Monthly Archives: October 2017

A Disruptive Innovation to Fight and Cure Intractable Diseases

Posted on by
Reply

Several important facets of health care often arrest general attention. These are also widely discussed, analyzed and argued vehemently – with each person or group trying to justify one’s own point of view. Among these, following 6 critical areas, broadly dominate the deliberations:

  • Incredible advancement in the medical science driving health care,
  • Infrastructure, facilitators and providers of health care,
  • ‘Wolves of health care in sheep’s clothing’, as described by many
  • Large populations facing inadequate availability and access to health care,
  • The need for Universal Health Care (UHC)
  • Public investments, policies and regulations governing health care.

In this article, I shall focus only on the first area – incredible recent advancement in the medical science driving health care, especially the very recent developments on a disruptive innovation called ‘Gene Therapy’.

Gene Therapy:

As some would know, one of the latest developments in the pharma world, relates to marketing approval in the United States and Europe of ‘Gene Therapy’ – a disruptive innovation in the medical science.

This technique of treatment using genes to manage, cure or prevent many intractable diseases are fast gaining ground globally, including India – at a slower pace, though. As I said, in America, the first gene therapy has already obtained the approval of the US-FDA in August 2017, closely followed by the second in October 2017, with the third waiting in the wings. In the European Union (EU), the first gene therapy was approved in 2012, but faced some commercial issues that I shall discuss later in this article.

During approval of the first gene therapy in the United States (US), the FDA Commissioner Scott Gottlieb reportedly said, this new frontier in medical innovation has the ability to reprogram a patient’s own cells to attack a deadly disease, such as cancer, creating an inflection point to treat, and even cure many intractable illnesses.

According to an October 10, 2017 publication of the U.S. National Library of Medicine, gene therapy may allow doctors to treat a disorder by inserting a gene into a patient’s cells instead of using drugs or surgery. Extensive research is ongoing, adopting several approaches to this treatment, including:

  • Replacing a mutated gene that causes disease with a healthy copy of the gene.
  • Inactivating, or “knocking out,” a mutated gene that is functioning improperly.
  • Introducing a new gene into the body to help fight a disease.

Thus, gene therapy is fast emerging as a promising treatment for a number of life-threatening diseases, including inherited disorders, some types of cancer, and certain tough to treat viral infections. That said, the technique being risky, is still under study to make it safer the patients. Currently, it is being tested only for diseases that have no other cures.

The first approval of gene therapy in the United States:

On August 30, 2017, US-FDA took a historic decision with its approval for the first ever gene therapy in America – meeting an unmet need in its true sense, and thus creating a major milestone in medical science. US-FDA approved this treatment for certain pediatric and young adult patients with a form of Acute Lymphoblastic Leukemia (ALL) – resistant to standard treatment, or which often relapses. The overall remission rate within three months of this treatment was found 83 percent in clinical trials.

This path-breaking therapy (tisagenlecleucel) is named Kymriah, and is made by Novartis. Nevertheless, it is worth noting that the treatment was developed by a group headed by Carl H. June  at the University of Pennsylvania and licensed to Novartis.

A customized treatment:

The US-FDA approval letter to Novartis says, “Kymriah is a genetically modified autologous T-cell immunotherapy. Each dose of Kymriah is a customized treatment created using an individual patient’s own T-cells, a type of white blood cell known as a lymphocyte. The patient’s T-cells are collected and sent to a manufacturing center where they are genetically modified to include a new gene that contains a specific protein (a chimeric antigen receptor or CAR) that directs the T-cells to target and kill leukemia cells that have a specific antigen (CD19) on the surface. Once the cells are modified, they are infused back into the patient to kill the cancer cells.”

Nevertheless, Kymriah can cause life-threatening side effects, such as dangerous drops in blood pressure. This has prompted US-FDA to caution that hospitals and doctors should be specially trained and certified to administer this therapy, and require stocking of drugs to control severe reactions, if and when required.

The price tag is jaw dropping:

As  reported by New York Times (NYT), Kymriah will be given to patients just once and must be made individually for each, costing US$ 475,000. Novartis reportedly has said, if a patient does not respond within the first month after treatment, there will be no charge. The company also said it would provide financial help to families who were uninsured or underinsured. This is indeed a commendable gesture.

The second USFDA approval for gene therapy:

Just about a week ago, on October 18, 2017, US-FDA approved Yescarta (axicabtagene ciloleucel) of Kite Pharma Inc. – a Gilead company. This is gene therapy is to treat adult patients with certain types of large B-cell lymphoma who have not responded to or who have relapsed after at least two other kinds of treatment.

Initially, 54 percent of patients on Yescarta reportedly had complete remissions with their tumors disappearing. Another 28 percent had partial remissions, where tumors shrank or appeared less active on scans. After six months, 80 percent of the 101 were still alive.

Just as Kymriah, Yescarta will also reportedly be introduced gradually, and be available only at centers where doctors and nurses have been trained in using it. This is, again, due to its serious side effects, which include high fevers, crashing blood pressure, lung congestion and neurological problems.

As reported, Kite Pharma hopes that Yescarta will eventually be approved for earlier stages of lymphoma, rather than being limited to patients with advanced disease who have been debilitated by multiple types of chemotherapy that did not work.

Yescarta will cost less than Kymriah at US$ 373,000 per patient. This is a single dose treatment to be infused into a vein, and must be manufactured individually for each patient. About 3,500 people a year only in the United States is estimated to be candidates for this therapy.

Yet another gene therapy is likely to get US-FDA approval soon:

Close on the heels of these two developments, yet another gene therapy is likely to get US-FDA approval in the coming months. On October 12, 2017, Spark Therapeutics – a gene therapy company in the United States, reportedly won unanimous support from a US-FDA advisory panel for its gene therapy – Luxturna (voretigene neparvovec), after the experts concluded that the benefits of this gene therapy outweighed its risks.

Luxturna – a one-shot treatment, has shown to reverse blindness by restoring vision in children with an inherited form of blindness, and shows potential to restore blood-clotting function to hemophiliacs, or even cure rare diseases outright. However, as the analysts estimate, the cost of Luxturna will be hefty, which could even be more than Kymriah of Novartis – at US$ 1 million per patient.

The first gene therapy in Europe was not commercially viable:

As stated above, in 2012, the first gene therapy – Amsterdam-based Uniqure’s Glybera (alipogene tiparvovec), was approved by the European Medicines Agency (EMA) for the EU market. The product was indicated for treatment of rare inherited disorder – lipoprotein lipase deficiency (LPLD).

However, with treatment cost of €1m+ per patient, Glybera was reportedly the most expensive therapy ever approved in Europe. Interestingly, in April 2017, Uniqure decided to terminate post-marketing studies required for prolongation of its existing EU conditional market approval, for its extremely limited usage, making the product commercially non-viable.

These four developments give me a sense of both – the fast pace of progress of gene therapy and also its possible commercial vulnerability, due to astronomically high prices coupled with a limited number of current usages linked to the specific disease types.

Gene therapy research in India:

According to the paper titled, “Gene therapy in India: a focus,” published by the Journal of Biosciences in June 2014 – ‘starting from 1998, the Indian government is playing a leading role in the advancement of gene therapy research in India by providing enormous financial support to scientists and clinicians through its various funding agencies like Department of Biotechnology (DBT), Department of Science and Technology (DST), Indian Council of Medical Research (ICMR), etc.’

India is not far behind other Asian countries in the field of gene therapy. In Asia, China is the leader with 16 research laboratories, followed by Japan (13), India (10), South Korea (4), Israel (3) and Taiwan (3), the paper says.

The laboratories established in India to conduct gene therapy research are: Advanced Centre for Treatment, Research and Education for Cancer, Mumbai (1998), University of Delhi (2002), Saha Institute of Nuclear Physics, Kolkata (2004), Indian Institute of Science, Bengaluru (2005), Actis Biologics Private Limited (2005), Mumbai, Center for Stem Cell Research, Vellore (2010), Vellore Institute of Technology, Vellore (2012), Institute of Life Sciences, Bhubaneswar (2012), Narayana Nethralaya, Bengaluru (2013).

Conclusion:

As deliberated above, gene therapy reflects an incredible advancement in the medical science driving health care. This is primarily because, the disruptive innovation is aimed at treating genetic diseases at the molecular level by correcting the defective genes.

The fact, as captured in the worldwide gene therapy data table, that between 1989 and February 2016, over 2,300 gene therapy clinical trials have been conducted – 93 of which being in phase III while 3 in phase IV, further vindicates the rapid pace of evolution of this science.

As stated before, the critical process of this treatment reportedly involves ‘introduction of new genes into cells, to restore or add gene expression, for the purpose of treating disease. Most commonly a mutated gene is replaced with DNA encoding a functional copy. Alternatively, DNA encoding a therapeutic protein drug may be introduced.’ However, the exorbitant current cost of this novel treatment, for various reasons, severely limits its access to a vast majority of the global population, at least for now.

Be that as it may, the disruptive medical innovation culminating into gene therapy of date, is expected to open new vistas of opportunity to fight and cure several life-threatening intractable diseases. This game changing advancement in the medical science, no doubt, would help provide a new lease of life only to some, mostly due to its price barrier. Nevertheless, for many, it does carry a new hope for access to this life changing therapy – probably at some point of time in future. God willing!

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.

‘Digiceuticals’: A Force Multiplier to Contain Chronic Diseases

Posted on by
Reply

There is a growing need for more effective prevention, treatment or management of many serious Noninfectious Chronic Diseases (NCDs), with greater safety and at a lesser cost. As a major step in this direction, ‘digiceuticals’ or ‘digital therapeutics’ are now drawing heightened interest from the medical and scientific communities.

‘Digiceuticals’ are basically custom made digital software working as drugs. These are presented mostly in the form of user-friendly smartphone apps for various disease conditions –  both as stand-alone therapy, or to augment other treatment processes for better outcomes.

Increasing usage of digital technology enabled therapy for a gamut NCDs, prompts me to discuss in this article the relevance, scope, promise, and of course, the rationale behind the same. Its importance swells manifold when the risks of lifelong health hazards that such chronic disorders may pose are factored-in, alongside their overall socioeconomic impact.

Chronic diseases – the invisible global epidemic:

Chronic diseases, such as heart disease, stroke, chronic respiratory disorders and diabetes, including cancer, are by far the leading causes of death and disability worldwide. The World Health Organization (W.H.O) also reiterates that this invisible epidemic is spreading out globally – across every region and pervading all socioeconomic classes.

The mortality, morbidity and disability attributed to chronic diseases, as estimated by the W.H.O, is expected to rise to 73 percent of all deaths and 60 percent of the global burden of disease by 2020. Interestingly, 79 percent of the deaths attributed to chronic disorders occur in the developing countries, such as India.

Can chronic diseases be prevented?

W.H.O also emphasizes that four of the most prominent chronic disorders, namely cardiovascular (CVD), cancer, Chronic Obstructive Pulmonary Diseases (COPD), and Type 2 diabetes – are linked by common and preventable biological risk factors, notably high blood pressure, high blood cholesterol and overweight. Most importantly, these relate to major behavioral risk factors, like unhealthy diet, physical inactivity and tobacco use, among several others.

Awaits a radical change – from “Suppliers Push” to “Consumer Pull”:

In the above perspective, a series of well-integrated action related to several human behavioral factors, could help prevent many NCDs, effectively. A fundamental change in mindset of all concerned is critical to avert the merciless onslaught of this epidemic. This calls for a radical change in the existing process of addressing these disorders – from “Suppliers Push” to “Consumer Pull.”

The January 2017 White Paper titled, “Human-Centric Health: Behavior Change and the Prevention of Non- Communicable Diseases”, published by the World Economic Forum (WEF), drives home this point succinctly, as follows:

“Decreasing the burden of NCDs will require a transformation through which the threat of disease is recognized and addressed. The transformation should move us away from the present state of ‘supplier push’, which emphasizes expensive, capital-intensive, hospital-centric interventions that have so far produced disappointing results, to a system that relies on ‘consumer pull’. A consumer-focused system would recognize the principles of behavioral economics to encourage and enable people to adopt healthier behavior across all aspects of their lives. Individuals would be supported in this effort by a network of critical stakeholders ranging from government to private enterprise, from healthcare providers to payers, from the technology developers to local communities.”

NCDs are triggered by behavioral pattern and lifestyle:

Picking up the thread from here, I shall deliberate now, how the state of the art digital technology-developers are playing a stellar role in this space, with greater precision and more cost-effective way. This is because, many NCDs are triggered by consistent behavioral and lifestyle pattern of an individual. Consequently, continuously monitoring of desired changes in individual behavior, are expected to gradually become the first-line treatment to effectively address these conditions. Several published studies indicate that the process has started rolling, aided by smartphone based sophisticated digital tools – in many cases even without any expensive and lifelong medications.

The May 26, 2016 paper titled, “Clustering of Five Health-Related Behaviors for Chronic Disease Prevention Among Adults, United States, 2013”, captures a cluster of five health-related behaviors for chronic disease prevention as – never smoking, getting regular physical activity, consuming no alcohol or only moderate amounts, maintaining a normal body weight, and obtaining daily sufficient sleep. This article was published by the Centers of disease Control and Prevention of the United States.

Preventing chronic diseases with ‘digiceuticals’:

The April 7, 2017 article captioned, “Can ‘Digital Therapeutics’ Be as Good as Drugs?”, published by the MIT Technology Review, dwells on this area. The paper indicates an emerging belief among technology geeks that ‘digiceuticals’, or digital drugs will become ‘the third phase’ of medicine for many disease conditions, being the successor to the chemical and protein drugs that we have today, but without the billion-dollar cost of bringing one such drug to market. The core idea behind this new concept is to develop software that can improve a person’s health as much as a drug can, but without the same cost and side-effects, the author says.

An innovative new class of medicine:

The term digital therapeutics or ‘digiceuticals’, as many calls these, is considered as an innovative new class of medicine that gives participants access to the world’s most effective behavior therapies, enhanced with smart digital technology, and delivered directly to their front door. These can be used both as a replacing medicine, and also for enhancing efficacy of a medical treatment, as a situation would necessitate.

There doesn’t seem to be any clear-cut difference between these two – digital therapeutics and ‘digiceuticals’. Nonetheless, some do believe that there is a difference – quite akin to prescription medication versus nutritional supplements, with consequential differences in regulatory and other areas. Be that as it may, ‘digiceuticals’ when used for prevention, treatment or effective management of any chronic ailments would require to be scientifically evaluated just as any other drugs, devices and treatment processes.

The future of health care will be App-based:

Another article titled “Digital Therapeutics: The Future of Health Care Will Be App-Based”, published in Forbes on July 24, 2017, highlights how several digital technology companies are now focusing on the development of state of art smartphone app-based digital treatment programs that can be delivered at a massive scale and with a low cost to prevent progression of many debilitating NCDs, for a large population across the world, including India.

‘Digiceuticals’ versus other mobile wellness apps:

Unlike many smartphone based wellness apps to keep a regular tab on daily exercises, heart rates, calorie intakes, breathing, sleep pattern among several others; treatment processes with ‘digiceuticals’ are quite different. These softwares are tailor-made to prevent or treat specific chronic disorders, like diabetes, cardiovascular conditions, COPD, insomnia and chronic depression, to name a few. The trend is fast catching up along with an increasing general realization that the influence of individual behavior and lifestyle pattern is so crucial in the prevention, and also in arresting the progression of many debilitating NCDs.

The current status:

The latest scenario in this area has been well captured in several research studies. One such is the 2017 Report of Grand View Research, Inc., which articulated the following key findings:

  • The global ‘digiceuticals’ or digital therapeutics market size was estimated at USD1.7 Billion in 2016, which is expected to grow at 21.0 percent CAGR from 2017 to 2025.Diabetes is expected to gain the largest market share due to the increasing global prevalence, fueled by the preventive steps taken to reduce them.
  • The adoption of digital therapeutics offers a reduction in healthcare cost associated with many NCDs, and are thus being used on an increasing scale. Digital tracking, continuous monitoring of various health parameters, management of physical activity and controlling eating habits are some of the important factors expected to propel the market growth.
  • Ascending trend of its usage for prevention of a wide range of NCDs would further add to the growth momentum. Patients accounted for the largest market share in the end-user segment owing to user-friendly interface and cost-effective management of many NCDs.
  • The North American region accounted for the highest revenue owing to technological advancement and health care expenditure to curb rise in a number of chronic diseases.
  • The Asia Pacific region is expected to garner considerable growth during the forecast period owing to increasing adoption of advanced healthcare technologies and rise in the number of NCDs.

The latest development in India:

A similar initiative, though, as augmentation of physician intervention in patients with Type 2 diabetes for better treatment outcomes, has recently been reported by the Press Trust of India (PTI) on June 13, 2017.

The abstract of the report, among other points, says that an Indian digital diabetes leader has announced “the results from a pilot designed to evaluate the feasibility and scalability of an artificial intelligence-led lifestyle intervention to improve self-management of people living with type 2 diabetes as a supporting tool to existing care in India…. The pilot results suggest that continuity of care between physician appointments for people with type 2 diabetes can be achieved with positive outcomes in a clinically significant, scalable and affordable way through this program. Participants that completed the pilot on average dropped their average blood sugar levels (HbA1c) by 0.59%. Amongst the participants that completed and dropped their HbA1c, the average observed was even higher at 1.04%. In addition, the participants showed a daily active usage of 78% for the duration of the 16-week program.”

This is indeed a laudable initiative by an Indian digital tech company. More such ventures are expected to be forthcoming, taking rapid strides in India. Keeping pace with these developments, “digiceuticals,” I reckon, will spread its wings faster to play a crucial role in preventing, if not treating and managing several serious NCDs – and in most cases without even swallowing any pill.

Conclusion:

The key concept behind ‘digiceuticals’ or digital therapeutics is to exert a strong influence on individual behavior and lifestyle pattern, which are crucial both in prevention, and in controlling the progression of many NCDs.  The desired level of change in behavior and lifestyle of individuals can be achieved through custom-made digital software. These are expected to deliver the same, or even better results in such disease conditions, at a much lesser cost, sans any serious side effects.

The ball has already started rolling with considerable success and a discernible promise in this direction. However, accelerating its speed further, and ultimately flooring the gas pedal, would depend on how all concerned stakeholders’, especially the technology experts, doctors, pharma industry, and other health care providers work in-sync with each other, leveraging the true potential of ‘digiceuticals’.

The rapid pace of progress in this endeavor will be a force multiplier in arresting the fast spreading ‘invisible epidemic’, as it were, of many serious chronic diseases or disorders, in a much better and cost-effective way than ever before.

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

Posted on by
Reply

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.

Indian Pharma: Optimism, Concern and Retaining Trust

Posted on by
Reply

As many would know, the significance of trust is profound. It is virtually all-pervasive. Building trust is fundamental in retaining any relationship – be it in the family, society or even in business, such as pharmaceuticals. For long-term success and sustainability of any enterprise, trust is of strategic importance, and will continue to remain so.

In that sense, it is interesting to note that a growing number of Chief Executive Officers (CEOs) of a variety of corporate business entities, including pharmaceutical and also from India, have started experiencing a new challenge in a new paradigm, more than ever before. The rapid pace of evolution of the state of the art technology is further complicating the quagmire. CEOs, in general, are realizing the hard way that ‘in an increasingly digitalized world, it’s harder for businesses to gain and retain people’s trust’, keeping their nose to the grindstone of the conventional business process.

This feeling has been well-captured, among other issues, in the 20th CEO Survey titled, “Gaining from connectivity without losing trust”, conducted by PwC. The participating CEOs mostly believe that social media could have a negative impact on the level of trust in their industry over the next five years. With this trend, ‘as new technologies and new uses of existing technologies proliferate, they envisage new dangers emerging – and old ones getting worse.’ 1,379 CEOs were reportedly interviewed from 79 countries, including 106 from India in PwC’s 20th CEO Survey.

In the context of Indian pharma sector, the above finding is unlikely to raise many eyebrows, rather be construed as an obvious one. In this article, keeping the above as the backdrop, I shall discuss what the Indian CEOs recently expressed regarding their near-term business performance. After analyzing their confidence level on business growth, together with critical concerns, I shall try to gauge the quality of interconnection between the critical success requirements for business growth, and the optimism they voiced, drawing relevant data from PwC’s 20th CEO Survey, and other important sources.

Indian CEO confidence in business growth:

CEOs confidence, or optimism or pessimism about the business growth prospect of their companies is often used as a measure of ‘Business Confidence’. Financial Times defined ‘Business Confidence’ as “an economic indicator that measures the amount of optimism or pessimism that business managers feel about the prospects of their companies/organizations. It also provides an overview of the state of the economy.” A score above 50 indicates positive confidence while a score above 75 would indicate strong positive confidence.

According to published data, ‘Business Confidence’ in India increased to 64.10 in the first quarter of 2017 from 56.50 in the fourth quarter of 2016 with an. average 58.08 from 2005 until 2017, reaching an all-time high of 71.80 in the first quarter of 2007, and a record low of 45.70 in the third quarter of 2013.

More recently, as per Press Release dated September 22, 2017 of the National Council of Applied Economic Research (NCAER), ‘Business Confidence’ Index fell by 2.5 per cent in July 2017 over April 2017 on a quarter-on-quarter basis, for different reasons.

PwC’s 20th CEO Survey, by and large, captures similar optimism, as it says: “Nearly three quarters of India’s CEOs are very confident about their company’s prospects for revenue growth over the next 12 months as opposed to 64% in the previous year. In terms of optimism, CEOs in India surpass their global counterparts (38%) and their counterparts in China (35%) and Brazil (57%).”

Interestingly, as the report says, the motivation behind high CEO optimism is primarily driven by those factors, which are being widely discussed, at least, over a decade, such as favorable demographic profile, rising income levels and urbanization.

A mismatch:

Remarkably higher confidence level of the Indian CEOs on business growth, as compared to their global counterparts, is indeed encouraging. Nevertheless, while exploring the reasons behind the same, a glaring mismatch surface between high level of CEO optimism and their concern on uncertain economic growth, as PwC’s 20th CEO Survey indicates. 82 percent of Indian CEOs expressed concern about uncertain economic growth in the country, in this study.  A staggering 81 percent of them perceive over-regulation and protectionist policies and trends, as serious threats to their growth ambitions. Intriguingly, 64 percent of CEOs in India are concerned about protectionism as opposed to 59 percent globally, as the report flags.

The concern about uncertain economic growth in the country has also been voiced by many economists. For example, in an article, published by The Times of India on October 04, 2017, Ruchir Sharma – Chief Global Strategist and head of the Emerging Markets Equity team at Morgan Stanley Investment Management, wrote: “The global economy is enjoying its best year of the decade, with a worldwide pick up in GDP and job growth, and very few economies have been left behind. India is one of the outliers, with GDP growth slowing and unemployment rising.”

Sharma further added: “The Organization of Economic Cooperation and Development (OECD) says that all 45 economies that it tracks will grow this year, the first time this has happened since 2007, the year before the global financial crisis led to a worldwide recession. Moreover, three quarters of all the countries will grow faster this year than they did last year; India is in the slumping minority, with GDP growth now expected to decelerate this year.”

This mismatch throws more questions than answers.

Wherewithal required to meet expectation:

It goes without saying that Indian CEOs must have required wherewithal to achieve whatever growth they think is achievable in their respective businesses. Besides financial resources, this will also involve having both, soft skills – which are basically ‘people skills,’ and the hard skills – that include an individual’s technical skill set, along with the ability to perform specific tasks for the organization.

A. Soft skills:

Indian CEOs identified ‘leadership’, ‘creativity and innovation’, ‘adaptability’ and ‘problem solving’ as the four important soft skills required to achieve the key business goals, according to the 20th CEO Survey, as quoted above.

A mismatch:

Here again, a strong mismatch is visible between the ‘importance of the skill’ and ‘Difficulty in recruiting people with skill’, as experienced by the CEOs:

Skills Importance of the skill Difficulty in recruiting people with skill
Leadership

98

73
Creativity and innovation

95

74
Adaptability

98

66
Problem solving

99

64

(Source: PwC’s 20th CEO Survey)

B. Hard skills:

Adaptation of any technology involves people with required hard skill sets in any organization. Currently, various state of the art technology platforms and tools, including digital ones, are absolutely necessary not just in areas like, research and development or manufacturing, but also for charting grand strategic pathways in areas, such as sales and marketing.

This is quite evident from PwC’s 20th CEO Survey data. While 76 percent of Indian CEOs participating in the survey expressed concerns about rapidly changing customer behavior, 77 percent of them highlighted the need to create differentiation in their products and offerings, by managing data better. Both these can be well addressed by digital intervention. Interestingly, 81 percent of CEOs in India have stated that it is important to have digital skills, and 66 percent have already added digital training to their organizations’ learning programs.

A mismatch:

The intent of having adequate hard skill, such as digital technology, within an organization is indeed laudable. However, here too a key mismatch stands out regarding their overall perception of the digitizes word. This is evident when 73 percent of CEOs participating in this survey felt that it is harder for businesses to keep and gain trust in an increasingly digitized world.

On the contrary, a 2017 report of EY, titled ‘Reinventing pharma sales and marketing through digital in India’ says: “Digitization can not only enhance trust, transparency and brand equity, but also generate new revenue streams beyond the pill.”

The report further says: “Since 2000, digital disruption has demolished 52% of Fortune 500 companies. These companies have either gone bankrupt, been acquired or ceased to exist. 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. The urgency of acting is acute. It is time that pharma companies in India took a step back and re-envisioned digital as a core strategic enabler.”

I am, therefore, not quite sure about the thought process behind this perception of the CEOs in the digitized world. Instead, by increasing business process transparency, digitized world helps gaining and retaining trust not just of the customers, but all stakeholders, including the employees and the Government, further strengthening the relationship. This is now a well-established fact.

Conclusion:

While analyzing the optimism of Indian CEOs for business growth in the near future, alongside the key concerns, it appears, they are quite perturbed on retaining trust of the stakeholders, especially the customers. More importantly, a telltale mismatch is visible between their level of business confidence, and the reality on the ground – including wherewithal needed to translate this optimistic outlook into reality.

Such incongruity, especially in the Indian pharma sector, calls for a quick reconciliation. Ferreting out relevant facts for the same, I reckon, will be the acid test for evaluating the fundamental strength behind CEOs’ confidence for near-term business growth in India.

In tandem, reasonable success in creating a high degree of trust and transparency in the DNA of their respective organizations, will undoubtedly be pivotal for this optimism coming to fruition. The name of the game for business excellence in this complex scenario is – breaking status quo with lateral thinking.

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

Posted on by
Reply

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.