‘e-detailing’: The Future of Pharmaceutical Sales?

Posted on September 30, 2013 by Tapan Ray

Pharmaceutical product detailing to doctors by Medical Representatives (MRs) is believed to fetch the single largest return on marketing investments by the pharmaceutical companies globally, as on date.

At the same time, the pharma players, across the world, are increasingly experiencing that the costs of product detailing by the MRs to the doctors are not now quite commensurate to the desired return in terms of financial results, despite bringing in many new skills and other productivity improvement measures on a regular basis.

Thus, to make such interaction between the MRs and the doctors more productive and cost efficient, increasingly the global pharmaceutical industry has been exploring various models and methods with numerous state-of-art digital Internet based applications. Some pharmaceutical companies, especially, from the western world, have already started putting such innovation into practice.

Waning productivity of traditional detailing:

This is quite apparent now that due to changing market dynamics and increasingly busy schedules of the doctors, the productivity of traditional product detailing is fast waning. As a result, pharmaceutical companies are encountering huge challenges in the process of generating prescription demand for their respective products by taking commensurate share of mind of the Physicians.

This is mainly because, the number of patients is also now fast increasing and the doctors are trying to see these large numbers of patients within their limited available time. As a result each patient is getting lesser doctors’ time, while the doctors are trying to provide optimal patient care in each patient visit. At the same time, other obligations of various kinds also overcrowd physicians’ time.

As a result, increasing number of MRs, which has almost double in the past decade, is now fiercely competing to get a share of lesser and lesser available time of the doctors. Added to this, increasing inflow of new doctors not being in line with the increasing inflow of patients is making the situation even worse.

As stated earlier, significant expenditure that the pharma companies have been incurring towards product detailing, many of them feel, is not resulting into desired top and bottom line growth for the organization, any more. Even good numbers of important specialist doctors do not seem to value this traditional MR product detailing process any longer, mainly due to immense time pressure on them and also due to their easy access to other modern product information gathering tools.

What is happening today:

Today, keeping the core concept of traditional detailing unchanged a few, especially large pharmaceutical companies in India, have introduced a number of digital interventions to eliminate some important manual processes that MRs used to follow earlier like, call planning, access to other relevant information electronically, instant reporting etc.

Such incremental improvements in the traditional detailing model, though helpful to the MRs, do not seem to be just good enough to produce desired business results in today’s highly competitive environment. The time calls for radical technological interventions.

A new report on the trend:

According to a new study of CMI Communication Media research report, about half of physicians restrict visits from MRs in one way or another.

It reported, just half of cancer specialists (oncologists) saying that they would interact about new products with MRs, while 47% of them indicated email as a preference.

Surveys found the oncologists being the most restrictive specialists, with only 19% allowing MRs without restrictions. On the other hand, 20% of them would not see MRs at all, with the 40% in the middle either requiring appointments or limiting visits to particular hours of the day or week.

‘e-Detailing’:

The well known consulting company Mckinsey & Company in a paper titled, ‘Making sense of e-detailing in Japan’s pharmaceutical sector’ has defined e-detailing as follows:

“e-detailing or electronic detailing refers to interacting with physicians virtually rather than physically. It often takes place through a company’s own website or through a physician portal coupled with email- driven promotions and attached explanatory videos offering up-to-date pharmaceutical product information.”

Thus, in ‘e-detailing’ Internet-based communications applications are used to provide customized services to the doctors, in many times to complement the activities of MRs.

‘e-detailing’ is now evolving as a modern technological innovation in the field of communication between MRs and doctors. It is intended to be highly customized, very interactive, more effective, quite flexible and at the same cost-efficient too. Live analytics that ‘e-detailing’ would provide instantly could be of immense use in the strategizing process of pharmaceutical marketing.

Cost effectiveness of ‘e-detailing’:

In the same paper, as mentioned above, to highlight the cost advantages of ‘e-detailing’, McKinsey & company, from its Japan experience, has reported as follows:

“While accurate, apples-to-apples data is hard to come by, we estimate each e-detail costs between 500 and 750 Yen, depending on the scope  of audience and the sophistication  of content. An MR costs 7,000 Yen  to 12,000 Yen, depending on sector, region, and hospital vs clinic The ROI (return on investment) for MR detail is in the range up to ~20x, versus ~4-6x for e-detail. In other words, the cost structure allows for sustained ROI  for e-detailing—even when extending reach beyond the top prescribing quintiles of physicians.”

In the Japanese context, Mckinsey & Consulting further states:

“Right now, e-detailing in Japan is more often used at the beginning of a product’s lifecycle (i.e. to win attention during product launches) or at the end (i.e. to sell established products). These are what we call ‘stay in the race’ practices; necessary, but not sufficient.”

Perceived advantages of ‘e-detailing’:

The traditional way of detailing through ‘Visual Aids’ may not be good enough today when the available time with the doctor has come down drastically. Just providing, by and large, the usual ‘one size fits all’ types of data/information to the doctors is gradually proving to be not effective and efficient enough to generate expected outcome. There is a dire need for helping these busy doctors to get access to drug information they value and trust at a time of their need and convenience.

Thus, the process of medical detailing should be made highly flexible depending on whatever time is chosen by each doctor to satisfy his/her specific needs.

In such an environment ‘e-detailing’, as discussed above, would help creating customized, more impressive, self-guided by doctors and more focused presentations with significant reduction in the detailing cost/ product with improved productivity.

Moreover, ‘e-detailing’ would:

Make expensive printed promotional aids redundant
Eliminate time required and cost involved to deliver such material
Have the flexibility of change at any time
Ordering of just required samples online, eliminating wastage

Fast increasingly number of doctors using computers and the Internet for professional purposes, especially in the urban areas, would facilitate this process.

Key success factor:

Experts believe, besides developing an effective and user-friendly tool for e-detailing, the important success factor for such initiative by a pharmaceutical company would well depend on:

Well planned integration of ‘e-detailing’ into the Customer Relationship Management (CRM) strategy
Deep understanding of physician segments
Efficient application of ‘e-detailing’ to support marketing goals.

The challenges:

Though there are many benefits for ‘e-detailing’, it throws some challenges too, as follows:

Still many doctors continue to prefer the personal touch of the MRs in traditional detailing

Some doctors do give prescription support to a company based on their good relationship with the concerned MRs

Despite hectic schedule, many busy doctors continue to take time out to interact with such MRs.

Though such relationships do not develop with all MRs, this challenge needs to be effectively overcome to make ‘e-detailing’ successful wherever possible, probably by creating an optimal mix of traditional and ‘e-detailing’.

A recent initiative:

Recent media reports highlight one such innovation, among many others. Pfizer has reportedly come out with an interesting innovation in the field of medical detailing to the primary care doctors. This new service of the company ‘Ask Pfizer’ claims that it can provide promotional product information to the doctors at a time convenient to them. Thus the ‘digital medical representatives’ of Pfizer leave the decision as to whether they want to see them and if so, when.

‘Ask Pfizer’, featuring in the website called ‘Pfizerline’ of the company says that the system is:

Simple
Flexible
Convenient
Calls can be arranged to suit the doctors’ busy practice schedule
Online meeting room provides a rich multi-media interaction where the doctor can see trained country-specific’ digital representative making product presentations and also discuss the relevant subjects with them.

Pfizer is advertising this new service called ‘digital detailing’ on the British Medical Journal (BMJ) website aiming, reportedly, at the UK doctors.

This initiative is indeed innovative, as it creates an environment of direct marketing in an indirect way with the help of simple Internet applications like Skype.

Conclusion:

Like many other industries, in the pharmaceutical industry too, across the world, communication of relevant information in an interesting way is of utmost importance. Here also. Indian pharmaceutical industry is no exception.

Since ages, the pharma players in India, in general, have been continuing to follow the traditional model of product detailing, hoping to generate more and more prescriptions from the doctors by deploying a larger and larger contingent of MRs, who highlight superiority of their respective products over competition.

Some may argue, there is nothing wrong in this model, but question would arise, is it still as productive as it used to be? This is mainly because, the doctors are now giving lesser and lesser time to the MRs.

Those pharmaceutical companies of the country who sincerely believe that innovative use of technology in the digital world of today may considerably help addressing this issue, at least in the urban areas, would possibly get a head start, as they delve into the future for business excellence in this area.

With e-detailing they will be able to provide an interesting communication option to the top-prescribers having a very busy schedule for top of mind recalls of their respective brands, leading hopefully to increase in prescription generation.

It is worth noting, though ‘e-detailing’ is emerging as an important innovation in the field of product detailing, there are still some questions that need to be answered. Some of these questions could be as follows:

Would many doctors prefer to schedule time for this purpose after a busy day’s schedule?

Would the information overload from other sources not keep them away from seeking more information through such a process?

Taking all these into consideration, the question that we need to answer: Is ‘e-detailing’ the future of pharmaceutical sales, also 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.

Humongous Pharma Corruption: China Ups The Ante…and India?

Posted on September 23, 2013 by Tapan Ray

In the ‘pharma bribery’ related scandal in China, many postulated that the Chinese Government has cracked down selectively on Multinational Corporations (MNCs) to extend unfair business advantages for its local players.

Media reports of September 2013 indicate that in all probability the intent of the Chinese Government is not to spare homegrown corruption in this area. The country appears to be taking tough measures against both global and local perpetrators of such criminal acts, which have spread their vicious tentacles deep into the booming Chinese pharmaceutical industry.

The report names the following domestic companies:

Sino Biopharmaceutical Ltd has set up a team to investigate allegations broadcast on the state television that its majority-owned subsidiary had paid for illegal overseas trips for doctors to Thailand and Taiwan.

Privately held Gan & Lee Pharmaceuticals investigating allegations of spending around US$ 130.75 million to bribe doctors to promote their pharmaceutical products over five years.

More MNCs under investigation:

At the same time, international media are reporting names of more and more big global pharma players allegedly involved in this humongous scam, as follows:

In July 2013, the British drug maker GlaxoSmithKline (GSK) was allegedly involved in around US$ 490 million deceptive travel and meeting expenses as well as trade in sexual favors. Chinese authorities detained four senior executives of GSK in China to further investigate into this matter.

In the same month Chinese police reportedly visited the Shanghai office of another British pharmaceutical major AstraZeneca for investigation related to this scam.

In August 2013, Sanofi of France reportedly said that it would cooperate with a review of its business in China after a whistle-blower’s allegations that the company paid about US$ 276,000 in bribes to 503 doctors in the country.

Again in August 2013, a former employee of the Swiss pharmaceutical major Novartis has reportedly claimed that her manager urged her to offer ‘kickback’ to doctors to increase use of the cancer drug Sandostatin LAR. She had about US$ 105,000 budget for payments to doctors who prescribed at least 5 doses, aiming for 50 doses in all. She filed the compensation claim of US $817,000 after resigning from the company.

In the same month, another whistleblower has reportedly made bribery allegations involving Eli Lilly of the United States and US$ 4.9 million in purported kickbacks to Chinese doctors.

In September 2013, media reports indicated that the Chinese authorities are investigating the German pharma major – Bayer over a “potential case of unfair competition”.

Another very recent report of September 17, 2013 states, Alcon Eye Care division of Novartis is investigating allegation of fabricated clinical trials to bribe doctors. The report says Alcon outsourced the trials to a third-party research company, which in turn compensated doctors with “research payments”. It is claimed by the whistleblower that Alcon used funds earmarked for “patient experience surveys” on lens implants to bribe doctors at more than 200 hospitals. One doctor received about US$ 7,300, for studying 150 patients. Alcon allegedly spent more than US$ 230,000, on such studies last year.

This list of pharmaceutical companies involved in alleged serious malpractices to boost their sales and profits in China is probably not exhaustive.

However, only time will unravel whether this juggernaut of scams will keep moving unabated despite all high voltage actions, bulldozing patients’ interest.

Crack down on food companies too:

Crack down of the Chinese Government on alleged malpractices has reportedly extended to milk products’ companies too.

Again in August 2013, Mead Johnson Nutrition and Danone were among six dairy companies ordered to pay a combined 669 million Yuan by the Chinese Government for price fixing of their products.

Global industry lobby has a different view point:

In an interview with the BBC, an expert from APCO Worldwide, considered as the giant of the lobbying industry said:

“China’s behavior was very worrisome for foreign companies. They don’t know what’s hitting them right now. The government is resorting to its traditional “toolbox” of coercive methods, including shaming and ordering people to confess that they’ve done wrong so that your penalties can be minimized. They’re just treating foreign companies the way they’ve treated their own for many years, and this is the way the Party does things.”

He continued, “What may be going on is they’re telling foreign companies and they’re telling private companies here: Behave yourself; remember we’re the Party, we’re in charge.”

This is seemingly an interesting way of pooh-poohing serious allegations of bribery and other malpractices by the pharmaceutical companies in China without even waiting for the results of the pending enquiry.

However, such comments coming from an industry lobbying organization or any Public Relations (PR) Agency is not uncommon. That’s their business.

Possible reasons for crack down:

Experts opine that China has a high drug price problem. This is vindicated by the fact that while most developed nations of the world spend not more than 10-12 percent of their healthcare budget on medicines, in China it exceeds 40 percent. This huge disparity is believed to have prompted Beijing’s crackdown on the industry, especially the MNCs that dominate the Chinese pharmaceutical industry with newer drugs. The powerful National Development and Reform Commission (NDRC) of China has already said that it is examining pricing by 60 local and international pharmaceutical companies.

Some other reports point out, low basic salary of the doctors at the 13,500 public hospitals in China, who are the key purchasers of drugs, is the root cause of corruption in the Chinese healthcare industry.

According to McKinsey with estimated healthcare spending of China nearly tripling to US$1 trillion by 2020 from $357 billion in 2011, the country is increasingly attracting pharma and medical equipment companies from all over the world in a very large number.

The fall out:

A recent media report indicates that Chines crackdown on the widespread pharma bribery scandal in the country is quite adversely affecting the sales of both global and local players, as many doctors in the Chinese hospitals are now refusing to see medical representatives for fear of being caught up in this large scam.

Drug expenditure is even more for healthcare in India:

Several studies indicate that Out Of Pocket Expenditure towards Healthcare in India is one of the highest in the world and ranges from 71 to 80%.

According to a 2012 study of IMS Consulting Group, drugs are the biggest expenditure in the total Out Of Pocket (OOP) spend on healthcare as follows:

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

Despite these facts, India has remained virtually inactive in this critical area so far, unlike China, except some sporadic price control measures like, Drug Price Control Order (DPCO 2013) for essential drugs (NLEM 2011), which covers around 18% of the total pharmaceutical market in India.

Universal Healthcare (UHC): A possible answer?

Another interesting study titled, ‘The Cost of Universal Health Care in India: A Model Based Estimate’ concludes as follows:

The estimated cost of UHC delivery through the existing mix of public and private health institutions would be INR 1713 (USD 38) per person per annum in India. This cost would be 24% higher, if branded drugs are used. Extrapolation of these costs to entire country indicates that Indian government needs to spend 3.8% of the GDP for universalizing health care services, although in total (public+private) India spent around 4.2% of its GDP on healthcare (2010) at 11% CAGR from 2001 to 2010 period.

Moreover, important issues such as delivery strategy for ensuring quality, reducing inequities in access, and managing the growth of health care demand need be explored.

Thus, it appears, even UHC will be 24% more expensive after a public spend of staggering 3.8% of the GDP towards healthcare, if branded drugs are used, which attract huge avoidable marketing expenditures, as we have seen in the Chinese pharma industry scandal.

High marketing costs making drugs dearer?

A recent article, captioned “But Don’t Drug Companies Spend More on Marketing?” vindicates the point, though the drug companies spend substantial money on R&D, they spend even more on their marketing related activities, legally or otherwise.

Analyzing six global pharma and biotech majors, the author highlights that SG&A (Sales, General & Administrative) and R&D expenses vary quite a lot from company to company. However, in this particular analysis the range was as follows:

SG&A:	23% to 34%
R&D:	12.5% to 24%

SG&A expenses typically include advertising, promotion, marketing and executive salaries. The author says that most companies do not show the break up of the ‘S’ part separately.

In the pharmaceutical sector all over the world, the marketing practices have still remained a very contentious issue despite many attempts of self-regulation by the industry. Incessant media reports on alleged unethical business practices have not slowed down significantly, across the world, even after so many years of self-regulation. This is indeed a critical point to ponder.

Scope and relevance of ‘Corporate Ethical Business Conducts and Values’:

The scope of ‘ethical business conducts and value standards’ of a company should not just be limited to marketing. These should usually encompass the following areas, among many others:

The employees, suppliers, customers and other stakeholders
Caring for the society and environment
Fiduciary responsibilities
Business and marketing practices
R&D activities, including clinical trials
Corporate Governance
Corporate espionage

That said, codes of ethical conduct, corporate values and their compliance should not only get limited to the top management, but must get percolated downwards, looking beyond the legal and regulatory boundaries.

Statistics of compliance to codes of business ethics and corporate values are important to know, but perceptible qualitative changes in ethics and value standards of an organization should always be the most important goal to drive any business corporation and the pharmaceutical sector is no exception.

Foreign Corrupt Practices Act (FCPA): A deterrent?

To prevent bribery and corrupt practices, especially in a foreign land, in 1997, along with 33 other countries belonging to the ‘Organization for Economic Co-operation and Development (OECD)’, the United States Congress enacted a law against the bribery of foreign officials, which is known as ‘Foreign Corrupt Practices Act (FCPA)’.

This Act marked the early beginnings of ethical compliance program in the United States and disallows the US companies from paying, offering to pay or authorizing to pay money or anything of value either directly or through third parties or middlemen.

FCPA currently has some impact on the way American companies are required to run their business, especially in the foreign land.

However, looking at the ongoing Chinese story of pharma scams and many other reports of huge sums paid by the global pharmaceutical companies after being found guilty under such Acts in the Europe and USA, it appears, levy of mere fines is not good enough deterrent to stop such (mal)practices in today’s perspective.

China acts against pharma bribery, why not India?

Like what happened in China, many reports, including from Parliamentary Standing Committee, on alleged pharma malpractices of very significant proportions, which in turn are making drugs dearer to patients, have been coming up in India regularly, since quite sometime.

Keeping these into consideration, abject inertia of the government in taking tough measures in this area is indeed baffling and an important area of concern.

Conclusion:

The need to formulate ‘Codes of Business Ethics & Values’ and more importantly their effective compliance, in letter and spirit, are of increasing relevance in the globalized business environment.

Unfortunately, as an irony, increasingly many companies across the world are reportedly being forced to pay heavy costs and consequences of ‘unethical behavior and business practices’ by the respective governments.

Intense quarterly pressure for expected business performance by stock markets and shareholders, could apparently be the trigger-points for short changing such codes and values.

There is, of course, no global consensus, as yet, on what is ethically and morally acceptable ‘Business Ethics and Values’ uniformly across the world. However, even if these are implemented in country-specific ways, the most challenging obstacle to overcome by the corporates would still remain ‘walking the talk’ and ‘owning responsibility’.

That said, to uphold patients’ interests, China is already giving the perpetrators of the ongoing humongous pharma scam a ‘run for life’, as it were, despite what the industry lobbyists have been laboriously working on for the world to believe. Today, common patients’ in India being in a much worse situation for similar sets of reasons, should the domestic regulators not now wake up from the ‘deep slumber’, up all antennas, effectively act by setting examples and bring the violators to justice?

By: Tapan J. Ray

MNCs to Challenge MNC Patents in India: Boon for Patients?

Posted on September 16, 2013 by Tapan Ray

Close on the heels of a reasonably successful patent challenge by the German pharma Multinational Corporation (MNC) Fresenius Kabi for the breast cancer drug Tykerb of GlaxoSmithKline (GSK) in India, another MNC Mylan, with its headquarter in the United states, has explicitly expressed its plan to challenge frivolous and weak patents of MNCs, in conformance to the Indian Patents Act, to provide less expensive generic drugs to patients.

This is indeed another interesting development, which could possibly culminate into robust, cleverly crafted and fiercely competitive business strategies of many other MNCs, revolving around patent challenges in India, for business excellence in the country.

Mylan develops new products in India:

Mylan is now reportedly working with the local Indian player Biocon to develop a strong new product pipeline, which would include a portfolio of biosimilar drugs. The advanced breast cancer drug Trastuzumab (Herceptin) of Roche is just one of many in the list. Mylan has also expressed its intent to market ‘Herceptin’ at a price, which will be affordable to many more cancer patients of India.

It is worth mentioning that some other domestic Indian companies like, Reliance Life Sciences and BDR Pharma are reportedly working on generic Trastuzumab (Herceptin), besides some South Korean bio-pharma players.

Mylan has also inked an agreement with Biocon to develop and market an insulin drug derived from the global major Sanofi’s expensive patented product Lantus.

All these developments apparently augur well for India.

Weak patent?…Recapitulating Herceptin saga in india:

Though Roche decided to discontinue its patent rights for Herceptin in India, it reportedly lost this patent earlier in Europe. This vindicates the views of experts that Herceptin patent was weak, as it would probably not be able to clear the litmus test of a stringent patent scrutiny. The report, therefore, argues that core reason for withdrawal of Herceptin patent in India by Roche cannot be attributed, even remotely, to the ‘weak IP ecosystem’ in India.

To extend the patent right for Herceptin, in early September 2013, Roche reportedly announced that the European Commission has approved a new formulation of its breast cancer drug Herceptin, which allows the medicine to be administered more quickly.

A tough market, yet difficult to ignore:

For global innovator pharma majors, India still remains a tough market to crack, despite strong overseas political pressures of various types, intense collective and individual lobbying efforts and deployment of expensive global ‘Public Relations’ firms working in full steam.

Their strong success factors of the yesteryears in this area, which worked so well across the world, are getting mostly negated by the ‘evolving patient friendly IP laws’ of the emerging economies.

Considering the vast business potential of the pharmaceutical market of 1.2 billion people in India, it is now envisaged by many, more like-minded MNCs will gradually jump into this fray with similar intent of patent challenges in conformance with the Indian Patents Act 2005.

If this scenario assumes a cascading effect on a broader canvas, ultimate beneficiary will be the ailing patients, having much greater access to more affordable newer drugs for many dreaded diseases, like cancer.

Other countries too tightening up the patent laws:

To provide less-expensive generic drugs to patients, other countries also have started following India to leash astronomical prices for new drugs, especially for life threatening and intensely debilitating ailments. China has reportedly strengthened its compulsory licensing provisions already for dealing with costly drugs, paving the way to force entry of generic drugs in the Chinese market well before patent expiry.

In 2012, Indian Patent Office, in a path breaking decision granted Compulsory License (CL) to a local company, Natco Pharma, to manufacture the patented kidney-cancer drug, Nexavar of Bayer reportedly at a cost of Rs. 8,800 (around US$ 176) for a month’s therapy of 120 capsule against Bayer’s price of Rs. 280,000 (around US$ 5,600) for the same.

This is the first-ever case of CL granted in India thus far to make life saving drugs affordable to patients.

On September 3, 2012, the Indonesian government took the unprecedented step of overriding the patents on seven HIV and hepatitis treatments, citing urgent need to improve patient access. These drugs were reportedly beyond the reach of most of the patients in Indonesia.

Thailand has also used this provision more than once, and countries like, Brazil has reportedly threatened quite often for invoking CL during price negotiations of such drugs with global pharma majors.

Winds of Change in South Africa:

Now South Africa has also exhibited its firm intent to have a tight leash on the grant of pharmaceutical patents of all types.

A recent report indicates that the Department of Trade and Industry (DTI) of the Government of South Africa is calling for comments on its proposed ‘National Policy on Intellectual Property’ by October 4, 2013, which if implemented, would significantly curb patent evergreening and expand production of generics.

The same report mentions that at present, South Africa does not examine patent applications. Instead, the system allows pharmaceutical companies to obtain multiple patents on the same drug, even for inventions, which do not fall under the country’s definition of innovation. This allows the pharma players to extend their respective patent lives, blocking competition and charging exorbitant prices.

The report also points out, while in 2008, South Africa granted 2,442 pharmaceutical patents, Brazil approved only 278 in the 5 years between 2003 and 2008.

Patents revoked in India:

Since November 2010 following 8 MNC patents have been revoked in India after respective patent challenges:

Combigan and Ganfort of Allergan (for specified eye conditions)
Tykerb of GSK (for breast cancer)
Sutent of Pfizer (for liver and kidney cancer)
Pegasys of Roche (for hepatitis C)
Iressa of AstraZeneca (Anti-cancer)
Anti-asthma FDC aerosol suspension of Merck & Co (Anti-asthma)
Dulera of Novartis (Anti-asthma)

China and Brazil revoked patents:

In August 2013, just about a year after China introduced the country’s amended patent law, its State Intellectual Property Office (SIPO) has reportedly revoked the patent on HIV/AIDS and hepatitis B drug – Viread (tenofovir disoproxil fumarate) of Gilead Science Inc.

Aurisco, the largest manufacturer of Active Pharmaceutical Ingredients (APIs) in China, challenged this patent. The ground of patent revocation was that the drug lacked novelty and was not entitled to protection.

In 2008 Brazil also declared the patent of tenofovir invalid. It is worth mentioning that tenofovir of Gilead is the third-best-selling drug of the company, clocking sales of US$ 849 million in 2012.

Top 10 ‘jaw-dropping’ most expensive medicines of the world:

No.	Name	Disease	Price US$ /Year
1.	ACTH	Infantile spasm	13,800,00
2.	Elaprase	Hunter Syndrome	657,000
3.	Soliris	Paroxysmal nocturnal hemoglobinuria	409,500
4.	Nagalazyme	Maroteaux-Lamy Syndrome	375,000
5.	Folotyn	T-Cell Lymphoma	360,000
6.	Cinryze	Hereditary Angioedema	350,000
7.	Myozyme	Pompe	300,000
8.	Arcalyst	Cold Auto-Inflammatory Syndrome	250,000
9.	Ceredase / Cerezyme	Gaucher Disease	200,000
10.	Fabrazyme	Fabry Disease	200,000

(Source: Medical Billing & Coding, February 6, 2012)

The good news is, protests against such ‘immoral and obscene pricing’ have started mounting, which are expected to have a snow-balling effect in the years ahead.

Mounting global protests:

Probably due to this reason, drugs used for the treatment of rare diseases are being reported as ‘hot properties for drug manufacturers’, all over the world.

The above report highlighted a changing and evolving scenario in this area.

In 2013, the Dutch Government had cut the prices of new enzyme-replacement therapies, which costs as high as US$ 909,000. Similarly, Ireland has reduced significantly the cost of a cystic fibrosis drug, and the U.K. rejected a recommendation to expand the use of a drug for blood disorders due to high costs.

Soon, the United States is also expected to join the initiative to reduce high prices of orphan drugs as both the government and private insurers increasingly come under the cost containment pressure.

Emerging markets – the Eldorado:

Competition within MNCs is expected to be even more fierce in the coming years as the developed markets continue to slow down, as follows, due to various reasons:

No.	Country	USD Bn.	% Share	Val. Gr.
	Global Pharma Market	961	100	5
	USA	329	38	-1
	Japan	112	13	0
	China	82	10	24
	Germany	42	5	-6
	France	37	4	-8
	Brazil	29	3	6
	Italy	27	3	-8
13.	India	14	1	11

Source: IMS Knowledge Link Global Sales 2012

This compelling scenario is prompting a change in the dynamics of competition within MNCs in the emerging pharmaceutical markets. The intents of Fresenius Kabi and Mylan, as enunciated above, I reckon, are just very early signals of this challenge of change.

All these would probably help turning the tide in favor of a seemingly win-win solution to bring down the prices of patented medicines at an affordable level, improving their access to vast majority of patients in the world.

Scope for more patent challenges in India:

Quoting a study, a recent media report highlighted that only 3% of the patent applications filed in India since 2006 were challenged. The study concluded:

“This demonstrates that given the various resource constraints faced by the Indian patent office, one can never really be sure of the patent quality unless the patent is challenged.”

Therefore, this process is expected to gain momentum in the years ahead as more MNCs join the fray of patent challenges, though driven primarily by business interests, but nevertheless, would benefit the patients, in the long run.

Further, as indicated in my previous columns, a study indicates that 86 pharmaceutical patents granted by the IPO post 2005 are not breakthrough inventions but only minor variations of existing pharmaceutical products and demanded re-examination of them.

Since, most of the above patents have not been challenged, as yet, the quality of these patents cannot be ascertained beyond any reasonable doubt, as we discuss today. If challenged, some experts envisage, these patents may not be able to stand the scrutiny of section 3(d) of the Indian Patents Act.

In that sense, if the pharma MNCs with deep pockets, challenge these patents, there stands a good chance of making generic equivalents of those products at affordable prices for the Indian patients.

However, considering different degree and elements of market entry barriers, it appears, most of the patent challenges in India by the MNCs would probably be for biologics, as compared to small molecule chemicals.

Flow of newer drugs in the Indian market is now irreversible:

Taking stock of the emerging scenario, it appears, India will continue to see newer drugs coming into the market at a lower price in the years ahead, come what may. This flow seems to be unstoppable due to the following reasons:

Stricter implementation of Section (3d) of the Patents Act in India will ensure that NCEs/NMEs not conforming to this act will not be granted patents. In that case, those products will be open to generic copying by all, in India. Thus, in the absence of a market monopoly situation and fuelled by intense price competition, the patients will have access to those newer drugs.

More patent challenges of already granted patents could lead to revocation of more number of patents paving the way for entry of their generic equivalents.

If any MNC decides not to launch a new product in India having obtained its patent from the IPO, after three years, as per the statute, the same product becomes a candidate for CL in the country.

If any patented new product is launched without ‘reasonably affordable price’, again as per statute, the possibility of applications for CL coming to the IPO from the local players will loom large.

Hence, considering all these points, it appears, if the new products do not conform to the Indian Patents Act and are not launched with responsible pricing, the possibility of their generic entry at much lower prices is almost inevitable.

Conclusion:

Legal battle is expensive, even in India, and patent challenges are perhaps more expensive. All those new products, which are not patentable in India or may otherwise be challenged against other statutes of the Patents Act, will carry risks of getting caught in protracted litigations or generic competition.

MNCs with deep pockets coming forward with such intent, though may be based purely on their business interest in India, would ultimately offer spin-off benefits of affordable pricing, especially, to the patients suffering from life threatening and fast debilitating illnesses like, cancer.

That said, do all these developments unravel yet another way to improve access to newer medicines in India, signaling a boon for patients?

By: Tapan J. Ray

Buying Physicians’ Prescriptions in Cash or Kind: A Global (Dis)Order?

Posted on September 9, 2013 by Tapan Ray

Recently a European business lobby reportedly raised its voice alleging pharma Multinational Corporations (MNCs) in China have been ‘unfairly targeted’ by a string of investigations into bribery and price-fixing cases despite their generally ‘strong legal compliance’ and has suggested that China ‘must step back.’

Two comments of this European lobby group, presumably with full knowledge of its past records, appear indeed intriguing, first – ‘unfairly targeted’ and the second – ‘China must step back’, that too when a reportedly thorough state investigation is already in progress.

Reality is all pervasive:

However, while looking over the shoulder, as it were, an altogether different picture emerges and that reality seems to be all pervasive.

Over the past several decades, the much charted sales and marketing frontier in the pharmaceutical industry has been engagement into a highly competitive ‘rat race’ to create a strong financial transactional relationship, of various types and forms, with the physicians, who only take the critical prescription decisions for the patients. Most of the times such relationships are cleverly packaged with, among many others, a seemingly noble intent of ‘Continuing Medical Education (CME)’ by the companies concerned.

Increasingly, across the globe, more questions are now being raised whether such pharmaceutical business practices should continue even today. These voices are gradually getting louder fueled by the recent moves in the United States to ‘separate sales and marketing related intents of the drug industry from the practice of medicine’, especially in large medical teaching hospitals, in tandem with the enactment and practice of ‘Physician Payment Sunshine Act 2010’.

A recent article titled, “Breaking Up is Hard to Do: Lessons Learned from a Pharma-Free Practice Transformation”, published in the ‘Journal of the American Board of Family Medicine’ deliberated on an interesting subject related to much talked about relationship between the doctors and the pharmaceutical players.

The authors argue in this paper that significant improvement in the quality of healthcare in tandem with substantial reduction in the drug costs and unnecessary medications can be ensured, if the decision makers in this area show some willingness to chart an uncharted frontier.

‘Questionable’ relationship in the name of providing ‘Medical Education’:

‘The Journal of Medical Education’ in an article titled “Selling Drugs by ‘Educating’ Physicians” brought to the fore the issue of this relationship between the pharma industry and individual doctors in the name of providing ‘medical education’.

The article flags:

“The traditional independence of physicians and the welfare of the public are being threatened by the new vogue among drug manufacturers to promote their products by assuming an aggressive role in the ‘education’ of doctors.”

It further elaborates that in the Congressional investigation in the United States on the cost of drugs, pharma executives repeatedly stated that a major expenditure in the promotion of drugs was the cost of ‘educating’ physicians to use their products.

The author then flagged questions as follows:

“Is it prudent for physicians to become greatly dependent upon pharmaceutical manufacturers for support of scientific journals and medical societies, for entertainment and now also for a large part of their ‘education’?”

“Do all concerned realize the hazards of arousing wrath of the people for an unwholesome entanglement of doctors with the makers and sellers of drugs?”

Financial conflicts in Medicine:

Another academic paper of August 13, 2013 titled, “First, Do No Harm: Financial Conflicts in Medicine” written by Joseph Engelberg and Christopher Parsons at the Rady School of Management, University of California at San Diego, and Nathan Tefft from the School of Public Health at the University of Washington, states:

“We explored financial conflicts of interest faced by doctors. Pharmaceutical firms frequently pay physicians in the form of meals, travel, and speaking fees. Over half of the 334,000 physicians in our sample receive payment of some kind. When a doctor is paid, we find that he is more likely to prescribe a drug of the paying firm, both relative to close substitutes and even generic versions of the same drug. This payment-for-prescription effect scales with transfer size, although doctors receiving only small and/or infrequent payments are also affected. The pattern holds in nearly every U.S. state, but it is strongly and positively related to regional measures of corruption.”

On this paper, a media report commented:

“The findings – based on recently released data that 12 companies have been forced to make public as a result of US regulatory settlements – will rekindle the debate over the limits of aggressive pharmaceutical marketing, which risks incurring unnecessarily costly medical treatment and causing harm to patients.”

A call for reform:

The first paper, as quoted above, titled “Breaking Up is Hard to Do” reiterates that even after decades, individual practitioner still remains the subject to undue influence of the pharmaceutical companies in this respect. It categorically points out:

“The powerful influence of pharmaceutical marketing on the prescribing patterns of physicians has been documented and has led to fervent calls for reform at the institutional, professional, and individual levels to minimize this impact.”

The rectification process has begun in America:

Interestingly, even in the United States, most physicians practice outside of academic institutions and keep meeting the Medical Representatives, accept gifts and drug samples against an expected return from the drug companies.

Many of them, as the paper says, have no other process to follow to become ‘pharma-free’ by shunning this hidden primitive barrier for the sake of better healthcare with lesser drug costs.

To achieve this objective, many academic medical centers in America have now started analyzing the existing relationship between doctors and the drug companies to limit such direct sales and marketing related interactions for patients’ interest.

This unconventional approach will call for snapping up the good-old financial transactional relationship model between the doctors and Medical Representatives of the Pharma players, who promote especially the innovative and more costly medicines.

An expensive marketing process:

The authors opine that this is, in fact, a very powerful marketing process, where the pharmaceutical players spend ‘tens of billions of dollars a year’. In this process more than 90,000 Medical Representatives are involved only in the United States, providing free samples, gifts along with various other drug related details.

The study reiterates that deployment of huge sales and marketing resources with one Medical Representative for every eight doctors in the United States, does not serve the patients interests in any way one would look into it, even in terms of economy, efficacy, safety or accuracy of information.

“But Don’t Drug Companies Spend More on Marketing?”

Yet another recent article, captioned as above, very interestingly argues, though the drug companies spend good amount of money on R&D, they spend much more on their marketing related activities.

SG&A	23% to 34%
R&D	12.5% to 24%

SG&A expenses typically include advertising, promotion, marketing and executive salaries. The author says that most companies do not show the break up of the ‘S’ part separately.

A worthwhile experiment:

Removing the hidden barriers for better healthcare with lesser drug costs, as highlighted in the above “Breaking Up is Hard to Do” paper, the researchers from Oregon State University, Oregon Health & Science University and the University of Washington outlined a well conceived process followed by one medical center located in central Oregon to keep the Medical Representatives of the pharmaceutical companies at bay from their clinical practice.

In this clinic, the researchers used ‘a practice transformation process’ that analyzed in details the industry presence in the clinic. Accordingly, they educated the doctors on potential conflicts of interest and improved patient outcomes of the clinical practice. The concerns of the staff were given due considerations. Managing without samples, loss of gifts, keeping current with new drugs were the key concerns.

Based on all these inputs, various educational interventions were developed to help the doctors updating their knowledge of new drugs and treatment, even better, through a different process.

The experiment established, though it is possible to become “pharma free” by consciously avoiding the conflicts of interest, implementation of this entire process is not a ‘piece of cake’, at least not just yet.

Need for well-structured campaigns:

The researchers concluded that to follow a “pharma sales and marketing free” environment in the clinical practice, the prevailing culture needs to be changed through methodical and well-structured campaigns. Although, initiation of this process has already begun, still there are miles to go, especially in the realm of smaller practices.

One researcher thus articulated as follows:

“We ultimately decided something had to be done when our medical clinic was visited by drug reps 199 times in six months. That number was just staggering.”

Where else to get scientific information for a new drug or treatment?

The authors said, information on new drugs or treatment is currently available not just in many other forum, but also come with less bias and more evidence-based format than what usually are provided by the respective pharmaceutical companies with a strong motive to sell their drugs at a high price to the patients.

The paper indicated that there are enough instances where the doctors replaced the process of getting information supplied by the Medical Representatives through promotional literature with monthly group meetings to stay abreast on the latest drugs and treatment, based on peer-reviews.

‘Academic detailing’:

In the process of ‘Academic detailing’ the universities, and other impartial sources of credible information, offer accurate information without bias, whenever sought for. In the United States, some states and also the federal government are reportedly supporting this move now, which is widely believed to be a step in the right direction.

Moves to separate sales and marketing of the drug industry from the practice of medicine:

As stated above, there are many moves now in the United States to ‘separate the sales and marketing influence of the drug industry from the practice of medicine’, especially in large medical teaching hospitals, as the paper highlights.

The study also reported that of the 800,000 physicians practicing in the United States only 22 percent practice in the academic settings and 84 percent of primary care physicians continue to maintain close relationships with the pharmaceutical companies.

Citing examples, the new report indicated various tangible steps that primary care physicians can possibly take to effectively mitigate these concerns.

Emerging newer ways of providing and obtaining most recent information on new drugs and treatment together with educating the patients will hasten this reform process.

A commendable move by the Medical Council of India:

Taking a step towards this direction, the Medical Council of India (MCI) vide a notification dated December 10, 2009 amended the “Indian Medical Council (Professional Conduct, Etiquette and Ethics), Regulations 2002″. This move was welcomed by most of the stakeholders, barring some vested interests.

The notification specified stricter regulations for doctors in areas, among others, gifts, travel facilities/ hospitality, including Continuing Medical Education (CME), cash or monetary grants, medical research, maintaining professional Autonomy, affiliation and endorsement in their relationship with the ‘pharmaceutical and allied health sector industry’. These guidelines came into force effective December 14, 2009.

With this new and amended regulation, the MCI, on paper, has almost imposed a ban on the doctors from receiving gifts of any kind, in addition to hospitality and travel facilities related to CMEs and others, from the pharmaceutical and allied health sector industries in India.

Moreover, for all research projects funded by the pharmaceutical industry and undertaken by the medical profession, prior approval from the appropriate authorities for the same will be essential, in addition to the ethics committee.

Although maintaining a cordial and professional relationship between the pharmaceutical industry and the doctors is very important, such relationship now should no way compromise the professional autonomy of the medical profession or any medical institution, directly or indirectly.

It is expected that the common practices of participating in private, routine and more of brand marketing oriented clinical trials would possibly be jettisoned as a pharmaceutical strategy input.

However, inability of the Indian regulator to get these guidelines effectively implemented and monitored has drawn sharp flak from all other stakeholders, as many third party private vendors are reportedly coming up as buffers between the industry and the physicians to facilitate the ongoing illegal financial transactions, hoodwinking the entire purpose, blatantly.

No such government guidelines for the industry yet:

MCI under the Ministry of Health, at least, came out with some measures for the doctors in 2009 to stop such undesirable practices.

However, it is difficult to fathom, why even almost four years down the line, the Department of Pharmaceuticals of the Government of India is yet to implement its much hyped ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ for the entire pharmaceutical industry in India.

‘Physicians payment induced prescriptions’ – a global phenomenon:

Besides what is happening in China today with large pharma MNCs alleged involvement in bribery to the medical profession soliciting prescriptions of their respective drugs, world media keep reporting on this subject, incessantly.

For example, The Guardian in its July 4, 2012 edition reported an astonishing story. Since quite some time many pharmaceutical giants are being reportedly investigated and fined, including out of court settlements, for bribery charges related to the physicians.

In another very recent article titled “Dollars for Docs Mints a Millionaire” the author stated as follows:

“The companies in Dollars for Docs accounted for about 47 percent of U.S. prescription drug sales in 2011. It’s unclear what percentage of total industry spending on doctors they represent, because dozens of companies do not publicize what they pay individual doctors. Most companies in Dollars for Docs are required to report under legal settlements with the federal government.”

In India, deep anguish of the stakeholders over this issue is also getting increasingly reverberated all across, without much results on the ground though. It has also been drawing attention of the patients’ groups, NGOs, media, Government and even the Parliament of the country.

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

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

Physician Payment Sunshine Act of 2010:

To partly address this issue under President Obama’s ‘Patient Protection Affordable Care Act’, ‘Physician Payment Sunshine Act’ came into force in the United States in 2010.

Under this Act, any purchasing organization that purchases, arranges for, or negotiates the purchase of a covered drug, device, biological, or medical supply or manufacturer of a covered drug, device, biological, or medical supply operating in the United States, or in a territory, possession, or commonwealth of the United States is required to publicly disclose gifts and payments made to physicians.

Penalty for each payment not reported can be upto US$ 10,000 and the penalty for knowingly failing to submit payment information can be upto US$ 100,000, for each payment.

Centers for Medicare and Medicaid Services (CMS) has already released their ‘Physician Payment Sunshine Act’ reporting templates for 2013. The templates apply for reports dated August 1, 2013 – December 31, 2013.

Should the Government of India not consider enacting similar law in the country without further delay?

Conclusion:

That said, these well-researched papers do establish increasing stakeholder awareness and global concerns on the undesirable financial influence of pharma players on the doctors. Product promotion practices of dubious value, especially in the name of ‘Continuing Medical Education (CME), seem to strongly influence the prescribing patterns of the doctors, making patients the ultimate sufferer.

The studies will help immensely to establish that achieving the cherished objective of a ‘pharma sales and marketing free’ clinic is not only achievable, but also sustainable for long.

The barriers to achieving success in this area are not insurmountable either, as the above article concludes. These obstacles can easily be identified and overcome with inputs from all concerned, careful analysis of the situation, stakeholder education and identifying most suitable alternatives.

Thus, I reckon, to effectively resolve the humongous ‘physician payment induced prescriptions’ issue for the sole benefit of patients, it is about time for the pharmaceutical players to make a conscientious attempt to shun the ‘road much travelled, thus far, with innovative alternatives. However, the same old apprehension keeps lingering:

“Will the mad race for buying physicians’ prescriptions in cash or kind, much against patients’ interest, continue to remain a global (dis)order, defying all sincere efforts that are being made today?

By: Tapan J. Ray

R&D: Is Indian Pharma Moving Up the Value Chain?

Posted on September 2, 2013 by Tapan Ray

It almost went unnoticed by many, when in the post product patent regime, Ranbaxy launched its first homegrown ‘New Drug’ of India, Synriam, on April 25, 2012, coinciding with the ‘World Malaria Day’. The drug is used in the treatment of plasmodium falciparum malaria affecting adult patients. However, the company has also announced its plans to extend the benefits of Synriam to children in the malaria endemic zones of Asia and Africa.

The new drug is highly efficacious with a cure rate of over 95 percent offering advantages of “compliance and convenience” too. The full course of treatment is one tablet a day for three days costing less than US$ 2.0 to a patient.

Synriam was developed by Ranbaxy in collaboration with the Department of Science and Technology of the Government of India. The project received support from the Indian Council of Medical Research (ICMR) and conforms to the recommendations of the World Health Organization (WHO). The R&D cost for this drug was reported to be around US$ 30 million. After its regulatory approval in India, Synriam is now being registered in many other countries of the world.

Close on the heels of the above launch, in June 2013 another pharmaceutical major of India, Zydus Cadilla announced that the company is ready for launch in India its first New Chemical Entity (NCE) for the treatment of diabetic dyslipidemia. The NCE called Lipaglyn has been discovered and developed in India and is getting ready for launch in the global markets too.

The key highlights of Lipaglyn are reportedly as follows:

The first Glitazar to be approved in the world.

The Drug Controller General of India (DCGI) has already approved the drug for launch in India.

Over 80% of all diabetic patients are estimated to be suffering from diabetic dyslipidemia. There are more than 350 million diabetics globally – so the people suffering from diabetic dyslipidemia could be around 300 million.

With 20 discovery research programs under various stages of clinical development, Zydus Cadilla reportedly invests over 7 percent of its turnover in R&D. At the company’s state-of-the-art research facility, the Zydus Research Centre, over 400 research scientists are currently engaged in NCE research alone.

Prior to this in May 14, 2013, the Government of India’s Department of Biotechnology (DBT) and Indian vaccine company Bharat Biotech jointly announced positive results, having excellent safety and efficacy profile in Phase III clinical trials, of an indigenously developed rotavirus vaccine.

The vaccine name Rotavac is considered to be an important scientific breakthrough against rotavirus infections, the most severe and lethal cause of childhood diarrhea, responsible for approximately 100,000 deaths of small children in India each year.

Bharat Biotech has announced a price of US$ 1.00/dose for Rotavac. When approved by the Drug Controller General of India, Rotavac will be a more affordable alternative to the rotavirus vaccines currently available in the Indian market.

It is indeed interesting to note, a number of local Indian companies have started investing in pharmaceutical R&D to move up the industry value chain and are making rapid strides in this direction.

Indian Pharma poised to move-up the value-chain:

Over the past decade or so, India has acquired capabilities and honed skills in several important areas of pharma R&D, like for example:

Cost effective process development
Custom synthesis
Physical and chemical characterization of molecules
Genomics
Bio-pharmaceutics
Toxicology studies
Execution of phase 2 and phase 3 studies

According to a paper titled, “The R&D Scenario in Indian Pharmaceutical Industry” published by Research and Information System for Developing Countries, over 50 NCEs/NMEs of the Indian Companies are currently at different stages of development, as follows:

Company	Compounds	Therapy Areas	Status
Biocon	7	Oncology, Inflammation, Diabetes	Pre-clinical, phase II, III
Wockhardt	2	Anti-infective	Phase I, II
Piramal Healthcare	21	Oncology, Inflammation, Diabetes	Lead selection, Pre-clinical, Phase I, II
Lupin	6	Migraine, TB, Psoriasis, Diabetes, Rheumatoid Arthritis	Pre-clinical, Phase I, II, III
Torrent	1	Diabetic heart failure	Phase I
Dr. Reddy’s Lab	6	Metabolic/Cardiovascular disorders, Psoriasis, migraine	On going, Phase I, II
Glenmark	8	Metabolic/Cardiovascular /Respiratory/Inflammatory /Skin disorders, Anti-platelet, Adjunct to PCI/Acute Coronary Syndrome, Anti-diarrheal, Neuropathic Pain, Skin Disorders, Multiple Sclerosis,	Ongoing, Pre-clinical, Phase I, II, III

R&D collaboration and partnership:

Some of these domestic companies are also entering into licensing agreements with the global players in the R&D space. Some examples are reportedly as follows:

Glenmark has inked licensing deals with Sanofi of France and Forest Laboratories of the United States to develop three of its own patented molecules.

Domestic drug major Biocon has signed an agreement with Bristol Myers Squibb (BMS) for new drug candidates.

Piramal Life Sciences too entered into two risk-reward sharing deals in 2007 with Merck and Eli Lilly, to enrich its research pipeline of drugs.

Jubilant Group partnered with Janssen Pharma of Belgium and AstraZeneca of the United Kingdom for pharma R&D in India, last year.

All these are just indicative collaborative R&D initiatives in the Indian pharmaceutical industry towards harnessing immense growth potential of this area for a win-win business outcome.

The critical mass:

An international study estimated that out of 10,000 molecules synthesized, only 20 reach the preclinical stage, 10 the clinical trials stage and ultimately only one gets regulatory approval for marketing. If one takes this estimate into consideration, the research pipeline of the Indian companies would require to have at least 20 molecules at the pre-clinical stage to be able to launch one innovative product in the market.

Though pharmaceutical R&D investments in India are increasing, still these are not good enough. The Annual Report for 2011-12 of the Department of Pharmaceuticals indicates that investments made by the domestic pharmaceutical companies in R&D registered an increase from 1.34 per cent of sales in 1995 to 4.5 percent in 2010. Similarly, the R&D expenditure for the MNCs in India has increased from 0.77 percent of their net sales in 1995 to 4.01 percent in 2010.

Thus, it is quite clear, both the domestic companies and the MNCs are not spending enough on R&D in India. As a result, at the individual company level, India is yet to garner the critical mass in this important area.

No major R&D investments in India by large MNCs:

According to a report, major foreign players with noteworthy commercial operations in India have spent either nothing or very small amount towards pharmaceutical R&D in the country. The report also mentions that Swiss multinational Novartis, which spent $ 9 billion on R&D in 2012 globally, does not do any R&D in India.

Analogue R&D strategy could throw greater challenges:

For adopting the analogue research strategy, by and large, the Indian pharma players appear to run the additional challenge of proving enhanced clinical efficacy over the known substance to pass the acid test of the Section 3(d) of the Patents Act of India.

Public sector R&D:

In addition to the private sector, research laboratories in the public sector under the Council for Scientific and Industrial Research (CSIR) like, Central Drug Research Institute (CDRI), Indian Institute of Chemical Technology (IICT) and National Chemical Laboratory (NCL) have also started contributing to the growth of the Indian pharmaceutical industry.

As McKinsey & company estimated, given adequate thrust, the R&D costs in India could be much lower, only 40 to 60 per cent of the costs incurred in the US. However, in reality R&D investments of the largest global pharma R&D spenders in India are still insignificant, although they have been expressing keenness for Foreign Direct Investments (FDI) mostly in the brownfield pharma sector.

Cost-arbitrage:

Based on available information, global pharma R&D spending is estimated to be over US$ 60 billion. Taking the cost arbitrage of India into account, the global R&D spend at Indian prices comes to around US$ 24 billion. To achieve even 5 percent of this total expenditure, India should have invested by now around US$ 1.2 billion on the pharmaceutical R&D alone. Unfortunately that has not been achieved just yet, as discussed above.

Areas of cost-arbitrage:

A survey done by the Boston Consulting Group (BCG) in 2011 with the senior executives from the American and European pharmaceutical companies, highlights the following areas of perceived R&D cost arbitrage in India:

Areas	% Respondents
Low overall cost	73
Access to patient pool	70
Data management/Informatics	55
Infrastructure set up	52
Talent	48
Capabilities in new TA	15

That said, India should realize that the current cost arbitrage of the country is not sustainable on a longer-term basis. Thus, to ‘make hay while the sun shines’ and harness its competitive edge in this part of the world, the country should take proactive steps to attract both domestic as well as Foreign Direct Investments (FDI) in R&D with appropriate policy measures and fiscal incentives.

Simultaneously, aggressive capacity building initiatives in the R&D space, regulatory reforms based on the longer term need of the country and intensive scientific education and training would play critical role to establish India as an attractive global hub in this part of the world to discover and develop newer medicines for all.

Funding:

Accessing the world markets is the greatest opportunity in the entire process of globalization and the funds available abroad could play an important role to boost R&D in India. Inadequacy of funds in the Indian pharmaceutical R&D space is now one of the greatest concerns for the country.

The various ways of funding R&D could be considered as follows:

Self-financing Research: This is based on:

“CSIR Model”: Recover research costs through commercialization/ collaboration with industries to fund research projects.
“Dr Reddy’s Lab / Glenmark Model”: Recover research costs by selling lead compounds without taking through to development.

Overseas Funding: By way of joint R&D ventures with overseas collaborators, seeking grants from overseas health foundations, earnings from contract research as also from clinical development and transfer of aborted leads and collaborative projects on ‘Orphan Drugs’.

Venture Capital & Equity Market: This could be both via ‘Private Venture Capital Funds’ and ‘Special Government Institutions’. If regulations permit, foreign venture funds may also wish to participate in such initiatives. Venture Capital and Equity Financing could emerge as important sources of finance once track record is demonstrated and ‘early wins’ are recorded.

Fiscal & Non-Fiscal Support: Should also be valuable in early stages of R&D, for which a variety of schemes are possible as follows:

Customs Duty Concessions: For Imports of specialized equipment, e.g. high throughput screening equipment, equipment for combinatorial chemistry, special analytical tools, specialized pilot plants, etc.
Income tax concessions (weighted tax deductibility): For both in-house and sponsored research programs.
Soft loans: For financing approved R&D projects from the Government financial institutions / banks.
Tax holidays: Deferrals, loans on earnings from R&D.
Government funding: Government grants though available, tend to be small and typically targeted to government institutions or research bodies. There is very little government support for private sector R&D as on date.

All these schemes need to be simple and hassle free and the eligibility criteria must be stringent to prevent any possible misuse.

Patent infrastructure:

Overall Indian patent infrastructure needs to be strengthened, among others, in the following areas:

Enhancement of patent literacy both in legal and scientific communities, who must be taught how to read, write and file a probe.

Making available appropriate ‘Search Engines’ to Indian scientists to facilitate worldwide patent searches.

Creating world class Indian Patent Offices (IPOs) where the examination skills and resources will need considerable enhancement.

‘Advisory Services’ on patents to Indian scientists to help filing patents in other countries could play an important role.

Creating R&D ecosystem:

Knowledge and learning need to be upgraded through the universities and specialist centers of learning within India.

Science and Technological achievements should be recognized and rewarded through financial grants and future funding should be linked to scientific achievements.

Indian scientists working abroad are now inclined to return to India or network with laboratories in India. This trend should be effectively leveraged.

Universities to play a critical role:

Most of Indian raw scientific talents go abroad to pursue higher studies. International Schools of Science like Stanford or Rutgers should be encouraged to set up schools in India, just like Kellogg’s and Wharton who have set up Business Schools. It has, however, been reported that the Government of India is actively looking into this matter.

‘Open Innovation’ Model:

As the name suggest, ‘Open Innovation’ or the ‘Open Source Drug Discovery (OSDD)’ is an open source code model of discovering a New Chemical Entity (NCE) or a New Molecular Entity (NME). In this model all data generated related to the discovery research will be available in the open for collaborative inputs. In ‘Open Innovation’, the key component is the supportive pathway of its information network, which is driven by three key parameters of open development, open access and open source.

Council of Scientific and Industrial Research (CSIR) of India has adopted OSDD to discover more effective anti-tubercular medicines.

Insignificant R&D investment in Asia-Pacific Region:

Available data indicate that 85 percent of the medicines produced by the global pharmaceutical industry originate from North America, Europe, Japan and some from Latin America and the developed nations hold 97 percent of the total pharmaceutical patents worldwide.

MedTRACK reveals that just 15 percent of all new drug development is taking place in Asia-Pacific region, including China, despite the largest global growth potential of the region.

This situation is not expected to change significantly in the near future for obvious reasons. The head start that the western world and Japan enjoy in this space of the global pharmaceutical industry would continue to benefit those countries for some more time.

Some points to ponder:

It is essential to have balanced laws and policies, offering equitable advantage for innovation to all stakeholders, including patients.

Trade policy is another important ingredient, any imbalance of which can either reinforce or retard R&D efforts.

Empirical evidence across the globe has demonstrated that a well-balanced patent regime would encourage the inflow of technology, stimulate R&D, benefit both the national and the global pharmaceutical sectors and most importantly improve the healthcare system, in the long run.

The Government, academia, scientific fraternity and the pharmaceutical Industry need to get engaged in various relevant Public Private Partnership (PPP) arrangements for R&D to ensure wider access to newer and better medicines in the country, providing much needed stimulus to the public health interest of the nation.

Conclusion:

R&D initiatives, though very important for most of the industries, are the lifeblood for the pharmaceutical sector, across the globe, to meet the unmet needs of the patients. Thus, quite rightly, the pharmaceutical Industry is considered to be the ‘lifeline’ for any nation in the battle against diseases of all types.

While the common man expects newer and better medicines at affordable prices, the pharmaceutical industry has to battle with burgeoning R&D costs, high risks and increasingly long period of time to take a drug from the ‘mind to market’, mainly due to stringent regulatory requirements. There is an urgent need to strike a right balance between the two.

In this context, it is indeed a proud moment for India, when with the launch of its home grown new products, Synriam of Ranbaxy and Lipaglyn of Zydus Cadilla or Rotavac Vaccine of Bharat Biotech translate a common man’s dream of affordable new medicines into reality and set examples for others to emulate.

Thus, just within seven years from the beginning of the new product patent regime in India, stories like Synriam, Lipaglyn, Rotavac or the R&D pipeline of over 50 NCEs/NMEs prompt resurfacing the key unavoidable query yet again:

Has Indian pharma started catching-up with the process of new drug discovery, after decades of hibernation, to move up the industry ‘Value Chain’?

By: Tapan J. Ray

Vaccines Development: Is it Just a Business Based on Fear?

Posted on August 26, 2013 by Tapan Ray

‘Vaccination – A Business based on fear’, is the title of a book written by Dr. Gerhard Buchwald M.D, a German medical doctor and a vaccination critic. This book talks about:

“The damage and the deaths caused by vaccination are written off as ‘pure coincidence’, as something which would have occurred anyway, even without vaccination. Often damage is trivialized by claiming that vaccine damage occurs only very, very rarely, or the damage is covered up by naming as the cause, the most unlikely syndromes which can only be found in special literature.”

However, his critics and pro-vaccination experts do opine that this book “is a pathetic presentation of vaccination, from a self-proclaimed anti-vaccination lobbyist. It is full of half-truths, blatant lies and misrepresented statistics”.

Vaccination – one of the most important development in medicines:

Quite in contrary to what Dr. Gerhard Buchwald wrote, vaccination was voted as one of the four most important developments in medicine of the past 150 years, alongside sanitation, antibiotics and anesthesia by readers of the ‘British Medical Journal’ in 2007. No wonder, Vaccines are one of the most successful and cost-effective public health interventions, which help preventing over 3 million deaths every year throughout the world topping the list in terms of lives saved.

Vaccines that are being developed and marketed today, though provide high level of protection against increasing number of diseases with reduction of associated morbidity and mortality, there is still a crying need for greater encouragement, more resource deployment and sharper focus towards newer vaccines development for many more dreaded and difficult diseases.

In tandem, concerted efforts need to be made by both the industry and the government to improve affordable access to all these vaccines for a larger section of the population, especially in the developing world.

Rejuvenating trend:

However, from the business perspective, the vaccine market, though initially considered to be a low-profit initiative, now has started being under rejuvenated focus keeping pace with improved understanding of the human immune system. The future scope of vaccines is immense, as the management of several potentially preventable diseases remains still unaddressed.

Consequently, the focus of the global vaccine industry is getting expanded from prophylactic vaccination for communicable disease (e.g. DTP vaccine) to therapeutic vaccines (e.g. Anti-cancer vaccines) and then possibly non-communicable disease vaccines (e.g. vaccines for coronary artery disease).

Shifting focus on vaccines types:

As per the ‘National Institute of Health (NIH)’ of USA, following are some types of vaccines that researchers usually work on:

Live, attenuated vaccines
Inactivated vaccines
Subunit vaccines
Toxoid vaccines
Conjugate vaccines
DNA vaccines
Recombinant vector vaccines

Among all these segments, sub-unit vaccine is the largest revenue generator, though synthetic vaccines, recombinant vector vaccines, and DNA vaccines are emerging as the fastest-growing segments.

The first vaccine of the world:

In 1796, Edward Anthony Jenner not only discovered the process of vaccination, alongside developed the first vaccine of the world for mankind – smallpox vaccine. To develop this vaccine Jenner acted upon the observation that milkmaids who caught the cowpox virus did not catch smallpox.

As per published data prior to his discovery the mortality rate for smallpox was as high as up to 35%. Thus, Jenner is very often referred to as the “Father of Immunology”, whose pioneering work has “saved more lives than the work of any other person.”

Later on in 1901 Emil Von Behring received the first Nobel Prize (ever) for discovering Diphtheria serum therapy.

R&D costs for vaccines:

According to a paper published by the US National Library of Medicine and National Institute of Health (NIH):

“A vaccine candidate entering pre-clinical development in 2011 would be expected to achieve licensure in 2022; all costs are reported in 2022 Canadian dollars (CAD). After applying a 9% cost of capital, the capitalized total R&D expenditure amounts to $ 474.88 million CAD.”

Issues and challenges:

To produce a safe and effective marketable vaccine, besides R&D costs, it takes reportedly around 12 to 15 years of painstaking research and development process.

Moreover, one will need to realize that the actual cost of vaccines will always go much beyond their R&D expenses. This is mainly because of dedicated and highly specialized manufacturing facilities required for mass-scale production of vaccines and then for the distribution of the same mostly using cold-chains.

Around 60% of the production costs for vaccines are fixed in nature (National Health Policy Forum. 25. January 2006:14). Thus such products will need to have a decent market size to be profitable.

Unlike many other medications for chronic ailments, which need to be taken for a long duration, vaccines are administered for a limited number of times, restricting their business potential.

Thus, the long lead time required for the ‘mind to market’ process for vaccine development together with high cost involved in their clinical trials/marketing approval process, special bulk/institutional purchase price and limited demand through retail outlets, restrict the research and development initiatives for vaccines, unlike many other pharmaceutical products.

Besides, even the newer vaccines will mostly be required for the diseases of the poor, like Malaria, Tuberculosis, HIV and ‘Non Communicable Diseases (NCDs)’ in the developing countries, which may not necessarily guarantee a decent return on investments for vaccines, unlike many other newer drugs. As a result, the key issue for developing a right type of newer vaccine will continue to be a matter of pure economics.

A great initiative called GAVI:

Around 23 million children of the developing countries are still denied of important and life-saving vaccines, which otherwise come rather easily to the children of the developed nations of the world.

To resolve this inequity, in January 2000, the Global Alliance for Vaccines and Immunization (GAVI) was formed. This initiative was mainly aimed at generating sufficient fund to ensure availability of vaccines for children living in the 70 poorest countries of the world.

The GAVI Alliance has been instrumental in improving access to six common infant vaccines, including those for hepatitis B and yellow fever. GAVI is also working to introduce pneumococcal, rotavirus, human papilloma virus, meningococcal, rubella and typhoid vaccines in not too distant future.

In August 2013, GAVI has reportedly launched a campaign in Kenya to fight the world’s leading killer of children under five with a new Pneumococcal Vaccine for prevention from pneumonia, meningitis and sepsis, which kill more than half a million people a year.

GAVI hopes to avert 700,000 deaths by 2015 through the immunization of 90 million children with pneumococcal vaccines.

Global pharma majors Pfizer and GlaxoSmithKline (GSK) are producing the vaccines as a part of a deal part-funded by Britain, Italy, Canada, Russia, Norway and the Bill Melinda Gates Foundation.

Current trend in newer vaccine development:

Malaria Vaccine:

According to the National Institute of Health (NIH) of the United States, the results of an early-stage clinical trial published in August 8, 2013 in the ‘Journal Science’ for an investigational malaria vaccine has been found to be safe to generate an immune system response and to offer protection against malaria infection in healthy adults.

The scientists at Sanaria Inc., of Rockville, Md. Research Center developed this vaccine known as PfSPZ. The researchers reportedly found that injecting patients with live-but-weakened malaria causing parasites appeared to create a protective effect.

Earlier, Reuters on December 20, 2011 reported that the British scientists have developed an experimental malaria vaccine, which has the potential to neutralize all strains of the most deadly species of malaria parasite.

In October 2011, the data published for a large clinical trial conducted in Africa by GlaxoSmithKline on their experimental malaria vaccine revealed that the risk of children getting malaria had halved with this vaccine. Reuters also reported that other teams of researchers around the world are now working on different approaches to develop a malaria vaccine.

Tuberculosis vaccines:

The Lancet reported in March 2013, as BCG vaccination provides incomplete protection against tuberculosis in infants, a new vaccine, modified Vaccinia Ankara virus expressing antigen 85A (MVA85A), has been designed to enhance the protective efficacy of BCG. MVA85A was found well-tolerated and induced modest cell-mediated immune responses. However, the reasons for the absence of MVA85A efficacy against tuberculosis or M tuberculosis infection in infants would need exploration.

Universal Cancer vaccines:

In a breakthrough development, the Israeli company Vaxil BioTherapeutics has reportedly formulated a therapeutic cancer vaccine, now in clinical trials at Hadassah University Medical Center in Jerusalem.

If everything falls in place, the vaccine could be available about six years down the road, to administer on a regular basis not only to help treating cancer but also to keep the disease from recurring.

Though the vaccine is being tested against a type of blood cancer called multiple myeloma, if it works as the initial results indicate, its platform technology VaxHit could be applied to 90 percent of all known cancers, including prostate and breast cancer, solid and non-solid tumors.

HIV Vaccine:

A recent effort to find a vaccine for HIV is reportedly beginning in 2013 at laboratories in a London hospital and two centers in Africa. The work will be split equally between London, the Rwandan capital Kigali and Nairobi in Kenya.

It has been reported that scientists are recruiting 64 healthy adult volunteers for the trial, which is expected to take up to two years.

Vaccines requirements of the developing world:

Developing countries of the world are now demanding more of those vaccines, which no longer feature in the immunization schedules of the developed nations. Thus to supply these vaccines at low cost will be a challenge, especially for the global vaccine manufacturers, unless the low margins get well compensated by high institutional demand.

India needs a vibrant vaccine business sector:

For greater focus on all important disease prevention initiatives, there is a need to build a vibrant vaccine business sector in India. To achieve this objective the government should create an enabling ecosystem for the vaccine manufacturers and the academics to work in unison. At the same time, the state funded vaccine R&D centers should be encouraged to concentrate more on the relevant vaccine development projects ensuring a decent return on their investments, for longer-term economic sustainability.

More often than not, these stakeholders find it difficult to deploy sufficient fund to take their vaccines projects successfully through various stages of clinical development in order to obtain marketing approval from the drug regulator, while registering a decent return on investments. This critical issue needs to be appropriately and urgently addressed by the Government to make the disease prevention initiatives in the country sustainable.

Changing market dynamics:

Even in a couple of decades back, ‘Vaccines Market’ in India did not use to be considered as a focus area by many pharmaceutical companies. Commoditization of this market with low profit margin and unpredictable interest of the government/the doctors towards immunization were the main reasons. Large global players like Glaxo exited the vaccine market at that time by withdrawing products like, Tetanus Toxoid, Triple Antigen and other vaccines from the market.

Currently, the above scenario is fast changing. The vaccine market, as stated above, is getting rejuvenated not only with the National Immunization Program (NIP) of the country, but also with the emergence of newer domestic vaccines players and introduction of novel vaccines by the global players, which we shall discuss below.

In addition, the ‘Indian Academy of Pediatrics (IAP) Committee on Immunization’ now recommends the ‘best individual practices schedule’ for the children in consultation with their respective parents. Such schedule may not conform to NIP and include newer vaccines, broadening the scope of use of vaccines in general.

Global Market:

According to GBI Research Report, overall global vaccines market was valued at US$ 28 billion in 2010 and is expected to reach US$ 56.7 billion by 2017 with a CAGR of 11.5%. The key growth driver of this segment will be introduction of newer vaccines, which are currently either in the regulatory filing stage or in the late stages of clinical development.

The important international players in the vaccines market are GlaxoSmithKline, Sanofi, Pfizer, Novartis AG, Merck and SP-MSD. Together they represent around 88% of the total vaccine segment globally, the report highlights.

Indian Market:

McKinsey in its report titled, “India Pharma 2020: Propelling access and acceptance, realizing true potential“ stated that at 2% penetration, the vaccines market of India is significantly under-penetrated with an estimated turnover of around US$ 250 million, where the private segment accounts for two-thirds of the total. McKinsey expects the market to grow to US$ 1.7 billion by 2020.

India is one of largest markets for all types of vaccines in the world. The new generation and combination vaccines, like DPT with Hepatitis B, Hepatitis A and Injectable polio vaccine, are driving the growth. The demand for veterinary vaccines is also showing ascending trend. Pediatric vaccines contribute to around 60% of the total vaccines market in India.

Domestic Indian players like, Serum Institute, Shantha Biotecnics, Bharat Biotech and Panacea Biotech are poised to take greater strides in this direction. Bharat Biotech is incidentally the largest Hepatitis B vaccine producer in the world. Likewise, Serum Institute is reportedly one of the largest suppliers of vaccines to over 130 countries and claim that ’1 out of every 2 children immunized worldwide gets at least one vaccine produced by Serum Institute.’

The first new vaccine developed in India:

Indian scientists from Bharat Biotech Ltd in Hyderabad have reportedly developed a new oral vaccine against the Rotavirus induced diarrhea, where both vomiting and loose motion can severely dehydrate children very quickly. This is the first new vaccine developed in India, establishing itself as the first developing country to achieve this unique distinction.

Two recent vaccine JV and Partnership agreements in India:

British drug major GlaxoSmithKline (GSK) has reportedly agreed to form a 50-50 venture with the domestic Indian vaccine manufacturer Biological E Limited in January 2013 to develop a product that would combine GSK’s injectable polio shot with a vaccine produced by Biological E to protect against five diseases including diphtheria and tetanus.

In addition, MSD pharma of the United States and Indian drug major Lupin have announced a partnership agreement to market, promote and distribute, MSD’s 23-valent Pneumococcal Polysaccharide Vaccines under a different brand name in India for prevention of Pneumococcal disease, pneumonia being its most common form affecting adults.

A possible threat:

As per reports most Indian vaccines manufacturers get a major chunk of their sales revenue from exports to UN agencies, charitable organizations like, the Bill & Melinda Gates Foundation and GAVI, and other country-specific immunization programs.

The report predicts, the virtual monopoly that Indian vaccines manufacturers have enjoyed in these areas, will now be challenged by China, as for the first time, in 2012, the Chinese national regulatory authority received World Health Organization’s (WHO) ‘pre-qualification’ certification that allows it to approve locally manufactured vaccines to compete for UN tenders.

Action areas to drive growth:

McKinsey in its above report ‘India Pharma 2020’ indicated that the action in the following 4 areas by the vaccine players would drive the vaccine market growth in India:

Companies need to go for local production of vaccines or leverage supply partnerships. MSD and GlaxoSmithKline’s local partnership in India and for the HiB vaccine with Bio-manguinhos in Brazil may be cited as examples.

Companies will need to conduct studies on the economic impact of vaccination and establish vaccine safety and performance standards.

Extension of vaccine coverage beyond pediatricians and inclusion of general practitioners, consulting physicians and gynecologists will be essential.

Companies will need to enhance supply chain reliability and reduce costs.

Conclusion:

On January 7, 2012, while requesting the ‘Overseas Indian Medical Professionals’ to partner with the institutions in India, the Health Minister, in his address, announced that the Ministry of Health has already introduced the second dose of measles vaccine and Hepatitis-B vaccination across the country. Moreover, from December 2011 a ‘Pentavalent Vaccine’ has been introduced, initially in 2 States, covering 1.5 million children of India.

All these augur quite well for the country. However, keeping in view of the humongous disease burden of India, immunization program with various types of vaccines should receive active encouragement from the government as disease prevention initiatives, keeping the future generation in mind.

If vaccine related pragmatic policy measures, with equal focus on their effective implementation, are initiated in the country, without delay, the domestic vaccine market, in turn, will receive much awaited further growth momentum. Such initiatives together with newer foreign players and modern imported vaccines coming in, would help the country addressing effectively a prime healthcare concern of the country in a holistic way.

It is about time to aggressively garner adequate resources to develop more modern vaccines in the country, promote and implement vaccine awareness campaigns in the nation’s endeavor for disease prevention before they strike hard and at times fatally.

That said, taking available real world facts into account, doesn’t Dr. Gerhard Buchwald’s and today’s anti-vaccination lobbyists’ postulation, ‘Vaccination – A Business based on fear’, appear to be emanating from a self created world of doom and gloom, defying public health interest for effective disease prevention?

By: Tapan J. Ray

Pharma FDI: Damning Report of Parliamentary Panel, PM Vetoes…and Avoids Ruffling Feathers?

Posted on August 19, 2013 by Tapan Ray

An interesting situation emerged last week. The Parliamentary Standing Committee (PSC) on Commerce proposed a blanket ban on all FDI in brownfield pharma sector. Just two days after that, the Prime Minister of India vetoed the joint opposition of the Department of Industrial Policy and Promotion (DIPP) and the Ministry of Health to clear the way for all pending pharma FDIs under the current policy.

On August 13, 2013, Department related Parliamentary Standing Committee on Commerce laid on the Table of both the Houses of the Indian Parliament its 154 pages Report on ‘FDI in Pharmaceutical Sector.’

The damning report of the Parliamentary Standing Committee flags several serious concerns over FDI in brownfield pharma sector, which include, among others, the following:

1. Out of 67 FDI investments till September 2011, only one has been in green field, while all the remaining FDI has come in the brown field projects. Moreover, FDI in brown field investments have of late been predominantly used to acquire the domestic pharma companies.

2. Shift of ownership of Indian generic companies to the MNCs also results in significant change of the business model, including the marketing strategy of the acquired entity, which are quite in sync with the same of the acquirer company. In this situation, the acquired entity will not be allowed to use flexibilities such as patent challenges or compulsory license to introduce new affordable generic medicines.

The withdrawal of all patent challenges by Ranbaxy on Pfizer’s blockbuster medicine Lipitor filed in more than eight countries immediately after its acquisition by Daiichi-Sankyo is a case in point.

3. Serial acquisitions of the Indian generic companies by the MNCs will have significant impact on competition, price level and availability. The price difference between Indian ‘generics’ and MNCs’ ‘branded generic’ drugs could sometimes be as high as 80 to 85 times. A few more larger scale brownfield takeovers may even destroy all the benefits of India’s generics revolution.

4. FDI inflow into Research & Development of the Pharma Industry has been totally unsatisfactory.

5. FDI flow into brown field projects has not added any significant fresh capacity in manufacturing, distribution network or asset creation. Over last 15 years, MNCs have contributed only 5 per cent of the gross fixed assets creation, that is Rs 3,022 crore against Rs 54,010 crore by the domestic companies. Further, through brownfield acquisitions significant strides have not been made by the MNCs, as yet, for new job creation and technology transfer in the country.

6. Once a foreign company takes over an Indian company, it gets the marketing network of the major Indian companies and, through that network, it changes the product mix and pushes the products, which are more profitable and expensive. There is no legal provision in India to stop any MNC from changing the product mix.

7. Though the drug prices may not have increased significantly after such acquisitions yet, there is still a lurking threat that once India’s highly cost efficient domestic capacity is crushed under the weight of the dominant force of MNCs, the supply of low priced medicines to the people will get circumvented.

8. The ‘decimation’ of the strength of local pharma companies runs contrary to achieving the drug security of the country under any situation, since there would be few or no Indian companies left having necessary wherewithal to manufacture affordable generics once a drug goes off patent or comply with a Compulsory License (CL).

9. Current FIPB approval mechanism for brownfield pharma acquisitions is inadequate and would not be able to measure up to the challenges as mentioned above.

The Committee is also of the opinion that foreign investments per se are not bad. The purpose of liberalizing FDI in pharma was not intended to be just about takeovers or acquisitions of domestic pharma units, but to promote more investments into the pharma industry for greater focus on R&D and high tech manufacturing, ensuring improved availability of affordable essential drugs and greater access to newer medicines, in tandem with creating more competition.

Based on all these, The Committee felt that FDI in brown field pharma sector has encroached upon the generics base of India and adversely affected Indian pharma industry. Therefore, the considered opinion of the Parliamentary Committee is that the Government must impose a blanket ban on all FDI in brownfield pharma projects.

PM clears pending pharma FDI proposals:

Unmoved by the above report of the Parliamentary Committee, just two days later, on August 16, 2013, the Prime Minister of India, in a meeting of an inter-ministerial group chaired by him, reportedly ruled that the existing FDI policy will apply for approval of all pharmaceutical FDI proposals pending before the Foreign Investments Promotion Board (FIPB). Media reported this decision as, “PM vetoes to clear the way for pharma FDI.”

This veto of the PM includes US $1.6-billion buyout of the injectable facility of Agila Specialties, by US pharma major Mylan, which has already been cleared by the Competition Commission of India (CCI).

This decision was deferred earlier, as the DIPP supported by the Ministry of Health had expressed concerns stating, if MNCs are allowed to acquire existing Indian units, especially those engaged in specialized affordable life-saving drugs, it could possibly lead to lower production of those essential drugs, vaccines and injectibles with consequent price increases. They also expressed the need to protect oncology facilities, manufacturing essential cancer drugs, with assured supply at an affordable price, to protect patients’ interest of the country.

Interestingly, according to Reserve Bank of India, over 96 per cent of FDI in the pharma sector in the last fiscal year came into brownfield projects. FDI in the brownfield projects was US$ 2.02 billion against just US$ 87 million in the green field ventures.

Fresh curb mooted in the PM’s meeting:

In the same August 16, 2013 inter-ministerial group meeting chaired by the Prime Minister, it was also reportedly decided that DIPP will soon float a discussion paper regarding curbs that could be imposed on foreign takeovers or stake purchases in existing Indian drug companies, after consultations with the ministries concerned.

Arguments allaying apprehensions:

The arguments allaying fears underlying some of the key apprehensions, as raised by the Parliamentary Standing Committee on Commerce, are as follows:

1. FDI in pharma brownfield will reduce competition creating an oligopolistic market:

Indian Pharmaceutical Market (IPM) has over 23,000 players and around 60,000 brands. Even after, all the recent acquisitions, the top ranked pharmaceutical company of India – Abbott enjoys a market share of just 6.6%. The Top 10 groups of companies (each belonging to the same promoter groups and not the individual companies) contribute just over 40% of the IPM (Source: AIOCD/AWACS – Apr. 2013). Thus, IPM is highly fragmented. No company or group of companies enjoys any clear market domination.

In a scenario like this, the apprehension of oligopolistic market being created through brownfield acquisitions by the MNCs, which could compromise with country’s drug security, needs more informed deliberation.

2. Will limit the power of government to grant Compulsory Licensing (CL):

With more than 20,000 registered pharmaceutical producers in India, there is expected to be enough skilled manufacturers available to make needed medicines during any emergency e.g. during H1N1 influenza pandemic, several local companies stepped forward to supply the required medicine for the patients.

Thus, some argue, the idea of creating a legal barrier by fixing a cap on the FDIs to prevent domestic pharma players from selling their respective companies at a price, which they would consider lucrative otherwise, just from the CL point of view may sound unreasonable, if not protectionist in a globalized economy.

3. Lesser competition will push up drug prices:

Equity holding of a company is believed by some to have no bearing on pricing or access, especially when medicine prices are controlled by the NPPA guidelines and ‘competitive pressure’.

In an environment like this, any threat to ‘public health interest’ due to irresponsible pricing, is unlikely, especially when the medicine prices in India are cheapest in the world, cheaper than even Bangladesh, Pakistan and Sri Lanka (comment: whatever it means).

India still draws lowest FDI within the BRIC countries:

A study of the United Nations has indicated that large global companies still consider India as their third most favored destination for FDI, after China and the United States.

However, with the attraction of FDI of just US$ 32 billion in 2011, against US$ 124 billion of China, US$ 67 billion of Brazil and US$ 53 billion of Russia during the same period, India still draws the lowest FDI among the BRIC countries.

Commerce Minister concerned on value addition with pharma FDI:

Even after paying heed to all the above arguments, the Commerce Minister of India has been expressing his concerns since quite some time, as follows:

“Foreign Direct Investment (FDI) in the pharma sector has neither proved to be an additionality in terms of creation of production facilities nor has it strengthened the R&D in the country. These facts make a compelling case for revisiting the FDI policy on brownfield pharma.”

As a consequence of which, the Department of Industrial Policy and Promotion (DIPP) has reportedly been opposing FDI in pharma brownfield projects on the grounds that it is likely to make generic life-saving drugs expensive, given the surge in acquisitions of domestic pharma firms by the MNCs.

Critical Indian pharma assets going to MNCs:

Further, the DIPP and the Ministry of Health reportedly fear that besides large generic companies like Ranbaxy and Piramal, highly specialized state-of-the-art facilities for oncology drugs and injectibles in India are becoming the targets of MNCs and cite some examples as follows:

Through the big-ticket Mylan-Agila deal, the country would lose yet another critical cancer drug and vaccine plant.

In 2009 Shantha Biotechnics, which was bought over by Sanofi, was the only facility to manufacture the Hepatitis B vaccine in India, which used to supply this vaccine at a fraction of the price as compared to MNCs.

Mylan, just before announcing the Agila deal, bought over Hyderabad based SMS Pharma’s manufacturing plants, including some of its advanced oncology units in late 2012.

In 2008, German pharma company Fresenius Kabi acquired 73 percent stake in India’s largest anti-cancer drug maker Dabur Pharma.

Other major injectable firms acquired by MNCs include taking over of India’s Orchid Chemicals & Pharma by Hospira of the United States.

With the US market facing acute shortage of many injectibles, especially cancer therapies in the past few years, companies manufacturing these drugs in India have become lucrative targets for MNCs.

An alternative FDI policy is being mooted:

DIPP reportedly is also working on an alternate policy suggesting:

“It should be made mandatory to invest average profits of last three years in the R&D for the next five years. Further, the foreign entity should continue investing average profit of the last three years in the listed essential drugs for the next five years and report the development to the government.”

Another report indicated, a special group set up by the Department of Economic Affairs suggested the government to consider allowing up to 49 per cent FDI for pharma brownfield investments under the automatic route.However, investments of more than 49 per cent would be referred to the Foreign Investment Promotion Board (FIPB).

It now appears, a final decision on the subject would be taken by the Prime Minister after a larger inter-mimisterial consultation, as was decided by him on August 14, 2013.

The cut-off date to ascertain price increases after M&A:

Usually, the cut off point to ascertain any price increases post M&A is taken as the date of acquisition. This process could show false positive results, as no MNC will take the risk of increasing drug prices significantly or changing the product-mix, immediately after acquisition.

Significant price increases could well be initiated even a year before conclusion of M&As and progressed in consultation by both the entities, in tandem with the progress of the deal. Thus, it will be virtually impossible to make out any significant price changes or alteration in the product-mix immediately after M&As.

Some positive fallouts of the current policy:

It is argued that M&As, both in ‘Greenfield’ and ‘Brownfield’ areas, and joint ventures contribute not only to the creation of high-value jobs for Indians but also access to high-tech equipment and capital goods. It cannot be refuted that technology transfer by the MNCs not only stimulates growth in manufacturing and R&D spaces of the domestic industry, but also positively impacts patients’ health with increased access to breakthrough medicines and vaccines. However, examples of technology transfer by the MNCs in India are indeed few and far between.

This school of thought cautions, any restriction to FDI in the pharmaceutical industry could make overseas investments even in the R&D sector of India less inviting.

As listed in the United Nation’s World Investment Report, the pharmaceutical industry offers greater prospects for future FDI relative to other industries. Thus, restrictive policies on pharmaceutical FDI, some believe, could promote disinvestments and encourage foreign investors to look elsewhere.

Finally, they highlight, while the Government of India is contemplating modification of pharma FDI policy, other countries have stepped forward to attract FDI in pharmaceuticals. Between October 2010 and January 2011, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Need to attract FDI in pharma:

At a time when the Global Companies are sitting on a huge cash pile and waiting for the Euro Zone crisis to melt away before investing overseas, any hasty step by India related to FDI in its pharmaceutical sector may not augur well for the nation.

While India is publicly debating policies to restructure FDI in the ‘Brownfield’ pharma sector, other countries have stepped forward to attract FDI in their respective countries. Between October 2010 and January 2011, as mentioned earlier, more than 27 countries and economies have adopted policy measures to attract foreign investment.

Thus the moot question is, what type of FDI in the pharma brownfield sector would be good for the country in the longer term and how would the government incentivize such FDIs without jeopardizing the drug security of India in its endeavor to squarely deal with any conceivable eventualities in future?

Conclusion:

In principle, FDI in the pharma sector, like in any other identified sectors, would indeed benefit India immensely. There is no question about it…but with appropriate checks and balances well in place to protect the national interest, unapologetically.

At the same time, the apprehensions expressed by the Government, other stakeholders and now the honorable members of the Parliament, across the political party lines, in their above report, should not just be wished away by anyone.

This issue calls for an urgent need of a time bound, comprehensive, independent and quantitative assessment of all tangible and intangible gains and losses, along with opportunities and threats to the nation arising out of all the past FDIs in the brownfield pharma sector.

After a well informed debate by experts on these findings, a decision needs to be taken by the law and policy makers, whether or not any change is warranted in the structure of the current pharma FDI policy, especially in the brownfield sector. Loose knots, if any, in its implementation process to achieve the desired national outcome, should be tightened appropriately.

I reckon, it is impractical to expect, come what may, the law and policy makers will keep remaining mere spectators, when Indian Pharma Crown Jewels would be tempted with sacks full of dollars for change in ownerships, jeopardizing presumably long term drug security of the country, created painstakingly over decades, besides leveraging immense and fast growing drug export potential across the world.

The Competition Commission of India (CCI) can only assess any possible adverse impact of Mergers & Acquisitions on competition, not all the apprehensions, as expressed by the Parliamentary Standing Committee and so is FIPB.

That said, in absence of a comprehensive impact analysis on pharma FDIs just yet, would the proposal of PSC to ban foreign investments in pharma brownfield sector and the PM’s subsequent one time veto to clear all pending FDI proposals under the current policy, be construed as irreconcilable internal differences…Or a clever attempt to create a win-win situation without ruffling MNC feathers?

By: Tapan J. Ray

India, China Revoke Four Pharma Patents in A Fortnight: A Double Whammy for MNCs?

Posted on August 12, 2013 by Tapan Ray

Revocation of four pharma patents by India and China within a fortnight has raised many eyebrows, yet again, across the globe. In this short period, India has revoked three patents and China one.

While this quick development is probably a double whammy for the Multinational Corporations (MNCs) operating in both the countries, a future trend could possibly emerge by analyzing and connecting the evolving dots.

On August 8, 2013, a judicial body, the Intellectual Property Apellate Board (IPAB) of India reportedly revoked two patents of Allergan Inc on Combigan and Ganfort, both are Fixed Dose Combination (FDC) drugs of known molecules, used in the treatment of specified eye conditions. Local pharmaceutical player Ajantha Pharma had challenged these patents granted earlier to Allergan Inc. by the Indian Patent Office (IPO), alleging that the patents were obtained on false representation, the compositions were obvious ones, mere admixture of two pharmaceutical substances and not inventions.

IPAB in its order, while revoking the patent, has also said:

“The revocation of the patent was sought on various grounds that the patent was obtained on a false suggestion or representation, that it is not an invention, that it is obvious and does not sufficiently disclose and that the Section 8 of the Patents Act, 1970 was violated.”

The “respondents (Allergan Inc) have incorrectly deciphered enhancement in therapeutic efficacy as reduction in interocular pressure comparable to serial application.”

“The respondent has not shown that it had complied with the Section 8 of Patents Act, 1970.”

Though Allergan claimed to have achieved enhanced efficacy with reduced side effects for these FDCs, the IPAB did not find the claims justifiable. Interestingly, Ajantha’s product reportedly is much less expensive too. As compared to Allergan’s Ganfort drops (3 ml) costing about Rs 580, Ajanta’s equivalent formulation costs just Rs 131.

The other pharma patent revocation of the fortnight:

On July 27, 2013, IPAB revoked yet another patent granted earlier to GlaxoSmithKline (GSK)’s Lapatinib ditosylate salt of its breast cancer drug Tykerb, while upholding the patent on the original API, Lapatinib. IPAB in its order has stated that the ditosylate salt version of Lapatinib is not patentable as per patentability criteria of the Indian Patents Act.

Experts believe, with these decisions, the Indian legal system has clearly demonstrated that despite intense anger, pressure and protests mainly from the United States and Europe, to dilute public health interest related safeguards enshrined in the current Indian patent regime, the rule of law still prevails in the country for IP disputes.

Tykerb decision of IPAB follows the landmark judgment of the Supreme Court of India clarifying patentability criteria for incremental innovations.

An interesting precedent set:

In case of Tykerb of GSK, unlike other occasions, for the first time one MNC has challenged the patent of another MNC in India, instead of domestic companies doing so. The German drug manufacturer, Fresenius Kabi, instead of criticizing Indian IP law like other MNCs, had challenged the British drug maker GSK’s patent on the patentability criteria as provided in the Indian Patent Law and obtained a favorable decision from the IPAB against one of their two patent challenges on Tykerb.

A different case, yet worth mentioning:

Earlier, in late 2012, Delhi High Court while recognizing the validity of Roche’s patent for Tarceva (erlotinib), ordered that Cipla’s generic equivalent of erlotinib has different molecular structures. Hence, Cipla has not infringed Roche’s patent.

The generic version of Cipla’s erlotinib is reportedly available at a price of Rs 1,600 against Roche’s price of Rs 4,800 for Tarceva. Though this is not a patent revocation, but an interesting case nevertheless.

Other patent revocations:

Besides the only Compulsory License (CL) issued, so far, by the IPO for Bayer’s Nexavar to Natco (Cost of a pack of 120 tablets of Natco generic is Rs.8,800 against Nexavar’s Rs. 280,000), such patent challenges are now taking place in India quite close on the heels of one another as follows:

Sutent (Pfizer):

In this case, the patent for liver and kidney cancer drug of Pfizer – Sutent (Sunitinib), granted earlier by the IPO in 2007, was revoked by the IPAB in October 2012, after a post grant challenge by Cipla and Natco Pharma on the ground that the claimed ‘invention’ does not involve inventive steps.

However, on November 26, 2012 in a new twist to this case, the Supreme Court of India reportedly restored the patent for Sutent. Interestingly, at the same time the court removed the restraining order, which prevented Cipla from launching a copycat generic equivalent of Sunitinib.

The cost of 45 day’s treatment with Cipla generic is Rs. 50,000 against Rs. 196,000 of Sutent. (Source ET, April 7, 2013)

Pegasys (Roche):

Again, on November 2, 2012 the IPAB revoked the patent of Pegasys (Peginterferon alfa-2a) – the hepatitis C drug of the global pharmaceutical giant Roche. It is worth mentioning, Pegasys enjoys patent protection across the world.

Though Roche was granted a patent for Pegasys by IPO in 2006, this was subsequently contested by a post-grant challenge by the Indian pharma major – Wockhardt and the NGO Sankalp Rehabilitation Trust (SRT) on the ground that Pegasys is neither a ‘novel’ product nor did it demonstrate ‘inventiveness’ as required by the Patents Act of India.

It is worth noting, although the IPO had rejected the patent challenges by Wockhardt and SRT in 2009, the judicial body IPAB reversed IPO’s decision revoking the patent of Pegasys, costing Rs. 360,000 for a six month course of treatment for a patient.

Iressa (AstraZeneca):

On November 26, 2012, IPAB reportedly denied patent protection for AstraZeneca’s anti-cancer drug Iressa (Gefitinib) on the ground that the molecule lacked invention.

The report also states that AstraZeneca suffered its first setback on Gefitinib in June 2006, when the Indian generic company Natco Pharma opposed the initial patent application filed by the global major in a pre-grant opposition. Later on, another local company, GM Pharma, joined Natco in November 2006.

After accepting the pre-grant opposition by the two Indian companies, IPO in March 2007 rejected the patent application for Iressa Gefitinib citing ‘known prior use’ of the drug. AstraZeneca contested the order through a review petition, which was dismissed in May 2011.

Anti-asthma FDC aerosol suspension (Merck & Co):

Similar to Allergan case, on December 11, 2012 Indian Patent Office (IPO) reportedly revoked a patent granted to an anti-asthma FDC drug of Merck & Co on the ground of lack of invention, after the domestic pharma major Cipla Ltd challenged an earlier granted patent of this FDC drug.

This aerosol suspension combines three molecules: mometasone furoate, formoterol and heptaflouropropane.

A similar asthma treatment, Dulera, reportedly lost its Indian patent held by Novartis AG in 2010.

Patentability for ‘Incremental Innovations’ in India:

Patentability criteria for any ‘incremental innovation’ has been defined in the Section 3(d) of the Indian statute as follows:

“The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.”

“Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.”

Indian Patents Act prevails:

As is well known, way back in 2006, IPO refused to grant patent to the cancer drug Glivec of Novartis on the ground that the molecule is a mere modification of an existing substance known as Imatinib.

In that case, on April 1, 2013 the Supreme Court of India upheld the validity of Section 3(d), where the rules of the game for patentability of incremental pharmaceutical innovations, as captured in the Indian Patents Act 2005, were cast in stone.

Court did not disallow all incremental innovations:

Point 191 in page number 95 of the Glivec judgment very clearly states as follows:

“191. We have held that the subject product, the beta crystalline form of Imatinib Mesylate, does not qualify the test of Section 3(d) of the Act but that is not to say that Section 3(d) bars patent protection for all incremental inventions of chemical and pharmaceutical substances. It will be a grave mistake to read this judgment to mean that section 3(d) was amended with the intent to undo the fundamental change brought in the patent regime by deletion of section 5 from the Parent Act. That is not said in this judgment.”

Thus, it should not be highlighted unfairly by concerned constituents that all ‘incremental innovations’ are not patentable in India. The above judgment just says that Glivec is not patentable as per Section 3(d) of Indian Patents Act based on the data provided and the arguments of Novartis.

Only 3% of patents are challenged:

Quoting a study, a recent media report highlighted that only 3% of the patent applications filed in India since 2006 were challenged. The study concluded, “This demonstrates that given the various resource constraints faced by the Indian patent office, one can never really be sure of the patent quality unless the patent is challenged.”

Rejection by IPO under Section 3d is minimum – is that a key issue?

Another study done by Columbia University reportedly found that out of 214 patents filed in India last year, only 3 patents were rejected by IPO exclusively for failing to prove better efficacy, as required under Section 3d. Turning this finding on its head, would it be reasonable to ponder:

Could this be a key issue for so many patents failing to pass the acid test of judicial scrutiny when challenged?

Government has no role to play in IP disputes:

The proponents of ‘no change required in the Section 3(d)’ argue, patent challenge is a legal process all over the world, where the Government has hardly any role to play in resolving these disputes. The law should be allowed to take its own course for all disputes related to the Patents Act of the country, including Section 3(d).

They also opine that India must be allowed to follow the law of justice without casting aspersions on the knowledge and biases of the Indian judiciary by the vested interests.

That said, there is certainly an urgent need to add speed to this legal process by setting up ‘Fast-track Courts’ for resolving all Intellectual Property (IP) related disputes in a time bound manner.

Pharma patents granted in India:

As reported in the media, pharma MNCs have been granted over 1,000 patents since 2005. Moreover out of 4,036 patents granted in the past six years, 1,130 have been awarded to MNCs, like:

AstraZeneca 180 patents
Roche with 166 patents
Sanofi with 159 patents
Novartis with 147 patents

It is therefore understandable, as pharma MNCs have secured more number of pharma patents they are facing larger number of litigations at this point of time.

China and Brazil revoke patents:

Last week, just about a year after China introduced the country’s amended patent law, its State Intellectual Property Office (SIPO) has reportedly revoked the patent on HIV/AIDS and hepatitis B drug – Viread (tenofovir disoproxil fumarate) of Gilead Science Inc. Aurisco, the largest manufacturer of active pharmaceutical ingredients in China, challenged this patent. The ground of patent revocation was that the drug lacked novelty and was not entitled to protection.

South Africa mulls new law to stop ‘Evergreening’:

Recently, the Department of Trade and Industry of South Africa has reportedly submitted to the South African Cabinet a draft Intellectual Property Policy with far-reaching changes to the country’s Intellectual Property Rights (IPR) for medicines in order to increase access to cheaper drugs by making it harder for companies to obtain and extend patents.

The draft includes a proposal to introduce a patent examination office to stop pharmaceutical companies from “evergreening” where companies take out new patents based on minor changes or new uses.

Currently, South Africa uses a depository system, in which patent applications are granted without extensive scrutiny. Experts believe, “this system allows companies to file multiple patents on the same medicine and extend the life of their monopoly, keeping prices artificially high.”

Innovators Angry:

In this context, the following report recently captured the anger of the innovator companies and stated that the US drug giants are once again pushing for stronger patent protection in India:

“A coalition of U.S. lawmakers and business groups outlined concerns about Indian policies as a threat to American exports, jobs and innovation in a letter to President Barack Obama on June 18. Among the business groups were the Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Association. On June 14, the top Democrat and Republican on the Senate Finance Committee urged that Kerry raise trade concerns on his visit.”

Quoting US Chamber of Commerce’s Global Intellectual Property Center another report highlighted, “Recent policy and judicial decisions that invalidate intellectual property rights, which have been increasing in India, cast a daunting shadow over its otherwise promising business climate. From the revocation of patents to the staggering rates of piracy, India stands alone as an international outlier in IP policies. This trend is bad for investment, innovation and international trade.”

Does it benefit patients?

In the paper titled ‘TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond’, published in ‘Chicago Journal for International Law, Vol. 3(1), Spring 2002’, the author argues, though the reasons for the lack of access to essential medicines are manifold, there are many instances where high prices of drugs deny access to needed treatments for many patients. Prohibitive drug prices, in those cases, were the outcome of monopoly due to strong intellectual property protection.

The author adds, “The attempts of Governments in developing countries to bring down the prices of patented medicines have come under heavy pressure from industrialized countries and the multinational pharmaceutical industry”.

While the ‘Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS)’ of the World Trade Organization (WTO) sets out minimum standards for the patent protection for pharmaceuticals, it also offers adequate safeguards against negative impact of patent protection or its abuse in terms of extraordinary and unjustifiable drug pricing. The levels of these safeguards vary from country to country based on the socioeconomic and political requirements of a nation, as in India.

Following table is an example of price differential between patented and generic equivalents of those molecules used in the treatment of HIV/AIDS:

1			2			3
3TC (Lamivudine)			Zerit (Stavudine)			Viramune (Nevirapine)
Price / Year / Patient in US$			Price / Year / Patient in US$			Price / Year /Patient in US$
GSK	Cipla	Hetero	BMS	Cipla	Hetero	B.I.*	Cipla	Hetero
3271	190	98	3589	70	47	3508	340	202

(Source: Third World Network, *B.I: Boehringer Ingelheim)

Patentability for ‘genuine innovations’:

A report on ‘Patentability of the incremental innovation’ indicates that the policy makers keeping the following points in mind formulated the Indian Patents Act 2005:

The strict standards of patentability as envisaged by TRIPS pose a challenge to India’s pharmaceutical industry, whose success depended on the ability to produce generic drugs at much cheaper prices than their patented equivalents.

A stringent patent system would severely curtail access to expensive life saving drugs to a large number of populations in India causing immense hardships to them.

Grant of a product patents should be restricted only to “genuine innovations” and those “incremental innovations” on existing medicines, which will be able to demonstrate significantly increased efficacy over the original drug.

Conclusion:

A study by the ‘Indian Pharmaceutical Alliance (IPA)’ indicates that 86 pharmaceutical patents granted by the IPO post 2005 are not breakthrough inventions but only minor variations of existing pharmaceutical products and demanded re-examination of them.

Since, most of the above patents have not been challenged, as yet, the quality of these patents cannot be ascertained beyond any reasonable doubt, as we discuss today.

If the apprehension, as expressed above in the IPA study has any merit, right answers to the following questions, I reckon, would help charting out the future direction for the IP ecosystem of India:

Is there a theoretical possibility of revocation of all these 86 already granted product patents, if and when challenged in a court of law?
Is the current Patents Act of India pragmatic?
Does it reasonably benefit both the innovators and the Indian patients, signifying a paradigm shift in the global IPR scenario?
Will it inspire other countries also to emulate similar IP system in the years ahead?
Will it then invite more intense ire of the global pharma innovator companies creating increasing pressure on the Indian Government to amend the current Patents Act?
Being under continuous public scrutiny, would it be feasible for any Indian Government, now or in future, in the near or medium term, to amend the Indian Patents Act due to any amount of outside pressure?
And finally, is the Act then irreversible, at least, for quite some time from now?

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

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