Indian pharmaceutical industry was valued $12 billion in 2012 including domestic production of drugs, exports and imports. Technical and infrastructure capabilities of pharma companies, cost effective production process and reduced time to market drugs due to domestic regulations are the key factors driving the growth of Indian pharma segment.
Indian API manufacturers produce close to 1000 APIs for various therapeutic segments such as oncology, anti-infectives etc. India has more than 120 FDA approved sites and close to 90 MHRA approved plants. Efficient infrastructure facility coupled with relatively reduced labour cost enables the Indian pharma segment to attract foreign direct investments (FDI). The FDI flow is also reflected in the form of increased partnerships – either through mergers or acquisitions, including that of Abbott – Piramal (2010), Strides Arcolab – Aspen (2010), Solvay Pharma – Abbott Capital (2010), Hospira – Orchid Chemicals (2010) etc.
India is viewed as one of the most preferred and cost effective outsourcing partners for pharma MNCs. Outsourcing of bulk drugs by big pharma is slated to grow by $3 billion while the CMO market in India is expected to grow at a rate of 20 per cent till 2015. In terms of capacity, currently, the Indian pharma industry is operating at an average of 60-65 per cent. Henceforth, these major MNCs are planning to utilise the remaining 15-20 per cent for their outsourcing activities.
| Innovative R&D alliances | ||
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Created a globally specialised HIV company to focus solely on research, development and commercialisation of HIV medicines. | Increased ROI, through expertise and technology sharing in R&D. avoided duplication of R&D efforts. On the whole, efforts were aimed to reduce time to market of drugs |
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Collaborated R&D to identify early stages in Alzheimer’s disease. | Efforts were oriented to reduce the overall complexity in the supply chain by early detection and cure |
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Entered into an agreement to develop and commercialise potential treatment of Gaucher’s disease (which is quite a rare disease). | Innovative R&D approach to cater to the niche market of rare disease |
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Joint venture enabled Pfizer to commercialise off patented sterile injectable and oral products whereas licensing will be carried out by Strides Arcolab. | Reduced time to market of drugs as the complex processes viz. licensing and branding are carried out by two different entities |
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Chorus, Eli Lilly’s subsidiary has been established to carry out virtual R&D. The purpose is to quickly take the molecules to the proof of concept stage and outsourcing other stages of clinical trials. | Eli Lilly has transformed itself from a traditional integrated pharma company to a pharma network by leveraging on its innovation base especially in virtual R&D. |
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Lilly has collaborated with CROs/CMOs such as Piramal Life Sciences, Hutchinson MediPharma and Suven Life Sciences for developing molecules. | Collaboration efforts were aimed towards reducing time to market of drugs as most of the R&D process was outsourced. |
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A Swiss based global biopharma company with focus on developing innovative new drugs that target unmet medical needs. It in-licenses and develops small molecules which are already in clinical phases I, II or III and sells it to major pharma companies. | Bypasses critical supply chain component – Drug development and allows the major companies to focus more on marketing and branding which reduces overall supply chain complexity. |
Indian pharma supply chain: Indian pharma supply chain follows a symmetric network with distributors, wholesalers and retailers occupying a major portion of the segment. However, it is different from the US supply chain in the following two aspects
Insurance providers as ad hoc segment: US pharma supply chain has insurance providers as an integrated segment whereas Indian pharma supply chain is currently in an ad-hoc stage and not integrated completely with insurance providers and other service providers.
Increasing partnerships with medical device companies: Major pharma companies such as Bayer, Boehringer Ingelheim have collaborated with medical device companies such as Aptar, Nypro and Gerresheimer, starting from Phase I development of drugs, for developing formulations for pre filled syringes and inhalers. Such a collaborative approach calls for reducing the time to market these products in India, since the medical device companies are involved in design and manufacturing of medical device components right from Phase I development of drugs.
Indian pharma landscape – A comparative analysis
While global pharma MNCs are well advanced in terms of innovative R&D, technology partnerships, open innovation and crowd sourcing, domestic Indian players are yet to follow the race. However, this type of technological innovation is yet to take shape in India, as Indian companies are not investing in R&D due to lack of adequate required capital. There are no companies in India who have already come up or are planning to install full-fledged virtual R&D centres for the lack of technology and other funding requirements in India. Globally, the following sample alliances (See Table: Innovative R&D alliances) indicate the highly innovative ventures taken recently by major pharma companies. The reactive nature of Indian pharma industry might act as a barrier to run in the global race where innovation tends to be the major factor to differentiate one pharma major from the other.
Logistics and distribution network
Pharma wholesaler or distributor sector is fragmented. The first point of contact after the manufacturer is the carry forward agent. In each State there will be one or two carry forward agents who pay the deposit fee and carry pharma inventory. Since India has a double taxation system for every state – central sales tax and state sales tax, possessing CFA in every state will avoid multiple tax payments for the same goods.
Integrating CROs with pharma companies
CROs form an integral part of the pharma supply chain and they assist major pharma companies in cost effective drug development process.For example in India, CROs assist pharma companies in:
Providing staff: (Clinical Research Associate or CRAs) for monitoring clinical trials
Regulatory work: CRO help pharma companies expedite regulatory work (Clinical trial material import etc.)
Data management: Though data management services are majorly provided by BPOs (TCS, Accenture, Cognizant), some leading CROs in India (SiroClinpharm, Quintile) do provide these services as well.
Need to revamp Indian pharma supply chain
Primary reasons to revamp a pharma supply chain in India can be outlined as a shifting global trend towards in-life licensing, continuous manufacturing and value based pricing. There is a huge potential left in terms of ‘innovation’ in which the aforementioned three parameters play a vital role.
Indian pharma companies are yet to bring innovative R&D and patient management and assistance programmes integrated into the supply chain and are dependent on the high volume segment – generic drugs. Indian pharma industry is currently in a nascent stage in terms of technological innovation and new advancements such as open innovation, crowd sourcing etc. The socio-economic conditions in India are driving the patient segment towards low cost drugs. Hence, generics segment in India is growing at a faster rate when compared to patented drugs. Though, global pharma companies are innovating in terms of technology, open innovation, crowd sourcing, in-licensing etc., Indian pharma companies are yet to follow the global race.
However, Indian pharma segment has an intensive patient pool with varying genotypes when compared to developed regions. Global pharma MNCs can leverage the patient pool for conducting their clinical trials in India. This will provide opportunities for increased partnerships (which leads to increased R&D trials) of global pharma MNCs with domestic CROs. A shift in industry trend from high volume to high value can be expected if pharma MNCs focus to drive to increase their R&D spend. This will increase vertical integration in terms of increased partnerships from raw material manufacturers (APIs, excipients and other chemicals – back ward integration) to pharma distribution companies (forward integration) in the overall pharma supply chain.