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.
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We wish you a very happy 72nd Indian Independence Day!
Seven decades after our historic tryst with destiny, on 15 August 2018, India will celebrate 72 years of independence, democracy and sovereignty. Presenting some interesting snippets from the archives on this occasion.
“India was officially proclaimed independent on 15th August 1947 with much celebrations in Delhi and other towns. Cipla celebrated the first Independence Day by a flag hoisting ceremony where all workers and staff of Cipla were present.”
– Dr. Khwaja Abdul Hamied,
‘A Life To Remember – An Autobiography’ (1972)
This is how India’s first Independence Day was celebrated by Cipla. The tricoloured Indian national flag was proudly unfurled and hoisted and the venue was Cipla’s very first manufacturing site and headquarters in Mumbai Central.
Cipla’s celebration of Indian independence did not end there. As a nationalist and freedom fighter, Dr. K.A. Hamied ensured that Cipla as an employer played its part in making the occasion unforgettable for Ciplaites by announcing a generous Independence Bonus!
The late Dr. A.R. Kidwai was a multi-faceted personality – public servant, scholar, statesman extraordinaire of post-independence India. Dr. Kidwai was a Cipla chemist from 1941 to 1945 and was witness to early scientific projects of Cipla as well as the involvement of then Ciplaites in the independence movement. Here’s a snippet of his reflections from the Oral History collection of the archives.
This advertisement placed by Cipla in the 1948 edition of the journal, Marg is a strong reminder of how Cipla was a trail-blazer in pharma R&D, quality and manufacturing in India, and saw itself as second to none. Spend a minute or two to read it with its context in mind – a time of euphoria, great promise, unrealised potential. A time when the state of India would finally attain equality in status with others on the world stage. Cipla’s strides were a microcosm of India’s in so many ways.
On that note, we wish you a very happy 72nd Indian Independence Day!
Cipla Receives Final Approval for Generic Reyataz® (Atazanavir Caps 100mg, 150mg, 200mg, 300mg)
Cipla Limited (“Cipla”) today announced that it has received final approval for its Abbreviated New Drug Application (ANDA) for Atazanavir Caps 100mg, 150mg, 200mg, 300mg from the United States Food
and Drug Administration (US FDA).
Cipla’s Atazanavir Caps 100mg, 150mg, 200mg, 300mg is AB-rated generic therapeutic equivalent version of Bristol-Myers Squibb Pharma Company’s, Reyataz®. It is a protease inhibitor indicated for use in combination with other antiretroviral agents for the treatment of HIV-1 infection in patients with minimum age of 6 years and older weighing at least 15 kg.
According to IQVIA (IMS Health), Reyataz® and its generic equivalents had US sales of approximately $324M for the 12-month period ending April 2018.
Cipla partners with MSN Laboratories for marketing and distribution of generic Xeloda® (Capecitabine Tabs 150mg and 500mg)
Cipla USA, Inc., (“Cipla”) a subsidiary of Cipla Limited, today announced that it has secured rights from MSN Laboratories Private Limited to market & distribute Capecitabine 150mg and 500mg tablets in the United States of America. The product is available immediately.
The Capecitabine 150mg and 500mg tablet is an AB-rated generic therapeutic equivalent version of Genentech’s Xeloda®. Capecitabine tablets are indicated as a single agent for adjuvant treatment in patients with Dukes C colon cancer who have undergone complete resection of the primary tumor when treatment with fluoropyrimidine therapy alone is preferred, and also indicated for the treatment of patients with metastatic breast cancer after failure of prior anthracycline-containing chemotherapy.
As per IQVIA (IMS Health), Xeloda® and its generic equivalents had sales of approximately $178M for the 12-month period ending June 2018 in the United States.
About MSN Group
Founded in 2003 with a mission to make health care affordable, the MSN Group based out of Hyderabad is one of the fastest growing research-based pharmaceutical company in India. MSN has 10 API (including Oncology) and
five finished dosage facilities out of which three in Hyderabad, one both in USA & Myanmar. MSN Labs has an integrated R&D Center for both API and product formulation under one roof. The company’s core strategy will be to focus on high barrier of entry & first to market paragraph 4 products. MSN customer base exceeds 250 customers with a global presence in 65 countries throughout US, Europe, Latin America, Middle-East, Asia Pacific, Africa and CIS markets. With more than 350 National & International patents filed, MSN’s product basket offers 300 APIs & 200 Formulations covering 35 major therapies.
Cipla Receives USFDA Approval for Generic Voltaren® Gel (Diclofenac Sodium Topical Gel, 1%)
Cipla Limited (“Cipla”) announced that it has received final approval on August 3, 2018, for its Abbreviated New Drug Application (ANDA) for Diclofenac Sodium Topical Gel, 1% from the United States Food and Drug Administration (US FDA).
Cipla’s Diclofenac Sodium Topical Gel, 1% is AB-rated generic therapeutic equivalent to the reference listed drug (RLD), Voltaren® Gel, 1% of GlaxoSmithKline Consumer Health®. It is a non-steroidal anti-inflammatory drug
indicated for the relief of the pain of osteoarthritis of joints amenable to topical treatment, such as the knees and those of the hands.
According to IQVIA (IMS Health), Voltaren® Gel and its generic equivalents had US sales of approximately $353M for the 12-month period ending June 2018. The product will be available for shipping in the US in the upcoming week.