Looking ahead, the brand new year 2015 appears quite interesting to me both from the global and also from the local pharmaceutical industry perspective. In this article I shall try to give a glimpse of some of the important drivers and barriers for success of the industry as the year unfolds, based on recent and ongoing developments.
Let me start with the global outlook of 2015, where in the midst of all gloom and doom of the past years, I notice formation of a distinct and new silver lining, mainly due to the following two reasons:
1. Record number of new drugs approval in 2014 spanning across10 therapy areas:
As indicated in its website, USFDA has approved 41 novel medicines in 2014, which is 14 more than the previous year and is the second highest after 1996 that witnessed 53 approvals. Many of these new drugs are with blockbuster potential.
According to another report, the European Medicines Agency (EMA) has also recommended 82 new medicines in 2014, which though includes generic drugs in its list. However, this number too shows an increase from 79 in 2013 and 57 in 2012.
According to January 02, 2014 report from Forbes, very interestingly, infectious diseases dominated with 12 approvals (27 percent), cancer with 8 approvals (18 percent), followed by rare diseases with 5 (11 percent). Just two of these new approvals are for Hepatitis treatment and the rest are for bacterial, fungal, viral, and parasitic infections.
AstraZeneca received the highest number of 4 approvals followed by Eli Lilly with 3.
2. Patent expired blockbuster drugs in 2015 would have low generic impact:
Though drugs worth sales turnover of US$ 44 billion would go off patent in 2015, patent expiries will have minimal impact on the top line as 2015 sales will grow close to four times that of patent losses. Following are the top 10 drugs among those:
|No.||Brand||Company||Disease||Sales2013 (US$ Bn)||Patent Expiry|
|2.||Abilify||Otsuka/Bristol-Myers Squibb||Schizophrenia/ Other neurological conditions||7.8||April 2015|
|3.||Copaxone||Teva||Multiple sclerosis||4.33||Sept 2015|
|4.||Neulasta||Amgen||Infection reduction in cancer patients on chemotherapy||4.4||Oct 2015|
|5.||Tracleer||Actelion||Pulmonary arterial hypertension||1.57||Nov 2015|
|6.||Namenda||Actavis||Alzheimer’s disease||1.5||April 2015|
|7.||Avodart/Jalyn||GSK||Benign prostatic hypertrophy||1.34||Nov 2015|
|8.||Zyvox||Pfizer||Gram-positive bacterial infections||1.35||May 2015|
|9.||AndroGel||Abbvie||Low testosterone||1.03||Early 2015|
|10.||Synagis||AstraZeneca||Monoclonal antibody to prevent respiratory syncytial virus infection in infants||1.1||Oct 2015|
(Compiled from FiercePharma data)
As a significant number of these drugs are biologics, such as Lantus, Abilify, Neulasta and Synagis, the generic impact on those large brands, post patent expiry, would be minimal, at least, for several more years.
However, Lantus sales could soon be impacted, as its biosimilar versions from Boehringer Ingelheim and Eli Lilly have already received approval in Europe, and may be launched in the United States, as well.
Biosimilar versions of other drugs that will go off patent in 2015, do not seem to be anywhere near launch soon to make immediate dent in the sales of the original biologics. I had deliberated on various possible reasons for delay in biosimilar entry, especially in the US, in my earlier blog post of August 25, 2014, titled “Scandalizing Biosimilar Drugs With Safety Concerns”
Taking all these into consideration, EvaluatePharma has estimated that out of patent expiry related sales turnover of US$44 billion, just around US $16 billion would get impacted in 2015 by their generic equivalents.
Global market outlook 2015:
According to IMS Health, spending on medicines will reach nearly $1,100 billion in 2015 with a growth rate of 3-6 percent over the last five-year period.
According to EvaluatePharma, the overall outlook of the global pharma industry in 2015 and beyond is expected to be as follows:
- A dozen products launched in 2015 are forecast to achieve blockbuster sales by 2020
- Drugs treating high cholesterol and heart failure will dominate the field with a combined 2020 sales forecast of US$8 billion
- Sovaldi and its combination product Harvoni will take the number one worldwide seller spot with forecasted sales of $15.3 billion in 2015
- Patent expiries will have minimal impact on the top line as 2015 sales will grow close to four times that of patent losses
- Financing climate appears friendly and deals will continue at a steady pace but M&A activity unlikely to match the frenzy of 2014
Moreover, Oncology therapy area brings a huge promise with novel immuno-oncology drugs. As Reuters have reported, Merck & Co’s Keytruda and Bristol-Myers Squibb’s Opdivo, which work by blocking a protein called Programmed Death receptor (PD-1), are the first in a coming wave of immuno-therapies that analysts believe could generate annual sales of more than US$30 billion a year.
Indian pharma industry outlook 2015:
Indian pharmaceutical industry, dominated by branded generic drugs, is estimated to register a turnover of around US$ 33.8 billion with an average growth of 10.3 percent in 2014 – 2018 period, according to Deloitte. Increasing number of diagnosis and treatment of chronic ailments, fuelled by ascending trend in the per capita income, would be the key factors to drive this double-digit growth rate.
In 2013-14, pharma exports of the country with a turnover of US$ 14.84 billion grew at a meager 1.2 percent, which is the slowest growth in nearly the last 15 years. Pharmexcil attributed its reason to USFDA related regulatory issues and increasing global competition. India still stands exposed in this area, unless meaningful corrective measures are taken forthwith. It is worth noting, although India exports drugs to over 200 countries in the world, the United States (US) alone accounts for about 25 percent of India’s pharma exports.
Key issues and challenges in ‘The Exports Front’:
Generic drugs currently contribute over 80 percent of prescriptions written in the US. Around 40 percent of prescriptions and Over The Counter (OTC) drugs that are sold there, come from India and account for around 10 per cent of finished dosages in the US.
Almost all of these are cheaper generic versions of patent expired drugs, which are mainly produced in around 200 USFDA approved drug-manufacturing facilities located in India. Hence, India’s commercial stake in this space is indeed mind-boggling.
Indian drug exports were taking place satisfactorily without any major regulatory hitches since quite some time. Unfortunately, over the last few years, mostly the Federal Drug Administration of the US (USFDA) and the United Kingdom (UK)’s Medicines and Healthcare Products Regulatory Agency (MHRA) have started raising serious doubts on the quality of medicines manufactured in India, creating an uncertainty on drug exports in those countries.
To overcome this critical issue and keep marching ahead with distinction in the drug exports front, Indian pharma would require to successfully dealing with the following two areas:
A. Data integrity:
Since quite a while, USFDA has been raising serious concerns on ‘Data Integrity’ in their previously approved production facilities of a large number of Indian pharma players. The details of each of these concerns are available in the USFDA website.
This worrying development is now posing a huge threat to future growth potential of Indian drug exports, as in this area the Indian government had set an objective, in its strategy document, to register a turnover of US$ 25 billion in 2014-15. In all probability, it would fall far short of this target at the end of this fiscal, predominantly for related reasons. However, the good news is, considering the criticality of the situation, the Indian government is now working with the USFDA to resolve this problem.
I discussed a part of this area in my Blog Post of September 29, 2014 titled “Make in India…Sell Any Where in The World”: An Indian Pharma Perspective
B. Credibility of Clinical Trial Data from India:
Credibility of ‘Clinical Trial Data’ generated by the domestic players in India, has also become a cause of great concern, as the regulators in France, Germany, Belgium and Luxembourg suspended marketing approval for 25 drugs over the genuineness of clinical trial data from India’s GVK Biosciences.
Key issues and challenges in ‘The Domestic Front’:
Though 2015 would also witness the following important issues and challenges, meeting with this challenge of change should not be difficult with a proper mindset and right strategies:
A. The Drug Price Control Order 2013 (DPCO 2013):
Change in the mechanism of drug price control from earlier ‘cost based’ to newer ‘market based’ one and the specified provisions to neutralize inflationary impact of the input costs on the bottom line, based on the WPI, have already been considered as welcoming changes for the industry. As a result, despite implementation of the DPCO 2013, the pharma shares continued to do well in 2014 despite doomsayers’ predicaments, not just in the past, but even today.
I believe, the DPCO 2013 would not cause any significant negative impact further in 2015 on the performance of pharma companies, as the price controlled drugs would in all probability continue to be around 20 percent of the total pharma market. Moreover, now annual price increases are linked to the WPI for the controlled products and the companies can increase prices of remaining 80 percent of decontrolled products, upto 10 percent every year, irrespective of inflationary trend.
That said, due to huge inter-brand price differences, in July 2014 the National Pharmaceutical Pricing Authority (NPPA) had brought under price control 50 more cardiovascular and anti-diabetic drugs in addition to 348 drugs that featured under price control in the DPCO 2013.
If the pharma players do not take note of such abnormal inter-brand price variation of the same drugs without meaningful reasons, there could possibly be further move by the NPPA in this direction.
Additionally, any mechanism for patented products’ pricing, if announced in 2015, would have far-reaching impact, especially on the MNCs marketing such drugs.
B. Unethical practices in Clinical trial:
In the Clinical Trial arena of India, responding to a Public Interest Litigation (PIL), the Supreme Court of the country and separately the Parliamentary Standing Committee had indicted the drug regulator and charted out some action areas. The Parliamentary Committee in its report had even mentioned about a nexus existing between the drug regulator and the industry in this area.
Driven by the directives of the Apex Court of the country, the union ministry of health of the government of India has already strengthened some areas of past laxity in drug regulatory control, such as mandatory registration of clinical trials, constitution of committees to oversee the trial approval, its execution and above all ethical treatment of patients, including compensation.
Although, these are all requisite measures to create an appropriate longer-term eco-system for clinical trials in India, it has reportedly ruffled many feathers, such as CROs in the country who work mainly for pharma MNCs and some global pharma players too. This is mainly because of inordinate delays in drug approvals during the regulatory rectification process, besides cost of clinical trials going up. An orderly drug regulatory environment must prevail, instead of allegedly ‘free for all’ clinical trial environment in the country, costing many innocent lives and livelihoods. Responding to this changing clinical trial environment, some MNCs have already articulated that they are reconsidering their drug trial strategy in India and some Indian players, possibly with vested interests and echoing similar sentiments, are also saying that they would shift their clinical trial projects out of India, which would adversely impact the country’s clinical trial industry.
Be that as it may, it appears now that under the directive of the Supreme Court of the country, the decisions taken by the government in clinical trial area are irreversible, for the long-term interest of the country.
C. Intellectual Property (IP) issues:
Reacting to some well-justified measures taken by India in the IP area to make healthcare affordable to all, the US and its some key allies, continuously pressured by their powerful pharma lobby groups, continue to push India hard to broaden the IP protections. ‘Big Pharma’ lobbyists are reportedly trying to compel India to amend its IP laws that would suit their business interest at the cost of patients.
Fortunately, many stakeholders, including media, have started raising their voices against such strong-arm tactics, further fueling the credibility erosion of ‘Big Pharma’ and creating important pressure groups for the government.
Simultaneously, concerned pharma MNCs are also seeking legal recourse over issues mainly related to the section (3d) and Compulsory Licensing of the Indian Patents Act. However, most of the judicial verdicts vindicate the quality of decisions taken by the Indian Patent Office (IPO) in these areas.
Though very unlikely, any amendment or tweaking of the existing patent laws of India in 2015 would provide an unfair advantage to MNCs with negative impact on public health interest.
D. Uniform Code of Pharmaceutical Marketing Practices:
Compared to the actions that are now being taken by the law enforcers overseas against pharmaceutical marketing malpractices, India has been showing a rather lackadaisical attitude in these areas, until recently. It astonishes many that unlike even China; no pharmaceutical company has been investigated thoroughly and hauled up by the government for alleged bribery and other serious allegations of corrupt practices.
However, frequent reporting by the Indian media had triggered a debate in the country on the subject. A Public Interest Litigation (PIL) on this subject is now pending before the Supreme Court for hearing in the near future. It is worth noting that in 2010, ‘The Parliamentary Standing Committee on Health’ also had expressed its deep concern by stating that the “evil practice” of inducement of doctors by the pharma companies is continuing unabated as the revised guidelines of the Medical Council of India (MCI) have no jurisdiction over the pharma industry.
The Government, until recently, has shown no active interest in this area either, though the new Union Health Minister, J.P. Nadda decried the unethical nexus between the doctors and pharma companies, amounting violations of medical ethics in the country. He reportedly has stated that in majority of the cases, the pharma companies are luring the doctors by giving gifts and other benefits for prescribing the brand of medicines of their choice to the patients.
As the saying goes, ‘better late than never’, on December 12, 2014, the Department of Pharmaceuticals (DoP) of the Government of India announced details of the ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’, which would be effective across the country from January 1, 2015 for all pharma players to implement, across India.
However, I reckon, the document in its current form is rather weak in its effective implementation potential. Meaningful and transparent deterrent measures to uphold public health interest are also lacking. The entire process also deserves a well-structured monitoring mechanism and digital implementation tools that can be operated with military precision. I discussed this issue in my Blog Post of December 29, 2014, titled “India’s Pharma Marketing Code (UCPMP): Is It Crafted Well Enough To Deliver The Deliverables?”
On UCPMP a survey done by E&Y has highlighted the following points, besides other areas:
- More than 50 percent of the respondents are of the opinion that the UCPMP may lead to manipulation in recording of actual sampling activity.
- Over 50 percent of the respondents indicated that the effectiveness of the code would be very low in the absence of legislative support provided to the UCPMP committee.
- 90 percent of the respondents felt that pharma companies in India should focus on building a robust internal controls system to ensure compliance with the UCPMP.
In my view as well, the self-regulatory measures prescribed in the UCPMP of the DoP are unlikely to make any significant impact in 2015, unless pharma companies start focusing on building robust internal controls system to ensure compliance with the UCPMP.
I would now put on the balance of probabilities, the new ‘Silver Linings’ of the Global pharmaceutical industry as discussed above, the issues and challenges of 2015 for the Indian pharma and also other important factors that I have not been able to discuss in this article. The overall emerging picture depicts that the pharma industry, both global and local, would fare much better than what it did in the recent past, provided the industry, as a whole, does not continue to ignore the storm signals outright.
Thus, based on the available data, the year 2015, as appears to me, would provide an enormous opportunity with promises of an interesting time ahead that the pharmaceutical industry should try to leverage on…and then cherish it for a long while…most probably as a turning point of the same ball game with different success requirements.
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.