Evolution or Devolution?

by buildingpharmabrands

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Medical Council of India (MCI) and the Indian government are aggressively promoting the use of generic drugs. Pharmabiz wrote in an article titled Medical Council of India asks doctors to prescribe drugs with generic names on May 10, 2013, that the MCI has issued circulars to the deans of all medical colleges, directors of Post Graduate Institutes and presidents of state medical councils to give wide publicity to ensure compliance by doctors to the clause 1.5 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002.

Branded Generics to Generic-Generics?

One hears more often these days that going generics is the way to improve access to medicines. The recent wins of patent cases against a few of the anticancer drugs and an approval of a generic version of an MNC’s anti-diabetic drug have only furthered the case for generics. Is generic prescribing a better option? Which is the logical way or a path for a branded-generics pharmaceutical industry that is poised to evolve into a research-based drug industry in future? Become a generic-generics drug industry? Would that be an evolution or devolution?

Two Assumptions

The popular themes about promotion of generic prescribing is based mainly on two assumptions:

  1. It will reduce prices and improve access of medicines considerably
  2. It will significantly reduce the corrupt prescribing practices

Let us examine the first assumption that generics-prescribing leads to considerable reduction in drug prices. This is more relevant to the highly regulated first-world markets such as the US, Western Europe and Japan where research-based pharmaceutical industry rules the roost. In these patent-protected markets when the patents of drugs expire, a number of generics are introduced bringing down the prices considerably depending upon the generic penetration almost by eighty to ninety per cent of the innovator-drug prices within six months of genericization.

In branded-generic markets like India, where the prices are already at 20 to 30 per cent of the innovator-drug prices a significant price reduction is unlikely to almost ninety per cent of drugs as they are off-patents already. In case of new drugs the government can regulate the prices in a number of ways taking into account the socioeconomic conditions of the patient populations.

Can the generic-prescribing reduce the corrupt prescribing practices? Think for a moment what is the root cause of this problem. When you look at the hierarchy of pharmaceutical products, innovator or brand-name drugs are at the top with the maximum product differentiation, which enables them to command a price premium. Next in the pecking order are value-added generics such as drug delivery products of the same molecule with a perceptible and patentable degree of differentiation, which helps them get some price premium. Branded generics are next in the line with a lesser degree of differentiation in terms of quality perception, availability, customer service , etc. Generic-generics are at the bottom with a commodity status with virtually no differentiation. When there is no product differentiation, gratification rules the strategic roost. That explains but doesn’t justify the unabated corrupt practices by drug manufacturers in wooing the prescribers.

The prices of branded-generics and generic-generics do not vary significantly in branded generic markets such as India. The prices to retailers and hospitals may have hefty discounts, which are not passed on to patients entirely. Patients pay almost the same price while the channel members get increased margins.

Evolution or Devolution?

The modern pharmaceutical industry as we know it today has evolved over many years and contributed significantly in the discovery and development of drugs to cure many diseases that were thought untreatable. The same industry has to develop even the future cures. Therefore, it has to continuously evolve. The evolutionary path for a research-based pharmaceutical industry has been an arduous one. A firm would start off as an API manufacturer or a generic-generic manufacturer and move up the evolutionary road to become a branded-generic manufacturer to international generics manufacturer and further move up to a value-added generics to specialty Pharma and finally to a research-based pharmaceutical industry. The Pharma companies need to generate an investible surplus to move up at every stage. With each forward step during this evolutionary process, the company would be creating and increasing its ability to differentiate itself from the rest of the pack.

Going back to generic-generics is devolution or backward-evolution. De-evolution is the notion that a species can change into a more primitive form over time. In terms of modern biology, the term may be a misnomer for that concept as it presumes that there is a preferred hierarchy of structure and function, and that evolution must mean progress to more advanced organisms. However, in the context of modern pharmaceutical industry and the state and stage at which the Indian pharmaceutical industry is currently positioned going from branded generics to generic-generics instead of  moving towards a research-based pharmaceutical industry is clearly devolution. It is, if not going back to primitive stage it is likely to become primitive tomorrow by standing still at the present stage in its present state, while the rest of the pharmaceutical world is moving forward.