Digital Awareness to Digital Utilitarian

Two unrelated new articles caught my attention last week. The first one was about a prominent Indian pharmaceutical company who seemed to have got into the news for their digital strategy. The second one was a comparison of prices for mobile data across the world.

The first news article about the digital strategy of a pharmaceutical company intrigued me, as it did many others – given a tweetchat that ensued during the day. My intrigue was about how this company used technology to do more of the same, rather than to carefully consider the different options that technology throws open. This is a classic case where digital is ‘done’ instead of the business transforming to leverage technology.

I will not embark on a long post on the merits of digital transformation since I wrote a bit on the topic in the past. Suffice to say that technology is best utilized when its potential is understood. Instead of looking to find how technology can help a business do more of what it is already doing, business leaders must seek to understand what new tech tools can offer and how those new options can transform the way they did business. “Moving beyond the pill” is not merely the stuff that ppts are made of. It is right here in the real world.

It is well known that there is tremendous growth in technology and the number of tools that have emerged from it. What is not so well known is that those tools have application in the pharma business model and can solve for many an inefficiency that business heads have worried about. Very rarely do business heads seek insights into the tech that they buy, or the tools that they deploy. Business plans, when looked at from the window of such insights, can look inadequate and tech can then be very meaningfully deployed to get much better results or to achieve a business objective in a much easier and cost-effective manner.

This is the essential difference between being digitally aware versus being a digital utilitarian.

A digitally aware business head generally considers digital to be ‘in addition’ to organizational objectives, thinks of technology as more important than strategy and will spend huge resources to buy new tech and as the novelty wears off, declare tech to be of no use.

A digital utilitarian will on the other hand, understand that the need to change is not because tech is available, but because the fundamentals of business and customers have changed. These business heads realise that customers are well into the digital economy. Doctors, patients and caregivers alike, search for a lot of health-related information on the net. Can you therefore not afford to be where people are looking for you and insist on pushing more money after bad, on a sales force that doctors increasingly reject? A digital utilitarian will thus, be acutely aware of the challenges that the changing environment has on his business and will look for tech solutions to *transform* the way he reaches out, engages and converts his customers.

Typically, pharma businesses grow when more doctors prescribe their brand and patients consume it. This means that these two sets of customers need to be familiar with the brand. The current pharma model falls short on both fronts. The company with the largest sales force in India can barely cover 3/4th of the doctor universe. Others fall woefully short. On the patients’ front, in most cases, pharma is still learning how to.

This brings me to the second article that caught my attention – the one comparing the prices of mobile data around the world. No one needs to be told about the penetration of mobile phones in India or the emergence of high speed and dirt-cheap (Rs. 18 per 1GB data compared to global average of Rs. 600) data connectivity. How many pharma managers have changed their plans or even thought about this? When I recommended this to clients I was countered by the lack of speed that accompanies the cheap prices. They don’t seem convinced even when I tell them that online video audiences are expected to double to 500 million by 2020. What does that say about speed and connectivity?

Almost every pharma business worries about increasing awareness, penetrating and gaining access to new customer groups and geographies. If these are your business challenges, shouldn’t you be looking for tech options that can help you achieve this? At such cheap data prices, you have so many options to create live channels, conduct social media campaigns, create communities, reach specific targeted customer groups or even something as mundane as increasing the number of contacts with your targeted doctors at a fraction of the cost of hiring new reps.

Technology offers a plethora of solutions and more to tackle these mundane problems that have plagued pharma for years. Pharma on its part has moved from being digitally illiterate to digitally aware. The next step towards business transformation would be to become a digital utilitarian.

The Digital Economy

The first time I heard the term ‘digital economy’ in the medical context, it was from a reputed doctor who was a co-panelist and speaker at a company town hall event on digital marketing. It did not surprise me one bit that the doctor knew more about the digital economy than most of the pharma marketers gathered in the audience. But, it set me thinking.

The digital economy is the effect that advancements in technology have on the ways of doing business. Things change in the digital universe only in shape and form. The principles stay the same. It is probably why marketers think that everything is new. They have simply forgotten the old.

Customer engagement, not products or services

While in the analogous world the golden rules of marketing have gathered a thick layer of dust, the digital world is brutal. It is ruled by customers who are spoiled for choice. In this economy your business is no longer only about your products or services. Customers believe product quality and features to be hygiene factors that are to be taken for granted. They do not give brands that dupe them a second chance. Not only do they expect honest and transparent business, they pay a premium for brands and companies that engage them.

Rule 1: In the digital world, your business is to engage customers in the most meaningful ways.

Data, not money

It goes without saying that customers will never engage with brands that do not recognize them. In the words of Keith Weed – the CMO of Unilever, customers today are informed, presumptuous and impatient. If you do not know enough about your customers to engage them almost instantly, they will ‘bounce off’ your website. They presume that you are tracking them and that you know everything about them. And it makes them impatient if they think brands will make them waste time by getting to know them when all they want to do is satisfy their needs. This makes data the new currency – not money. Money is just incidental for customers to get what they need and they will choose to spend that money wisely. Brands or businesses that do not know them, will not get their money.

Rule 2: The digital economy is powered by data – not money.

Customer experience trumps all else

If customers expect you to know them well and are willing to engage only with those who do, there is a reason for it. Let’s say you Skyped with your friend one morning and she told you about a new book or a video game. It fascinated you. You never heard of it and you want to know everything about it. Instantly, you Google it and read up every review that you can lay your hands on. Once you have, you want to buy it. Amazon it is! All in the matter of a few minutes. And since you’re all happy, you want to watch a new flick on Netflix.

Now imagine if this scenario had played out 15-20 years ago. You would have had to go over to your friend’s place to have that conversation and then walk over to the lone book store, then off to the bank to withdraw some money and then back to the store to buy the book or game CD. And if you had the energy to watch a movie, then you would trudge off to the local single-screen cinema to try your luck with buying a movie ticket on the black market.

Rule 3: Customer experience is your competitive advantage

Digital has made everything so easy! In the new world, experience trumps everything else. Digital natives keep ‘in touch’ on social media, text their friends more than speak to them, transact online, cannot remember when they last went to a supermarket or to the bank and don’t know what it means to have to wait for a cab!

Its almost like the physical world doesn’t exist anymore.

Why would you think that doctors and patients are any different? Digital has (in most cases) done away with time and distance. One can talk to a doctor on call and not have to go to a clinic or hospital (unless in emergencies). Doctors can get all the information they need at the click of a button. They don’t depend on medical reps anymore for it. And that’s probably why they don’t value meeting them so much anymore.

This is not to say that medical reps have no jobs to do. Far from it! It means the nature of their jobs have gone back to being what they were originally meant to be. The time-tested yet now forgotten – serve the customer. Its time to brush the dust off those principles.

I didn’t say this – the doctor at the town hall did. Doctors get the digital economy. You can be dead sure that he and his colleagues aren’t waiting with bated breath for pharma to start participating. Its time we accepted that and played by the rules.

 

The Digital World – Be there or be square!

A few weeks ago I had the opportunity to talk to a group of mid-level pharma marketers on what marketing means in a digital world and how the rules of the game have changed. I began by asking them what they thought was the basic purpose of a marketer. They responded in their own ways and after a bit of debate, we agreed on headlining it as “promoting my product”. Didn’t that sound too much like a product-oriented approach, I asked. Isn’t that exactly your problem as a pharma marketer? That there is a clutter of products? That the market is commoditized with over 60,000 brands? Heads nodded in agreement.

As the group warmed up to the chat, they threw up the challenges that they faced every day. Customers did not see value in sales reps calling on them, hence did not give them more call time in their clinics. They often complained to senior company executives who called on them, that pharma marketing was getting dull and boring and did not provide them with information that was helpful to treat their patients better. On their part, marketers faced the constant challenge of slow sales and sought to constantly improve product sales. They wondered if the panacea for all their problems was “digital”. Is digital the answer, was their eager question.

Of course not! Digital is not the solution to all the problems that the industry faces, but it surely is the way the world is moving, so why not catch up? If the pharma industry – that for long had held up the flag of innovation – was comfortable launching new and better products, why was it such a laggard in recognizing and adopting the advancements in technology?

Digital is simply about leveraging technology

It is often misunderstood that digital means reorienting the entire company and sometimes even the business model. This is not always required. Most pharma companies have very customer-facing business models. A majority of the industry makes a sincere effort to understand and serve customers. Going digital simply means understanding technology and how it can help the company serve its customers better. It’s more about the mind-set than anything else.

Shifting the mindset

If the dominant mindset in a company is “promote my products”, digital does play a role, but the purpose of digital adoption might be slightly different as compared to another company where the mindset is “engage or serve my customers”. If more and more customers have an increasing digital presence, does it make sense for the company to not be there? Like an old adage goes, “fish where the fish are!” If all the fish are downstream, looking for them to bite upstream might be stretching the optimism a bit, wouldn’t it? So, if your customers are looking for information online and using digital tools and platforms to update themselves, would it make sense for you to not be there? As they say in America, be there or be square.

Misplaced obsession with sales

A “promote my products” mindset betrays an obsession with product sales. While this is not necessarily bad, it misses a crucial point. You can sell only to those who engage with you. If the idea is to simply push your product all the time, it won’t necessarily work. However, if the customer is engaged and sees value in engaging with you, they are already sold to. Engaged customers don’t need to be sold to, they already love your company and your product. Sometimes, they are even willing to pay more for your product because they love it so much. While this may set off alarm bells in the howling winds of price control, the point is that engaged customers become agnostic to price. This means that you will succeed even if you have a premium-priced product. Provided you have engaged your customer base very well and consistently. Digital provides you with tools to do exactly that!

If today the only way you engage your customers is through your sales force, why then would you ignore or avoid more channels of reaching and engaging them? Instead of just the visual aids that reps carry, technology allows you to create content in multiple different ways (graphics – simple and in 3D, videos – short and long, using augmented and virtual reality and a lot more) that bring novelty and value to customer interactions. Platforms allow you to host all the wonderful content that you create and apps allow that content to be distributed in the most efficient manner to your customers – at a time and place of their choice. And the best part is that all of this augments the efforts of the sales force. Where you have one channel (the sales force) to engage your customer, technology allows you multiple channels. Hence, multi-channel marketing or MCM.

Marketing in a digital world

In an almost totally digital world, marketing is therefore about:

  1. Engaging your customers and not merely promoting your product.
  2. Providing to customers what they want to see and not what you want them to see
  3. Personalizing content – each individual (your customers are individuals too) has different likes and dislikes. Personalise by curating content. There is a ton of it already created, so don’t waste your time creating more (as much as you would like to think otherwise, your visual aid bores your customer. So show her what she wants to see or someone else will).
  4. “Pulling” customers. Pulled customers look for excuses to engage. They wait for more content, new products and are willing to pay more for it.

I asked the group to imagine a world where they could provide their customers a fast, personalized and frictionless experience. They had difficult imagining it, so I asked to think of the kind of experience that they had while searching for information, buying or selling something and completing banking transactions online. All at a time and place of their choice. That’s the kind of experience your customers seek in the digital world. It is your role to give them that experience. So, dear pharma marketers, be there, or be square!

Digital Darwinism

Digital Darwinism is when technology and society evolve faster than an organization can adapt. Digital Darwinism is a fate that threatens most organizations in almost every industry, but particularly those in the pharmaceutical industry in India.

Evolution of technology will make it tougher for pharma companies to differentiate, engage customers and compete, unless they master digital evolution.

Digital Evolution

 

 

Selling in a digital era

Recently I decided to buy a laptop. As I looked around for the right one, I realized how little I knew about hardware. Having always used a company provided one, it was one of the things I had never bothered to educate myself on. As I always do for most things that I know nothing about, I spoke to friends. From what they told me, I did a lot of research online. Armed with information of an ideal laptop, I decided to “look and feel”. I headed off to an electronics store and spent the better part of an hour ‘testing’ a few models with the help of the friendly salesman before I bought the one I wanted. Do most of us shop this way? Maybe!

As you see, in my ‘journey’ the human element came in just once – to seal the deal. With so much information available online, I had already made up my mind before I went into a store and bought what I wanted to. This was a case of laptops and dummies, but is this very different in the case of drugs and doctors?

In such an era, pharma companies invest a significant amount of money into hiring and maintaining large sales forces. This component is, in fact the largest part of a company’s selling expenses. This is driven by the decades-old belief that nothing compares to a salesman calling on a doctor to convince him of a company’s product. Yet, in reality, the idea that reps will soon be obsolete is constantly reinforced by reducing in-clinic time for them, as doctors see lesser and lesser value delivered. There is also the constant pressure on profit margins as companies negotiate a fluid regulatory environment. These factors are as true in India as they are overseas. What is yet to be determined is if ‘non-rep’ models are bust-cycle fads that will reverse in soon to follow boom-cycles?

My personal opinion is that in any selling process, a human element is never obsolete, but the effectiveness of that element is maximized when it is introduced at the most appropriate moment in the ‘customer journey’.

old to new model

It is quite well known that in the new era, 70% of the buying decision is made before the first contact with a supplier is made. By the time I walked into the electronics store, I knew which laptop I wanted to buy, its specifications, its size, color and add-ons. I walked into that store just to see how that laptop actually looked and to understand the deals that the store would offer on my purchase. The salesman at the store already had a ready and willing customer and his sale was efficient and quick even though I made a big show of looking and evaluating other options. The actual amount of time he spent on making the deal was not more than 15 minutes of that hour.

Such efficiency is needed in pharma sales as well since the rep model is currently under stringent evaluation. Companies seeking operational efficiency are critically analyzing all major costs and are looking for alternatives. In such a scenario, instead of considering a ‘no-rep’ model, companies should consider a ‘low-rep’ model. This means downsizing a bulging force to just the optimal number of people needed to quickly and efficiently close deals. An example is illustrated below:

customerjourney

As companies build websites, apps, videos and other digital content, is this a ‘customer journey’ that they have at the back of their minds? Are they willing to prime a customer as much as they can using their formidable online resources and connect a medical rep as the final point of contact to seal the deal? If this is how it can be done, how would the medical rep’s job evolve? What kind of training would such sales forces require?

Of course, this isn’t an easy process. Moving away from a decades-old mindset of building armies of medical reps isn’t going to be easy. And to be sure, such models will probably not be the best in every single situation. For example, a new product launch will require a different strategy compared to a more established brand. The fact of the matter is, evolving technology provides superior alternatives to creating value for customers without having to compromise traditional sales metrics.

I am pretty sure the salesman at the electronics store was half-relieved that I knew what I wanted when I walked in. It saved his time and allowed him to refocus his energy to other dummies who wanted laptops. Wouldn’t drug reps and doctors feel the same way?

 

 

 

Current and Future Trends for Pharma

We live in exciting times. New technology and innovation that can change the way we live, is pouring out at unprecedented frequency. It is well known that although the pharmaceutical industry is considered to be very technologically advanced, it is also one that is quite inward focused and therefore stuck in the past. Therefore, it has been of great interest to me to understand how advances in technology and innovation are shaping trends and how ready the industry is for those trends.

From my viewpoint, in the last few years, the industry has defined its success on how it handles the following three trends:

  1. Increasing Role of Generics

A record number of patents expired in the last few years. As soon as a drug goes off patent, generics force drug prices to drop by almost 85 percent. Pharmaceutical companies have responded to the generic threat in several ways.

It was thought that the most promising approach is drug companies getting into “branded generics” themselves. The logic was that these branded versions of their original drugs sell for higher prices than unbranded generic equivalents but are less expensive than the true branded product. While this didn’t work for ‘innovator companies’, it did throw up a vast generic industry globally with companies such as Teva, Valeant and Mylan growing into industry dominating positions as governments around the world preferred cheaper generics.

  1. Emerging Markets

Rapid growth in emerging markets is a beacon of hope for the pharma industry. The Indian and Chinese drug markets could grow even more rapidly. However, drug firms’ traditional approach of creating drugs in the West and then pushing them in the East is not likely to work any longer for a several reasons.

First, there is a significant price pressure in these emerging markets, which argues for a stronger role for branded generics. Second, drugs developed in the West are not always relevant in emerging countries. Virally induced cancers, for example, are rare in Europe but common in China. Finally, the insurance and payment systems in many of these markets are quite different from those in the developed world.

  1. Outcomes – based medicine

Pressure on healthcare costs is rapidly pushing pharma to enter into outcomes-based pricing deals with payers. While there have been a few noteworthy ones so far, companies are likely to add more to that list soon. A majority of health plans want to ink outcomes-based contracts with companies, particularly in the high-end, niche and ultra premium priced therapies such as hepatitis C, oncology, multiple sclerosis and rheumatoid arthritis among others. Even drugs for widespread chronic conditions–such as cardiovascular medicines–are also on payers’ radar.

Unless the preference for outcome based drugs picks up faster, the industry is due to commoditize itself. As the blockbuster model becomes less dominant and the market becomes more competitive, commoditization has led to business models to become more customer-centric.

We have seen medical costs increase per capita even though the industry has commoditized. With costs increasing, and patients expected to pay for innovation on their own (as payers fail to keep up with technology and innovation), the following three trends are set to change the way health care will be consumed. How cognizant pharma is to these trends will probably decide how it moulds itself for the near and foreseeable future.

  1. Personalized Medicine and Empowered Patients

Personalized medicine and targeted therapies can significantly increase the effectiveness of new drugs in specific patient groups. Drugs that would be deemed ineffective in typical clinical trials now have a chance to show high degree of success among certain patients.

This changes the economic model of firms and calls for highly specialized marketing. Some experts argue that this specialization may force the industry to move away from its vertical structure and focus instead on a few core areas such as drug discovery or development. It also calls for drug firms to take a larger role in diagnostic procedures. This trend is very promising, and is fast expected to come of age.

Unless payers place a premium on outcomes-based, patients will have to self-finance this innovation. How will pharma react to it? When patients pay for innovation, they research it, gather information around it and update themselves regularly. Here lie opportunities for pharma to engage with empowered patients.

  1. 3-D printing of drugs

The first 3-D printed drug was approved by the US-FDA in 2015. If the trend catches on – and it surely will – patients can print their pills on their own and completely bypass pharma. All they need is to use the algorithm or procedure that will become available on the internet and use a 3-D printer at home.

Business savvy pharmacy chains may sell these procedures to patients instead of pills. In its current state the pharma industry has no control on 3-D printing and no coordinated action to counter it. Does it have a scenario with an action plan ready? And if you think it sounds like science-fiction, be aware that human organs that were made using 3-D printers have already been used for transplants.

  1. Supercomputers

Google announced recently that it launched a feature called symptom search which seeks to use its vast computational prowess to help patients self-diagnose their symptoms. In its current mode, this is unthinkable in pharma that always tells patients to consult their doctors.

Google’s use of combining big data to mine zillions of patient records and match symptoms search words to throw up the most relevant answers is a show of how artificial intelligence and big data can be harnessed through the power of supercomputers. Another example is IBM’s use of machine intelligence to scan through zillions of doctor notes and available medical literature to throw up diagnosis and treatment plans for treating diseases. Imagine the impact this can have on pharma which prides itself as the sole owner of information on disease and drugs. This, it considers, is its sole value proposition to its health care professional customers. With supercomputers, artificial intelligence and big data, pharma risks losing the very value that drives its customer interactions and therefore its business. Does pharma have a plan to counter or harness this development?

The challenges facing pharma due to developments in the outside world are not routine ones in the traditional sense. The solutions will revolve around ‘unlearning’ a lot. It will be very interesting to see how a traditionally technologically advanced sector surfs the wave unleashed by rapidly developing non-traditional technology.

 

India Pharma – Of Markets and Morals

Of late, the pharmaceutical industry has been in the news for all the wrong reasons. First, the government intervened to bring in large groups of medicines under the price cap to make them more affordable to the sick. Even before that happened, companies were caught overcharging for some medicines in violation of the prices set by the national price regulator.  Recently fixed dose combinations (FDCs or products containing two or more medicines in a single dosage form) were banned en masse by the government. All these decisions caused observers to declare that the free market in pharma had all but failed.

Fixed Dose Combinations (FDCs) – convenient but deadly

Recently, an expert committee found about a 1000 of these products to be irrational in nature which means that they could potentially harm patients who consumed them. Commentators pegged FDCs to constitute nearly 50% of the $15 billion domestic Indian pharma market. It is impossible to believe that such a large market exists without consumer demand to match.

These medicines have been available for years – in some cases, over 30 years. To be sure, this doesn’t make it legitimate. If FDCs have been deemed to be unsafe for patients by experts, then we must accept the verdict. What is wrong is wrong and one should not defend it.

What one should definitely do though, is debate how to make things better. Why were irrational combinations approved? What systemic shortcomings should be plugged to ensure that this doesn’t happen again? What kind of punitive action should be forthcoming?

Rather than engage in such conversation, the discussion in the public domain has been completely a moralistic one. Pharmaceutical companies have been labeled greedy and corrupt. They have been accused of caring nothing for human lives and focusing only on making profits instead.

This is not to absolve companies at all, but what seems to irk some commentators more than anything else is that no laws were broken and so it is difficult to lay the blame squarely on one party. To confound matters, the courts immediately granted stay orders on the ban. This prompted commentators to wonder if companies bent the rules. Why else have state regulators – who approved most of these products – not stood up to defend their case, they ask?

Instead of such conjecture, would it not be more fruitful to understand why this was allowed to go on for so many decades?

Governance and Free Markets

If FDCs were irrational, why were they authorized in the first place? If the rules stipulated that licenses obtained from state regulators be validated by the central regulator, why were there no checks in the system to make sure that was done?

Obviously, there isn’t an appropriate approval system that seeks proper documentation. There is no proper adverse event reporting (AER) system in place that helps gather real-world evidence of the harm caused by such medicines. Absent all these systemic check-points, the government action seems ham-handed and open to moralistic judgment.

This is probably why an informal survey carried out by a leading business daily found that 40% of doctors disagreed with the ban on products they had routinely used in thousands of their patients over many years.

It is common knowledge that the governance system is severely underdeveloped in India. Yet, when a PIL was filed in the Supreme Court of India, the judges threw the case out saying something to the effect that they had bigger priorities to work on! An indifferent judiciary kills free markets.

In this backdrop, does a ban seem like the best solution to the problem? It seems more like a reaction by a hapless regulator to fill the void created by an inefficient judicial system. Yet, there is not a single voice appealing to reform this system. That would have been more logical than moralistic jingoism.

Aside from the lack of science to support the products, the ban is based on the fact that these FDCs aren’t approved by the US-FDA. This is simply because the single medicines used in creating the combinations are often under patent protection and belonged to different companies. It would take extraordinary effort for these companies to forge deals to create such combination products. India does not recognize these patents and therefore Indian companies can easily formulate combination products.

Voice of the patient

Sadly, what began as an exercise to help patients reduce pill burden and increase compliance to therapy ended up in an overambitious industry effort to create products, not all of which were supported by science.

But, has anyone bothered to ask what the patient wants? It would be interesting to examine if patients complained about problems with these products. What happens to people for who a particular combination that worked to relieve cold and fever for years is suddenly pulled off the market? Shouldn’t consumers have a way of lending their voice too?

Despite being morally correct to do so, no commentators called for the formalization of patient bodies that can have a place at the table during such decisions. No one asked if it was right for government to decide what’s right for people. No one asked about personal choice.

On one hand, it is common knowledge that goods with great demand that are banned by governments, find their way to consumers through a parallel marketplace that we commonly call the ‘black market’. The government knows this through its strict regulation on alcohol, narcotics, gold and other such goods. Sadly, it learns nothing. Is it morally right to allow patients to buy low grade medicines off the black market? If the government cannot tell people about legitimate medicines, can we expect them to “protect” citizens from spurious and counterfeit ones?

Corporatization of Free Markets

On the other hand, it goes without saying that exploiting loopholes in the law is definitely not a smart business decision. History has taught us that such seemingly short-term benefits can turn out to be disasters in the medium to long term. Companies considered market leaders and ‘too-big-to-fail’ have disappeared after doing so in the past. Why do executives not learn from history then? Are they evil, scheming Scrooges as they are made out to be?

Perhaps, corporate incentives are completely misaligned. They are too skewed towards profit. While this in itself is not bad, it can encourage risk, recklessness and avarice especially in a system with a grossly underdeveloped governance structure.

What about internal ethics and governance policies of companies? Even if local laws are not stringent about submitting scientific evidence to back up the therapeutic benefit of these products, shouldn’t drug-makers have gathered evidence anyway? It is no excuse at all as observers claim,  and rightly so.

Morals and Markets

At the end of the day, whether for moral reasons or economic ones, companies should know that irresponsible behavior undermines the very nature of the free markets that they advocate for. Popular moralistic sentiment mistakes corporate behavior as the epitome of the evils of privatization and the subsequent failure of free markets. The irony is that bans, punitive government action and continued interference prove time and time again that markets are NOT free at all.

Much reform in the space is required to set markets free in the true sense. To argue against free markets by pointing out recent failures is to not understand what free markets truly mean.

Not much can be said if the government is forced to intervene because of reckless corporate behavior. The key question is who will stand up and take the responsibility of breaking this vicious cycle?

Until then, we will misguidedly worry about markets becoming detached from morals instead of using the opportunity to push for reforms that will truly benefit patients. And that is through a free and fair market.

The Right to Health or the Right to stay Unhealthy?

After the Right to Work, the Right to Food and the Right to Education were introduced by the earlier govt, they were duly criticized by a section of the polity as encouraging govt spending at a time of a burgeoning fiscal deficit. The new government – which consists of many of those critics – now thinks that the time has come for a Right to Health. The argument is that given the poor state of public healthcare infrastructure in this country, what are the poor and the disenfranchised to do?

 Some people argue that the government should deliver healthcare directly to the poor. Others favor cash transfers. Just to be sure this piece assumes that the role of the government is primarily limited to financing healthcare which is not envisaged in the govt’s policy document. It is difficult to say which approach seems the most favorable in an area with this magnitude of social impact.

Published literature suggests that contrary to popular sentiment, conditional cash transfers are necessary but not sufficient for improving health. Instead, good government-funded health care is essential, as are schemes which address social determinants of health.

India’s move to adopt cash transfer through schemes such as the Janini Swasthya Yojana (JSY) attracted polarised debate despite the scheme reportedly having shown success by reducing infant and maternal mortality rates.

A study published in The Lancet, found that the opposition is on two counts. First is that cash transfer requires precise identification of the needy. As with anything that has cash and govt together in it, the percent of women receiving payments ranged from as low as 7% to as high as 42%. This may leave a substantial number of poor out of the benefits.

Second, the inability of some Indian states to fully participate in JSY may be due to disparities in public health infrastructure between regions in India. Where will people invest the cash they receive if there are no facilities? The fungibility of money and low health awareness in the masses adds to the complexity.

Although in 2005 India implemented the National Rural Health Mission (NRHM) with the goal of increasing public spending on health from under 1% to 3% of GDP, Indian healthcare is still largely private.  An increase in public spending to finance healthcare is – to quote Arun Shourie – more said than done.

Therefore, should govt even attempt to throw more good money after bad? Is tax payer money best spent improving the supply of public healthcare itself? Is that even something we can expect? Or are markets better placed to provide health care and services?

If the Prime Minister is held to his pre-electoral promise of ‘minimum govt, maximum governance’, it would mean that the govt takes radical steps to deregulate medical education, produce medicines and insure people. This can only happen through large-scale privatization of the industry as the govt changes track from providing healthcare to only governing its provision.

It must also mean eliminating all subsidies to the sick or unhealthy as subsidies act as incentives to its beneficiaries and therefore creates more of whatever is being subsidized. If subsidies to the sick promote carelessness, indigence, and dependency, can its elimination strengthen the will to live healthy lives and to work for a living?

As a recent paper on the economics of healthcare states, if people are determined to live unhealthy lives, then there is no system that can fix the underlying problem. At the end of the day, health is largely a matter of personal responsibility.

The health sector is characterized by information asymmetry where doctors know more than patients, and the industry knows more than regulator. Asymmetry creates an imbalance of power and therefore compromises on honesty and morality. If the market decides not to be honest, no govt intervention can prevent, or even deter it. Focusing the State’s energy, power and resources to plug this loop can probably be the most impactful intervention to improve India’s pathetic health sector.

Subsidies to the poor through another Rights bill could only incentivize unhealthy behavior in a section of society that doesn’t need it and hardly impact the section that desperately needs it. The Rights to Work, Food and Education have shown it to be true in the past but in true Indian style, no lesson seems to have been learned.

What can the pharmaceutical industry expect from the new government?

India’s economy is performing poorly, at least compared to its relative dynamism just a few years ago. With a general election to be concluded by the end of May 2014, many are looking to the country’s next government to break India out of its economic doldrums. Pre-poll surveys (whether you like them or not) have predicted a strong wave of support for the Bharatiya Janata Party (BJP), led by its prime ministerial candidate Narendra Modi. It is expected that a business friendly environment and policies that support the health care sector may well be on the cards if this was indeed to happen.

 I am certainly hopeful that a BJP led govt comes to power at the Centre with a majority mandate. This will ensure that the government has a free hand to set the economic agenda of the country. This is, of course, assuming that the agenda will favor right leaning economic policies all the way which may not be likely. 

 Are changes to India’s health policy likely?

 At the moment, it is speculative to say what the changes in policy are likely to be since the BJP has not spelt out its agenda or made its “Vision 2025” document publicly available. That said, the only thing one can be fairly certain about is that market sentiment will be buoyed only if the political environment remains stable. It will be a shame if a fractured mandate forces any party to align with parties of opposed ideologies – or God forbid – an Alternate Front comes to power.

 On the health policy, I can be fairly certain that a new govt will have two important things to address: 1) reduce the current account deficit (to control inflation and prices) and 2) bring in revenues to a depleted treasury. To work towards these two objectives, it can be fairly assumed that industry friendly policies will be adopted since welfare schemes are populist in nature and cannot be withdrawn in India.

 While the FDI policy is clear (uncapped), the same is not true of areas such as clinical trials and IPR. The BJP manifesto promises to support industry that transfers technology into India. If this happens, we may see FDI flow into greenfield projects which has been quite slow so far. However, this will require complexities such as the Land Acquisition Bill, Labour laws etc. to be simplified. At the moment it is assumed that a Modi govt will be more inclined to push Economic Reforms 2.0 than the UPA was. This means that we may see a fillip to the industry overall.

 If the govt pursues industry friendly policies we are unlikely to see capped pricing on patented drugs but a more nuanced approach to balance prices of medicines and access. There maybe an inclination to strengthen insurance coverage through RSBY and the private sector, state-purchase and distribution of medicines through the Jan Aushadi 2.0 scheme, more hospitals through PPPs etc.

 What will be very interesting is to see how the IPR issue is tackled. I believe this is more a diplomatic failure and grandiose posturing rather than a real issue. There have been more cases of CLs being rejected than issued. Validity of patents have been upheld fairly, so I feel it is unfair to term India’s IPR regime as “fluid”. India has the responsibility of protecting the health interests of its citizens and it should continue to do so. The issue can easily be laid to rest through some deft diplomacy which a govt strengthened by stability can achieve. 

 Another development that hasn’t captured public imagination and debate in India is the US sponsored TPP agreement. Indian generic players can be strongly impacted if the TPP comes into effect and the US de-prioritizes India as a result of the agreement.

 Will the new government pursue Universal Health Care?

 UHC is something that has been on the cards of all political parties for a long time. However, there seems to be no clear direction on how to progress. With the BJP proposing to support federalism and strengthening the state govts, it remains to be seen if they will put their money where their collective mouths are and first, increase spending on healthcare as a % of GDP to at least 3% (the WHO mandates 6%) and second, transfer a bulk of that money to state govts.

 This is the tricky part. Opinion polls have shown that the BJP will rule at best in 15 out of 29 states. Assuming 100% of BJP states comply with UHC, ~50% of India’s population would be deemed to be covered. This is in line with the UPA govts plan of increasing health coverage to about 52% of the population, up from the currently covered 35%.

 This alone would be a significant step to achieve in 5 years since UHC would involve a paradigm shift in health policies and programs in favor of vulnerable population groups, restructuring of public health cadres, reorientation of undergraduate medical education, more emphasis on public health research, and extensive education campaigns

What should the new government’s focus be?

 The one big issue would be to ensure quality and affordable health for all its citizens. It is criminal that after almost seven decades, Free India still cannot save mothers and babies from dying, ensuring that the sick get treated without either going bankrupt or being turned away from hospitals for not being able to pay and that productivity of its citizens is so sub-optimal. No Right to Education can make a malnourished child learn. No Right to Food can save lives of children who do not know it is important to wash their hands before eating. No Right to Information can empower the sick and the disabled. No aspiring superpower can afford to miss so badly on MDGs.

 Only when its populace is healthy can India think of educating its young, employing its youth and caring for its elderly. Health can have a multiplier effect on the GDP of India. And it must be available freely and equitably to every citizen of this country.

 Will the change be for the better?

 Apart from progressing on UHC, the present government could have done a lot to ensure that the health care sector was seen as a attractive destination to investors. While there are statistics to show that the sector still is attractive, it has been badly dogged by several flip-flops from the government, be it on clinical trials, on FDI, on drug pricing, on IPR, or on frowning on acquisitions. With the global economic crisis and govts across the world cutting back on health care costs, India had a golden opportunity to position itself as a world class health provider. Formidable terms such as “largest number of FDA approved plants outside the US”, “pharmacy to the world”, “medical value travel destination of the world” were all lost to other nations who grabbed the opportunities with open hands.

Over the last decade, India was a tragic case of epithets becoming epitaphs. There are no silver bullets here. Tackling these issues is a very big project. But the present system needs to change. Many countries have successfully transformed similar systems after seeing them lead to a rise outlays but a drop in outcomes. The next government must do what it can to help push India toward similar progress. 

Clinical Trials and Judgmental Errors

A few days ago, the Union Health Ministry accepted the Prof. Ranjit Roy Chaudhury Expert Committee report on approval of new medicines, clinical trials & banning of medicines. One of the points in the Action Taken Report was that the Ministry decided to admit data from Phase I and Phase II trials done overseas for medicines that are being developed in India. This, they say, will reduce the time for new medicines to be launched in India.

Phase I trials study the effect of newly discovered medicine – which is either a chemical or a biological compound (new chemical/molecular entities or NCE/NMEs) – on the body of healthy volunteers. These studies determine the way the medicine behaves in the human body. The data is important to identify the dose at which the medicine has the best desired effect.

Once the dose is identified, Phase II studies are conducted to assess the efficacy and the safety of those medicines at the identified doses. Both these phases are essential first steps in the journey of drug discovery and provide confidence to both researchers and government regulators that the medicines are safe for mass commercialization. Phase III trials study the safety and efficacy of new medicines closer to availability in the market and Phase IV study them after the medicines are available on the market.

Before the Roy Choudhury Committee recommendation, the law did not allow the Central Drugs Standard Control Organization (CDSCO) – of which the Drugs Controller General of India (DCGI) is a part – to accept Phase I and II data of NCEs/NMEs that were conducted abroad. What confounded this rule was the fact that India does not have enough capacity in the first place, to deal with the requirements of Phase I and Phase II trials. This often delayed the process.

 It is another story that these delays were inconsequential because very few NCE/NMEs are actually developed – and therefore need to be tested – in India. Almost all new medicines launched in India are discovered abroad and none of those innovator companies conduct Phase I or II studies here.  This is because Phase I trials are completed in 4-8 weeks in the US and Europe while it takes at least 16 weeks to complete the first phase in India.

If the idea is to encourage drug discovery in India, it is an inconsequential one. As a study in 2012 by the Institute of Bioinformatics and Applied Biotechnology, found that the prospects for original drug discovery in India are poor. Improving drug discovery in India will need reforms at a much broader structural level. Merely allowing trials to be done abroad is hardly an incentive for companies to begin to invest in drug discovery – a process that involves hundreds of millions of dollars. So how does this development actually help the Indian patient?

To be fair, this maybe an attempt to reverse the damage created by the knee-jerk reactions plaguing the clinical trials industry in India. The rules currently allow parallel Phase II and Phase III Clinical trials in India for NCEs/NMEs undergoing clinical trials anywhere. This is an important step if the government is serious about making new drugs available faster to the Indian patient, since it is willing to approve medicines which have been studied in a sizeable sample of Indian subjects during Phase III. However, by clamping down on approvals of clinical trials, MNCs will continue to remain unclear on whether those parallel trials will ever take off in India.

Companies will also be forced to reconsider bringing to India even those medicines that have completed all trials (Phase I-IV) overseas. This could mean a delay of many years. To worsen this situation, the government wants to amend a rule that allowed the waiver of clinical trials in Indian subjects if the medicines had approval abroad. The government now intends to make it possible to waiver trials in Indian subjects only if there is a national emergency or an epidemic. This means a few more years of delay to the availability of new medicines in India. Add to this the ambiguity around India’s stand on IP laws and pricing of new medicines.

So will the changes make new medicines available in India faster than before? Are these changes going to be accepted independent of the other interlinking factors which often seem contradictory? At the moment, the hullabaloo around India’s health policy continues. Viewed macroscopically, it seems to be a misguided case of almost comical trials and judgmental errors.