TF1 Survey – European Markets dependence on China and India for medicines supply

Mumbai:  Europe is becoming increasingly dependent on a high percentage of imported generic medicines from India and China. Without the appropriate level of control and monitoring, this could easily lead to shortages and problems with supply continuity in those smaller markets. Globalisation of the generic medicines industry will bring new challenges to Europe which must be met if the sector is not to be marginalised with respect to both pricing and supply. Innovation has been traditionally perceived as the domain of the research-based originator companies. However, generic medicine companies often spend significant sums on innovating – improving formulations, enhancing delivery systems and finding solutions to patient compliance issues.

In an interview with an Indian CFO, Shantanu Kumar Singh, Taj Pharma Group,

Mr. Singh commented, “A generic medicine treatment is now available within many of the major therapeutic classes and this is often the ‘gold standard’ option for specific diseases. Opportunities exist to recommend schedules that encourage initiation of treatment with these ‘gold standard’ generic medicines. This is a positive sign which should increase the uptake of these drugs and potentially generate long-term savings through the use of a safe and effective therapy at an affordable price. ”

Singh also mentions, ‘In 2011, 7% of revenues from the generics medicine industry were spent on research and development alone. Furthermore, sector investments in manufacturing and development facilities have created a solid base of employment (150,000 direct employees in the EU2) yielding societal benefits that go beyond the realms of healthcare. The potential benefits of the generics medicine industry will not be maximised if the focus is on the lowest price alone. There is a need to increase the volume of generic medicines penetration in the EU market and optimise such key areas as competition with in-patent medicines, co-payment policies, time to market, and ready supply’.

What do you think about the rising costs of health care in Europe?

The provision of an effective and efficient healthcare system in any country is a complex equation balancing appropriate levels of patient care with resources available. Within this lies the need for infrastructures to support both primary and secondary care as well as associated services such as social welfare. Making direct comparisons of costs and best practices across EU member states is difficult; inherent political differences give rise to highly variable systems. No one country is the same. However, one element that is common to all and often the focus of attention is the cost of medicines. Although medicines generally constitute only around 10% of a country’s total healthcare budget (with generic medicines only comprising between 1-2%) they are a prime target for cost savings – despite being arguably the most cost-effective part of the healthcare solution. However, even here, the lack of coherent policies and variations in pricing and reimbursement systems, sociodemographics and the management of healthcare within each EU member state make comparisons difficult. What works in one country may be totally inappropriate in another. One thing is certain, the ageing population and changes in lifestyle automatically bring an increased demand for  healthcare and consequent escalation of costs. Pharmaceutical expenditure has been growing at comparable rates across all the major Western markets, with the developing markets exhibiting greater growth due to expanding access to medicines. Prolonged life expectancy in diseases previously associated with high mortality is also extending the use of longer-term chronic therapy treatments, further increasing the burden on healthcare providers. It is a fundamental principle in medicine that pharmaceuticals can delay or even prevent the need for costly hospitalisation in some patients. Therapies to improve quality of life in patients with terminal diseases are also playing a growing role in the physicians’ armamentarium. Against this background, it is possible to draw a correlation between life expectancy and pharmaceutical consumption.

Pharmaceuticals undeniably play an essential role in improving and maintaining health, but managing and controlling cost remains a major challenge for society, including governments and payers. Although the percentage of GDP spent on healthcare is fairly consistent in the major EU countries, the absolute amounts available are straining to deliver the desired levels of healthcare.

You’re announcing strong first half results today. What’s driven that performance?

Shantanu Kumar Singh, CFO (Taj Pharma Group) comments, ‘I have to say I’m very, very happy, we’re extremely pleased by the results that we announced today’. We’re looking at revenues up by 22.6%, we’re looking at our operating profits up by 40%, gross margins are almost 50%, fantastic cash flow growth by 74%, and we have a fantastic net debt to equity ratio of 18%. So we’re very, very happy with these numbers. I’ve always said that this is a very well diversified business, and we have three main engines that continuously feed this growth. So this year for the first half, the US Generic business did extremely, extremely well, so we’re very happy with that. That has been fantastic growth. Our Injectable business for the first half was very good also, we’re very happy with that. And the Brand business, as we had previously said, would this year be split almost evenly between the first half and second half. So the Brand business was stable and we are looking at very good growth in the Brand business for the second half of the year. So overall, all three engines have been performing quite well, and the diversity and diversification has come in and worked again to give us these fantastic results….