Global pharmaceutical markets are in the midst of major discontinuities. While growth in developed markets will slow down, emerging markets will become increasingly important in the coming decade. The Indian pharmaceuticals market, along with the markets of China, Brazil and Russia, will spearhead growth within these markets.
The Indian Pharmaceutical industry
The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (with only approximately 330 in the organised sector). The top ten companies make up for more than a third of the market. It accounts for about 1.4% of the world’s pharma industry in value terms and 10% in volume terms. As per a McKinsey report, the Indian pharmaceuticals market is expected to grow to US$ 55 bn. in 2020 and has a potential to reach US$ 70 bn. by 2020.
The total turnover of the Indian Pharma sector is estimated to be close to US$ 21 bn of which around US$ 9 bn. comes from exports while the rest comes from domestic sales. Currently, India is the 4th largest market in the world in terms of volume and 13th in terms of value and around eight percent of the world’s drugs are manufactured in India.
Besides the domestic market, Indian pharma companies also have a large chunk of their revenues coming from exports. While some are focusing on the generics market in the US, Europe and semi-regulated markets, others are focusing on custom manufacturing for innovator companies.
Companies from developed countries spend a large amount on R&D and are responsible for discovering and launching a number of innovative drugs/formulations. Compared to this, Indian companies have established their presence in the generics segment.Generics are low-cost versions of branded drugs and have the same medicinal effect as the branded or original drug. Once the patent period for a drug expires, companies can come in with generic versions of a drug which provides affordable medicines for consumers.
Rising household income and improvements in health infrastructure and delivery systems will continue to support long-term growth in the pharmaceutical market. Driven by numerous factors including increasing health care expenditure, large population base, patient demographics, and rising life expectancy, India’s pharma industry is expected to touch the pinnacle of success in near future.
Logistics in Pharmaceutical Industry
Pharma logistics is one of the most important stages of the operations for any pharmaceutical business as the activities are highly time sensitive. It is very critical for providing the right medicine to the right patient at the right time, place and dosage and most importantly at the right price. Since business is highly competitive today, success largely depends upon the efficiency of supply chain. Supply chain is very critical as it maintains the complex network relationship between the organizations (drug manufacturers), trading partners to source raw materials, delivery products, retailers and hospitals.
The Indian logistics and transport industry has huge growth prospects for local and foreign operators alike. The lifeline of the pharmaceutical industry is new product innovation and delivery. Pharmaceutical products need temperature-controlled storage and distribution. The industry has given importance to logistics by focusing on supply chain and logistic level activities such as delivering the product to the end-customer at the right time, right place, in a secure mode and at a competitive operational cost.
As international and domestic firms are increasing their presence with new pharma products having new characteristics, they have started raising the bar for Logistics Service Providers (LSPs). Practices such as handling products without touching them and temperature monitoring are becoming common. In-house training on to product handling and training centers are also being set up to educate the front level people who handle these products.
Issues and Challenges
The most important supply chain factors in pharmaceutical industry are Inventory Reduction and Reduction of Order cycle time. This is because, operational performance is directly linked to logistics costs, while inventory reduction and the demand to decrease order cycle time are related to just-in-time deliveries and supply chain speed.
Since pharma products are sensitive to external environmental factors such as heat, light, etc., any sort of deficiency in the pharma transport/storage system could damage them. So starting from collection to delivery/distribution of pharma products, logistics service providers need to arrange for maximum safety of the consignment.
The major problem is transportation and infrastructure, in terms of roads, rail, ports, warehouses, and others are woefully inadequate to support the country’s manufacturing growth.
The important considerations for pharma SCM are:
- Protection from contamination, etc.
• Managing perishable products
• Maintaining temperature control
• Exceptionally long cycle times
• Maintaining Inventory
• Specialized packaging
• Barcode scanners
• Data loggers for temperature control
• To maintain delivery schedules and meet deadlines
• Relative humidity indicators (RH) Temperature Mapping for the storage area before toring critical and temperature sensitive products (vaccines)
The opportunities from the logistics perspective are very high as most of the pharmacy retail players are approaching the third party logistics service providers to provide them with effective logistics solutions for the smooth functioning of the back-end operations.
Logistics is regarded as a crucial part of the pharmaceutical industry since the activities are highly time sensitive. In addition, pharma products need temperature-controlled storage and distribution. From the cost composition point of view, the major logistics costs in the pharmaceutical industry include packaging, distribution, etc. Transportation of goods and inventory management are concerned areas. SCM has helped pharma companies to enhance their efficiency in managing resources and improving relationships
With the growing competition among major pharmaceutical players in the industry, inventory control plays a significant role in pharma value chain as lots of inventory exists in the supply chain. For instance, out of stock situation in existing business environment is unacceptable and research and development requires huge investment to bring products to market, when it finally arrives.
The Indian pharmaceutical industry has grown well at over 10 per cent in the last few years, and is expected to maintain the growth rate for the next few years too.The pharma retail segment is a very promising and upcoming segment and since pharma logistics is very important stages of the operations for any pharmaceutical business,pharma companies are ready to spend to improve efficiency of supply chain therefore logistics providers have a great opportunity to cater this market.
A well designed supply chain with robust planning cycles that takes care of the various lead times in the end-to-end supply chain can help achieve speed to market as well as an agile supply chain. Thus, logistics and SCM are expected to play a significant role in Indian pharma industry and could contribute towards the enhancement of productivity as well as growth of the industry.
India’s pharmaceuticals market is firmly moving on the growth path. The central issue now rests on the extent of the markets potential. With strong player intent, investments and conducive business environment will enable the sector to break into the top global markets
By Mr Jasjit Sethi, President & CEO, TCI SCS.