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A Summary of History of the Pharmaceutical Industry - 80 Years of Manipulation, Greed, and Knowledge Exploitation

Recently, I was talking to one of my mentors and when I told him my aspirations, he told me, Suman to create History you need to know the History. It felt so real because in the past few months, I have devoted myself to reading History. We are on a mission to make quality healthcare accessible and affordable for the “Missing Middle”  - 400 million Indians. It will be nothing less than creating a History. Hence I have been reading the history of pharmaceuticals, drugs, healthcare, healthtech etc. 

In my case, History has also been the source of conviction and pushed me to be in the arena even after almost everything went south. This essay is a personal note that what we are doing is not a “reinvention of the wheel” We are only eliminating the information asymmetry and also the greed and manipulation of a few capitalists who created a new category of the drug to make extra profits. These capitalists used gimmick marketing, sudo narratives, and lobbying of regulators to play with the lives and money of Individuals. Unfortunately, almost all future supply-side ecosystems followed the same and pocked profits - the Indian market is also following the same old and probably the wrong methods. This has a lot to do with our mindset of living in the Past.    

Even though all of us claim that we are living in present which is just an illusion because we all live in the past - we are simply following the past. We are so comfortable that we don’t even question which is one of the unfortunate parts of our modern civilisation. In fact, if anyone dares to question, we all look at them as an Alien. But our today’s world is the by-product of a few who questioned and went against the flow and pulled the future into the present. We, initially, vilified them, termed them as crazy, ignored them etc. But our world needs more of those who dare to pull the future into the present and this loop should never stop because, think for a while, that is what we call progress - Pulling the future into the present, no? 

The past 18 months of work at Jile Health also gave me a realisation that in India the largest tech outcomes would come from having a problem-first mindset. And when you have a problem first mindset what you are also looking at is how can we survive longer so the chances to solve this problem without creating a new problem improve by a greater percentage. Hence in the past 18 months, we have pivoted multiple times, considering we don’t want to get trapped in sunk-cost fallacies. We believe that to solve this problem, we need a wedge that could give us cash flow from day one. And now we have that wedge! 

In India, 89% of the drugs are generic however sold as branded hence the consumers are paying a premium of up to 90%. We can understand Generic and Branded drugs through an example: let’s say a pharmaceutical company would like to discover a drug for a specific health condition, the company will spend time and money on research and finding the molecule, dissolution strength (how swiftly those molecules will dissolve in the human’s body). After this, information will go to the clinical trials. There are four phases of clinical trials and each trial must be approved by the regulators. If these chemical compositions, dissolution strength, and other details are approved by the regulator (For USA FDA for India CDSCO), the company gets the salt composition (Also called Generic Name) approval. The mention of this Salt composition of the drug on the packaging is mandatory and pharma companies can market directly with the composition name, however, just to confuse, charge whatever they want on the name of the brand, and keep the monopoly these pharma companies market these compositions with brand names to Healthcare providers and patients. In the entire process when a pharma company discover such molecules they patent it to prevent other companies from copying and selling their innovation. However, the patents are granted for only 18 years max, in that regulators take a few years of approval this means that pharma companies will have a monopoly of that Salt Composition for 15 to 16 years. 

Once the patient protection is over, it is also termed a “Patent Cliff”. Any company can use that formulation and manufacture drugs with the same Chemical composition - Of course, there will be some differences in inactive chemicals and dissolution strength. Drugs manufactured by Pharma companies using this method are called “Generic Drugs”. 

In a simple comparison, the cost of drugs by the company that spent years of research, development, clinical trials, regulator approval, manufacturing, market education, and marketing will be many times higher than the company that will simply utilise everything and manufacture. Hence there is a massive price difference between Branded and Generic Drugs across the market. Now in a developed market, this distinction is clear and thanks to the active regulators, consumer awareness is super high hence at the time of purchase a consumer is aware of whether they are getting generic or branded and pays accordingly. In fact, 90% of Insurance-related drug dispensing is generic. Companies such as CVS Health even give free generic drugs to acquire customers because of having that price advantage [I will write about this in the future].  

In comparison to India, even though 89% of the drugs are Generic, pharma companies are using their label and calling these drugs Branded - and charging a premium of up to 90%. You won’t believe sometimes the price would be so drastic for the same composition that you will end up being frustrated - we have been in the past many months. 

In India, regulators know this, pharma companies know this, and Providers (Doctors and Hospitals) know this but the most important stakeholder has no idea about this which is Patients (let’s call them consumers). This is unfortunate because the medication is the biggest cost component of the Out of Pocket Expenditure (OOPE), true for other treatments. This information asymmetry is inflating the net healthcare delivery cost for every Indian - especially for “Missing Middle”. 

There are many factors that are inflating the current Healthcare delivery cost however this is one of them and demands no invention of the wheel to fix so the cost of healthcare delivery could be deflated. Hence for us, it is important to not only understand the roots of this problem but also to look for ways by which we can solve this and make it more efficient. Therefore, we wanted to understand this in depth and the discoveries are shocking. [Part-1] 

The Pharmaceutical industry has evolved over the past 80 years and at this point, the chemical compositions of almost all necessary drugs that can be used to cure/treat human conditions are publically available. It is mandatory for pharma companies to write the generic name of the drug on the package apart from writing the brand name. At the same time, the providers (Doctors and hospitals) can prescribe generic names, however, due to instant incentives by the Pharma companies most of the providers write the Brand names, and this creates confusion at the patient's level. The surprising part of all this is that - this utilization of different names started even before the pharma companies had no pressure of “Patent Cliff”. 

Before we explore the history, let me share a story. We were making calls to wholesalers and stockists who could supply us the generic drugs. Out of 25 calls, only one of them was dealing with generic and the surprising part was this: all 24 of them used the same term - we only deal with Ethical Drugs. They were calling Generic branded ethical, and again this is a gemic of the wording because Ethical Drugs have nothing to do with Generic or Branded. The drugs prescribed by doctors are called “Ethical Drugs”.  Therefore, Generic drugs are also ethical if prescribed by doctors. See, this is how the pharma companies are manipulating the market till the last mile. But what are the origins of all these? 

In 1945, a Pfizer Scientist Alexander Finlay discovered Terramycin with the chemical Structure C22H24N2O9. Terramycin is not only good with antibiotics it has other medical benefits such as Treatment of Infections. Hence, Pifizer wanted to protect its true nature. So they hired an ad agency that could convert this simple pill into a sexy brand that could hide its true nature. So they adopted the seductive pizzazz of more traditional advertisement - catchy, copy, splash graphics - and to market directly to an influential constituency - the prescribers - with a completely different Campaign name Terra Bona with no mention of the actual drug name. Since they advertised to prescribers - the true nature of the drugs was hidden under the brand name. This was the first instance in the pharmaceutical industry when the brand name of the drug took over the actual name. And in this way “Medical Advertisement” destroyed the market because this was just the beginning of the manipulations, greed, and exploitation of knowledge. And it is affecting billions of humans!  

In the Indian context, there is also good news because Healthcare is still an evolving industry and it will take another 10 to 15 years to mature like Banking and Finance. Most of the small and individual private providers are open to writing generic drugs. In fact, in the past 2 months, of all providers that we have talked to 60% are writing generic and redirecting those patients and prescriptions to “Jan Ayushadhi”. Unfortunately, these stores cannot fulfil the demand for multiple reasons - you can read that in our last essay.

Again, India’s healthcare is an evolving market and the way Pharma companies exploited the market many of the methods can also be used to correct the market. Solving India’s healthcare problem is unlike any other market here a company can’t expect to sit in the office, it will demand a deeper understanding of the multiple components, utilization of smart narratives, incentives for all connected stakeholders, utilization of technology, and most importantly, a “Chief Medical Officer”. This is a personal experience of working for the past 18 months, for a healthcare company with a mission to solve this problem “Chief Medical Officer” is more important than Chief Technology Officer.  

The drastic increase in Healthcare vertical specific funds is a testament that Healthcare is going to be one of the biggest markets and can be the source of many large outcomes even though tech will play an important role, however, the approach needs to be different because India is at 1950 to the USA from GDP per capita and also from the consumer's evolution pov.  

Concluding the essay, this is a good time, we must stop living in the Past and work hard to pull the future into the present. We should do it because it demands no “reinventing the wheel”. If a few can use the narratives to exploit the market, we can use the narrative to correct the market! 

Thanks for reading, if you find this interesting, please share this in your network. 

I shall see you all the next week

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