Difficult issues in pharma going global (part I)
Dr. Faiz Kermani
Although the economic downturn has had a negative impact, the global pharmaceutical market is still experiencing strong growth, although the rates differ considerably between the major established markets and emerging markets. Predictions for the 2010 global pharmaceutical market suggest that it will exceed US$825 billion1. Growing at between 4-7% annually, it is predicted that the global pharmaceutical market will be valued at over US$975 billion by 20131.
The US, Europe and Japan still represent around 80% of current global pharmaceutical sales, but much of future global growth will actually be driven by so-called emerging markets. IMS Health has identified the emerging markets of China, Brazil, India, South Korea, Mexico, Turkey and Russia as key to this expansion. Greater affluence in these populations has translated into a demand for the latest medicines. For 2010, the markets of Russia, Turkey, South Korea and Mexico are expected to grow at a combined aggregate rate of 12 – 14%, and by 13 – 16% over the following five years1. The Chinese pharmaceutical market will even exceed the expansion of these markets, with 20% growth in 20101. Many predict that the Chinese pharmaceutical market will soon become the fifth largest in the world and perhaps the largest by 20502. Not surprisingly, most pharmaceutical companies are well established in the country or have collaborations with local firms.
Ensuring a wide international presence has been a long held ambition of many pharmaceutical companies, but the growth rates predicted for the emerging markets have seen renewed efforts by companies to advancing beyond the core markets of the US, Europe and Japan. As many governments in these markets struggle with rising healthcare costs the desire to place pressure on pharmaceutical companies to reduce their prices has often been a favoured policy. These cost containment policies have predominantly occurred in Europe and Japan, but are also gaining ground in the US. These policies have had a noticeable impact on company profits. Even though cost containment policies do exist in emerging markets, the huge demand for modern medicines makes them more welcoming areas for pharmaceutical companies in which to do business. The global rollout of new drugs is therefore seen as necessary to maximize revenue.
"...the last decade has seen numerous companies investing in China, particularly because they have seen their rivals do so."
A limitation for pharmaceutical companies in emerging markets is that, at present, only a proportion of the population can afford modern medicines3. However, this section of society is sufficiently large to offer companies a promising consumer base for the future. Companies believe that in the long-term the section of society that can afford new medicines and healthcare services will increase. Thus it is in their interest to establish themselves in these regions early on in order to better understand them and their operating conditions. For example, the last decade has seen numerous companies investing in China, particularly because they have seen their rivals do so. In such a competitive world market late entrants into the Chinese market may be unable to take advantage of the potential opportunities that exist, as rivals will already have gained a head start.
Outsourcing clinical trials to emerging markets
The demands to include additional patient data and the competitive nature of clinical development have also led to a more global outlook for clinical trials and associated research activities of the pharmaceutical industry.
The lower cost of R&,D and the increasing availability of skilled staff have led to companies opening research facilities in emerging markets. The European Federation of Pharmaceutical Industries and Associations (EFPIA) has noted that some major pharmaceutical companies are exhibiting a preference for these regions when establishing new facilities. For example, it documented that during 2001-2006, while 18 research sites were closed in Europe, 14 were opened in Asia4.
Although the prime drug development regions of the world remain the US, Europe and Japan, there has been a surge of interest in running clinical trials in emerging markets. Since regulatory agencies such as the FDA and EMEA are starting to accepting clinical data generated in these regions, this also helps companies support their global marketing objectives. This has further significance given that these emerging regions are themselves also becoming important markets for new products. Through clinical trials, local physicians gain experience of new products and therefore it is in a company’s interests to base some clinical research in these locations.
"...during 2001-2006, while 18 research sites were closed in Europe, 14 were opened in Asia."
The field of clinical trials is highly competitive and companies often face situations where their preferred initial locations in the established markets do not result in the necessary number of patients being recruited. In contrast, emerging regions have large, growing populations and there is often a sizeable group of patients affected by diseases of interest to pharmaceutical companies, but not on current therapies. It is generally considered that the diseases characteristic of urban communities in major industrialized countries also typify the population of cities in emerging markets.
Apart from a wider availability of patients there are other attractions for conducting clinical trials such as positive patient attitudes and low costs. As many people in these areas tend to be poorer they have extremely limited access to healthcare. For such patients, clinical trials can be seen as a means to receive medical treatment and care for free. Since companies spend around 40% of their R&,D budget on clinical development the lower running costs of trials in emerging markets are a huge attraction. Such factors illustrate why China and India have become the major centers for outsourced clinical trials. In many cases, these trials are being handled by contract research organizations (CRO) on behalf of pharmaceutical companies. The CRO sector has grown dramatically as these firms compete for business from pharmaceutical companies. Clearly those that can promise better recruitment and lower costs will be in a stronger position to win business.
It has been estimated that clinical trials can be conducted in China for around half the equivalent cost in a Western country5. More specific domestic estimates suggest that phase I clinical trials in China are 15% of the price in the West, while phase II trials in China cost 20% of the price in the West6. In 2006, the former CEO of AstraZeneca, Sir Tom McKillop, was cited in the Wall Street Journal as stating that a major post-marketing clinical trial for two cardiovascular drugs (involving 46,000 patients in 1,250 hospitals in China) cost US$3 million7. Such a trial would be impossible to run in the West or Japan, to the required standards, for such a low cost.
"Trials in India can cost between 30-50% less than in the West..."
Similar factors have encouraged global companies to set up their operations in India8. The estimated value of the market for outsourced clinical trials here is over US$1 billion9. Trials in India can cost between 30-50% less than in the West and in addition the cost of skilled professionals is still low in comparison to western countries. A clinical trial monitor typically earns approximately 10-15% of his or her US and European counterparts. Since the population is large, companies have had positive experiences in recruiting patients. For example, in some of the difficult diseases within the oncology therapeutic area, one CRO managed to recruit 200 patients in less than 2 years of recruitment time from less than 10 centers8. This recruitment was achieved through the use of referral networks, but unlike the typical approach in established markets, without any campaigns and advertisements.
Maintaining clinical trial standards
As clinical trials progress to involve new areas of the world, there is often a focus on the operating costs and availability of patients. However, equally important is the existence of an ethics system that ensures subjects are well cared for and looked after and that they participate in studies of their own free will. In recent times, there have been calls by a number of industry observers to ensure that such systems are in place around the world. Their concerns are that in the drive to reduce costs and enroll patients rapidly, companies may not sufficiently highlight how ethical standards will be maintained. It is also important that companies are seen as encouraging local authorities to have the right systems in place to ensure that guidelines are followed. Overall, there are difficult questions to answer in how best to involve subjects in clinical trials when operating in emerging markets, as commercial factors are also involved, and the discussion can become emotive.
So, whilst outsourcing clinical trials to emerging markets is often commercially attractive, there are ongoing concerns about laying down an ethical framework for these regions. In the second part of this article I will review some of the efforts being made to manage development activity in these new markets and look at how the industry can avoid exploiting the local populace in a negative way.
References:
1. Anon (2009). IMS Forecasts Global Pharmaceutical Market Growth of 4 - 6% in 2010, Predicts 4 - 7% Expansion Through 2013. IMS Health. http://www.imshealth.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?vgnextoid=500e8fabedf24210VgnVCM100000ed152ca2RCRD&,cpsextcurrchannel=1
2. Anon (2009). China could become the fifth largest drug market by 2010-11 and the largest by 2050 (overtaking the US).
3. Kermani F. (2006). China's Healthcare System and the Demand for Biopharmaceutical Products. In: Langer E.S. (Editor). Advances in Biopharmaceutical Technology in China. BioPlan Associates, Inc., Rockville, MD 20850, USA. http://www.bioplanassociates.com
4. Anon (2009). The pharmaceutical industry in Europe: key facts and figures. EFPIA. http://www.efpia.org
5. Jia H (2008). China beckons to clinical trial sponsors. Nature Biotechnology. http://www.nature.com/drugdisc/news/articles/nbt0705-768.html
6. Reymond E. China lives up to outsourcing hype. In-Pharma Technologist. 16 January 2007. http://www.drugresearcher.com/news/ng.asp?n=73400-ukti-pfizer-china-clinical-trials-outsourcing
7. Berton E. More Chinese get free drugs in clinical trials. The Wall Street Journal. 14 February 2006. http://online.wsj.com/public/article/SB113988758015373215-3cIaQCU2VMtRObREr8e5Rj8AiP8_20060221.html
8. Sahoo U. and Kermani F. (2007). The Contract Research Industry in India. In: Langer E.S. (Editor). Advances in Biopharmaceutical Technology in India, 1st Edition. BioPlan Associates, Inc., Rockville, MD 20850, USA. http://www.bioplanassociates.com
9. Singh M (2008). Should Clinical Trials Be Outsourced? Time magazine. http://www.time.com/time/health/article/0,8599,1830334,00.html
About the author:
Faiz Kermani is an independent consultant with experience in the US and UK. At some time or another he has found himself in discovery R&,D, international clinical trials, pharmaceutical pricing and reimbursement, and medical communications. This jack of all trades history causes him to attempt articles that look at the big picture for the global pharmaceutical industry. He can be contacted at faiz@doctors.net.uk.
Continued in "Difficult issues in pharma going global (part II)"
Are ethics being maintained in emerging market clinical trials?
