LEAD STORY. Pharma landscape ’18: Watch out for the ‘black swan’

There’s never a dull moment in the pharmaceutical industry, some predictable some unpredictable, and there’s always a black swan waiting somewhere, says industry veteran Ranjit Shahani, when asked to do a little crystal ball-gazing into 2018.

Leaders in the pharma industry have been dealing with this and will have to deal with it in the future too, he says, particularly if regulatory authorities spring surprises as they have in the recent past. Shahani is Vice Charman and Managing Director, Novartis India, besides being former head of the Organisation of Pharmaceutical Producers of India (OPPI), a platform for multinational companies.

But the view isn’t very different for home-grown companies. “The single-minded pursuit of ‘access at affordable prices’ by the Government and the complete disregard for the promotion, development and growth of the industry will have a major adverse impact on the growth and sustainability of Indian pharmaceutical industry in 2018,” says DG Shah of the Indian Pharmaceutical Alliance, a voice for large domestic drugmakers.

The reference is to doctors being asked to prescribe medicines using generic names and not brands, besides the pricing regulator’s “activism” to bring in more products under price control.

With access to affordable healthcare being the raison d’être for government action on the prices of medicines and medical devices, industry experts are calling for a more “holistic” approach. The policy fluidity, they say, only hurts the industry. And this will not benefit patients if the industry is not equipped to bring out better medicines tailored to the local population.

Health is becoming a part of the political agenda, says Shahani, hopeful that it will give healthcare the much-needed attention it deserves. But studies have identified that impediments to access include proximity of a healthcare facility; the capacity and functionality of that facility; and the quality of the resources providing care.

“These elements come ahead of the price of treatment or medicines,” he says, adding that the real barrier to access was the inability to pay out-of-pocket and the lack of insurance cover. “A viable public healthcare model requires a combination of financing and non-financing measures,” he says, calling for a sustainable policy that addressed healthcare financing, infrastructure and human resource challenges.

Despite pricing and regulatory challenges, India and the United States are key markets for domestic drugmakers, says PwC India Partner Sujay Shetty. India continues to be dynamic, with growth over 10 per cent, he says, adding that companies will have to fire on all cylinders, including in markets like Europe, Japan and the CIS and Africa to sustain growth.

Shah points to US protectionist policies, as manifested in the tax reforms and Make in America campaigns, as a key concern. And though the US Food and Drug Administration’s (USFDA) move on generics will benefit the industry by clearing barriers to generic drug introductions, the quicker approvals of medicine would also bring in intense competition, he points out. All this, even as local industry leaders need to stay focussed on tackling quality issues they face in export markets.

On the Intellectual Property Rights (IPR) front, Shah says, the many bilateral trade agreements that countries are negotiating among themselves and with India could impact local drugmakers.

But Shahani points to data protection as a key missing feature despite India having amended its Patents Law in 2005. Recently, China increased data protection from 6 years to 10 years, he says, adding, “No wonder every single investment in pharma R&D (is) headed to China.”

Industry representatives, though, speak in one voice on 2018’s merger and acquisition prospects. It will see more deals, driven partly by difficult challenges faced by the industry and partly by new business opportunities, says Shah.

Shahani is optimistic on digital opportunities that will pole-vault the way healthcare delivery is dispensed. On consolidation, he says, the industry has been ready, but seller expectations have been unrealistic. But the buzz is around already for some possible action on this front this year, he quips.