By Dev K Ramchandani, director & head of India, Hitachi Consulting and Vivek Chaturvedi, vice president of EMEA, Hitachi Consulting
Vivek Chaturvedi, Hitachi Consulting
The Indian pharmaceutical industry has been cited as a ‘flagship’ sector by prime minister Modi’s government. It has one of the highest number of UDFDA, UKMHRA, WHO-GMP1 approved manufacturing facilities for medical ingredients and formulations outside of the US and Europe. These facilities are responsible for a quarter of all medicines consumed in the UK and they make nearly 40% of generic drugs and over-the-counter products sold in the US2 as well as many drugs and vaccines used by global aid agencies for health programmes. On paper, the industry is blossoming, so why in reality, is it in the middle of a credibility crisis?
Regulators are increasingly citing concerns about Indian manufacturing practices with 39 drug-making facilities in India being blacklisted by the US Food and Drug Administration over the last few years. In 2015, six Indian drug-makers lost clearance to make medicines for US consumers due to regulatory problems and the EU banned 700 Indian-made generic drugs, citing doubts about the credibility of clinical trials.
To add to this, the number of US FDA warnings against Indian manufacturers has risen from 9 to 15 over the past two years and the consequences of this are significant. Import bans and regulatory fines are levied for non-compliance which can dramatically erode existing trust and reputation. Global pharmaceutical companies are already reviewing their alliance plans with Indian drug makers and influential US pharmacy benefit managers have indicated that they may look for alternatives to India, as they consider whether the risks have started to outweigh the benefits. The FDA has formally indicated that it has stepped up oversight and scrutiny of Indian drug exporters.
Last year’s growth in Indian drug exports slowed to less than 3%, while for much of the past decade, growth had stood at a robust 12-13%3. Indian drug companies are currently standing and watching the world around them slowly start to crumble and fade, so where is the root of the problem and why are efforts to rectify this situation falling short? Hitachi Consulting has studied this problem in depth and believes that Indian companies tend to lean too strongly on certification, auditing of quality management systems and on technological improvements. This is part of a wider industry trend in which we are seeing pharmaceutical companies increasingly begin to realise that the cost of regulatory non-compliance is far higher than the cost of compliance.
Pharmaceutical executives have, as a result of this realisation, started to spend more money and allocate more resources to drive improvements. However, in the Indian industry, this has come at the price of the structural organisation of the companies. The businesses that are failing are neglecting to delve into the operational way of working and starting to delay tackling the structural organisational root causes that take far longer to realise results that are sustainable. If this issue is left untreated for much longer, it could lead to the collapse of not just a company but a nationwide industry.
In our experience, there are a number of typical hurdles that we encounter in local companies that need to undergo a significant transformation. To turnaround Indian pharmaceuticals, each company will need to identify and address their own business challenges but as a starting point for the collective industry, the following two areas are key:
- Increasing communication to employees around the overarching aim to produce high-quality products. Senior figures in each pharmaceutical company realise the need to maintain high standards in product quality but often this message fades as you travel down the company ladder. What is needed is a translation of this aim to explain how achieving this is segmented into individual functions so that employees have a holistic view of their contribution.
- Improving hygiene and Good Manufacturing Practices (GMP). When a lack of focus on producing high-quality products is present within an organisation, it is likely that good hygiene practices will also slip. If hygiene and pest control practices are insufficiently embedded within a company, products can become contaminated which would then result in a plant having to be closed for a period of time. High quality and good hygiene must go hand-in-hand with each other and enforcing these regulations would only serve to benefit Indian pharmaceutical companies and decrease the number of legal implications the industry is currently facing
To elaborate slightly more on these challenges, there appears to be a strong cultural bias to look for new tools or methodologies without sufficiently understanding the overall objective of utilising them and checking if current practices are being implemented to their full potential. Organisations need to understand the importance of change management when implementing any changes as it is currently being underestimated and might ultimately lead to the downfall of the business. A good example of this is the common failure to thoroughly review any complaint, deviation and out-of-specification result i.e. lack of a structured CAPA “corrective actions preventative actions” process which has been cited by the FDA as a major non-compliance finding within the Indian context.
The root causes for failures in manufacturing practices within the Indian pharmaceuticals sector are mainly behavioural. More attention needs to be paid to the change management challenge that exists across the value chain for the sector to be able to reach its full potential.
1United States Food and Drug Administration (USFDA), UK’s Medicines and Healthcare products Regulatory Authority (UKMHRA). World Health Organisation (WHO)
2The Telegraph: Britain ignored warnings of Indian whistleblower at heart of drugs scandal 2013
3Business Standard: Indian drug makers to benefit as US expedites generic clearances