Tag Archives: emerging

Quick implementation of the UNDILUTED ‘Central Drug Authority (CDA)’ Bill is essential for emerging India

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Many industry experts after having carefully evaluated the provisions of the original draft of the proposal of forming a CDA in the country commended and supported this praiseworthy initiative of the Government. This Bill also known as, “The Drugs & Cosmetics (Amendment) Bill No.LVII of 2007 to amend the Drugs & Cosmetics Act, 1940” was introduced in the ‘Rajya Sabha’ on August 21 2007 and was thereafter referred to ‘The Parliamentary Standing Committee of Health and Family Welfare’ for review. The Committee also has submitted its recommendations to the Government since quite some time. However, the fact still remains that the proposed CDA Bill has not seen the light of the day, as yet.

Mashelkar Committee Recommendation:

It is high time to consider the recommendations of Dr. R. A. Mashelkar Committee on the subject and make amendments in the Act to facilitate the creation of a Central Drugs Authority (CDA) and introduce centralized licensing for the manufacture for sale, export or distribution of drugs.

Seven reasons for the dire need of the CDA in India:

I firmly believe that the formation of the ‘Central Drugs Authority (CDA)’ will provide the following seven significant benefits to the Industry and also to the Government:

 1.    Achieving uniform interpretation of the provisions of the Drugs &  Cosmetics Act & Rules

 2.    Standardizing procedures and systems for drug control across the country

3.    Enabling coordinated nationwide action against spurious and substandard drugs

4.    Upholding uniform quality standards with respect to exports to foreign countries from anywhere in India

 5.    Implementing uniform enforcement action in case of banned and irrational drugs

 6.    Creating a pan-Indian approach to drug control and administration

7.    Evolving a single-window system for pharmaceutical manufacturing and research undertaken anywhere in the country.

Major countries have similar set up even within a federal system:

All major countries of the world have a strong federal drug control and administration system in place for the Pharmaceutical Industry. Like for example, despite strongly independent states within the federal structure of the U.S., the US – FDA is a unified and fully empowered federal government entity. 

Similarly, the coming together of many independent countries in Europe has led to the need for a pan-European drug control agency and that responsibility has been vested on the ‘European Medicine Agency (EMEA)’ which has overriding pan-European powers, that is within the European Union (EU).

Thus, a single Central Authority that administers and regulates both pharmaceutical manufacturing and pharmaceutical research is an absolute necessity in India’s bid to be a global hub for drug discovery.

The interim measure:

In my view, till CDA is formed, registration and marketing authorization for all new drugs and fixed-dose combinations should only be granted by Drugs Controller General of India (DCGI).  I would like to emphasize, it is essential that there a smooth transition takes place from the existing regulatory environment to the proposed CDA, carefully tightening all the loose knots in the process. All necessary infrastructures along with the required personnel must be in place so that all permissions are granted to applicants within stipulated time frame.

The watershed regulatory reform initiative should not go waste:

Thus the CDA Bill is considered to be a watershed regulatory reform initiative in the pharmaceuticals space of India. This reform, besides all others as discussed above, would have updated the legislation considering the advances the country has made, especially, in the last five decades in clinical research, treatment methods, and sophisticated diagnostic and medical devices.

Conclusion:

It now appears that the Government could revive the CDA Bill and reintroduce in the Parliament. It was to be introduced in its monsoon session. However, the plan did not fructify because of various political reasons.

Centralize drug licensing has also been highly opposed by the state drug authorities and some section of the industry. The stated position of these opponents to the CDA Bill highlights that the proposed centralized structure will not be able to deliver as the requisite infrastructure for the same is not in place, as yet.

All these developments bring out the apprehension that the proposal to centralize drug licensing as part of the proposed law, very unfortunately, may get quite diluted because of vested interests.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Emerging markets and a robust oncology portfolio expected to be the future growth engine of the global pharmaceutical industry… but not without associated pricing pressures.

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When the growth rate of the developed markets of the global pharmaceutical industry started slowing down along with the declining R&D productivity, the emerging markets were identified as the new ‘El-Dorado’ by the global players. At the same time, new launch of anti-cancer drugs, more in number, started giving additional thrust to the growth engine of the industry, at least in the developed markets and for the ‘creamy layers’ of the emerging markets of the world. As cancer is being considered as one of the terminal illnesses, the cancer patients from all over the world, would like to have their anti-cancer medications, at any cost, even if it means just marginal prolongation of life with a huge debt burden.According to a recent study done by the Cancer Research, UK, despite significant decline in the overall global pharmaceutical R&D productivity over a period of time, in a relative yardstick, newer anti-cancer drugs have started coming up to the global market with a much greater frequency than ever before. ‘Pharmacy Europe’reports that 18 percent, against a previous estimate of 5 percent of 974 anti-cancer drugs will see the light of the day in the global market place, passing through stringent regulatory requirements. This is happening mainly because of sharper understanding of the basic biology of the disease by the research scientists.Another study reports that between 1995 and 2007 such knowledge has helped the scientists to molecularly target ‘kinase inhibitors’, which are much less toxic and offers much better side effect profile. Well known anti-cancer drug Herceptin of Roche is one of the many outcomes of molecularly targeted research.

Price of Anti-cancer drugs:

Although in the battle against the much dreaded disease cancer, the newer drugs which are now coming to the market, are quite expensive. Even in the developed markets the healthcare providers are feeling the heat of the cost pressure of such medications, which would in turn impact the treatment decisions. Probably because of this reason, to help the oncologists to appropriately discuss the treatment cost of anti-cancer drugs with the patients, the American Society of Clinical Oncology recently has formed a task force for the same.

The issue is now being fiercely debated even in the developed markets of the world:

In the developed markets of the world, for expensive cancer medications, the patients are required to bear the high cost of co-payment, which may run equivalent to thousands of U.S dollars. Many patients are finding it difficult to arrange for such high co-payments.

Thus, it has been reported that even the National Institute of Health and Clinical Excellence (NICE), UK considers some anti-cancer drugs not cost-effective enough for inclusion in the NHS formulary, sparking another set of raging debate.

‘The New England Journal of Medicine’ in one of its recent articles with detail analysis, expressed its concern over sharp increase in the price of anti-cancer medications, specifically.

Is the global pharmaceutical industry in a ‘gold rush’ to get into the oncology business?

Recently ‘The New York Times’ reported some interesting details. One such was on the global sales of anti-cancer drugs. The paper reports that in 1998 only 12 anti-cancer drugs featured within the top 200 drugs, ranked in terms of global value turnover of each. In that year Taxol was the only anti-cancer drug to achieve the blockbuster status with a value turnover of U.S$ 1 billion.

However, in 2008, within top 200 top selling drugs, 23 were for cancer with three in the top ten, clocking a global turnover of over U.S$ 1 billion each. 20 out of 126 drugs recording a sales turnover over U.S$ billion each, were for cancer, impressive commercial growth story of which is far from over now.

How to address this issue?

Experts are now deliberating upon to explore the possibility of creating a ‘comparative effectiveness center’ for anti-cancer drugs. This center will be entrusted with the responsibility to find out the most cost effective and best suited anti-cancer drugs that will be suitable for a particular patient, eliminating the possibility of wasteful expenses, if any, with the new drugs, just because of their newness and some additional features, which may not be relevant to a particular patient. If several drugs are found to be working equally well on a patient, most cost effective medication will be recommended to the particular individual.

Some new anti-cancer medications are of ‘me-too’ type:

‘The Journal of National Cancer Institute’ reports that some high price anti-cancer drugs are almost of ‘me too’ type, which can at best prolong the life of a patient by a few months or even weeks. To give an example the journal indicated, ‘Erbitux for instance, prolongs survival in lung cancer patients by 1.2 months… at a cost of U.S$ 80, 000 for an 18 – week course of treatment.’

However, the manufacturer of the drug later told ‘The Wall Street Journal’ (WSJ), ‘U.S.$ 80,000 is like a sticker price, but the street price is closer to U.S$ 10,000 per month” i.e around U.S$ 45,000 for 18 week course of treatment.

Conclusion:

Even in the developed countries, the heated debate on expensive new drugs, especially, in the oncology segment is brewing up and may assume a significant proportion in not too distant future. India being one of the promising emerging markets for the global pharmaceutical industry, willy nilly will get caught in this debate, possibly with a force multiplier effect, sooner than later.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Envisaging ‘five emerging key strategic changes’ in the Indian Pharmaceutical Industry

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In India, the domestic pharmaceutical market has clocked a CAGR of around 13% to 14% since the last five years. Currently, the market is dominated by the drugs for mass ailments. However, such trend has already started showing a shift towards ailments related to the life-style of patients. This emerging trend is expected to fast accelerate in future.All such factors put together, driven by the following key drivers for growth backed by strong logistics support and hopefully improving healthcare delivery system are expected to contribute significantly towards faster growth of the Indian pharmaceutical industry, as we move on.Key growth drivers:

The growth drivers may primarily be divided into two categories:

- Local and
- Global

Local:

• Rapidly growing more prosperous middle class population of the country.

• High quality, cost effective, domestic generic drug manufacturers who will have increasing penetration in both local and emerging markets.

• Rising per capita income of the population and in-efficiency of the public healthcare system will encourage private healthcare systems of various types and scales to flourish.

• Expected emergence of a robust healthcare financing/insurance model for all strata of society.

• Fast growth in Medical Tourism.

• Evolving combo-business model of global pharmaceutical companies with both patented and generic drugs boosting local outsourcing opportunities.

Global:

Global pharmaceutical industry is going through a rapid process of transformation. Cost containment pressures due to various factors are further accelerating this process. Some of the critical effects of this transformation process like Contract Research and Manufacturing Services (CRAMS) will drive growth of many Indian domestic pharmaceutical players.

Expecting the need for ‘New Strategic Changes’ of radically different in nature:

The impact of many of these evolutionary changes is being felt in India already. However, some more radically different types of changes, which the industry has not experienced, as yet, are expected to be felt as the country moves on to satisfy the desired healthcare needs of its population while fully encashing the future growth opportunities of the Indian pharmaceutical industry.

Five ‘New Strategic Changes’ envisaged:

Five new key strategic changes, in my view, will be as follows:

1. As the country will move towards an integrated and robust healthcare financing system:

• Doctors will no longer remain the sole decision makers for the drugs that they will prescribe to the patients and the way they will treat the common diseases. Healthcare providers/ medical insurance companies will start playing a key role in these areas by providing to the doctors well thought out treatment guidelines.

• For a significant proportion of the products that the pharmaceutical companies will sell, tough price negotiation with the healthcare providers/ medical insurance companies will be inevitable.

• Health Technology Assessment (HTA) or outcome based pricing will play an important role in pricing a healthcare product.

2. An integrated approach towards disease prevention will emerge as equally important as treatment of diseases.

3. A shift from just product marketing to marketing of a bundle of value added comprehensive disease management processes along with the product, will be the order of the day

4. Patents will be granted on truly innovative medicines and incremental innovation to be protected within the patent life of the original product only or separately for a much lesser period.

5. Over the counter medicines, especially originated from natural products for common and less serious illness, will curve out a larger share as the appropriate regulations will be put in place.

Conclusion:

With the above changes in the ball game of the Indian pharmaceutical industry, it may not be easy for the local players to adapt to such changes sooner and compete with the global players on equal footing. Those Indian Pharmaceutical companies who are already global players on their own rights, will be well versed with the nuances of this new game, within the country. These domestic companies, in my view, will offer a tough competition to the global players, especially, in the generic space.

However, so far as other domestic players are concerned, the new environment could prove to be a real tough time for them, further accelerating the process of consolidation within the Indian pharmaceutical industry. So the ‘writing on the wall’ appears to be ‘prepare now’ or ‘perish’.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Europe: now emerging as a more preferred market for the domestic Indian Pharmaceutical Industry

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Since almost last 30 years the Pharmaceutical Industry of India has been a net foreign exchange earner. Deutche Bank Researchindicates that over the last ten years the export surplus has widened from EUR 370 million to EUR 2 billion.Around 80% of these pharmaceuticals manufactured in India are sold to the US and Europedriven by higher purchasing power of the people in those countries and also due to recent regulatory changes towards greater cost containment initiatives by the respective governments.
Europe – a preferred destination for Indian Pharmaceutical companies:

In the quagmire of global recession, prompted by increasing pricing pressure with consequent pressure on the bottom-line, many Indian pharmaceutical companies have started increasing their focus on Europe. The European generics market is now growing faster than overcrowded US generics market.

Top domestic Indian pharmaceutical Companies like Ranbaxy, Sun Pharma, Dr. Reddy’s Laboratories (DRL), Glenmark, Wockhardt and Aurobindo whose performance is highly dependent on their revenues from the US and Europe perhaps will need to have a sharper look at both western and eastern Europe.

It has been reported that because of higher volume penetration of over 55% of generics pharmaceuticals in Europe, which is significantly higher than US, Europe offers an attractive and better growth opportunities to the Indian pharmaceutical companies in the medium to longer term. Companies like Ranbaxy, Wockhardt and Aurobindo have already reported to have started showing higher revenue growth in Europe than USA.

Major merger and Acquisition (M&A) initiatives of the Indian pharmaceutical companies in Europe augur well towards this direction. Ranbaxy has already acquired companies in France, Belgium, Romania and Zydus Cadila in France. DRL purchased Betapharm in Germany.

Inorganic growth will demand a more cautious approach:

However, the path of M&A by Indian pharmaceutical companies should be treaded with more caution. The case in point is Wockhardt, which grew with a scorching pace of over 30% on an average for several years in the recent past driven by its inorganic growth strategy. In 2006-07 Wockhardt acquired two companies in Europe, one in Ireland and the other in France. Unfortunately, the company could not manage its rapid growth through such M&A as efficiently for long and got entangled in a debt trap of around Rs. 34,000 crore in that process.

Converting problems into opportunities:

Global financial meltdown throws open an opportunity for the Indian pharmaceutical companies to acquire the distressed specialty pharmaceutical companies at a very competitive price in Europe. Many small pharmaceutical companies in Europe are now looking to sell their facilities because of difficulty in maintaining their business arising out of higher operating costs.

In such a scenario after acquiring a company in those countries, the Indian acquirer will have an opportunity to transfer the manufacturing operations to India, where the costs are much lower, keeping just the marketing operations there.

A report from The Economic Times (ET) indicates that Pharmaceutical majors like Zydus Cadilla are looking for acquisition in Spain and Italy and Glenmark in the Eastern Europe. Kemwell of Bangalore has recently acquired the manufacturing plant of Pfizer located in Sweden and has expressed intention to shift their manufacturing operations to India to concentrate only on marketing with the acquired local infrastructure.

Just at the same time and for the same reasons many global pharmaceutical companies plan to outsource their manufacturing requirements from India and China retaining the R&D and marketing operations with them.

Increasing attention on Eastern Europe:

According to PMR, the Polish Market Research company, countries like Ukraine, Bulgaria, Turkey, Russia and Romania are quite attractive for pharmaceuticals business in the Eastern Europe.

In that part of the world, Russia, Romania and Ukraine have been dominating in terms of sustained high growth since last five years. Acquisition of a local company will provide the best option for quick entry into these markets, recommends PMR.

Conclusion:

Global financial meltdown has thrown open many doors of opportunities for rapid entry into both eastern and western European markets by the Indian pharmaceutical companies for better future growth potential. I am sure the domestic pharmaceutical companies will carefully evaluate these opportunities to take appropriate action to catapult themselves to a higher business growth trajectory in the years to come by.

Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Managing expectations of the emerging markets of the world, proactively, will differentiate winners from the rest, in the Global Pharmaceutical Industry.

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Change or Perish:In Mid 2007, PricewaterhouseCoopers (PwC) recommended to the research-based global pharmaceutical companies that for sustainable business performance they should move a part of their expenditure from marketing to research. They also recommended that the drug prices should be related to incremental efficacy that the products would provide. That global pharmaceutical business model is “economically unsustainable and operationally incapable of acting quickly enough to produce the types of innovative treatments demanded by global markets” as a challenge of change, was forecasted in 2007 by PwC in their ‘Pharma 2020: The vision’, report.Fast evolving scenario:

The global pharmaceutical industry scenario is fast evolving. More drugs are going off patent than what the innovator companies can replace with the new products. The research is undoubtedly failing to deliver.

At the same time, the business growth in the developed markets of the world has been declining over a period of time. The growth in the top two pharmaceutical markets of the world viz, USA and Japan has gone negative. IMS predicted in their recent ‘CEO Conclave’ in Mumbai that negative trends in these markets will continue even beyond 2013.

In the same conclave IMS predicted that ‘Pharmerging’ markets and Venezuela will drive the growth of the global pharmaceutical industry in the next five year period. Within ‘Pharmerging’ markets, China is expected to record highest CAGR growth of over 25%, followed by India and Turkey around 12-14% each. With such a scorching pace of growth China is expected to become third largest pharmaceutical market in the world in 2013 with India holding its 2008 ranking of no. 13. Venezuela is expected to register highest CAGR growth of around 40% during this period placing itself as the eleventh largest pharmaceutical market of the world, comfortably overtaking India.

Emerging markets will drive global growth:

IMS health reported that last year the global pharmaceutical market recorded a turnover of US$712 billion, which is an increase of US$178 billion over last five years. However, the growth rate has come down to 6.4% compared to 11.8% in 2001. Emerging markets like India, China, Russia, Turkey and South Korea have recorded a growth of 13%, 25.7%, 20.2%, 17.2% and 10.7%, respectively against just 3.8% growth of the US market.

Making up sales revenue of world’s top 10 products:

World’s 10 top selling prescription drugs, as reported by IMS, which will be difficult to replace in terms of single-product value turnover after they go off patent, are as follows:

- Lipitor, US$13.5 billion (Pfizer)

- Plavix, US$7.3 billion (Sanofi-Aventis)

- Nexium, US$7.2 billion (AstraZeneca)

- Seretide/Advair, US$7.1 billion (GlaxoSmithKline)

- Enbrel, US$5.3 billion (Amgen and Wyeth)

- Zyprexa, US$5 billion (Eli Lilly)

- Risperdal, US$4.9 billion (Johnson & Johnson)

- Seroquel, US$4.6 billion (AstraZeneca)

- Singulair, US$4.5 billion (Merck)

- Aranesp, US$4.4 billion (Amgen)

Focus on the emerging markets and other measures are expected to more than offset the loss of revenue and profit for these products.

Key business issues in the emerging markets:

Governments of many of these emerging markets expect some local benefits out of the evolving growth opportunities of the global pharmaceutical companies from their respective countries. Various reports indicate that there will be mainly the following two key issues in these markets:

• Local manufacturing of products
• Pricing

Local manufacturing:

Out of these emerging markets, Indonesia has clearly spelt out its intention by specifying that the pharmaceutical companies marketing their products in Indonesia will need to establish local manufacturing facilities. The new rule is directed towards local job creation.

The Health Minister of Indonesia has said, “If they want to get licenses (to sell their products) they have to invest here also, not just take advantage of the Indonesian market.” The Minister further added, “they can’t just operate like a retailer here, with an office that’s three meters by three, and make billions of rupiah. That’s not fair.” It has been reported that India and China may also come out with similar requirements for their respective countries.

U.S. Chamber of Commerce has registered a strong protest in this matter with the President of Indonesia and has urged a reversal of this decision. However, the country appears to have taken a firm stand in this matter. This is evident when in response to the report that some global pharmaceutical companies have threatened withdrawal of their business from Indonesia because of this reason, the Health Minister retorted, “If they want to go away, go ahead.”

Pricing:

Anticipating such moves in the emerging markets, GlaxoSmithKline (GSK) has already started reducing the prices of its products in the emerging markets.

The visionary CEO of GSK, Andrew witty strongly believes that such price reduction will enable more patients in the emerging markets to afford GSK products. Consequently the increased sales volume will not only be able to offset the price loss but will also create a substantial goodwill for the company in these markets.

Quoting Andrew Witty the ‘Wall Street Journal’ (WSJ) reported that in Philippines, GSK has reduced the price of 28 products by 30% to 50%. In other emerging markets in Asia including India, Malaysia and Thailand the company has reduced the prices of Cervarix, its cervical cancer vaccine, substantially.

Price reductions made by GSK in Philippines in March have started paying rich dividends to the company with 15% to 40% increase in sales revenue.

Conclusion:

To achieve the growth objectives in the emerging markets of the world, global pharmaceutical companies will need to find out a win-win solution. Andrew Witty of GSK has set examples in this area with various path breaking initiatives. Pricing and local manufacturing of products, in that order, are expected to be the key issues in the business model for emerging markets of the global pharmaceutical companies. Witty has responded to such expectations proactively and in an exemplary way. His vision is widely expected to be emulated by many others, as we move on, in the interest of all stakeholders.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Is rural India emerging as the new ‘Eldorado’ for the Indian pharmaceutical industry?

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“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative consumers, a whole new world of opportunity will open up,” wrote the management guru C K Prahalad in his well known book titled, “The Fortune at the Bottom of the Pyramid”.I am not sure whether the above profound observation is encouraging the pharmaceutical companies to spread their wings, at a much organized way, in rural India, where over 70% of the Indian population live and most of them are poor.Rural reforms have commenced in India at a much faster pace than ever before. Even many die-hard skeptics will now agree that the “Rural India has started Shining”. The shine, however, may not be as much as it ought to be. But surely, it is happening. The result of recent General Election in India perhaps will vindicate this point.

Is rural India the new growth opportunity for the pharmaceutical industry?

Decent business prospects in largely un-tapped rural India are making the pharmaceutical companies to move into this uncharted frontier. Reaching out to about 65% of the population who do not have access to modern medicines, could prove to be the new ‘Eldorado’ for the industry. Some well organized but small preparatory steps are already being taken towards this direction, which ultimately could lead to taking a giant leap towards this new frontier.

Some companies have started charting in a new way in this much uncharted frontier:

Possibly as a testimony to this new business approach we can now see:

1. Novartis with its “Arygoya Parivar” initiative working out a tailor-made program for rural areas of seven selected states, to start with. They have developed special packs of essential medicines with special prices to reach out to the rural marketing population.

2. Novo Nordisk screening patients suffering from diabetes in the rural areas of Goa with mobile clinics.

3. Eli Lilly developing a program along with the Self-Employed Women’s Association in Ahmedabad to educate and encourage rural patients suffering from tuberculosis to go for treatment.

4. Ahmedabad based Cadila Pharma setting up a dedicated rural marketing arm called ‘Explora’, which has already clocked a reported annual turnover of Rs. 50 crore.

5. Vadodara based Alembic Chemicals creating a rural business unit called ‘Maxis’.

6. Piramal Healthcare launching a pilot project in Rajasthan to take its products to rural areas where there is no proper public health system.

These are just a few illustrations and not an exhaustive list. However, the question is whether the rural marketing initiatives will continue to remain an illusion to the pharmaceutical companies in India or will get translated into a decent strategic move?

Going by various published reports, it appears that fortune still exists at the bottom of the pyramid.
In 2007 the rural markets registered a growth of over 40% over the previous year. This scorching pace of rural market growth is expected to continue in the next decades.

Moreover, according to McKinsey Report, rural markets will contribute about 27% of the total consumption of India by 2020 and by 2015, rural India will account for over 24% of the domestic pharmaceutical market from its current level of 17%.

Rural market size:

The rural markets currently contribute about 17% of U.S$8.1 billion pharmaceutical market in India. As reported in ‘India Pharma 2015’ of McKinsey,” by 2015 rural pharma market size is expected to reach U.S$4.8 billion from U.S$1.2 billion in 2005.”

Key growth drivers, as McKinsey indicated in this report, will be as follows:

• Income growth: 40%
• Medical infrastructure: 20%
• Health insurance penetration: 15%

Rural markets are currently dominated by ailments related to various types of infections. This disease pattern is expected to change by the next decade to non-infectious chronic illness, like diabetes, cardiac diseases, cancer, hypertension etc.

The opportunities in the rural markets:

‘The Fortune at the Bottom of the Pyramid’, the famous observation of the management guru C.K. Prahalad is equally apt for the pharmaceutical industry of India, where the just 35% of the population has access to affordable modern medicines.

Further, 20 million middle class households living in about 6,00,000 villages, which is almost the same as the number of middle class households residing in urban India, is currently instrumental to significant increase towards healthcare spending in rural India.

Rural market entry strategy:

Instead of transplanting the urban marketing strategy into rural India, some companies like, Novartis, Novo Nordisk and Eli Lilly, as mentioned above, have taken the community-welfare route to make the rural population aware of particular disease segments like, tuberculosis, diabetes, waterborne diseases etc together with the treatments available for such ailments.

These value added marketing strategies offer benefits to both the patients and the company concerned. The local medical practitioners, in turn, are also benefitted as they get increasing number of patients in their clinics through such disease awareness community program by the pharmaceutical companies.

Key challenges:

There are some key challenges, as well, for effective rural penetration by the Indian pharmaceutical industry, which are as follows:

• Inadequate basic healthcare infrastructure. Only 20% of total healthcare infrastructure of the country is in rural areas where over 70% population lives.

• Density of doctors per 10,000 populations in India is just 6. About seven lakh villages in India do not have doctors. As per AC Neilsen study, an average rural Indian has to travel about 6 km to visit a doctor. A Medical Representative will require travelling about 250 to 300 km every day just to meet about 10 doctors and 4 dealers.

• Villages are not well connected by proper all season roads.

• Lack of appropriate supply chain network and logistics support.

National Rural Health Mission (NRHM) – a key facilitator:

Be that as it may, greater focus of the new UPA Government on NRHM will help immensely to overcome many of these challenges in various different ways.

In the interim budget 2009, the Government has allocated U.S$ 2.35 billion for the NRHM. It is expected that this initiative, if implemented well, will help improving not only the healthcare infrastructure in rural India, but also supply of affordable medicines, in these long neglected areas.

Conclusion:

With required infrastructural support and tailor made value added marketing strategies for rural India, simultaneously delivering both preventive and curative therapies under one umbrella, it may not be difficult for the Indian pharmaceutical companies to discover ‘The Fortune at the Bottom of the Pyramid’ – a win-win situation indeed for both the ‘haves’ and a vast majority of ‘have nots’ living in India.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

To reap rich harvest from emerging global opportunities, Indian Biotech sector needs a ‘lifeline’ from the new Government… Now.

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Growth of Biotech Industry in India took a dip in 2008. It registered a turnover of U.S $2.56 billionwith a growth of 20%, over the previous year. The industry was clocking an annual growth of over 30%, before this period.According to the Association of Biotech Led Enterprises (ABLE)this growth rate can still be considered as encouraging. Some industry experts endorsed this view by commenting that 10% drop in the growth rate was mainly due to exchange rate variations impacting exports earning.However, many other do not subscribe to this explanation. They argue that global financial meltdown has caused an all-round liquidity crisis and lower demand in the biotech sector, leading to sharp decline in income generation.

It appears that even 2009 will continue to be a challenging year for the Biotech sector. As is known to many, continuous innovation is the growth driver of this sector and the main fuel for this growth driver is continuous infusion of capital, the pipeline of which is drying up during the current period of global financial crisis.

ABLE Survey on Biotech sector:

A recent survey, conducted by ABLE, reported as follows for the biotech sector:

1. 56% of revenue (U.S$ 1.44 billion) was generated from exports

2. Bio-pharma accounted for about 70% of exports

3. Bio-services are about 26% of exports with an encouraging growth of 46% followed by bio-informatics with 31% growth rate

4. The top 20 Indian firms accounted for 48 % of the total biotech market

5. Last year investments in Biotech were reported to have grown by around 21%.

ABLE expects a decent growth of the bio-pharma segment over the next five years. Bio-services and bio-generic exports to the regulated markets are expected to be the key growth drivers during this period. However, the moot question is: will the current global financial crisis act as a dampener to such bullish expectations?

Market forecast for Biotech sector:

‘Bio-spectrum’, in one of its recent reports, highlighted that with the new biotech policy of the Government of India (GoI), the sector is expected to grow to U.S$ 13-$16 billion by 2015. Serum Institute of Pune is at the top of the league table with a turnover of Rs. 9.87 billion followed by Biocon and Panacea Biotech.

Some analysts feel that the Indian biotech sector has the potential to register a turnover of U.S$5 billion by 2010 and U.S$20 billion by 2020. This is mainly due to increasing global demand for more affordable medicines in general and biotech medicines in particular. Recent introduction of ‘The Promoting Innovation and Access to Life-Saving Medicine Act’ in the US House of Representatives vindicates this point.

It is envisaged that this bill will enable the US Food and Drug Administration (USFDA) to create regulatory pathways for marketing approval of ‘bio-similar’ drugs in the USA. Many Indian biotech companies, analysts feel, are preparing themselves to make full use of this golden opportunity as soon as it comes.

How is the ‘Global Financial Meltdown’ affecting the Biotech sector?

The impact of ‘Global Financial Meltdown’ is all pervasive in the Biotech sector, all over the world, India is no exception.

Because of global liquidity crunch, availability of capital to fund the growth of this sector has become scarce, leading to most of the growth plans, if not all, are being put on hold. Fear among the Indian Biotech companies of turning an easy prey for the predators in search of a good biotech portfolio, is looming large. It was recently reported in the media that GlaxoSmithKline and Sanofi-Aventis are interested to acquire a majority stake of Shantha Biotech of Hyderabad.

In abroad, we have witnessed such instances when Roche acquired Genentech, Astra Zeneca bought MedImmune, Eli Lilly acuired Imclone and Merck took over Serno.

Why is the impact of global ‘liquidity crunch’ more on the Biotech sector?

The impact on ‘liquidity crunch’ on the Biotech sector is more pronounced because all over the world this sector is dominated mainly by much smaller companies, engaged in the drug discovery and development research. Continuous flow of fund is of utmost importance not only to fund growth of these organizations, but for their survival, as well. Private equity funding is also dwindling up pretty fast.

GoI initiatives to encourage growth of Biotechnology sector:

Mr. Kapil Sibal outgoing Minister of Science and technology of the erswhile UPA government, not too long ago, announced the plan of the GoI to build 20 more biotech parks in India, in order to provide the required infrastructural facilities to this sector and promote high quality R&D initiatives related to biotechnology.

It is indeed encouraging to note that the Department of Biotechnology (DBT) has already signed a 10-year contract with the Welcome Trust towards developing human resources of high quality, for the sector.

Emerging outsourcing opportunities:

Despite such pessimistic scenario, Indian biotech sector is bullish on the business opportunities from various types of emerging outsourcing opportunities being offered by the global pharmaceutical companies, because of their business compulsions, particularly in Contract Research and Manufacturing services (CRAMS) space.

Zinnov management consulting recently reported that outsourcing opportunities of over U.S. $ 2.5 billion will come to the Indian Pharmaceutical Industry, including its Biotech sector by 2012. This will indeed help the domestic pharmaceutical companies in a big way, as many players are now finding the transition from manufacturing ‘copy cat’ generic drugs to devising new therapies, pretty difficult.

Conclusion:

To reap a rich harvest from of all these emerging global and local opportunities, the biotech sector of India now needs a ‘lifeline’ from the new Government. Ensuring easy availability of capital will be the ‘lifeline’, at this moment of global financial crisis.

In the battle against disease let the Biotech parks of India be seen as the ‘Armageddon’, as it were, global hub to cater to the needs of poor and needy – a symbol of scientific supremacy.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Recent appetite of Global Pharmaceutical Majors for Generic Pharmaceutical Business: can it pose a threat to pure generic players?

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Last year Lehman Brothers estimated that by 2012 over 25% of the global pharmaceutical market will face competition from generics. Higher demand of generics is mainly due to the following reasons:1. Increased number of patented drugs is going off-patent.2. Cost containment and pricing pressure, especially from the Government, in the developed markets of the world.

3. Increasing number of patents is being challenged, especially in the U.S courts, on the ground of “obviousness”.

“Obviousness” is becoming a key reason of patent challenges in the U.S:

In first quarter of the last year we read about the U.S trial court making void the key patent of Yasmin, the contraceptive drug of Bayer for ‘obviousness’. This incident had compelled Bayer to revise its profit forecast downwards, for 2008.

‘Obviousness’ is increasingly becoming one of the key reasons for challenging Patents in many countries of the world, including India. Financial Times reported recently that keeping protection to all patents intact, could eventually pose to be a key challenge for the R&D based global pharmaceutical companies. Many analysts feel that the issue of “obviousness” could indeed be a threat to many U.S pharmaceutical patents, especially those, which will be considered by the court just as a ‘tweaked-up’ version of existing drugs.

As reported by ‘Chemical Weekly’, March 2008, total 338 patent challenges were recorded globally in 2008. India ranks only next to USA with a share of 21% pharmaceutical patent challenges.

Global generic pharmaceutical market is growing at a faster pace:

Prescription market in the U.S grew by just 1.3% last year to U.S$291 billion. Key factors believed to be responsible for slower growth in the U.S market are as follows:

1. Higher prescriptions for less expensive generic medicines.

2. Lower sales of higher priced new products.

3. Economic downturn has made more patients to move to generics and large number of consumers to lose their health insurance.

Similarly in the United Kingdom (U.K) generics industry supplies 64% of medicines dispensed by the National Health Scheme (NHS), though they contribute just around 30% of NHS expenditure towards medicines.

Recent reports indicate that the generic global pharmaceutical market is expected to record a turnover of U.S$ 520 billion by 2012. This market size is too lucrative to ignore by any big global pharmaceutical player.

Based on sales turnover of 2007, Teva tops the list of global generic players with a turnover of U.S$ 9.1 billion, followed by Sandoz with U.S$ 5.8 billion and Mylan/Merck with U.S$ 4.6 billion.

From India, Ranbaxy registered a turnover of U.S$ 1.7 billion, Dr.Reddy’s U.S$ 1.4 billion, Cipla U.S$ 1 billion and Sun Pharma/Taro U.S$ 900 million, during that year.

48% of the total 422.6 million prescriptions written in Canada in 2007 were for generic medicines, which registered an annual growth of 14%, reports IMS Canada. Compared to this performance, branded products in Canada recorded a growth of meager 0.2%, during this period. As a consequence, generic Canadian pharmaceutical companies like Novopharm (Teva) and Apotex recorded impressive growth of 46.8% and 18.5%, respectively, in that period.

Despite such outstanding performance of generic pharmaceuticals, overall growth of prescription drugs in Canada was at just 6.3%, the lowest in the last ten year period.

President Obama’s Healthcare Policy will encourage generics and biosimilar drugs:

It is widely believed that the new U.S administration under President Barak Obama will try to encourage speedy introduction of generics into the U.S market.

So far as ‘Biosimilar’ drugs are concerned, in 2009 Obama administration is expected to work out the road map to facilitate the introduction of ‘Biosimilar dugs’ in the U.S market. Due to inherent characteristics that biological are ‘grown and not just manufactured’, biosimilar drugs are not expected to be replica of the original products.

To find out a solution to the heated debate, an answer has to be found out regarding the extent of clinical trials that the ‘biosimilar’ manufacturers will require to undertake to satisfy the U.S FDA that these drugs are as safe as the original ones. It is believed by some that the answer to this question lies in the approach that gives regulatory authority the flexibility in ‘what it demands that asks for more evidence than is now required for generic drugs, but something less than the kind of full-blown trials required for products new to the market.’

Global pharmaceutical majors are developing appetite for generics business:

Keeping a close vigil on these developments, as it were, even Pfizer, the largest pharmaceutical player of the world, has started curving out a niche for itself in the global market of fast growing generics, following the footsteps of other large global players like Novartis, GlaxoSmithKline, Sanofi-Aventis and Daiichi Sankyo.

Is Pfizer planning to follow the business model of Abbott and Johnson & Johnson (J&J)?

As reported by the Wall Street Journal (WSJ), Mr. Kindler the CEO of Pfizer very recently commented, “We are breaking the company down into smaller units so we aren’t dependent on any single product… I am a great admirer of J&J and Abbott’s business model.”

It appears what Mr. Kindler perhaps meant by this statement is that smaller business units, like Over the Trade Counter (OTC), Vaccines, Nutrition and Animal Health can be more ‘manoeuvrable and innovative’ for faster business growth. Acquisition of Wyeth could actually help Pfizer to implement this business model.

Coming back to generic business, the recent collaborative arrangement of Pfizer with Aurobindo Pharma in India vindicates Pfizer’s recent appetite on generic global pharmaceutical business. The company is already in this business with some of its off patent products. But now like others, Pfizer seems to be strategizing to reap a rich harvest from fast-growing generic pharmaceutical business through most probably its “Established Products” business division.

Could such business model of Global Pharmaceutical majors pose a threat to pure generic players in the business?

The entry of the global pharmaceutical majors into generic pharmaceutical business, in my view, could pose a serious threat to current generic players in the business, including those who are operating from India in the ‘regulated markets’ of the world, for the the following reasons:

1. Generic pharmaceutical business is usually a high volume, relatively low margin and highly competitive business. To survive in this business of cut-throat competition will require both financial and innovative marketing expertise, as well as financial and marketing muscle, where large global players are expected to easily score over others.

2. Product price of generics of the same or similar molecules being within a price band, prescribers and payors’ preference are expected to be in favour of large global pharmaceuticals, because of corporate brand image.

3. In future, the pharmaceutical marketing model, in my view, is expected to shift from ‘marketing of only medicines’ to ‘marketing of a bundle of medicines and services’. In the changed scenario global pharmaceutical majors are expected to have a distinct strategic advantage.

4. Global Pharmaceutical majors may also use this business model as a ‘preventive strategy’ to restrict market entry of number of players for an off-patent molecule and thereby effectively contain the extent of price erosion, as the brands will go off-patent.

It will, therefore, be quite interesting to watch, what happens in the global generic pharmaceutical business in the next five to ten years. I expect a significant consolidation taking place in this market, both global and local.

By Tapan Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.