Dilip Surana, CMD, Micro Labs and his leadership team recount how early brushes with regulatory censure helped future-proofed their quality systems, while empowering their employees to be fully part of this transformation. Pharma technology expert Rajesh Kuppuswamy was also part of this edition of SAP India’s Industry Knowledge Exchange Forum’s Expert Speak series
The year was 2004. Three-decade old Bengaluru-headquartered Micro Labs was growing steadily, adding facilities to meet domestic and overseas demand. Its original Chennai facility was joined by additional facilities at Hosur, Tamil Nadu (June 1982), by Bengaluru, Karnataka’s Peenya Industrial Area (1990) and then Pondicherry (August 1999). Founder G C Surana was joined by son Dilip in 1983 and business was good.
But in January 2004, the promoter family decided to set up separate plants for beta-lactams and cephalosporins, the first pharma company in India to do so. An automated plant specialised to handle penicillin-based products at Bengaluru’s Bommasandra Industrial Area was followed by a new facility at Goa Industrial Area, the company’s first US FDA approved plant.
Dilip Surana, now CMD reflects on the challenges during those tough years, mentioning how the Micro Labs’ eye drops and sterile injections facility was at that point of time (in 2006) considered one of Asia’s biggest and best facilities.
A baptism by regulatory fire
But then disaster struck and in 2014, the Goa plant was shut down by the US FDA for quality slip-ups. It took a long three years to rectify these issues before it was re-certified by the US FDA.
In hindsight, Surana, says those early lessons were well learnt and have served the company well. “Touch wood, after that it’s been a smooth journey.”
Today Micro Labs has18 manufacturing plants, all certified by global regulators, with a presence in 40 odd countries. How does the senior management ensure that the same quality ethos is maintained at all facilities?
Most pharma companies in India are promoter-driven and fairly bound by hierarchy, with the agenda and culture flowing from the top. So it is interesting that Surana believes that Micro Labs is a very lean organisation, with staff encouraged to share their ideas.
Again, Surana could well be painting a very idealistic situation, when he states that it doesn’t make sense to punish people down the line for errors. According to him, once they’ve realised that they are not going to be penalised for admitting to a mistake, even if the rectification is an expensive process, they open up with their ideas.
Has this almost paternalistic approach paid off?
Harking back to the Goa’s plants regulatory issues, Rajesh Kshirsagar, COO, Micro Labs says that’s where the whole transformation actually started within Micro Labs, to understand how they can utilise the combination of technology and re-trained people to ensure that they resolve the regulatory issues by building their quality systems.
Echoing Surana’s mantra, Kshirsagar posits that “people are our strength, they are not bad but need to be guided clearly on the changes in the regulatory systems.”
This attitude seems to be the foundation of Micro Labs’ technology transition as they began integrating IT systems into their conventional manufacturing systems, while upskilling staff to handle new roles. Adopting the Quality By Design (QbD) approach, he explains how the mid-sized Micro Labs was able to transform itself in the last eight to 10 years into a quality-driven pharma company. The sales field force started using online reporting tools since 2013-14.
And a pandemic too
The next leap in the digital transformation process came due to the COVID-19 pandemic, when companies were forced to go digital almost overnight. Dolo650 became the no 1 brand in the Indian pharma market in January 2022, as per the AWACS Secondary Sales Audit Report, January 22, 2022.
Recounting the huge ramp-up, Jayaraj Govindaraju, Executive Vice President- Marketing & Corporate Communications, Micro Labs spoke of how the company invested in collaboration tools to keep in touch with all employees and doctors for awareness webinars.
Hand-holding through the growth pains
But all change, especially tech transitions, come with growth pains. And most times, the solution provider has to iron out the kinks. The Micro Labs team were unanimous when it came to their expectations from solution providers, expecting technology solutions customised to their needs and hand-holding during the implementation phase until they see the results.
Accepting this ask, Rajesh Kuppuswamy, Life Sciences and Health Care Industry Advisor, SAP India agrees that while a solution that meets global pharma needs maybe be valid in India, but would still need to be tailored to each company’s specific need. “The product offered has to work in the context of the client. Whether its language localisation or certain price point customisation, certain functionalities. It is just not possible to believe that one solution will fit all.”
But too much customisation runs the risk of merely reinforcing set patterns rather than breaking out of them and paving the way for sustainable business model innovation.
He cautions that companies need to be open to change, because at the end of the day, “Processes don’t matter, end results do. If new technology gets results through a simpler process, that’s what we all want. We want to ensure that we have delivered, not just a product, but a solution to the overall problem.”
Automation technology has always been associated with job losses and Micro Labs was no different, though Surana avers that tech adoption has added jobs to Micro Labs each year. But do existing employees fit the new job profiles?
Kuppuswamy points out that pharma companies globally face another hurdle to tech implementation: a multi-generation workforce. The seniors have years of functional expertise but are wary of new tech. At the other end of the spectrum, millennials are fresh out of college but are eager to experiment with new tech. His advice is to have a collaborative workplace, with technology rolled out by line function employees and adapted to suit their needs on the go, rather than leaving it to the IT department.
Paying for quality
Using world-class quality systems comes at a price. Most pharma companies today do not have separate manufacturing plants for regulated and non-regulated markets, which adds to the cost. Surana feels that it is justified that the Government allows a separate pricing for such products.
He also points out that many pharma companies stopped making some older useful medicines once they went under the cost-based older Drug Price Control Order (DPCO). They preferred to switch to newer but more expensive molecules. Thus while the government-controlled prices to keep medicine prices more affordable, drug price control ended up having the opposite effect. Citing examples like betamethasone, doxycycline, he reasoned that clotrimazole which costs 60-70 paise a tablet, companies have moved on to ciprofloxacin, which at that point of time was Rs 30 per tablet. So from a patients ended up paying more for treatment, even though most older molecules have a manufacturing cost of less than Rs 2/ tablet.
This is not a new argument, Many pharma companies have made this point before. But will the government re-consider it stance, given that pharma companies have proved that this is one sector that deserves to be kept viable, given the number of lives saved during the pandemic? Micro Labs’ Dolo-650 was practically the default go-to pill for fever management during the pandemic so Surana does know what he is talking about.
And as companies like Micro Labs scale up, they are investing in technologies that help them balance the three imperatives of improving efficiencies, expanding capacities and improving quality systems while they meet increasing demand.
The next half-century
Even in a pandemic year, Micro Lab’s vital stats seem healthy enough. Though an unlisted company, market reports put the operating revenues at over Rs 4083 crore for FY2021, a 31.87 per cent increase in net worth, 41.26 per cent uptick in EBITDA. Total assets of the company increased by 14.77 per cent while liabilities decreased by -20.57 per cent. The company seems poised for a steady run.
Looking ahead, Surana reflects on the lessons of these COVID times, with the big one being the need to reduce dependency especially for APIs. As Micro Labs readies for its 50th year in 2023, he spells out their strategy of focusing on niche therapeutic areas, especially difficult-to-formulate generics as well as geographies. Needless to say, with continued focus on quality. That’s a hard lesson well learnt by most pharma companies globally. Let’s hope the message from the boardroom stays the same.