A race to the bottom on price must not mean low quality, high volumes

Professor (Dr) Hilary Thomas, Partner and Chief Medical Officer – Healthcare and Life Sciences Advisory and Global Centre of Excellence, KPMG in the UK gives Viveka Roychowdhury a glimpse of some of the trends to watch out for in 2019

With governments in key markets like the US, UK and EU becoming more focussed on reducing the healthcare burden of aging populations, what are the challenges facing Indian life sciences companies?

Cost pressures mean that cutting costs will be very important – and it is simpler to cut the cost of drugs rather than the complexity of making savings across the system. Therefore there are pricing challenges which will feed through to Indian companies doing business in the US and EU.

How can Indian life sciences companies move from a pure generics volume play in key markets like the US, etc to a more differentiated value proposition?

There needs to be a focus on quality in order to compete globally and there will need to be a focus on how outcomes and value based pricing/ funding models would apply.

Governments, and consumers, want high quality patented medicines at low cost of generics. How can Indian pharma companies meet these two seemingly paradoxical demands?

Again – focus on quality to justify better prices but also understand where value can be created taking advantage of the lower cost base in India.

The government in India is hoping that generics will improve access to medicines through schemes like Ayushman Bharat. But how can they make this an economically viable proposition for pharma companies, both Indian as well as MNCs who might want to participate in such schemes but also have to answer to shareholders?

This will inevitably create a tension and achieving both of these will require navigating a tightrope. It will be important not to compromise on quality so a race to the bottom on price must not mean low quality, high volumes.

What trends do you see unfolding in terms of future business and operating models and strategies that will be or are being adopted by Indian companies to navigate these challenges?

Pharma companies need to be more agile and able to acquire, divest and change more rapidly in terms of nimble operating models. Partnering – with smaller companies, CROs, academia and start-ups will be of increasing importance to speed up the move from discovery to licensed drugs.

With thinning margins, what will be the fate of pharma R&D?Will we see more pharma companies divesting, partly or fully, their R&D portfolios and if so to what kinds of players?

Inevitably – see our R&D 2030 Thought Leadership – R&D will be the product of more collaboration and insourcing rather than keeping R&D in house as has historically been the case.

How can stakeholders incentivise R&D into disease areas where not much research is being done (like for tropical diseases etc)?

In some areas – such as developing antibiotics – there has been a failure of the model as we do not see enough new molecules coming through. However, going forward more and more diseases will be ‘rare’ due to greater personalisation thanks to scientific advances.

Is creating a common pool of R&D lead molecules, part of the answer?

I’m not sure this is scientifically feasible as we are identifying more specific targets – however immunology is becoming increasingly important.

What are the trends in oncology treatment globally and what role can Indian pharma companies play to fit this need? Any examples? Genetic testing holds opportunities but also risks for Indian players. How can this be tackled?

Oncology is a huge area of opportunity globally – growing as we understand more about the molecular profile of disease, the flip side is that smaller numbers of patients will be suitable for more therapies (see our The Future of Oncology Thought Leadership) Genetic testing and genomics are a large part of this opportunity. If Indian companies can keep pace with the science and partner appropriately then they can de-risk this area.