INDIAN PHARMA INDUSTRY CHANGING DYNAMICS_An essay by Pragadeeshwari S.

Introduction

India enjoys a significant position in the worldwide pharmaceuticals sector. The nation also has a huge pool of engineers and scientists having the capability to steer the business forward to a much greater degree. Currently over 80 percent of these antiretroviral drugs used worldwide to fight AIDS (Acquired Immuno Deficiency Syndrome) are provided by Indian pharmaceutical companies.Indian pharmaceutical market is the next biggest concerning quantity and thirteenth largest concerning value, according to a report by Equity  master.India is the biggest provider of generic modifications internationally using all the Indian generics ccounting for 20 percent of global exports concerning volume.Naturally,consolidation is now a significant feature of the Indian pharmaceutical market place as the business is extremely fragmented.            

           

Developments in medical technology have long been confined to procedural or pharmaceutical advances, while neglecting a most basic and essential component of medicine: patient information management. - John Doolittle

Indian Pharmaceutical Industry.

• The pharmaceutical industry in India ranks 3rd in the world terms of volume and 14th in terms of value.India’s cost of production is nearly 33 per cent lower than that of the US
• Labour costs are 50–55 per cent cheaper than in Western countries. The cost of setting up a production plant in India is 40 per cent lower than in Western countries
• Cost-efficiency continues to create opportunities for Indian companies in emerging markets & Africa
• India has a skilled workforce as well as high managerial & technical competence in comparison to its peers in Asia

India has the 2nd largest number of USFDA-approved manufacturing plants outside the US

• India has 2,633 FDA-approved drug products. India has over 546 USFDA-approved company sites, the highest number outside the US

·       Growing per capita sales of pharmaceuticals in India offers ample opportunities for players in this market
Per capita sales of pharmaceuticals expanded at a CAGR of 17.6 per cent to US$ 33   in 2016
Economic prosperity would improve affordability for generic drugs in the market & improve per capita sales of pharmaceuticals in India

·       The UN-backed Medicines Patent Pool has signed six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus Labs, allowing them to make generic anti-AIDS medicine TenofovirAlafenamide (TAF) for 112 developing countries.

                                                                        

Now is not the time to give greater protections to pharmaceutical companies that put unsafe drugs like Vioxx on the market. Such protections have nothing to do with the liability insurance crisis facing doctors and should be stripped from this bill. - Dennis Cardoza

Present Indian Pharma Industry Scenario         

The Indian pharma industry, which is expected to grow over 15 per cent per annum between 2015 and 2020, will outperform the global pharma industry, which is set to grow at an annual rate of 5 per cent between the same period!. The market is expected to grow to US$ 55 billion by 2020, thereby emerging as the sixth largest pharmaceutical market globally by absolute size, as stated by Mr Arun Singh, Indian Ambassador to the US. Branded generics dominate the pharmaceuticals market, constituting nearly 80 per cent of the market share (in terms of revenues). The sector is expected to generate 58,000 additional job opportunities by the year 2025. *
India’s pharmaceutical exports stood at US$ 16.4 billion in 2016-17 and are expected to grow by 30 per cent over the next three years to reach US$ 20 billion by 2020, according to the Pharmaceuticals Export Promotion Council of India (PHARMEXCIL).

Competition makes things come out right. Well, does that mean in health care? More hospitals so they compete with each other. More doctors compete with each other. More pharmaceutical companies. We set up war. Wait a minute, let's talk about the patient. The patient doesn't need a war. - Donald Berwick

Indian companies & Approvals:

Indian companies received 55 Abbreviated New Drug Application (ANDA) approvals and 16 tentative approvals from the US Food and Drug Administration (USFDA) in Q1 of 2017. The USFDA approvals are expected to cross 700 ANDA in 2017, thereby recording a year-on-year growth of 17 per cent. The country accounts for around 30 per cent (by volume) and about 10 per cent (value) in the US$ 70-80 billion US generics market.

            India’s biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and bioinformatics is expected grow at an average growth rate of around 30 per cent a year and reach US$ 100 billion by 2025. Biopharma, comprising vaccines, therapeutics and diagnostics, is the largest sub-sector contributing nearly 62 per cent of the total revenues at Rs 12,600 crore (US$ 1.89 billion).

           

Pharmaceutical companies are enjoying unprecedented profits and access with this Administration. Yet the Republicans' prescription drug plan for seniors has been a colossal failure, and over 43 million Americans wake up every morning without health insurance. - Jim Clyburn

Indian Pharma Industry Investments:

            The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for manufacturing of medical devices subject to certain conditions.

The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 14.71 billion between April 2000 and March 2017, according to data released by the Department of Industrial Policy and Promotion (DIPP).

When we seed millions of acres of land with these plants, what happens to foraging birds, to insects, to microbes, to the other animals, when they come in contact and digest plants that are producing materials ranging from plastics to vaccines to pharmaceutical products? - Jeremy Rifkin

Indian pharmaceutical firm, Eric Lifesciences Pvt Ltd, has launched its initial public offering (IPO) worth Rs 2,000 crore (US$ 311 million) in June 2017.

Indian pharmaceutical company, Cadila Healthcare Ltd, is planning to raise Rs 1,000 crore (US$ 155 million) via a qualified institutional placement (QIP) of shares shortly.

  Capital International Group, a private equity fund, has acquired a three per cent stake in Intas Pharmaceuticals Ltd from ChrysCapital Llc for a consideration of US$ 107 million, thereby valuing Intas Pharma at approximatively US$ 3.5 billion.

Aurobindo Pharma Ltd, has acquired four biosimilar products from Swiss firm TL Biopharmaceutical AG, which will require TL Biopharmaceutical to supply all the developmental data for four molecules, which will be developed, commercialised and marketed by Aurobindo Pharma

Piramal Enterprises Ltd acquired a portfolio of spasticity and pain management drugs from UK-based specialty biopharmaceutical company Mallinckrodt Pharmaceuticals, in an all-cash deal for Rs1,160 crore (US$ 171 million).
Aurobindo Pharma has bought Portugal based Generis Farmaceutica SA, a generic drug company, for EUR 135 million (US$ 144 million).

Sun Pharmaceutical Industries Ltd, India’s largest drug maker, has entered into an agreement with Switzerland-based Novartis AG, to acquire the latter’s branded cancer drug Odomzo for around US$ 175 million.
Kedaara Capital Advisors LLP, a private equity (PE) firm, plans to invest Rs 430 crore (US$ 64.5 million) to acquire a minority stake in Hyderabad-based diagnostics chain Vijaya Diagnostic Centre Pvt Ltd.
Sun Pharmaceuticals Industries Limited plans to acquire 85.1 per cent stake in Russian company Biosintez for US$ 24 million for increasing its presence in Russia through local manufacturing capability.
Abbott Laboratories, a global drug maker based in US, plans to set up an innovation and development center (I&D) in Mumbai, which will help in developing new drug formulations, new indications, dosing, packaging and other differentiated offerings for Abott’s global branded generics business.

There are opportunities in the pharmaceutical industry, the insurance industry, so yes back home we are talking about investment opportunities in Morocco for various sectors of our economy and we will continue to do that. - Donald Evans

Indian Government in Indian Pharma Sector:

                       The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In addition, the thrust on rural health programme, lifesaving drugs and preventive vaccines also augurs well for the pharmaceutical companies.
The implementation of the Goods and Services Tax (GST) is expected to be a game-changer for the Indian Pharmaceuticals industry. It will lead to tax-neutral inter-state transactions between two dealers, thereby reducing the dependency on multiple states and increasing the focus on regional hubs. It is expected to result in an efficient supply chain management, which is expected to reduce its cost considerably. The cost of technology and investment is expected to reduce on account of tax credit which can be availed now on the duties levied on import of costly machinery and equipment.

               

This change to a higher phase of alert is a signal to governments, to ministries of health and other ministries, to the pharmaceutical industry and the business community that certain actions now should be undertaken with increased urgency and at an accelerated pace. - Margaret Chan

Pharma Vision 2020:

Some of the initiatives taken by the government to promote the pharmaceutical sector in India are as follows:
The Government of India unveiled ‘Pharma Vision 2020’ aimed at making India a global leader in end-to-end drug manufacture. Approval time for new facilities has been reduced to boost investments.
The government introduced mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the issue of affordability and availability of medicines.
Mr Ananth Kumar, Union Minister of Chemicals and Petrochemicals, has announced setting up of chemical hubs across the country, early environment clearances in existing clusters, adequate infrastructure, and establishment of a Central Institute of Chemical Engineering and Technology.
Road Ahead

We've had a long wrangle with the pharmaceutical industry about parallel imports, and what we were saying is we want to make medicines and drugs as affordable as a possible to what is largely a poor population. - Thabo Mbeki

Future Indian pharmaceutical market:

         The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025, driven by increasing consumer spending, rapid urbanisation, and raising healthcare insurance among others.
Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers that are on the rise.

Pharmaceuticals have become an increasingly important part of modern medicine, and our seniors shouldn't have to worry about whether they can afford the medicines they need to stay healthy and maintain their independence. - Michael K. Simpson

Traditional models

The historical innovation pathway for pharmaceutical companies has involved the development of small-molecule drugs following an "integrated model," according to Tariq Sadat, a doctoral student studying with Roslyn Russell, a professor in the School of Economics, Finance, and Marketing at RMIT University in Australia. "For many years, pharmaceutical companies leveraged organic chemistry-based research and manufacturing, and with government support for intensified R&D programs that facilitated the application of microbiology, enzymology, and biochemistry, built the capability to produce and sell prescription drugs to doctors and hospitals," he says. As a result, pharmaceutical companies became very large, highly integrated organizations with R&D, manufacturing, marketing, and distribution capabilities that were very R&D-intensive and innovative, focusing on target-based drug discovery.

                  Biopharmaceutical companies have not followed this model, however. With the discovery of DNA and genetic engineering, biotechnology became a research tool for drug discovery and the development of recombinant protein drugs, with many biotechnology companies founded to commercialize biotechnology developed at universities, according to Sadat. "Lacking capital and organizational capabilities, many of these startups formed collaborations with large pharmaceuticals firms, and thus adopted a ‘collaborative model’ for their innovation," he explains. The large drug companies benefited from this collaborative approach as well, often acquiring smaller biopharmaceutical companies and achieving the development of blockbuster drugs. As a consequence, Sadat notes that they grew into the "Big Pharma" companies we know today.

  Need for change

Due to the changing market dynamics of the pharmaceutical industry, however, the integrated model is no longer effective and even limited collaborations do not provide the level of innovation required today. "Competition from low-priced generics, demands from consumers and other payers, changing government policies particularly with respect to reimbursement, the needs of emerging markets, spiraling R&D costs, and declining R&D productivity are all Healthcare reforms and drug price controls are perhaps the most important factors. "Obtaining regulatory approvals for a drug used to be the biggest hurdle to market entry; today it is the reimbursement criteria set by payers combined with pricing challenges, such as Medicare discounts in the US, price caps in India, ‘value-based pricing’ in the UK, reference pricing in Germany, and price-controlled drugs in China," Sadat observes. Complicating the picture is the expected decline in demand in the US and Europe, with a concomitant increase in the global market share for emerging markets, which can be challenging for pharmaceutical companies to navigate. "Weak regulatory controls and intellectual property protection, a lack of health insurance programs, and the much reduced per capita drug spend in emerging markets all affect innovation to some degree," says Sadat. The fact that numerous blockbuster drugs have already or will lose patent protection by 2016 is contributing to the decline in drug spending in mature markets, although low-priced generics will benefit. Sadat also notes that specialty drugs (biologics, orphan drugs) for cancer, HIV, hepatitis C, and rare diseases are the few drug classes for which novel therapies will continue to experience strong growth.

“Childhood vaccines are one of the great triumphs of modern medicine. Indeed, parents whose children are vaccinated no longer have to worry about their child's death or disability fromwhooping cough, polio, diphtheria, hepatitis, or a host of other infections.” - Ezekiel Emanuel

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The open innovation model

To create value under these changing market conditions, Big Pharma companies are adopting an open innovation model in which value creation is achieved by exploiting evolving scientific and technological knowledge from a vast array of sources, including academic researchers, other biotechnology and pharmaceutical companies, government institutes, independent innovation centers, consultants, and even companies in other industries. Some specific activities, according to Sadat, include mergers, acquisitions, and in-licensing deals to extend product portfolios with specialty drugs; expanding R&D, manufacturing, and sales networks in emerging markets through capital investments, joint ventures, and collaborations with local companies; partnering with generic manufacturers, particularly in emerging markets; and collaborating with insurance companies to identify treatment-responsive patients and to share the risks associated with new drug development.

“One of the biggest challenges to medicine is the incorporation of information technology in ourpractices.” - Samuel Wilson

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The rise of the academic medical center

One type of external resource that pharmaceutical companies are increasingly turning to is academic medical centers that offer a range of support, from basic research to technology development to specialized services. Wake Forest Baptist Medical Center realized about two years ago that the approach to innovation taken by the pharmaceutical industry was changing, and that the center could position itself as a key resource by expanding its capabilities. "We wanted to be at the forefront of this emerging new trend of open innovation in the pharmaceutical industry, working closely with industry to develop and commercialize high-value products," says Eric Tomlinson, chief innovation officer and president of Wake Forest Innovation Quarter. "At Wake Forest, we’re committed to accelerating the transformation of both our own research discoveries and those of industry into viable commercial products by partnering with pharmaceutical companies to bring to the marketplace therapeutics and devices that will save lives and improve health care worldwide," he adds.

           Academic medical centers such as the one at Wake Forest are attractive to industry because they have a large knowledge base and expertise, and often, established contacts already exist between faculty members and industry. What is changing is the extent of support that these centers can provide to a pharmaceutical company in terms of taking fundamental discoveries and converting them into commercial products that can benefit patients. Wake Forest has been investing heavily over the past two years to build on its extensive scholarship base in order to help companies create technologies based on that expertise, including the addition of special "We are focused on three core areas¾scholarship, innovation, and services¾and are engaging with industry through direct faculty-company connections, through business development efforts, and through web-based interactions. We have also invested effort into developing systems to support not only easy access, but simplified arrangements, such as efficient licensing and partnership terms, so that working with Wake Forest Baptist Medical Center is as seamless as working with an internal R&D group," he adds. Keeping the legal aspects as simple as possible is critical for ensuring the success of these relationships, given the competitive nature of the pharmaceutical industry, he notes.

. “Medicine is the restoration of discordant elements; sickness is the discord of the elements infused into the living body.” - Leonardo da Vinci

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            Key to success

"The key change in today’s pharmaceutical industry is that the value of pharmaceutical innovation is no longer embodied in new drugs and new markets alone, nor is it commanded by pharmaceutical companies. Rather, the benefits of new drugs (and thus pharmaceutical innovation) are those perceived by users, and this perceived value is jointly created by pharma companies and users. In developed markets, the focus will be on high-priced specialty drugs for chronic and rare diseases, with low-priced generics preferred otherwise, while in emerging markets, large-volume, low-cost generics will dominate. Big pharma’s success with respect to innovation lies in finding ways to capture value based on these market opportunities and requires a shift from product-centric innovation towards market-centric innovation," Sadat concludes.

              

“He who studies medicine without books sails an uncharted sea, but he who studies medicine without patients does not go to sea at all.” - William Osler

Conclusion

3             Declining effectiveness  of  current sales  model will only lead to emergence of newer approaches in pharma selling .Though the approaches will vary vastly from company to company , the trend has already started. Pharmaceutical players should seriously start evaluating their options and envisage how their sales models evolve in the next 10 years to maintain their competitive edge.No single business model may suffice in future . The future will belong to hybrid  business models with different structures co-existing  together.

Service to the humanity is the service to the god.