reported to the Supreme Court, is now in the process of quickly putting in place a robust and transparent CT mechanism in India.

This well thought-out new system, besides ensuring patients’ safety and fair play for all, is expected to have the potential to help reaping a rich economic harvest through creation of a meaningful and vibrant CT industry in India, simultaneously benefitting millions of patients, in the years ahead.

5. US-FDA/UK-MHRA drug import bans:

Continuous reports from US-FDA and UK-MHRA on fraudulent regulatory acts, lying and falsification of drug quality data, by some otherwise quite capable Indian players, have culminated into several import bans of drugs manufactured in those units. All these incidents have just not invited disgrace to the country in this area, but also prompted other national regulators to assess whether such bans might suggest issues for drugs manufactured for their respective countries, as well.

This despicable mindset of the concerned key players, if remains unleashed, could make Indian Pharma gravitating down, stampeding all hopes of harvesting the incoming bright opportunities.

The ‘Import Alert’ of the USFDA against Mohali plant of Ranbaxy, has already caused inordinate delay in the introduction of a cheaper generic version of Diovan, the blockbuster antihypertensive drug of Novartis AG, after it went off patent. It is worth noting that Ranbaxy had the exclusive right to sell a generic version of Diovan from September 21, 2012.

The outcome of such malpractices may go beyond the drug regulatory areas, affecting even the valuations of concerned Indian pharma companies.

6. Pharma FDI revisited in India:

After a series of inter-ministerial consultations, the Government of India has maintained 100 percent FDI in pharma brownfield projects through FIPB route. However, removal of the ‘non-compete’ clause in such agreements has made a significant difference in the pharma M&A landscape.

7. ‘No payment for prescriptions’:

Unprecedented acknowledgement and the decision of GSK’s global CEO for not making payments to any doctor, either for participating or speaking in seminars/conferences to influence prescription decision in favor of its brands, would indeed be considered as bold and laudable. This enunciation, if implemented in letter and spirit by all other players of the industry, could trigger a paradigm shift in the prescription demand generation process for pharmaceuticals brands.

Crystal Gazing 2014:

While ‘Crystal Gazing 2014′, once again, the following ‘Top 7 (most likely) Pharma Developments’, besides many brighter growth opportunities, come to the fore:

1. Public Interest Litigation (PIL) now pending before the Supreme Court challenging DPCO 2013 may put the ‘market based pricing’ concept in jeopardy, placing the pharma price control system back to square one.

2. The possibility of revision of NLEM 2011, as many essential drugs and combinations have still remained outside its purview, appears to be imminent. This decision, if taken, would bring other important drugs also under price control.

3. Universal Health Care (UHC) related pilot projects are likely to be implemented pan-India along with ‘free distribution of medicines’ from Government hospitals and health centers in 2014. Along side, more Public Private Partnership (PPP) initiatives may come up in the healthcare space improving access to quality healthcare to more number of patients.

4. With the Supreme Court interventions in response to the pending PILs, more stringent regulatory requirements for CT, Product Marketing approvals, Pricing of Patented Medicines and Ethical Marketing practices may come into force.

5. Possibilities of more number of patent challenges with consequent revocations and grant of several Compulsory Licenses (CL) for exorbitantly priced drugs in life-threatening disease areas like, cancer, loom large. At the same time, between 2013 and 2018, US$ 230 billion of sales would be at risk from patent expirations, offering a great opportunity to the Indian generic players to boost their exports in the developed markets of the world.

6. More consolidation within the pharmaceutical industry may take place with valuation still remaining high.

7. Overall pharma IPR scenario in India is expected to remain as robust and patient friendly as it is today, adding much to the worry of the MNCs and relief to the patients, in addition to the generic industry. More number of countries are expected to align with India in this important area.

Conclusion:

The year 2013, especially for the pharmaceutical industry in India, was indeed eventful. The ‘Top Seven’ that I have picked-up, out of various interesting developments during the year, could in many ways throw-open greater challenges for 2014.

My ‘Crystal Gazing 2014’, would challenge the pharma players to jettison their old and traditional business mindsets, carving out new, time-specific, robust and market savvy strategic models to effectively harvest newer opportunities for growth.

That said, the pharmaceutical industry will continue to thrive in India with gusto, including the MNCs, mainly because of immense potential that the domestic market offers in its every conceivable business verticals, propelled by continuous high growth trend in the domestic consumption of medicines, excepting some minor aberrations.

The New Year 2014, I reckon, would herald yet another interesting paradigm for the pharma industry. A paradigm that would throw open many lucrative opportunities for growth, both global and local, and at the same time keep churning out different sets of rapidly evolving issues, requiring more innovative honed corporate skill-sets for their speedy redressal, as the time keeps ticking.

By: Tapan J. Ray

The ‘TINA Factor’: A Hotspot for Patented Drugs

Posted on December 16, 2013 by Tapan Ray

An article published in a global business magazine on December 5, 2013 mentioned that Marijn Dekkers, the CEO of Bayer AG reportedly has said at the Financial Times Global Pharmaceutical & Biotech Conference held this month that:

“Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western Patients that can afford it.”

The head honcho deserves kudos for revealing his mind upfront, while inviting two quick questions, as follows:

If that is so, why did Bayer launch Nexavar in India?
Did Bayer have any other alternative or choice for not doing so, other than negotiating for a ‘Voluntary License’?

As Bayer already had decided against any ‘Voluntary License’ for Nexavar in India, the simple answer to both the questions is : There Is No Alternative (TINA). And…that’s my ‘TINA Factor’, now a hotspot for patented drugs in India.

I shall dwell on it below, just in a short while.

Bellicose stance for high drug prices and more stringent patent regime:

Everybody acknowledges, beyond even an iota of doubt, that the contribution of the global pharmaceutical industry in the ongoing fight of mankind against diseases of all kinds, is commendable and exemplary.

However, over a period of time, as the low hanging fruits of pharma R&D are in the process of getting all plucked, raw commerce mainly driven by likes of “The Wall Street” quarterly expectations, have started overriding public health considerations involving a large section of the society, across the world, including India.

In this evolving scenario, healthcare has to be extended to almost everybody in the society by the respective Governments in power with strong support from the pharma industry. Instead, to utter dismay of many, the later seems to have opted for a bellicose stance. Their lobby groups appear to be power playing with all might in the corridors of power, to make the product patent regime of faster growing emerging markets more and more stringent, restricting smooth entry of affordable generic or biosimilar drugs increasingly difficult.

Underlying reasons for Big Pharma’s near obsession to have in place an ever stringent patent regime, defying all public health interest particularly of the developing countries, I reckon, are mainly three-fold:

Grant of product patent for any innovation irrespective of triviality
To have absolute pricing freedom for patented drugs for unlimited profits
To enjoy and extend product monopoly status as long as possible

Probably, to camouflage these intents, the reasons for high prices of patented drugs are attributed to the over-used buzz-words – fostering and re-investing in innovation, which is more often underscored as frightfully expensive.

Fair enough, in that case, let the high cost of R&D be appropriately quantified involving independent experts and made known to public. It will then not be like a jig saw puzzle for people to understand the real intent or the truth behind high drug prices. Thereafter, practical solutions need be fleshed-out putting the bright brains and minds together to make new medicines affordable to patients, across the world.

Most probably, that is not to happen, unless a legally binding system of disclosure of expenses is made mandatory for R&D, just as the ‘Physician Payment Sunshine Act’ of the United States demands public disclosure of gifts and payments made to doctors by the pharma players and allied businesses.

On the contrary, incessant efforts by vested interests still continue to keep the patented drug prices beyond the reach of common man. The following are just some very recent examples:

Another ‘defiant move’ in drug pricing:

In another recent development, US-FDA on December 6, 2013 approved Sovaldi (sofosbuvir) of Gilead Sciences Inc. This new drug is reported to be a cure for chronic infection with hepatitis C virus, without co-administration of interferon.

According to the report of July 2013 of the World Health Organization (WHO), about 150 million people are chronically infected with hepatitis C virus, and more than 350, 000 people die every year from hepatitis C- related liver diseases, across the world.

Most interestingly, Gilead Sciences have reportedly decided to keep the price of Sovaldi at a staggering US$ 1,000 (Rs. 62,000) -a-day for one tablet to be continued for 12 weeks. Thus the cost of a three month course of treatment with Sovaldi would be a mind boggling sum of US$ 84,000 (Rs.L 5.21), just for one patient.

It is worth noting that the above price/table of Sovaldi, as decided by Gilead Sciences, has started culminating into a storm of protest, almost immediately, even in the United States (US). The biggest drug benefits manager in that country – Express Scripts Holding Co. in a decisive move to drive down spending on the medicines, reportedly plans to start a price war when Sovaldi comes to market next year or early in 2015 wearing a price tag of US$ 1,000 a pill.

Further, on this seemingly defiant pricing strategy, that too for a life saving drug affecting patients belonging to all strata of the society, ‘Doctors Without Borders’ have reportedly commented: “Using patents to block affordable versions of sofosbuvir and pricing this drug out of reach of the most vulnerable groups who need it most is simply putting profits before people’s lives.”

Brewing a fresh initiative for more stringent high drug price regime:

To foist stricter pharmaceutical patent regime, making access to affordable drugs for the world’s poor increasingly challenging, an initiative is reportedly brewing afresh led by the United States (US).

Ministers of Trade from 12 countries initiated a discussion on December 6, 2013 at Singapore to meet the US deadline of forging a deal on the proposed ‘Trans-Pacific-Partnership (TPP)’ before the end of 2013.

These twelve countries – Australia Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam, contributing 40 percent of the world economy, are expected to hammer out the TPP deal first, though other countries may hitch on thereafter.

However, after 4 days of intense negotiation, the US-led TPP talks ended on December 10, 2013, without beating into shape any deal. These countries would reportedly meet again on January 2014, in contrast to earlier plan.

The global human right groups like ‘Medicins Sans Frontieres (MSF)’ and ‘Doctors Without Borders’ have reportedly commented, “The ‘Data Protection’ period will prevent drug regulatory agencies in TPP signatory countries from referencing data needed to approve lower-cost generic versions of a protected drug, delaying competition that would lead to cheaper prices”.

In a poll commissioned by ‘Avaaz’ – a global advocacy group, reportedly 62 percent of Americans, 63 percent of Australians, 70 percent of New Zealanders, and of 75 percent Chileans opposed limiting access to generic medicines through the patent proposal in TPP.

Quite expectedly, the powerful US pharma lobby group ‘Pharmaceutical Research and Manufacturers of America (PhRMA)’ said, “It was necessary for companies to recover investments and conduct further research into new cures”.

Breath of fresh air:

The good news is that some prudent developments are also seen around in the midst of a monopolistic drug pricing scenario, offering a breath of fresh air. Some countries around the world, including an important payor in the Unites States, National Institute for Health and Care Excellence (NICE) of UK which assesses the value of drugs for NHS use, and even ‘National Development and Reform Commission (NDRC)’ of China, have now started taking note and proactive measures in different ways on monopolistic high drug prices.

A recent report highlighted that ‘National Development and Reform Commission (NDRC)’ of China would examine and regulate the price-related monopolistic practices of six industries operating in the country, including pharmaceuticals and would crack down wherever they find excessively high prices.

Can India insulate itself from pricing onslaught?

Despite growing global pressure against ‘putting profits before people’s lives’, one may arguably expect more such initiatives spearheaded by Big Pharma to make the patent regime, of especially the emerging markets, more stringent in the years ahead.

That said, ‘The TINA Factor’, which I shall now dwell upon, would probably help reinforcing the protective shield of Indian patent regime against foreseeable assaults with strategies quite similar to as cited above, denying access to new life saving drugs to most of the general population of the country.

‘The TINA Factor’ and three ‘Alternatives’ available to MNCs:

Since enactment of patient-friendly patent laws by the Parliament of India effective January 1, 2005, many global pharma companies and their lobby groups have been continuously expressing immense displeasure and strong anger in many ways for obvious reasons, just as the CEO of Bayer AG did recently.

There are, of course, a few exceptions, such as Sir Andrew Witty, the global CEO of GlaxoSmithKline (GSK), who has been publicly expressing balanced views on this subject in several occasions, so far.

Being driven by anger and possibly desperation any MNC may wish to choose one of the following three ‘Alternatives’ available to them:

Alternative 1: Do not apply for the product patent in India at all.

‘The TINA Factor’: In that case the product will be made available in a platter for the generic players to copy.

Alternative 2: Obtaining the relevant patent from the Indian Patent Office (IPO), do not launch the patented product in India.

‘The TINA Factor’: After three years from the date of grant of patent, as per the statute, the said product could become a candidate for CL on the ground that the patented invention has not been worked in India.

Alternative 3: Launch the product only at the international price.

‘The TINA Factor’: If any patented new product is not available to patients at a ‘reasonably affordable price’ or ‘reasonable requirements’ of patients with respect to the patented invention are not satisfied, again according to statutes, interested parties are free to apply for CL to the IPO, following the steps as specified in the Act. Moreover, the Government itself may issue CL in national emergencies or ‘extreme urgency’ for non-commercial use.

Considering the ‘TINA Factor’, it appears, if the new products do not conform to the ‘Indian Patents Act’ and are NOT launched with ‘reasonably affordable prices’ or ‘reasonable requirements’ of patients are NOT met with these new drugs, the possibility of their legal generic entry at much lower prices is rather high in India. CL granted by the IPO for Bayer’s Nexavar to NATCO vindicates this point.

Summing-up effects of the ‘TINA Factor’:

Many would now reckon that the ‘TINA Factor’, being a hotspot for patented drugs in India, has the potential for getting adopted by many other countries in not too distant future. Two of its palpable effects, as felt in the country so far, may be summed-up as follows:

It leaves no option to any MNC, other than launching their new products in India, especially after obtaining relevant patents from the IPO.

It also squashes apprehensions of many that discontented Big Pharma would be able stop launching patented new products in India, depriving a large number of patients of the country.

Conclusion:

‘The TINA Factor’, thus created by the lawmakers, is expected to remain undiluted, unless commensurate changes are made in the Indian Patents Act.

Not withstanding the reported anger expressed by the CEO of Bayer AG or recently reported ‘absurd pricing’ of Sovaldi, or even for that matter, fresh attempts that are now being made to cobble together a TPP deal, patented new products would continue to be launched in India, as they will receive marketing approval from the Drug Controller General of India (DCGI).

Any possibility of dilution of the ‘TINA Factor’ seems remote now, though powerful overseas pharma lobby groups are investing heavily for a change to take place in various ways.

It also does not seem likely, at least in the near to mid-term, that India would be a party to its ‘Patents Act’ diluting any ‘Free Trade Agreement’ or remain unmoved with high drug prices like, US$ 1000/tablet for life saving drugs like sofosbuvir, more so, if those are considered essential medicines in the country.

Come 2014, it appears improbable that any new Union Government would be able to garner enough numbers in the Parliament to amend Indian Patents Act, buckling under pressure of powerful lobby groups, directly or indirectly, and daring to ignore public sentiment on this sensitive issue.

Considering all these, the point to ponder now:

While abhorring pro-patients ‘Patents Act’ of India, can the Big Pharma come out with any viable alternative today for NOT launching their life saving patented new drugs in the country with the ‘TINA Factor’ prevailing?

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

Tag Archives: USFDA

The Takeover Magician To Tango Again On A Bold New ‘Sunny’ Tune

Loss of Ranbaxy, Gain of Big Pharma…And Two Intriguing Coincidences

Is Credibility Erosion of Pharma Accelerating?

Threats to Indian Generics: Failing in US Inspections is Just Half The Story

Some Examples:

FDA ‘Import Bans’: Valuing Drug Supply Chain Security for Patients’ Safety

NDDS as New Drug: Good for Patients, Great for Pharma

Sets 2013, Dawns 2014: Top 7 Pharma Developments

The ‘TINA Factor’: A Hotspot for Patented Drugs

Ministers of Trade from 12 countries initiated a discussion on December 6, 2013 at Singapore to meet the US deadline of forging a deal on the proposed ‘Trans-Pacific-Partnership (TPP)’ before the end of 2013.

These twelve countries – Australia Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, USA and Vietnam, contributing 40 percent of the world economy, are expected to hammer out the TPP deal first, though other countries may hitch on thereafter.

However, after 4 days of intense negotiation, the US-led TPP talks ended on December 10, 2013, without beating into shape any deal. These countries would reportedly meet again on January 2014, in contrast to earlier plan.