Pharma Outlook 2015: A Glimpse Of Some Drivers and Barriers

Posted on January 5, 2015 by Tapan Ray

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
1.	Lantus	Sanofi	Diabetes	7.9	Feb 2015
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.

Conclusion:

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.

Cheaper Drugs: Happy Patients: Angry Industry

Posted on July 21, 2014 by Tapan Ray

Recent price reductions of a number of cardiovascular and diabetes drugs falling outside the National List of Essential Medicines 2011 (NLEM 2011), have attracted fury of the pharma industry . By a notification dated July 10, 2014, the National Pharmaceutical Pricing Authority (NPPA) has invoked Para 19 of the DPCO 2013 for these price changes, the implications of which would indeed be far reaching.

NPPA has now decided to examine inter-brand price variation for single ingredient formulations in eight therapeutic groups, which, besides cardiovascular and diabetic drugs, would include, anti-cancer, HIV/AIDS, anti-TB, anti-malaria, anti-asthmatic and immunological (sera/vaccines). In these therapy areas, the Maximum Retail Price (MRP) of the brand(s) exceeding 25 per cent of the simple average price of all in the same molecular category having 1 percent or above market share, would be capped at the 25 per cent level.

Pharma industry, in general, feels that this ‘unwelcoming decision’ of the NPPA, which allegedly goes beyond the scope and spirit of DPCO 2013, would invite great uncertainty in its business environment.

On the other hand, many consider this price reduction as a ‘Good Omen’ for millions of patients suffering from related life-long ailments. They argue, the purpose of this ‘Bitter Pill” of the NPPA, is to send a clear message to the pharma industry to shape-up with responsible drug pricing.

The new Minister’s recent statement:

It may not be a bad idea to take into consideration the above notification of the NPPA in the light of what the new minister of Chemicals and Fertilizers – Mr. Ananth Kumar said on May 28, 2014. According to media report, the Minister expressed his intent as follows:

“… As far as branded medicines of multinational pharmaceutical companies are concerned, we will talk to all of them and try to bring down prices of essential drugs for poor by 25-40 per cent… The pharmaceutical industry is very important for the health of the country, he added…our main mission will be to ensure the availability of all necessary medicines at affordable prices, especially for poor across the country.”

It is, therefore, quite possible that the NPPA’s decision on price reduction of cardiovascular and diabetes drugs has the Minister’s concurrence.

Industry’s key concern:

This recent decision of the NPPA has reportedly angered the industry, as the Drug Price Control Order 2013 (DPCO 2013) clearly articulates two basic criteria for drug price control in India, as follows:

1. Span of price control:

This was re-defined (from DPCO 1995) on the ‘essentiality criteria’ of the drugs, which in turn is based on the National List of Essential Medicines 2011 (NLEM 2011)

2. Methodology of price control:

This was re-defined (from DPCO 1995) with a clear departure from ‘Cost-Based Price Control’ to the ‘Market-Based Price Control’.

The industry alleges violation of these criteria for the recently announced price reduction of a number of diabetic and cardiovascular drugs, as those do not fall under NLEM 2011.

Price variation is of no-use to patients for prescription drugs:

As the prices of non-scheduled formulations are not fixed by the NPPA, which can virtually be launched at any price to the market, there has been a huge variation of prices between the branded generics within the same chemical entity/entities. Following is a quick example:

Molecule	Disease	MRP of Lowest Price Brand	MRP of Highest Price Brand
Telmisartan 10’s	Hypertension	Rs. 25	Rs. 385
Glimeperide 10’s	Diabetes	Rs. 40	Rs. 133 (Brand Leader)

From this chart, one may be able to fathom some basis in the NPPA’s argument that similar price variations in many branded-generics are of no-consequence for prescription drugs, as doctors decide the medicines that a patient would take. If doctors were influenced to prescribe high priced medicines, the patients would require paying more for those drugs, further increasing their Out of Pocket (OoP) expenses. It is also not uncommon that highest price brands are category-leaders too, as indicated in the table above.

Key lacunae in DPCO 2013:

As highlighted in my earlier blog post titled “Is The New ’Market Based Pricing Model’ Fundamentally Flawed?”, even besides that specific drawback in the methodology of price control in DPCO 2013, NLEM 2011 does not also cover a wide range of essential drugs.

NLEM 2011 does not cover many combinations of TB drugs, a large number of important drugs for diabetes and hypertension, which I shall deliberate in just a bit.

Many other critical life saving medicines, such as, anti-cancer drugs, expensive antibiotics and products needed for organ transplantation have been left out of price control. In fact, the prices of a number of these drugs have reportedly gone up after the notification of DPCO 2013.

The government has now reportedly admitted in an affidavit filed before the Supreme Court that the market value and share of medicines covered by new DPCO 2013, as ‘Essential Drugs’, is a meager 18 per cent of the Indian Pharmaceutical Market (IPM).

As a result, DPCO 2013 based on NLEM 2011 undermines the entire objective of making essential drugs affordable to all.

All these lacunae in the current DPCO 2013 calls for a major revision of NLEM 2011. The Union Health Ministry has reportedly initiated steps to revise the list considering the existing market conditions and usage of drugs by the patients.

Invocation of a ‘Safeguard Provision’ in DPCO 2013:

Probably anticipating this scenario, a key safeguard provision was included in Para 19 of DPCO 2013, which reads as follows:

“Fixation of ceiling price of a drug under certain circumstances:

Notwithstanding anything contained in this order, the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the Government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year.”

It now appears, NPPA could realize the key limitations of DPCO 2013, which was put in place rather hastily, in course of its implementation for over one year. Consequently, the patients’ long standing plight with high drug costs for many common life style diseases that are not featuring in NLEM 2011, prompted the the drug regulator in its above notification to bring 108 non-scheduled formulation packs of diabetic, cardiac and other drugs under Para 19 of DPCO 2013, catalyzing an outcry within the pharmaceutical industry in India. Out of these 108 formulation packs, 50 come under anti-diabetic and cardiovascular medicines.

Many important drugs are outside NLEM 2011:

Following is an example of the important cardiovascular and anti-diabetic drugs, which are not featuring in the NLEM 2011 and have now been brought under Para 19 of DPCO 2013:

Sitagliptin, Voglibose, Acarbose, Metformin hcl, Ambrisentan, Amlodipine, Atenolol, Atorvastatin, Bisoprolol, Bosentan, Gliclazide, Glimepiride, Miglitol, Repaglinide, Pioglitazone, Carvedilol, Clopidogrel, Coumarin, Diltiazem, Dobutamine, Enalapril, Rosuvastatin, Simvastatin, Telmisartan, Terazosin, Torasemide, Trimetazidine and Valsartan, Enoxaparin, Eplerenone, Esatenolol, Fenofibrate, Heparin, Indapamide, Irbesartan, Isosorbide, Ivabradine, Labetalol, Levocarnitine, Lisinopril, Metolazone, Metoprolol, Nebivolol, Nicorandil, Nitroglycerin, Olmesartan, Prasugrel, Prazosin, Propranolol, Ramipril.

More reasons for industry outcry:

As reported in the media, the industry outcry reportedly highlights, besides what I have cited above, the following:

The price control order under Para 19 has been notified without any prior consultation with the industry.

The manner and method in which this unilateral decision has been taken is untenable.

The NPPA’s reasoning, about exploitative pricing by the industry as the reason for such a move, is incorrect given that every product category (in consideration) has approximately 30-70 brand options across price ranges for physicians and patients to choose from. The premise that products are not accessible due to affordability is misplaced. (The above table explains this point).

Disease environment was same when the government had cleared the policy and no “extraordinary circumstance” has emerged since then for the regulator to invoke Para 19 in public interest.

NPPA has exceeded its brief and gone into policy-making.

NPPA’s rationale for invoking Para 19 of DPCO 2013:

On the other hand, following reasons were cited by the NPPA for taking this decision:

The aim of DPCO 2013 is to ensure that essential drugs are available to all at affordable prices. The Supreme Court of India vide its Order dated November 12, 2002 in SLP no. 3668/2003 have directed the Government to ensure that essential and life saving drugs do not fall outside the ambit of price control, which has the force of law.

The Ministry of Chemicals and Fertilizers has delegated the powers in respect of specified paragraphs of the DPCO 2013, including paragraph 19, to be exercised by the NPPA on behalf of the Central Government in public interest.

There exist huge inter-brand price differences in branded-generics, which is indicative of a severe market failure as different brands of the same drug formulation identical to each other vary disproportionately in terms of price.

The different brands of the same drug formulation may sometimes differ in terms of binders, fillers, dyes, preservatives, coating agents, and dissolution agents, but these differences are not significant in terms of therapeutic value.

The main reason for market failure is that the demand for medicines is largely prescription driven and the patient has very little choice in this regard.

Market failure alone may not constitute sufficient grounds for Government intervention, but when such failure is considered in the context of the essential role that pharmaceuticals play in the area of public health, such intervention becomes necessary. This assumes greater significance, especially when exploitative pricing makes medicines unaffordable and beyond the reach of most, putting huge financial burden in terms of out-of-pocket expenditure on healthcare.

There is very high incidence of diabetes in the country, which affects around 61 million persons and the figure is expected to cross 100 million by 2030 as per the projection of the International Diabetes Federation; and it is estimated that every year nearly 1 million people in the country die due to diabetes and hypertension.

The drug regulator categorically mentions that In accordance with the guidelines issued by the NPPA, after approval of the ‘Competent Authority’, these price fixations of non-scheduled formulations under Para 19 of DPCO 2013 have been made.

Constituents of the same Ministry with conflicting view points:

Though both NPPA and the Department of Pharmaceuticals (DoP) come under Mr. Ananth Kumar, the new Minister of Chemicals and Fertilizers, both these constituents seem to have conflicting views on this important issue.

The pharma industry reportedly has sought the DoP’s intervention in this matter. The DoP, in turn, is learnt to have requested for the opinion of the Ministry of Law on using ‘Para 19′ provision in favor of public interest by the NPPA, invoking the power assigned to the drug regulator.

Another route for the industry is to legally challenge the said notification of the NPPA. However, one should keep in mind that a PIL is still pending before the Supreme Court questioning the validity DPCO 2013.

The arguments for and against:

Taking all the above points into consideration, the following two important areas of debate have now emerged on this NPPA notification, both in favor and also against:

A. Nothing has materially changed since DPCO 2013 was put in place:

Industry sources highlight that he following two points, that triggered NPPA’s invoking Para 19, have been there for a long time, including the period when the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) was formulated:

- Huge price differences among various branded generics of the same molecule

- Cardiovascular ailments and diabetes have assumed endemic proportion

The other group counters that, if mistakes were made while formulating the NPPP 2012 because of intense pressure from vested interests in the erstwhile regime, why corrective actions can’t be taken now?

B. NPPA has exceeded its brief:

Industry sources question, how could NPPA possibly issue such notification of price reduction for non-scheduled formulations, as it is not a policy maker?

Others counter with equal zest: Of course NPPA is not a policy maker, it is a drug price regulator… And as a price regulator, it has implemented Para 19 of DPCO 2013 in the right earnest with the requisite powers conferred on it.

The impact:

According to published data, after the latest price revisions of diabetic and cardiovascular drugs, around 21 per cent of the anti-diabetic drug market faces the ceiling price, while the total market of cardiovascular medicines under price control is now estimated at around 58 per cent, with an overall adverse impact of reportedly Rs 550 Crore on the Indian Pharmaceutical Market. Overall price reduction for these two categories would range between 5 and 35 per cent, the average being around 12 per cent.

MNCs seem to have been hit harder:

An additional bad news for the MNCs is that the scope of Para 19 has now gone beyond the generic space and included even patented product.

For the first time a patented product Sitagliptin has been brought under the purview of Drug price Control order. This decision could give an unprecedented handle to the NPPA to regulate prices of even patented drugs through invocation of Para 19 of DPCO 2013 in future. Moreover, many high-priced branded generics of MNCs are brand leaders too. Thus, in a relative yardstick, invocation of Para 19 would hit the MNCs harder, creating an uncertainty in their business environment.

Conclusion:

Drug prices are cheapest in India in dollar terms, claims the pharma industry. Does this claim hold much water? May be not, because it should be realistically seen in terms of Purchasing Power Parity (PPP) and Per Capita Income in India. In that sense many would argue that drug prices in India, on the contrary, are not cheaper at all.

Moreover, it is important to take into cognizance the huge inter-brand price differences in branded-generics due to a flawed system, as patients have no role to play in choosing a drug (within the same molecule) that they would need to buy. It is the doctor who is the sole prescription decision maker, where price, per se, may not play a very significant role.

In a situation like this, despite the anger of the industry, many would ponder whether or not NPPA’s engagement and reasoning, on behalf of the Government, to bring some sense in the madness of drug pricing in India be just wished away?

Cheaper medicines in general and generic drugs in particular, would always make the patients and the payor happy, leaving the industry mostly angry.

Keenly observing the recent series of events and taking note of a number of highly credible viewpoints, besides a couple of seemingly spoon-fed, ill-informed and run-of-the mill type editorials, this is about time for the stakeholders to judge without any bias what is right for the country, its people and of course the business to work out a win-win solution, dousing the likes of ‘Fire in The Blood‘, once and for all.

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.

The New Government To Ponder: Is “Market Based Drug Pricing Policy” An ill Conceived One?

Posted on June 4, 2014 by Tapan Ray

According to a recent media report, Mr. Ananth Kumar, the new minister of Chemicals and Fertilizers has recently made a statement, as follows:

This statement assumes great significance for the Indian Pharmaceutical Industry and simultaneously rekindles hope for many patients, as the minister expressed intent that the new government wants to revisit the current drug price control system of India.

However, why did the minister in his above statement single out MNCs for discussion, is not very clear, just yet. Most probably, this is due to much published reports that branded generics from MNCs, which are outside price control, usually cost more than others, for whatever may be the reasons. Anyway, that could be the topic of another discussion in this blog.

The backdrop of DPCO 2013:

After a protracted negotiation and lobbying by the Indian Pharma Industry and others with the then UPA II Government, a well sought after paradigm shift took place in the drug price control regime of India.

In the new “National Pharmaceutical Pricing Policy 2012”, the span of price control was changed from bulk-drug based to all drug formulations falling under the ‘National List of Essential Medicines 2011 (NLEM 2011)’. The methodology of price control was also radically modified from the cost-based to market based one. Accordingly the new Drug Price Control Order (DPCO 2013) was notified on May 15, 2013.

The decision to have new drug policy was taken as a last minute sprint, as it were, primarily driven by the immense pressure generated by the Supreme Court on the UPA II Government for pussyfooting this important issue over almost a decade.

Hurried action after prolonged inaction:

The last Drug Policy of India was announced in 2002, which was subsequently challenged by a Public Interest Litigation (PIL) in the Karnataka High Court on the ground of being inflationary in nature. The Honorable Court by its order dated November 12, 2002 issued a stay on the implementation of the Policy.

This judgment was challenged by the Government in the Supreme Court, which vacated the stay vide its order dated March 10, 2003 and ordered as follows:

“We suspend the operation of the order to the extent it directs that the Policy dated February 15, 2002 shall not be implemented. However we direct that the petitioner shall consider and formulate appropriate criteria for ensuring essential and lifesaving drugs not to fall out of the price control and further directed to review drugs, which are essential and lifesaving in nature till 2nd May, 2003”.

As a result, DPCO 1995 continued to remain in operation pending formulation of a new drug policy as directed by the honorable court, since then.

Unfortunately, the then government did not show any urgency to come out with a new drug policy, even thereafter, for about a decade.

Fortunately, in the recent years, coming under intense judicial scrutiny and pressure due to a PIL on the subject before the Supreme Court of India, the then Government was compelled to come out with the New National Pharmaceutical Pricing Policy 2012 (NPPP 2012), rather hurriedly, effective December 7, 2012.

That was the ‘grand beginning’ of a new paradigm of ‘market-based’ drug price control regime in India.

Hype and rapid disillusionment:

Many stakeholders, barring some NGOs, felt at that time that DPCO 2013 could be a win-win strategy for both the industry and patients, as it would apparently be less intrusive for the pharma players.

Along side, through ‘Public Relations’ overdrive, hype was created by vested interests to generate a feeling that the drug prices are coming down by 30-40 percent, as a result of the new market-based price control regime.

That could well be true for a handful of drugs, but the fact is that the industry was adversely impacted by around 2.3 percent and the span of price control came down from 20 percent of the just pervious DPCO 1995 to 18 percent in DPCO 2013, not impacting the industry as much as it was hyped before.

Realization of these facts was just enough for the public disillusionment to set in.

Questions started popping-up almost immediately:

Unfortunately, many key questions started popping-up just at the very onset of its implementation process. Besides many others, some basic questions raised on DPCO 2013, a good number of which went into litigations and/or departmental reviews, are as follows:

Implementability of new ‘Ceiling Prices (CP)’ for market stocks within 45 days of notification by the respective companies.

Criteria of calculation of 1 percent market share for brands.

How would already existing different drug delivery systems of the same drug substance be considered to work out a common CP?

How reliable is the IMS Data, based on which CP calculation would be done by the NPPA?

What will happen to those NLEM 2011 drugs for which IMS does not provide any information?

Erstwhile Finance Ministry wanted to continue with cost plus formula:

When the new draft National Pharmaceutical Pricing Policy (NPPP) had gone for comments from various ministries of UPA II Government, the key recommendations of the then Ministry of Finance were reportedly as follows:

The proposal to limit the NPPP to control prices of only formulations leaving aside bulk drugs is not supported.

Top priced brands in many therapy areas are also the brand leaders. As a result, high prices of such drugs while calculating the ceiling prices would push up prices of many low priced drugs significantly.

The current system, which is a cost plus system is adequate to cover all legitimate costs for a manufacturer, particularly when the costing is being done annually and should be continued.

The same cost plus system should also apply to other formulations where additional therapeutic elements will be added. Related incremental cost in those cases can be considered to determine the ceiling price of combination formulations.

The Maximum Retail Prices (MRP) for all NLEM 2011 drugs may be fixed by the NPPA accordingly and the pharmaceutical companies would be free to price these NLEM products at any level below the MRP.

Annual indexation of price with WPI is not supported. The cost analysis should determine the quantum of increase.

Data related to prices and market shares should be collected from sources other than IMS even for drugs covered by them. The methodology to be followed by NPPA for evaluating IMS data and for collecting the data for medicines from other sources should be included in the NPPP.

A phased movement towards 100 percent generic manufacturing, as recommended by the Ministry of Health (MoH), for all drugs under the NLEM should be considered.

Current imbroglio over ceiling price fixation:

A recent media report highlighted that even almost 15 months after the announcement of DPCO 2013, National Pharmaceutical Pricing Authority (NPPA) fails to fix prices of 111 scheduled formulations due to scanty available information.

According to this report, though NPPA has revised prices of over 400 formulations out of around 652 as per DPCO 2013, it has now come out with a list of 103 formulations for which prices could not be fixed due to insufficient information. Besides, it could not fix the prices of eight more formulations, as the NLEM 2011 did not provide required information, such as, strength, route of administration and dosage form.

Thus, it appears that required price control of essential drugs as per DPCO 2013 is in a limbo today because of serious implementability issues, over and above its other (de)merits, as discussed above.

The fundamental question:

The fundamental question that is now being raised by many is, whether from patients point of new there was any need to change from ‘Cost Based Price Control (CBPC)’ to the new ‘Market Based Price Control (MBPC)’ system?

As a result, a Public Interest Litigation (PIL) is still pending before the Supreme Court challenging DPCO 2013.

This judicial scrutiny could put the MBPC concept in jeopardy, placing the pharma price control system back to CBPC mode, unless the new government takes a pre-emptive strategic move well before hand.

The New Minister’s recent statement rekindles hope for action:

There are now more reasons to justify why the new Minister Mr. Ananth Kumar should revisit MBPC mechanism, sooner. As I wrote in one of my earlier blog post that “The New ‘Market Based Pricing Model’ is Fundamentally Flawed”.

Conclusion:

From the statements of the new Minister of Chemicals and Fertilizers herein, and also the new Health Minister, as quoted in my last blog post, it appears that the Department of Pharmaceuticals (DoP) would continue to remain with the Ministry of Chemicals and Fertilizers, at least for some more time. This is quite contrary to the general expectations that DoP would be a part of the Ministry of Health in the new regime.

That said, besides full implementability of DPCO 2013 for all essential drugs, the Ceiling Price (CP) calculation methodology also appears to be fundamentally flawed, its misuse and abuse by some pharma players, as highlighted in my earlier blog post, have also been a subject of great concern and consumer aghast.

With this rapidly evolving scenario, unless the new minister Ananth Kumar steps in to sort out the conundrum with deft handling, unlike his almost defunct predecessor in UPA II, or till the Supreme Court intervenes responding to the PIL on DPCO 2013 related issues, the growing dissatisfaction of the affected section of stakeholders and the constraints of the NPPA would continue to linger, poor patients being the ultimate sufferers.

By: Tapan J. Ray

Is The New ‘Market Based Pricing’ Model Fundamentally Flawed?

Posted on April 7, 2014 by Tapan Ray

After a long wait of close to two decades, when the Drug Price Control Order 2013 (DPCO 2013) followed the National Pharmaceutical Pricing Policy 2012 (NPPP 2012) last year, it appeared that the new pharma price control regime is more acceptable to the industry than the previous, resulting in better over all implementation and compliance.

However, just within a year, the reality seems to be quite different. Not only the Ceiling Price (CP) calculation process of the National Pharmaceutical Pricing Authority (NPPA) based on DPCO 2013 appears to be fundamentally flawed, its misuse and abuse by some pharma players have also been the subject of great concern and consumer aghast.

The eternal ‘Cat and Mouse’ game continues:

Probably there would be many instances of pharmaceutical companies dodging the DPCO 2013. However, FDA, Maharashtra, has unearthed the following two instances, so far:

1. Favorable consumer expectations with well-hyped DPCO 2013 received a body blow for the first time, when the general public came to know through media reports, that too after almost a year, that GlaxoSmithKline (GSK) Consumer Healthcare having launched its new ‘Crocin Advance’ 500 mg with a higher price of Rs 30 for a strip of 15 tablets, has planned to gradually withdraw its conventional price controlled Crocin 500 mg brand costing around Rs 14 for a strip of 15 tablets to the patients . GSK Consumer Healthcare claims that Crocin Advance is a new drug and therefore should be outside price control.

According to IMS Health data, ‘Crocin Advance’ is currently the fifth largest brand among top Paracetamol branded generics, clocking a sales turnover of Rs 10.3 Crore during the last 12 months ending in February 2014.

2. The second instance of evading DPCO 2013 has also been reported by the media. In this case some other pharmaceutical companies have reportedly started selling the anti-lipid drug Atorvastatin in dosage forms of 20 mg and 40 mg, which are outside price control, instead of its price controlled 10 mg dosage form. Quoting the Maharashtra FDA, the report states: “Atorvastatin may face a similar kind of action from the state FDA as other overpriced brands of drugs as this drug has been overpriced five to 10 times more than the DPCO price. This kind of overcharging is a subject for investigation. Atorvastatin of 40 mg dosage is generally recommended for senior citizens.”

Tip of an Iceberg?

All these seem to be just the tip of an iceberg related to evasion of DPCO 2013 by some pharma black ships, raising costs of essential medicines for the patients. Ironically, what is happening now is an exact replica of the same old strategy that many pharma players got involved into to avoid price control under earlier DPCO 1995. Continuation of the same act of deceit with DPCO 2013 confirms that the ‘cat and mouse game’ to avoid price control is eternal in India, in the absence of any strong and exemplary deterrent.

Better late than never:

When Maharashtra FDA brought it to the notice of National Pharmaceutical Pricing Authority (NPPA), the later asked GSK to immediately reduce the market price of ‘Crocin Advance’, as there is no proven additional therapeutic efficacy for the product. The price regulator also sought confirmation of the action taken by the company in this regard. Additionally, GSK Consumer Healthcare now faces consequential punitive measures from the NPPA for price overcharging. This action on the part of NPPA, in all probability, would get lost in the quagmire of litigation, as usually happens in India.

Be that as it may, I expect NPPA taking similar action for Atorvastatin too and increasing its vigil for such scant respect on patient-centric laws and policies of the country.

A brief recapitulation:

Just to recapitulate, DPCO 2013 has been fundamentally different from its ‘predecessor’ DPCO 1995, mainly on the following two counts:

1. Methodology of Price Control:

This has changed from earlier ‘Cost Based Pricing (CBP)’ to ‘Market Based Pricing (MBP)’ based on simple average of all products having 1 percent or more market share.

2. Span of Price Control:

In DPCO 1995, all formulations of 74 bulk drugs, selected based on specified criteria, were under cost based price control, covering over 1700 formulations. Whereas, in DPCO 2013 all essential drugs as mentioned in the National List of Essential Medicines 2011 (NLEM 2011) come under price control applying the above new methodology of MBP. DPCO 2013 brings around 652 formulations of 348 drugs under 27 therapeutic segments of the NLEM 2011, under price control.

Significant benefits of DPCO 2013 to the industry:

DPCO 2013 offers following three key advantages to the industry, both in the short and longer term:

MBP methodology in DPCO 2013 is considered by the industry as more transparent and less ‘intrusive’ than CBP methodology.

Span of price control with DPCO 2013 came down to 18 percent of the total pharmaceutical market covering around 610 formulations, as against 20 percent in DPCO 1995 covering over 1700 formulations.

Opportunity for automatic annual price increase for controlled formulations based on WPI, which was not there in DPCO 1995, is now available to the industry. Thus, in keeping with the relevant provision of DPCO 2013, NPPA has recently allowed the drug companies to increase the Maximum Retail Price (MRP) of the price controlled medicines, contributing 18 percent of the total market, by 6.32 percent effective April 1, 2014, while prices of balance 82 percent of drugs, that are outside price control, can go up by 10 percent every year.

Check on essential drugs going out of market:

Interestingly, DPCO 2013 has tried to prevent any possibility of an essential drug going out of the market without the knowledge of NPPA by incorporating the following provision in the order:

“Any manufacturer of scheduled formulation, intending to discontinue any scheduled formulation from the market shall issue a public notice and also intimate the Government in Form-IV of schedule-II of this order in this regard at least six month prior to the intended date of discontinuation and the Government may, in public interest, direct the manufacturer of the scheduled formulation to continue with required level of production or import for a period not exceeding one year, from the intended date of such discontinuation within a period of sixty days of receipt of such intimation.”

However, it is still not clear, whether or not GSK Consumer Healthcare had followed this stipulated provision for price controlled conventional Crocin formulations. At least, I do not remember having come across any such public notice, as yet.

Key concerns expressed with DPCO 2013:

The MBP methodology seems to be unique to India as CBP is more common in countries that follow drug price control. Hence the following concerns were expressed with DPCO 2013.

Reduction in drug prices with market-based pricing methodology is significantly less than the cost based ones. Hence, consumers will be much less benefitted with the new system.

Earlier cost based pricing system was not more transparent only because a large section from the industry reportedly did not co-operate with the NPPA in providing cost details, as required by them.

Serious apprehensions have been expressed about the quality of outsourced market data lacking adequate confidence level across the board, which now forms the basis of CP calculations.

Additionally, outsourced data would provide details only of around 480 out of 652 NLEM formulations. How will the data for remaining products be obtained and with what level of accuracy?

It is, therefore, believed now by many that DPCO 2013 is more of an outcome of a successful lobbying efforts of the pharmaceutical industry in India, rather than a robust pricing policy supported by a flawless methodology for CP calculations.

DPCO 2013 faces challenge in the Supreme Court:

As a result of the above apprehensions, a Public Interest Litigation (PIL) is now pending before the Supreme Court for hearing challenging DPCO 2013.

Ground Zero of the quality of outsourced market data:

While assessing from the ‘Ground Zero’, keeping aside instances of hoodwinking DPCO 2013 with tweaked formulations, the core issue of the quality of outsourced market data forming the bedrock of CP calculation by the NPPA, undoubtedly becomes more fundamental, creating huge discomfort for many pharma players .

Unlike DPCO 1995, where NPPA used to calculate the CP based on its own audits, data provided by the concerned companies and from many other reliable market sources, the calculations to arrive at the CP for DPCO 2013 products are based predominantly on data outsourced from IMS Health, if not solely.

IMS data does not always capture correct brand prices:

As stated above, many leading pharmaceutical companies are now reportedly pointing out repeatedly that the CP fixation by the NPPA is not accurate, as the IMS Health data does not represent the real prices in many cases.

This is not a new issue either. I have been hearing similar complaints since ages in different forum, wearing different hats and also from various other reliable industry sources. Moreover, NPPA and the Department of Pharmaceuticals (DoP) have indicated several times in the past that IMS data do not capture the requisite details as needed for over 100 products featured in NLEM 2011.

According to Pharmabiz of April 2, 2014, some of the companies expressing the above apprehensions are Sun Pharma, Unichem Labs, Panacea Biotec, Win-Medicare, Albert David, Baxter (India), Indi Pharma and Gland Pharma.

Responding to such widespread complaints, the DoP has directed NPPA to revalidate the IMS data, now being used for CP calculations, for all notified medicines. Accordingly, NPPA has sought the relevant details from respective companies. However, till such data validation takes place, pharma players must comply with all CPs, as notified by the NPPA from time to time.

Difficulty in data validation:

In my view, it would not be easy for the NPPA to revalidate the IMS data due to the following reasons:

Those companies, whose prices are showing higher than the current ones in the IMS Health data, may not report to NPPA, as that could ultimately affect them adversely.

Pharma companies’ response, in general, to requests from NPPA for furnishing cost and price related information has traditionally been much less than encouraging.

The logjam to continue:

With this evolving scenario, I reckon, till the Supreme Court intervenes responding to the PIL on DPCO 2013 related issues, the dissatisfaction of the industry and the constraints of the NPPA would continue, patients being the primary sufferers.

Conclusion:

Despite the reported concern expressed in the 2014 National Trade Estimate (NTE) Report on Foreign Trade Barriers over the Indian drug price control mechanisms as a deterrent to foreign investments, government price control for essential medicines in India is here to stay for a long haul, to uphold the patients’ health interest.

That said, the final verdict of the Supreme Court related to the PIL on the NPPP 2012, based on which DPCO 2013 has been worked out, is yet to come. Any unfavorable decision of the Honorable Court on the subject may push both the NPPP 2012 and DPCO 2013 back to square one, yet again.

In this backdrop, considering the key fundamental flaw in the CP calculation process of DPCO 2013 with associated loud hiccups as evidenced by the GSK Consumer Healthcare episode and others, would a well-considered verdict of the Supreme Court on the subject be more desirable for greater access to more affordable essential drugs by the patients in India?

By: Tapan J. Ray

NDDS as New Drug: Good for Patients, Great for Pharma

Posted on January 13, 2014 by Tapan Ray

The Ministry of Health of India has reportedly decided to amend Rule 122 (E) of the Drugs and Cosmetics Rules, 1945 to categorize the New Drug Delivery Systems (NDDS), including ‘Controlled Release (CR)’ or ‘Modified Release (MR)’ formulations, whether a copy of studied and approved drugs or a new one, as ‘New Drugs’.

After the amendment, all vaccines and recombinant DNA (r-DNA) derived drugs would also fall under this nomenclature. Accordingly, to obtain ‘Marketing Approval’, such formulations would be subjected to requisite studies, including ‘Clinical Trials (CT), as specified for ‘New Drugs’ under the Drugs and Cosmetics Act of India.

It has however been clarified though, that these applications will not be treated as Investigational New Drugs (IND) and the Central Drugs Standard Control Organization (CDSCO) shall prepare appropriate regulatory guidelines for all NDDS formulations.

The main reason for the amendment is possibly much late realization of CDSCO that such formulations are vastly different from each other with respect to both efficacy and toxicity.

Besides, it has been widely alleged that some pharma companies in India, mainly to hoodwink the Drug Price Control Orders (DPCO) in the past, used to switch over from ‘Immediate Release (IR)’ formulations to products with CR/MR technology of the same molecule. However, that loophole has since been plugged in DPCO 2013, creating almost a furore in the industry.

A long overdue decision for patients’ health safety:

As stated earlier, this is indeed a long overdue decision of the Indian drug regulatory policy makers, solely considering patients’ health interest.

The primary reason being, any NDDS formulation with CR/MR technology is designed to release the drug substance in a controlled manner with high precision to achieve desired efficacy and safety, quite unlike its IR equivalent, if available in the market. It is important to note that inappropriate release of the drug in any CR/MR formulation would result in lesser efficacy or increased toxicity, jeopardizing patients’ health.

Process followed by US-FDA for CR/MR formulations:

In the United States, for marketing approval of such products, FDA usually requires submission of New Drug Applications (NDAs) providing details based on the evidence of adequate drug exposure expressed by blood levels or dose, and the response framework validated by clinical or surrogate endpoint(s).

US-FDA has three types of NDAs for MR drug products:

IR to CR/MR switch
MR/CR to MR/CR switch with unequal dosing intervals
MR/CR to MR/CR switch with equal dosing intervals

For switching from an IR to a CR/MR product, which is more common in India, the key requirement is to establish that the new CR/MR product has similar exposure course of the drug as compared to the previously approved IR product, backed by well-documented efficacy and safety profile. If not, one efficacy and/or safety trial would be necessary, in addition to three clinical pharmacology studies.

Good for patients:

The good news for patients is that, being categorized as ‘New Drugs’, all NDDS formulations, without any exceptions whatsoever, would henceforth obtain marketing approval only from the Drug Controller General of India (DCGI), after having passed through intense data scrutiny, instead of State Drug Authorities where getting a manufacturing license of such formulations is alleged to be a ‘child’s play’. Thus, with the proposed amendment, efficacy and safety concerns of CR/MR formulations are expected to be addressed adequately.

Great for Pharma:

Currently, while fixing the ‘Ceiling Prices (CP)’ under DPCO 2013, National Pharmaceutical Pricing Authority (NPPA) treats CR/MR formulations at par with IR varieties of the same molecules having the same dosage strength.

Thus, categorization of all NDDS formulations as ‘New Drugs’, irrespective of the fact whether these are copies of studied and approved drugs or new ones, would be lapped up by the manufacturers from product pricing point of view. All these formulations, after the proposed amendment, would go outside the purview of drug price control under Para 32 (iii) of DPCO 2013, which categorically states that the provisions of this order shall not apply to:

“A manufacturer producing a ‘new drug’ involving a new delivery system developed through indigenous Research and Development for a period of five years from the date of its market approval in India.”

A similar past issue still haunts:

Similar callousness was exhibited in the past, while granting marketing approval for a large number of highly questionable Fixed Dose Combination (FDC) drugs by the same drug regulators. Unfortunately, that saga is still not over, not just yet.

All these irrational FDC formulations, even after being identified so by the Drug Technical Advisory Board (DTAB), have been caught in the quagmire of protracted litigations. Consequently, such dubious products are still being promoted by the respective pharma players intensively, prescribed by the doctors uninhibitedly, sold by the chemists freely and consumed by patients ignorantly. With ‘pharmacovigilance’ being almost non-functional in India, the harmful impact of these drugs on patients’ health cannot just be fathomed.

Conclusion:

With the above examples, it is quite clear that technological precision of high order is absolutely imperative to manufacture any effective CR/MR formulation. In addition, stark regulatory laxity in the marketing approval process for these drugs is a matter of great concern.

In such a scenario, one could well imagine how patients’ health interests are being compromised by not formalizing and adhering to appropriate regulatory pathways for marketing approval of such drugs in the country, since decades.

That said, as the saying goes “Better Late, Than Never”. The ‘New Drug’ nomenclature of all CR/MR formulations or for that matter entire NDDS as a category, including vaccines and recombinant DNA (r-DNA) derived drugs, would now hopefully be implemented in India, though rather too late, a much welcoming decision nevertheless.

By: Tapan J. Ray

Sets 2013, Dawns 2014: Top 7 Pharma Developments

Posted on December 31, 2013 by Tapan Ray

Wish You Good Health, Happiness, Success and Prosperity in 2014

In this article I shall focus on ‘Top 7 Pharma Developments’, both while ‘Looking Back to 2013′ and also during my ‘Crystal Gazing 2014′.

Looking Back to 2013:

While looking back, the ‘Top 7 Pharma Developments’ unfolded in India during 2013, in my opinion, are as follows:

1. Supreme Court judgment on Glivec:

The landmark Supreme Court judgment on the Glivec case has vindicated, though much to the dismay of pharma MNCs, the need to strike a right balance between encouraging and protecting innovation, including incremental ones, and the public health interest of India.

2. DPCO 2013:

Following the National Pharmaceutical Pricing Policy (NPPP) of December 2012, the new Drug Price Control Order 2013 (DPCO 2013) signaled a significant departure from the decades old systems of arriving at both the ‘span’ and also the ‘methodology’ of drug price control in India. However, its implementation has been rather tardy as on today.

As a result, at the very beginning of the process of its effective roll-out, the new DPCO faltered badly. It created unprecedented complications and dead-locks not just for the pharmaceutical companies and the trade, but for the National Pharmaceutical Pricing Authority (NPPA), as well, which has not been able to announce the new ceiling prices for at least 100 essential drugs, even 8 months after notification of this order.

The pharma companies and the NGOs have already taken this policy to the court, though for different reasons. The rationale for the National List of Essential Medicines (NLEM) 2011 has also been questioned by many along with a strong demand for its immediate review.

Thus much awaited DPCO 2013 is still charting on a slippery ground.

3. India, China revoked 4 pharma patents:

In the Intellectual Property Rights (IPR) arena many National Governments have now started asserting themselves against the prolonged hegemony of the Western World pressing for most stringent patent regime across the globe, at times even surreptitiously. Such assertions of these countries signal a clear tilt in the balance, favoring patients’ health interest rather than hefty gains in business profits, much to the delight of majority of world population.

Revocation of four drug patents by India and China within a fortnight during July-August 2013 period has thus raised many eyebrows, especially within the pharma Multinational Corporations (MNCs). In this short period, India has revoked three patents and China one.

While these unexpected and rather quick developments are probably double whammy for the pharma MNCs operating in India and China, a future trend would possibly emerge as soon as one is able to connect the evolving dots.

4. Supreme Court intervened in Clinical trials (CT):

With a damning stricture to the Indian Drug Regulator, the Supreme Court, in response to a PIL filed by the NGO Swasthya Adhikar Manch, came out heavily on the way Clinical Trials (CTs) are approved and conducted in the country.

Breaking the nexus decisively between a section of the powerful pharma lobby groups and the drug regulator, as highlighted even in the Parliamentary Committee report, the Ministry of Health, as reported to the Supreme Court, is now in the process of quickly putting in place a robust and transparent CT mechanism in India.

This well thought-out new system, besides ensuring patients’ safety and fair play for all, is expected to have the potential to help reaping a rich economic harvest through creation of a meaningful and vibrant CT industry in India, simultaneously benefitting millions of patients, in the years ahead.

5. US-FDA/UK-MHRA drug import bans:

Continuous reports from US-FDA and UK-MHRA on fraudulent regulatory acts, lying and falsification of drug quality data, by some otherwise quite capable Indian players, have culminated into several import bans of drugs manufactured in those units. All these incidents have just not invited disgrace to the country in this area, but also prompted other national regulators to assess whether such bans might suggest issues for drugs manufactured for their respective countries, as well.

This despicable mindset of the concerned key players, if remains unleashed, could make Indian Pharma gravitating down, stampeding all hopes of harvesting the incoming bright opportunities.

The ‘Import Alert’ of the USFDA against Mohali plant of Ranbaxy, has already caused inordinate delay in the introduction of a cheaper generic version of Diovan, the blockbuster antihypertensive drug of Novartis AG, after it went off patent. It is worth noting that Ranbaxy had the exclusive right to sell a generic version of Diovan from September 21, 2012.

The outcome of such malpractices may go beyond the drug regulatory areas, affecting even the valuations of concerned Indian pharma companies.

6. Pharma FDI revisited in India:

After a series of inter-ministerial consultations, the Government of India has maintained 100 percent FDI in pharma brownfield projects through FIPB route. However, removal of the ‘non-compete’ clause in such agreements has made a significant difference in the pharma M&A landscape.

7. ‘No payment for prescriptions’:

Unprecedented acknowledgement and the decision of GSK’s global CEO for not making payments to any doctor, either for participating or speaking in seminars/conferences to influence prescription decision in favor of its brands, would indeed be considered as bold and laudable. This enunciation, if implemented in letter and spirit by all other players of the industry, could trigger a paradigm shift in the prescription demand generation process for pharmaceuticals brands.

Crystal Gazing 2014:

While ‘Crystal Gazing 2014′, once again, the following ‘Top 7 (most likely) Pharma Developments’, besides many brighter growth opportunities, come to the fore:

1. Public Interest Litigation (PIL) now pending before the Supreme Court challenging DPCO 2013 may put the ‘market based pricing’ concept in jeopardy, placing the pharma price control system back to square one.

2. The possibility of revision of NLEM 2011, as many essential drugs and combinations have still remained outside its purview, appears to be imminent. This decision, if taken, would bring other important drugs also under price control.

3. Universal Health Care (UHC) related pilot projects are likely to be implemented pan-India along with ‘free distribution of medicines’ from Government hospitals and health centers in 2014. Along side, more Public Private Partnership (PPP) initiatives may come up in the healthcare space improving access to quality healthcare to more number of patients.

4. With the Supreme Court interventions in response to the pending PILs, more stringent regulatory requirements for CT, Product Marketing approvals, Pricing of Patented Medicines and Ethical Marketing practices may come into force.

5. Possibilities of more number of patent challenges with consequent revocations and grant of several Compulsory Licenses (CL) for exorbitantly priced drugs in life-threatening disease areas like, cancer, loom large. At the same time, between 2013 and 2018, US$ 230 billion of sales would be at risk from patent expirations, offering a great opportunity to the Indian generic players to boost their exports in the developed markets of the world.

6. More consolidation within the pharmaceutical industry may take place with valuation still remaining high.

7. Overall pharma IPR scenario in India is expected to remain as robust and patient friendly as it is today, adding much to the worry of the MNCs and relief to the patients, in addition to the generic industry. More number of countries are expected to align with India in this important area.

Conclusion:

The year 2013, especially for the pharmaceutical industry in India, was indeed eventful. The ‘Top Seven’ that I have picked-up, out of various interesting developments during the year, could in many ways throw-open greater challenges for 2014.

My ‘Crystal Gazing 2014’, would challenge the pharma players to jettison their old and traditional business mindsets, carving out new, time-specific, robust and market savvy strategic models to effectively harvest newer opportunities for growth.

That said, the pharmaceutical industry will continue to thrive in India with gusto, including the MNCs, mainly because of immense potential that the domestic market offers in its every conceivable business verticals, propelled by continuous high growth trend in the domestic consumption of medicines, excepting some minor aberrations.

The New Year 2014, I reckon, would herald yet another interesting paradigm for the pharma industry. A paradigm that would throw open many lucrative opportunities for growth, both global and local, and at the same time keep churning out different sets of rapidly evolving issues, requiring more innovative honed corporate skill-sets for their speedy redressal, as the time keeps ticking.

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

Slugfest in Pharma Land: Isn’t ‘The Pot Calling the Kettle Black?’

Posted on July 29, 2013 by Tapan Ray

Close on the heels of detention of a British Citizen, an American citizen too has been reportedly detained, for the first time, by the Chinese Government in connection with unfolding mega corruption scandal in the country’s pharma industry involving even ‘third party’.

A slugfest over this corruption scandal too has already begun. Media reports highlight, vested interests, as usual, retaliate by saying that China’s attention to the alleged corruption by MNCs is to benefit the local Chinese companies.

As per reports, big global pharma innovator companies like, GlaxoSmithKline, AstraZeneca and UCB are currently being questioned by the Chinese authorities related to this scam.

Critical role of ‘Third Party’ in pharma bribery and corruption:

Although in the above Chinese scam, a third party, in form of a travel agency, has been accused to have played a critical role in the GSK case, it will be hard to believe that this is a solitary example.

Internal ‘Compliance Systems’ of global pharma companies, in most cases, are believed to be robust enough and will generally be found squeaky clean by any audit. Unfortunately, as it appears from various international reports, corruption still enters through cracks between seemingly robust ‘compliance firewalls’ for business gain.

Invariably in response, expensive and high decibel Public Relations (PR) machineries are put to overdrive. These extremely capable PR agents, with their all guns blazing, keep trying to establish that such incidents, though quite frequent and are taking place across the world unabatedly, are nothing but ‘small aberrations’ in pursuit of pharma ‘innovation’ for newer drugs just to benefit the patients.

As one understands from the GSK case, the ‘third party’ travel agent reportedly attempted to keep all transactions at arm’s length to avoid detection of any unholy nexus by the Chinese regulators.

However, in the real world, it could possibly be any crafty and well-identified ‘third party’, intimately associated with the pharmaceutical business process. These ‘third parties’ are crafty enough to exploit the loopholes in the seemingly robust compliance systems of the concerned companies to help facilitating their financial performance.

An interesting commonality in all such often repeated scams is the lack of top management accountability of the companies involved. This would probably surprise even the recent public sector scam tainted concerned ministers and top bureaucrats of India.

Much to everybody’s dismay, such incidents reportedly continue to take place in various parts of the world and in all probability in India too.

Other countries initiated probes:

Unlike the high-octane development in China, in many developed countries probes against such corruption have already been initiated at a different scale and level. For example, in Canada a conservative MP reportedly testified on October 17, 2012 to the ‘Standing Senate Committee on Social Affairs, Science and Technology’ as an expert witness regarding post-approval drug monitoring and the corrupt practices of pharmaceutical companies.

Global Corruption Barometer 2013:

When a person talks about corruption, it usually gets restricted to corrupt practices in the Public Sector. Any such issue involving Business, Healthcare, Education and even Judiciary, Media and NGOs are considered at best as misdemeanor, if not minor aberrations.

In this context it is worth mentioning that ‘Transparency International’ has released Global Corruption Barometer 2013 recently. This ‘2013 Barometer’ is the world’s largest public opinion survey on corruption. It surveyed 114,000 people in 107 countries.

The reported global findings of this survey, which indicate a general lack of confidence in the institutions tasked to fight corruption, is as follows:

More than one in two people thinks corruption in their country has worsened in the last two years.

54 per cent of people surveyed believe their governments’ efforts to fight corruption are ineffective.

27 percent of respondents have paid a bribe when accessing public services and institutions in the last 12 months, revealing no improvement from previous surveys.

In 51 countries around the world, political parties are seen as the most corrupt institutions.

In 36 countries, people view the police most corrupt, in 20 countries they view the judiciary as most corrupt.

54 percent of respondents think that the government in their country is run by special interests.

Situation alarming in India:

However, in India, the situation is much worse. Besides political parties, police and legislature, institutions like, Health Systems, Business, Judiciary, NGOs and even Media smack of high level of corruption, as follows:

No:	Institutions	Bribe Quotient %
1.	Political Parties	86
2.	Police	75
3.	Legislature	65
4.	Education	61
5.	Health Systems	56
6.	Business	50
7.	Judiciary	45
8.	Religious Bodies	44
9.	Media	41
10.	NGO	30
11.	Military	20

Moreover, as per the report, approximately one out of four people paid a bribe globally in 2012, while in India, the bribe-paying rate was twice, with a little over one out of two people paying a bribe. Based on this indicator alone India occupies 94th rank out of 107 countries.

Coming back to healthcare in India, manifestations of high level corruptions in this critical area taken together with the same, as reported for its close connects like, as follows, are indeed alarming:

Business houses (include pharma companies)
Education (produces doctors, nurses etc.)
Judiciary (also resolves various pharma disputes)
Media (help creating unbiased public opinion)
NGOs (takes care of Patients’ interest)

The prevailing situation is highly disturbing, as any meaningful reform measures in the healthcare space of India could be effectively blunted, if not negated, by influencing related corrupt institutions.

It is important to note that bribery in the Indian healthcare sector was as rampant as Education and Judiciary in 2012, as follows:

No.	Sector	Bribe Paid in 2012 %
1.	Police	62
2.	Registry & Permits	61
3.	Land	50
4.	Utilities	48
5.	Education	48
6.	Tax Revenue	41
7.	Judiciary	36
8.	Health	34

Source: Global Corruption Barometer 2013

Where there’s smoke, there’s fire:

All these numbers vindicate the well-known dictum ‘where there’s smoke, there’s fire’ for the healthcare sector, in general, and the pharmaceutical sector, in particular, of India.

Bribery and corruption appear to have emerged as the key compliance related issues in the pharma sector. A report indicates that this is mainly due to manipulable environment in the pharma industry, just like in many other sectors as mentioned above.

Such manipulations could range from influencing drug procurement prices in return for kickbacks, giving expensive freebies to the medical practitioners in return of specific drug prescriptions, and even making regional regulatory bodies to provide favorable reports overlooking blatant malpractices.

High level of tolerance:

KPMG Fraud Survey Report 2012 also highlights, though bribery and corruption continues to be an issue, pharma industry shows reluctance to discuss it openly. Moreover, close to 70 per cent of respondents surveyed said, they faced no significant threats from such issues.

The report also indicated, around 72 per cent of respondents expressed that their respective companies have in place a robust mechanism to address bribery and corruption. However, only few respondents expressed inclination to explain such in-house mechanisms. This vindicates the point of high levels of institutional tolerance to bribery and corruption in the pharmaceutical sector of India, just like in many other countries.

“Collusive nexus”:

Even a Parliamentary Standing Committee in its findings reportedly indicted India’s top drug regulatory agency for violating laws and collusion with pharmaceutical companies to approve medicines without clinical trials with the following remark:

“There is sufficient evidence on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.”

A Research Scientist fumes:

Following is a reported comment of a research scientist on corruption and bribery in the pharmaceutical industry of India:

“It would not make me happy, to put it mildly, to think of a drug that I’d had a part in discovered being flogged via sleazy vacation offers and sets of cookware dumped on a doctor’s office floor.”

Where pharma and political slugfests unite:

This short video clip captures one of too many pharma slugfests given a very high level and fiery political dimension in the global pharma land.

Conclusion:

As we have seen in the ‘Global Corruption Barometer 2013’, the respondents regarded almost all key institutions and industrial sectors in India as being corrupt or extremely corrupt.

As per the above report, corruption seems to have engulfed the private sector too, and alarmingly has not spared even the ‘healthcare system’ at large , as it quite prominently shows up in the ‘Corruption Barometer 2013’.

As deliberated above, some ‘third parties’ of any type, working within the pharmaceutical value chain, could well be the fountain heads of many types of corruptions, as reported in China. They should be put under careful vigil of the regulators, placed under magnifying glasses of scrutiny and the rogues must quickly be brought to justice wherever and whenever there are violations. A report stating, Chinese administration has decided to punish 39 hospital employees for taking illegal kickbacks from pharmaceutical companies as a part of country’s widening investigation against pharma corruption, would justify this point.

That said, the task in hand is much tougher. On the one hand an Indian Parliamentary Panel observes that both regulators and the pharma companies are hand in glove to fuel corruption, instead of dousing the fire.

On the other hand, the global pharma industry has been accusing the Indian government of ‘protectionism’, ‘lack of transparency/predictability in its policy measures’ and ‘draconian IP laws’.

In the midst of all these cacophony, haven’t the stakeholders and the public at large, with exposure to contextual information, started pondering:

Gosh! in the slugfest on the pharma land, isn’t ‘The Pot Calling the Kettle Black?’

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

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Slugfest in Pharma Land: Isn’t ‘The Pot Calling the Kettle Black?’