Beruflich Dokumente
Kultur Dokumente
* Associate Fellow, Centad Health Economist, Public Health Foundation of India (PHFI) Legal Advisor, Third World Network (TWN)
Introduction
Background of the study: Objectives and Methodology and Chapterisation Overview of the Pharmaceutical Industry in India: A Snapshot of Changing dynamics and future challenges The Regulatory web of the Pharmaceutical Sector in India: Implications for Ex-ante Competition The MRTP Experience in the Pharmaceutical Sector Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector in the light of experiences in comparative jurisdictions Competition Advocacy and interventions Conclusion and Draft recommendations
The Indian Pharmaceutical Industry among top Five producers of bulk drugs in the world Pharmaceuticals market can be roughly classified in to
Bulk drugs (20%) The bulk drug segment of the market has increased in the past decade at around 20% annual growth rate Formulations (80%) Production of formulations has increased by around 15% annually
Firms can be either in production of bulk drugs or formulations or may manufacture both. Firms in to formulations may be further classified into innovating firms and noninnovating firms. However, R&D is insignificant when compared to MNEs. After USA (169), India has the highest number of ANDA approval (132) in US in the year 2007 There are about 8174 bulk drug manufacturing units and 2389 formulations units spread across India. Total: 10563 units
Exports of pharmaceutical drugs and fine chemicals: 17.8% Imports of pharmaceutical products: 18.4%
Source: Sudip Chaudhuri, The WTO and Indias Pharmaceuticals Industry: Patent Protection TRIPS and Developing Countries, New Delhi, Oxford University Press, 2005. pp 18
No of Acquisitions 1 1 1 1 1 6 7 12 20 14 14
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000
Telecommunication Pharmaceuticals Chemicals Automobile Real Estate Construction Petroleum Services Cement Mining Power IT
Inflows of FDI in Pharmaceuticals Industry from 2002-03 to February 2009 (USD Million)
Year
Million US$
1457
Source: DIPP
Indian % Investments in R&D has not been substantial even while top firms have geared up to product innovation
Report of the Taskforce (2008), Ministry of Commerce and Industries, Dept. of Commerce, Govt. of India
Report of the Taskforce (2008), Ministry of Commerce and Industries, Dept. of Commerce, Govt. of India
Clinical Research Organisations in India Cost advantage in Clinical research organisations and the market size.
Current retail market pegged at US $ 7.8 US Billion and estimated to reach US$ 16 Billion by 2015. (Dept of Commerce Taskforce Report) Existing level of competition in the retail market in India (Jha, 2008)
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Ex ante application of different policy and legal interventions can have positive and negative implications on the dynamics of competition in the pharmaceutical sector. No single sector regulator in pharmaceuticals: This presents challenges in coordinated single national strategy Draft National Pharmaceutical Policy, 2006 Innovation and Regulation Issues: Creative destruction and the innovation paradox The innovation productivity crises in the global pharmaceutical industry; focus on me too drugs. The innovation structure in linear and on a patent based framework Upstream technologies can be patent protected Public funded R&D protection; Open source innovation; National Innovation Bill, and miscellaneous policy interventions- their implications for ex ante competition Intellectual Property Rights and implications for ex-ante competition Patents (Patents Act, 1970, as amended up-to 2005)
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Nature and content of the patent law: the complexity of patent scope Scope of patentability: Sec 3(d) and its experience in evaluating pharmaceutical applications Working of the Pre-grant and post-grant opposition Mechanism Acquisition and enforcement Substantial patent applications under mail-box may involve NCEs disclosed pre-1995 Recent landmark judicial trends under patents law Madras High Court Decision in Novartis case (2007) Delhi High Court Decision in Roche v. Cipla (2009) Rigid mechanism of Compulsory Licensing Mechanism under the Patents Act (the regulatory interface with competition law) Grounds for Compulsory license Some instances of abusive conduct may be remedied under patents Act on ex ante basis Not a single instance of application made post 2005 Overly rigid procedural requirements. Waiver requires the govt. to notify on health emergency grounds; in normal instances expiry of three years duration is essential
Limited scope of patent law limitations and exceptions: research exemption, Bolar provisions, Government use, Parallel imports etc
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
The Trademarks Act, 1999 Parallel imports of trademarked goods Differential standard test for evaluating consumer deception in case of pharmaceuticals? Use of international non-proprietary names: Implications for competition
Institutional challenges in avoiding abuse of Intellectual Property rights Drug Regulation and Competition
Less than 0.2% to 0.3% spurious drugs in the country as per Parliament question number 1084. Amendment of Schedule M of Drugs and Cosmetics Act, 1940 (GMP Compliance and Competition)
Najma Heptullah Committee Report Small scale pharma perceives threat Closure and opening of Govt. Vaccines units due to Schedule M Some standards may unscientific and overly burdensome undermining the competitiveness of the small scale pharma industry
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Drug Marketing approvals and Competition
The Central Drug Authority (amendment) Bill
Follow-on biologics and ex-ante Competition: Changing dynamics in the generics landscape? Data-protection and Competition
Impact of Drug-patent linkage: recent Delhi High Court Order expecting the drug controller to comply police patents before granting marketing approval
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition Price Control Regime in India
The Honble Supreme Court in the K.S. Gopinath case (2003), directed the government to ensure that essential and life-saving drugs do not fall out of price control Study by NPPA (Pandey, 2008):15 TOP FORMULATIONS of 15 TOP BULK DRUGS which remained under Price Control in DPCO,1995/ went out of Price Control in 1995. (1994 Prices compared with July,2007)
Comparison Price Increase Price Decreased Total Price increase / during the period reduction Unit Nos Nos. Nos. % DPCO 6 9 15 10.3% Non DPCO 15 15 117.8%
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Under the current DPCO 1995, the Retail Price are fixed as follows
Year Number of Drugs Approx Market Share (%)
(MC+CC+PM+PC) x (1+MAPE/100) + excise duty (MC = material cost including cost of bulk drugs/excipients: CC = conversion cost; PM = cost of packing material; PC = packaging charge; MAPE = Maximum Allowable Postmanufacturing Expenses)
347 142 74 74
80 60 40 20
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
The first category identified for price negotiations Lowest international reference price (market price) 40%-70% reductions for prescriptions generated from public health facilities Challenges in the Price negotiations: Does it lead to affordable prices? Public procurement and Competition Drug Expenditure by Govt. (All-India): Drugs & Med. ( Mln): 18890.38 Health Exp. (Rs. Mln): 1962636.86 % of Drugs to Health Exp: 9.63 Tamil Nadu Model (TNMSC) Covers 12000 medical facilities No recorded evidence of bid-rigging or other anti-competitive activities due to structural and institutional settings of the TNMSC model Efficiency in quality and supply Emerging challenges in the TNMSC model Practices in the Central Govt. Procurement and others Minimum turnover clause: For participating in public procurement (20-50 crore) turnover must be shown- this will exclude small scale industry competitors from the market E.g. Indian Railways has fixed Rs. 50 crore as the benchmark
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Taxing and ex ante competition issues: Major findings of the NIPER study on Price comparison of the drugs manufactured in the exempt v. non-exempt states Opening up of Generic stores in each districts (Jan Aushadhi shops) Prices most competitive
Insurance can complement or distort incentives for consumers to avail cheaper drugs- not much of a concern where insurance penetration and prescription drug coverage is scant. Ministry of Health universal health insurance coverage may change the dynamics
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition Consumer Issues: Source of Healthcare Spending
Interaction between consumer health care and competition
Poverty and health care spending: Probability of the poor falling sick is 2.3 times more. A Rs. 1000 increase in per capita income increases life expectancy at Birth by 3 years. An Estimated 3.3% of the population is getting pushed below poverty line on account of medical treatment
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Medicines Other Expenditure Medicines Other Expenditure
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition Consumer Issues: Source of Healthcare Spending
Private Firms 3% Central Govt. 7.2% Local Govt. 2.2% External Funds 2% Public Firms 2% NGO s 0.3% O thers 0.1%
Households 68.8%
% S p e n t o n D ru g s
Rural India
Source: Sakthivel Selvaraj (2009): From NSS, 1999-2000.
Urban India
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition & Consumer Access Issues WPI on Drugs and Medicines and WPI on All Commodities (1993-2004)
275 255
235
215
Price Index
195
175
155
135
115
95
1 993-94
1 994-95
1 995-96
1 996-97
1 997-98
1 998-99
1 999-00
2000-01
2001 -02
2002-03
2003-04
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition & Consumer Access Issues
Pattern if per capita monthly out of pocket expenses on medicine and health care in 1999-2000
Out of pocket expenses in India (2000), Centad study on Economic Constraints for Access to medicines (2006)
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition & Consumer Access Issues Increasing shortages of UIP Vaccines Demand & supply of UIP vaccines has been erratic
UIP vaccine DPT DT TT BCG OPV Measles Hep.B 1991-92
(in lakh doses) Demand 1320.24 350.00 1190.00 500.60 1550.60 500.00 ----Supply 1270.30 650.82 2319.71 168.50 950.50 680.00 ---Demand 1916.96 378.01 3651.45 894.94 4823.66 2688.10 843.83
2006-07
(in lakh doses) Supply 1636.88 370.29 2887.94 758.66 4812.48 2688.10 843.83
Source: Y Madhavi, NISTADS, 2009. Compiled from Annual reports of Health Information of India 1991 to 2004-05 and national Health Profile 2007
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition Matrix of Promotion (Amitava Guha, 2009)
CME Funding
R esear ch F und i ng
Advertising
DTCA
Pr ess r el eases Pr o f essio nal Jo ur nals
Consumer
Presciber
Pharmacist
Consumer
Pharmacist Precriber
Consumer
Prescriber
Pharmacist
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
Perception of the Pharmaceutical Industry
Possible Anticompetitive Practices in the Pharmaceutical Market Supply Chain In India, a CUTS study has already identified certain anticompetitive practices prevailing in the Indian pharmaceutical market A Centad Sample Study as part of this project is ongoing. The sample study has encompasses structured interview questionnaires to select hospitals, medical practitioners, medical representatives, retailers, wholesalers Many non-structures interviews conducted during this project point to various anticompetitive practices condemned by the Competition Act, 2002
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition
The Regulatory web of the Pharmaceutical Sector in India: Its implications for exante Competition Survey of web of laws governing the supply chain and health care professionals
The Regulatory web of the Pharmaceutical Sector in India: Its implications for ex-ante Competition Survey of web of laws governing the supply chain and health care professionals
There is no practical legal distinction made between prescription and nonprescription medicines DTCA of prescription pharmaceuticals allowed: Certain advertisements may run foul of the law There is no adequate regulation on prohibiting promotion of drugs inconsistent with approved information There is no adequate regulation on prohibiting promotion in disguise There is no statutory framework, except the code of ethics of the Medical council of India to suggest that no gifts/financial benefits/benefits in kind should be offered to health care professionals as inducements to prescribe particular medicines? Drugs and Magic Remedies Act does not have a full proof mechanism to require that promotional materials are submitted for pre-approval Except for the Advertising standards council of India code, no other statutory provision can be pointed out that sets out specific standards in relation to information available on the internet i.e. to prevent consumers from gaining inappropriate access to information
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Defining relevant product market in pharmaceuticals Pharmaceutical markets are different as conditions prevailing in others do not prevail in this sector.
The conventional SSNIP test presents very important challenges: Are pharmaceutical markets different? Does the Cellophane Fallacy apply? Who is the consumer? Limited price sensitivity is shown by consumers! Does price matter? In prescription drugs, the ultimate consumer is not the buyer. The doctor is the buyer, the consumer only pays. The costliest brand is the highest sold even in the presence of substitutes There are no practical constraints in setting market prices in drugs A single drug may constitute a relevant product market? Competition in this sector may largely on non-price grounds Interchangeability may be difficult Do generics constitute a different market from those of patented drugs?
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Defining relevant product market in pharmaceutical in lieu of section 2(t) definition: The standard approach is the use of therapeutic classification (Anatomical Therapeutic Chemical (ATC) Classification) is resorted to. The WHO maintains the classification and is accessible on through the website The EU maintains similar classification. How is the ATC defined? The ATC classification groups drugs as per the organ or system for which they are developed to target. The first level is ATC1 The therapeutic, pharmacological and chemical properties are in ATC 2, 3 and 4. The fifth level can used at an increased level of sophistication. Astrazeneca case (2005) and evaluating relevant product markets (EU) Evaluation in the EU pharma inquiry context is yet to be seen SmithKline Corp. v Eli Lilly (1978) US 3rd CAFC Barr Laboratories, Inc. V Abbot Labboratories
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Review of US FTC cases points out to the following considerations Whether the drugs treat the same diseases, condition, or indication Whether the drugs treat a disease by interacting with the body in the same manner (whether they have the same mechanism/action) Whether the drugs have the same specific chemical compounds Whether drugs have the same dosage form such as injectible, liquid, capsule, tablets etc.. Whether drugs have the same frequency of dosage Whether they are branded or generics Whether they require a prescription or are sold over the counter Whether they are currently marketed or in development
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Anticompetitive agreements Section 3, which prohibits such agreements. Section 19, which provides for inquiry into anti-competitive agreements. Section 27, which concerns orders, passed by the Commission after inquiry into agreements or abuse of dominant position They are one of the strongest provisions in the Act- The AAEC test Vertical restraints: Most practices that were studied in the pharmaceutical market supply chain can be violative of section 3(4) when r/w section 19
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Horizontal Agreements (sec.3 r/w 19): Difficulty in evaluating evidence of anticompetitive horizontal agreements Case laws from Comparative jurisdictions Vitamins Cartel OJ [2003] L6/1, [2003] CMLR 1030 (EU and other jurisdictions) Roche, BASF, AVENTIS fined Euro 855.23 million Sandoz Proditti Farmaceutici v. Commission (1990 ECR I-45) Bayer v. Commission (2004) Danish Association of Pharmaceutical Producers and the Danish Ministry of Health (EU) (Quota sharing arrangement Will restraints in licensing IP not covered by Patents Act be violative of section 3 (3) (b)? EU Technology Transfer Block Exemption (Regulation 772/2004) Block Exemption and its scope under the EU (article 5 exceptions) US FTC-DOJ guidelines on Licensing Intellectual Property Patent pools, standardisation and IPRs Will deceptive and misleading advertisement fall foul of section 3?
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Patent Settlements ( they can be violative of section 3) Reverse payments: payments made patentees to the competitors wanting to challenge patents. Such payments to competitors may even exceed profits which such competitor would have made by entering into the market. Are they natural extension of patent rights? Greater chances of the patent being invalid when challenged by generics- Some recent trends and patterns Reverse payments in the Indian Pharmaceutical Industry: No recorded evidence in the Indian context as yet, Ranbaxy decided to drop lawsuits in different foreign jurisdictions after the Daichi takeover. Position in the US: Courts have had a pro-settlement approach: Reasoning- such agreements reduce costs and increase innovation; they are natural by-products of patent protection
In re Cardizem CD Antitrust Litigation- per se illegal: Only potential competitor would refrain from marketing its generic version of Cardizem CD even after obtaining FDA approval. Schering Plough; Tamoxifen and Ciproflaxacin case The pending Cephalon case
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Medicare Prescription Drug, Improvement and Modernization Act, 2003 requires parties to provide notice of settlement agreements to antitrust enforcement agencies Agreements not to compete FTC against US courts unwarranted leniency: Arguments for declaring them as per se illegal Cephalon, Inc., Civil Action No.: 1:08-cv-00244 (D.C.D.C.) Agreements on Price or Price-Related Terms Colegio de Optometras de Puerto Rico, C-4199 (consent order 2007) and others The EU Pharmaceutical Sector inquiry During the period 2000 2007 originator companies spent on average 17% of their turnover from prescription medicines on R&D worldwide (approximately 1.5% of turnover was spent on basic research to identify potential new medicines, the rest mostly on (pre-)clinical trials and tests). Products and Patents Patent Filing and Patent Enforcement Strategies Patent-Related Exchanges and Litigation Settlements and Other Agreements Other Practices Affecting Generic Entry Cumulative Use of Practices against Generic Companies
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Abuse of Dominant position Section 4, r/w section 19 Possibility of emergence of super dominance patented products market leading to monopolistic pricing. Presumption in case of patented products? A 2007 Report of the Office of Fair Trade (UK) recommended that pharmaceutical price regulation scheme should be reformed in order to make the prices paid by NHS reflect the therapeutic value to patients of the drug in question Dominant position: Hoffman-La Roche v Commission (1979)- large market shares may in themselves be evidence of a dominant position, save exceptional circumstances Vertical integration as a barrier for entry Existence of IP (Tetra Pak 1 (BTG License)- entry barriers Abuse: Price and non-price Comparative jurisdictions have not shown active interest in price regulation United Brands jurisprudence Deutsche Post AG (2001) GlaxoSmithKline (EU) T168/01- case of dual pricing However, the South African Competition Commission has some experience: Harmony Gold Mining Co Ltd v. Mittal Steel South Africa Ltd (2007) GSK and Boehringer-Ingelheim issues licenses on ant-retroviral after threat from SA Competition Tribunal : Royalty decided at 5%
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Refusal to License IP and the Essential Facilities Doctrine Trinko (US Jurisprudence) v. Microsoft (EU jurisprudence) Predatory pricing activities has been experienced in comparative jurisdictions soon after the expiry of the patent to restrict generic entry GlaxoSmithkline France (EU Case): Held that GSK held dominant position in the market for an injectable antibiotic. The Council endeavored to show that the laboratorys predatory pricing policy had been implemented in a related market for the purpose of forcing out the competing generic drug manufacturers in order to enable it ultimately to raise its sale prices. Napp Pharmaceutical Holdings Ltd (2001): Predatory and excessive pricing AstraZeneca (2005): It can be an abuse of dominant position to misuse the regulatory process (patents)- Commission- Case in appeal to CFC
Competition Law in India: Challenges in its application and in the Indian Pharmaceutical Sector
Regulation of Combinations (section 6 r/w section 20)
Issues in identifying relevant markets in combinations The AAEC test in case of combinations and evaluating efficiencies Combinations that can harm generic competition- reduction in price competition Elimination of substitute products from the market and foreclosure of competition Change in generic firms strategy after acquisition
Case laws from Comparative jurisdiction Recent US FTC consent orders: Mylan/Merck and Sun/Taro: existence of multiple generic version meant that patented products no longer constrain the price of generic drugs; ordered divestment of products (2008) American Home Products Corporation/American Cyanamid Company, 119 F.T.C. 217 (1995) (consent order) Pfizer Inc. and Pharmacia Corporation
Competition Advocacy
A Muliti-pronged strategy for creating awareness about competition issues on ex ante basis. Since there are different actors in the Pharmaceutical industry and healthcare markets, strategies can be specifically with reference to: The need that generic companies must take initiatives in effectively challenging patent grants. Industry associations must be made aware about possible anticompetitive effects of acquisitions and mergers of generic companies. Need for generating awareness among patent offices about anticompetitive effects due to wrong application of patentability standards prescribed under the law Need for generating awareness among S&T authorities about the implications on normative IP framework in case of Public funded Pharmaceutical R&D in the light of experiences from comparative jurisdictions Concerted efforts for generating awareness about the loopholes in the law regulating actors and activities in the pharmaceutical supply chain Need to create awareness among the Drug regulatory authorities about possible impact of Drug-patent linkages and issues around Data Exclusivity and Competition Need to sensitize the NPPA about pricing issues connected to patented drugs and other branded generic medicines Need to create awareness among the Drug regulatory authorities about possible impact of standardisation on the competitiveness of small scale enterprises
Competition Advocacy
Need for creating awareness among government Agencies involved in drug procurement so as to adopt best practices in drug procurement largely based on the Tamilnadu model. Need to sensitize Government agencies about impact of minimum turnover requirement in case of drug procurement Need for Generating awareness among various actors in the supply chains
Medical Practioners should be sensitized about the importance and efficacy of generic medicines for prescription Marketing reps. and companies must be made aware of ethical standards of marketing, drug promotion and awareness and must built around direct to consumer advertising. A proper statutory framework must be proposed. Wholesalers and retailers must be made aware of possible actions against them for keeping supranormal margins through anticompetitive agreements. Hospitals with drug outlets must be asked to streamline their procurement policies and adopt best practices in procurement. Issues for advocacy involve excessive pricing and profit margins maintained by such outlets Jan Aushadhi must be popularized on an all India basis. Rashtriya Swasthya Bima Yojana, 2008 must be popularized
Need for greater consumer awareness about health insurance Other Government agencies must be made aware of evaluating their actions by keeping in mind the competitive structure of the Indian pharmaceutical industry and consumer access from a health care perspective
Thank You