Does Healthcare Feature In Raisina Hill’s To-Do List?

Posted on June 27, 2016 by Tapan Ray

At the Capitol Hill, while addressing the joint session of the United States Congress, on June 08, 2016, our Prime Minister Mr. Narendra Modi well articulated the following, in his inimitable style:

“My to-do list is long and ambitious. It includes a vibrant rural economy with robust farm sector; a roof over each head and electricity to all households; to skill millions of our youth; build 100 smart cities; have a broadband for a billion, and connect our villages to the digital world; and create a 21st century rail, road and port infrastructure.”

This ambitious list is indeed praiseworthy. However, as the Prime Minister did not mention anything about health care infrastructure, while referring to rapid infrastructure development in India, it is not abundantly clear, just yet, whether this critical area finds a place in his ‘to-do’ list, as well, for ‘We The People of India’.

This apprehension is primarily because, no large scale, visible and concrete reform measures are taking place in this area, even during the last two years. It of course includes, any significant escalation in the public expenditure for health.

Ongoing economic cost of significant loss in productive years:

“The disease burden of non-communicable diseases has increased to 60 per cent. India is estimated to lose US$ 4.8 Trillion between 2012 and 2030 due to non-communicable disorders. It is therefore critical for India to transform its healthcare sector,” – says a 2015 KPMG report titled, ‘Healthcare: The neglected GDP driver.’

This significant and ongoing loss in productive years continues even today in India, handicapped by suboptimal health care infrastructure, and its delivery mechanisms. Such a situation can’t possibly be taken for granted for too long. Today’s aspiring general public wants the new political leadership at the helm of affairs in the country to address it, sooner. A larger dosage of hope, and assurances may not cut much ice, any longer.

Transparent, comprehensive, and game changing health reforms, supported by the requisite financial and other resources, should now be translated into reality. A sharp increase in public investments, in the budgetary provision, for healthy lives of a vast majority of Indian population, would send an appropriate signal to all.

As the above KPMG report also suggests: “It is high time that we realize the significance of healthcare as an economic development opportunity for national as well as state level.”

Pump-priming public health investments:

With a meager public expenditure of just around 1.2 percent of the GDP on health even during the last two years, instead of rubbing shoulders with the global big brothers in the health care area too, India would continue to rank at the very bottom.

Consequently, the gaping hole within the healthcare space of the country would stand out, even more visibly, as a sore thumb, escaping the notice, and the agony of possibly none.

With around 68 percent of the country’s population living in the rural areas, having frugal or even no immediate emergency healthcare facilities, India seems to be heading towards a major socioeconomic imbalance, with its possible consequences, despite the country’s natural demographic dividend.

According to published reports, there is still a shortage of 32 and 23 percent of the Community Health Centers (CHC) and the Primary Health Centers (PHC), respectively, in India. To meet the standard of the World Health Organization (WHO), India would need minimum another 500,000 hospital beds, requiring an investment of US$ 50 Billion.

Moreover, to date, mostly the private healthcare institutions, and medical professionals are engaged in the delivery of the secondary and tertiary care, concentrated mostly in metro cities and larger towns. This makes rural healthcare further challenging. Pump-priming public investments, together with transparent incentive provisions for both global and local healthcare investors, would help augmenting the process.

Help propel GDP growth:

As the above KPMG report says, the healthcare sector has the ability to propel GDP growth via multiple spokes, directly and indirectly. It offers a chance to create millions of job opportunities that can not only support the Indian GDP growth, but also support other sectors of the economy by improving both demand and supply of a productive healthy workforce.

Three key areas of healthcare:

Healthcare, irrespective of whether it is primary, secondary or tertiary, has three major components, as follows:

Prevention
Diagnosis
Treatment

Leveraging digital technology:

As it appears, leveraging digital technology effectively, would help to bridge the health care gap and inequality considerably, especially in the first two of the above three areas.

A June 06, 2016 paper titled, ‘Promoting Rural Health Care: Role of telemedicine,’ published by the multi-industry trade organization -The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said: “With limited resources and a large rural population telemedicine has the potential to revolutionize the delivery of healthcare in India.”

As the report highlighted, it would help faster diagnosis of ailments, partly address the issues of inadequacy of health care providers in rural areas, and also the huge amount of time that is now being spent in physically reaching the urban health facilities. Maintenance of the status quo, would continue making the rural populace more vulnerable in the health care space, than their urban counterparts.

The study forecasted that India’s telemedicine market, which has been growing at a compounded annual growth rate (CAGR) of over 20 per cent, holds the potential to cross US$32 million mark in turnover by 2020, from the current level of over US$15 million.

According to another report, currently, with around 70 percent overall use of smartphones, it is quite possible to give a major technology enabled thrust for disease prevention, together with emergency care, to a large section of the society.

However, to demonstrate the real technology leveraged progress in this area, the Government would require to actively help fixing the requisite hardware, software, bandwidth and connectivity related critical issues, effectively. These will also facilitate keeping mobile, and other electronic health records.

Disease treatment with medicines:

To make quality drugs available at affordable prices, the Indian Government announced a new scheme (Yojana) named as ‘Pradhan Mantri Jan Aushadhi Yojana’, effective July 2015, with private participation. This is a renamed scheme of the earlier version, which was launched in 2008. Under the new ‘Pradhan Mantri Jan Aushadhi Yojana’, about 500 generic medicines will be made available at affordable prices. For that purpose, the government is expected to open 3000 ‘Jan Aushadhi’ stores across the country in the next one year i.e. 2016-17.

The question now is what purpose would this much hyped scheme serve?

What purpose would ‘Pradhan Mantri Jan Aushadhi Yojana’ serve?

Since the generic drugs available from ‘Jan Aushadhi’ retail outlets are predominantly prescription medicines, patients would necessarily require a doctor’s physical prescription to buy those products.

In India, as the doctors prescribe mostly branded generics, including those from a large number of the Government hospitals, the only way to make ‘Jan Aushadhi’ drugs available to patients, is to legally allow the retailers substituting the higher priced branded generic molecules with their lower priced equivalents, sans any brand name.

Moving towards this direction, the Ministry of Health had reportedly submitted a proposal to the Drug Technical Advisory Board (DTAB) to the Drug Controller General of India (DCGI), for consideration. Wherein, the Ministry reportedly suggested an amendment of Rule 65 of the Drugs and Cosmetics Rules, 1945 to enable the retail chemists substituting a branded drug formulation with its cheaper equivalent, containing the same generic ingredient, in the same strength and the dosage form, with or without a brand name.

However, in the 71st meeting of the DTAB held on May 13, 2016, its members reportedly turned down that proposal of the ministry. DTAB apparently felt that given the structure of the Indian retail pharmaceutical market, the practical impact of this recommendation may be limited.

For this reason, the ‘Pradhan Mantri Jan Aushadhi Yojana’, appears to be not so well thought out, and a one-off ‘making feel good’ type of a scheme. It is still unclear how would the needy patients derive any benefit from this announcement.

Conclusion:

On June 20, 2016, while maintaining the old policy of 100 per cent FDI in the pharmaceutical sector, Prime Minister Modi announced his Government’s decision to allow foreign investors to pick up to 74 per cent equity in domestic pharma companies through the automatic route.

This announcement, although is intended to brighten the prospects for higher foreign portfolio and overseas company investment in the Indian drug firms, is unlikely to have any significant impact, if at all, on the prevailing abysmal health care environment of the country.

Hopefully, with the development of 100 ‘smart cities’ in India, with 24×7 broadband, Wi-Fi connectivity, telemedicine would be a reality in improving access to affordable healthcare, at least, for the population residing in and around those areas.

Still the fundamental question remains: What happens to the remaining vast majority of the rural population of India? What about their health care? Poorly thought out, and apparently superficial ‘Pradhan Mantri Jan Aushadhi Yojana’ won’t be able to help this population, either.

With the National Health Policy 2015 draft still to see the light of the day in its final form, the path ahead for healthcare in India is still rather hazy, if not worrying.

As stated before, in the Prime Minister’s recent speech delivered at the ‘Capitol Hill’ of the United States earlier this month, development of a robust healthcare infrastructure in the country did not find any mention in his ‘to-do’ list.

Leaving aside the ‘Capitol Hill’ for now, considering the grave impact of health care on the economic progress of India, shouldn’t the ‘Raisina Hill’ start pushing the envelope, placing it in one of the top positions of the national ‘to-do’ list, only to protect the health interest of ‘We The People of India’?

By: Tapan J. Ray

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

Recomposing Notes of Pharma Marketing Playbook

Posted on June 20, 2016 by Tapan Ray

The global management guru Peter Drucker, in one of his management classics – “The Practice of Management”, published in 1954, that created the discipline of modern management practices, had underscored the following:

“As the core purpose of any business is to create a customer, a business has two, and only two functions, marketing and innovation. Only these two produce business results. All the rest are costs.”

The Harvard Business Review also had rated ‘The Practice of Management’ as Drucker’s best book on the managerial profession. Far more crisp than the larger compendium on Management, nicely balanced between precept and example, this book is eminently practical yet of genuine intellectual breadth. If Drucker’s work holds anything of immediate value for you, you will most likely find it here…”

Thus, Peter Drucker’s above concept is so fundamental that the pharmaceutical business can’t be any exception to it, in any way. That the old customers need to be retained, and the new customers are to be created on an ongoing basis, even in the modern times, still remain a basic requirement.

Nevertheless, the marketing process of doing so needs to change, according to the changing market dynamics. Continuation of playing the same notes from the grand old marketing playbook, with minor alterations here or there, would no longer suffice to keep pace with the changing market, and to effectively address the new stakeholders’ needs and wants.

Need to recompose notes of the playbook:

Both the current processes of pharma marketing and the patent claim for any type of drug innovation that the majority of the global pharma companies is currently following, have become highly contentious over a period of time, to say the least.

Even otherwise, in my view, both these processes have already hit the ceiling of the famous ‘law of diminishing returns’, where very simply put, the level of profits or benefits gained is less than the amount of money or energy invested.

Therefore, the question that comes up: Are the notes of the pharma marketing and innovation playbook fair, right, inclusive, and sustainable? However, in this article, I shall focus only on contemporary pharma marketing, and the opportunities that are coming up along with waves of changes in the business environment.

An example of ‘Change the logo’ saga:

Going by my personal experience, I have worked with many pharma marketing professionals, some of whom are still working in the industry. Post recruitment in the new company, having gone through a rigorous screening process, most of them would probably give a similar feedback that an anonymous quote captures as follows:

“The optimist says, ‘the glass is half full’; The pessimist says, ‘The glass is half empty.’ The marketing consultant says, ‘The glass needs resizing and a different logo.”

On a lighter vein, I am using below an example of one ‘change the logo’ approach. This is just one of many of my real life experiences. This may give you a panoramic view of how things generally are. The stretching of the same old marketing paradigm beyond its elastic limit is rather common, of course, with some sporadic digital tweaking. Nonetheless, the notes in the marketing playbook remain almost the same, producing the same tunes for some, and noise for many others.

This ‘logo change’ saga may sound quite familiar to many of my ex-colleagues of not so distant past. This approach exemplifies the limitations of a new recruit for a senior position to identify the core issues that would lead to the organization’s performance improvement.

It does not surprise me at all, when I find some top managements, who were an integral part of that selection process, promptly buying these shallow, and at the most peripheral ideas. It is quite evident that some of these top management members also suffer from similar analytical and management myopia. It is needless to mention that such things usually happen during the ‘honeymoon’ period’ of the new recruits.

Accordingly, the ‘logo change’ takes place in no time, paying a huge sum to the creative agency. Commensurate hype is simultaneously created around the new logo, backed by massive efforts to communicate its ‘ethereal design’ to as many targets as possible, often with no tangible outcome. Alongside, attempts are also made to change as many old things as possible, generating a multitude of seemingly high-voltage activities, though the performance on the ground remains unchanged, or rather deteriorates.

I fully understand, there is nothing wrong in changing anything, including a logo, that is not working or has outlived its time. However, when this assumes the top priority of a new and a top recruit, immediately after assuming office with a new responsibility, it somewhat doesn’t gel, and very often does not achieve the desired purpose.

Pharma marketing over-dependent on the likes of ‘Surrogate CMEs’?

Today, when there is a need to hear more from all the major stakeholders, one sided ‘telling my story’ mostly to the doctors continues to occupy a major part of pharma marketing, besides company sponsored or allegedly surrogate ‘Continuing Medical Education (CME)’ even for old branded generics.

The preparation of a canned brand communication in India is a routine pharma marketing process, with a plethora of avoidable and unproductive activities. This canned message is delivered to the doctors, usually through the Medical Representatives, conforming to a structured ‘tool-kit’, and heavily backed by free samples and gifts.

A large number of doctors too, continue to take this process, particularly in India, as an unavoidable routine, and also an integral part of their professional activities. It is widely believed, and frequently reported that the ‘magic wand’ for large scale prescription generation for pharma brands lies somewhere else.

Apparently, it is where the financial relationship between the doctors’ and pharma players is usually built and strengthened. One allegation is, in the garb of so called ‘CMEs’, even for old branded generic or as some folks call these as ‘classic’ brands, this financial relationship continues to thrive.

This gives rise to a suspicion in many, as to why pharma marketing is so over-dependent on the so called ‘CMEs’, even for old branded generics in India.

The vicious circle continues:

When the financial relationship of various hues, between the drug players and the doctors take the center stage, which pharma company has a deeper pocket counts. More expenses incurred in such relationship building process, may consequently drive the drug prices higher. In this situation, the patients get literally caught between the devil and the deep blue sea, where the Governments are compelled to intervene, as has started happening now in many countries.

In tandem, the pressure on performance keeps mounting on the marketers from the same top management, ultimately repeating the old vicious circle, where it may not be the ‘logo change’ that time, but another different sets of the same genre of hectic activities would commence, in pursuit of the illusive sweet smell of business success.

Recompose notes of the marketing playbook:

Even today, the marketing communication in the pharma industry remains primarily a monologue. Many training programs are currently sold to the industry to make this process a dialogue, as the Medical Representatives detail their products to the doctors.

However, on the ground, as I witnessed even in the last month while seating incognito in the clinics of some doctor friends, that the practice of monologue continues reflecting a great visible hurry in the product communicators’ end. Some from large pharma companies were using electronic gadgets, instead of a usual spirally bound product detailing folder, but their overall communication approaches were monologue too.

Thus, the modern age pharma marketers need to recompose the notes of their marketing playbook, soon. Some of the areas of active consideration may include the following:

A. Brand messages to be “pulled” by doctors, not “pushed” by marketers:

An interesting worldwide survey of 228 senior global marketing executives was conducted in February 2006 by the Economist Intelligence Unit, in co-operation with Google. The study highlights the need to transform the marketing communication platforms from a monologue to a more intense process of engagement, through effective dialogue with the stakeholders.

In this new environment, the relevance is more important than repetition, and marketing messages should be “pulled” by the consumer rather than “pushed” by the marketer. This calls for a transformation of the internal marketing organization. All the deliverables of pharma marketers’ must have a relevance to time, and measurable, with total accountability for top and bottom line growth in the areas of responsibility.

In the consumer products’ industry, the last decade has witnessed several innovative two-way marketing “conversations” between the customers and some of the world’s leading consumer brands. Driven by a confluence of innovation, competition and big shifts in consumer behavior, the dialogue between brands and their customers is replacing the traditional marketing monologue, the study observes.

Some recent developments:

In this regard, on Jun 2016, an IBM News Release announced that ‘The Weather Company’, an IBM Business has developed an industry-first capability in which consumers will be able to interact with IBM Watson through advertising, by being able to ask questions via voice or text and receive relevant information about the product or offering. It can create a one-to-one connection with the consumer, that can be personal, relevant and valuable; and can scale across millions of interactions and touch points. This digital tool can also help the marketers uncover consumer and product insights faster than ever before, revealing connections previously invisible to human data scientists, IBM claims.

For example, an anti-allergy brand could enable visitors to Weather.com to ask questions about whether the product is appropriate for children or what sort of side effects it might cause, as WSJ mentioned in its news item of the same date.

However, only the FMCG companies, such as, Unilever, Campbell Soup Co. and GSK Healthcare have, so far, reportedly signed on with Weather Co. to start running Watson-powered ads on both desktop and mobile devices this year.

According to another 2014 report of IMS Health on Social Media, among the top 50 pharmaceutical companies, more than half do not engage with consumers or patients through social media on healthcare-related topics. The top 3 pharma companies in this regard are: Johnson & Johnson, GlaxoSmithkline (GSK), and Novo Nordisk.

Thus, in the pharma industry, the old tradition, by and large, prevails. This scenario, I reckon, signals a pressing need to recompose the notes of the pharma marketing playbook, in general, and very soon.

B. Studying the future digital trends and customize:

To find out about what digital trends to expect in future, the February 2006 survey by the Economist Intelligence Unit had asked survey takers and executives about the online trends they learned during the previous 12 months from their children or other young people. The top three new trends came out as follows:

Social networking,
Podcasting
Multi-player video games

These are just examples, individual pharma marketers would need to take calls about the relevance of specific digital tools and trends relevant to their business and customize them accordingly.

C. Two important marketing tactics proposed:

It is becoming quite evident now, across the world, that with the stakeholders-mix and the traditional doctor-focused “push” messaging delivered mainly through a large sales force coverage, are not generating commensurate a return on investments.

While this approach still remains somewhat relevant for the doctors, one needs to find out what is happening to effectively engage the other important stakeholders. For example, what is happening to those patients who are seeking meaningful engagement through various digital platforms for healthcare?

Recently, the Wharton School, Google and McKinsey & Company teamed up to write a new e-book entitled ‘Pharma 3D’, which proposes the following two important marketing tactics:

To reach patients, pharma companies need to leverage broader engagement models through alternative digital channels (including wearable, online, and social media).

Pharma companies can no longer rely solely on their relationships with physicians; they also need to engage with other influencers, like online communities and social networks.

D. Pharma marketing organizations may consider doing 3 things for success:

The authors of ‘Pharma 3D’ suggested that the pharma marketing organizations may consider doing the following three things really well, for success:

They Discover the behaviors, beliefs and needs of the people they are marketing to.
They Design experiences relevant to the people they are marketing to.
They Deliver those experiences consistently, superbly, and efficiently.

Conclusion:

Though Peter Drucker had said long ago that marketing and innovation are two most critical functions of any business and only these two produce business results, in the overall pharma marketing activities a wide gap between the modern marketing realities and the current marketing practices still exist, rather glaringly.

It is true that digital tools are now being selectively used by some pharma companies, these largely fall in the area of digitizing the manual functions, with some add on gimmickry, and glamor quotient built into it.

In my view, pharma companies, especially in India, should no longer rely solely on building relationships with the physicians. Their top marketers also need to directly engage with all other crucial influencers, including the expert groups, online communities, and the social media, whenever required, leveraging the broader stakeholder engagement models.

The old pharma marketing playbook is slowly, but surely going out of sync with the stark market realities of date. So are the mindsets of a large section of the pharma marketers. It is now high time for the top management to create an appropriate marketing organization, and then encourage it composing the new notes for a contemporary, and a more relevant marketing playbook, jettisoning the old one, for good.

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 Stakeholder-Mix Has Changed, But Pharma Marketing Has Not

Posted on June 13, 2016 by Tapan Ray

“We try never to forget that medicine is for the people. It is not for profit. Profits follow, and if we have remembered that, they never fail to appear.”

In 1952, George Wilhelm Herman Emanuel Merck, the then President of Merck & Co of the United States said this. He was then aptly quoted on the front cover of the ‘Time Magazine’, epitomizing his clear vision for the company: “Medicine is for people, not for the profits”.

The globally acclaimed Management Guru – Peter F. Drucker had also clearly articulated in his management classics that, “Profit is not the purpose of business and the concept of profit maximization is not only meaningless, but dangerous.” He further said, “There is only one valid purpose of a business, and that is to create a customer”

As this is an ongoing process, in the pharma perspective, it may be construed as ensuring access to new drugs for an increasing number of patients.

It really worked:

In those days, driven by such visionary leadership, the pharma used to be one of the most respected industries and Merck topped the list of the most admired corporations in America. It is clear that pharma leadership at that time wanted to make ‘inclusive growth’, both in the letter and spirit, as an integral part of the organizational progress, moving with time.

Thus, it worked. The sales and marketing growth of the global drug industry at that time was not lackluster, either, in any way. The R&D pipeline of the drug companies used to be also rich, with regular flow of breakthrough new products too.

Straying away from ‘inclusive’ to ‘self-serving’ strategies:

Much water has flown down the bridges, since then, so is the change in the public and other stakeholders’ perception about the pharma industry, in general.

Sharply in contrast with George W. Merck’s (Merck & Co) vision in 1952 that “Medicine is for people, not for the profits”, in December 2013 the global CEO of Bayer reportedly proclaimed in public that: “Bayer didn’t develop its cancer drug, Nexavar (sorafenib) for India but for Western Patients that can afford it.”

It appears that the focus of the pharma industry on ‘inclusive growth’ seems to have strayed away to ‘self-serving growth’, with the passage of time. As a result, a large majority of the new stakeholders started harboring a strong negative feeling about the same industry that continues its active engagement with the very same business of developing new drugs that save many precious lives.

Granted that the business environment has changed since then, with increasing complexities. Nonetheless, there does not seem to be any justifiable reason for straying away from ‘inclusive growth’ strategies.

As are regularly being reported, both in the global and local media, mindless arrogance on fixing exorbitant high new drug prices severely limiting their access, unabated malpractices in drug marketing and escaping with hefty fines, releasing only favorable clinical trial data, just to mention a few, are giving the industry image a strong tail spin.

Stakeholders changed, but pharma marketing did not:

Keeping the same strategic direction and pace, overall pharma brand marketing strategy also continued to be increasingly ‘self-serving’, and tradition bound. Success, and more success in building relationship with the doctors, whatever may be the means, is still considered as the magic wand for business excellence, with any pharma brand. Thus, since over decades, building and strengthening the relationship with doctors, continue to remain the primary fulcrum for conceptualizing pharma marketing strategies.

It does not seem to have not dawned yet for the pharma marketers, that over a period of time, the market is undergoing a metamorphosis, with several key changes, and some of these would be quite disruptive in the traditional pharma marketing ball game. Consequently, the above key the fulcrum of pharma marketing is also gradually shifting, slowly but surely.

In this article, I shall deliberate only on this area.

A new marketing paradigm:

The key customer in the pharma business is no longer just the doctors. That was the bygone paradigm. The pharma stakeholders’ mix is no longer the same as what it used to be.

The evolving new paradigm constitutes multitude of important stakeholders, requiring a comprehensive multi-stakeholder approach in modern day’s pharma marketing game plan.

Patients, governments, policy influencers, health insurance providers, hospital administrators, social media, and many others, have now started playing and increasing role in determining the consumption pattern of pharma brands, and their acceptability. More importantly, these not so influential stakeholders of the past, are gradually becoming instrumental in building overall pharma business environment too. This necessitates customized engagement strategy for each of these stakeholders, with high precision and relevance.

Changing mindset is critical:

An effective response to this challenge of change, calls for a radical change in the marketing mindset of the top pharma marketers. The most basic of which, is a strong will to move away from the age old ‘one size fits all’ and ‘self-serving’ initiatives with some tweaking here or there, to a radically different ‘inclusive marketing’ approach. In this game, both the types and the individual customer concerned, would occupy the center stage for any meaningful interactions on the brands and associated diseases, besides many other areas of relevance.

Multi-stakeholder – Multi-channel approach:

For a multi-stakeholder customized engagement, innovative use of multiple channels would play a crucial role, more than ever before.

Availability of state of the art digital tools, would facilitate crafting of comprehensive marketing strategies, accordingly. For example, for the doctors, some companies are moving towards e-detailing.

As I discussed in my article in this Blog titled, “e-detailing: The Future of Pharmaceutical Sales?” on September 13 2013, this modern way of interaction with the doctors is fast evolving. E-detailing is highly customized, very interactive, more effective, quite flexible, and at the same time cost-efficient too. Live analytics that e-detailing would provide instantly, could be of immense use while strategizing the game plans of pharmaceutical marketing.

A feel of the changing wind direction:

A relatively new book titled, “Good Pharma: How Marketing Creates Value in Pharma”, published in March 2014, and written by Marcel Corstjens, and Edouard Demeire, well captures some of the key changes in the pharma industry with a number interesting examples.

The above book seems to somewhat respond to Ben Goldacre’s bestselling book ‘‘Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients’, which I discussed in this blog on October 15, 2012. It made some important observations in many areas of pharma business. I am quoting below just a few of those incoming changes to give a feel on the urgent need of recasting the marketing models of the pharma industry:

On emerging markets’ like India:

“Emerging markets should not be seen as low-hanging fruits. Their prevalence of diseases may not be the same, the stakeholders may be very different. In addition, the healthcare infrastructure is often not very sophisticated, and these markets can be rather volatile and difficult to predict. It’s not a sure bet; you have to invest. … Companies need to commit seriously to building a heavily localized approach that is substantiated by a global reputation.” This is perhaps not happening in India, to a large extent, as I reckon.

On personalized Health Care (PHC):

The new drugs brought to market by the pharma companies are not just expensive, but often work only for small segments of the patient population. In India this situation mostly leads to very high out of pocket expenditure, which often is wasted for the drug not working on the patient. Thus, the regulators and payers in the developing countries are setting the threshold for higher reimbursement. The authors observed that PHC is now being put forward as the industry’s best bet for satisfying stricter effectiveness criteria, not only by developing new drugs, but also by investing in the magical trio of the future: “drug-biomarker-diagnostic. In that case, pharma marketing would need to undergo a significant change, starting from now.

On ‘Category captains’:

The book also says, “The most financially successful companies in the past 20 years has been Novo-Nordisk. They have specialized in diabetes, they’re extremely good at that. Roche specializes in oncology. The larger the company, the more ‘captive’ areas they can have. The success of Novo-Nordisk, a relatively small company, proves firms of all sizes have a chance to compete, as long as they stick closely to their strengths. When this happens in a much larger scale, pharma marketing would also be quite different and more focused.

Many pharma companies are still avoiding to change, successfully. For example, as announced on May 31, 2016, Intercept Pharma of the United States announced its new liver disease drug with a hefty price tag of US$ 70,000 a year. According to the report, the company said, prices are justified by a drug’s level of innovation and cost savings for the healthcare system. This justification has now become very typical in the pharmaceutical world, which has been facing barrage of criticisms, including from Capitol Hill, about too-high drug prices.

However, as we move on, the writing on the wall seems to be very clear on the sustainability of health care business, the world over.

Conclusion:

Finally, the question arises, would the traditional approach still be good enough to achieve the desired sales and marketing objectives, any longer?

No, probably not, I reckon. With changed mindsets, ‘getting under the skin’ of each stakeholder, separately, would assume key importance. It would play a key role, while devising each component of any cutting-edge pharma sales and marketing strategy, tactic, and task.

The shift from the old paradigm, signals towards a total recast of pharma marketing to make it more ‘inclusive’, and not just ‘self-serving’. Newly crafted commensurate grand marketing plans and their effective implementation should satisfy the needs and wants of all stakeholders, simultaneously. Singular focus on building, or further strengthen the relationship with prescribing doctors, won’t be adequate enough, anymore.

Thus, the name of the new pharma ballgame would again be ‘inclusive marketing for inclusive growth’.

By: Tapan J. Ray

Leveraging 3D Printing In Pharma, For Cost Containment And Patient-Centricity

Posted on June 6, 2016 by Tapan Ray

Today, although a number of new and state of the art drugs is regularly being developed, and brought to the market at a reasonably rapid pace, their access to the majority of the global population has still remained a huge challenge. One of the key access barriers continue to remain exorbitant prices of these drugs.

Keeping commensurate pace with gradual improvement in the pinpointed diagnosis of various diseases with modern diagnostics, processes, devices and techniques, fueled by increasing health awareness within a sizeable section of the population, more patients are now aspiring for access to a better quality of life, and greater productivity at work. This is happening all over the world, though with varying degree and magnitude.

Consequently, there has been a sharp increase in the demand for healthcare, which has caused a huge bottleneck in the overall healthcare delivery process, for various reasons. The huge gap between the availability of high-tech drugs/healthcare services, and their access to the general population, mostly due to affordability reasons, is going north at a rapid pace.

Two-pronged cost containment pressure:

This unfettered ascending trend is creating primarily the following two types of cost containment pressure:

Being driven purely by the economical reasons, the Governments and other payers have started taking stringent cost-containment measures, bringing huge pricing pressure, especially on the drugs and medical device manufacturers.

In countries, such as, India, where the ‘Out of Pocket’ expenditure on healthcare in general, and the medicines in particular, is hovering around 70 percent, the patients, several Governments have started announcing drug price control policy to protect the health interest of patients.

However, currently, only some piecemeal measures are being initiated, including in India, where a holistic approach for all, such as, Universal Health Care (UHC) and several other similar options, are long overdue.

Three different remedial measures:

In my view, consideration of either of these three following approaches, or an innovative blend of these, would enable the Governments to address this pressing issue, remove the existing bottle neck, and thereby bridge the healthcare access gap, holistically:

A. Fast implementation of Universal Health Care (UHC).

B. Closer look at the entire Pharmaceutical Value Chain with a resolve to work out innovative, game-changing solutions to reduce cost of each of its critical components, significantly.

C. Effectively addressing the emerging need of Patient-Centricity.

A. Fast implementation of Universal Health Care (UHC):

I have already discussed UHC in one of my articles titled, “Universal Health Coverage: The Only Alternative To Drug Price Control in India?”, published in this Blog on November 9, 2015.

B. Cost containment with 3D printing:

A report of IMS Health, published on November 18, 2015, forecasts the increase of total global spend for pharmaceuticals by US$ 349 billion on a constant-dollar basis, compared with US$182 billion during the past five years. It also indicated, more than half of the world’s population will live in countries where the use of medicine will exceed one dose per person per day by 2020, up from 31 percent in 2005, as the “medicine use gap” between the developed and the emerging markets narrows.

This steep ascending trend would eventually affect the pharma ‘Value Chain’ in a significant way, throwing open several path-breaking high-technology based options, with impressive favorable impact on the general costs of medicines. 3D-printing technology is expected to play a significant role in this initiative.

Before proceeding further, let me zero-in on a few critical components, as follows, of the pharma ‘Value Chain’, as I see visualize these:

Drug innovation (R&D)
Manufacturing
Marketing
Supply Chain

According to my understanding, at least in 3 of the above 4 ‘Value Chain’ components, there is an immense potential of leveraging 3D printing technology effectively, and in a big way.

In my article of January 11, 2016, published in this Blog, titled “3D Printing: An Emerging Game Changer in Pharma Business”, I have already discussed the game changing impact of 3D Printing technology on the drug discovery process, drug manufacturing strategy, and supply Chain effectiveness in the pharma business.

Hence, I prefer not to dwell on those areas, yet again, here. Instead, I shall briefly deliberate on the application of 3D Printing technology to effectively address the emerging need of ‘Patient-Centricity’ with an interesting and a very recent example.

C. Improving ‘Patient-Centricity’ with 3D printing:

At this stage, there is a need to understand what exactly is the ‘’Patient-Centricity’. It seems to be a popular buzzword now with the health care related companies, primarily to give an impression that they are really focusing on ‘Patient-Centricity’.

However, there does not seem to exist any universally accepted definition of this terminology, just yet. Nevertheless, one appropriate definition could well be: “A focused and transparent approach to providing maximum possible benefits to a patient from a drug, device, technology, or health care services.”

I briefly focused on a part of this basic issue in my article titled, “‘Disease Oriented Treatment’ to ‘Patient Oriented Treatment’- An evolving trend’, published in this Blog on January 7, 2013.

As I said before, in this article, to explain ‘Patient-Centric’ approaches with 3D printing, I would quote from a very recent, and a path-breaking work in this area.

On May 25, 2016, ‘The Straits Times’ reported, the researchers at the National University of Singapore have found a way to use 3D printers to create low-cost tablets. With the help of this technology a tablet can be so personalized to respond to individual patient’s needs that the drug can be customized to take on different release profiles, such as, constant release, pulsed release, increasing or decreasing release, and any arbitrary interval as required by the patient. However, the most striking is, different drugs with different release profiles can also be combined in a single pill.

Once administered, the tablet dissolves layer by layer over a period of time, releasing the drug at a controlled rate. The duration can be altered by changing the chemical composition of the liquid.

It is worth noting here that the conventional tablets are only capable of a constant rate of release, requiring the patient to manually control the dosage and release rate, by taking doses according to a prescribed schedule, given by the doctor. In this scenario, if a patient requires different drugs with different dosages and intervals, it can become inconvenient to keep track and potentially dangerous, especially when the patient misses a dose, the report highlighted.

The commercially available printer used in the project costs just S$2,000.

The Assistant Professor Soh Siow Ling, who leads the project, reportedly, expects that the low cost will allow it to be used in hospitals and neighborhood clinics. He further explained, “Every single person is different, based on many factors such as genetics, age, body mass and so on. Different people also have different activity levels and consumption habits, which affect their needs. It is, (therefore), not desirable to use the same drug to treat different illnesses which have similar apparent symptoms.”

The report indicated that in October, 2015, these findings were published in an issue of Advanced Materials, which is a peer-reviewed materials science journal.

A patent for the tablets was filed last year, and they are currently in talks with multinational corporations, and medical professionals to identify potential applications, the article highlighted.

Changing role of doctors:

From the above developments, it appears that unleashing the full potential of 3D printing technology in the pharma industry, would also enable the medical profession to move further towards ‘Patient-Centricity’, in its true sense.

This technology would empower them offering to each patient, the right drug or drug combinations, with most suitable drug delivery system, and exactly the way individual patients would prefer, with a very high degree of precision.

Thus, from overall disease treatment perspective, especially with medicines, this approach offers a great potential to be significantly more effective, and convenient to individual patients, as compared to the conventional approaches.

I reckon, over a period of time, professional competitiveness would drive the doctors further honing their effectiveness in the disease treatment process, and that too with a high degree of precision. In that situation, many doctors may decide to setup on-demand 3D drug-printing facilities even at their clinics.

The gradual embodiment of this brilliant technology by the doctors, is expected to throw open new vistas of opportunity, also to personalize the shapes, colors and flavors of any medicine, according to individual patient’s choice. This, in turn, would improve patient compliance, ensure a predictable relief from the disease, and demonstrate ‘Patient-Centricity’ of a high order by the medical profession, in general.

Conclusion:

For the first time ever, with Aprecia Pharmaceuticals in the United States getting approval of the US-FDA on August 3, 2015 for the market launch of a 3D printed prescription drug for oral use by the epilepsy patients, dawns a new paradigm in the global pharma business horizon.

Effective application of this ‘disruptive innovation’ could well be a game changer not just in the ‘value chain’ of conventional pharma business models, across the world, but also for taking a giant leap towards ‘Patient-Centricity’. The doctors are also expected to be very much an integral part of this process.

Besides all the above benefits, 3D printing can also encourage low-volume production, whenever required, and a wide variety of Active Pharmaceutical Ingredients, to meet any immediate demand, mostly for use in research and developmental work.

Thus, noting the ongoing significant progress in this area, I reckon, leveraging 3D printing technology in pharma, not just to address the cost containment pressure, effectively, but also to ensure a tangible and visible move towards ‘Patient-Centricity’, in true sense. All-round success in the innovative application of this cutting-edge technology in the global pharma industry, would eventually separate men from boys in pursuit of business excellence.

By: Tapan J. Ray

The Next Frontier: Frugal Innovation For High-Tech Drugs

Posted on May 30, 2016 by Tapan Ray

Should drug innovation models remain as expensive as what these are claimed to be now by the global pharma industry, in general?

Finding a credible, appropriately quantifiable, and generally acceptable answer to this question is critical. It won’t, then, just be a myth-buster for billions of dollar price tag, that is now being attached to drug innovation and development initiatives, by the global pharma industry, as a justification for arbitrarily fixing high new drug prices. If the upcoming and new startups with frugal models for even high-tech drug innovation succeed with flying colors, the patients and the payers would also possibly breathe a huge sigh of relief, from the increasing burden of disease and the cost of medicines.

I believe, it would eventually happen, may not be overnight, but over a period of time. I shall discuss in this article about some bright sparks, already visible in that direction.

The facade of high cost of drug innovation:

At the very outset, to avoid any possibility of misunderstanding, let me confess up front, just as many others, I also strongly believe that drug innovation is extremely important. It needs to be encouraged, protected and rewarded reasonably.

That said, let me also give the right perspective of how the cost of ‘drug innovation’ is being often misused as a facade for keeping the drug prices high, if not exorbitant.

According to a contentious study of ‘Tufts University Center for the Study of Drug Development’, the total cost of innovation of a new drug and bringing it to market, has increased more than double from US$ 1.22 billion in 2003 to US$ 2.6 billion in 2014.

Despite these numbers being vehemently challenged in credible journals, many global pharma majors still keep justifying the high new drug prices on the same old pretext. As a diversionary tactic, they relentlessly argue that innovation has to be adequately rewarded to keep its wheels moving in perpetuity, though no one challenges this basic fact, not even remotely.

The moot questions:

The moot questions, therefore, are: how expensive is the drug innovation and how does the global drug industry establish its relationship with high new drug prices? The answers to these queries must be clear, specific, quantifiable and credible, and not ethereal, if not airy-fairy.

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

The above BMJ article also put forth similar questions: “What does it really cost to bring a new medicine to the market, and do these costs justify the high price?”

The authors pointed out that the pharmaceutical market is not actually a “free market” based on supply and demand with minimal government intervention through taxes, subsidies, or regulation. On the contrary, the pharma market is highly manipulated, and not focused on achieving the best prices, or even fair prices for essential and life saving medicines.

No linear link between high drug price and innovation cost:

As I discussed this subject in my previous article titled, “Arbitrary Pricing of Essential Drugs Invites State Intervention”, it has been well established by now that there is no linear, or any relationship between high drug prices and cost of drug innovation. Since long, this argument is being misused just as a façade to keep the cost of medicines high, and making high profits even at the cost of lower sales volume.

The façade has started crumbling:

In India too, the pharma MNCs often use the same façade to keep the prices of also their branded generics much higher than the comparable formulations manufactured by larger domestic pharma manufacturers. However, the façade has started crumbling in many countries, across the world. This gradually increasing general realization is welcoming.

The Governments in many countries, have now started acting. They are increasingly forcing the drug makers to eye for volume growth, by reducing the fat margin, and improving patients’ access to high-priced drugs.

Just to draw an example, I would quote a very recent development in this area, outside India. On May 20, 2016, the Chinese health authorities announced price cuts of up to two-thirds to three patented drugs, in their latest move to reduce the cost of healthcare for patients. It is noteworthy that this happened in the world’s second-biggest economy, after the United States.

Why is arbitrary drug pricing continuing?

It appears, the only reason for the majority of the drug players to continue keeping the new drug prices high is because they can still make huge money through a small segment of patients who can afford their brands. What about the rest? This doesn’t seem to matter to them, at all, unless compelled to, in various ways.

Need to totally demolish the façade of innovation:

Thus, there is a compelling need is to demolish the façade of innovation, decisively, for keeping medicine prices high.

To move towards this direction, some flickers of a sound possibilities, are now visible in the horizon. The ‘Frugal’ or the ‘Silicon Valley’ type startups for high-tech drug innovation models, especially in the biotech sector, have shown high potential to be a game changer in this area.

Frugal innovation models for high-tech drugs:

The quest to find a pathway towards this direction continues. Recently, Professor Atul Butte, Director of the University of California Institute of Computational Health Sciences, highlighted that like other Silicon Valley startups, almost anyone can bring a drug to market from their garage with just a computer, the internet, and freely available data. Professor Butte, students, and research staff have already explored various methods and approaches of scientifically utilizing this data in search for new medicines.

As reported in the May 5, 2016 issue of ‘The Conversation’, Professor Butte outlined this process for an audience of local and international scientists and medics in a talk given at the Science on the Swan conference held in Perth in May 2016.

Professor Butte outlined several models of ‘Frugal Innovation’, especially for new biotech drugs or finding new indications for existing drugs.

A. The search for a new target:

There could be several approaches to the search of a new biotech drug. An example of one such, that Butte’s team is reportedly engaged in, is the construction of a map of how the genetic profiles of people with particular diseases are related to each other. The team looked for diseases with very similar genetic profiles.

Some may argue, this process of discovering other uses of drugs, conventionally termed as “drug repositioning”, is in the strictest sense is not exactly a novel one. They may attempt to establish it by drawing an example from Viagra, which was originally developed for treatment of cardiovascular conditions. However, the major difference is that Viagra’s repositioning for erectile dysfunction is an outcome triggered by its side-effects in patients taking the drug for its original cardiovascular disease treatment.

B. Desk research and discovery:

The primary desk research can start from the freely available enormous published genetic data, based on thousands of studies on humans, mice and other animals. The publications’ websites are also highly credible, such as, National Institute of Health and the European Molecular Biology Laboratory. Thus, as a result of abundantly available high quality genetic data, the cost of genetic sequencing, using gene chip technologies, is also coming down quite rapidly.

C. Animal testing:

After the potential drug discovery in the garage, there is a need to test the drugs on animals.

As Professor Butte suggests, this process also can be made much less expensive. For this purpose, he recommends the internet and the websites, such as, Assay Depot. This site is structured like Amazon, from which a researcher can order an experiment to be carried out to test a drug on a range of animal models, as the report states.

Butte finds this Internet based process very useful for ‘choosing the experiment type the researcher wants, adding it to a shopping cart, paying by credit card and getting the experimental results mailed back in a few weeks’ time.’ Such websites also offer wide choices to the researchers, even regarding the laboratory they would like to use, including the country where the laboratory is located.

D. Human Trial:

As ‘The Conversation’ article indicates, once a new use for a drug has been shown to work in an animal model, the next step would be to test the drug on human volunteers, get approval for the use of the drug for that condition, and then finally take the drug to market.

This purpose could involve spinning out startups with money from investors. In California, Professor Butte and his students have already followed this process after discovery of new uses for several drugs.

As Professor Butte epitomizes, none of this would be possible without sharing data. The ‘Frugal innovation’ models also highlight, how the growth of availability of open research data will be able to discover a range of uses, that would not have been foreseen, when the individual experiments were being carried out.

Would Big Pharma gobble up these startups?

If ‘Big Pharma’ starts gobbling up these startups paying exorbitant prices, the expectations of lower prices of novel drugs may possibly not come to fruition. Nevertheless, the facade of innovation for high drug prices would crumble. But, surely some other different and well-orchestrated pretext would surface, to maintain their stubbornness to continue with the same business model of very high margin and lesser volume sales, with cash register ringing, as ever.

Here is an example. ‘The Huffington Post’, in an article of May 10, 2016, reported on Big Pharma’s betting on a cancer drug startup.

The May 2016 article said, the pharmaceutical giant AbbVie acquired a startup named ‘Stemcentrx’ in a deal that values it at as high as US$10 billion.

The startup Stemcentrx has found out a unique approach, though somewhat controversial, for treating several forms of cancer. While most of today’s treatments view cancer as a result of unchecked cell growth, wherein any cell is capable of becoming cancerous, Stemcentrx believes that cancer primarily sprouts from only one cell type: cancer stem cells.

Conclusion:

Be that as it may, hopefully, the evolving models of ‘Frugal innovation’, development and commercialization of high-tech drugs, are expected to be the game changer for quickly bringing a number of new drugs, or existing drugs for new indications to the market, for many disease conditions, at very affordable cost.

Big Pharma may not allow it happen so easily, just for vested interest, but the pressure group must keep a close vigil on this development, and more importantly, must prevail.

Thus, the next frontier of pharma research and development, would possibly shift to small startups of ‘Frugal Innovation’, especially for affordable high-tech drugs, extending their access to the majority of the patients, the world over.

By: Tapan J. Ray

Arbitrary Pricing of Essential Drugs Invites State Intervention

Posted on May 23, 2016 by Tapan Ray

Arbitrary drug pricing has now become a subject of a raging debate, all over the globe. It involves both patented and generic drugs, as we have recently witnessed in the largest pharma market in the world – the United States.

In many countries the same issue is inviting the direct intervention of the Government to protect health interest of a vast majority of the populations. India, I reckon, belongs to this group of countries.

In this article, I shall discuss this issue, citing examples from both the global and local recent developments.

Most high drug price increases defy logic:

Published in March 2016, the ‘Express Scripts 2015 Drug Trend Report’ points out, in the perspective of the United States, that over the last 30 years more and more dollars are spent on specialty, rather than on traditional medications.

Most drug development and spend in the late ‘80s and early ‘90s, used to be on traditional, mostly small-molecule oral solid drugs, used to treat conditions, such as, peptic ulcer, depression, hypertension and diabetes. Today, 37.7 percent of drug spends go for specialty medications, with the number expected to increase to 50 percent by 2018, and continue to grow further, thereafter.

The report also states that there are 7,000 potential drugs in development, with most aimed at treating the high-use categories of oncology, neurologic disorders and infectious diseases.

High-cost therapies for non-orphan conditions, particularly for cancer, high cholesterol and Alzheimer’s disease, will continue to increase the population of patients with high annual drug expenditures.

‘Express Scripts Exclusive Prescription Price Index’ reveals a brand-price inflation in the United States, nearly doubled between 2011 and 2015, with the greatest impact seen in more recent years. Compared to 2014, brand prices in 2015 were 16 percent higher. Brand medications have increased in price by 164 percent between 2008 and 2015, the report highlighted.

Similar trend, though may not be of similar magnitude and proportion, has commenced in India too. In this emerging situation, the patients with high ‘out of pocket’ expenditure on medicines have started feeling the pinch too. This is becoming more intense as the disease pattern has started shifting from short-term infectious and parasitic diseases to almost lifelong non-infectious chronic ailments.

The pressure started building up:

The drug industry is likely to come under increasing scrutiny on product pricing, to alleviate the ‘pressure cooker’ situation for the patients, in general, especially during chronic and life-threatening disease conditions.

May 10, 2016 issue of ‘Bloomberg’, in an article titled, “Mutual Fund Industry to Drug makers: Stand Up and Defend Yourself”, reported: “In a sign of how U.S. political pressure to rein in drug pricing is weighing on pharmaceutical companies and their investors, a group of major funds called an unusual meeting with top biotech and pharma lobbyists, urging them to do a better job defending their industry.” This is indeed unusual, and I reckon, should happen in India too.

The article also states: “Investors are stepping up pressure on pharma lobbyists at a critical time for the industry, as drug pricing has become a potent political issue on the presidential campaign trail and in Congress. Democratic candidate Hillary Clinton sent biotech stocks tumbling last year when she first talked about ‘price gouging,’ and Donald Trump has suggested that Medicare should negotiate with manufacturers.”

It also reported that responding to this emerging pressure situation, the global pharmaceutical lobbying organizations, such as, PhRMA in the Washington, DC has already set up a dedicated webpage called “Costs in Context” with infographics and fact sheets. It has also tried to peg responsibility on insurance companies for making it hard for patients to access medicines.

Patients’ can no longer be taken for granted:

That patients’ can no longer be taken for granted with costly drugs, backed by high profile marketing campaigns, is evident from a recent study.

In May 2016, Harvard T.H. Chan School of Public Health, published a poll result on “Americans’ Attitudes About Changing Current Prescription Drug & Medical Device Regulation”.

Among many other related issues, the study reflected that around 57 percent of the poll participants believe that pharmaceutical companies should no longer be allowed to advertise prescription drugs on television. This is because of interesting reasons. The respondents believe that ads for prescription medicines sometimes encourage and persuade the patients to ask for costlier drugs that may not be appropriate for them.

In this context, it is worth recapitulating that on November 17, 2015 the American Medical Association (AMA) also called for a ban on direct-to-consumer advertising of prescription drugs and medical devices, including television advertisements.

According to a statement released by the group, “member physicians are concerned about a growing proliferation of ads driving demand for expensive treatments, despite the clinical effectiveness of less costly alternatives.”

Hence, the bottom-line is, even the American patients, most of whom are covered by health insurance of different kinds, are now feeling the bite of increasing medicine prices.

Many patients seem to be realizing that such unfair price increases, driven by the respective pharma manufacturers, are avoidable. This serious concern may assume a snowballing effect, notwithstanding high voltage lobbying and campaigns to negate these general stakeholders’ feelings by the top global pharma lobbying organizations, across the world, India included.

Premium pricing of MNCs’ branded generics arbitrary?

One gets its reflection even in the Indian branded generic market, where the MNCs usually market their generic single molecule or FDC brands at a huge premium price. Such high priced products are backed by intense marketing of all kinds. The MNCs’ justification of charging a high premium stand on the promise of adherence to world-class drug quality standards, unlike many domestic generic manufacturers.

There are not enough evidences either to accept or ignore this claim. However, it has received a big jolt even recently, raising similar suspicion as I briefly raised in my article titled, “Ease of Doing Pharma Business in India: A Kaleidoscopic View”, published in this blog on March 28, 2016.

On May 12, 2016 Reuters reported that Central Drugs Standard Control Organization (CDSCO) of India, in the notices posted on its website in February and also in April, has made it public that it has found some batches of Sanofi’s ‘Combiflam’ (FDC of paracetamol and ibuprofen) to be “not of standard quality”, as they failed disintegration tests.

According to the US-FDA, this particular test is used as an integral part of quality-assurance measure in pharmaceuticals, and its non-conformance makes the drug ‘sub-standard’.

Hence, huge premium charged for all those branded generics, which are outside DPCO, and mostly by the MNCs, may be construed by many as baseless and arbitrary.

Premium pricing, with payment to doctors is a winner?

This has again been vindicated in a recent study.

A paper, published in the May 09, 2016 issue of JAMA Internal Medicine, establishes that: ‘Pharmaceutical industry payments to physicians may affect prescribing practices and increase costs, if more expensive medications are prescribed.’

Although no such credible study has been published in the Indian context, it is widely believed, the prevailing situation in this regard, within the country, is no different. Nevertheless, arbitrarily high drug pricing, even for the branded generics, is considered as a winning strategy by many pharma companies.

When the Government steps in:

It happened in India recently, yet again.

As we know, the ‘National List of Essential Medicines 2011 (NLEM 2011)’ came under intense public criticism, as it did not include many modern drugs for chronic and lifesaving diseases under its fold, for inclusion in the drug price control order of the Government.

The Experts Committee formed for this purpose recommended addition of a number of drugs for a variety of serious diseases, such as, cancer, hepatitis C, diabetes, cardiovascular, and HIV in the NLEM, to make them more affordable to patients.

Acting on this proposal, the Union Ministry of Health replaced the NLEM 2011 by NLEM 2015 in December 2015. This increased the span of drug price control from 684 to 875 medicines.

According to the well-reputed pharma market research organization – AIOCD Pharmasofttech AWACS Pvt Ltd., with NLEM 2015, still only 18 percent of Indian Pharmaceutical Market (IPM) by value will now come under price control, against 17 percent with NLEM 2011.

On May 12, 2016 the ‘National Pharmaceutical Pricing Authority (NPPA)’ started with revising prices of 54 recently included essential medicines in the NLEM 2015, in some cases bringing them down up to 55 percent, in conformance with the DPCO. Again on May 19, 2016 another set of 27 formulations, which, among others, include the treatment for epilepsy, infections and diabetes, were brought under price control.

Does ‘free market economy’ work in pharma industry?

As the NPPA has articulated a number of times, with umpteen number of examples, that arbitrary and wide variation in pricing for the same kind of branded generics is a result of ‘market failure’.

We all are living in a unique situation, where the consumers are unable to participate in the process of an affordable drug selection, much unlike any other consumer goods in a ‘free economy’.

I deliberated this issue in my article titled, “Does ‘Free-Market Economy’ Work For Branded Generic Drugs In India?”, published in this Blog on April 27, 2015.

Conclusion:

Arbitrary drug pricing is increasingly attracting the ire of many Governments, other payers, patients and even some important investors, as we have seen in the United States. Most Indian fund houses and other investors are probably taking stock of the possible emerging situation. A large number of them are, by and large, going by the same old and traditional way of evaluating a pharma business.

Pharma companies, across the world, instead of trying to find out an innovative way to douse this fire for the benefit of all concerned, are getting more and more desperate to rationalize their arbitrary drug pricing, in whatever way they possibly can.

The approach taken by them is convincing none, instead, adding further fuel to the fire. Getting favorable views from some handful of seemingly spoon-fed write-ups, would possibly not help resolve this raging issue or protect public health interest, in any way.

All concerned should try to realize that a utopian ‘free market economy for medicines’, with patients exercising their informed choices, backed by active support from the treating doctor, does not exist in the real world, not just yet.

Thus, arbitrary pricing for essential drugs, where market competition is made irrelevant by many drug makers, allegedly by unethically influencing the prescribers in various ways, merits state intervention, unquestionably, solely to protect patients’ health interest.

By: Tapan J. Ray

How Expensive Is Drug Innovation?

Posted on May 16, 2016 by Tapan Ray

High prices for patented drugs are quite often attributed to the exorbitant cost of drug innovation, by the global pharma players. This argument is played, replayed again, again… and again by them, in various ways and forms, especially when many eyebrows are raised, failing to fathom the primary reason for ever escalating prices of life-saving new drugs.

I find the same argument often getting echoed by some section of both the global and local media too, and also through some cleverly disguised and apparently sponsored articles on the subject.

In this article I shall dwell on this sensitive issue.

A strong justification:

The Institute for Policy Innovation (IPI) based in Texas in the United States, in an article titled “The High Cost of Inventing New Drugs–And of Not Inventing Them”, published on April 16, 2015 reiterated that the financial cost of developing new drugs is indeed a big one.

It argues that “there is also a big cost to not developing new drugs, and that cost can be both financial and human. People may be able to live with the pain that an undiscovered drug might have alleviated, but they may not be able to do all the things they would have.”

The paper asks, “A cancer patient might still have a few productive years after a diagnosis, but how much would it be worth to the patient—and to society (think Steve Jobs), if a new drug could extend a patient’s life indefinitely?”

“The drug manufacturers poured money into finding a treatment for AIDS once it became clear the disease would take thousands of lives. The research and development was costly and didn’t emerge overnight, but being diagnosed with AIDS is no longer a death sentence,” the authors elucidated.

This is a very cogent argument, and nobody would dispute it. This issue lies somewhere else, as I would try to explore in this article.

The supporting data:

We also find supporting published data to justify the high cost of innovation with numbers.

On November 18, 2014, a new study by the ‘Tufts Center for the Study of Drug Development’ highlighted that developing a new prescription medicine and gaining its marketing approval, which is a process often lasting longer than a decade, is estimated to cost US$ 2,558 million.” This number is indeed mind boggling by any yardstick.

While many details of the study remain a secret, only slightly more than half of this cost is directly related to research and development (R&D). For example, US$ 1.2 billion are “time costs” – returns that investors might have made if their money wasn’t tied up in developing a particular drug.

Not many takers:

Besides the above reason, for several other factors, there does not seem to be many takers for this exorbitant cost of innovation and bringing a new drug to the market.

The above study has become a contentious one and has, therefore, been challenged by many experts. I would give here just one example, out of many, from a highly credible source.

May 14, 2015 issue of ‘The New England Journal of Medicine’ questioned the methods used to generate the US $ 2.6 billion figure and raised the following interesting points in the above Tufts Center study:

The analysis was based on data that 10 unnamed drug makers provided on 106 unnamed investigational compounds that they had “self-originated.”

The raw numbers on which the analysis is based are not available for transparent review, and are likely never to be divulged.

Since a balanced assessment would have to take into account the costs of failures as well as successes, it is hard to evaluate the key assumption that more than 80 percent of new compounds are abandoned at some point during their development, which is a key driver of the findings.

Nearly half the total cost of developing a new drug (US$ 1.2 billion) was ascribed to this cost of capital, with only US$ 1.4 billion attributed to the funds actually spent on research. These capital costs were assessed at 10.6 percent per year, compounded, despite the fact that bonds issued by drug companies often pay only 1 to 5 percent.

In terms of access to capital, it’s interesting to note that large drug makers are among the U.S. firms with the highest amounts of profits held overseas. Two pharmaceutical companies are ranked third and fourth among all the U.S. corporations in this regard: Pfizer (US$ 69 billion) and Merck (US$ 57 billion), respectively. Collectively, another eight drug companies reportedly have an additional US$ 173 billion of capital that is retained overseas, untaxed by the United States. Such funds could potentially help with the cash-flow problem that plays such a large role in these estimated costs of drug development.

The Tufts calculations also explicitly do not take into account the large public subsidies provided to pharmaceutical companies in the form of research-and-development tax credits or substantial payments received from the federal government for other research activities, such as testing their products in children.

The US$ 2.6 billion figure does not consider drug-development costs borne by the public for the large number of medications that are based on external research that elucidated the disease mechanisms they address.

One recent analysis showed that more than half of the most transformative drugs developed in recent decades had their origins in publicly funded research at nonprofit, university-affiliated centers.

High innovation cost fails to justify high drug prices:

That even the high cost of innovation fails to justify high drug prices, was also echoed in an article published in ‘The New York Times’ on December 19, 2015.

The article categorically said, ‘there is ample evidence that drug prices have been pushed to astronomical heights for no reason other than the desire of drug makers to maximize profits. Prices in many cases far exceed what’s needed to cover the costs of research and clinical trials, and some companies have found ways to rake in profits even without shouldering the cost of drug development.’

Yet another justification of high new drug prices:

Yet another justification of a slightly different kind also frequently comes from the global pharma players for high prices of new drugs.

On May 2, 2015 ‘The Washington Post’ also published an article, which recapitulated this oft repeated justifications for keeping the prices of new drugs high, especially those for rare diseases, including many types of cancer. The key rationale of this argument: the smaller is the number of patients who need the drugs, more would be the need of the company to price the drugs high to recoup the significant costs of drug development.

On the face of it, this justification too may sound convincing. However, on the ground, even if this argument of the global drug companies fails to stand on its feet, post robust scrutiny of the experts. In that context, I shall cite two recent examples.

Two new research studies broke this myth too:

The Following two April 2016 study conclusively demolishes the above justification of the global drug companies:

1. On April 28 2016, a new study was published in JAMA Oncology, throwing a great deal of light on the robustness of the above reasoning. In this paper, the researchers looked at 32 oral cancer medications and found that launch prices of these drugs have spiraled upward, even after adjusting for inflation. The average monthly amount insurers and patients paid for a new cancer drug was less than US$ 2,000 in the year 2000, but it skyrocketed to US$ 11,325 in 2014.

2. In April 2016, another study published in Health Affairs found, when a drug became useful to a larger number of patients, the price also shot up. It, therefore, concluded as follows:

“Our findings suggest that there is currently little competitive pressure in the oral anticancer drug market. Policy makers who wish to reduce the costs of anticancer drugs should consider implementing policies that affect prices not only at launch but also later.”

Are high new drug prices, then arbitrary?

According to a July 2015 article published in JAMA Oncology, the high prices of new drugs, especially for cancer, are arbitrary. This is vindicated in the discussion of the article that clearly states, as follows:

“Cancer drug prices are rising faster than the prices in other sectors of health care, drawing concern from patients, physicians, and policy researchers. We found little difference in the median wholesale price of 21 novel drugs and 30 next-in-class drugs approved over a 5-year period (next-in-class drugs, $119 765; novel drugs, $116 100; P = .42).”

“Our results suggest that the price of cancer drugs is independent of novelty. Additionally, we found little difference in price among drugs approved based on time-to-event end points and drugs approved on the basis of RR (disease Response Rate). Our results suggest that current pricing models are not rational, but simply reflect what the market will bear.”

Thus, the derived fact is, the high prices of new drugs are neither dependent on high cost of drug innovation, nor on the number of drug users – high or low. Higher drug prices, therefore, appear to be nothing but arbitrary, the public justifications being no more than façades.

Is the real cost of drug innovation much less?

This question brings me back to the moot point, ‘What is then the real financial cost of drug innovation?’

The search for a generally acceptable answer to this question gets even more complicated, when one reads the paper of The Bureau of Economics, Federal Trade Commission’ in Washington, DC, published on March 7, 2006 in Health Affairs – the leading journal of health policy thought and research.

The paper estimates the cost per new drug to be US US$ 868 million. However, it says, “Our estimates vary from around US$ 500 million to more than US$ 2,000 million, depending on the therapy or the developing firm. The paper recommended that variations in cost estimates suggest that policymakers should not use a single number to characterize drug costs.

Conclusion:

This situation arises, because the drugs with brand names, whether patented or off-patent, do not compete on price in the pharma market, across the world. The primary reason being a consumer is neither the prescription decision makers nor can they exercise their brand choice in any manner. For any patients, a doctor always takes this decision, who is often influenced by the drug manufacturers, and may not be even aware of the drug price, as is generally alleged, globally.

This process is quite unlike to any other essential commodities. However, the ongoing marketing campaigns for branded drugs are quite a keen to commonly used consumer goods, carrying brand names and backed by high profile branding campaigns, where high prices rather add greater perceived value to the brand status.

But the irony is glaring. The administration of life-saving highly expensive drugs is not optional for any patient, whether poor or rich. These are necessary to save lives. Thus, does not merit arbitrary high-profit driven pricing, at least, from the standpoint of patient-centric ethical business practices.

It still happens, even at the cost of access to such drugs by a large majority of the global population, who requires them the most. In all probability, this process is likely to continue in the near future too, irrespective of the quest of many to fathom how expensive is the drug innovation, unless the government or other payers actively intervenes. I shall discuss this issue in my next article in this Blog.

Nevertheless, the answer to the crucial question, ‘How expensive is the drug innovation’ would continue to remain elusive to many, at least in the near term. This because, no global drug company is likely to allow any competent and independent experts group to arrive at this number in a transparent manner, which can also be peer reviewed. Nor would the pharma players, in all probability, furnish this information to any Government to justify the high price of their respective new brands.

Till this is done, pricing decisions of new lifesaving drugs would continue to remain arbitrary, primarily driven by high-profit motives. It is unlikely to have even a remote direct linkage to the cost of drug innovation, limited consumer access notwithstanding, just as what happens with many branded consumer goods.

By: Tapan J. Ray

An Evolving Paradigm of ‘Price-Value Model’ Of Pharma Value Delivery System

Posted on May 9, 2016 by Tapan Ray

May 4, 2016 edition of the ‘MIT Technology Review’ published an interesting article carrying the headline, “The World’s Most Expensive Medicine Is a Bust”.

The obvious question that floats at the top of mind: What is this most expensive drug in the pharma history, and why has it failed commercially, despite being a product of disruptive innovation and a marvel that stands out in the space of contemporary drug innovation?

The product is called Glybera (alipogene tiparvovec). It heralded the dawn of the “first gene therapy” in the Western world, whose approval helped ignite an explosion of investment and excitement around treatments that correct DNA, as the MIT article said.

Glybera promises to cure rare inherited diseases with one-time repairs to a person’s DNA. A single dose of gene therapy can change the genetic instructions inside a person’s cells in ways that last many years, or even a lifetime.

Interestingly, even with this unprecedented product offering, the product has become a commercial flop, due to its staggering million-dollar price tag, which very few patients can afford.

Is this an extreme example of price-value relationship for a new breakthrough pharma product? Yes, of course! Nevertheless, it makes us ponder on some key fundamentals, afresh, such as:

The core purpose of drug innovation
The price-value relationship of even breakthrough drugs

The proper understanding of these points comprehensively, especially the above two fundamentals, would enable the drug companies to achieve both, the core purpose of intricate drug innovation initiatives, and also making these medicines commercially successful with increased access to patients, through innovative ‘value delivery’ mechanisms.

I believe, the pharmaceutical industry is now at the threshold of a paradigm shift. The new paradigm would signal a metamorphosis in the price-value equations for all drugs, mostly due to changing socio-political environment, across the world, as we have started witnessing in the topmost free economy of the world – the United States.

Pharma business is a ‘value delivery system’:

Way back in June 2000, an article published in ‘McKinsey Quarterly’ on delivering value to the customers, deliberated on a 1988 paper of Michael J. Lanning and Edward G. Michaels. The study combines the value-maps developed in the price-value models with the idea of the “business system,” which was introduced in 1980.

The paper titled, “A business is a value delivery system,” emphasizes the importance of a clear, well-articulated “value proposition” for each targeted market segment. This means a simple statement of the benefits that the company intends to provide to each segment, along with the approximate price the company will charge each segment for those benefits.

Looking at this concept in pharma perspective:

Keeping the above paper in perspective, when we look at the pharma value delivery system, besides the key benefits that a drug offers, one of the most critical value parameter continues to be the financial value.

The healthcare value chain, across the world, has started sharpening its focus on the drug cost today, more than ever before. This is primarily based on the differential value that a drug offers as compared to its closest alternatives. We may like it or not, it is happening irrespective of, whether the drug in question is a breakthrough innovation, or an off-patent high-priced generic medicine.

As I said before, not just in India, the affordability of health care in general, and medicines in particular, is rapidly emerging as a key concern for all developed and the developing nations, including the United States.

Thus, even after careful consideration of all novel product’s benefits and the costs associated with these, the stakeholders’ focus is getting sharper on the overall financial value of the product offerings to the patients. This is reality, and can’t just be wished away by any measure of powerful and expensive advocacy campaigns, together with clever media management.

The drug companies may continue to crib about it, but this will possibly lead them nowhere, in the long term. Instead, they would require to search for a workable win-win and level headed solution, for this most fundamental business issue.

Understanding the evolving paradigm:

We are fast arriving at this new paradigm. There, the financial value of a drug, in the ‘value delivery system’ of pharma marketing, would occupy the center stage. The drug companies would need to arrive at this financial value, not just by understanding the professional mindset of the doctors and taking them on board somehow, but by properly understanding what would the majority of stakeholders want to pay for a new drug, and then perhaps work backwards to translate that finding into reality.

Its successful application would soon assume a pivotal role in the pharma value delivery system. A company may contemplate pricing a drug high, limiting its access to a few rich, and still succeed in making its cash register ringing, such as, some new hepatitis C or cancer drugs. Nonetheless, this could ultimately make their overall business socio-politically too vulnerable, and may not be sustainable either, in the long run.

The same old and current approach does not create a wholesome value for a new drug to most of the customers, despite the company having a state of art ‘value delivery platform’, for unleashing a dazzling marketing blitzkrieg.

The pharma marketing strategy remains unchanged and stale:

At a time, when a paradigm shift is taking place, especially in the way the entire world views at the price-value equation of a new drug, the overall strategic approach of the pharma marketers, as I see it, still remains in the old paradigm, with its roots firmly entrenched there.

I think it so, because the traditional pharma marketing has always been a unilateral communication process, predominantly involving the doctors, and trying to fathom their needs, wants and professional mindset.

Accordingly, the product value delivery process for the doctors, with or without the medical representatives, is basically woven around those needs, wants and mindsets of the target doctors. It, by and large, continues even today, with some cosmetic changes in tools and formats here or there.

Therefore, when the basic marketing and communication process aims at effectively delivering the value of drugs, let us discuss briefly what does the core value of a drug mean?

The value of a drug:

For this purpose, I reckon, it would be prudent to avoid an ethereal approach to arrive at the financial value of a drug, such as, what is the cost of a life, as often raised by many pharma players. A practical approach to resolve this issue would benefit all, in every way.

Without going much into the core purpose of pharma innovation, usually the drug companies define the value of a medicine based on what they think about its attributes. Accordingly, respective players arrive at its financial value, that the patients or the payers must pay for, if they want to have an access to it.

Usually not many independent studies are conducted by the drug companies to ascertain how much the majority of stakeholders, including the governments, payers and patients, would want to willingly pay for a new drug, after well considering its value offerings.

Competitive Scenario:

The ever increasing, and virtually obsessed focus on drug ‘innovation’, while justifying the high financial value of a medicine for the patients, also restricts competition, especially for newer ones. For most of the patients this situation is a double whammy.

Additionally, the consolidation process within the industry is also fuelling this situation further. The virtual monopoly of a few companies with some new drugs, in key therapy segments, such as, diabetes, cancer, vaccines and HIV, is restricting the overall competitive environment. This would continue.

A September 24, 2014 Article, published in the ‘Insight’ of Bain & Company on the throws some light on the subject. It says, “over the past 20 years, and especially since 2000, building leadership in a category has become a crucial route to success in pharma. Seven of our 10 leading value creators, including Roche in oncology and Novo Nordisk in diabetes care, generated at least 50 percent of their revenues from one therapeutic area or primary care. In two cases – Biogen Idec in neurology and Celgene in oncology – more than 90 percent of revenues came from a single therapeutic area.”

As I said, this process is expected to continue, it is necessary for the drug companies, governments, other payers and the patients understand the new paradigm, and act accordingly to address this issue to protect mutual benefit.

If it does not happen, the evolving socio-political environment, across the world, would occupy the driver’s seat to navigate through this complexity, in the healthcare space in general and pharma in particular, safeguarding the patients’ health interest.

The core issue:

In the prevailing scenario, the core issue that gets reinforced, yet again, as raised by many, including the World Health Organization (WHO), is the growing inherent conflict between predominantly the profit driven business goals of the pharma players, and the public health interest of a nation.

Possibly for this reason, Dr. Margaret Chan, the Director General of the World Health Organization (WHO), at a briefing to discuss the Ebola outbreak in West Africa at the UN Foundation in Washington on September 3, 2014 said:

“Big Pharma’s greed for profits, not lack of funding, delaying Ebola treatment development.”

Many countries are now seriously striving to arrive at a middle path to resolve this perennial conflict, India included. The drug companies may wish to take note of it.

I discussed this issue in an article published in this Website titled, “Is The Core Purpose of Pharma Business Beyond Profit Making?” on November 10, 2014.

Conclusion:

As the above ‘McKinsey Quarterly’ paper articulated, the strength of the buying proposition for any customer is a function of the product value minus the price. In other words, the ‘surplus value’ that the customer will enjoy once that product is paid for. As the paper clarified, the “value” in a price-value map will necessarily be informed guesses, though after well-considering multiple variables.

Delivering more of this ‘surplus value’ to patients, willy-nilly, would soon be the name of the game, especially for the winners in both the global and local pharma industry.

In the entire drug sector, including India, this ‘price-value model’ could help a pharma company ascertain the sustainability of its competitive position, well considering the stakeholders’ perspective, and accordingly take the right business decision.

Thus, proper understanding of the ‘surplus value model’ while pricing a drug, and its immaculate execution through state of the art marketing and communication strategies, will separate the men from the boys, for sustained excellence in the pharma business.

Sans understanding of this ‘price-value model’, which is so important in the evolving new paradigm of a pharma value delivery system, a pharma player would risk getting caught in a tough headwind, especially with new high-priced products. This situation could, in turn, jeopardize its long term success, and even erode the well-earned company reputation, in tandem, at times mercilessly.

By: Tapan J. Ray

PILMAN

A Tapan Ray Website

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