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Innovation: Is Big Pharma Talking Differently?

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“Nearly 2 billion people have no access to basic medicines, causing a cascade of preventable misery and suffering. Good health is impossible without access to pharmaceutical products.” The World Health Organization’s (WHO) ‘Access to Medicine’ report on ‘Ten years in public health 2007–2017’ made this observation.

It also reemphasized: “A significant proportion of the world’s population, especially in developing countries, has yet to derive much benefit from innovations that are commonplace elsewhere.” Despite this, continued lobbying of many pharma companies for TRIPS-plus measures and legislation, the breaching of laws or codes relating to corruption and unethical marketing, and several blatant instances of company misconduct continues, even today.

In the midst of this situation, has Big Pharma started thinking differently about the purpose of innovation? I shall try to explore the ground reality in this article.

The argument of Big Pharma:

In response to the above observation or anything akin to that, Big Pharma has counter arguments, which are rather contentious, as many believe. They generally say, it is the responsibility of the different governments to alleviate health misery of the citizens, and not theirs. In tandem, they keep repeating the same old argument, underscoring lower prices of innovative drugs would lead to lower profit generation, significantly slowing down the process of innovation.

Drug innovation follows an arduous path and an expensive process: 

Big Pharma wants people to comprehend about what it entails in the journey of discovering a New Molecular Entity (NME) and converting it to a safe and effective medicine.

For example, in its booklet Bayer explained: ‘it takes about ten to twelve years to develop a new drug. during this time, highly qualified scientists from a variety of disciplines work on filtering out a suitable active ingredient from an enormous number of compounds. Between 5,000 and 10,000 compounds are rigorously studied in numerous laboratory tests and the best ones further optimized. out of four or five drug candidates that are then tested on humans in clinical studies often only one substance is approved and becomes available to physicians and patients.”

The entire process reportedly takes around 14 years, and according to a 2016 study by the Tufts Center for the Study of Drug Development - developing a new prescription drug, which gains marketing approval, is estimated to cost drug manufacturers USD 2.6 billion. Besides, a new analysis conducted at Forbes finds that getting a single drug to market may involve an expenditure of USD 350 million before the medicine is available for sale. It concludes, large pharmaceutical companies that are working on dozens of drug projects, spend USD 5 billion per new medicine.

Drug innovation is only for those who can afford:

As is being witnessed by many, Big Pharma always tend to argue that high R&D costs drive new drug prices up in pharma. Moving a step further, that drug innovation is for only those patients who can afford, was justified even by the CEO of a major constituent of Big Pharma. An article published in Forbes Magazine on December 05, 2013 wrote: “At the Financial Times Global Pharmaceutical & Biotech Conference this week, Bayer AG CEO, Marijn Dekkers, is reported to have said that Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western patients that can afford it.”

How strong is the justification for high new drug cost?   

Instead of believing the pharma argument on its face value, it will be worthwhile to go for a dip-stick analysis. One such analysis, titled “Pharmaceutical industry profits and research and development”, published by the USC-Brookings Schaeffer Initiative for Health Policy on November 17, 2017, presents some interesting facts.

It says, the pharmaceutical industry is a high-fixed-cost and low-marginal-cost industry. This means, as the authors explain, that the cost of bringing a new drug to market is very high and the process is risky, while the cost of producing an extra unit of a product that is on the market is frequently “pennies a pill”. It also, indicates, though there is a disagreement about the exact cost of bringing a new drug to market, there is general recognition that the process costs run a fewhundreds of millions of dollars per new drug. Thus, innovative drugs are supposed to be somewhat more expensive to many patients. But how much – is the question to ponder, I reckon.

An example of a new drug pricing:

Let me choose here, as an example, the pricing of one of the most contentious, but undoubtedly a breakthrough medicine – Sovaldi (Sofosbuvir) of Gilead. Sofosbuvir was discovered in 2007 – not by Gilead Sciences, but by Michael Sofia, a scientist at Pharmasset. The drug was first tested on human successfully in 2010. However, on January 17, 2012 Gilead announced completion of the acquisition of Pharmasset at approximately USD 11.2 billion.

Subsequently, on December 06, 2013, US-FDA approved Gilead’s Sovaldi (Sofosbuvir) for the treatment of Chronic Hepatitis C. Sovaldi was priced at USD 1,000 a day in the U.S., costingUSD 84,000 for a course of treatment. That Gilead can’t justify the price of its hepatitis C therapy – Sovaldi, was highlighted in an article with a similar title, published in the Forbes Magazine on June 17, 2014.

It is worth mentioning that Sovaldi costs around USD 67,000 for a course of therapy, in Germany. Whereas, it costs round USD 55,000 in Canada and the United Kingdom (UK). Gilead has accepted an altogether different pricing strategy for Sovaldi in some other countries, such as India and Egypt.

When the above concept is used to explain Sovaldi pricing:

The above Forbes paper explained its pricing by saying: “Add in other therapies that supplement Sovaldi, and now you’re talking about USD 100,000 or so to treat a single patient. To use Sovaldi to treat each of the 3 million hepatitis C patients in the United States, it would cost around USD 300 billion, or about the same amount we annually spend for all other drugs combined.”

Let me now put a couple of important numbers together to get a sense of the overall pricing scenario of a new drug. The New York Times (NYT) reported on February 03, 2015: “Gilead Sciences sold USD 10.3 billion of its new hepatitis C drug Sovaldi in 2014, a figure that brought it close to being the best-selling drug in the world in only its first year on the market.”

Against its just the first-year sale, let me put the cost of acquisition of Sovaldi at USD 11.2 billion, an expenditure of USD 350 million before the medicine is available for sale as calculated in the Forbes articleand the cost to manufacture a pill of Sovaldi at around USD 130. This reinforces the point, beyond any doubt how ‘outrageous’ its pricing is.Even Gilead’s CEO admitted to failures in setting price of Sovaldi at USD 1,000-A-Pill, said another article on the subject. More important is, the costs to Gilead for Sovaldi acquisition and launch were virtually recovered in just a little over a year, but Sovaldi’s original price tag remains unaltered.

Is the Big Pharma talking differently now?

It appears that some constituents of Big Pharma have now started talking differently in this regard, publicly – at least, in letters, if not in both letter and spirit. Be that as it may, one will possibly be too naïve to accept such sporadic signals coming from pharma, as a shift in their fundamental thought pattern on drug innovation as a profit booster. Being highly optimistic in this area, I would rather say that these are early days to conclude that Big Pharma has really accepted the reality that – drug innovation is only meaningful, if it reaches those patients who need them the most.

Changing…not changing…or early days?

Let me explain this point with examples of changing…not changing…orearly days.

Changing?

On July 24, 2018 during an interview to Pharm Exec the head of the sub-Saharan African region for Roche made some key points, such as:

  • Groundbreaking innovation in medical science is only meaningful, if it reaches the patients who need it.
  • Access to healthcare is a multidimensional challenge and key to addressing the barriers, is really understanding them
  • Need to create a new business model that can sustainably – and this is very important – create access for patients.

Not changing?

When one Big Pharma constituent is showing some change in its approach on the purpose of innovation, another constituent is trying to make the entry of cheaper biosimilar drugs even tougher. This creates yet another doubt – both on safety and efficacy of biosimilars, as compared to much higher priced off-patent original biologic drugs.In August 2018, Pfizer reportedly called for US-FDA guidance on ‘false or misleading information’ about biosimilars, citing some of the following examples from other Big Pharma constituents, such as:

  • Genentech’s “Examine Biosimilars” website, which states that “the FDA requires a biosimilar to be highly similar, but not identical to the existing biologic medicine.” Pfizer argues that Genentech’s omission of the fact that an approved biosimilar must have no clinically meaningful differences from its reference product is a failure to properly communicate the definition of a biosimilar.
  • Janssen Biotech’s patient brochure for brand-name Remicade, which states that a biosimilar works “in a similar way” to a biosimilar without clarifying that the biosimilar must have the same mechanism of action as the originator. Pfizer also takes issue with the brochure’s suggestion that no infliximab biosimilar has been proven to be safe or effective in a switching study.
  • Amgen’s April 13, 2018, tweet that states that patients may react differently to biosimilars than to reference products. Pfizer also points out an Amgen YouTube video that implies that switching to a biosimilar is unsafe for patients who are well controlled on a current therapy.

Interestingly, on July 20, 2018 Pfizer announced that the US-FDA has approved Nivestym (filgrastim-aafi), a biosimilar to Neupogen (filgrastim) of Amgen, for all eligible indications of the reference product. This is the fourth US-FDA approved Pfizer biosimilar drug, the marketing and sales promotion of which expectedly, I reckon, will be no different from other biosimilars.

Early days?

Yes, it appears so. These are early days to draw any definitive conclusion on the subject.

Conclusion:

W.H.O observed in its above report that the ‘overall situation is somewhat improving’. It was also corroborated in the ‘2016 Access to Medicines Index’, which gave high marks to those companies that negotiated licenses for antiretrovirals and hepatitis C medicines through the Medicines Patent Pool (MPP). MPP was set up in 2010 as a public health organization supported by the United Nations to improve access to HIV, hepatitis and tuberculosis treatments in low- and middle- income countries.

It could well be, on the purpose of drug innovation some new realization has dawned, at least, on some few global pharma majors. However, it is still difficult to fathom its depth, at this point of time. There is no conclusive signal to believe that the Big Pharma is now thinking differently on the subject, not just yet.

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.

Multichannel Marketing: Two Important Pharma Trends

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On September 6, 2018, Reuters reported the announcement of GlaxoSmithKline (GSK) that it would cut about 650 positions in the United States related to a global restructuring program. This includes 450 Medical (sales) Representatives (MR). Similar announcements on job cuts for MRs by other pharma companies are being made since the last several years. Last week’s GSK announcement was the continuation of the same process. This prompts me to use the aforementioned global news while focusing on two important emerging trends in the pharma industry, as we witness today.

In the rapidly digitalized world, several broader questions are often raised today. These include whether or not e-detailing in the pharma industry will eliminate the role of MRs, or for that matter will digital marketing replace the pharma print media? As the concept of ‘multichannel marketing’ (MCM) gains momentum, finding right answers to these questions or at least the right trends are assuming as much importance for business success. As I don’t have any specific answers to these queries, in this article, let me discuss just two of these emerging trends, as appears to me.

Importance of multichannel marketing in pharma:

Many pharma companies are fast realizing that their customers, such as doctors, patients and others, are showing increasing interest in getting the requisite product or treatment related information from multiple readily available channels or sources. These are accessible both in digital and print platforms, which are often of independent origin. Such behavioral preferences of pharma customers are contrary to what was mostly happening in the past, globally. However, in the pharma world of contemporary India the same old traditional path of product information flow, from drug companies through Medical Representatives to doctors, continues, by and large.

Looking ahead, ‘multichannel marketing’ for pharmaceutical and biologic products is being generally considered as the recipe for commercial success of brands. Thus, pharma players are trying to engage their customers more through multiple channels, both directly or indirectly. This is happening in many countries of the world. It is a matter of time, I reckon, that majority of large to medium Indian drug manufacturers will also follow suit.

Two interesting trends:  

As multichannel marketing in pharma catches up, I find some interesting developments. These are outcomes of different channels getting balanced, based on customer preferences. Let me underscore, these are customers’ perceptions in the real world and not what the drug companies and their associates usually think, hence are worth considering. The two emerging trends, in my view, are as follows:

1. Although, the role of Medical Representatives is still important, but not as indispensable as was in the past.

2. Despite high decibel discussion over digital media, print media is still very relevant.

1. Impact on the role of Medical Representatives (MR): 

“There is an ongoing debate about the effectiveness and impact of the traditional sales representative, with some arguing to discontinue the role while others sense an opportunity to improve both rep productivity and efficiency.” This was articulated in a McKinsey & McKinsey paper titled, “Death of a sales model or not.” The same article also says, even those who champion the role, point out that using richer analytics, better leadership and aligned incentives to deliver stellar results in many geographies.

To comprehend what is really happening in this area, I would quote below from two important global survey reports, with a sincere wish that similar surveys are carried out in India too. Although, these two surveys are different in nature, but address the same basic issue.

A. ZS’s Access Monitor 2014 survey:

According to this survey, “Representatives access to physicians continues to decline, particularly in certain specialties and areas of the country. Overall, close to half of all doctors in the United States are now considered “access restricted” to varying degrees.” It further says: “Since the initial ‘Access Monitor’survey in 2008, access has steadily fallen, with 77 percent of physicians considered “accessible” that year, compared with 65 percent in 2012, 55 percent in 2013 and 51 percent in 2014.

In another important finding the same study captured that “the pharmaceutical and biotech industry wastes approximately USD 1.4 billion in infeasible calls. (A call is considered infeasible if a best-in-class sales rep can’t deliver it.) The cost of infeasible calls appears to have plateaued, as companies have largely squeezed out sales force inefficiencies— making alternative channels the best path to improving access and customer engagement.”

B. CMI/Compas Media Vitals research 2018:

Despite such debate, doctors still value face to face interaction with MR, across the world. However, the digital tools and platforms of various types are increasingly used as the source of both new and existing product information, including updates.

According to CMI/Compas Media Vitals research 2018, as shown in the Table I below, doctors’ dependence on MR for information on new and existing products now stands at 51 percent and 46 percent, respectively. Similarly, for product updates their dependence stands at just 39 percent. The above McKinsey & McKinsey paper also predicts that the number of MR will gradually decline as the multichannel marketing initiatives pick up.

That said, in Table I – dinner meeting ranks seven and peer to peer information comes in the third place. Digital sources when put together now occupy a significant part of the doctors’ preferences for obtaining product information.This is also clear from the Table I that the doctors have started showing interest e-detailing, as well.

Table I:  How do you want to receive information from pharma companies, for:

In % New Products Existing Products Product Update
E-detailing

15

16

13
EHR

16

16

26
Reps’ Email

21

7

27
Medical Journal

22

19

12
MSL

24

23

14
Pharma Brand E-Mail

24

21

28
Direct Mail

32

29

29
Peer-to-peer

47

40

21
Dinner Meetings

49

45

24
Representatives

51

46

39

(Source CMI/Compass Media Vitals 2018)

Dinner Meetings:

As I said before, “Dinner Meetings” were rated as the second most preferred choice of the doctors for getting new and existing product information, in the above Table I. This is interesting, especially when one reads it along with the findings of the research paper, published in the August 2016 issue of JAMA Internal Medicine. The study concluded with: “The receipt of industry-sponsored meals was associated with an increased rate of prescribing the promoted brand-name medication relative to alternatives within the drug class.” The paper also clarified that “the findings represent an association, not a cause-and-effect relationship.”

2. Print media remains relevant despite digital push:

The research by CMI/Compass Media Vitals 2018 has also shown that despite the abundant availability of online versions of various medical publications, many doctors still prefer to read the print format of the same Journal, as shown below in the Table II:

Table II. How do doctors read medical Journals? 

Online/Digital format (%)

Print format (%)

47

53

(Source CMI/Compass Media Vitals 2018)

Although, the professional portals are the most used to get the requisite information by the doctors, print journals still rank number three, after peer-to-peer information.

That print media is still relevant for the doctors to know about drugs, was confirmed by another study, as shown in Table III:

Table III. Print media is still relevant:

Professional Portal Colleagues Print Journals CME Meetings Online Journals Drug Ref. App In Person Speaker program
72% 67% 66% 66% 53% 53% 53% 53%

(Source :Kantar Sources & Interactions report from September 2017)

It is noteworthy that ‘online journals’ rank number 5, after ‘CME meeting’.

Conclusion:

Despite Millennials in India mostly prefer reading news online through digital media, print media has still remained relevant and growing too. So are the television channels, regardless of easy availability of anytime streaming of all types of news, videos, TV serials and even movies.

Moreover, with increasing preference of digital media by an increasing number of populations, reliance of many industries such as Fast-Moving Consumer Goods (FMCG) haven’t totally shifted from magazine and newspaper advertisements, alongside targeting their customers through digital platforms. The same is expected to happen with various print formats in multichannel pharma marketing, where the physical presence of MRs still play an important role. Thus, to create a greater impact on doctors, patients and other stakeholders, pharma marketers are expected to leverage the best of both print and digital world in the form of comprehensive MCM initiatives. It could well be more on digital platforms and less with print materials, as we move on.

The new role of MRs was epitomized in an interview of the Sales Director, Roche, UK, published in the eyeforpharma on January 26, 2018. In the words of the sales director: “For us, in our market, the traditional showing a visual aid and some messages with the HCP is dead… But the face to face meeting is certainly not. Its role, however, will be more about adding value, about finding the right patients for the right drug.” He further highlighted, “the clear challenge that stands before the pharmaceutical industry’s sales organizations; a world where access to physicians is diminishing, trust in the information the industry provides is dwindling, and having a costly sales force is increasingly hard to defend.”

Against this backdrop, regardless of MCM, the role of those MRs who will be in sync with the requisite applications of technology in their focus areas of work, will continue to remain relevant, though they will be lesser in number. A few of them will also stand out and shoulder higher and higher professional responsibilities in the industry.  Be that as it may, in my view, these two emerging trends are expected to gather a strong tailwind, at least in the medium to long term, heralding the dawn of a new era in the Indian pharma industry.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Patients’ Trust And Pharma Remain Strange Bedfellows?

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Like many other industries, pharmaceutical companies too often talk about improving focus on effective ‘stakeholder-relationship management’. The doctors obviously form an integral part of this process. There is nothing wrong with it. Nevertheless, serious concern of ‘conflict of interest’ between the two entities is being raised on the means adopted to achieve the targeted end results.

Much as the drug makers expect that these methods are easily justifiable and would not bother anyone, it usually doesn’t happen that way, especially among the informed patients. When patient-interest gets compromised in this complex transactional web, the residual impact is awfully negative. Over a period of time, such episodes lead to a patient-doctor trust-gap, having a snowballing effect on the integral constituent of this saga – the pharma industry.

In this article, I shall briefly explore the scale and depth of such trust-gap and try to fathom who can effectively address this cancerous spread. This initiative when implemented well, won’t just protect patients’ health interest, ensuring affordable health care of good quality for all. It will also help rejuvenate pharma players’ declining reputation, facilitating long-term business interest –unchained by too many stifling regulations.  

For being in the paradise of health care…

‘Trust’ is the bedrock of any meaningful relationship and is usually built based on one’s experience, perception and feelings, besides a few other factors. It falls apart in the presence of deception or lies, even if these are well camouflaged. Similarly, clandestine acts when unearthed could also lead to the same outcome. The charted pathways for development or collapse of patients’ trust regarding doctors, or government policy makers trust towards pharma players are fundamentally no different.

In a scenario where patients can trust doctors for suggesting the best affordable treatment of good quality, including safe and effective drugs; hospitals and caregivers are just and conscientious; insurance companies are caring and fair in their dealings; drug prices are rational; published clinical trial reports on drug efficacy and safety are unbiased, the communication from pharma companies are trustworthy without any hidden agenda – we are living in the paradise of health care.

Nonetheless, the same paradise built on patients’ valuable trust would get shattered, as the drug regulators and the media get to know and unearth lies and clandestine dealings between doctors and pharma companies. Patients soon realize, though the hard way that they are being short-changed. A trust-gap is created, giving rise to an avoidable vicious cycle in the healthcare space. It is difficult to break, as one witness today, but not impossible, either.

The trust-gap is all pervasive:

Although, we are discussing here the trust-gap between doctors and drug companies on the one hand, and patients, drug policy makers and the regulators on the other – the trust-gap is all pervasive. This is vindicated by a startling headline of the January 16, 2018 edition of a leading Indian business daily. It says: “Over 92% people don’t trust the health care system in India: Study”.

It quotes the GOQii India Fit 2018 report saying a large part of which includes doctors, hospitals, pharma, insurance companies and diagnostic labs. The following table shows the ranking of some these constituents in terms of trust gap of Indians.

Rank Healthcare system People don’t trust (%)
1. Hospitals 74
2. Pharma companies 62.8
3. Insurance companies 62.8
4. Medical clinics 52.6
5. Doctors 50.6
6. Diagnostic Labs 46.1

The survey emphasizes that a series of failure, particularly the negligence of hospitals in the recent past has made it hard to trust in the system. The lack of transparency was the other reason that stands out.

Not a recent phenomenon, but increasing:

A trust-deficit in the healthcare system isn’t a recent phenomenon. This was corroborated in the article, titled ‘Doctors, patients, and the drug industry: Partners, friends, or foes?’ It was published almost a decade ago – in the February 07, 2009 edition (Volume 338) of the British Medical Journal (BMJ). The authors quoted a contemporary report issued by the ‘Royal College of Physicians’, which captured an all-time low relationship between the drug industry, academia, healthcare professionals, and patients, even at that time. The paper suggested that it is in the interests of all parties to bridge the trust-gap, without further delay.

As mentioned before, this particular discussion will focus on just two areas – pharma companies and the doctors – not all constituents of the health care system. This is primarily to have a congruity with my previous discussion on the importance of ‘perception’ in pharma. From that perspective, it is evident from the BMJ paper that a trust-gap exists not just in the doctor-patient relationship, but also between the drug policy makers and the pharma industry. I shall try to drive home this point with the following two examples.

 A. The trust-gap in doctor-patient relationships for ‘Conflict of Interests’:

The article titled, “Conflict of Interest in Medicine” featuring in the JAMA Network on May 02, 2017 described ‘Conflict of Interest’ as ‘a situation in which a person is or appears to be at risk of acting in a biased way because of personal interests.’

The article further elaborated thatdoctors’ relationships with drug companies (including any payments or gifts received from the companies) might affect how they report the results of research studies, what they teach medical students about particular drugs, or what treatments they recommend for patients. Moreover, doctors may preferentially refer patients to those diagnostic facilities for tests that may financially benefit them for doing so.

B. The trust gap between the government policy makers and the pharma industry:

That such trust-deficit is all pervasive, gets reverberated even through the speeches of no less than the Prime Minister of India.

On April 18, 2018, during an interactive session of theBharat Ki Baat, Sabka Saath‘ diaspora event at the Central Hall in Westminster, UK, Prime Minister Modi,reportedly said that doctors visit Singapore and Dubai to attend conferences, and not because someone is sick. “The pharma companies invite them for that. To finally break the resultant sale of expensive medicines, the government has launched generic stores where medicines of similar quality are sold at cheaper prices” – the PM further added during his interaction with the audience present in this function at London.

As expected, the medical community in India expressed displeasure over the remark of the PM on doctors and pharma companies on a foreign soil, the same media report highlighted.

Interestingly, just a year ago, on April 17, 2017, while inaugurating a hospital in Surat, a home to several top Indian generic drug makers Prime Minister Modi had said: “We are going to make legal arrangements to ensure that when doctors write prescriptions they write that generic medicines are sufficient and that there is no need for any other medicine.”

Some ineffective interventions:

As I said before, this downward spiral with a widening trust-gap in the healthcare space of the country needs to be arrested soon, with effective steps. The best remedial measure in such cases will obviously be self-regulation by all concerned, keeping patients’ interest at the center.

As an antidote to this problem, in the previous Government regime, ‘Uniform Code of Pharmaceutical Marketing Practices (UCPMP)’ was put in place, but only for voluntary implementation by the drug companies.

Enough time has elapsed in experimenting with this process, since then. Regrettably, like many other countries, self-regulation in this area to address the malady of trust deficit hasn’t worked in India too. Both the ‘Professional Conduct and Ethics’ of Medical Council of India (MCI) for doctors, and the UCPMP of the Department of Pharmaceuticals (DoP) for drug companies intended to address the so-called doctor-pharma industry unholy nexus, have not yielded expected results. The saga continues, unabated.

Conclusion:

From the patient-interest perspective, what is happening today in the global healthcare space is indeed baffling. Improving access to good quality, affordable drugs for all, has become a challenge in many countries, just as in India. Consequently, alleged unholy doctor-industry nexus that contributes a significant part to this problem, is attracting greater public attention today. The issue is being often raised even at the highest echelon of the incumbent government. But, more puzzling is, even after the PM’s public anguish, the DoP doesn’t seem to have walked the talk. Much hyped – the proposed mandatory UCPMP has not yet seen the light of the day, despite a clear indication of the same.

The question then arises, what happens if it does not happen due to political or any other compulsions? In that case, I reckon, the primary initiative to bridge the existing trust-gap, should rest on pharma companies. They may not always agree with all public allegations leveled against them, as the creator of this ungodly collaboration, and rightly so. Nonetheless, remaining in a perpetual denial mode in this regard, won’t help the pharma industry, anymore. More so, when the number of net-savvy, reasonably well-informed and globally connected patient groups, are fast increasing. Besides being fair in all business transactions, drug players need to sincerely engage with patients, not in usual condescending ways, but with due respect, for mutual benefits.

Otherwise, despite pharma industry and patients being interdependent in so many ways, sans a strict regulatory framework with legal teeth, ‘patients’ trust’ and ‘pharma’ will continue to remain uneasy, if not strange bedfellows.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

The Importance of Managing ‘Perception’ in Pharma

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Each one of us – individually or collectively in a society, community or even as a supporter of anyone or anything, view certain things in a certain way, and tend to believe only this is true. This process consequently leads to developing a ‘perception’, which the Oxford dictionary defines as: “The way in which something is regarded, understood, or interpreted.”

A ‘perception’ once formed, creates a long-lasting impact – helps form a strong opinion, often making people judgmental in their expressions. Based on ‘perception’, people also try to act and influence others, which are not always in a persuasive manner. On the contrary, the methods, are at times rather coercive, using fear as the key. The sources that help create ‘perceptions’ may not be genuine, often fake or doctored and picked-up from half-baked, unproven and unverified provenance.

Just as any other business, in pharma industry too, stakeholder ‘perception’ plays a critical role, especially in building or tarnishing reputation of the sector or individual companies. In this article, I shall discuss, the importance of managing perception – the right way – overcoming a key barrier, for sustainable business success.

‘Perception’ often stands between success and failure or winning and losing:

In today’s world ‘perception’ often stands between success and failure or winning and losing, more than ever before. Creating and maintaining a ‘positive perception’ is time consuming and a challenging task, for anything. Interestingly, a negative ‘perception’ may also be deliberately created for self-serving purposes, and that too in a much shorter time. Although, there is a high financial cost attached to it, such instances aren’t too few, either.

Umpteen number of instances can be cited, in this regard. However, to drive home the point, let me quote just two examples – the first one is of a negative ‘perception’ mostly created by the industry from within. The other one – again a negative perception that prevails outside the industry, but mostly created due to the acts pursued within the industry. Interestingly, both these adversely impact the pharma consumers too, and are tough to neutralize.

1. ‘Perception’ created by the industry insiders:

The general ‘perception’ that ‘branded generic drugs’ are superior to more affordable ‘non-branded generic medicines’, mostly in terms of overall quality, efficacy and safety. This negative ‘perception’ has been successfully created without enough credible scientific evidence, and irrespective of names, size and the operational scale of the manufacturers. It is worth noting, both need drug regulatory approval and all such approvals come only in the generic names – and not in any brand name. The brands for a generic drug molecule may be as many as, say sixty or hundred, or even more. So are the numbers of ‘non-branded generics.’

To enable the consumers availing benefits of this category of drugs in reducing out of pocket expenditure on medicines, both the State and the Central Governments in India are trying hard through various measures, such as ‘Jan Aushadhi Scheme’. But the negative perception towards ‘non-branded generics’ doesn’t seem to wane a bit, in the face of an ongoing campaign to maintain the status quo.

2. ‘Perception’ created outside, due to the acts of the industry:

Similarly, the general negative ‘perception’ leading to a declining reputation of the industry, prevails across the world – even in India. Again, the issues leading to such negative perception may, at times, be grossly exaggerated and generalized. But the fact remains, despite serious attempts by individual companies and their lobby groups to negate the same, it continues to exist. Nevertheless,continuing efforts by the industry in this direction, which are often quite expensive, are visible globally.

Let me illustrate this point quoting a recent media report on PhRMA – arguably the largest pharma trade body globally. As the pharmaceutical industry faces potential pricing reform and continued criticism from patient advocates, PhRMA reportedly spent US$ 15.5 million lobbying in the first half of this year, which is an 11.5 percent increase (US$ 1.6 million) compared with the same period last year. But, the negative ‘perception’ is too strongly entrenched to neutralize so quickly and effectively. It continues to exist.

That the money spent to alleviate the impact of negative ‘perception’ has not yielded results since long, is vindicated by the June 19, 2018 Business Insider report. Quoting the research and consulting firm Reputation Institute, it says, in 2018, the pharma giants saw a 3.7 percent decline in reputation score from last year. This was driven by a decline in the public perception of transparency, openness and authenticity of drug makers. In the midst of an overall descending trend, of the 22 pharma companies ranked, Sanofi features in the first and Pfizer takes the last positions.

Reported practices of drug makers also influence public ‘perception’: 

While explaining why Pfizer has been ranked 22 with a strong negative ‘perception’, the same Business Insider article reported as follows:

“Pfizer had the lowest reputation score among the pharmaceutical companies that the Reputation Institute looked at, based on the general public’s perception of the product, prices and public hospitality. It was reported in May that Pfizer used charity to mask a heart drug price hike. Pfizer also had a huge role in the drug shortage crisis, according to Fortune.”

Similarly, in a relative yardstick, better public ‘perception’ for Sanofi’s among the big pharma players were ascribed to the following reasons:

“Sanofi’s winning characteristics lies in its promotion of ethics and transparency, according to Reputation Institute. Sanofi has in the past year promised to limit price increases and disclose ‘transparency reports’ behind overall costs of its drugs.”

Destructive power of negative ‘perception’ on pharma industry:

An interesting survey, titled “Restoring trust in the pharmaceutical industry by translating expectations into actions” conducted by PricewaterhouseCoopers (PWC) Health Research Institute captures the realities of ‘perception’ on the pharma industry. Pharmaceutical industry executives, consumers, and stakeholders, such as doctors in physician groups, researchers in academia, former health policy makers, hospital executives, managed care organization executives, participated in this survey.

The paper highlighted that ‘perception’ driven peoples’ behavior is triggered by a myriad of reasons attributing to the recent loss of trust of key pharma stakeholders’, such as regulators, payers, physicians, and patients. The authors suggested, the industry should act to restore trust as the central tenet of all of its relationships.

Two major perceptions of pharma consumers and stakeholders were captured, as follows:

  • A high percentage of pharmaceuticals in the total healthcare costs, distorts the value–for–money argument used by the industry.
  • The process and the nature, extent and quantum of money spent on pharmaceutical sales and marketing lack transparency, especially with respect to drug risks and benefits.

Constructive power of positive ‘perception’ needs to be strengthened:

Likewise, the constructive power of positive ‘perception’ needs to be strengthened.

Let me illustrate this point with three examples out of many. The first two examples come from the pharma players in India, and the third one from a top non-pharma giant.

- To add public confidence to the corporate brand and strengthen its image among its stakeholders in India, Mankind Pharma appointed Amitabh Bachchan as the brand ambassador. The company wants to primarily emphasize the importance of good health and affordable treatment for all.

- To enhance public ‘perception’ and corporate reputation further, Abbott rolled out a corporatecampaign in India – ‘live life to the fullest.’ The advertisement communicates to the people in an interesting way that “At Abbott, we’re all about helping you live the best life you can through good health. We keep your heart healthy, nourish your body at every stage of life, help you see clearly, and bring you information and medicines to manage your health. Every day and around the world, we’re discovering new ways to make life better.”

Since,the public ‘perception’ of pharma keeps getting worse, let me illustrate the point of constructive power of ‘perception’ from the huge success of several companies from the tech industry. As featured in Tech Times on July 23, 2016, in the ‘perception strength’ of customers in the world on a yearly basis, Apple Inc ranked the world’s top company in 2016 followed by Microsoft.This survey conducted by FutureBrand asked 3,000 customers to rank the big enterprises by 18 different factors, such as trust, price premium, individuality and innovation.

As defined by the survey report, “future brands” are those with a high chance to grow in the future. One of the defining characteristics of such a brand is that it has a consistent balance between the customers’ perception of its purpose and its delivered experience, the article indicated.And that’s exactly what constructive power of ‘perception’ that needs to be strengthened.

…But a key barrier to remedial measures still exists in pharma:

Regardless of industry’s intensive advocacy and multimedia initiatives, a strong negative ‘perception’ on pharma business persists. One of the reasons could be that the nature of most of these overt and covert measures questions the stakeholders for their negative ‘perception’ – justifying the industry practices. This approach often boomerangs. Consequent responses keep getting stronger – leading to a no-win situation. This arises out of a discord between the two concerned entities on the merits of the views that lead to adverse ‘perception’.

The PWC research paper quoted above also substantiates this point. It brings to the fore that pharmaceutical executives and stakeholders hold strikingly different views on a number of issues related to the development of ‘perception’ affecting the reputation.

The article, titled ‘Reputation and Its Risks’, published in the February 2007 issue of Harvard Business Review (HBR) also emphasizes, a clear recognition that reputation is a matter of ‘perception’ of stakeholders, will help companies to effectively manage their reputation. It also says, if companies fail to be in sync with stakeholders’ changing beliefs and expectations, building reputation through effective ‘perception’ management, would appear a tough call.

Conclusion:

Public ‘perception’ plays a crucial role, not just in shaping government policies and regulations, but also in the long-term business success. More positive the ‘perceptions’ are, easier will it be for the company to smoothly sail through, in business – even while navigating through occasional headwinds. Thus, the ability in shaping up a positive ‘perception’ for any business, is fast emerging as an antidote even to any possibility of getting ultimately shipped out. This ability is not dependent just on presenting hard positive facts to all concerned, but a tad more.

Which is why, it is so critical to understand the root cause of the views or ‘perceptions’ of the stakeholders in the industry or an individual company. In case of pharma, when the ‘perception’ is so negative, it will be worthwhile to neutralize it first, rather than immediately trying to counter it with a fresh coat of yet one more fact-based narrative. As a ‘perception’ is not necessarily based on hard facts, such attempts may lead to a never-ending debate on which ‘perception’ is right – ‘your perception’ or ‘my perception’, rather than ‘what is right to do’?’

There lies, therefore, the criticality of effective management of ‘perception’ in pharma. The situation, I reckon, would be even more challenging in the days ahead, if the stakeholders and the pharma industry continue to hold strikingly different views on a number of crucial issues related to the development of such ‘perception’ – further denting its already dented reputation.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

The Hype of Digitalization in Pharma Marketing

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Having access to the fountain of knowledge residing in the cyberspace, fueled by word of mouth information and aided by social media, patients’ behavior is fast changing globally. Its degree may vary. But the change is real. The good news is – in a digital world of today, people are talking about ‘digitalization’ to rejuvenate per dollar productivity even in the pharma business, while navigating through a strong environmental headwind.

But, the bad news seems to be, that many pharma players, especially in India, can’t possibly quite fathom, just yet, the profound impact of the changing customer profile. With the hype of ‘digital marketing’ and associated cacophony, most of them seem to be focusing on automation of various processes with digital tools, rather than a customer-centric pan-organization digitalization of business. In this article, I shall dwell on the relevance of such intervention in the pharma marketing model, including the processes, before it’s too late for an organization.

The reality – profile of pharma consumers is changing:

It is well documented today that the profile of pharma consumers is changing. There are several studies in this area. For example, the McKenzie paper of November 2014, titled “A digital prescription for pharma companies,” penned some important observations in this regard, as follows:

  • Consumers in the healthcare sector are becoming more informed, empowered, and demanding.
  • The vast majority of connected patients using an array of digital tools, to take control of their health and the health care services they access and buy.
  • Over 70 percent of patients who are online in the United States use the Internet to find healthcare information, and around 40 percent of people who diagnosed their condition through online research had it confirmed by a physician.
  • Patients equip themselves with information about product safety, efficacy, cost comparison, quality indicators from websites and online communities.
  • The more healthcare data become digitally accessible, the more patients will use it to weigh—and potentially reject—expensive health care treatments, as is particularly true in the United States.
  • These patients are demanding more information, so they can apply the same cost-benefit analysis and research techniques they use to purchase cars or phones when they purchase health care.
  • They are also making more informed, rational choices about where they put their money.
  • If pharma companies do not join the digital dialogue and influence the conversation, they will lose an opportunity to shape it, and they may be put on the defensive trying to refute the statements made by those that do take part.

In this evolving scenario, the expectations of pharma customers even in India, are also changing. It may not be as fast as in the United States, but certainly can’t be ignored in any way, for long term business success. Thus, I reckon, it would be futile to keep the basic process of business as tradition-bound as it has always been, of course, with some interesting tweaking here or there.

When everybody talks about digital intervention, what it is really?

To effect this desired change, all concerned are now talking about ‘digitalization’. It has already become a buzz word and is often considered as a ‘magic wand’ by many enthusiasts. There is nothing wrong in this hype, provided this process is properly understood. I tried to explain it in my article, published in this Blog on January 2018. Are we missing wood for the tree? Let me start with the current ‘digitalization’ focus of pharma marketing in this area, particularly in India – as I see it.

Where’s the current focus on ‘digitalization’ in pharma marketing?

Generally, the pharma marketing focus broadly covers two different categories:

A. Push marketing 

B. Pull marketing

A. Push marketing: 

In my view, ‘push marketing’ involves targeting physicians through Medical Representatives and other means, including several contentious ones. These ensure that the doctors “push” the identified pharma brands of the company while writing prescriptions for patients. Some experts call it an ‘inside out’ and brand focused strategy of the industry players to drive sales.

Many companies are taking major digital steps to introduce automation in this area, which are not transformative, but incremental and aimed at improving productivity. Such drive encompasses many areas of a pharma organization, including the field staff related functions. For example, replacing usage of paper-based items, such as detailing folders or reporting material, with algorithm-based digital tablet devices. These reforms help answer customer questions promptly, besides almost real-time entry of accurate doctors’ call related data into a remote computer server for continuous analysis and feedback.

Automation of such types may free enough time of the field staff for greater customer contacts in different ways, but may not be considered as digitalization of the organization. Moreover, these are not transformative in nature either, as the overall process of doing business remains the same.

Nonetheless, process automation and its re-engineering add significant, but incremental value to the business, as the organization continues to maintain similar ‘inside-out’ focus on brands. The re-engineered processes also become faster and more accurate to help improve productivity. However, patients’ knowledge-base, needs, demands, values and aspiration keep changing fast, which just process automation can’t leverage to excel in business.

B. Pull marketing: 

Unlike ‘push marketing’, ‘pull marketing’ targeting pharma consumers who are increasingly becoming more informed and want to get involved in their treatment decision making process, including selection of a drug. The evolving trend suggests, to succeed in business, pharma players would require focusing more on patients, using various digital tools and platforms of engagement, in different ways.

To make this process meaningful, it is essential for a drug company to venture into mapping the patient’s journey from end-to-end for a specific disease or a set of diseases. This means capturing real-life data right from the time patients feel the need for a medical intervention, through the search for the right treatment, to effective disease management or cure, including follow-up, if any. Thus, mapping this arduous and complex odyssey would demand application of state-of-the-art digital tools.

Thereafter, equally sophisticated measures structured on digital platforms and formulated accordingly, require to be and implemented on the ground. It then becomes the ground-rock to transform the company’s focus – ‘through brands to patients’ to – ‘through patients to brands.’ Dovetailing this new marketing concept to a pan-organization initiative will call for new insight and wherewithal of the right kind.

When implemented by the right kind of people, this approach will encouragepatients to “pull” the demand of the selected brands, as they participate along with doctors in the drug selection part of the entire treatment process. The informed patients won’t hesitate posing questions to doctors – why ‘this’ drug is being prescribed and why not ‘that’ drug?’ The doctor would require responding with convincing answers in that situation. Some experts have termed this process as – an ‘outside in’ strategy.

Difference in impact – one ‘Incremental’, the other ‘transformative’:

It’s important to reiterate that the impact of digitalization for an ‘inside-out push strategy’, is generally incremental. Whereas, the same for ‘outside-in pull strategy’ is expected to be transformative in nature, not just in the business performance, but also the way pharma business is viewed and conducted as on date, especially in India.

Conclusion:

As I understand, process automation may be based on digital platforms and even with the application of Artificial Intelligence (AI) or robotics, the overall business process remains unchanged. It brings greater efficiency in the same business processes, improving employee productivity, and usually adds incremental success to brand performance.

Whereas, digitalization helps create a new way of achieving excellence – gaining a new insight for the business. This happens, first through generation, and then detail analysis of an enormous amount of relevant customer-centric data. Effective interpretation and use of the same, help transform the business – giving shape to new business processes for organizational distinction.

Simply speaking, automation improves the business efficiency with its key focus on ‘pushing brand prescription demand’, as much as possible. Whereas, digitalization aims at business transformation for a long-term organizational effectiveness. It creates a new purpose for business based on changing customer profile, across the organization. A sharp focus on delivering research-based and well-targeted customer values help ‘pulling brand prescription demand’, the decision of which is often jointly taken by the doctors and the patients or will happen that way even in India, sooner than later.

In this perspective, what we see in pharma marketing, generally in India, is automation of various types, of course, by using digital tools, platforms and even AI, in some cases. There isn’t anything wrong in that. But, digitization would call for much more. First, the core organizational focus to shift from being ‘brand-centric’ to ‘customer-centric’ for financial achievements, and then effectively delivering customer values through each ‘company-brand-customer interface’ and beyond that. This is essential for sustainable excellence of pharma players in the digital age.

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.

Creating ‘Shared Value’ in Pharma – The Way Forward

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Many Pharmaceutical companies, both global and local, are struggling with a plethora of critical challenges. With the industry reputation diving south successful navigation through this headwind has become an onerous task, more than ever before.

Under this backdrop, the article, titled “Creating Shared Value” of Michael Porter and Mark Kramer, published in the Harvard Business Review (HBR) in its January – February 2011 issue, becomes very relevant to analyze the situation.

The paper says: “Companies are widely thought to be prospering at the expense of their communities. Trust in business has fallen to new lows, leading government officials to set policies that undermine competitiveness and sap economic growth. Business is caught in a vicious circle. A big part of the problem lies with companies themselves, which remain trapped in an outdated, narrow approach to value creation.”

The authors also articulated that pharma players, generally focus on optimizing short-term financial performance, overlooking the greatest unmet needs in the market as well as broader influences on their long-term success. They questioned: “Why else would companies ignore the well-being of their customers and the economic distress of the communities in which they produce and sell?”

Porter and Kramer advised the companies to bring business and society back together – redefining their purpose as creating “shared values”. It means generating economic value in a way that also produces value for society by addressing its challenges.In this article, I shall explore in this area.

Not CSR or Philanthropy, its engaging business as business, for social progress:

Creation of “Shared values” for a business is quite different from “Philanthropy” or “Corporate Social Responsivity (CSR)”. Philanthropy usually involves ‘donations to worthy social causes’ and CSR is primarily directed at compliance with community standards and good corporate citizenship. Whereas the creation of “shared value” means integrating societal improvement into economic value creation, making social improvement as an integral part of with a business model.

To create “shared values”, it is imperative for business organizations to create “social value” through active participation in addressing the social issues and needs related to the business. Or in other words, the creation of “shared values” would entail striking a right balance between “social value” and the “business value.”

An article titled “What Is the Social Value of Pharmaceuticals?”, published by FSG on February 13, 2014 dwells on the business relevance of creation of “social value” in the pharma industry. It writes,creation of “social value” corresponds to effecting positive change along the major societal challenges, such as affordable health care, by working more in collaboration with other stakeholders to address the needs of the underserved through commensurate value creation. This entails engagement of a business as a business, not as a charitable donor, nor through public relations, for social progress.

A resolution to create “shared value” in the pharma industry:

An interesting article, featured in SFGATE of the San Francisco Chronicle on July 11, 2018, elucidated that the reputations of drug makers have taken a hit over the past few years as the public and politicians have called out the companies for high prescription drug prices that even Americans are facing. Recently, President Donald Trump, reportedly, singled out the top pharma companies of the world  for raising the list prices on some of its prescriptions.

Possibly it’s a sheer coincidence, but on the same day, an intent of creating “shared values” with the society got reflected in the statement of the president of the Novartis Institutes for Biomedical Research. The officialexplained, why his company has a ‘contract with society’. He admitted that: The cost of health care, which has been rising has left many on the hook for a larger amount of their prescription drug cost that can place a big burden on patients in many countries, including the United States.

Consequently, the pressure from the people who need medications is now on the pharmaceutical companies for doing right, he added. Thus, Novartis feels:”We have a contract with society, and society is our shareholder. A company like ours exists to have a definitive impact on life threatening diseases, to keep people alive and healthy for a long, long time, full stop” – the official concluded.

A laudable intent, but is it credible?

The concept of pharma having a contract with the society ‘to keep people alive and healthy for a long, long time,’ is laudable, but is it credible? This question arises because, just before public articulation of this intent, the same company, reportedly, entered into USD 1.2-million contract with President Trump’s lawyer, Michael Cohen, allegedly, to provide access to the US President.

The exact reason for the same is being investigated by competent authorities, including the US Senators. However, another report highlighted, “Novartis is among the drug companies that has put through significant price increases for its products since Trump took office in 2017 – in some cases more than 20 percent.”

Another  repot of July 09, 2018, quoting a tweet of the US President, poured more cold water on the warm intent of pharma’s ‘contract with the society.’ According to this article President Trump tweeted: “Pfizer & others should be ashamed that they have raised drug prices for no reason. They are merely taking advantage of the poor & others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe & elsewhere. We will respond!”

Consistently declining pharma’s image and public trust:

Many believe that due to such hyperbolic statements and conflicting actions of pharma, over a long period time, are driving down the public image and trust on the industry, in general, from deep to deeper level, which has not found its bottom, just yet.

The reality gets reflected in various well-recognized polls, conducted even in the top pharma market of the world, which is also one of the richest nations, globally. August 2017 Gallup Poll on ‘Business and Industry Sector Ratings,’ features pharma industry at the very bottom of the ranking, just above the Federal government.

The concern gets reverberated in the February 03, 2017 article titled, ‘How Pharma Can Fix Its Reputation and Its Business at the Same Time,’ published in the Harvard Business Review (HBR). The paper observes that the worrisome mix of little growth potential and low reputation prompts the pharma players, among other actions, developing new treatments for neglected populations, and pricing existing products at affordable levels – avoiding corruption and price collusion.

How will “shared value” creation help pharma?

The process of creating “shared values” will involve creating “social value” with all sincerity and a clearly defined purpose. Its outcome should be measurable, and the impact felt by the society. In tandem, striking a right balance between “social value” and the “business value” would call for a metamorphosis in the concept of doing business.

There aren’t too many examples of creation ‘shared values’ by pharma companies, yet. However, to illustrate this point, let me quote one such that was originated from India, which I had the privilege to observe closely. This initiative is ‘Arogya Parivar (healthy family) of Novartis in India.

‘Arogya Parivar’ is a ‘for-profit’ social initiative developed by Novartis to reach the under-served millions living at the bottom of the pyramid in rural India. As Novartis claims, since its launch in 2007, ‘Arogya Parivar’ is proving to be both a force for improving health in rural communities and a sustainable business. ‘Arogya Parivar’ is a commercially-viable program and began returning a profit after 30 months with sales increasing 25-fold, since launch. After successful implementation of this initiative in India, the company has created similar programs in Kenya, Indonesia and Vietnam, according to Novartis.

Conclusion:

The concept of ‘shared values’ emphasizes that business success of a company is closely related to the progress, development and wellbeing of the society where it transacts the business. This can be achieved by striking a right balance between the social need and the business need. In the pharma space too, the value creation in the business value chain may need to be redesigned to meet the ‘social value’. This happened as in the case of ‘Arogya Parivar’ initiative of Novartis in India.

Creating robust business models based on ‘shared values’, in sync with the business-specific needs of the society can help make more profit in areas where there is none, at present. It will also facilitate achieving additional growth of the organization and improve long-term competitiveness.

Consequently, pharma can earn recognition of the society as a powerful contributor for containing suffering and even death of many ailing patients, by increasing access to affordable medicines for those who need these most. This, in turn, would help pharma companies to improve their public image and reputation. Let me hasten to add that provided, of course, no countermeasures are taken by them, surreptitiously, as I have discussed above.

The good news is, some pharma players have already initiated action in this direction. Thus, I reckon, many of them would soon realize that creating ‘shared value – based’ business models are the way forward for sustainable business excellence.

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 Drug Pricing Transparent May Work Better Than Price Control

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“Now, one-fourth of the Indian pharma market to be under price control.” This possibility was reported by some national dailies, on July 03, 2018. The new methodology of drug price control could be anything – ranging from earlier ‘cost-based’ model to the current ‘market-based’ one – to even the new pharmaceutical index, as proposed by the Government ‘think tank’ – Niti Aayog. This gives an indication of acceptance by the policy makers that none of the price control mechanisms have worked as intended, till the last 48 years. Otherwise, why are such changes taking place?

On the other hand, the drug pricing models of the pharma industry, are also not working. Drug pricing related issues, directly or indirectly, continue driving pharma reputation down south. Strong negative vibes on the industry continues, despite a vigorous and expensive advocacy of the industry trade associations, primarily positioning the need to encourage ‘drug innovation’ right at the front. No perceptible impact of this pharma strategy on the policy makers is still visible, besides a few spoon-fed media editorials – as many believe. The saga continues. The pricing focus keeps remaining solely on a company’s financial interest. How far the price of a drug can be stretched to benefit the company, is the point to ponder. Why aren’t the basis and rationale of drug pricing made transparent, voluntarily? In this article, I shall discuss on this contentious issue.

Current pricing approach becoming counterproductive: 

The good news is, of late, some global drug majors apparently have been compelled to realize that this approach is gradually becoming more and more counterproductive, inviting more drastic measures from many Governments. Even recently in the United states, ‘Trump wants U.S. Health Secretary to get tough on drug prices, opioids.’ This situation demands, more than ever before, that a measurable quantum of all-round health benefits accrued by patients with the medicine, have to be factored into the drug pricing model, now.

Can pharma too, look for an ‘Out of the box’ solution?

I found two excellent examples of ‘looking outside the box’ in an article featured in the Pharmaceutical Executive, on March 06, 2018. Both the illustrations from non-pharma companies focus on product output to the consumer rather than inputs on the same by the companies, such as the cost of a drug innovation to an innovative company. Many find difficult to accept – why for extending life of cancer patients by just three to six months, an innovative oncology drug would cost thousands of rupees more to the sufferers, or their family?

Couple of interesting ideas:

The two interesting ideas are as follows:

- Erstwhile Monsanto, the article says, ‘had historically been able to maintain its market position and technological edge in developing superior genetically modified seeds through patents and contracts with farmers. In order to fully capture the value of its genetically modified seeds, however, Monsanto went a step further and shifted to a royalty type price model, charging a fee after the crops were harvested based on the yield. This end-use fee shifted Monsanto’s price model from seed-based to yield-based pricing, i.e., from input- to output based.”

-  The second one comes from a time “when Michelin developed a new tire that lasted 25 percent longer than existing tires, the company found it difficult for customers to accept a premium” – the paper highlights. “Rather than giving away the innovation, Michelin changed its pricing model. Truck fleets, a key customer segment, track cost per mile for each truck as their revenue model is also based on charging its customers per mile. Michelin decided to adapt its pricing model and to offer the new tires on a price per mile rather than per tire basis. The company then offered a contract to replace the tires after they wore down. Under this new pricing model, customers perceived a parity price as they were not asked to pay more, while longer lasting tire from Michelin was able to capture a premium for its innovation” – the article emphasized.

Two patient-oriented pharma pricing models:

Looking somewhat ‘outside the box’ and trying to factor in patients’ overall interest, some global majors are contemplating the following two broad approaches:

  • Value based pricing (VBP)
  • Outcomes based pricing (OBP)

The Drug Pricing Lab (DPL) based at Memorial Sloan Kettering Cancer Center defines these two models as follows:

Value-based pricing: When the price of a drug is based on its measured benefits, for instance, in clinical trials leading to its approval.  Methods used to determine value-based prices are transparent, reproducible and data driven.

Outcomes-based pricing: Refers to arrangements between manufacturers and payers, in which the manufacturer is obligated to issue a refund or rebate to the payer that is linked to how well the therapy performs in a real-world population. This refund or rebate is off of a list price that the manufacturer sets.

These concepts are neither very new or untried. Nevertheless, these are being used very selectively by some global pharma majors, from time to time. There doesn’t seem to be any consistent approach with these two models, thus far. For example, in 2005, with its erectile dysfunction drug Levitra (vardenafil), Bayer entered into a “no cure, no pay” initiative in Denmark, where patients dissatisfied with the treatment get a refund. Moreover, there are several instances of interchangeable use of these two definitions, in various literature. But, I shall stick only to the above definition, in this deliberation.

Are there any takers for VBP?

A few other pharma majors, such as Eli Lilly, have accepted the need in finding a right balance between investment on innovation and providing affordable medicines, as the key to bettering the health of the world with value-based pricing. It will call for requisite engagement between the drug manufacturers and health planners, covering the following two points, especially in the Indian context:

  • Critical scientific evidence about new drugs would create a pathway to set accurate rates for better availability to patients who need treatment.
  • Making drug price regulators and health policy planners better anticipate the holistic impact of the drug on patients, leading to generation of more accurate efficacy and pricing/health economics data.

The major issue with VBP:

The critical point to note, that for a meaningful discussion on VBP, the pharma players will require to share their pricing data with the competent authorities. In this regard, the article, titled “Pricing Turning Point: The Case for Innovating Pharma’s Model,” published by Pharmaceutical Executive on March 06, 2018, flags an important reality.

It says,a drug pricing model consists of two parts – How to charge (the details of the rationale)? And how much to charge (the level)? The article reinforces that the pricing decisions in the pharma industry generally focus on ‘how much to charge’, for the last 100 years. This process is now being stretched to a mind boggling level that raises many eyebrows in ‘disbelief’. I, therefore, reckon, it would be a real challenge for the drug maker to make the basis or rationale of a pricing decision transparent to all. In that case, the moot question is, how would the value-based pricing work?

Are there any takers for OBP?

According to reports,  the erstwhile CEO of Novartis – Joe Jimenez, and his Amgen counterpart at that time – Robert Bradway, among others, publicly spoke about pegging drug costs to their outcomes. Intending to be a part of the drug pricing solution, Novartis inked performance-based contracts with Cigna and Aetna on its new heart failure medication Entresto, so did Amgen on its anti-lipid drug – Repatha. Novartis also fleshed out the details of outcomes-based pricing model in a comprehensive report, describing its benefits to address the affordability challenge. However, such initiatives have not gained momentum, just yet.

OBP may not be the right option, and why:

Thereafter,the Drug Pricing Lab (DPL), based at Memorial Sloan Kettering Cancer Center,analyzed that the methods manufacturers use to generate list prices are typically opaque, inconsistent, and driven more by market factors than clinical data. These methods are often referred to by manufacturers as “pricing to what the market will bear”.

‘The Drug Pricing Lab’ illustrated the basic difference to patients between the ‘value-based’ and ‘out-come’ based pricing models by looking into Amgen’s outcome-based refund contract with Harvard Pilgrim for Repatha (Evolocumab). Amgen had agreed to refund Harvard Pilgrim the cost of medication for patients who have a heart attack or stroke, an estimated 3.5 percent of individuals on the drug. This equates to a reduction in annual list price from US$ 14,100 to US$ 13,620. In contrast, the ‘Institute for Clinical and Economic Review’finds that a value-based price for Repatha would be US$ 2,200 to US$ 5,000 per year, one third to one fifth the expected price resulting from the outcomes-based contract.

VBP comes out as a better option:

Based on the available data, it appears that VBP is a better option that focuses on tangible value delivery of a drug to individual patients. This is quantified with the help of available statistical tools, in a transparent manner. Application of Health economics is also being tried in this area.

Thus, the core concept behind VBP is that any drug price should be a function of the differential value that it delivers over the conventional ones, generally used for treating the same disease. Unfortunately, arriving at a consensus on the ‘value assessment’ metrics for a drug, often throws a tough challenge, especially to the manufacturers.

Conclusion:

Recently, with exorbitantly high-priced new drugs coming into the market, the issue of drug pricing mechanism has become a major concern for all stakeholders. Pharma companies can’t wish it away, any longer, even with the high decibel advocacy of ‘protecting and encouraging innovation’ of new drugs. The consequent potential risks are becoming too costly.

This situation prompts the pharma players to reengage with the consumers, providing quantifiable details about the differential value that a drug offers to patients and its relationship to the price that the company charges.  This is easier said than done. It’s time for drug companies to establish a solid link between these two. As I said before, many stakeholders are refusing to accept, just to extend life for a few months, why should an innovative anti-cancer drug cost thousand or even lakhs of rupees more than a conventional one – pushing families into dire financial distress?

Pharma players can’t afford to remain a part of this critical problem, any longer. They should take responsibility to become a part of the solution. With VBP or with any other credible alternatives, making drug pricing transparent – voluntarily, may work better for them than facing mandatory price control. It’s a different ball game altogether, requiring a new mindset, and… the name of the game is: ‘out of the box’ Ideas.

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.

Blockchain: A Game Changer For Safe Medicines

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‘Your medicine box may have fake drugs’ was the March 18, 2018 headline of a popular pan Indian news daily. Just the year before, the 2017 report of the World Health Organization (WHO), also flagged that around 10.5 percent of all medicines in low-and middle-income countries, including India are substandard or fake. Even prior to this, another news headline of February 15, 2016 highlighted: ‘1 In 7 Indian Drugs Revealed As Substandard.’ These reports paint a scary situation for consumers of medicine in India, especially when the same incidence is just around one percent in the high-income countries of the world. Nevertheless, getting into a protracted discussion to prove the veracity of this issue, may not yield much, either. Some may even term these as efforts to ‘sensationalizing’ the situation.

That said, the good news is, the Government Think Tank Niti Aayog and also the Drug Technical Advisory Board (DTAB) of India,are reportedly contemplating to combat this menace with cutting-edge technology. In this article, I shall dwell on this threat, starting with its profound impact, not just on human health, but also on the economic and the socioeconomic space of India.

Why is it so important?

The most obvious fallout of this hazard is of course borne by the consuming patient.  The other two critical impact areas has also been well captured by the World Health Organization (WHO) in its 2017 study, titled ‘A study on the public health and socioeconomic impact of substandard and falsified medical products’. I am summarizing those 3 key impact areas hereunder:

A. Health impact: 

  • Adverse effects (for example, toxicity or lack of efficacy) from incorrect active ingredients
  • Failure to cure or prevent future disease, increasing mortality, morbidity and the prevalence of disease
  • Progression of antimicrobial resistance and drug-resistant infections, loss of confidence in health care professionals, health programs and health systems

B. Economic impact:

  • Increased out-of-pocket and health system spending on health care
  • Economic loss for patients, their families, health systems and manufacturers (and other actors in the supply chain) of quality medical products
  • Waste of human effort and financial outlay across the health system, further straining resources, staff and infrastructure
  • Increased burden for health care professionals, national medicine regulatory authorities, law enforcement and criminal justice systems.

C. Socioeconomic impact:

  • Lost income due to prolonged illness or death
  • Lost productivity costs to patients and households when seeking additional medical care, the effects of which are felt by businesses and the wider economy
  • Lack of social mobility and increased poverty

What the Government contemplates in India? 

According to the April 09, 2018 news report, “Indian policy think tank Niti Aayog is working to put the entire inventory of drugs made and consumed in the country on blockchain with an intent to crack down on counterfeit and spurious drugs, according to two government sources. The government wants to complete a proof of concept (PoC) solution by the year-end and begin implementation in 2019.”

On May 16, 2018, DTAB reportedly deliberated and approved a Track and Trace mechanism to address this issue. The proposal is a stand-alone measure to combat fake or counterfeit drugs covering 300 pharma products. However, it does not intend to cover the entire drug supply chain integrity with Blockchain technology, in a comprehensive manner.

According to the above report, this particular approach involves asking the pharma manufacturers to print a unique 14-digit alphanumeric code on the package of the drug. While buying any medicine, the individual can inquire via a text message, whether the drug bearing that code is genuine or not.

I wrote an article in this Blog on the use Blockchain by pharma players, on January 22, 2018. You may wish to refer that to know more about it in context of the pharma industry.

Recent Blockchain initiatives by global pharma majors:

Some global pharma layers have already covered some ground with Blockchain, especially in this area.On September 21, 2017, an article titled ‘Big Pharma Turns to Blockchain to Track Meds’, published in Fortune, presented some interesting facts. It indicated: to stop a flow of fake, spurious or counterfeit medicines entering the supply chain and reaching patientshow the pharma industry appears to be on the verge of resolving this long-time problem with the intervention of one of the most modern technology – Blockchain.

A group of companies, including Genentech and Pfizer has announced the MediLedger Project for creating blockchain tools to manage pharmaceutical supply chains. The group, has completed a successful pilot program to track medicines, where all concerned – from drug manufacturers to wholesalers to hospitals and retailers will be recording drug deliveries on a blockchain. This would ensure that, at each step of the distribution process, a network of computers will vouch for the ‘provenance and authenticity’ of a drug shipment—making it virtually impossible for counterfeiters to introduce fake drugs – the article highlighted.

Quoting domain experts, the authors underscored the key difference between current practices in this area and managing supply chain through Blockchain technology. At present, most companies use various software to manage the supply chain. However, these usually consist of a mishmash of different databases. ‘The introduction of a Blockchain system, in which each participant controls a node on the network, and transactions require a consensus, is thus a significant leap forward’ – the experts noted.

On scaling up, if this project achieves the intended goals, it would possibly be a game changer for the pharma companies in addressing the counterfeit or fake drug menace, effectively.

How will Blockchain combat fake or counterfeit drugs?

In India, there are basically four constituents in the pharma supply chain: source of procurement of various ingredients – manufacturers – C&F Agents – wholesalers – retailers, besides hospitals and dispensaries. To avoid counterfeit or fake/spurious drugs in a comprehensive way, it is critical for these constituents to see and share relevant data based on a modern and tamper-proof technology platform. Unfortunately, the current practices mostly fail to address this serious threat in a holistic way.

Experts envisage Blockchain delivering a superior value in this area, as it has the potential to cover end-to-end supply chain network of a pharma business. A November 14, 2017 article appeared in a Harvard Business School publication of Technology and Operations Management (TOM) explains its rationale very well. The paper is titled “Can blockchain help solve the problem of counterfeit drugs?”

In the context of a supply chain it says, blockchain can be used to track the flow of goods and services between businesses and even across borders. At each step of the distribution process, a network of computers can unmistakably indicate the provenance and authenticity of a shipment, making it harder or counterfeiters to introduce fake drugs. The key advantage of this technological process is that

it is virtually impossible for malicious actors to alter the event logs. Another advantage is speed: should a shipment be disrupted or go missing, the data stored on the common ledger would provide a rapid way for all parties trace it, and determine who handled the shipment last, the author elaborates.

Common anti-counterfeit-measures:

In many countries, including India, drug regulators are focusing on putting in place various anti-counterfeit measures, such as, ‘track and trace’ and ‘mass serialization.’ In some nations these mandatory in nature. At present, the most common process, globally, is to have machine-readable codes carrying a serial number featuring on each and every pack of medicines. Many anti-counterfeit solution providers call these in various different names, to position themselves on a marketing high ground. Other such measures include, forensic markers, cloud-based supply chain data repositories are also being talked about.

So far so good, but the current reality continues to remain scary for patients, probably more in India. Each year ‘tens of thousands dying from $30 billion fake drug trade,’ – reported Reuters just recently – on November 28, 2017. As reported by IntelligentHQ on November 3, 2016, ‘studies have shown that the pharmaceutical industry still struggles on two main counts: interoperability between all the participants, from the manufacturer to the dispenser and data management, to better integrate the serialization systems. Being able to avoid drug counterfeiting is just one of the reasons for which it is so critical to successfully track products down the supply chain.’

Conclusion:

Ensuring safety and security of the pharma supply chain – from sourcing to manufacturing to logistics to retail chemist and ultimately to the final consumer, is now possible with the application of Blockchain. In fact, this process has already been developed, and tried in many continents of the world, including Africa (video).

Thus, in my view, for an effective anti-counterfeiting system to work or even a substandard drug ingredient going into any original final product that ultimately will be consumed by patients, the most important requirement is to ensureend-to-end supply chain visibility and integrity.Any stand-alone anti-counterfeit measure can’t possibly provide such holistic solution.

Just to emphasize on this point – what happens, if anything goes wrong during sourcing of ingredients, or during the manufacturing of the original drug? The drug in question, although could be substandard, can’t be termed counterfeit. Hence, any standalone anti-counterfeit mechanism will obviously indicate ‘all is well’ for the patients to consume this original medicine – before the product is ultimately recalled, if and when the defect is detected by other means.

From this perspective, the application of Blockchain technology covering end-to-end supply chain network has the wherewithal of being a game changer – offering safe medicines to patients.

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.