Pharmaceutical Profits In Syria

Center of Strategic Health Studies CSHS

Dissertation

Uncontrolled prices & profit margins of pharmaceutical products at Syria. Health Economics, Policy & Finance

Maher ALAREF

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This dissertation submitted to Liverpool University, Faculty of Health and Life Science at December 2011 and accredited a Mater Degree of Health Economics, Policy and Finance.

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Acknowledgments All through the hard road of this Master , many great people and true supports were an essential tool of my life and study . Unforgettable names by heart and mind added lots of special moments and enormous help to me :       

Prof. Roy CarrHill , my great master and friend , (Cheers !) Miss Dima Alrashee , the hard worker tutor that handled most of our irrational attitude as big students . Dr. Raghad Taqieldien , her continuous support and understands finally brought us to where we should be. Dr. Orwa Alabdullah , the friend indeed whom his contribution to this work was more than a need . My father , father in low and big brother their financial support made this master. My mother and mother in low , your brays and tears weeded this work to tree. My first princes Lolita (Leen) , her sweet words and talk meant to me all the energy was needed.

And last but not least , our great teachers whom their knowledge and experience were beyond our expectations :Talaium Jebara, Peter Cosgrove, Detlef Schwefel, Peter West, Alan Maynard, Cor Jonker and many other great names , we had an endless benefit for our country and mind out of your words.

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Table of contents: 1- Introduction

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2- Importance of research

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3- Literature Review

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4- Aim and Objectives

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5- The framework of research design

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6- Methodology and Methods

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I.

Research Methodology

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Research Setting

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III.

Research Sampling

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IV.

Research Methods

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II.

7- Research Procedures

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8- Data Analysis

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9- Results

27

10- Discussion

31

11- Conclusion

32

12- Recommendations

35

13- Limitations

37

14- Appendixes

38

15- References

43

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Abstract Introduction: The Syrian pharmaceutical market is considered to have a valuable and supportive effect on the overall Syrian National economics. The Syrian pharmaceutical market is regulated by MoH. However, there are several factors which affect the competition between the pharmaceutical firms such as bonuses which also affect the profit size of these firms. Moreover, these factors could affect the people demand and the quality of the pharmaceutical products. Aim of the Research: This research aimed to identify the role of bonuses and their effectives on the Syrian pharmaceutical market. Moreover, this inquiry aimed to identify and study the factors which support these incentives. Methods: This inquiry was considered as a case study which was conducted in order to study a single and unique case of the pharmaceutical sector. In this inquiry, both qualitative and quantitative methodologies were used by preparing questionnaire to be fulfilled by targeted pharmacists, in addition to semi-structure interviews with public and private stakeholders. Results: Bonuses size showed significant relationships with several factors such as buying rate, therapeutic category, pharmacist’s price. However, there was no relationship between bonuses size and quality of the pharmaceutical products. Conclusion: The current feature of the pharmaceutical market in Syria as a vicious circle of several overlapped factors which are combined together to form the series of the overall Syrian pharmaceutical market picture. The pharmacists’ behavior in selling the pharmaceutical products as OTC or ethical, along with his ethics, is key factor to start any solutions of controls.

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1- Introduction: Pharmaceutical expenditures are witnessing a rapid increase in many countries which result in additional concerns in the pricing sector of pharmaceuticals. Therefore, many countries have been creating and developing some form of expenditure regulation. Actually many countries worldwide are, nowadays, applying the pharmaceutical regulations in order to limit the cost of the pharmaceutical bills. The pharmaceutical marketplace creates several forms of competitive market wherein each firm seeks to achieve a fast product manufacturing and selling by spending billions of dollars on marketing activities to maximize overall revenue (Bhatia et al, 2006, p.3). Comparing the pharmaceutical market to the normal competitive market is irrational and illogical. Consumers among normal market are to a certain extent able to ensure that they get value for money. However, it is completely unavailable within the pharmaceutical market where the individuals are unable to ensure the value of the pharmaceutical product by themselves. Moreover, the intervening role of governments in the pharmaceutical market could lead to distortion of the competitive market operation. Actually the current regulations of the countries were introduced from the perspective of people protection. These regulations are concerning the intrinsic efficacy, safety and quality of pharmaceuticals, as well measures to raise the standard of prescribing and promote the appropriate use of medicines (Capri, S. & Levaggi, R, p.2). Pharmaceutical expenditure and drug procurements, in developing countries, account for 20 to 50 % of public health budgets. The key condition for improving national health indicators is making essential drugs available for everyone at affordable prices. Moreover, the role of corruption in pharmaceutical and medical supplies procurement and distribution result in reducing the access to essential medicines, particularly for the most vulnerable groups. In addition, the performance of the health system in any country is affected by the inadequate provision of drug and medical supplies (U4 partner agencies). Prices as it is considered to be the means for regulating access in free markets, is a method by which goods are distributed depending on private desires. Therefore, governments should create the optimal incorporation of the pharmaceutical market among the overall policy to achieve the objectives of the health sector. The regulating role of government regarding pharmaceutical pricing is to ensure affordability and equitable access, and to rationalize drug consumption and control price growth in order to avoid excessive costs resulting in additional societal burdens. Therefore, governments are seeking for the uniformity of the similar pharmaceutical products’ across the country. In low-income developing nations, the focus is on improving access, while in developed countries, the challenge is on cost control. However, several mid-income developing nations face both challenges. Therefore, as there are market imperfections, 6

there are imperfections associated with government criteria of pricing. The process can be difficult and prone to political manipulations. Indeed, there are several alternatives by which the governments can achieve the same goals such as price control. By applying financing methods, governments might guarantee the access to health care system by individuals such as the expansion of insurance coverage. Moreover, expand the basic information in order to enhance the price competition, limit the competition between pharmaceutical firms by the use of compulsory licensing for products and the use of generic forms in prescribing and labeling. Government can make a control on drug expenditure through different ways such as prescribing control and incentives margins such as bonuses which are frequently overlooked. Distribution margins also contribute directly to pharmaceutical costs, and can affect products categorization and total pharmaceutical consumption (WHO, 1998). The pharmaceutical industry is relatively young in Syria. A little over 20 years ago, Syria had to import over 82% of its drug requirements, and there were only two state-owned factories supplying the bulk of the country’s pharmaceutical products. That is now a thing of the past. Since then, dozens of companies have been established and local production is estimated to cover around 90% of demand. Nowadays, capacity is estimated to be twice the local market demand, which in turn is estimated at around US$750 million per year. Despite having grown exponentially in the last five years, pharmaceutical exports are still modest. According to the statistics of the Scientific Council for National Pharmaceutical Industries In the eighties, Syria imported medicine with a cost of around USD 600 million each year, and now Syria ranks second among Arab countries after Egypt in covering local needs, and also ranks second among Arab countries after Jordan in export. The Syrian pharmaceutical industry ranks first among the country's industries, and is considered the primary resource for supporting national economy. The Syrian pharmaceutical industry has developed during the past years to become one of the main industries that support national economy through export, which amounts to over USD 120 million. According to the statistics of the Scientific Council for National Pharmaceutical Industries, this industry provides 25,000 job opportunities, 25% of which are university graduates. Pharmaceutical products, which amount to USD 500 million, provide more than 92% of the local market's needs, lowering the amount of imports to less than 10%. The public sector produces 7% of the overall Syrian production; with the private sector producing the rest. The yearly production size is approximately 500 million dollars, 350 million of which is for the local market while the rest are exported worldwide. Syria exports pharmaceutical products to 56 countries, mostly Arab and African countries and

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some Asian countries, with exports to European countries beginning recently.(AMS DATA) According to a public stockholder Strict control is exercised by the ministry of Health (MOH) over the industry. The MoH which established a Good Manufacturing Practice guideline in conjunction with the World Health Organization enforces strong quality controls and has the capacity to close outright any plant that does not abide by its standards. The MOH also sets the price of any drug that is produced and sold in Syria with the aim of making medicines available to all segments of society. MOH also controls the price of any drug that is produced and sold in Syria. According to Syrian MoH, currently, there are 66 licensed firms producing pharmaceutical products in the country. Fifty-four have acquired ISO 9001 certification, while 49 are ISO 14001 certified and 28 are ISO 18001 certified, in addition to compliance with the international Good Manufacturing Practices GMP specifications. Syria has the largest number of pharmaceutical companies compared with any other Arab market, even though its domestic market size is smaller than many others. Private capital inflows have increased significantly in the last decade thanks to the involvement of several major industrial and trading groups in the drug industry. The MoH sets prices according to a formula that includes all production and marketing costs, plus a 20 percent profit margin for the manufacturer, see appendix 2 (MoH, 2009). Prices of Licensed products are usually set at around a 50 percent premium. The strong price controls exercised by the Ministry have two negative consequences: first is psychological as many patients are often reluctant to buy cheap medicines that they associate with poor quality; the other is that the downward pressure on prices is forcing some manufacturers to limit costs and research and development.

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2- Importance of research : Increasingly sales of drugs without prescription by unqualified people, who have financial incentives (special bonuses given to pharmacies from the manufacture ) to overprescribe, leads to unnecessary and irrational use of medicines. As manufacturers keep pressuring, the prices of drugs become higher and higher to insure more profit for them, while no equitable distribution of income has been guaranteed to hose-holds as consumers. A case that could be typically known for economists as supply induced demand , and might result in a catastrophic loss of resources as most of the money goes to the industry with limited or no benefit for public . Furthermore if we looked at type of medicines related to the most irrational usage (see table A below), we can reach to simple conclusion that Antibiotic alone represents 17.5% of the total expenditure on pharmaceutical, where penicillin's and third-generation cephalosporin's sales amount to USD 68 million approximately one fifth of the overall drug consumption of the community. Table A , Sales according to therapeutic categories for Syrian market

2007 Sales*

2008 Sales*

Share % of total sales**

COMBINATIONS OF PENICILLINS, BETA-LACTAMASE INHIBITORS

1,233,262,624

1,734,761,943

7.30

THIRD-GENERATION CEPHALOSPORINS

1,226,416,222

1,383,025,309

5.82

ANILIDES

656,080,485

828,931,406

3.49

HMG CO-A REDUCTASE INHIBITORS

487,922,955

595,984,294

2.51

PROTON PUMP INHIBITORS

495,941,676

577,117,633

2.43

ACETIC ACID DERIVATIVES AND RELATED SUBSTANCES

534,569,494

558,767,215

2.35

SYMPATHOMIMETICS

467,479,246

558,690,807

2.35

PLATELET AGGREGATION INHIBITORS EXCL. HEPARIN

405,902,239

547,073,940

2.30

PENICILLINS WITH EXTENDED SPECTRUM

378,400,488

523,766,673

2.20

MACROLIDES

520,476,251

513,931,401

2.16

Therapeutic Category

(AMS Data, 2009).

In 2003 and 2004 expenditure on drugs represented 38 % of overall health Syrian expenditure (47.5 and 54.5 Billion SP respectively) , ranked first even before Inpatient Care that comes secondly with about 36 % of overall health expenditure in Syria (Data from Regional Health System Observatory-EMRO , SYRIA Health System Report 2006). Due to population growth rates and higher health standards, drug consumption in Syria indicates rising demand. With several socioeconomic and demographic changes, the market has become highly sophisticated . MoH have introduced several laws that have been trying to regulate the sudden growth of the market, but apparently, with no enough efficient control, an economical failure in supply and demand took place recently. While demand for pharmaceutical products was raising , the prices were raising accordingly. 9

Pharmaceutical industry should be powerful partners of the MOH as it constitutes a back bone of the health care system and expenditure . Recently issued law by the MoH that stated a 20% deduction on price for almost 70% of the products existing in the market ( see appendix 3) clearly demonstrate the big effort of the ministry to overcome the same problem this research is trying to highlight. While the previously mentioned law was enforced immediately, no available data were found later to evaluate wither it achieved its purpose or not. This research might help in one of its objectives to investigate more about the results of this law .

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3- Literature Review: Expenditures on prescribed drugs account for a remarkable large size share of total health care expenditures these days compared with 10 years ago. In addition, the gradual increasing in the costs of prescribed drug affect consumers along with health plans. Consumers struggle with financially managing their prescription drug regimens while health plans attempt to provide comprehensive benefits at affordable prices (Scott et all, 2007). Unfortunately, the available researches regarding physicians’ prescribing behavior are inadequate. Several studies in France have shown that physicians remain rather insensitive to economic determinants as long as they do not bear the cost. The main factors contributing to doctor prescribing behaviour are the doctor age (and the role of patient’s age). Other studies have also shown that the doctor’s risk aversion might also affect the prescribing behaviour (S. Jacobzone., 2000). Figures which might give us a clue for what Pharmaceutical industry spend to market its product can be obtained from published reports of IMS*, Verispan, CAM or Angell. But as the method of calculations differ, the figures become vague, here are some recent estimates from different recourses :  $20.4 billion in 2007  $29.8 billion in 2005  $57.5 billion in 2004  $54 billion in 2001 * IMS and Verispan are companies which initiate their researches regarding pharmaceutical marketing after collecting data from industry. However, CAM collects industry marketing data directly from doctors. Angell estimation was based on Novartis annual reports which distinguish marketing from adminstiration.

According to (S. Jacobzone., 2000), in the United States, the marketing variables for the pharmaceutical firms include direct sales calls, advertising directly to consumers, advertising in medical journals and advertising at various physician meetings. Actually it is very important for pharmaceutical firms to estimate the increase in the number of new prescriptions written for the particular drug. It is assumed that the structure for the industry should be concluded through research and developing in order to create patented drugs in addition to marketing and competition. Although many countries negotiate prices product-by-product, a few regulate the profits of pharmaceutical firms. Product-by-product price fixing has been chosen when a universal health-care system prescribes pharmaceuticals products, and to improve the patient access without financial determinants, and when public funds are limited. Product-by-product price fixing may involve distortions and it is complicated to review since it can bias statistical instruments such as price index. Additionally, in order to control health expenditure, governments need to control volumes of consumption 11

through worldwide budgets. When countries have faced financial restrictions, especially in Europe, attempts to stabilize expenditure have involved price cuts, or lower compensations. This may result in short-term securing and has generally, however, left the essential rate of growth of expenditure on pharmaceuticals unchanged. Reforms of pharmaceutical policies need to promote efficiency and preserve equity. This can be approached through increased market pressure to create competitive prices for non-patented pharmaceutical products while allowing higher prices for those still on patent. Actually the recent experience from OECD countries (Organization for Economic Co-operation and Development) indicate a remarkable success in this sector. Nowadays, several countries and health systems are using the reference pricing system for nonpatented products and the use of generic pharmaceutical products has been increased in many countries. A few countries have produced additional plans regarding pharmaceutical products pricing. They introduced a test of cost effectiveness before new drugs will be accepted. In order to improve the cost-effectiveness of prescribing, an advanced management methods were derived from controlled and managed care settings and tools. These methods are also influential measures to assess the best value for money (S. Jacobzone., 2000, p.3-4) Actually the main goal of the pharmaceutical firms is to market and get rid of their goods in a rapid manner and best values. Therefore, these firms are in a continuous developing in of a new method to market and sell the pharmaceutical products. The “detailing” process is one of the most important and expensive marketing method, it involves a medical representative from the company to visit Doctors clinic and promote a product or more by giving specific encouragement details. “Detailers” precise information about what each physician prescribes by collecting data about purchased drugs from retail pharmacies. The use of pharmaceutical “detailing” is on the rise. As the method becomes more frequent, it becomes increasingly competitive and sometimes on illegal manner. Industry sales reps have a harder time keeping a doctor’s attention or even getting through the office door. “Gifts” and offer meals are ways to make friends with office staff and get time with doctors (Horner, et al, 2006). There are several factors which are considered to influence the physician’s prescription behavior. Although these factors vary between countries and prescribers, the main factors are clarified in this figure (Bhatia et al, 2006). In U.S.A, drug advertising and marketing process have been shown to affect physicians' prescribing behaviors, with an estimated $12 billion a year spent on drug advertising and marketing (Humaidi, 2008). Nowadays, pharmaceutical companies use several approaches to advertise and market their pharmaceutical products. They developed techniques such as hospital and office detailing by pharmaceutical representatives, direct-to-consumer advertising television advertisement, magazines, and printed 12

materials in journals. Additionally, there is a developed and important marketing method which is commonly used by pharmaceutical firms. This method is the distribution of free drug samples. The clinical use of samples is common in many ambulatory care settings. However, there are only a few published studies about how this practice affects physicians' prescribing habits (Chew, et al., 2000).

Figure 1: Keys influence on the physician prescription (08, p.43).

Product Profile: 1- Physician experience. 2- Product valuation

Patient Influence: 1- Profile (age, race, gender) 2- Treatment history. 3- Co-morbidity

Marketing Activities of Pharmaceutical firms: 1- Details 2- Samples 3- Other incentives

Payor influence: 1- Managed care. 2- Medicare

Physician's Prescription behaviour

Pharmaceutical marketing is considered as a specialized sector where medical representatives are considered to be the backbone of entire marketing efforts. Pharmaceutical companies also nominate medical representatives and assign them defined territories. Medical representatives or detailers meet doctors, chemists and pharmacists as per company norms. Medical representatives try to affect the prescription pattern of physicians in favour of their brands (Girdharwal, 2007). Between 2001 and 2004, the number of pharmaceutical detailers in the United States for the 40 largest companies increased from 81,588 to 101,531. In 2004, there were roughly 884,000 doctors licensed in the nation. That means for every eight doctors, there was at least one sales rep. As these numbers have increased, the increasing 13

competition has resulted in the pharmaceutical industry pushing their products ever more aggressively (Horner et al., 2006). In 2007, and according to estimation, there were slightly less than 95,000 reps, up from 88,000 in 2001. In other words, this is about 1 rep for every 7 doctors (based on 95,000/663,000). However, many physicians are in non-clinical roles, in rarely visited rural practices, or refuse to see representative (Pharmaceutical Industry Marketing, 2009). As mentioned, individual pharmaceutical firms representatives meet with doctors and pharmacists to promote specific prescription in a marketing method called ‘detailing’. Each detail consists of the sales representative sharing information regarding the medications, efficacy and side effects of the drug in clinical studies. Most currently literature found a significant effect of detailing on physicians prescribing and find physicians to be unrelenting in their prescription patterns (Bhatia et al., 2006, p.4) Indian pharmaceutical market is approximately similar to Syrian pharmaceutical market in term of the pharmaceutical distribution channel. [Figure 2]. Moreover, Indian Pharmaceutical distribution channels are depot, stockiest and chemist. Pharmaceutical companies nominate one company depot usually in each district and authorized stockiest in each district. Company depot sends stocks to authorize stockiest as per the requirement. Retail pharmacists buy medicines on daily or weekly basis from this stockiest as per demand. Patients visit pharmacy for buying medicines either advertised or prescribed by a doctor (Girdharwal, 2007). Figure 2: Supply Chain of Indian Pharmaceutical Market (11) Pharmaceutical Company

Company Depot

Stockiest (Detailing)

Medical Representative

Chemist

Patient

Doctor 14

In a study conducted in India in order to illustrate the most important factors influencing prescription behavior of physicians has found that the regular visit of medical representative of pharmaceutical companies was the fifth factor followed by the personality of medical representative as the eighth factor. However, the price of product was the second factor while prescribing a medicine. The study has indicated according to physicians’ comment that the best tool of promotion for the pharmaceutical industry is the regular visit by a smart, experienced, skilled and well trained representative. The role of this representative is considered as an influencing factor by which the pharmaceutical company has its effect on physician prescription behavior when the representative presents a well prepared presentation explaining about the product. In addition, the representatives may offer additional informal incentives such as a sponsorship for conferences or personal visit to a medical event. These incentives are considered to be very effective tools used by the pharmaceutical companies by which the stimulate physicians to prescribe their products. Furthermore, several pharmaceutical companies use the personal gifts and free drug samples as other incentives for physicians. Regarding to factors which help in product recalling by physicians, physicians have to remember several brands or products of several pharmaceutical companies. The study has concluded that advertising pictures which are gifted by the pharmaceutical company play an effective role in brand recalling. The competition status between the pharmaceutical companies is obvious by their pressure on physicians to shift from one brand to their own brand in same therapeutic category. According to the same study, which involved 100 physicians; 86% of them has been shifting their prescription from one brand to another because of several influenced factors. Among the influenced factors, the regular visits and persistence of the pharmaceutical industry representative in addition to the promotional efforts of the pharmaceutical company were the third and forth factors respectively (Girdharwal, 2007). Sporling et al have carried out an analysis of 58 studies in order to explain the effect/ role of detailing on physician behaviour. The results have indicated that 38 studies confirmed the statement that physicians who are detailed by pharmaceutical representative tend to prescribe the brands of these firms more than other brands. Furthermore, Sporling has found that this behavior lead to more expenditure by patients for drugs which are not the best for patients’ health status (SANA, 2010). Generic drugs are drugs with the same chemical compound, including the same International Common Denomination. However, differ on their trade names. Products which are off-patent can be sold as generic drugs at a much lower price. Recently, with the time limit on patents expiring for an increasing number of products, and the need to save generate, the concern in generic drugs has grown. (S. Jacobzone, 2000, p.21). Pharmaceutical companies use their medical representatives to update physicians’ knowledge as a source of information about their brands. Medical representatives and mailers from pharmaceutical companies were the third and forth source of information 15

respectively by which physicians update their knowledge about generic drugs. The role of pharmaceutical companies is to update physicians’ knowledge using their own brand instead of generic drug. Nowadays, pharmaceutical companies are trying to develop other incentives in order to stimulate physicians to prescribe their products. Several companies have developed relationship marketing by which they use the regular events related to physician as way to produce their incentives and gifts such as birthdays and undertaking high positions such a director or dean of medicine. The study has resulted that 42% of physicians are influenced by these relationship (Girdharwal, 2007). These results are meeting with those concluded from an economic conducted survey which states that consumers’ demand for drugs tends to be sensitive to price, but the sensitivity varies across different groups of patients in term of socioeconomic level. However, physicians' prescribing behavior seems to show little sensitivity to economic factors. (S. Jacobzone, 2000, p.5). Pharmaceutical firms have contracted with many hundreds of physicians to serve on their advisory boards for which they are well compensated. These firms have additional affective incentive such as offering the continuing Medical Education (CME) which physicians are required to earn free of charge their speciality certification. Moreover, these firms produce payment for attending “scientific” conferences and scholarship, pharmaceutical samples, and grants for research projects (Horner, et al, 2006). Although, pharmaceutical firms’ marketing plans are directed toward physicians, medical students are involved in these plans as well. Regarding to this issue, a study has conducted in Canadian academic centre (University of Western Ontario) in order to assess the attitudes of medical students regarding to pharmaceutical promotion including the gifts, free drug samples, and incentives. 202 first, second and fourth-year medical students were involved in this study. 59% of students did not agree with the statement that medical students should not have any interaction with pharmaceutical firms’ marketing. Furthermore, 49% of students agreed with the statement that it is acceptable for medical students to receive gifts and incentives from a pharmaceutical firm. In term of prescriptions, 17% of participants indicated that they will prescribe the drug brands from the pharmaceutical firms that provided them with gifts or incentives rather than brands from drug firms that did not interact with them through incentives, gifts, and free samples. 81% of students stated that pharmaceutical industries are primary interested in profits beside the interests of physicians and patients. Moreover, while 24% of students believed that information relevant to drug effectiveness from pharmaceutical firms is undependable, about 39% of students believed that this information is trustworthy. 36% of them were neutral regarding to this issue (Barfett et al., 2004). Free samples are one of the most marketable ways to make advertising about any product. However, in term of pharmaceutical sales, this issue will raise a lot of questions 16

to minds. Pharmaceutical companies offer huge amounts of incentives as free samples to physicians and healthcare facilities. Although these companies have the right to market their products in a way which is considered to be the proper way, the marketing procedures should be restricted by certain criteria relevant to the pharmaceutical products’ quality regardless of other incentives which are sometimes considered to be informal method of pharmaceutical marketing. The potential problem in this way of marketing is the probability of this method to develop to a competition by which the national and foreign pharmaceutical companies will launch their products using this “informal” method to increase sales regardless to the safety and rational recommendations of drug consumption. Moreover, from the patients’ perspective, there are several effects on patients which are resulted by this method. This competition, in addition to the wide prevalence of the same pharmaceutical product with several trade names besides the point of product quality will result in the “informal incentives” way amongst physicians and pharmacists in order to guarantee better sales and revenues (Humaidi, 2008). According to (Bhatia et al, 2006) the optimal distribution of detailing depending on response parameters assessed by using a surrogate allocation mechanism by allocating detailing using the data on the percentage of new patients for each doctor along with the prescription cost information. The three specific allocations tested here are:  Same detailing to each physician (base case)  Prescription cost based allocation (current industry practice)  Prescription cost and percentage of new patients based allocation (our recommendation) Regarding this issue, a study was conducted to study the role of detailing on doctors’ prescribing behaviors. The found that allocating more detailing resources (as currently used by the industries) works better than allocating the same detailing per physician. Moreover, the study also found that the prescription costs and percentage of new patients based allocation performs much better than the allocation based just on the prescription volume (Bhatia et al, 2006, p.29-31). Samples are always welcomed by patients and physicians. In addition to former drug salesmen, some doctors and public health stakeholders and advocates suggest the free pills are part of a developed marketing technique to encourage patients to buy costly brand-name drugs. Free samples and bonuses also bypass pharmacists, who can give these incentives to the patient (Favole, 2010). A study conducted on free samples effectiveness found that patients who receive free prescription samples spent approximately 40 percent more for medication during the

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six months they got samples, and nearly 20 percent more in the six months afterward, than those who didn’t. “The notion that people have is that if you receive samples, it helps with out-of-pocket costs because you don’t have to go out and buy the drugs,” said Anirban Basu, one of the study authors and an assistant professor of medicine at the University of Chicago. He added; “What we found, actually, was that their out-of-pocket expenditures increased. Most surprising was that those out-of-pocket expenditures continued even after the samples stopped.” The study refreshes the debate regarding the role of more than $18 billion in free pharmaceutical samples distributed each year, which drug firms’ representatives have described as a cost-saving safety net for the poor. “This builds on a growing body of literature that shows that samples are not aimed to help the uninsured and the poor, but to increase the sales of the branded drugs,” said Dr. William Shrank, an instructor at Harvard Medical School, who has studied the issue. “However, Reason for higher costs isn't clear. Exactly why the costs rose wasn’t clear”, said Alexander, who added that the study wasn’t designed to answer that question. “Patients who received samples may have been sicker than those who didn’t, which would explain the higher costs. But analysis showed that illness played a small part, at most, in the higher expenses”, Alexander said. “Or, patients may have received higherpriced brand-name drugs — those ones most often given as samples — and then continued with the same pricey prescriptions”, Alexander added. “We have known for a while that sample use increases health care costs,” said Leuchter. “But the new study provides first details of out-of-pocket costs, including the fact that the medication expenses remained high even after the samples were finished” (Aleccia, 2011). When physicians listen to the detailers’ information, and have been the beneficiary of free samples, gifts and others perks, it is not simply a matter for patients’ checkbooks. While industry maintains that detailer reps produce the “education” for doctors about important new drug forms. In addition, the message delivered by this detailer may not be based on academic rules. Indeed, research stated that physicians are heavily relying on detailers’ information and that the more doctors rely on commercial sources of information, the less likely they are to prescribe drugs in a pattern consistent with patient needs. Actually the information provided by detailers is often biased, and sometimes seriously misleading. According to the Food and Drug Administration, inaccurate information of pharmaceutical sales detailers during their meetings with doctors were the fourth most common source of false or misleading drug information observed in pharmaceutical marketing. Studies show that many doctors ignored even the most serious safety warnings required on prescriber information by the FDA (Horner, et al, 2006).

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4- Aim & Objectives: This research aims to suggest research-based recommendations regarding the current situation of pharmaceutical market in Syria to form an optimal support regarding the national economy, medical sector, and public demands. 1- To describe the current situation of Syrian pharmaceutical market and its relationship with the overall Syrian economical market. 2- To asses if the Bonuses could be an indicator to what known as a Market Failure between supply and demand, and to identify which major variables had lead to this current situation. 3- To identify the possible solutions in order to deal with this imperfection.

5- The framework for research design: The main purpose of this inquiry is to define the reason of pharmaceutical market imperfection and clarify the reasons which lead to the current situation of informal competition between pharmaceutical industries, which in turn could lead to inequality in the gain amounts, in addition to its reflection on overall Syrian market and Syrian economy as the pharmaceutical market considered as a backbone of Syrian economy. Furthermore, by clarifying the current defect in the pharmaceutical market, we will be able to establish the most suitable criteria and principles to be followed in order to reach an optimal fairly status of the Syrian pharmaceutical industry. The theory of this study is focused about the reality of the existence of serious imperfection in the Syrian pharmaceutical market and illegal competition between Syrian pharmaceutical firms. This failure is a result of unorganized relationship between the Syrian pharmaceutical market control on one hand and illegal forms of pharmaceutical marketing. This initiative theory of the research was based on in order to clarify the aim and objectives of this research. Furthermore, this research will suggest research-based recommendation in order to develop the current situation of Syrian pharmaceutical market to support in an optimal way the Syrian economical market. There are several questions which are going to be answered throughout this research linked in with the based theory of the research; “The existence of a imperfection in Syrian pharmaceutical market and illegal competition between Syrian pharmaceutical firms using several informal ways”. Using this theory and in combination with the gained data of this research and results, we tried to find logical answers of several questions; what is the reality of the failure in Syrian pharmaceutical market, and what are the most important factors which create the appropriate environment for Syrian pharmaceutical firms to use their own illegal forms of competition to reach their annual gains? Furthermore, what are the optimal solutions for this imperfection and how could it be used in order to accommodate the Syrian pharmaceutical market with the overall 19

Syrian economical market? However, this enquiry will clarify other relevant theories which will be needed to tackle through other researches. As this inquiry is considered as a case study (the inquiry discussed the case of Syrian pharmaceutical market and its assumed imperfection). Therefore, the study discussed in general several points regarding the contribution of case study. According to (Singh, 2006, p.148) the points which should have discussed are:  The inclusion of this particular case under a specific category: this case is categorized under an economical sector as the pharmaceutical market is considered as a backbone for the overall Syrian economy.  The evaluation of this inquiry: by studying the case after the recommendations of the inquiry take place.  The findings of the research depending on the statistical analysis and results will be evaluated and analyzed critically. Moreover, these findings should have been discussed in term of current pharmaceutical market, and will be compared with the suggested or recommended market for Syrian pharmaceutical manufacturing.  The research will suggest the possible topics which may discussed as new researches among pharmaceutical sector. The logical studying of the Syrian pharmaceutical market as a specific case based on a specific set of criteria in order to reach a logical findings and conclusion. According to (Mohd Noor, 2008), the research was undertaken by discussing the following steps:

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According to (Singh, 2006, p.292), the research was conducted following three main phases:  Retrospective phase: the study discussed the pharmaceutical market in Syria in term of history, recent development, and recent legislations regarding the pharmaceutical market in Syria.  Prospective phase: the study analysed the current pharmaceutical market in Syria in order to approach better understanding of the case. Thereupon, we can suggest the optimal recommendations.  Conspective phase: depending on the interviews, questionnaires, and our comprehension to the topic, and depending on our recommendations, the researcher discussed the expectation of Syrian pharmaceutical market.

6- Methodology and Methods: I. Research Methodology: The research was conducted in order to assess the imperfection in the pharmaceutical market in Syria. In addition, it was initiated in order to identify the main reasons behind this assumed failure and conclude the available recommendations regarding this imperfection to create the fairly situation regarding the relationship between the Syrian pharmaceutical firms and the overall Syrian economical market. The researcher has discussed aspects which can be quantified or expressed in term of quantity. In addition, the research contains semi-structured interviews. The data collected through the research explores the relation between specific variables expressed in quantitative terms However, as this study is a unique study regarding the pharmaceutical market in Syria, and there are no previous study regarding this issue, we used qualitative data to support our results as a descriptive analysis in linked with pharmaceutical market in Syria and the possible solutions. Therefore, this research is considered as quantitative-qualitative mixed research. As this research involves testing of our hypothesis, the underlying reasons which are making the relationship with the hypothesis should first be confirmed and operationalized, and then the deductive method will be followed (Gray, 2004, p.6). Therefore, the issue regarding an existence of a failure in Syrian pharmaceutical market was confirmed, and after confirming the underlying variables which are assumed to be in relationships with the failure in pharmaceutical market and its effect on overall economical market, we used a deductive process in order to test our hypothesis to ensure the reality about the existence of this imperfection. Thereupon, and before starting the interviews and collecting data, we operationalized some of our underlying variables in order to make them measurable and we created some indicators to measure collected data and make the desired comparison between the hypothesis and gained data in one hand, and among the entire data themselves on another hand. These 21

procedures will be explained later throughout the progress of the research and will be clarified on the whole. This study was conducted in order to describe the current situation of Syrian pharmaceutical market and its relationship with the overall Syrian economical market. Therefore, this study is considered as descriptive enquiry. Furthermore, as we used the already available facts regarding Syrian pharmaceutical market depending on several interviews with public and private sector stakeholders, this study included an analytical support to our data and results (Robson, 2002, p.292). The suggested variables of this inquiry are related to the theory regarding the existence of failure in pharmaceutical market. These variables are out of researcher’s control and actually they are closely related to the theory. Therefore, the main design of this inquiry is non experimental. Moreover, as this research deal with a particular situation or case and involve an in-depth examination of a this single case to provide an accurate, description, and complete analysis of this case to expand the knowledge and clarify the current blurry situation of pharmaceutical market. Therefore, this study is considered as non experimental case study (Marczyk et al, 2005, p.147-148). This case study research attempted to capture as many variables as possible to identify how the complex set of regulations, attitudes, facts and behaviors come together to produce the current pharmaceutical market status in Syria (Hancock, 2002, p.6-7). There was a close collaboration between the researcher and practitioners which was done through the interviews with public and private stakeholders to collect information on their attitudes and perspectives in pharmaceutical field. Moreover, our findings were based on data which were collected by self administered questionnaire to pharmacists; these findings leaded to clarify the reality of the pharmaceutical failure and identified the main reasons behind this failure. In addition, the main aim of this research is to create a change in the current situation of pharmaceutical market by research-based recommendations. There upon and depending on previous facts, this research is considered as an action research (Gray, 2004). II.

Research Setting:

The research procedures took place in several cities in Syria. The selection of these cities was depending on the average of drug consumption for each city in Syria, and the total average of drug consumption among these three cities was 72%. Of total consumption in Syria of which 35% was in Damascus Meanwhile, the total consumption of pharmaceutical products was 25% in Aleppo as the second ranked, and 12% for Homs as the third ranked (according to Pharmex, the governmental pharmaceutical distribution company).

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III.

Research Sampling:

There are several points should be taken in consideration in order to develop an appropriate sample design:  Type of pharmacist sample: there are two types of samples in our research. The first one is considered as human samples. The public and private stakeholders in addition to the pharmacists are considered as human samples. Whereas, the pharmaceutical products are considered as the second type of the sample.  Size of samples: the total numbers of pharmacists who were asked to be involved in the research is 30.  Sampling frame: basing on the average of drug consumption among the mentioned three cities, we decided to distribute our questionnaire to be filled out by pharmacists among these three cities in a manner by which we accord the average of total consumption for each of these three cities and the number of targeted subjects (pharmacists) in each city. Of the total drug consumption in the three cities 49% (of the 72%) was in Damascus 35% was in Aleppo and 16% in Homs. Given these proportions, then the 30 questionnaires will distributed on 15, 11, and 4 in Damascus, Aleppo, and Homs respectively..  Sampling method: Actually the majority of pharmacists have the same background regarding to the pharmaceutical marketing which is applied by pharmaceutical companies in Syria. Therefore, we could rely on a convenience sampling method in order to distribute the questionnaires.  On the other hand, regarding the pharmaceutical products, the sampling method will be completely different from the previous one. In this part of the research sampling, basing on the researcher’s practical knowledge of the research area (pharmaceutical marketing) in an intellectual manner, the researcher chose the most productive pharmaceutical products to answer the researcher question. Therefore, and after taking on consideration that this research is directed in order to explain a case study, this part of sampling was considered to be a judgment (purposeful) sampling method. This study is considered to be a unique study in Syria in term of its purpose. Therefore, an in-depth comprehension was required to interpret our findings and relate them with the pharmaceutical market situation in Syria. As the stakeholders (public and private) have the most interaction with this situation, it was suggested to conduct self interviews with them. The interviewees were suggested by the researcher and were considered as additional targeted sampling units by interviews in order to make a descriptive analysis for their interviews to support our findings. The method by which the additional sample units were defined is a purposeful sampling method (Marshall, 1996).

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IV.

Research Methods:

This research was aimed to study the current situation of the pharmaceutical market in Syria. Several variables were involved in the analysis in order to attain a holistic comprehension for this case. A prepared list of the most 100 pharmaceutical product was prepared by the researcher depending on the suggested factors by which the pharmaceutical market is affected. This rating was according to AMS Data .Moreover, a prepared questionnaire was set by the researcher to be self administered by 30 pharmacists. This questionnaire was directed to collect additional information for several variables which are suggested to have a significant role in the pharmaceutical marketing in Syria. 4-1- Pharmaceutical product variables according to AMS: 4-1-1- Pharmaceutical form: by which the product was manufactured. 4-1-2- Pharmaceutical company: which the pharmaceutical product is belonged to. However, and for ethical and confidential purpose, during the analysis, pharmaceutical companies’ names in addition to products’ names were ignored and not mentioned in the results and replaced by numbers. 4-1-3- Pharmacist’s price: the estimation cost for each selected form unit which was paid by the pharmacist to the pharmaceutical firm. 4-1-4- Pharmaceutical product’s classification according to MoH: OTC products were classified as 1 and ethical products by 2. This classification was according to the minister of health deputy for pharmaceutical affaires. 4-1-5- Therapeutic categories: depending on the products’ indications. Moreover, the pharmaceutical forms were categorized among two main categories 1antibiotics: the most frequent therapeutic category. 2- other categories. 4-1-6- Units: number of the sold units by pharmaceutical firms for each product. 4-1-7- product manufacturing in term of its source whether it was imported, under licensed(Brand), or locally manufactured(Generic) . 4-1-8- Product categorization depending on MoH definition whether it was classified as Over The Counter (OTC) drug (purchased without medical prescription), or as Ethical drug (dispensed only with prescription). 4-2- Pharmaceutical product variables among the pharmacists’ questionnaire: 4-2-1- Bonus: (informal incentive pharmaceutical products which are given to pharmacists). This variable contained the number of free units given for every 10 or 100 buy units. Moreover, the total size of bonuses for each selected pharmaceutical form was calculated by multiplying the total number of sold units by the number of bonuses units divided by 10 or 100. Additionally, the total

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market size for the total size of bonuses for each selected form was calculated by multiplying the last variable by pharmacist’s price. 4-2-2- Discount: certain deducted percentage of the sold pharmaceutical product bill value. This variable has a one-way reciprocal direct relationship with net price variable. The two previous variables are considered to be a significant part of the heart of the pharmaceutical marketing matter in Syria. 4-2-3- Quality: each pharmaceutical product was rated according to the pharmacists’ viewpoint by one of 3 main values; 1- good, 2- accepted, 3- ok. 4-2-4- Buying rate for each product: which referred the rating value of buying average for each pharmaceutical product in the list. The variable was categorized as following: 1- high-average of buying which pharmacist might buy on a weekly bases , 2- Moderate-average of buying which pharmacist might buy on a monthly bases, 3-low-average of buying as more than a month bases of buying . 4-2-5- Pharmaceutical product classification according to the pharmacist’s behavior: the subject had asked to classify each of the 100 products according to the way by which each product was sold. OTC products were classified by 1, and the ethical products were classified by 2. Bonus was categorized among new variable depending on bonus size: 0: No bonuses, 1: low bonus (1-2) units, 2: medium bonus (3-5) units, 3: high bonus more than 5 units. 7- Research Procedures: We were provided with AMS data by PharmaWare using a software programme. According to this software, we chose the top 100 selling pharmaceutical product in Syria. The list contained 562 entries of all forms and packaging sizes (1 product may give 11 different forms). Therefore, we took the most selling form as a percentage of overall money selling size to make the data collection by the questionnaire is manageable. Data were collected within a period of time from the 1st of December 2010 to 25th of January 2011. The pharmaceutical drugs list was obtained from AMS data. A descending sort was applied on the list depending on sells volumes by U.S dollars to draw out a list of 100 pharmaceutical products. A self-administered questionnaire was designed and distributed among the targeted pharmacists. The purpose of the research was orally explained for each targeted pharmacist beside the written explanation. The questionnaire was submitted to the pharmacist after an oral consent. The time of submission was determined by the pharmacist. At the same time, a set of several questions was prepared in order to be asked as a semi-structure interview. Questions for each interview were selected according to the interviewee specialty (specialty based semi-structure interview). The interview’s time was determined after a call contact between Centre for Strategic Health Studies CSHS, Damascus and the targeted 25

stakeholder. The interviews were conducted, analysed, and the requested statements were selected to support our findings by them.

8- Data Analysis: Data analysis was performed using SPSS v.18 and Excel Microsoft. The bonus values for every 100 product were transformed to represent every 10 product units. After that, the mode for each product variables was identified and recorded as the value for the variable. Actually there were no remarkable gaps regarding the values which were filled out by pharmacists as they share same backgrounds in term of pharmaceutical marketing methods. 9- Results: Depending on AMS data, several analysis were performed in order to present the current situation of pharmaceutical market in Syria. According to AMS database, the market share of the 100 pharmaceutical products was 36.8% of the total pharmaceutical market size in Syria. Furthermore, the total market size of the 100 product was 228,026,282 U.S dollars. However, the market size of the selected top selling presentational form for each product was 141,964,182 U.S dollars. From our Data and calculations explained above the total market size for bonuses of the 100 top selling product was 23,395,852 U.S dollars which forms 16.5% of the total pharmaceutical size in Syria. Local manufacturing was the prominent sector among the 100 products. While as 90 products were locally manufactured (26 were under licensed(Brands), and 64 locally(Generics), 10 products were imported. Descriptive analysis was performed by studying the values which were provided by the pharmacists. 58 products were sold by the pharmaceutical firms with informal incentives (bonus). While among the 100 pharmaceutical products there was a single case which had 15 bonus units , there were 2 different products which had 12 bonus units. The most frequent number of bonuses was 2 which were presented with 11 different products. Table 1 expresses the frequency of pharmaceutical products according to the bonus categories.

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Table 1: The frequency of pharmaceutical products depending on bonus categories:

Bonus category

Frequency

0

59

Low

19

Medium

13

High

9

Total

100

There were 9 products associated with high bonus level made a market size of 9,764,998 U.S dollars, and 13 products with medium bonus level which made total market size of 8,286,580 U.S dollars. While the lowest bonus level had 19 products with a total market size of 5,344,273 U.S dollars .The previous numbers reflect a larger market size of the 9 pharmaceutical products comparing to other products in term of bonus level. In some cases below data analysis is restricted to presentational products with bonuses. Data analysis did not show any significant relationship between quality of the pharmaceutical products and the buying rate of these products (p >0.05). However, there was a significant relationship between the bonuses size and buying rate (table 2). Products with high bonus size related with threefold probability of high buying rate among pharmacists. Table 2: Bonus size and buying rate relationship:

Buying rate 

Low Medium High

p Value

OR

0.01 >0.05 >0.05

0.5 8.9 3.1

95% CI Lower Upper 0.13 2.42 2.46 17.22 0.36 28.21

Reference category is (0) buying rate.

When we categorized the most frequent sold products in a single group and test the relationship between this group and therapeutic categories we did not find any significant relationship between these variables. However, when we confounded this relationship by the pharmacists’ behavior in selling the pharmaceutical products as OTC or ethical we found that this relationship became significantly related. Although the probability of selling the most frequent therapeutic products which were sold as OTC depending on the pharmacists’ behavior with low size bonuses was 4 times more than selling them without bonuses, the probability of selling these products with high bonuses size was approximately 2 times more than selling them without bonuses (table 3). 27

Table 3: relationship between therapeutic category and bonuses category:

Low Bonus Moderate category High

p Value

OR

0.001 0.009