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Improving the Consumer Interface of Pharmaceutical Sector in India

Prof. Viswanath PingaliIndian Institute of Management Ahmedabad

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PreliminariesPlease organize yourselves into groups of five, preferably not from

the same background

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Outline of the talk

• Background of the Industry• Regulatory Framework• Consumer interface in the pharmaceutical sector• Ethical issues related to marketing• Role of the Government• Role of advocacy groups• Case study on ethical advertising

Towards the later half of the talk, there will be several discussion questions. I might pick a group at random and ask them to discuss the issue under consideration

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Background

• Started in 1930s with the Bengal Chemicals and Pharmaceutical works

• History of the Indian pharma is virtually non-existent before 1970s; started with revamping of patent act in 1970

• From importing country to exporting country• Output of $1.9 Billion in 1980• Robust y-o-y growth rate from 2001 onwards• Growth of around 10% between 2001 and 2006• 14% since 2007

• Currently at around $18 billion with 60% for domestic consumption and rest for exports

• Ranked third in terms of volume and tenth in terms of value• Expected to reach $25 billion by 2015 and $50 billion by 2020 4

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Key drivers for future growth• Affordability improves:• Indian GDP growth is projected at a robust rate• Government poverty alleviation programs like MNREGA showing

some signs of progress• Government implemented insurance for poor households

• Life-style disorders become more prevalent:• Between 2005 and 2015, growth of chronic diseases like coronary

heart disease, diabetes, asthma, obesity etc. is expected to be more than 50%

• Patent expiry of pharmaceutical products:• Several bio-pharmaceuticals – for example, monoclonal

antibodies like bevacizumab, trastuzimab, etc. – are likely to lose patent status soon

• An ICRA report estimates roughly $100 billion worth drugs would lose patent status soon 5

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Some predicted trends in the industry• Speciality and super-speciality segment is likely to grow more

than mass-therapy segment• Metro and Tier 1 cities segment will continue to grow robustly,

but the share of rural market is likely to increase• Hospital channel is likely to increase significantly more than

the retail market segment• Non-traditional opportunities (read non-generics) might grow:• Investment in patented medicine• Biologics and vaccines market also grows up

• Several mergers, collaborative research and marketing, increasing foreign investment, etc

• Penetration of sales representatives is likely to be higher (from 1 rep for 7 doctors to 1 rep for 3 doctors in 2020)

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23Regulatory Framework• Intellectual Property: India and the US• Pricing in India• Good Manufacturing Practices• Deficiencies in the framework

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Regulatory framework: Intellectual Property

• Big break through Indian Patent act in 1970’s• No product patenting: Local firms could copy new drugs without

having to worry about infringement as long as they did not copy the process of manufacturing. Transformed India into net importer of medicines to net exporter

• Next big break is India’s accession to TRIPS in 1994, w.e.f 2004• Re-introduction of product patenting• Numerous pharmaceutical product patents were granted since

2005 onwards• Entry of several multinationals and their products into country• Welfare effects of what happened with product patents is still up

for grabsDiscussion: What happens to overall welfare due to implementation of product patenting? Both pros and cons 8

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• The Hatch-Waxman act of 1984 in the US• Sufficient to establish bio-equivalence• Insurance mechanism promoting only generics• Benefit to the Indian pharma

• Other countries adopted similar laws but differ in the details• Overall logic of encouraging generics to keep healthcare costs low

while maintaining quality remains paramount

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Regulatory framework: Pricing

• First introduced in 1962, and controlled through Drug Prices and Control Order (DPCO)

• Criteria: mass consumption potential (disease burden) and lack of potential and viable competition

• Drugs with market share more than 50% are subject to price control

• Discussion: Definition of market share and competition• List of drugs under price control has been reducing• Discussion: Welfare effects of price controls• For drugs not under price control, the government allows the

company to set minimum retail price, and intervenes only if the annual price increases by more than 20%

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Regulatory practices: GMP• The WHO GMP were originated in 1975, and as of July 1, it

became mandatory to follow the Schedule M of the GMP• Small scale pharma has greater problems than large scale ones

with regards to compliance• No concrete reports available as to the extent of such

compliance by various firms• Maharashtra, Andhra Pradesh, and Gujarat lead in number of

units with GMP compliance• For more advanced economics, complying with WHO is not

sufficient: US-FDA, UK-MHRA, AUS-TGA, etc• India has the maximum US FDA approved manufacturing

plants (100)Discussion: The Ranbaxy incident in 2007

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Deficiencies

• Recently, the regulatory authorities (CDCA) withdrew 294 molecules on the grounds that they are therapeutically spurious and counterfeit drugs

• No regulation for approval of cocktail drugs; whether PKPD studies are mandated or not

• WHO estimates that roughly 30% of medicines could be in some way contaminated

• No transparency in licensing, approval etc• OTHER POINTS ANYONE WOULD LIKE TO ADD

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Consumer Interface• Rational Use of Drugs• Understanding detailing broadly• Detailing to doctors• Direct to Consumer advertising

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Rational use of drugs

WHO defines rational use of drugs as a situation where: patients receive medications appropriate to their clinical needs, in doses that meet their own individual requirements, for an adequate period of time, and at the lowest cost to them and their communityContrast it with the facts regarding developing countries including India:• More than 50% of the drugs are improperly prescribed, sold

and consumed• The overuse, underuse or misuse of medicines harms people

and wastes resources• More than 50% of countries do not implement basic policies

to promote rational use• Less than 40% of patients in developing countries are treated

according to proper clinical guidelines14

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National Rural Health Mission (NHRM) study pertaining to exclusively rural India:• Very little effort to promote Rational use of medicine• Common to see prescriptions with banned drugs• Prescriptions with overdose of antibiotics

WHO recommends several ways to encourage rational use of drugs. Most important for this talk is:

“There should be no financial incentive to prescribe particular drugs, and artificially withhold some other important, and, perhaps, more efficacious drugs.”

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Detailing the doctors

• The decision maker and payer are two distinct personalities• Detailing is a dynamic process• Detailing of drugs in mature markets like the US• Detailing in India where branded generics dominage• Detailing serves several purposes:• Information to the doctors about availability of new drugs• Barrier of entry within the molecule and therapeutic area

Discussion: Ethicality of erecting entry barriers within a molecule and within a therapeutic area

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Attitudes towards detailing• 1998 study on attitudes of physicians and patients about

physicians receiving gifts from drug companies• The BMJ 2004 study of physicians and drug company

connections. Suggestions from the study include:• Appointing a centralized authority in hospitals to interact with

drug companies• Transparency in dealings between drug companies and doctors• Clear mentioning of conflict of interest

• Main point of contention: conflict of interest can result in doctors prescribing sub-optimal drug therapy

Discussion: Pharmaceutical companies view of detailing activities to physicians and more importantly gift giving and conference sponsorship? 17

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Further points for discussion:• Given that the doctor ought to be the primary decision maker

on drug therapy, is Direct to Consumer Advertising indeed justified?

• Given that the prescription drugs are available even without prescription, and a patient is likely to miss-assess the potential of a drug, isn’t DTCA potential health hazard?

• Experience of buying sorafenib tosylate and sitagliptin phosphate in Delhi

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A Bigger ethical question:

Is substantial part of pharmaceutical advertising (especially for off-patent drugs) in India, a classic case of prisoners’ dilemma?

In a country like India where many people cannot afford basic medicine, how ethical is it to incur such substantial expenditure over advertising (which, in turn, has to be passed on to the consumers through higher prices)?

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23Role of the Government:Compulsory licensingGeneric name vs. brand name prescriptions

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Compulsory licensing

Facts of the case:• In 2012, the government allowed Natco Pharma a compulsory

license to manufacture Bayer’s renal cancer product Nexavar (sorafenib tosylate)

• The reason cited by the government is public interest• Cost of therapy fell by 90%; Cipla soon joined in

Questions for discussion• Is the government right in granting compulsory licensing to

Natco Pharma?• What could be the positives and negatives of granting

compulsory licensing for pharmaceutical products?21

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Brand vs. Generic prescriptions

• The government is planning to propose a bill re: prescription habits of the doctors. According to the bill:• The doctor has to write generic name of the medicine on the

prescription and not the brand name of the medicine• The pharmacist would give the available brand to the consumer

• This means, patented and proprietary drugs require marketing but off patent drugs require no marketing activity• Direct implication is reduction of prices for the molecules which

see competition and are old in the market place

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Discussion of the bill: Questions

• How will the proposed bill change the way pharmaceuticals do business: • Strategy• Marketing activity• Brand management?

• What are the positives of such bill to:• Doctors and patients• Pharmaceutical companies

• What are the negatives of such bill to:• Patients and doctors• Pharmaceutical companies

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Conclusions

• What can the other groups do?• Patients• Pharmaceutical associations?• Advocacy groups?

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