Rising cost of raw materials a challenge for drug firms: Cipla's Hamied

Companies will have to manage work to match India's National List of Essential Medicines but it will be worth the endeavour, she says

The pharma industry feels that 2023 will be about rising costs, patents and innovation. Samina Hamied, executive vice chairperson of Cipla and vice president of Indian Pharmaceutical Alliance (IPA), spoke to Sohini Das, about industry trends in 2022 and what is ahead.

Here are edited excerpts from an interview.

Covid-19 was a significant part of the domestic business of drug firms. Now that there are no Covid-19 sales how do firms calibrate their India strategies?

It’s about recalibration and re-imagination to a certain extent, because, during Covid the focus was on delivering every drug at every supply chain point that was possible for India. And it was virtually akin to going into war, so that's what the company focused on and we were battling with the disease--both within the organization and in the ecosystem, so it was working against the tide. Now with Covid having subsided and also a fairly evolved vaccine programme that has incredibly covered most of India, we see very few cases of Covid in India.

As for organisations, I’ll speak for us. We had a very large portfolio across therapeutic areas and with Covid there was a massive push whether for respiratory medicines or anti-infective drugs, antibiotics, etc. So, we just continue to move around developing products, being innovative, and racing ahead across the therapeutic area. A large portion of our sales was with Covid products, but very quickly other businesses have also come back—the paediatric business etc, which had been marginalized during Covid has kicked back. We are definitely back showing growth even to pre-Covid levels.

What are your thoughts about the new National List of Essential Medicines (NLEM). Would you say the pricing regulation in India is stringent?

I think on pricing it's always been challenging and NLEM is about striking a balance between patient centricity, public health concern and future policy direction. So, obviously, beyond chronic diseases, it's very laudable that NLEM has attempted to address the threat of antimicrobial resistance which now has become a critical issue not just for India but globally as well.

Unfortunately, costs continue to increase, and with China having not solved the Covid issue, there are intermittent lockdowns that affect movement of raw materials. Therefore, there is a lot of variability in price, and it's very challenging for every pharma company, especially for the top 50 or top 100 who really uphold the standard of quality. These companies will struggle more in the NLEM category of drugs to access high-quality raw materials. There is now a war in Ukraine and we see freight prices going up; oil and gas prices have gone up. So, while this year a 10 per cent price increase was allowed, input material costs have also gone up. NLEM is definitely challenging, but our constant endeavour is to partner for social health and we will continue to do that.

How are drug firms keeping production cost in check?

I think there's an entire shift to digitization and machine learning and robotics. While you transform in your manufacturing space with technology, your capex costs are high to start with, but then your overall unit costs reduce. So, there is focus on being more automated that will help bring down the cost per unit.

But, if we look at where China is with their large-scale production, India lost out in that race. It will take a long time for us to regain that share. There is a push to create a homegrown API industry; we have a PLI scheme for that now. However, it’s still some way for us to be self reliant.

Are we looking to develop alternative sources for API apart from China?

Yes, correct, we are. Where we can substitute we will do so for the same level of quality and supply. But not all APIs are manufactured in India. So, it's obviously creating alternate vendors across the world beyond China. And sometimes this can be globally at a higher input cost. But just to secure our supply chain, we've had to take some of those calls as well where beyond India; you take supply of API from another country even though it's at a higher cost just so that you can ensure supply security. So, it’s definitely a challenge.

How do Indian pharma players look at the opportunity of blockbuster drugs going off patent?

Yes, I think there's a huge opportunity, but also there's a lot of competition, because everyone is in preparation of creating these molecules because you had enough time to create R&D and manufacturing processes because the visibility of the patent expiring has been around. So, I think it's good for India because you have many more suppliers and you definitely have a low-price product which is of a high quality, but it is challenging because the market is getting more and more competitive and competition basically reduces the price.

How is the industry looking at innovation now as the next leap?

There is an innovation curve and as you move from generic to NCEs (new chemical entity), the curve is fairly wide. So, I think companies are investing a lot in R&D, between 7 and 10 percent, which is a large amount of their top line towards innovation and about creating this R&D ecosystem. The IPA has been working with the government as well on how we can create the right ecosystem for organizations to even be further indexed and to build this R&D ecosystem. So, I think, possibly research-linked incentive schemes for the industry to ensure companies play a stronger role in innovative medicine providing funding access; maybe the tie-up between academia and pharmaceutical companies just to proliferate research and development.

What are the lessons from the pandemic?

The lessons were immense, I think one was just the partnership between industry and industry came together very strongly as a cohesive unit. That was one of the biggest learning out of Covid--that there can be an opportunity for partnership. And I think just making sure that your supply chain is ready to fire, plants can now operate and there are systems and processes that have been created as SOPs in case one plant goes down, how does the next plant takeover, or how do we get employees in and out safely. How do people work from home to make sure that processes continue? I think now better than ever we have processes so even today, out of our plants and our distribution, our corporate offices work, and continue to work in a hybrid model. And I think that's important because you continue to know that you can operate if everything else shuts down.