Affordable Generic Drugs: The end-game

Posted by on May 1, 2017 in Blog | 1 comment

This is my last blog in the series discussing affordability of medicine in India. In my past blogs, we have tried to understand the problem,  the nomenclature that confounds this issue, and elements of a solution space that will give us a roadmap to our goal of affordable generic medicines.  I have tried to focus the discussion on data, rather than on emotive issues and opinions. But honestly, I have never actually addressed the core issue; is it possible for us to have affordable medicines in this country? I will try and address this issue now and I believe this is the most important topic in this entire discussion.

What we have heard on the television debates and in newspaper reports is a lot misdirection. We have several stakeholders whose opinion often contradicts one-another. We heard that any attempt to regulate the industry more than it is now is a death-knell for this emerging sector of our economy, so much so that the industry lobby linked their ability to command a price to their desire to set up new manufacturing facilities overseas (presumably to supply the domestic market). We heard from the regulator, CDSCO in the past that global quality standards cannot be applied to Indian industry serving the domestic market because it is too expensive for the industry to comply. It will put the domestic pharma industry out of business. The rationale of our regulator therefore is that our countrymen should learn to accept second-rate systems and live with it. Tough!

I have two data points for you to consider.

The Indian Pharmaceutical Industry is second only to the IT industry in terms of its ability to earn foreign exchange by selling its product in overseas regulated markets. Here are some reports that present how much our industry earns from foreign markets. Report 1, Report 2, Report 3 & Report 4. Not just revenue, the industry’s profits from these markets are very healthy. Here are a few reports on the industry’s financials: Report 6, Report 7 & Report 8. All of these reports confirm that our industry does extremely well selling into these regulated markets. These markets are profitable and profits from the regulated markets makeup for a significant part of their bottom line.

Now lets see the pricing data that allows our industry to generate these healthy profits from the overseas regulated markets. Dr David Belk has compiled a list of what an average pharmacy in the US pays for generic medicines. His research is available here: The True Cost of Healthcare. For ease of reading, he has categorized generic drug names alphabetically and for each formulation; his tables tell us what an average pharmacy paid for each drug/formulation in 2016. Let us look at a few examples of medicines commonly prescribed in our country for chronic treatments (cardiovascular and metabolic diseases):

Cost Per Tablet in the US
Atorvastatin 10 mg $0.11 7.15 ₹
Atorvastatin 20 mg $0.13 8.45 ₹
Atorvastatin 50 mg $0.15 9.75 ₹
Atorvastatin 80 mg $0.17 11.05 ₹
Simvastatin 10 mg $0.03 1.95 ₹
Simvastatin 20 mg $0.03 1.95 ₹
Simvastatin 50 mg $0.04 2.60 ₹
Simvastatin 5 mg $0.04 2.60 ₹
Carvedilol 12.5 mg $0.03 1.95 ₹
Carvedilol 25 mg $0.03 1.95 ₹
Carvedilol 3.125 mg $0.03 1.95 ₹
Carvedilol 6.25 mg $0.03 1.95 ₹
Glimepiride 1 mg $0.07 4.55 ₹
Glimepiride 2 mg $0.10 6.50 ₹
Metformin HCL 1000 mg $0.03 1.95 ₹
Metformin HCL 500 mg $0.02 1.30 ₹
Metformin HCL 850 mg $0.03 1.95 ₹
Metformin HCL ER 500 mg $0.04 2.60 ₹
Metformin HCL ER 750 mg $0.09 5.85 ₹
1 USD = 65 INR

These are just a few examples, the entire list is available on the link above.

Clearly, these prices (converted into Indian Rupees) look affordable to me. Mind you, the industry is still able to generate healthy profits from selling their products at these negotiated prices in the world’s most regulated market (the USA). To comply with the US Standards for cGMP, manufacturing facilities used by our own industry put what they use to make drugs for domestic consumption to shame. They conduct bioequivalence studies to demonstrate therapeutic efficacy, conduct long term stability studies to support expiry dates (which is still not mandatory in India, we just assume the drug is good until the date printed) and submit annual reports both for safety and batch release to the US FDA on schedule. And this is not the whole list. All of these things do take time, effort and money. Despite complying with these standards, our own industry, which accounts for more than 50% of the US drug supply  makes a healthy profit selling their product at these negotiated prices.

My question is simple. If our industry can do this for the US market, what is stopping it for replicating this model at home? Why are we told that we have to live with a lower standard, consume substandard medicines and  if we dare question the industry’s practices, then all hell breaks loose? What I find absolutely amazing is that the regulator, whose job is to protect public health becomes a vocal proponent of the industry’s arguments.

Our pharmaceutical industry made investments to comply with US standards and is generating healthy profits for their shareholders by selling into that market. Do they do half of that for a license to sell domestically in India? I think we all know the answer to this question. Why is that?

Keep in mind that these negotiated costs include costs to ship the product made in India to the US. Furthermore, it doesn’t address the fact that our patient pool in India is three times as large as the US. Doesn’t that scale warrant additional efficiencies?

Why then, are we told both by the industry and the regulator to suck it up and stop complaining? That if we ask for compliance with global standards, we will kill this industry? What are we missing here?

If there is one lesson from the discussion over the last two weeks about the issue of affordability, it is that we need to remove the issue of “quality” as a variable from the equation. Look at the same issue being debated in the US, do they even bring the issue of “quality” up? It is a testament to their regulator and their administration that the discussion is focussed on price, and just price.

This was the reason I approached the Supreme Court of India in March 2016 with a set of Public Interest Litigations based on two years of grueling RTI work. I was disappointed that the Chief Justice then questioned my standing, because I am a US Citizen of Indian origin to bring such a case in an Indian court. The judge said my arguments were academic, and that the court had more important issues to adjudicate. Now that this issue has been brought into the public awareness by none less than the Prime Minister of India, perhaps there will be a more successful effort in us achieving his vision of providing affordable medicines to the citizens of this country.

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Affordability: What does procurement have to do with it?

Posted by on Apr 30, 2017 in Blog | 0 comments

In the last blog, we looked at how we can enable pharmaceutical manufacturers to use quality as a differentiator and empower the citizens of our country to make more informed decisions about the medicines that they purchase. We briefly touched upon access, and I said we will come back to revisit this topic later. Let us now look closely at a few interesting facts about how our public procurement systems work, which is a key determinant of access.

Other than policy related documents on how procurement of medicine “should” work in our country, there has been very little research on its implementation and on-the-ground reality of how it actually does. The best reference I came across is this 2013 study published in the British Medical Journal where the authors from Indian School of Business and Indian Institute of Public Health compared drug procurement among five Indian states. Using information collected through the RTI process among other things, they looked at how Tamil Nadu, Kerala, Odisha, Punjab and Maharashtra implemented their drug procurement policies. The article makes for very interesting reading, and their conclusions are nicely summarized in this poster,

For the purposes of our discussion here, I would like to draw your attention to the following conclusions drawn by the authors followed by my comments inline:

  • Lack of any sophistication in demand estimation and forecasting models. States use previous year’s consumption as the basis, no feedback in the modeling exercise.
    • In today’s complex and dynamic disease burden conditions, clearly we can do better than this. Forecasting is sophisticated science, there is absolutely no reason we shouldnt utilize it in our demand planning.
  • Quality control: Empaneled private labs and/or government labs.  Tamil Nadu has empaneled laboratories to which every sample from each batch is sent for quality testing before distributing to user institutions.  Odisha and Maharashtra do not have any quality testing protocols in place, apart from the supplier s internal quality certificate. Pre-qualification criteria, GMP/WHO-GMP/US-FDA is a requirement for all
    • I have trouble reconciling this fact with what the DCGI and the CDSCO has publicly said, that a large majority of our manufacturing facilities do not conform even to Schedule M, forget WHO-GMP. How then are these states fulfilling this requirement?
  • More than half of the suppliers to Tamil Nadu are from within the state. The same statistic for Kerala is 14%, for Maharashtra 34% and for  Odisha, a surprising 0%! 
    • While it could be a good practice to help develop the local drug manufacturing industry, this also points to political patronage. Although difficult to substantiate, patronage manifests itself in many ways, including shortages, availability and overpayments.
  • There was no observed correlation between price vs. volume but there is a negative correlation between level of quality control and pre-qualification criteria vs. price
    • This is very surprising, particularly the second observation. Clearly, quality is not a differentiator when it comes to public procurement it appears. As far as the first observation goes, doesn’t it defeat the whole purpose of having a consolidated procurement system?
  • Tracking dispatched/delivered drugs: value based to none
    • Again, we can do a whole lot better here. Leakages within the system benefit no one, especially, those toward whom this is targeted. Political patronage plays a key role here.
  • A clear difference in the efficiency of the processes can be seen between the autonomous organizations and the state-run organizations in terms of lead times for payments, quality control and in the usage of IT systems and so on. Autonomy refers to the extent of government involvement in the decisions of the procurement organization; fully autonomous’ implies minimal involvement while government owned indicates a high degree of involvement. The idea of having an autonomous organization in the public sector is to enable it to function more transparently by avoiding the plausible procedural delays and also to enable it to make decisions of contracting and outsourcing that are best suited for the prosperity of the organization.  

The procurement process followed by the central and the state governments is vividly described, with interesting anecdotes in this 2007 Working Paper from the University of Edinburgh, which also makes for very interesting reading.

While this study is limited to just a few states, the observations and conclusions drawn are applicable to all. If access to medicines is a priority for us, several of these obvious gaps in our supply chain need to be better managed.

There are no silver bullets, this is a complex web. Most of the changes needed here are systemic. However, there are a number of things we can do in short order to help. Here are some low hanging fruit that we can adopt to simplify our supply chain:

  • With the advent of GST, one of the key reasons for the existence of the many Clearing & Forwarding (C&F) Agents that dot our drug supply should vanish. These entities existed primarily to address the disparate tax collection systems between the various states and the centre and contributed to the price of the drug at the pharmacy counter.
  • While selecting the provider and negotiating contracts:
    • We should change our approach away from selecting the lowest bidder in government contracts. When it comes to medicines, the lowest cost bidder is not always the best. We want the industry to function, and deliver good quality medicine.
    • Only those formulations which have proven therapeutic efficacy should make the cut. The manufacturer ought to have secured regulatory approval for safety and efficacy prior to qualifying for the bidding process
    • The bidding process should be transparent and automated to make it free of political influence. In all my research, this seems to be a big factor. Because Health is a State subject, individuals in power within the State administration essentially have a carte-blanche when it comes to procurement of medicine. There is virtually no accountability or transparency.

Then there are lessons we can draw from how the US is handling drug shortages. Driven primarily by the regulatory observations and actions against pharmaceutical manufacturers based in India, the US public health system has also been at the receiving end of shortages of some life saving drugs. The way in which the system responded to these challenges and the remedies that they have put in place is instructive to us as a country. For more information on how they did it, you can read it here.

As you can see, affordable medicines is a noble objective which can be achieved. But it needs us to understand why we are where we are and chart out a roadmap to our goal in a thoughtful and deliberate manner.

Guidelines from the MCI for example, which were reiterated last week, show how poorly these institutions understand the ground reality of how our drug supply chain works. We should refrain from offering such simplistic platitudes and focus our effort toward developing a better understanding how how the system works today, where systemic issues such as the ones highlighted here prevent efficiencies and therefore result in lack of access.


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A step toward affordability

Posted by on Apr 29, 2017 in Blog | 0 comments

In this series of blog posts, I have described the challenges with the proposed simplistic approach to make drugs affordable, including the nomenclature we use, the factors confounding the problem and the difficulties we face with the proposed solution in the long term. Since this is a problem we created with decades of neglect of our healthcare systems, it is going to take at least half of that time to undo the damage we have caused.

In this post, we propose a small step which empowers the patient to make the right choices for herself. Prashant Reddy, who helped me with my PIL and I wrote an opinion about this in a recent op-ed. The conversation on affordability has been hijacked (and rightfully so) by two specific issues. Access and Quality. A cursory scan of the reporting on this topic for the last week will show anecdotes of lack of access in many cases. While that is an important aspect of this solution, for now, lets focus on quality and we will come back to access another time.

One approach to allaying the fears about quality of drug supply is to enable the patient to verify that the medicine he is dispensed has been checked for therapeutic efficacy.  We already have such a tool in the Clinical Trial Registry of India (CTRI).  The idea behind establishing this database was similar to what the US does to promote transparency, make manufacturers register their planned clinical studies. This accomplishes two objectives. If the study fails, the pharma company cannot hide the data forever.  Pharmaceutical companies were notorious for publishing positive studies and not disclosing studies that failed. This addresses that issue. Someone can look up the study registration and ask the company to publish what it found at a future date. Second, it provides an effective platform for patients seeking experimental therapy to enroll into clinical studies. Now, let us see how we can use this tool in the current context.

The Indian Pharmaceutical Alliance (IPA) has argued that their products have been tested for efficacy and safety against their innovator counterparts. Their argument is that the rest of the (unbranded) drug supply has never been; therefore, it may not be effective therapeutically. Let us ask them to provide these BE studies and their respective study reports to CDSCO. Let the CDSCO verify that they have in fact conducted proper BE studies on their product and if so, allow these member IPA companies to register these studies retrospectively with the CTRI. For every study that the CDSCO verifies as properly done, let it issue some kind of logo or an image to the manufacturer, which can be printed on the packaging that both the pharmacist at the dispensing counter and the patient can easily read. Presence of such a logo will confirm that this specific formulation has been verified for therapeutic efficacy. For those manufacturers who fall into what the IPA says supply the remainder of the drug supply, the presumption is that they have never conducted clinical studies. If they have, let them follow the same process; if they have not, let them register new studies in the CTRI and conduct these studies and secure such a logo.

This is a simple and cost effective approach to addressing the issue of quality. It inspires confidence in us, the citizens that someone has checked and verified the formulation we are being dispensed. It addresses a key issue among the medical fraternity. And most importantly, this can be implemented quickly. The IPA says their products are equivalent, lets start there. We will at least know that 15% of our drug supply has been verified as therapeutically effective to begin with. This approach provides a powerful differentiator to those companies that actually invest in building quality systems. It empowers the patient to make informed choices.

Now, the only drawback to this approach is the integrity of the regulator, CDSCO. History shows that it has not always acted in public interest. There needs to be some independent oversight of this process to ensure that when it evaluates retrospective studies from any manufacturer, whether a member of the IPA or an unbranded one, it does it based only on Science and not other influencing factors.

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