Déjà Vu In Pharma Industry

It’s happening in the West, and is equally widespread in the Eastern part of the globe too, though in different ways and forms, as both the national and international media have been reporting, consistently. The phenomenon is all pervasive, and directed towards stalling almost all possible future laws and policies that a large section of the pharma industry sees as a potential apocalypse for their business models.

It has a wide reach and covers, for example, the policy-decision makers or possible policy-decision makers in the near future, other policy influencers, many hospitals, and the final interface with the patients – the prescription decision makers.

Although, it affects health care as a whole, in this article I shall focus just on the pharma industry.

Looking West:

While looking at the West, I would cite a recent example from the United States. It’s yet another déjà vu for the western pharma industry.

On August 26, 2016, ‘The Los Angeles Times’ in an article titled, “Drug companies spend millions to keep charging high prices” stated, “Of roughly US$ 250 million raised for and against 17 ballot measures coming before California voters in November, more than a quarter of that amount – about US$ 70 million – has been contributed by deep-pocketed drug companies to defeat the state’s Drug Price Relief Act.”

The Drug Price Relief Act of California, is aimed at making prescription drugs more affordable for people in Medi-Cal and other state programs by requiring that California pays no more than what’s paid for the same drugs by the Department of Veterans Affairs of the United States. It would, in other words, protect state taxpayers from being ripped off.

The report also quoted Michael Weinstein, President of the AIDS Healthcare Foundation saying that industry donations to crush the Drug Price Relief Act “will top US$ 100 million by the election, I’m quite certain of it.” He further added, “They see this as the apocalypse for their business model.”

Looking East:

While citing a related example from the eastern part of the globe, I shall draw one from nearer home – India, as China has already been much discussed on this matter. This particular media report on a wide-spread pharma industry practice, though took place in a different form, as compared to the United States, belongs to the same genre, and captures yet another déjà vu involving the pharma players operating in the eastern world, similar to what’s happening in the west.

India:

On August 30, 2016 a report published in ‘The Economic Times’ titled, “Pharma cos offer freebies to doctors, violate code: MP” quoted a serious allegation of a Rajya Sabha Member of the Parliament on this issue. The MP claims, he has evidence of four drug companies’ recently bribing doctors across India to push their products. These four companies include both large Indian and multinational pharma players, and two out of these four features, among the top five companies of the Indian Pharma Market (IPM).

The lawmaker further said, “I am waiting for the minister’s response on this issue. Nothing has come so far. We also have the names of the doctors who have taken bribes, which we will release eventually,”

Another September 06, 2016 report, published by the same business daily in India, categorically mentioned that TOI has documents to establish that one of these companies took hundreds of doctors from across India to places like Vancouver, Amsterdam, Oslo, Venice, New York, Boston, Brussels and Moscow. The documents reportedly include email exchanges between the company executives, city-wise lists of doctors with ‘legacy codes’, names of spouses, passport copies and visa copies, and show how the company has spent several millions of rupees in taking doctors and sometimes even their spouses, ostensibly to attend medical conferences.

Other NGOs have also reportedly submitted proof of the same to the Government for remedial measures in India, against such gross ongoing unethical practices in pharma marketing.

It is worth mentioning here that all these expenses are part of the marketing budget of a company and the sum total of which is built into the ‘retail price to the patients’ of the respective drugs, even in India.

Two broad processes for the same goal:

Thus it emerges, very broadly, there are two key processes followed by many in the pharma industry to achieve the same goal of increasing profit. These are as follows:

  • Marketing malpractices in various forms to influence prescription decision
  • Arbitrary increase of drug prices, for both branded and generic medicines

The justification:

Many global pharma majors still keep justifying, though the number of its believers is fast dwindling, that the high new drug prices have a linear relationship with the cost of new drug innovation. Even for argument’s sake one nods in favor, the critical question that needs to be answered is, if this is the basic or primary axle on which the wheel of innovation moves, won’t affordability and access to drugs for a significant number of the population be seriously compromised?

If not, why is this furor, across the world, is fast assuming a snowballing effect? Why are even the generic drug prices going up steeply even in the United States, where some of the largest Indian drug manufacturers are being questioned for the same by the competent authorities of the country?

I deliberated on a similar subject in my article titled, “The Next Frontier: Frugal Innovation For High-Tech Drugs”, published in this Blog on May 20, 2016.

Marketing malpractices:

Laws are fast catching up to book the offenders resorting to pharma marketing malpractices in most of the countries of the world, including China. This is vindicated by the fact that global pharma players are now paying billions of dollars a fine, in various countries, especially in the West.

Just as no criminal law can totally eliminate any crime, anywhere in the world, despite a heavy dent in pharma’s reputation related to this area, many companies still continue to indulge in such malpractices, blatantly, and even with some brazenness.

India:

Unfortunately, in India, the inertia to catch the bull by the horn and lack of governance in this regard continues, making patients pay a heavy price. As the above media report indicates, both MNCs and the local players indulge into this deplorable activity almost without any inhibition. As many industry watchers believe, some companies have started hiring these services through professional third parties just to create a facade for taking the high moral ground, as and when required, both with the government and also other stakeholders.

Initiating a step in this direction, on December 12, 2014, the DoP announced details of the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’, which became effective across the country from January 1, 2015. The communique also said that the code would be voluntarily adopted and complied with by the pharma industry in India for a period of six months from the effective date, and its compliance would be reviewed thereafter on the basis of the inputs received.

UCPMP, though not a panacea, was aimed at containing pharma marketing malpractices in India. However, as happened with any other voluntary pharma marketing code, be it of a global drug major or their trade associations, similar non-compliances were detected even by the DoP with voluntary UCPMP.  This gross disregard to the code, apparently prompted the DoP contemplating to make the UCPMP mandatory, with legal implications for non-compliance, which could possibly lead to revocation of marketing licenses.

In this context, it is worth recapitulating that the Union Minister of Chemicals and Fertilizer – Mr. Ananth Kumar, in his reply in the Indian Parliament, to a ‘Lok Sabha Starred Question No: 238’ on the UCPMP based on the inputs received, also had admitted:

“The Government had announced Uniform Code for Pharmaceutical Practices (UCPMP) which was to be adopted voluntarily w.e.f. 1st January, 2015 for a period of six months and has last been extended up to 30.06.2016. After reviewing the same it was found that the voluntary code was not working as expected. The Government consulted the stakeholders, including NGO’s / Civil Society members and after examining their suggestions it is now looking into the viability of making the Code Statutory.”

This seems to be yet another assurance, and expression of a good intent by the Union Minister. The fact today is, after extending the UCPMP in its original form up to June 30, 2016 with four extensions and despite the Government’s public admission that it is not working, by a circular dated August 30, 2016, the Government has informed all concerned, yet again, that voluntary UCPMP has now been extended ‘till further orders’.

This not only creates public apprehension on the DoP’s true intent on the subject, but also gives enough room for speculation regarding behind the scene power play by the vested interests to keep a mandatory UCPMP, having sufficient legal teeth, away, as long as possible. Are these forces then also visualizing its enforcement as an apocalypse for their business models in India too?

Thus, the possibility of containing pharma marketing malpractices in India is still charting in the realm of the decision makers’ assurances and no further.

Arbitrary drug price increases:

Arbitrary price increases of important drugs are drawing increasing public ire in the West, the latest being a 400 percent price increase of generic EpiPen of Mylan. This is now being considered yet another business malpractice in the pharma industry, as whole.

No robust regulatory or legal measure is now being followed in the West to contain the drug over pricing public health menace. Thus, it is increasingly assuming a critical political significance today to win over the voters, especially in the forthcoming Presidential election of the United States.

Thus, as reported by Reuters, on September 02, 2016, Hillary Clinton announced that, if elected, she would create an oversight panel to protect the consumers of the United States from large price hikes on longer-available, life-saving drugs and to import alternative treatments if necessary, adding to her pledges to rein in overall drug prices.

She would give the ‘Oversight Panel’ an aggressive new set of enforcement tools, including the ability to levy fines and impose penalties on manufacturers when there has been an unjustified, outlier price increase on a long-available or generic drug.

On September 08, 2016, reacting to these proposed measures articulated by Hilary Clinton, the global CEO of the world’s largest pharma player reportedly commented, as expected, that it “will be very negative for innovation.”

Nonetheless, the bottom-line is, even in the United Sates, a transparent mechanism to deal with arbitrary price increases of the existing important medicines, still charts in the realm of several assurances of the probable decision makers, just as it is India to effectively deal with pharma marketing malpractices.

A global CEO’s lone voice stands out:

In this context, I would start with yet another example of astronomical price increase of a widely used anti-diabetic product, besides EpiPen of Mylan. According to Dr. Mayer Davidson, Professor of Medicine at the Charles R. Drew University of Medicine and Science in Los Angeles, who has carefully tracked the rapid and repeated increases, from 2011 to 2013 the wholesale price of insulin went up by as much as 62 percent in the United States. Whereas, from 2013 to 2015 the price jumped again, from a low of 33 percent to as much as 107 percent.

In the midst of this scary situation, a solitary and apparently a saner voice from the global pharma industry stands out. According to an article published in the Forbes Magazine on September 06, 2016, Brent Saunders, CEO of Allergan, ‘explicitly renounced egregious price increases.’ Saunders also said that the industry needs to ‘end its addiction to price hikes far in excess of inflation, often taken several times in a single year.’ While outlining his company’s “social contract with patients,” Saunders vowed that Allergan would:

  • Limit price increases to single-digit percentages, “slightly above the current annual rate of inflation,” net of rebates and discounts.
  • Limit price increases to once per year.
  • Forego price increases in the run-up to patent expiration, except in the case of corresponding cost increases.

Though this seems to be a lone voice in the pharma industry, it makes the CEO stand much taller than his peers.

India:

On this score, India has already put in place the ‘National Pharmaceutical Pricing Authority’ to regulate the drug prices of primarily those falling under the ‘National List of Essential Medicines (NLEM)’. However, it is a different matter that as per its own public admission, NPPA is still unable to strictly enforce these price controls, with significant incidences of non-compliance. Therefore, the net benefits to the patients in India for having this mechanism, is indeed arguable.

The core issue:

All that we witness in this area are mostly assurances, promises and good intent on the part of various Governments of different political dispensation, over the last several decades. The same indifference to public health care, in general, continues. Nothing seems to be working effectively in the public health care space of the country, even today. A large section of patients, bearing the tough burden of the highest out of pocket health expenditure in India, are under significant consequential stress of all kinds.

An important part of this scenario is well-captured in the statement of the erstwhile Secretary of the Department of Pharmaceuticals (DoP) – V K Subburaj at an event in New-Delhi on April 19, 2016, when he said, “In the entire world, I think our drug control system probably is the weakest today. It needs to be strengthened.”

Is it a legacy? Possibly yes. But, who will fix it, and what steps are we taking now for its satisfactory resolution?

The core issue in the pharmaceutical arena is, therefore, about striking an optimal balance between drug profitability and patient affordability, to avoid any adverse impact on access to drugs for a large majority of population in the world.

Conclusion:

Thus, it appears to me, if those who now decide for the people’s health interest, also refuse to wake up from deep slumber and remain as indifferent as before, soon we may hear or read or experience yet another or more of similar deplorable developments, having serious adverse repercussions on the patients.

Interestingly, despite such incidents, pharma stocks remain generally unaffected and buoyant. Its overall trend continues heading north, factoring-in that no implementable Government action is forthcoming, for obvious reasons. Consequently, pharma business remains as robust as ever, but the patients continue to suffer increasingly more.

Pharma industry in general, has been seriously attempting to wash its hands off for this scary emerging situation, since long. It blames the governments for trying to throttle the money spinning business with ‘unnecessary’ regulations, as discussed above, for something that is only the state responsibility, as they perceive. The governments, in turn, blame the industry and try to regulate it more strictly. Invariably, the patients in need of right and affordable medical care get caught in this cross-fire – some succeed to overcome the health crisis, but mostly exposing themselves to huge financial uncertainty in the future, many others can’t.

When the business continues to flourish with current business ‘practices’, why would the pharma players bother about rapidly tarnishing industry reputation, and public outcry? Does it really matter at all on the ground, for running a money spinning business machine, especially when there exists a fair chance of stalling the new laws and policies, with deep pockets, as alleged by many?

In this scenario, what else a common man would do while falling seriously ill, except praying to the almighty for divine care and blessings for a speedy recovery, along with possibly lamenting, it’s déjà vu in the pharma industry?

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

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