Tag Archives: value

Creating A ‘Virtuous Cycle’ Through Patient Reach and Care

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As many would know, in the strategic marketing process of any product including patented and generic drugs crafty product differentiation plays a critical role.

This strategic process of creating a competitive edge with unique product differentials is necessary. It helps perceiving a product more attractive to the target audience, against its competitors. When done effectively, the product fetches a greater share of mind for usage, achieving higher levels of top of mind recall, and, of course, a price premium.

In pharma, the traditional brand differentiation revolves around delivering cutting-edge values, skimming through the intrinsic product features and benefits. In India, which is predominantly a branded generic market, the local pharma marketers almost routinely keep trying to toe this line.

As I said before, some of them often vehemently argue in favor of maintaining a status quo in this area. It could probably be due to professional discomfort in venturing out of their respective comfort zones.

In the current pharma marketing environment, especially in India, finding the right answer to a not-so-easy-to-reply question may trigger a disruptive change in the traditional, or virtually routine marketing practices. This is widely considered a prevailing normal of date, and generally includes ‘features and benefits oriented product differentiation.’

In this article, I shall dwell on this important area, picking a thread from this simple, but a difficult-to-answer question.

The question:

This question goes like this: ‘How does a pharma marketer conceptualize product features and benefits oriented differential values, when there are virtually no clinically significant differentials between the competing products?’ There would possibly be no credible answers, justifying this practice.

Are branded generic sales mostly driven by contentious factors?

This query is more relevant in a branded generic market, such as India. Yet, pharma marketers keep following routinely the traditional methods in this area. As many say, actual product sales are driven by mostly by those critical factors, which are contentious and are being fiercely debated within the country, even today.

Pharma needs more extrinsic differentiation rather than intrinsic:

In the midst of an evolving new value expectation of pharma consumers, the market access strategy of the industry marketers must also evolve, keeping at least a step ahead of the former. This would help in delighting the customers, by offering them something meaningful, well before they start expecting the same. Thus, it makes me believe, a time has come to make the extrinsic factors, such as patient experience or delight, the center piece of product differentiation, weaving around its intrinsic qualities.

Many global companies have already started acting in this area – creating a whole new experience of care and relief for the patients, with new marketing models delivering differential product values to the target groups. Similar steps can successfully be taken even where there are no clinically significant differentials between the competing products.

Greater participation of consumers in treatment choices:

The information revolution in the world, mainly empowered by the Internet-based platforms – social or otherwise, is enabling many consumers to be partners in the disease treatment choices along with the doctors. In India too, it has started happening – slowly, but surely.

Those consumers, both in urban and mostly in the rural India, who won’t have any direct access to such information, ‘word of mouth’ enlightenment received from others would have a somewhat compensatory effect. Thus, the patients and their near and dear ones will have multiple treatment choices to choose from. In my view, this situation would gain a critical mass – much faster than what the current trend suggests. There won’t be any surprises, if this change assumes a snowballing effect, with modern technology being the key catalyst.

The current attitude could be counterproductive:

In this dynamic situation, any arrogance or ignorance of pharma marketers nurturing a seemingly ‘perennial’ conviction that ‘Indian pharma market and the patients are different’, could indeed be grossly counterproductive. This group of people seems to form a majority, today.

However, it is great to notice that some young Indian pharma professionals with an agile mindset and cerebral power, are thinking differently. They are not just keenly observing the ‘dots’, but also capturing, connecting and mapping the changing needs of the patients.

Their fingers are always on the pulse – concentrating more on strategizing extrinsic differentiation of products rather than remaining in the cocoon of the intrinsic ones. This quest to create an unchallenged and difficult to match market-space, will be essential in gaining the competitive cutting edge, as we move on.

Creating a virtuous cycle:

The focus of a pharma player in creating an extrinsic product differential edge, in pursuit of delivering the value of unique consumer experience, would in turn help enhancing the company reputation. This would, consequently, add value in creating an extrinsic product differential edge – thus, completing a ‘Virtuous Cycle’. It is generally caused by ‘complex chains of events that reinforce themselves through a feedback loop.’

A study on the ‘Impact of Corporate Reputation on Brand Differentiation’, has also established the ‘influence of company reputation, or what is often referred to as corporate reputation on branding strategy and producing intangible asset for different industries…’ This study is considered a pioneering attempt to measure the impact of corporate reputation on brand differentiation strategy.

Conclusion:

Today, especially in the marketing process of branded generic drugs, Indian marketers keep following a system that creates a sequence of reciprocal cause and effect, in which different elements of this overall activity intensify and aggravate each other, leading inexorably to a worsening of the situation. The Oxford dictionary defines this situation as a ‘Vicious Cycle.’

It’s not quite easy to come out of it, extricating the involved players from caustic remarks and allegations of indulging into contentious sales activities, if not blatant ‘marketing malpractices’. Nevertheless, breaking this mold is a ‘must do’ requirement, as many industry watchers believe.

This is because, if one wants to build a company for sustainable business excellence, it has to follow the principles of a ‘Virtuous Cycle’. Otherwise, it could threaten the very survival of the business, as we have witnessed several such instances in India, involving pharma companies. Several global pharma players are now trying hard to create a ‘Virtuous Cycle’, through well-researched strategic initiatives of patient reach and care.

To face this challenge of change squarely, Indian pharma marketers may also wish to focus on extrinsic differentiation of products, rather than intrinsic ones, as is mostly being done today, routinely. This course correction, I reckon, would play a ‘make or mar’ role in the pharma business, eventually. The passion to create a relatively unchallenged and difficult to match market space around patients, will be essential in gaining the requisite competitive advantage – giving shape to the much desired ‘Virtuous cycle’, as we move on.

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.

Should ‘Pharma Marketing’ Be In The Line of Fire?

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Close to half a century ago, Peter Drucker – the Management Guru wrote: As the purpose of business is to create customers, any business enterprise has two basic functions: marketing and innovation. Drucker’s concept is so fundamental in nature that it will possibly never change, ever.

That innovation is the lifeblood of pharma industry is well-accepted by most people, if not all. However, when similar discussion focuses on pharma marketing, the industry virtually exposes itself in the line of fire, apparently from all directions. This trend, coupled with a few more in other areas, is making a significant dent in the reputation of the pharma industry, triggering a chain of events that create a strong headwind for business growth.

The consequences of such dent in pharma reputation get well-reflected in an article titled “How Pharma Can Fix Its Reputation and Its Business at the Same Time,” published in the Harvard Business Review (HBR) on February 3, 2017. The author observed:

“This worrisome mix of little growth potential and low reputation is the main explanation for why investors are increasingly interested in how pharma companies manage access-to-medicine opportunities and risks, which range from developing new treatments for neglected populations and pricing existing products at affordable levels to avoiding corruption and price collusion.”

On the above backdrop, this article will try to explore the relevance of Drucker’s ‘marketing’ concept in the pharma business – dispassionately. Alongside, I shall also deliberate on the possibility of a general misunderstanding, or misinterpretation of facts related to ‘pharma marketing’ activities, as these are today.

Communicating the intrinsic value of medications:

Moving in this direction, let me recapitulate what ‘pharma marketing’ generally does for the patients – through the doctors.

Despite being lifeblood that carries the intrinsic value of a medication from research lab to manufacturing plants and finally to patients, ‘pharma marketing’ is, unfortunately under incessant public criticism. It continues to happen, regardless of the fact that one of the key responsibilities of pharma players is to disseminate information on their drugs to the doctors, for the benefits of patients.

One may justifiably question any ‘marketing practice’ that is not patient-friendly. However, the importance of ‘marketing’ in the pharma business can’t just be wished away – for patients’ sake.

Way back in 1994, the article titled, “The role and value of pharmaceutical marketing” captured its relevance, aptly articulated:

“Pharmaceutical marketing is the last element of an information continuum, where research concepts are transformed into practical therapeutic tools and where information is progressively layered and made more useful to the health care system. Thus, transfer of information to physicians through marketing is a crucial element of pharmaceutical innovation. By providing an informed choice of carefully characterized agents, marketing assists physicians in matching drug therapy to individual patient needs. Pharmaceutical marketing is presently the most organized and comprehensive information system for updating physicians about the availability, safety, efficacy, hazards, and techniques of using medicines.”

The above relevance of ‘pharma marketing’, whether globally or locally, remains unchanged, even today, and would remain so, at least, in the foreseeable future.

It’s a serious business:

As many would know, in many respect ‘pharma marketing’, especially of complex small and large molecules, is quite a different ball game, altogether. It’s markedly different from marketing activities in most other industries, including Fast Moving Consumer Goods (FMCG), where customers and consumers are generally the same.

In contrast, in prescription drug market customers are not the consumers. In fact, most consumers of any prescription medicine don’t really know much, either about the drugs or their prices. They get to know about their costs while actually paying for those directly or indirectly. Healthcare providers, mostly in those countries that provide Universal Healthcare (UHC) in any form, may also be customers for the drug manufacturers. Even Direct to Consumer (DTC) drug advertisements, such as in the United States, can’t result into a direct choice for self-medication, other than Over the Counter (OTC) drugs.

Additionally, pharma market is highly regulated with a plethora of Do’s and Don’ts, unlike most other industries. Thus, for the drug manufacturers, medical professionals are the real customers, whereas patients are the consumers of medicines, as and when prescribed by doctors.

With this perspective, ‘Pharma marketing’ assumes a critical importance. It is too serious a strategic business process to be jettisoned by any. There exists a fundamental responsibility for the drug manufacturers to communicate important information on various aspects of drugs to individual physicians, in the interest of patients. This has to happen, regardless of any controversy in this regard, though the type of communication platforms, contents used and the degree of leveraging technology in this process may widely vary from company to company.

Assuming that the marketing practices followed by the industry players would be ethical and the regulators keep a strict vigil on the same, effective marketing of a large number of competing molecules or similar brand increases competition, significantly. In that process, it should ultimately enable physicians to prescribe drugs that will suit each patient the most, in every way. There can’t possibly be any other alternative to this concept.

A common allegation:

Despite these, a common allegation against ‘pharma marketing’ keeps gathering momentum. Reports continue pouring in that pharma companies spend far more on marketing drugs than on developing them. One such example is a stinging article, published by the BBC News on November 6, 2014.

Quoting various published reports as evidence, this article highlighted that – 9 out of 10 large pharma players spend more on marketing than R&D. These examples are generally construed as testimony for the profiteering motive of the pharma companies.

Is the reason necessarily so?

As any other knowledge-based industry, effective communication process of complex product information with precision, to highly knowledgeable medical professionals individually, obviously makes pharma marketing cost commensurately high. If the entire process of marketing remains fair, ethical and patient centric, such costs may get well-neutralized by the benefits accrued from the medicines, including lesser cost of drugs driven by high competition.

Further, a successful pharma marketing campaign is the ultimate tool that ensures a reasonable return on investments for further fund allocation, although in varying degree, to offer more new drugs to patients – both innovative and generics.

Marketing decision-support data generation is also cost-intensive:

Achieving short, medium and long-term growth objectives are as fundamental in pharma as in any other business. This prompts that investments made on ‘pharma marketing’, fetch commensurate returns, year after year. To succeed in this report, one of the prime requirements is to ensure that the content, platform and ultimate delivery of the product communication is based on current and credible research data having statistical significance.

With increasing brand proliferation, especially in competing molecules or branded generic market, arriving at cutting-edge brand differentiation has also become more challenging than ever before. Nevertheless, identification of well-differentiated patient-centric product value offerings will always remain ‘a must’ for any persuasive brand communication to be effective.

It calls for generating a vast amount of custom made decision-support data on each aspect of ‘pharma marketing’, such as target market, target patients, target doctors, competitive environment, differential value offering, and scores of others. The key to success in this effort is to come out with that ‘rare commodity’ that separates men from the boys. This is cost intensive.

What ails pharma marketing, then?

So far so good –  the real issue is not, therefore, whether ‘pharma marketing’ deserves to be in the line of fire. The raging debate on what ails ‘pharma marketing’ should primarily focus on – how to ensure that this process remains ethical and fair, for all.

Thus, when criticism mounts on related issues, it may not necessarily mean that ‘marketing’ is avoidable in the pharma business. Quite often, critics do mix-up between the crucial ‘importance of pharma marketing’ and ‘malpractices in pharma marketing.’ Consequently, public impressions take shape, believing that the pharma marketing expenses are generally higher due to malpractices with profiteering motives.

As a result, we come across reports that draw public attention with conclusions like: “Imagine an industry that generates higher profit margins than any other and is no stranger to multi-billion dollar fines for malpractice.”

A similar article published ‘Forbes’ on February 18, 2015 also reiterates: “The deterioration of pharma’s reputation comes from several sources, not the least of which is the staggering amount of criminal behavior that has resulted in billions of dollars’ worth of fines levied against the industry.”

One cannot deny these reports – lock, stock and barrel, either. Several such articles named many large pharma players, both global and local.

Conclusion:

In my view, only pharma marketers with a ‘can do’ resolve will be able to initiate a change in this avoidable perception. No-one else possibly can do so with a total success in the foreseeable future – not even the requirement of a strict compliance with any mandatory code having legal teeth, such as mandatory compliance of the Uniform Code of Pharmaceutical Marketing Practices (UCPMP) that the Indian Government is currently mulling.

I guess so because, after a strong deterrent like mandatory UCPMP is put in place, if reports on marketing malpractices continue to surface, it will invite more intense public criticism against ‘pharma marketing’ – pushing the industry’s reputation further downhill, much faster.

Be that as it may, it’s high time for all to realize, just because some pharma players resort to malpractices, the ‘pharma marketing’ process, as such, doesn’t deserve to be in the line of fire – in any way.

By: Tapan J. Ray 

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

 

A Sine Qua Non to Pharma Success in Digitized World

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A wind of change is now blowing at an accelerated speed – encompassing virtually anything, across the world, including India, with a varying degree, though. It leaves a profound impact on the day to day lives of many, including almost free access to a plethora of information of any kind available in the cyberspace. The way we express ourselves – connect with others – meet our various needs and requirements – make hassle-free financial transactions – increasing transparency – containing corruption, besides scores of others.

Fast evolving digital technology is predominantly catalyzing this paradigm shift. Its weighty impact can also be felt across the global business world, sparing virtually none. Digitally enabled recent GST implementation process in India is just one such example.

Newer technology driven transformation process of overall business ecosystem is sending a strong signal to all concerned to shape up – coming out of their respective comfort zones of the old paradigm, and embracing the new one. Squarely facing this challenge of change is equally critical even to one of the most conservative, tradition bound, and well-regulated pharma industry. It’s rather an absolute necessity for pharma, as virtually all its stakeholders, including the patients and governments, have already started stepping on to the digitized world. The fundamental choice is, therefore, between shaping-up and shipping-out.

In this article, I shall argue on this critical need, based on several recent, pertinent and contemporary research findings on this fascinating space.

Indian CEOs take:

The 20th CEO Survey of 2017 titled, “Being Fit for Growth”, conducted by PwC

reveals that the term ‘digital’ evokes both excitement and a sense of apprehension among CEOs, both globally and locally. The following are some interesting findings involving the Indian CEOs, as captured in this survey:

  • 38 percent observed that over the past 5 years alone, disruptive technological innovations have had a significant impact on competition within their respective industries.
  • 47 percent believe that in the next 5 years, disruptive technological innovations will have a significant impact on competition in their industry.
  • 77 are concerned about the speed of technological change.
  • 76 percent expressed concerns about rapidly changing customer behavior.
  • 77 percent mentioned the need to create differentiation in their products and offerings by managing data better. 

Its relevance in pharma:

The relevance of taking this wind of change in stride and embracing it fast, is beyond any reasonable doubt today. The 2017 report of EY, titled ‘Reinventing pharma sales and marketing through digital in India,’ also reaffirms: ‘Digital will play an ever-increasing role in this era of profound transformations, characterized by increasingly informed patients/physicians, new range of customers and new disruptive entrants. To stay relevant, pharma companies need to adopt a nimbler approach and make data the currency of marketing.’.”.

The urgency:

A sense of urgency for this change has also been epitomized in the same report, as it underscores that digital disruption has demolished 52 percent of Fortune 500 companies, since 2000. The study further reiterates: “The pace of transformation has increased, competition has intensified and business models have been profoundly disrupted. This shift is happening at breakneck speed across industries, and pharma can no longer be an exception. Customers have already embraced technological changes, through their many digital touch points, and pharma must look toward digital to re-imagine the customer experience.”

Just changing manual processes to digital won’t suffice:

This is exactly what is mostly happening today in pharma. Concerned employees, in general, are also receiving training inputs accordingly. Vindicating this point, a recent study reiterates that just changing manual processes to digital won’t suffice, any longer. Delivering greater value to the stakeholders continuously through digitization of business is the name of the game.

The above EY report unambiguously endorses that: “Whatever was being done manually earlier is now being done digitally. But we are not adding additional value.”

While capturing in the report Indian pharma’s journey to the digital world, it articulates, though some digitization initiatives are being taken now, Indian pharma companies are still way behind their global counterparts. The survey found 53 percent of the participating companies still at the ‘beginners’ stage, while 40 percent are at the ‘conservatives’ stage and only 7 percent have moved toward the ‘explorers’ stage.

Three fundamental non-technical barriers, and the way forward:

Two important studies – one by EY, as quoted above, flagged three fundamental non- technical barriers in this area, and the other one by McKinsey & Co that proposed three strategic actions for Indian pharma to start on a digital path by leveraging its intrinsic value, meaningfully.

EY study indicated, 86 percent of the senior pharma leaders exhibited a strong positive inclination toward digital as a ‘strategic’ rather than a tactical approach. It then highlighted the following three key barriers to embracing digital:

  • Lack of clear digital strategy for the organization
  • Incremental value proposition and effective delivery
  • Change management

McKinsey & Co in its August 2015 report, titled ‘The road to digital success in pharma’ also indicated, though differently, lack of a clear strategic direction and focus in this area. The study noted: ‘Most pharma companies have started to build some digital capabilities, but the talent and resources for their efforts can be fragmented, often across hundreds of small initiatives. Without clear strategic direction and strong senior sponsorship, digital initiatives often struggle to secure the funding and human resources required to reach a viable scale, and they cannot overcome barriers related to inflexible legacy IT systems.’

Based on the above finding, the paper proposed three strategic actions for pharma companies to place it on the right trajectory, capturing the differential value of digital, as follows:

  • Develop the right organization for new business models with significant value addition from digital. This, I reckon, would involve a cultural shift.
  • Focus on two or three flagship initiatives, such as building a digital ecosystem for patient adherence to a blockbuster drug.
  • Run collaborative experiments, and then scale what works, such as putting the right people from IT, business compliance, and outside partners in a ‘war room’ to run quick test-and-learn cycles of a well deliberated digital strategic initiative. Where results are positive, scale those up.

Personalization in every facet of the value delivery system:

As we move ahead, personalization in virtually every facet of the value delivery system is unlikely to remain optional for the Indian pharma players. With this wind of change gathering further momentum, many will eventually witness a mind-boggling level of personalization – spanning across from personalized diagnosis of serious ailments based on complex genomics, doctors’ writing personalized medicines to tech savvy pharmacists dispensing 3D printed individualized formulations.

This trend will continue evolving with an ascending trend of outcomes, breaking all conceivable barriers. Accordingly, services to patients and physicians would also demand more personalization, along with the other stakeholder engagement process.

Most of these may appear no more than a figment of imagination today, or probably a science fiction to many – just as what the incredible narrative of unleashing unfathomable potential of the Internet appeared to so many, not so long ago. Indian pharma players may prefer to wish away this emerging scenario, but at their own peril.

Conclusion:

The Indian pharma industry is currently passing through a phase of transition to move into the digitized world. Just doing digitally whatever is being done manually now or earlier, won’t suffice, any longer.

Giving shape to a robust, comprehensive digital strategic game plan for the organization, as a whole, is the need of the hour. Pharma CEOs would require leading their respective core teams to the drawing boards for charting out this digital pathway, without further delay.

This would be a game changer, as constantly delighting the stakeholders with the best possible value addition in business, emerges as the primary means for sustainable organizational excellence. Long term success in this effort, would call for constant upgradation of the state of the art digital platforms and tools.

This is sine qua non to pharma success in the digitized world – offering a strong foothold as the new paradigm ushers in. Envisioning, what all-round excellence in business would entail in a rapidly evolving digitized world, and championing its effective implementation on the ground, sooner, is now a critical accomplishment factor for pharma CEOs in India.

By: Tapan J. Ray 

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

Pharma Governance Maladies and Corporate Leadership

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On September 26, 2017, two media headlines related to the Indian pharma industry, possibly made many wonder – Are these some of the key reasons prompting the Government to enforce stringent and costly regulations in this sector?

Above revelations came close on the heel of a series of alleged fraudulent, collusive and even criminal behavior of many domestic pharma players, by several overseas regulators, including the US-FDA. Besides international media, similar reports often featured in the national business dailies too. Most of these allegations are related to pharma marketing practices, and drug quality related concerns. In that sense, the core issues of following two news items are no different, and were reported as follows:

  • “The income tax (IT) investigation wing claims to have unearthed a nexus between a leading pharmaceutical company and doctors, and evidence showing payments running into Crores to the latter for prescribing the company’s medicines.”
  • Reaching out to Niti Aayog, Indian drug industry lobby groups, “mainly objected to three proposals in the draft policy floated last month: one drug one brand, curbing retailer margins, and mandatory bioavailability and bioequivalence (BA/BE) test for all drugs approved by state regulators and also future renewals.”

Out of these, the objection to mandatory BA/BE tests appears more intriguing to me – for two reasons. First, the news report doesn’t mention the participation of any global pharma company or their lobby groups in this meeting. If true, it would possibly mean, the pharma MNC players operating in India aren’t unduly worried about BA/BE requirements, which are mandatory in other countries of the world, primarily to ensure high generic drug quality standards.

The second one being, when the Indian pharma industry is so vocal on ‘poor quality’ of generic drugs sans brand names, apparently to protect branded generics, why is its lobby groups opposing mandatory BA/BE tests – so critical to address the quality issue. Opposing these tests, citing some ‘reason’, appears absurd. Resolving safety concerns on ‘Unbranded’ generics is nonnegotiable – for patients’ health and safety.

The major incident that snowballed:

It reminds me of the major US-FDA related quality issue involving Ranbaxy of India that eventually snowballed, attracting global media attention. This incident was well covered by Indian Press and Television, as well. As one such business daily reported, the much talked about whistleblower Dinesh Thakur, reportedly claimed that his boss in Ranbaxy made a detailed presentation of the alleged widespread manufacturing lapses and fudging of data in the company first to “a closed-door board of directors meeting in Thailand” in September 2004, and then to its science committee on December 21, 2004. Be that as it may, Ranbaxy subsequently pleaded guilty to several charges by the US-FDA, based on Dinesh Thakur’s testimony, and paid a hefty fine of US$ 550 million. It is worth noting, although Ranbaxy had an immaculate Board of Directors at that time, including distinguished and eminent personalities as the Independent Directors, the company used to be run by the promoters, or in other words, the key shareholders of the company. It may be coincidental that the majority of such incidences reported from India, either related to dubious pharma marketing practices or drug quality standard, may find a curious link with the promoter or the key shareholder driven domestic pharma companies.

The purpose of this article is not to assign blame to anyone, or any organization, but to have an intimate look at the governance process of most of such companies, which is systemic in nature. It may be worth pondering thereafter, whether one can learn the way forward from the credible research reports, available on this important subject.

The doctrine of ‘Maximizing Shareholder Value’:

In many corporate training sessions, especially for the senior management, including pharma industry in India, the above well-known doctrine is emphasized and reemphasized – again and again. It postulates, the ‘corporate managers should make maximizing shareholder value their goal – and that boards should ensure that they do.’

Indian pharma companies predominately being the promoter or the key shareholder driven corporations, choosing ‘maximizing shareholder value’ as the primary corporate mission, I reckon, is not too uncommon, either.

The basic premises of the theory:

The details of this theory were articulated in the 1976 Journal of Financial Economics article “Theory of the Firm,” by Michael Jensen and William Meckling. The concept was further deliberated in the article titled “The Error at the Heart of Corporate Leadership” by Joseph L. Bower and Lynn S. Paine, published in the May-June 2017 issue of Harvard Business Review, and its basic premises were summarized as follows:

  • Shareholders own the corporation and are “principals” with the original authority to manage the corporation’s business and affairs.
  • The corporation’s shareholders delegate decision-making authority to the managers and are thus “agents” of the shareholders.
  • As agents of the shareholders, managers are obliged to conduct the corporation’s business in accordance with shareholders’ desires.
  • Shareholders want the business to be conducted in a way that maximizes their own economic returns. (The assumption that shareholders are unanimous in this objective is implicit throughout the article.)

A flawed corporate governance model?

Bower and Paine in their above paper lucidly analyze a number of serious flaws in the basic premises of ‘maximizing shareholder value’ model. For example, they indicate that the ultimate responsibility and accountability for good corporate governance, or lack of it, lies squarely with the concerned senior management and the Board of Directors of the company and none else – not even with its large shareholders.

Moreover, the authors caution that this theory’s doctrine of alignment spreads moral hazard throughout a company and narrows management’s field of vision.

Putting it in the context of Indian pharma industry, I reckon, such risks increase alarmingly, when promoters take all management and Governance decisions, with the senior management, including the Board of Directors doing no more than endorsing those, knowingly or unknowingly, just as what happened in case of Ranbaxy, mentioned above.

Providing a more realistic foundation for corporate governance:

Against this backdrop, and accepting the following ground realities, there evolves a critical need to have a more realistic foundation for corporate governance and shareholder engagement, as the above HBR article deliberates:

  • Corporations are complex organizations whose effective functioning depend on talented leaders and managers.
  • Corporations can prosper over the long term only if they’re able to learn, adapt, and regularly transform themselves.
  • Corporations perform many functions in society – such as providing investment opportunities and generating wealth, producing goods and services, creating employment, developing technologies, paying taxes, and making several other significant contributions to the communities in which they operate.
  • Corporations may have differing objectives and strategies in this regard – such as, what the purpose of a corporation ought to be from a societal perspective may not be quite the same as what its promoters or key shareholders believe those to be.
  • Corporations must create value for multiple constituencies – such as, companies succeed only if customers want their products, employees want to work for them, suppliers want them as partners, shareholders want to buy their stock, and communities want their presence. In contrast, the ‘creating more shareholder value’ theory’s implied decision prompts that managers should always maximize value for shareholders – oversimplifies this challenge and leads eventually to systematic underinvestment in other important relationships.
  • Corporations must have ethical standards to guide interactions with all their constituencies, including shareholders and society at large – going beyond forbearance from fraud and collusion, is essential for earning the trust companies need to function effectively over time. ‘Creating more shareholder value’ theory’s ambivalence regarding corporate ethics can set companies up for destructive and even criminal behavior -which generates a need for the costly regulations that agency theory proponents are quick to decry.

All the above eight points, especially the last one, as many consider, are so relevant for the Indian pharma industry, probably more in the promoter-driven ones, as these constitute the bulk of it. It is equally important to understand that corporations are embedded not just in a network of financial systems, but also in a political and socioeconomic matrix, whose health is vital to their sustainability. Thus, changing from ‘‘creation of more shareholder value-centered governance’ to a ‘company-centered governance’ would be more meaningful in today’s paradigm.

The merits of ‘company-centered governance’:

As the Harvard article says, following are some of the merits of changing to a ‘company-centered governance’ from ‘creating more shareholder value-centered governance:’

  • More board-level attention to succession planning and leadership development
  • More board time devoted to strategies for the company’s continuing growth and renewal
  • More attention to risk analysis and political and environmental uncertainty
  • A strategic (rather than narrowly financial) approach to resource allocation
  • A stronger focus on investments in new capabilities and innovation
  • More-conservative use of leverage as a cushion against market volatility
  • Concern with corporate citizenship and ethical issues that goes beyond legal compliance

Conclusion:

Almost all domestic pharma companies in India are currently family run, mostly by the first or second-generation entrepreneurs, with well-defined and clearly established ownership pattern.

The glorious history of the family run Indian pharma business has started facing a more challenging future, especially in addressing the types of maladies, as epitomized in the above two recent media reports. With the ongoing process of ‘creating more shareholder value’ driven governance – almost totally scripted by the promoter or the key shareholders at the helm, the task ahead remains formidable. Additionally, the reports on Ranbaxy whistleblower’s narrative, prompted many to wonder the role of Independent Directors on the Board of strong promoter driven Indian pharma companies, besides others.

In this scenario, particularly to address the Governance related maladies effectively, a highly competent corporate leadership professionals should be empowered to steer the Indian pharma organizations, in general, from ‘creation of more shareholder value centric governance’ to a well-crafted ‘company centric governance’ process, in a well-calibrated manner and sooner.

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.

Generic Drug Quality: Cacophony Masks An Important Note, Creates A Pariah

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In the ongoing debate between branded-generics and generic drugs without brand names, the concern about drug quality is occupying the center stage, with the former generally being painted in white, and the later in black – with no shades of gray in-between. Interestingly, many large domestic companies manufacture and sell both these genres of generic medicines, and the marketing approval process of both is no different, in a relative yardstick. The degree of difficulty in testing their quality standards, across the country, is no different, either.

On February 25, 2017, even the USFDA, reportedly, raised concerns, for the first time, on the quality and efficacy of medicines, in general, being sold within India. The news report further highlighted: ‘Over the past two years, many domestic majors, including Sun Pharma, Dr. Reddy’s, Cipla and Zydus Cadila have faced regulatory ire over quality of medicines exported from here and sold in the US and other overseas markets’.

It is undeniable, if prescriptions in generic names are made mandatory, there could be direct job losses within the industry, just as loss of significant business clientele of many professional service providers for branded generic business, directly or indirectly. Its net impact needs to be factored-in too, while taking a final decision on this subject.

Lack of enough credible scientific data establishing superiority of branded-generics over their non-branded equivalents are also striking, so are few instances of doctors filing Pharmacovigilance reports with the DCGI on the inferior quality of non-branded generic drugs. Neither is the most competent body in this area – the Central Drugs Standard Control Organization (CDSCO), has concurred with any such claims, so far. Without these, the whole debate based on seemingly over the top claims of superiority of branded generics as a class, is based no more than a matter of conjecture.

I discussed most of these points in one of my earlier articles published in this blog on April 24, 2017. Thus, in this article, I shall focus mostly on an important generic-drug-quality related amendment, very recently made in the Drugs and Cosmetics Act of India, which hasn’t received as much attention as it deserves. This finer note in the drug regulatory playbook, in fact, got nearly masked in the high-decibel cacophony of arguments and counterarguments on Prime Minister Modi’s recent hint on making prescriptions in generic drug names mandatory.

The core issue remains the same, both for non-branded and branded generics:

In the marketing approval process of any branded generic or a non-branded generic drug, Bioequivalence (BE) studies hold immense scientific importance. It ascertains whether the generic equivalent possesses similar efficacy and safety profile as the original molecule for interchangeability. Which is why, in most countries, including Europe and the United States, BE testing is mandatory for approval of any generic drug. Even the large buyers of these drugs, such as the World Health Organization, buy only those generics with proven BE.

Nonetheless, like many other nations, in India, as well, the marketing approval standards for all generic drugs, with or without a brand name, are exactly the same. However, this approval process gets alarmingly relaxed, for both these generic types, with the passage of time, which is the core issue.

New drug definition in India:

According to section 122-E of Drugs and Cosmetics Rules, 1945 (D&C Rules) new drugs will include unapproved drugs, modified or new claims, such as, indications, dosage forms (including sustained release dosage form) and route of administration of already approved drugs and combination of two or more drugs. A new drug shall continue to be considered as new for a period of four years from the date of its first approval or its inclusion in the Indian Pharmacopoeia, whichever is earlier.

BE studies necessary only for ‘New Drugs’:

For all such new drugs and their Fixed Dose Combinations (FDC), including those which are not covered by a patent, if introduced for the first time in India, would necessarily require its applicant to submit the marketing approval documents well-supported by phase III clinical trial data, which includes BE studies against the original molecules. BE of a drug product is achieved if its extent and rate of absorption do not show statistically significant differences from those of the reference product when administered at the same molar dose.

After the 4-year period BE tests not necessary:

Interestingly, after the 4-year period, D&C rules allow subsequent manufacturers of similar drugs to generally rely on the data generated by other pharma companies to obtain marketing approvals for their drugs. In other words, after this 4-year period, manufacturers of branded or non-branded generic drugs are not required to establish comparable safety and efficacy of their formulations with the original molecule through BE and other studies. It is worth noting here, unlike India, BE tests are mandatory for approval of all generic drugs at any time, in most countries across the world.

How would a doctor select only those branded-generics with BE studies?

As there isn’t any easy way to know and identify, both by the doctors and also the patients, which branded or non-branded generics were introduced without BE studies, both these categories pose equal risks to patients – not just the cheaper generic drugs sans brand names.

Changes recommended:

This laxity in the regulatory framework in India did create a lot of uneasiness about the quality of branded and non-branded generic medicines approved by the drug regulators and sold in the country. Responding to this issue, Professor Ranjit Roy Chowdhury Committee Report recommended in July 2013 to make BE and bio­availability studies mandatory for all types of generic drugs, even after the 4-year period.

Cacophony masks an important note:

The good news is, on April 3, 2017, by a Gazette Notification, Indian Government enacted amendments to the Drug and Cosmetics Act (1940) requiring mandatory BE studies for marketing approval of all generic drugs even beyond the 4-year period of the ‘new drug’ definition. It says, “The applicant shall submit the result of bioequivalence study referred to in Schedule Y, along with the application for the grant of a license of the oral dosage form of drugs specified under category II and category IV of the biopharmaceutical classification system.”

Biopharmaceutics Classification System:

The Biopharmaceutics Classification System (BCS) is a scientific framework to differentiate the drug formulations based on their aqueous solubility and intestinal permeability, and mainly depends on two factors:

  • How well the drug dissolves in the stomach and intestinal fluids (drug solubility)
  • How readily the drug passes through the intestinal wall into the blood flow (drug permeability)

The BCS was introduced by Gordon L. Amidon in 1995 to classify drugs into the four categories based on these parameters, as follows:

  • Class I: High Solubility – High Permeability
  • Class II: Low Solubility – High Permeability
  • Class III: High Solubility – Low Permeability
  • Class IV: Low Solubility – Low Permeability

CDSCO still needs to find the right answer to a key question:

Interestingly, this so important note in the regulatory playbook of India got masked in the high-voltage cacophony on branded and non-branded-generics. However, CDSCO would still require finding out the right answer to a key question: how would a doctor or a patient possibly know on which branded and non-branded generic drugs BE tests were not carried out, before the above amendment came into force.

Reported data on substandard drugs in India:

Quoting CDSCO data, the September-October 2015 issue of the ‘Indian Journal of Endocrinology and Metabolism’ summarized that ‘during the years 2011-2014, the regional laboratories tested samples at 91 percent of the installed capacity, but their overall detection rate of sub-standard drugs were only 3.6 percent’. Many have expressed doubts about these numbers though, nevertheless, these are Government data, and don’t fall in the realm of any conjecture.

In any case, the Union Ministry of Health doesn’t seem to concur that the issue of substandard drugs in India, that includes both the branded and non-branded generics, has assumed a public health menace in India or even alarming.

No qualms on value added branding of generic drugs, but fix the loophole for all:

It is understandable, when generic drugs are branded for tangible value-added product differentiation even within the identical or the same drug molecules. There are no qualms on such branding per se, though it comes at a high cost.

Marketing approval requirements being the same for all branded and non-branded generic drugs with the same pitfalls of no mandatory BE-testing requirement after the 4-year period, branding should add commensurate tangible value. Otherwise, why should most patients pay a significantly extra amount for heavily promoted branded-generics? Is it to help the pharma companies fighting with each other to increase their respective pies of revenue and profit on an essential commodity? Instead, stakeholders should now focus on easy detection of all those branded and non-branded generic drug formulations that avoided mandatory BE studies, prior to April 3, 2017.

In conclusion:

Despite CDSCO’s statistical data on substandard drugs, the general concern regarding the efficacy and safety of medicines manufactured in India is often raised both inside the country, as well as by some well-respected overseas drug regulators. Curiously, when raising the same concern CDSCO banned hundreds of branded FDCs, as these drugs came to the market without carrying out required scientific tests due to some major lacunae in the regulatory system, there was a huge protest in the country raised by almost the same people, as business interests prevailed over patients’ health interest.

Interestingly, displaying a sharp contradiction in today’s cacophony, patients’ health interest has been put in the forefront to protect business interests, especially when the CDSCO has raised no such concern, whatsoever.

The reverberating claims on superior drug quality for branded-generics as a class, over their cheaper non-branded equivalents, with the former generally being painted in white, and the later in black – with no shades of gray in-between, as I said before, is based mostly on conjecture rather than enough hard facts. Thus, the question comes up, who is responsible for ensuring drug efficacy and safety for the patients in India – CDSCO or non-fact based claims being raised mostly by those who have a direct or indirect financial interest in branded-generic business?

Keeping this in perspective, it is indeed intriguing, why such an important regulatory step of April 3, 2017 requiring mandatory BE studies for marketing approval of all generic drugs, even after the 4-year period, is getting masked in the cacophony, mostly favoring the branded-generics as a category. However, it’s no-brainer to understand that this din would continue, projecting all generic drugs sans brand names – a pariah!

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.

Disruptive Digital Innovation To Reduce Medication Need?

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Application of digital technology in various spheres of not just business, but in our individual day to life also, promises a disruptive change for the better, from the traditional way of doing things and achieving goals – freeing a lot of precious time for us to do much more, and even faster. An impending tsunami of this digital revolution, as it were, is now all pervasive, with various digital application platforms becoming increasingly more cost effective, quite in tandem with the fast pace of cutting-edge innovation. This is so different from what is generally witnessed in the pharma business.

Interestingly, despite high demand for cost effective health care from all over the world, not much progress in this area is still visible within this industry, in general, and particularly in the pharma business. Various reasons may be attributed to this apathy, which I shall not venture to go into, today.

On the other hand, sniffing a huge opportunity in this largely vacant space, many tech giants and startups are investing heavily to make health care of people easier, and at the same time reap a rich harvest, far outpacing the big pharma players.

As I connect the different dots on world-class digital initiatives in the health space, a clear trend emerges on the global scenario. The way Internet revolution, to start with, followed by smartphones and many other wireless digital services is changing the rhythm of life for many making it much easier, is just amazing. These include a plethora of everyday ‘must-do’ and several other functions, such as, precise need-based information gathering, online banking, tax-filing, shopping, payment, social networking, cloud computing and storage, besides a gamut of other digital services.

Similar disruptive digital innovations are expected in the health care space too, involving many long-awaited patient-centric areas, such as, significant reduction in the cost of medication. I discussed a similar issue in one of my earlier articles, published in this blog. However, today, I shall focus on this specific area, in view of its possible huge impact on the traditional pharma business model.

May reduce need of medication:

That tech startups are developing digital tools that reduce the need of medication, was very recently reported in an article titled, ‘Digital disruptors take big pharma beyond the pill’ published in the Financial Times on April 24, 2017. For example, a California-based startup, has reportedly come out with a digital device, smaller than an iPhone and fitted with a cellular chip, that can keep instant and accurate track of blood sugar levels. If the readings fall in the danger zone, an appropriate text message will be automatically generated for the person, such as – “drink two glasses of water and walk for 15 minutes”. The individual can also seek further help over the telephone from a trained coach – a highly-qualified dietitian for further guidance, the article highlights.

The whiz kid developers of wearable digital devices and apps are now intently working on many innovative health care solutions. Many of these can help early disease detection, and chart the risk profile of persons prone to various ailments, based on an enormous amount of well researched scientific data, significantly reducing the need of medication through effective disease prevention and management protocols. For example, there are umpteen evidences, demonstrating that specific moderate physical exercises help control diabetes just as well as medication, when detected early.

Thus, I reckon, such wearable digital devices and apps carry a huge promise to detect many diseases like, diabetes at its very onset or even before, and influence the person to take the necessary measures. In case of diabetes, it could be like, walking a certain distance every day, along with regular dietary advices from a remote center. Won’t such digital interventions work out far cheaper and convenient than lifelong visits to physicians and administration of anti-diabetic drugs?

The notes of the pharma business playbook need to be rewritten?

Let me quickly elaborate this point with an example of a common chronic ailment, say, diabetes. For effective management of this disease, global pharma players prefer to focus on better and better antidiabetic drug development, and after that spend a fortune towards their effective sales and marketing for generating enough prescription demand. Branded generic manufacturers are no different. This is important for all of them as most patients will have to administer the medicines for chronic ailments for a lifetime, incurring significant recurrent expenses for effective disease control. The first access point of such disease management has always been a doctor, initially for diagnosis and then for lifelong treatment.

Disruptive digital innovation could change the first point of intervention from the doctors to various digital apps or devices. These digital tools would be able to check and capture the person concerned predisposition to chronic diseases like, hypertension and diabetes, besides many other serious ailments, including possible cancer. When detected early, primary disease management advice would be available to patients from the app or the device itself, such as, the above-mentioned device for diabetes. If the preventive practices can manage the disease, and keep it under control, there won’t be any serious need to visit a doctor or pop a pill, thus, avoiding any need of active medication.

In that sense, as the above FT article has articulated, ‘rather than buying a pill, people might buy an overall solution for diabetes’ can’t be more relevant. When it happens, it will have a multiplier effect, possibly impacting the volume of consumption of medicines, just as what disease prevention initiatives do. Consequently, the notes of the pharma business playbook may have to be rewritten with right proactive measures.

As reported, the good news is, at least a couple of global pharma players have started fathoming its impact. This is apparent from Sanofi’s collaboration on digital devices and patient support for diabetics, and to some extent with Pfizer on immuno-oncology, using expertise in data analytics to identify new drug targets.

The key players in this ‘healthcare value chain’:

When the digital health care revolution will invade the current space of traditional-health care, it will create both the winners and losers. This was clearly highlighted in an article titled, ‘A digital revolution in healthcare is speeding up’, published by ‘The Economist’ on March 02, 2017.

From this article, it appears, when viewed in the Indian context that primarily two groups of players are currently ‘fighting a war for control’ of this ‘healthcare value chain’, as follows:

  • Traditional innovators: These are pharma companies, hospitals and medical-technology companies, such as, Siemens, GE and Phillips.
  • Technology insurgents: These include Microsoft, Apple, Google, and a host of hungry digital entrepreneurs and startups – creating apps, predictive-diagnostics systems and new devices.

Where is the threat to traditional pharma innovators?

This emerging trend could pose a threat to traditional innovators as the individual and collective knowledge base gets wider and wider – the above article envisages. With the medical records getting increasingly digitized with new kinds of patient data available from genomic sequencing, sensors and even from social media, the Government, including many individuals and groups, can now get a much better insight into which treatments work better with avoidable costs, on a value-based yardstick. For example, if digital apps and wearable devices are found even equally effective as drugs, with the least cost, to effectively manage the menace of diabetes in the country, notwithstanding any strong ‘fear arising’ counter propaganda, as we often read and here and there, those will increasingly gain better acceptance from all concerned.

The moot question, therefore, arises, would the drug companies lose significantly to the emerging digital players in the health care arena, such as, Microsoft, Apple and Google?

Tech giants are moving faster:

In several disease areas like, cancer and diabetes, the tech giants are taking longer and bigger strides than the traditional pharma innovators. For example:

  • Microsoft has vowed to “solve the problem of cancer” within a decade by using groundbreaking computer science to crack the code of diseased cells so that they can be reprogrammed back to a healthy state.
  • Apple has a secret team working on the holy grail for treating diabetes. The Company has a secret group of biomedical engineers developing sensors to monitor blood sugar levels. This initiative was initially envisioned by Steve Jobs before his death. If successful, the advance could help millions of diabetes patients and turn devices, like Apple Watch, into a must-have.
  • Verily – the life sciences arm of Google’s parent company Alphabet, has been working on a “smart” glucose-sensing contact lens with Novartis for several years, to detect blood glucose levels through tears, without drawing any blood. However, Novartis has since, reportedly, abandoned its 2016 goal to start testing the autofocus contact lens on people, though it said the groundbreaking product it is “progressing steadily.” It has been widely reported that this could probably be due to the reason that Novartis is possibly mulling to sale its eye care division Alcon.
  • Calico, which is also owned by Google’s parent company Alphabet, has US$ 1.5 billion in funding to carry out studies in mice, yeast, worms and African naked mole rats for understanding the ageing process, and how to slow it, reports MIT Technology Review.

No wonder, why an article published in Forbes magazine, published on April 15, 2017 considered these tech giants as ‘The Next Big Pharma’. It said, ‘if the innovations of Google and Apple are another wake-up call for the life science industry, which oftentimes has relied on the snooze function of line extensions and extended-release drugs as the source of income and innovation.’

In conclusion:

An effective disease treatment solution based on different digital platforms has a key financial advantage, as well. This is because the process of generation of huge amounts of credible scientific data, through large pre-clinical and clinical trials, establishing the efficacy and safety of new drugs on humans for regulatory approval, is immensely expensive, as compared to the digital ones.  Intriguingly, no global pharma player does not seem to have launched any significant digital health care solution for patients to reduce the overall cost of disease burden, be it prevention or management.

In that context, it’s encouraging to note the profound comment of the Chief Operating Officer – Jeff Williams of Apple Inc., made during a radio show – ‘Conversations on Health Care’, as reported by ‘appleinsider.com’ on January 06, 2016. During the interaction, Williams reiterated that the rapid progress of technology in this direction is very real, as ‘Apple’ and other smartphone health app developers are stretching the commoditization of computer technology to serve health sciences. In not so distant future, with relatively inexpensive smartphones and supporting health apps – the doctors and researchers can deliver better standards of living, even in severely under-served areas like Africa, where there are only 55 trained specialists in autism.

Thus, it now looks reasonably certain to me that disruptive digital innovation on various chronic health care solutions is ultimately going to reduce the need of medication for many patients, across the world, including India, significantly.

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.

Leveraging 3D Printing In Pharma, For Cost Containment And Patient-Centricity

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Today, although a number of new and state of the art drugs is regularly being developed, and brought to the market at a reasonably rapid pace, their access to the majority of the global population has still remained a huge challenge. One of the key access barriers continue to remain exorbitant prices of these drugs.   

Keeping commensurate pace with gradual improvement in the pinpointed diagnosis of various diseases with modern diagnostics, processes, devices and techniques, fueled by increasing health awareness within a sizeable section of the population, more patients are now aspiring for access to a better quality of life, and greater productivity at work. This is happening all over the world, though with varying degree and magnitude. 

Consequently, there has been a sharp increase in the demand for healthcare, which has caused a huge bottleneck in the overall healthcare delivery process, for various reasons. The huge gap between the availability of high-tech drugs/healthcare services, and their access to the general population, mostly due to affordability reasons, is going north at a rapid pace. 

Two-pronged cost containment pressure:

This unfettered ascending trend is creating primarily the following two types of cost containment pressure: 

  • Being driven purely by the economical reasons, the Governments and other payers have started taking stringent cost-containment measures, bringing huge pricing pressure, especially on the drugs and medical device manufacturers.
  • In countries, such as, India, where the ‘Out of Pocket’ expenditure on healthcare in general, and the medicines in particular, is hovering around 70 percent, the patients, several Governments have started announcing drug price control policy to protect the health interest of patients. 

However, currently, only some piecemeal measures are being initiated, including in India, where a holistic approach for all, such as, Universal Health Care (UHC) and several other similar options, are long overdue.

Three different remedial measures:

In my view, consideration of either of these three following approaches, or an innovative blend of these, would enable the Governments to address this pressing issue, remove the existing bottle neck, and thereby bridge the healthcare access gap, holistically:

A. Fast implementation of Universal Health Care (UHC).

B. Closer look at the entire Pharmaceutical Value Chain with a resolve to work out innovative, game-changing solutions to reduce cost of each of its critical components, significantly.

C. Effectively addressing the emerging need of Patient-Centricity.

A. Fast implementation of Universal Health Care (UHC):  

I have already discussed UHC in one of my articles titled, “Universal Health Coverage: The Only Alternative To Drug Price Control in India?”, published in this Blog on November 9, 2015.

B. Cost containment with 3D printing:

A report of IMS Health, published on November 18, 2015, forecasts the increase of  total global spend for pharmaceuticals by US$ 349 billion on a constant-dollar basis, compared with US$182 billion during the past five years. It also indicated, more than half of the world’s population will live in countries where the use of medicine will exceed one dose per person per day by 2020, up from 31 percent in 2005, as the “medicine use gap” between the developed and the emerging markets narrows. 

This steep ascending trend would eventually affect the pharma ‘Value Chain’ in a significant way, throwing open several path-breaking high-technology based options, with impressive favorable impact on the general costs of medicines. 3D-printing technology is expected to play a significant role in this initiative.

Before proceeding further, let me zero-in on a few critical components, as follows, of the pharma ‘Value Chain’, as I see visualize these: 

  • Drug innovation (R&D)
  • Manufacturing
  • Marketing
  • Supply Chain

According to my understanding, at least in 3 of the above 4 ‘Value Chain’ components, there is an immense potential of leveraging 3D printing technology effectively, and in a big way.

In my article of January 11, 2016, published in this Blog, titled “3D Printing: An Emerging Game Changer in Pharma  Business”, I have already discussed the game changing impact of 3D Printing technology on the drug discovery process, drug manufacturing strategy, and supply Chain effectiveness in the pharma business. 

Hence, I prefer not to dwell on those areas, yet again, here. Instead, I shall briefly deliberate on the application of 3D Printing technology to effectively address the emerging need of ‘Patient-Centricity’ with an interesting and a very recent example. 

C. Improving ‘Patient-Centricity’ with 3D printing: 

At this stage, there is a need to understand what exactly is the ‘’Patient-Centricity’. It seems to be a popular buzzword now with the health care related companies, primarily to give an impression that they are really focusing on ‘Patient-Centricity’.

However, there does not seem to exist any universally accepted definition of this terminology, just yet. Nevertheless, one appropriate definition could well be: “A focused and transparent approach to providing maximum possible benefits to a patient from a drug, device, technology, or health care services.” 

I briefly focused on a part of this basic issue in my article titled, “‘Disease Oriented Treatment’ to ‘Patient Oriented Treatment’- An evolving trend’, published in this Blog on January 7, 2013.

As I said before, in this article, to explain ‘Patient-Centric’ approaches with 3D printing, I would quote from a very recent, and a path-breaking work in this area.

On May 25, 2016, ‘The Straits Times’ reported, the researchers at the National University of Singapore have found a way to use 3D printers to create low-cost tablets. With the help of this technology a tablet can be so personalized to respond to individual patient’s needs that the drug can be customized to take on different release profiles, such as, constant release, pulsed release, increasing or decreasing release, and any arbitrary interval as required by the patient. However, the most striking is, different drugs with different release profiles can also be combined in a single pill.

Once administered, the tablet dissolves layer by layer over a period of time, releasing the drug at a controlled rate. The duration can be altered by changing the chemical composition of the liquid.

It is worth noting here that the conventional tablets are only capable of a constant rate of release, requiring the patient to manually control the dosage and release rate, by taking doses according to a prescribed schedule, given by the doctor. In this scenario, if a patient requires different drugs with different dosages and intervals, it can become inconvenient to keep track and potentially dangerous, especially when the patient misses a dose, the report highlighted. 

The commercially available printer used in the project costs just S$2,000.

The Assistant Professor Soh Siow Ling, who leads the project, reportedly, expects that the low cost will allow it to be used in hospitals and neighborhood clinics. He further explained, “Every single person is different, based on many factors such as genetics, age, body mass and so on. Different people also have different activity levels and consumption habits, which affect their needs. It is, (therefore), not desirable to use the same drug to treat different illnesses which have similar apparent symptoms.”

The report indicated that in October, 2015, these findings were published in an issue of Advanced Materials, which is a peer-reviewed materials science journal.

A patent for the tablets was filed last year, and they are currently in talks with multinational corporations, and medical professionals to identify potential applications, the article highlighted. 

Changing role of doctors:

From the above developments, it appears that unleashing the full potential of 3D printing technology in the pharma industry, would also enable the medical profession to move further towards ‘Patient-Centricity’, in its true sense.

This technology would empower them offering to each patient, the right drug or drug combinations, with most suitable drug delivery system, and exactly the way individual patients would prefer, with a very high degree of precision.

Thus, from overall disease treatment perspective, especially with medicines, this approach offers a great potential to be significantly more effective, and convenient to individual patients, as compared to the conventional approaches. 

I reckon, over a period of time, professional competitiveness would drive the doctors further honing their effectiveness in the disease treatment process, and that too with a high degree of precision. In that situation, many doctors may decide to setup on-demand 3D drug-printing facilities even at their clinics.

The gradual embodiment of this brilliant technology by the doctors, is expected to throw open new vistas of opportunity, also to personalize the shapes, colors and flavors of any medicine, according to individual patient’s choice. This, in turn, would improve patient compliance, ensure a predictable relief from the disease, and demonstrate ‘Patient-Centricity’ of a high order by the medical profession, in general. 

Conclusion:

For the first time ever, with Aprecia Pharmaceuticals in the United States getting approval of the US-FDA on August 3, 2015 for the market launch of a 3D printed prescription drug for oral use by the epilepsy patients, dawns a new paradigm in the global pharma business horizon.

Effective application of this ‘disruptive innovation’ could well be a game changer not just in the ‘value chain’ of conventional pharma business models, across the world, but also for taking a giant leap towards ‘Patient-Centricity’. The doctors are also expected to be very much an integral part of this process. 

Besides all the above benefits, 3D printing can also encourage low-volume production, whenever required, and a wide variety of Active Pharmaceutical Ingredients, to meet any immediate demand, mostly for use in research and developmental work. 

Thus, noting the ongoing significant progress in this area, I reckon, leveraging 3D printing technology in pharma, not just to address the cost containment pressure, effectively, but also to ensure a tangible and visible move towards ‘Patient-Centricity’, in true sense. All-round success in the innovative application of this cutting-edge technology in the global pharma industry, would eventually separate men from boys in pursuit of business excellence. 

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 Evolving Paradigm of ‘Price-Value Model’ Of Pharma Value Delivery System

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May 4, 2016 edition of the ‘MIT Technology Review’ published an interesting article carrying the headline, “The World’s Most Expensive Medicine Is a Bust”.

The obvious question that floats at the top of mind: What is this most expensive drug in the pharma history, and why has it failed commercially, despite being a product of disruptive innovation and a marvel that stands out in the space of contemporary drug innovation? 

The product is called Glybera (alipogene tiparvovec). It heralded the dawn of the “first gene therapy” in the Western world, whose approval helped ignite an explosion of investment and excitement around treatments that correct DNA, as the MIT article said.  

Glybera promises to cure rare inherited diseases with one-time repairs to a person’s DNA. A single dose of gene therapy can change the genetic instructions inside a person’s cells in ways that last many years, or even a lifetime. 

Interestingly, even with this unprecedented product offering, the product has become a commercial flop, due to its staggering million-dollar price tag, which very few patients can afford.

Is this an extreme example of price-value relationship for a new breakthrough pharma product? Yes, of course!  Nevertheless, it makes us ponder on some key fundamentals, afresh, such as:

  • The core purpose of drug innovation
  • The price-value relationship of even breakthrough drugs

The proper understanding of these points comprehensively, especially the above two fundamentals, would enable the drug companies to achieve both, the core purpose of intricate drug innovation initiatives, and also making these medicines commercially successful with increased access to patients, through innovative ‘value delivery’ mechanisms.

I believe, the pharmaceutical industry is now at the threshold of a paradigm shift. The new paradigm would signal a metamorphosis in the price-value equations for all drugs, mostly due to changing socio-political environment, across the world, as we have started witnessing in the topmost free economy of the world – the United States.

Pharma business is a ‘value delivery system’: 

Way back in June 2000, an article published in ‘McKinsey Quarterly’ on delivering value to the customers, deliberated on a 1988 paper of Michael J. Lanning and Edward G. Michaels. The study combines the value-maps developed in the price-value models with the idea of the “business system,” which was introduced in 1980.

The paper titled, “A business is a value delivery system,” emphasizes the importance of a clear, well-articulated “value proposition” for each targeted market segment. This means a simple statement of the benefits that the company intends to provide to each segment, along with the approximate price the company will charge each segment for those benefits. 

Looking at this concept in pharma perspective:

Keeping the above paper in perspective, when we look at the pharma value delivery system, besides the key benefits that a drug offers, one of the most critical value parameter continues to be the financial value.

The healthcare value chain, across the world, has started sharpening its focus on the drug cost today, more than ever before. This is primarily based on the differential value that a drug offers as compared to its closest alternatives. We may like it or not, it is happening irrespective of, whether the drug in question is a breakthrough innovation, or an off-patent high-priced generic medicine.

As I said before, not just in India, the affordability of health care in general, and medicines in particular, is rapidly emerging as a key concern for all developed and the developing nations, including the United States.

Thus, even after careful consideration of all novel product’s benefits and the costs associated with these, the stakeholders’ focus is getting sharper on the overall financial value of the product offerings to the patients. This is reality, and can’t just be wished away by any measure of powerful and expensive advocacy campaigns, together with clever media management. 

The drug companies may continue to crib about it, but this will possibly lead them nowhere, in the long term. Instead, they would require to search for a workable win-win and level headed solution, for this most fundamental business issue.

Understanding the evolving paradigm:

We are fast arriving at this new paradigm. There, the financial value of a drug, in the ‘value delivery system’ of pharma marketing, would occupy the center stage. The drug companies would need to arrive at this financial value, not just by understanding the professional mindset of the doctors and taking them on board somehow, but by properly understanding what would the majority of stakeholders want to pay for a new drug, and then perhaps work backwards to translate that finding into reality. 

Its successful application would soon assume a pivotal role in the pharma value delivery system. A company may contemplate pricing a drug high, limiting its access to a few rich, and still succeed in making its cash register ringing, such as, some new hepatitis C or cancer drugs. Nonetheless, this could ultimately make their overall business socio-politically too vulnerable, and may not be sustainable either, in the long run. 

The same old and current approach does not create a wholesome value for a new drug to most of the customers, despite the company having a state of art ‘value delivery platform’, for unleashing a dazzling marketing blitzkrieg.                                 

The pharma marketing strategy remains unchanged and stale: 

At a time, when a paradigm shift is taking place, especially in the way the entire world views at the price-value equation of a new drug, the overall strategic approach of the pharma marketers, as I see it, still remains in the old paradigm, with its roots firmly entrenched there.

I think it so, because the traditional pharma marketing has always been a unilateral communication process, predominantly involving the doctors, and trying to fathom their needs, wants and professional mindset.

Accordingly, the product value delivery process for the doctors, with or without the medical representatives, is basically woven around those needs, wants and mindsets of the target doctors. It, by and large, continues even today, with some cosmetic changes in tools and formats here or there. 

Therefore, when the basic marketing and communication process aims at effectively delivering the value of drugs, let us discuss briefly what does the core value of a drug mean?

The value of a drug: 

For this purpose, I reckon, it would be prudent to avoid an ethereal approach to arrive at the financial value of a drug, such as, what is the cost of a life, as often raised by many pharma players. A practical approach to resolve this issue would benefit all, in every way.

Without going much into the core purpose of pharma innovation, usually the drug companies define the value of a medicine based on what they think about its attributes. Accordingly, respective players arrive at its financial value, that the patients or the payers must pay for, if they want to have an access to it. 

Usually not many independent studies are conducted by the drug companies to ascertain how much the majority of stakeholders, including the governments, payers and patients, would want to willingly pay for a new drug, after well considering its value offerings.

Competitive Scenario:

The ever increasing, and virtually obsessed focus on drug ‘innovation’, while justifying the high financial value of a medicine for the patients, also restricts competition, especially for newer ones. For most of the patients this situation is a double whammy.

Additionally, the consolidation process within the industry is also fuelling this situation further. The virtual monopoly of a few companies with some new drugs, in key therapy segments, such as, diabetes, cancer, vaccines and HIV, is restricting the overall competitive environment. This would continue.

A September 24, 2014 Article, published in the ‘Insight’ of Bain & Company on the throws some light on the subject. It says, “over the past 20 years, and especially since 2000, building leadership in a category has become a crucial route to success in pharma. Seven of our 10 leading value creators, including Roche in oncology and Novo Nordisk in diabetes care, generated at least 50 percent of their revenues from one therapeutic area or primary care. In two cases – Biogen Idec in neurology and Celgene in oncology – more than 90 percent of revenues came from a single therapeutic area.”

As I said, this process is expected to continue, it is necessary for the drug companies, governments, other payers and the patients understand the new paradigm, and act accordingly to address this issue to protect mutual benefit.

If it does not happen, the evolving socio-political environment, across the world, would occupy the driver’s seat to navigate through this complexity, in the healthcare space in general and pharma in particular, safeguarding the patients’ health interest. 

The core issue:

In the prevailing scenario, the core issue that gets reinforced, yet again, as raised by many, including the World Health Organization (WHO), is the growing inherent conflict between predominantly the profit driven business goals of the pharma players, and the public health interest of a nation.

Possibly for this reason, Dr. Margaret Chan, the Director General of the World Health Organization (WHO), at a briefing to discuss the Ebola outbreak in West Africa at the UN Foundation in Washington on September 3, 2014 said:

“Big Pharma’s greed for profits, not lack of funding, delaying Ebola treatment development.” 

Many countries are now seriously striving to arrive at a middle path to resolve this perennial conflict, India included. The drug companies may wish to take note of it.

I discussed this issue in an article published in this Website titled, “Is The Core Purpose of Pharma Business Beyond Profit Making?” on November 10, 2014.

Conclusion:

As the above ‘McKinsey Quarterly’ paper articulated, the strength of the buying proposition for any customer is a function of the product value minus the price. In other words, the ‘surplus value’ that the customer will enjoy once that product is paid for. As the paper clarified, the “value” in a price-value map will necessarily be informed guesses, though after well-considering multiple variables.

Delivering more of this ‘surplus value’ to patients, willy-nilly, would soon be the name of the game, especially for the winners in both the global and local pharma industry. 

In the entire drug sector, including India, this ‘price-value model’ could help a pharma company ascertain the sustainability of its competitive position, well considering the stakeholders’ perspective, and accordingly take the right business decision.

Thus, proper understanding of the ‘surplus value model’ while pricing a drug, and its immaculate execution through state of the art marketing and communication strategies, will separate the men from the boys, for sustained excellence in the pharma business.

Sans understanding of this ‘price-value model’, which is so important in the evolving new paradigm of a pharma value delivery system, a pharma player would risk getting caught in a tough headwind, especially with new high-priced products. This situation could, in turn, jeopardize its long term success, and even erode the well-earned company reputation, in tandem, at times mercilessly.

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.