Utkarsh Palnitkar, Partner, National Head – Infrastructure, Government & Healthcare and National Head – Life Sciences practice, KPMG India, elaborates on the emerging trends, which are further impacting pharma companies, leading to an intense need for an efficient and competitive business model
The last decade or so has seen exciting breakthroughs in the sector leading to discovery of novel therapeutics for unmet patient needs. However, as the focus is shifting from a ‘provider-dominated and product-focussed’ system to a ‘patient-centric and customer-focussed’ model, the pharmaceutical industry is also facing several challenges. The conventional strategy of pursuing blockbuster drugs is declining as patents for major drugs are expiring and the output of product pipelines is diminishing. The emerging trends such as regulatory pressure, new technologies and patient centricity are further impacting pharma companies, leading to an intense need for an efficient and competitive business model. A few of the key trends impacting the global pharma industry are as follows:
Smarter and more focussed marketing strategies
- Digital advertising to increase patient engagement Although the pharma industry lags behind other industries in digital marketing, spend on digital advertising directed towards patients and healthcare professionals is expected to see an upward trend. Pharma marketers are forecast to spend $2.5 billion in 2019 on paid online and mobile advertising compared with $1.6 billion in 2015.1 The approach could be used to send personalised and relevant messages to patients.
- Value-based pricing to promote higher efficacy-driven treatments
Considering that the new patient pool is well-informed about the treatments and medicines they undergo and are prescribed, respectively, a majority of payers are looking forward to ink different healthcare plans with the outcome/ value-based pricing model, especially for the high-priced and speciality drugs — oncology drugs, hepatitis C treatment, etc. Enhancing the patient experience via better efficacy of drugs drives value-based pricing instead of volume-based pricing.
Increase in the adoption of technology-based care
- Implementing Big Data analytics for making precise decisions: As the industry is realising the importance of applying Big Data to take informed decisions, pharma companies too are increasingly embracing the need to analyse Big Data. The analysis of real-time data collated from telehealth, mHealth, eHealth and digital health devices would enable making precise decisions for patients.
- Technocare for targeted therapy: Augmented Reality (AR) and Virtual Reality (VR) via devices like digital contact lenses from a technology company (to measure blood glucose levels from tears), cognitive computers like IBM Watson (to help physicians make medical decision), 3D printed drugs, and all such disruptive technologies could help researchers contribute significantly to targeted breakthroughs within the healthcare industry. The latest emerging technology of brain-computer interface (BCI) technology would significantly contribute to breakthroughs within the pharma industry. Smart applications such as spinal cord stimulators (for pain relief) and retinal implants (to restore sight) and are also under development.2
- Increasing pharma–tech collaborations: As the industry is progressing towards becoming digitised, more collaborations are expected in the near future between pharma manufacturers and tech companies. For example, a pharma company entered into an alliance with a tech company to enable in-house remote monitoring of clinical trial patients through smartphones. In fact non-traditional companies have expertise in collecting information from multiple platforms and can collaborate with researchers and pharma companies to develop and commercialise more effective treatments.
Patient-centricity in drug development
- Focus on patient centricity in the drug development process: Patient centricity is an increasingly important element of the pharma business model, but it has been ignored by the industry as a whole. A French multinational pharma company took steps to this end in 2015, by adopting a three-pillar strategy for patient centricity and creating a new role of chief patient officer. In January 2016, the European Patients’ Academy launched an Internet library to educate patient representatives on the drug development process, fostering greater understanding and increasing patient involvement in R&D process. Patients performing an active role in trial design can help reduce cost, increase recruitment and thus accelerate road development to market drugs.
Shift towards biosimilars
- Increase in the adoption of biosimilars: Several countries are adopting biosimilars to provide affordable care and increased access. The regulatory pathways are evolving towards establishing more rigorous standards for safety and efficacy of biosimilars. Patent expiries on major biologic products are also expected to push the growth of biosimilars globally.
Trends impacting the Indian pharma industry
The last few decades have seen genericisation becoming the global arsenal to combat surging healthcare costs. The generic version of life sciences products emerged as a profitable business option for the Indian pharma industry. By taking advantage of low labour cost and high technology skills, domestic companies have already demonstrated their prowess in the global generic business. However, owing to the increasing complexities of the business environment, the need to evolve continuously has intensified.
The following business trends are expected to impact the Indian pharma industry in 2017:
Greater adoption of digital technology
- Increase in the adoption of digital technologies: Indian pharma players are increasingly using digital technologies to market products to doctors, strengthen patient engagement and compliance, etc. Marketing spend through digital platforms is estimated to soar by approximately 50 per cent in the next two years to reach Rs 220 crore. An Indian pharma company has launched a mobile app in May 2016 to make patients aware about asthma and enhance adherence to its treatment. Similarly, a pharma MNC has introduced several tools like a single platform where physicians can access medical information, a heart and liver app and another one for vertigo exercises.
- GST implementation: The Indian pharma and biotechnology industry, like others, is eyeing GST as a favourable tax regime that might eliminate the cascading effect of taxes and other anomalies of the current indirect tax structure. The government is planning to implement GST from April 1, 2017. GST is expected to reduce the burden of taxes considerably by removing the anomalies of the current indirect tax structure, reduce compliance hassles, etc.3 Further, with the advent of GST, the supply chain of the pharma industry would be impacted by the availability of input tax credit of interstate trade GST (IGST) on inter-state transactions, eliminating the need for Carrying and Forwarding Agents (CFAs) in each state. The implementation of GST in 2017 is expected to propel the ease of doing business in India for pharma companies.
- Implementation of the mandatory Uniform Code of Pharmaceutical Marketing Practices (UCPMP): The Department of Pharmaceuticals (DoP) had launched voluntary UCPMP guidelines in 2015 for better adherence to ethical practices by the industry while promoting sales. The government is now planning to implement a mandatory code that is expected to replace the current voluntary UCPMP for increased adherence and governance.
- Regulation of online pharmacies: The government is working on a policy governing the sale of medicines online by start-ups/ online pharmacies that have disrupted the traditional business model. The e-pharmacy policy aims at establishing rules and regulations for the sale of medicines online and facilitating access to quality medicines in a cost-effective manner.
A government panel has recommended the creation of a national portal as a nodal platform to monitor sales of medicines via the Internet. Further, as the industry policies evolve, along with increase in the adoption of technology, the market share of online pharmacies in India’s drug distribution market is likely to increase.
- Fixed Dose Combination (FDC) ban: In March 2016, the Health Ministry banned 344 FDC drugs on grounds that it posed a risk to humans when alternative drugs were available.4 This has impacted the growth rate of Indian pharma industry and ease of doing business environment in the country. In 2017, the pharma companies are expected to come up with new strategies and combination drugs to recover from this set back.
- Price control regime: Under the current regime, the Drug Price Control Order (DPCO) continues to affect the growth of pharma companies at large. However, the government is planning to overhaul the drug pricing policy to delink it from the national list of essential medicines and enable investment opportunities in the industry.
The pharma industry in India has come a long way in the last few decades and has grown from strength to strength in terms of R&D capabilities, infrastructure development and technical skills. The industry is facing several challenges regarding the price control regime, a complex regulatory regime and poor infrastructure, which continue to remain contentious in the market. On the brighter side, trends such as increased R&D investments, technology adoption and global expansion are positive signs for the future growth of pharma companies.
The industry has rightfully gained the epithet as ‘pharmacy to the world’ and with numerous strengths in areas aligned with current market trends, it is expected to remain an attractive investment destination.
1. “Pharma digital spending ticks upward slowly but surely”, FiercePharma, April 2016
2. “Brain computer interfacing: Applications and challenges”, ScienceDirect, July 2015, Volume 16, Issue 2, accessed 18 November 2016
3. “India-U.S. trade – a formidable economic force”, KPMG in India, June 2016
4. “Ban on sale of 344 drugs: Delhi HC to resume hearing pleas against Centre’s order”, Indian Express, MARCH 2016
(The views and opinions in this article are those of the author and do not represent the views and opinions of KPMG in India.)