shift in business paradigm of price erosion testing...
TRANSCRIPT
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Shift in Business Paradigm of Price Erosion
Testing the Cost Frontier
International Conference on Total Cost Management
CII : Taj Vivanta, Mumbai Nov 21st
Pankaj Agarwal – Chief Operational Excellence
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Agenda
1
2
3
4
5
Pharma Overview
Pricing Challenges
Lupin Experiences
New Manufacturing Technologies
Innovations at Consumer End
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PHARMA OVERVIEW
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99.9Contribution of Lead time for Testing in cycle of time of Plant
Quality Labs Operations
Pharma• 30 % of generic drugs (by volume)
• 10 % by value in US are from India
Exports to US from India
FDA/MHRA Audit cycle of Manufacturing Sites
Every batch Rejected
$ 20Bn 6 Mths CAPA
24X7 80%
No overwriting in Documentation
Quality Manpower % of Operating manpower
Data Integrity 60%
Manufacturing• Any change in last three steps/filed
process has to get regulatory approval • Plan to make each site report quality
metrics on quarterly basis
Patients are not Customers, regulatory agencies/Doctors are – Patient can not detect poor quality
Regulatory• At least one Site of all Companies is
under import alert• Any change in last three steps/filed
process has to get regulatory approval
1.1 Pharma Industry Context
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1.2 Therapeutic Areas
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PRICING CHALLENGES
North America
• Generics industry declined by 2% in 2016 and continuing due to 8% pricing decline in Q1 ‘18
• Due to continued customer consolidation and heightened Gxcompetition, market growth is expected to be 1-2% till 2025 India
• India slowed down to 1% growth in 12M Sep 2017 due to GST and demonetisation
• But still expected to grow 10-13% to enter Top 10 pharma markets by 2021
Japan
• Generics forecasted to grow at a CAGR of ~2% through 2023
• Price reform to be announced in December
• Price cuts: Proposed annual from current biennial system
Europe
• Gx market expected to grow by 3% CAGR till 2025
LatAm
• 5% Gx market growth in the past year
• Highly dependent on overall economic growth
Global generics market is slowing down from 2011-16 CAGR of 9.2% to 2016-20 CAGR of 5.8%
2.1 Market Outlook – Global Generics Growth Slowing
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• Branded medication that sells for $100 before patent expiration is sold for $95 by a single generic manufacturer during the first 6 months
•Next 6 to 18 months, as more companies get approval price drops to $40
•This flattens out to cost of goods plus some margin over 3 to 5 years
2.2 Price Erosion
Cetrizine 30mg -
pack of 30 tabs
Time
Pri
ce in
USD
/Pac
k
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Multip
le
Geogra
phie
s
Complex Products
Complex Tech-
nologies
Complex Geog-
raphies
Complexity in Generic Pharma
Manufacturing
2.3 Global Generics Challenge
Recent performance pressures
Saving Grace
Mitigation Strategy
Global Peers
Have acquired aggressively leading to
very high leverage
Established specialty franchise; but facing patent expirations
Divesting to lower leverage
Indian Peers
Still room to acquire due to comparatively
lower leverage
Other businesses like India and RoW
Each has its own different strategy
Acquired and base business facing pricing pressure in US
2.4 Global /Indian – Key Themes
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2.5 Strategy of Cost Competitiveness
Cost Competitiveness
ProcuremntExcellence
Operational Excellence
Product Mix
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2.6 Constant Evaluation of Product Mix
Product Mix
• Margin Based
• Revenue Based
• Build capability
• Retain in-house capability
• Make Vs Buy
• Utilize existing capacity for high margin products
• Drop products
Ba
lan
cin
g T
ax im
plic
atio
ns
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LUPIN EXPERIENCES
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Operational Excellence
for Sustainable Value Generation
Value Realization
• Deployment of Lean Six Sigma
• Focus on yield improvement, throughput enhancement and energy savings
DISHA
• Deployment of “Total Productive Maintenance” and improve OEE
• Manpower Optimization through MOST* and benchmarking
TPM/ MOST
• Auto Recipe based operation
• Curve Metrics
• Visual Process Signature
• Multi Phase Analysis
• Sales spend effectiveness
Analytics
• Alternate Vendor Development
• Value Re-engineering
• Sourcing strategy optimization
APEX
• Improving Field Force Productivity
• Global Shared Service center
PRISM/Shared Service
• Six Sigma Molecules
• Human Error Reduction
Quality
3.1 Operational Excellence - Framework
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3.2 API Major Yield Increase and Capacity Increase Projects
ProductTheoretical
Yield
90% oftheoretical
yield
Baseline from where
improvement started
Yield achieved in Wave 7
% Increase
Savings( In Rs. Cr)
Molecule 7 0.630 0.2332 0.2474 0.2878 16% 63
Molecule C 0.571 0.415 0.311 0.395 27% 56
Molecule L 2.419 0.986 0.843 0.97 15% 32
• Major Yield Increases :
• Capacity increases
Product Initial CapacityCapacity
increased toafter project
% Increase
Molecule LT 24 TPM 32.5 TPM 35%
Molecule L 10 TPM 11 TPM 10%
Over Rs 350 Cr savings vetted by Finance from Operational Excellence initiatives over last 4 years
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37
25
3431
25
52 54 54
4649
Site 1 Blister Site 2 Capsule Site 3 Bulk Site 4 Capsule Site 5 Blister
Baseline (Apr15-Jun15) Q3-FY17 All data is in percentageMcKinsey Top QTL McKinsey Median
60% 47%
42%
53%
42%
53%54%
65%
54%
65%
42%
53%
40% 114% 97%
Percentage improvement(%)
• One Plant costs Rs 600 Cr . An increase in 2 major plants in Capital Productivity (OEE x CU) by 50% can reduce the need for one plant.
• Capital Productivity (OEE X CU) is in the range of 25 to 30 % - there is enough headroom for improvement
3.3.1 Areas with Significant Improvement ( OEE)
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% Utilization
Area Cubicle Name Sep Oct Nov Dec Jan Feb Mar Average
Omega 1 Coating I, IV 131 84 110 117 81 62 49 90
Gamma 1 Coating VI 48 165 121 87 105 114 89 104
Delta Coating VII 138 156 124 126 111 121 31 115
Beta 1 Coating II, V 78 95 96 82 68 48 47 73
Beta 2 Coating III 135 108 92 61 60 30 88 82
Epsilon Coating IX 86 79 74 72 80 77 88 79
Rho Coating VIII 0 85 12 77 27 3 67 39
Alpha 1 Unit 2 169 220 121 79 122 65 113 127
Alpha 2 Unit 2 16 91 27 118 10 73 36 53
Kappa Capsule III 103 255 246 315 115 101 92 175
Zeta Capsule I, II 61 119 71 77 63 52 91 76
Lambda Capsule IV 143 110 123 137 95 61 47 102
Epsilon Bulk I, II, III & Unit II 86 116 92 98 76 81 42 84
Tau Cam 1 & 2 75 79 58 56 67 15 53 58
Theta BQS 1, 2,3 75 96 80 96 61 84 47 77
• Shift occupancy details at Manufacturing Location
• Every product has to be validated on a machine, if the equipment equivalence does not exist, it has to be revalidated for other equipment
• This could lead to underutilization of certain equipment due to demand fluctuations
3.3.2 Areas with Significant Improvement ( Utilization )
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• Fetch data from multifarious equipment to common server ( Data Acquisition System and Historian)
• Self-service on-demand data access and tools for Investigation analysis and process improvement
• Root cause analysis and real time implementation through decision rules
• Data Visualization/comparison to act on capacity utilization and OEE improvement
• CAPABILITIES: Process trending, Curve Metrics, Multivariate analysis, Visual Process Signature, Multi- Phase Analysis
3.4 Analytics
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Sustained Value Generation
Process
Best-in -class
processes for
reliable, risk-
free material
supply of
desired quality
and cost
Technology
Cutting-edge
IT tools for
analytics &
operations
Structure
Strategic
procurement
function with
category/count
ry expertise
People
Capability
Competency
building
through
classroom &
on-the-job
training
Culture of continuous improvement
Value RelationsationInfrastructure Build
Objective: To strengthen the process, technology, structure &
people capability for sustained value creation
Objective: To derive savings from
Lupin’s overall spend base
3.5 Procurement Excellence
CategoryAccrual FY17
(Cr Rs.)
Spares, MRO & cLogistics
4.6
APIs 1.9
R&D Proc. 2.5
Excipients Phase 2 3.1
TP/MM/LL 4.4
Packing Material 7.2
Power & Fuel 7.3
KSMs & Chemicals 15.5
Excipients 24.8
Total 71.3
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3.6 Supply Chain : PS&OP Model
Business planning
Marketing planning
Category planning
Demand forecasting
Operations planning• Inventory planning
Supply planning
Distributionplanning
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NEW MANUFACTURING TECHNOLOGIES
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Online in-process quality checks meeting regulatory
requirements
Collaborate with suppliers to integrate equipment's for
continuous manufacturing using digital solutions
Continuous Manufacturing
If we transport a pharmaceutical scientist from the
1960s into a current pharmaceutical production
plant, they would be familiar with most of the
processes and production techniques. - Lawrence Yu, Ph.D. FDA’s Deputy Director, Office of Pharmaceutical Quality
High receptiveness to malfunctions since a single fault
can stop the entire course of production
Control of the entire course of production from Single HMI Point
4.1.1 Continuous Manufacturing
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Janssens’ Prezista – FDA Approved
4.1.2 Continuous Manufacturing
HIV drug Prezista (600 mg tablets)
With Rutgers University, USA, developed a direct-compaction line using continuous manufacturing principles.
FDA encourages Continuous Manufacturing due to :
• Reduced human related errors in batch handling
• Improved process Reliability
• Reduced manufacturing costs
• Higher Yield and Product uniformity
• Reduced inspection and quality checks
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Source: FDA Perspective on Continuous Manufacturing by SharmistaChatterjee at IFPAC Annual Meeting in Baltimore, January , 2012
4.1.3 Traditional Manufacturing Operations
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Manufacturing• Continuous blending/
granulation• Close coupling of fully
integrated compression/ coating
Quality• PAT systems• RFID
Regulatory• eBatch monitoring
Explore use of smart devices, predictive asset maintenance, connected machines, analytics, smart sensors, track & trace etc
Source: FDA Perspective on Continuous Manufacturing by Sharmista Chatterjee at IFPAC Annual Meeting in Baltimore, January , 2012
4.1.4 Continuous Manufacturing
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• Levetiracetam needs to dissolve quickly in the mouth of patient for instantons relief in case of Epilepsy attack
• Because a drug product's structure can affect drug release, complex 3D structures create new opportunities for drug delivery.
• Competitive advantages for complex, personalized and products made on-demand.
http://www.sciencedirect.com/science/article/pii/S0169409X16300771
4.2 3D Printing
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INNOVATION AT THE CONSUMER END
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Different looking products in the “-cillin” family
• Five products in the “-cillin” family
• Full color cartons that coordinate with vial labels and caps to distinguish among strengths
• Increases safety and reduce medication errors
• In highly fragmented Generics Business helps Sagent stand out
• Sagent only manufacturer that differentiates every product in every product family
2.7 Sagent Pharma – Branded Generics
Reference: http://www.sagentpharma.com/
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The researcher Identifies a set of genes they find intriguing
Improved Health Outcomes Through Passive Services
• Value Innovation by moving away from Traditional modes of Healthcare
• Closing of treatment gap that exists in Chronic Diseases
• Optimal therapeutic outcomes by moving to a Service centric model
• Predictive models powered by machine learning which improve accuracy over time
5.1 Innovation at Consumer End
Courtesy: Accenture Strategy
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Courtesy: Accenture Strategy
5.2.1 Around the Patient : Medtronic ( Artificial Pancreas)
• Medtronic is a medical technology, services and solutions company
• For Diabetes management, Glucose level is checked continuously and insulin is injected if glucose level is high
• “Carelink “– Connects patient and family with care team and monitors glucose levels, diet and exercise regime followed
Courtesy: Accenture Strategy
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Courtesy: Accenture Strategy
5.2.2 Around the Patient : Astra Zeneca
• Post Acute Care Recovery and medication adherence is a challenge
• 24 % heart patients are readmitted
• 54 % of those are preventable• Avoidable cost for insurance
agencies
• With Vida Health AstraZeneca has an app “Day by Day” – helps cardiac patients connect with coaches to encourage them to:
• Adopt healthy diet, • Take meds regularly• Manage stress • Stick to exercise prescription
Courtesy: Accenture Strategy
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5.3 Chronic Care Management – The Next Big thing!
Leveraging Qualcomm’s 30 years of mobile and connectivity expertise, Qualcomm Life is shaping a new connected care standard.
• Liberating vital data and unlocking insights in the hospital, in the home, and at all points in between.
• Open, medical-grade platforms connect to one of the world’s largest health care ecosystems, making data contextual and accessible, and powering intelligent care everywhere.
Reference: http://www.qualcommlife.com/
THANK YOU