Being one of the fastest growing pharmaceutical manufacturing markets, India is raising its bar on how pharma products get transported to consuming markets around the world. While the availability of an adept workforce gives the industry a definite competitive advantage, there are several challenges to be dealt with. Lubna Soge
The third largest in volume and tenth largest in terms of value, the Indian pharmaceutical market is expected to grow at a compound annual growth rate (CAGR) of 23.9 percent to reach $55 billion by 2020. The US is the apex destination for Indian pharma exports followed by the United Kingdom. America accounts for about 25 percent of India’s pharma exports. The Pharmaceuticals Export Promotion Council (Pharmexcil) expects a healthy rate of growth in pharma exports at around 12 percent in the current fiscal on the back of rising demand of drugs from African countries. The government has set pharma exports target for current fiscal at $25 billion. In the previous fiscal, Indian pharma exports grew at its slowest pace in 15 years at 1.2 percent to $14.84 billion amid growing tension with the US over intellectual property rights (IPR) related issues. The previous slowest growth rate for domestic pharma exports was in FY10 at 5.9 percent. Exporting drug intermediates, active pharmaceutical ingredients, finished dosage formulation and bio-pharmaceuticals to more than 200 countries, Indian pharmaceutical industries are generating large chunks of revenue from exports. The Indian pharmaceuticals industry is on an epoch of transformation, from the supply chain management to the distribution channel. Though the industry is flourishing there are irrefutable challenges faced by the pharma logistics sector. “Our key challenges are areas where DHL doesn’t have direct control/access to the cargo. Additionally, infrastructure challenges at air and seaports, road infrastructures challenges at trans-shipment and destination airports, where required temperature zones are not available,” said Ashutosh Dixit, Senior Director- Marketing & Sales, DHL Global Forwarding. However, the logistics divisions have geared up to trim down these short comings. Access to temperature data and logistics events through IT platform has condensed traceability challenge. DHL Thermonet is seen as coming forth to endow pharma logistics with temperature visibility along the supply chain, 24/7 monitoring and integrated SOP management. DHL’s Thermonet has been rendering its supervised network of veteran and trained specialists working internationally to standardize consistency and operate an absolute IT platform. It uses RFID technology to monitor consignment temperature along the transportation chain. This new facet not only benefits austere global compliance but also ensures quality and veracity of the pharma products. According to Dixit, for DHL Supply Chain 30 percent of its pharma export is by airfreight and 70 percent by ocean freight. Transporting pharmaceuticals products involves connoisseur knowledge to ensure the logistics process is both secure and smooth. Besides, there are distinct challenges of pharmaceuticals transportation as well, from recognizing provider that congregates all the regulatory requirements for transporting pharma products to systematizing them to ensure compliance and reliability. Pharma products which were initially transported in ambient conditions are now strictly being transported in 8-25 degrees Celsius temperature controlled reefers. Speaking on the need to maintain precise temperatures while medical products are in transit and maintaining the integrity of the product, Vikas Anand, Managing Director, DHL Supply Chain said, “There are temperature controlled devices which ensure that the product integrity is maintained and monitored, there are also visibility tools and processes which facilitates timely sharing of this information to our customers for their consumption and comfort.” New technologies are opening frontiers for the manufacturers and suppliers of the pharma products who are looking for improved ways to deal with the risk of product damage and loss from temperature divergences. Shedding light on one such technology, which is making it easy for pharmaceutical and medical companies to monitor, track and locate high-value, time sensitive and regulated shipments, Rajesh Pednekar, a veteran industry analyst with 18 years of experience in supply chain and logistics said, “Telematics is the new technology emerging in pharma which is an opportunity for tracking real time vehicles and their movements. The telematics solutions give real time location of a container, also provide with temperature conditions of the contents inside, whether the products are transported in temperature condition complaint manner or not. These new technologies are definitely helping supply chain visibility.” Insufficiency in supply chain management at the warehousing level has been causing the pharmaceuticals industry to uphold higher inventory levels than most other industries. The pricey returns and obliteration process of expired products increase the cost of overage inventory. To combat this, logistics companies are improving serialisation and their track initiatives which contribute to inventory reduction by providing data on inventory from downstream supply chain. This has resulted in supply chain efficiencies both within the stockade and across the whole and extended supply chain. Besides, the government is also taking initiatives to facilitate the growth. “The goods and services tax (GST) which the government has said will be implemented from April 2016 would be an opportunity where people can look at their network, design and possibly optimize their warehousing and transportation,” added Pednekar. According to the latest reports, GST, when implemented, will free the decisions on warehousing and distribution from tax considerations. In future it would be based entirely upon operational and logistics efficiency. Moreover, with the unveiling of Pharma Vision 2020 by the government of India, investments in the sector are likely to grow as it will help boost foreign direct investments. According to data released by the Department of Industrial Policy and Promotion (DIPP), the drugs and pharmaceutical sector drew FDI worth approximately $13billion between April 2000 and September 2014. Expiring patents and finely tuned competition from generics have also restricted the potential of branded pharmaceutical business units. Numerous drugs going off-patent in the US creates opportunities for local generic drug makers such as Sun Pharmaceutical, Lupin, Dr Reddy’s Laboratories and Cipla. Foreseeing the opportunity, Indian drug makers are structuring a strong vent of products to be sold in the US market and are filing abbreviated new drug applications (ANDA) to the US Food and Drug Administration (FDA) to seek approval for generic drugs. In the year 2013, Indian companies secured approvals for 39 percent of the total 400 ANDAs filed which was comparatively higher than in 2012 when 37 percent of 476 such applications got approvals, according to the Care Ratings report (2013). Pharma exports recorded slowest growth in at least 15 years at 1.2 percent to $14.84 billion in the 2013-14 fiscal in the midst of growing apprehension with the US over intellectual property rights related issues. A report by India Ratings & Research has said that pharma exports to the US are probable to keep growing regardless of import alerts issued by the US Food and Drug Administration (USFDA) in 2013. Where Indian pharmaceutical logistics have heaps of challenges, Anand has been optimistic about DHL Supply Chain’s association with the industry. “There are three major areas where we see opportunities; performance, investments and compliance. Most of the companies in this sector are managing their logistics in a traditional way either directly or micro managing through multiple local CFAs. They are now realizing the importance of considering logistics and supply chain management as a strategic pillar within their organization and want to defocus on their day to day operations” He believes DHL Supply chain is making certain that the company, through these opportunities, is driving in the desired changes in the pharma logistics. “DHL Supply Chain acts as a change agent for bringing in this transformation in the supply chain and logistics set-up of the client by facilitating right investment (based on optimized solutions), ensuring the set-up becomes performance oriented and the entire chain is regulated and complaint,” continued Anand. Demand from home and international markets is adding to the growth of the sector. The volumes that are generated by the pharma industry are emergent but the value is not burgeoning enough. According to Organisation of Pharmaceutical Producers of India (OPPI) the sector accounts for approximately 1.5 percent share of the total global pharma production by value. “India is a large market, a population of 1.2 billion will definitely require medicines, medicines are essential, so the volumes are growing but not necessarily the value because of the pricing pressure of the government. The challenge is that the value is not growing which is putting a backward pressure on the cost, to reduce transportation and warehousing cost, and at the same time the government is getting aggressive on the compliance temperature conditions,” said Pednekar. International airlines have been scaling up their operations and increasing their capacity in major Indian metros to take advantage of the rising pharma exports from India. Airports in Hyderabad, Chennai and Mumbai are key destinations from where a major portion of India’s pharma export takes off. In October last year, IAG Cargo introduced the Boeing 787 between London’s Heathrow and Chennai largely to support the fast growing Indian pharma market. With its advanced temperature control capability, which includes air conditioning in the hold, the B787 is perfectly suited to the shipment of pharmaceutical products. “India is fast becoming one of our most important markets, particularly when it comes to the pharma industry. Our specialist product for this sector, Constant Climate, leads the industry and the introduction of the B787 will further enhance IAG Cargo’s capabilities by allowing us to precisely control the temperature at which unstable medications and compounds are transported. Of course, the introduction of the B787 is good news for all businesses operating on the Chennai route and demonstrates to our customers how committed we are to this market,” said John Cheetham, regional commercial manager for APAC, IAG Cargo. The Indian pharmaceutical industry has seen scores of regulatory interventions over the last few years. Hence, slowed growth and industry pressures are forcing pharmaceutical companies to embrace demand-chain thinking and cloud-enabled solutions. Mankind Pharma has already stepped forward to adopt cloud-enabled platform to aid its business growth and development. The pharmaceutical company has selected SoftLayer, an IBM company, to handle its cloud applications and put into operation the use of these applications across several locations. Ganesh Margabandhu, General Manager, Global Technology Services, IBM India South Asia said, “IBM has been a strategic partner of Mankind Pharma for a long time and it is exciting to see our engagement is expanding on to cloud. With SoftLayer, IBM is focused on providing higher value and delivering unmatched expertise and capabilities to help clients tackle business specific challenges with cloud. With SoftLayer cloud, Mankind Pharma can have a better control on their operations to drive business growth.” The cloud-based platform is serving pharmaceutical companies with alignment to their IT network so as to meet the best of their business goals. It has also helped to ease operations and minimize capital expenditure. This espousal is making possible for the pharmaceutical companies to become more supple and at the same time enabling them to share data in real-time with their partners, from contract manufacturers to 3PLs and retailers.