Welcome to BioMarketing Insight's monthly newsletter.

The pharma/biotech industry has actively pursued the emerging markets due to over-saturation of the US and European markets. In addition, cost cutting measures have become dominant. In November, I looked at what the medical device industry was doing in the emerging markets. This month and next, I will briefly cover the regulatory environment in the emerging markets for pharma/biotech and medical devices.

Read on to learn more about this topic and other current news. On the right are quick links to the topics covered in this month's newsletter. The next newsletter will be published on February 15th.

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Please email me, Regina Au, if you have any questions, comments, or suggestions.

Sincerely,

Regina Au

Principal, Strategic Marketing Consultant

BioMarketing Insight 

Reuters reported that in 2012, pharma companies have invested $20 billion into emerging markets, approximately a 65% increase over last year.  A report from Freshfields, the London-based global law firm, said $6.8 billion had gone into China, because China is forecast to be the second-largest drug market behind the U.S. by 2016, according to IMS Health. China is very attractive to drug makers because the market is projected to grow by 15% to 18% a year, from $155 billion and $165 billion in four years (2016), compared to flat sales in Western markets.

However, drug companies should proceed with caution because political issues and the world economic state could cause this growing market to struggle as well. "While M&A is an expensive remedy, 'pharmerging' markets are obvious investment choices for cash-rich drug companies," Freshfields corporate partner Jennifer Bethlehem told Reuters.

Emerging markets are for those who are willing to invest for long-term returns. In addition to language and cultural barriers, government (regulatory, business and reimbursement) barriers can be significant as well.

The pharma/biotech industry has already experienced regulatory barriers, with governments requiring foreign companies to use local companies to register, test, and distribute their products before being permitted to do business in that country (read below). Here is my overview, along with updates on any changes in the regulatory environment for the BRICKorea countries and a few beyond in two parts. I will cover Brazil, Russia, and India now and in February I will cover China, South Korea and a few countries beyond.

To sell pharmaceuticals or medical devices in Brazil, both have to be registered with the Brazilian National Health Surveillance Agency (ANVISA), the government agency in Brazil responsible for regulating the importation of drugs and medical devices.

The documents required to register drugs with the ANVISA is outlined in detail here. It provides instructions on how to submit applications for registering drugs, modifications, exemptions, and renewals. It outlines the information and documentation required and instructions on how to complete the application forms.

The regulations for medical device in Brazil, as well as the medical device classification schemes (Class I-IV) can be found in Annex II of RDC-185, and are very similar to those of the U.S. FDA and the European Union's Council Directive concerning medical devices (93/42/EEC).

ANVISA registration review can take 6-12 months for Class I-III and longer for Class IV. The ANVISA registration is valid for 5 years. 

According to ANVISA's RDC 59/00 regulation, foreign firms looking to export to Brazil must submit an inspection request through representatives or registered importers in order to certify products.  This represents a significant obstacle to smaller foreign drug makers wishing to enter the Brazilian market, and has led to partnering agreements between multinational pharmaceutical firms with local players in Brazil.

Pharmaceutical giants are also required to pay the local subsidiaries for product development and distribution, while the profits earned are shared between the two. This skillfully supports local companies, both financially and within the industry, as Brazilian pharmaceutical brands are given the opportunity to work alongside experienced players in the market.

Clinical Trials

On January 2, 2013, ANVISA published a documentclarifying the rights of individuals who participate in clinical trials in Brazil. "Clinical trial subjects must be informed that Brazilian law prohibits compensation for participating in a trial, other than reimbursement for the cost of transportation and for meals." The informed consent form must also include that clinical trial participants have the right to leave the trial at any time, even after informed consent has been obtained.

ANVISA will require clinical trial proposals to be in compliance with Good Clinical Practice (GCP) requirements and conducts inspections of Brazilian research centers in verifying adherence to those requirements. The agency is also encouraging the public to notify the Research Ethics Committee of the Research Center and the National Committee for Research Ethics for any violations to the rights of clinical trial patients.

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Russia requires a Certificate of Product Registration before a pharmaceutical product can be manufactured, imported, or sold in the country.  Moreover, medical devices and drugs require a Sanitary Epidemiological Conclusion Certificate as well, unlike most products that require one or the other.  The state agency that issues the Certificate of Product Registration is the Federal Service on Supervision in the Sphere of Public Health Services and Social Development (Roszdravnadzor).   

Pharmaceuticals

Registering a pharmaceutical product in Russia requires a review of its quality, efficacy, and safety by the National Center of Pharmaceutical Products Expertise (FGU), which is comprised of a number of different sections and institutes and is the only center authorized to provide independent expertise to Roszdravnadzor.  

Any pharmaceutical company registering a drug in Russia must submit the registration dossier directly to the National Center, and the regulatory specialist must communicate with its experts on a weekly basis.

In April 2010, the Russian government passed new legislation after much criticism and debate within the Russian government and the pharmaceutical industry. The new law replaced the previous 1998 Federal Law on Medicines and went into effect on September 1, 2010, which resulted in several fundamental changes to the existing regulatory regime.

Although the new legislation was initially heavily criticized, the new regulatory process is a substantial step forward from the previous framework, which was hampered by lengthy procedures and insufficient accountability for undue delays by the regulators. The new law introduces set timelines for every step in the regulatory process, where the time frame for registering new drugs is no longer than 210 days.

The new law abolished the two-part registration fee and replaced it with a single fee.  The maximum payment is fixed at 300,000 rubles (~$10,200). 

When clinical trials results conducted outside the registration process are used, the overall fee is 425,000 rubles (~$14,500). Under the new legislation, the applicant no longer has to deal directly with the FGU; state authorities are tasked with interacting with the bodies performing expert examinations.  

Medical Devices

Registration for medical devices can be challenging. Unlike most countries, Russia requires its own product testing in granting approval for medical devices, and this testing must be completed regardless of whether the device already has US 510(k) clearance or European CE Marking. 

In order for a company to sell a medical device in Russia, the company must identify an equivalent device that has been previously registered in the Russian Federation, and to provide documentation certifying equivalence with this predicate. (N.B. in the Russian Federation, this is called an 'analogue' device). The classification of devices is similar to the US.

Significant changes to how medical devices are regulated in the Russian Federation are anticipated for early 2013, but final implementation of the new rules remains tentative.  

"Some of the most important changes that may come about include a less direct regulatory role for Roszdravnadzor, final approval decisions will be made by "expert reviewers" rather than the regulator; lack of timelines for medical testing, meaning they could last for years; and inclusion of medical device registration fees into written law."  To view the proposed changes, click here. 

Pharmaceuticals

"Demonstration of safety and efficacy of the drug product for use in humans is essential before the drug product can be approved for import or manufacturing of new drug by the applicant by Central Drugs Standard Control Organization (CDSCO)."   Through the International Conference on Harmonization (ICH) process, the Common Technical Document (CTD) guidance's have been developed for Japan, the European Union, and the United States.

CDSCO has also decided to adopt the CTD format for technical requirements in registering pharmaceutical products for human use. This CTD format has already been in effect since 2009 for biological products and now this same guidance document will be used for CTD in obtaining marketing approval of pharmaceuticals for human use, other than biological products (vaccines, biotechnology products, stem cell products, etc).

Intellectual Property Protection

Patent protection in India was poor until the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement negotiated by the World Trade Organization (WTO) tried to unify, countries around the world to establish basic ground rules for intellectual property rights in the modern global world. This negotiations between countries lead up to India's adoption of the Amendments to the Patent Law Act of 1970 in 2005 (revised Act).

However, the compulsory licensing provision remained as a need to procure medicines at a lower cost for the poor. The purpose of India's compulsory licensing provision is to allow local Indian generic maker to manufacture and sell products before patent expiration by obtaining a compulsory license if "a patent is not worked in India [for] three years after its grant...."  In addition, the government will issue a compulsory license under two circumstances: "'reasonable requirements of the public' are not satisfied" and "[the patented invention] is not available to the public at a 'reasonably affordable price'...." The Indian patent office is allowing drugmakers to plead their case before a compulsory licensing is granted.

Recently, a compulsory licensing was granted against Bayer's Nexavar, and three more are in the process with Roche's Herceptin and BMS' Sprycel, and Ixempra, all cancer drugs.  The battle over patent protection will be a long struggle for pharma companies as in the case with Novartis' blood cancer drug Glivec.

Clinical Drug Trials

In the last five years, there have been over 2,242 deaths during clinical drug trials in India and the government plans to regulate the $500 million sector by implementing drug laws to make multinational pharma companies responsible for any negligence in monitoring clinical drug trials a punishable offense and enhance compensation.   

The Supreme Court chastised the Health Ministry for allowing their people to be used as "guinea pigs" in clinical trials, and ordered them to draft rules to monitor clinical trials under the Drugs and Cosmetics Act within the month (January 2013).

For the first time, the Health Ministry will make it mandatory for investigators and sponsors of drug trials to address issues of medical management particularly serious adverse events such as death.

The new rules provide a fixed minimum compensation and a higher compensation in serious adverse events such as death. Currently, drug companies have only been paying a very small arbitrary payment as low as Rs 50,000 (US$916.77) in the case of death.

The government will also set up independent ethics committees under medical institutes to monitor ongoing drug trials in India. These committees must be registered with the Drug Controller General of India prior to conduct of clinical drug trials. At present, the pharma company hosting the trial sets up its own committee and has its own investigators for inquiring into serious adverse events (SAEs).

Medical Device

The Drug Controller General of India (DCGI) will launch initiatives to monitor the medical device manufacturers, to ensure the safety and efficacy of products sold and used in India.  This initiative is Central Drugs Standard Control Organization's (CDSCO) effort to acknowledge the importance of the medical device industry as part of the Indian healthcare system, as well as the need to have an effective regulatory protocol specifically designed to regulate and monitor the medical devices sector.

DCGI's Dr. G. N. Singh stressed, "Considering (the) important role that the medical devices play in preserving the health of the patients, it is high time to recognize it as a separate and individual entity in line with the drugs and cosmetics in the country. Since they are different from drugs ...different set of rules and regulations that are specific to this sector (are needed) and we hope that steps will be taken by the government to hasten the process to pass the bill at the earliest."

Medical devices are currently classified as a drug under the Drugs and Cosmetics (D&C) Act. However, since manufacturing and quality controls of medical devices are different from drugs, the CDSCO has recently drafted a guidance document entitled the Drugs Cosmetics and Medical Devise Bill specifically for the medical device industry. Once the bill is passed by Parliament, the D&C Act will be amended to Drugs, Cosmetics, and Medical Device Act. If applicable, Dr. Singh will hire additional experts and biomedical engineers as medical device inspectors within the regulatory system to monitor this sector.

The medical device market in India will become an $11 billion opportunity within a decade (2023) according to an analyst firm Visiongain in the U.K.  Today's Medical Developments reports that would be a huge jump considering the device market in India was worth about $3 billion in 2011.

While emerging markets are attractive for growth, the regulatory barriers can make it less attractive, particularly China. Investing in emerging markets is definitely a long-term investment with pay offs in the long run. The good news is that as these emerging markets transition to developing markets, the regulatory systems will become more universal, as we are starting to witness above.

These new regulations will certainly help companies to navigate the regulatory process more easily and weed out foreign device companies that do not comply with the countries' regulatory standards. This helps large and small foreign pharma/biotech and medical device companies, but they face increased competition from local pharma and device companies in the respective countries as they develop innovative products that meet western quality standards.

The BRICK countries and beyond are very motivated to build up their own pharma, biotech and medical device industry. China is especially motivated in persuading experienced healthcare expatriates back to China to start their own businesses. One of China's primary goals in their Five Year Strategy Plan is to build up the biotech industry. Read more on China's regulatory environment in my February Newsletter.

Avelas Biosciences based in San Diego, CA develops peptides that react to protease activity in tissue. In normal tissue where there is low protease activity, it appears to glow blue and in metastatic tissue where there is high protease activity, it appears to glow red (see picture below). When it is used during surgery in conjunction with a fluorescence-imaging camera, a color-coded image is superimposed onto the normal surgical view, providing the surgeon a map of the cancer.

Red Fluorescence in Cancer Cells. Source: Xconomy

The technology, developed by the Nobel laureate Roger Tsien, will first be used for breast cancer in fluorescence-guided surgery, giving surgeons an immediate ability to determine whether cancer cells have migrated from the primary tumor to nearby lymph nodes. This enables surgeons to remove the metastatic lymph nodes instead of waiting for pathology results or scheduling a follow-up surgery.

Avelas raised $7.65 million in a Series A financing round in December 2012, raised almost entirely from San Diego-based Avalon Ventures.  Jay Lichter, a partner at Avalon Ventures is serving as CEO. For more details from Xconomy, click here.  

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Eighteen Medical Device and Fifteen Pharma/Biotech Funding Deals

To determine whether funding is picking up, I will be focusing on all types of funding that are $1 million or greater in seed investments and series A or B (or the valley of death) that are pre-IPO. Even though VCs are investing, they continue to invest in their existing portfolio companies and less in new start-ups. Incubators, state funding, and business competitions are great for initial seed money but not enough to keep the company going long-term.  These are worldwide funding deals. 

Partnerships and licensing deals with upfront payments and milestones will not be included.

Funding deals are in chronological order by date.

$0 = No financial terms disclosed. For more information, read more ....

Funding deals are in chronological order by date.

$0 = No financial terms disclosed. For more information, read more...     

Mergers & Acquisitions continue to be made for both medical device (16) and pharma/biotech (4).  

Pharma/Medical giants such as Baxter, Amgen, Thermo Fisher, Coviden, and Gilead Science have all made acquisitions this month with Baxter making the largest purchase in acquiring Gambro AB for $4 billion.  

Merit Medical Systems made two purchases this month, Medigap and Thomas Medical Products. 

Acquisitions are in chronological order by date with Medical Device/Diagnostics followed by Pharma/Biotech.

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