Ever since the late 90s, the yard stick of any Indian pharma company’s performance has been their relative success in the advanced markets and in particular the US. Companies which could not raise the bar of internal processes to comply with these standards found opportunities for themselves in the so called “lesser regulated” markets like Africa and the CIS. This was coupled with their independent business growth for India where companies were well entrenched with medical representatives and specific distribution systems. As on today most of the companies have operations in many parts of the world like the US, Europe, Africa, CIS and Asia including of course India. Purely from a statistical perspective, Indian pharma market stood at US$ 12 bn in size in 2009 while exports of generic medicines from India was around US$ 11 bn. (source – www.ibef.org, pharmaceuticals)

Catering to diverse markets
In a broad sense Indian Pharma has been able to take its products globally and in many cases set up operations in foreign markets. Over a period of time, the magnitude of business which caters to markets across the world presents complexities for companies in areas like product development, regulatory affairs, supply chain, launch etc. The business priorities are clearer since markets are typically run as separate profit centres with a drive to meet its targets. However the internal mechanisms like R&D to support these targets are mostly shared amongst the various markets and businesses. This creates conflicts in prioritization amongst various business needs. For example, over a period of time, many companies have tasted enormous successes in the US market and hence internal prioritization tilts more in favour of the needs for that specific market. This creates delays and lack of focus for businesses which are not fully supported.

The duplication of efforts
The way the existing model has evolved is that each market or a division like the API business is run like a separate SBU with separate product development and launch plans. The thinking is to drive everything from within and try to be in control of the full process. This is fine from a front end perspective since each market or business need is different and gives a sense of urgency to the activity. However when you imagine multiple profit centres pursuing this approach and this in turn is aggregated into a list of activities or demands required from a shared back end, the complexity gets compounded. For example, a company of a size of US$ 1 bn would be catering to a requirement of 100 different countries, but will still be reliant on certain common shared services like R&D, technology transfer, production, regulatory affairs and sourcing. The business or front end tries to extract as much resources from the various shared services to put its business plans on track. The above process can be termed as an “evolved” model, since this has emerged naturally within companies over a period of time.

Let us take for example a product A where a company has capabilities in API as well as in formulations. From the API perspective, the product initially identified for the less regulated markets, goes through the usual product development process – The assignment goes to the API R&D team, which checks for routes given in literature, narrows down on an option, runs a patent check specifically for India, orders the input material, works on the process and delivers the first sample. After a few months, another enquiry comes in from a different market, and the scientist figures out that there is a patent in existence in that particular country, which means a slightly different route needs to be followed. Added to this is the need to meet certain impurity limits in the specification.

Again the product development is taken up and the same processes followed to arrive at a sample. The technical dossier requirements too vary and many a time one realizes that product development has not been followed up with proper documentation for a specific country. After a few months, the US team is interested in the API and this triggers one more round of product development. This time, the idea is to get a non-infringing route. From a broad perspective, the R&D team can rely on residual knowledge from previous developments, but one can easily realize that the company has lost time and utilized resources ineffectively. Going forward, multiple routes also create issues in scaling up the product and getting the right efficiencies leading to issues of production and cost.

The same model is followed in formulations as well. Here other issues like packaging differences, different stability protocols, filing batch needs and bio study requirements come into the picture. Imagine a case where the product A is taken up for the US, and then followed by a filing requirement for Brazil with a different stability protocol and packaging. One year down the line, the EU team requires the product for that market too, but the company realizes that the development for the US and Brazil is of no use for EU since some basic procedures were followed specifically for the identified markets, and not with the global picture in mind. Hence the company decides to take batches specifically for EU, involving various functions costing time and money. Along with all these differences, there are other localized issues arising out of ERP systems which companies follow. Typically discussions are centered on codes to be used for different markets and interchangeability of material.

As we clearly see above, there is considerable duplication in terms of money, time and efforts. However the reason for such a structure in many companies is not difficult to understand. Over a period of time, companies have grown in various markets, typically being spearheaded by various business leaders leading to different business units (read companies) within an organization leading its own growth strategies. On the positive side, this has helped companies grow much faster, since each business unit strikes a lonely path not pulled down by inefficiencies or differences in strategy that exists within organizations. However as a company grows bigger, this creates problems, since resources fall behind the pace of growth.

In such cases a company needs to move to a more homogeneous planning platform for the needs of different markets.

Internal globalization
The key feature of this concept is to leverage product development and stream line internal processes for needs across the markets. The idea is to have a single platform, so that the needs of various markets can be captured and one chain of product development takes place incorporating differences. If we were to extrapolate this to the example in discussion before, the product development would have taken place after answering the question “What do we want to do with this product globally?” Typically requests would have emerged from 4-5 key markets, and the entire development and planning would have taken place keeping this in mind. Hence the patent checks, R&D development and filing batches would have been conducted through a single-window, which then caters to the requirements of different markets. Imagine the time and efforts which get saved by following this process.

At the same time this cannot be a universal rule, since certain products cannot have a uniform process or development requirement. Or in some cases, by following this process, a company may jeopardize the timing of its entry in the US market and hence lose out on potential profits. To start with, if a company can identify 25 per cent  of their product developments into this category, it will give an experience on how the costs can be kept down, and how revenues can be realized across multiple markets, in the same development time. Many of the MNCs have started doing global clinical trials to facilitate product entry into multiple markets at the same time. This leads to lot of efficiencies in the launch process on a global scale. Similarly some large Indian companies have tried to globalize their product portfolio. However this is still not a trend in most of the companies. There would be a need for two things to happen to fuel this change – First, the management consciously starting to employ this model and second, having adequate processes in place to ensure the success of this approach.

While the entry of Indian companies in global markets is established beyond doubt, the sustenance of this for the current and upcoming companies will be enhanced by this approach. The stakeholders should deliberate on the current processes which exist inside an organization and take steps for aligning them towards the concept of “internal globalization”. And this needs to be done by design rather than by chance. Having done the exercise there would still be certain products and projects which needs to be kept separate, but this would at least be the result of a detailed exercise and at the same time ensuring that it is not a blind shift to “internal globalization”.