www.synerzys.com Pharma Business dynamics in ROW markets Challenges & opportunities for Indian Pharma SME manufacturers a)Introduction From an era (Pharma 1.0) of “blockbuster” drugs, global Pharmamarket has moved into the current era (Pharma 2.0) that is focussing on emerging markets opportunity and Genericisation. Many factors are driving this change. Western economies are decelerating and a large chunk of Healthcare costs are public funded. Though governments acknowledge healthcare provision to be strategically important, their willingness and ability to pay for it is subject to the current economic slowdown. Simultaneously R&D productivity at global pharma giants has been at historic lows leaving them grappling with a patent cliff and need to discover newer avenues of growth. In such a scenario, emergence of E7 markets (also known as BRICKMT –for Brazil, Russia, India, China, South Korea, Mexico & Turkey) that is forecast to generate per-capita GDP growth of 6.9% a year till 2020, made it an attractive destination for global pharma industry. It is estimated that E7 pharma sales is projected to grow by 10.7% all though 2008 to 2020. With an estimated size of $260.9 bn by 2020, E7 markets are expected to contribute 21% to global pharma sales, doubling its contribution of 10.5% in 2008. Similarly ROW markets (excludes US, Western Europe, Japan and E7) are expected to increase its contribution to global pharma sales from 15% in 2008 to 23% in 2020 and become worth $288.9 bn. However despite increasing level of affluence in ROW markets, these markets have been and are slated to be dominated by generics. These factors have created a momentum that is shifting the focus of global pharma business to Genericisation & emerging markets (ROW & E7). As a result of these dynamics, Generics business is expected to grow at 8.5% CAGR from 2008 to 2020, in contrast to overall projected growth of just 4.5%.for global pharma sales. India with its traditional advantage of low cost of skilled manpower and innovation, is well poised to benefit in this scenario. There are approximately 250 large units and about 8000 small The emerging markets growth opportunity Mkt Size (USD Bn) Mkt contri % CAGR 2008 202 0 2008 2020 % Global 732.7 1244.2 100% 100% 4.5% E7 76.8 260.9 10% 21% 10.7% ROW 110.7 288.9 15% 23% 8.3% Adapted from : World phar ma model v.1.0, UBS inve stment research, Q-series
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Many governments in ROW countries are realizing the strategic importance of Pharmaceuticalindustry. Pharma industry not only is a key component of their welfare agenda to provide basic
level of healthcare to local population but also can be a significant drain on limited foreign
currency reserves. Thus governments are setting up tariff and non-tariff barriers to protect and
promote local pharmaceutical industry.
For example in Algeria, in last few years, government has implemented following measures
leading to a significant increase in local manufacturing activity.
Tariff barriers
o
Increased tax rates for imported products
Non-Tariff barriers
o Banning import of products with more than 2 local manufacturers
o Preferential interest rates for new manufacturing projects
o Differential regulatory requirements for imported and locally produced
products. Bioequivalence is required for imported formulations and formulated
bulk premix but not for locally produced formulations
c.2) Increased regulatory stringency
With the rising reach of low-cost generic medicines, regulators across many ROW markets are
opting for stricter norms to focus on quality. With the distinction between regulated and semi
/ non-regulated market thinning by the day, CTD format with minor country specific
customizations is becoming increasingly common. More countries insist on plant audits for
GMP approval.
For eg. Peru MOH now insists for GMP plant audits for those plants that do not have approvals
from any one of the Stringent regulatory authorities like USFDA, EMEA, TGA etc
Many African countries like Kenya, Uganda & Tanzania authorities have also mandated GMP
Plant audits.
c.3) Move towards a harmonized regulatory environment
A cluster of countries come together to create a uniform regulatory environment, provide
mutual recognition to product approvals and in many cases also provide an unified market forthe manufacturers
Zone IV stability data - Many countries in LATAM, ASEAN, GCC etc now insist on zone-IVstability studies. Non-availability of such data that is relatively low-cost but time consuming to
generate, has delayed or even lead to loss of an export opportunity in many cases.
Thus manufacturers should ideally incorporate Zone-IV studies as a part of their product
development protocol.
Countries known to expect zone IV Long-term stability conditions
Source: http://www.who.int/medicines/publications/pharmprep/pdf_trs953.pdf#page=101, Pg 118, accessed on 3rd Dec 2013 at 08:35 AM IST
Bioequivalence – Though a significant cost, some countries insist that BE study data for finished
product be submitted before approval is granted for import of either finished product or even
formulated bulk premix. Considering the business potential and individual market of interest a
decision to generate the same can be taken.
API from DMF & Non-DMF source – For core products, a manufacturer can consider preparing
registration dossiers for formulation using API from both DMF and non-DMF source. This can
provide flexibility to offer differential prices depending on the regulatory requirement of theimporting country.
Reference NRA approval - Plant approval from stringent regulatory authorities like USFDA, TGA
Australia, UK MHRA, can enable exemption from plant audits in large number of countries.
However typically this route entails high cost, huge efforts and in many cases manufacturer’s
infrastructure may not be geared to face audit from such SRA.
However similar strategy can be employed with lower resources, within regional clusters. In
many cases, an approval of reference NRA makes approval from other countries within that
cluster significantly easy.
For example, if a manufacturer is targeting Middle East markets than approval by Jordan NRA
(JFDA) provides automatic approval in Syria and facilitates approval within Middle East.
Similarly, for a manufacturer targeting LATAM markets approval by any one of the four
reference NRAs can facilitate approvals in other countries. The four reference NRAs for LATAMare ANVISA Brazil, ANMAT Argentina, COFEPRIS Mexico, INVIMA Colombia,
d.5) Super GenericsIndian pharma industry is known globally for its formulation development prowess.
Supergenerics (Mouth Dissolving tabs/ Effervescent /Granules) or fixed dose combinations
approved by USFDA / EMEA enables pharma SMEs to build competitive advantage. Regulatory
pathway for approvals of such products may be slightly longer compared to normal products,however it can lead to significant improvement in margins, especially when the improvement
fulfils a genuine patient need. For example, Ahmedabad based Lincoln Pharma has developed
a novel Ondansetron nasal spray which has been granted a patent in 2011.
e) What can Pharma SMEs do better?
e.1) Well thought out comprehensive contract documentso Certified Bilingual contracts
o Focus on scenario planning.
All possible “what if” scenarios & remedial measures to be clearly defined
e.2) Partner identification & assessment processPharma SMEs would need a partner in local countries to register, distribute and market their
products. Choosing a partner arguably can be the most important decision a manufacturer will
make that will determine the success in particular market. Hence most companies pay asignificant amount of time and energy to whet the prospective partners on a matrix of
capability, financial strength, strategic fit and reputation.
Equally important in our opinion is to assess the partner on softer areas like cultural fit, business
principles, personal comfort, organizational culture etc. This issues are particularly important
wherein a manufacturer envisages a long term relations with the partner.
f)
Conclusion
ROW markets can offer a comparatively easier learning curve for exports market access to
Indian Pharma SMEs. ROW markets offer higher margins compared to domestic markets and
can become a significant contributor to a Pharma SME’s top line and bottom line. Indian
Pharma SMEs can leverage their relatively nimble decision making process to create
organizational processes that endow competitive advantage to it compared to its bigger peers.
Profitable growth of Pharma SMEs is necessary not only to ensure continued self-reliance of