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India is fast emerging as the go to destination for quality generics. This has linked Indian pharmaceutical supply chains with the global chains. An inefficient, unwieldy, and inward looking supply chain has now to transform into a complex, state of the art supply chain, in step with the global best practices. And given the fragmented nature of the players, there is a long way to go. The SCMPro research team delves into the major transformational themes that are likely to drive the Indian pharmaceutical supply chains for the next few years.
The Indian health care industry is showing steady progress. If we look at the infant mortality rate from the 1970s to 2009, we see a significant drop. Yet we are still around 40 percent higher than the developed world. In addition, we have a host of other issues – malnutrition, poor sanitation, unsafe drinking water, female health issues, and poor rural health. At the same time,there has been some very encouraging developments – we have seen efforts s to improve health awareness, growth of private initiatives in health care – we have seen the number of hospital beds double from 760000 in 2002 to 1550000 by 2010. We have also seen public private partnerships in hospitals and diagnostic centers. That is the story so far – there were some challenges, and some developments.
If we look to the future, two major trends can be seen – availability and affordability. The bulk of the challenges we face can be because of the non-availability of the product or facility at the place where it is needed most, and/ or the people who need these products cannot afford to buy them. The future will be defined by how we address these issues – jointly by the government, the health care industry, and the pharma sector. There are quite a few positives here – the government expenditure on health care is set to go up from 1 percent to 2.5 percent of the GDP. The government is playing a dual role – of a provider and a payer. The Government is setting up health care facilities, and at the same time, there is a massive effort to provide health insurance cover to the poor across the country. Going forward we will see the ability to avail of health care services and the availability of these services – both increasing. This offers the pharma industry with ample growth opportunities.
These opportunities will come from growth in metros and Tier 1 markets, urban poor, rural population and infectious diseases and vaccines. Unfortunately, the rural population is at the bottom of the stack in terms of priorities – quite a contradiction – where the services are needed most, is the least priority. This is something that the industry has to resolve – why is it that we do not focus on our rural population. There are a few imperatives to achieve this growth: The first is the industry needs to drive down costs. To do this we need to enter into a collaborative work ethic. The fruits of such collaboration can be seen in the FMCG and auto industries in entering new markets. One firm takes its products to a market, and other firms tie up with it to piggy back their products to the same market. And this is where the industry needs to leverage partnerships. This opens up a plethora of possibilities. Another imperative for market growth is focus through segmentation.
Globally, we are seeing growth in the US peaking and Europe essentially flat, while emerging markets including India and Africa showing robust.However, US continues to be the biggest market for Indian pharma sector. The issue is going to be about margins- including branded products, branded generics, and generic generics. Research shows that the Pre R&D margins are set to take a hit – from around 48 percent in 2010 to around 43 percent by 2020. That will be a challenge to the industry.
We are at a unique junction – on the one hand, we have an opportunity to tap new markets, new products, and new customers. At the same time, there is a need to improve reach, and explore chronic products – which means stable consumption patterns. And all of these have to happen at a lower cost. Fortunately, India is one of the lowest cost countries for pharmaceuticals – lower than USA and almost half of Europe. That is where the industry is going to deliver going forward. If that has to happen, transformation has to happen across the supply chain – right from planning through sourcing (API, intermediates and raw materials) through manufacturing (including packing) through distribution right down to the last point – sale to the patient.
A major trend will be the rise of digitalization and analytics. It is estimated that by 2020 one in three pharma supply chains will gain actionable insights from data led decision making. We will see major manufacturers upgrade their end-to-end planning processes with analytics tools and IoT software.By integrating the workflows of manufacturing and distribution using IoT, Supply chain managerscan accuratelyforecast, ensure savings where possible, and quickly react to situations. This will help reduce the amount of drug recalls that occur due to packaging and labelling errors.
India too will see the increasing use of temperature controlled transport of pharmaceutical products. Not just temperature controlled, but with the ability to monitor temperature in real time and assure stability.
Drug misuse, under dosing and reduced patient adherence are major issues in the pharma sector. Ensuring patient adherence will place pressure on packaging and labelling. There will be pressure on manufacturers to integrate principles of patient adherence into packaging. The occurrence of drug misuse epidemics is only going to force the importance of patient adherence to rise.
Pressure in lead time is a perennial problem in the pharma sector. Pharma firms need to gear up their supply chains to and collaborate with its customers and suppliers to crash lead times.The lead time today is probably more than 180 to 200 days. This is an opportunity for the pharma companies to sit together with their customers and supply chains to reduce this lead time. The future is all about our ability to sit together to develop products for our customers.