Sunrise At Sunset Point
To win the battle of perception, the Indian pharma industry should focus on capital allocation choices and capability building.
The Indian pharma model has depended on a few fundamentals. It capitalised on a strong domestic base in India through rapid product introductions, the Hindu rate of price increases, a large army of medical representatives and a benign regulatory and IP system. Indian pharma companies chose pockets in Africa, Asia, Middle East servings as natural expansion outposts. They leveraged India’s formulation expertise to address the world’s largest generics market, US, fully exploiting the advantages that US offered.
All that is changing.
The industry faces a battle of perceptions. Despite being the supplier of over a third of the world’s requirement of medicine, and with over 20,000 companies competing in the domestic market, there is still a perception that the Indian patient is paying high prices for drugs. The remedy: more drugs under price control.
The trade channels in this industry take nearly a third of the retail price a patient pays. This share of the patient price may be one the highest in the world. With 5-7 lakh chemists and stockists, the distribution channels remain fragmented, and the cost of distribution reflects this. The remedy: a higher cap on these margins.
Indian medicines are identified by ‘brand names’. The doctor uses the brand name to identify the drugs he is choosing for his prescription. Under the belief that all drugs with the same ingredients are identical, we may move to an era where doctors prescribe the generic names of the medicines, and it will be left to the chemist and the patient to choose the company whose drug she wishes to use. But are similar drugs from various companies identical? They should be — by law – but they aren’t. Inspectors and analysts who work with national and state regulatory agencies, follow the same law, only in theory. Their implementation varies from office to office, state to state. Unless the drug regulatory laws are implemented in an identical fashion across every state and city of the nation, any doctor by prescribing a generic drug is putting his reputation at risk, as he is at the mercy of the choices that an ill-trained chemist and patient might make.
Indeed, the national regulator has a formidable task at hand–to engage, re-skill and train several lakhs of employees across the country and bring them to a common skill level and then hold them accountable to one common national standard. Who will fund the increased drug policing costs? If they come back to the industry, in some way, they might result in price hikes.
What happens to the several thousand companies? Will they be able to cope with these changes? One estimate is that not more than 500 companies will survive this.
The industry employs 7-8 lakh, medical representatives. What is their fate, if the industry turns generic? Are they going to become an extinct species? The reps, through the years, toiled hard, to be the knowledge interface between the doctor and the industry. Will their role change if the nature of the industry changes? Quite possibly: digital technology and social platforms are providing myriad ways of reaching doctors. What shape will the human touch take in this era?
Many companies, use multi-brand marketing strategies to cover the vast expanse of the Indian terrain, for the same drug. At the most simplistic level, a company could have two brands of a given drug — one for the hospital sector, the other for the retail sector. Over time, in pockets, it may have led to some distortions of pricing and trade margins. Very often, these are manufactured at contract sites. The contract manufacturing industry, in India, serves a useful purpose to provide bridge capacity, especially for those focused on high volume exports from their own plants. “One brand, at one site” could jeopardise a sub-sector that employs a few lakhs and turns over probably Rs 20,000 crore.
Such ‘remedies’ are some of the sweeping changes suggested in the Draft Pharmaceutical Policy 2017. If implemented, while quality and affordability will improve, the policy will unwittingly strike at the core of the business model of the industry and will disrupt it in fundamental ways.
The US market — the largest generic market in the world and where Indian drugs fill three to four out of 10 prescriptions – is seeing three big trends. Channel consolidation has led to 90 percent of the buying power concentration in three big companies. The FDA along with increased scrutiny has been approving the backlog of drugs aggressively, leading to hyper-competition. This double whammy is causing the prices in the base business to fall by high single-digit to low double-digit rates. Buyers have tightened the screws and are increasingly vigilant on even legitimate price increases.
The combined effect has wiped out nearly 40 percent of the core industry’s market cap in the last few months. A whopping value destruction of over five lakh crore.
So what should the industry look out for?
Three simple things: innovation, calibrated diversification, and consolidation or ICDC in short.
The industry needs to diversify the geography risk beyond US and India, invest in innovation beyond traditional generics and acquire more global scale. Aurobindo is doing just that. In contrarian style, it is going to Europe, when others have recalibrated their ambitions there.
India does not need more than 500 companies to have a reasonably competitive market. The rest must perish or be acquired. Of the dozen or so large and mid-sized companies, some should merge and acquire global scale. Two Ahmedabad-based companies are reportedly in discussion to do just that. Some more will surely follow suit.
Those with scale must invest in innovation – US specialty, global bio-similar, science-validated NCEs and digital. Zydus Cadilla is invested in a diversified portfolio — vaccines, animal health, bio-similars – beyond core generics. Dr Reddy’s, Cipla, Sun, Lupin, Glenmark, Biocon are exploring these themes. Success would depend on capital allocation choices, capability building and ring-fencing for focus. Investing community must probe the latter two – to be more informed.
This article originally appeared in Business Standard.
Click here to download the PDF.
Read it now
Cipla Q3 FY18 Results Reflect Continuously Improving Quality Of Earnings Backed By Strong Momentum Across Key Regions
Cipla Limited (BSE: 500087, NSE: CIPLA) today announced its unaudited consolidated financial results for the quarter ended December 31, 2017. The Company reported quarterly revenues of Rs 3,914 crores, a growth of 7% on a year-on-year basis, with EBITDA at 20.9%, growing 21% on a year-on-year basis. EBITDA margins have been improving continuously driven by cost optimization across all spend lines despite R&D getting stepped up to 7.6% of sales during the quarter. When adjusted for the one-offs during the quarter, the Profit After Tax rose by ~25% on a year-on-year basis. The Company reported healthy growth across businesses in India, South Africa, API, Europe and Sub-Saharan Africa markets.
“This has been one of our better quarters. Key performance metrics look healthy and are inline
with the internal targets we set for ourselves. We are stepping up our investments in R&D
which has resulted in approvals for differentiated products in the US”
– Umang Vohra
MD and Global CEO, Cipla Ltd
Download the PDF.
Programme On Nutritious Food Organised By Cipla
Samala Hema, Seethaphalmandi Corporator attended the programme about nutritious food organised by Cipla industries at Jyothi Model High School, here on Wednesday. As a part of the programme, experts from the health industry held a session to explain parents’ about child health and immunity.
The corporator too encouraged children and the parents to adopt a hygienic and healthy lifestyle to protect young lives. Later, the corporator along with officials of the GHMC and senior TRS leaders comprising Laxman Rao, ward member of the constituency interacted with the residents of Beedal Basthi as a part of the Basthi Baata programme to know their problems.
Adequate nutrition is an important aspect of a healthy lifestyle. Attended the “Nutrition Awareness” drive organised by Cipla at Jyothi model school & explained the importance of maintaining food nutritive value to students and parents. pic.twitter.com/WDQc6sxn20
— Hema Samala (@hema_samala) January 31, 2018
This article originally appeared in The Hans India.
Cipla Receives Final Approval for a Generic Version of Gilead’s Viread®
Cipla Ltd, a global pharmaceutical company which uses cutting edge technology and innovation to meet the everyday needs of all patients, announced that it has received final approval for its Abbreviated New Drug Application (ANDA) for Tenofovir Disoproxil Fumarate Tablets, 300mg, from the United States Food and Drug Administration (USFDA) to market a generic version of Gilead Sciences’ Viread® Tablets, 300mg.
Cipla’s Tenofovir Disoproxil Fumarate Tablets, 300mg, are AB-rated generic equivalents of Gilead Sciences’ Viread® Tablets, 300mg, and are indicated in combination with other antiretroviral (ARV) agents for the treatment of HIV-1 infection in adults and paediatric patients 12 years of age and older. Cipla is excited to add this important antiretroviral product to its growing portfolio of ARVs in the U.S.
The product will be available for commercial shipment in the U.S. immediately. Viread® Tablets,
300mg, had U.S. sales of approximately $725M for the 12-month period ending November 2017,
as reported by IMS Health.
India’s Cancer Cases Far Lower Than Those In The West, Yet Death Rate Higher
India’s cancer graphs tell two distinct stories. The first holds out hope as India’s cancer incidence is far lower than developed nations such as Denmark and the US. If cancer strikes over 300 out of every 100,000 population in Denmark, the corresponding number in India hovers around 80. But the second Indian cancer story is worrisome: cancer manages to get the upper hand in almost 70% of cases in India. A study in the medical journal, The Lancet, in 2014 indicated only 30% of India’s cancer patients survive for over five years.
So while India has lower cancer rates than many other countries, it has a high death rate. Check the World Health Organisation’s Globocan 2012 report’s analysis for breast cancer: only 1 out every 5 or 6 women newly diagnosed with breast cancer died in the US, but corresponding figures in India stood at 1out of every 2 patients.
Experts said early detection could go a long way in reducing the high death rate caused due to illiteracy, fear and taboos. “In India, almost 50% of all cancers are seen in late stages. This is the reason our death rate is higher than western countries,” said senior medical oncologist Shona Nag.
Maximum cancer patients succumb to lung, head and neck and breast cancers. “We lose almost 80% of all patients detected with lung cancer. The death rate due to breast cancer world over is 20%, but we lose over 50% of our breast cancer patients,” Nag said.
Almost 80% of cervical cancer patients are diagnosed in stage 3-4 in India, but the West has almost eradicated this cancer due to regular pap smear tests. Given India’s population, it is impossible to scan everybody. “Self-breast exams and clinical exams involving community workers or ancillary health professionals are hence crucial,” she added.
Lack of awareness is the main cause for late detection. “In the western world, the culture is openness and they are more aware. Though we have facilities, we cannot reach out to such a huge population. Almost all cancers are detected at late stage in India mainly because of lack of awareness and social stigma,” said medical oncologist Anantbhushan Ranade.
Cancer surgeon Anupama Mane said, “We have women with 10cm lumps who come to us late because the lump didn’t hurt or cause pain so they did not think a check was needed.” Moreover, men don’t discuss women’s health. “So a blood stain or excessive bleeding is dismissed and not taken up as cause for worry,” Mane said. Early detection is key to reduce mortality. “It is important to diagnose cancer early because then you have a chance at curing it. The spread and extent of it make it harder to control,” said oncosurgeon Snita Sinukumar. Lack of a dedicated health care system is one of the big reasons for higher deaths. “Just like Aadhar, we need to make it compulsory to invest in one’s own healthcare,” Sinukumar added.
This article originally appeared on The Times of India