Facing competition from the global giants, the Indian Pharma companies have started to diversify and are taking bold steps to strengthen their product portfolio
ver the past decade, India has emerged as the one Oof the fastest growing pharmaceutical markets in the world. The growth rate of the industry, which was 18 percent per annum between 2005 and 2015,
stands at over US$30 billion. Further, the generic drug sector has seen a steady growth of over 22 per cent annually during the same period, and accounts for 20 per cent share of global exports by volume today.
This growth is expected to continue in the coming years with Indian Pharmaceutical sector touching US$55 billion by 2020. Moving ahead, the generic drug sector is expected to grow and capture 6-7 per cent of the US$ 760 billion generic drug market by 2020. These numbers are achievable with India having highest number of FDA proved drug manufacturing sites only next to the US.
Supply chain management
India’s growth graph seems promising at least on the paper however it is evident that there is a significant gap between the strategic vision and operational realities of the sector. Indian pharmaceutical companies are facing a unique set of challenges that are creating significant pressure on them to transform their supply chains.
Moreover the industry stalwarts feel the goods and services tax (GST) regime will influence the sourcing, manufacturing and distribution footprint, with particular impact on transportation and warehousing. Products have proliferated exponentially and become more complex compelled by patient’s therapeutic needs. Fragmentation at every stage of the value chain is direct hit on the supply chain efficiency. Then there are quality issues and the supply issues which have snowballed into the value chain, triggered by regulatory scrutiny.
The current scenario
Facing competition from the global giants the Indian Pharma companies have started to diversify and are taking bold s include developing capabilities to manufacture more differentiated and complex generic, investing in innovators and building capacity to manufacture biosimilars.
A key challenge Indian organizations face is that the business differentiator is shifting from being reverse engineering experts to having improved operational performance parameters such as service level and cost to deliver. Competition is fierce and the pressure to bring down the cost of the drug is an additional element resulting in the need to reexamine the supply chain. Most Indian companies have successfully figured out how to reverse engineer and manufacture generic drugs but have paid little or no attention to operational aspects. Three key performance indicate that organizations rely on to gauge their overall supply chain health and readiness for growth.
However the industry average is 15 per cent points higher than the global best in class, which indicates suboptimal routes, high transportation costs, and issues with the storage, specifically for high-risk and conditioned products, on average, manufacturing conversion costs account for nearly 75 per cent of the total supply chain cost, with distribution responsible for the remainder.
Key barriers
Quality issues have deepened and widened over time and increasing number of these are occurring across the value chain. These range from issues at procurement level over the quality of the raw materials as well as at the manufacturing stage where plant shutdowns and
“We could easily gauge the inefficiency in the supply chain. On one hand there is 5 percent return of goods due to expiry and other reasons while on the other side, estimates though the sources say that there is a parallel counterfeit medicine market which amounts to 25 per cent of the overall Indian domestic pharma market.”
-Pradyumn Singh, Co-founder of CEO, Pharmarack Technologies Pvt. Ltd
“Reverse Cold chain is always difficult to handle since infrastructure such as cold rooms, packaging material as well as trained staff is rarely available. Sensitizing associates in the market, training our logistics, service providers and extra precautions by quality in assessing fitness of return goods are useful.”
-Surendra Deodhar, Vice President, Head Material Management at Reliance Life Sciences
inability to get necessary certifications have created unused capacity. Lack of quality control at the R&D stage has also led to more failures of trial batches, causing delay in product launches.
Surendra Deodhar, Vice President, Head Material Management at Reliance Life Sciences, says, “Reverse Cold chain is always difficult to handle since infrastructure such as cold rooms, packaging material as well as trained staff is rarely available. Sensitizing associates in the market, training our logistics, service providers and extra precautions by quality in assessing fitness of return goods are useful.”
Indian Pharma companies are expanding their portfolio at a fast pace. This has been driven in part by new product development, dosage forms, enhanced formulations and changes in packaging and labeling to cater to the new markets. Increased competition which fuels the need to constantly innovate and varying regulatory requirements across the multiple markets are other key driving forces.
The fast paced proliferation has several implications for supply chain, including higher manufacturing & distribution costs, more inventories and a larger supplier base.
India’s supply chain network is very complex making it tougher to manage it properly. The sheer number of players at each stage with varying requirements, lack of clear categorization, lack of proximity to the manufacturer and different degrees of quality standards are clear challenges.
“We could easily gauge the inefficiency in the supply chain. On one hand there is 5 percent return of goods due to expiry and other reasons while on the other side, estimates though the sources say that there is a parallel counterfeit medicine market which amounts to 25 per cent of the overall Indian domestic pharma market.”
-Pradyumn Singh, Co-founder of CEO, Pharmarack Technologies Pvt. Ltd
As a result, production schedule changes are more common because of the poor supplier service levels, further affecting the ability of supply chain to make and deliver on time.
Pradyumn Singh, co-founder & CEO, Pharmarack Technologies Pvt. Ltd., enthuses, “We could easily gauge the inefficiency in the supply chain. On one hand there is 5 per cent return of goods due to expiry and other reasons while on the other side, estimates though the sources say that there is a parallel counterfeit medicine market which amounts to 25 per cent of the overall Indian domestic pharma market.”
Steps to take
The easiest way to tackle this issue is to design the supply chain that is more adaptive, flexible and responsive to the changes. This can be done by focusing their efforts on following steps.
Enabling efficiency: India’s Pharma Supply chain is crippled with end-to-end complexity. Reducing these complexities can unleash an array of benefits. Efforts should be focused on these top priorities for immediate actionable results.
Agility and visibility: In addition to changing patient’s needs and shifting diseases patterns, the global market is experiencing more frequent shor tages and communicable diseases outbreak. It is vital that pharma companies are ready to react to such market changes if they want to be best in class performers.
Ensuring that the supply chain is integrated with the sales and operations planning processes and commercial strategies will enable pharmaceutical companies to move from a ‘planning for convenience’ model to a ‘planning for market model.’
“Navigating through fragmented segment dotted with unorganized independent units and inadequate information infrastructure, drug makers are faced with uncertainty regarding the stock movement in channels beyond the CFA points. This results in instances of non-availability of medicines or products at the retailers, translating into loss of sales for the company”
-Murlidharan Nair, Partner with Ernst & Young
Last mile distribution: The last mile means the final, and most tangible, promise of the contract between the seller and shopper. If anything goes wrong in the final stretch, that is when they get upset and brand is damaged. Retailers should try and put themselves in the foot of the customer by regularly mystery shopping their clients and seeing if the last mile promise is being delivered.
“Navigating through fragmented segment dotted with unorganized independent units and inadequate information infrastructure, drug makers are faced with uncertainty regarding the stock movement in channels beyond the CFA points. This results in instances of non-availability of medicines or products at the retailers, translating into loss of sales for the company,” says Murlidharan Nair, Partner with Ernst & Young.
Going further, Nair adds, “Drug companies register losses when their representatives are unable to service the shortage of medicine stocks at a chemist fast enough. In fact drug makers need to make their supply chain efficient by becoming customer driven in replenishing stock, as opposed to pushing month-end stocks into the channel.”
Thus, it is clear that outmoded ways of logistics will not hold good in the future. The companies will have to make new strategies which are closely aligned with their manufacturing and commercial strategies. So be it temperature control, security or regulatory compliance, strategic supply chain management including logistics with the aid of technology, is pivotal to tackle important issues of the pharma industry.
