My Thoughts and Expressions
Kiran Mazumdar Shaw

Wednesday, 16 April 2014

Sun Pharma-Ranbaxy Deal Has Some Important Lessons

Image adapted from:
Over the last few days, media has been abuzz with the news of Sun Pharma’s $4-billion acquisition of Ranbaxy.

Given the fact that it is the second largest acquisition in the Indian pharmaceutical sector till date, it is not surprising that everybody is fixated on the sheer size of the deal.

But if you look beyond the fancy valuation, this courageous move by Sun Pharma founder Diliip Shanghvi to buy out the beleaguered Ranbaxy from Daiichi Sankyo has some important lessons for everybody.

1. Creating value

Dilip Shanghvi, a first-generation entrepreneur, has not rested on his laurels after building India’s most valuable pharmaceutical company.

By acquiring Ranbaxy, Sun Pharma has taken a giant leap to emerge as the fifth largest speciality generic drug maker globally and the largest in India.

An entity that started off with a single manufacturing plant in 1983 is now poised to have operations in 65 countries, 47 manufacturing facilities across five continents and a global portfolio of specialty and generic products once the Ranbaxy deal closes.

Not only that, Sun Pharma’s revenue will almost double to $4.3 billion.

2. Restoring lost glory

Ranbaxy's acquisition by Sun Pharma will result in a formidable generics power house, which could help restore India’s reputation as a reliable provider of good quality, affordable medicines for patients the world over.

Having successfully dealt with regulatory issues at its US subsidiary Caraco Pharmaceuticals, I believe Sun Pharma is better placed than Ranbaxy’s erstwhile Japanese owners in tackling the various instances of regulatory non-compliance in the company.

Both Sun Pharma and Ranbaxy have formidable track records in the US market, so the pooling of their manufacturing, distribution and regulatory strengths could be a crucial step forward in regaining the market share the Indian pharma industry has lost in the aftermath of the recent quality controversy.

3. Living up to reputation

Dilip has an enviable reputation of acquiring distressed assets and turning them around.

He has previously succeeded in reviving the fortunes of Israel-based Taro Pharmaceutical.

If Dilip can give Ranbaxy a fresh lease of life, it will cement his reputation as a turnaround artist par excellence.

4. Unshackling pharma M&As

The Sun Pharma-Ranbaxy deal also shows that there is no need to ring fence the Indian pharma industry though restrictive FDI policies. The domestic pharma industry can compete with pharma MNCs when it comes to M&As.

As an Economic Times editorial put it succinctly: “The current deal shows that what MNCs can do, Indian companies can do as well, to achieve scale.”

The Sun-Ranbaxy merger stands a better chance of being successful due to the inherent similarity of their business models and work cultures.

The Ranbaxy deal has been structured in such a way that Daiichi Sankyo will become the second largest shareholder in Sun Pharma. Instead of seeing Daiichi Sankyo as a threat, Dilip sees the Japanese company as an ally in realizing Sun Pharma’s global ambitions.

Depending on the business imperatives, founders of pharma companies should be free to monetize their assets just like most of the other sectors.

5. Doing things differently

Where others had written off Ranbaxy because of the company’s quality and regulatory non-compliance problems in the US, Sun Pharma decided to take a contrarian view.

In fact, Sun Pharma has succeeded in being an outlier in the Indian pharma industry because of Dilip’s penchant of doing things differently.

If there’s one big lesson that a budding entrepreneur can take away from the Sun Pharma-Ranbaxy deal it is that good entrepreneurs need to constantly look for opportunities, whether they are just getting started or already in business. And when opportunities come, one will need to take a calculated risk.

This post originally appeared on LinkedIn, please click here to read it on LinkedIn. 

Wednesday, 9 April 2014

Indian Pharma: Regaining Our Brand Equity

Image adapted from:

Global Impact of India’s Pharma Industry

Imagine a scenario where a life-saving medicine for HIV/AIDS costs $12,000 a year, pushing it out of reach for most patients who need it. Or a world where a rotavirus vaccine costs $9 per dose, making it too expensive for most children across the globe.

Now, consider a reality where we radically bring down the cost of these essential therapeutics.  This has actually happened – in 2001 HIV treatment was revolutionized by an Indian company CIPLA where a three-in-one HIV/AIDS treatment was made available for a dollar a day.  In 2013, Bharat Biotech, an Indian manufacturer of a new rotavirus vaccine has pledged to sell it for $1 a dose, even below the $2.50 per dose negotiated by the GAVI alliance.

India’s pharma industry has been at the core of this public health revolution. By delivering high-quality generics at the lowest cost, India has become irreplaceable in delivering affordable access to healthcare – to the world and to the US, which is the largest market for generic medicines.

Drug manufacturers in India have brought down the prices of a range of therapeutics — from vaccines for Hepatitis B, diphtheria, polio and tetanus, to drugs for HIV, tuberculosis, diabetes and cancer — and saved millions of lives in the process.

Indian generics account for a 30% share of the US market and are critical to President Obama’s affordable healthcare programme. Data from the 2013 Generic Drug Savings in the US report shows that generic pharmaceuticals saved the US health system and patients $217 billion in 2012 and a staggering $1.3 trillion dollars in the most recent decade.

The Indian pharma industry’s impact can be gauged from the following:

  •  It accounts for 6% of the world's pharma industry in value and constitutes a significant 25% in terms of volume
  • With over 60,000 generic brands across 60 therapeutic categories, India manufactures more than 400 different active pharmaceutical ingredients
  • India is the largest global exporter of generic medicines (in volume)
  •  It exports vaccines to 150 countries and caters to 70% of the World Health Organization’s demand for DPT and BCG and 90% of measles vaccines
  •  One in three of the world’s children receive vaccines made in India

Bad Medicine Or Bad Press?

Recently, the reputation of “The Pharmacy to the World”, as the country’s drug industry is called, has been sullied. Ranbaxy, Wockhardt, Sun Pharma and other manufacturers have been put on notice by the USFDA. Some of their products were banned or recalled and some of their processes red-flagged for non-compliance with current good manufacturing practices (cGMPs).

These quality control issues – a few major and mostly minor – have given rise to a lot of bad press which is damaging India’s reputation. While some of this taint can be justified due to irresponsible actions of a few drug makers, it is evident that vested interests among global pharma stakeholders are engaging in propaganda and alarmist reporting, projecting the whole of India’s pharma industry as having poor regulatory standards.

Even Margaret Hamburg, the commissioner of the United States Food and Drug Administration, commented “recent lapses in quality at a handful of pharmaceutical firms” overshadowing the good manufacturing and quality process of many Indian companies.

If there are a few errant manufacturers in any country, would the entire industry of a country be suspect? This would never be the case, but this is what is happening to India’s pharma industry.

The world – and the US – needs to understand that we are an integral partner in their affordable healthcare system. While the US and Europe may be among the largest producers of generics in terms of value, their products lack the cost-efficiency that India offers.

Let us understand what India can do to blow away this black cloud of “bad quality” which hangs above our pharma industry.

Our Quality Image – Myths and Reality

The Indian pharma industry has built a formidable position in the global market by leveraging its strengths. The quality standards at India’s pharma companies are already quite high, thanks in part to the industry’s export thrust. According to Pharmexcil, over 55% of the country’s exports are to highly regulated markets.

So what has happened to change this situation in the recent past? Has our normally robust quality control system become weak? Or are vested interests seeking to counter India’s capabilities and market share — trying to block our industry through lobbying and loaded claims?

1.    Greater The Share, More The Scrutiny

As the India’s market share in the US, grows, it is only understandable that our exposure to US FDA scrutiny rises. Add to that US FDA’s stricter compliance rules and procedures, and we can see why there has been a sudden rise in alerts and notices.

India has 119 manufacturing sites approved by the US FDA, the highest in any country outside of the US. According to US FDA data, inspections of drug facilities in India rose to 195 in 2012 from 11 in 2002.

Domestic manufacturing facilities received merely two import alerts in 2012. However, in 2013, 19 drug manufacturing factories across India were barred from supplying medicines to the US. In the same period, Chinese drug manufacturing facilities faced seven FDA import alerts; Australian, Canadian and Japanese companies two each; and South African and German units one each.  However, when viewed as a percentage, the optics would favour India.

2.    We Are Not The Only Ones Picked, But We’re Paying The Greatest Price

Pharma companies from other countries have also been pulled up for non-compliance with quality control norms and procedures. This is true not merely of companies outside the US, but also of companies within the US.

From 2010 to June 2013, the US FDA has issued warning letters to 66 companies. 12% of these companies were Indian. But major global names – both generic manufacturers as well as innovators — figure in that list of 66. These include Boehringer Ingelheim, Hospira, Merck, Novartis, Genzyme, Sanofi Aventis, SmithKline Beecham, and Teva.

And the number of warning letters issued has been growing each year: from 14 in 2010 to 19 in 2011 and 21 in 2012. Till June, 2013 there were 13 warning letters issued.

But nowhere except in India is the entire industry being unfairly victimized for the actions of a few.  Unfortunately the global media attention that focuses on alerts or warning letters issued to Indian pharma companies fails to reflect the reality that we are not the only country facing US FDA action.

3.    Minor Deviations In A Maze Of Regulations

Understanding and navigating the ever-changing and increasingly unforgiving regulatory scenario of Good Manufacturing Practices (GMP), Good Clinical Practices (GCP) and Good Laboratory Practices (GLP) in the pharma industry is extremely crucial. Even as these regulations set a legal benchmark for high quality products, they set a standard for exports that companies must meet if they seek to penetrate markets abroad.

However, India does not export to the US alone. For example, the EU has endorsed 350 Indian manufacturing sites till April 2013. Moreover, India exports to countries across the world. The stakes are huge. India’s pharmaceutical exports are poised to rise to about $20 billion by 2020.

There is no globally harmonized standard of drug safety, efficacy and quality. Pharma companies face increasing pressure to comply with a plethora of global regulatory standards across diverse geographies. These standards keep changing as regulatory bodies make requirements more stringent.

In such a situation, Indian pharma companies, even when they try to adhere to all these varying standards, may fall short of regulatory expectations in some cases.

The only incident of serious regulatory non-compliance pertains to one company, Ranbaxy, and most regulatory infractions pointed out by the regulators, fall within the realm of deviations that reflect oversight or negligence.

With adequate attention and corrective action, all errant Indian companies can quickly satisfy regulatory requirements. India already has high benchmarks in quality and this must be recognized.

Debunking the ‘Bad Quality’ Myth

Our current troubles are a wake-up call for the entire Indian pharma industry for collectively working to protect our reputation and build our quality image through an action plan.

Exports have played a crucial role in the growth story of the Indian pharma industry, and the US is one of the biggest export markets for Indian generic drug makers. It is, therefore, imperative to ensure that we set standards of quality and compliance for both products and services that are on a par with the best in the world. In most cases, these are already in place.

While one aspect of our action plan needs to ensure compliance with regulations, the other prong of our attack must effectively battle the unfair propaganda that the industry is facing. A crucial component here is demonstrating — in the market and in media — that our pharma industry is the keystone for delivering high quality, affordable medicines to the world.

If Indian generics account for a 30% share of the US market by volume, this should translate into value as well. Given India’s low-cost differentiator, this may not translate into value as in realization of profits proportional to our share by volume. But this value certainly needs to be rendered into a respect and recognition of India’s indispensability in driving affordability across the global healthcare system.

An abridged version of this article appeared in The Economic Times on Tuesday, April 8th, 2014.

Tuesday, 8 April 2014

5 Reasons Why BJP’s Manifesto Stands Apart

Image adapted from:

The BJP seems to have invested a lot of thought in preparing its election manifesto, ensuring that the document is granular in its objectives while being wide-ranging in its scope. The manifesto’s emphasis on e-governance, decentralization, entrepreneurship and creation of physical and social infrastructure are truly progressive.

The BJP’s approach to food security, water security, health security, job security, education and skills development are more thoughtful and nuanced than the UPA's ‘dole’ approach. The sense that one gets is that there are people in the BJP who understand India’s myriad challenges in the economic, social and administrative spheres and have a credible plan to tackle them.

Here are five reasons why I think that the BJP’s manifesto stands apart in articulating a fresh approach to some persistent issues.

1. Governance

The BJP manifesto singles out E-Governance as the overarching and underlying model for delivering good governance in the country. To facilitate this, the manifesto not only talks about digitization of government records but also about the need to build digital highways across the country through optical fibre networks. Most importantly, it talks about the initiation of a National e-Governance Plan, which will cover every government office from the Centre to the panchayats.

2. Food security

The BJP’s approach to food security is also refreshingly different from the UPA’s dole-centric model. Increasing public investment in agriculture and rural development and addressing the issue of under-nutrition and malnutrition, as outlined in the BJP manifesto, will go a long way in ensuring proper nutrition and the dignity of a sustainable livelihood to the bulk of India’s population. Moreover, putting in place strict measures to prevent hoarding and black marketing as well as setting up an agri rail network to quickly move perishables like vegetables from one part of the country to another can prove effective in keeping food inflation under check.

3. Job creation

The BJP’s approach to job creation also stands out for its emphasis on entrepreneurship in both rural and urban areas. The BJP manifesto thus talks about incubating entrepreneurship and facilitating credit to encourage self-employment among the youth, initiating multi-skills development programmes, generating IT-based jobs in rural and semi-urban areas.

Importantly, the manifesto lays a lot of stress on skill development, promotion of vocational training and bringing together industry, academia and government to ensure industry-responsive manpower. Once implemented, these initiatives will be able to create high-skilled jobs that add long-term value to the economy.

4. Water security

The BJP manifesto is also exceptional in that it draws attention to the urgent need for a comprehensive plan to address the issue of India’s water security. At a time when our water resources are depleting fast, measures such as rain water harvesting, river linkages, water conservation, sewage treatment and desalination projects will go a long way in tackling this looming problem.

5. Health security

The BJP’s manifesto also highlights the need for a universal healthcare program which hinges on affordability and access. The document talks about leveraging telemedicine and mobile healthcare for rural healthcare delivery, addressing the shortfall of healthcare professionals in the country, modernizing government hospitals and upgrading healthcare infrastructure among the various measures needed to achieve the goal of ‘healthcare for all.’

In addition to these, the BJP’s manifesto also promises legal, judicial, administrative and police reforms, which will deliver quick and far reaching results that will boost the confidence of both investors and as well as citizens. The commitment to a dedicated police force and related infrastructure for women is also an important aspect of these intended reforms.

Manifestos brought out by political parties before elections are usually met by cynicism from voters, so if the BJP is able to show the necessary political will in implementing these bold measures in a time-bound manner when it comes to power the party will be rewriting the political paradigm in India.

Monday, 7 April 2014

Science and Technology Shape Economic Future

The new government will have to act swiftly in course correcting the stalled Indian economy. To begin with, they will have to focus on a number of regulatory reforms that will address the ease of doing business, reduce transaction costs and expedite approval timelines. The lack of rules and guidelines in taxation and business matters have deterred investment and introduced delays in project approvals. These measures alone can add a per cent or two to GDP growth through increased FDI and project implementation.
The new government will also have to bring greater investment into healthcare and education.  Private sector must have a role in these sectors. Other areas include power and natural resources, especially water. We are in urgent need of management of perennial sources of water where there is a staggering loss.

 A sector of strategic importance is science & technology.  We must step up investment in this area. Innovation is key to value-added growth. We have barely leveraged technology to address a number of grand challenges the country faces starting with e-governance. Aadhar has been sub-optimal in its application. This is a powerful platform that should have served as the basis for e-governance and e-healthcare, but unfortunately this has not happened. The next government has the opportunity to build on the 600 million Aadhar cards and create a unique e-delivery model. Science & technology have a crucial role to play in shaping economic future and the new government must enable innovation through scientific research and development. We must identify key areas in which to build world class scientific and technological excellence eg. genomics, nanoscience, synthetic biology, IT, space technology etc. The ban on clinical trials and GM crops must be lifted. To quote Narendra Modi, “I am all for technology.  We should not discard technology that helps farmers; we must have faith in science. We must put technology and science to use with regulations and add value to produce.”

Finally, it is time we put in place rules and regulations that are unambiguous and transparent and prevent any impediments that often arise due to ambiguity and opaque norms. We must now rely more on deemed and automatic approvals and not inordinately lengthy approval timelines that have denied us infrastructure project implementation which has perhaps knocked off 1-2% off GDP growth.

The Congress manifesto has made a plethora of promises to deliver 8% GDP growth most of which relate to regulatory and fiscal reforms. Let us hope the new government is effective in acting and not be wrapped up in mere rhetoric.

After all, the underlying economy is still strong and capable of delivering robust growth.

The original article appeared in The New Indian Express on the 30th of March, 2014 and can be viewed here 

Wednesday, 1 January 2014

Adieu 'Annus Horribilis'

2013 was probably one of the worst years for the Indian economy, with inflation running unbridled and economic growth grinding down to a level below 5 per cent.

Unfortunately, the pharma sector also witnessed an unprecedented slowdown growing at a single digit in 2013 against an average growth of 12 per cent the previous year. The negative impact was further compounded with adverse policy decisions with respect to pricing, FDI, clinical trials and compulsory licensing in India. An overactive USFDA issuing notices to some of the leading Indian pharma companies tarnished the sector’s image. All this made 2013 an ‘Annus Horribilis’ for Indian pharma.

Friday, 20 December 2013

India Needs to Embrace a Start-Up Culture

A recent WHO report shows that out of the 27 million babies born in India every year, close to 3.6 million are born prematurely, and out of this more than 3 million infants fail to survive due to complications.

Wednesday, 18 December 2013

10-steps to make Bangalore a World -Class City

Once a little-known Indian city, Bangalore today has captured the world’s attention for its IT excellence. Ironically, the very city that delivers innovative solutions to the globe is itself mired in civic chaos evidenced by bad roads, shoddy infrastructure, lack of water & power, unruly traffic and poor waste management.