CARMA Analysis

Drug Pricing in India (May 2012)

For the month of May 2012, drug pricing in India was much discussed in the earned media. At close of April, Government allowed Indian firm Natco Pharma to sell generic version of cancer drug Nexavar at far lower price than that offered by patent-holder Bayer Corp. Further fueling the discussion about drug pricing, drug maker Cipla announced slashing prices of certain cancer drugs. In the later half of the month, Group of Ministers (GoM) led by national agriculture minister Sharad Pawar reportedly took up dialogue about controlled pharma pricing with respective parties. CARMA International, the world's leading independent media measurement and analysis company used its proprietary media content analysis methodology to analyze Indian media coverage* for the 1-31 May 2012 period. A count of 65 news articles underwent extensive human-based research by trained content analysts. The CARMA analysis developed insights about drug pricing debate, commentators who influenced the debate and messages that reflected varied perceptions.

*CARMA handpicked a sample of 12 media outlets notable for their editorial contribution and Pan-India exposure. These include Business dailies:

Economic Times, Financial Express, Business Standard, Mint; Mainline dailies: Times of India, Hindustan Times, Telegraph, Hindu, DNA; Magazines: Business World, Business Today, India Today •Note Bene : The present study findings are indicative and not inclusive of all possible media analysis indices that CARMA International offers as part of its bespoke and comprehensive media evaluation suite.

Leading Triggers for debate in news media

CARMA analysis identified broadly who initiated discussions in news media about drug pricing with an aim to better understand who is driving the agenda on this critical issue

Notably, the issue of drug pricing was near equally originated by Government as the Pharma companies. Cipla’s announcement to slash cancer drug prices was the large corpus of company initiated news coverage. Of the Government driven news reporting, GoM’s interactions with diverse stakeholders of the India pharma industry provided the impetus for coverage. Of the third party, it were the NGOs and political activists as MP Jyoti Mirdha who took up the issue of drug pricing.

Looking in detail, following were the notable elements of the company driven news reporting …. In the early half of the month, generic drugmaker Cipla announced slash in prices of certain cancer drugs by an overwhelming 76%. Media was quick to corroborate the move ‘comes on the back of the government allowing domestic firm Natco Pharma to sell generic version of cancer drug Nexavar at nearly 97% lower price than charged by patent-holder Bayer Corporation’ (4 May, Times of India). The news reporting thereon involved several segments. YK Hamied, CMD, Cipla espoused : "This initiative of price reduction is a humanitarian approach by Cipla to support cancer patients“ (Financial Express, 4 May). Bayer spokesperson strongly hinted: "We will rigorously continue to defend our intellectual property rights which are a prerequisite for bringing innovative medicines to patients” (Financial Express, 8 May). Other than the company officials, Anjan Sen, director-healthcare, Deloitte Touche Tohmatsu India noted : "It's a smart move by Cipla. With this, they will reach many more patients, and will also be able to garner greater market share” (Economic Times, 5 May). Some unnamed industry experts anticipated: “Cipla's move will trigger a reevaluation of portfolio and prices in the oncology segment for all companies competing in this space” (Economic Times, 6 May). Rival companies even though not named, reportedly saw the move as ‘a desperate effort by Cipla to prevent its products from losing out in the market place owing to competition’ (Financial Express, 5 May).

Company 43%

Regulatory / Government

41%

Third Party 16%

Leading Commentators

Commentators - SoV The news articles about drug pricing engaged a host of commentators. Officials from pharma companies were active commentators on the issue of drug pricing (29% SoV). Industry associations trailed close with a 22% SoV with all others garnering less than 20% SoV. Note Bene : For the present study, ‘Pharma Company Official’ includes both prescription & generic drug makers.

Commentators – Favorability Analysis On in-depth favorability analysis of each Commentator, clearly ‘NGOs’ and ‘Other political sources’ (political person but not holding a post in the government) were negatively biased and sought cost based drug pricing. ‘Analysts’, ‘Regulator’ and ‘Other sources’ largely tended to hold a neutral view. Notably, ‘Pharma company officials’, ‘Government’ and ‘Industry associations’ represented mixed views on drug pricing. Below sections report the points of view reported in relation to various category of commentators… Pharma Company Officials: As the study featured officials of generic and prescription drug makers under a single umbrella of ‘Pharma companies’, therefore divergent views emerged. YK Hamied, CMD, Cipla the leading source for the period of study was oft quoted in relation to price cuts for Cipla’s cancer drugs. While most often neutral to drug pricing issue he sometimes propagated compulsory licensing policy: “…Now that Cipla has also reduced prices, the government should wake up and announce a pragmatic compulsory licensing policy" (Financial Express, 5 May). Contesting this, Ranjit Shahani, president of OPPI and head of Novartis India operations said: "Around 35% of our population that lives below the poverty line will not be able to afford medicines at any price because of the huge socio-economic disparities. Any efforts at price control will, therefore, be unsuccessful at reaching the loftier goal of healthcare for all" (Financial Express, 14 May). Government: Over the proceedings of the GoM, several ministers were quoted with some taking positions in relation drug pricing. For instance, ‘During the last GoM meet, health minister Ghulam Nabi Azad argued the prices of drugs should be based on the cost of production’ (Business Standard, 14 May). Commerce and industry minister Anand Sharma took a more balanced view: "While market-based pricing is certainly a more judicious methodology than the cost-based price control as it prevails, perhaps a weighted average of all brands of formulations with more than 5% market share may be considered to avoid cartelization" (Financial Express, 25 May). Industry Associations : DG Shah, secretary general, IPA emphatically supported : “The time has come to move away from cost-based pricing since you cannot have the same norms for those who make drugs from a garage and those who do it out of US FDA-audited facilities,” (Financial Express, 25 May). Other Political & NGO : Congress Nagaur MP Jyoti Mirdha was most vocal political figure along with NGOs, Jan Swasthya Abhiyan (JSA) and All India Drug Action Network (AIDAN) in demanding that all medicines marketed in India be put under price control. Mirdha contended: "There appears to be no effective way to keep (drug) prices and profits at reasonable levels except by bringing all drugs under price regulation“ (Telegraph, 18 May). Analysts: Most analyst comments were about impact of price cuts on Cipla’s business. Sarabjit Kaur Nangra, vice-president, research, at Angel Broking however took an unfavorable view about drug pricing:“There are more and more cancer cases now. And in India, there can be no case for premium pricing” (Financial Express, 5 May)

Commentators – FNU Analysis Commentators - Share of voice

CARMA analysis determined the sources influencing the discussion about drug pricing and also put forward opinions resonating in

news media

30%

22% 17%

11% 9% 9%

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25

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68

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8%

37

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Key Messages

The decibel for cost based pricing was significant as ‘Drug price controls enhance access to medicine / make healthcare affordable’ and ‘Cost of production should be basis for drug pricing’ were the leading two messages for the month. However the following three consecutive messages espoused market based pricing, thus creating as much awareness of the pharma companies point of view. The messages thereafter represent corollary discussions. Overall, the ratio of unfavorable : favorable messages was tipped at 38:26 respectively. Below are key quotes that encapsulate the messages identified by CARMA Analysts… ‘Drug price controls enhance access to medicine or make healthcare affordable’ / ‘Cost of production should be basis for drug pricing’ ‘ MP Jyoti Mirdha told a ministerial panel set up to finalise the country's drug pricing mechanism that retail prices of medicines should be fixed on the basis of cost of production’ (Times of India, 20 May). On Market based pricing, Amit Sengupta of JSA said : "Allowing such price mechanism would mean legitimizing the high prices of drugs and this doesn't augur well in a market where 80% of healthcare costs are incurred out of pocket and of this, over 70% is spent on medicines” (Financial Express, 18 May). YK Hamied, CMD, Cipla sought to encourage affordability by drug price controls : "My move is not against multinationals, and has nothing to do with Natco. It is all about making drugs affordable" (Financial Express, 5 May). Market based drug pricing should prevail / Drug price controls stifle competition or innovation or investment in the drug industry / Prescription drugs are more effective than generic drugs, or ,are of better quality ‘The patent office's move had stirred up a heated debate on the pricing of medicines in the country, with multinational companies arguing that such a move to stifle prices will undermine innovations in the industry’ (Financial Express, 5 May). Ranjit Shahani, president of OPPI and head of Novartis' India operations said: "Around 35% of our population that lives below the poverty line will not be able to afford medicines at any price because of the huge socio-economic disparities. Any efforts at price control will, therefore, be unsuccessful at reaching the loftier goal of healthcare for all" (Financial Express, 14 May). ‘A section of the industry feels that price is not the only determinant in the oncology market, and quality becomes more important especially in critical care products’…Zohra Dawoodani, senior project director, Ipsos Research noted: "Hence the decision of a doctor to choose a premium priced brand over an economical one will depend on the patient type, stage of disease and affordability” (Economic Times, 6 May).

CARMA analysis determined the messages being put forward in news media in an effort to determine the perceptions being created in

relation to issue of drug pricing

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0 2 4 6 8 10 12 14

Drug price controls deter bringing in of patented drugs/investments

Prescription drugs are more effective than generic drugs / better quality

Regulation in drug prices is harmful for industry / patients

Regulation in drug prices is legitimate / prevalent in other countries too

Industry spends far too much money on marketing efforts

Cost based pricing of medicines is a relevant mechanism

Generic drugs are as effective as prescription drugs / offer same quality

Cost based pricing of medicines is no longer a relevant mechanism

Drug price controls stifle competition / innovation/ investment

Market based drug pricing should prevail

Cost of production should be basis for drug pricing

Volume

Neg. Msg. Pos. Msg

Drug price controls enhance access to medicine / make healthcare affordable

R&D by industry brings unique drugs for untreated/ life threatening

Manufacturers only care about making a profit / put profit ahead of patients

For customized CARMA analysis services in relation to your company & brands, article tonality, spokesperson effectiveness, key messaging and other such media impact parameters, please contact info@carmaindia.in; +91 120 6520784/85; www.carmaindia.in