Big Pharma can gain from tango with small fry

Half-a-century of existence of India’s largest pharmaceutical industry body, the Indian Drug Manufacturers Association, presents a picture of vivid contrasts — one end of the spectrum has companies that have multiplied in scale and size, while the other has players that lack direction and are struggling to survive.

Management experts have an interesting take on this: India’s transition from being a largely protected industry to one that is exploring big global opportunities is driven by the professionalism of the promoters.

For companies like Sun Pharma, Lupin and Dr Reddy’s Laboratories, the big motivation has been to shed the traditional picture of being excessively dependent on the Indian market or exports of bulk drugs, but for a few others who have run business operations on conservative values, it’s been a time warp.

Today, that bunch of medium and small sized companies speaks of technology transfer of small changes in existing formulations to international generic firms, making specialised injectable medicines and mostly leaning on the good old Indian market, while their bigger counterparts look at scaling up in key geographies like Russia and Japan, taking a front position in the emerging biologics or biosimilars segment and partnering with global innovators with an eye on launching their own pipeline of drugs in those markets.

Putting the two distinct bunches and mapping their strengths and weaknesses, it would appear that we have the best fitment for a deal between small Indian companies and the larger ones. But unfortunately, we have not seen much of that.

On the contrary, overseas companies have been seen aggressively pitching for deals to smaller, often unnoticed Indian players.

Very often, industry doyens are faced with the question of creating a company that boasts of the size and capability of Teva, the largest generic company in the world. Due credit to Teva for capturing all the opportunities of the US generic market, buying out companies in Europe and Japan and creating a formidable brand like Copaxone to treat multiple sclerosis — all in a short span of 10-12 years.

Was this not doable for an Indian company?

It was, only if the promoters had seen value in combining and understanding complementary strengths — not just in approaching the markets but also in harnessing technology.

Sun Pharma chief Dilip Shanghvi has rightly pointed out that there is too much duplication in the Indian industry. As reported in newspapers, he has taken the lead in identifying smaller companies and picking up equity in those with unique selling propositions.

A similar move is reported by Ajay Piramal of Piramal Healthcare, who is scouting internationally for companies that can market drugs or technologies with future potential.

Late realisation, some would say, to tap into niche segments, but a start is better than drawing up blank strategies.

Big Pharma can gain from tango with small fry

Most blockbusters marketed by larger global firms are licensed innovations of smaller companies or worked out in premier universities. With tight cost controls, a learning that comes from the generic industry mindset, Indian promoters would be best placed to pool their resources for scientifically researched compounds.

On their part, medium sized companies need to take up a few changes in their operations to succeed. They have to enhance their technology skills, draw up a better marketing strategy for niche positioning globally and substantially reduce their dependence on commoditised businesses.

The oft-quoted figure of 10,000 units in India, scrambling to survive, presents a distorted picture. Hundreds of these units may be in APIs that are quality-compromised, a few thousand may be in formulations that have 200 copies of the same active ingredient, while there may be scores that have real product innovation capabilities but are falling short due to funding or partnering prospects.

For the larger Indian companies that look for competence globally, it may be a good idea to keep an eye on their smaller Indian counterparts. An open mind can bring two unknown entrepreneurs together and who knows, we may see some bright leads emerging out of that.

Agreed, it appears a dreamy eyed thought as of now because internal competition has been so fierce that companies are out to kill each other on costs and prices. But a move has been made by a few visionaries and hopefully the next 50 years of the Indian Drug Manufacturers Association will see more innovators than bulk drug producers.