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Family owned pharma business: Separate ownership from management for long term organization interest

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A study recently conducted by ‘ASK Investment Managers’ reported, “Family Owned Businesses (FOB)” account for 60% of market cap among the top 500 companies in India and comprise 17% of the IT Industry, 10% of refineries, 7% of automobiles and 6% of telecom, in the country. Within the domestic pharmaceutical sector similar percentage, I reckon, will be much higher.

July 31, 2011 edition of  ‘The Times of India’ published an article titled, “Keep dynasties out of India Inc.” The article described the dynastic management succession of India Inc. as:

“Family-run businesses in India have rudimentary succession plans. Most follow a set formula: the heir receives an MBA from a good American university, joins the family business in mid-management, rises rapidly up the ranks and eventually takes the top job”.

Many, however, believe that, especially, for medium to large Indian companies, the financial interest of the owners will be better served if they separate ownership from management, as we find even today that just below the founder Chairman, many big Indian corporations like, Reliance, Tata, Aditya Birla Group, Godrej and even Dabur, are run by strong team of professionals.  However, such a scenario has not emerged in the domestic pharmaceutical industry of India, not just yet.

In this context, it is worth mentioning that while interacting at a CII event in New Delhi on April 9, 2011, Mr. Adi Godrej, Chairman of Godrej Group said:

“I expect that my successor will be someone from the family. Though the heads of the Group Companies are all professionals… If a family member is to be chosen, external assessment is also very important.”

On a different note, Mr. Rahul Bajaj, Chairman of Bajaj Group had earlier announced that their businesses will continue to be managed by Bajaj family members.

This brings us to the moot question, ‘is there any institution more enduring or universal than a family business?’  Before the multinational corporations, there were FOBs. Before the Industrial Revolution, there were FOBs. Before the enlightenment of Greece and the empire of Rome, there were FOBs.

However, with today’s fast changing corporate business dynamics, the same question haunts again, ‘will the FOBs prevail in this new millennium, as well?
Families are the developmental foundation for new business and future prosperity:
In many of the most productive countries, like, the United States, Germany, Spain and China, to name just a few, families control up to 90 percent of the businesses and contribute more than 50 percent of the gross domestic product. In the emerging economies, families are the developmental foundation for new business and future prosperity. Until now, the focus on ensuring prosperity through family businesses was to help them preserve wealth and survive from one generation to the next. But with changing times, the families have come to understand the requirements for long-run growth and productivity that can generate prosperity for many generations to come. A critical facet of all thriving businesses and growing economies is no secret entrepreneurship.
Need to differentiate between a family and business interest: Even in India a large number of businesses are owned and managed by families, which though always may not be considered as a weakness, as long as the families are able to:
• Differentiate between a family and business interest • Bring in a strategic focus in business, instead of trying to do everything that appears lucrative • Strike a right balance between their short and long term strategic business goals with a sharp customer focus • Build a human capital for the organization and appoint the best professionally-fit person for the key positions • Decentralize the decision making process with both authority and accountability. (Unfortunately many Indian entrepreneurs still feel that an organization can be termed as a professional one just by hiring outside professionals and keeping all major decision making authority within the family and close friends) • Institute good corporate governance within the organization.

In India, almost all of the domestic Pharmaceutical companies are family run:
Almost hundred percent of the domestic Pharmaceutical companies in India are currently family run. As most of these companies started showing significant growth only after 1970, we usually see the first or second generation entrepreneurs in this family run businesses. In most of these companies, ownership is well defined and has been very clearly established. Unfortunately, in few others, internal squabbles within the family members, make the Board of Directors irrelevant and consequently seem to be on a disastrous tail spin.

The most successful Indian Pharmaceutical Company, so far, with global foot prints is Ranbaxy. Unfortunately, in the very early third generation of entrepreneurship, the business was sold off to Daichi-Sankyo, probably for some very valid business reasons.
Even in the second generation of entrepreneurship, we have witnessed some well known Pharmaceutical Companies, like Glenmark, Elders etc. getting split up between brothers. Perhaps in future we shall see more of such splits and consolidations.
What could possibly be the reason of such changes within the family managed Indian Pharmaceutical Business? Could it be due to an overlap between family and business interests? Could it be that a professional manager at the helm, devoid of the concerned business family interest and reporting to a professional board of directors could have managed the business better? Is it then an issue of business leadership? Most probably it is.
‘Family Councils’ or ‘Super Board’?
Many ‘family owned’ companies in India irrespective of the types of business, after the organization attains a critical mass, create an informal or even formal “Family council” consisting of the family members. The “Family Councils” act as a primary link between the business family and the Board. They also play a key role in the appointments of the Board Members, the CEO and his direct reports.
Some feel that these ‘Family Councils’ with the sweeping decision making authority at the highest level that they have vested on themselves, could at times tend to act as a ‘Super Board’. When it happens, it seriously impedes the independent functioning of the Board, which may in turn prove to be counter- productive to overall governance of the business.
The situation could get further complicated, if there is a discord within the members of these all-powerful “Family Councils.”
Should a family business be professionalized in true sense?
Let us now try to deliberate, if the family decides to hand over the reign of business to a professional CEO, reporting directly to a professional board of directors, while retaining majority of voting rights, how could the family address this situation?
It is reported that at the close of 2007, the Chairman of Eli Lilly & Co. said publicly what many industry observers have been saying privately for some time, “I think the industry is doomed if we don’t change”. The accompanying statistics painted a grim picture of the traditional big pharma business model going from blockbuster to bust. The old business model – sprawling organizations, enormous capital investments, and spiraling costs, underwritten by a steady stream of multibillion blockbuster products – is simply no longer feasible.
In search for a new and more viable business models, some boards of directors have been selecting CEOs of substantially different backgrounds to lead their companies through the current industry crisis.
It’s a bold new direction and being adopted by a number of leading companies. However, entails significant risk that boards should fully understand and take steps to mitigate.
The family run Pharmaceutical Companies in India should take a note of the changing dynamics of the professionally managed global pharmaceutical business while selecting the helmsman and may wish to get some message out of those newer trends, as and when they would decide to pass on the baton to a professional CEO reporting directly to a well competent professional board of directors.
Changing dynamics of the Big Pharma . . .
Although some global pharmaceutical companies are still following the traditional succession planning model, many leading pharmaceutical companies have started adopting different new models for succession planning. I have tried to classify those models into 4 categories, as follows:
GenNext Insiders: Preferring to seek leaders with pharma experience but with new perspectives, some boards have selected youthful industry insiders to take the reins:
• GlaxoSmithKline, Europe’s largest drug maker, has designated Andrew Witty to succeed Jean-Pierre Garnier as chief executive officer in May 2008. At 43, the new CEO, who has been with the company since 1985, will be its youngest-ever leader.
• One month before Witty took over at Glaxo, Severin Schwan, 40, became the youngest-ever CEO of Roche Holding AG, where he has spent his entire career.
Dare Devils: Other boards, also seeking the combination of pharmaceutical experience and new perspectives, have sought industry insiders from functions that don’t ordinarily lead to the top job:
• In 2006, Pfizer named Jeffrey Kindler, the company’s general counsel, to succeed Henry McKinnell. Kindler in his rather short tenure as the head honcho of the company, oversaw the company’s mega cquisition of Wyeth. However, in mid December,  2010 Jeffrey Kindler retired, rather all of a sudden, reportedly not being able to cope with the work pressure and Pfizer veteran Ian Read, Head of its Biopharmaceutical operations, immediately assumed the role of President, CEO and  director in the Board of the Company.

• James M. Cornelius, who was named CEO of Bristol-Myers Squibb in September 2006, spent 12 years as CFO of Eli Lilly.
Youthful Outsiders: Pursuing a leadership model that represents both the promise of youth and of outside perspectives, some companies have selected young leaders from other industries, initiating them into the pharma industry and then promoting them to CEO:
• In 2000, Thermo Electron (now Thermo Fisher Scientific) named as COO the then 41-year-old Marijn E. Dekkers, who had previously held several executive positions at Honeywell International, and who became CEO of Thermo in 2002.
• In 2007, Novartis brought 47-year-old Joseph Jimenez aboard to lead the Novartis Consumer Health Division and named him CEO of Novartis Pharmaceuticals shortly after. He brought with him extensive experience in consumer products at ConAgra, Clorox, and Heinz.
Seasoned Outsiders: Although a 50-something executive from outside the industry would offer an attractive combination of an established record of leadership and fresh perspectives, this model has rarely been tried. The scarcity of examples is surprising, given that such a strategy is less risky than bringing in youthful outsiders, and I expect to see this new model adopted in upcoming nominations.
Enabling it to work… One will observe that the risk in all of these new representations is high but doing nothing is inherently riskier. In the meantime, I would recommend that Indian Pharmaceutical Companies who may contemplate to examine one of these models should try to explore the following three steps to ensure long-term success:
1. Employ the most sophisticated assessment techniques available:
In all four versions, the most difficult challenge is evaluation of talent.
GenNext Insiders lack the extensive leadership background that might indicate how well they will perform over the long term.
Dare Devils are difficult to assess for competencies they’ve rarely been required to exhibit.
Youthful Outsiders not only lack extensive leadership backgrounds but also pose the question of how well their talents will apply to pharma.
Seasoned Outsiders pose the same challenge.
Arguably, these new leadership models have expanded the pool of potential CEO candidates, but they clearly require boards to exercise great diligence in assessment.
2. Continually plan for succession:
After installing a new CEO, the Indian entrepreneur along with its professional Board of Directors shouldn’t assume that the company is set for the next five to ten years. In the event that the new leader fails to produce over the first 24-36 months, the board should have a Plan B already in place, as the markets will not be as patient. Defining skill sets, aligning search committees, and recruiting a new leader takes time, and the average length of CEO tenure continues to shrink. Thus through ongoing succession planning, the board can be ready for any eventuality. It is wise to engage in constant succession planning at the top in any industry, but it’s essential in an industry searching for fundamental shifts in its business models, through new leadership.
3. Create a talent pool:
For an Indian Pharmaceutical Company, in a short span – the search for CEO talent will become even more challenging. The professional board of directors will understand this today and insist that their companies take action to create a talent bench now, by bringing in executives from other industries and providing them with development plans that can potentially lead to the top job. Stakeholders and markets are unlikely to wait patiently for success in this period of profound transformation in the industry. Whichever leadership models the boards will choose, they should take every precaution to get it right the first time.
Family-run Indian Pharmaceutical Businesses will now face even a more challenging future:
The glorious history of the family run Indian Pharmaceutical Business will now face even a more challenging future. The valor and resolve of these entrepreneurs would be tested by the product-patent regime, the ever evolving product portfolios, the environment of intense competition and consolidations.
Crossing the second generation of a ‘family-run’ business is critical:
In most of the family-run pharmaceutical businesses, successfully crossing the second generation of promoters appears to be critical for the ongoing success of the organizations. A large majority of family-run pharmaceutical businesses in India is still run by the first generation of promoters. Those companies, including very large ones like Ranbaxy or even the medium to smaller size promoter driven pharma businesses, who are or were with their second generation of promoters, had faced or could face their own problems in various areas including the ownership issues or in passing on the baton to a competent successor. In that process some of these very successful companies have even changed hands.
In addition, some other well-reputed promoter driven pharmaceutical businesses are ‘going south’ in their business performance, mostly because the second generation of promoters are not collectively pulling on to the same direction and in that process creating confusion within the management of the organization. Upcoming third generation, though not yet ready to run the businesses, tend to throw their weight in the critical decision making process, endangering very survival of the business. This could put the organization in a difficult to control deadly ‘tail-spin’, as it were.
Conclusion:
In a situation like this, with increasing global business opportunities, together with the new IPR regime, Indian Pharmaceutical entrepreneurs should separate the ‘business interest’ from the ‘family interest’, appoint a professional CEO, reporting directly to a competent and professional board of directors, to face squarely the “Challenge of Change” and be accountable to deliver the agreed deliverables to the stakeholders of the business.

A fair and transparent succession model is a crucial element of good corporate governance in the family run pharmaceutical businesses in India, just as any other industry sectors. Someone in this context said, “the market is a ruthless arbiter: it will reward companies that rise above family’.

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.

The importance of ‘Supply Chain Integrity’ in ‘Global Supply Chain Management (GSCM)’ process

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Since the last decade with increasing pace of change, mostly in the western world has accelerated the globalization process in the Pharmaceutical Industry across the world. The key drivers to these changes are as follows:

1. A large number of patent expiration hugely impacting the top-line growth
2. Research pipeline is drying-up
3. The cost of bringing a new molecule from ‘the mind to market’ has now touched around US $ 1.75 billion
4. Regulatory requirement to get the marketing approval is getting more and more stringent, basically for patients’ safety, making clinical development more expensive and time consuming
5. Cost containment measures of various governments around the world is putting an immense pressure on product price, significantly affecting the profit margin

Changing Business Process:

All these factors are triggering other sets of consequential strategic events of enormous significance. Among those, following key corporate strategic steps indeed stand out:

1. More mergers and acquisitions of various size and scale to achieve both revenue and cost synergy, with new products and newer types of resources

2. Transformation in the fundamental operating models, e.g. R&D focused companies like Pfizer, GSK, sanofi aventis are extending their business interest in the pharmaceutical generics space, as well

3. Increasing globalization process and more focus on the emerging markets of the world like, Brazil, Russia, India, China, Turkey, Mexico

4. Growing emphasis on partnering, as we see in India, like for example, between Pfizer and Aurobindo, Claris and Biocon, GSK with Dr. Reddy’s Lab (DRL), AstraZeneca with Torrent, sanofi aventis with Zydus Cadila etc.

5. Global outsourcing in the ‘Contract Research and Manufacturing Services (CRAMs)’’ space

Increasing importance of GSCM:

In today’s evolving scenario, Global Supply Chain Management (GSCM) process has assumed a key importance. The need to reduce costs significantly and minimize the risks associated with the procurement activities of the business, have compelled many innovator companies to extend the activities of their Supply Chain management process to the Global arena, instead of just confining to the local space.

The changing requirements of all hues and types in various areas of the business, like in sales and marketing, manufacturing, research and development etc., have created a challenging, if not a rather volatile operating environment.

Such an evolving scenario will make the GSCM to increasingly play a key role in the overall business process of an organization to ensure that the right products are available at the right place, at the right time, at a right price and following the right processes…Always.

Emerging GSCM hubs:

There is at the same time, a new trend emerging to provide world class outsourcing services, especially from countries like India and China. These initiatives, which in turn will make these two countries the key global outsourcing hubs, are definitely not due to just cost arbitrage. It encompasses increased integrated value proposition for the overseas customers. Cost is just one of the key factors, others being quality, speed and suppliers’ integrity and reliability. Nothing in this value chain is mutually exclusive. GSCM will need to go through a set of complex algorithms to strike a right balance between all these vital parameters.

Importance of GSCM integrity:

In the days to come by, one of the greatest challenges in GSCM will be to improve the supply chain integrity and security. An appropriate definition of integrity for supply chains could be:

“…the requirement that the system performs its intended function in an unimpaired manner, free from deliberate or inadvertent manipulation.”

A safe and secure supply chain is definitely not a new requirement. However, in the list of priority of importance, it has now come up significantly, compared to what it was just a few years back. Though the issue of improving supply chain integrity and security has now assumed global importance, unfortunately, any uniformity in national regulatory requirements for this vital parameter is glaringly missing. Such a lack of regulatory uniformity clearly highlights that the pharmaceutical companies, engaged in manufacturing, are still not aligned with each other on what will be the right way to ensure absolute integrity, safety and security in the supply chain operating process to guarantee patients’ safety.

Globally, many Pharmaceutical Companies are getting engaged in improving supply chain integrity, security and patients’ safety with the introduction RFID. This, as many may know, is an inventory tracking system for improved product traceability, which in turn extends some protection to its customers with genuine products from the genuine pharmaceutical manufacturers. It is worth noting that RFID is just one component of overall patients’ safety initiative.

Along with high tech measures like RFID, to improve supply chain integrity, I reckon, pharmaceutical companies will need to further enhance their respective ‘supplier qualification process’. The process of supplier audits should include all important and critical areas of manufacturing, testing and quality, related to each individual product.

Stringent supplier qualification standard is of prime importance:

Only a stringent supplier qualification process will be able to guarantee integrity, safety and the quality of outsourced products from the suppliers.

An example of a GSCM related tragedy:

Before I conclude, I would like reinforce my recommendation with the example of the ‘Heparin tragedy’ where the supply chain integrity was violated and seriously challenged thereafter.

In the beginning of 2008, there were media reports on serious adverse drug events, some even fatal, with Heparin, a highly-sulfated glycosaminoglycan of Baxter International. Heparin is widely used as an injectable anticoagulant. Baxter voluntarily recalled almost all their Heparin products in the U.S. Around 80 people died from contaminated Heparin products in the U.S. The US FDA reported that such contaminated Heparin was detected from at least 12 other countries.

A joint investigation conducted by Baxter and the US FDA ascertained that the Heparin used in batches associated with the serious adverse drug events was contaminated with over sulfated chondroitin sulfate (OSCS). It was reported that his Heparin was supplied to Baxter by Scientific Protein Laboratories, Changzhou, China.

The cost of OSCS is just a fraction of the ingredient used in Heparin. Being driven by the criminal profiteering motive the manufacturers in Changzhou, China had reportedly used OSCS for highly-sulfated glycosaminoglycan as the former could not be detected by the pharmacopeia test in use, until 2008. This is because OSCS mimics Heparin in the pharmacopeia test. Post this criminal event, at present, all over the world more specific pharmacopeia test methods have been adopted for Heparin.

Conclusion:

Let us all ensure that such a tragedy does not get repeated in future due to a breach in the supply chain integrity, anywhere in the world…for the patients’ sake.

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.

Create, Deliver and Realize maximum value from a new product launch with an innovative Supply Chain Management system

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Like in many other industries, effective supply-chain management (SCM) in the pharmaceutical industry involves a systematic process, spanning from procurement of raw, packaging and other related materials, converting those materials into finished goods stock keeping units (SKUs), inventory management of both raw and packaging material, as well as finished goods and finally the distribution of these SKUs to wholesalers/ stockists/ distributors, C&F Agents.Now a days, with intense cost containment pressure all around, effective SCM is gaining a critical importance in the overall business process of the pharmaceutical companies. Besides all these, SCM also plays a very important role in maintaining regulatory compliance and help preserving product quality and safety standards.Key deliverables of a good SCM system:

The key deliverables of a good SCM system are to ensure availability to the customers:

Of RIGHT Product
At RIGHT Time
In RIGHT Quantity
At RIGHT Place
At RIGHT Price and
Of RIGHT Quality

However, in this article, I shall not dwell on these well known and basic parameters. Instead I shall deliberate on three other very important aspects of the supply chain management for your consideration:

1. What will a great SCM system mean?
2. What is the emerging role of SCM system in launching a new product
3. Innovation and measuring SCM effectiveness

1. What will a great SCM system mean?

In my opinion this will cover three important points:

- The SCM system should have an excellent feel of demand fluctuations and its robust measurement system.
- The cost of running an efficient SCM system should be kept at its minimum.
- The SCM structure should always be without any organizational flab.

I repeat, to be effective, a good SCM System must always be demand driven. Customer demand must be ascertained and quantified first and only then company specific supply chain requirements to be worked out and not the other way.

Various research studies confirm that there are certain common qualities for the demand-driven companies, namely:

- Reaction time to gauge and respond to the customer needs and demand is very quick
- A robust IT infrastructure is in place to facilitate delivery of the key Supply Chain
deliverables

SCM helps in value creation, value delivery and the value realization process:

As we know that value creation is the first step for a demand driven organization, followed by value delivery and value realization.

Pfizer Inc ranked high towards these efforts with Lipitor. If by any chance Lipitor gets out of stock, doctors usually do not switch over to other statins; the patient may possibly come back to the Pharmacy next day and hope he/she will get Lipitor. Such type of value creation for the product had made Lipitor over US$14 billion brand today despite the presence of other newer statins in the market and a very efficient SCM system of Pfizer Inc.

In an ideal scenario there should be an overlap between product management, demand management and the SCM systems.

Need for interaction between SCM and Product Development/Management Teams:

In my view, some sort of close interaction between the Supply Chain with Product Development and Management teams is very important for any innovative company to succeed in the market place. This I reckon will be unavoidable in not so distant future. Currently there could be some such link, as mentioned above, existing in some organization, but certainly not what it ought to be.

A robust IT system is a major requirement:

A robust IT system is a major requirement for such interaction process between Product Management, Demand Management and the SCM. Those companies, which will be unwilling to invest in a robust and rapidly scalable IT infrastructure that provides process integrity, transaction reliability, data visibility and intelligence for decision making may find it difficult to implement such an important business process.

2. The role of SCM System in launching a New Product:

In the twenty first century, as we all are aware that quality of innovation determines the sharpness of the competitive edge of any company in the marketplace. This aspect of competitiveness will be increasingly more and more important. Unfortunately, despite having this cutting edge many highly innovative companies have been experiencing great problems while launching their innovative new products in the market.

As we have seen from the recent media reports, two examples indeed stand out:

- Delays in the launch of Airbus 380 wiped off five billion euros of the value of its parent
company.
- Another important example was the enormous problem that Sony faced to make adequate
number of Play Station 3 consoles for the holiday season.

These illustrations indicate that conceptualizing, developing and finally launching new products is becoming increasingly more and more difficult. It is now widely believed that the key issue is inadequate understanding of the critical role that the supply chain plays in the innovative process of an organization.

SCM – a key success factor for a new product launch:

In most of the companies, the world over, the marketing team decides on the product launch decisions. Fortunately now we have started understanding though gradually but surely that the success of a new product launch very heavily dependent on effective co-ordination on all aspects of the supply chain from design to sourcing to manufacturing to distribution.

Therefore, in order to succeed with a new product launch, concerned company will need to ensure that Product development, Sales and Marketing, operations planning and supply chain work very closely together as a coherent team. Such co-ordination between these functions is now an absolute imperative. Close co-ordination even within the various activities of SCM systems play a critical role on the quality and nature of an innovative product or services and thereafter for an effective logistic support to the finished new products.

3. Innovation and measuring SCM effectiveness:

Quality of innovative ideas implemented in various levels of the SCM process along with the operational excellence will determine the ultimate effectiveness of a SCM system of a company.

Operational excellence is usually measured through the effectiveness of various parameters set for the same like. These parameters may include order fill rate, cost of the SCM process followed and the speed that it adds right from the material procurement process to the delivery of required SKU’s right up to the retail chemists.

Similarly effectiveness of innovative steps taken in the SCM process is measured by many on parameters like, the return on new product development and the speed of launch.

Conclusion:

To make a new product launch successful, companies will increasingly require to work out not only an effective process for launch, but will also need to ensure that marketing, finance, operations and SCM with innovative steps built into it, work very closely together to help create, deliver and realize both tangible and intangible value of a new product, most effectively, to contribute significantly to the stakeholders’ value.

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

Dire need of quality ‘Cold Chain’ infrastructure for pharmaceuticals in India and its efficient management through Public Private Partnership initiatives.

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Why Cold Chain for pharmaceuticals?Drugs are complex entities and many of these are temperature sensitive in nature. This entails them requiring precise and continuous temperature conditions in transit in order to retain their potency and resultant efficacy.Many life saving drugs including biotech products and vaccines fall under such category. Any break in the cold chain process for such drugs can lead to immediate denaturing or deterioration in their quality parameters. It is imperative that a careful consideration is given by all concerned including government agencies mainly at the seaports and airports while providing storage space at their warehouses for such drugs.

Current bottlenecks and lack of proper cold chain infrastructure:

Currently in India there are bottlenecks at the Airports and Seaports that include authorities not being able to assure cold room space despite getting advance notices from the pharmaceutical companies about the possible unloading of large consignments of temperature sensitive products.

Some of the other gaps include improper training and refresher courses for the handling staff who handle such products at the ports. Storage of Pharmaceutical products along with meat and food products is against the GMP norms.

Cold Chain medicines require different and special temperature control:

Cold Chain Medicines require special temperature controlled Cold storage. There are two commonly recommended temperatures specified on labels of cold chain products:

1. Products requiring temperature between 2 to 8 degree centigrade

2. Products requiring temperature around -10 to -20 degree centigrade

Cold Chain should be an uninterrupted series of storage and distribution activities which will maintain required temperature range of 2 to 8 degree centigrade or -10 to -20 degree centigrade as per products requirements.

Proper Cold Chain Management system is essential to ensure right product quality:

Proper Cold Chain Management of pharmaceuticals will ensure that the right quality of such products is maintained not only during storage but during transportation also to meet regulatory specifications. There is a greater focus and stringent regulatory guidelines/standards are in place today in the developed markets around the world for strict adherence to right storage and transportation process for cold chain sensitive pharmaceuticals.

It should be kept in mind always that Cold Chain products are mostly sensitive biological substances that can become less effective or lose potency if not properly stored.

Some examples:

Products requiring 2 to 8 degree storage will not be effective if:

i. They are frozen or stored below 2 degree centigrade
ii. Exposed to temperatures above 8 degree centigrade
iii. Exposed to direct sunlight or fluorescent light

The loss of potency is cumulative and irreversible. If products are exposed to conditions outside the established range, the quality may be adversely affected, reducing their assigned shelf life, diminishing their effectiveness or making them ineffective. The exposed product may look just as the same – the loss of potency may not be visible.

World class SOPs for Cold Chain storage and handling facilities are essential :

Quality of storage and handling of Cold Chain Pharmaceutical products at Airports and Seaports in the course of export from or import into India requires special care and attention. Since multiple products are stored and handled at Seaports/ Airports, personnel may not be able to appreciate the special need for Cold Chain pharmaceuticals’ storage & handling. Thus, there should be Standard Operating Procedures (SOPs) for storage and handling of pharmaceuticals laid down by the Port Management authorities, so that the personnel handling pharmaceuticals strictly adhere to the pre-set norms.

Pharmaceutical products requiring cold chain facilities are rapidly growing in numbers:

Pharmaceutical Products for which efficient Cold Chain facilities are required are rapidly growing in numbers. In their movement across the supply chain from the manufacturers to the patients, the medicines are handled and stored by various stakeholders like transporters, Airports, Seaports, Distributors, Stockists, Retailers etc. Since the storage and handling of Cold Chain Pharmaceuticals Products are unique, an uninterrupted Cold Chain is to be maintained in the entire supply chain network without any discontinuity, even for a short while. This will ensure that medicinal products of high quality reach the patients, always. it is, therefore, very important for all concerned stakeholders to ensure maintenance of proper Cold Chain facilities.

Government plan of “Pharma Zones” in India:

The Drugs Controller General of India (DCGI) has planned a separate dedicated controlled environment – ‘Pharma Zone’, within the cargo premises at Airports and Seaports for proper storage of Pharmaceutical products in line with Good Manufacturing Practices and Good Distribution Practices so as to assure right quality, safety and efficacy of Pharmaceutical products, which are to be either imported or exported.

Currently no ‘Pharma Zones’ in India:

At present there are no ‘Pharma Zones’ in India. However, Mumbai International Airport Private Limited (MIAL) has created 4 new cold rooms for pharmaceuticals. It has been reported that the new Cargo Terminal of Delhi International Airports Limited (DIAL), which is expected to be commissioned later in the year, will have around 4000 square metres of additional cold room capacity compared to the current cold room capacity of 400 square metres. Similarly, MIAL is also planning for a dedicated Cold Room facility for Pharmaceutical Products in their new set–up.

Need for outsourcing Cold Chain services:

In the developed markets of the world there are private cold chain storage and third party logistics providers to offer contract logistics and storage services especially to cater to the growing demands of the Biopharmaceutical segment, which is now the fastest growing manufacturing sector within global pharmaceutical industry.

It is expected that spend of the Biopharmaceutical companies towards outsourcing of cold chain facilities will grow by over 10% to 15% for the next three to five years in the developed markets. India being the second largest producers of Biopharmaceuticals after China, similar opportunities exist in the country.

In India some renowned international courier companies like DHL and World Courier have been reported to have developed an efficient cold-chain management process, especially for the pharmaceutical companies to properly maintain the cold chain in their logistics network.

Conclusion:

A world class cold chain infrastructure and its efficient management within the country will help immensely to Indian domestic pharmaceutical companies, as well, as they are exploring more and more opportunities to export Biopharmaceuticals in the global market. To achieve this objective modern cold chain warehouses and their efficient management as per regulatory guidelines will play a key role in ensuring right product quality standard that India will export.

Over a period of time cold-chain management practices of global standards will be required to achieve this goal. Currently for both import and export of cold-chain sensitive pharmaceuticals, as indicated above, the available infrastructural facilities pose to be one of the key challenges encountered by the industry to maintain high product quality during shipment and warehousing at the ports. Individual pharmaceutical companies like Eli Lilly, India have their own vehicles equipped with cold-chain management systems for transportation of their cold chain sensitive products.

Greater initiative by the DCGI in particular in this area, in collaboration with the Indian pharmaceutical industry, sooner, is absolutely essential. For the patients’ sake.

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.