Shift in Business Paradigm of Price Erosion Testing...

Aerial view of Lupin offices, Baltimore, US

Shift in Business Paradigm of Price Erosion

Testing the Cost Frontier

International Conference on Total Cost Management

CII : Taj Vivanta, Mumbai Nov 21st

Pankaj Agarwal – Chief Operational Excellence


Agenda

1

2

3

4

5

Pharma Overview

Pricing Challenges

Lupin Experiences

New Manufacturing Technologies

Innovations at Consumer End


PHARMA OVERVIEW


99.9Contribution of Lead time for Testing in cycle of time of Plant

Quality Labs Operations

Pharma• 30 % of generic drugs (by volume)

• 10 % by value in US are from India

Exports to US from India

FDA/MHRA Audit cycle of Manufacturing Sites

Every batch Rejected

$ 20Bn 6 Mths CAPA

24X7 80%

No overwriting in Documentation

Quality Manpower % of Operating manpower

Data Integrity 60%

Manufacturing• Any change in last three steps/filed

process has to get regulatory approval • Plan to make each site report quality

metrics on quarterly basis

Patients are not Customers, regulatory agencies/Doctors are – Patient can not detect poor quality

Regulatory• At least one Site of all Companies is

under import alert• Any change in last three steps/filed

process has to get regulatory approval

1.1 Pharma Industry Context


1.2 Therapeutic Areas


PRICING CHALLENGES

North America

• Generics industry declined by 2% in 2016 and continuing due to 8% pricing decline in Q1 ‘18

• Due to continued customer consolidation and heightened Gxcompetition, market growth is expected to be 1-2% till 2025 India

• India slowed down to 1% growth in 12M Sep 2017 due to GST and demonetisation

• But still expected to grow 10-13% to enter Top 10 pharma markets by 2021

Japan

• Generics forecasted to grow at a CAGR of ~2% through 2023

• Price reform to be announced in December

• Price cuts: Proposed annual from current biennial system

Europe

• Gx market expected to grow by 3% CAGR till 2025

LatAm

• 5% Gx market growth in the past year

• Highly dependent on overall economic growth

Global generics market is slowing down from 2011-16 CAGR of 9.2% to 2016-20 CAGR of 5.8%

2.1 Market Outlook – Global Generics Growth Slowing


• Branded medication that sells for $100 before patent expiration is sold for $95 by a single generic manufacturer during the first 6 months

•Next 6 to 18 months, as more companies get approval price drops to $40

•This flattens out to cost of goods plus some margin over 3 to 5 years

2.2 Price Erosion

Cetrizine 30mg -

pack of 30 tabs

Time

Pri

ce in

USD

/Pac

k


Multip

le

Geogra

phie

s

Complex Products

Complex Tech-

nologies

Complex Geog-

raphies

Complexity in Generic Pharma

Manufacturing

2.3 Global Generics Challenge

Recent performance pressures

Saving Grace

Mitigation Strategy

Global Peers

Have acquired aggressively leading to

very high leverage

Established specialty franchise; but facing patent expirations

Divesting to lower leverage

Indian Peers

Still room to acquire due to comparatively

lower leverage

Other businesses like India and RoW

Each has its own different strategy

Acquired and base business facing pricing pressure in US

2.4 Global /Indian – Key Themes


2.5 Strategy of Cost Competitiveness

Cost Competitiveness

ProcuremntExcellence

Operational Excellence

Product Mix


2.6 Constant Evaluation of Product Mix

Product Mix

• Margin Based

• Revenue Based

• Build capability

• Retain in-house capability

• Make Vs Buy

• Utilize existing capacity for high margin products

• Drop products

Ba

lan

cin

g T

ax im

plic

atio

ns


LUPIN EXPERIENCES


Operational Excellence

for Sustainable Value Generation

Value Realization

• Deployment of Lean Six Sigma

• Focus on yield improvement, throughput enhancement and energy savings

DISHA

• Deployment of “Total Productive Maintenance” and improve OEE

• Manpower Optimization through MOST* and benchmarking

TPM/ MOST

• Auto Recipe based operation

• Curve Metrics

• Visual Process Signature

• Multi Phase Analysis

• Sales spend effectiveness

Analytics

• Alternate Vendor Development

• Value Re-engineering

• Sourcing strategy optimization

APEX

• Improving Field Force Productivity

• Global Shared Service center

PRISM/Shared Service

• Six Sigma Molecules

• Human Error Reduction

Quality

3.1 Operational Excellence - Framework


3.2 API Major Yield Increase and Capacity Increase Projects

ProductTheoretical

Yield

90% oftheoretical

yield

Baseline from where

improvement started

Yield achieved in Wave 7

% Increase

Savings( In Rs. Cr)

Molecule 7 0.630 0.2332 0.2474 0.2878 16% 63

Molecule C 0.571 0.415 0.311 0.395 27% 56

Molecule L 2.419 0.986 0.843 0.97 15% 32

• Major Yield Increases :

• Capacity increases

Product Initial CapacityCapacity

increased toafter project

% Increase

Molecule LT 24 TPM 32.5 TPM 35%

Molecule L 10 TPM 11 TPM 10%

Over Rs 350 Cr savings vetted by Finance from Operational Excellence initiatives over last 4 years


37

25

3431

25

52 54 54

4649

Site 1 Blister Site 2 Capsule Site 3 Bulk Site 4 Capsule Site 5 Blister

Baseline (Apr15-Jun15) Q3-FY17 All data is in percentageMcKinsey Top QTL McKinsey Median

60% 47%

42%

53%

42%

53%54%

65%

54%

65%

42%

53%

40% 114% 97%

Percentage improvement(%)

• One Plant costs Rs 600 Cr . An increase in 2 major plants in Capital Productivity (OEE x CU) by 50% can reduce the need for one plant.

• Capital Productivity (OEE X CU) is in the range of 25 to 30 % - there is enough headroom for improvement

3.3.1 Areas with Significant Improvement ( OEE)


% Utilization

Area Cubicle Name Sep Oct Nov Dec Jan Feb Mar Average

Omega 1 Coating I, IV 131 84 110 117 81 62 49 90

Gamma 1 Coating VI 48 165 121 87 105 114 89 104

Delta Coating VII 138 156 124 126 111 121 31 115

Beta 1 Coating II, V 78 95 96 82 68 48 47 73

Beta 2 Coating III 135 108 92 61 60 30 88 82

Epsilon Coating IX 86 79 74 72 80 77 88 79

Rho Coating VIII 0 85 12 77 27 3 67 39

Alpha 1 Unit 2 169 220 121 79 122 65 113 127

Alpha 2 Unit 2 16 91 27 118 10 73 36 53

Kappa Capsule III 103 255 246 315 115 101 92 175

Zeta Capsule I, II 61 119 71 77 63 52 91 76

Lambda Capsule IV 143 110 123 137 95 61 47 102

Epsilon Bulk I, II, III & Unit II 86 116 92 98 76 81 42 84

Tau Cam 1 & 2 75 79 58 56 67 15 53 58

Theta BQS 1, 2,3 75 96 80 96 61 84 47 77

• Shift occupancy details at Manufacturing Location

• Every product has to be validated on a machine, if the equipment equivalence does not exist, it has to be revalidated for other equipment

• This could lead to underutilization of certain equipment due to demand fluctuations

3.3.2 Areas with Significant Improvement ( Utilization )


• Fetch data from multifarious equipment to common server ( Data Acquisition System and Historian)

• Self-service on-demand data access and tools for Investigation analysis and process improvement

• Root cause analysis and real time implementation through decision rules

• Data Visualization/comparison to act on capacity utilization and OEE improvement

• CAPABILITIES: Process trending, Curve Metrics, Multivariate analysis, Visual Process Signature, Multi- Phase Analysis

3.4 Analytics


Sustained Value Generation

Process

Best-in -class

processes for

reliable, risk-

free material

supply of

desired quality

and cost

Technology

Cutting-edge

IT tools for

analytics &

operations

Structure

Strategic

procurement

function with

category/count

ry expertise

People

Capability

Competency

building

through

classroom &

on-the-job

training

Culture of continuous improvement

Value RelationsationInfrastructure Build

Objective: To strengthen the process, technology, structure &

people capability for sustained value creation

Objective: To derive savings from

Lupin’s overall spend base

3.5 Procurement Excellence

CategoryAccrual FY17

(Cr Rs.)

Spares, MRO & cLogistics

4.6

APIs 1.9

R&D Proc. 2.5

Excipients Phase 2 3.1

TP/MM/LL 4.4

Packing Material 7.2

Power & Fuel 7.3

KSMs & Chemicals 15.5

Excipients 24.8

Total 71.3


3.6 Supply Chain : PS&OP Model

Business planning

Marketing planning

Category planning

Demand forecasting

Operations planning• Inventory planning

Supply planning

Distributionplanning


NEW MANUFACTURING TECHNOLOGIES


Online in-process quality checks meeting regulatory

requirements

Collaborate with suppliers to integrate equipment's for

continuous manufacturing using digital solutions

Continuous Manufacturing

If we transport a pharmaceutical scientist from the

1960s into a current pharmaceutical production

plant, they would be familiar with most of the

processes and production techniques. - Lawrence Yu, Ph.D. FDA’s Deputy Director, Office of Pharmaceutical Quality

High receptiveness to malfunctions since a single fault

can stop the entire course of production

Control of the entire course of production from Single HMI Point

4.1.1 Continuous Manufacturing


Janssens’ Prezista – FDA Approved


HIV drug Prezista (600 mg tablets)

With Rutgers University, USA, developed a direct-compaction line using continuous manufacturing principles.

FDA encourages Continuous Manufacturing due to :

• Reduced human related errors in batch handling

• Improved process Reliability

• Reduced manufacturing costs

• Higher Yield and Product uniformity

• Reduced inspection and quality checks


Source: FDA Perspective on Continuous Manufacturing by SharmistaChatterjee at IFPAC Annual Meeting in Baltimore, January , 2012

4.1.3 Traditional Manufacturing Operations


Manufacturing• Continuous blending/

granulation• Close coupling of fully

integrated compression/ coating

Quality• PAT systems• RFID

Regulatory• eBatch monitoring

Explore use of smart devices, predictive asset maintenance, connected machines, analytics, smart sensors, track & trace etc

Source: FDA Perspective on Continuous Manufacturing by Sharmista Chatterjee at IFPAC Annual Meeting in Baltimore, January , 2012



• Levetiracetam needs to dissolve quickly in the mouth of patient for instantons relief in case of Epilepsy attack

• Because a drug product's structure can affect drug release, complex 3D structures create new opportunities for drug delivery.

• Competitive advantages for complex, personalized and products made on-demand.

http://www.sciencedirect.com/science/article/pii/S0169409X16300771

4.2 3D Printing


INNOVATION AT THE CONSUMER END


Different looking products in the “-cillin” family

• Five products in the “-cillin” family

• Full color cartons that coordinate with vial labels and caps to distinguish among strengths

• Increases safety and reduce medication errors

• In highly fragmented Generics Business helps Sagent stand out

• Sagent only manufacturer that differentiates every product in every product family

2.7 Sagent Pharma – Branded Generics

Reference: http://www.sagentpharma.com/


The researcher Identifies a set of genes they find intriguing

Improved Health Outcomes Through Passive Services

• Value Innovation by moving away from Traditional modes of Healthcare

• Closing of treatment gap that exists in Chronic Diseases

• Optimal therapeutic outcomes by moving to a Service centric model

• Predictive models powered by machine learning which improve accuracy over time

5.1 Innovation at Consumer End

Courtesy: Accenture Strategy



5.2.1 Around the Patient : Medtronic ( Artificial Pancreas)

• Medtronic is a medical technology, services and solutions company

• For Diabetes management, Glucose level is checked continuously and insulin is injected if glucose level is high

• “Carelink “– Connects patient and family with care team and monitors glucose levels, diet and exercise regime followed




5.2.2 Around the Patient : Astra Zeneca

• Post Acute Care Recovery and medication adherence is a challenge

• 24 % heart patients are readmitted

• 54 % of those are preventable• Avoidable cost for insurance

agencies

• With Vida Health AstraZeneca has an app “Day by Day” – helps cardiac patients connect with coaches to encourage them to:

• Adopt healthy diet, • Take meds regularly• Manage stress • Stick to exercise prescription



5.3 Chronic Care Management – The Next Big thing!

Leveraging Qualcomm’s 30 years of mobile and connectivity expertise, Qualcomm Life is shaping a new connected care standard.

• Liberating vital data and unlocking insights in the hospital, in the home, and at all points in between.

• Open, medical-grade platforms connect to one of the world’s largest health care ecosystems, making data contextual and accessible, and powering intelligent care everywhere.

Reference: http://www.qualcommlife.com/

THANK YOU

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