The global pharmaceutical industry is going through a period of turmoil.
Public's image and understanding of its motives and business approaches
are at an all time low. R&D costs are unaffordable even to the
largest corporations with productivity reaching unacceptable low levels.
To ensure economic sustainability and growth of this vital industrial
segment and to regain public's confidence, a paradigm shift in
approaches to all major activities including R&D, manufacturing and
marketing is called for. The current decade will see major strategic
shifts which will hopefully lead to the return of a vibrant industry
fulfilling its avowed mandate of being a provider of effective and safe
drugs at affordable prices to the masses who need them.
The year 2009
In
many ways, 2008 and 2009 were years to forget not only due to the
unprecedented economic melt down affecting global development goals, but
also due to loss of public's faith in what was thought to be well
established institutions in both public and private sectors. The global
pharmaceutical industry was probably the least affected during these
turbulent years. Nevertheless, while demand had expectedly grown in all
markets there was a steady decline in investments in newer facilities
and even more importantly in research and development, the most
important lifeline for the industry. The years 2008 and 2009 saw the
lowest number of new drugs introduced in the world market. The year 2009
also saw several events which seriously affected the fortunes of the
industry .
The global pharmaceutical industry had a total sales
of around $720 billion in 2009. The growth in value terms has been in
low single digits in the developed economies while in the emerging
markets annual growth was 12 to 20 per cent. It is estimated that by
2020, the market will be worth $ 1.3 trillion with Brazil, China, India
Indonesia, Mexico, Russia and Turkey accounting for two -fifths of the
global sales.
Image of the industry
The credibility of
various activities of the pharmaceutical industry were seriously dented
during recent years. Suppression of valid information gathered during
the clinical phase of drug development, and even post-marketing, poor
quality standards, lack of transparency in marketing, creating nexus
with the medical professionals to gain undue advantages, irrational
promotion of drugs to the medical profession or even to the patients,
concentration on market needs rather than medical needs while allocating
investments in new drug discovery and development, using the patent
system to ensure monopoly in the market, forming cartels while fixing
prices, anti-competition practices are some of the charges levelled
against the industry in general
Recent events of adverse drug
reactions of well established drugs and their withdrawals and bans have
raised serious questions both about the validity of current pre-clinical
and clinical evaluation methods as well as the interpretation of the
outcomes of such studies. There is also the criticisms of companies
developing and marketing too many "Me Too" drugs with no major medical
benefits to the patients to gain an entry into a new market or protect
their market share with patented products.
Challenges of pharma industry
While
the above charges against the industry has caused serious damage to the
image of the industry, from the industry's perspectives there are
several major issues which need to be addressed and corrective actions
and approaches identified and implemented to ensure sustainability and
growth. These challenges relate to R&D, state of Intellectual
Property Rights (IPR) Protection, more stringent regulatory standards
for approval of new drugs, control on prices of drugs, difficulty in
making drugs available at affordable prices to the majority of world's
population, emergence of new diseases as well as resistant infections
and problems of distribution across the various geographical
territories.
Pharmaceutical R&D
The current
business model which has been responsible for the industry's present
standing as a major contributor to healthcare is no longer economically
viable or operationally suitable to provide the needed services. That
model is primarily based on strong R&D and innovation leading to new
drugs which then are made available to meet the global market needs.
The key pre-requisite for success of this model is the ability to
recover the massive investments in R&D through the patent system
which gives the innovator the exclusive rights to be a monopoly supplier
to the market for a period of twenty years from the date of filing of
the patent application. The success of this model is dependent on the
speed with which the innovation cycle moves and the costs of discovery
and development of new drugs.
Over the years the costs of new
drug discovery and development R&D have escalated considerably and
present estimates are that every new drug that reaches the market costs
not less than $ 1.5 billion. Even though the exclusivity though the
patent system is available effectively for up to 10 to 12 years, in
actual practice there is no guarantee that the drug will remain in the
market that long since unexpected side reactions, competition from newer
and better products and the emergence of alternative therapies can
considerably affect the life of the drug in the market place.
The
reasons for the high and ever-increasing costs of R&D are low
productivity and poor success rate due to the need for setting higher
standards of safety and efficacy of new drugs ; stricter regulatory
systems ; poor understanding of disease processes, infective organisms
and transmission vectors and higher costs of pre-clinical and clinical
experiments and others. The financial bottom line of R & D based
pharma companies is purely dependent on the number of patent protected
drugs in their portfolio.
Impact of biotechnology in new drug discovery and development
With
the expiry of several patents on some of the blockbusters , large
pharma companies are increasingly moving into high value biotech drugs
which in spite of small volumes, in view of the high prices ,are
commercially attractive.
Modern biotechnology- based drugs are
only two decades old largely triggered by the deciphering of the
structure of DNA and much later of the human genome as well as the
genomes of a large number of infective organisms and vectors.
Recombinant technology and the production of monoclonal antibodies have
revolutionized the advent of biologicals as therapeutics, diagnostics
and prophylactics.
The percentage of biologicals approved for
marketing or are in the pipeline of development has been increasing in
recent years. In 2009, seven of the 26 new drugs approved for marketing
by the USFDA belonged to this category. These products meet selected
niche medical needs and are generally much higher priced than their
synthetic counterparts.
Thus each of the top 10 biotechnology
drugs had annual sales ranging from $ 3 bn to $7.66 bn with Enbrel
(Amgen) Remicade (Schering-Plough), Rituxan (Roche), Herceptin (Roche),
Humira (Abbott), Lovenox (Sanofi-Aventis) crossing the $ 4 bn mark.
There are over 300 biotechnology products under pre-clinical and
clinical development primarily in the area of cancer, viral disorders,
immune compromised diseases and central nervous system disorders.
While
biotech drugs are largely based either on functional proteins
identified using tools of modern genomics and proteomics and on specific
humanized monoclonal antibodies and are highly specific in their
activity, they suffer from the problem of not being useful to all
populations. In other words they lead to personalized medicines rather
than medicines for the masses. In addition they are not affordable to
the majority of patients who need them. Yet another issue is the
approval of biogenerics. Establishing equivalence with a marketed
biotech drug and its generic counterpart is a complex process. That is
why, even though over a half dozen biotech drugs have gone off patents,
starting with human insulin , bio-generics have hardly been approved for
marketing.
Mergers and acquisitions
A major strategy
adopted by pharmaceutical companies during the last three decades or
more has been growth though mergers and acquisitions . While the
compulsions to take this route to growth were different for different
players, they largely were triggered by the need to fill in their
product portfolios, increasing the size and profitability to afford
higher levels of R&D investments, consolidating and downsizing
activities, centralizing facilities, complementing the management
expertise of the partners etc.
During the last few years total
M&A deals have crossed over $ 300 billion of almost 40 per cent of
the global pharma industry's sales. Apart from the earlier ones of Glaxo
& Smith Kline Beecham (GSK), CIBA- Geigy, & Sandoz (Novartis),
Bristol Myers & Squibb (BMS), Sanofi, & Aventis (Sanofi
-Aventis), notable new ones are Pfizer & Wyeth ($ 68 bn) Roche &
Genentech ($ 46.88 bn), Merck & Schering-Plough ( $ 41 bn),
Novartis-Alcon ($28.1 bn) and many smaller ones such as GSK Steifel ($
3.6 bn), Sanofi-Aventis &Merck Animal care ($ 4 bn). The trend will
continue and by the end of the decade the footprints in the map of the
global industry will have a totally restructured look based on
consolidation of the major merged entities. Indian companies have also
been victims of such global strategies as in the case of Ranbaxy &
Daiichi, Nicholas Piramal & Abbotts, Orchid & Hospira, Shanta
Biotechnics & Marion and many other smaller ones.
The patent scene
The
World Trade Organisation (WTO) which administers the global
intellectual property (IPR) system under the TRIPS Agreement has
recognised that all members except those of the Least Developed Category
(in DOHA, the Inter - Ministerial conference extended the transition
period to 2016) have legislated TRIPS compliant IPR systems in their
countries, even though there are minor differences from the full TRIPS
agreement in the patent laws of India, Brazil, Argentina, China, Mexico,
Egypt , Thailand and a few other members. To an extent even the US has
certain sections which are outside the ambit of the TRIPS Agreement.
What is however of major concern is the difficulty faced by developing
countries for protecting their public health interests through
legitimate grant of compulsory licenses as provided for under Para 6 of
the Doha Declaration. It is hoped that the by the end of the current
decade there will be more clarity on these issues and an equitable
modality of implementation of the Doha Declaration will be worked out.
Drug prices
One
of the major issues faced by the pharma industry is its inability to
provide effective and safe drugs to three fourths of the world's
population at affordable costs. There are no easy solutions to the
problem as long as the current models for R&D, decentralized
production and marketing are followed. In all countries , the healthcare
providers, insurance companies, the patients and the public at large
will continue to put pressure on the industry to reduce prices of drugs
and the industry has to device ways and means to achieve costs reduction
in all it's activities .
Regulatory agencies
The
arguments for and against stricter regulatory controls have raised many
important issues. With more and more drugs being withdrawn, banned or
discontinued, there have been major questions on the reliability of
clinical studies and the regulatory approvals based on those studies.
Stricter controls, better systems and higher standards of
pharmaco-vigilance are inevitable consequences of the present loss of
faith in the existing systems. The current decade will surely witness
some major changes in the area.
Conclusion
Overall, for
the global pharmaceutical industry, the current era is one of
introspection and corrective actions in order to ensure a growth pattern
which will satisfy the needs of all stake holders including healthcare
policy planners, providers, medical profession, administrators, patients
and the general public. The industry to gain confidence of the public
should move from merely being a supplier of drugs to being in addition a
participating member of the community contributing to the overall
healthcare of populations . It's obligation to its direct stakeholders,
the investors and equity holders is not questioned, but maximizing
returns to them should not be at the cost of hurting the interests of
its consumers, the patients.
The author is a senior research scientist & industry expert based in Chennai