Patenting is a political act. Technical details of patent law aside, the Glivec ruling highlights the most contested issue in medicine today:  what constitutes true innovation in an age where scientific advances are transforming the very definition of a drug?  This is a question that extends far beyond patent law into basic value judgments like how society should spend limited resources on medical technologies, in a way that balances patient access with the economic incentives needed to seed their development in the first place.  The external demand for value – the pressure to prove it beyond doubt – is driving every aspect of the pharma supply chain today.  Seeking to raise the bar around the basic patenting criteria of novelty, non-obviousness and an innovative step, as the Glivec decision just did, is but one expression of this broader challenge facing the industry.

India has made a choice — on Industrial Policy grounds.  What is interesting about the 112-page Court judgment is not the cursory review of whether Glivec’s chemical reactant composition delivered an “enhancement of known efficacy” – a requirement for recognition as a patentable innovation – but the emphasis it places on broader issues of policy and economics.  The ruling quotes approvingly from the academic literature that “rules and regulations of the patent system are not governed by civil or common law but by the interest of the national economy.”  More than a third of the text traces the rise of the domestic drug industry, noting that “development of the bulk drugs sector is the most important achievement of the pharmaceutical industry in India,” an outcome it said was made possible by the absence of full patent protection for pharmaceuticals prior to completion of the country’s accession to the WTO TRIPS agreement in 2005.

A finding writ backwards.  The Court’s reasoning is rooted in a complacent approach to the dynamics of market growth and social change, to wit: reproducing other people’s drugs is a business model that works for India; preservation of the generic sector’s license to operate has been in India’s economic interest since confederation, and patent law should simply mirror that commitment.  Left unsaid is whether a court of law is competent to make such assumptions on the basis of past history when the Indian industry itself is undergoing a significant shift toward greater global engagement, with innovation – in process as well as products — emerging as an equally attractive alternative to copying.  India’s burgeoning, up-from-nothing CRO sector is one domestic constituency unlikely to plot new growth from the Court’s arguments. Another likely casualty is the rich infrastructure that surrounds modern drug innovation, from clinical trials, subsidies to academic teaching hospitals, to advanced manufacturing and improvements in supply chain technology.  Much of this investment is likely to continue to transit to more predictable host countries – like China.

No alms for the poor.  Nothing in the Court ruling suggests that the plight of those without access to essential medicines will improve. The decision simply maintains the status quo for Indian generic producers, most of who manufacture primarily for export – because the money is better abroad than at home. As the world’s largest exporter of bulk drugs, Indian producers bear some responsibility for a recent World Health Organization [WHO] survey that found prices for even the lowest-priced generic products sold through the private sector were at least nine to as much as 29 times higher than the agreed international organization reference price, in most WHO regions.  Even in the public sector, provision of essential generic medicines covers only about 42 per cent of the potential target population in developing countries.  Access to medicines is complex – it is a cliché that bears truth. Generic production, particularly for profit, will not by itself deliver what the Court ruling claims is the commitment underlying India’s patent law to “provide drug access to the rest of the world.”

Regional trade is the next phase in the activist war on patents. The Glivec case has shredded much of what was left of the industry’s multilateral IP agenda, a decline that started with CEO acquiescence to the November 2001 WTO Doha Ministerial Declaration on TRIPS and Public Health.  The Declaration, whose principles are embedded in the 2005 Indian patent law, limited the scope of drug patents where public health considerations intervene and thus had the effect of inhibiting enforcement of relevant TRIPS provisions.  In response, big Pharma has moved aggressively to shore up IP protection in key regional trade negotiations, including the pending Trans Pacific Partnership [TPP].  As in any political negotiation involving countries at different stages of development, the high profile given to the Glivec case has put the industry on the defensive in its drive for more uniformity in the standard of protection.  Operating on multiple fronts, activist groups intend to promote the Indian model of “IP flexibility” to allow for compulsory licensing, patent linkage, open pre-grant opposition and a low bar on data protection.

Industry strategy needs a re-think. The Glivec case suggests there is not much heft left to big Pharma’s reliance on insider lobbying and technical expertise to defeat the anti-patent access lobby and governments who apply IP as a discriminatory trade barrier.   Recovery must start with a better message. If what the industry describes as India’s patent “theft” can be justified by activists as providing more access to the poor, then most observers will say it is a vice that is easy to live with — especially when the top five big Pharma patent holders are currently sitting on an idle cash pile of nearly $70 billion.

Work underway in Africa to highlight how IP promotes civic engagement and job-creating entrepreneurship can break the perception that patent rights are a zero sum game, an instrument of power that hoards knowledge rather than liberates it.  More pressure on governments to sit down and negotiate structurally sound tiered pricing arrangements, with proper safeguards, can obviate the need to misapply patent law for pricing and cost containment purposes. Creative use of licensing can be a “win win,” with many examples evident in the HIV space. It’s also worth explaining how the science of drug discovery is changing, where companies – big and small – must collaborate to mitigate the risks from the evolution of knowledge as a “floating asset.”    Patents are a force multiplier – it’s the best solution to the “tragedy of the commons” that plagues many well-meaning drug development initiatives by taking too long to consummate and that often yield little actual value to patients.

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One man’s goof is another man’s growth, potentially.

A study funded by Becton Dickinson and Company (BD) and published last December in American Health & Drug Benefits found that adverse events associated with injectable medication error in the clinical setting increase US payer costs by anywhere from $2.7 to $5.1 billion a year. On average, that’s $600,000 in extra costs per hospital due to improper administration of injected drugs.

BD Rx – a recently formed subsidiary of BD – will oversee the production and regulatory approval of a new line of pre-filled generic syringes. The first drug in the BD Simplist product line is an antihistamine injection called diphenhydramine hydrochloride, or generic Benadryl. Mark Sebree, president of BD Rx, says the line will span categories including antiemetics, blood modulators, pain management drugs, anesthetics, and other categories. The BD Rx subsidiary has no plans to develop biosimilars or branded vaccines, says Sebree.

Pre-filled syringes in commonly-used dosages can help prevent medication errors since each syringe has its own barcode and label, says Sebree. “Because these products are pre-filled and pre-labeled, and because the vast majority of these drugs are actually administered at the bedside, the label travels all the way to the patient,” meaning physicians or nurses get a second look just before giving an injection. Pre-filled injections also eliminate “the possibility of transcription error,” or incorrect data entry, one of the leading causes of medication error, says Sebree.

“We’re entering a market that, by our assessment, is worth $1.2 billion…our products will target 50% to 70% of that market,” says Sebree, adding that several group purchasing organizations (GPOs) have already signed agreements with BD Rx to purchase the syringes. The BD Simplist line of pre-filled syringes will be priced slightly higher than traditional injections, but at the hospital level, “there doesn’t seem to be any level of surprise about the price we’re requesting for these products,” says Sebree.

BD Rx has filed six other generic pre-filled syringes with FDA, and expects to launch between 20 and 30 products in the next three or four years, says Sebree. The approval of generic Benadryl marks BD’s first foray into pharmaceutical manufacturing. The company’s bread and butter are medical supplies and devices. On an analyst call last week, BD CEO Vincent Forlenza said the company expects the BD Simplist line to generate “incremental revenues of about $100 to $200 million by the end of fiscal year 2017.” BD Rx is targeting only the US for now, but “will certainly evaluate other geographies” going forward, says Sebree.

Niels Erik Hansen, president and CEO of Intelligent Hospital Systems

Last fall’s deadly meningitis outbreak linked to contaminated steroid injections is a tragic reminder of the risk of errors inherent in manual pharmacy medication compounding. Unsanitary conditions at the Massachusetts compounding pharmacy that made the injections resulted in fungal contamination of the drugs. The resulting outbreak sickened nearly 700 people in 19 states, and killed more than 40. Can technology prevent another outbreak?

Although the Massachusetts case is an egregious example of medication compounding gone awry, it is hardly an isolated incident. In December, the journal American Health & Drug Benefits reported that medication errors from injectable drugs harm more than 1 million patients annually in US hospitals. Adverse events due to injectable medications cost US healthcare payers between $2.7 billion to $5.1 billion annually, an average of $600,000 per hospital.

If a contagious disease with such devastating consequences and costs were to emerge, we would put all available resources toward eradicating it. Yet this epidemic of medication errors goes largely unchallenged. What is perhaps most tragic is that the technology to prevent it is already available. Automated pharmacy compounding systems have existed for more than a decade – it’s just that too few pharmacies use them.

Medication compounding is a common practice in hospitals and pharmacies. Physicians prescribe combinations of medicines that are mixed in a single syringe or IV bag for a specific patient. To make these compounds accurately and safely, pharmacists must measure and combine drugs with meticulous care – for example, diluting a few milliliters of one drug and adding an equally small quantity of another. But despite the best efforts of pharmacy workers to mix medications perfectly, humans are not perfect.

One of the biggest advantages automated pharmacy compounding technology provides is removing the primary source of contamination and error – humans – from the compounding process. And automated compounding systems deliver many more benefits than the ability to make highly-precise sterile compounds exactly right every time.

Automated compounders have an aseptic chamber where medications are mixed. Vials are photographed and their barcodes are scanned; both are then matched to a product database to ensure the right product is being used in each step. As compounding progresses, pulsed UV light provides extra disinfection to critical puncture sites, needles are automatically capped (reducing the risk of needle sticks), and the finished product is dispensed in a syringe or IV bag with an electronic barcode label for documentation. The result is a sterile and accurate medication compound that is verifiably safe for the patient.

By increasing safety, the technology also saves money. Automation lowers the cost-per-dose of medication and reduces the need for medication outsourcing. Equally important, automated compounding minimizes the risk of medication errors that can result in patient injury, emergency intervention, extended hospitalizations and tort liability – critical considerations for hospitals already burdened with more than a half-million dollars in costs from adverse drug events every year.

Some will say that automated compounding systems are expensive, but that’s relative. CT scanners, MRI machines and many other types of healthcare technology can be considered expensive, but they are an investment in a higher standard of patient care. Fortunately, through enhanced safety and lower medication costs, even the most expensive automated compounding systems have paid for themselves in less than three years.

Last fall following the meningitis outbreak, Congress held hearings about how the FDA can better regulate compounding pharmacies. Rep. Ed Markey (D-MA) introduced legislation to enhance pharmacy safety, and plans to reintroduce it in the new Congress. It is imperative that any effort to regulate pharmacy compounding include a discussion of the available technology that is proven to make it safer. Congress and the FDA must seize this opportunity to put medical technology to its highest and best use, not just improving the quality of patients’ lives, but saving them.

Dr. Niels Erik Hansen is president and CEO of Intelligent Hospital Systems in Winnipeg.

Falsified and substandard medicines can be ineffective, promote drug resistance and even cause severe illness and death, said panel chairman Lawrence Gostin, Georgetown University Law Center professor and director of the WHO Collaborating Center on Public Health Law and Human Rights. The report [“Countering the Problem of Falsified and Substandard Drugs” available at www.nap.edu] urged regulators to adopt international practices on surveillance, regulation and enforcement, including technical quality standards developed by the International Conference on Harmonization.

Most important to pharma companies, the panel backed a mandatory U.S. electronic drug track-and-trace system able to identify products at the unit level through unique serial numbers. This approach is supported by the Food and Drug Administration – which requested the report — but considered too costly and complex by manufacturers, pharmacists and wholesalers.

The expert panel also proposed to strengthen supply chain tracking through tighter state regulation of drug wholesalers, including creation of a public database of distribution firms that have had licenses suspended or revoked. And the federal government would help low- and middle-income countries detect substandard products by identifying new sampling and analytical technologies through a central repository at the National Institute of Standards and  Technology (NIST).

Counterfeits separate

One strategy for building support for all these activities is the panel’s decision to drop the term “counterfeit” in describing substandard drugs that pose a public health risk. The aim is to narrow the use of “counterfeit” to refer to products that infringe on trademarks and intellectual property protections, but are not necessarily substandard or adulterated. Calling all poor quality drugs “counterfeit,” the report notes, is seen by advocates for generic and low-cost medicines as a way to use the campaign against “bad drugs” as a guise to enforce patent and trademark regulations.

Similarly, the report  defines more clearly “substandard,” “falsified” and “unregistered” drugs to provide a basis for regulatory agencies to target their legal and regulatory efforts.

The panel also calls for international development and financing agencies to support drug manufacturers in low-income countries that seek to upgrade facilities to meet good manufacturing practices. Such investment efforts would counter fake drug marketing by boosting local capacity for producing quality medicines.

Although an international treaty enforcing drug quality standards is the ultimate goal, publication of guidance on best practices as an interim step “is more realistic,” noted panel member Hans Hogerzeil, professor of global health at Groningen University in the Netherlands. The IOM panel also is asking the World Health Assembly to support its basic recommendations at its May 2013 annual meeting.

There’s some optimism that this report may spur FDA, manufacturers, distributors and pharmacists to reach agreement on an effective drug track-and-track system, an issue that has generated heated debate for more than a decade. Congressional action is needed to authorize mandatory tracking, as well as to require states to support a database on licensed drug wholesalers. Added resources for FDA to take on these tasks also is a real challenge.

While cost is an issue everywhere in implementing new regulatory and oversight programs, Gostin noted that limiting the use of substandard drugs would bring notable benefits in terms of lower hospital costs and fewer drug-resistant medicines. Adopting the panel’s recommendations, he said, is “a very good investment.”

The commentary included in the law echoes industry concern that more clarity is needed to ensure that preemption is not applied ‘too narrowly’. While the law may not be the best news for pharma, “it’s better to have one burdensome statute than to have 50 different ones with variable impacts; a statute that at least imposes  uniformity across states has value,” as John Kamp, Executive Director for the Coalition for Healthcare Communication put it to Pharm Exec. CMS responded to the issue by promising guidelines to clarify the preemption requirements, while at the same time adding a confusing caveat that state preemptions would be evaluated on a case-by-case basis. Kamp warns, “This case-by-case clause is a flag to industry that says, ‘This may not be over’.” Such a contingency gives the CMS the flexibility to gauge how Federal Reporting actually works and then to adjust its actions accordingly, versus simply living with the reality of what States currently do in their own reporting.

Alternatively, The Sunshine Act may have the effect of doing away with the clash that state laws present against the status quo in Washington. In January, Minnesota repealed its physician payment disclosure laws in anticipation of the Sunshine Act’s release. “There’s an element of logic that dictates states will fall back on the federal statute and reinforce the complexity of Sunshine as it is,” says Saul B. Helman MD, Managing Director and Life Sciences segment leader at Navigant Consulting, a company that advises life science companies on issues of compliance.

“On the other hand,” he counters, “states may realize that they require disclosure for payments that are not included in the federal Act, or that they may require different thresholds and additional areas of reporting.” For instance, if a state decides that CMS’ defined list of teaching hospitals fails to include facilities that that state’s government pays for to provide services, more specifically the prescribing of medical products, it may prompt further requirements to be introduced. As Helman puts it, there’s an ambiguous ‘wait and see’ period as to how states will respond on this issue.

The bottom line is that compliance remains a dynamic area, especially with the possibility of stepped up international requirements being introduced to the mix in the future.  For now, the Act urges that companies continue to comply with state and local authorities in their reporting requirements until August 1st, when the federal requirements take effect.

Section 6004 now mandates that annual reports on distribution of samples be electronically submitted to the FDA, in contrast to PDMA provisions that left it to the discretion of regulators to request such information.  As noted on the FDA web site:

The Affordable Care Act explicitly states that manufacturers and authorized distributors must submit the following information concerning drug sample distribution to FDA: (1) the identity and quantity of drug samples requested; (2) the identity and quantity of drug samples distributed; (3) the name, address, professional designation, and signature of any person who makes or signs for the request, and (4) any other category of information determined appropriate by the Secretary.

In addition to these requirements, the reports are to be sent to the FDA in XML (Extensible Markup Language) format. Howard Shatz, SPL and ACA 6004 Project Manager at Data Conversion Laboratory, told Pharm Exec that this puts additional obligations on manufacturers who contract their sample distribution to other companies, as “some drug makers will have to check with multiple companies in order to consolidate all of the information required under the law.”

Shatz also points out that this data will be analyzed and speculates “that it could be an easy way of identifying doctors who are abusing the system.”  Clearly, the practice of providing free samples has come under increased scrutiny.  The European Federation of Pharmaceutical Industries and Associations [EFPIA],  established sample distribution caps on members in 2010 as a result of ethical concerns by patient groups and governments, including the assertion that an unlimited “sampling culture” directs physicians away from prescribing more appropriate and affordable medicines. The intent behind the new US reform language is unclear at this point, but with this European precedent and a regulatory climate that is more skeptical of industry marketing claims, the prospect of formal limits on sampling in the US is now on the radar screen.

Nevertheless, opinion remains divided on whether these specific requirements will lead to a broader crackdown on sampling.  Many observers say that bureaucratic realities are such that the provision of advance notice means the data will be applied, rather than just warehoused.  However, there is another aspect to the story:  Section 6004 could render obsolete the push toward tougher state regulations intended to supplement PDMA’s lax directives.  Federal oversight might save companies the headache of accounting for myriad discrepancies in compliance, on a state to state basis.

What is clear is the implications will start to narrow as implementation of Section 6004  moves forward and the effects of the overhaul are assessed in real time by providers, regulators and politicians.   Like it or not, a tipping point in the debate on drug sampling is at hand.

Successfully commercializing a proprietary drug in China can be a Kafkaesque affair. The all-important hospital listing, a prerequisite to sales detailing, in turn requires first a national price from the central government, followed by an acceptance onto the tender in each province where the drug will sold. Before the product can be listed at a given hospital – which requires a committee meeting – it must first get on the tender in the province where the hospital is located.

“After SFDA approval, it takes about one and a half to two years to really get to a point where you are 80% commercial in the country,” says Blobel. “That’s a big difference” from the US, for example, where the PDUFA date is a pretty reliable marker for anticipating commercialization of a new drug – assuming the product in question receives approval.

The second major challenge, according to Blobel, is that drug patents and IP don’t prevent local generics from emerging. “In China, [IP] doesn’t do anything to keep competitors away.” On the flip side, though, IP expiries don’t necessarily lead to a sharp patent cliff. “You aren’t depending on the protection from IP, so the life cycle continues growing,” says Blobel, adding that SciClone grew revenues faster for Zadaxin (thymalfasin), a treatment for hepatitis B and C, liver cancer and other cancers, and as a vaccine adjuvant, after the patent expired.

IP is beneficial in China, however, because it allows a company to fetch a better reimbursement price. “If you are the originator and have IP, it allows you – for a long time, even after the patents expire – to enjoy preferential pricing,” says Blobel. Measured by revenue, Zadaxin is one of the largest imported products in China, earning roughly $100 million in 2011, and $30.4 million in 2Q 2012, according to company reports. Although Zadaxin is approved in 30 countries, 97% of sales come from China, where the product was first approved in 1996. The product is listed on the Reimbursement Drug List – which is distinct from the Essential Drug List – and receives government reimbursement as a result. Last month, SciClone announced a government-mandated 18% cut to Zadaxin’s retail price, but the company says the ultimate impact of the price cut will amount to roughly 5%, as SciClone’s importation and distribution network will shoulder the majority of the percentage decrease.

SciClone’s sales force numbers around 850. Sanofi, on the other hand, employs multiple thousands of sales reps in China. So why does it make sense for Sanofi to pay SciClone to market Depakine, a broad-spectrum anticonvulsant? “Sanofi focuses its four or five thousand reps on Plavix and Lantus,” says Blobel. “When they were promoting Depakine, they grew it bys eight or nine percent a year, topline. Since we took over in 2008, we have grown the brand by 30% every year.” Blobel says one of the reasons SciClone is able to be more effective is due to the company’s focus on fewer products. “It’s very difficult to focus an organization on 10 products and get the same power behind them,” says Blobel. “At SciClone, the business unit that handles Depakine, that’s the prime product they’re selling. For Sanofi, it would have been an also-ran. That’s the key difference.” Blobel says another important element of professional promotion in China is an expertise in the hospital system, and its myriad departments. “If you want to sell Depakine as an anti0epilepsy drug, you need to go to the people who are treating this. For bipolar disorder, it’s another department. Focusing [reps] on specific departments within the hospital” is crucial to generating new sales, says Blobel.

Like several companies operating in China, SciClone is currently under investigation by the SEC and the DOJ for potential violations of the Foreign Corrupt Practices Act (FCPA). Last November, the company hired a VP of compliance – Min Yin – based in Shanghai, and has conducted it’s own investigation to determine what practices were violative, and what needed to change. Based on the internal investigation, Blobel says the problem boils down to three issues.

First, Chinese physicians visiting the US for medical meetings like ASCO took side trips on the way home, stopping over in Disneyland, for example, which is “not okay,” says Blobel. Secondly, the policies and training put in place by the company were not intensive or explicit enough, admits Blobel. Lastly, the finance team in China was “too independent and was run on too long of a leash.” Now, the financial team reports directly to the US-based CFO, and new training programs and other compliance practices have been put into place, and shared with the SEC and DOJ. The SEC investigation was launched in August 2010, and Blobel is hopeful – based on guidance from his legal representation – that “maybe later this year, or maybe in Q1 2013” the investigation will be concluded.

One of the particular challenges with respect to the FCPA, according to Blobel, is that “in the definition of the SEC and the DOJ, every doctor in China is a government official,” since just about every hospital has at least some equity participation from a municipal or provincial government entity. “In the eyes of the SEC, since every doctor is a government official, if you give them four mooncakes in a year, that’s already too many,” says Blobel.

On the question of whether China’s Essential Drugs List (EDL) will be expanded to include specialty drugs, especially cancer drugs, Blobel says its likely to happen late this year or early next year. But the big question, according to Blobel, is what the government will do to ensure acceptable quality. Since the prices on the EDL are so low, manufacturers can feel forced to take shortcuts. “With these rock bottom prices, the government pushes too aggressively, which causes some companies and many local manufacturers to cut corners,” which is unfortunate, says Blobel.

While health insurance is expanding to include much of the country, it’s mostly at a low level – around 200 renminbi per person, per year – at least relatively speaking. “A consultation at a university hospital might cost only two or three renminbi, so in this context, 200 is a pretty decent amount,” says Blobel. “But most originator drugs, including Zadaxin, an injection might cost five or six hundred renminbi, so two hundred doesn’t last very long.”

Blobel says that China’s economy is likely to change so that more and more people will be able to afford innovative medicines, but that change will take time. “The government realizes, and most economists agree, that the Chinese economy needs to be switched from an exporter model to a more consumer-driven model. The people have the money, they have the savings, but they will only use it to consume more if two fundamental concerns are solved: health insurance, and a pension plan, or what happens when they grow old.”