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Is The Global Generic Drug Market Slowing Down?

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Driven by a strong environmental headwind, both within and outside the country, several pharma companies in India have recently started raising a red flag on their future earning guidance for the stock market, though citing quite different reasons altogether. Quoting the following two recent examples, I shall illustrate this point:

“For decades, the generic drug business has followed a simple model for growth: wait for a chemical medicine to go off patent, then copy it. But 2018 promises to be one of the industry’s last big bumper crops, with $27.8 billion worth of therapies losing protection. The following year’s haul drops by almost two thirds, and the year after it shrinks even further” – reported the May 27, 2017 article in Bloomberg titled, ‘Pharma Heir Seeks a New Holy Grail as Generic Drugs Run Dry,” quoting the promoter of Glenmark.

Another May 27, 2017 article by Reuters also quoted similar business sentiment, though for a much different reason, of the world’s fifth-largest generic drug maker – Sun Pharma, following similar concerns of Dr. Reddy’s Laboratories Ltd and Lupin Ltd. Here, the promoter of Sun Pharma said, “We may even have a single digit decline in consolidated revenue for full-year 2018 versus full-year 2017.”

These red flags, though signal different reasons, prompt some fundamental questions: Is the global generic drug market, especially the US, slowing down? If so, what then is the real reason of the anticipated business slow-down of large Indian pharma players? Is it due to lesser number of patented products going off-patent in the future years, or is it due to pricing pressure in various countries, including the US, or a combination of several other factors alongside? In this article, I shall deliberate on this emerging concern.

Global generic drug market – the past trend:

Several favorable environmental factors have been fueling the growth of generic drug prescriptions across the world, and the trend continues going north. Currently, the growth of generic drug prescriptions is outpacing the same for the patented ones. According to the April 2017 research study titled “Generic Drugs Market: Global Industry Trends, Manufacturing Process, Share, Size, Growth, Opportunity and Forecast 2017-2022”, published by IMARC, the global generic drug market was valued at around US$ 228.8 Billion in 2016, growing at a CAGR of around 9 percent during 2010-2016.

This trend has been well captured in numbers, from various different angles, in the September 2016 report of Evaluate Pharma, as follows:

Global trend of prescription generic drug sales (2008-2015) 

Year 2008 2009 2010 2011 2012 2013 2014 2015
Global Rx Drug Sales (2008-15) (US$ Billion) 650 663 687 729 717 724 749 742
Growth per Year (%) +2.0 +3.5 +6.1 (1.6) +0.9 +3.5 (1.0)
Rx Generics Drug Sales (US $Billion) 53 53 59 65 66 69 74 73
Generics as % of Total Rx Drugs 8.2 8.0 8.6 9.0 9.2 9.5 9.9 9.9
% Market at risk to patent expiry or available for new generic drugs entry 3.0 4.0 4.0 5.0 7.0 4.0 5.0 6.0

(Table 1: Adapted from the report ‘World Preview 2016, Outlook to 2022’ of EvaluatePharma, September 2016)

The Table 1 shows, while the overall global sales growth of prescription drugs faltered during 2012-15 period, mainly due to after effects of patent expiry of several blockbuster drugs, the general trend of generic drug sales continued to ascend. As we shall see below, the projected trend in the succeeding years is not much different, either.

Global generic drug market – present, and projected future trend:

The global generic drug market is currently growing at a faster pace than the patented drugs, and this overall trend is likely to remain so in future too, as we shall find below.

Globally, North America, and particularly the US, is the largest market for generic drugs. According to the QuintilesIMS 2016 report, generic drugs saved patients and the US health care system US$227 billion in 2015. Although around 89 percent of the total prescriptions in the US are for generic drugs, these constitute just 27 percent of total spending for medicines. In other words, the share of patented drugs, though, just around 11 percent of total prescriptions, contribute 73 percent of the total prescription drug costs.

Backed by the support of Governments for similar reasons, Europe is, and will continue to register impressive growth in this area. Similarly, in Latin America, Brazil is the largest market for generic drugs, contributing 23 percent and 25 percent of the country’s pharma sector by value and by volume, respectively, in 2015.

Major growth drivers to remain the same:

The following major factors would continue to drive the growth of the global generic drug market:

  • Patent expiration of innovative drugs
  • Increasing aging population
  • Healthcare cost containment pressure, including out of pocket drug expenditure
  • Government initiatives for the use of low cost generic drugs to treat chronic diseases
  • Despite high price competition more leading companies are taking interest in generic drugs especially in emerging markets

India – a major global player for generic drugs:

India and China dominated the generic drug market in the Asia pacific region. India is the largest exporter of the generic drug formulations. A large number of drug manufacturing plants belonging to several Indian players have obtained regulatory approval from the overseas regulators, such as, US-FDA, MHRA-UK, TGA-Australia and MCC-South Africa. Consequently, around 50 percent of the total annual turnover of many large domestic Indian drug manufacturers comes from exports.  The top global players in the generic drug market include Teva Pharmaceuticals, Novartis AG, Mylan, Abbott, Actavis Pharma and India’s own Sun Pharma.

No significant change in the future market trend is envisaged:

When I compare the same factors that fueled the growth of global prescription generic drug market in the past years (2008-2015) with the following year (2016), and the research-based projections from 2017-2022, no significant change in the market trend is visible.

Global trend of prescription generic drug sales (2015 – 2022)

Year 2015 2016 2017 2018 2019 2020 2021 2022
Global Rx Drug Sales (2015-22) (US$ Billion) 742 778 822 873 931 996 1060 1121
Growth per Year (%) (-1.0) +4.8 +5.7 +6.2 +6.6 +7.0 +6.5 +5.7
Rx Generics Drug Sales (US $Billion) 73 80 86 92 97 103 109 115
Generics as % of Total Rx Drugs 9.9 10.3 10.5 10.5 10.4 10.4 10.3 10.3
% Market at risk to patent expiry or available for new generic drugs entry 6.0 6.0 4.0 4.0 4.0 2.0 2.0 5.0

(Table 2: Adapted from the report ‘World Preview 2016, Outlook to 2022’ of EvaluatePharma, September 2016)

The Table 2 shows, the overall global sales growth trend of prescription drugs appears a shade better in 2008-15 period, even with the after effects of patent expiry (Table 1), as compared to 2016-22. The scope for entry of new generic drugs goes below 4 percent of the total prescription drug market only in two years – 2020 and 2021. Thus, any serious concern only on this count for a long-term growth impediment of the global generic drug market, post 2018, doesn’t seem to be based on a solid ground, and is a contentious one. Moreover, the sales trend of prescription generic drugs as a percentage of the total value of all prescription drugs, hovers around 10 percent in this statistical projection, which is again a shade better than around 9 percent of the past comparable years.

What triggered the major pricing pressure?

With its over 40 percent of the total pharmaceutical produce, predominantly generic drug formulations, being exported around the world, India has become one of the fastest growing global manufacturing hubs for medicinal products. According to Pharmaceutical Export Promotion Council of India (Pharmexcil), United States (US) is the largest market for the India’s pharma exports, followed by the United Kingdom (UK), South Africa, Russia, Nigeria, Brazil and Germany.

Since long, the largest pharma market in the world – the US, has been the Eldorado of pharma business across the globe, mostly driven by the unfettered freedom of continuously charging a hefty price premium in the country. Thus far, it has been an incredible dream run, all the way, even for many large, medium and small generic drug exporters from India.

However, ongoing activities of many large drug companies, dominated by allegedly blatant self-serving interests, have now given rise to a strong general demand on the Governments in different countries, including the US, to initiate robust remedial measures, soon. The telltale signs of which indicate that this no holds barred pricing freedom may not be available to pharma, even in the US, any longer.

Self-inflicted injury?

The situation where several major Indian generic companies are in today, appears akin to an avoidable self-inflicted injury, basically falling in the following two important areas. Nonetheless, even after the healing process gets over, the scar mark would remain for some more time, till the business becomes as usual. Hopefully, it will happen sooner than expected, provided truly ‘out of box’ corrective measures are taken, and followed up with a military precision.

Huge price hikes:

According to the Reuters report of September 11, 2016, US Department of Justice sent summons to the US arm of Sun Pharma – Taro Pharmaceutical Industries Inc. and its two senior executives seeking information on generic drug prices. In 2010, Sun Pharma acquired a controlling stake in Taro Pharmaceutical Industries.

On September 14, 2016, quoting a September 8, 2016 research done by the brokerage firm IIFL, ‘The Economic Times’ also reported that several large Indian generic drug manufacturers, such as, Sun Pharma, Dr. Reddy’s, Lupin, Aurobindo and Glenmark have hiked the prices of some of their drugs between 150 percent and 800 percent in the US. These apparently avoidable incidents fuel more apprehensions in the prevailing scenario. As I wrote in this Blog on September 12, 2016, the subject of price increases even for generic drugs reverberated during the last Presidential campaign in the US, as well.

Serious compromise with product quality standards:

Apprehensions on dubious quality standards of many drugs manufactured in India have now assumed a gigantic dimension with import bans of many India made generic drugs by foreign drug regulators, such as US-FDA, EMA and MHRA. Today, even smaller countries are questioning the Indian drug quality to protect their patients’ health interest. This critical issue has started gaining momentum since 2013, after Ranbaxy pleaded guilty and paid a hefty fine of US$ 500 million for falsifying clinical data and distributing allegedly ‘adulterated medicines’ in the United States.

Thereafter, it’s a history. The names of who’s who of Indian drug manufacturers started appearing in the US-FDA and other overseas drug regulators’ import ban list, not just for failing to conform to their quality standards, but also for willful non-compliance with major cGMP requirements, besides widely reported incidents of data fudging and falsification of other drug quality related documents.

Global murmurs on generic drug quality among doctors:

There are reported murmurs both among the US and the Indian doctors on the generic drug quality standards, but for different drug types and categories.

According to the Reuters article published on March 18, 2014, titled “Unease grows among US doctors over Indian drug quality”, many US doctors expressed serious concerns about the quality of generic drugs supplied by Indian manufacturers. This followed the ‘import bans’ by the USFDA and a flurry of huge Indian drug recalls there. Such concerns are so serious, as India supplies about 40 percent of generic and over-the-counter drugs used in the United States, making it the second-biggest generic drug supplier after Canada.

While the doctors in the US raise overall quality concerns on the products manufactured by the large Indian branded generic companies, Indian doctors are quite at ease with the branded generics. They generally raise quality concerns only on generic drugs without any brand names.

Thus, a lurking fear keeps lingering, as many feel that Indian drug manufacturing quality related issues may not necessarily be confined only to exports in the developed world, such as, the United States, European Union or Canada. There is no reason to vouch for either, that such gross violations are not taking place with the medicines consumed by patients in India, or in the poorer nations of Africa and other similar markets.

In conclusion:

Sun Pharma has publicly expressed its concern that pricing pressure in the US may adversely impact its business in 2018. There doesn’t seem to be any major surprise on this statement, as many believe it was likely to happen, though for a different reason, since when the global media reported in September 2015: “FDA revokes approval for Sun Pharma’s seizure drug over compliance issues.”

As investors are raising concerns, the following comment by the Co-Chairman and Chief Executive of Dr. Reddy’s Laboratories, reported by ‘Financial Express’ on August 24, 2015, well captures the vulnerability of Indian generic drug business in this area: “The U.S. market is so big that there is no equivalent alternative. We just have to get stronger in the U.S., resolve our issues, build a pipeline and be more innovative to drive growth.”

Inadequate remedial measures could unleash this pressure to reach a dangerous threshold, impacting sustainable performance of the concerned companies. On the other hand, adequate remedial action, both strategic and operational, could lead to significant cost escalation, with no space available for its neutralization through price increases, gradually squeezing the margin. It will be a tight rope walk for many in the coming years.

As research reports indicate, the global generic drug market is not and will not be slowing down in the long term, not even in India. There may be some temporary ups and downs in the market due to pricing pressure, and the number of novel products going off-patent in some years. Nevertheless, the traditional business models being followed by some large companies may retard their respective business growth, considerably.

The pricing pressure is a real one. However, from the Indian perspective, I reckon, it’s primarily a self-inflicted injury, just as the other major one – the drug import bans on the ground of serious compromise with product quality standards. Many Indian generic drug players don’t believe so, and probably would never will, publicly.

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.

Rebalancing Skill Sets In Pharma Sales And Marketing

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A disturbing trend against much needed more job creation across the world, has been well captured in a May 2016 MIT article. It concluded through several complex mathematical models that: “As more tasks performed by labor are being automated, concerns that these new technologies will make labor redundant have intensified.”

However, despite well-hyped concerns in this area, ongoing rapid advancement of technology and other related innovation haven’t yet caused any alarming level of unemployment anywhere in the world, nor it possibly will. Several instances of gradual reduction in the number of routine and traditional jobs due to such automation, are generally related to a lesser level of hard skill sets. As we shall see below, many industries require doing so in the modern times, for long term sustainability of business.

In tandem, promising high tech jobs requiring state or the art hard skill sets are getting created too, though are fewer in number. Nevertheless, the number of brilliant startups has increased by manifolds, during the same period. This change is inevitable, mostly in any science and technology driven industry, e.g., banking sector, where most of human operated bank tellers have made way to ATM machines.

A recent vindication:

Vindicating this point, as it were, on May 18, 2017, Reuters reported that Swiss pharma major Novartis, as a part of its “ongoing global transformation” initiative launched last year to create a unified operating model, will cut around 500 traditional and routine jobs in Switzerland, and add 350 in high-tech areas. Immediately thereafter, for similar reasons, the company announced the elimination of another 250 jobs in the United States.

Jobs are important to all for a living. Any job loss, irrespective of the nature of business compulsion, is indeed unfortunate. That said, whether we like it or not, such evolving trends are the stark realities, and expected to continue or even accelerate in the years ahead for higher growth in productivity, especially involving the routine and traditional tasks.

Pharma industry, though a science-based one, loss of routine and traditional jobs due to technological advancement is fortunately still much less as compared to other similar industries. This is primarily due to the continuation of the traditional business models in the pharma sector, requiring a huge number of human intervention, which call for a different balance of soft and hard skill sets.

However, crystal gazing the future, it appears quite likely that there will be a strong need to rebalancing the required soft and hard skills in the drug industry. The contour of my discussion in this article will be on pharma sales and marketing. 

Skill – the ability to do something well:

The Oxford dictionary defines ‘skill’ as ‘the ability to do something well’. Similarly, the term ‘ability’ has been defined by it as ‘possession of the means’. Thus, ‘skill’ means ‘possession of the means to do something well’. It is an absolute must in all professions, including pharma sales and marketing.

Skills broadly fall into two categories – hard and soft skills. Hard skills involve specific knowledge and teachable abilities that can be defined and measured and are usually quantifiable.

Hard skills are individual proficiency in various scientific, technical, mathematical and even some artistic areas of creation, besides other related ones. In pharma sales and marketing arena of the near future, these include, among others, robust scientific knowledge-base to understand various aspects of drug molecules, content creation with astute market understanding, data generation and analysis through state of art analytics and research, software programing, digital savviness and social media expertise. Many of these skills are related to the Intelligent Quotient of an individual.

Soft skills, on the other hand, are less tangible and quantifiable, such as etiquette or personality development; work ethics, getting along with people, ability to listen patiently, overcoming objections, persuading others and a deep sense of accountability. Many of these skills are usually related to emotional intelligence of an individual.

Which one is more important?

Both hard or soft skills are useful, valuable and important. However, the mix of these two skills for high performance of any individual professional will generally depend on success requirements of a job in a specific macro business environment.

That said, it is important to note that most of the hard skills are taught and learnt mostly before a person’s entry into science, technology or various other craft or design based jobs. The related hard skills are essential for getting selected for specialized jobs. Whereas, softer skills are usually learned on the job, and through experience by all those who want to grow in the profession.

In this context, it may not be a bad idea for all pharma sales and marketing professionals to take a hard look at our own current soft and hard skill sets again, against rapidly changing demands of the business environment. Regardless of where we are now, it will be worth writing down on a piece of paper the type of each of these two skills, in order of their strengths, that we individually possess, which are good enough for achieving sustainable excellence in business performance and personal career progression. It may provide a broad sketch of where we stand today in the VUCA world.

The years ahead for pharma won’t be quite the same:

A strong wind of change has already started signaling that the years ahead for the pharma industry, won’t be quite the same as the bygone years nor like what it is today. Some, industry professionals have picked up this cue, while many are still in pursuit of replicating the traditional past with some digital tweaking here and there, whatever may be the reasons.

The current mix of skill sets of the sales and marketing professionals, quite perceptibly, tilts more towards sharpening the softer skills of the employees, as the traditional pharma business models prompt so.

Future need – rebalancing the skill sets:

To be a successful in the days ahead, pharma companies would need to dive deep into the cyberspace – just to be on the same wavelength with its important stakeholders, including, the Government.

Looking around, one witnesses many patients going digital at a faster pace than ever before. They enjoy the cyberspace while embracing the new ways of living life, such as – communicating digitally, chatting in WhatsApp sharing patient’s experience, interacting with online patient communities, and preferring data mining to know more about anything of interest. These activities also get them a sense of the differential advantages of various health care products, services and their cost, before or while consulting doctors and deciding what they can afford.

Similarly, many medical professionals are also not depending solely on the company representatives now to get relevant details on any medicinal product, device or services. Besides frequent interaction with their peer groups, they get such detail information from various websites run by independent, and credible expert groups.

Thus, one of the common arena for pharma stakeholder engagement and interaction would soon be the enigmatic Cyberspace. As the changing days come nearer, there is likely to be greater emphasis on the acquisition of talent having specialized hard skills in this area of sales and marketing.

This emerging scenario prompts rebalancing the mix of soft and hard skill sets with much greater care, and hire young sales and marketing professionals, accordingly to give shape to it. This process should commence now, as the present makes way for the future. This is so important because, the current trend of tweaking with many digital tools and devices mostly as interfaces, or for complementing in-person product detailing or for better field management, or even to draw up marketing and sales plans, may not yield the desired business results any longer, even for survival, as we move on.

Becoming digital natives?

According to the 2015 A.T. Kearney Report titled, “Time for Pharma to Dive into Digital”, pharma sales and marketing professionals must also become digital natives, providing content that is both up-to- date and appropriate for multiple digital channels. Moreover, they will have to be familiar with advanced analytics to monitor and measure actual consumption pattern, besides capturing in real time a huge sample of relevant data for deeper customer insights.

The new normal:

One of the biggest challenges would be in the approach to content development and management. Creating an interactive detailing toolbox for truly responsive customer engagement, requires a good deal of thought and quite complex coding. This would necessitate centralization of marketing content production, which is traditionally decentralized in many sales and marketing organizations. Similarly, the major focus of the sales force will shift from maximizing physician-call rates, to becoming a team of digital communication specialists, and coordinators who would ensure that the right channels are used at the right time.

As the November 2016 Accenture Report titled, ‘The Rebirth of The Pharmaceutical Sales Force’ underscores, the most successful pharmaceutical sales teams in the future will be those willing to define and servicing customers in new ways… and will use digital advances to change the conversation, and position themselves as committed to helping physicians improve health outcomes.

This expected change, I reckon, will put in place a new normal for pharma sales and marketing success in the years ahead.

In conclusion:

Young aspirants wanting to make a career in the pharma industry, may wish to take note of this evolving trend of inevitable changes. They may wish to get well-considered views on the same of a couple of experts’ having no conflict of interest, for a careful and independent personal assessment. These budding strivers should realize that the final actionable decision on developing requisite hard and soft skill sets for a successful take off in their respective working lives, should preferably be taken only by themselves, and none else.

An August 2015 article of McKinsey & Company titled, “The road to digital success in pharma” articulates that the pharma companies, though can play a central role in the digital revolution of healthcare, are running hard to keep pace with changes brought about by digital technology. But soon there may not be any other option left for achieving business excellence.

While the nation is taking strides to transform itself into ‘Digital India’, the pharma companies operating in the country can’t possibly afford to remain far behind. Willy-nilly, they will soon need to realign their business processes accordingly, as there may not be any further scope for individual pharma players to operate within the same old cocoon of tradition bound activities, and still survive.

To meet the new and tougher demands for excellence in pharma sales and marketing, the urgent need of the changing time lies squarely outside the box. To usher in a requisite transformation in the current business model, it calls for a series of well-calibrated, much researched, and bold steps – skillfully rebalancing the crucial soft and hard skill sets, achievable within a realistic and self-determined timeframe.

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.

Disruptive Digital Innovation To Reduce Medication Need?

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Application of digital technology in various spheres of not just business, but in our individual day to life also, promises a disruptive change for the better, from the traditional way of doing things and achieving goals – freeing a lot of precious time for us to do much more, and even faster. An impending tsunami of this digital revolution, as it were, is now all pervasive, with various digital application platforms becoming increasingly more cost effective, quite in tandem with the fast pace of cutting-edge innovation. This is so different from what is generally witnessed in the pharma business.

Interestingly, despite high demand for cost effective health care from all over the world, not much progress in this area is still visible within this industry, in general, and particularly in the pharma business. Various reasons may be attributed to this apathy, which I shall not venture to go into, today.

On the other hand, sniffing a huge opportunity in this largely vacant space, many tech giants and startups are investing heavily to make health care of people easier, and at the same time reap a rich harvest, far outpacing the big pharma players.

As I connect the different dots on world-class digital initiatives in the health space, a clear trend emerges on the global scenario. The way Internet revolution, to start with, followed by smartphones and many other wireless digital services is changing the rhythm of life for many making it much easier, is just amazing. These include a plethora of everyday ‘must-do’ and several other functions, such as, precise need-based information gathering, online banking, tax-filing, shopping, payment, social networking, cloud computing and storage, besides a gamut of other digital services.

Similar disruptive digital innovations are expected in the health care space too, involving many long-awaited patient-centric areas, such as, significant reduction in the cost of medication. I discussed a similar issue in one of my earlier articles, published in this blog. However, today, I shall focus on this specific area, in view of its possible huge impact on the traditional pharma business model.

May reduce need of medication:

That tech startups are developing digital tools that reduce the need of medication, was very recently reported in an article titled, ‘Digital disruptors take big pharma beyond the pill’ published in the Financial Times on April 24, 2017. For example, a California-based startup, has reportedly come out with a digital device, smaller than an iPhone and fitted with a cellular chip, that can keep instant and accurate track of blood sugar levels. If the readings fall in the danger zone, an appropriate text message will be automatically generated for the person, such as – “drink two glasses of water and walk for 15 minutes”. The individual can also seek further help over the telephone from a trained coach – a highly-qualified dietitian for further guidance, the article highlights.

The whiz kid developers of wearable digital devices and apps are now intently working on many innovative health care solutions. Many of these can help early disease detection, and chart the risk profile of persons prone to various ailments, based on an enormous amount of well researched scientific data, significantly reducing the need of medication through effective disease prevention and management protocols. For example, there are umpteen evidences, demonstrating that specific moderate physical exercises help control diabetes just as well as medication, when detected early.

Thus, I reckon, such wearable digital devices and apps carry a huge promise to detect many diseases like, diabetes at its very onset or even before, and influence the person to take the necessary measures. In case of diabetes, it could be like, walking a certain distance every day, along with regular dietary advices from a remote center. Won’t such digital interventions work out far cheaper and convenient than lifelong visits to physicians and administration of anti-diabetic drugs?

The notes of the pharma business playbook need to be rewritten?

Let me quickly elaborate this point with an example of a common chronic ailment, say, diabetes. For effective management of this disease, global pharma players prefer to focus on better and better antidiabetic drug development, and after that spend a fortune towards their effective sales and marketing for generating enough prescription demand. Branded generic manufacturers are no different. This is important for all of them as most patients will have to administer the medicines for chronic ailments for a lifetime, incurring significant recurrent expenses for effective disease control. The first access point of such disease management has always been a doctor, initially for diagnosis and then for lifelong treatment.

Disruptive digital innovation could change the first point of intervention from the doctors to various digital apps or devices. These digital tools would be able to check and capture the person concerned predisposition to chronic diseases like, hypertension and diabetes, besides many other serious ailments, including possible cancer. When detected early, primary disease management advice would be available to patients from the app or the device itself, such as, the above-mentioned device for diabetes. If the preventive practices can manage the disease, and keep it under control, there won’t be any serious need to visit a doctor or pop a pill, thus, avoiding any need of active medication.

In that sense, as the above FT article has articulated, ‘rather than buying a pill, people might buy an overall solution for diabetes’ can’t be more relevant. When it happens, it will have a multiplier effect, possibly impacting the volume of consumption of medicines, just as what disease prevention initiatives do. Consequently, the notes of the pharma business playbook may have to be rewritten with right proactive measures.

As reported, the good news is, at least a couple of global pharma players have started fathoming its impact. This is apparent from Sanofi’s collaboration on digital devices and patient support for diabetics, and to some extent with Pfizer on immuno-oncology, using expertise in data analytics to identify new drug targets.

The key players in this ‘healthcare value chain’:

When the digital health care revolution will invade the current space of traditional-health care, it will create both the winners and losers. This was clearly highlighted in an article titled, ‘A digital revolution in healthcare is speeding up’, published by ‘The Economist’ on March 02, 2017.

From this article, it appears, when viewed in the Indian context that primarily two groups of players are currently ‘fighting a war for control’ of this ‘healthcare value chain’, as follows:

  • Traditional innovators: These are pharma companies, hospitals and medical-technology companies, such as, Siemens, GE and Phillips.
  • Technology insurgents: These include Microsoft, Apple, Google, and a host of hungry digital entrepreneurs and startups – creating apps, predictive-diagnostics systems and new devices.

Where is the threat to traditional pharma innovators?

This emerging trend could pose a threat to traditional innovators as the individual and collective knowledge base gets wider and wider – the above article envisages. With the medical records getting increasingly digitized with new kinds of patient data available from genomic sequencing, sensors and even from social media, the Government, including many individuals and groups, can now get a much better insight into which treatments work better with avoidable costs, on a value-based yardstick. For example, if digital apps and wearable devices are found even equally effective as drugs, with the least cost, to effectively manage the menace of diabetes in the country, notwithstanding any strong ‘fear arising’ counter propaganda, as we often read and here and there, those will increasingly gain better acceptance from all concerned.

The moot question, therefore, arises, would the drug companies lose significantly to the emerging digital players in the health care arena, such as, Microsoft, Apple and Google?

Tech giants are moving faster:

In several disease areas like, cancer and diabetes, the tech giants are taking longer and bigger strides than the traditional pharma innovators. For example:

  • Microsoft has vowed to “solve the problem of cancer” within a decade by using groundbreaking computer science to crack the code of diseased cells so that they can be reprogrammed back to a healthy state.
  • Apple has a secret team working on the holy grail for treating diabetes. The Company has a secret group of biomedical engineers developing sensors to monitor blood sugar levels. This initiative was initially envisioned by Steve Jobs before his death. If successful, the advance could help millions of diabetes patients and turn devices, like Apple Watch, into a must-have.
  • Verily – the life sciences arm of Google’s parent company Alphabet, has been working on a “smart” glucose-sensing contact lens with Novartis for several years, to detect blood glucose levels through tears, without drawing any blood. However, Novartis has since, reportedly, abandoned its 2016 goal to start testing the autofocus contact lens on people, though it said the groundbreaking product it is “progressing steadily.” It has been widely reported that this could probably be due to the reason that Novartis is possibly mulling to sale its eye care division Alcon.
  • Calico, which is also owned by Google’s parent company Alphabet, has US$ 1.5 billion in funding to carry out studies in mice, yeast, worms and African naked mole rats for understanding the ageing process, and how to slow it, reports MIT Technology Review.

No wonder, why an article published in Forbes magazine, published on April 15, 2017 considered these tech giants as ‘The Next Big Pharma’. It said, ‘if the innovations of Google and Apple are another wake-up call for the life science industry, which oftentimes has relied on the snooze function of line extensions and extended-release drugs as the source of income and innovation.’

In conclusion:

An effective disease treatment solution based on different digital platforms has a key financial advantage, as well. This is because the process of generation of huge amounts of credible scientific data, through large pre-clinical and clinical trials, establishing the efficacy and safety of new drugs on humans for regulatory approval, is immensely expensive, as compared to the digital ones.  Intriguingly, no global pharma player does not seem to have launched any significant digital health care solution for patients to reduce the overall cost of disease burden, be it prevention or management.

In that context, it’s encouraging to note the profound comment of the Chief Operating Officer – Jeff Williams of Apple Inc., made during a radio show – ‘Conversations on Health Care’, as reported by ‘appleinsider.com’ on January 06, 2016. During the interaction, Williams reiterated that the rapid progress of technology in this direction is very real, as ‘Apple’ and other smartphone health app developers are stretching the commoditization of computer technology to serve health sciences. In not so distant future, with relatively inexpensive smartphones and supporting health apps – the doctors and researchers can deliver better standards of living, even in severely under-served areas like Africa, where there are only 55 trained specialists in autism.

Thus, it now looks reasonably certain to me that disruptive digital innovation on various chronic health care solutions is ultimately going to reduce the need of medication for many patients, across the world, including India, significantly.

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.

Making New Cancer Drugs Cost-effective

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The prices of new cancer drugs are increasingly becoming unsustainable across the world, and more so in India. A sizable number of poor and even middle-income patients, who spend their entire life’s savings for the treatment of this dreaded disease, is pushed towards extreme economic hardship. Their plight in India would continue to remain so, till Universal Health Care (UHC) comes into force, as enunciated in the National Health Policy 2017.

Thus, the delivery of affordable and equitable cancer care poses one of India’s greatest public health challenges. Public expenditure on cancer in India remains below US$ 10 per person, as compared with more than US$ 100 per person in high-income countries. The May 2014 paper, published in ‘The Lancet Oncology’, analyzed this concern in detail.

In this article, after giving a brief backdrop, I shall explore a possible alternative to make cancer treatment with new drugs affordable to many by scaling up this strategic option.

Cancer – the second leading cause of death:

According to the World Health Organization (W.H.O), cancer is the second leading cause of death globally and accounted for 8.8 million deaths in 2015. This works out to nearly 1 in 6 of all global deaths, with US$ 1.16 trillion being the estimated total annual economic cost of cancer in 2010. Lung, prostate, colorectal, stomach and liver cancer are the most common types of cancer in men, while breast, colorectal, lung, cervix and stomach cancer are the most common among women. To reduce significant disability, suffering and deaths caused by cancer worldwide, effective and affordable programs in early diagnosis, screening, treatment, and palliative care are needed. Treatment options may include surgery, medicines and/or radiotherapy – the report reiterates. In many instances, anti-cancer drugs are the mainstay treatment.

For the country, Indian Council of Medical Research (ICMR) reported over 736, 000 people succumbing to the disease in 2016. This figure is expected to shoot up to 880,000 by 2020. ICMR estimated the total number of new cancer cases at around 1.45 million in 2016, and the same is likely to reach 1.73 million by 2020. The situation in this area, therefore, rather grim across the world, including India.

Cancer treatment cost in India is one of the highest in the world:

Anticancer drugs are generally expensive. As stated in a related article, published in the Nature Reviews Clinical Oncology on March 14, 2017, in the United States, a novel anticancer drug routinely costs more than US$ 100,000 per year of treatment. When adjusted for per capita spending power, these lifesaving medicines become most unaffordable in economically developing nations, such as India and China. Not only are their launch prices high and fast rising, but these also often escalate during the respective patent exclusivity period.

That in terms of the ability to pay for drugs, cancer drugs are most affordable in Australia and least affordable in India and China, was established in one of the largest research study presented at the 2016 Annual Meeting of the American Society of Clinical Oncology. Moreover, even in those cases where cancer could be detected early, about half the patients in India are compelled to skip the treatment for high drug cost, highlights another article.

Interestingly, the concerned drug manufacturers seldom, if at all, justify such astronomical drug prices and subsequent price increases well supported by some rational factors, such as, the extent of benefit patients are likely to derive, the novelty of the agents, or detailed spending on research and development, the above paper states.

The increasing trend of price escalation of cancer drugs harms many patients, often directly, through increased out-of-pocket expenses, which reduce levels of patient compliance, or drive thousands of cancer patients skipping the drug treatment, altogether. Consequently, it also harms the society by imposing cumulative price burdens on many patients that are unsustainable.

Despite high cost, annual global spending on anticancer drugs has already exceeded US$100 billion, and is predicted to reach US$150 billion by 2020. In India too, oncology is a leading therapeutic segment, which reached a turnover of Rs. 2,000 Crore (around US$ 320 million) in 2013 and is expected to grow to Rs. 3,831 crore (around US$ 615 million) by the end of 2017, according to a report of Frost and Sullivan.

The reason for high drug price:

The real reason for the high cost of cancer drugs, just as many other life-saving medicines, is quite challenging to fathom. Many attribute its reason to unsustainable R&D models of the global pharma companies, in general.

For example, “the spiraling cost of new drugs mandates a fundamentally different approach to keep lifesaving therapies affordable for cancer patients” – argued an article titled, “How Much Longer Will We Put Up With US$ 100,000 Cancer Drugs?”, published by Elsevier Inc. In the same context, another article titled “Making Cancer Treatment More Affordable”, published in the ‘Rare Disease Report’ on Feb 09, 2017, reiterated that the current R&D model needs to change, as the cost of many such treatments is higher than the cost of an average person’s house in the United States.

Nonetheless, the drug manufacturers answer this difficult question with ease and promptness, citing that the cost of innovation to bring these drugs through a complex research and development (R&D) process to the market, isn’t just very high, but is also increasing at a rapid pace.

Pharma R&D cost:

An analysis by the Tufts Center for the Study of Drug Development, published in the Journal of Health Economics in March, 2016 pegged the average cost to develop and gain marketing approval for a new drug at US$ 2.558 billion. It also said that the total cost of innovation of a new drug and bringing it to market, has increased more than double from US$ 1.22 billion in 2003 to US$ 2.6 billion in 2014. Although these numbers are being vehemently challenged in several credible journals and by the international media, many global pharma majors justify the high new drug prices

by highlighting that developing a new molecule takes an enormous amount of time of 12 to 14 years, lots of financial resources and huge efforts.

On the other hand, an article titled, “Does it really cost US$ 2.6 billion to develop a new drug?”, published in The Washington Post on November 18, 2014 observed that: ‘The never-ending debate about what drugs should cost is in part driven by the fact that no one seems to know what it actually costs to develop one.”

But, why is the decline in the R&D productivity trend?

According to a 2014 review article titled, “Recent Advances in Drug Repositioning for the Discovery of New Anticancer Drugs”, published in the International Journal of Biological Sciences, while the total R&D expenditure for drug discovery worldwide increased 10 times since 1975 (US$ 4 billion) to 2009 (US$ 40 billion), the number of NMEs approved has remained largely flat (26 new drugs approved in 1976 and 27 new drugs approved in 2013). The average time required for drug discovery to market launch has also increased over time in the US and in the EU countries from 9.7 years during 1990s, to 13.9 years from 2000 onwards.

Be that as it may, the bottom-line is regardless of tremendous advancement in biological science, technology and analytics, especially in the new millennium, coupled with increasing investments in pharma R&D, the total number of NMEs that has reached the market hasn’t shown commensurate increase.

One of my articles published in this blog titled, “How Expensive Is Drug Innovation?” found an echo of the same in a globally reputed journal. This study, published by the BMJ on May 2016, titled “Propaganda or the cost of innovation? Challenging the high price of new drugs”, expressed deep concern on the rising prices of new medicines. It reiterated that this trend is set to overwhelm health systems around the world.

Need for an alternative R&D strategy:

The hurdles in discovering and developing new drugs call for alternative approaches, particularly for life threatening diseases, such as cancer. I reckon, it’s about time to scale-up a viable alternative strategy to bring down the R&D cost of new drugs, improve the success rate of clinical development, reduce a decade long ‘mind to market’ timeframe for an innovative drug or a treatment, and of course, the mind blogging cost of the entire process, as asserted in the above report from the Tufts Center.

One such alternative strategy could well be: ‘Drug Repurposing’

Drug Repurposing:

As defined by the National Center for Advancing Translational Sciences, ‘drug repurposing’ “generally refers to studying drugs that are already approved to treat one disease or condition to see if they are safe and effective for treating other diseases”.

As many molecules, with well-documented records on their pharmacology and toxicity profile, have been already formulated and undergone large clinical trials on humans, repurposing those drugs building upon the available documents and experiences for fresh clinical trials in different disease conditions, would hasten the regulatory review process for marketing approval, and at a much lesser cost.

I shall quote here just two such examples of ‘drug repurposing’ from well-known molecules, as follows:

  • Sildenafil (Viagra): The blockbuster drug that was launched by Pfizer in 1998 for the treatment of erectile dysfunctions was originally developed for the treatment of coronary artery disease by the same company in 1980s.
  • Thalidomide: Originally designed and developed by a German pharmaceutical company called Grünenthal in Stolberg as a treatment for morning sickness in 1957, but was withdrawn in 1961 from the market because it caused birth defects. The same molecule was reintroduced in 1998 as a ‘repurposed drug’ to effectively treat patients with erythema nodosum leprosum (ENL) – a complication of leprosy, and multiple myeloma – a type of cancer.

I had given many more examples of ‘drug repurposing’ in one of my earlier articles published in this blog.

Repurposing drugs for cancer:

The above-mentioned review article of International Journal of Biological Sciences 2014 clearly noted: “Drug repositioning has attracted particular attention from the communities engaged in anticancer drug discovery due to the combination of great demand for new anticancer drugs and the availability of a wide variety of cell and target-based screening assays. With the successful clinical introduction of a number of non-cancer drugs for cancer treatment, ‘drug repurposing’ now became a powerful alternative strategy to discover and develop novel anticancer drug candidates from the existing drug space.”

The following are some recent successful examples of ‘drug repurposing’ for anticancer drug discovery from non-cancer drugs, which are mostly under Phase I to II clinical trials:

Drug Original treatment Clinical status for cancer treatment
Itraconazole Fungal infections Phase I and II
Nelfinavir HIV infections Phase I and II
Digoxin Cardiac diseases Phase I and II
Nitroxoline Urinary Tract Infections Preclinical
Riluzole Amyotropic lateral sclerosis Phase I and II
Disulfram Chronic alcoholism Phase I and II

‘Drug repurposing’ market:

A January 2016 report by BCC Research estimates that the global market for drug repurposing will grow from nearly US$ 24.4 billion in 2015 to nearly US$ 31.3 billion by 2020, with a compound annual growth rate (CAGR) of 5.1 percent for the period of 2015-2020.

Expressing concern just not enough:

There are enough examples available across the world regarding stakeholders’ expression of great concern on this issue, with the buzz of such protests getting progressively shriller.

However, in India, high prices of cancer drugs do not seem to be a great issue with the medical profession, just yet, notwithstanding some sporadic steps taken by the National Pharmaceutical Pricing Authority (NPPA) to allay the economic burden of cancer patients to some extent. Encouragingly, the top cancer specialists of the American Society of Clinical Oncology are reportedly working out a framework for rating and selecting cancer drugs not only for their benefits and side effects, but prices as well.

In a 2015 paper, a group of cancer specialists from Mayo Clinic also articulated, that the oft-repeated arguments of price controls stifle innovation are not good enough to justify unusually high prices of cancer drugs. Their solution for this problem includes value-based pricing and NICE like body of the United Kingdom. An interesting video clip from Mayo Clinic justifies the argument.

All this can at best be epitomized as so far so good, and may help increase the public awareness level on this subject. However, the moot point remains: Has anything significantly changed on the ground, on a permanent basis, by mere expression of such concerns?

Conclusion:

This discussion may provoke many to go back to the square number one, making the ongoing raging debate on Innovation, Intellectual Property Rights (IPR) and Public Health Interest to gather more steam, but the core concern continues to remain unresolved.

I hasten to add that all such concerns, including strong protests, may no doubt create some temporary pressure on drug manufacturers, but they are experienced enough to navigate through such issues, as they have been doing, so far. However, for making new cancer drugs cost-effective for a vast population of patients, coming out of the current strategic mold of pharma research and development would be necessary. Grant of Compulsory License (CL), or the expectation of the local drug manufacturers for a Voluntary License (VL) of new cancer drugs, can’t be a routine process either, as it appears unrealistic to me, for various reasons.

I have discussed in this article just one alternative R&D strategy in this area, and that is Drug Repurposing (DR). There could be several others. DR is reportedly gaining increasing focus, as it represents a smart way to exploit new molecular targets of a known non-oncological drug for a new therapeutic applications in oncology. Be that as it may, pharma companies and the academia must agree to sail on the same boat together having a common goal to make new cancer drugs cost-effective for majority of cancer patients struggling hard, for life.

I would conclude this article quoting the President and Chief Science Officer of Illinois-based Cures Within Reach who said: “What I like about drug repurposing is that it can solve two issues: improved health-care impact and reduced health-care cost – That’s a big driver for us.”

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.

In a Quandary of Drug Quality, Price Control, Innovation and Patient Interest in India

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The patients in India have every reason to apprehend, whether the prescription drugs that they consume are efficacious, safe and conform to the government approved prices, alongside another important question: Do they affordable access to the fruits of innovation?

The regulator responsible for drug quality in India is responsible for ensuring the first two, and the drug price regulator of the country ensures the remaining two.

Apparently, both these esteemed government bodies, are sure that they are doing the best jobs in their respective areas. Moreover, in these days of social media blitzkrieg, it won’t be uncommon to witness some of them, creating hype on some issues that many feel is better avoided, and at times even contradictory in nature.

Amid this seemingly chaotic continuity of the same or a bit deteriorating scenario, patients are often caught in an unenviable footing.

In this article, I shall discuss on these concerns afresh, quoting a few recent examples. My objective is to encourage all concerned to move away from incessant hype creation by accepting the reality, as the patients feel. This is necessary, because anyone, including the regulators can fall victim of such unfettered developments, at any point of time.

Thus, it may be appropriate for all to jettison any residual arrogance or a faint shade of narcissism, before putting the nose to the grindstone to resolve these pressing issues decisively, for patients’ sake.

Are we consuming effective and safe medicines?

I raised this question first in an article titled, “Are We Taking Safe and Effective Medicines?” published in this blog on November 13, 2013. That deliberation was primarily based on US-FDA ‘import bans’ from various drug manufacturing facilities in India, involving even the top Indian pharma players. Based on their own quality and safety audits, the US regulator had concluded that drugs produced in those factories are not safe for consumption by the patients in America.

This apprehension has now almost reached its crescendo, when on February 24, 2017, probably for the first time ever, US-FDA publicly voiced its apprehension about the efficacy of medicines being sold and consumed by patients in India.  The observation came from the India director of the US-FDA in an annual conference of a large pharma trade association of some of the top domestic pharma companies. While commenting, “I do not think any one of us wants to take such drugs which lack efficacy”, the official reportedly revealed, he occasionally gets samples sent from the US embassy health unit in Delhi, and complaints are usually about the medicines not giving the desired results.

It is noteworthy, as earlier, rubbishing claims levelled by media expressing growing concern among overseas regulators over the quality of Indian made drugs, the Drug Controller General of India (DCGI) had reportedly strongly reiterated that there have been no lapse or compromise on quality parameters of the drugs manufactured throughout the country, as the efficacy of the drugs and safety of the patients have always remained the top priority of DCGI.

Yet another news article of August 22, 2016 reported that after a year-long survey involving Government, civil society and pharmacy professionals, and testing nearly 50,000 drug samples across the country during this period, the Ministry of health of India found that medicines produced in India are safe and effective. This study was kicked off in the wake of rising concerns that several medicines made in the country posed risks to patients, the report highlighted.

Should ‘Self-certification’ by industry prevail?

Intriguingly, when questions on drug quality manufactured in India, are regularly being raised by other equally responsible drug authorities, we find ‘self-certification’, in this regard, coming from all those who are expected to resolve this issue beyond an iota of doubt, always prevails.

Apparently, not just the drug regulator and the Union Ministry of Health are in a sustained denial mode, many large pharma companies also seem to be in the same mode. On March 01, 2017, the media reported, “Close on the heels of US FDA India office raising concerns over the quality of medicines marketed in India, pharma leaders came together to defend the quality of their products. There is no question of compromising quality of Indian products meant for domestic market and export, they pointed out.” This rebuttal was expected. Nevertheless, the apprehension lingers: Should such self-certification by pharma players prevail?

That said, one may try to justify this quandary by saying that effectively regulating over 20,000 domestic pharmaceutical companies, including third party and loan license manufacturers, poses a serious challenge to the DCGI and the State Drug Controllers. However, the moot point is, who has been encouraging such over-proliferation of drug manufacturing facilities over a long period of time, in any case? In that sense, whose prime responsibility is it to ensure that drugs consumed by patients in India are efficacious and safe?

The answer to these vexing questions continues to remain unanswered.

Did patients benefit from drug price control orders?

Let me first draw a brief sketch on the global perspective of price increases in generic drugs. It appears that in all those countries where there is no drug price control in place, the entire pharma industry is being adversely impacted by huge generic drug price inflation. This finding has been well captured in a study by Elsevier. It shows, between November 2013 and November 2014, out of its research sample of 4421 generic drug groups, there were price increases in 222 drug groups by 100 percent or more. In 17 drug groups price increases were taken even over 1000 percent, which include even tetracycline. With this trend sharply moving north, many patients, across the world, are struggling hard to find ways to survive in this situation. With this backdrop, I now get back to its India perspective.

I have read some media editorials questioning, just as the pharma industry, whether it is the right approach to make essential medicines affordable through drug price control in India? Nevertheless, there isn’t an iota of doubt in my mind that yes, it is, in the prevailing health care scenario of the country sans universal health care, with out of pocket expenses on medicines being the highest in the world and when market competition doesn’t bring down the price of medicines, for obvious reasons. My questions, on the contrary, will be, is drug price control being enforced in India the way it should? Are the patients getting commensurate benefits out of it? If not, why?

However, on the face of it, the answer to the question above “Did patients benefit from drug price control orders”, may appear to be an affirmative one. This is mainly because, on July 28, 2017, no less than the Union minister for Chemicals and Fertilizers, in a written reply to the Rajya Sabha reportedly conveyed that the Indian consumers have saved nearly Rs 5,000 crore due to the Government fixing the prices of essential medicines under the Drugs Price Control Order (DPCO) 2013.

The ground reality of drug price control:

Let me try to explore a bit in this area with some recent examples.

According to the data from India’s drug pricing watchdog – the National Pharmaceutical Pricing Authority (NPPA), compliance to various Drug Price Control Orders (DPCO) is far from satisfactory. Outstanding dues for non-compliance to notified ceiling prices, including penalty, from scores of pharma companies, have now reportedly piled up over the past two decades exceeding Rs. 4,551 crore (around USD 700 million). Thus, the same question haunts: Has drug price control benefitted the patients in India, as was intended to?

The situation is no different, even with DPCO 2013. On February 23, 2017, NPPA notified the ‘Suspected cases of Noncompliance of Ceiling Price by Pharmaceutical Companies,’ of 634 drugs, along with a ‘Public Notice’ for the same. This listed included the products marketed by some leading pharma companies in India, such as, Cipla, Abbott India, Alkem Labs, AstraZeneca, Dr Reddys Lab and Cadila, among many others.

Yet another fresh allegation related to drug pricing has just come to light. Interestingly, it relates to an anti-diabetic drug that falls outside DPCO 2013. On March 01, 2017, a news articled reported, “India’s drug regulator will look into allegations that four leading pharmaceutical companies are colluding to set the price of anti-diabetic drug Vildagliptin, a move that may rattle the almost Rs. 10,000 Crore (around USD 1540 million) market in the country.” Vildagliptin is a proprietary drug of Novartis, which has licensed it to three other companies. All of them sell Vildagliptin in India under their own brand names. Abbott sells it as Zomelis, USV as Jalra and Emcure as Vysov. The combined sales of these brands stood at Rs. 822 Crore (around USD 125 million) last year, the report states.

Be that as it may, the bottom line, as many believe, continues to remain unchanged, as it has always been – the patients don’t derive intended benefits due to lackluster and apparently ineffective enforcement of the drug price control in India.

Another crucial player:

Besides the two important and powerful Government authorities – DCGI and NPPA, there is another very critical player in this game – the Indian drug industry. Without whole-hearted cooperation and result-oriented action by all the three players, in tandem, nothing can possibly change this agonizing status quo, in this area.

The industry too is in a denial mode:

Quite like the other two critical constituents, who always deny any serious allegation on their actions, not being good enough to fetch the intended benefits for the patients, the drug industry too doesn’t seem to be any different. It always appears to be in a pre-programmed denial mode against all such allegations, irrespective of whether these are on drug quality, price, or on frequent misuse of the term innovation. They always try to justify their action, playing the victim card, as it were, and expecting other stakeholders to believe that they are doing right, always.

Let me now explore each of these areas separately, basically from the pharma industry perspective:

Drug quality: Pharma players, just as the Indian drug regulator, do not seem to accept that many drugs in India do not provide desirable benefits to patients, as alleged even by the US-FDA after studying some test results, following complaints from their local establishments. Many of us, at an individual level, may also have experienced just the same, and nurture the same doubt on the efficacy and safety profile of some branded generics that we consume, but have no wherewithal to prove the same. Doctors just change the brands, when any patient comes with such complaints, as Pharmacovigilance has not taken-off in the country with full steam, just yet. Thus, both the government regulators and the industry are in sync with each other, on this issue.

Drug price control: In this specific area, unlike the issue of drug quality, the respective stands of the government and the industry are poles apart. The former believes that it is working well, and the latter says, it isn’t.

The industry, as I see it, wants to project an impression that drug price control is the root cause of all evils, including compromises on drug quality, and some drugs going out of the market. The industry further highlights that drug price control offers a crippling blow to innovation, as they can’t garner enough financial resources through increased drug prices. It is another matter that they can’t possibly claim, drug price control offers a telling blow on their profit, as despite price control pharma is one of the highest profit making industry in India and globally too.

What innovation means to patients:

Interestingly, both the domestic and multinational pharma players often use the term of innovation, mostly construed as a façade, as it were, in their different advocacy initiatives, and during media outreach, as well. For global players, it primarily means innovation of new products, which offers monopolistic marketing and pricing advantage. Whereas, for generic players, it is generally process innovation, and different generic or biosimilar product development.

This is fine, but why should patients pay high drug prices, only because pharma players want to spend more on innovation, either for a new drug or a new process? I reckon, almost none will be willing to pay just for the heck of it.

Commensurate incremental price for incremental value:

Many patients, on the other hand, will be willing to pay more for any commensurate incremental value that a drug or a process will offer for a speedy recovery from illness, or to live a better quality of life, or for a lesser net treatment cost. Thus, the price of any brand is considered by stakeholders as a function of the value that it promises to offer. Consequently, brand marketing is deemed a value delivery system. For medicines, this value must be easily perceptible, quantifiable and scientific research based. Accordingly, the outcome of any such innovation should convince the regulators, doctors, hospitals and ultimately the patients – what value delivery – path breaking or incremental, for which patients need to pay commensurate incremental prices.

Various ways of ensuring it:

There are several different ways of addressing it, even for branded generics in India. For example, when branded generics of the same drug or similar FDCs of different drugs, are marketed by different companies with a huge price difference, the pharma players should necessarily submit before appropriate authorities, prior to marketing approval, all data regarding incremental and quantifiable value offerings, especially for those branded generics falling at the top of the price band. This is necessary, as an increasing number of brands in the market of the same generic molecules or the same FDCs, may not necessarily lead to greater competition with any significant impact on price. I shall argue on this point below.

What happens, generally:

For any drug falling outside price control in India, branded generic drug makers, usually set prices based on whatever each of them considers the market will accept. This consideration is highly elastic in nature, varying from a very low to a very high price, for any specific molecule and its FDCs. As I said before, it has been well-established by now that competition doesn’t play any significant role to bring down the branded generic drug prices, unlike many other consumables in different industries.

Why market competition doesn’t work for medicines?

This is primarily because, the purchasing decision for medicines does not depend on individual patients, unlike many other consumables. This decision is taken by the doctors while writing prescriptions for them. It is widely alleged, all over the world, that many important doctors are heavily influenced by the drug companies, often through dubious and highly cost intensive means, to prescribe their respective brands or branded generics in the process of treatment of a wide variety of medical conditions. In this rat race of generation of more and more prescriptions, pharma companies require to have a deep pocket to achieve their financial goals. Thus, many brands attract high prices to generate more profit and keep moving this vicious circle. Value based brand differentiation for many leading branded generics or even me-too patented products, aren’t mostly robust enough to stand any scientific or peer scrutiny. Consequently, the prescription demand of a most branded generics or me-too patented products do not have any linear relationship with the nature of market completion, and therefore, on their prices. In this perspective, setting a price for a pharma brand doesn’t depend on quantifiable value offerings for patients, as someone said before, “It is not a science. It is a feel.”

In conclusion:

The overall concern spans across several important public health and safety related issues, which also involve general quality standards of medicines, the effectiveness of drug price control, the core intent of so frequent use of the term ‘innovation’ in various pharma advocacy initiatives, including media outreach.

In this scenario, is the pharma industry, together with the drug quality and pricing watchdogs, failing to fathom the grave residual impact of continuity of this situation? In my view, this specific assumption appears too simplistic, naïve, and unrealistic. Or else, could it be that they are actually in a quandary, not being able to decide what would be the most effective actionable blueprint to resolve these issues?

I reckon, this is high time now for all concerned to accept the reality, seriously introspect on these critical issues, opt for a dip-stick expert analysis to assess the real status, and then work out a time-bound action plan with assigned accountability on the ground.

Together they may wish to address the following queries, among several others:

  • Why are they still running on a treadmill, as it were, over the last four decades, to come nearer these issues for better understanding, without moving an inch on the ground, despite public outcry?
  • Are they really in a quandary?
  • Are these concerns not an outcome of basically governance related failures?
  • Why hypes are being created all around on significant savings over out of pocket expenses on medicines because of ‘good enforcement’ of DPCOs, when it doesn’t seem so?
  • What prompts all the key players to be in a consistent denial mode on dubious drug quality standards in India, when foreign drug regulators are pointing it out in public?
  • Isn’t the term ‘innovation’ being rampantly misused, more as a major tool for advocacy to gain free pricing advantage?
  • Shouldn’t ‘Que Sera, Sera’ days change now?

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.

Dwindling Drug Innovation: Declining Image: Unchanged Business And Advocacy Models

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A report of ‘The United States International Trade Commission (USITC)’ released on December 22, 2014 suggested, if tariffs and investment restrictions were fully eliminated, and standards of IP protection were made comparable to the U.S and Western European levels, American exports to India would rise by two-thirds.

A year later, on February 01, 2015 an interesting news article highlighted that the flashpoint of this issue “has clearly been pharmaceutical companies and their lobby group Pharmaceutical Research and Manufacturers of America (PhRMA), which have made some of the strongest representations to the US government against India’s IPR regime.” The same report also indicated that many other companies including the aircraft maker Boeing and the generic drug giant Abbott felt that India offered adequate IP protection and that they had not experienced major IP problems in the country.

The above stance of USITC continued echoing right from the beginning of this year. In January 2017, the CEO of US Biotechnology Innovation Organization (BIO) reportedly told our Prime Minister Narendra Modi, ‘if he follows western practices on intellectual property protection, his country would see a “tidal wave” of biotech industry investment.’

On February 08, 2017, when the fifth edition of ‘U.S. Chamber International IP Index’ report was released by the ‘Global Intellectual Property Center (GIPC)’, India featured in the 43rd rank out of 45 countries. With this India remained virtually at the bottom of the IP index for the fourth year on the trot. The GIPC report underscored India’s “anaemic IPR policy”, Section 3.d of the Indian Patents Act, besides several others, as major market access barriers.

On February 14, 2017, another news article reported that America’s pharma sector has asked the US Trade Representative (USTR) to continue to keep India on its Priority Watch List (PWL), which includes countries that are alleged violators of US patent laws, claiming that the environment on the ground remains ‘challenging’ in India. Among the areas of concern for the US pharma companies operating in India, unpredictable IP environment, high tariffs and taxes on medicines, regulatory data protection failure, discriminatory and non-transparent market access policies and unpredictable environment for clinical research were listed among others.

With this backdrop, the key question that haunts many industry watchers, when the World Trade Organization (WTO) has no complaint with the Indian Patents Act 2005, and finds it TRIPS compliant, why are these reports coming from the United States consistently emphasizing that the current IP regime of the country is a key barrier to market access, especially for research-based pharma companies?

Is the core issue of the global pharma industry in India is predominantly not encouraging innovation well enough, or the dearth of inadequate Intellectual Property (IP) protection – or it is something beyond that, and is more fundamental in nature. In this article, I shall dwell in this area, first in the global perspective, and then zeroing-in to India.

A global perspective:

“The past 60 years have seen huge advances in many of the scientific, technological and managerial factors that should tend to raise the efficiency of commercial drug research and development (R&D). Yet the number of new drugs approved per billion US dollars spent on R&D has halved roughly every 9 years since 1950, falling around 80-fold in inflation-adjusted terms.  There have been many proposed solutions to the problem of declining R&D efficiency. However, their apparent lack of impact so far and the contrast between improving inputs and declining output in terms of the number of new drugs make it sensible to ask whether the underlying problems have been correctly diagnosed,” articulated an important article published on March 01, 2012 in the Nature Reviews Drug Discovery.

This trend continues, virtually unchanged. R&D efficiency continues to remain a cause of great concern to the research-based global pharmaceutical companies. Accordingly, a 2016 report of the Deloitte Center for Health Solutions titled, ‘Measuring the return of pharmaceutical innovation’, among other findings, has captured the following:

  • Annual projected pharma R&D return declines to 3.7 percent from 10.1 percent in 2010
  • Peak sales per asset fall 11.4 percent year-on-year since 2010

What then is its basic solution?

When the right solution eludes:             

In this scenario, when the right solution is still eluding, to record growth in corporate profit and earning to meet shareholders’ expectations, keeping the existing business model intact, the global research-based pharma companies have the following two limited options, which they are actively pursuing:

  • Take high price increases for the existing products
  • Launch the limited new products at a very high price

A report published in The First Word Pharma on October 06, 2015 quoting The Wall Street Journal (WSJ) vindicated exercising the first option. It reported that many drug makers have succeeded in increasing revenue on products despite a flat or declining demand by consistently increasing prices. An analysis revealed that revenue for the top 30 products in the United States zoomed by 61 percent over the past five years, three times the increase in the number of prescriptions sold over that period. While another report by Credit Suisse illustrated that 80 percent of the growth in net profit for the top 20 drug makers was attributable to price hikes.

To substantiate application of the second option, I quote from the CBS News, which on April 05, 2016 reported that an investigation into the cost of prescription drugs revealed huge price hikes over the past five years. Several brand name medications more than doubled in price. Again, on  August 24, 2016, it gave a sense of this trend with the following examples, covering the launch price of innovative drug, and price increases of generic drugs:

  • Gilead fixed their new hepatitis C drug Sovaldi’s cost at US$ 900 – 1,000 per pill
  • Mylan Pharmaceuticals’ increased the cost of its anti-allergic drug EpiPen from about US$ 57 in 2007 to more than US$ 500 in 2016
  • Turing Pharmaceuticals increased the price of the anti-malaria drug Daraprim by 5,000 percent last year, charging US$ 750 per pill for a drug that used to cost US$ 13.50 per pill.

PhRMA – the often quoted trade association in America, representing the country’s leading pharma and bio-pharmaceutical research-based companies, reportedly said in a statement: “Focusing solely on the list prices of medicines is misleading because it ignores the significant discounts and rebates negotiated by insurers and pharmacy benefit managers.”

Even if, this argument is accepted as such, the tough impact of regular hefty drug price increases on the consumers is real, unquestionably.

The current business model leaves behind many patients:

The ‘Access to Medicine Index 2016’ report also finds that companies generally do not systematically target populations with the highest needs in their registration, pricing and licensing actions. Although, we continue to make progress toward major public health goals, such as, polio is close to being eradicated, as is guinea worm; more than 45 percent of people living with HIV/AIDS have access to ARVs; important vaccines for malaria and dengue fever are being implemented, still business models for providing healthcare are leaving many people behind. Globally, two billion people cannot access the medicines they need, most of whom live hand to mouth.

Particularly, the big global pharma companies, as the innovators and producers of life-saving medicines, need to act much earlier in the patients’ value chain. Without or inadequate action by these companies, alongside governments, NGOs and others, it will be impossible to bring modern medicine to everyone.

Public outrage over high drug prices:

Many studies indicate that the research-based global pharma and biotech companies, still strive hard to stick to their existing overall business models with a sharp focus on improving both the top and bottom lines of the business, though the R&D projects are becoming lesser and lesser productive. This prompts them resorting to hefty price increases, and introducing new products with high price. Fueled by this self-serving mindset, a simmering public outrage, globally, over high drug prices is fast catching up, further undermining the trust in the industry, as another report says.

No wonder why in the Gallup Poll of August 15, 2016, pharmaceutical industry featured just one above the bottom among the ‘Worst-Rated U.S. Business Sectors’. Moreover, even the Harris Poll released on January 17, 2017 found that 91 percent of U.S. consumers believe pharmaceutical and biotechnology companies put profits over patients.

The industry continues chasing rainbows:

In response to this mounting stakeholders’ criticism, arguably the richest pharma association in the world in its member subscriptions – PhRMA, reportedly launched a new ad campaign costing tens of millions of dollars on January 25, 2017. It aims to highlight innovation and scientific breakthroughs to change the public’s negative perception of the industry. This campaign will span across television, print, digital, and radio, the report elaborates.

Following is an example, as reported, listing three important and interesting comments on this campaign for pharma image revamp from some of those who matter:

  • Lawmaker Peter Welch, who chairs the House Democratic Caucus’ task force on drug pricing, said, “The issue here is not whether drugs have some benefits … The issue is whether pharma is going to be able to kill us with their pricing power or whether we will get transparency and competition.” He added, “The campaign is all about defending their pricing power and pushing their product.”
  • Similarly, another lawmaker Sen. Chuck Grassley (R-Iowa) said, “This is [PhRMA] trying to change the subject and to try and divert people’s attention away from drug pricing. Continuing to ignore drug pricing is probably not going to work.”
  • Ameet Sarpatwari, a drug pricing policy researcher at Harvard University said, “It’s really a matter of being tone deaf in terms of thinking somehow that this is going to change public perception”

Isn’t a great example of chasing rainbows by the industry association, in the number one pharma and biotech market of the world, instead of amending to the root cause of this burning issue?

The situation in India:

In this backdrop, amid a tough global situation, let me assess the related Indian scenario.

The research-based global pharma companies, apparently want to introduce the whole range of their patented products at a high price and in a monopolistic situation in India too, for much higher growth in revenue and profits. Thus, they are consistently pushing hard, with all guns blazing, for major changes in the Indian Patents Act 2005, which would involve jettisoning many patients’ health interest related safeguard conditions enshrined in the Act, such as Section 3.d that restricts ever-greening of patents, and introducing several other tougher IP measures, such as data exclusivity under the garb of imaginary patient safety issues with generic drugs.

They don’t seem to like price control of essential drugs in India, either. While intensely lobbying for it, the lobbyists vehemently argue in favor of the absurd, which is the affordability of medicines does not help to increase drug access to all those who need these most, even when on the ground, the out of pocket expenses for drugs in the country is as high as around 65 percent and universal health care does exist in the country, much to the dismay of many.

It has now been generally established by many global experts, including our own National Pharmaceutical Pricing Authority (NPPA) that market competition does not necessarily bring down drug prices, including for generics, quite unlike many other industries, but various pressure groups, including the media, can catalyze it, and quite effectively. What has happened recently with the cardiac stents price in the country, is just an example.

Is the devil in the traditional pharma business model?

An article titled, “How Pharma Can Fix Its Reputation and Its Business at the Same Time”, published on February 03, 2017 in The Harvard Business Review, emphatically states: “It’s a fact that the current business model of pharma companies is not working efficiently.” It suggests, besides enhancing the current unenviable public image of the industry, expanding access to medicines will help pharma companies enhance shareholder value. The success of a new business model depends on both the willingness and the ability of pharmaceutical companies to fully integrate access to medicine into their business strategies, the article emphasizes.

A July 2015 paper of McKinsey & Company titled, “Pharma’s next challenge”, also reiterates that in the developed economies, market access is chiefly concerned with pricing, and with satisfying local conditions. Whereas, in the emerging markets, to overcome the barriers, pharma players need to shift the focus of their commercial models from marketing and sales to access, and from brand-by-brand access planning to integrated cross-brand planning.

In pursuit of a new model:

Based on the above premises, the search for a new pharma business model, especially for the research-based pharma companies, in my view, may broadly focus on the following areas:

  • Learn from innovation models of the IT industry: Win-Win collaborative innovation models, including ‘Open Source Drug Discovery’, if scaled up, could reduce the cost of innovation significantly and making the new innovative drugs generally affordable. Thus, larger volume sales may adequately offset a voluntary cut in the product margin, creating a multiplier effect.
  • Be a part of the solution and not the problem: Because of fiercely pushing the blatant self-serving agenda, inconveniencing many patients, the core mindset of the pharma industry is considered by many as an integral part of the main problem. While pharma industry, quite rightly, seek more market access, they need to act as a facilitator too, to improve general access to medicines, in various imaginative ways, which is, of course, possible. This will make the pharma industry to be a part of the solution to the national problem, over a period of time.
  • Walk the talk: While pharma industry speaks all right things, in terms of ethical conduct of business, at a time when both national and international media frequently expose their gross wrongdoings. This continues, unabated. Sales and marketing functions are indeed very important, but not at the cost of good corporate governance. I am aware, all compliance rules exist immaculately on paper for many companies, but the senior management officials should demonstrate that they walk the talk, giving exemplary punishment to the wrongdoers, including their peers.
  • Change the current advocacy model: The current advocacy model of the research-based pharma companies is too self-serving. For example, in India it mostly demands, which is bordering obsession, to change the IP laws of a sovereign country, when the World Trade Organization (WTO) has no problem with these, whatsoever. There is a need for them to demonstrate, sans any shade of arrogance, visible respect to any country’s general sentiment on its Patents Act, as it’s their own decision to operate in those countries. An imaginative win-win change in this area, would significantly help to create a strong bond and mutual respect with other important stakeholders.

Are senior citizens in pharma business a barrier to change?

A recent white paper of ‘Eye for Pharma’, says in its conclusion “many of those now running pharma organizations have come through the ‘golden age’ of pharma and so may be reluctant to change”. Does this issue need to be addressed first by the Independent Directors of the respective Boards of the pharma companies?

In conclusion:

Many questions do spring up while addressing this issue. One common belief is that, pharma industry, in general, is reluctant to change its traditional business model, beyond just tweaking, despite declining overall productivity and in its public image.

In advocacy initiatives, while drawing stakeholders’ attention to the core grievance agenda, though they try hard to project their business focus on patients, especially using the buzzwords, such as, ‘patient centric approach’ or ‘patient engagement’, among many others, has anything visibly changed, just yet?

As the business environment is getting tougher and consumer expectations are fast changing, drug innovation is also steadily dwindling, so is the declining industry image. However, pharma business and advocacy models continue to remain mostly unchanged. It remains intriguing, why are the ‘wise guys’ of pharma business still so deeply obsessed with chasing rainbows, with so much of zeal, hectic activity and money, while majority of patients keeps bearing the brunt?

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.

How Cost-Effective Are New Cancer Drugs?

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The main reason why cancer is so serious a disease, is the ability of the malignant cells to spread in the body, both locally by moving into nearby normal tissue, and regionally to nearby lymph nodes, tissues, or organs, affecting even the distant parts of the body. When this happens, doctors term it as metastatic or stage IV (four) cancer.

Although most patients with metastatic tumors would eventually die of cancer, the treatment with various types of anticancer drugs, could help prolong life, in varying degree. No wonder, many new anticancer drugs now obtain regulatory approval based on their effectiveness on metastatic cancer patients. Consequently, it has now become almost a routine to administer newer anticancer drugs to patients with early stage of disease, after they have undergone surgery or radiotherapy.

But, these lifesaving drugs are expensive – very expensive! For example, a newer anticancer treatment is often priced at US$ 100,000 or more per patient, which, obviously, a large majority of the population can’t just afford.

Are these new drugs cost-effective?

To put in simple words, cost effectiveness of a drug is generally ‘expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, sight-years gained) and the numerator is the cost associated with the health gain.’

From this perspective, a January 2015 research study titled, “Pricing In The Market For Anticancer Drugs”, published by the National Bureau Of Economic Research of the United States observed that anticancer drugs like bevacizumab (US$ 50,000 per treatment episode) and ipilimumab (US$120,000 per episode) have fueled the perception that the launch prices of anticancer drugs are fast increasing over time.

To evaluate the pricing trend of these drugs, the researchers used an original dataset of 58 anticancer drugs, approved between 1995 and 2013, and found that launch-prices, adjusted for inflation and drugs’ survival benefits, increased by 10 percent, or about US$ 8,500, per year. This study was restricted to drugs administered with the primary intent of extending survival time for cancer patients and drugs for which survival benefits have been estimated in trials or modeling studies. The researchers did not consider drugs administered to treat pain or drugs that are administered to alleviate the side effects of cancer treatments.

The paper concluded, as compared to the older ones, newer anticancer treatments, generally, are less cost-effective. Despite this fact, the prices of these drugs are rising faster than their overall effectiveness.

How much do these drugs cost to prolong a year of life for cancer patients?

Another paper, titled “Cancer Drugs Aren’t As Cost-Effective As They Used To Be”, published in the Forbes magazine on September 30, 2015, expressed serious concern on the declining cost-effectiveness of new anticancer drugs. The author termed this trend as unacceptable, and more disturbing when providing just a year of life to cancer patients costs around US$ 350,000 to even US$ 800,000. High prices should reflect large benefits, and we need to demand value out of medical interventions – he recommended.

Do the claims of efficacy also reflect the real-world effectiveness?

Providing an answer to this question, a very recent article titled, “Assessment of Overall Survival, Quality of Life, and Safety Benefits Associated With New Cancer Medicines”, published in the well reputed medical journal ‘JAMA Oncology’ on December 29, 2016, concluded as follows:

“Although innovation in the oncology drug market has contributed to improvements in therapy, the magnitude and dimension of clinical benefits vary widely, and there may be reasons to doubt that claims of efficacy reflect real-world effectiveness exactly.”

As stated above, this conclusion was drawn by the researchers after a detail study on the overall survival, quality of life, and safety benefits of recently licensed cancer medicines, as there was a dearth of evidence on the impact of newly licensed cancer medicines.

The authors analyzed in detail health technology assessment reports of 62 cancer drugs approved in the United States and Europe between 2003 and 2013, and found that these were associated with increased overall survival by an average of 3.43 months between 2003 and 2013. Following is a summary of the detail findings:

  • 43 percent increased overall survival by 3 months or longer
  • 11 percent by less than 3 months
  • 30 percent was not associated with any increase in overall survival, which means almost one third of these drugs lacked evidence to suggest their increased survival rate when compared to alternative treatments
  • Most new cancer drugs, though improved quality of life, were associated with reduced patient safety

The researchers expect this study to support clinical practice, and promote value-based decision-making in the cancer drug treatment, besides assessing their cost-effectiveness.

Some overseas Cancer Institutes protested:

In 2012, doctors at the Memorial Sloan-Kettering Cancer Center reportedly announced through ‘The New York Times’ that their hospital would not be using Zaltrap, a newly patented colorectal cancer drug at that time, from Sanofi. This action of the Sloan-Kettering doctors compelled Sanofi to cut the price of Zaltrap by half.

Unlike India, where prices of even cancer drugs do not seem to be a great issue with the medical profession, just yet, the top cancer specialists of the American Society of Clinical Oncology are reportedly working out a framework for rating and selecting cancer drugs not only for their benefits and side effects, but prices as well.

In a 2015 paper, a group of cancer specialists from Mayo Clinic also articulated, that the oft-repeated arguments of price controls stifle innovation are not good enough to justify unusually high prices of these drugs. Their solution for this problem includes value-based pricing and NICE like body of the United Kingdom.

This Interesting Video from Mayo Clinic justifies the argument.

Was it a tongue-in-cheek action from India?

On March 9, 2012, India did send a signal to global pharma players on its apparent unhappiness of astronomical pricing of patented new cancer drugs in the country. The then Indian Patent Controller General, on that day, issued the first ever Compulsory License (CL) to a domestic drug manufacturer Natco, allowing it to sell a generic equivalent of a kidney cancer treatment drug from Bayer – Nexavar, at a small fraction of the originator’s price.

However, nothing has changed significantly since then on the ground for cancer drugs in the country. Hence, many construe the above action of the Government no more than mere tokenism.

In this context, it won’t be out of place recapitulating an article, published in a global business magazine on December 5, 2013 that quoted Marijn Dekkers, the then CEO of Bayer AG as follows:

“Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India, but for Western Patients that can afford it.”

Whether, CL is the right approach to resolve allegedly ‘profiteering mindset’ at the cost of human lives, is a different subject of discussion.

VBP concept is gaining ground: 

The concept of ‘Value-Based Pricing (VBP)’, has started gaining ground in the developed markets of the world, prompting the pharmaceutical companies generate requisite ‘health outcome’ data using similar or equivalent products.

Cost of incremental value that a product delivers over the existing ones, is of key significance, and should always be the order of the day. Some independent organizations such as, the National Institute for Health and Clinical Excellence (NICE) in the UK have taken a leading role in this area.

Intriguingly, in India, public health related issues, however pressing these are, still do not seem to arrest much attention of the government to provide significant relief to a large majority of population in the country.

Conclusion:

Warren Buffet – the financial investor of global repute once said, “Price is what you pay. Value is what you get.” Unfortunately, this dictum is not applicable to the consumers of high priced life-saving drugs, such as, for cancer.

Prices of new drugs for the treatment of life-threatening ailments, such as cancer, are increasingly becoming unsustainable, across the world, and more in India. As articulated by the American Society of Clinical Oncology in 2014, this is mainly because their prices are disconnected from the actual therapeutic value of products.

Currently, a sizable number of poor and even middle-income patients, who spend their entire life’s saving for treatment of a disease like cancer, have been virtually priced out of the patented new cancer drugs market.

The plight of such patients is worse in India, and would continue to be so, especially when no trace of Universal Health Care/Coverage (UHC) is currently visible anywhere near the healthcare horizon of the country.

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.

Awaiting The Two To Tango: Pharma Innovation And Public Health Interest

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“The rewards for the breakthrough drug discovery must be substantial, but if prices are the only mechanism through which returns on research flow, affordability will be compromised,” articulated an article titled, ‘Pharmaceutical Policy Reform – Balancing Affordability with Incentives for Innovation’, published in The New England Journal of Medicine (NEJM) on February 25, 2016.

The article arrived at this conclusion, on the backdrop of the high prices of prescription drugs becoming an issue of paramount concern, not just in the United States, but across the world. This concern is so acute that it found its way into policy proposals from both the prime candidates, in the American Presidential election held on November 8, 2016.

Through last several decades, healthcare sector in general and particularly the pharmaceutical industry, witnessed many innovations that cure and effectively manage ailments to improve the general quality of life. It enormously impacted the lives of many in the developed countries, and a few others which offer high quality Universal Health Care in a comprehensive format, for all.

A trickle-down impact:

Nevertheless, even no more than its just a trickle-down impact, helped increase overall life expectancy of the population in many developing and poor countries, mostly driven by the expanding number of cheaper generic drugs, fueled by more treatment and disease management options.

The paper titled, ‘World Population Prospects – The 2015 Revision’ of the Department of Economic and Social Affairs, Population Division of the United Nations’ reported that the life expectancy at birth rose by 3 years between 2000-2005 and 2010-2015, that is from 67 to 70 years. All major areas shared in the life expectancy gains over this period, but the greatest increases were in Africa, where life expectancy rose by 6 years in the 2000s, after rising by only 2 years in the previous decade.

Similarly, the global life expectancy at birth is projected to rise from 70 years in 2010-2015 to 77 years in 2045- 2050 and to 83 years in 2095-2100. Africa is projected to gain about 19 years of life expectancy by the end of the century, reaching 70 years in 2045-2050 and 78 years in 2095-2100. Such increases are contingent on further reductions in the spread of HIV, and combating successfully other infectious as well as non-communicable diseases.

The availability of cheaper generics gave some respite:

Out of a total population of 7.3 billion, as the above report says, the World Bank estimated that in 2013, 767 million people still lived on less than US$ 1.90 a day. Unfortunately, despite the greater availability of a large variety of cheaper generic drugs, the basic health care remains elusive to hundreds of millions of people in the world.

What causes more concern is the fact that 6 percent of people in low and middle-income countries are tipped into or pushed further into extreme poverty because of health spending, as the June 12, 2015 report of the World Health Organization (W.H.O) and the World Bank highlights. W.H.O has estimated that over a billion population of the world still suffer from neglected tropical diseases.

How many people benefitted from pricey patented drugs?

Nevertheless, despite so much innovation in the pharma industry, access to these new drugs remains elusive to a large section of even some the most developed nations, such as the United States, as they can’t afford these high-priced drugs. The overall situation, in this regard, is going from bad to worse. For example, the March 16, 2015 study published in the Mayo Clinic Proceedings reveals that the average annual cost of cancer drugs increased from roughly US$ 10,000 prior to 2000 to an astounding over US$  100,000 by 2012.

Further, an August 31, 2015 article published in the ‘Health Affairs’ also gave examples of Biogen Idec’s multiple sclerosis drug, Tecfidera, which costs US$ 54,900 per patient per year; hepatitis C cures from Gilead Sciences, with a sticker price of $84,000 per patient; and Orkambi, a cystic fibrosis drug from Vertex Pharmaceuticals approved this month, priced at a whopping US$ 259,000 per year. A Kaiser Health Tracking Poll last July 2015 found that 73 percent of Americans find the cost of drugs to be unreasonable, and most blamed drug manufacturers for setting prices too high, the article stated.

The health care scenario in India is no better:

A study conducted by the ‘National Sample Survey Organization (NSSO)’ from January to June 2014, which was the 71st round of the ‘National Sample Survey’, and published in the ‘Health in India’ report, narrates a very gloomy picture for India, especially for a clear majority of those who incur ‘out of pocket’ expenses on medicines. The report states, out of all health expenditure, 72 percent in rural and 68 percent in urban areas was for buying medicines for non-hospitalized treatment.

Thus, many patients cannot afford health services, even when these are needed the most. As many as 68 percent of patients in urban India and 57 percent in rural areas attributed “financial constraints” as the main reason to take treatment without any medical advice, the report adds.

In this situation, the challenges that the Governments and the civil society are facing in many developing, and to some extent even in some developed countries, though for different reasons, are multi-factorial. It has been well established that the humongous global health care challenges are mostly of economic origin.

Pharma innovation benefitted the developed countries more:

A study  titled, ‘Pharmaceutical innovation and the burden of disease in developing and developed countries’ of Columbia University and National Bureau of Economic Research, to ascertain the relationship across diseases between pharmaceutical innovation and the burden of disease both in the developed and developing countries, reported that pharmaceutical innovation is positively related to the burden of disease in the developed countries but not so in the developing countries.

Making the two to tango:

These facts prompt the need to make the pharma innovation and public health interest to tango. Several suggestions have been made and initiatives taken in this direction. Some of which are as follows:

  • Responding to this need, in 2006 W.H.O created the ‘Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG)’. The primary focus of IGWG is on promoting sustainable, needs-driven pharmaceutical R&D for the diseases that disproportionately affect developing countries. One positive effect of this global debate is that some global pharmaceutical companies have initiated their R&D activities for neglected tropical diseases, such as, Malaria and Tuberculosis. Many charitable organizations like, Bill & Melinda Gates Foundation and Clinton Foundation, are allocating significant funds for this purpose.
  • A paper  titled, “Optional reward for new drugs for developing countries” published by the Department of Economics, University of Calgary, Institute of Health Economics, proposed an optional reward fund for pharmaceutical innovation aimed at the developing world to the pharmaceutical companies, which would develop new drugs while ensuring their adequate access to the poor. The paper suggests that innovations with very high market value will use the existing patent system, as usual. However, the medicines with high therapeutic value but low market potential would be encouraged to opt for the optional reward system. It was proposed that the optional reward fund should be created by the governments of the developed countries and charitable institutions to ensure a novel way for access to innovative medicines by the poor.
  • ‘Open Innovation’ or the ‘Open Source Drug Discovery (OSDD)’ is another model of discovering a New Chemical Entity (NCE) or a New Molecular Entity (NME). Imbibing ‘Open Innovation’ for commercial results in pharmaceuticals, just has what has happened to android smartphones, would encourage drug discovery initiatives, especially for the dreaded disease like cancer, to make these drugs affordable for a very large section of people across the globe. In this model, all data generated related to the discovery research will be available in the open for collaborative inputs. In ‘Open Innovation’, the key component is the supportive pathway of its information network, which is driven by three key parameters of open development, open access and open source. This concept was successfully used in the ‘Human Genome Project’ where many scientists, and microbiologists participated from across the world to sequence and understand the human genes. Currently, pharmaceutical R&D is a well-protected in-house initiative of innovator global companies to maximize commercial benefits. For this reason, only a limited number of scientists working for the respective innovator companies will have access to these projects. In India, the Council of Scientific and Industrial Research (CSIR) is the champion of the OSDD movement, locally. CSIR believes that for a developing country like India, OSDD will help the common man to meet his or her unmet medical needs in the areas of mainly neglected tropical diseases.

Conclusion:

Thus, the ongoing heated debate on Innovation, Intellectual Property Rights (IPR) and Public Health Interest is gathering steam all over the globe.

Argumentative Indians are also participating in this raging debate. I reckon rightly so, as India is not only the largest democracy of the world contributing 16.7 percent of the global population, it is also afflicted with 21 percent of the global burden of disease. Considering this, the reason for similar heated debate in our country is indeed no-brainer to anyone.

Many would possibly not disagree, both encouraging innovation and safeguarding the public health interest are equally important to any society, be it in the developed nations or developing countries. Nevertheless, some constituents of ‘Big Pharma’ and their trade association still highlight that ensuring access to high price innovative drugs is the responsibility of the respective Governments. Any other regulatory mechanism to bring down such prices will be construed as a barrier to encouraging, protecting and rewarding innovation.

Be that as it may, most other stakeholders, across the world, especially the patients, are awaiting these two goals to tango. From that point, I reckon, giving a quick shape to commercially well-tested initiatives, such as, ‘Open Innovation’ model could well be an important step to ensure access to innovative new medicines for a larger number of patients of the world, meeting their unmet medical needs with greater care.

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.