Roadmap for sustainable growth

Dr Ajit Dangi, President and Chief Executive Officer, Danssen Consulting, outlines measures needed to ensure the Indian pharma industry’s continuous and accelerated growth

In the recent past we have been bombarded with catch phrases like, Swachh Bharat Abhiyan, Digital India, Make in India, Universal Health coverage etc. However, the ground reality is a little different from these rhetorics. A recent article in the globally acclaimed medical journal The Lancet lambasts Modi Government for ignoring India’s health sector and has warned that India is on the verge of collapse under the weight of its own ill health. While the criticism seems too harsh, it is time to wake up and face the realities. A fundamental problem is the lack of investment in healthcare, with just about one per cent of GDP being allocated to healthcare by the government. As long as this is not significantly enhanced, the healthcare challenge will continue to haunt us. While we are still battling the menace of infectious diseases like malaria, TB, HIV AIDS etc., we have to face an increasing threat from NCDs which have reached alarming proportions due to lifestyle changes. This will have significant impact on not only public health but also on the economy. With a burgeoning population, and around 70 per cent of them living in rural areas, the problem is compounded.

There are three As of healthcare viz. availability, affordability and access. The Indian pharma industry has effectively contributed to the first two by being the third largest producer of quality medicines at affordable prices. The industry, however, needs to partner with government to improve access which is abysmally low at less than 40 per cent. This will happen only when health infrastructure like diagnostic facilities, physicians, hospitals, retail chemists etc. is substantially improved. The pharma industry, being an integral part of healthcare, will have to focus on following four areas for sustainable and profitable growth.

• Innovation: While we are proud of being called the ‘Pharmacy of the World’, our contribution to the global pharma sales, which is about $ one trillion, is less than two per cent. Why does this happen? Well, it is because we have focused on reverse engineering to produce generics which is a ‘high volume and low margin business’. Our competitive advantage has always been low costs. Whether it is manufacturing, R&D or clinical trials, our costs have been 30 to 40 per cent lower than those in the developed countries. However, now we have move up the value chain from cost arbitrage to intellectual arbitrage as cost advantage is seldom sustainable in the long run. While drug discovery domain requires deep pockets and global marketing muscle, we can always graduate towards biosimilars, NDDS and complex generics as a first step towards innovation. But, to succeed in this area, we need an ecosystem which fosters innovation such as intellectual property protection, pragmatic pricing policies and collaboration with academic institutions to get a continuous stream of intellectual capital with appropriate skill set.
• Quality: The recent crackdown by US FDA on our pharma majors for non-compliance is a worrisome development. While consistently producing standard quality drugs is not rocket science, it needs strict adherence to standard operating procedures (SOPs), data integrity as well as continuous and rigorous training of personnel involved in drug manufacturing and quality assurance. The drug manufacturing costs are continuously increasing due to automation required to reduce human error, introduction of newer technologies such as Process Analytical Technology (PAT), high inspection fees by the US FDA for inspecting manufacturing facilities and approval of Abbreviated New Drug Application (ANDAs), Drug Master Files (DMFs) etc. However, the cost of non-conformance is much higher and the erring company also suffers from reputational damage. Quality, therefore, must be on the top of every pharma CEO’s agenda.
• Pricing strategies: The recent incident of Turing Pharma, a US-based company coming under fire for raising the price of Drug Daraprim used for toxoplasmosis, from $13.50 to $750 a pill has put pharma pricing back in focus, even in free market economies like the US. Blaming the high cost of drugs and lack of price control has become a popular subject in the US Presidential election campaign. Hillary Clinton, a presidential candidate has claimed that she will fight ‘price gouging’ by pharma companies and has emphasised on the need for price regulation, which has earned her good ratings in the electoral campaign. Another presidential candidate, Bernie Sanders received a huge applause from the audience for naming ‘drug companies as the enemy he is proud of.’ Pharma companies have to explore innovative pricing strategies, particularly for expensive lifesaving drugs as well as those required for chronic diseases. In this context, Project Sambhav of MSD India for their anti-HCV drug is worth emulating. Sambhav involves educating the patient and the family about HCV transmission and prevention. It also helps manage the therapy cost by subsidising the cost of treatment. Similarly, pricing their anti-diabetic drug Januvia in India at one-fifth of its price in the US is a case in point. Sovaldi is granting voluntary license to many Indian generic companies for Sofosbuvir, a drug costing $85,000 for complete therapy in the US. It is already a blockbuster and worth replicating. In other industries, it is common for vendors to promote their product through equipment lease, soft loan, supplier finance credit etc. Time has now come to adapt such models, especially for expensive lifesaving drugs and those used for chronic diseases.
• Productivity: Sales force productivity through conventional doctor detailing is increasingly becoming an area of low RoI in a large country like India which has over nine lakh doctors and over 30,000 hospitals. Industry has to find newer ways like use of social media and digital marketing to help hospitals manage their drug costs by using principles of pharmacoeconomics and efficient inventory management. Similarly, co-marketing, contract sales force and geographic expansion in rural areas etc. need to be actively explored.

With over 10,000 pharma manufacturing companies, the market has become intensely competitive, fragmented and cluttered with ‘me-too’ products, with even the top company having only six to seven per cent market share. Consolidation of the industry through mergers and acquisitions is overdue and will improve scale of economies, improve productivity and help focus on one’s key strength and make the industry robust and agile. The pharma industry is a jewel in the crown of India’s fast growing economy. Its success and sustainability depends on the aforementioned strategic factors.