Online Pharmacy – The Way Forward

(Supply Chain Perspective)

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Introduction
Online pharmacy segment has recently seen good traction from both customers as well as
investors. Rising internet ***********, improving medical infrastructure, higher disposable
income and the ease of buying online has fueled growth in this segment.

The future of the Industry will majorly depend on the government regulations and robust
supply chain infrastructure. The online medicine purchase is a widely accepted
phenomenon in developed countries but is still in nascent stage in India. Owing to high
number of SKUs and specific requirements of handling, storage, packaging and
transportation, medicine delivery has posed entirely new set of logistics challenges.

Success of this format will depend a lot on how these companies manage their supply chain
and ensure the quality and regulatory compliances across the value chain, right from first
mile pick up to last mile delivery.

The True Potential

Indian pharmacy market is ready to explode with expected CAGR of 23.5 % over next five
years and is expected to cross $55 Billion mark by 2020. Currently the online channel
contributes to only 0.06 % of total sale which is 16 times lesser than online *********** in
retail. This gap has started to fill in last few years which is contributed to increased interest
from both investors and entrepreneurs in this domain. Around 31 companies were launched
in this domain which raised more than $70 Million in 2015.
In Retail, the online market share is expected to grow six times from 1% to 6 % in next 5
years. Online drugs being at even more nascent stage is expected to grow at even higher
rate.

What Can Stop It

Digital supply chain has the capability to ensure access of anything and everything to
anyone in very less time. Indian logistics landscape has always been a chaser to the
expectations of today’s new generation demanding and aware citizens.

Following has been major issues daunting the home-grown logistics companies.
Lack of End to End Service providers

Unlike the developed markets which boasts of unified service providers catering all the need
of online companies under one umbrella, Indian digital companies have to rely on multiple
partners to ensure fulfilment. Multiple partners leads to exchange of more hands and data
traversing through various systems which reduces the overall visibility and adds cost. It also
causes reliance on more than one partner which increases the chances of delay.

Poor Service Quality. Frequent Delays

Insufficient infrastructure and network planning has led to high lead time in Indian e
commerce ecosystem. Same day and next day deliveries are yet privileges which are rare
and cost ineffective. This is a major challenge when deliveries of essential items like
medicines is concerned, where the relevance of fulfilment is closely ******* with speed of
delivery. To make the whole customer experience good, it is very important for these
companies to ensure quick and consistent services.

Lack of Supply Chain Visibility

Lack of visibility is essentially a by-product of having multiple Service providers. In today’s

market scenario when the customer is spoilt by choice and margins are very thin, it is
important for both supplier and receiver to have end to end visibility of the product with
tracking at each stage and correct estimate of delivery schedule. Technology is another
area which is to play a very important role in ensuring a complete customer experience
when visibility is concerned.

Customized Solutions not available

Innovation will be need of hour as the online world will move forward from the conventional
products and foray into newer categories. Perishable and fragile items would require tailor
made solutions right from storage, packaging, transportation to delivery.

There will be need to develop infrastructure around these requirements to ensure that the
fulfilment meets the required standards and minimizes losses.

This has led to a shift in essential product segment from marketplace model to inventory led
model. Also this has to be ensured that the fulfilment centers offer the items to be stored in
controlled environment, stocking the SKUs as per the prescribed condition. Fulfilment
centers should also have packaging facilities for fragile and perishable items.

Online Drugs Supply Chain – What it takes

Fulfilment Centre and associated Challenges

Medicines have to be stored as per the manufacturer recommendation. Storage at hot

temperatures or in moist conditions could affect the drug quality and can pose threat to
patient’s health.

The process has to be redesigned to suit the requirements of online pharmacy. Quality
checks should be in place to discard any expired or damaged medicine and also ensure
that packaging is done as per the requirement of product.

There should be a robust warehouse management system in place which can give a clear
visibility of inventory stocks and fulfilment trends to the online pharmacies.

Last Mile Regulatory Challenges

Last mile poses a different set of challenges and needs special handling and regulatory
compliances. Online pharmacies have been often criticized for having inefficient handling of
prescribed drugs. Below factors have to be ensured in the last leg of supply chain-

1. Prescription has to be checked and stamped to avoid reuse of same prescription.

2. Children less than 18 years shouldn’t be handed over the medicines.
3. To ensure confidentiality of patient, it is important to deliver drug to the consignee
only.

Other Regulatory Challenges

Below are some other regulatory challenges which the industry has to overcome to ensure
a sustainable business model:

1. Lack of well-defined law for online pharmacies. Drug and cosmetic act 1940, drug
and cosmetic rules 1945, pharmacy act 1948 and Indian medical act 1956 were
formed much before advent of e commerce in India.
2. Indian pharmacy act 1948 states that no person other than registered pharmacist
shall compound, prepare, mix, or dispense any medicine on the prescription of a
medical practitioner. In case of online retail, It would not be possible to ensure
dispensing of medicines through a pharmacist
3. Prescription drugs as well as OTC drugs are to be sold only by licensed
retailers. Licensing requirements for online pharmacies is yet not clear.

Conclusion
With increasing internet *********** and customer acceptance, online pharmacy is poised to
grow and become the new norm in next five years. There is need of well-defined regulation
from government for regulating this segment and accreditation of online pharmacies to
ensure that the interest of end consumer is protected.

Companies which can handle the complexities and adapt as per the requirements of this
segment will emerge as market leaders.

About Holisol Logistics

Holisol is a leading supply chain services organization providing solutions in retail (end to
end fulfilment), Auto & Engineering (packaging & supply chain) and Consulting. Holisol
works on value proposition of Design-Implement-Manage to offer customers an experience
of working like their own extended team, with affordable strategic and operational expertise.

Headquartered in Delhi, Holisol has a workforce of 200 plus supply chain enthusiasts who
are continuously building value through leadership, innovation and long term relationship.

URL - https://holisollogistics.com/online-pharmacy-way-forward-supply-chain-perspective/
The Indian Cold Chain Pharma Market
Tags: India Cold Chain Market Pharmaceutical Supply Chain India Temperature Sensitive Drugs

Karan Chechi
09/19/2012

The current pharmaceutical supply chain scenario in India is extremely complex. One of the main
reasons for this complex supply chain environment is the presence of more than 55,000 retail
pharmacies which are spread across India. In India, large number of medicines and other such
facilities are required to be transported to the distant areas through poorly connected routes. Due to
the poor transport facilities in India the cost of drugs is much higher than the USA or Europe. About
1/3rd of the revenues generated by the drugs companies have been spent on the transportation
only.

The problem of poor supply chain management becomes even more severe when the temperature
sensitive drugs such as Polio vaccines, life saving drugs, etc. are required to be transported to the
far flung areas. Hence the presence of proper supply chain management which also includes the
temperature controlled vehicles and store houses have become important for the pharmaceutical
industry of India. Now companies as well as the government have started taking initiatives to
transport the medicines in such a manner that the drug or vaccines reaches the target area without
losing its efficiency. Currently the market value of temperature controlled vehicles which are
deployed for the transportation of pharmaceutical products is more than USD 3.8 Million, which is
likely to reach at around USD 17.1 Million in next five years. Under the 12th Five Year Plan (2012-
2017), The Department of Pharmaceutical has asked for the assistance of around INR 50 Crore
(USD 9.2 Million) for setting up the cold chain facilities across India. The market value of vaccine
market in India is around USD 180.5 Million, which is growing at a healthy pace of around 25%-30%
annually. Vaccines require the support of temperature controlled environment right from the point of
their initial stage of production to their final distribution. This indicates the unexplored potential for
both the domestic as well as the international players which are present in the cold chain
management system.
[eventpdf]

‘India Cold Chain Market Forecast & Opportunities, 2017’ has evaluated the future growth
potential of cold chain market and provides statistics and information on market structure, trends and
opportunities. The report includes segmental market projections and demand forecasting. The report
is intended to provide cutting-edge market intelligence and help decision makers to take sound
investment evaluation. Besides, the report also identifies and analyzes the emerging trends along
with essential drivers, challenges and opportunities available in cold chain market worldwide. For
more information on the report go to http://www.techsciresearch.com/1981.

URL - https://www.pharmalogisticsiq.com/supply-chain-security-track-trace/articles/the-indian-cold-
chain-pharma-market
Why government's new draft rule could make or break e-pharmacies like NetMeds, PharmEasy
By Prabha Raghavan, J Vignesh, ET Bureau|
URL - https://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/why-
governments-new-draft-rule-could-make-or-break-e-pharmacies-like-netmeds-
pharmeasy/articleshow/63690489.cms

Future Of Drug Distribution

Every delay & shortage is an opportunity for falsified or
substandard products to infiltrate the market or for life-
saving drugs being sold at premium prices
1455122342_bpHFlG_drug.jpg

May, 2018
11
by Gaurav Brahmbhatt
Print this articleFont size -16+
As medicine supply has started crossing international borders, the long product delivery
chain from a pharmaceutical company’s factory to the consumer is plagued with many
challenges notably logistic, meeting demand-supply, product expiry, product damage,
maintaining cold-chain, packaging and re-packaging, quality control and regulatory
framework that wholesalers and distributors must navigate. Every delay & shortage is
an opportunity for falsified or substandard products to infiltrate the market or for life-
saving drugs being sold at premium prices. Therefore, it is crucial for everyone involved
in the drug supply chain to consistently analyse what works and what does not.

A very crucial step in supply chain management is maintaining effective drug inventory,
which can affect drug supply and pricing in more than one way. Maintaining
unnecessary inventory at primary and secondary levels of stock-keeping results in a lot
of expired or damaged products making way back to the manufacturer. A good solution
is to maintain real-time inventory using pharmacy management software and based on
tracking drug sale pattern over a time-period. This reduces the need for general and
specialized storage space at every pharmacy as all drugs sold in a geographical area
are stored centrally. Pharmacies can have access to online ordering and tracking
platforms through use of bar codes, electronic product codes, radiofrequency
identification, and mobile verification.

The delays resulting from keeping a lot of inventory can be overcome by using a Direct
to Pharmacy or Direct to Patient approach or the third-party logistics model. These
models allow the pharma companies to shorten the supply chain.

With the advent of online pharmacies, drug delivery supply chain is ripe for disruption.
Manual drug inventory and distribution process, that is expensive and prone to error,
can be replaced by encouraging drug distribution through online pharmacies. The e-
commerce model allows instant data sharing among partners in the supply chain,
fosters trust in the market and reduces operational cost.

Wholesalers/drug manufacturers can forge closer relationships with large retail chains.
Usually large retail chains have an automated product inventory and tracking system,
and adequate storage space and cold chain which can be effectively utilized by the
wholesalers/drug manufacturer. Though in nascent stage in India, organized retail
pharmacies have started making way in the drug distribution system and are gradually
gaining acceptance.
Patent awareness also plays a big role in the drug distribution chain. While branded
products have only one manufacturer in play, generic market has several players. A
generic manufacturer with the cheapest version, good supply, and giving the best
margin to wholesaler overtakes others in competition thus disrupting the chain.
However, this competition can cause sub-quality drugs to hit the market. Therefore,
there should be strict regulatory guidelines for the generic market that allow only
registered manufacturers to enter the supply chain.

India is a vast country with constantly evolving regulatory framework, difficult to reach
terrains, and low income that cannot afford branded drugs. In these situations, cheap
counterfeit or sub-standard drugs may enter the drug supply chain, online pharmacies
and retail stores. Hence patient safety and awareness become imperative and this
should be addressed on priority through national advertisements, strong regulatory
framework, patient education, insurance coverage and national health schemes. Some
patients often acquire knowledge about their medicines from online blogs, websites or
from their local chemists, but majority of the patients in India need strict regulatory
control mechanism to prevent such illicit instances.

India needs low cost technological advancements to help drug supply in remote terrains
where e-commerce cannot reach. However, technology advancements will definitely
change the way in which medicines are being made available to patients. One of the
examples is, since 2016, a Silicon Valley based company, Zipline International, is using
drones to deliver life-saving drugs and blood in remote areas of Rwanda, a country with
poor infrastructure in Africa. With the penetration of technology, it seems a very near
possibility that this model can be replicated in India too.

Experts in home healthcare such as HealthCare atHOME (HCAH) have identified these
advancements as the future of healthcare and are going the extra mile to ensure a
smooth drug delivery chain through their medicine distribution services. Such services
are not only aimed at delivering medicines at home but also about training, counselling,
adherence & compliance tracking of patients to ensure that patients get clinically
benefited out of their prescribed therapy.
Today pharmaceutical companies are looking for innovative cost-effective ways to
supply drugs to their end users. New technologies and e-commerce are paving way for
a better drug distribution system. In this evolving world of new drugs, mergers and
acquisitions and cross-border transactions, the future of drug distribution is constantly
evolving and improving. Key players in this business should thus keep up with the future
of drug distribution in India.
 Disclaimer: The views expressed in the article above are those of the authors' and do
not necessarily represent or reflect the views of this publishing house. Unless otherwise
noted, the author is writing in his/her personal capacity. They are not intended and
should not be thought to represent official ideas, attitudes, or policies of any agency or
institution.

Tags assigned to this article:

Gaurav Brahmbhatt
The author is the Vice President & Business Unit Director at HealthCare atHOME.

URL - http://www.businessworld.in/article/Future-Of-Drug-Distribution/11-05-2018-148956/

TOP CHALLENGES IN
PHARMACEUTICAL SUPPLY CHAIN IN
INDIA
 Published on April 5, 2017
Bhavik Kumar
FollowFollow
Founder and CEO at Medibox3 articles

URL - http://www.businessworld.in/article/Future-Of-Drug-Distribution/11-05-2018-148956/

TOP CHALLENGES IN PHARMACEUTICAL SUPPLY CHAIN IN INDIA

Published on April 5, 2017

Bhavik Kumar

Founder and CEO at Medibox

Challenges are there in every business and so is the case with pharmaceutical supply chain in
India. The industry has multiple layers and the outbound supply chain is very complicated with
various stakeholders such as C&F, CSA, super stockists, dealers, distributors, sub-stockists, etc.
Even among distributors, there are trade distributors, hospital stockists, generic Pharma
distributors, medical device suppliers, consignment agents to name a few. To complicate this
further, there are inter-state transfer pricing challenges, CST, Octroi, etc.
Complications do not end here! There are over 300,000 brands and 300 new brands are launched
every month! Not to mention vested interest of consultants, sales targets, procurement managers.
Incentives are based on primary or secondary sales and not on real-demand. Thus the negative
implications are reverse logistics, high rate of expiries and high employee turnover ratios
compared to any other industry. This differentiates Pharma supply chain to a large extent and
hence, is one of the most complicated one!

The Pharma Industry has been very skeptical in accepting changes, still relying on supply chain
and manufacturing paradigms that have been around for a long time. But not for long now, given
that technology and digitalisation has disrupted every industry, Pharma supply chain will not be
left behind.

Factoring top challenges:

1. The Pharma supply chain is highly fragmented comprising of more than 60,000 suppliers in
India. There are many geographical areas which are operating with larger numbers of SKUs. and
on the other hand, there are areas, where even essential medicines are not available on time! This
makes the whole process of supply chain management complex and consolidation will be the
name of the game!
2. The Bullwhip effect of inventory which increases the demand variability in the supply chain as
stock moves from manufacturer to patient. This results in higher cost, impacts every stakeholder
negatively on performances and more. With predictive analysis, digital supply chain solutions,
this costs will take a ‘U’ turn sooner than later!
3. The non-visibility of inventory causes serious threats of counterfeits, loss of sale, challenges to
trace products and unpredictable demand scenarios. Digital platforms talking to each other and
IIoT 4.0 (industrial Internet of Things) making its foray, information dashboards at finger-tips is
not very far!
4. GST would have an impact on the pricing, working capital requirements, contracts with vendors
and customers, change in processes, etc. The impact is no one’s guess as yet; so wait and watch is
the status!
5. Sales force effectiveness is a key parameter to define incentives, targets and it effects the
functioning of Pharma supply chain directly. Smartphones, mobile apps, digital visual aids and
real-time updates are redefining companies that are exponentially growing against their
competitors!
6. Reverse logistics takes a toll on costs that are adjusted in regular sales. Just expiries result in over
USD 300 dollars loss in India! End-to-end supply chain visibility of demand forecasting and
analytical insights will definitely bring positive changes.

The challenges are not limited to these six points. It is imperative to know that there are various
kinds of business models that exist in this industry and hence, the degree and types of challenges
would vary as per the model.

URL - https://www.linkedin.com/pulse/top-challenges-pharmaceutical-supply-chain-india-bhavik-
kumar/
ndian Pharma Companies Need Supply Chain Transformation
Unlocking growth
Abhishek Malhotra, Partner, AT Kearney, India
Kaushika Madhavan, Partner & Head, Strategic Operations Practice, AT Kearney India
Amit Saharia, Principal, AT Kearney, India

India’s pharmaceutical companies have a unique opportunity to lead global growth for years to come.
However, there is a significant gap between the strategic vision and operational realities of the sector.
Firms are facing challenges on multiple fronts in their supply chains. They need to overcome these
hurdles to unlock their full potential.
India has emerged as one of the world’s fastest growing pharmaceutical markets over the past
decade. The industry saw a growth of around 18 per cent per annum between 2005 and 2015, and
now stands at US$30 billion. The generic drug sector expanded at an even faster pace of 22 per
cent per annum during the same period and now accounts for 20 per cent share of global exports by
volume.
The phenomenal growth is expected to continue in the coming years, with India’s pharmaceutical
sector forecast to nearly double to US$55 billion by 2020. The generic drug sector is expected to
capture 6 to 7 per cent of the US$760 billion generic drugs market by 2020. With India having the
highest number of FDA approved drug manufacturing sites - second only to the US, these numbers
seem achievable.
However, while India’s growth trajectory looks promising on the surface, it is evident that there is a
significant gap between the strategic vision and operational realities of the sector. Indian
pharmaceutical companies are facing a unique set of challenges that are creating significant
pressure on them to transform their supply chains.
Simply put, a supply chain refers to the combination of organisations, people, activities, and
resources that are involved in moving a product or service from a manufacturer to the customer.
Indian pharmaceutical companies are facing hurdles on multiple fronts in their supply chains.
Key hurdles
As part of our efforts to assess the state of the pharma supply chain in India, which serves local and
global markets, we conducted a study in collaboration with the Organisation of Pharmaceutical
Producers of India (OPPI) and the Indian Pharmaceutical Association (IPA). As part of this study, we
interviewed CEOs and supply chain executives in medium and large Indian pharma companies. The
executives highlighted four key challenges they are facing.
Quality and regulatory issues: Quality continues to be a hot topic in the industry. With 600-700 FDA -
approved sites in India, global regulatory agencies have been inspecting sites with increased
regularity, with more than 800 issues identified by the US FDA over the past eight years. In 2015,
ten companies were issued warning letters, a 25 per cent increase from 2014.
Quality issues have deepened and widened over time and an increasing number of these are
occurring across the value chain. These range from issues at the procurement level over quality of
raw materials, as well as at the manufacturing stage where plant shutdowns and inability to get
necessary certifications have created unused capacity. Lack of quality control at the R&D stage has
also led to more failures of trial batches, causing delays in product launches.
Product proliferation: Indian pharmaceutical companies are expanding their portfolio at a fast pace.
This has been driven in part by new product development, new dosage forms, enhanced
formulations, and changes in packaging and labelling to cater to new markets. Indian players launch
anywhere from 15 to 30 products / SKUs a year.
Several underlying factors have contributed to this including changing demographics which has seen
the rise of non-communicable diseases such as diabetes, chronic pain and cardio vascular problems
in India. Increased competition, which fuels the need to constantly innovate and varying regulatory
requirements across multiple markets are the other key driving factors.
This fast-paced product proliferation has several implications for the supply chain, including higher
manufacturing and distribution costs, more inventory, and a larger supplier base.
Supply chain fragmentation: India’s supply chain network is very complex making it even tougher to
manage properly. Companies manage over 15,000 raw materials across over 10,000 facilities
clustered around zones spread over five to six states and that’s before we move down the chain to
distribution. The sheer number of players at each stage with varying requirements, lack of clear
categorisation, lack of proximity to the manufacturer, and differing degrees of quality standards are
clear challenges.
As a result, production schedule changes are becoming more common because of poor supplier
service levels, further affecting the ability of the supply chain to make and deliver on time.
With two thirds of the global pharma industry being outsourced, decentralised R&D-where
companies use multiple third party centres at different stages of development-creates a convolution
of technology and data transfer, lengthening timelines for regulatory approval, increasing costs to
deal with discrepancies, and reducing plant utilisation.
Infrastructure gaps: India has had a long-term struggle with improving its infrastructure. Less than
five per cent of roads are highways, the railway system is simply inadequate, and the airways are
underutilised. There are also gaps in storage and power supply.
In terms of storage, the lack of a robust cold chain network to support the supply chain represents a
significant gap in today’s pharma infrastructure. Drugs have varying storage requirements to ensure
that potency is maintained throughout their shelf life. Moving specialty products and vaccines
requires continuous monitoring at all stages of the value chain. However, companies are still unable
to ensure a product is stored at the required conditions throughout its transition.
India’s cold chain market is fragmented itself with more than 3,500 companies. Most are in dire need
of both connectivity and technology. These gaps are not only a hurdle to the sector’s growth, but
also pose a threat to patients who receive poorly handled drugs.
Unlocking growth
Given these challenges, Indian companies need to design a supply chain that is more adaptive,
flexible and responsive to the changes. This can be done by focusing their efforts on four
dimensions:
Reducing complexity:
India’s pharma supply chain is crippled with end-to-end complexity. Reducing this complexity can
unleash an array of benefits. Efforts should be focused on these top three priorities for immediate,
actionable results:
• Consolidating and optimising the network as a whole, supporting seamless communications across
suppliers, manufacturers, distributors, and customers
• Tailoring visibility of supply chains, segmenting consumer needs, product types, product attributes,
and markets. This will be crucial to improve efficiency
• Handling the portfolio’s complexity both upstream (R&D portfolio proliferation) and downstream
(product SKU proliferation), which will optimise capacity and resources upstream and kill
underperforming SKUs, resulting in immediate cost cutting.
Creating agility and visibility:
In addition to changing patient needs and shifting disease patterns, the global market is experiencing
more frequent drug shortages and communicable disease outbreaks. It is vital that pharma
companies are ready to react to such market changes if they want to be best in class performers.
Ensuring that the supply chain is integrated with Sales and Operations Planning (S&OP) processes
and commercial strategies will enable pharmaceutical companies to move from a ‘planning for
convenience’ model to a ‘planning for market’ model.
Based on our experience, companies see a 10 to 20 per cent increase in service levels (from the
current average of about 60 per cent) simply by streamlining their S&OP processes, which typically
leads to a 1 to 2 per cent increase in the top-line.
Building robust quality and compliance system:
There is an immediate need for quality processes to be tightened. It is imperative to have a strong
quality organisation with visibility and oversight across all practices in the supply chain, both internal
and external. A few leading companies have paved the way in taking structured initiatives to boost
their quality standards, receiving positive affirmation from global regulatory bodies such as the FDA.
The following five internal initiatives can have a sizeable impact on quality systems:
• Developing understandable, executable, and compliant standard operating procedures, supported
with regular compliance training
• Enforcing a ‘quality culture’ from senior leadership, targeting the message across the organisation
with supporting documentation of practices that can be followed by all
• Establishing data integrity organisation with data integrity officer lead
• Conducting routine internal audits by both global and local audit and compliance committees.
• Implementing technologically advanced systems across network to reduce manual error: lab
information management systems and document management systems.
Using tech across supply chain:
Technology remains one of the most important areas for pharmaceutical companies to focus on.
One immediate result of using technology is greater transparency, which leads to better decision
making. Technology can be used to integrate all functions across the network, increase visibility of
products across the value chain, and automate processes to improve the supply chain’s
responsiveness and reliability.
External factors
A transformation of the supply chain in India’s pharma industry is in immediate need. However, a
total revamp cannot be done in isolation. There are some things beyond the control of the industry
that can only be overcome by strong collaboration with government and industry bodies.
The recent conversations between government and industry to combat India’s dependence on China
for Active Pharmaceutical Ingredients (API) are a great example of such ollaboration.
For the India pharma industry to realise its full potential the government and industry need to work
together to eliminate external factors by enforcing regulatory standards and ensuring overall
improvements to the pharma ecosystem and the country’s infrastructure.
This will create the right conditions for India’s pharma sector to transform its supply chain and
support the industry as it grows.
Indian Pharma Companies Need Supply Chain Transformation
Unlocking growth
Abhishek Malhotra, Partner, AT Kearney, India
Kaushika Madhavan, Partner & Head, Strategic Operations Practice, AT Kearney India
Amit Saharia, Principal, AT Kearney, India

India’s pharmaceutical companies have a unique opportunity to lead global growth for years to come.
However, there is a significant gap between the strategic vision and operational realities of the sector.
Firms are facing challenges on multiple fronts in their supply chains. They need to overcome these
hurdles to unlock their full potential.
India has emerged as one of the world’s fastest growing pharmaceutical markets over the past
decade. The industry saw a growth of around 18 per cent per annum between 2005 and 2015, and
now stands at US$30 billion. The generic drug sector expanded at an even faster pace of 22 per
cent per annum during the same period and now accounts for 20 per cent share of global exports by
volume.
The phenomenal growth is expected to continue in the coming years, with India’s pharmaceutical
sector forecast to nearly double to US$55 billion by 2020. The generic drug sector is expected to
capture 6 to 7 per cent of the US$760 billion generic drugs market by 2020. With India having the
highest number of FDA approved drug manufacturing sites - second only to the US, these numbers
seem achievable.
However, while India’s growth trajectory looks promising on the surface, it is evident that there is a
significant gap between the strategic vision and operational realities of the sector. Indian
pharmaceutical companies are facing a unique set of challenges that are creating significant
pressure on them to transform their supply chains.
Simply put, a supply chain refers to the combination of organisations, people, activities, and
resources that are involved in moving a product or service from a manufacturer to the customer.
Indian pharmaceutical companies are facing hurdles on multiple fronts in their supply chains.
Key hurdles
As part of our efforts to assess the state of the pharma supply chain in India, which serves local and
global markets, we conducted a study in collaboration with the Organisation of Pharmaceutical
Producers of India (OPPI) and the Indian Pharmaceutical Association (IPA). As part of this study, we
interviewed CEOs and supply chain executives in medium and large Indian pharma companies. The
executives highlighted four key challenges they are facing.
Quality and regulatory issues: Quality continues to be a hot topic in the industry. With 600-700 FDA -
approved sites in India, global regulatory agencies have been inspecting sites with increased
regularity, with more than 800 issues identified by the US FDA over the past eight years. In 2015,
ten companies were issued warning letters, a 25 per cent increase from 2014.
Quality issues have deepened and widened over time and an increasing number of these are
occurring across the value chain. These range from issues at the procurement level over quality of
raw materials, as well as at the manufacturing stage where plant shutdowns and inability to get
necessary certifications have created unused capacity. Lack of quality control at the R&D stage has
also led to more failures of trial batches, causing delays in product launches.
Product proliferation: Indian pharmaceutical companies are expanding their portfolio at a fast pace.
This has been driven in part by new product development, new dosage forms, enhanced
formulations, and changes in packaging and labelling to cater to new markets. Indian players launch
anywhere from 15 to 30 products / SKUs a year.
Several underlying factors have contributed to this including changing demographics which has seen
the rise of non-communicable diseases such as diabetes, chronic pain and cardio vascular problems
in India. Increased competition, which fuels the need to constantly innovate and varying regulatory
requirements across multiple markets are the other key driving factors.
This fast-paced product proliferation has several implications for the supply chain, including higher
manufacturing and distribution costs, more inventory, and a larger supplier base.
Supply chain fragmentation: India’s supply chain network is very complex making it even tougher to
manage properly. Companies manage over 15,000 raw materials across over 10,000 facilities
clustered around zones spread over five to six states and that’s before we move down the chain to
distribution. The sheer number of players at each stage with varying requirements, lack of clear
categorisation, lack of proximity to the manufacturer, and differing degrees of quality standards are
clear challenges.
As a result, production schedule changes are becoming more common because of poor supplier
service levels, further affecting the ability of the supply chain to make and deliver on time.
With two thirds of the global pharma industry being outsourced, decentralised R&D-where
companies use multiple third party centres at different stages of development-creates a convolution
of technology and data transfer, lengthening timelines for regulatory approval, increasing costs to
deal with discrepancies, and reducing plant utilisation.
Infrastructure gaps: India has had a long-term struggle with improving its infrastructure. Less than
five per cent of roads are highways, the railway system is simply inadequate, and the airways are
underutilised. There are also gaps in storage and power supply.
In terms of storage, the lack of a robust cold chain network to support the supply chain represents a
significant gap in today’s pharma infrastructure. Drugs have varying storage requirements to ensure
that potency is maintained throughout their shelf life. Moving specialty products and vaccines
requires continuous monitoring at all stages of the value chain. However, companies are still unable
to ensure a product is stored at the required conditions throughout its transition.
India’s cold chain market is fragmented itself with more than 3,500 companies. Most are in dire need
of both connectivity and technology. These gaps are not only a hurdle to the sector’s growth, but
also pose a threat to patients who receive poorly handled drugs.
Unlocking growth
Given these challenges, Indian companies need to design a supply chain that is more adaptive,
flexible and responsive to the changes. This can be done by focusing their efforts on four
dimensions:
Reducing complexity:
India’s pharma supply chain is crippled with end-to-end complexity. Reducing this complexity can
unleash an array of benefits. Efforts should be focused on these top three priorities for immediate,
actionable results:
• Consolidating and optimising the network as a whole, supporting seamless communications across
suppliers, manufacturers, distributors, and customers
• Tailoring visibility of supply chains, segmenting consumer needs, product types, product attributes,
and markets. This will be crucial to improve efficiency
• Handling the portfolio’s complexity both upstream (R&D portfolio proliferation) and downstream
(product SKU proliferation), which will optimise capacity and resources upstream and kill
underperforming SKUs, resulting in immediate cost cutting.
Creating agility and visibility:
In addition to changing patient needs and shifting disease patterns, the global market is experiencing
more frequent drug shortages and communicable disease outbreaks. It is vital that pharma
companies are ready to react to such market changes if they want to be best in class performers.
Ensuring that the supply chain is integrated with Sales and Operations Planning (S&OP) processes
and commercial strategies will enable pharmaceutical companies to move from a ‘planning for
convenience’ model to a ‘planning for market’ model.
Based on our experience, companies see a 10 to 20 per cent increase in service levels (from the
current average of about 60 per cent) simply by streamlining their S&OP processes, which typically
leads to a 1 to 2 per cent increase in the top-line.
Building robust quality and compliance system:
There is an immediate need for quality processes to be tightened. It is imperative to have a strong
quality organisation with visibility and oversight across all practices in the supply chain, both internal
and external. A few leading companies have paved the way in taking structured initiatives to boost
their quality standards, receiving positive affirmation from global regulatory bodies such as the FDA.
The following five internal initiatives can have a sizeable impact on quality systems:
• Developing understandable, executable, and compliant standard operating procedures, supported
with regular compliance training
• Enforcing a ‘quality culture’ from senior leadership, targeting the message across the organisation
with supporting documentation of practices that can be followed by all
• Establishing data integrity organisation with data integrity officer lead
• Conducting routine internal audits by both global and local audit and compliance committees.
• Implementing technologically advanced systems across network to reduce manual error: lab
information management systems and document management systems.
Using tech across supply chain:
Technology remains one of the most important areas for pharmaceutical companies to focus on.
One immediate result of using technology is greater transparency, which leads to better decision
making. Technology can be used to integrate all functions across the network, increase visibility of
products across the value chain, and automate processes to improve the supply chain’s
responsiveness and reliability.
External factors
A transformation of the supply chain in India’s pharma industry is in immediate need. However, a
total revamp cannot be done in isolation. There are some things beyond the control of the industry
that can only be overcome by strong collaboration with government and industry bodies.
The recent conversations between government and industry to combat India’s dependence on China
for Active Pharmaceutical Ingredients (API) are a great example of such ollaboration.
For the India pharma industry to realise its full potential the government and industry need to work
together to eliminate external factors by enforcing regulatory standards and ensuring overall
improvements to the pharma ecosystem and the country’s infrastructure.
This will create the right conditions for India’s pharma sector to transform its supply chain and
support the industry as it grows
URL - https://www.pharmafocusasia.com/strategy/supply-chain-transformation
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