Most ‘Indian Pharma Outlook’ reports from the likes of McKinsey
& PwC almost exclusively focus their policy &
regulatory scenario call-outs on aspects that bear an impact on entry &
exit strategies of global pharmaceutical companies - which is understandable
given they form the healthcare client-base of these consulting organizations. Not
much information is however available when it comes to information on the
policy & regulatory landscape within India that has a bearing on the
commercial prospects of Indian pharmaceutical companies globally & one that
can influence the investor sentiment/ emotion driving it.
Inspired by CNN Money’s beautifully minimal ‘Fear & Greed Index’, I
set about categorizing and analysing the three most debated India-specific pharmaceutical
policy & trade issues in the past few months. Thus categorized as low,
elevated & high risk, these three issues broadly mapped out the boundaries
of factors influencing ‘Global Prospects & Investor Attractiveness of
Indian Pharmaceutical Industry”.
I
COUNTERFEIT MEDICINE
Lack of candor in acknowledging a local
& global menace of counterfeit drugs
FDA
website says “Counterfeit medicine is fake medicine. It may be contaminated
or contain the wrong or no active ingredient. They could have the right active
ingredient but at the wrong dose. Counterfeit drugs are illegal and may be
harmful to your health” – While US Pharmacopeia broadly uses the same
definition, it extends the scope of fake to the drugs that are “deliberately
mislabelled” and with “fake-packaging” - Now, while the definitions do not
say so, it is an inferred & accepted norm within the regulatory, federal
& industry circles within USA, EU most other developed economies that any
drug approved for a certain geography/ country if found to be distributed,
marketed in another geography where it hasn’t obtained any approval makes that
drug a counterfeit too.
In what
could be explained within ten lines of text as above & given this is a
definite public health issue, it’s confounding how so much energy is spent by so
many espousing interpretations of varied hues on what doesn’t amount to a
counterfeit. A recent news
item in TOI showcases how a whole country’s credibility could take a
beating with misinformed defence of an ill-articulated official position. The
gentleman in the referred article states "Counterfeit is essentially an
intellectual property issue referring to falsely packaged products that violate
trademarks, but it is not necessarily about the quality of the medicine" -
almost affecting that a counterfeit with a real API a lesser crime" – If
this is indeed the official position of Indian on counterfeits, it sure needs
work.
Factors at play
From the consumer’s perspective it could be Cost
differential of counterfeits vis-à-vis’ branded formulations & No-hassles
(online) access of Prescription drugs. From the counterfeiter’s perspective,
it’s all about monetizing the existence of a vast ill-informed & gullible
market
& then there is this legacy of distrust & malice……
While there is/ was a definite basis to suspect &
investigate role of India connection to the counterfeits, for a larger part of
the last decade FDA, PhRMA, SOCMA & EFCG and the various allied task-forces
went on an extended witch hunt, not entirely without dishonourable motives
(read: SOCMA, EFCG; NA/ EU manufacturers
losing out to outsourcing to India), for Indian knockoff offenders & in
the bargain tarnishing the image of many ethical Indian organizations that in
some instances were completely unaware of their product getting trans-shipped
through parallel/ secondary import channels (ref. the PhRMA report on counterfeit drug statistics quoting 2008 data)
*Image courtsey: from a Forbes article about Indian companies adaptng the mobile verification systems in a big way
Pros
& Cons
↑ ZILCH: There can absolutely be nothing positive about;
- A fake drug with a spurious drug &/OR
- A counterfeit with a real drug &/OR
- A true generic in an unauthorized territory
↓ CREDIBILITY: Any knee-jerk reactions such as the above, based
impractically on a painful legacy, may end up sounding like a tacit Indian
support to counterfeit industry and will severely harm the genuine promise
Indian generic industry holds and is pursuing
↓ PUBLIC HEALTH: The above cynical approach to addressing global
concerns on counterfeits can easily get rubbed off within the Indian context
& the consequent confusion can be used by counterfeiters to take root &
rot the whole public health system within India
↓ NET
IMPACT ON INDIAN PHARMA: This is a
no-brainer really, with zero positive & two negatives; this is a present
& imminent danger to the credibility of Indian pharmaceutical Industry.
What could
Indian Pharmaceutical industry & policy makers do to address the above
aspects/ issues?
Ironically a lot of Indian response to any dialog on
counterfeits still seems to be based on the sole concept that some of the
"real-API counterfeits' are traceable to India & many a time, without
the manufacturing company realizing so -
while this may still be a relevant grouse, it still cannot be the sole
discussion point whenever someone mentions counterfeits.
From a global perspective, Counterfeits, even if they use
“real API” should still be eliminated from supply chain owing to the following
consequences* (adapted
from a USP DQI presentation) of their existence;
- Diminished trust in health care system
- Waste of financial resources
- People go untreated—leads to prolonged illness
or, possibly, death
- Sub-potent treatment can lead to resistance and
treatment failure
India Pharma Industry, policy makers should shed the baggage
of the hurtful past & acknowledge explicitly to the world community that
the above concerns are applicable for control of counterfeits on the Indian
soil too & hence both internally & externally India will deal with all
dialog on counterfeit medicine FIRST as a public safety debate & THEN as a
trade debate.
Looking ahead
The regulators & industry in developed countries such as
USA & EU, UK should also look beyond the greed-driven commerce as the
trigger for the existence of counterfeits & acknowledge that the reasons can be equally economical, triggered
by the need for affordable medicine for the outlier population that is neither
covered by the state nor by the insurance companies. This aspect is bound to be
helped by the current winds of genericization blowing through USA & Europe
and this trend will hopefully and naturally topple the cheap counterfeit
applecart – Having said that tackling counterfeits should be the primary
corporate social responsibility of the pharmaceutical industry worldwide.
II
COMPULSORY LICENSING
The not so surprising enthusiasm for the compulsory
Licensing route to introduction of 'copy cats'
Back in March 2012, Natco Pharma opened the gates (or Pandora's box depending upon which side
of fence one is..) with their successful bid for the Compulsory License of Sorafenib
Tosylate (Nexavar) using the provisions set out in the TRIPS agreement. The
recent endorsement of this decision by IPAB seems to have ushered-in the
growth-phase of CLs with BDR Pharmaceuticals of Mumbai filing an application for Dasatinib and the grapevine says quite a few as this are lined up in the
immediate future, in India & overseas.
While CLs are being looked into seriously by other developed
countries too, what complicates it in the Indian context is the sheer price
difference that makes the royalty on sales to the innovator a trifling
formality and the sheer size of the lost opportunity for the innovator huge
(size of Indian population). The
case-in-study being Nexavar again wherein Bayer’s price is 35 times the Natco’s
price & the 7% royalty Bayer was granted, wouldn’t even pay for their
lawyers fee at the initial sales volume.
Factors at play
Cost
effective access to newer therapeutics in India, Compliance with global IPR
norms (both prescribed & inferred) and last but not the least, A really big
(read: 1.2 billion population) market opportunity, the surface of which has
been hardly scratched.
Pros
& Cons
↑ SOCIA
IMPACT: The Indian population will have
economical access to technologically superior later-date drugs
↑ FINANCIAL
IMPACT: Opening up of a new market in India for these newer therapies hitherto
not adopted owing to a steep price barrier
↓ CREDIBILITY:
The Indian pharmaceutical industry's credibility will take a hit if the trend
catches up in a big & uncontrolled fashion - The obvious impact will be a gradual
deceleration of outsourcing to India & more specifically withdrawal of
contract manufacturing of proprietary drugs in India by innovators affected by
the CL (which could be all within a very
short-span)
↓ NET
IMPACT ON INDIAN PHARMA: At the current stage, I’d believe Indian industry as a
whole has more to lose w.r.t. loss of outsourcing pie than the money generated
out of the CL drugs.
Also,
despite a large price differential & given the drug use in India is still physician
controlled & not state-sponsored or paid for by the insurers, the innovator
companies are likely to resort to a sustained campaign through physicians to
color the local copy-cat as a 'compromised medicine' & thus can significantly
and negatively impact the Indian company's anticipated fortunes – Improbable as
this may sound, this indeed happened a few years ago in the vaccine domain with
the MNCs spoiling the retail-dreams of the local contenders using their sheer financial-muscle
& reach to influence the physician** against the local vaccine.
**My daughter’s pediatrician forcefully opposed my
suggestion to go-in for a Hep-B vaccine from a good Indian company &
insisted that he wouldn't suggest we compromising on the quality of the vaccine
and that we should instead opt for the pricier but reliable MNC - Ironically, a decade later this Indian
company was acquired by the very same MNC :-))
What could
Indian Pharmaceutical industry & policy makers do to address the above aspects/
issues?
A
transparent, public evaluation of the application & a greater scrutiny of
the "need"/ "essentiality" of a certain new drug vis-a-vis
further price rationalization drugs that have already fallen off the patent
cliff.
Possession
of validated process for the said drug by the applicant at the time of application
to be deemed as an automatic disqualification - to mean, since this indicates
that the applicant reaching out to the innovator for a licence has been done
without an intent to get one & hence that refusal of a license by the
innovator is not sufficient basis of the Indian generic company to go in for a
CL route
In effect
create a higher barrier to incoming applications & thus walling-out
contestable awards that bring no incremental benefit neither to the industry nor to the consumer
Looking
ahead
While at the
face of it this may look like essentially an opportunity for Indian generic
players, I tend to believe that pretty soon the global generic giants will join
the game through strategic alliances, acquisitions et al & eventually even innovators
would themselves monetize the trend by introducing authorized "cheap"
generics - “Cheap” being the keyword, as it is eminently evident from the
Nexavar price differential, a mere 20-30% reduction wouldn’t really sway the
regulatory sentiment in favour of innovator.
III
ENHANCED VISIBILITY
Gearing up for better transparency,
eventually
Even as articulation of a position is still a challenge for
India in some key policy areas as above, Visibility, mostly aided by
cyberization of governance is getting bigger & better in India each day.
While digital governance may be an emerging global phenomenon, what makes it
unique in the Indian context is that this amounts to a tentative first step
towards transparency, a beast that India is struggling to tame for many years
now.
Factors at play
The acknowledgement of a consensus approach to policy
making; The concept an of enforcement designed & driven by the stakeholder
universe; An attempt to encourage innovation within India by providing clarity
on patentability aspects & finally, a rather brave attempt to forestall
patent walling-in attempts by companies & to prevent encroachments on
traditional knowledge
The pros
& cons
↑ ENABLING BUSINESS CLIMATE – As a country that conducts business
transactions in English, India already has an inherent advantage with respect
to visibility & transparency. The increased digital visibility will go a
long way in helping India consolidate this advantage & give a much needed
differentiator vis-à-vis the omnipresent Chinese competition
↑ IMPROVED BUSINESS ETHIC – Each step in this direction will help
India better its ranking on the transparency international’s
corruption index – in part the visibility through digital governance itself
is an outcome of higher awareness, wariness of the Indian citizen towards
corruption in public & corporate life
↓ DELAYED POLICY MAKING – Though my initial thought was to say
nothing negative here, I realize that the Indian problem with ‘clear articulation
of a policy’ can be further compounded by the diversity of information received
through feedback, debates et al & thus potentially delay the legislation of
the guidelines
↑ NET IMPACT ON INDIAN PHARMA – Overall any favourable changes in
governance will always translate as a better business/ investor sentiment,
eventually
What could
Indian Pharmaceutical industry & policy makers do to address the above
aspects/ issues?
Indian
pharma would do good to dive head-long into this process of deliberation on policies;
guidelines etc. and partake in creating an enabling framework. On their part,
the policy makers, government should proactively solicit participation of
Industry and fine-tune the guidelines in light of practical business
considerations.
Looking ahead
As stated earlier, enhanced visibility is the tentative
first step towards transparency – it’d be ideal for all stakeholders to do whatever
they could to sustain this forward momentum & help India shed the
stereotypical image of a difficult third world country.
While I stopped at three, there are some other important
factors that can impact the prospects of Indian pharma in some measure - a quick
visual representation of these factors is as follows;
One recurring theme in the above discussions is a need for
emergence of clearly articulated and transparently evaluated policies which
then could be implemented in spirit.
Where no other motivation works the lure of commerce does, well in most cases. While
this may sound dogmatic, it is a valid reason for an economy increasingly dependent on globalization & externalization. I wish & hope the Indian Pharmaceutical Industry
will play a major role in setting the house in order & thus achieve and
sustain their much deserved success world-over.
Interesting to note the theme of 'venture capital model being broken' is being evaluated from very different perspectives by different people – while I’d love to see the perspective of an LP on this, haven’t come across any till date…
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