By Andrew White
Why the Middle East must win against counterfeiters if it is to realise the full potential of today's drugs.
The pharmaceutical business is the only business I know of where you go into all of your new projects knowing that most of them will fail," admits Robert Essner. "And yet you still do it."
For all the industry's pitfalls, Wyeth Pharmaceuticals shareholders will be glad that the multinational's CEO doesn't give in too easily. Under his tenure at the head of one of the world's largest drug companies, Essner has steered the US giant to revenues of over US$20bn - and established Wyeth as a leading developer of cutting-edge drugs used to treat patients around the globe.
In the US, for example, we had 95% of children getting Prevnar within a year.
This is Essner's first trip to the Middle East as CEO. It is also his last - he steps down to take the position of chairman of the board in January - yet he is insistent that future Wyeth CEOs will have good cause to spend more of their time in the region. "It is a part of our business that is growing very rapidly," he says. "We're very excited about the future, and as I'm going to stay on as chairman of the company for some time, I wanted to come here and see it for myself.
"What I have seen is a lot of extremely energetic people bringing in some of the brand new modern technology that we have," he continues. "I see a lot of optimism about the future, and I think over time this part of the world can grow by multiples for us. We expect to see good growth everywhere in the world - but this could clearly be one of the fastest growing parts for us."
Wyeth's worldwide growth is explosive. Net revenue increased 9% to US$5.6bn for Q3 2007, and 10% to US$16.6bn for the first nine months of 2007. Excluding the favourable impact of foreign exchange rates, worldwide revenues increased 6% for Q3 2007, and 7% for the first nine months of the year.
Closer to home, Wyeth has been in the region for nearly 50 years, spread widely across the GCC, Levant, and North Africa. Its blockbuster drug Prevnar - the first vaccine for infants against pneumococcal bacteria, a common cause of pneumonia and ear infections - has proved particularly popular in the region. The treatment, which has slashed pneumococcal infection rates among children by 97% since its debut, is currently mandatory in countries including the Dubai, Abu Dhabi, Kuwait, and Qatar.
However, it has not all been plane sailing for the ‘wonder drug'. Supply shortages have hampered Prevnar's roll-out across the region, and although Essner is now confident that those issues have been resolved, the delays did embarrass Wyeth at a time when every parent wanted their child vaccinated as a matter of urgency.
"When we were first launching the product we did have shortages, and for two reasons," says Essner. "One, the product is extraordinarily hard to make. Prevnar, as it is today, is seven different valent vaccines, so it works on seven different strains, seven different organisms.
"They have to be both manufactured individually, and then combined in a way that did not cause interactions between the various components in the vaccine, and that is not an easy thing to do," he continues.
"Over the years we've mastered how to do it very well and we've also increased our capacity dramatically now, so today we have adequate supplies of Prevnar for anybody who wants to use it."
Essner also admits that Wyeth simply failed to anticipate the level of demand for the new drug. The uptake was unprecedented, and the company just wasn't prepared for it.
"We thought it would take a little while for this vaccine to be adopted, but it was taken on very quickly by government systems," he points out. "In the US, for example, we had 95% of children getting Prevnar within a year."
Such are the sensitivities of Prevnar, it demands a transportation process known as ‘cold chain' - whereby the temperature of the drug is tracked from the plant all the way to its final destination - Joe Henein, managing director of Wyeth MENA, tells Arabian Business. This process takes time, and the company's refusal to distribute batches of Prevnar that have given inappropriate readings, have further added to the delays.
"Our quality and our standards are very high, and if there is any breach in the temperature during the transit, then we refuse the batch and we ask for a new batch," explains Henein. "So probably these are some of the delays that may have happened. That does not mean that there is a product shortage, though. We just want to ensure that the best quality arrives to the local patient."
This year we’ve spent well over US$3bn in research alone — so it’s a pretty heavy investment.
Of course, not all in the business of making money from pharmaceutical products are necessarily interested in quality control. The Middle East in particular has seen soaring levels of counterfeit drugs flood the market, at a cost of billions of dollars a year to legitimate manufacturers. Essner is adamant that governments must do more to stem the tide of pirated pills.
"Counterfeiters are doing a stunningly good job of copying the physical appearance of the product, to the point where some of our own people picking up a package can't tell which is the counterfeit and which is the real one," he reveals.
"The problem today is that the profits in counterfeiting are frankly as good as the profits in trading in narcotics, and yet the penalties in most of the places are low, if any," Essner continues. "People who have historically been involved in narcotics and illicit drugs are finding they are better off doing their business now in counterfeit prescription drugs - they know they can make more money, and even if they're caught, typically the penalty is a slap on the wrist."
Essner points out that the World Health Organisation has increased its focus on the problem, now that it has estimated that as many as one in every three drugs on the market is counterfeit in some parts of the Far East.
These counterfeits range from generic versions of the real drug, to drugs that have no active ingredients in them, or even contain toxic elements.
"We're now finding counterfeit versions of Prevnar that have infiltrated some markets," he says. "You can imagine the situation where the parent, who thinks their child has been protected from pneumococcal diseases, never finds out that in fact they were given a counterfeit that has no active ingredient.
"We're finding counterfeits of some of our hostile antibiotics we sell, a couple of very important antibiotics that are used to treat the most serious infections," he continues. "We're finding counterfeit versions of this, where they've even taken the empty vials from our product, refilled it with water or sometimes nothing, and sold it back onto the market. You can imagine how that will affect patients in a hospital, literally dying of infection, getting something that's basically water."
For all that Essner believes that governments need to play a greater role in tracking down the counterfeiters, he does admit that manufacturers have only recently become attuned to the significance of the problem. "I'm being honest when I say that only in the last couple of years, have we really taken this issue seriously," he says.
"For the first time, we are really understanding its scope.
"If you don't look for counterfeits, then because they are so good, even the manufacturer doesn't know that they are out there," he continues. "So we've developed now, within the company, a whole group of people whose job is only to search out counterfeits, detect them, and publicise them."
Essner explains that traditionally, pharmaceutical companies have been wary of publicising counterfeits for fear of creating concerns about legitimate drugs on the market. However, manufacturers are now fighting a high-profile, and high-tech, battle against the black marketers.
"We are trying to build protective devices into our packages and products, including various kinds of radio frequency tagging - we've already gone through the holograms and the bar codes, and we found that the counterfeiters duplicate those," he says. "Sometimes we've even found products we don't put holograms on, but where the counterfeiters already have them. So they're very fast."
I think we’re going to see more and more regulatory scrutiny, higher hurdles to get your products approved.
Essner cites radio frequency tagging - which will allow a scanner which will identify both what's in the package and also its shipment history of where its been - as a possible solution to criminal operations. However, he warns that the technology is still "many years away" from implementation.
"The issue with technology is not something drug companies can do unilaterally," he insists. "The scanning technology, which appears to be the best hope out there for some universal system, requires that every outlet that distributes the drug, whether it's a hospital or a pharmacy or a doctor's office, also uses that scanner universally.
"Drug companies, I think, will in the next few years be able to offer products that have this coding built into them," he continues. "However, I think it will be some time before the healthcare systems around the world will develop a technology that can actually read the code which is contained in them."
In the Middle East, Wyeth has been talking to a number of governments to try and address the immediate problem presented by fake goods. To this moment, counterfeiters have typically concentrated on ‘lifestyle' drugs such as Viagra, steering away from Wyeth's major products. However, in the UAE and Lebanon in particular, the company is in continuous contact with regulators to ensure that the counterfeiters do not shift towards ‘ethical' products, such as Premarin cream or Effexor, a treatment for clinical depression. Each represents US$3bn-a-year in sales to Wyeth, and the company won't give up a cent without a fight.
"This year we've spent well over US$3bn in research alone - which represents about 20% of our pharmaceutical revenue - so it's a pretty hefty investment," contends Essner. "If you look at it realistically, the average cost of putting a drug on the market is about US$1.5bn."
This huge cost means that the longer it takes to get a drug to market, the longer it will be before a manufacturer can begin to claw back at least part of its investment. It is to the frustration of Essner and his peers that the different regulatory systems around the world prevent a new product being rolled out around the world in one fell swoop.
"If everyone wanted to save money and actually create better registration packages, having one universal application accepted by governments everywhere would allow drug companies to do research more inexpensively, more quickly, and still allow a large data package for governments to review," he insists. "We're not close at all to that.
"There is an effort called International Clinical Harmonisation, which was begun jointly by the FDA and the European Authorities 20 years ago, and is about today where it started," he sighs.
"Europe, the US and Japan have different standards in terms of what's ok. In the US you must do placebo-controlled trials, you must test your drugs against inactive substances, and in Europe you must test it against an active substance. So the rules are not only different, they are in opposition to one another."
This uncertainty is one of the reasons that the pharmaceutical industry takes pains to hedge its bets in the production of new drugs. The portfolio is all-important, and Essner stresses that new products must offer a real advantage if they are to hit the targets expected of them when development started.
"It's about working in a broad enough area, and having enough different projects under development, which we call ‘shots on goal'," he smiles.
"In order to have a chance of success you can't rely on one or two or three. Typically we'll have 50 or 60 products in different stages of development, and if you do that it's our belief that we can year after year bring, on average, one or two drugs a year to development."
Yet despite Essner's ‘win some, lose some' mantra, there is no doubt that each shot off target is a source of personal frustration as much as financial harm. And the current regulatory climate is causing him a great deal of discomfort - a trend the industry veteran can only see worsening over the coming years.
"I think we're going to see more and more regulatory scrutiny, higher hurdles to get your products approved, and more and more pressure on pricing," he says.
"I think there's a real risk [that high regulatory levels will stop drugs coming to the market] and I think we're in an environment today where safety and efficacy are on two sides of a balance scale," he continues.
"It's a scale of justice, and I think many times safety, or the notion of safety, outweighs any sense of efficacy. And in trying to balance things that way, many times the patient gets lost. "
Essner argues that regulatory authorities should be put under less "pressure", and points to the US Food & Drug Administration (FDA), which he believes "is under tremendous scrutiny from the legislative branches, with the constant hearings and borderline interrogations of FDA officials". Regulators have to worry more about headlines and hearings, than they do about "good science-based decisions".
"I think the right way of thinking about this is not looking at the drug and saying, ‘what's the safety and benefit ratio?'" He continues. "It's taking it from the perspective of the patient and saying, ‘is the patient better off if that drug is available, so that it is used on them by the physician, or are they worse off?' And when you put the patient at the centre of the thinking, many times you come to a different decision than those that are being made about drugs at the moment."
There's a sense that, if he can settle down the regulators, and cut out the pirates, then Essner might just shorten the odds of succeeding with his next project. That, after all, is why he still does it.
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