Building & Scaling a Successful Pharmaceutical Enterprise in India

India’s pharmaceutical industry has traversed a successful journey in the past 50 years. India's pharmaceutical industry ranks tenth globally in terms of value, it is ranked third in volumes. These characteristics present their own opportunities and challenges.

The industry stands today at USD 40 BN, including exports & will sustain its healthy growth trajectory of 15% CAGR and is expected to grow to a size of USD 190 billion to 200 billion by 2030. Indian Pharmaceutical industry is on the cusp of transformation.

Several trends including the prevalence of NCD, demographic, regulatory, technological and financial, are altering the trajectory of the industry.

With over 140 million households expected to enter the middle class in India & around 1.1 billion in Asia in the next decade, consumption of healthcare services is set to increase. Healthcare is at the centre of the government’s agenda & the government has recently launched the biggest universal healthcare scheme in the world through Ayushman Bharat. This universal healthcare scheme will also push healthcare demand and drive up patient volumes. If more drugs coming in the ambit of DPCO is any indication, this high-volume industry will be accompanied by pricing and margin pressures as regulations continue to focus on aiding access to low-cost drugs and services. Clearly, the focus on India, with 15% CAGR growth, will grow

As growth momentum is gathering, the outlook of the Indian pharmaceutical market has changed from “Is it worth our while to be in India?” to “How can we be the part of India’s high growth story” & “How can we quickly establish our leadership in this important market?”

Noticeable Trends

 Changes in Demographic & Healthcare Ecosystem is Driving the Growth: Population growth at around 1.1 per cent every year and a steady rise in disease prevalence is increasing the patient pool.

India today has some 300 million people with some insurance coverage on their own, another 500 million will be added by the universal healthcare scheme. The next decade will witness the addition of 140 million new middle-income households. All this will invert India’s opportunity pyramid into a diamond.

These households will drive a multifold increase in healthcare consumption. The affordability of drugs is rising due to sustained growth of income & insurance penetration. Accessibility to drugs is expanding due to growth in medical infrastructure, new business models for Tier-II towns and rural areas, launches of patented products, and greater government spending on healthcare. Medical infrastructure will experience dramatic growth over the next decade, with over USD 275 billion in investment

Increase in the Ageing Population: India has one of the world’s youngest populations today. However, the proportion of the population older than 60 years of age is expected to increase to 20% by 2050. Rapid ageing, greater life expectancy and altered lifestyle leading people to encounter NCDs early are expected to become key drivers for the growth of disease burden in India and as a consequence will increase the demand for healthcare services

Pricing Regulations are Constraining Margins: The pharmaceutical industry is witnessing margin stress for quite some time now because of the price regulations to increase access to affordable medications. Currently, price caps impact more than 820 formulations representing about 18% of the Indian Pharma Market. It is expected that 25% to 35% of the pharma products could come under price caps in the next five years. The government’s push for generic medicines is further putting pressure on drug prices and margins.

Mass Therapies Consolidating while Specialty Therapies Increasing Share: Speciality and super-speciality therapies are expected to grow faster than the market while mass therapies will continue to be the largest segment. Mass therapies for acute indications such as respiratory and gastro-intestinal are treated by general practitioners (GPs) and consulting physicians (CPs). This segment is increasingly being driven towards the OTC route, caused by greater patient awareness and a tendency to self-medicate. Older therapies in chronic indications such as diabetes, hypertension and epilepsy are growing this segment because of deeper percolation & adoption by the GPs & CPs.

Industry is Reshaping: Pharmaceutical companies are witnessing the rise in chronic drug sales however robust growth is expected in the biosimilars market on account of several biologics patent expiring in the coming years and favourable government regulations for automatic biosimilar substitution. These products are projected to grow to nearly $17 to $20 billion globally by 2025 up from about $10 billion today, clocking a 30% annual growth, approximately.

Digital Health Ecosystem: Digital technology platform is pushing digital health adoption with the primary aim of enhancing the delivery of care.

The pharmaceutical industry has been laggard to adopt the digitalization wave both internally as well as externally. The industry will have to evolve itself to be in sync with the digitalization growth & is expected to model itself to capture the patient’s journey in the digital delivery ecosystem.

It also is expected to look at digital tools to deliver communications & messages to customers for its products 

Essentials for Commercial Success

FOCUS will be Key for PROFITABLE Future

Pharmaceutical companies will have to focus going forward by defining clearly the markets they will wish to play in.

From a market as a whole, the focus will need to be shifted to a market that can be addressed & shaped. Segmenting & targeting (S&T) the market will become increasingly important to ensure profitability as the margins will shrink.

To stay competitive in today’s transforming healthcare environment and engage better with physicians and patients, pharmaceutical companies need to shift from being product-focused to being customer-focused. Market segmentation will ensure a better way to understand target customers, to provide detailed information on consumer personalities, emotions, values, interests, beliefs, and attitudes thereby helping to identify their issues correctly and provide the required solutions, to know what customers want and why they want it, to understand crucial information on the factors driving behavioural change among customers and to help pharmaceutical companies to analyze augmenting behavioural and demographic data with key insights on consumer personalities and motivations. The go-to-market & entry strategy must reflect this focus where the business is built brick by brick through development, diagnosis, adoption & conversion, patient by patient. In the compelling commercial strategy, analytics must be a part where data is captured & analysed for data-driven decisions. Analytics will be key to success & data must be integrated with IMS to have real-time insights

Cost Optimised Operating Models: Current trends point to an industry that is going to evolve into a high-volume, low-margin market. Incremental efficiency gains will not be enough. Pharmaceutical companies will be encouraged to zero-base and aggressively remove costs from the system. Zero basing can potentially result in a 10 to 15% improvement in profitability.

Generics vs Branded: The debate of generic vs branded can not be just answered within the confines of clinical. Of course, there are various studies which clearly establish the marginal (not substantial but incremental) superiority of branded over generic.

One can not deny the coexistence of segmentation of both Branded & Generic. Today Generics indeed have a substantial share of the market, but it is also true that Branded products continue to dominate in every therapeutic area, especially in Chronic, Rare, speciality, super-speciality & life-saving disorders.

There is enough space in the market for both of these to play & this trend will continue. Despite the generics, all the branded MNCs & Domestic branded companies are dominating the market. Rather this is an opportunity for organizations to manage their innovation pipeline & portfolio strategy. While one drug may be getting off-patent in a therapeutic segment, the company in the meantime innovates a new patented drug with better efficacy & safety in the same therapeutic area. Hence that allows an organisation to manage its portfolio in a way where off-patent generic can be sold as an older generation drug with lesser price, while a new patented drug sells in the branded segment within the same therapeutic segment at a premium to recover the R&D investment

In Future Pharmaceutical Industry will Need to Shape the Market

Pharma industry will need to learn from the medical devices about shaping therapeutic segments, Orthopedic joints are a case in point. Before the joint replacement, patients had to live with the pain for years together. The industry invested huge resources to educate & bring crucial awareness about the safety of the procedure & also its impact on the quality of life later. They successfully captured the patient journey from diagnosis to management to surgical intervention & have worked hand in hand with the providers, clinicians, patients & regulators to establish the procedure as safe & effective. Orthopaedic joints companies developed the market that never existed through awareness, diagnosis & up-gradation. This will also be important for formulary listing in future as rising costs of therapies will have to be justified against the stressed healthcare budgets & scrutiny by payers

Pharmaceutical Industry will have to follow the suit. It has been working in silos till now. Moving forward, it will be required to work in tandem with diagnostics, providers, payers, clinicians, medtech organizations to capture the full journey of the patients

Prepare for Ayushman Bharat 2.0 for Quality and Access: While Ayushman Bharat has the potential to drive dramatic healthcare access, it is imperative that access must be coupled with quality as well. The industry must work with the government to deliver comprehensive and high-quality care through co-development of protocols, standard treatment guidelines and coverage inclusions based on clinical and economic benefits. Health Economics & Outcome Research (HEOR) & Health Technology Assessment Boards (HTAB) will be crucial elements to convince payers & governments towards Value-Based Healthcare (VBHC)

Building Optimised & Effective Team in Times of Compromised Margins

Defining Strategy, GTM, Market entry and S&T must precede before deciding on the organisation structure & design. Organizations must define a structure that justifies the current & future opportunity in the most optimised manner & the structure must be aligned with the market & strategy. Roles for each position must be clearly defined & must be matched with the competency required. Talent acquisition team must not limit their search within the industry but must be guided by the skills required & must get those skills from outside the industry as well, if required. Training of people traditionally have been limited to products, medical & soft skills, but moving forward people will also need training around the digital tools, engagement models, monitoring & execution tools and data analytics

Analytics & Digital Transformation is Key for Future Success: The growing availability of tools to capture, integrate, visualise and analyse large amounts of data today means that pharmaceutical companies can become more effective in generating and targeting demand. Additionally, digital supplementation of Medical Representatives (MRs) by Pharmaceutical companies can dramatically increase clinician’s reach & can help in providing customised information based on individual clinicians’ information-seeking behaviour. Pharmaceutical companies can also build and deploy value-added services like integrated disease management systems and practice productivity tools, which doctors identify as a clear unmet need today. In addition to nurturing higher clinician engagement and advocacy, such tools have the potential to drive up drug sales. For example, medication adherence rates in India for chronic disease treatment is estimated at a mere 7% compared with more than 20% in developed markets like Europe. Disease management tools can help drive up this rate—an increase in drug adherence to about 10% can result in $8.5 billion in additional drug sales by 2024.

Traditional Channels are Transforming: Organised pharma retail though is nascent but it is a rapidly growing channel projected to grow at about 20% annually over the next few years. This will be further emphasized by the online pharmacy growth of more than 25%. Nursing homes are likely to emerge as an important institutional sales channel as Ayushman Bharat gains momentum. It is estimated to be over $1.2 billion opportunity for Pharmaceutical companies by 2025. Pharmaceutical companies must set up the right distribution and sales and marketing structure to tap into this opportunity. Formularies, insurers and pharmacists influence 76% of the total prescriptions. This creates a clear imperative for Pharmaceutical companies to engage with this broader stakeholder set in a meaningful manner to drive prescriptions. Hiring people from FMCG having clear skills in managing channel more effectively will be a good idea. Distribution network strategy will have to be optimised & lean to support the demand in the most focussed manner capturing newer channels such as organised retail, e-pharmacy and urban, semi-urban & rural markets to capture the total value chain

Curing Public Procurement beyond L1: Public procurement today largely revolves around lowest price tendering without taking into account post-tender outcomes. The government recently also have unfolded Public procurement Order (PPO) to support its Make in India initiative. The industry must work with the government to bring in more holistic procurement models, which evaluate quality, beyond-the-pill services and outcomes of care in addition to the price. This will enable the government to maximise patient outcomes while allowing the industry to participate as true partners in improving India’s health.

Market Access a Winning Strategy

There is an increasing need to establish market access functions, especially in emerging markets, where the complex, dynamic healthcare landscape confounds product approval and uptake. Moreover, emerging markets are the engines of growth today, and, thus, performing in these markets is critical for the majority of pharmaceutical companies. To address the challenges posed by regulatory agencies and diverse stakeholders, a customized market access strategy is the need of the hour. Traditionally, R&D, sales, and marketing have been the predominant drivers of commercial success for pharmaceutical companies. This traditional market access approach is very linear and involves engaging with physicians, pharmacies, and regulatory bodies for greater product uptake, but it includes only pricing and reimbursement activities. However, market access must be defined as a process that ensures all appropriate patients have rapid and continued access to the product at the right price. This indeed is a broad concept that includes multiple functionalities from a company's commercial, regulatory, supply chain, marketing, medical, and corporate functions. There has already been a recent shift in the makeup of stakeholders to also include patients, payers, and advisory groups due to their increased role in treatment decision making. These changes have forced an evolution in market access to a value-based approach from the traditional price-based perspective. This has made market access an increasingly important area of focus for pharmaceutical companies to achieve success through improved access.

Building an Integrated Regulatory Strategy

The pharmaceutical industry is facing an ever more complex regulatory landscape. Managing drug approvals in major developed markets is already an immensely challenging task. Pharmaceutical companies now must navigate the regulatory guidelines for multiple countries simultaneously to gain approval for new drugs. Meanwhile, pharmaceutical companies must also balance more demanding regulations in the areas of advertising and promotion, model code for ethical marketing of pharmaceutical products, manufacturing, and benefit and risk management. Despite these developments, the government regulatory affairs (GRA) organizations at many pharmaceutical companies have not kept pace. They are often perceived as purely transactional or a compulsory function that slows progress and chokes innovation. To meet the evolving challenges, GRA organizations must adopt new mind-sets and substantially upgrade their capabilities.

The regulatory strategy must also be aligned with Portfolio Management. R&D, Regulatory & Commercial teams can integrate their efforts to ensure as soon as a product becomes off-patent, they can get to market an upgraded product for the same therapeutic segment with better safety & efficacy profile. Managing patents cycle must be part of regulatory & R&D strategy & it must be integrated with the portfolio & regulatory strategy

The world of the Indian pharma industry is changing rapidly. To respond to these changes, pharmaceutical companies must react promptly to meet the needs of the future by reimagining their commercial and operating models to safeguard future profitability.