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Moving Up The Generic Pharma Value Chain

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June 2014 underscores a significant development for the generic drug exporters of India. Much-delayed and highly expected launch of generic Diovan (Valsartan) is now on its way, as Ranbaxy has reportedly received US-FDA approval to launch the first generic version of this blood pressure drug in the United States.

As deliberated in my earlier blog titled “Big Pharma’s Windfall Gain From Indian Pharma’s Loss, Costs American Patients Dear”, delay in launch of the generic equivalent of Diovan caused a windfall gain for Novartis from US$ 1.7 billion US sales of this drug last year, instead of usual declining turnover of an innovative molecule post patent expiry.

The generic version of Diovan (Valsartan) is estimated to contribute around US$ 200 million to Ranbaxy’s sales and US$ 100 million to its profit after tax, during the exclusive sale period. Against these numbers, delay in the launch of generic Diovan has reportedly cost payers and consumers in America around US$ 900 million in the first 18 months.

Since four Ranbaxy manufacturing facilities in India are now facing US-FDA ‘import bans’ due to violations of ‘Good Manufacturing Practices’ of the American regulator, its Ohm Laboratories unit located in New Jersey has been allowed to make generic Valsartan for the US.

Go for gold: 

Hopefully, Ranbaxy would soon get similar approvals from the US drug regulator for its ‘first to launch’ generic versions of Nexium (AstraZeneca) and Valcyte (Roche), as well.

It is worth mentioning that around 90 percent price erosion would take place with intense competition, as soon the period of exclusivity for such ‘first to launch’ generics gets over.

Nonetheless, this is indeed a very interesting development, when the global generic pharmaceutical segment is reportedly showing signals of a tough chase for overtaking the branded pharmaceuticals sector in terms of sales turnover too.

India has a huge a stake in this ball game, as it supplies around 30 to 40 percent of the world’s generic medicines and is well poised to improve its pharma exports from around US$ 15 billion per year to US$ 25 billion by 2016. Since 2012, this objective has remained an integral part of the country’s global initiative to position India as the “pharmacy to the world.”

However, considering the recent hiccups of some Indian pharma majors in meeting with the quality requirements of the US-FDA, though this target appears to be a challenging one for now, the domestic pharma players should continue to make all out efforts to go for the gold by moving up the generic pharmaceutical value chain. In this context, it is worth noting that penetration of the generic drugs in the US is expected to increase from the current 83 percent to 86-87 percent very shortly, as the ‘Obamacare’ takes off with full steam.

Moving up the value chain:

In the largest pharma market of the world – the United States, global generic companies are increasingly facing cutthroat price competition with commensurate price erosion, registering mixed figures of growth. Even in a situation like this, some companies are being immensely benefited from moving up the value chain with differentiated generic product launches that offer relatively high margin, such as, specialty dermatologicals, complex injectibles, other products with differentiated drug delivery systems and above all biosimilars.

As a consequence of which, some Indian generic companies have already started focusing on the development of value added, difficult to manufacture and technology intensive generic product portfolios, in various therapy areas. Just to cite an example, Dr. Reddy’s Laboratories (DRL) is now reportedly set to take its complex generic drug Fondaparinux sodium injection to Canada and two other emerging markets.

Thus, those Indian pharma companies, which would be able to develop a robust product portfolio of complex generics and other differentiated formulations for the global market, would be much better placed in positioning themselves significantly ahead of the rest, both in terms of top and the bottom lines.

One such key opportunity area is the development of a portfolio of biosimilar drugs – the large molecule proteins.

Global interest in biosimilars:

According to the June 2014 report of GlobalData, a leading global research and consulting firm, the biosimilars industry is already highly lucrative. More than 100 deals involving companies focused on the development of biosimilars have been completed over the past 7 years, with a total value in excess of US$10.7 billion.

GlobalData further states, there are a number of factors driving the initiative toward global adoption of biosimilars, from austerity measures and slow economic growth in the US, to an aging population and increasing demand for healthcare in countries, such as Japan.

The costs of biosimilars are expected to be, at least, 20 to 30 percent lower than the branded biologic therapies. This still remains a significant reduction, as many biologics command hundreds of thousands of dollars for 1 year’s treatment.

According to another media report, biosimilars are set to replace around 70 percent of global chemical drugs over the next couple of decades on account of ‘safety parameters and a huge portion of biologic products going off patent’.

Biosimilar would improve patient access:

Although at present over 150 different biologic medicines are available globally, just around 11 countries have access to low cost biosimilar drugs, India being one of them. Supporters of biosimilar medicines are indeed swelling as the time passes by.

It has been widely reported that the cost of treatment with innovative and patented biologic drugs can vary from US$ 100,000 to US$ 300,000 a year. A 2010 review on biosimilar drugs published by the Duke University highlights that biosimilar equivalents of novel biologics would improve access to such drugs significantly, for the patients across the globe.

Regulatory hurdles easing off:

In the developed world, European Union (EU) had taken a lead towards this direction by putting a robust system in place, way back in 2003. In the US, along with the recent healthcare reform process of the Obama administration, the US-FDA has already charted the regulatory pathway for biosimilar drugs, though more clarifications are still required.

Not so long ago, the EU had approved Sandoz’s (Novartis) Filgrastim (Neupogen brand of Amgen), which is prescribed for the treatment of Neutropenia. With Filgrastim, Sandoz will now have at least 3 biosimilar products in its portfolio.

Key global players:

At present, the key global players are Sandoz (Novartis), Teva, BioPartners, BioGenerix (Ratiopharm) and Bioceuticals (Stada). With the entry of pharmaceutical majors like, Pfizer, Sanofi, Merck, Boehringer Ingelheim and Eli Lilly, the global biosimilar market is expected to be heated up and grow at a much faster pace than ever before. Removal of regulatory hurdles for the marketing approval of such drugs in the US would be the key growth driver.

Globally, the scenario for biosimilar drugs started warming up when Merck announced that the company expects to have at least 5 biosimilars in the late stage development by 2012.

Most recent global development:

A key global development in the biosimilar space has taken place, just this month, in June 2014, when Eli Lilly has reportedly won the recommendation of European Medicines Agency’s Committee for Medicinal Products for launch of a biosimilar version (Abasria insulin) of Sanofi’s Lantus insulin. This launch would pave the way for the first biosimilar version of Sanofi’s top-selling drug clocking a turnover of US$7.8 billion in 2013. Eli Lilly developed Abasria with Boehringer Ingelheim of Germany.

In May 2014, Lantus would lose patent protection in Europe. However, biosimilar competition of Lantus in the US could get delayed despite its patent expiry in February, as Sanofi reportedly announced its intention of suing Eli Lilly on this score.

Global Market Potential:

According to a 2011 study, conducted by Global Industry Analysts Inc., worldwide market for biosimilar drugs is estimated to reach US$ 4.8 billion by the year 2015, the key growth drivers being as follows:

  • Patent expiries of blockbuster biologic drugs
  • Cost containment measures of various governments
  • Aging population
  • Supporting legislation in increasing number of countries
  • Recent establishment of regulatory pathways for biosimilars in the US

IMS Health indicates that the US will be the cornerstone of the global biosimilars market, powering a sector worth between US$ 11 billion and US$ 25 billion in 2020, representing a 4 percent and 10 percent share, respectively, of the total biologics market.

The overall penetration of biosimilars within the off-patent biological market is estimated to reach up to 50 percent by 2020.

Challenges for India:

Unlike commonly used ‘small molecule’ chemical drugs, ‘large molecule’ biologics are developed from living cells using very complex processes. It is virtually impossible to replicate these protein substances, unlike the ‘small molecule’ drugs. One can at best develop a biologically similar molecule with the application of high degree of biotechnological expertise.

According to IMS Health, the following would be the key areas of challenge:

High development costs:

Developing a biosimilar is not a simple process but one that requires significant investment, technical capability and clinical trial expertise. Average cost estimates range from US$ 20-100 million against much lesser cost of developing traditional generics, which are typically around US$ 1-4 million.

Fledgling regulatory framework:

In most markets apart from Europe, but including the United States, the regulatory framework for biosimilars is generally still very new compared to the well-established approval process for NCEs and small-molecule generics.

Intricate manufacturing issues:

The development of biosimilars involves sophisticated technologies and processes, raising the risk of the investment.

Overcoming ‘Branded Mentality’:

Winning the trust of stakeholders would call for honed skills, adequate resources and overcoming the branded mentality, which is especially high for biologics. Thus, initiatives to allay safety concerns among physicians and patients will be particularly important, supported by sales teams with deeper medical and technical knowledge. This will mean significant investment in sales and marketing too.

Indian business potential:

The biosimilar drugs market in India is expected to reach US$ 2 billion in 2014 (Source: Evalueserve, April 2010).

Recombinant vaccines, erythropoietin, recombinant insulin, monoclonal antibody, interferon alpha, granulocyte cell stimulating factor like products are now being manufactured by a number of domestic biotech companies, such as, Dr. Reddy’s Laboratories, Lupin, Biocon, Panacea Biotech, Wockhardt, Glenmark, Emcure, Bharat Biotech, Serum Institute, Hetero, Intas and Reliance Life Sciences.

The ultimate objective of all these Indian companies is to get regulatory approval of their respective biosimilar products in the US and the EU either on their own or through collaborative initiatives.

Domestic players on the go:

Dr.Reddy’s Laboratories (DRL) in India has already developed Biosimilar version of Rituxan (Rituximab) of Roche used in the treatment of Non-Hodgkin’s lymphoma.  DRL has also developed Filgastrim of Amgen, which enhances production of white blood cell by the body and markets the product as Grafeel in India. DRL has launched the first generic Darbepoetin Alfa in the world for treating nephrology and oncology indications and Peg-grafeel, an affordable form of Pegfilgrastim, which is used to stimulate the bone marrow to fight infection in patients undergoing chemotherapy. The company reportedly sold 1.4 million units of its four biosimilars, which have treated almost 97,000 patients across 12 countries. Besides, in June 2012, DRL and Merck Serono, of Germany, announced a partnership deal to co-develop a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs). The partnership covers co-development, manufacturing and commercialization of the compounds around the globe, with some specific country exceptions.

Another Indian pharmaceutical major Cipla, has reportedly invested Rs 300 Crore in 2010 to acquire stakes of MabPharm in India and BioMab in China and announced in June 19, 2014 collaboration with Hetero Drugs to launch a biosimilar drug with Actroise brand name for the treatment of anemia caused due to chronic kidney disease. Actorise is a biosimilar of ‘Darbepoetin alfa’, which is marketed by US-based Amgen under the brand Aranesp.

In 2011, Lupin reportedly signed a deal with a private specialty life science company NeuClone Pty Ltd of Sydney, Australia for their cell-line technology. Lupin reportedly would use this technology for developing biosimilar drugs in the field of oncology. Again, in April 2014, Lupin entered into a joint venture pact with Japanese company Yoshindo Inc. to form a new entity that will be responsible both for development of biosimilars and obtaining marketing access for products in the Japanese market.

In November 2013, The Drug Controller General of India (DCGI) approved a biosimilar version of Roche’s Herceptin developed jointly by Biocon and Mylan.

In June 2014, Ipca Laboratories and Oncobiologics, Inc. of USA reportedly announced the creation of an alliance for the development, manufacture and commercialization of biosimilar monoclonal antibody products.

Many more such initiatives reportedly are in the offing.

Oncology becoming biosimilar development hot spot:

Many domestic Indian pharmaceutical companies are targeting Oncology disease area for developing biosimilar drugs, which is estimated to be the largest segment globally with a value turnover of around US$ 60 billion growing over 17 percent.

As per recent reports, about 8 million deaths take place all over the world per year due to cancer.

Indian Government support:

In India, the government seems to have recognized that research on biotechnology has a vast commercial potential for products in human health, including biosimilars, diagnostics and immune-biological, among many others.

To give a fillip to the Biotech Industry in India the National Biotechnology Board was set up by the Government under the Ministry of Science and Technology way back in 1982. The Department of Biotechnology (DBT) came into existence in 1986. The DBT currently spends around US$ 300 million annually to develop biotech resources in the country and has been reportedly making reasonably good progress.

The DBT together with the Drug Controller General of India (DCGI) has now prepared and put in place ‘Regulatory Guidelines for Biosimilar Drugs’ in conformance with the international quality and patient safety standards. This is a big step forward for India in the arena of biosimilar drugs.

In June 2014, under the advanced technology scheme of Biotechnology Industry Partnership Program (BIPP), the DBT has reportedly invited fresh proposals from biotech companies for providing support on a cost sharing basis targeted at development of novel and high risk futuristic technologies mainly for viability gap funding and enhancing existing R&D capacities of start-ups and SMEs in key areas of national importance and public good.

However, the stakeholders expect much more from the government in this area, which the new Indian government would hopefully address with a sense of urgency.

Conclusion: 

According to IMS Health, biosimilar market could well be the fastest-growing biologics segment in the next few years, opening up oncology and autoimmune disease areas to this category of drugs for the first time ever. Moreover, a number of top-selling biologic brands would go off patent over the next five years, offering possibilities of reaping rich harvest for the biosimilars players of the country. Critical therapy areas such as cancer, diabetes and rheumatoid arthritis are expected to spearhead the new wave of biosimilars.

While moving up the generic pharma value chain, Indian pharma players desiring to encash on the emerging global biosimilars opportunities would require to do a thorough analysis, well in advance, to understand properly the key success factors, core value propositions, financial upsides and risks attached to investments in this area.

Indian companies would also need to decide whether moving ahead in this space would be through collaborations and alliances or flying solo would be the right answer for them. Thereafter would come the critical market access strategy – one of the toughest mind games in the long-haul pharma marketing warfare.

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.

 

With Free Medicines In, Would The New Government Revisit ‘Universal Health Coverage’ Soon?

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Friday last, the new Union Health Minister Dr. Harsh Vardhan reportedly announced that the his ministry would soon start work on distributing free medicines through public hospitals across the country.

For this purpose the Minister would soon call a meeting of the State Health Ministers to integrate this policy with the National Health Mission (NHM). The said meeting will be held under the framework of the Central Council of Health (CCH), which also includes professional experts.

A commendable beginning:

This decision of Dr. Harsh Vardhan would revive a plan that the former Prime Minister Manmohan Singh had promised in his Independence Day speech to the nation in 2012, but could not be implement due to paucity of adequate fund. Implemented effectively, the above scheme has the potential to significantly reduce the Out-of-Pocket (OoP) expenditure on healthcare in India.

According to a 2012 study of IMS Consulting, expenditure on medicines still constitute the highest component of OoP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012.  Similarly for IP care, the share of medicines in total OoP has also marginally decreased from 46 percent in 2004 to 43 percent in 2012.

However, it is worth noting that still 46 percent of patients seeking healthcare in public channels purchase medicines from private channels for non-availability. The new scheme hopefully would resolve this issue with sincerity, care and a sense of purpose.

For early success in this area, experts recommend that up and running Tamil Nadu and Rajasthan models of this scheme, which are most efficient and cost effective, should be replicated in rest of the states.

Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation with the manufacturers, and distribution of those drugs free of cost from the Government hospitals and health centers to the patients efficiently, could further add value to the process.

The cost and span:

Planning Commission estimated that a countrywide free generic drug program would cost Rs 28,560 Crore (roughly around US$ 5 Billion) during the 12th Five-Year Plan period. The Centre will bear 75 percent of the cost while the states would provide the rest. Under the previous government plan, 348 drugs enlisted in the National List of Essential Medicines 2011 (NLEM 2011) were to be provided free at 160,000 sub-centers, 23,000 Primary Health Centers, 5,000 community health centers and 640 district hospitals.

“Universal Health Coverage” – Still remains the holistic approach:

That said, despite its immense importance, “distribution of free medicines” still remains just one of the key elements of Universal Health Coverage (UHC). It is expected that the new government would take a holistic view on the UHC agenda, sooner, to provide comprehensive healthcare services, including preventive care, to all citizens of the country.

According to another recent media report, the new Health Minister has already expressed a different viewpoint on this subject. Dr. Harsh Vardhan has reportedly said:

“I am not in favor of taxpayers’ money being used to push a one-size-fits-all health policy. From this morning itself, I have started contacting public health practitioners to know their minds on what should be the road ahead.”

Without deliberating much on the roll out of UHC as of now, the Minister promised that the government would work to provide ‘health insurance coverage for all’ through a National Insurance Policy for Health.

This statement is significant, because until recently, the ‘high level’ understanding was that the country, at least directionally, is in favor of public funded UHC, which was defined as follows:

“Ensuring equitable access for all Indian citizens, resident in any part of the country, regardless of income level, social status, gender, caste or religion, to affordable, accountable, appropriate health services of assured quality (promotive, preventive, curative and rehabilitative) as well as public health services addressing the wider determinants of health delivered to individuals and populations, with the government being the guarantor and enabler, although not necessarily the only provider, of health and related services”.

The groundwork started with ‘The HLEG Report‘ :

Just to recapitulate, in October 2010, the Planning Commission of India constituted a ‘High Level Expert Group (HLEG)’ on UHC under the chairmanship of Dr. Prof. K. Srinath Reddy, President of the ‘Public Health Foundation of India (PHFI)’. The group was mandated to develop a framework for providing easily accessible and affordable health care to all Indians.

HLEG in its submission had suggested that the entire scheme would be funded by the taxpayers’ money for specified sets of healthcare services and for additional services commensurate health insurance coverage may be purchased by the individuals. Accordingly, to ensure a modest beginning of the UHC, in the 12th Five Year Plan Period, public expenditure on health was raised to 2.5 percent of the GDP.

UHC guarantees access to essential free health services for all:

Because of the uniqueness of India, HLEG proposed a hybrid system that draws on the lessons learnt from within India, as well as other developed and developing countries of the world.

The proposal underscored that UHC will ensure guaranteed access to essential health services for every citizen of India, including cashless in-patient and out-patient treatment for primary, secondary and tertiary care. All these services will be available to the patients absolutely free of any cost.

UHC provides options to patients:

Under the proposed UHC, all citizens of India would be free to choose between public sector facilities and ‘contracted-in’ private providers for healthcare services. It was envisaged that people would be free to supplement the free of cost healthcare services offered under UHC by opting to pay ‘out of pocket’ or going for private health insurance schemes.

What exactly is the new Health Minister mulling?

If the new Health Minister is mulling something different to provide similar healthcare coverage to Indians, let me now explore the other options adopted by various nations in this area.

As we know, UHC is a healthcare system where all citizens of a country are covered for the basic healthcare services. In many countries UHC may have different system types as follows:

  • Single Payer: The government provides insurance to all citizens.
  • Two-Tier: The government provides basic insurance coverage to citizens and allows purchase of additional voluntary insurance whenever a citizen wants to.
  • Insurance Mandate: The government mandates that insurance must be bought by all its citizens, like what happened in the USA in 2010 under ‘Obamacare’.

The Global scenario:

As per published reports, all 33 ‘developed nations’ (OECD countries) have UHC in place. America was the only exception, till President Barack Obama administration implemented its ‘path breaking’ healthcare reform policy in 2010 against tough political opposition.

India is already too late in providing UHC:

Based on an article titled, ‘ Analyzing our economy, government policy and society through the lens of cost-benefit’ published in ‘True Cost’, following is the list that states in which countries the UHC is currently in place and from when:

Country Start Date of Universal Health Care System Type
Norway 1912 Single Payer
New Zealand 1938 Two Tier
Japan 1938 Single Payer
Germany 1941 Insurance Mandate
Belgium 1945 Insurance Mandate
United Kingdom 1948 Single Payer
Kuwait 1950 Single Payer
Sweden 1955 Single Payer
Bahrain 1957 Single Payer
Brunei 1958 Single Payer
Canada 1966 Single Payer
Netherlands 1966 Two-Tier
Austria 1967 Insurance Mandate
United Arab Emirates 1971 Single Payer
Finland 1972 Single Payer
Slovenia 1972 Single Payer
Denmark 1973 Two-Tier
Luxembourg 1973 Insurance Mandate
France 1974 Two-Tier
Australia 1975 Two Tier
Ireland 1977 Two-Tier
Italy 1978 Single Payer
Portugal 1979 Single Payer
Cyprus 1980 Single Payer
Greece 1983 Insurance Mandate
Spain 1986 Single Payer
South Korea 1988 Insurance Mandate
Iceland 1990 Single Payer
Hong Kong 1993 Two-Tier
Singapore 1993 Two-Tier
Switzerland 1994 Insurance Mandate
Israel 1995 Two-Tier
United States 2010 Insurance Mandate

In-sync with the concept, probably with different means:

From the above statement of the new Health Minister, it appears that to provide healthcare coverage to all citizens of India, his ministry would work towards developing a National Health Insurance Policy. He also expressed that his ministry wants to focus on preventive healthcare.

Preventive healthcare being an integral part of UHC, it could well be that Dr. Harsh Vardhan wants to follow ‘Single Payer’ type of UHC system type.

Another school of thought:

However, another school of thought opines that a government owned efficient public healthcare system with adequate infrastructural facilities provides healthcare to patients almost free of cost as compared to the “insurance mandated” one.

This is mainly because, to address respective healthcare needs currently the patients have either or a mix of the following two choices:

  • Use public health facilities: Available virtually at free of cost if accessible, but quality is mostly questionable.
  • Use private health facilities: Virtually unregulated, much better services, though available mostly at high to very high cost.

Thus, these groups of experts believe that provision of universal health insurance for treatment at the expensive private facilities may not be cost effective even for the government, if these are not adequately regulated with appropriate stringent measures.

In absence of all those measures, the new Health Minister could consider taking a decision in favor of tax-funded UHC, with appropriate budgetary provisions and investments towards improving country’s healthcare infrastructure and its delivery mechanism for all.

Conclusion:

Be that as it may, there is not even an iota of doubt that India needs ‘Universal Health Coverage (UHC)’, like any OECD or other countries of the world for its citizens, sooner. Just distributing free medicines through public hospitals across the country for all, without a holistic approach such as UHC, may not yield desired results.

From the initial deliberations of Dr. Harsh Vardhan, it appears that UHC would soon not just be revisited, but receive a new thrust too, from the no-nonsense minister, probably leaning more towards private participation than with a public funded one, contrary to what was proposed by the HLEG.

Does it matter really? Well…

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.

Is Drug Innovation As Critical As Access To Medicines For All? [Augmented By A Video]

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To make important medicines available to all in a sustainable way, the renowned philosopher Thomas Pogge in this very interesting video clipping titled “Medicines For The 99 Percent” suggested the following three simple, yet critical, steps to effectively run the healthcare system of any nation with a cost-effective and patient-centric approach:

  • Access to important medicines for all
  • A robust drug innovation model to meet the unmet needs of patients
  • Transparent and efficient systems to make medicines affordable to all, eliminating wastage of all kinds

To translate this process into reality Pogge proposed an out-of-box model, not just to incentivize companies for drug innovation, but also to produce those drugs in a cost-effective way . In his submission, Pogge recommended a US$ 6 billion ‘Health Impact Fund’ to revolutionize the way medicines are developed and sold. He strongly argued that the value of an innovative drug should always be ascertained by its differential “Health Impact” on patients over the equivalent available generics in the respective disease areas.

As you will see in the video, the model is interesting and deserves wholehearted support from all stakeholders, despite possible resistance from some powerful quarters prompted by vested interests.

Drug innovation and access to medicines:

As the good old saying goes, “Health is Wealth”. When a person falls sick, regaining health is all-important. Medicines play a very critical role there, for all. In the ongoing battle against various types of diseases, addressing unmet needs of the patients is also equally important. For this reason, drug innovation plays just as critical a role.

However, it is now a well-known fact that medicines, as such, are not very expensive to manufacture on a relative yardstick. Abundant availability of cheaper generic medicines, post-patent expiry, with as much as  90 percent price erosion over the concerned patented drug price, would vindicate this point.

Current R&D model:

Astronomical mark-ups on the cost of goods for the innovative-patented drugs coming out of the current R&D model, restrict access to these medicines mostly to rich people of both poor and rich countries of the world, depriving majority of the have-nots. Although in an ideal situation, all these medications should be accessible to those who need them the most.

Is the model sustainable?

Innovator companies attribute ‘astronomical’ high prices of patented drugs to hefty R&D expenditure, which probably includes high cost of failures too. Unfortunately, despite ongoing raging debates, R&D expense details are still held very close to the chest by the innovator companies, with almost total lack of transparency. Many experts, therefore, believe that this opaque, skewed and unsustainable drug R&D model of the global pharma majors needs a radical makeover now, as you would yourself see by clicking on the ‘video clipping’, as mentioned above

To ensure full access to important drugs for all, there are other R&D or innovation models too. Unfortunately, none of those appears to be financially as lucrative to the innovator companies as the one that they are currently following, thus creating a challenging logjam in the inclusive process of drug innovation.

Are Pharmaceutical R&D expenses overstated?

Some experts in this area argue that pharmaceutical R&D expenses are overstated, as the real costs are much less.

An article titled “Demythologizing the high costs of pharmaceutical research”, published by the London School of Economics and Political Science in 2011 indicated that the total cost from the discovery and development stages of a new drug to its market launch was around US$ 802 million in the year 2000. This was worked out in 2003 by the ‘Tuft Center for the Study of Drug Development’ in Boston, USA.

However, in 2006 this figure increased by 64 per cent to US$ 1.32 billion, as reported by a large pharmaceutical industry association of the United States, though with dubious credibility as considered by many.

The authors of the above article had also mentioned that the following factors were not considered while working out the 2006 figure of US$ 1.32 billion:

▪   Tax exemptions that the companies avail for investing in R&D

▪   Tax write-offs that amount to taxpayers’ contributing almost 40 percent of the R&D cost

▪   Cost of basic research should not have been included as those are mostly undertaken       by public funded universities or laboratories

The article observed that ‘half the R&D costs are inflated estimates of profits that companies could have made, if they had invested in the stock market instead of R&D and include exaggerated expenses on clinical trials’.

“High R&D costs have been the industry’s excuses for charging high prices”:

In line with this deliberation, in the same article the authors reinforce the above point, as follows:

“Pharmaceutical companies have a strong vested interest in maximizing figures for R&D as high research and development costs have been the industry’s excuse for charging high prices. It has also helped generating political capital worth billions in tax concessions and price protection in the form of increasing patent terms and extending data exclusivity.”

The study concludes by highlighting that “the real R&D cost for a drug borne by a pharmaceutical company is probably about US$ 60 million.”

Should Pharmaceutical R&D move away from the traditional model?

Echoing philosopher Thomas Pogge’s submission, another critical point to ponder today is:

Should the pharmaceutical R&D now move away from its traditional comfort zone of expensive one company initiative to a much less charted frontier of sharing drug discovery involving many players?

If this overall collaborative approach gains broad acceptance and then momentum sooner, with active participation of all concerned, it could lead to substantial increase in R&D productivity at a much lesser expenditure, eliminating wastage by reducing the cost of failures significantly, thus benefiting the patients community at large.

Choosing the right pathway in this direction is more important today than ever before, as the R&D productivity of the global pharmaceutical industry, in general, keeps going south and that too at a faster pace.

Making drug innovation sustainable: 

Besides Thomas Pogge’s model with ‘Health Impact Fund’ as stated above, there are other interesting drug R&D models too. In this article, I shall focus on two examples:

Example I:

A July 2010 study of Frost & Sullivan reports: “Open source innovation increasingly being used to promote innovation in the drug discovery process and boost bottom-line”.

The concept underscores the urgent need for the global pharmaceutical companies to respond to the challenges of high cost and low productivity in their respective R&D initiatives, in general.

The ‘Open Innovation’ model assumes even greater importance today, as we have noted above, to avoid huge costs of R&D failures, which are eventually passed on to the patients again through the drug pricing mechanism.

‘Open Innovation’ model, as they proposed, will be most appropriate to even promote highly innovative approaches in the drug discovery process bringing many brilliant scientific minds together from across the world.

The key objective of ‘Open Innovation’ in pharmaceuticals is, therefore, to encourage drug discovery initiatives at a much lesser cost, especially for non-infectious chronic diseases or the dreaded ailments like Cancer, Parkinson’s, Alzheimer, Multiple Sclerosis, including many neglected diseases of the developing countries, making innovative drugs affordable even to the marginalized section of the society.

Android smart phones with huge commercial success are excellent examples of ‘Open Source Innovation’. So, why not replicate the same successful model of inclusive innovation in the pharmaceutical industry too?

Example II - “Accelerating Medicines Partnership (AMP)” initiative:

This laudable initiative has come to the fore recently in he arena of collaborative R&D, where 10 big global pharma majors reportedly decided in February 2014 to team up with the National Institutes of Health (NIH) of the United States in a ‘game changing’ initiative to identify disease-related molecules and biological processes that could lead to future medicines.

This Public Private Partnership (PPP) for a five-year period has been named as “Accelerating Medicines Partnership (AMP)”. According to the report, this US federal government-backed initiative would hasten the discovery of new drugs in cost effective manner focusing first on Alzheimer’s disease, Type 2 diabetes, and two autoimmune disorders: rheumatoid arthritis and lupus. The group considered these four disease areas among the largest public-health threats, although the span of the project would gradually expand to other diseases depending on the initial outcome of this project.

“A Social Brain Is a Smarter Brain”: 

As if to reinforce the concept, a recent HBR Article titled “A Social Brain Is a Smarter Brain” also highlighted, “Open innovation projects (where organizations facing tricky problems invite outsiders to take a crack at solving them) always present cognitive challenges, of course. But they also force new, boundary-spanning human interactions and fresh perspective taking. They require people to reach out to other people, and thus foster social interaction.” This articulation further reinforces the relevance of a new, contemporary and inclusive drug innovation model for greater patient access.

Conclusion:

Taking these points into perspective, I reckon, there is a dire need to make the process of offering innovative drugs at affordable prices to all patients absolutely robust and sustainable as we move on.

Philosopher Thomas Pogge, in his above video clipping, has also enunciated very clearly that all concerned must ensure that medications get to those who need them the most. He has also shown a win-win pathway in form of creation of a “Health Impact Fund’ to effectively address this issue. There are other inclusive, sustainable and cost effective R&D models too, such as Open Innovation and Accelerating Medicines Partnership (AMP), to choose from.

That said, a paradigm shift in the drug innovation model can materialize only when there will be a desire to step into the uncharted frontier, coming out of the comfort zone of much familiar independent money spinning silos of drug innovation. Dove tailing business excellence with the health interest of all patients, dispassionately, would then be the name of the game.

Bringing this transformation sooner is extremely important, as drug innovation would continue to remain as critical as access to important medicines for all, in perpetuity.

However, to maintain proper checks and balances between drug innovation and access to medicines for all, the value of an innovative drug should always be ascertained by its differential ‘Health Impact’ on patients over equivalent available generics in that disease area and NOT by how much money, including the cost of R&D failures, goes behind bringing such drugs to the market, solely driven by commercial considerations.

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.

 

 

Would ‘Empowered Patients’ Hold The Key For Rapid Progress of Healthcare In India?

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Empowered patients would eventually hold the key of rapid progress of healthcare all over world. It has to happen in India too and is just a matter of time.

One such approach has recently been initiated in America. ‘The Patient-Centered Outcomes Research Institute (PCORI)’, established through 2010 Patient Protection and Affordable Care Act of the United States, helps its people in making informed healthcare decisions to significantly improve healthcare delivery and outcomes. Active promotion of high integrity, evidence-based information that comes from intensive research, ably guided by patients, caregivers and the broader healthcare community, forms the bedrock of this Institute.

PCORI ensures that, patients and the public at large have information that they can use to make decisions that reflect their desired health outcomes.

This initiative can be termed as one of the key steps towards ‘Patients Empowerment’ in the United States, setting a good example for many other countries to follow, across the world.

Come May 2014, the new Union Government of India, with its much touted focus on healthcare, would probably find this Act worth emulating.

Changing doctor-patient relationship:

In good old days, well before the accelerated use of Internet became a way of life for many, patients used to have hardly any access to their various health related information. As a result doctors used to be the sole decision makers to address any health related problem of patients, sitting on a pedestal, as it were.

Any patient willing to discuss and participate in the decision making process of his/her ailments with the doctors, would in all probability be frowned upon with a condescending question – “Are you a doctor?” Clearly indicating – ‘Keep off! I am the decision maker for you, when you are sick”. This situation, though changing now even in India, rather slowly though, needs a radical transformation with clearly established individual ‘patient empowerment’ mechanism in the country.

Individual ‘Patient Empowerment’:

Just as PCORI in the US, Government of India too needs to encourage individual ‘Patient Empowerment’ by making him/her understand:

  • How is the healthcare system currently working on the ground?
  • What are the key drivers and barriers in getting reasonably decent healthcare support and solution in the country?
  • What should be done individually or collectively by the patient groups to overcome the obstacles that come on the way, even in rural India?
  • How should patients participate in his/her healthcare problem solving process with the doctors and payor?

The essence of ‘Patient Empowerment’:

‘Natural Health Perspective’ highlighted ‘Patient Empowerment’ as follows:

  • Health, as an attitude, can be defined as being successful in coping with pain, sickness, and death. Successful coping always requires being in control of one’s own life.
  • Health belongs to the individual and the individuals have the prime responsibility for his/her own health.
  • The individual’s capacity for growth and self-determination is paramount.
  • Healthcare professionals cannot empower people; only people can empower themselves.

It started in America: 

Much before PCORI, the movement for ‘Patient Empowerment’ started in America in the 70’s, which asserts that for truly healthy living, one should get engaged in transforming the social situation and environment affecting his/her life, demanding a greater say in the treatment process and observing the following tenets:

  • Others cannot dictate patients’ choice and lifestyle
  • ‘Patient Empowerment’ is necessary even for preventive medicines to be effective
  • Patients, just like any other consumers, have the right to make their own choices

Thus, an ‘Empowered Patient’ should always play the role of a participating partner in the healthcare decision making or problem solving process.

‘Patient empowerment’ is a precursor to ‘Patient-Centric’ approach:

In today’s world, the distrust of patients on the healthcare system, pharmaceutical companies and even on the drug regulators, is growing all over the world. Thus, to help building mutual trust in this all important area, the situation demands encouraging ‘Empowered Patients’ to actively participate in his/her medical treatment process.

In India, as ‘out-of-pocket’ healthcare expenses are skyrocketing in the absence of a comprehensive, high quality and affordable Universal Health Coverage (UHC) system, the ‘Empowered Patients’ would increasingly demand to know more of not only the available treatment choices, but also about the medicine prescription options.

‘Patient Empowerment’ is the future of healthcare:

Even today, to generate increasing prescription demand and influence prescription decision of the doctors, the pharmaceutical companies provide them with not just product information through their respective sales forces, but also drug samples and a variety of different kinds of gifts, besides many other prescription influencing favors. This approach is working very well, albeit more intensely, in India too.

Being caught in this quagmire, ‘Empowered Patients’ have already started demanding more from the pharma players for themselves. As a result, many global majors are now cutting down on their sales force size to try to move away from just hard selling and to gain more time from the doctors.  Some of them have started taking new innovative initiatives to open up a chain of direct web-based communication with patients to know more about the their needs in order to satisfy them better.

In future, with growing ‘Patient Empowerment’ the basic sales and marketing models of the pharmaceutical companies are expected to undergo a paradigm shift. At that time, so called ‘Patient-Centric’ companies of today would have no choice but to walk the talk.

Consequently, most pharma players will have to willy-nilly switch from ‘hard-selling mode’ to a new process of achieving business excellence through continuing endeavor to satisfy both the expressed and the un-expressed or under-expressed needs of the patients, not just with innovative products, but more with innovative and caring services.

In the years ahead, increasing number of ‘Empowered Patients’ are expected to play an important role in their respective healthcare decision making process, initially in the urban India. Before this wave of change effectively hits India, the pharmaceutical players in the country should pull up their socks to be a part of this change, instead of attempting to thwart the process.

‘Empowered Patients’ can influence even the R&D process:

Reinhard Angelmar, the Salmon and Rameau Fellow in Healthcare Management and Professor of Marketing at INSEAD, was quoted saying that ‘Empowered Patients’ can make an impact even before the new drug is available to them.

He cited instances of how the empowered breast cancer patients in the US played a crucial role not only in diverting funds from the Department of Defense to breast cancer research, but also in expediting the market authorization and improving market access of various other drugs.

Angelmar stated that ‘Empowered Patients’ of the UK were instrumental in getting NICE, their watchdog for cost-effectiveness of medicines, to change its position on the Age-related Macular Degeneration (AMD) drug Lucentis of Novartis and approve it for wider use than originally contemplated by them.

Patient groups such as the Cystic Fibrosis Foundation (CFF) reportedly fund directly to develop novel therapies that benefit patients in partnership with industry.

Meeting with the challenge of change:

To effectively respond to the challenge posed by the ‘Empowered Patients’, some pharmaceutical companies, especially in the US, have started developing more direct relationship with them. Creation of ‘Patient Empowered’ social networks may help addressing this issue properly.

Towards this direction, some companies, such as, Novo Nordisk had developed a vibrant patient community named ‘Juvenation’, which is a peer-to-peer social group of individuals suffering from Type 1 diabetes. The company launched this program in November 2008 and now the community has much over 16,000 members, as available in its ‘Facebook’ page.

Another example, Becton, Dickinson and Co. had created a web-based patient-engagement initiative called “Diabetes Learning Center” for the patients, not just to describe the causes of diabetes, but also to explain its symptoms and complications. From the website a patient can also learn how to inject insulin, along with detailed information about blood-glucose monitoring. They can even participate in interactive quizzes, download educational literature and learn through animated demonstrations about diabetes-care skills.

Many more Pharmaceutical Companies, such as Pfizer, Johnson & Johnson, Novartis, Boehringer Ingelheim, AstraZeneca, Bayer, GlaxoSmithKline, Sanofi, Roche and Merck are now directly engaging with the customers through social media like Twitter, Facebook etc.

Technology is helping ‘Patient Empowerment’:

Today, Internet and various computer/ iPad and smart phone based applications have become great enablers for the patients to learn and obtain more information about their health, illnesses, symptoms, various diagnostic test results, including progress in various clinical trials, besides product pricing.

In some countries, patients also participate in the performance reviews of doctors and hospitals.

Conclusion:

Increasing general awareness and rapid access to information on diseases, products and the cost-effective treatment processes through Internet, in addition to fast communication within the patients/groups through social media like, ‘Twitter’ and ‘Facebook’ by more and more patients, I reckon, are expected to show the results of ‘Patient Empowerment’ initiatives, sooner than later, even in India.

Accelerated ‘Patient Empowerment’ initiatives with modern technological support, would help the patient groups to have a firm grip on the control lever of setting truly patient centric direction for the healthcare industry.

Working in unison by all stakeholders towards this direction, would herald the dawn of a new kind of laissez-faire in the healthcare space of India, the sole beneficiary of which would be the mankind at large.

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.

 

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

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

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

The eternal ‘Cat and Mouse’ game continues:

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

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

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

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

Tip of an Iceberg?

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

Better late than never:

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

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

A brief recapitulation:

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

1. Methodology of Price Control:

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

2. Span of Price Control:

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

Significant benefits of DPCO 2013 to the industry:

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

  • MBP methodology in DPCO 2013 is considered by the industry as more transparent and less ‘intrusive’ than CBP methodology.
  • Span of price control with DPCO 2013 came down to 18 percent of the total pharmaceutical market covering around 610 formulations, as against 20 percent in DPCO 1995 covering over 1700 formulations.
  • Opportunity for automatic annual price increase for controlled formulations based on WPI, which was not there in DPCO 1995, is now available to the industry. Thus, in keeping with the relevant provision of DPCO 2013, NPPA has recently allowed the drug companies to increase the Maximum Retail Price (MRP) of the price controlled medicines, contributing 18 percent of the total market, by 6.32 percent effective April 1, 2014, while prices of balance 82 percent of drugs, that are outside price control, can go up by 10 percent every year.

Check on essential drugs going out of market:

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

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

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

Key concerns expressed with DPCO 2013:

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

  • Reduction in drug prices with market-based pricing methodology is significantly less than the cost based ones. Hence, consumers will be much less benefitted with the new system.
  • Earlier cost based pricing system was not more transparent only because a large section from the industry reportedly did not co-operate with the NPPA in providing cost details, as required by them.
  • Serious apprehensions have been expressed about the quality of outsourced market data lacking adequate confidence level across the board, which now forms the basis of CP calculations.
  • Additionally, outsourced data would provide details only of around 480 out of 652 NLEM formulations. How will the data for remaining products be obtained and with what level of accuracy?

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

DPCO 2013 faces challenge in the Supreme Court:

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

Ground Zero of the quality of outsourced market data:

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

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

IMS data does not always capture correct brand prices:

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

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

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

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

Difficulty in data validation:

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

  • Those companies, whose prices are showing higher than the current ones in the IMS Health data, may not report to NPPA, as that could ultimately affect them adversely.
  • Pharma companies’ response, in general, to requests from NPPA for furnishing cost and price related information has traditionally been much less than encouraging.

The logjam to continue:

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

Conclusion:

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

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

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

By: Tapan J. Ray

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.

 

 

For Affordable Healthcare: Synergize Resources Through PPP Models

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According to a 2012 study of IMS Consulting, the key factor of significantly high ‘Out of Pocket (OOP)’ expenditure on healthcare in India is that people are pushed into seeking costlier private care services due to imbalanced infrastructure of healthcare workers, medicines and facilities.

Currently, 74 percent of patients in ‘Out-Patient (OP)’ care and 65 percent in ‘in-Patient (IP)’ care seek healthcare in the private channels. In private inpatient care, the average cost of treatment exceeds the average monthly household income at 121 percent for the affording population and 217 percent for the poor population, forcing many families to borrow money or sell assets.

Thus, the affordability challenges for healthcare of the country, as manifested by high OOP spend, is mostly a consequence of a large patient population using the private healthcare channel due to still inadequate availability of public healthcare services.

The situation is looking up:

According to IMS study 2012, currently, on an average about 54 percent of the patients are receiving free medicines from the Government hospitals. In progressive states like, Tamil Nadu, Andhra Pradesh, Maharashtra and Karnataka this number goes up to 85 percent. At the same time, in rural India, which constitutes around 70 percent of the total 1.2 billion populations of India, usage of Government facilities for OP care has increased from 22 percent in 2004 to 29 percent in 2012, mainly due to the impact of National Rural Health Mission (NRHM).

Consequently, this increase will also have significant impact in reducing OOP healthcare expenses of the rural poor.

Medicines constitute highest component of OOP:

Medicines still constitute the highest component of OOP expenses in OP care, though its percentage share has decreased from 71 percent in 2004 to 63 percent in 2012.  Similarly for IP care, the share of medicines in total OOP has also decreased from 46 percent in 2004 to 43 percent in 2012.

However, still 46 percent of the patients seeking healthcare in public channels had to purchase medicines from private channels. Recently announced drug procurement system through Central Medical Services Society (CMSS) after hard price negotiation and distribution of those drugs free of cost from Government hospitals and health centers, could address this issue effectively.

Further scope to reduce OOP:

The study highlights that OOP spend could be lowered by 22 percent with:

  • Improved availability of healthcare facilities at public hospitals and health centers, which can be achieved through effective implementation of “National Health Mission” with higher budgetary allocation.
  • Improved availability of medicine at the public channels, which is feasible through effective implementation of already announced “Free Medicine” scheme of the Government across the country.

A total reduction of ~40% in overall OOP spend appears to be possible, the study reiterates, when more people would get confidence that public healthcare can meet all their needs.

The roadmap to achieve the goal:

Fundamentally there are five ways to deal with the affordability issue:

1. Reduction in demand: Creating a better health environment,

2. Reduction in costs: Through price control, increased competition, group purchasing power

3. Increase in financial support from government

4. Increased penetration of health insurance programs

5. Increase per-capita income of households

All these five areas, I reckon, would not be difficult to address through well-structured and strategic Public Private Partnership (PPP) initiatives.

It is increasingly recognized that there are many other healthcare challenges, which do not fall exclusively under either the public or the private sectors. These challenges need to be addressed with combined efforts… with well structured Public Private Partnership (PPP) models.

Private sector should play its role:

The private sector is already a major provider of health services in India. Hence, it has the wherewithal to support implementation of Government’s flagship healthcare programs, especially in the area of service delivery, to enhance their overall effectiveness.

As the Universal Health Care (UHC) proposal made by the High Level Experts Group (HLEG) to the Planning Commission of India highlighted, the government would provide the budget, while the private sector would take the responsibility for delivery of healthcare services.

Accountability for PPP should not fall through the systemic cracks:

The above study indicates, the private parties could include individual physicians, commercial contractors, large private and corporate super-specialty hospitals, not-for-profit agencies (NGOs), pharmaceuticals and device manufacturers. Expertise of all these stakeholders should be appropriately leveraged.

It is absolutely essential to make sure that the accountability of the PPP initiatives does not fall through the cracks now existing in the system.

To control costs and ensure required standards are met, all contractual agreements for PPPs, as recommended, must have adequate built-in monitoring and supervision mechanisms of the highest order, assigning clear roles and responsibilities for each party.

Similarly, NGOs need to be given a larger role of monitoring the activities or services rendered at such facilities to make sure the designated institutions are fulfilling their obligations to the public.

Conclusion:

To make healthcare affordable in India, well-strategized PPP initiatives would have critical roles to play.

Thus, instead of resorting to blame games with Government accusing the private sector to be exploitative and the private sector continuously moaning for ‘unfriendly’ business policies of the government, there is a fundamental need for both the constituents working closely together.

As a result, patients will have greater access to quality healthcare at an affordable price, the industry will grow faster in a sustainable way and the government will have its public healthcare obligations fulfilled to a reasonable extent.

Some of the major sectors in India where PPP has been quite successful are infrastructure, telecom, irrigation, power and airports. So, why should it not work for the healthcare sector of the country, as well?

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.

“Make Global Pharma Responsible in Homeland for Objectionable Conduct in Clinical Trials Elsewhere”

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In the context of his recent meeting with Commissioner Margaret A. Hamburg of US-FDA, the Drug Controller General of India (DCGI) reportedly expressed his concern to ‘The Economic Times’ on the ‘objectionable conduct’ of global pharma in new drug trials in India, as follows:

“US and other global drug makers who conduct clinical trials at different locations across the globe need to be made responsible in their home country for their objectionable conduct in clinical trials elsewhere.”

He further added:

“While conducting trials, drug makers cannot discriminate on the basis of nationality, because patient safety is top priority for every regulator – US or India”

The above report also mentioned that there is already a law in place in the United States that makes companies accountable in their homeland, if they are found to be indulging in corruption overseas.

‘Uncontrolled clinical trials are causing havoc to human life’:

That is exactly what the Supreme Court of India observed last year in response to a Public Interest Litigation (PIL) filed by the Human Rights group ‘Swasthya Adhikar Manch (SAM)’.

At the same time, revoking the power of the ‘Central Drugs Standard Control Organization (CDSCO)’ under the Drug Controller General of India (DCGI), the apex court directed the Health Secretary of India to be personally responsible for all ‘Clinical Trials (CT)’ of new drugs conducted in the country in order to control the ‘menace’ of poorly regulated trials on a war-footing.

Earlier in May 2012, the Parliamentary Committee on Health and Family Welfare in its report on the CDSCO, also stated as follows:

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

Inaction on CT related deaths:

According to the Ministry of Health, between 2005 and 2012, around 475 new drugs were approved for CT, out of which only 17 obtained the regulatory approval for market launch. Though 57,303 patients were enrolled for CT, only 39,022 could complete the trials. During CT, 11,972 patients suffered Serious Adverse Events (SAE) and 2,644 died. 506 SAEs out of the total and 80 deaths had clearly established link to CTs. However, only 40 out of 80 trial related deaths had their respective families meagerly compensated.

An independent investigation:

Interestingly, an investigation  in 2011 by ‘The Independent’, a newspaper of global repute, also highlighted the recruitment of hundreds of tribal girls for a drug study without any parental consent.

Stringent regulatory action followed:

Following high voltage indictments, alleging wide spread malpractices, from all corners – the Civil Society, the Supreme Court and the Parliament, the Ministry of Health constituted an experts committee last year chaired by Professor Ranjit Roy Chaudhury. The committee, after due consultation with all stakeholders, submitted its report recommending a robust process for CTs in India. Besides many other, the experts committee also recommended that:

  • CTs can only be conducted at accredited centers.
  • The principal investigator of the trial, as well as the Ethics Committee of the institute, must also be accredited.
  • If a trial volunteer developed medical complications during a CT ‘the sponsor investigator’ will be responsible for providing medical treatment and care.

Further, in October 2013, the Supreme Court reportedly ordered the government to video record clinical trials of new drugs, making it even tougher for pharma MNCs and the CROs to avoid responsibility on informed consent of the participating volunteers, as required by the regulator.

Consequent industry uproar and recent Government response:

Following all these, as the ball game for CTs in India changed significantly, there were uproars from Big Pharma, the CROs and their lobbyists crying foul.

As the caustic comments and the directive of the Supreme Court of India triggered the regulatory changes in CT, the Union Ministry of Health did not have much elbowroom to loosen the rope. Consequently, the pharma industry and the CROs reportedly made some angry comments such as:

“The situation is becoming more and more difficult in India. Several programs have been stalled and we have also moved the trials offshore, to ensure the work on the development does not stop.”

In response to shrill voices against the stringent drug trial regime in India, Mr Keshav Desiraju, Secretary, Union Ministry of Health and Family Welfare, reportedly said recently:

“While it is not our intention to impose unrealistic barriers on industry, it is equally our intention not to take risks, which may compromise the safety of the subjects of clinical trials.”

During the same occasion, the Union Health Minister Ghulam Nabi Azad also remarked:

“The industry has complained that the regulations are too stringent, but there have also been complaints by parliamentarians, NGOs and others that they are too lax, which the Supreme Court had taken note of.”

He further said without any elaboration, “The Indian regulatory regime governing clinical trials needs to balance the interests of all stakeholders.”

Conclusion:

According to the Indian Society for Clinical Research (ISCR), pharma companies conduct around 60 percent of CTs and the rest 40 percent are outsourced to Contract Research Organizations (CROs) in India.

With the Supreme Court laying stringent guidelines and the regulatory crackdown on CTs, the number of new drug trials in India has reportedly come down by 50 percent. According to Frost & Sullivan, the Indian CT industry was worth US$ 450 million in 2010 -11. Currently, it is growing at 12 percent a year and is estimated to exceed the US$1 billion mark in 2016, with perhaps some hiccups in between due to recent tightening of the loose knots in this area.

Some experts reportedly argue that laxity of regulations and cost arbitrage were the key drivers for global players to come to India for CTs. Thus, there should not be any surprise that with the costs of drug trials going north, in tandem with stringent regulations in the country, some business may shift out of the country. As Mr. Desiraju epitomized in his interview succinctly, as quoted above, this shift would result in much increased costs for the respective companies, which his ministry would ‘regret greatly.’

That said, would the recent anguish of the DCGI, when he expressed “Make global pharma also responsible in their respective homelands for objectionable conduct in CTs elsewhere”, be also construed as a clear signal for shaping up, sooner?

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.

‘Herceptin Biosimilars’ Seriously Questioned

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The news struck as an anticlimax, close on the heels of high decibel product launch of ‘Herceptin Biosimilars’ in India, being hyped as the first in the world, bringing much needed relief to many diagnosed breast cancer patients for their economical pricing.

At the same time, this legal challenge has now come as an acid test for the regulator to prove that ‘Caesar’s wife must be above suspicion’ for any new drug approval and especially if it is a complex biosimilar used for the treatment of patients suffering from dreaded diseases, such as, breast cancer.

It’s not patent this time:

Interestingly, this is not a patent infringement case, as Roche has reportedly given-up its patent on Trastuzumab (Herceptin) in India last year.

Alleged violations: 

The above media report highlights, in Delhi High Court Roche has sued Biocon of India and its US based generic partner – Mylan along with the Drug Controller General of India (DCGI) related to launch of ‘Herceptin Biosimilar’ versions in India.

The allegation against Biocon and Mylan is that their recently launched drugs are being misrepresented as ‘biosimilar Trastuzumab’ or ‘biosimilar version of Herceptin’ without following the due process in accordance with the ‘Guidelines on Similar Biologics‘, necessary for getting approvals of such drugs in India.

‘Caesar’s wife’ under suspicion too:

The DCGI has also been sued by Roche for giving permission for launch of this product allegedly not in conformance with the above biosimilar guidelines, which were put in place effective August 15, 2012.

Roche reportedly argued that the above guidelines on similar biologics laid down a detailed and structured process for comparison of biosimilar with the original product and all the applications for manufacturing and marketing authorization of biosimilars are necessarily required to follow that prescribed pathway before obtaining marketing approval from the DCGI. Roche has also stated that there is no public record available, in the clinical trial registry India (CTRI) or elsewhere to show that these two players actually conducted phase-I or II clinical trials for the drug.

According to report Roche claims that DCGI has approved the “protocol and design study for testing” of Biocon related to the proposed drug just before the above regulatory guidelines were made effective, predominantly for patients’ health and safety reasons.

Interim restrain of the Delhi High Court:

In response to Roche’s appeal, the Delhi High Court has reportedly restrained Mylan and Biocon from “relying upon” or “referring to Herceptin” or any data relating to it for selling or promoting their respective brands Canmab (Biocon) and Hertaz (Mylan) till the next hearing.

The relevance of ‘Guidelines on Similar Biologics’:

The ‘Guidelines on Similar Biologics’ clearly articulated:

“Since there are several biosimilar drugs under development in India, it is of critical importance to publish a clear regulatory pathway outlining the requirements to ensure comparable safety, efficacy and quality of a similar biologic to an authorized reference biologic.”

Thus for patients’ health and safety interest the above regulatory pathway must be followed, the way these have been prescribed without any scope of cutting corners. This is even more important when so important pharmacovigilance system is almost non-functional in India.

Attempts to dilute the above guidelines from some quarters:

It was earlier reported that strong representations were made to the drug regulator in writing by powerful domestic players in this area urging to dilute the above ‘Guidelines’, otherwise it will be difficult for them to compete with the pharma MNCs.

This argument is ridiculous by any standard and smacks of putting commercial considerations above patients’ health interest.

The key issue:

As I see it, four quick questions that float at the top of my mind are as follows:

  • If the ‘Guidelines on Similar Biologics’ have not been followed either by the applicants or by the DCGI, how would one establish beyond an iota of doubt that these drugs are biosimilar to Trastuzumab, if not ‘Biosimilar to Herceptin’?
  • If these drugs are not proven biosimilar to Trastuzumab, as specified in the ‘Guidelines on Similar Biologics’, how can one use Trastuzumab data for their marketing approvals and the DCGI granting the same?
  • If these drugs were not biosimilars to Trastuzumab, would these be as effective, reliable and safe as Herceptin in the treatment of breast cancer?
  • Further, how are references related to Herceptin being used to promote these drugs both pre and post market launch?

Conclusion:

I guess, predominantly commercial considerations prompted Roche to sue Biocon, Mylan and also the DCGI on ‘Trastuzumab biosimilars’, launched recently in India.

Be that as it may, for the interest of so many diagnosed breast cancer patients in the country, there is crying need for the facts to come out in the open, once and for all. Are these drugs truly Trastuzumab biosimilars with comparable safety, efficacy, quality and reliability of Herceptin?

If the answer comes as yes, there would be a huge sigh of relief from all corners inviting millions of kudos to Biocon and Mylan.

However, if by any chance, the allegations are proved right, I do not have an iota of doubt that the honorable Delhi High Court would ferret out the truth, unmask the perpetrators and give them exemplary punishments for playing with patients’ lives.

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.