Making Out of India

Making Out of India

Pharmaceutical players will set up plants in major markets, go for more automation and focus on digital marketing

Illustration by Raj Verma Illustration by Raj Verma

Rajesh Raghavan, a medical representative with a mid-sized pharmaceutical company in Mumbai, no longer travels in local trains or visits crowded alleys to meet doctors. Locked down in his small flat in Navi Mumbai, Raghavan's main job now is to convince doctors for a Zoom meeting with his company's medical director and team. What's more, doctors are also happy to listen to the director about the latest medical innovations, besides discussing the advantages of the blood pressure drug that Raghavan has to market. "I was struggling to meet a dozen doctors earlier, now I am able to get in touch with an average 20 doctors a day," he says.

According to industry leaders, fundamentals of the biopharmaceutical industry, built over decades, are changing post-coronavirus. Manufacturing, supply chain management, doctor-patient interactions, research and development (R&D), regulatory hurdles - everything is undergoing a transformation.

Kiran Mazumdar-Shaw, Executive Chairman of Bangalore-based Biocon, with experience of over 45 years in biopharma research, says fundamental changes are bound to happen in healthcare post-corona, especially in scientific innovations. "Public health is likely to get priority, from the government, private sector and investor community," she says.

Umang Vohra, Managing Director and Global CEO, Cipla, says the pandemic will redefine ways in which drug manufacturers engage with stakeholders, focus more on self-reliance and embrace new technologies.

"Now it is natural for drugmakers to 'over-emphasise changes in the near-term' which will definitely happen, but the change will be gradual over time," says Nilesh Gupta, Managing Director, Lupin.

Changing Manufacturing Landscape

One thing that is happening now is that Indian drug manufacturers are receiving regulatory clearances for many of their plants found to be short of current Good Manufacturing Practices (cGMP) benchmarks of the US Food and Drug Administration (USFDA). The reason: With Covid-19 at its peak, the US started experiencing shortage of medicines and quickly cleared many Indian facilities under its scanner. First was IPCA Labs' two facilities for Hydroxychloroquine (HCQ) to treat Covid-19 patients. These plants were banned by the USFDA for nearly five years. It also gave green signal to Lupin (four plants), Dr. Reddy's Laboratories (two), Aurobindo (two) and Biocon (three) in the last couple of months. "That shows India's role and importance as a key supplier of drugs to the world," says an industry executive. Cipla's marketing application for the generics of Albuterol Sulphate, a medicine used to address breathing difficulties, was fast-tracked and approved by the USFDA last month. Its patented drugs, which have a market size of $1.1 billion, are sold by Merck, Teva and GlaxoSmithKline. Generics are cheaper than branded drugs. So far, the only other company to have received generic approval for the drug is US-based Perrigo.

An Axis Capital analysis says the Indian biopharma industry is now in a sweet spot, given the high earnings visibility, supply opportunities due to demand and shortages in the US and Europe, a depreciating currency and faster approvals for facilities having minor issues. As against this, Indian companies were experiencing pricing pressure and margin squeeze due to consolidation of wholesalers and severe regulatory scrutiny, causing loss of business and market capitalisation. Leading Indian companies lost over $1 billion in market cap in the last one year.

"The US and Europe are primary export destinations. India heavily exports paracetamol, ritonavir and key drugs like HCQ to these nations. With demand moving upwards, there is tremendous potential for the sector to make further inroads in international markets," says Cipla's Vohra. More investments in R&D and incentives for the private sector to boost export production in a favourable environment are needed to cash in on the opportunity, he adds.

In a post-Covid world, domestic manufacturing may emerge as the biggest takeaway. "Increasingly, countries would want security over supply chains, and this is an opportunity for deeply vertically-integrated players to make more in-country manufacturing moves in line with major market requirements," says Lupin's Gupta. However, such changes will need to take into account regulatory and economic considerations.

More automation in manufacturing lines and quality control is another likely change. Companies such as Lupin already use robots at some of its manufacturing lines to reduce human intervention. Increased focus on safety and sanitisation standards across sites are also here to stay, according to experts.

However, delays in re-inspection of facilities and approval of limited competition products can affect prospects of Indian companies, warn analysts at rating agency ICRA. The USFDA has put on hold all routine inspections till further notice and ban on exporting products within the European Union (EU) will hit Indian companies with manufacturing bases in Europe.

New World for APIs

Supply chain disruptions due to the lockdown in China have put in focus countries' dependence on China for critical raw materials. "It has prompted governments across the world to focus on self-reliance. Local manufacturing will become a key focus, like 'Make in America, Make in India, Make in China' and so on," says Cipla's Vohra.

One of the options before companies is to de-risk and procure raw materials from multiple sources and countries instead of a single source. Another is to manufacture key active pharmaceutical ingredients (APIs) and intermediates in-house. "We need to develop strategies to manage the production and distribution of products that are essential and in high demand," adds Vohra.

About 65-75 per cent of India's imports of APIs (the part of any drug that produces intended effects) and intermediates are from China, worth an annual $2.4 billion. India imports APIs worth $3.56 billion a year. China controls over 55 per cent of the global API market worth $172.69 billion (2018). In the case of key APIs such as cephalosporins, azithromycin and penicillin, the dependence on China is as high as 80-90 per cent, according to ICRA.

However, it may take years to build the scale of API manufacturing similar to China. "The government has to re-invigorate domestic manufacturing of raw materials through favourable policies and incentives that foster economies of scale and cost-competitive API output for the sector," says Lupin's Gupta.

The Centre seems to have caught the hint. It is setting up three bulk drug parks at an investment of Rs 3,000 crore, and is prioritising production of 53 key raw materials (KRM)s and APIs with incentives worth Rs 7,000 crore.

Healthcare to Go Digital

Online medicine delivery and doctor consultations are the new trends in healthcare. Companies such as Cipla are using e-commerce firms to deliver consumer health products. Digital therapeutics (DTx), or mobile assisted software for medical interventions unlike lifestyle and wellness apps, are also gaining prominence. Companies like Cipla have already taken baby steps in this direction by investing in Wellthy Therapeutics, an Indian DTx player focusing on lifestyle disease management.

Roles of medical representatives are changing as well, and there are new digital tools to connect doctors and patients. "The industry now engages healthcare professionals through virtual ad-boards, podcasts and webcasts to discuss scientific aspects of medicines, besides engaging doctors with global experts," says Sharad Tyagi, Managing Director, Boehringer Ingelheim, India.

After the lockdown is fully lifted, companies are likely to use the work-from-home model for roles that do not necessarily rely on being on-site, including for field-based employees, says Tyagi. Lupin's Gupta says more digital adoption will happen across the commercial supply chain, covering distribution and order fulfilment. Lupin is promoting a chatbot among doctors to facilitate patient-doctor interaction.

A study by American research firm IQVIA on the impact of Covid-19 for the Indian pharmaceutical industry says digital supply solutions, e-commerce and sustained investments by companies in digital channels, including video chats, e-detailing platforms and teleconsultations, will become a part of the new normal.

Changing R&D World

New drugs and vaccines, including for infectious diseases neglected earlier, will form the mainstay of global drug research going forward.

Biocon's Shaw says increased funding for public health solutions such as vaccines and developing healthcare infrastructure will take place, especially in primary healthcare. "Apart from government initiatives, venture capitalists, angel investors and corporate houses will come forward to invest in biopharma innovations and technology-assisted medical solutions, which they had neglected due to high risk and long waiting periods for rewards," she adds.

As an example, Shaw cites the launch of the Covid-19 Innovations Deployment Accelerator (C-CIDA) by DBT's Centre for Cellular and Molecular Platforms (C-CAMP) along with multiple non-governmental partners, an area of funding hitherto unheard of in biotech research in India.

But pursuit of new chemical entities (NCEs) and novel biological entities (NBEs) may not be easy for Indian companies as it involves funding of over $1 billion to develop a drug or a vaccine. Balanced product pipelines are being developed across high-value generics, biosimilars (a product similar to an already approved medicine), NCEs and NBEs, with a thorough assessment of intellectual capital, available financial resources and the evolving regulatory and pricing environment.

"Indian companies would continue such pursuits judiciously with a sharp focus on regulatory compliance and more global partnerships to shorten developmental timelines for complex products," says Cipla's Vohra.

Lupin's Gupta says generics, including complex generics and biosimilars, will always be a meaningful part of companies' businesses. Use of technology in R&D for reducing cost, time and speed of marketing is going to gain prominence. Technology will also be used for regulatory communications, including virtual data rooms for preparing and sharing key documents with government bodies or regulators, he adds.

But, ongoing trials could be impacted as safety of volunteers becomes a problem. "Researchers have to identify and actively monitor trials, pre-empt any possible issues and develop mitigation strategies accordingly, including shifting of trials to sites where risks are lower," says Cipla's Vohra.

The change is already here, and according to experts, companies are already adapting to the change. One thing is clear. The Indian biopharmaceutical industry has a lot to take away from the current crisis.