Pharmacy

Development of a new drug/molecule begins with a lot of ideas and interest and then it enters the long dark tunnel of risks and uncertainties. Pharma companies invest enormous amount of money and time for the development of a drug and bringing it into the market, but it is not without proper risk analysis and assessments that they do so.

In most industries around the world, risk analysis and decision- making tools arc relevant. In times of recession, patent products expiration, lack of novel technologically advanced skills, pharma companies are relying on sophisticated specialization for analyzing the risks and uncertainties prevalent in the market. This will not only help them achieve their desired targets but will also ensure   or   predict the huge stumble or roadblock that their product might face in the long run. By necessity, experts in the Held garnering varied solutions are preferred, and    Protivitri    is one   such   leading business    consulting firm    catering    to the    demands    of this sector. Businesses   around the     world     are facing   extraordinary challenges. In India, Protivitri commenced its   operatic ns   in October 2006 and have offices at NCR, Mumbai and Bangalore. We have rendered services ranging from value added internal audits. Information Technology   (IT)   effectiveness   & control, risk and compliance, finance and accounting excellence, and cost &   working   capital   optimization across   industries   ranging   from health care & life sciences, telecom, industrial products, infra structure, etc.

 Pharma industry: Present and future

The pharma industry in Indian is poised for a rapid growth over the next few years. Patents for several blockbuster drugs (estimated at over $250 billion in sales) will be expiring between 2011 and 2015, which will lead to an opportunity for the generic manufacturers in India. Once the drug loses patent protection, the market price of the product falls drastically by around 80 to 85 per cent. Even on a conservative basis of 10 per    cent,    the    market

for these drugs over the next five years would be in the range of $25 to 30 billion. Indian companies are leaders in generic manufacturing and have    set    up    state-of-the-art manufacturing facilities   in   India that   are   US   Food   and Drug Administration    (PDA)    approved. The US PDA has stringent regulatory standards     for     manufacturing of"   pharmaceuticals   products   in the world.

Considering the low cost of manufacturing in India, there seems to be a tremendous opportunity for the Indian drug makers. Over the past few years, we have seen several alliances/ takeover between Indian drug maker and foreign MNCs; the latest being the joint Venture (JV) between Merck and Sun Pharma that was formed with the idea to sell branded generics   in   emerging   markets. Some of the companies that are affected by loss or patent protection

Would be Pfizer, £Ii Lily, Johnson &. Johnson, Merck, etc.

Since the non-patent protection regime for such products   if   not   lucrative, the best way to retain the market share of this products by these foreign MNC's would be to share the technology/IP with a generic manufacture on a                profit share basis in form of JVs, contract manufacturing in low cost countries like India.

 Although opportunities exist for other companies to reverse engineer these products; the ultimate product will be near to the original products in terms of efficacy and effectiveness, but will not be the same. In case of share of Intellectual Property (IP)/ technology by these foreign MNCs, then the products Mill be similar. Hence, such JVs would hit the ground running from day one.

The other huge market in India is dominated by alternative medicines like ayurveda, naturopathy, homeopathy, siddha and unani. These have a great demand spedncally in the rural areas of India and is a huge market apart from the urban market. It is estimated that the  

market size (in terms of consumption)   for   These   alternative   medicines is equal to the size of allopathy medicine with ayurveda having a majority share.

 These medicines are considered more as concepts and beliefs rather than proven by empirical research. These medicines do not have the highest level of regulations and accordingly spurious, counterfeit, poor quality and adulterated herbal ingredients, concerns for patient safety are high. This gives an opportunity for the pharma companies to capture this market by means of educating the rural population and having their products available at a reasonable price in these locations.

Risks and solutions

With the anticipated growth in the pharma industry, there is paramount need to increase the production capability/ facility (for generics) and with that comes the additional risk like:

• Complex laws in India

• Environment-friendly facilities

• Competition from other generic manufactures

• Availability of good infrastructure and quality manpower

• Cap a city utilization

• Acquisitions and takeovers

Apart from above, the even larger risk is the discovery of any new product/ molecule for the same disease that makes the existing product redundant. Companies that invest heavily in R&D over a sustained period of time (like foreign MNCs) have a better chance of discovering a new molecule. Having done that, they would get that in commercial production in a short period of time. This would lead   to   discontinuance   of   the manufacture of generic that they were producing either in-house or through contract manufacturing.

Companies [hat invest in R&D make their money during the patent period where they have a monopoly, After they go off patent then the market  belongs  to   the  generic manufactures and cost is a huge factor. Cost cutting is not easy in a pharma company. The main cost is the raw material and production cost, which cannot be comprised or curtailed as these products deal with human life. The other major cost would be selling and distribution that can be optimized through an effective supply chain. All pharma products have an expiry date after which these have to be destroyed. Hence, an effective supply chain would ensure that these products are sold well before their expiry dates.

India being such a large country, supply and distribution across India is always a challenge. The right stock in the right: quantity has to be at the right place at the right time. For this to happen, the flow of information from the chemist shops (consumers) should flow to the company (manufacturer) on a' real-time basis and this is the key to enhance the revenue of any pharma company catering to the domestic market. Further, better storage conditions at warehouses, distributors etc lead to lesser damages thereby adding to the bottom line. This should be the key area that requires attention.

Pharma Company: General Challenges Faced and Solutions Offered

Any drug manufacturers in India must ensure that their drug reaches customers with uncompromised quality on a timely basis. As companies do not have direct access to retailer’s data on sales, most pharmaceutical companies depend "on clearing and forwarding agents (CFA)/ stockist sales date to monitor their secondary sales. The primary sale culminates when the stock at the CFA is hilled to the stockist. The secondary sale is when the stocks transferred from stockiest to the retailer is sold to the consumer.                                      

Medical representatives who facilitate this process are given predefined sales' targets. To meet these targets they are tempted to push inventory on the stockiest to levels that exceed the actual demand. When the next level of sale (secondary sale) does not take place, me stockist will either return goods to the company or the stock expires.

In India, manufacturers do not retain full control over domestic distribution system as there are many parties involved like factory people, truck operators, courier service. Air transport, CFA, stockists, retailer, branches, etc. Manufacturers are increasingly realizing the importance of an effective, distribution system, all the way to the end customer, and are adopting various strategies, tactics and technology to overcome these challenges and meet the overall objectives.

Protoiviti assisted the company by looking at the warehouse utilization, overall transportation costs and reductions that can be sought by innovative arrangements with transporters, merits and benefits for inter branch/inter CFA transfers to avoid loss of sale, optimization of transportation load by use of technology, performance monitoring and management of CFA's/transporters and conditions at storage areas to prevent damages with the sole objective of optimization the overall distribution network in terms of cost as well as operational efficiencies.

A game changer for life sciences sector?

Protiviti in India is led by a team of young individuals in their mid thirties. In late 2010, Protiviti acquired the internal audit and risk consulting arm of a 68-year-old, family-run chartered accountancy firm JC Bhalla and Co.

Protiviti's pharma and the sciences consultants provide solutions that allow organizations to strengthen compliance, improve the auditing process and drive financial performance- Companies within the life sciences industry    include   pharmaceutical manufacturers, biotechnology companies   and   medical   device manufacturers. These organizations are among the most regulated in the world, they continually face the challenge of complying with a wide and expanding body of laws and regulations, including the numerous requirements of the FDA, the prescription drug marketing, etc. Additionally, they are subject to privacy and data protection laws, corporate governance and consumer, protection laws, threats, fraud detection and prevention, and   increasingly demanding customers.

The life sciences industry experts at the company understand the challenges faced by pharmaceutical & life science

sector and have solutions that are designed to help them turn challenges into competitive advantages. Some of its key solutions include:

• Revenue risk management

• Supply chain optimization

• Enterprise risk assessment

• Internal audit

• Development of standard operating procedures

Whether it is turmoil in financial markets, introduction of new business models, expansion or consolidations, changing global and local regulation or the threat of litigation, businesses need a trusted advisor - the company helps them identify and manage both Opportunities as well as risks inherent for succeeding in the competitive global markets.