Government’s new Plan to End the Doctor-Pharmaceutical Companies Nexus is Juvenile. It is going to be a Colossal Disaster.

pharmaceutical companies

A recent report in Reuters (1) reported that the Modi government plans to crackdown on the practice of pharmaceutical companies “bribing” Doctors in order to influence prescribing and buying behaviour. This is neither the first attempt nor will it be the last and in my considered opinion of having been associated with the pharmaceutical and healthcare space for the better part of two decades and a half (both directly and indirectly), I feel this attempt also will come a cropper much like earlier attempts.

Unless the root causes of unethical behaviour namely, personal and corporate greed, lack of effective regulation, and the lack of an Ombudsman that can direct, instruct, guide, hear and settle issues related to unethical practices are addressed; guidelines, instructions, and diktats are not worth the paper they are written on.

This draft report talks about how the government was drawing up a set of “marketing rules” restricting gifts and holiday trips offered to Doctors and pharmacists to ₹1,000. The draft proposal apparently also provides for a marketing ban/suspension for a period of one year along with confiscation of all packs of the company’s “highest-selling drug brands”, which would then be given away to government hospitals. There is also the option of converting this suspension into a monetary penalty that would wipe the slate clean – I sincerely hope that all these juvenile suggestions are simply in the realm of speculation and better sense will prevail and a more robust guideline is formulated that is focused on the prevention of malpractice rather than looking at penalizing people and corporates after the deed has been done – this is typically the case with those who shut the stable doors after the horses have bolted.

Although there are several factors at play, there are three major issues that plague the Indian pharmaceutical market. These factors include the quid-pro-quo nexus between doctors and pharmaceutical companies, Branded generics that have cluttered the market, and the disorganized nature of the pharmaceutical sector leading to the proliferation of pharmaceutical companies that function “under the radar” This is by no means an exhaustive list of all the issues that plague the pharmaceutical industry but in my opinion are the key factors that need to be tackled if there is any hope of correcting the systemic errors that continue to corrode the Indian pharmaceutical industry from within. Each of these is discussed in the subsequent sections of this article.

Quid-pro-quo nexus:

In trying to understand the reasons for this quid-pro-quo nexus between the pharmaceutical Industry and the Doctor fraternity one needs to understand that unlike the FMCG model where more often than not the customer is also the consumer – the one who buys a product or avails of a service usually also uses/consumes the product/service. In the pharmaceutical model most often the customer is not the consumer – the customer here for a pharmaceutical company is the Doctor and the consumer the patient. It is the customer (Doctor) who influences the buying behaviour of the Consumer (patient) through an instrument called the prescription. Therefore the first point to be understood is that for a pharmaceutical company the customer (Doctor) is immensely more important than a Consumer (patient).  

Now, that we have established how from a pharmaceutical company’s standpoint the Doctor is more important than a patient, I would assume that the quid-pro-quo nexus alluded to above should be clear enough. This quid-pro-quo nexus once established is further perpetuated and fueled by:

  1. Customers (Doctors) who keep upping the ante and demanding more “bang for the buck”
  2. Pharmaceutical companies who are ever willing to meet and exceed the ever expanding expectations

I myself have been privy to conversations in meetings where the discussion centered on the nomenclature to describe this activity rather than the ethical and moral question of indulging in a clearly illegal activity. This expense incurred by pharmaceutical companies often referred to euphemistically as “Doctor Gratification” is neatly passed on to the patient (Consumer) who has no choice but to buy the product as it is a “brand” prescribed by his/her Doctor and because the Doctor (customer) is in a quid-pro-quo arrangement with the pharmaceutical company he/she will insist that the patient (consumer) buy only the brand prescribed him/her and will not accept a cheaper and equivalent substitute (if available). This is a perfect Win-Win for the pharmaceutical marketer and the customer (Doctor) duo while it is a Lose-Lose for the Consumer (patient).

Branded Generics:

The second important distinguishing (meant in the sense of a differentiator and not as an exemplar) feature is that in India pharmaceutical companies hardly if at all market original research molecules – this has led to the coining of the oxymoron – “Branded Generics” which essentially means that multiple companies with multiple “brand-names” market the same generic molecule to the same subset of a given Doctor population – for example you could have 200 brands of a particular antihypertensive, 600 brands of a pain-killer, 155 brands of a cholesterol lowering drug and so on. This multiplicity of brands within a therapeutic and even a generic niche has led to an internecine battle of wits amongst pharmaceutical companies vying for a piece of the same Roti in a market segment that often does not keep pace with the number of companies who jump into the fray with their own version of that very same molecule.

This again perpetuates the quid-pro-quo nexus – otherwise how do you get Doctors to prescribe your brand over that of the competitor? Pharmaceutical companies will also meet this challenge by introducing trade-offers, “schemes” and price-cuts for pharmaceutical distributors, retail chemists, and pharmacies so that they are motivated to sell one company’s product preferentially over that of another company’s – Pharmacies could do this by refusing to stock a particular company’s product – “Non-availability” is equal to “no-sales” or by motivating the consumer (patient) to opt for another brand because it is more “economical”, “superior quality”, “better company” and so on.

Disorganized Sector:

The Indian Pharma sector is probably the most disorganized “large pharma market” in the World. It is believed that there are more than 25,000 pharmaceutical companies (2) in the country of which approximately 350 would fall under the organized sector. This means a bulk of the companies that operate in the Indian pharmaceutical sector are those that operate “under the radar”. The question that really needs to be asked is how does this “draft-government-order” that aims to curb malpractice in the pharmaceutical sector address these companies? Not that the companies in the organized sector are any more ethical and those in the unorganized sector are any less but it is a fact that those in the organized sector can at least be scrutinized and subjected to some level of regulation. Companies in the unorganized sector would not be subject to the same level of scrutiny and held up to the same level of standards.

That apart, lax regulation in the licensing of pharmaceutical marketers has also meant that all it requires for a company to setup shop and start marketing their products is for a group of former employees of a pharmaceutical company to get together, pool-in some money, locate a place of approximately 150 to 200 Square feet to stock their products, grease a few palms to obtain a wholesaler license, register their Firm, and get their products manufactured from one of the several pharmaceutical manufacturing firms that dot the small township of Baddi in Solan district of Himachal Pradesh – the largest pharmaceutical manufacturing hub in Asia and the third largest globally. How do these “small” players survive? By undercutting the larger pharma companies and establishing their own quid-pro-quo nexus alluded to earlier, within their own little niches.

The government may be right in identifying that there exists a problem within the pharmaceutical industry that needs to be tackled but this draft resolution may not really serve the purpose beyond calling out what is already an open secret within the pharmaceutical industry.

In trying to understand what could be done and if this new draft notification would have any impact, I reached out to my senior colleague in the first company I worked at – a veteran of the pharmaceutical industry, a mentor for many pharma professionals, and head of the pharmaceutical think-tank “The Enablers” Professor Vivek Hattangadi. He too concurred that some form of intervention is required to clean the “Augean stables” of the Indian pharma industry but remained skeptical if this draft proposal would be able to do it. As he said “Companies will always find loopholes…

Several attempts in the past from within the pharmaceutical industry by the OPPI (Organization of Pharmaceutical Producers of India) and also the Doctor’s body – IMA have failed in curbing this practice because these are at best guidelines and advice that most pharmaceutical marketers have chosen to ignore.

What is required is a surgical intervention that shakes the pharmaceutical industry – nothing less will do. Otherwise a draft notification such as this will only be another addition to the numerous other guidelines and manuals that have had as much effect as water off a duck’s back.

As someone with a vested interest in the Pharmaceutical Industry, I would like at the minimum the following implemented:

  1. Create an Ombudsman that has on its board opinion leaders with untarnished credentials who will represent the interests of the public i.e. patients. The members should be drawn from the pharmaceutical Industry, Doctor fraternity, general population, and government and vested with enough autonomy and authority to investigate, address, and pass strictures and penalties – A Lokayukta for the pharmaceutical industry
  2. Suspend drug licenses of all pharma marketing firms who function with impunity within the unorganized sector and provide all such companies a one-time opportunity to clean up their act and become part of the regulated sector
  3. Throw the law book at the State licensing authorities who issue licenses without doing their due diligence and/or by accepting monetary favors.
  4. Make licensing of new pharmaceutical companies not only stringent but also digital so that middlemen are eliminated.
  5. Cap the number of brands that can be launched within a therapeutic segment – no brands can be launched once the fixed ceiling is reached – this should go a long way in reducing the number of “me-too” brands within the same therapy-segment – a key reason for the internecine battles amongst companies and the mad rush to build the “quid-pro-quo” nexus with Doctors
  6. Publish a guideline that outlines the fundamentals of what can and cannot be included in the promotional material published by pharmaceutical companies and ensure that the concept of “fair-balance” is maintained – conduct random and regular audits and penalize companies who make false, unjustified, and one-sided claims.

I think the government should look at these six areas initially. Even at the cost of sounding like a stuck record, I will still conclude by saying that this draft notification will not serve its purpose. What is required is a surgical intervention.