A Good Week for Big Bad Pharma

In last week’s post (“Trickle Down Again”), I wrote briefly about an announcement by the big pharma company, GlaxoSmithKline (GSK), on its plan for building its market in Africa and recycled a post from last fall about GSK and other pharma companies in the emerging and developing market countries. I thought GSK’s plan warranted a closer look since it illustrates the complications of improving health care in Africa and shows how the company thinks it can do so in a sustainable (profitable) way.

As was described in the company press release, GSK is committing £130 million over five years (about $42 million per year) to a plan that is “designed to address pressing health needs and contribute to long-term business growth.” I parsed the plan into the following parts:

Improving academic research infrastructure: GSK will first fund up to 25 professorships in African universities in the fields of pharmaceutical sciences, public health, engineering, and logistics with the long-term goal of building in-country manufacturing capabilities (amount of funding was not given). Second, it will establish a new “R&D Open Lab for NCDs” (non-communicable diseases) as a complement to its four-year-old Open Lab at Tres Cantos which is the company base for collaborations on infectious and neglected disease research (see Tres Cantos). In the new Lab, GSK researchers at its Stevenage R&D center will collaborate with African researchers to “conduct high quality epidemiological, genetic and interventional research to increase understanding of NCDs in Africa.” The near-term goal is to fund directly the education and training of African scientists and long-term to generate freely-available data needed for drug development. GSK will apply £25 million to this effort.

Improving the supply of GSK products: the company will spend £100 million to expand its existing manufacturing facilities in Nigeria and Kenya and build up to five new factories. The new GMP-compliant plants will make products such as antibiotics and respiratory and anti-HIV medicines and may be built in Rwanda, Ghana, and/or Ethiopia. FiercePharmaManufacturing reported this build-out will create 500 new positions (FPM article). The company will also improve its supply chain by creating regional supply hubs specific to serving rural areas. No amount was given for this effort. Also, GSK will work with its current business partner, the Aspen Pharma Group of South Africa, and regulators to increase the registration of GSK medicines and vaccines (mentioned are an antibiotic, Amoxil, and a respiratory med, Ventolin). Again, no monetary commitment was given.

Improving the health care system: over the next thee years GSK will contribute an unspecified amount of funding to support the training of 10,000 health care workers through an NGO, the One Million Health Workers Campaign. This effort is part of the company’s commitment to reinvest 20% of any profits generated in developing countries into strengthening health care infrastructure in those countries and through which GSK stated it will have supported the training of 15,000 workers by various NGOs partners by the end of this year.

So GSK is intending to improve health care in Africa through a long-term effort aimed at a number of targets- collaborative research, manufacturing, distribution, product registration, and community health worker training- which is good. Unlike some of the advocacy groups or NGOs which focus on a single aspect of the health care system, GSK is applying its operational experience and corporate giving in multiple areas to effect improvement. But the amount of funding committed is small relative to the overall company profits (probably less than one percent of 2013 $10 billion net profit before taxes) and modest relative to sales in Africa (about three percent of $1.5 billion annual sales); it should be/could be larger.

What other MNCs deserve notice for efforts in the emerging/developing world? Not to be out done by its rival GSK, Sanofi’s CEO, Chris Viehbacher, pointed out last week at conference on neglected diseases that Sanofi was investing almost 100 million euros ($138 million) in manufacturing and distribution in Algeria and Morocco, and started three collaborations with the Moroccan government to train doctors, build treatment facilities, and train regulatory staff (FiercePharma article). He also noted the company had 1 billion euros in sales in Africa last year and expects double-digit growth, so more investment is warranted.

Also last week, Merck announced that it and the Swiss specialty pharmaceutical company, Ferring, will be supporting the clinical testing of a new room-temperature-stable formulation of the drug, carbetocin, to prevent excessive post-partum bleeding (hemorrhage) (press release in FierceBioech). Post-partum hemorrhage is a main factor in the 275,000 annual maternal deaths, and the current therapy, oxytocin, requires cold chain distribution. The trial will be conducted by WHO starting this year and will involve 29,000 women in 12 countries. Merck did not specify how it will support the trial or amount of funding but did note that the trial is part its $50 million per year, ten-year program called Merck for Mothers (MFM). This drug development effort looks to me to be unique among the MFM-supported projects, most of which involve education and training conducted by universities, governments, and NGOs in Brazil, India, Uganda, US, and Zambia, and looks to me to be a more effective application of the companies’ expertise.

Better than Expected

Back in June, I wrote about GlaxoSmithKline’s (GSK’s) Discovery Partnerships with Academia program (DPAc) and its “competition” for participation called Discovery Fast Track (“The Good, the Bad, and the Ugly”).   In the latter, academic researchers were invited to submit a therapeutic hypothesis with supporting data that was to be judged by a panel of GSK scientists on several factors, including the potential for addressing an unmet medical need (Discovery Fast Track).  GSK would then use the researcher’s assays and its compound library and screening platforms to identify active compounds, and, if there were success, set up a funded, multi-year DPAc collaboration with the aim of generating a clinical candidate that GSK would develop.  GSK has been running DPAc for about three years and had collaborations with a number of university research groups (e.g., in the UK with the universities in Cambridge on alpha-1 antitrypsin deficiency and Edinburgh on severe acute pancreatitis and in the US with Vanderbilt on obesity and Fred Hutchinson Cancer Research Center on muscular dystrophy).  The Fast Track approach was aimed at expanding the program in the US and finding researchers who may have data leading to new mechanisms of action for drugs.  I opined that the program may also fund drug discovery for diseases of the rest of the world (and typically ignored by big pharma) and wished them well.

That was the good.  The ugly I mentioned was that at least one university’s administration (at UCLA) had taken umbrage at the program’s perceived lack of safeguards for university IP and had advised its researchers not to apply.  I noted the concern was unfounded and that GSK had modified the program to get the buy-in of university tech transfer offices.  Fortunately, many universities did not share UCLA’s concern, and, as was announced last week by GSK, the company evaluated 142 entries from 70 universities, academic research institutions, and hospitals that addressed 17 therapeutic areas (FierceBiotech article and GSK press release).  Eight projects were chosen, and I was pleased to note that five may result in therapies for diseases and conditions occurring partly or predominately in low- and middle-income countries (for a reason not given, the group at Harvard declined having its project described).  The projects are:

  • anti-microbial agents, Sarah Ades, Pennsylvania State University;
  • drugs for malaria, Myles Akabas, Yeshiva University;
  • treatments for leishmaniasis (a parasitic disease afflicting about 500,000 persons per year with a 10% mortality rate, Lauren Brown and Scott Schaus, Boston University, and Jim McKerrow, University of California, San Francisco;
  • antibiotics to overcome resistance, Rahul Kohli, University of Pennsylvania; and
  • regulation of male fertility for contraception, Deborah O’Brien, University of North Carolina at Chapel Hill.

The press release also noted that work on the projects will begin immediately and the first screens are expected to be completed in mid-2014, meaning to me that the preclinical phase may start in 2015 and resulting clinical candidates may show up by 2018.

Of course, it would be great if GSK decided to expand DPAc by adding a component that created start-up companies to further develop the academic research it finds, for example, projects that had advanced beyond the screening stage and/or had candidate compounds in hand.  And it would be great if GSK did this for global health start-ups and greater (for me) if GSK did so in the Boston area.  Connecting of a few dots suggested to me that GSK may be headed in this direction.  GSK is definitively putting major money into starting companies out of academia.  At BIO 2013 in May, GSK and Avalon Ventures announced they were creating an investment fund with up to $465 million from GSK and $30 million from Avalon to start perhaps ten companies over three years in the San Diego area but based on technology from “anywhere” (Xconomy article).  It was reported that the GSK spokesperson, Lon Cardon, senior vice president for alternative discovery and development, said that the new fund is modeled in part on DPAc (Global University Investing article).  Apparently, GSK will have offices in San Diego and Boston (actually Kendall Square in Cambridge) to “help manage current external relationships and collaborations as well as identify and review new opportunities,” according to a GSK blog post last month (More than Medicine blog).  Although the post provided few details of the Cambridge office, I found a position listing GSK put up in February for a “DPAc Entrepreneur in Residence – Biology,” who would be “a member of the Alternative Discovery and Development (ADD) Boston Incubator, a new collaborative pilot organization in Cambridge, MA” (Jobing.com posting).  One of the responsibilities of the new hire was “the creation of an exit strategy for the program [e.g., a DPAc project] to either transition into GSK or spin out into an independent entity.”  The job listing also indicated that each project would have an external funding of about $3 million (per year?) and an internal funding of $7.5 million, pretty substantial amounts.  So it is not unconceivable that, if the Boston Incubator includes an R&D facility (rather than only an office), global health-oriented projects in local academia, like the new DPAc-affiliated work at Boston University, could transition to it and eventually spin out as new ventures.  Cool.

 

The Good, the Bad, and the Ugly

Recently Bernard Munos, former pharma exec and now principal of his InnoThink Center for Research in Biomedical Innovation, published an analysis of output of the pharmaceutical industry’s research and development effort and found the industry’s claim to innovation to be modest at best.  As described by FierceBiotech (FierceBiotech review) (the article is available to those with a Nature subscription at Munos 2013), Dr. Munos looked at the NMEs (new molecular entities or drugs that are not rehashes of already-approved drugs) approved 2000-2012 (a total of 353) and found of those with known mechanisms of action (324, leading me to wonder how a drug can get approval without the FDA requiring that the applicant knows how it works) about half had novel actions and half did not.  From this finding, he concluded “there does not seem to be enough [known] mechanisms able to yield multiple drugs, to support an industry. The drug hunter’s freedom to roam, and find innovative translational opportunities wherever they may lie is an essential part of success in drug research,” and ”… if innovation cannot be ordained, pharmaceutical companies need an adaptive–not directive–business model.”  My interpretation of this conclusion is that big pharma may be more successful in finding truly new drugs if its R and D is driven by an understanding of the pathology of disease (any and all diseases) rather than a goal of adding drugs to a company’s existing franchises, that is, the diseases for which the company has drugs already.  Of course, one could say that big pharma does not want (or need) to be innovative; it just needs to find drugs that can offer some (maybe even marginal) improvement over current treatments and that society (us) agrees are worth a price that includes a high profit margin.  Or if it wants to be innovative, it could figure out how make affordable meds for the rest of the world.

But on to the good.  One company that seems to be trying an adaptive R and D model with the goal of pumping up its drug discovery effort is GlaxoSmithKline plc (GSK) (I apologize for writing another post on this company).  Several weeks ago, GSK announced that it was actively soliciting academic researchers for participation in its Discovery Partnerships with Academia program (DPAc) through a “competition” called Discovery Fast Track (GSK press release).  Specifically academics are invited to submit a “therapeutic hypothesis” with supporting data (cell-based assays are OK) which is judged by a panel of GSK scientists on several factors (lots more detail at Discovery Fast Track).  Awarded to a winner (up to 20 announced by August) will be a free trip to Philadelphia to present to the GSK reviewers and the opportunity to be evaluated for DPAc participation (about 10 to be selected).  As noted on the Fast Track website, “If your concept is chosen, GSK will collaborate with you to test the full diversity of our compound collection using our pharmacological screening platforms to discover active compounds. We will share key results from the screen to provide you with the best possible chemical probes to interrogate your translational biological assays.”  So, although the evaluation does not get the academic investigator funding, it does get her/him a 50/50 chance at a multi-year DPAc collaboration with funding and the aim of generating a clinical candidate (e.g., Vanderbilt DPAc announcement).  So the good is that academic researchers can test their concepts for drugs (not drugs themselves which academics rarely discover) in an industrial-strength drug discovery program with a small chance of contributing to finding a treatment for a disease.  Also good is that GSK is trying a new way to identify and support academics with novel concepts of disease pathology through which it can find clinical candidates with novel mechanisms of action, an approach that should be more effective than the prevalent franchise-driven, serendipitous process.  Also good is that GSK seems not to be putting any market-driven preconditions on participation in Fast Track or DPAc (What GSK Is Looking For).  Any potential therapy, including those for diseases of the rest of the world and that may lead to drugs with low profit margins, is welcome.

The bad is that participation requires commitment at an early stage in research, and there are lots of hoops to jump through and paper to read for the researcher and her/his institution to understand the commitment (e.g., Terms and Conditions).  But, from my experience on both sides of the table, having more information, even if it is written by lawyers, is better than less.  My read is that GSK, in keeping with its (relatively recent) corporate value to be transparent, has done a good job of protecting both sides’ interests in the potential results of the programs.

The ugly is that some people, even those who should know better or at least should take time to read the relevant information, may suspect GSK of trying to misappropriate university intellectual property.  For example, it was reported that shortly after the GSK press release, the UCLA vice chancellor for research and his associate vice chancellor sent an email to all faculty advising they not participate because the GSK terms and conditions are in conflict with their obligation to report all discoveries to UCLA for evaluation for patent protection (Pharmalive article).  The concern being that, by applying to the GSK program and making public her/his concept for treating a disease, the investigator, and her/his assignee, the university, may lose a chance to get a patent and future intellectual property rights.  I think there are several reasons why this concern is unfounded.  First, GSK states explicitly that the applicant should not submit any confidential information and should contact the university technology transfer office (TTO) before applying.  Also last week the company added a few more hoops (“enhancements”) to the process to involve the TTOs, like requiring explicit approval (GSK Enhancements).  Second, one should note that at this early stage of research, the best the university could do is file a patent application on a “method” of finding drugs to treat a disease, and the patent courts have raised the requirements for obtaining method of treatment patents over the past few years.  An applicant needs to provide an example compound that demonstrates the method in an animal model, so the university’s application will be lacking in the required “reduction to practice.”  Third, patents on methods of finding don’t have much commercial value since the methods can be used before a patent issued (likely several years) and there are allowances for use after it is issued (for a discussion of these two points, see a 2008 post by UCSF’s TTO director at MySDScience.com blog).

As I have noted in previous posts about university technology transfer and the obligation of universities to apply their research results to social good (like global health), universities should welcome anyone willing to put resources into getting something useful out of their research regardless if there is a risk that some time off in the future (for drug discovery maybe decades) the university is not in a position to tap a revenue stream.  Fortunately, it looks like other universities are not reacting like UCLA, and several are actively promoting participation the Fast Track/DPAc program (e.g., Princeton meeting notice).  I hope GSK gets lots of applicants especially those with ideas for treating global diseases and is successful in finding innovative drugs, especially for world markets, and other companies imitate its success.

Vax Tech

Vaccines have been an incredibly important tool in improving public health preventing millions of deaths each year from tuberculosis, diphtheria, tetanus, pertussis, polio, measles, hepatitis B, and Hib disease (WHO 2009 Fact Sheet).  For that reason governments, multi-lateral health agencies, private donor organizations, NGOs, and companies have invested considerable time, effort, and money in creating a pipeline from discovery to delivery.  But clearly, there are major challenges to their wider use of immunization in both preventing and treating disease.  Foremost, current multilateral programs to subsidize the purchase and delivery of vaccinations, like UNICEF and the GAVI Alliance, are not funded sufficiently to meet the all need in the low- and lower-middle income countries (a total of 107 countries).  WHO estimates the cost gap to be about $2 billion per year, or almost the amount that is spent now ($2.5 billion) (WHO Immunization Challenges).  Technical and scientific challenges to inventing new vaccines are multiple including the selection of antigens and adjuvants to induce an immunological response, especially against target organisms with multiple subtypes or those with high rates of evolution (Oyston and Robinson 2012 and the 2011 BVGH report, Vaccine Landscape for Neglected Disease).  The clinical testing of vaccines, since they are used in otherwise healthy people and often children, is extensive and expensive (CDC Vaccine Testing ).  The manufacturing of vaccines poses a host of technical issues including assuring the safety of inactivated viral vaccines, purification, and product characterization (Rathore et al. 2012).  There are also technical challenges in the delivery of vaccines, such as managing a long supply chain, keeping the doses cool, and administering via injection, all difficult in resource-constrained areas, (PATH Project Optimize).

Fortunately, academics, product development programs (PDPs), research institutes, and companies, large and small, are working on solutions (a good way to keep up with progress is through the FierceVaccines newsletter).  I wondered which technologies that had reached a point where the major vaccine companies were willing to investment in them, thus suggesting which may eventually be deployed in global immunization programs.

Earlier last month I posted about the acquisition of Inviragen by the Japanese pharma company, Takeda (“More Toes in the Water”).  I surmised the purchase may have been motivated by Inviragen’s lead candidate, a Dengue fever vaccine which had advanced into the next stage of a Phase II trial recently, and others in the pipeline, and not its technology.  I also noted that Takeda purchased another privately-held vaccine company in 2012, Montana-based Ligocyte (Takeda press release).  Ligocyte has proprietary technology for making VLP (virus-like particle) vaccines, several of which are in development.  VLP vaccines have the protein structure of the target virus but lack its genetic material and therefore are non-replicating but can represent the  all of the external structures needed to stimulate an immune response.  Their production is simpler in that multiple types of expression platforms (including plant cells) can be used to make VLPs rather than growing a virus in its natural target cell (Pharma Tech article).  Takeda’s investment in VPL technology is a relatively safe bet; four VLP vaccines have been approved and marketed (GlaxoSmithKline’s Engerix  against hep B and Cervarix against HPV and Merck’s Recombivax HB and Gardasil, also HepB and HPV [Mellado et al. 2010]).  I am guessing Takeda may combine the Ligocyte technology for designing vaccines for developing world diseases and Inviragen’s experience in testing them.

GlaxoSmithKline (GSK) went farther afield into new technology than Takeda when it bought Okairos, a venture-capital-backed Swiss firm, in late May for $325 million (FierceBiotech press release).  Okairos’s approach is to stimulate a T-cell immune response rather than a B-cell (antibody-producing) response which is needed for effective response to some infections (e.g., influenza, HIV, and hepatitis C) using an antigen produced by the body cells (typically muscle cells) after infection by an adenovirus genetically engineered to include the antigen’s genes (Okairos Fact Sheet and Platform).  The company, which spun out from Merck in 2007, developed its technology on relatively little funding, less than $20 million (FierceBiotech article) and has advanced it into the clinic.  The company’s pipeline includes clinical stage candidates for malaria, hepatitis C, HIV, and respiratory syncytial virus (Pipeline).  Okairos seems to be a good fit for GSK’s interests in global vaccines markets.

Also in a publication last month, scientists at Novartis, the Venter Institute, Synthetic Genomics, Inc., the US Biomedical Advanced Research and Development Authority, and the German Institut für Virologie, described a practical method of applying synthetic biology to the rapid design and production of vaccines to pandemic-type viruses (Dormitzer et al. 2013).  Specifically, the scientists designed a vaccine to a new strain of influenza that had appeared in China last year and had it ready to be put into production cell lines in less than two weeks.  According to the Venter Institute press release (JCVI press release):   “The researchers focused on three technological areas–speedy synthesis of DNA cassettes to produce influenza RNA genome segments, improved accuracy of rapid gene synthesis by improving error correction technology, and increased yields of hemagglutinin (HA), which is the essential vaccine antigen.”  Also as noted in the release, the team developed a new technique that may reduce manufacturing complexity by reproducing the synthetic virus in the same cell line that can be used in vaccine antigen production.  The implication is that world health agencies could mount a response to a emerging disease in that a central facility could rapidly generate a cell line for distribution and production in multiple countries.  In an article in the Boston Globe (Globe article), Marc Lipsitch, an epidemiologist and director at the Harvard School of Public Health, said “It’s a big deal if it works on a large scale.”  The Globe also had a nice graphic comparing timelines of the new approach and that used by Novartis to make a H1N1 vaccine in 2009 (Globe graphic).

Technology marches on.

GSK Splashes Away

Most of the big pharma companies are taking a toe-in-the-water approach to selling (and inventing) affordable medicines for the rest-of-the-world (ROW) markets, due to uncertain of revenue sources and, for new drugs, the long time frame and upfront investment needed.  While all the top twenty companies are slowly improving their performance in making affordable medicines accessible to the rest of the world (see the Access to Medicines Foundation’s [AMF] biannual review, the 2012 Index), GlaxoSmithKline plc (GSK) has stood out as pursuing an explicit global market strategy since 2008.  Under the leadership of its CEO, Andrew Witty (Sir Andrew as of 2012), GSK has increased its non-US and non-EU sales to now about one-third of total revenue and has implemented a long list of policies and practices to improve its market share in the mid- and lower-income countries.  Several of these, as summarized by the AMF’s GSK Profile, are:

  • Forming a Developing Countries and Market Access Unit that has a business model that includes both commercial and social objectives such as giving grants to strengthen the healthcare infrastructure in the lowest income countries ($6 million in 2011);
  • Reducing the prices of its patented products in the lowest income countries to no more than 25% of the products’ UK price;
  • Not enforcing patents in the lowest income countries, issuing 11 non-exclusive voluntary licenses for anti-retrovirals to generic manufacturers, and committing to licensing its antiretroviral portfolio royalty-free; and
  • Committing to making no political contributions in the countries where it operates.

Also to stimulate research and ultimately drug development for the “orphan” diseases of the ROW like TB and malaria, in 2010 GSK set up and funded a “Tres Cantos Open Lab Foundation” (TCOLF) with $8 million.  Researchers from non- and for-profits can propose projects for funding and “gain access to the available resources and facilities and work alongside the scientists” at GSK’s Tres Cantos research facility in Spain.  This “open innovation” strategy is intended to consolidate effort, tap GSK’s drug development expertise, get funding to researchers at less-well-endowed institutions, and generate results that are available to anyone to develop without requiring licensing.  This latter sticky wicket of intellectual property is handled by the TCOLF requesting but not requiring the grant recipients agree to the guiding principles of WIPO Re:search, a larger EU-based program (TCOLF agreement template).  Unfortunately, while well-intentioned, the TCOLF has the same flaws of WIPO Re:search about which I wrote in a post in 2011 (“Window Dressing”).  In my opinion, the primary problem with the TCOLF is its orientation to funding basic research at non-profit institutions as opposed to product development by low/no-profit companies which is much more sorely needed (since it is products that will change health outcomes not publications).  The TCOLF governing board is mostly academics and all but one of the 12 projects funded so far are at academic institutions (TCOLF Projects), although some projects are aimed at finding drug candidates (e.g., that of Michael Pollastri at Northeastern University).

The good news is that GSK has doubled its support of the TCOLF to $16 million (still a modest amount when compared to the cost of drug development, see below).  The better news is that the Wellcome Trust, a long-time supporter of global health efforts, announced last week that it recognized the need for more product-oriented work and donated $8 million to the TCOLF expressly to tackle “the next phase of drug development with the aim of turning promising active compounds into high quality experimental drugs” (Joint press release).  More funding for preclinical drug development is good but it needs to be accompanied by additional TCOLF advisers and staff who know and can direct drug development.  Especially important is the selection of experiments that may yield data to support and attract additional funding and interest in commercial development (for more, see my post, “Open Source Sesame” ).  And for the TCOLF to become more company-friendly.

Speaking of GSK’s CEO, Andrew Witty made another splash in March at a conference when he said the oft-cited $1 billion cost for developing a drug tag was “one of the great myths of the industry,” since it was an average figure that includes development costs for drugs that fail in trials (Reuters article).  More importantly, he said that the way to decrease costs and reduce prices is to improve the efficiency of drug development and that GSK was starting to do that.  Improving efficiency is an on-going struggle for the industry and ideas and technologies abound but best practices have yet to immerge.  Maybe GSK could start an open innovation initiative for that nut.  And from an interview April (Philly.com blog), he addressed what GSK is doing at the delivery end of health care:  “We don’t want to be simply a supplier of medicines into a system. We recognize the whole health-care challenge is complex. There are areas where our expertise can really add something. It is about trying to add more value into the system through expertise. If you look at what we’re doing in Africa, India and America, all are different. America is in a different universe compared to these other countries. But they all have different sorts of challenges. By working with local communities, it is amazing how often we find it might be as simple as acting as a catalyst to get the right groups together. The Health Communities initiative is a good example, where we get people together to talk about what is needed. That might guide us through some of our donations.  If I look at India in terms of creating health-care facilities in slums, if I go to Africa where we’re training 10,000 health-care workers through our donation program, they are all about how we use our expertise and knowledge and some money. But it’s often not about money. It very often is about expertise and human capital, to try to create a better solution. What’s crucial is that it’s the right solution for each country because they are all different.”

You go, Sir Andy.

Crossing My Desk Again

In checking my list of subjects for this week’s post, I saw a few of recent news items that I thought are relevant to the business of global health and worthy of noting.  Here is what caught my attention:

Big Pharma’s Report Card

Two weeks ago, the Access to Medicines Foundation issued its biannual Index, a well-balanced overview and ranking of the efforts of twenty of the largest pharmaceutical companies in how they are meeting the world’s need for affordable and needed drugs and vaccines (Access to Meds).  The Foundation rates a company on seven factors (management, public policy, R and D, pricing, patents, capability, and donations) and writes up a thorough summary of the activities of each.  While all ranking systems are susceptible to hidden biases, the Foundation’s methodology seems to me to be comprehensive in that it is developed with input by a wide range of experts in global health and is reviewed and adjusted frequently (Methodology).  Some of the highlights of the 2012 Index are:  all the companies are improving with some creating departments with access responsibility, are making their goals and processes more transparent, and have products and pipelines that are meeting a greater number of needs.  GlaxoSmithKline is still at the top with Johnson & Johnson and Sanofi improving to take the number two and three spots, respectively, surpassing two of the previous leaders, Merck and Gilead.  Most useful for me are the individual company reports that provide details of a company’s global health R and D activities and therefore indicate partnering opportunities (e.g., Novo Nordisk report).

Best Sellers

Did you ever wonder what are the world’s best drugs, at least in terms of the usefulness, safety, and affordability?  Eric Palmer of the newsletter, FiercePharma, recently used data from IMS Health, the leading firm for tracking pharmaceutical sales, to compile a list of the twenty top-selling generic drugs, noting “Some of the meds on the list are not prescription drugs but everyday over-the-counter products that are safe, effective, cheap, easy to make, easy to transport, and easy to store and so likely to show up everywhere in the world” (FP special report).  First on the list is pain-reliever, antipyretic paracetamol (acetominophen) at $6 billion in 2011 sales, apparently now favored over aspirin (no. 8) as the drug in the “take two and call in the morning” bromide.  At number two at $3 billion in sales is ethinyl estradiol, used in most contraceptive formulations (Wikipedia article) which are clearly popular through out the world.  Not surprisingly, two on the list are anti-cholesterol drugs (atorvastatin and simvastatin) and two are antibiotics (amoxicillin and clavulanic acid), all selling at $1.5 billion or more each.  Rounding out the twenty are an anti-acid (omeprazole), blood pressure controller (amlodipine), an opioid (fentanyl), anti-inflammatory (diclofenac), and anti-diabetic (metformin), also all selling at more that $1.5 billion each year.  One take-home lesson is that the market is working in creating cheap and (mostly) effective drugs for a wide range of aliments.  The take-home  for global health is that these are the drugs that should be considered essential by all public health agencies and there are business opportunities in improving their use (better diagnostics, compliance tools, formulations) and availability (distribution and sales).

Biggest Investor in Private Health Care in the Developing World

If you manage a life sciences company in an emerging economy country and need funding, skip the local bank and try the International Finance Corporation, a division of the World Bank that evidently has invested $450 million in life sciences companies over the past 10 years (IFC life science investment).  In addition to investing in established companies such as drug manufacturers, hospital and diagnostic chains, and drug distributors, the IFC invests in “innovative companies aiming to increase product access through research and development or new product development using a viable and sustainable business mode” and “private equity funds investing in early- or later-stage development projects where there are technical risks, but where success could lead to significant development impact in the fight against diseases” (IFC Approach).  Sounds good but the IFC investments are primarily as debt or equity, meaning the investee needs to have some assets and/or revenue to qualify, and I could find few details on how to apply and terms.  There are two business contacts listed though.  I also found a guide put out by the IFC that may be helpful for startups looking to sell into emerging market health care systems and needing to know the bumps (IFC Guide).

Playing the Long Game

One of the buckets that I beat regularly in this blog is that it will be worth the effort for biopharmaceutical and medical device companies to figure out how to make and sell affordable products to rest of the world, to those billions without access to the well-funded medical system that we in the “developed” world enjoy.  While I have noted and written about a handful of the biggest of these companies putting their toes in the ROW markets (see last week’s “To Boldly Go” and “Putting the Biz into BoP”), I’ve seen very little reporting data by companies on the money they’ve made doing so.  Until now.  This week it was reported in an article in Reuters that the strategy taken by GlaxoSmithKline’s Developing Countries and Market Access operating unit (DCMA) is working (Reuters article).

The two-year-old DCMA’s strategy includes:

  • focusing half its efforts on drug and vaccine sales and half on reputation-building in 40 African and 10 Asian countries;
  • having its performance measured on sales volume rather than profits;
  • pricing it products competitively (no more than a quarter of the UK price for patented drugs and generics at a small premium to the cheapest competing product);
  • shooting for modest profit margins (20% vs. 32% for the rest of GSK);
  • winning repeat business with public-sector payers; and
  • building out the marketplace by reinvesting 20% of the unit’s profits back into healthcare infrastructure through NGOs like Save the Children, African Medical and Research Foundation, and CARE International.

As reported in the article, the unit’s revenues are expected to be about $230 million this year (a tiny part of GSK’s overall sales of $40 billion or so), but are growing fast, more than triple the 2010 sales.  So far, so good.

But what may this success mean to the people who really matter to GSK and the other big companies, the investment analysts whose opinions guide the investment fund managers who have trillions of dollars to move about the world economy?  So far as I can tell (which is not too far), almost all health technology industry analysts do not include companies’ performance in the ROW markets in their buy/sell/hold recommendations, with one exception.  In 2010, team at UBS Ltd. issued a report, “Global Pharma: Doing well by going good?” (UBS report, UBS report).  In it, Amusa et al. analyzed a number of global pharma and stated:  “GlaxoSmithKline … is the clear leader in pharma at access to medicines and performs best along our Sustainability/ESG Framework.  We expect 70% of GlaxoSmithKline’s incremental £12.5bn sales generation from 2010 to 2015 to come from emerging and less developed markets.  Novartis, J&J and Merck also score well.”  It remains to be seen if UBS continues to rate the pharma companies on emerging/ROW market performance and uses the GSK/DCMA’s recent data and moreover, if other analysts and investors wake up to this type of valuation and the potential for long-term profit growth.

GSK’s strategy for emerging/ROW markets is not the only one being tried as was pointed out in a report recently published by FSG, a not-for-profit consulting group with roots in the Harvard Business School, called “Competing by Saving Lives:  How Pharmaceutical and Medical Device Companies Create Shared Value in Global Health” (FSG report).  Although I am puzzled by FSG’s rubic of “shared value” (I think they mean both the seller and the buyer benefit and receive value in a transaction, but isn’t that the basis of commerce?), I appreciated the report’s recognition of the limits of philanthropy and the potential profit for both companies and societies in global health and for its profiles of ten health tech companies’ emerging/ROW market strategies.  Unfortunately, as I noted in a post earlier this year on a similar report by German Federal Ministry of Economic Cooperation and Development and Endeva (“Putting the Biz into BoP”), the authors do not synthesize their findings into practical business advice, which I recognize would be a challenge since, as they note, the profiled companies’ efforts are still in an “experimental stage.”

That being said, the report’s authors offer the following (fairly generic) recommendations to health tech companies:

  • “Shift from defensive to affirmative engagement with patients [customers?] in low- and middle-income countries,” which I take to mean explain your goals and methods better to NGOs, governments, and customers who may not understand that sustainability (and progress in global health) requires profitability (although this recommendation appears to me to be self-serving for a consulting company);
  • “Innovate and capture knowledge on health product delivery,” an  important and unsolved problem that all the global health players need to concentrate on (e.g., see my post “NTD TD”);
  • “Invest early to gain first-mover advantage,” a standard business rubric that should be replaced by “learn from your competitors’ mistakes;” and
  • To both companies and the “implementation partners” (NGOs), form partnerships and learn from each other, good advice since NGOs are already operating in the markets (e.g., see my post “More Bang for the Buck” on working with drug procurement groups like Medicines Transparency Alliance [MeTA]).

While all of the report’s profiles are worth reading for the range of tactics being tried, I found Novartis’s most interesting because, unbeknownst to me, since 2007 Novartis has had a program called Arogya Parivar with the goal of developing a sustainable, scalable business to reach the large number of underserved rural Indians.  The plan involves extensive infrastructure development, now reaches 42 million people, is “generating profits,” and seems to be improving health.  Apparently, Novartis has created a Social Business unit to extend the program in India and replicate it in other Asian and African companies.  It would be interesting to look at the program’s profitability and replicability since a key to success in business is finding out what works and using as much as possible, and, as I have noted before, the success in the long game requires figuring out how to turn global health challenges into business opportunities.