As pharma companies grapple with the ongoing COVID-19 crisis, there are certain necessary measures that leaders will need to take in order to respond effectively to severe business shocks and reshape their plans for recovery. Charu Sehgal, Partner and Leader, Lifesciences and Healthcare, Deloitte India identifies these priorities for pharma leaders, in a chat with Raelene Kambli
What kind of economic impact have pharma companies suffered due to the COVID-19 crisis in India?
The long term impact is still uncertain, as no one knows for how long, as a nation, we will have to deal with this pandemic. However, the current impact of the coronavirus pandemic and the lockdown is clearly visible in many areas of health and pharma sectors in India. Significant disruptions were seen in the supply chain. Then the shortage and delay of API supplies as India is dependant on imports from China. Thirdly, due to the lockdown and the inability of the labour force to reach factories, manufacturing has decreased by 30-50 per cent in some cases. Then, since the government initially placed a blanket ban on the export of drugs and many Indian companies rely on significant exports revenue, there was a loss of revenue for these companies.
Another area is the decreased demand from the hospital segment. Since many hospital services (OPD, reduced IPD, no elective surgeries, etc.,) are on hold at the moment, the demand for several medicines and consumables has reduced.
In the coming times, what does the turnaround look like for pharma companies in India?
It is given that most pharma companies are likely to experience significant disruption to their business operations and will face underperformance during this crisis. We yet do not know how long will the lockdown last or whether there would be a second wave of an epidemic, so companies need to do some scenario planning. The turnaround will largely depend on how companies evaluate business prospects in future, identify and assess financial and operational risks and respond effectively. They will need to be agile and be ready to make changes in portfolios, export locations as well as to adapt to the new manufacturing and distribution paradigms
What are the actionable measures that companies need to take while they plan their path to recovery?
Companies will need to rethink their business strategies in order to respond, recover and thrive. The following can be applied for a speedy recovery:
- Look at digital solutions, use analytics and forecasting tools effectively: Wherever possible, companies will need to use technology solutions to reduce reliance on in-person transactions as well as respond better through the use of forecasting tools.
- Prepare for disruptions in manufacturing if units are in designated hot spots: For example, Maharashtra has been badly hit by COVID 19 so companies that have plants in Maharashtra will need to keep in mind that there will be more disruption at their manufacturing units in these locations and plan accordingly
- Prepare and plan for the impact on exports: Nine of India’s key export destinations are countries which are very badly hit by the pandemic. Now, companies will need to be ready for a huge impact on their export demand from these countries. Another aspect has been how foreign currencies have behaved – in many instances the rupee has appreciated. There will be a need to ascertain the impact of that and adjust wherever possible by taking advantage of opportunities from countries where exports have become more profitable due to currency changes.
- Look to change manufacturing portfolios: Some products such as anti-malaria, anti-TB and antiretroviral drugs will be in more demand. Companies will be able to leverage this increase in demand by shifting portfolios to include these drugs or to increase the production of these.
What are the opportunities in future?
I believe that there will be reimagination and readjustment of global supply chains. A lot of countries will and have already started thinking of not relying only on China for supply and having an alternate source. I think, if India plays its part well, we have an opportunity to become the alternate manufacturing location. The government has already initiated work on this front and has announced around Rs 3000 crore investment to encourage domestic and foreign companies to manufacture APIs in India.