Dr Rajesh Jain, Joint MD, Panacea Biotec, gives an insight on the need to raise the bar for quality standards at global levels, as it will lead to sustainability of performance and can be used for innovation-based initiatives
The Indian pharma market is third largest in terms of volume and 13th largest in terms of value, as per pharmaceuticals sector analysis report by Equity Master. It is likely to become sixth largest market globally in terms of absolute size. The Indian pharma industry is estimated to grow at 20 per cent CAGR over the next five years, as per India Ratings, a Fitch Group company making the country the largest provider of generic medicines globally.
A closer look at the strengths, weaknesses, opportunities and threats will help arrive at strategies to continue to create an eco-system which is most conducive for the growth and re-invent business models to succeed in this new environment.
- India’s cost of production is significantly lower than that of the US and almost half of that of Europe.
- Availability of a skilled workforce, high managerial and technical competence provide a competitive edge.
- Ahead in technology absorption.
- Approval time for setting up new facilities has been drastically reduced.
- Branded generics constitutes 70-80 per cent of the market.
- Over 80 per cent of the antiretroviral drugs used globally to combat AIDS are supplied by Indian pharma firms.
- The number of Indian pharma manufacturing facilities registered with the US Food and Drug Administration (FDA) as on March 2014 was the highest at 523 for any country outside the US.
- Geographic shifts and drifts.
- Pressure on pricing and margins due to increasing competition in domestic and international markets. Price erosion in generic market in the US has increased to 10-12 per cent per annum compared to 5-7 per cent earlier.
- Inclusion of more and more drugs in NLEM list and under DPCO in India thereby reducing profit margins in these products. It is increasingly becoming unviable for top companies to produce these drugs due to their higher cost of
- Recent push by the Government of India to promote generic drugs over branded generics, which as of now controls over 90 per cent of the market, thus there is fear that margins will remain under pressure.
- Lower R&D spending on innovation.
- 100 per cent foreign ownership and full repatriation of capital and profits.
- R&D programmes under the chapter of trade in services of WTO.
- Large consumer base, 17 per cent of the world’s population.
- Increasing spend by the Government of India on healthcare.
- Stringent quality control regulations and its implementation by national regulators, augmenting Indian companies efforts to continue to meet global quality standards for all markets as one quality.
- Incentives and schemes of Government of India for encouraging innovation and manufacturing in India, setting up of BIRAC, promotion of biotech, pharma and API clusters all over India, flagship schemes like Start up India, Skill India and Make in India for encouraging manufacturing, innovation and funding support for new entrepreneurs.
- Quality issues affecting supply reliability
- Growing dependence on external markets for key starting materials and intermediates.
- Cost competitiveness.
- Increasing patent, IP-related claims and lawsuits in various countries including India.
- Ambiguity or evolving regulatory guidelines related to biosimilar and stem cells research in India and other parts of the world.
Increasing competition from Chinese companies in major markets like the US, Europe, in the formulation business unlike in the past where Chinese were mainly active in API space.
In the current challenging and interesting playing field, it is imperative for companies to introspect and ask, ‘How do we sustain and grow our business from here? There is a strong need to invent new business models to suit the changing environment.
To reach this exciting goal, following may be useful:
10 point pathway
- Customer first: Goes without saying that to succeed in such a complex environment, companies will need to take a customer-centric view to re-look at the value proposition for each major customer segment in the value chain, be it channel partners, practicing physicians, or direct patients. Companies need to look at building distinctive forms of customer connect through advanced mechanisms of sales force engagement, consolidation of field force, strengthening of marketing channels with adoption of digital marketing, and organise patient education programmes. We at the helm of companies should not just promote our products but see ourselves as a disease prevention organisation and partner with medical profession in treating patients.
- Innovation: Shift from the so far mainstay strategy to produce high volumes at low prices to developing speciality and high-value products for chronic diseases offering decent margins, stable markets and attractive return on investment. Innovation is the key.
- Product portfolio: Focus on product diversification and broadening of product mix.
- Quality culture: Strict adherence to quality norms and meeting international quality standards, continuous training of employees and imbibing quality culture thereby reducing product failures, rejections, import alerts and warnings.
- Academia: On the R&D front, Indian companies should increase their interface with government research institutions, academia, take advantage of the recent initiatives of the government to facilitate innovation, entrepreneurship, funding support and startup support programmes. It is extremely important for Indian companies to actively leverage government initiatives and huge pile of innovation currently going on in academic institutions and work jointly to reorient, re-focus and accelerate market led innovation and faster commercialisation of drugs.
- Biologics: Indian companies with strong biology background or deep pockets need to build this capability for long-term gains. Pay more attention in developing biosimilars, vaccines in line with movement of the global life sciences industry, which is gradually transitioning from chemical-based drugs to biologics. The global sales contribution of biologics is expected to increase from 24 per cent in 2015 to 27 per cent in 2020.
- Strategic collaborations: Considering huge investments required for development of biologics, it is imperative to strike strategic collaborations, partnerships, joint ventures and acquisitions globally to acquire desired and missing capabilities.
- Government: It is important for Indian companies to align with Indian government’s war cry and thought of ensuring affordability, reliability of treatment, quality and reach to rural areas. Indian companies must find innovative ways to partner with government in meeting this goal.
- Controls: Tightening controls on cost escalation by adopting modern technology and automation in supply chain management, for product complaint identification and recall, etc.
- Time to market: Indian startups in the biotechnology and pharma sectors should be supported by major Indian companies for faster and cost- effective development of new drugs and faster commercialisation in niche and speciality
These changes will have significant impact on the Indian pharma industry and its influence and vibrant impact will be felt not only in India but globally.
Panacea Biotec have geared up to meet the challenges with a product portfolio of highly innovative products in therapeutic areas of oncology, organ transplantation, nephrology, diabetes, osteoporosis, gastro intestinal diseases and vaccines. The company is working on ‘Best Few’ decent product pipeline of niche products, thus leveraging its capabilities in the areas of nanotechnology, platform drug delivery technologies like micro-particles, liposomes, gastroretentive systems etc.
Highest focus is on deep understanding of science behind each product at each level in the company right from workers to executives across different functions in the company i.e. R&D, manufacturing, quality control, quality assurance, regulatory, clinical research and sales and marketing.
For any generic drug maker, transforming to a speciality and branded drug-focussed company may take five to ten years. This period is going to be challenging. However, the key will be to continue to raise the bar of quality standards at global levels as it will lead to sustainability of performance, which can be used for innovation-based initiatives.
Pharma companies can adapt to disruption through shifts in their business models and refocus on new fields of play.