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Greed for profit in pharma sector helps drug racketeers make money

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Greed for profit in pharma sector helps drug racketeers make moneyVijayawada: Aggressive marketing strategies by pharmaceutical companies to promote their products are helping racketeers introduce spurious drugs in the market.

All this comes at the cost of the end user. Consumers pay a high cost, financially and health-wise, because of this competition throughout the medicine supply chain.

The modus operandi of the two recently busted rackets in the capital region was to bring spurious or unauthorised drugs into the market in the guise of physicians samples, and sell them at low prices to hospitals that run on non-profit basis.

According to sources in Drug Control Administration (DCA), pharma companies now have carry forward stock points in all major cities. In the past, there used to be one or two authorised stockists in every district, but now there are many in the market.

Pharmaceutical companies attract stockists with discounts, depending on the quantity of drugs they purchase. Stockists, who get the medicines at discounted rates, woo retailers with higher profit margins.

Retailers prefer to buy medicines from stockists who provide them higher margins. This system helps spurious medicine rackets infiltrate the market. They strike a deal with stockists or dealers, and send spurious drugs into the markets.

The disturbing fact is that even the representatives of drug manufacturing companies cannot distinguish between original and spurious medicines. These medicines have to be lab tested as their packaging is just like the original ones.

Racketeers also infiltrate the supply chain with ‘physician’s samples’. It is a normal practice by the pharmaceutical companies to send physician samples to doctors through marketing executives free of cost to promote the sale of their products.

These samples have separate labels stating that they are meant for free distribution by physician’s to their patients, and not intended for sale. However, some drug companies do not print separate labels, and send normal medicines to the doctors.

The competition among pharmaceutical companies is high, and they also compete in distributing sample drugs to doctors. This practice has been extended to retailers also. Marketing executives woo retailers with free medicines, and manipulate them to into selling their drugs even if doctors prescribe drugs from rival firms.

There is another system that racketeers exploit. Pharma companies offer low-price medicine to doctors, and hospitals run on non-profit basis. The companies sell the drugs directly from carry forward depots based on referral letters by doctors, to non-profit hospitals. The dealers, with an eye on earning extra bucks, exploit these referral letters, and acquire stocks at cheaper prices.

To beat the competition, dealers again offer these medicine with high-profit margins to retailers. This practice is rampant in the market, and retailers travel to far off places to purchase medicine at cheaper prices.

Assistant director of DCA, Krishna district, Paruchuri Rambabu, said retailers in Vijayawada travel to Rajahmundry to buy certain medicines, which they get at 25% lower price. This is only one example, and they buy different medicines from different places for more profits.

Drug racketeers also use this competition for purchasing drugs at a lower price, and introduce spurious medicine in the market. They usually mix spurious drugs in the original batch of medicine, and distribute them evenly into the market. The spurious medicine contains the same batch number as the original ones.

Opaque marketing of medicines throughout the supply chain makes it difficult for DCA sleuths to trace the culprits. The search often ends at the dealer level, where unauthorised and spurious drugs are sold without bills.

Except the consumers, everybody else — dealers, stockists and retailers — get benefitted from the system.

While racketeers are exploiting the system, the DCA is struggling to act because of staff shortage. According to the norms, there should be one drug inspector for every 100 medical shops. In Vijayawada, only one drug inspector works in One Town, where there are more than 400 shops. There are more than 3,000 medical stores across Krishna district.

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AstraZeneca sued by Array BioPharma over cancer drug royalties

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AstraZeneca sued by Array BioPharma over cancer drug royalties

NEW YORK: Array BioPharma Inc on Thursday sued AstraZeneca AB, accusing the pharmaceutical company of refusing to pay required royalties for a cancer drug after entering into an $8.5 billion collaboration with Merck & Co.

In a complaint filed in the New York State Supreme Court in Manhattan, Array is seeking at least $192 million from AstraZeneca for the alleged breach of a 2003 licensing agreement related to the drug, known as selumetinib.

AstraZeneca did not immediately respond to a request for comment.

According to the complaint, selumetinib is a compound discovered by Boulder, Colorado-based Array that inhibits activity of an enzyme involved in cell growth and metabolism.

Array said the 2003 agreement allowed AstraZeneca to use selumetinib in research to fight cancer, and provided for a 12-percent royalty on sums that AstraZeneca might receive from sub-licensees such as Merck.

But according to the complaint, AstraZeneca said it intends to pay that royalty on what Array called an “absurdly small” fraction of an expected $1.6 billion upfront payment from Merck. The $192 million sought represents 12 percent of that payment.

Both companies agreed to have disputes under the agreement decided by New York courts, the complaint said.

Array’s revenue totaled $150.9 million in the year ended June 30, 2017, a regulatory filing shows.

Last July, AstraZeneca agreed to collaborate with Merck to study cancer drug combinations using its drug Lynparza, which regulators have approved to treat ovarian cancer and which could have other uses when combined with immunotherapy.

Merck agreed to pay AstraZeneca up to $8.5 billion in exchange for half of future Lynparza sales.

AstraZeneca has said it plans to report full-year results on Friday.

The case is Array BioPharma Inc v AstraZeneca AB, New York State Supreme Court, New York County, No. 650517/2018. (Reporting by Jonathan Stempel; Editing by Sandra Maler)

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Govt to roll out health cover scheme from next fiscal: FM Arun Jaitley

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Govt to roll out health cover scheme from next fiscal: FM Arun JaitleyNEW DELHI: Finance Minister Arun Jaitley on Friday said the world’s biggest health cover plan announced in the Budget will be cashless and not a reimbursement scheme, and promised more funds if required depending on the rollout later next financial year.

The National Health Protection Scheme (NHPS) touted as ModiCare envisaged to provide medical cover of up to Rs 5 lakh to over 10 crore poor and vulnerable families, constituting 40 per cent of total population.

“It takes care of hospitalisation, the secondary and tertiary care. Obviously, it will involve various state hospitals and selected private hospitals. It can be on trust model, it can be on insurance model. It’s not on reimbursement model because too many complaints come on the reimbursement model,” he said here.

The model is now being worked out between NITI Aayog and Health Ministry, he said adding the date of implementation would be next financial year and sometime in the course of the year it will be worked out.

If assuming the model to be insurance led, the premium shrink with the increase in number of policy holders, he said at an event organised by Open magazine.

The scheme although appreciated by experts also raises apprehension about its implementation and the initial corpus of just Rs 2,000 crore.

Assuring that the scheme will be entirely state funded, Jaitley said initial funds of Rs 2,000 crore has been allocated and whatever funds required, as the scheme rolls over, would be made available.

“In the coming year, I see more comfortable situation as far as revenues are concerned because the graphs as far as direct tax is concerned would move very fast,” he said.

Following demonetisation and implementation of Goods and Services Tax, the number of direct tax assesses have gone up … once anti-evasion measures, I do expect a little bump up in the GST collection also. I don’t see revenue going to be a major challenge in that,” he said.

Yesterday, Jaitley in the Budget speech said, “We are all aware that lakhs of families in our country have to borrow or sell assets to receive indoor treatment in hospitals. Government is seriously concerned about such impoverishment of poor and vulnerable families. Present RSBY provide annual coverage of only Rs 30,000 to poor families.”

Several state governments have also implemented supplemented health protection schemes providing varying coverage, he had said in the Lok Sabha.

The finance minister also advocated that the central and the state government can pool in resources for health care to achieve efficiency.

He also emphasised on having better hospitals in rural areas even though Tier I and Tier II cities have good hospitals.

Setting up of hospitals in various districts is the state subject under the federal structure, he added.

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Hike in duty on medical devices reversed

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Hike in duty on medical devices reversedMumbai: The first rollback of the Budget has happened. In a protectionist measure, customs duty increased in the Budget on medical devices to encourage the domestic industry, has been reversed by a finance ministry notification issued on Friday, sources told TOI. The customs duties on two categories of medical devices were increased to 7.5% and 10% from 5% and 7.5%. Now, as a result of the notification, it’s back to the original level, sending the domestic industry into a tizzy.

Terming the development “a deathblow”, the Rs 9,000-crore domestic industry suspects “foul play at the behest of the powerful US medical devices industry lobby”, and has decided to ask the government to investigate the issue.

“Our market share is coming down drastically, with nearly 90% of devices imported, including even basic products like syringes, needles and thermometers. For the last four years, we have waited for measures to be announced by the government to boost manufacturing, but they speak ‘Make in India’, but actually encourage import and sell in India,” Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AIMeD), told TOI.

The installed manufacturing capacity is lying idle, and many manufacturers are converting into traders, and realigning their business strategy as importers/marketers after resigning to lack of government support, and facing discrimination at even government-owned hospitals, he said. “Even basic consumables like thermometers, hot water bottles , disposable syringes and needles are being imported and sold as Indian brands. We are encouraging pseudo manufacturing “, he added.

Domestic manufacturers are finding it difficult to compete in government tenders due to low-priced Chinese products procuring tenders, or being beaten by restrictive conditions on “perceived quality”.

The medical tech and devices industry has doubled from Rs 31,900 crore in 2013-14 to over Rs 60,000 crore in 2016-17, with nearly 80% being imported, according to AIMED. With this huge influx of imports, domestic companies say they are reeling under the threat of Chinese manufacturers, who are dumping products at 30-40% cheaper rates than indigenously-produced products.

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How the Rs 3, 500 crore damages against Singh Brothers was arrived at

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The Arbitral Tribunal rejected Singhs’ plea that the petitioner suffered no loss as a result of the transaction.
The Arbitral Tribunal rejected Singhs’ plea that the petitioner suffered no loss as a result of the transaction.

The Delhi High Court last Wednesday upheld the arbitral award for damages against the erstwhile promoters of Ranbaxy Laboratories for allegedly hiding certain material information to Japanese major Daiichi Sankyo during their 2008 deal. The judgment analysed how the arbitrators had arrived at the damages figure of Rs 3,500 crore and found nothing wrong with it. Brothers Malvinder Mohan Singh and Shivinder Mohan Singh and entities controlled by them who were respondents in the case had contested both the amount of damages and method used to arrive at these. However, the court did not agree with these arguments.

Also, in the months before Daiichi inked the deal in June 2008, there was hectic activity in the Ranbaxy scrip. But, let us first see how arbitral tribunal in Singapore arrived at this figure.

Two deals and some dividend
Daiichi had bought the shares of Ranbaxy for Rs.19,804 crore in 2008. Out of this, about Rs. 9,576 crore was paid to the Singhs and entities controlled by them and the balance went to the general public in the open offer. About seven years later, in March 2015, Daiichi sold the business to Sun Pharma for Rs. 22,679 crore.

In addition, a dividend of Rs.53.74 crore was also received. Hence, the Japanese firm received a sum of Rs. 22,732/- crore. Citing these figures the brothers had contended that “The petitioner did not suffer a loss.” They cited these figures to say the computation of damages was wrong and was inconsistent with Indian laws.

While the respondents had worked forward, the tribunal had worked backwards from the valuations at the time of the Sun Pharma deal.

Time value of money & WACC
The Arbitral Tribunal rejected Singhs’ plea that the petitioner suffered no loss as a result of the transaction. It noted that this proposition does not take into account the element of time, cost and the rehabilitative work carried out by the petitioners in order to assist Ranbaxy. The tribunal accepted the plea that Daiichi intended to receive a return equal to average return it received on all its investments as represented by weighted cost of capital (WACC). Accepting WACC at a rate of 4.44%, the proceeds of Sun Pharma transaction of Rs 22,679 crore was accordingly sought to be discounted to obtain the present value (as on November 2008). The 2008 present value of Sun Pharma Transaction worked out to Rs.17,241.23 crore . This was Rs.2562.78 crore short of the sum of Rs 19, 804 crore shelled out by Daiichi in 2008 .

In addition to this, the tribunal also awarded interest at the same rate of 4.44 percent from November 7, 2008 to the date of the award. This worked out to Rs 851 crore. The third component of the award was the reimbursement of attorney fees and expenses incurred by the petitioners which came to $14.54 million. At current exchange rates, this works out to around Rs 93 crore. These three components take the damages to a total of Rs 3,506 crore.

Interest accruing from date of award
The arbitral award was given on April 29, 2016. Over 21 months have passed. This is significant as the award also talks about a simple interest of 5.33 per cent from the date of award till the time the damages are eventually paid. This means the eventual payout could touch Rs 4,000 crore. The court has held the award of interest was as per the terms in the original share purchase agreement and does not amount to multiple damages.

RHC Holding, the Singh family entity said in a statement this week that it was disappointed by the judgment and that it would explore legal options. In an appeal which is likely it is likely to reiterate its arguments against the damages and the methodology. “The value in 2015 discounted by WACC cannot reflect the true value of 2008 in the facts and circumstances of the case where the petitioner has been in management and enjoying voting rights on shares for seven years,” it had argued before the high court.

Run up in Ranbaxy shares
One aspect which was not brought before the arbitral tribunal or the court was the run-up in Ranbaxy shares before the deal in 2008. At a time, when the global financial crisis was picking pace and the Sensex itself had crashed from its January 2008 peaks, Ranbaxy had rallied. From around Rs 350 levels in February that year, the pharma firm’s scrip gained around 60 percent in value to close at Rs 560 on June 11, 2008. The price of Rs 737 per share offered by Daiichi represented a 53.5% premium over the average of daily closing prices of preceding three months.

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Biocon chief joins national body to fight oral cancer

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Biocon chief joins national body to fight oral cancerBengaluru, Ahead of World Cancer Day on Sunday, biotechnology major Biocon‘s Chairperson Kiran Mazumdar-Shaw on Saturday joined hands with medical experts from across India to form an independent body to fight oral cancer.

Apart from Shaw, the body includes experts like G.K. Rath, the chief of Dr B.R. Ambedkar Institute Rotary Cancer Hospital, New Delhi; Pankaj Chaturvedi, cancer surgeon at Mumbai’s Tata Memorial Hospital; Praveen Birur N., the oral cancer programme head at Biocon Foundation and three others.

Stressing that the treatment of oral cancer requires a multidisciplinary approach, Shaw said it involves the combined efforts of dental practitioners, surgeons, medical and radiation oncologists and researchers.

“The Oral Cancer Task Force is created to ideate, educate and engage people in order to effectively reduce oral cancer in the next decade,” the Biocon chief said.

The body of experts aims to synchronise oral cancer control efforts with a national cancer control programme, create a master plan leveraging technology and partnerships and enhance the skills of healthcare professionals in India.

It also aims to work towards creating an environment in the country that reduces oral cancer risk factors like tobacco, alcohol and others, through policy change and public awareness, while also providing benchmarks for research on oral cancer.

Oral cancer is said to one of the most common forms of cancer occurring among Indian men.

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