Beyond highly developed pharma markets! Wild card access to less explored, high entry barrier territories

In the ever-changing landscape of the pharma industry, we have witnessed a prolonged focus on the ‘developed markets’ by most of the growing pharma manufacturing companies from India. These are those coveted group of countries characterised by high spending capacity, stringent quality standards, well-established healthcare systems and open to globalisation. Although it is a fluid list generally, the US, Western Europe, Australia, Canada etc., are considered worthy participants of this list.

Undoubtedly it has turned out to be a winning strategy and it is reflected through tremendous value creation seen in the last decade by Indian pharma industry (Refer Chart 1). Today, India exports almost 60 per cent of the generic drugs consumed in the US and Europe and has the largest concentration of USFDA and EUGMP approved manufacturing facilities across the globe.

When the trailblazers, who started exporting to developed markets in the early 2000s, were followed closely by their peers. Within a decade after that, this market became a competitive space inching towards saturation for usual generic medicines. In parallel to manufacturing capacity, a strong R&D capability was built focusing on generic product development. The early 2000s was a time when Para IV filing and 180-day exclusivities were rare events. It turned around very quickly and within a decade as Indian companies started churning out Para IV submissions from the R&D facilities. For example ‘Eliquis’ saw more than 25 generic filings on day 1 with more than 60 per cent of those filed by Indian companies.

The writing was on the wall and strategy rooms of most of the pharma companies were busy figuring out how to maintain the growth which they achieved for years. They either had to continue focusing on the same markets with new and challenging products or find new markets which would provide the required momentum. At this point, the discussion of opening new markets started gaining steam. The ideal choice for the next wave of markets should have the following characteristics to support the ongoing growth trajectory –

– Big enough and growing markets to support the high-volume capacities developed

– Above average per capita income and spending capacity

– Willingness to accept affordable generics over innovator drugs

– Entry barriers should not make it impossible to do business

Well, there are not many countries on the map which fit in the above requirements. Our assessment suggests that the countries which fit in this list are Japan, Brazil, Mexico, South Korea and Taiwan. Unfortunately, there is no common factor linking them and all of them have their own unique dynamics. The only common thing is that it takes years together for an outside company to initiate business in these markets and at the same time, it takes immense focus and intricate local knowledge to make a successful entry.

So, why are we talking about these markets during the COVID-19 times?

These uncertain times may open opportunities allowing companies to reduce the time required to enter these resistant markets. Of course, this does not mean that doing business in these markets becomes any easier but there is a high possibility of a head start to initiate business. As the golden rule stays true, companies are more inclined to invest when revenue is on the cards. The pandemic can suddenly be an opening for any pharma company who can maintain the stringent quality standards set by authorities from these countries. If management teams show the willingness and focus coupled with navigation from local experts then it can become the start of a new phase of growth.

Let us focus on the Latin American giant, Brazil, which has remained elusive for a lot of finished formulation manufacturing companies for years. Brazil has its own ways of doing business and has significant barriers in place to protect home-grown companies. As a result, it is still dominated by strong local players and Big Pharma.

What has changed due to COVID-19? The initial hurdle lowered…

The drug shortages and supply chain disruptions have created a unique situation for a region which is affected significantly by COVID-19. The government is trying their best to find a solution where medication is available to every corner of the region without affecting their reputation of being quality conscious. This situation has triggered a series of announcements from health authorities amending regulatory and legislative guidelines, which reward the capable companies an interesting business opportunity.

Here is a compilation of a few such changes:

GMP clearance – National Sanitary Surveillance Agency (ANVISA), the Brazilian Health Regulatory Agency typically takes 8 to 10 months to inspect any facility from the day of GMP clearance request and the approval is granted for 2 years from the date of clearance.

What has changed – due to travel restrictions in COVID times, ANVISA has shown the willingness to grant GMP clearance based on the facility’s existing approval if any, from a few select higher regulated health authorities. If not, ANVISA has prepared guidelines for conducting inspection via remote access, though the timelines have been reduced to around 3 to 5 months.

Product registration timelines – Brazil is known for stringent and unique requirements for registration of generic pharmaceutical products. From requiring a BE study against local innovator product to Pharmaceutical Equivalence study conducted in ANVISA approved Analytical CRO in Brazil and plenty of analytical studies unique to that of Brazil.

What has changed – for a product which has an established COVID-19 application or allied application then, in order to get an adequate supply of such products, ANVISA has proposed fast track guidelines through which one can achieve product approvals and launch the product in Brazil withing 2 to 3 months. This is a huge opportunity, though applicable for a handful of products, as usually, a product approval takes around 18 months post-filing.

Exchange rate – Submission of a product in Brazil has significant local expenses in terms of GMP fees, PE studies, RLD costs etc. There is no possibility of getting a waiver to any of these as they are essential to maintain the quality standards expected by ANVISA

What has changed – COVID-19 has an economic impact almost everywhere in the world, including almost a 35 per cent correction in BRL against the USD.

As mentioned earlier as well, Brazil remains a challenging market and all the regular requirements shall be in force as and when the world gets normal. But for now, there is wild card access available for those companies that have a long-term vision to establish a solid footing in this high growth, high potential territory. As I have extensive exposure to Brazil, I could specifically point out the opportunity and present it. Similarly, there are a lot of changes ongoing in the conventional practices followed in a lot of countries. Such events may present an opportunity for the Indian industry to extend the reach to less explored territories driving the next phase value creation.

India has a history of providing solutions when the world faces grueling challenges, especially to those who are vulnerable. The industry carries the legacy of stalwarts like Mr Y K Hamied who once surprised the world with affordable HIV medicines and changed the way the world treated this dreaded disease. Maybe, it is another day of reckoning and moment to step forward.