Decline in R&D productivity, diminished pipeline for new drugs, increased drug discovery costs and  stringent regulatory measures dominate the current pharmaceutical industry scene. This is where acquisitions and alliances widen growth opportunities for international pharma  along with Indian companies to  tap opportunities  in Brazil, Russia India and China along with the established markets in the West and Far East  which covers Japan.

Companies are looking at buyouts  and partnerships to capture potential opportunities. Between January 2010 and October 2011, some of the mergers and acquisitions were  Abbot buyout of Piramal domestic formulation business, Reckitt Benckiser’s purchase of Paras Pharmaceuticals and the acquisition of the nutrition business of Wockhardt by Danone. Prior to that it was Daichi’s  acquisition of Ranbaxy, Sanofi and Shanta Biotechnics, Hospira and Orchid, Mylan and Matrix Labs.

 The  alliances that helped to  achieve productive collaborations from India  are Bayer and Zydus, Eli Lilly and Lupin, Novartis and USV, Sanofi and Glenmark, Merck and Sun Pharma, Endo Pharma and Jubilant, GSK an DRL, Pfizer and Aurobindo and Astra Zeneca with Torrent.

Now we are also seeing companies collaborating outside the realm of manufacturing and R&D with players in health insurance, medical technology, Information Technology and mobile technology to deliver superior sustainable healthcare services. These developments would benefit the pharma industry indirectly with reduced costs and streamlined supply chains, stated Sujay Shetty, Execitive Director, Indian Pharmaceuticals and Life Sciences Leader, PwC.

According to the PwC and CII report on ‘Indian Pharma Inc.: Enhancing value through alliances and Partnerships,’ the key entry for global players is through acquisitions. Now with the scarcity of assets, valuations in the sector which have increased over the last 12 to 18 months, there is a serious interest to  explore  other ways of collaboration through alliances and partnerships.

“We have looked at the  different types of alliances and partnerships that have taken place in India and assessed the  synergies involved to achieve productive and cohesive long term collaboration. Some of these alliances began with  product sourcing and have now entered  into other areas like  drug discovery, clinical development, sales  and marketing. Such collaboration between big pharma companies and Indian drug firms has proved beneficial not just to the two parties but to the Indian patients too,” stated Jai Hiremath, chairman CII Pharma Summit 2011 and vice chairman and MD, Hikal Ltd.

 Most large companies have traditionally done everything from R&D to commercialization. By 2020, however this model may no longer work and  to succeed,  there is need to improve research  productivity, reduce costs, tap the potential of emerging economies and switch from selling medicines to managing outcomes. Alliances and partnerships with firms within and outside the pharma industry is a key requirement of the pharma operating model of the future, he added. Therefore future of pharma will hinge on new technologies to drive R&D. The current linear phase R&D process will give way to in-life testing and live licensing.  There will be greater international regulatory cooperation. The blockbuster sales model will disappear. The supply chain functions will generate revenue.  More sophisticated direct-to-consumer distribution channels will diminish the role of wholesalers, according to the PwC and CII report.