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Improving the Consumer Interface of
Pharmaceutical Sector in India
Prof. Viswanath Pingali
Indian Institute of Management Ahmedabad
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Preliminaries
Please organize yourselves into groups of five, preferably not from
the same background
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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
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Outline of the talk
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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• 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
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Background
• 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
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Key drivers for future growth
• 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:
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• Affordability improves:
• 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
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• 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:
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Some predicted trends in the industry
• 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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Intellectual Property: India and the US
Pricing in India
Good Manufacturing Practices
Deficiencies in the framework
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Regulatory Framework
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Regulatory framework: Intellectual Property
• 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
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• Big break through Indian Patent act in 1970’s
• 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 grabs
Discussion: What happens to overall welfare due to
implementation of product patenting? Both pros and cons
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• Sufficient to establish bio-equivalence
• Insurance mechanism promoting only generics
• Benefit to the Indian pharma
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• The Hatch-Waxman act of 1984 in the US
• 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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• 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 framework: Pricing
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• 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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Regulatory practices: GMP
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• 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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Deficiencies
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Consumer Interface
Rational Use of Drugs
Understanding detailing broadly
Detailing to doctors
Direct to Consumer advertising
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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
community
Contrast 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 guidelines
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Rational use of drugs
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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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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:
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Detailing the doctors
• 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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• 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
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Attitudes towards detailing
• 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?
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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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Is substantial part of pharmaceutical advertising (especially for
off-patent drugs) in India, a classic case of prisoners’ dilemma?
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A Bigger ethical question:
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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Role of the Government:
Compulsory licensing
Generic name vs. brand name prescriptions
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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
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Compulsory licensing
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?
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• 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
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Brand vs. Generic prescriptions
• 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
• Strategy
• Marketing activity
• Brand management?
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• How will the proposed bill change the way pharmaceuticals do
business:
• 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
• Patients
• Pharmaceutical associations?
• Advocacy groups?
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• What can the other groups do?
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