Opportunities & Challenges in Manufacturing
for Pharmaceutical Industry in India
Shyam BangDirector, Jubilant Life Sciences Ltd, India
Date: 11th
Aug 2011
Siemens Process Automation End User Summit GOA
Jubilant Bhartia Group : Valued over US$ 3BnEmploys 20,000 people across the globe with 1400 in North America
•
Jubilant Bhartia Foundation, a not for profit organisation is a social arm of Jubilant Bhartia Group •
The foundation is engaged in community development work focusing
on primary education, basic healthcare, skill development through vocational training for youth & women
•
Aims at long term sustainable social intervention by empowering communities through 4P model (Public-Private-People-Partnership)
Pharma &
Life Sciences
Integrated pharma & life
sciences player providing
products and services to
global life sciences
companies
Revenues FY2011:
US $ 770 Mn
(Rs. 34,334 Mn)
Leading player in Agri
and Performance
Polymers sectors
Revenue FY 2011:
US $ 124 Mn
(Rs. 5,540 Mn)
Food Jubilant FoodWorks-
a master franchisee of Dominos Pizza and Dunkin’
Donuts in India
Revenues: FY 2011: US$ 152 Mn (Rs. 6,783 Mn)
RetailJubilant Retail business with 4 hypermarket cum malls in Bangalore, India
Jubilant MotorWorks –
sales and service of Audi make cars in Karnataka and Tamil Nadu
Portfolio of 7 blocks in
India and 1 block in
Australia
Producing Asset –
Kharsang
Development Asset -
KG block
AerospaceExclusive representative for sales & marketing of Bell Helicopters and represents other international aerospace companies.
Oil & Gas ServicesConsultant to Transocean-
offshore drilling company
Manning and Marketing services for Tidewater Marine International etc
Agri & Performance Polymers Food & Retail Oil & Gas Services
Jubilant Bhartia Group -
Snapshot
3
International Trade Barriers have disappeared
Indian Industry is competing globally
Evolution of Internet, giving access to whole lot of information
Evolution of mobile phones
Recognition of India’s intellectual capabilities
Remarkable Changes
MOVING UP THE VALUE CHAIN
BULK CHEMICALS
PERFORMANCECHEMICALS
SPECIALITY CHEMICALS
FINE CHEMICALS
API
DOSAGE FORMS
CONTRACT RESEARCH
DRUGDISCOVERY
REVENUE GROWTH
Net Sales -
Company
Drivers of change
Business Models
Customer
Valueproposition
Pharma 1.0Blockbuster drugs
Pharma 2.0Diversified drug portfolios
Pharma 3.0Healthy outcomes
►
Health care reform►
Health IT►
Consumerism►
Value mining
PhysicianPayor
Patient
R&D productivityPatent CliffGlobalizationDemographicsPricing & reimbursement
Changing paradigms for the global pharma market
The global pharmaceutical market is in a state of flux with declining growth rates……..
Market size in USD bn % growth over previous year
….and decreasing R & D productivity
The impact of Generic Erosion on Big Pharma’s revenues
Company
2008 2015 % Change
1
$40,529 $45,714 13%2
$20,595 $20,216 (2%)3
$22,367 $20,537 (8%)4
$22,858 $20,294 (11%)5
$43,177 $36,186 (16%)6
$29,724 $24,428 (18%)7
$21,603 $16,364 (24%)8
$20,275 $15,286 (25%)9
$48,639 $34,075 (30%)10
$31,522 $18,878 (40%)
“Base Revenue Estimates”
(US$ Millions)
Note: These figures show each company’s “base revenues”
from products that are already on the market. They exclude any future pipeline contributions
GLOBAL PHARMA MARKET
Region
Market size Market GrowthMarket Growth
Forecast
Yr 2008 ( USD Billion)
CAGR (2003 -
2008) CAGR (2011 -
2015)
North America 311.8 5.70% -1% to 2%
Europe 247.5 6.40% 3% to 6%
Japan 76.6 2.70% 1% to 4%
China 21.0 20% 23%
India 7.7 14.60% 12.20%
Global Sales 773.2 6.60% 3% to 6%
Strategy of one Global Pharma Company
Manufacturing plants reduced from 96 to 46 in five years by 2008.
Further reduction to 41 by 2010.
Increase outsourcing from 17% current to 30% in next three years.
Result : Country wise DMF filing (2000 to 2007)
Contract Research : Development USD bn
Contract Manufacturing USD bn
Global outsourcing USD bn
CAGR 14%
CAGR 17%
CAGR 19%
CAGR 13%
Growing 3 -4 times faster than the pharma market
Contract Research : Discovery USD bn
The good news is global outsourcing market has grown at a 14% CAGR over the last few years with the development services growing the fastest..
65%
Contract Research : USD bn Contract Manufacturing : USD bn
43%
However India still has only 5-6% of the overall outsourcing market
The Indian market has grown 4-5 times faster than the global outsourcing market ..
Operating Low Cost: an advantage
Detail India US1 RM / PM 75 75
2 Utility Power : India 10c, US 5c per unit 7 8
3 Wages Against USA : India Lobour hr rate 1/15. Chemist 1/10
5 25
4 Infra Structure Project cost US 3 times. Dep load high.
10 28
5 Others 3 3
TOTAL 100 139
Expense Head
Capital cost Operating Cost
Relative Value
Stage-specific R&D cost savings possible to be achieved by outsourcing to Asia
Likely cost saving : up to 60%.
Areas Key challenges
Governance and transparency
► As companies are looking at partnering with /investing in Indian
companies they need to ensure Indian companies adhere to the compliance, regulatory norms such as the FCPA (Foreign Corrupt Practices Act).
Scalability► Indian manufacturers might not have enough spare capacity to cater to the
global MNC demands. This increases the perception of risk in outsourcing such products to Asian companies, especially if the suppliers are seeking assurance of supply for their products
Confidentiality ► High attrition rates in industry increases the risk of transfer of knowledge of the
innovator to competing generic companies that could be possible competition in the future
Time management
► Companies tend to over commit in terms of timelines and are sometimes unable to deliver according to these timelines.
What are the challenges perceived ?
Manufacturing
Turnover to Asset Ratio
Global Pharma Company Ratio
1 0.33
2 0.65
3 0.68
4 0.40
5 0.45
6 0.60
7 0.62
Challenges in Pharma Supply Chain
FDA benchmarks outside the industryWhen ex-FDA commissioner Mark McClellan sought a benchmark for futurepharmaceutical manufacturing performance, he looked outside the industry, andchallenged Pharma.“You need to improve...Other high-tech industries have achieved enormous productivitygains in manufacturing in the last 25 years. We should expect nothing less fromthe Pharmaceutical industry.”
Quality Standards in Manufacturing Improving
Quality sigmaProcess sigma
Internal failure
Failure rateImproving the performance of a production process yields much
greater returns than improving the quality control system
A
–
Most companies are here with process sigma of 2.5 and quality sigma of 5.0, i.e. (2.5, 5.0)B
–
Many companies will invest to improve “quality byinspection”
without changing production processes to gethere, i.e.(2.5, 5.5). This will actually increase the internalfailure rateC –
If a company were to invest to bring process sigmalevels to 4.5 or greater to reach (4.5, 5.0), the impact onfailure rate reduction would be over 1000 times greaterthan that obtained by improving the quality system alone
•
Rather than inspecting the finished product world class manufacturer monitors the production line and predict the variability that may result in defective product.
•
The reject percentage in the pharmaceutical industry ranges from 5 percent to 10 percent (<2 Sigma), compared to 0.0001 (6 Sigma) in the semiconductor industry.
Measurable Leanness
Lean Principles in Pharmaceutical
A common objection “It may work in
Automotive, but we are different”
Pharma Manufacturing -
Quality By Design
PAT (Process Analytical Technology)
PAT consists of four basic components 1) Process understanding, 2) Risk-based approach, 3) Regulatory strategy to accommodate innovation and 4) Real-time release
The primary goal of PAT is to provide processes which consistently generate products of predetermined quality. In so doing, improved quality and efficiency are expected from:
Reduction of cycle times using on-, in-, or at-line measurements and controls
Prevention of reject product and waste
Real time product release
Increased use of automation
Facilitation of continuous processing using small-scale equipment, resulting in improved energy and material use and increased capacity
Automation
Managing Supply Chain Cost
Manufacturing Challenges
Equipment & Technology
Capacity utilization
Unit Operation and Optimization
High Product Changeovers
Yield Losses
Process Capability & Control
Stringent Quality
Energy Cost
Waste Disposable & Effluent Treatment
Solvent Recovery and Reuse Integration
People Challenges
Attrition
Rising Wages
TPM / WCM / Kaizen / OEE / OPE
Capacity Modeling / De-bottlenecking using TOC
Rough Cut Capacity Planning / Scheduling
SMED
Norms Improvement Projects
Six Sigma
Human Error Reduction Program
Energy Audits / Energy Conservation projects
Green Supply Chain Project
Alternate Technology, Raffinate
Reduction projects
Employee Engagement Surveys
Compensation & Benchmarking
Talent Succession Planning
Employee Referral Program
An Inefficient Supply Chain
The Pharmaceutical industry loses 4.5% of revenue on account of:
Complexity of drug supply chain.
Drugs can change owner 6 to 10 times before reaching the customer.
Lack of visibility.
Inefficient processes for conducting recall
Hospitals and retail pharmacies are spending, on average, between $7,00,000 and $8,00,000 per year on excess inventory.
WHO estimates counterfeit drug sales to range $75 billion in 2010
8% to 10% of world wide drug supply is estimated to be counterfeit.
Pressure to Reduce Cost supply chain
Cost effective cold chain distribution management.
Maintenance of humidity, temperature and light for drug during distribution.
Strategies for an efficient distribution system for just-in-
time deliveries and avoid stock out.
Value added services during the documentation process to avoid any delay during the import and export.
Value added services to match the need of clinical trial distribution requirement.
Technology to prevent counterfeit drug from entering into supply chain.
Technology to track and trace the location of drugs in distribution channel.
Thank You
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