Drugs & Devices: Chasing Never-Enough Profit And Price Control

On July 20, 2016, the Union Ministry of Health of India announced the addition of Coronary Stents to the National List of Essential Medicines (NLEM) 2015 with immediate effect, bringing them under the Drug Price Control Order.

Reacting sharply to this development, the medical device industry commented, with an undertone of threat, that this price cap could stop manufacturers from introducing technologically advanced stents in India.

However, without contributing to any further knee-jerk reaction, let me try to analyze in this article, whether the never-enough profit motive of the imported stent manufacturer prompted the Government to resort to price control for these life saving devices.

The use of stent:

In the treatment of coronary artery diseases, cardiac stents are now widely preferred in India, just as many other countries of the world. These are small expandable tubes, usually made of metal mesh, and are used to treat narrowed or weakened arteries in the body. 

One of its most extensive usages is in patients with Coronary Heart Disease (CHD), caused by the buildup of plaque, where stents are used to open narrowed arteries and help reduce the symptoms, such as, chest pain or angina, or to help treat a heart attack. This procedure of a percutaneous coronary intervention (PCI) is called angioplasty. 

According to the report of an experts’ sub-committee formed by the Government in October 2015, around 25 percent of deaths in India is attributed to Cardio Vascular Disease (CVD). Coronary Artery disease (CAD) is the commonest CVD accounting for 90-95 percent of all CVD cases and related deaths.

However, for a large majority of the Indian population, the cost of angioplasty is prohibitively high. A patient may have to shell out anywhere between around Rs. 60,000 and Rs. 150,000 for a stent coated with drugs, called Drug Eluting Stent (DES), to curb restenosis, according to published reports.

Even for most Government staff, the cost of angioplasty could well be several times more than their maximum reimbursable limit fixed for angioplasty. Thus, only around 3 out of 1000 needy coronary heart disease patients are treated with angioplasty in India, as compared to 32 in the United States.

An opportunity to shape up:

Despite DES being notified as drugs under the Drugs and Cosmetics Act, 1940, the coronary stents did not feature in the National List of Essential Medicines (NLEM) prior to the above notification, and therefore, were not covered by the Drug Price Control Order (DPCO), so far.

For a long time, this situation offered an important opportunity to the imported stent manufacturers to shape up with responsible pricing…but did they?

Why is angioplasty cost so high?

While trying to find out a credible answer to the above question, the following details on DES of Abbott Healthcare are worth looking at. This information was sourced from a Maharashtra FDA report, and referenced by Rema Nagarajan in her article published in the Times of India on September 25, 2014 to highlight why is DES so expensive for patients in India.

Although, pricing details are of 2014, nevertheless, it gives a flavor of the prevailing situation:

Cost Break-Up/Unit Cost per Unit (Rs.)
DES imported into India at 40,710
Sold to Distributor Sinocare at 73,440
Distributor Sold to Hinduja Hospital 1,10,000
Patient charged 1,20,000 (threefold increase of import price)

(Source: Maharashtra FDA report)

The saga of ‘Market driven pricing’:

Both the drug and the device companies apparently make valiant efforts to package such ‘arbitrary’ pricing as so called ‘Market Driven’ ones, though such price tags keep crippling many cardiac patients financially too. Ironically, the saga still continues.

Taking advantage of the free-pricing environment in India for Coronary Stents, to attain market dominance many global majors, possibly believe that they can print any Maximum Retail Price (MRP) on their import cost. It was happening even when the Government does not levy any customs duty on stents. Do these companies ignore its optics too? Who knows? 

Like most drugs, market forces do not play any significant role in the medical device pricing too, globally.

In June 2013, a research study published in the ‘American Heart Journal (AHJ)’, compared the use of Bare-Metal Stents (BMS), Drug-Eluting Stents (DES), and Balloon Catheters according to company presence in the hospital. It concluded that Medical Representative (MR) presence was associated with increased use of the concerned company’s stents during percutaneous coronary interventions. The effect was more pronounced with the use of DES, and resulted in the higher procedural cost of US$ 250 per patient.

In this particular study, it was found that DESs were used in about 56 percent of the cases, when the MRs concerned were at the hospital, against 51 percent when they weren’t there.

The situation is not terribly different in India too, where also the medical choices are often influenced by the drugs and device makers through, much discussed, dubious means.

The market:

According to a market research report of ‘Future Market Insights (FMI)’ dated May 09, 2016, the coronary stent market of India was of US$ 481 million in 2015, and by the end of 2016 is expected to reach at US$ 531 growing at a CAGR of 14.0 percent over the forecast period of 2016 – 2026.

This study segmented the market on the basis of the following product types:

  • Drug Eluting Stent (DES)
  • Bare Metal Stent (BMS)
  • Bioresorbable stent (BVS) 

DES segment is expected to exhibit the highest growth and the BMS segment a stable growth, during the forecast period. This is mainly attributed to the emergence of new and more effective stents in the market, the report highlights. 

The market is dominated by the imported stents. Abbott, Medtronics, Meril Lifesciences and Boston Scientific, hold together around 60 percent share of the Indian market.

In India, nine of the 11 domestic stent manufacturers are located in Surat and Vapi of Gujarat. These stents are picking up the market share currently hovering around 30 percent, costing even less than half, as compared to the imported ones.

The Government stepped in:

When the industry did not seem to shape up, despite the regulatory opportunity available to keep the stents out of the NLEM, the media started writing about it, strongly and quite frequently. These were intended to bring some sanity into the imported and advanced Coronary Stent pricing system. Still nothing changed, and the Government had to step in.

Ultimately, in October 2015, the Union Ministry of Health constituted a sub-committee of expert cardiologists under the chairmanship of Prof. Y.K. Gupta, Head of the department of pharmacology, All India Institute of Medical Sciences (AIIMS). The mandate of this sub-committee was to examine the issues relating to the essentiality of coronary stents, and recommend whether the coronary stents should be included in the NLEM.

Accordingly, after a series of in-depth discussion with various stakeholders, which included stent manufacturers and the patient groups, the sub-committee recommended the inclusion of two categories of coronary stents, namely the DES and BMS in the NLEM. This suggestion was in response to “the enormous need of percutaneous coronary intervention, or angioplasty with stent.”

By a notification on July 20, 2016, the Ministry of Health announced that the sub-committee has submitted its report to the Government, and after thorough examination of the report, its recommendations have been accepted for implementation with immediate effect.

This decision of the Government is expected to set the stage for the National Pharmaceutical Pricing Authority (NPPA) to work out ceiling prices, which are expected to be 40 percent to 70 percent less than the current prices for these stents.

Conclusion:

For the last several years, many stakeholders, including the media and the Government, have been expressing grave concern over the exorbitant prices of the Coronary Stents.

Earlier in 2015, following a petition, even the Delhi High Court directed the Government to monitor the prices of stents in the market.

Indian drug price regulator, the NPPA, and some state FDAs too flagged the point that although locally manufactured stents are much cheaper, doctors and hospitals continue to use the imported ones, for various commercial and other reasons. As a result, the situation remained the same, adversely affecting the health of a large number of cardiovascular patients in India.

The last week’s decision of the Indian Government for inclusion of coronary stents in the NLEM, needs to be viewed under the backdrop of steep increase in the incidence of CHD in India. It clearly poses a significant public health hazard, where the cost of stents becomes a key treatment barrier for the majority of the patients incurring out-of-pocket health expenditure.

Price control of drugs and devices may not be the best way to improve their access to the most of the Indian population. Nevertheless, considering the high out-of-pocket expenditure for health care in the country, instead of behaving responsibly, doesn’t the drug and the device makers’ mindless chase after ‘never-enough profit’ objectives, often prompt the imposition of regulatory price control?

The fact that many global drug and device manufacturers, even after posting over 30 percent standalone net profit growth in India, continue cribbing incessantly about the stifling Regulatory and Intellectual Property Right (IPR) environment in the country, vindicates the above point well, possibly beyond any reasonable doubt.

By: Tapan J. Ray  

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

 

 

In VUCA World: Changing Dynamics of Prescription Generation Process

The acronym VUCA is often being used to emphasize upon the Volatility, Uncertainty, Complexity and Ambiguity in various situations. The term has been derived from military vocabulary and is being used since 1990s in the business management parlance. VUCA is also considered as a practical code for awareness and readiness.

I find all the elements of VUCA playing an active role in the prescription demand generation space too, as it is based on various assumptions of what will work and what won’t in a fast changing pharmaceuticals business environment. 

The interplay:

Primary interplay in the sustainable prescription demand generation process of today’s digitally empowered VUCA environment, I reckon, could be as follows:

  • Volatility: Fast changing dynamics of medical communication with interfaces made of emerging modern technological tools carrying high risks of rapid obsolescence.
  • Uncertainty: Lack of predictability in assessing outcomes of increasingly expensive product detailing inputs, coupled with too many surprise elements popping-up in the environment almost from nowhere and more frequently.
  • Complexity: Multi-factorial Doctor-Medical Representative (MR) interactions, which get even more complicated with increasing time constraints for effective product detailing to take place.
  • Ambiguity: Difficult to fathom changing needs of the doctors/payors, leading to increasing cause-and-effect confusion by the pharma marketing strategy planners.

Keeping these in view, today I shall deliberate on the ‘Criticality of Optimal Mix of Human and State of Art Digital Interfaces’ for sustainable prescription demand generation in a VUCA environment.

The key influencer – a new study:

A research study published in June 2013, in the ‘American Heart Journal (AHJ)’ establishes that the interaction between physicians and MRs, though essential for  improvement of medical care, is indeed complex. This is mainly because of the apprehension that conflict of interests may affect the doctors’ prescription decision-making process. 

However, the fact comes out, the doctors tend to prescribe more of expensive medical products after interacting with MRs from the concerned manufacturing companies, which, in turn, raises the treatment costs for patients.

Study established MRs influence prescription decision:

This particular AHJ study compared the use of Bare-Metal Stents, Drug-Eluting Stents (DES), and Balloon Catheters according to company presence in the hospital. It concluded that MR presence was associated with increased use of the concerned company’s stents during percutaneous coronary interventions. The effect was more pronounced on the use of DES, and resulted in higher procedural cost of US$ 250 per patient.

In this particular study, it was found that DESs were used in about 56 percent of the cases, when the MRs concerned were at the hospital, against 51 percent when they weren’t there.

Interestingly on such interactions between the MRs and the drug/devices industry two opposite viewpoints emerge.

MR-Doctor interaction important‘ – Industry:

Quoting the Associate General Counsel and Director of Legal and Medical Affairs at the Advanced Medical Technology Association, a medical technology trade association, Reuters reported, “interactions between sales representatives and doctors benefit patients and are supported by professional medical organizations.”

MR interaction should not influence prescription decision’ – Doctors:

In the same report, the study’s lead author was quoted saying, “We need to evaluate carefully any interactions with medical industry to ensure that we minimize an effect on our decision making process.”

The bottom-line, though the debate continues:

This debate will keep continuing even in the years ahead. Be that as it may, the key fact that emerges out of the above study is, MRs do play a critical role in the prescription decision-making process of the doctors, especially for expensive medical products . Consequently, the pharmaceutical companies will prefer maintaining such ‘influencing’ roles of MRs to boost revenues of their respective brands.

This process assumes even greater importance in a VUCA world, as situation specific more frequent human interventions, strongly backed by state of art technological supports, would need to be effectively deployed for generation of sustainable prescription demand to excel in business.

The X-Factor:

However, one of the most challenging issues even in a VUCA situation is that pharma players continue and will continue to target the same sets of prolific prescribers for any given class of products in pursuit of success. As a result, time being so limited, very often even after waiting for hours MRs may not be able to meet the key prescribers.

Moreover, as and when the meeting takes place, it may well get restricted to just a very brief discussion due to the X Factor – paucity of the doctors’ time. Thus, delivering an effective product message in such a short time becomes increasingly challenging. Further, the difficulty in arresting un-interrupted attention of the busy practitioners due to X-Factor when they are with patients, compounds the problem.

Pivotal role of state of art technological tools:

The effectiveness of connection between respective brands of different drug makers and the doctors can be greatly facilitated with the application of state of art technology and modern internet based tools in varying proportions, as the sales and marketing communication strategy would dictate.

This area is emerging as a crafty game, which calls for wide-scale application of analytics.

Traditional strategies not enough:

In a VUCA world, while traditional face-to-face product detailing to doctors may continue to be the primary means for prescription demand generation, experimentation with a good number of new Internet based initiatives has already been started, as I discussed in my earlier article.

Hence, the concepts of digital marketing and e-detailing are gaining ground fast. Such initiatives of augmented digital communication of key marketing messages to doctors, would also help driving the key customers’ traffic to respective product Websites of the concerned companies for more detailed and convincing medical treatment solutions, as and when required by the busy doctors.

Types of digital interventions:

These digital interventions may include:

  • Highly targeted brand specific e-mailing responding to pre-identified needs of individual doctors
  • Sample ordering as per requirements of doctors
  • Live online product presentations at a time convenient to individual doctors
  • Quick and need-based problem solution centric online chats 24×7
  • Strategic usage of social media, backed by a robust pre-decided key output measuring matrix

However, the mix of each of these digital applications will need to be carefully worked out as robust supporting measures to key prescription demand generation activities, spearheaded by the MRs. 

MRs to remain as ‘Spearheads’:

In my view, MRs would still remain the frontline force in the emerging world (dis)order, may be lesser in number, for sustainable prescription demand generation process. Therefore, there is an urgent need to take them on board upfront and train suitably to make the modern digital interfaces successful as powerful differentiating support tools.

Technology based training on digital marketing and e-detailing as empowering initiatives, demonstrating tangible benefits that such high tech-interventions can offer in the overall sales performance of MRs, would play a critical role. Such efforts would, in turn, immensely help making digital augmentation strategies for pharma detailing successful, in the long run.

MR involvement is critical:

In my view, to be successful in a VUCA environment with all these endeavors, however tech-intensives those may be, there will be a critical need to make the MRs understand and learn the process. In tandem, it is equally important to actively engage them in the execution of the integrated medical communication strategy of the concerned companies.

Keeping this perspective in mind, I guess, it will be quite apt to quote Ben Franklyn, one of the Founding Fathers of the United States and a leading author, printer, political theorist, politician, scientist, musician, inventor and economist, all in one, who once wrote:

“Tell me and I forget, 

 Teach me and I remember,

 Involve me and I learn”

Thus, MRs would continue to have a critical role to play in the demand generation process for prescription medicines. However, they must be properly trained to be able to provide the types of knowledge and information that the doctors may not have ready access from elsewhere.

The entire process would, at the same time, require massive technological interventions, not incremental in nature but radical in scope and dimensions, and at a much wider scale than what we have been attempting today.

Challenges in India:

The very concept of VUCA in the changing dynamics of sustainable prescription demand generation, brings to the fore the issue of quality of MRs in India.

Currently there is a wide, both inter and intra company, variation in the educational qualifications, relevant product and disease area knowledge, professional conduct and ethical standards between MRs in our country.

Employability of MR in a VUCA world:

Just when we talk about augmented digital interfaces in medical communications, there exists a huge challenge in the country to strike a right balance between the level/quality of sales pitch generated by the MRs for a brand.

At times, many of them may not be properly armed with requisite scientific knowledge, and the basic norms of professional conduct/ ethical standards, while rendering their services.

They may not also be able to handle the sophisticated technological tools with quick application of minds. Hence, the subject of employability of MR in a VUCA world needs to be addressed afresh in India.

‘One size fits all’ strategies:

To make it happen, the pharmaceutical players would require to jettison, ‘one size fits all’ types of strategies in a VUCA world.

In tandem, pharma marketing strategists will need to be intimately conversant with a relatively difficult process of cerebral gymnastics to help formulating individual key prescriber-centric communication strategies, where MRs can play a key role with optimal digital interventions.

This is possible, if supported by the respective employers creating an environment of empowerment, backed by requisite product training, technological tools, modern behavioral inputs and above all by making investments to create of a large sustainable emotional capital for longer term  business excellence.

Conclusion:

All the elements of VUCA would keep playing very critical roles in sustainable prescription demand generation process in the years to come, more than ever before.

There is a critical need to understand the interplay between each of these dynamics on an ongoing basis to make strategic modifications quickly, whenever required. This is important, as the prowess to introduce right changes at right times will differentiate men from the boys in this ultimate ball game of the pharma industry. 

To succeed in a VUCA environment, pharmaceutical companies may choose to predominantly focus on harnessing their technological expertise. 

However, to face the waves of virtually unpredictable continuous change, only technology based efforts, I reckon, are less likely to fructify. Unless, these high- tech interventions are spearheaded by time-specific fast enough and intelligent skilled human responses in form of MRs. 

Having said that, it would be foolhardy to even think of completely taming VUCA with whatever human and technological wherewithal that any pharma player may be able to garner to achieve its goals. It is, in fact, a matter of relativity in managing VUCA in a given situation at a given time. 

Thus I believe, there is, on the contrary, a need to leverage a VUCA environment, for creation of an ‘Optimal Mix of Human and State of Art Digital Interfaces’ in the product detailing process with a high sense of urgency. This would be critical to gain cutting edge advantages for generation of increased prescription demand in a sustainable way.

For the pharmaceutical marketing strategists, this new ball game would obviously not be a piece of cake either, as the key success factors would involve the right mindset of first unlearning and then relearning the process on an ongoing basis, virtually in all time to come

With this perspective, I conclude by quoting the famous American writer and futurist Alvin Toffler, who once said,

“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”

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.