Think different : Big Pharma and drug pricing in emerging markets

I’d like to introduce a guest column by Salil Kallianpur, a healthcare marketing professional with experience in the pharmaceutical and medical devices industries. Salil is an avid reader and follower of healthcare current affairs, its politics, and strategies.  He comments on the intersection of healthcare and life on his blog My Pharma Reviews. He is based in Mumbai. The views in this article are his own and not those of his employer, a pharmaceutical organisation.

The price of medicines has always been a matter of animated, even acrimonious, debate. Most of the time, activists assume that the only way to solve social challenges is through government and charity and that the only purpose of business and investing is to make money. Responsible sections of the pharmaceutical industry reject that worldview. Consider this.

Swiss drug maker Roche reduced the price of its blood cancer drug Mabthera by 50% in South Africa. Sanofi slashed prices on its diabetes drug Lantus and its cancer treatment Taxotere in the Asia-Pacific region. Eisai cut prices of its Alzheimer’s drug Aricept in 6 Asian countries and GSK cut prices on “essential” drugs by 40% to 50% in Kenya.

These recent Big Pharma attempts at tiered pricing in the developing world signal a deviation from the age-old strategy of recovering research costs through high prices.

What’s changed? Continue reading “Think different : Big Pharma and drug pricing in emerging markets”

Five questions to ask about India’s proposed free drugs programme

India’s ambitious plan to provide free medicines to its people has received worldwide attention. For details see here.  It’s no secret that the world’s largest democracy also spends an abysmally low percentage of GDP on healthcare. This is a belated attempt to correct that. In theory, this is a welcome move.  In an earlier post, I had spoken of how India should not limit itself to tools such as compulsory licensing to improve drug access and affordability.

But having taken the call to make amends, what’s extremely hazy is how this scheme is to work in practice.  Here are five questions to ask about India’s proposed free drugs programme. Continue reading “Five questions to ask about India’s proposed free drugs programme”

Generic or innovator, manufacturing still make-or-break

The pharmaceutical industry puts a heavy premium on innovation – the ability to come up with new drugs. Indeed this separates the boys from the men. Generic pharmaceuticals however are seen as similar to any other commodity manufacturing sector.

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.

Abbott at number one : concerns about rising drug prices

Abbott’s acquisition of Piramal’s Indian branded drugs unit has raised the spectre of rising prices in some quarters. The reasons are two-fold : one, Abbott will pay Rs 17,000 crore for a Rs 2000 crore business and the need to earn a decent return on this will make it raise drug prices. And two, Abbott now has 7 per cent of the Indian market and is in number one position. Ergo, it is in a position of strength from where it can get away with price hikes.

Perhaps, Abbott will find the need to raise prices. But I believe it will find it difficult to do so across-the-board beyond a reasonable extent. For two reasons. One, what it has acquired are branded generics.  This business has multiple copycats already on the market and nothing – at least, in the law – prevents more from joining the party. So, it is competitive.  Two,  the Piramal unit’s growth has also been driven by the opening up of ‘bottom-of-the-pyramid’ type markets that hitherto were under-served by companies. For instance, Dharavi (Asia’s largest slum) in Mumbai. These are extremely price-sensitive.  So there will have to be a trade-off between profit and growth which defeats the purpose of the acquisition which is primarily for market share. And three, while a good number of drugs are outside government price control, the National Pharmaceutical Pricing Authority reserves the right to fix prices under a public interest clause if they are raised by more than 10 per cent in a year. Indeed, Piramal and a good number of other companies fell afoul of this law not too long ago and saw some drug prices fixed by the government in spite of these drugs falling outside the purview of drug price control. This also meant that companies could not change prices of these brands again with consulting the drug price regulator.

True, Abbott may launch its patented drugs at a hefty premium but that it is already doing anyway. The concerns of rising drug prices in the context of the Abbott-Piramal deal, to my mind, are overdone.

Counterfeit drugs : Europe vs India?

The EU’s industry commissioner says trade in counterfeit medicines in the Union has exceeded its worst fears, according to German daily Die Welt. “The number of counterfeit medicines arriving in Europe … is constantly growing. The European Commission is extremely worried,” the commissioner, Gunter Verheugen, said yesterday.  34 million tablets have been seized in 2 months from various custom points, he said.

Verheugen did not name names. But an AFP report based on Verheugen’s interview to the German daily pointed out that a July EU report had identified India as a large source of many of the fake pharmaceuticals seized in 2008.

That is embarassing, even shocking. If it is true. 

But the EU’s definition of counterfeit is elastic. It stretches to include generics of products currently under patent protection in the EU – even if they are in transit to other countries. It is this expansive definition that has led to seizures of Indian drug shipments at EU custom points,  and the tarring of India a as a significant source of counterfeits, says D G Shah, secretary-general of the Indian Pharmaceutical Alliance.  In recent months, tens of drug shipments from well-known Indian companies such as Dr Reddy’s, Macleods, and Cipla that were merely passing through EU ports on their way to countries in Latin America have been seized, in response to complaints from patent-holding companies such as Sanofi-Aventis, and Novartis. These drugs were however not under patent in the buyer countries.

Given that India is a huge exporter of generic drugs to those countries, and that transit via Europe is a preferred route, then is it any surprise that India is such a large source of ‘counterfeits’? 

New Delhi has so far been ineffective in preventing these seizures. It has belatedly reacted by taking the EU to dispute settlement in the WTO. But that’s clearly the beginning rather than the end of the issue as Verheugen’s latest interview – probably intended to keep the issue alive – indicates.

NICE, Nexavar, and why it matters

There has been some strong media and patient outrage in the UK over a decision to not make available Bayer’s Nexavar, a drug for terminally-ill liver cancer patients, through the National Health Service.  UK’s National Institute for Health and Clinical Excellence – referred to as the NHS’ drug rationing body by the UK media – says the drug’s price does not justify the benefits that it provides.  Nexavar costs 36,000 pounds a year (Rs 27 lakh). It extends survival by an average of about 3 months, and is the first to do so for liver cancer.

NHS could end up paying as much 9 million pounds on treating 600-700 patients a year who qualify.  Bayer has offered to give every fourth packet of the drug free but that would reduce the cost to 7.7mn pounds which is still pricey the NHS feels.

Bayer plans to appeal the decision.

The decision has health activists and patients up in arms. (See here and here). NICE has been roundly-roasted for putting a value on human life, so to speak. Note that neither of the articles that’s linked to above has a single talking head asking Bayer to bring down the price of the product.

Now consider what happens in India.  First of all, none  except those whom the government employs expect it to pay for drugs – whether for common cold or cancer.  80 per cent of our healthcare spend is out-of-pocket, among the highest rates in the world.

However, companies receive plenty of flak from the media for price increases (not that it stops many of them).

Indeed,  over the decades the government has conveniently shifted the onus of providing affordable drugs onto the drug industry.  How has it done this?  One, in the early seventies it liberalised the patents regime so that generics of globally under-patent drugs could be freely launched in India.  Two, it did little to raise the bar on quality. Indeed, once a drug was on the market for five years a new manufacturer did not even have to approach the central regulator for a quality approval – it simply got a manufacturing licence from the state.

As a result,  India has multitudinous copycats of a good number of drugs giving it the distinction of having among the lowest drug prices in the world. But quality is still a problem especially outside the metros. In fact, it is this inability of the government to guarantee quality that has allowed companies to charge an artificial premium for ‘brands’ – even though in a patents-free market there were hundreds of copycats of each drug. Brands are after all associated with quality.

So a strange duality exists in the country. Yes, it has some of the lowest drug prices in the world but to be sure of what they are getting, especially in life-and-death situations, consumers – rich or poor – still pay a fat premium.  Besides, when the markets are not large enough – such as for rare diseases – generics will not be found.

In recent months, a small attempt is being made in government to make amends.  The ministry of chemicals and fertilizers’ Jan Aushadhi pharmacy outlets provide unbranded medicines at far lower prices by using bulk sourcing.  Last heard, this was making slow progress for want of real estate and suppliers. The government also wants to pay for cancer drugs (currently a few hospitals like Tata Memorial funded by the Department of Atomic Energy subsidise medicines) but hasn’t yet begun.

As an aside, Nexavar – which is patented in this counry to Bayer under India’s tightened patent rules of 2005 –  is currently the subject of a lawsuit here.  Bayer has sued the Indian drugs regulator to prevent it from approving a Cipla generic which will probably be cheaper. And surprisingly, senior government counsel seems to be missing in action from the court proceedings.

True, it’s not all hunky-dory in the west as the Nexavar debate shows. Governments and insurers flush with funds to pay for healthcare have pushed prices to record highs to the point where countries are now feeling the pinch.  But India can learn from those mistakes and start forgeing its own system tailored to meet its needs.

And not sometime in the future. Today, right now, this minute.