Why Fitting a Square Plug in a Round hole is Profitable for Pharma and Most Likely Will Stay?

In 2005 I had raised a question about Batch or a Continuous Process: A Choice. At that time it seemed like a logical question and still is. However, I left part of the question unanswered. Missing was the discussion of components of pharma manufacturing, API manufacture and their formulations. Generally most of the discussion about pharma manufacturing focuses on formulations. API manufacturing is treated as an orphan and is not discussed.

In this discussion I have used Synthroid, # 1 prescribed and # 59 by revenue drug from top 100 US drugs from 2013 to review both segments of manufacturing and related options. Information could be used to create a better business model that will incorporate better manufacturing technologies and move away from ‘regulation centricity” to “process centricity”. End result would be improved profits and expanded global healthcare and coverage with lower costs. If properly done global pharmaceutical landscape will change.  

API manufacturing and their formulations need to be dealt separately as the technologies involved (unit processes and operations) are different. However, they influence the total business process. First has reactive processes along with purification. Resulting products could be solid or liquid. Formulation in the simplest form is basically mixing of excipients and creating dose that delivers the expected performance and can be easily dispensed and consumed. Packaging is part of the formulation.

Why Continuous Manufacturing of API’s would be a challenge:

In the last few years many on increasing frequency have chimed in for the continuous processes for API. However, it seems like that the rational principles of chemical engineering have not been applied in coming to that conclusion. Continuous usually means operating 24 hours per day, seven days per week with infrequent maintenance shutdowns, such as semi-annual or annual. Generally 15% downtime is acceptable. Anything short of this definition is not a continuous process. Continuous process also means starting with raw materials and producing finished salable product.

The following dictate the rationality of what type of process would produce lowest cost and highest quality products.

• Product volume per year
• Process
• Equipment

In the development of a commercial process chemist/chemical engineer have to know and understand these. They can have the best process but equipment and product volume dictate the course of action. Generally the first thought is to use the existing equipment if the volume does not justify a continuous process. We all know and understand that a continuous process most of the times means capital investment.

For batch or continuous process complete command of the operating conditions and methods is necessary to produce repeatable quality product. Anything short impacts product quality and business process.

Batch cycle time exceeding e.g. 48 hours necessitates a thorough review and effort even going back to the lab bench to reduce the cycle time. Long batch processes impact asset utilization and the whole business process. Every effort needs to be made to minimize the batch cycle time. In pharma extended API manufacturing batch cycle times are normal as there is no “process centricity”. “Regulation centricity” rules and is an impediment to innovation.

Table 1 is self-explanatory and presents very interesting numbers. There are some extrapolating assumptions. It is assumed that 5% of the global population uses synthroid. This most likely is a high number. Thus the actual demand for the active ingredient would be less than illustrated.

Table 1 illustrates that at 112 microgram dose at 100% formulation efficiency about 15,000 kilograms of the active would be needed to satisfy the global demand. A continuous API plant operating [24X7X350x0.85 =7,140 hrs.] would produce at about five pounds per hour, an extremely low production rate for a continuous process. Use of currently available equipment would pose many challenges and be really trying to fit square plug in a round hole. If a continuous process plant were to be built, it will require special equipment and process controls that might not be available.

All said and done there is no justification to have a continuous plant for the manufacture of active Levothyroxine (synthroid). I have not looked into it but I am sure that today multiple plants are producing the active ingredient. Each possibly has low process yields, are inefficient, have variable site to site and batch to batch product quality. Significant and expensive manpower would be needed to have consistent quality product. In reality a single plant using a batch process would satisfy total global demand.

Synthroid (Levothyroxine) sales number and prescriptions [Table 2] presents another interesting hypothesis. We can reverse calculate the price of the active ingredient. It would be based on certain assumptions and would give us a picture of profitability at different levels. US sales per prescription per month are about $3.05. These compare to sale price of $4.00 for thirty or $10.00 for ninety day supply at Walmart and Target etc.

2013 Sales, $	2013 # prescriptions	Dosage
858,725,708	23,452,848 [One prescription per person]	There are eleven different doses between (25-200 microgram) available. To facilitate calculations an average dose of 112 micrograms has been used.
Since synthroid has to be taken every day of the year we can calculate the total micrograms needed assuming 100% formulation yield. One prescription = one patient
Total API needed, micrograms per yr.		=23,452,848x112x365= 958,752,426,240
One kilogram = 1,000,000,000 micrograms
Total API needed to serve US population, Kilograms per yr.		958.75
US population taking Synthroid		(23,452,848x100)/320,000,000* = 7% [*US population]
Extrapolating number to project global Synthroid API demand per year
Global population seven billion. Assumption 5% takes synthroid = 350,000,000
Total Synthroid global API need Kg. per year			=(350,000,000x958.75/23,452,848) = 14,308

Table 1: Levothyroxine active ingredient needed for Global and US population

Sales, $	# Prescriptions
858,725,708	23,452,848
Avg. US patient cost $ per month = 858,725,708/(23,452,848x12) =3.05
Avg. dose, micrograms =112	API, Kg needed to fill US need = 958.75 Per Table 1
Profit assumption at wholesale level	100%
Sale price at wholesale level, $	= 0.5x858725708 = 429,362,854
Formulation profit 40%
Formulation level factory cost	=0.6x 429362854 = 257,617,712
Excipient and conversion cost	70% of Factory cost
Total API Purchase price, $	= 0.3x257617712= 77,285,313
API Selling price, $ per kilo	= 77,285,313/958.75= 80,610

Table 2: Reverse calculation of Levothyroxine selling price

Reverse calculation using US sales numbers suggest that active ingredient Levothyroxine cost to the formulator should be about $80,610 per kilo. Current selling price of levothyroxine on the world market is less than $3000 per kilo. This suggests even after generous profit margins being factored in Table 2 everyone in the supply chain has significant profits. These margins also indicate that all of the inefficiency costs can be passed on and there is no incentive to improve manufacturing practices. Average sale price of $3.05 per month would considered low by US standards but it might be considered expensive in the developing countries even when it is sold at $1.00 per month’s supply.  

Formulation Processes

Since dosages are in micrograms or milligrams, one kilogram can go a long way. One kilogram can make one million of one milligram and one billion of one microgram tablets at 100% yield. It tells us that a large volume of high value product can be produced from a small quantity. Using 10,000 kilograms Table 3 illustrates different production rates. At 100% yield we can produce ten billion of ten milligram or 10,000 billion tables containing one microgram active ingredient.

Tablet dose	10 milligram	100 microgram
10,000 Kilogram	10,000,000,000 Milligram	10,000,000,000,000 Microgram
# Tablets	1,000,000,000	100,000,000,000
Hours per year using 85% operating time	=350*24*0.85= 7140
Minutes per year using 85% operating time	=7140*60= 428,400
Tablets production rate per minute	=1,000,000,000 /428,400 =2,334	=100,000,000,000 /428,000 =233,426
Production rate Synthroid, 112 microgram tablets per minute		=233,426*1.43/1.12 =298,202

Table 3: Formulation production rates

Review suggests that a single plant could produce the necessary active ingredient to fill global synthroid demand. However, it would take multiple tableting lines/sites to convert the active in salable product. Since multiple doses are needed it would be worth to have parallel tableting lines. Multiple lines would give flexibility to meet the customer demand. 

Very precise and high degree of process control is needed at every step in each line. Various technologies to produce and package tablets exist. Blending of excipients and actives to deliver a uniform product requires precise controls. 

Analysis:

Point of this exercise is not to suggest that continuous processing is dead. Each manufacturing component has to be looked at separately to see what is the best for business and patient base. Going continuous for formulations is much easier than for API. Basis is ONE kilogram active ingredient can produce ONE million one milligram tablets that will serve about 27,000 patients per year at one milligram dose.

Many companies produce same API. Processes for these APIs are generally inefficient. Square plug in a round hole scenario for such molecules will exist unless a concerted business effort is made to alter the landscape through consolidation. If we look around, out of thousands of small molecule drugs may be less than ten APIs are produced using continuous processes.

Going from “B”(batch) to “C” (continuous) is not like going to the next alphabet. It will require a significant change in business thought process. Omeprazole, metformin hydrochloride and HCTZ (hydrochlorothiazide) are some APIs that could be produced using continuous process. For that matter any API that has a global requirement of more than 350,000 pounds per year could be produced using continuous process. Breakthrough chemistry and brilliant execution would be needed. Use of any API that is produced at these volumes (350,000 pounds per year or more) suggests that their consumption could be increased if costs come down. Pharmaceutical is the largest business segment where cost reduction can increase consumption by 20-30% i.e. by billions.

I am not giving up hope for continuous processes. I hope you don't either. It will take effort.

Girish Malhotra, PE

President

EPCOT International

Sun Pharma’s Exotic Challenge: How Real?

Since Sun’s acquisition of Ranbaxy Business-Standard, Economic Times and other papers have published many stories related to good and wonderful nature of the deal. I am sure everyone in India wants this to be a success and recoup the lost pride in Ranbaxy’s demise. However, no one wants to address or publish or discuss anything about the challenges Sun will face to get everything running full speed. Some of issues, especially personnel, Sun will have to deal with are generally considered taboo.   

In India businesses started are generally passed on to the coming generations. Before the launch of economic revolution in 1991 handful of companies were interested in India. Not very many companies are bought and sold in Indian culture. A sale to a competitor basically meant the entrepreneurs had failed, a setback in community. With that context acquisition of Ranbaxy by an Indian company has caught everyone by surprise and even pride. Ranbaxy has come home. Ranbaxy was part of the elite; the biggest pharma in India and its sale to Daiichi Sankyo was a loss. 

Sun’s acquisition of Ranbaxy besides financial benefits creates unprecedented opportunities to change the global landscape. It will face significant issues that any other Indian companies have not encountered on its scale. For its success it will have to deal with them. How they will manage and handle assimilation will determine Sun’s success.

Sun’s highest priority is get the sites approved from USFDA and other regulatory bodies ASAP to earn the trust and revenue it needs to implement changes. To achieve success Sun will have to deal with technology and human side of the organization. They will have to be dealt with very gently. I believe such an endeavor on this scale that has global implications has not been dealt in Indian business. 

On human side, personal and personnel issues may become the biggest hurdle. Colleagues of yesterday could challenge boss-subordinate relationships of tomorrow and that may impede assimilation. Sun’s way of managing and cajoling Indian psyche would be put to ultimate test. It might have to invent new and different ways and methods to develop strong and cohesive teams that will deliver on its goals.

On technology side Sun has to figure out how to move from every pharma company’s practice of “regulation centricity” to “process centricity” i.e. have complete command of the processes so that they can exceed regulations. This is a unique opportunity and not very many get it. It could be called once in a lifetime opportunity to change the global pharma playing field by showing how quality can be produced while lowering costs and improving profits. Complete and parallel review of the business model could create a model that could deliver quality and quantity on patient demand.

Benefits of process centricity if adopted can change the playing field in many ways. Stakeholders will have command of the processes and that means they will be able to rationalize global businesses for their products. Economies of scale will lead to commercialization of the best technologies which in turn would mean the producers will know that they have control of every aspect of manufacturing, quality and supply chain. Used technologies will exceed regulations and that would be something new and unheard of especially in pharma. Quality will be built in their processes rather than achieved through “trial and error” process.

Sun could step out of the pharma’s “me-too” model box and show how “process centricity” can change the playing field as it exceeds regulations and produces quality products with minimal in-process analysis. Such an achievement could change the global playing field forever. Ranbaxy had this opportunity in 2008 but did not take advantage of the opportunity. May be Sun will avail the opportunity and put the pride back for Indian management.

For assimilation to happen perfectly each wheel will have to turn at speeds to deliver the combined expected result. I am sure Sun’s team is well aware of the challenges they will face and were part of the acquisition consideration equation. I hope they have the resources and are willing to tap into resources to achieve their objectives. 

What Do The Recent Ranbaxy Citations Teach Us?

Recent Ranbaxy citation (UCM382514) is worth the review as it gives us cause and effect relationship between state of pharmaceutical manufacturing and regulations. Information can be used to improve pharmaceutical manufacturing whether it is API manufacturing or their formulations and how to avoid some of the common mistakes. It also gives us perspective of the regulators. Views expressed here are my own and are not any recommendations.

Involvement of Daiichi Sankyo as claimed may be coming but it may be too little too late.

Ranbaxy (Toansa) citation focuses on the following.

1.     Raw materials, intermediates and finished API failing specifications.

2.     Repeated analysis of the samples.

3.     Lack of procedures and adequate record keeping

Not being associated with or visited any of the Ranbaxy facilities, my first observation is that the manufacturing and supply chain management are out of control. These are also manifestation of a business model being practiced and are inadequate to meet the ever-changing needs at a plant site.  

Re-analysis of raw materials suggests that the company’s supply chain process needs significant review and edits. My conjecture is that the focus is on getting the cheapest raw materials that might come close to the desired specifications. Since these raw materials are converted to the desired API, process purification could be used to remove the impurities. If this is the case it is suggestive that there are serious issues and finally they have culminated in the current state.

Repeated sampling and analysis suggests that the manufacturing processes are out of control and yields are a variable. Product quality will be variable and in order to meet the desired specifications batch cycles would be variable. With lower asset utilization the overall plant capacity is lower than planned and costs will be higher than desired. This suggests that plant or the company profitability is a variable.

Lack of procedures also suggests that with changing raw materials, process conditions, methods and results plant personnel do not know how to analyze samples and then it becomes a fly-by-night operation and that is what the regulators found.

Since all such costs are absorbed, it means that the selling price of the salable API and the formulated products, to ensure profits, are much higher than what could be achieved by having optimum processes. All this could have been eliminated if Ranbaxy had complete command of their processes and they are repeatable. From a financial perspective this would mean that the site profits would be much higher from the current levels, a significant opportunity. In addition, asset utilization would improve resulting in higher production capacity with no or minimal investment.

Regulators in their citation/s are confirming that the processes are out of control. It is understandable that the regulators cannot and will not suggest corrective measures to comply. However there is an underlying question “Do the regulators know the cause and effect of what is happening when they are visiting/inspecting API manufacturing and their formulation facilities?”

Ranbaxy citation clearly indicates that there is tremendous opportunity to lower pharmaceutical manufacturing costs i.e. healthcare costs. Lower costs can mean larger customer base that can result in incorporation of better manufacturing technologies. Having command of the processes can be a global win.

Ranbaxy and Daiichi Sankyo have given significant lip service with every citation and consent decree suggesting they are in control of the situation but it seems that neither of them has been able to “walk the talk”.

Actually FDA citation of the API manufacturing facility is a heightened salvo and heads up warning to every API producer and formulator in India not to overlook cGMP practices. cGMP can only happen when companies will have command of the processes. Till that happens, with every inspection every company should be looking out for potential citations.

Girish Malhotra, PE

EPCOT International

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Will Pharma's Global Customers Redefine Maslow’s Hierarchy of Needs?                        January 27, 2014

http://www.pharmaevolution.com/author.asp?section_id=487&doc_id=562453 

Girish Malhotra, President & Founder, Epcot International

 15 comments

What do Maslow's hierarchy of needs and pharma have in common? On the surface, it might seem they have nothing in common. However, there are many points of connection in today's global economic landscape, where the world has not only flattened but also shrunk.

To some extent, the global customer base and its values have reconfigured Maslow's hierarchy. People are doing things that were unimaginable even 25 years ago. Suppliers are meeting their needs through innovation and lower costs, and they have profited. Following are some examples from outside pharma that should be harbingers of what to expect.

Until very recently, mobile phones were considered too luxurious for people in China, India, and other developing countries. Who knew that, in a few short years, China and India alone would have more cellphone users than the entire developed world? China and India have about 31% of the mobile phones used worldwide and more than six times the number used in the United States. Mobile phones have become a household staple; there's almost one phone for every person on the planet. These numbers suggest that the population is crossing the old boundaries of Maslow's need-based hierarchy.

Similar things are happening in other areas, including clothing, conveyance, food storage, and medical devices. Sonographs, though needed worldwide, once were expensive and could be used only in hospitals. The need for more ultrasound access was recognized, and portable sonographs were commercialized in the late 1990s. Though they were used for many applications, OB/GYN use was predominant and remains a key use now that strict controls have prevented its shocking misuse in promoting female feticide. Pulse oximeters, once considered only for elite hospitals, have become a necessary device and have improved healthcare.

Many in the developed countries take refrigerators for granted. With changing global economics, a significant percentage of the global population needs a food preservation device (cooler/refrigerator) but still cannot afford one. To address to issue of disrupted electrical supply in India, Godrej is exercising disruptive innovation. The company is marketing a cooler that works with 12-volt DC current or an external battery and is priced at one-tenth the price of a plug-in refrigerator. These coolers are also helpful in preserving medicines and injectables to serve a larger population.

Apple, once considered a failure, changed the world by creating devices and services the world thought it did not need. Amazon, digital imaging, and Google are disruptions. The world is changing, and companies are adapting to create products that were never considered a need. Companies that have hesitated are disappearing. We can see that multinational corporations (MNCs), in effort to increase their customer base, are creating conveniences for people in developing countries. They are achieving this through product innovation to meet local demands of product functionality and price. Even the local customer base has assisted in the development of needed products. MNCs have retained their profitability.

All these examples reinforce the idea that what used to be considered the need normal has changed. People are looking for reasonably priced products that facilitate their lives. This also applies to life extension therapies, drugs, and devices. Companies in developing countries are using innovation and creative practices (such as cataract surgeries) to fulfill health needs.

In the last 50 years, big pharma has done an excellent job of discovering much-needed drugs and therapies. However, its emphasis has been on patients who can afford them through their healthcare programs or who can pay for them from their own funds. This has limited the customer base to (my best estimate) less than 50% of the global population. The reason and rationale for the limited customer base is more likely to be high drug prices, rather than lack of qualified physicians in developing countries.

Pharma would like to have access to the growing market on its price and availability terms, but the world does not want to let that happen. If pharma would like to expand its customer base, it will have to make drugs affordable and available. It will have to come out of its cocoon (if it is there) and acknowledge the growing need for quality drugs at reasonable prices. High prices and small customer bases remind me of the myopic thinking many MNCs had for the developing countries in the mid-20th century. These countries were called underdeveloped, because much of the population could not afford many items the developed world took for granted.

Generic pharma producers have capitalized on the opportunities available in the developed world and expanded their customer base. They have caused a perturbation in the big pharma model. As the world economies improve, opportunities exist for ethical (brand) and generic producers to fulfill an ever-increasing need for medicine.

It seems that, by its actions, big pharma has not considered these expanding opportunities. Instead of having less than 50% of the world population, pharma could have 70% or more of the population as its customers. For that to happen, pharma has to review and improve its methods and costs related to other components of its business -- manufacturing technologies and methods, supply chain, regulatory compliance, product quality, etc. If properly developed and executed, economies of scale will significantly boost big pharma's revenue and profits. It has steadfastly neglected these opportunities; the focus has been on discovering new drugs, selling them during a short patent life, and moving on.

The citizens of the world would like pharma companies to discover new therapies that are affordable. Many humanitarians want to equalize the world's healthcare and make it affordable through their foundations and deeds. At times, even they are challenged. It is up to pharma to rationalize its business model to capitalize on a unique opportunity. Except for mobile phones28, no global business has this level of opportunity.

Innovation in drug discovery, therapies, manufacturing technologies, and business processes are needed to move placement of drugs from the upper half of Maslow's need triangle to the lower half. 

Do you think people power will force a change?

Recent buzz advancing the "You are with us or against us" concept could change the playing field very quickly with some very drastic steps (including government edicts). I hope they are not used, because they will be anti-capitalism. I don't think anyone wants to see that happen. What do you think needs to be done?

Reading the Tea Leaves: Predictions for Pharma's Future January 15, 2014   

Girish Malhotra, President & Founder, Epcot International

 30 comments

The human race has one significant weakness. We all want to know what the future holds for us, and we want to know now -- hence the popularity of fortune-telling and such "fields" as astrology. In our desire to predict tomorrow, however, we often forget simple cause and effect. What we do today helps determine what happens tomorrow. For instance, every new developed and approved drug, in efficacy and in price, directly impacts company and industry profits.

Despite ongoing product-quality issues, drug companies have been profitable. However, this picture is about to change. Some say that it has already begun to change. Clearly, what we do today will shape pharma's future.

Here are my predictions for the industry over the next five to fifteen years. How do they compare with yours? As you'll note, I see the status quo prevailing in some cases, forcing change to come from unexpected places, such as regulatory agencies or outside forces. But what do you think?

1. Pharma companies will have to figure out how to reach the world's masses, rather than small patient populations, if they are to succeed in the long term.
2. On average, the industry's success rate of development and commercialization, for both small molecule and biotech drugs, will not change much from its current level. “Eroom’s Law” still limits pharma's destiny.
3. High drug pricing soon will be frowned upon and discouraged by PBMs (pharmacy benefit managers) and hospitals.
4. Instead of becoming “process-centric,” pharma will stay “regulation-centric.” Process-centricity, if adopted, would allow companies to exceed regulatory requirements, which could also avoid many issues that have created public relations and financial headaches. Current regulatory guidelines and requirements discourage change. Since changing an existing process requires approval, it is still perceived to be a long and expensive step, and something to be avoided.
5. Industry will hedge in adopting many of the internal changes (manufacturing methods, technology, and supply-chain improvements) that could improve profitability and move from the current quality by analysis/aggravation to a quality by design approach. Again, this is due to regulatory constraints. Short patent lives for the ethical (brand) drugs will impede innovation in manufacturing technologies. At the same time, most generics manufacturers have been in business too short a time for their managers to grasp the value of better technologies and methods.
6. Since current or higher level of profits can be achieved with the current inefficient practices, industry leadership does not see any value in improving its product development, business, and technology practices. External forces will drive change.
7. With not much forthcoming from the industry to improve its manufacturing and business practices, regulatory bodies will enact regulations that will force the industry to adopt better practices. This tug of war will continue, unless the industry takes the lead.
8. Continuous formulation processes could be a reality in the next five years for new drugs.
9. Continuous API manufacturing is possible, but it will require a different economic and manufacturing model.

A shift is taking place in the global pharmaceutical businesses, whether we like it or not, and is being brought on by generics manufacturers based in developing countries. Pharmaceutical companies will have to take radical measures to retain or increase their revenue streams and profits.

A shift to a new model from the current model in new drug discovery, development, manufacturing technologies, supply chain, conservation, and sustainability requires an “unreasonable man” as described by George Bernard Shaw. ("The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.")

Significant innovation is feasible in manufacturing and its support functions. For it to happen, though, the pharmaceutical industry will have to move its focus from “regulation-centricity” to “process-centricity.” The industry still appears unwilling to take the steps required for change.

The world and its inhabitants would clearly benefit from better and higher availability of lower cost drugs, while companies would be able to improve their profits from the current levels. I view this as a win-win situation. What do you think?                                             

Can Emerging Pharma's Leadership Move On to the Next Stage?                               

December 18, 2013 

http://www.pharmaevolution.com/author.asp?section_id=487&doc_id=562221& 

36 comments

This past summer, when news of regulatory noncompliance troubles in the region reached a high point, I asked Indian pharma CEOs in a post on this site whether they had lost their chance to innovate.

A recent article by John Jullens in Harvard Business Review, "How Emerging Giants Can Take on the World," discusses different strategies that can be used by companies from emerging countries to compete against the multinationals. Jullens writes:

Companies in emerging markets embody a contradiction: They are both first movers and latecomers. They're among the first to have made cars, appliances, or computers in their home countries, but they're way behind multinationals that have been honing their capabilities, technologies, and brands for decades... As first movers, they have typically pursued rapid top-line growth at all costs, acquired technologies by all means legal and sometimes illegal, and simply copied the products and processes of developed-market companies. They have mastered the local business landscape and learned to cater to customers who are just joining the consumer economy. Their speed and agility have served them well -- indeed, some scholars have argued that opportunism, tenacity, ingenuity, and connections with local power brokers are the only capabilities emerging giants need.

However, Jullens says, many leaders have not laid the kind of foundation required to be profitable in a more conservative market. Competing based on quality is one example he cites. Another is innovative branding.

As these companies grow, he notes, leaders lose control, and operational problems become evident -- such things as poor product quality, low employee satisfaction, and poor inventory control. Unfortunately, these problems can only get worse over time.

Copying established companies' products and processes is fine when a business is young and markets are growing by double digits, but companies outgrow this phase.

With Indian pharma, for instance, many emerging giants are still run by their founders who have powerful connections, but tend to make decisions based on their own experience. This experience may no longer be relevant when companies grow, he writes:

They fail to realize that their organizations have outgrown their management structures or are overextended, with too many employees, too many facilities, and too many commitments to volume levels. They don't notice until too late that a changing business climate poses challenges the company isn't prepared to face.

The following are most critical when it comes to pharmaceutical companies in India, China, and other emerging markets:

•    The need to compete on quality
•    Overdependence on founders, whose judgment may not be enough to sustain the company during years of rapid growth

The answers to these problems are technology fortification and its enhancement and delegating authority to professional business managers at the highest ranks of management similar, just as companies in developed nations do.

Unless more companies in "pharmerging" regions adopt these strategies, they may not be around in 30 years, even those that changed the playing field for the pharmaceutical industry over the last 10 to 20 years. What do you think? Please write in and share your opinions.

Girish Malhotra, PE 

EPCOT International

Could the Google Books Decision Set a Precedent for Global Pharma Patents?

Girish Malhotra, President & Founder, Epcot International

 45 comments

Recently, US Circuit Judge Denny Chin exempted Google from US Copyright infringement laws. (To access the actual November 14 judgment, click here).

The exemption was based on Google's meeting four conditions of the law.

To summarize, the conditions are:

1.     the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit, educational purposes
2.     the nature of the copyrighted work
3.     the amount and substantiality of the portion used in relation to the copyrighted work as a whole
4.     the effect of the use upon the potential market for or value of the copyrighted work

What would happen if patent laws, similar to copyright material laws, could be drafted and adopted by countries that find pharmaceuticals to be too expensive for the masses? In some countries, such overrides are called “compulsory licenses,” and many governments have adopted/supported such actions.

Increases in the number of “compulsory licenses” worldwide, or exemptions such as the one issued to Google books for patents, might benefit the masses but would be very controversial for many pharmaceutical companies and stakeholders.

On the positive side, such changes might force companies to become more efficient and to develop better processes. They would bring many of the costs for pharmaceuticals down as well. However, they would have a negative financial impact and increase the competitive pressure that drug companies must already deal with. What are your thoughts? Please write in and let us know what you think.

Girish Malhotra, PE

EPCOT International