All opinions are my own.

Wednesday, June 17, 2015

Can An Alliance Between US Pharmaceutical Benefit Managers (1) and Make in India (2) Lead to Lower Global Drug Prices?

Question asked is very legitimate and the ANSWER is unequivocally YES. However, in order for it to happen there has to be a unique alliance that would bring bureaucrats, technocrats and business minds on the same table and work together “hand and glove” to change the global landscape.


Indian pharma companies with 2005 WTO/TRIPS agreement took advantage of the need for low cost generics in the developed countries. They succeeded. However, regulatory bodies (FDA, EMA and others) were not fully prepared to oversee their manufacturing practices. With time quality and therefore supply issues have resulted. My conjecture is that in order to stay profitable not every “t” has been crossed and not every “i” has been dotted with respect to manufacturing technology and meeting regulatory requirements.

Unless attention is paid in the improving manufacturing technologies and complying with regulations Indian companies might not be able to meet all of the regulatory and quality requirements. This could have long-term impact on the reputation of Indian companies as the “global pharmacy”.

Many of the Indian pharmaceutical companies have imported their Active Pharmaceutical Ingredients (API) from China. Chinese API overdependence has caught the attention of Modi government in India. Government of India is taking steps to alleviate API dependence from China (Centre mulls bulk drug policy, Government working on policy to promote APIs production). This recognition and remediation steps are of significant value.

My concern is that unless the right players are involved and timing is impeccable, Government of India might not be able to meet its “Make in India” plan for pharmaceuticals and might loose India’s status as the “global pharmacy”.

Indian companies for the foreseeable future will remain supplier of generic drugs. They have a significant opportunity to be the supplier of generics to 30+% of the global pharma market if all the pieces of puzzle fit.

Brand Company market revenue will be higher due to high drug prices but compared to generics they will have significantly lower patient base. I do not believe Brand companies will have much roll in this venture as their focus is catering drugs that are under patent. 

What all is needed:

With respect to formulations Indian pharma landscape is fragmented. There are too many players catering to the same customer base as a result they do not have economies of scale i.e. not the best manufacturing technologies. Economies of scale can improve profitability. Same holds for the needed API.

US PBMs, as the time progresses, will be consolidating. CVS Health and Target merger is the most recent. PBMs need to leverage their supply costs. Consolidation of PBMs is one way. The other way is to work with pharmaceutical manufacturers. Second way will have higher and sustained financial benefits for each participant.

PBMs along with a quasi-Indian government body can create pharmaceutical API manufacturing and formulation companies who can through economies of scale incorporate best of the technologies to produce quality drugs at the lowest price to supply the world’s pharma market.

If a “can-do” team that consists of savvy technocrats, bureaucrats and business folks from India and the United States can be created and it succeeds; it will change the global pharma supply landscape. Timing is of the essence and the team will have to operate on a fast track.

An International team can be assembled and it can very quickly select pharmaceuticals based on their revenue, patient need and manufacturing technologies. Reverse calculation method (3) using total global revenue can be a staring point. I would not venture out to say what cost reduction is possible but improved asset utilization, improved product yield, reduced waste and reduced quality approval time would definitely lower costs. Regulatory bodies will have to play their part for the success. It would be a global win.  

Girish Malhotra
EPCOT International

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