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Making quality medicines available at an affordable price – Are we ‘missing woods for the trees’?

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On August 4, 2010 the Parliamentary standing committee for Health and Family Welfare in its 45th report, recommended the following to the ‘Rajya Sabha’ of the Parliament of India for ‘Making quality medicines available at an affordable price’ to the common man:

1. Blanket caps on the profit margins of all medicines across the board, as these are the ‘only items’ where the purchasing decision is taken by a doctor – a third party and not by the patients who will actually pay for such medicines. In such a situation, a possible’ unholy nexus’ between the prescribing doctors and the pharmaceutical companies could put the patients at a disadvantage and in a helpless situation.

2. This blanket cap on profit for ALL drugs will discourage pharmaceutical companies to shift the balance of their product portfolio from schedule (price control) to non-schedule (outside price control) formulations.

3. This action will make the administration of the ‘Price Control’ mechanism by the Government much simpler by eliminating the current practice of price monitoring and the government preference of substitution of generic drugs for the branded pharmaceuticals

4. MRP of ALL medicines should be determined by the NPPA based on an open and transparent process and considering interests of all stake holders, as is currently being followed in other areas like, electricity tariff, bus, auto rickshaw and taxi fares, insurance premiums and various interest rates.

5. The Department of Health and Family Welfare and the Department of Pharmaceuticals should work out a system through the Inter-Ministerial Coordination Committee to put a blanket cap on profit margins of ALL drugs across the board, immediately.

6. Despite amendment of the MCI guidelines for the doctors in December 2009, banning the acceptance of all kinds of gifts, trips to foreign destinations and availing various types of hospitality by them from the pharmaceutical companies, nothing much has changed on the ground related to such ’unethical practices’. Since MCI has no jurisdiction over the pharmaceutical companies, the government should formulate similar punitive steps through the DCGI, CBDT etc. against the erring pharmaceutical companies.

7. The Committee indicated that it desires to be kept apprised of the action taken in this regard by the Government.

The key factors influencing affordability of medicines:

All the above steps will remain as good intent by the policy makers, if the issue of access to medicines is not addressed simultaneously. As we know that affordability will have no meaning, if one does not have even access to medicines.

In my view, there are five key factors, which could ensure smooth access to medicines to the common man across the country; affordable price being just one of these factors:

1. A robust healthcare infrastructure
2. Affordable healthcare costs including pharmaceuticals
3. Rational selection and usage of drugs by all concerned
4. Availability of healthcare financing system like, health insurance
5. Efficient logistics and supply chain support throughout the country

High out of pocket expenditure could push a section of population below the poverty line:

In India ‘out of pocket expenditure’ as a percentage of total healthcare expenses is around 80%, being one of the highest in the world.

A study by the World Bank conducted in May 2001 titled, “India – Raising the Sights: Better Health Systems for India’s Poor” indicates that out-of-pocket medical costs alone may push 2.2% of the population below the poverty line in one year.

‘Missing woods for the trees’?

Affordability is indeed a relative yardstick. What is affordable to an average middle class population may not be affordable to the rest of the population even above the poverty line. Similarly, below the poverty line population may not be able to afford perhaps any cost towards medicines. In a situation like this, putting a blanket profit cap on all medicines will not be just enough. There is a crying need to put in place an appropriate healthcare financing model by the policy makers, covering all sections of the society. Are we then ‘missing woods for the trees’?

Create a robust healthcare provider group through Public Private Partnership (PPP) initiatives to offer quality healthcare at an affordable price:

To resolve the issue of affordability of healthcare in general including medicines, the policy makers should take immediate steps to put in place the ‘Healthcare Financing’ initiatives through a robust PPP model in the country. A highly competitive ‘Health Insurance’ sector, created through PPP, could emerge as a powerful and key healthcare provider in the country. The power that such stakeholders will then assume in deciding for their respective clientele, types of doctors, hospitals, diagnostic labs and even what types of medicines that will be dispensed to them to offer quality healthcare at an affordable price, could indeed be a game changer having an immense influence in bringing the cost of overall healthcare for the common man, including medicines, very significantly.

The ‘Health Insurance’ companies can then decide through the Third Party Administrators (TPA), based on public interest, what types of fees should be charged by the following to offer quality healthcare services at an affordable price to their clientele, if these groups would like to avail the huge business potential for a long period of time:

1. Doctors
2. Hospitals
3. Diagnostic laboratories
4. Other related service providers

For making centralized purchase of medicines, these insurance companies or payors may enter into a hard negotiation with the pharmaceutical companies directly to bring down the price of medicines for the use of their respective clientele.

A recent incident:

To illustrate the above point let me quote an important and related news item, which was published in almost all the leading national daily newspaper, just in the last month.

In July 2010, it was reported that about 18 health insurance companies, who were providing cashless services to the policy holders at over 3,000 hospitals across India, found out that only 350 of them constituting around 11% of the total, were consuming more than 80% of the total claims.

It was also reported that the patients were overcharged by these hospitals for each hospitalization irrespective of the treatment provided and were left with them very little funds for their next treatment. This prompted the said insurance companies to bring some order out of the chaos, as it were.

As a result, at least 150 hospitals only from Delhi and the National Capital region were taken out of their designated list for the cashless facility, keeping the facility available at around 100 hospitals where none belonged to any corporate chain. Similar action was taken against hospitals in other cities, as well.

Thereafter, these insurance companies also decided to convey to the invidual policy holders the fresh list of hospitals for cashless facilities, working out new treatment packages depending on the quality of available healthcare infrastructure of each hospital and a lower or a higher rate was worked out for implementation, accordingly.

This illustration will vindicate how powerful and assertive the health insurance companies could be with the effective use of the TPAs for the sake of public health interest, if they wish to and at the same time to protect their respective bottom lines, creating a win-win situation for all.

Conclusion:

It is indeed an irony that despite being the 4th largest producer of pharmaceuticals and catering to the needs of 20 per cent of the global requirements for the generic medicines, India is still unable to ensure access to modern medicines to around 650 million population of the country (The World Medicine Report, WHO 2004). Like in many other emerging economies of the world, in India too, access to modern medicines along with their affordability, is the key macro healthcare issue of the nation.

In a situation like this, as stated above, when the payors or health insurance companies will start exerting immense performance pressure to all concerned to provide quality healthcare at an affordable price, even the alleged ‘unholy nexus’ between the pharmaceutical companies and the medical profession, perhaps will not have any practical relevance.

It is worth pondering, whether the Government is now sending confusing signals to the civil society at large by propagating ‘non-regulated pricing’ for Petroleum Products and ‘regulated pricing’ for pharmaceutical products?

By Tapan 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 ‘Climate Change’ and its impact on ‘Public health’: is there anything in it that we can do ourselves?

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The Lancet in its December 5, 12 and 19, 2009 issues published the following interesting studies:A. Public health benefits of strategies to reduce greenhouse-gas emissions: household energy
B. Public health benefits of strategies to reduce greenhouse-gas emissions: urban land transport
C. Public health benefits of strategies to reduce greenhouse-gas emissions: low-carbon electricity generation
D. Public health benefits of strategies to reduce greenhouse-gas emissions: food and agriculture
E. Public health benefits of strategies to reduce greenhouse-gas emissions: health implications of short-lived greenhouse pollutants
F. Public health benefits of strategies to reduce greenhouse-gas emissions: overview and implications for policy makersThe findings of these studies clearly indicate that climate change is intimately linked to the global public health.

The key highlights:

1. In rural households (particularly in a developing country like India), if low carbon emission cooking stoves are used, the incidence of acute respiratory tract infections, chronic respiratory illnesses and even cardiac disorders can be brought down significantly.

2. For city transportation, increased usage of more fuel efficient or even hybrid vehicle will not be just enough to effectively reduce the greenhouse effect and improve public health. To achieve this some fundamental change in our life style and urban pedestrian infrastructure will be necessary rather than building more and more flyovers. Encouragement of ‘foot- and pedal-powered mobility’ could prove to be more useful for specific public health benefits, which could come in terms of reductions of cardiovascular disease by around 20%, in addition to reduced incidence of depression, dementia and diabetes.

3. The civil society would require putting more efforts to burn less of fossil fuels and increase in production of cleaner energy through solar and wind power to substantially improve the quality of air that we breathe.

4. In areas of agriculture and food production, initiatives like lesser usage of fossil fuel, innovative usage of manure, reduced livestock production and intensive programs of carbon capture could significantly lower the impact of climate change on public health.

“A 30% fall in the adult consumption of saturated fat from animal sources would reduce heart disease in the population by around 15% in the UK and by 16% in the city of São Paulo, Brazil. If the study had used additional health outcomes such as obesity and diet-related cancers, the health gains might have been even more substantial”, the Lancet highlighted.

The studies further indicated, “Recognition that mitigation strategies can have substantial benefits for both health and climate protection offers the possibilities of policy choices that are potentially both more cost effective and socially attractive than are those that address these priorities independently.”

India perspective:

‘Climatico national first assessment report’ of March 8, 2009 makes important observations on the general trends between national policies to understand how climate policy is developing in the major greenhouse gas-emitting countries like, UK, EU, France, Germany, Canada, USA, Mexico, India, China, Indonesia, Japan, Australia.

Key findings of the report are as follows:

1. “A significant funding gap is appearing for adaptation, as developing country lack domestic resources and capacity and also appears unable to rely on international transfer mechanisms to meet their financing needs. It is at present unclear how adaptation will be effectively financed”.

2. “The financial crisis is allowing a mainstreaming of climate change into recovery packages, accelerating otherwise difficult shifts to low carbon growth in developed countries. However, the same crisis is causing a major slow down in projects that do not contribute to financial recovery”.

It has been reported that the above observations have prompted the Government of India to seek global cooperation both in terms of funding and technology to facilitate the capacity building exercise in these areas to effectively address all issues arising out of ‘climate change’.

Conclusion:

It has now been well accepted by the policy makers in India that there is a dire need to effectively address the critical public health issues related to global ‘climate change’. Based on the findings, as published in ‘The Lancet’, the Government of India should take appropriate collaborative measures to neutralize the adverse impact of ‘climate change’ on ‘public health’, sooner the better.

At the same time, let me hasten to add that there are many other measures, as stated earlier, which we all can take ourselves as a civil society in general and a responsible citizen in particular, to prevent this impending crisis.

By Tapan 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.

Key business strategies of global pharmaceutical industry are undergoing a radical change, while in India we are still thinking within the box. Who cares about the global clue?

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One of the leading consulting companies, PricewaterhouseCoopers (PwC) in its report of June 2007 titled “Pharma 2020: The vision –Which path will you take?” postulated that the business model followed by the global pharmaceutical companies is, “economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets”.
R&D is failing to deliver:Datamonitor highlighted that drugs worth U.S$ 140 billion will go off patent by 2016. Thus the value turnover that will be lost because of number of drugs going off-patent will be almost impossible to replace by this time. Many analysts have been expressing concerns about gradual but steady decline in pharmaceutical R&D productivity since quite some time. During this period, most of the research based companies could afford only a small increase in their R&D budget, while marketing and other overhead expenditures registered a significant increase.

Single global process of Drug Regulatory approval…is possible…but is it probable?

PwC in the same report touched upon another interesting possibility within the R&D space of the global pharmaceutical industry. It indicated that the research based pharmaceutical companies will gradually switch over from, “Classic model of drug development that ends in regulatory approval to ‘live licenses’ that allow for narrow product launches followed by gradually expanding approvals as drugs are continuously tested.”

Most interestingly, the report also forecasted that by 2020, the drug regulators across the world will work together under a collaborative framework to arrive at uniform and single global process of drug regulatory approval. If it materializes, the process will indeed be path breaking in every sense.

Global pharmaceutical market will register significant growth:

Following this trend, the report highlighted, that the global pharmaceutical sales will touch U.S$ 1.3 trillion by 2020, almost double of what it is today. High growth of emerging markets and the aging global population are expected to be the key growth drivers.

During this period E7 countries like, Brazil, Russia, India, China, Mexico, Turkey and Indonesia are expected to contribute around 20% of Global Pharmaceutical turnover. Keeping pace with the economic progress, the disease pattern of these countries are also changing, from infectious diseases to non-infectious chronic illnesses, like diabetes, hypertension, just as we now observe in the developed world.

Together with this change, many predict that ‘greenhouse effect’ arising out of global warming process will have significant impact on health of the global population, resulting in large scale re-emergence of diseases like malaria and cholera together with various types of respiratory disorders.

Radical change is envisaged in pharmaceuticals marketing:

In April 2009, PwC came out with another interesting report titled, “Pharma 2020: Challenging business models, which path will you take?” on the future of the global pharmaceutical industry.

As the time progresses global pharmaceutical companies will need to understand the shift in ‘perceived value’ that is taking place within patients, medical profession and the community as a whole towards healthcare delivery. Just an innovative medicine will no longer be able to satisfy their ‘value expectations’. Pharmaceutical companies will have to offer a ‘bundle of benefits’, combining the innovative products with related health services, for which the market will not hesitate to pay a reasonable premium.

Thus in future, global pharmaceutical companies will need to collaborate with disease management specialists for a “holistic offering” to address an ailment rather than just treatment of the disease with medicines. Such “value added and innovative” marketing strategies will differentiate business success from failure, in 2020.

In the recent report PwC advocates that to be successful, in future, global pharmaceutical companies will need to change their ball game almost radically. The future strategy will focus on collaborative arrangements between various allied healthcare establishments and the pharmaceutical companies to offer a “holistic solution” to the patients in all disease areas.

That means, global manufacturer of an anti-diabetic drug will need to offer along with the innovative drug, counseling on diet regimen, suggesting exercise programs and their follow-up, reminders for regular and timely intake of medicines and many more. Who knows?

“Better late than never”:

In any case, to excel in business at a time when the global pharmaceutical business model is undergoing a fundamental shift; there is a need to keep on investing more towards R&D, which will continue to remain the ultimate growth engine of pharmaceutical business, the world over. At the same time, there will be a dire need to prune expenditure in innovative ways and that opens the door for global outsourcing of various business processes from most cost efficient countries having world class facilities.

Domestic pharmaceutical players, if start mustering all resources to avail these global opportunities, India can soon become a global hub for pharmaceuticals outsourcing, outracing China which is currently placed ahead of India, in this field. As the good old saying goes, I shall always wish, “better late than never”.

By Tapan 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.

We need to encourage the new product patent regime

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Ushering in the Product Patent Regime in India heralds the dawn of a new era. The era that vindicates not only the need to encourage, protect and reward innovation for the rapid progress of our nation but also to compete effectively, in the knowledge economy with the best in the world to establish India as a leading country with a significant share of the global economy.However, it is quite unfortunate that the patents that protect today’s innovations and drive research and development to create tomorrow’s life-saving treatments are under criticism from some quarters.India chose to follow an alternative to Product Patent regime for many years. In 1970, the Government of India amended its IP laws with a clear objective in mind to reduce the prices of medicines to improve their access to the ailing population of the country.

As a result, some drugs were made cheaper. However, the moot question that we need to address now: was it a panacea? While looking back, it does not really appear so. On the contrary, the situation remained as gloomy thereafter, so far as the access of medicines is concerned. After almost 4 decades of continuation with the above policy, around 65% of Indian population still do not have access to cheaper off-patent medicines against comparative figures of 47% in Africa and 15% in China (Source: International Policy Network, November 2004).

Children still go without routine vaccinations, though the Government has made the primary vaccination programs free in our country, for all. Even in a situation like this, where affordability is no issue, only about 44% of infants (12 – 23 months) are fully vaccinated against six major childhood diseases – tuberculosis, diphtheria, pertussis, tetanus, polio and measles.

Moreover, as we know, despite distribution of cheaper generic HIV-AIDS drugs by the Government and others mostly free for years, only 5% of India’s AIDS patients were receiving any drugs by the end of 2006.

The above two important examples prove the point very clearly that, addressing the issue of price alone will not help our country to solve the issue of poor access of medicine to the ailing population of India. Only a sharp focus on rejuvenation of our fragile healthcare system, healthcare financing and rapid development of healthcare infrastructure of the country by the Government or through Public Private Partnership (PPP), will help address this pressing issue.

Indian Patent Act 2005 has paved the way for innovation and hi-tech research and development within the country. Contrary to adverse forecasts from some quarters, prices of medicines have not gone up.

However, while medicines play a relatively small role in rising overall health care spending including hospitalization, it is important to ensure that individuals with large healthcare expenses have affordable access to their medicines. Thus a good affordable insurance coverage (both Government and Private) available to all Indians belonging to various socio-economic strata, together with the above measures, will help address the key issues of both access and affordability of medicines for all, in a holistic way.

The attack on patents is not really a defense of patients or the poor. Such attacks help diverting attention from the core healthcare issues, as mentioned above, which are healthcare system, healthcare financing and healthcare infrastructure. Health of our nation will depend on how well these key issues are being addressed by the policy and decision makers. Our country cannot afford to ignore that Intellectual Property is one of the keys to prosperity of a great nation like India and it should be encouraged, protected and rewarded under a robust Patent Act of the country for inclusive growth.

By Tapan Ray

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