Germany’s move is just the latest attempt by governments in Europe to control spiralling drug costs.  UK is attempting a new ‘value-based pricing’ system “in which fees are negotiated with companies on the basis of a scientific assessment of the drug’s clinical value”, reports Nature. Italy recently cut prices of generic drugs.

In India, price control has been a fact of life for the pharma industry. Over time the number of drugs under control has been pared. As a result only 74 drugs are under control and the rest are free.  However, the government has the right to intervene and fix prices of ‘out-of-control’ products if they escalate beyond a point (more than 10 per cent a year).

The drug industry has from time to time proposed a move towards price monitoring rather than controls but that has not gained traction yet.  It also believes that the ‘cost-plus ‘ mechanism that is used to control prices (where government fixes a margin over the costs incurred to produce a drug) is flawed.

However, over time the industry has learned to live with the system, even beat it. Some companies have circumvented drug price rules within the limits of the law and sometimes outside it spawing a spate of lawsuits between the government and companies that have dragged on for years. In the meantime, the government’s price control system has worked inconsistently -  medicines for cancer and rare diseases are still prohibitively expensive. And since most are imported, it is difficult to ascertain their production costs and fix prices. In recent months, there has been talk of the government regulating prices of cancer drugs.

Germany’s move to control drug prices weakens the industry’s case against controls further.  It is also a move that should be watched carefully by the Indian government which is now trying to figure out how to negotiate the prices of patented products that will have no generic competition; a 2005 law allows patents on drug products instead of just the process of making them.  As European countries experiment with different methods, there’s lots for India to learn and choose from.

However, in the last two years  one generic and one innovator have been both done in by manufacturing issues. Ranbaxy’s controlling family threw in the towel when it found it had no appetite to set right persistent quality issues at its manufacturing facility. More recently, Genzyme has become fair game to predators such as sanofi-aventis after it lost investor confidence over manufacturing problems.

More and more innovators are outsourcing manufacturing to cut costs with what some regulators believe could be inadequate oversight.  If they are not careful it might be this and not drying research pipelines that could trip them up.

In the last decade (maybe a little more), biotech seems to have been having better luck than Big Pharma putting new drugs into the pipeline especially for really difficult-to-treat diseases such as cancer as also for really rare diseases that were not worth the while of large pharmacos. In the case of Genzyme, I have quite  literally come face to face with what that means.

I have met children with these rare diseases in India and their families and I know what it means when they have a cure and when they don’t. Here are two  stories :

-Suyog is in his late teens and looking at him you wouldn’t say he was sick. He’s got Gaucher’s Disease which means his body lacks a vital enzyme that breaks down fat. This fat deposits on vital organs and muscles and leads to their steady deterioration until one day it proves fatal.  When he was less than five (if I recall the age correctly) his spleen had ballooned until it pushed up his rib cage. It had to be surgically removed.  The only solution was enzyme replacement therapy and the only company (then) in the world that made it was Genzyme. Luckily it had a compassionate access programme and he eventually got it. He’s been on free Cerezyme for years. His father couldn’t have afforded it – it costs lakhs and is taken for life. His father is now trying to raise awareness about rare diseases along with parents of other children with such diseases. Gaucher’s is just one type of a group of enzyme disorders known as LSD.

-Then there’s Rahul Chand, the son of a coconut vendor. Chand is about eight years old but apart from his face the rest of his body suggests he stopped growing at three. When he sits on a chair, his feet stick out before him clear off the floor. Even in repose he seems to be struggling to breathe, and when he speaks his name he’s barely audible. Chand has lost his ability to walk – the result of a weakness in the muscles caused by the deposition of unmetabolised fat. His features are distinctive – a prominent forehead, a flattish nose. Chand has MPS 2, a type of LSD, that a good number of other children in this group appear to be suffering from.By the time Chand’s parents found out he had MPS 2 and that it was a genetic  condition, they had already produced Rohit. He also has MPS 2.  I met Rahul and his father on International Rare Diseases Day in February this year. MPS 2 has a treatment – it’s made by Shire but they don’t make it available in India from what I was given to understand by a doctor at a reputed govt hospital in the capital.

There are plenty more such stories in India – for even a “rare” disease in a populous country such as ours is a helluva lot of people. The stories that I heard from patients and their families suggest an acute lack of knowledge from doctors about these diseases, the absence of diagnostic facilities to correctly diagnose the problem, and the waste of precious time while your child wastes away before your eyes.

Of course, the price of these therapies is mind-boggling – lakhs of rupees for life. What’s  heartening is that at least some of these kids are getting it free.   Hopefully, even under a new owner Genzyme will continue to honour its commitments.

“I’m not paying 37 times earnings for an Indian company, I am just not.”

“We are going to walk away from opportunities that go out of our price range, and where we don’t think we can drive value….”

“We’re not going to get drawn into the bidding frenzies.”

Witty can perhaps afford to be a bit choosy given the position of GSK’s Indian subsidiary. For years, Glaxo was number one in terms of market share in the country and only fell lower when in the wake of its integration with SmithKline Beecham in the early 2000s it consciously decided to chase profitability over market share and pedalled down on certain price-controlled products.  Even now it continues to be in the top five (number four) by market share. Last fiscal GSK Pharma’s net sales grew 12 per cent.  It has also demonstrated an ability to think out of the box – being one of the few Big Pharma subsidiaries that did India-specific product-licensing deals with the likes of Eisai, Organon and Astellas to bolster its offerings in the country. Also,  there have been no major mega-deals (after the merger with SmithKline Beecham) to rock the boat.  In terms of volumes, GSK India is already a significant contributor to the GSK stable.

Against this backdrop, Witty’s stance might be easier to comprehend.

For instance, the Chinese don’t understand US and European regulatory processes as well as we do, their English language skills aren’t as good as ours. But can they reverse engineer – of course they can. Do they understand manufacturing – of course, they do. It’s a matter of time before they figure out the US FDA, and learn English, no? I mean this was the country that executed the head of its drug regulatory system for corruption – so when they want to make a statement they know how to.

And what’s even more worrying is that once they do this there’s actually little difference between Indian and Chinese – after all, a generic is a generic is a generic.

The only way to keep the lead is to innovate. Not in dribs and drabs but in buckets. The government seems to have realised this – with its plan for a Rs 10,000 crore venture capital fund for pharma R&D.  Provided it becomes a reality, and is deployed well this could help.

Now if companies won’t reveal their numbers, and the only available database in the country isn’t good enough then does this mean we will never know how big the private vaccines market in India is?  Vaccines after all are a high growth sector. Globally more money is going into vaccine research and development than before. And India’s baby cohort and growing middle-class mean that it’s a potentially large market for these companies. Surely there has to be a way?

“It is expected to screen over seven crore adult population (30 years & above) for diabetes and hypertension, early diagnosis of NCDs and treatment at early stages. To fill the gap in the health delivery system, about 32,000 health personnel would be trained at various levels to provide opportunistic and targeted screening, diagnosis and management of NCDs,” it says.

Well, sounds good. Though Vikas Dandekar of pharmasia news (whose tweet sent me to this release) thinks it may lack commitment. I for one, am surprised we even got this far. I recall the first time I wrote about India’s dual burden of communicable or infectious and non-communicable diseases with my colleague Jeetha D’Silva at The Economic Times was in the year 2002 using WHO data.

I got an extract of that article from the Internet and here’s what we said : “The chickens are coming home to roost. The first-ever global analysis of disease burden due to cardiovascular risks, conducted by the World Health Organisation (WHO), shows the burden is getting heavy in the developing world.The WHO says that while tobacco, blood pressure and cholesterol have been leading risks in the developed world, they now feature prominently in middle income countries and are beginning to show up in poorer developing countries as well. The analysis is part of the World Health Report which is to be released at the end of this month. The thrust of the analysis is that cardiovascular disease is no longer a “western” problem.”

That WHO report was probably not the the first warning either.

Of course, am happy that government is beginning to addresss the problem in what appears to be a cohesive, structured manner.  It isn’t too late – provided we don’t take the next ten years to begin implementing the programme.

The study “highlights a high percentage of diabetes and hypertension patients who are suffering from associated co-morbidities such as kidney disease, dyslipidemia (uncontrolled cholesterol level), and also shows that there are a significant number of cases where patients are suffering from one or both the conditions, in spite of no family history or genetic predisposition towards either disease,” says a sanofi statement. “ The results also alarmingly show that almost a quarter of the hypertensives were still undiagnosed and unaware that they were living with a serious medical condition.”

I have no doubt in my mind that the findings from other states will not deviate hugely from the trend. This begs two questions : won’t this level of disease weigh down India’s ability to emerge rapidly as a ‘super power’ (which many of our key opinion leaders in politics, media, business and social life assume is a matter of course). And two, shouldn’t the country start addressing ways to curb the huge healthcare tab of treating all these sick Indians? We need a massive programme that combines prevention, early diagnosis and intervention and is executed with missionary zeal. Such a programme could potentially also dovetail into how best to use Indian systems of medicine to treat diseases that Indians seem to be more prone to than many other nationalities, for instance.

In the meantime, see findings below :