Pharma in China – Compliance Challenges and Options

China poses unique compliance challenges for pharmaceutical companies, with several well-known foreign companies getting caught up in corruption investigations in the past year. President Xi Jinping has publicly made fighting corruption one of his cornerstone policies. Additionally, the DOJ and SEC have been quite vocal in recent years about their ongoing Foreign Corrupt Practices Act (FCPA) enforcement focus on the pharmaceutical industry, with a particular focus on China. In recent years, 10 investigations under the FCPA involving alleged violations in China by pharmaceutical and medical device makers. Finally, it’s been long known that the structure of the healthcare system and environment in China creates a high-risk industry. So why, despite knowing these things, did certain pharmaceutical companies recently find themselves embroiled in corruption scandals?

Fundamentally, it comes down to the way business is done in China, the inherent lack of a proper funding mechanism for hospitals and doctors, which are largely state-owned, and the lack of a robust compliance program on the part of pharmaceutical companies (or a willingness to look the other way in the pursuit of revenue). Pharmaceutical companies have embraced the Chinese market and its risks as it was seen as a solution to weak sales growth in developed markets and reduced revenue due to competition from generic drugs.

Corruption risks are not limited to the healthcare industry. Any business that purchases from vendors or has sales and distribution networks will likely eventually face kickback issues. However, China’s healthcare industry is largely government owned, elevating the risk into the FCPA realm. Doctors are notoriously low paid (taxi drivers generally earn better wages than new doctors), and therefore are forced to seek alternative sources of income. The competition in this industry is fierce with many players being able to operate without having to be concerned with FCPA ramifications.

Therefore, given that backdrop, there are tremendous pressures on pharmaceutical companies and their employees to perform and opportunities to meet performance objectives that do not comply with western ethical standards and laws.

Given the above, pharmaceutical companies have a few options. They can engage in local business practices and hope that any crackdown is temporary, which is sometimes the case in China. In such case, companies take the gamble that the short-term pain is offset by the long-term gain. Many see the recent action by the government across several industries (pharmaceuticals, dairy products and television screens) as primarily a price reduction initiative. Once prices are reduced, the thinking is that further action will abate. However, if a company is unlucky enough to get caught up in a corruption/anti-bribery probe, one has to wonder whether the financial consequences, such as the substantial costs of conducting investigations and substantial penalties that can be imposed, and damage to a company’s reputation are worth the ultimate price it will pay in the end. The risks with this approach are substantial as foreign companies are easy targets for government-initiated crackdowns by the government in China, which can have a ripple effect triggering FCPA investigations by the U.S. DOJ.

Another option is to not enter China or leave if a company is already there. Actavis recently made the decision to exit China with its CEO stating that China “is just too risky” and “not a business friendly environment”, and hinting that it wasn’t a level playing field due to the uneven application of law, which allows certain companies a competitive advantage.

The third option is to understand the limitations and costs one has to endure to operate in the China market, accept certain unfair market realities, perhaps adjust the way products are sold in China and, finally, ensure that you have a robust compliance program in place. The American Chamber of Commerce in Shanghai recently released its 2013 – 2014 China Business report which indicates that just over 40 percent of the 400 American companies surveyed will increase spending on compliance programs over the next year. If a company wants to have an effective compliance program in China, particularly in a high-risk industry such as healthcare, it’s going to take considerable time, money and effort to continuously educate and monitor employees. A good training program should consist of the following:

Training 

Employees must be provided extensive and continuous training to drive home that the company has zero tolerance for certain practices. Many employees will view certain practices prohibited by the FCPA, and Chinese anti-bribery laws, as essential to doing business. It is important for companies to explain in detail and provide examples of what is prohibited by the FCPA and Chinese anti-bribery laws, and explain the consequences for violating such rules, i.e. termination of employment and investigation by authorities.

Encourage Whistleblowing

Companies should encourage employees to come forward if they have any information regarding any violations, and have policies and programs in place to ensure such employees do not face retaliation for doing so. Often whistleblowers will flag schemes or behavior a company is unaware of, and will have access or insight to information that will be impossible to obtain through an investigation.

Continuous Auditing of Business Relationships and Financial Transactions

In the investigations conducted last year against several pharmaceutical companies, it was revealed that many of those involved had funneled money through travel agencies to hospitals and doctors. Employees are creative in coming up with arrangements to make illicit payments to obtain business. Companies must have compliance teams in place that can spot irregularities. In one case, the company was paying the travel agency millions of dollars a year, but the travel agency appeared to be doing very little work. In hindsight, this should have been an obvious red flag. Another common method is for employees to submit fraudulent receipts to obtain cash reimbursements to use for illicit payments. It is very easy to get such receipts in China so companies need compliance teams that can effectively control the reimbursement process.

Ultimately, it’s a business decision as to which option a pharmaceutical company wishes to pursue given the legal risks involved and potential business opportunities. However, it’s likely most would agree that the third option makes the best long term sense. A company just needs to carefully analyze whether it can compete effectively given the additional costs and business constraints it will face over certain competitors.

The state structure that regulates registration issues in Russia

The Ministry of Health of the Russian Federation makes a decision on a pharmaceutical product registration based on results of evaluations performed by the lower institution – the Federal State Budgetary Institution “Scientific Center for Evaluation of Medicinal Products" of the Ministry of Health of the Russian Federation (FSBI SCEMP (www.regmed.ru)). The FSBI SCEMP evaluates the proposed drug quality control methods and quality of submitted samples of a drug, and also evaluates the expected benefit to possible risk ratio which is done after the clinical study of a drug. To date, the FSBI SCEMP of the Ministry of Health of the Russian Federation has been prohibited to render services on pharmaceutical product evaluation directly to applicants in the course of the registration process. As a budgetary institution, the FSBI SCEMP only performs evaluations for the Ministry of Health of the Russian Federation upon receipt of their instructions.

An applicant pays a state duty (MoH fees) to the account of the Ministry of Health of the Russian Federation for state registration or introduction of changes (amount of the state duty; banking details for payment of the state duty)

For interaction with applicants, a new state portal grls.rosminzdrav.ru was created. The portal contains public (accessed without a password) and restricted information (accessed via a personal account protected by a password assigned). The public information is the State Register of pharmaceutical products and the State Register of selling price limits.

Amendments to drug registration law in Russia: Implications for the future

At a recent conference I attended, dedicated to the regulatory affairs in Russia, CIS, and Turkey, the overriding message from pharma company representatives (in terms of registering their products in Russia) was concern about the lack of clarity and “vagueness” of law defining the  country’s drug registration process. There was much anticipation in relation to the amendments to the federal law, FZ:61 “On Drug Circulation” due within the next few weeks.

The eagerly awaited draft amendments to the federal law, as well as Article 333.32.1, part two of the tax code of the Russian Federation, were published for consultation by the country’s Ministry of Health in late January this year. The amendments proved to be a mixed bag.

Proposed changes

So, what are some of the proposals within the amendments? Apart from the definitions of terminology such as pharmaceutical substances, orphan drugs, biological drugs, reproduced drugs, reference drugs, bioanalogues, interchangeable drugs, and bioequivalence studies, the draft amendments also include:

·         Accelerated registration for orphan drugs and newly registered generics. This accelerated procedure will not be applicable to biosimilars, originator drugs (except orphan drugs), generic drugs (except newly registered ones), new combinations of previously registered drugs, and medicines that were registered earlier but produced in other dosage forms.

·         Local clinical trials. While, local clinical trials will still be necessary, for orphan drugs “the results of preclinical and clinical studies performed outside of the Russian Federation in accordance with the rules of good laboratory practice and good clinical practice will be recognised”.

·         Expertise for carrying out clinical studies. Additionally, the document proposes the requirement to obtain a “permit to import a particular consignment of unregistered medicines for the pharmaceutical examination of samples” in order to receive approval for an international multicentre clinical trial or post-registration clinical trial of a drug. Also, a document confirming “payment of state fees for the ethical review, examination of documents and examination of samples of pharmaceutical drug to get approval for an international multicentre clinical trial of the medicinal product for medical use, or a document confirming payment of state fees for the ethical review of examination papers and pharmaceutical examination of samples of the drug to get the permission for a post-registration clinical trial of the drug for medical use” will be required.

Implications of the amendments

Certain changes would potentially be a welcome development for the pharma industry and pharmaceutical manufacturers. For example, the need for clarification of terminology has been alluded to on several occasions by Russia’s Federal Antimonopoly Service (FAS). Furthermore, the accelerated registration process for orphan drugs and in particular, the recognition of results of preclinical and clinical trials performed outside Russia is a positive development for orphan drug manufacturers given the challenges posed by conducting domestic clinical trials–considering the limited patient population for rare conditions.

In terms of an accelerated process for “newly registered generics” the regulations could potentially encourage faster access of generics to the market once the originator drug comes off patent.

The proposals for a permit to import a particular batch of unregistered medicines, a fee to be paid for ethical review and examination of documents and samples may, on the other hand, be a negative development. This requirement, if approved, could make the registration process even lengthier and more complex – not to mention the potential increased expense for pharmaceutical companies.

What to expect next…

The public consultation for the draft document is expected to continue until 23 March. However, as of now, several suggestions have been proposed by the FAS–as well as other organisations and industry associations. The MoH has stated that it is expecting to introduce changes to over 40 articles within the pharmaceutical law. The changes will be related to areas such as registration of biologics and bioanalogues, interchangeability of medicines as well as introducing the possibility to “pause/freeze” the registration process, and differentiated requirements for “expertise” for different drug categories.

It remains to be seen whether further clarifications and specifics will be introduced to the registration legislation–and what these will mean for the pharma industry.

New rules on licensing of the pharmaceutical activity in Russia

Regulation of the Russian Government dated 22 December 2011 No. 1081 “On licensing of the pharmaceutical activity” (“Regulation on licensing of the pharmaceutical activity”) entered into force on 7 January 2012. The Regulation on licensing of the pharmaceutical activity was adopted as a follow-up to Federal law dated 4 May 2011 No. 99-FZ “On licensing of certain types of activities” (“Law on licensing”), thus revoking the previously-effective Regulation of the Russian Government dated 6 July 2006 No. 416 “On approving of the rules on licensing of the pharmaceutical activity”. It should be pointed out that under section 4 article 9 of the Law on licensing, a pharmaceutical license has no fixed expiration date.
In this alert we will discuss the following key issues of the Regulation on licensing of the pharmaceutical activity:

• list of activities which constitute pharmaceutical activity;
• licensing authorities;
• licensing requirements;
• documents for obtaining a pharmacy license.

List of activities which constitute pharmaceutical activity
Regulation on licensing of the pharmaceutical activity provides for a definite normative list of services for rendering of which it is necessary to obtain a pharmacy license:

1.    services which relate to circulation of medical products for medical application:

• wholesale and retail trade of medical products;
• storage of medical products;
• carriage of medical products;
• allotment of medical products;
• preparation of medical products.

2.    services which relate to circulation of medical products for veterinary application:

• wholesale and retail trade of medical products;
• storage of medical products;
• carriage of medical products;
• allotment of medical products;
• preparation of medical products.

Licensing authorities
Companies or individual entrepreneurs which intend to obtain a pharmacy license should approach one of the following authorities:

• Federal Service on health care and social development supervision– for activity, exercised by companies of wholesale trade of medical products for medial application;
• Federal Service on veterinary and phytosanitory supervision – for activity, exercised with regard to medical products for veterinary application;
• Executive authorities in the constituent parts of Russia – for activity, exercised with regard to medical products for medical application (with the exception of the wholesale trade).

Licensing requirements
Regulation on licensing of the pharmaceutical activity provides for a definite distinction between requirements:

1.    Requirements for  license applicants, i.e. premises, qualified staff and management;
2.    Requirements for the license-holder, i.e. premises, qualified staff, further upgrade of qualification of specialists, compliance with legislation of medical products circulation, trade rules etc.
Documents for obtaining a pharmacy license
The applicant should submit the following documents to the relevant authority:

1.    Documents, which are necessary under the Law on licensing (application, constituent documents, documents which confirm payment of the state duty);
2.    Documents which relate to the pharmaceutical activity (data on the medical license, copies of documents which confirm the existence of the relevant equipment and premises, data on a hygiene certificate, copies of documents which confirm the relevant qualification and education of the staff, etc.).
Conclusion
On the whole, it should be pointed out that the Regulation on the licensing is more precise and has more definite structure than the previously-effective rules. A positive sign is that there is no obligation to prolong licenses which were issued before.

According to the Law on licensing there is a term within which the competent authority should issue a license (not more than 45 days) and exhaustive grounds for the refuse to issue a license (indication of the false or distorted information, non-compliance with the licensing requirements, decision on annulling the previously issued pharmacy license). Thus, there is possibility to develop the practice of pharmaceutical companies in Russia.

Pharma Social Networking Benefits - Facebook, Twitter & more

 

Facebook, Twitter and more have led us to social media mayhem! Pharma companies are no exception, with many companies having a web presence through social media. Great pharmaceutical centers use social media platforms to release press updates, offer exclusive deals and keep connected with their clientele. Pharmaceutical social media is on the rise, and we have outlined seven ways in which pharma companies use social media most effectively to build their businesses. They are as follows:

1. Pharmaceutical companies add social bookmark links to their most important webpages to increase the rate of sharing. With a single embedded line of script, hundreds of viewers can express their “like” or “comments” on content regarding new drugs and news about the direction of the pharma company. For instance on one major pharma company's website found you can find Recommend this page buttons for Facebook, Twitter, Email and more.
2. Pharmaceutical companies build blogs and teach people about common pharmaceutical practices and uses. By having a reliable foundation of content, pharmaceutical companies do a huge favor for the inquisitive public. When people identify a further need for a pharmaceutical company’s services after their search, the pharmaceutical company then sees the fruits of its labor regarding informational blogs and posts. See how this works at this pharma company blog.
3. For every video project purchased and recorded for pharmaceutical companies, webmasters of these drug giants should ensure that there’s an embeddable web version of the video for improved sharing across sites. What’s better than having one video up on YouTube? Having that video being linked on blogs across the country so every time the video is played remotely, an expanding audience hears the pharmaceutical company’s mission.
4. Pharma companies are extremely good at tagging and using other metadata to enhance the public’s ability to find the information they provide. Simply titling a video and creating a brief description isn’t enough – tagging your content makes it more relevant for anyone searching for tag-related content.
5. By regularly Tweeting out updates, pharma jokes, questions for clientele and more, pharma companies reveal their underlying personalities. A quick look at how this is being done on Twitter shows how career openings can be blasted to several thousand people every day via Twitter!
6. Pharmaceutical companies establish platforms that communities flock to – groups for charitable races, large sponsored events and more are made possible through organization via social media. Check out how pharma companies are increasing support to some of their favorite charities (note the "share this" button!) in this article.
7. Pharmaceutical companies assist other companies in starting up within social networks which strengthens their business ties within the social media site. By developing web-based B2B connections, drug manufacturers can strengthen bonds with packaging companies, shipping companies and other complimentary industries with which they do business.

Technology progressively gets better facilitating communication between organizations and individuals. Public opinion is highly coveted and with social media we no longer need to rely on polsters to get this information. Because of this the internet has assisted in directing pharma companies' research, development and marketing efforts.

 

 

Generic Drugs Face Regulatory and Scientific Challenges

Generic drugs have become the mainstay of pharmaceutical therapy, accounting for more than 80% of US prescriptions, as more blockbuster pharmaceuticals have lost patent protection. A range of legislative and regulatory actions have facilitated consumer access to safe, high-quality generic products, although manufacturing lapses and product quality problems have created critical shortages in important medicines, casting a shadow over the industry's success.

FDA marked the one-year anniversary of the Generic Drug User Fee Amendments (GDUFA) of 2012 in June by noting that the agency collected $255 million in user fees—a little short of its $299 million goal for fiscal year 2013, but enough to hire 165 new staffers for the Center for Drug Evaluation and Research (CDER) and to expand the industry "self-identification" program to ensure accurate fee assessment and to improve generic industry supply-chain information.

A GDUFA steering committee, which includes representatives from CDER plus the FDA commissioner's office and the Office of Regulatory Affairs (ORA), is shifting focus to enhancing the generic-drug review program to meet GDUFA performance commitments. That assignment falls to Office of Generic Drugs (OGD) acting director Kathleen Uhl, who has made some progress in reducing the application backlog and enhancing review processes. But Uhl and her staff face considerable challenges, particularly in the face of further organizational changes slated for OGD.

Legal controversies 

Generic drugs also have been in the spotlight recently due to cases before the US Supreme Court involving pay-for-delay patent settlements and safety labeling issues. Manufacturers lost an important case in early June 2013 when the Justices made it more difficult for brands and generics to negotiate "reverse payment" patent settlements. A majority ruled in the Federal Trade Commission v. Activis case (docket no. 12-416) that the Federal Trade Commission (FTC) has the right to challenge these deals as anticompetitive and harmful to consumers. However, the Court stopped short of declaring these arrangements per se illegal. Both brand and generics firms have insisted that pay-for-delay agreements avoid costly litigation and actually permit generics marketing prior to patent expiration, but the ruling is slated to discourage these settlements in the future.

A majority of Justices, though, supported manufacturers and FDA in Mutual Pharmaceutical Co. v. Bartlett (docket no. 12-142). The case raised important questions for both brands and generics about whether lower courts can challenge FDA regulatory decisions, and whether generics makers should revise labels to reflect important new safety information when the brand does not do so. A patient who took Mutual's generic product and suffered adverse events sued and won a $21 million judgment based on the company's failure to warn of the drug's potential dangers. Mutual argued that the long-marketed anti-inflammatory and its label were approved by FDA, and the Justice Department agreed that states can't undermine the FDA approval process by overriding federal regulatory policy. A sharp dissent from some Justices in this 5-4 ruling, along with strong complaints from consumer activists, puts pressure on FDA to revise regulations to allow new warnings on generic drug labels, even if the information differs from that of the reference product.

The High Court is likely to revisit this issue as other cases emerge involving state versus federal consumer protection rules. In fact, one failure-to-warn suit has been brought against a brand manufacturer, even though injury was caused by a generic.

Encouraging innovation

These and other complex regulatory policies stand to benefit from an important GDUFA initiative that supports research on issues affecting generic-drug testing and quality. The GDUFA Regulatory Science Plan for 2013 launched this $20-million program by identifying 13 research topics that warrant further study, ranging from quality-by-design (QbD) and postmarketing surveillance to bioequivalence (BE) and pharmacokinetic (PK) evaluation of complex dosage forms.

FDA held a meeting in June to update industry and the research community on studies funded by this program to date and to gain input for its 2014 science plan, which is due Oct. 1, 2013. The aim, explained Robert Lionberger, OGD acting deputy director for science, is to identify scientific issues that limit the availability of generic drugs and where regulatory science can improve the evaluation of therapeutic equivalence and post-approval assessment of generics. For example, FDA is seeking study proposals for developing in-vivo predictive dissolution methods for inhaled drugs to further establish BE standards for inhalation therapies and nasal sprays. There's interest in improving in-vitro release tests for topical products and new approaches to test gastrointestinal drugs with lower solubility. Research has begun on PK and BE studies for anti-epileptic drugs, with additional studies slated to build confidence among clinicians and patients in substitutability in this area.

Related studies may examine ways to identify those individual patients who have difficulty with generic drug substitution to better understand variability in patients and products. This touches on the hot topic of bioequivalence for Budeprion (bupropion). FDA was criticized at the June meeting for approving generic Budeprion XL 300 without adequate testing, and the agency is looking to examine why and whether different patients respond differently to a drug and how that relates to BE assessment.

Similar issues arise related to the equivalence of narrow-therapeutic-index (NTI) drugs and complex drug products such as iron colloids, liposomal products, and sustained release parenterals.

A related topic is whether human factors studies can expand understanding of switchability in drug-device combination products such as inhalers and auto-injectors. Other patient-use studies may explore physical attributes of drugs, such as how tablet size, color, and shape influence patient acceptance of generic drugs—or create confusion between brands and generics. FDA also is looking for more research on modeling and simulation methods as "enabling technology" for defining new equivalence methods.

Quality by design (QbD) for generic drugs is an important topic, Lionberger pointed out at the meeting noting that FDA would like manufacturers to move beyond standard dosage forms to apply QbD to more complex products. Gordon Johnston, representing the Generic Pharmaceutical Association (GPhA), noted that guidance on implementing QbD for added dosage forms could encourage more industry investment in this area. Manufacturers also would like further examination of how to leverage prior knowledge to reduce required testing and how manufacturing changes can support a less burdensome post-approval changes process, Johnson noted. And manufacturers of APIs seek to promote innovation in their field through research demonstrating that new production methods don't alter product bioequivalence, noted Carla Vozone of Hovione LLC, representing the European Fine Chemicals Group.

Postmarketing assessment and adverse-event monitoring of generic drugs also warrant further research. FDA is interested in switching studies on marketed drugs, as seen with transplant patients to assess equivalence of immunosuppressants. And there's continued interest in methods for evaluating whether new abuse-deterrent formulations actually reduce abuse in opioids.

 

The overall aim of manufacturers, said Johnson of GPhA, is to develop sound testing methods for generics that support a move away from clinical endpoint studies required for brands. Research evaluating immunosuppressants, liposomes, and sustained-release parenterals may not affect a high volume of generic products, but can help industry move forward in developing innovative, affordable therapies.

 

 

Marketing Exclusivity in US

An innovator pharma company invests millions of dollars for the development and placing the new lifesaving medicine into the market. By provide the exclusivity to innovator for specified duration in the market governments encourage the research and development in pharmaceutical at the same time approving the lower cost generic for the same medicine after expiration of the exclusivity.

Under the article 39.3 of TRIPS Agreement, WTO Members States requires to protect pharmaceutical test data but only undisclosed test data originated from new chemical entities and that required considerable effort to generate.

Before 1984 in the United States pharmaceutical test data was protected as a trade Secret. The basis for protecting trade secrets is unfair competition. There was no legal prohibition against relying upon published data to establish safety and efficacy of drugs.

Under the current US exclusivity approach, generic drug manufacturers and national drug regulatory authorities cannot rely upon the originator’s test data to approve generic applications during a pre-determined period of time.

The current U.S. data exclusivity regulations are quite complex and co-exist with a number of other non-patent provisions that extend marketing exclusivities, including:

1. New Drug Product exclusivity

2. Supplementary product exclusivity

3. Orphan drug exclusivity

4. Paediatric drug exclusivity

5. Generic drug exclusivity

6. Rx to Over the counter switch

7. Patent term extension

All the above exclusivity is discussed in below:

1. A 5 year period of data exclusivity from the date of the FDA approval is granted to new drug products containing new chemical entities. The main condition is that the approved new drug application must contain a new active ingredient that is a New Chemical Entity or new active moiety, never approved previously by the FDA alone or in combination. The effect of this exclusivity is that no ANDA or 505(b)(2) applications are not be submitted during the 5 year exclusivity period.

There is an exception: the five-year period may be reduced to 4 years if the generic application contains a certification of patent invalidity or noninfringement (Paragraph IV Certification).

2. A 3 year period of marketing exclusivity from the date of the FDA approval is granted to new uses or indications of drug products containing an active moiety that has been previously approved, when the application contains new clinical investigations (other than bioavailability studies) which were essential for the approval of the new drug application or supplement. Contrary to the 5 year exclusivity, this three-year exclusivity allows the FDA to receive and review ANDA or 505(b)(2) applications before it has expired. The FDA can even grant tentative approval, but the approval becomes effective only after 3 year period has elapsed. The second applicant can thus market its product immediately following expiry of the three-year exclusivity.

3. A 7 years of exclusivity is granted to drugs or biologics intended to treat rare or orphan diseases or conditions which has the disease prevalence of <200,000 cases per year in US. This exclusivity prevents approval of another version of the same drug for the same indication for 7 years called as Orphan drug exclusivity.

4. Pediatric exclusivity or extended exclusivity of 6 months is granted in case where Sponsor conducts FDA requested pediatric studies. This exclusivity extends any applicable patent or regulatory exclusivity by an additional 6 months. Two separate 6 month extensions are possible.Pediatric studies can also support 3 year exclusivity.

5. Under the Drug price competition and patent term restoration act 1984 (Hatch Waxman Act)180 days of marketing exclusivity is grated to the first application contains a certification of patent invalidity or noninfringement (Paragraph IV Certification).

6. The USPTO grants patent extensions to compensate for delays in USPTO examinations and prosecution that extend past three years. Thus the average 1.4 years past the three year mark during prosecution may be tacked onto the 20 year patent term. The Hatch Waxman act provides a maximum 5 year extension, and is limited to a 14 year term from the time of FDA approval. The calculation of extension is complex and depends on patent prosecution and approval factors.