PROJECT REPORT

ON

A ANALYSIS OF THE QUALITY

PROCEDURES AT ALKEM
LABORATORIES
 CERTIFICATE OF ORIGINALITY

This is to certify that the project titled “A Analysis of the Quality

Procedures at Alkem Laboratories" is an original work of the Student and

is being submitted in partial fulfillment for the award of the “Master’s Degree

in Business Administration” of Indira Gandhi National Open University.

This report has not been submitted earlier either to this University or to any

other University/Institution for the fulfillment of the requirement of a course of

study.

Signature of Student Signature of Supervisor

ii
 ACKNOWLEDGEMENT

The study, on “A Analysis of the Quality Procedures at Alkem

Laboratories” was undertaken under the guidance of Mr. _____________, I

am grateful to him for his guidance and support in successful completion of

the study. I am particularly indebted to him for being patient and encouraging

me to complete the project.

I would like to acknowledge my gratefulness to all those who went out of

their way to help me in completing the project.

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 TABLE OF CONTENTS

· Introduction

· Company Profile – Alkem Laboratories

· Objective of the Study

· Theoretical Perspective

· Research Methodology

· Survey Findings & Analysis

· Conclusion & Recommendation

· Bibliography

· Annexure:

Questionnaire

iv
 INTRODUCTION

In five years, the world pharmaceutical market alone is poised to grow at a

CAGR of 8% with business opportunities of over a trillion USD! USA, Japan

and the European countries led by Germany shall remain the dominant

markets controlling over 80% trade opportunities. Asian countries like

South Korea, Taiwan and India are expected to have growth rates ranging

from 12 to 15% annually. Advantage India India needs to leverage its

inherent strengths to its collective advantage. Areas would include

productivity in drug discovery, production in terms of API and formulations

besides becoming referral laboratories to identify questionable drug

molecules.

· Cost competitive manufacturing base with a high number of

internationally approved facilities

· World class skills in chemistry and process development

· Rapidly improving skill sets in biotechnology and drug discovery and

development research

· Access to a large base of high caliber scientists and trained technical

manpower

· Large number of providers of R&D, manufacturing and clinical trials

outsourcing services

· India has roughly 7,000 pharma units, 35% of which (2,400) are

registered manufacturers with Drug Controller General, India.

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· Ratio of API: Formulation units are 20:80.

· Only 300 units of these 7,000 are API units controlling 70% of India’s

production facilities.

· Of these 300, only 80 units have the required US FDA approval albeit the

highest outside the USA.

· Of these 80 units, only 10 units control 37% of the total Indian market ; 8

being Indian manufacturers.

· Since 1971, MNC share of Indian domestic trade has reduced to 35%

while local players have progressively increased their presence to 65%.

· India’s export market is growing at a rate of 23%.

· Infrastructure in high-end manufacturing and testing facilities.

· Focused training per International standards and protocols for effective

global presence.

The underlying opportunity lies in the fact that though Indian companies

control 8% of the global volume (4th by world ranking) of business, it is

merely 1% (13th by world ranking) in value terms.

Globalization and increasing domestic competition have brought a sense of

urgency in inducting highly successful total quality management techniques

in Indian pharmaceutical organizations.

In the period before the 1950s, the onus of buying a good quality product

was on the buyer himself, though this shifted towards a system of product

warranty in sixties, when the manufacturers started taking, at least, limited

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responsibility for their products. This also started the advent of the statistical

quality controls concept. In the 1970s quality became the cornerstone of

Japan to make its industry competitive and it started producing high quality

products.

Later, by employing quality principles in controlling process waste, it was

realized that quality could not be restricted any longer to a designated quality

department, but it was to spread across the company, giving birth to the

concept called "Total Quality Management" or TQM. TQM marks the

beginning of new era, in which managers will focus on customer values,

cross-functional systems and continuous improvements.

This report presents the basic ideas and components of TQM. The

managerial skills required in the new environment and various techniques

like benchmarking and business process re-engineering are also outlined.

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 REVIEW OF LITERATURE

Quality is never an accident. It is always the result of high intentions, sincere

efforts, intelligent direction and skillful execution. It is an attribute or

characteristic whose dictionary meaning is the degree of goodness or worth

of a person, place or thing.

In determining the quality of a product, the customer's expectations about

the product will be given the top most priority. In the present scenario,

customer delight is the need of the hour in order to survive the cutthroat

competition.

There are different approaches through which the concept of quality can be

under stood. According to the product-based approach, quality is an

attribute, which can be measured quantitatively. The manufacturing based

approach on the other hand, uses universal definition of conformance to

requirements. The value-based approach says that the consumer purchase

decision is based on consistent quality at an affordable price.

Definition of Quality

W. Edwards Deming defines quality as: "Pride in Workmanship"

Dr. J. Juran defines quality as: "those product features which meet the

needs of customers and thereby provide product satisfaction." or "freedom

from deficiencies."

Kaoru Ishikawa defines quality as: "total quality control, Japanese style, is a

thought revolution in management."

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Gary Griffith, in his book "The Quality Technician's Handbook," defines

quality as: "the totality of features and characteristics of a product or service

that bear on its ability to satisfy given needs."

Total Quality Management (TQM)

Total Quality Management is a management approach that originated in the

1950's and has steadily become more popular since the early 1980's. Total

Quality is a description of the culture, attitude and organization of a company

that strives to provide customers with products and services that satisfy their

needs. The culture requires quality in all aspects of the company's

operations, with processes being done right the first time and defects and

waste eradicated from operations.

Total Quality Management, TQM, is a method by which management and

employees can become involved in the continuous improvement of the

production of goods and services. It is a combination of quality and

management tools aimed at increasing business and reducing losses due to

wasteful practices.

Some of the companies, which have implemented TQM, include Ford Motor

Company, Phillips Semiconductor, SGL Carbon, Motorola and Toyota Motor

Company.

The TQM Concept

In this age of liberalization, the quality of products has become a major

concern for pharma industries. To be competitive, an industry needs to

provide a product/service, into which quality is designed, built, marketed and

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maintained at the most economical cost, which brings in customer "delight"

instead of customer satisfaction. These competitive edges made the pharma

industries think of approaching quality management efforts in their total form,

known as Total Quality Management.

The job of quality management is not just advising a sampling plan for the

acceptance/ rejection of the incoming materials or products and controlling

manufacturing process conditions. It is in fact a job at every stage of the

company's activities.

Quality Management is a company wide activity, involving the combined

efforts of various departments such as R & D, engineering, purchase,

production, Quality Control, Quality Assurance, Human Resources,

Marketing, Distribution, Warehouse, etc in different phases with a view to

achieve the desired quality of the end product.

Quality awareness must begin at the very conception of the product and

continue through various stages of development and manufacture & even

during its use to get feedback from the users, which is essential for

continuous product improvement.

TQM Defined

TQM is a management philosophy that seeks to integrate all organizational

functions (marketing, finance, design, engineering, and production, customer

service) to focus on meeting customer needs and organizational objectives.

TQM views an organization as a collection of processes. It maintains that

organizations must strive to continuously improve these processes by

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incorporating the knowledge and experiences of workers. The simple

objective of TQM is "Do the right things, right the first time, every time". TQM

is infinitely variable and adaptable. Earlier, it was applied to manufacturing

operations, and for a number of years were used only used in that area.

Now, TQM is becoming recognized as a generic management tool, just as

applicable in service and public sector organization. Different sectors created

different or their own versions from the common ancestor. TQM is the

foundation for activities, which include:

· Commitment by senior management and all employees

· Meeting customer requirements

· Reducing development cycle times

· Just In Time/Demand Flow Manufacturing

· Improvement teams

· Reducing product and service costs

· Systems to facilitate improvement

· Line Management ownership

· Employee involvement and empowerment

· Recognition and celebration

· Challenging quantified goals and benchmarking

· Focus on processes / improvement plans

· Specific incorporation in strategic planning

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This shows that TQM must be practiced in all activities, by all personnel, in

Manufacturing, Marketing, Engineering, R&D, Sales, Purchasing, HR, etc.

TQM is a philosophy, which aims at managing a set of business practices

that emphasizes continuous improvement in all phases of operations. It

focuses of giving 100 percent accuracy in performing activities, involvement

and empowerment of employees at all levels, team based work design,

benchmarking and fully satisfying customer expectations. Quality

improvement processes have now become a globally pervasive part of the

fabric of implementing strategies keyed to defect-free manufacture, superior

product quality, superior customer service, and total customer satisfaction.

TQM entails creating a tool quality culture bent on continuously improving

the performance of every task and value chain activity.

In any TQM philosophy, aligning business processes to fulfill business

objectives is the major exercise. Functions/activities are performed to

achieve business objectives. Departmental objectives are derived from

business objectives. Activities are performed in the department to achieve

departmental objectives. For each activity there is immediate internal or

external customer and supplier. It is necessary for every process owner to

think about “My Customers” and “What I provide to them” and about “My

Suppliers” and “What They Provide to Me”. It is necessary to identify major

business process in the organization and measurement of process

performance.

TQM plays major role in successfully implementing business strategy. When

TQM is not a part of wider scale effort to improve strategy execution and

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business performance, they deteriorate into strategy-blind efforts to manage

better.

Principles of TQM

The key principles of TQM are as following:

· Management Commitment

1. Plan (drive, direct)

2. Do (deploy, support, participate)

3. Check (review)

4. Act (recognize, communicate, revise)

· Employee Empowerment

1. Training

2. Suggestion scheme

3. Measurement and recognition

4. Excellence teams

· Fact Based Decision Making

1. SPC (Statistical Process Control)

2. DOE (Design of Experiments), FMEA (Failure Modes and

Effects analysis)

3. The 7 statistical tools

4. TOPS (FORD 8D - Team Oriented Problem Solving)

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 · Continuous Improvement

1. Systematic measurement and focus on Cost of Non Quality

(CONQ)

2. Excellence teams

3. Cross-functional process management

4. Attain, maintain, improve standards

· Customer Focus

1. Supplier partnership

2. Service relationship with internal customers

3. Never compromise quality

4. Customer driven standards

What is the Philosophy of TQM?

Although no two businesses use TQM in exactly the same way, its theory

rests on two basic tenets. The first and most important is that customers are

vital to the operation of the organization. Without customers, there is no

business, and without business, there is no organization. Consequently, it

should be the primary aim of any group to keep customers satisfied by

providing them with quality products (Deming 1986).

These ideas are not foreign to most organizations. What makes TQM unique

is its call for a restructuring of management methods to create that quality.

TQM proponents urge organizations to turn nearsighted, top-down

management "on its head" by involving both customers and employees in

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decisions. This second tenet, that management needs to listen to

nontraditional sources of information in order to institute quality, is based on

the belief that people want to do quality work and that they would do it if

managers would listen to them and create a workplace based on their ideas

(Deming).

Managers, in the TQM view, need to become leaders who "not only work in

the system but also on the system" (Rocheleau 1991). A company will see

continuous improvement in products only when managers realize all systems

consist of interdependent parts and work to aim all those parts toward a

vision of quality. This type of leadership is needed to ensure that product

quality improves constantly and forever and truly satisfies the customers

(Deming).

The Concept of Continuous Improvement by TQM

TQM is mainly concerned with continuous improvement in all work, from high

level strategic planning and decision-making, to detailed execution of work

elements on the shop floor. It stems from the belief that mistakes can be

avoided and defects can be prevented. It leads to continuously improving

results, in all aspects of work, as a result of continuously improving

capabilities, people, processes, technology and machine capabilities.

Continuous improvement must deal not only with improving results, but also

more importantly with improving capabilities to produce better results in the

future. The five major areas of focus for capability improvement are demand

generation, supply generation, technology, operations and people capability.

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A central principle of TQM is that people may make mistakes, but most of

them are caused, or at least permitted, by faulty systems and processes.

This means that the root cause of such mistakes can be identified and

eliminated, and repetition can be prevented by changing the process.

There are three major mechanisms of prevention:

1. Preventing mistakes (defects) from occurring (Mistake - proofing or

Poka-Yoke).

2. Where mistakes can't be absolutely prevented, detecting them early

to prevent them being passed down the value added chain

(Inspection at source or by the next operation).

3. Where mistakes recur, stopping production until the process can be

corrected, to prevent the production of more defects. (Stop in time).

Implementation Principles and Processes

A preliminary step in TQM implementation is to assess the organization's

current reality. Relevant preconditions have to do with the organization's

history; its current needs, precipitating events leading to TQM, and the

existing employee quality of working life. If the current reality does not

include important preconditions, TQM implementation should be delayed

until the organization is in a state in which TQM is likely to succeed.

If an organization has a track record of effective responsiveness to the

environment, and if it has been able to successfully change the way it

operates when needed, TQM will be easier to implement. If an organization

has been historically reactive and has no skill at improving its operating

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systems, there will be both employee skepticism and a lack of skilled change

agents in that organization. If this condition prevails, a comprehensive

program of management and leadership development should be instituted. A

management audit is a good assessment tool to identify current levels of

organizational functioning and areas in need of change. An organization

should be basically healthy before beginning TQM. If it has significant

problems such as a very unstable funding base, weak administrative

systems, lack of managerial skill, or poor employee morale, TQM would not

be appropriate.

However, a certain level of stress is probably desirable to initiate TQM.

People need to feel a need for a change. Kanter (1983) addresses this

phenomenon by describing building blocks, which are present in effective

organizational change. These forces include departures from tradition, a

crisis or galvanizing event, strategic decisions, individual "prime movers,"

and action vehicles. Departures from tradition are activities, usually at lower

levels of the organization, which occur when entrepreneurs move outside the

normal ways of operating to solve a problem. A crisis, if it is not too

disabling, can also help create a sense of urgency, and can mobilize people

to act. In the case of TQM, this may be a funding cut or threat, or demands

from consumers or other stakeholders for improved quality of service. After a

crisis, a leader may intervene strategically by articulating a new vision of the

future to help the organization deal with it. A plan to implement TQM may be

such a strategic decision. Such a leader may then become a prime mover,

who takes charge in championing the new idea and showing others how it

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will help them get where they want to go. Finally, action vehicles are needed

and mechanisms or structures to enable the change to occur and become

institutionalized.

Models of TQM

These models are presented in brief, because many of the concepts are

already discussed above and these models have put different emphasis on

some of these concepts. Only where some new point is brought in the

model, it is discussed in details.

1. Seven characteristics of total quality by Feigenbaum

(i) Systematic Process, extending throughout the company.

(ii) Quality process in the organization must be correctly structured.

Else Everybody’s job is Nobody’s Job.

(iii) Total Quality improvement must take place from Marketing to After

Sales Service covering all aspects of the business.

(iv) Emphasis on what buyer wants.

(v) Application of new Technologies.

(vi) Participation of ALL – not just Specialists.

(vii) Company must establish clear Customer Oriented Quality

Management System, which people should understand and want

to be part of.

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2. The Integrated model of TQM

CUSTOMER
FOCUS
STATISTICAL
QUALITY MANAGEMENT
CONTROL COMMITMENT

Total
SYSTEMATIC Quality Mission: TOTAL
PROBLEM Continuous PARTICIPATION
SOLVING Improvement

Figure 2.2: ‘The Integrated Model of TQM

In this model the Continuous Improvement is considered as the central

mission of TQM.
3. The Building Blocks Model of TQM

THE TOP - QUALITY PLANNING

- LEADERSHIP
- VISION FOR WORLD CLASS
- COMPETITIVENESS

TQ: THE PILLARS

WORKPLACE DESIGN, LAYOUT,
SAFETY, METHODS ENGG
MANAGEMENT CONTROL

PROCESS FLEXIBILITY
SPC, SQC, ISO - 9000

CAD/CAM, ETC.
USER – SUPPLIER
SYSTEMS

SYSTEM
CHANINS

T Q : T H E
FOUNDATION
- CONTINUOUS IMPROVEMENT
- VALUE MANAGEMENT AT EACH STAGE

- EMPLOYEE INVOLVEMENT

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 Figure 2.3: The Building Blocks Model of TQM (Zairi, 1991)

4. Oakland’s Model

Teams

Communication
Culture
Process

CS
Systems
Too
Commitment
ls
Figure 2.4 The Oakland Model on Total Quality Management

The Customer — Supplier chains, both within and outside the organization

are considered as central to TQM around which the other features are

interwoven.

Oakland’s 13 states representing gradual progression towards

implementation of TQM based culture:

(i) Understanding Quality

(ii) Commitment to Quality

(iii) Policy on Quality

(iv) Organisation for Quality

(v) Measuring Costs of Quality

(vi) Planning for Quality

(vii) Design for Quality

(viii) System for Quality

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(ix) Capability for Quality

(x) Control for Quality

(xi) Team Work for Quality

(xii) Training for Quality

(xiii) Implementation of TQM

How does TQM Create an Environment that Promotes Quality?

TQM is more than just a philosophy. In addition to proposing new theories

about the workplace, it advocates specific changes that managers need to

make if they want to improve the system. These changes are best described

in Deming's "14 Points," which are condensed under the four categories

below:

· Customer Relationships: Customers can be either internal or external to

an organization. Just as a customer is the person buying a product in a

store, an employee is the customer of management. Managers need to

realize that quality work will not be done unless they provide employees

with quality products to work with (Blankstein 1992).

· Employee Empowerment: TQM starts at the top but should permeate the

workplace the fact is that it will fail without employee involvement. Since

workers know more about their jobs than management does, their input is

vital to improving the system. It is a manager's responsibility to

continuously train employees in the methods of TQM, involve them in

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 management decisions, listen to their suggestions for system changes,

and work towards implementing those changes (Schmoker 1992).

· Continual Gathering and Use of Statistical Data: Most companies monitor

the quality of their products by doing mass inspections that determine

how many low-quality items are being produced, but Deming calls for

monitoring of the production process by continually gathering statistical

data so that problems can be identified as they are happening instead of

when it is too late to solve them. When problems are identified, they

should be the focus of discussion, and the groups discussing them

should rely on the data to institute change instead of randomly assigning

blame to individuals or departments (Deming).

· Create an Environment that Promotes Unity and Change: People need to

feel comfortable discussing problems and suggesting solutions.

Managers need to work at breaking down barriers between departments

so that interactive discussion can take place. Fear must be eliminated.

Also, managers are urged to do away with slogans, quotas, goals, and

objectives since they encourage competition between workers and put

the focus on individual results rather than process (Deming).

The TQM Vision

The quality cycle begins and ends with the user. It starts when the user's

need is analyzed to design a product. During the development &

manufacture of that product, various departments and sections of the

company make their contributions in building quality into it. The cycle ends

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with the user because the final proof of the product quality comes during its

use by the user, whose "delight" is the ultimate aim of this concept. Quality is

no longer the exclusive domain of the inspectors, manufacturers and

pharmacists. Even Sales personnel have their role to play in the

achievement of the primary objective of quality.

Quality Management, as does any management process, has three main

components:

1. Quality Planning - Designing the desired & deliverable quality standards.

2. Quality Implementation.

3. Quality Monitoring & control.

It is imperative that TQM efforts should be properly organized to co-ordinate

the various contributing aspects of quality. As such we need to know the

basic ideas behind TQM. Organizations are made up of a complex system of

customers and suppliers. People pay attention to who supplies them; with

what they need to do their job and who the customer is for what they

produce. When everybody becomes concerned about meeting their

customers' requirements, quality will be there, without doubt.

In meeting customer expectations the focus must be on the process, not just

on the results. To improve a process it is important to look at the socio-

cultural issues of organization to create a healthy, open atmosphere in which

people are willing to open up and do some introspection on their processes.

And this is something the management must be able to facilitate.

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In contrast to traditionally managed organization, TQ managed organizations

believe that, though there is no complaint from the customers, there is

always scope for improvement. Everybody in the organization is trained to

plan & participate in groups. Meetings & Brain storming sessions become

primary vehicles for planning & creative problem solving. Each member in

the team is recognized & rewarded. Errors and problems are viewed as

opportunities for learning rather than blunders to be punished.

In the recent past, TQM got its formal recognition by way of ISO 9000. In

order that organizations may successfully compete with world-class leaders,

it is imperative to look at and be prepared for quality way beyond the popular

ISO 9000.

In the context of the Indian organization, the common perception held is that

quality improvement is uneconomical since it increases cost and investment,

thereby decreasing productivity. Traditional Indian managers are not

prepared for intense global competition where quality, cost, sticking to the

deadlines and customer satisfaction are of paramount importance. They are

not prepared to shed the belief that they can get business by cornering

licences, influencing the bureaucrats.

Domestic managers are unaware of the momentous changes taking place.

Ironically even today most Indian managers rely more on market gossip and

collecting random data than paying an accredited agency for factual

information.

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Indian companies should wake up to the realities and try to build up an

organization where information flows freely; employees are empowered with

decision-making and problem solving, where teamwork is awarded and

encouraged. Our executives have to learn how to become successful quality

managers, so that they can become global managers and this primarily

means change in their mindset.

The key word here is "professionalism".

Many managers have trouble fully trusting their employees. It is not

surprising that many new managers want to keep control firmly in their own

hands, but TQ managers see their employees as a work group and believe

that their team wants to do a good job.

The manager must learn skills of collaboration. He is to make certain his

team has had the correct training in the use of data and statistical tools.

Management by fact is the main characteristic of TQ manager.

He should also reward the deserving team or individual for their support of

the TQM philosophy. Recognition and reward are his key tools and he has to

know how to use them in order to support TQM. He should help employees

to gain insights from their personal experiences and how to improve on them

thereupon.

Many companies in India are realizing this and are now focusing their efforts

on team building and teamwork.

Hindustan Lever Limited, a Unilever group company operating in India,

started implementing quality assurance in place of Quality Control. Looking

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at the success of quality assurance, the company started TQM in 1990;

mainly to focus on intensified broad based training at all levels,

institutionalizing quality improvement programmes, vendor development &

certification.

TQM Techniques

Benchmarking: For many companies benchmarking has become a

component of their TQM Programme.

In most developing countries like India, until recently almost all the industries

had a few number of products and services, which differed markedly in their

utilitarian characteristics. However, such a situation is hardly sustainable

with increasing competition from foreign goods and services. In such a

situation, competing firms have to continuously improve.

The benchmarking approach not only provides a comparative profile, but

also helps the management to identify innovative products and services.

"Benchmarking is a continuous process of measuring one's products,

services & practices against toughest competitors". It will search for the best

practices in the industry, which will lead to superior quality goods. With the

growing emphasis on quality, it has got great significance in the present

competitive world.

If best practices are followed, customer requirements can easily be met,

leading to increasing profitability of the company. But the employees resist

change in the beginning because they are habituated to old processes.

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Efforts to change mindset of employees must vigorously continue till desired

effect is achieved.

Business Process Reengineering:

Business Process Reengineering generally redesigns processes & the

organization that performs them in order to reduce the number of boundaries

crossed. Each time a process crosses an organizational boundary,

opportunities for errors arise. Business Process Reengineering is the

fundamental rethinking and radical redesign of Business Processes to

achieve dramatic improvements in critical contemporary measures of

performance, such as cost, quality, service and speed.

Precautions:

Wherever the responsibility of quality management is to be delegated to

different departments, it should be done with many precautionary measures,

thereby ensuring monitoring & control is in the hands of quality management

people. The hierarchy structure of quality management should be kept to as

few levels as possible and the span of control should be as broad as

possible.

As the traditional organizations are unable to meet the present challenges,

there is every need for new techniques & philosophies with which

organizations can survive and thrive under grueling competition. To retain

their competitive edge, company should change their traditional ways of

working, to read their customer's mind. No organization can afford to

overlook customer, competition & change, the three vital forces of today's

23
competitive environment. TQM is an important milestone in the ongoing

evolution of the field of management.

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 COMPANY PROFILE

Alkem Laboratories Ltd. is one of India's top ten pharmaceutical companies

with a turnover of US$130 million. The company is engaged in manufacture

and marketing of pharmaceutical formulations and neutraceuticals. The

company is highly respected by the medical profession and trade.

Alkem's products are widely prescribed by the medical profession in India

and some of the Indian Pharma industry's top brands are Alkem brands.

Taxim (Cefotaxime) Alkem's No.1 brand is amongst top 5 brands of the

Indian Pharmaceutical Industry. Several other Alkem brands feature among

the top brands of the industry. Over the last 3 decades Alkem has grown

rapidly. The genesis of Alkems growth has been organic i.e. by building

mega brands. This is one of the major areas of core competence in Alkem.

Alkem is very sound on the financial front as well. Alkem is a zero debt

company with substantial reserves which are ploughed back into future

projects. Technically Alkem is among the very best in India. Alkem's

Cephalosporin formulation unit in Daman is approved by UKMHRA for both

injectable as well as orals - a rare achievement. This facility is also approved

by MCC South Africa. By the first quarter of 2005, Alkems manufacturing

facility wherein Cardiovascular products, antidiabetics, NSAIDS and

neuropsychiatry products are produced should also be UKMHRA approved

as per company plans.This is true for Alkem's Blactam facility as well.

Alkems products are exported to around 40 countries worldwide including

regulated European markets.

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Alkem - The Indian Pharma major is rapidly moving towards globalisation.

HISTORY

Alkem Laboratories Ltd. was started in 1973 by its founder chairman Mr.

Samprada Singh who continues to be chairman even today. Mr. Samprada

Singh was joined by his brother Mr. B. N. Singh in this venture as a director.

Mr. B. N. Singh is Managing Director of Alkem currently. In the last few

decades Alkem has shown a spectacular growth and is not only one of the

top pharmaceutical companies in India but also one of the fastest growing

companies in the country. Today Alkem enjoys a pride of place in the

organized Indian Pharmaceutical sector.

CORE PHILOSOPHY

Alkem was started with the basic objective of the Chairman Mr. Samprada

Singh to serve humankind with the best possible medical care at affordable

prices. Innovation to serve humanity coupled with a life long commitment to

health care professionals forms the core of ALKEM's business approach.

"ALKEM cares about life and ALKEM's commitment to life is LIFE LONG".

MANAGEMENT

Alkem Laboratories Ltd. was started by Mr. Samprada Singh (currently

Chairman) around three decades back in 1973 on the very auspicious day of

Dasshera. Today Mr. Samprada Singh is one of the most respected and

successful entrepreneurs of the Indian Pharmaceutical Industry. The growth

of Alkem and the success of Mr. Samprada Singh is most amazing since Mr.

Samprada Singh started this organization from scratch and through

26
tremendous dynamism, vision and leadership has brought it to the top of the

Indian Pharmaceutical Industry today. To Mr. Samprada Singh goes the

major credit of seeing Alkem through its various stages of progress from the

beginning, till today, when Alkem is a name to reckon with in the Indian

Pharmaceutical Industry.

Mr. Samprada Singh was born in an agriculturist's family in Bihar. He took

active part in India's struggle for independence and this high level of

patriotism made Mr. Samprada Singh to decide that he will start a business

of his own so as to serve his countrymen. With healthcare being of top

importance to every human being Mr. Samprada Singh selected healthcare

and pharmaceuticals as his focus area as an entrepreneur. In this venture he

was joined by his brother Mr. B. N. Singh, a post graduate in Political

Science. Mr. B. N. Singh is currently the Managing Director of Alkem

Laboratories Limited.

From the very early days of Alkem Laboratories Ltd., Mr. Samprada Singh

always emphasized the need for excellence in products, personnel, quality

and service. This coupled with his high managerial competence, leadership,

vision and drive for success, helped him to influence Alkem personnel

positively and resulted in a very competitive and effective Alkem team in all

departments. The Singh brothers have overseen the various stages of

Alkem's growth and brought it to this level of tremendous success.

Mr. Samprada Singh is an ardent believer in GOP (Getting On with People)

through which he has been able to generate and maintain the enthusiasm of

Alkem employees from Senior management to factory workers. All Alkem

27
employees irrespective of their position are treated like members of one

family. Every Alkemite has tremendous love & affection for Mr. Samprada

Singh and this by itself is a motivating factor that makes them deliver the

best. He treats all employees as family members with a very personal touch

thereby leading to very high commitment levels across the board.

PROGRESS

Alkem has made rapid progress in the last three decades and today finds

itself amongst the top ten pharma companies in India. Marketing and

Finance have been ALKEM's inherent strengths. ALKEM has a very strong

track record of building Mega Brands, Taxim - Alkem's No.1 brand features

among the top 5 brands of the Indian Pharmaceutical Industry. In the sales

year April 2003 to March 2004 ALKEM recorded a sales of US$22 mio for

TAXIM alone. ALKEM has also in its portfolio other mega brands like TAXIM

O (Cefixime), ALCIPRO (Ciprofloxacin), CLAVAM (Amoxycillin plus

Clavulanic Acid), HEMFER (Hematinic), A TO Z (Antioxidant) etc. ALKEM is

one of the top companies in Antibiotics and is number one in India in

Cephalosporin formulations.

In the recent past Alkem has launched many top potential molecules like

Cefipime, Valdecoxib, Cefpodoxime Proxetil, Piperacillin + Tazobactam,

Gatifloxacin and many more. Alkem is the first Indian company to develop,

manufacture and market the leading anti-cancer drug Anaestrazole. Alkem

manufactures the bulk as well as the formulation of Anaestrazole. This was

marketed in India in January, 2004. In March, 2004, Alkem launched a

combination of Cefotaxime plus Sulbactam for the first time in the world.

28
Very recently Alkem has launched Meropenam with the brand name

ZAXTER, being the first Indian company to do so. The list of firsts from

Alkem will increase in times to come.

With life style diseases on the increase worldwide and India being no

exception, Alkem saw this as a business opportunity. Alkem has successfully

launched two speciality divisions, Pentacare and Cytomed. Pentacare

markets Neuropsychiatry, Cardiovascular & Anti diabetic products. Cytomed

is a dedicated division for anticancer & HIV products.

MISSION

Alkem's mission is to achieve the turnover of US$250 million in the next

three years.

VISION

To be one of the Top 5 companies in India and also be a successful global

company.

ENVIRONMENT POLICY

Alkem Laboratories Limited reaffirms its commitment to minimize the

adverse impact of its operations on the environment and strives for

Safe and sound work practices with a focus on continual improvements of

processes and products to prevent pollution.

Conserving natural resources and energy by constantly seeking to optimize

usage and reduce wastage for sustainable development.

29
Fulfilling relevant environmental legal and other requirements by broad

margins.

Effective Environmental Management System with well defined objectives

and targets and a program to review, impacts at regular intervals for

improving environmental performance.

QUALITY POLICY

To achieve value driven leadership in Indian Health Care Industry and

beyond.. through Quality that is infinite Service that cares Hard Work that

endures.

ALKEM HAS 6 BUSINESS DIVISIONS AS LISTED BELOW:

Main Pharma Division

The main pharma division markets products encompassing various

therapeutics groups like antibacterials, NSAIDS, Gastroenterology products,

antioxidants etc. The main pharma division has several mega brands in its

portfolio. At the top of product portfolio is Taxim (Cefotaxime) worth nearly

Rs.100 crores (approximately US$ 22 million). Taxim is amongst the top 5

products in the entire Indian Pharmaceutical Industry. This is testimony of

Alkems inherent strength in brand building. Several other mega brands such

as Taxim-O (Cefixime), Alcipro (Ciprofloxacin), A to Z (antioxidant) are also a

part of the main divisions product range. A study of the product range of the

main division proves the wide spectrum of brands that this division

successfully markets.

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Ulticare Division

Alkem's Ulticare division markets a wide range of products including

antibacterials, neutraceuticals, hematinics, NSAIDs, anti T.B. products etc.

Well known brands of the Indian Pharmaceutical Industry like Swich

(Cefpodoxime proxetil), Magtam (Cefoperazone + Sulbactam), Tofe C.I.

(Carbonyl Iron), Broadicillin (Ampicillin), Alprovit (Protein supplement) are

marketed by the Ulticare division. Ulticare has also successfully launched a

combination of Piperacillin + Tazobactam with the brand name Revotaz and

Etoricoxib the new NSAID with the brand name Evaxx.

Bergen Division

Bergen is one of the fast growing divisions of the Alkem group. Bergen has a

distinction of making successes of several brands like Gemcal (combination

of Calcium Carbonate + Calcitriol), Nexcet (Levocetirizine), Nuloc

(Esomeprazole), Cefast (Ceftriaxone), Tazid (Ceftazidime). Bergen has

recently launched very successfully one of the top NSAIDS, Alcoxib

(Etoricoxib).

Pentacare Division

With the life diseases rapidly on the increase world wide and in India as well,

Alkem decided to expand into these segments in a big way. This formed the

genesis of the Pentacare division which focuses on cardiovascular,

antidiabetic and Neuropsychiatry products. A perusal of the product range

clearly indicates that all the potential & top molecules in these 3 segments

are a part of the Pentacare portfolio.

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Cytomed Division

Cytomed is a dedicated division for Oncology products. This division

successfully markets a good range of anti cancer products. The Cytomed

range even includes Anaestrazole. Alkem is the first Indian company to

successfully develop, manufacture & market Anaestrazole.

Generic Division

Of these divisions, main pharma division contributes maximum to the overall

turnover of the company. It is as the name suggests the main division and

the first division of the Alkem. As Alkem expanded rapidly over the years, the

need was felt to have more than one division in order to increase the product

portfolio. Whilst the main pharma division, Ulticare and Bergen Division have

top brands encompassing several therapeutic groups, Pentacare and

Cytomed are speciality divisions. Pentacare focuses on Neuropsychiatry,

Cardiovascular and antidiabetic products. Cytomed is Alkem's speciality

oncology division.

INTERNATIONAL BUSIENSS

Alkem began its exports operations in 1994, having identified this as one of

the primary areas of growth. Operations began with exports to Myanmar,

Vietnam and Sri Lanka. Today, Alkem has operations in over 50 countries.

Alkem has seen steady exports growth over the last 3 years. Contribution of

exports to their overall turnover is almost 10% now.

All their 3 manufacturing facilities strictly follow WHO GMP and ICH

guidelines.

32
One of their manufacturing facilities in Daman has recently secured the UK

MHRA approval for Oral and Injectible Cephalosporins. Supplies to the

regulated markets of Europe have started. This facility also has the

distinction of securing the South African MCC approval.

With these recent developments, Alkem’s exports will see exponential

growth in the years to come. Contribution of exports to overall turnover will

also rise significantly.

They strive to ensure Affordability and Uncompromisingly High Quality.

Their strategy for achieving export growth would be 3 pronged:

1. Marketing of their brands through agent network in unregulated and semi

regulated markets.

2. Toll manufacture for large generic companies in highly regulated markets

like Europe, Australia, South Africa and the USA.

3. Their own European filings and ANDAs to avail of the huge generic

opportunities in the regulated markets due to imminent patent expiries of

a number of block buster molecules.

Manufacturing

Alkem has several manufacturing facilities, primarily situated in Daman &

Taloja. The Taloja facility was the Alkem first manufacturing facility. Bulk of

Alkem's production is undertaken in the "State of the Art" manufacturing

facilities in Daman. The Cephalosporin formulations facility in Daman is

approved by UKMHRA for orals and injectables. This facility is also approved

33
by MCC South Africa. Alkem also has a general manufacturing facility

wherein cardiovascular products, anti-diabetics, NSAIDS, neuro-psychiatry

products etc. are manufactured. The modern Betalactam facility is

responsible for Alkem's entire Betalactam range.

DAMAN FACILITY

Their Daman Facility comprising of three units is located about 175 km from

the Mumbai head office.

The first facility at Kachigam, Daman was set up in 1998, on land measuring

9075 sq.mtrs. The next two facilities on lands measuring 21329 sq. mtrs. &

8300 sq. mtrs. were set up in the years 2001 and 2004 respectively at

Amaliya, Daman. All the three facilities are state of the art formulation

manufacturing units equipped with latest manufacturing and testing

equipments and current 'Good Manufacturing Practices (c-GMP)'. In

conformance to the latest manufacturing concepts, the ß-lactams and

cephalosporins are handled in two separate independent buildings, The

Cephalosporins formulation unit is approved by the WHO, UKMHRA and

MCC (South Africa), MCA (Z), NAFDAC (Nigeria), NDA (Uganda). Other

units are WHO, MCA (Z), NAFDAC (Nigeria), NDA (Uganda) approved. n

addition to the formulation facility, the quality assurance, warehouse, utilities

and the administrative activities are housed in independent buildings. These

units mainly have formulation manufacturing facility for Dry powder & Liquid

injections, Tablets and Capsules, Dry and Liquid syrups.

34
AMALIYA MANFACTURING FACILITY - I

It comprises two production blocks (General and Cephalosporins),

warehouse, quality assurance cum administrative block, utilities block and an

effluent treatment plant. These production blocks are designed to meet the

domestic and export production requirements. The General block is a three-

floor structure having production on ground and first floors measuring

3025.35 sq. mtrs. and 1596.94 sa. mtrs. respectively. A part of the first floor

and the third floor house the HVAC system etc.

The Cephalosporin block, which is approved by the UKMHRA and MCC

(South Africa) is a three-floor structure having production on ground and first

floors measuring 877.85 sq.mtrs. and 877.85 sq.mtrs. respectively. The third

floor houses the HVAC system etc. The ware housing facility has available

area measuring1893.04 sq. mtrs. on ground floor and 1893.04 sq. mtrs. on

first floor.

The major equipments installed in these blocks are two high-speed dry

powder injections and one high-speed dry syrup filling and packing lines, two

high speed liquid orals filling and packing lines, tablets and hard gelatin

capsules production and packing lines. The unit has an independent well-

equipped quality assurance department.

The unit is connected to various utilities such as the steam, nitrogen plant,

compressed air, chillers, purified water, water for injection, HVAC system

and DG sets

35
AMALIYA B-LACTAM FACILITY

It comprises one production block (for ß-Lactams) having warehousing,

quality assurance, administrative office and a separate utilities block. This

plant is designed to meet the domestic and export production requirements.

This plant is a four storeyed structure having production on ground and

second floors measuring 1996 sq.mtrs. and 2072 sq.mtrs. respectively. A

part of the first floor and the third floor house the HVAC, water system etc.

The injection facility of this plant is a modular clean room based design and

this is one of the best and most modern manufacturing facilities in the

country.

The major equipments installed in these blocks are high-speed dry powder

injections and two high-speed dry syrups filling and packing lines, tablets

and hard gelatin capsules production and packing lines. The unit has well-

equipped quality assurance department. The ware housing facility has the

available area measuring 504 sq.mtrs on ground floor and 428 sq.mtrs. on

second floor.

The unit is connected to various utilities such as the steam, nitrogen plant,

compressed air, chillers, purified water, water for injection, HVAC system

and DG sets.

KACHIGAM UNIT

The Kachigam unit is four storeyed structure with available area of 2275

sq.mtrs. and 2450 sq. mtrs. for the ground and the second floor respectively

with the first and the fourth floors mainly housing the HVAC etc. The ware

36
housing facility has an available area of 875 sq. mtrs. This GMP unit is

designed for production of injections, tablets, capsules and dry syrups for

domestic and export markets.

The major equipments installed in this unit are three high-speed dry powder

injection and two high-speed dry syrup filling and packing lines as well as

tablets and hard gelatin capsules production and packing lines. The unit has

an independent, well-equipped quality, assurance department.

The unit is connected to various utilities such as the steam, nitrogen plant,

compressed air, chillers, purified water, water for injection, HVAC system

and DG sets.

SYSTEMS

All three Daman manufacturing facilities have independent, well-designed,

well-equipped and well-maintained c-GMP compliant warehousing facilities

for the raw materials, packing materials, in process materials and the

finished goods. In addition to this there is a centralized warehouse for the

finished goods.

The hazardous solvents are stored in separate solvent yards. The

warehousing facilities have walk in coolers, RLAF sampling and dispensing

booths, materials handling equipments, high precision weighing equipments,

HVAC, water systems etc.

All the three facilities have well designed safety features and are covered

with fire hydrant systems.

37
Risk analysis and validation is well practiced at all stages in all the three

plants right from the concept & design to operation stages.

Vendors are selected on the basis of quality audits conducted at their

manufacturing units.

All the three units have a quality system comprising quality assurance,

quality control with stability studies facility. The quality control function

involves activities such as the sampling and analysis of the raw and packing

materials, in process materials and finished goods. This involves testing by

checking of various physical parameters, analysis using wet laboratory

methods, instrumental analysis and microbiological methods.

There are well-defined documentation systems compliant to the local 'Drug

laws' and the various overseas regulatory bodies such as WHO, MHRA

(UK), MCC (South Africa) etc. The quality control and assurance laboratories

are equipped with following major equipments : HPLC with photo diode array

detector, HPLC with UV detector, preparative liquid chromatograph with UV

detector, gas chromatograph with head space sampler, UV Visual

spectrophotometer, IR spectrophotometers, TOC analyzers, auto titrator,

digital pH meter, liquid particle counter etc.

The main utilities used at their Daman facility are power, purified water,

water for injection, chilled water, steam, compressed air Nitrogen, cooling

towers, and ETP. The electricity is sourced from Daman Electricity. All the

three plants have supply of 400 KVA, 1490 KVA &1200 KVA. In addition to

this THEY have four DG sets, which can collectively supply 2100 KVA

38
enough to meet their production requirement in case of supply failure. The

collective purified water generation is 25 cubic/hour.

R&d

Research & Development activities play a vital part in maintaining Alkem's

market position through Development and subsequent commercial scale ups

of new products. Research & Development at Alkem is making a major

contribution to strengthen corporate competitiveness by concentrating on

product value addition and technological prowess. It also provides technical

support to the export markets.

Alkem's Research & Development Centre of 45,000 sq.ft. is located at

Taloja, Mumbai. The facilities comprise of fully equipped, modern state-of-

the-art laboratories, sophisticated information services, and an excellent

Library of scientific literature. The centre is approved by the DSIR, Ministry of

Science and Technology, Government of India.

The Research and Development Centre is active in almost all facets of the

business which include:

· Pharmaceutical formulations development including Novel Drug Delivery

Systems

· Clinical trial Phase I - Pharmacokinetics ( Bioavailability / Bioequivalence

/ Drug Metabolism Studies )

· Innovative process development for Bulk Actives

· Biotechnology and Bio-pharmaceuticals

39
· Development of new nutritional products

The activities are well synchronized to provide Alkem a competitive

advantage in the new patent regime. Over a period, the company has

ambitious plans to further expand the research activities.

All of manufacturing industry has an overriding concern for quality. This

means they want to make products 'right first time' without any flaws or

defects. The drive to maintain this quality is called Total Quality Management

(TQM). There are three main aspects of TQM that are distinctive to the

pharmaceutical industry.

1. The long development time.

Once a promising molecule has been found, it can take up to 12 years to the

launch of the medicine. This is much longer than, say, the development of a

new car. However, it is essential to allow the company to ensure that the

medicine is acceptably safe.

2. The licence and the production processes.

The manufacture of a motor car can be changed once it has started.

However, in the pharmaceutical industry a licence has to be granted before a

medicine can be produced. Its issue depends on the production process.

Therefore, once the licence has been issued, it is very difficult to change the

process. This means that the production process must be carefully planned

at the very beginning.

40
3. An overriding concern for safety.

This can be seen by the use of strict quality control systems. These exist at

all stages in the manufacture and trialling of the new medicine and include:

* checking the safety of a medicine through extensive trials

* a system for tracking each stage in the production of a batch

* heavy investment in training.

Pharmaceutical companies devote a lot of time to training. They encourage

their staff to take responsibility for their work. They can't rely on someone

else making up for their mistakes. They know that their contribution has to be

perfect for the medicine to be as safe as possible and for the company to

succeed.

Pharmaceutical manufacture is a high technology process. As well as relying

on the skill and knowledge of their employees, pharmaceutical companies

use high precision and efficient control systems. They are major employers

in this country and contribute significantly to the economy. The industry

seems to have a good future but, as with anything successful, it cannot be

complacent and remains a dynamic, developing industry.

OBJECTIVES OF THE STUDY

§ To study the Quality Control Systems as adopted by pharmaceutical

companies in India.

§ The aim of this study is to analyze the implementation and effectiveness

of Total Quality Management at Alkem Laboratories.

41
RATIONALE FOR CHOOSING THE TOPIC

The area of study of this project is Total Quality Management. What

has been done in this direction and how? It is proposed to be a study of

Quality Control Process at Alkem Laboratories. It is not supposed to be

a definite study of every fact of quality management but to try and trace

how important it is in pharmaceutical industry and for that matter any

field.

One of the reasons for selecting this subject was to link theory with

productivity and quality as implemented in industry. Managers of today in

any industry or organizations are facing enormous challenges. To be a

success in today’s world it becomes mandatory for an organization to be

competitive in every aspect of business. This can be achieved through

excellence in design, manufacturing, marketing and after sales service. The

keys to this excellence for any organisation are its people and their

productivity. The ever-changing business environment and its stringent

requirements as regards quality, cost and delivery are putting undue

pressure on the organizations to perform par excellence. This competition-

induced stress has to be borne by the people of the organization, who as

depicted as the most vital resource in this philosophy, most abundant yet

scarce. Managers in order to excel, managers enhance their effectiveness

and usefulness to the organization. They are in constant search of solutions,

which can help them in the continuous quest for excellence of theirs and

their team members.

42
RESEARCH METHODOLOGY

The project being undertaken is exploratory research. Where in all these

approaches of exploratory research like:

DATA COLLECTION APPROACH

The base on which a study rests is the information that is embedded in it.

The data for this study will be obtained as a blend of both Secondary and

Primary sources.

Secondary Data

Already published data will form the starting point for the study. This

includes: -

· Official Reports on related matters.

· Literature of quality management available at Alkem Laboratories

Limited.

· Books and Journals on quality process of “Pharmaceutical Companies.

· Books on Quality, and Operation Management

Primary Data

Data will be collected specifically for the research needs at hand. The

sources include: -

· Interviews of 4 Managers at Alkem Laboratories.

· Questionnaires: A structured, non-disguised questionnaire will be

prepared. This will than be presented to concerned people at Alkem

43
 Laboratories. 10 employees from middle and Senior Management will be

contacted for the purpose of getting the required information. The

information gathered would be analyzed and presented in the final report.

The final report would than be submitted to IGNOU.

LIMITATIONS

· Time will be the biggest constraint but all effort will be made to get all the

relevant information required for this study.

· I will have an in-depth study on all the parameter related to quality

process and improvement measures adopted by Alkem Laboratories.

But the information that will be provided may not be self sufficient to

project the scope and direction of future R&D in respect to other products

that are being produced by Alkem laboratories Limited. But all effort will

be made by me to present in this report the fact and figures, which will be

relevant to the quality management at Alkem.

44
 FINDINGS AND ANALYSIS

Good Manufacturing Practice or GMP also referred to as 'cGMP' or 'current

Good Manufacturing Practice' is a term that is recognized worldwide for the

control and management of manufacturing and quality control testing of

foods and pharmaceutical products.

Since sampling products will statistically only ensure that the samples

themselves (and perhaps the areas adjacent to where the samples were

taken) are suitable for use, and end-point testing relies on sampling, GMP

takes the holistic approach of regulating the manufacturing and laboratory

testing environment itself. An extremely important part of GMP is

documentation of every aspect of the process, activities, and operations

involved with drug and medical device manufacture. If the documentation

showing how the product was made and tested (which enables traceability

and, in the event of future problems, recall from the market) is not correct

and in order, then the product does not meet the required specification and

is considered contaminated (adulterated in the US). Additionally, GMP

requires that all manufacturing and testing equipment has been qualified as

suitable for use, and that all operational methodologies and procedures

(such as manufacturing, cleaning, and analytical testing) utilized in the drug

manufacturing process have been validated (according to predetermined

specifications), to demonstrate that they can perform their purported

function(s).

45
GMPs are enforced in the United States by the FDA; within the European

Union, GMP inspections are performed by National Regulatory Agencies

(e.g., GMP inspections are performed in the United Kingdom by the

Medicines and Healthcare products Regulatory Agency (MHRA); in Australia

by the Therapeutical Goods Administration (TGA); in India by the Ministry of

Health and by similar national organisations worldwide). Each of the

inspectorates carry out routine GMP inspections to ensure that drug

products are produced safely and correctly; additionally, many countries

perform Pre-Approval Inspections (PAI) for GMP compliance prior to the

approval of every new drug for marketing.

Regulatory agencies (including the FDA in the US and regulatory agencies in

many European nations) are legally entitled to turn up unannounced to

conduct inspections, if they believe that there are suitable grounds for doing

this.

46
Good manufacturing practice (GMP) is that part of quality assurance which

ensures that products are consistently produced and controlled to the quality

standards appropriate to their intended use and as required by the marketing

authorization. GMP is aimed primarily at diminishing the risks inherent in any

pharmaceutical production, which may broadly be categorized in two groups:

cross contamination/mix-ups and false labelling. Above all, manufacturers

must not place patients at risk due to inadequate safety, quality or efficacy;

for this reason, risk assessment has come to play an important role in WHO

quality assurance guidelines.

Quality assurance

Quality assurance is a wide ranging concept covering all matters that

individually or collectively influence the quality of a product. With regard to

pharmaceuticals, quality assurance can be divided into four major areas:

quality control, production, distribution, and inspection.

Production

Good manufacturing practice (GMP) is that part of quality assurance which

ensures that products are consistently produced and controlled to the quality

standards appropriate to their intended use and as required by the marketing

authorization. GMP is aimed primarily at diminishing the risks inherent in any

pharmaceutical production, which may broadly be categorized in two groups:

cross contamination/mix-ups and false labelling. Above all, manufacturers

must not place patients at risk due to inadequate safety, quality or efficacy;

47
for this reason, risk assessment has come to play an important role in WHO

quality assurance guidelines.

Distribution

Any comprehensive system of quality assurance must be founded on a

reliable system of controlling the quality, safety and efficacy of a finished

product delivered to a market. It is important that all manufacturing

operations are carried out in conformity with the accepted norms of GMP.

The distribution channel and supply chain need to follow quality assurance

as well in order that patients are getting quality medicines. WHO has issued

a number of international standards assisting Member States and those

involved in the supply chain.

Inspections

Inspections are part of the overall drug quality assurance system. The

objective of inspecting pharmaceutical manufacturing facilities is either to

enforce Good Manufacturing Practice (GMP) compliance or to provide

authorization for the manufacture of specific pharmaceutical products,

usually in relation to an application for marketing authorization. A further

aspect of pharmaceutical inspection is monitoring the quality of

pharmaceutical products in distribution channels, from the point of

manufacture to delivery to the recipient, as a means of eliminating the

hazard posed by the infiltration of counterfeit drugs

48
Quality Projects

The term quality control refers to the sum of all procedures undertaken to

ensure the identity and purity of a particular pharmaceutical. Such

procedures may range from the performance of simple chemical

experiments which determine the identity and screening for the presence of

particular pharmaceutical substance (thin layer chromatography, infrared

spectroscopy, etc.), to more complicated requirements of pharmacopoeial

monographs. Activities extend to the area of quality control laboratories

(good laboratory management practices, models, e.g. for certificate of

analysis and lists of laboratory equipment, and an external assessment

scheme.

Production of Starting Materials

The production of quality starting materials must be carefully planned in

order to obtain starting materials which are both suitable and safe for the

intended purpose. This includes the quality of raw materials for the

production of starting materials, including purification steps, and quality

control of the finished product – including in-process controls, batch release

and, if appropriate, the stability of the product in its container. In other words,

starting materials should be produced according to appropriate quality

standards. For active substances this is generally accepted and already

provided for by good manufacturing practices (GMP) guidelines published by

WHO or under development. All parties in the chain from the production of

starting materials to the manufacture of the final product have responsibility

for their actions, which must be documented in compliance with established

49
GMP. However, the ultimate responsibility remains with the manufacturer of

the final drug product. National or international regulations are currently

being implemented or are in the process of being developed.

Excipients are rarely produced specifically for pharmaceutical purposes. The

majority of the frequently used pharmaceutical excipients are mainly utilized

in food or cosmetics, which may be, but probably are not, produced

according to GMP. Certain excipients even have their main use in

completely different fields like paint, building materials, refrigeration, etc.

Some excipients are being specifically manufactured for pharmaceutical

application, in which case full GMP for active substances should be applied.

In this instance, the same principles should be applied as for the production

of active substances, i.e. GMP. In any case, excipients should at least be

produced under appropriate quality standards and a quality management

system such as ISO 9000. Chemicals that are principally used for purposes

other than pharmaceutical or nutritional supplements may also be used as

active substances or excipients for the production of medicinal products. In

this case, it cannot be expected that these substances are produced

according to GMP because the manufacturer may not be aware of the

pharmaceutical use of the substance, for instance, as the amount used

pharmaceutically can be very small. Such a substance becomes a

pharmaceutical starting material when it is specifically designated as such,

e.g. by labelling it as complying with a pharmacopoeial monograph, such as

those published in Ph. Eur. or USP. From this point on, all following steps

should be performed under GMP. Although it is generally accepted that

50
quality must be built in to a product during its production, this rule cannot be

applied here. Therefore, the designation as a pharmaceutical starting

material of such substances deserves special consideration and must be

well founded and documented. The status of each manufacturing process

should be clear and the test methods necessary for quality control should be

defined as a function of the quality system in place.

Containers, including closures, may or may not be regarded as belonging to

the category of starting materials. However, since they come into close

contact with the dosage form and the starting materials and are often

intended to protect them from deterioration – such as that caused by light –

they may have an important influence on the stability of the medicinal

product.

Consequently they must be of suitable and consistent quality and should

also be produced employing a suitable quality management system, such as

GMP or the ISO 9000 series. A certificate of analysis and good record

keeping of documentation will also be required for packaging materials

intended for pharmaceutical use.

Distribution and Trade

Labelling and packaging are a usual practice of a number of trading

companies (brokers and wholesalers) for several reasons. This practice may

be accompanied by changing certificates of analysis issued by the producers

of the starting materials into certificates bearing only the name of the trading

company. In addition, containers are sometimes used whose suitability to

51
maintain the quality of the starting material has not been demonstrated.

Labelling and/or packaging is usually performed by a forwarding company on

behalf of the trading company and may not be under direct control of the

trading company. Finally, storage and shipment are sometimes being

performed under unsuitable conditions. Obviously improper trading practices

can be an important risk to the quality of starting materials and consequently

measures should be taken to prevent this risk by establishing good trading

practices. In order to maintain the original quality, packaging, labelling (and

re-)certification of any starting material must be carried out according to

GMP, and storage, shipment and trade performed according to

internationally accepted good distribution practices (GDP).

Certification and its Reliability

Certificates of analysis that are not based on scientific results will be useless

and may even be misleading as they may give the unjustified impression that

a particular batch of a starting material is of suitable quality, when it is not.

To prevent such a dangerous misinterpretation the supplier of a starting

material should be qualified and authorized before accepting the certificates

of analysis. Authorization of the supplier should be based on auditing in

order to confirm his adherence to GMP or another suitable quality

management system, such as the ISO 9000 series. This should include all

subcontractors, repackagers and distributors and be periodically repeated.

Authorization should be supplemented by testing an adequate number of

lots and comparing the results obtained with those provided by the supplier,

taking into consideration the suitability of test methods, in order to establish

52
their equivalence. Furthermore the supplier must agree to inform the

customer about all relevant changes in production.

Proper identification of starting materials is indispensable under all

circumstances, even when the starting material is accompanied by a reliable

certificate of analysis. The only alternative to the use of reliable and

meaningful certificates is full testing of the quality of the starting material by

its user according to suitable specifications and using suitable test methods.

However, it must be kept in mind that quality must be built into a starting

material during production. Consequently in any case it is important that the

supplier and any certifier of a starting material employs a suitable quality

management system.

Typical deficiencies in certificates of analysis are: lack of signature, copies

instead of original certificates, incomplete test results rather than full results

of all tests included in the respective pharmacopoeial monographs, tests

using less precise or less specific methods, different from those indicated in

the relevant pharmacopoeia or product specification, lack of identification of

the manufacturer of the material, and of the issue of the certificates, etc.

Nomenclature and Standards

In contrast to active substances, no generally accepted nomenclature is

available for the majority of excipients. To avoid mislabelling and

misunderstanding in trade such an internationally accepted nomenclature

system would be very useful. Another obstacle to the use of excipients by

manufacturers of dosage forms, and to trade, is the fact that pharmacopoeial

53
norms are not usually harmonized, sometimes resulting in different

requirements.

The pharmaceutical industry includes the manufacture, extraction,

processing, purification, and packaging of chemical materials to be used as

medications for humans or animals. Pharmaceutical manufacturing is divided

into two major stages: the production of the active ingredient or drug

(primary processing, or manufacture) and secondary processing, the

conversion of the active drugs into products suitable for administration.

This document deals with the synthesis of the active ingredients and their

usage in drug formulations to deliver the prescribed dosage. Formulation is

also referred to as galenical production. The main pharmaceutical groups

manufactured include:

· Proprietary ethical products or prescriptiononly medicines (POM),

which are usually patented products

· General ethical products, which are basically standard prescription-

only medicines made to a recognized formula that may be specified in

standard industry reference books

· Over-the counter (OTC), or nonprescription, products.

The products are available as tablets, capsules, liquids (in the form of

solutions, suspensions, emulsions, gels, or injectables), creams (usually oil-

in-water emulsions), ointments (usually waterin-oil emulsions), and aerosols,

which contain inhalable products or products suitable for external use.

Propellants used in aerosols include chlorofluorocarbons (CFCs), which are

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being phased out. Recently, butane has been used as a propellant in

externally applied products.

The major manufactured groups include:

· Antibiotics such as penicillin, streptomycin, tetracyclines,

chloramphenicol, and antifungals

· Other synthetic drugs, including sulfa drugs, antituberculosis drugs,

antileprotic drugs, analgesics, anesthetics, and antimalarials

· Vitamins

· Synthetic hormones

· Glandular products

· Drugs of vegetable origin such as quinine, strychnine and brucine,

emetine, and digitalis glycosides

· Vaccines and sera

· Other pharmaceutical chemicals such as calcium gluconate, ferrous

salts, nikethamide, glycerophosphates, chloral hydrate, saccharin,

antihistamines (including meclozine, and buclozine), tranquilizers

(including meprobamate and chloropromoazine), antifilarials, diethyl

carbamazine citrate, and oral antidiabetics, including tolbutamide and

chloropropamide

· Surgical sutures and dressings.

The principal manufacturing steps are (a) preparation of process

intermediates; (b) introduction of functional groups; (c) coupling and

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esterification; (d) separation processes such as washing and stripping; and

(e) purification of the final product. Additional product preparation steps

include granulation; drying; tablet pressing, printing, and coating; filling; and

packaging.

Each of these steps may generate air emissions, liquid effluents, and solid

wastes. The manufacture of penicillin, for example, involves the batch

fermentation—using 100–200 cubic meter (m3) batches—of maize steep

liquor or a similar base, with organic precursors added to control the yield.

Specific mold culture such as Penicillium chrysogenum for Type II is

inoculated into the fermentation medium. Penicillin is separated from the

fermentation broth by solvent extraction. The product is further purified using

acidic extraction. This is followed by treatment with a pyrogen-free distilled

water solution containing the alkaline salt of the desired element.

The purified aqueous concentrate is separated from the solvent in a

supercentrifuge and pressurized through a biological filter to remove the final

traces of bacteria and pyrogens. The solution can be concentrated by freeze

drying or vacuum spray drying. Oil-soluble procaine penicillin is made by

reacting a penicillin concentrate (20–30%) with a 50% aqueous solution of

procaine hydrochloride. Procaine penicillin crystallizes from this mixture.

The manufacture of pharmaceuticals is controlled by Good Management

Practices (GMP) in some countries. Some countries require an

environmental assessment (EA) report addressing the fate and toxicity of

drugs and their metabolized by-products. The EA data relate to the parent

drug, not to all metabolites, and include (a) physical and chemical properties;

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(b) biodegradability; (c) photolysis propensity; (d) aqueous toxicity to fish; (e)

prediction of existing or planned treatment plant to treat wastes and

wastewaters; and (f) treatment sequences that are capable of treating

wastes and wastewaters.

The pharmaceutical industry faces many challenges. They are at the

crossroads of maintaining a traditional healthcare system and adapt itself to

the fast changing environment. This means the industry has to strive to meet

the norms of the countries for which they wish to they manufacture their

products. They have to establish certain standards and the documentation

requirements of that country to which they are exporting their products. Thus

one has to comply with local FDA guidelines and also build one's own in-

house specifications as per current cGMP guidelines so as to satisfy the

audits carried out by international agencies.

Many global pharmaceutical majors are looking to outsource manufacturing

from Indian companies, which enjoy much lower costs (both capital and

recurring) than their western counterparts. Many Indian companies have

made their plants cGMP compliant and India is also having the largest

number of USFDA-approved plants outside USA.

Indian companies are proving to be better at developing Active

Pharmaceutical Ingredients (APIs) than their competitors from target markets

and that too with non-infringing processes. Indian drugs are either entering

in to strategic alliances with large generic companies in the world of off-

patent molecules or entering in to contract manufacturing agreements with

innovator companies for supplying complex under-patent molecules.

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Some of the companies like Dishman Pharma, Divis Labs and Matrix Labs

have been undertaking contract jobs for MNCs in the US and Europe. Even

Shasun Chemicals, Strides Arcolabs, Jubilant Organosys, Orchid

Pharmaceuticals and many other large Indian companies started

undertaking contract manufacturing of APIs as part of their additional

revenue stream. Top MNCs like Pfizer, Merck, GSK, Sanofi Aventis,

Novartis, Teva etc. are largely depending on Indian companies for many of

their APIs and intermediates.

The Boston Consulting Group estimated that the contract manufacturing

market for global companies in India would touch $900 million by 2010.

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 SURVEY FINDINGS

v The pharmaceutical industry in the Asia Pacific region is booming,

especially in China and India. There is significant investment from foreign

pharmaceutical companies throughout the region. And, domestic

manufacturers are also going through an expansion phase to keep pace

with increased demand. Business opportunities in Asian pharmaceutical

markets are very different today from what they were a few years ago.

The traditional tiger economies, characterised by economic growth, free

market environment, developed industry and investment in health and

health infrastructure have had a long haul back from the financial

instability and economic downturn in the 1990s.

v India is well positioned to take advantage of increased demand in

affordable medicines and the growth in the domestic industry is already

very well documented. India has a strong core competency in producing

high quality and affordable medicines as well as active pharmaceutical

ingredients to supply overseas markets.

v The pharmaceutical industry is currently under significant pressure to

reduce overall costs as well as to ensure regulatory compliance and drug

safety. This trend is worldwide. They are looking at increased productivity

from the laboratory and to this end, reduced cost per analysis while still

maintaining compliance with regulatory requirements. We see continued

growth in the Asian pharmaceutical sector. Going forward, this size is

likely to exceed that of Europe and the US within the next few decades.

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 Asia, led by Japan and India, will also start developing a robust pipeline

of novel drugs that address the needs of both Asia and the rest of the

developed world such as US and Europe. Various countries in Asia will

undeniably face a multitude of challenges as they develop their

industries. However, given their traditional resourcefulness and

determination, it is beyond doubt that Asia's place within the global

pharmaceutical industry over the next few decades will grow in rapid

prominence.

v Asia's impact on the global biotechnology and pharmaceutical industry is

accelerating. From quality supply of API's to discovery of new chemical

entities (NCE's), this sector is finally coming of age. The challenge, of

course, lies in whether the Asian chrysalis will metamorphasise profitably

through innovation or will choose the less risky pathway to grow beyond

generics through contract manufacturing and other services, to make its

presence felt worldwide. Drug discovery may be feasible but, just like the

US-based small cap biotechnology companies, Asian companies will

have to look for partners to help bring any successful innovation to

market. This realisation has already spurred acquisitions, alliances

between the Asian and global pharmaceuticals in R&D, and outsourcing

of services and clinical trials.

v The key to the success of Asian pharmaceutical companies is their ability

to retain their cost advantage while matching the quality standards of the

West. But lower costs cannot be enough. Availability of skilled manpower

and a favourable regulatory environment that assures compliance with

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 global norms are the other two legs underpinning success. With a

growing skill set and capacity in contract research (from combinatorial

chemistry to high throughput screening, assay development and

validation to clinical trials) and contract manufacturing, Asian companies

are increasingly becoming preferred partners for Western bio-

pharmaceutical companies seeking to bring their products to the market

in a timely and cost-effective manner. India already boasts of more

USFDA GMP approved API facilities than any other nation other than US.

v In their domestic markets, Indian and Chinese companies are

successfully serving countries with high GDP growth (89 percent) and

large populations (1 billion plus people each) while selling drugs at prices

that would give most pharmaceutical executives a coronary. Yet, Indian

companies are still able to churn out operating margins often comparable

to those of Western-branded pharmaceutical companies. Obviously,

Asian managers are changing the very business model that has defined

success for Western companies during the past century.

v When it comes to innovation driven by new science, the challenge for the

Asian companies is clear—how do you transform yourself from a

company that successfully copied someone else's innovative product

cost effectively into a true innovator? Continuing to do what now amounts

to a commodity business has been a good springboard, but only

successful R&D can turn this nice but modest base into a sustainable

global presence over the long haul. One has to remember that Asian

firms are not only competing with their more developed counterparts in

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 the US and Europe, but also with each other, especially in their bread

and butter generic business. Chinese API manufacturers, for example

are just coming in on their own, and will likely pressure the Indian

companies pricing options even further.

v All the leading MNC's and their Indian counterparts have identified co-option,

denoting collaboration and competition at the same time, whereby companies

collaborate in identifying best practices and sharing the various steps in drug

discovery, to competing on generics. Co-option has increasingly been adopted as

a model for sustaining growth momentum. This adoption has happened on the

back of cross-border acquisitions, licensing (both in- licensing and out- licensing

agreements) and by becoming preferred outsourcing partners of multinational

pharma companies. This has made Indian pharma companies redefine the global

pharma value chain by building collaborative networks and has resulted in

increasing visibility of growth.

v Poor quality medicines are not only a health hazard, but a waste of money for

both governments and individual consumers. A poor quality medicine may

contain toxic substances that have been unintentionally added. A medicine that

contains little or none of the claimed ingredient will not have the intended

therapeutic effect.

v Most countries will only accept import and sale of medicines that have been

manufactured to internationally recognized GMP. Governments seeking to

promote their countries' export of pharmaceuticals can do so by making GMP

mandatory for all pharmaceutical production and by training their inspectors in

GMP requirements.

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v Good manufacturing practice (GMP) is a system for ensuring that products are

consistently produced and controlled according to quality standards. It is

designed to minimize the risks involved in any pharmaceutical production that

cannot be eliminated through testing the final product. The main risks are:

unexpected contamination of products, causing damage to health or even death;

incorrect labels on containers, which could mean that patients receive the wrong

medicine; insufficient or too much active ingredient, resulting in ineffective

treatment or adverse effects. GMP covers all aspects of production; from the

starting materials, premises and equipment to the training and personal hygiene

of staff. Detailed, written procedures are essential for each process that could

affect the quality of the finished product. There must be systems to provide

documented proof that correct procedures are consistently followed at each step

in the manufacturing process - every time a product is made. WHO has

established detailed guidelines for good manufacturing practice. Many countries

have formulated their own requirements for GMP based on WHO GMP. Others

have harmonized their requirements, for example in the Association of South-

East Asian Nations (ASEAN), in the European Union and through the

Pharmaceutical Inspection Convention.

v Good quality must be built in during the manufacturing process; it cannot be

tested into the product afterwards. GMP prevents errors that cannot be

eliminated through quality control of the finished product. Without GMP it is

impossible to be sure that every unit of a medicine is of the same quality as the

units of medicine tested in the laboratory.

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v Making poor quality products does not save money. In the long run, it is more

expensive finding mistakes after they have been made than preventing them in

the first place. GMP is designed to ensure that mistakes do not occur.

Implementation of GMP is an investment in good quality medicines. This will

improve the health of the individual patient and the community, as well as

benefiting the pharmaceutical industry and health professionals. Making and

distributing poor quality medicines leads to loss of credibility for everyone: both

public and private health care and the manufacturer.

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 SWOT ANALYSIS

It is often said that the pharma sector has no cyclical factor attached to it.

Irrespective of whether the economy is in a downturn or in an upturn, the

general belief is that demand for drugs is likely to grow steadily over the

long-term.

The SWOT analysis of the industry reveals the position of the Indian pharma

industry in respect to its internal and external environment.

Strengths

Low cost - Indian manufacturers are one of the lowest cost producers of

drugs in the world. With a scalable labor force, Indian manufactures can

produce drugs at 40% to 50% of the cost to the rest of the world. In some

cases, this cost is as low as 90%.

Strong technical skills – I ndian pharmaceutical industry posses excellent

chemistry and process reengineering skills. This adds to the competitive

advantage of the Indian companies. The strength in chemistry skill help

Indian companies to develop processes, which are cost effective. Large

untapped market - Indian with a population of over a billion is a largely

untapped market. In fact the penetration of modern medicine is less than

30% in India. To put things in perspective, per capita expenditure on health

care in India is US$ 93 while the same for countries like Brazil is US$ 453

and Malaysia US$189.

Huge market for lifestyle drugs – The growth of middle class in the country

has resulted in fast changing lifestyles in urban and to some extent rural

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centers. This opens a huge market for lifestyle drugs, which has a very low

contribution in the Indian markets.

Weaknesses

Poor R&D expenditure -Compared to the global pharmaceutical industry,

Indian R&D expenditure is still minuscule, which could have a negative effect

in the long run, especially in Product Patent regime.

The average R & D spend in India, though growing at a CAGR of 18% over

last five years, is just 1.9% of sales, as against 9-10% spend by global

pharma companies.

Tag of being “Copy Cats” – Majority of the Indian companies are dependent

on replicating drugs developed by MNCs, hence Indian companies are

viewed in not so good light.

Price Regulation - The Indian pharma companies are marred by the price

regulation. Over a period of time, this regulation has reduced the pricing

ability of companies. The NPPA (National Pharma Pricing Authority), which

is the authority to decide the various pricing parameters, sets prices of

different drugs, which leads to lower profitability for the companies. The

companies, which are lowest cost producers, are at advantage while those

who cannot produce have either to stop production or bear losses.

Slow growth - Indian pharma market is one of the least penetrated in the

world. However, growth has been slow to come by. As a result, Indian

majors are relying on exports for growth. To put things in to perspective,

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India accounts for almost 16% of the world population while the total size of

industry is just 1% of the global pharma industry.

Low entry barriers - Due to very low barriers to entry, Indian pharma industry

is highly fragmented. This makes Indian pharma market increasingly

competitive.

The industry witnesses price competition, which reduces the growth of the

industry in value term. To put things in perspective, in the year 2003, the

industry actually grew by 10.4% but due to price competition, the growth in

value terms was 8.2% (prices actually declined by 2.2%) Labour laws -

Outdated and restrictive labour laws are hampering all the industries in India

and making it unviable for the MNCs to set up production base in India.

Opportunities

Off patent drugs - Large number of drugs going off-patent in Europe and in

the US between 2005 to 2009 (approx. $80 billion) offers a big opportunity

for the Indian companies to capture this market. Since generic drugs are

commodities by nature, Indian producers have the competitive advantage,

as they are the lowest cost producers of drugs in the world.

Expansion - Opening up of health insurance sector and the expected growth

in per capita income are key growth drivers from a long-term perspective.

This leads to the expansion of healthcare industry of which pharma industry

is an integral part.

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Outsourcing - Being the lowest cost producer combined with FDA approved

plants, Indian companies can become a global outsourcing hub for

pharmaceutical products.

Threats

Transition from “Process” patent to “Product” patent – This is the major

threat

Indian pharma industry is facing. Indian companies especially medium and

small sized do not have capabilities to develop new molecules, and they may

succumb to the giants.

Counterfeit drugs – The extent of the problem of counterfeit drugs is

unknown.

Counterfeiting is difficult to detect, investigate, and quantify. So, it is hard to

know or even estimate the true extent of the problem. What is known is that

they occur worldwide and are more prevalent in developing countries. It is

estimated that upwards of 10% of drugs worldwide are counterfeit, and in

some countries more than 50% of the drug supply is made up of counterfeit

drugs Other low cost countries - Threats from other low cost countries like

China and Israel exist. However, on the quality front, India is better placed

relative to China. So, differentiation in the contract manufacturing side may

wane.

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 SUGGESTIONS

v Starting materials purported to be used as a pharmaceutical starting material

must meet all of the quality criteria suitable for the intended pharmaceutical use.

v Starting materials designated to be of pharmacopoeial quality should meet the

respective requirements before the material can be labelled and accepted for the

intended pharmaceutical use.

v Starting materials should be manufactured, handled and distributed according to

GMP from the moment they are designated for pharmaceutical purposes.

v National and regional legislation on medicinal products should be extended to

cover starting materials.

v National and regional legislation on medicinal products, including starting

materials, should be extended to free ports.

v Key parties in the chain – producers, traders, forwarders, tenderers, brokers –

must be authorized for their activities by the competent health authority of the

country in which each activity occurs. Authorization should be appropriate for

each key activity in the chain, in accordance with the risk assessment of the

activities. Such authorization requires adequate inspection. Failure to follow the

requirements of the authorization must have appropriate legal consequences.

There should be free and open exchange of information on such cases between

governments.

v GMP/GDP observance should be monitored by GMP/GDP inspection.

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v All pharmaceutical manufacturers must have access to suitably equipped

analytical testing laboratories in order to control incoming materials and final

products.

v While low-cost manufacturing capability is a key strength for Indian

pharmaceutical companies, it is also critical for those targeting exports to

regulated markets to maintain systems and processes that ensure product quality.

ICRA, therefore, assesses the systems followed by the company during

manufacturing, its testing facilities, the quality of its trained manpower, and the

quality of its documentation during manufacturing. Backward integration may be

crucial in sustaining cost advantages in exports, as that usually provides for

greater value addition. For instance, some Indian manufacturers have been able

to sustain profitability even after over 90% price erosion on generics, through

effective cost control.

v Upgrading and maintaining a manufacturing facility that meets the standards of

the regulated markets call for significant financial commitments. Also,

inspection and approvals being a time-consuming process, companies with

existing facility approvals from agencies like US FDA4, UK MHRA5, and

ANVISA6 can have a crucial time advantage over others. Besides, companies

with quality manufacturing facilities can also cash in on potential opportunities

in the field of contract manufacturing and custom synthesis.

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 CONCLUSION

The pharmaceutical industry operates in a very dynamic environment, with

significant events in one market—like product development, patent expiry

and regulatory changes—often impacting players in other markets. Exports

opportunities also throw up complex management challenges, with

profitability (and price erosion) being influenced by niche opportunities,

unique chemistries or dosage forms, and complex legal and marketing

issues. These have become particularly relevant, given the retaliatory

strategies increasingly being adopted by innovator companies to thwart

generic challenges.

The Indian domestic pharmaceutical industry is increasingly becoming

globally competitive to counter the weaknesses and threats. The key trends

and strategies being adopted by the local pharmaceutical industry are:

Driven by the imminent change to a product patent regime at home from

2005 the leading pharmaceutical companies in India have been increasing

their R&D budgets over the years. Indian pharmaceutical companies are

likely to double their expenditure on R&D over the next 2 years.

Indian pharmaceutical companies are on a global beat. Currently, exports

contribute more than half the total revenues for most of the Indian

pharmaceutical majors. Exports have increased in recent years as Indian

pharmaceutical companies have made deep inroads into the regulated

generic markets of the US and Europe, in addition to unregulated markets.

MNCs showing growing interest in India

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The share of MNCs in the Indian pharmaceuticals market is expected to

increase with the recognition of product patents in the country from 2005, as

they will be able to freely introduce top of the line, patented products in the

domestic market. Moreover, with the new price control order expected to be

passed soon, DPCO coverage will be substantially reduced and margins of

m o s t M NCs with strong brands will drastically improve. The Indian

Government’s decision to allow 100 per cent Foreign Direct Investment into

the drugs and pharmaceutical industry is expected to aid increased

investment in R&D infrastructure by MNCs in India.

Quality of management remains a key factor for all credit ratings. Lack of a

seasoned management team in areas like R&D, regulatory affairs, business

development, and manufacturing can significantly increase the business

risks of a pharmaceutical company. The industry is also seeing several

acquisitions, driven by the need for inorganic growth.

Besides a strong balance sheet, depth in management is a prerequisite for

the successful handling of integrationrelated issues that acquisitions throw

up almost invariably. Going forward, there would be increasing competition

for the trained-manpower available, especially in critical areas like R&D and

business development. Therefore, professional management structure and

focus on human resources would be of crucial importance for the industry.

Due to increasing competitive market pressures, more and more

pharmaceutical companies are adopting process improvement

strategies that are established in other industries such as Six Sigma,

lean manufacturing. Issues driving these needs include the necessity

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to improve cycle time, marketing and packaging efficiencies to

monitor supply chain and streamline manufacturing processes to

maintain profitability and remain competitive in today’s global

market. In the past few years, a few pharmaceutical companies

started adopting Six Sigma mainly to reduce cycle time and cost.

New products drive revenue growth In general, revenue growth of a

pharmaceutical producer depends on new product introductions, which fulfill

unmet therapeutic needs. Hence, a producer's ability to innovate and

develop new products is critical to its success.

Patent protection encourages new product development Given that a drug is

the intellectual property of a producer and is usually developed at a

significant cost, most countries have a regulatory system of patents that

protect the intellectual property rights of the producer, and enable the

producer to recover the costs of development from the sales of the drug.

Nearly 80 per cent of the pharmaceutical market comprises drugs that are

sold by prescription (ethical drugs). The success of a drug depends on the

medical fraternity’s perceptions about the superior properties of the drug.

Hence, the selling effort of a pharmaceutical company is focused on

providing information about the drug to the medical fraternity.

Price increases are restricted by the Government and institutional buyers In

most countries, a portion of a citizen’s healthcare cost is funded by the

government. Many governments are trying to control the cost s o f

pharmaceuticals, in order to restrict state spending and increase the reach of

73
the state healthcare programmes. In the US, where prices are not regulated

by the Government, the increased presence of large institutional buyers has

been restricting the increase in pharmaceutical prices.

Worldwide, regulators certify manufacturing facilities and drugs, in order to

ensure the safety and quality of pharmaceuticals. A reputation for quality

products and production facilities is a key determinant of the producer’s

ability to build a market share and access the export markets.

As the pharma industry is mainly product focused, the key performance

indicators are:

v New Products in the pipeline Pharmaceutical development can take five

to 10 years; hence they require a full pipeline because the company must

have products to sell while other products are still in development.

Another point to consider with long pipeline lives is that some products

may lose promise before being fully developed. Other products in the

pipeline will need to be able to absorb those losses.

v Pharmaceutical companies spend more on R&D than many other

industries compared to other industries, the global pharmaceutical

industry spends around 9-10% of their sales on R&D, though in Indian

average is just about 2%

v This is critical in the pharmaceutical industry; as companies receive

patents for new drugs or treatments. Similar research is often being

simultaneously conducted across competitors and the first one to receive

the patent wins.

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v Reducing cycle time is the primary focus of most companies. A measure

of cross-functional cooperation can lead to interesting results and have a

large impact on improving the overall time to market.

v Quality & Standard conformance Apart from investment in original

research, the need to upgrade manufacturing facilities is becoming

critical, Good Manufacturing Practices (GMP) compliances and approvals

from international bodies such as the US FDA, the UK MCA, the South

African MCC and the like are becoming necessary.

The achievements of the Indian pharmaceutical industry are spectacular in

recent times and are praise worthy, which has evolved as model industry of

the country in performance. But, in the 21st century, the pharmaceutical

value chain would depend on the ability of pharmaceutical companies to

make the technological shift necessary to maintain and increase their

competitive positions.

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BIBLIOGRAPHY

Poter, M.E. (1990), The competitive Advantages of Nations, MacMillan Press

Ltd., London.

Saunders, M. et al (2000), research Methods for Business Students,

Prentice Hall, Pearson Education.

http://www.alkemlabs.com

http://www.google.com

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