Opportunity areas in pharma distribution

I was speaking to the India office of one of the largest global logistics company last week to understand their presence in the life sciences/ pharma vertical which got me thinking about two particular opportunity areas:

1. Fully integrated third party logistics company

Many of the pharma companies that I spoke to so far mentioned that the lack of a fully integrated 3PL player was a challenge. The presence of such a company might not only enable in faster product launches but also create an ecosystem where smaller firms without deep competencies in sales & marketing might be encouraged to launch brands.

Agreed that many companies are actually banking on their distributor/ stockist base as a competitive advantage but this is not sustainable. With GST (Goods & Services Tax) going to be rolled out sometime soon leading to these layers consolidating, there will be a (theoretical) surplus of these distributors. None of the current players (distributors & stockists) are thinking that far ahead to align themselves with the market trends.

The company that I spoke to mentioned that unless there is an import/ export component to the distribution it doesn’t take on customers which is probably the reason why their major customers in the life sciences area are MNCs.

I personally think there is a great opportunity for a 3PL player in this industry. Thoughts anyone?

2. PPP for Public Sector Distribution

Since the large companies, including their last mile connectivity partners, have a widely established network of warehouses, transportation facilities in most of the states, there is an opportunity to have a play in the public sector distribution of medicines/ other medical consumables as well.

The PPP could be either be a full operating arrangement or even be structured as a Build-Operate-Transfer probably for 5 years which will not only lead to process streamlining and capacity building. While the obvious criticism to such an idea might be prohibitive costs for the government to engage with the logistics companies but if you throw in process improvement and capacity building into the pool, there is definitely a case for it. Thoughts anyone?

Importance of Strategic Alliances in Pharma | Part 2

In my earlier post, I have detailed out the current context in terms of global disease prevalence and the opportunity it presents to all the stakeholders in the healthcare ecosystem. Which brings me to my question – How does one address these issues of diseases with massive prevalence (and incidence) by tapping into enormous fund pools? – The answer, I believe, is Alliances. The linkages between academia, industry, philanthropic agencies, governments and investors (yes, investors too because for an economy to have a non-linear, paradigm altering growth it needs innovators and investors in equal parts) are extremely critical in creating wave after wave of new opportunities.

Industry – Industry linkages are the common norm in the pharma industry across the value chain (in research, development, manufacturing and marketing). Several instances keep popping up daily in the news (Here)

Also in my earlier blog post (here), I have written about interesting models where academia & philanthropic organizations (MEND); Academia & Government (OSDD by CSIR); Industry & crowd-sourced seed capital (Pink Army Cooperative) have come together to address these highly relevant issues.

One other instance of an alliance that I have recently come in connect with is that of Gilead Sciences (Sales ~ US$ 5.3 Billion (2009); Net Income ~ US$  2 Billion (2009)). It was among the first few companies to introduce a OD (Omne in Die – Once a day, every day) pill for HIV instead of multiple medications, often intravenous. With tiered pricing for low, middle and high income countries, innovative partnerships with distributors and generic drug manufacturers, Gilead has been able to reach over a million patients (of which about 70% of the patients were from the developing countries). This being said, it is not a surprise that over 84% of the company’s revenues were generated through its top three HIV treatments. (More info on Gilead’s Access Program here)

Bear with me while I emphasize this, in the late 90s and early 2000s, most of the companies have viewed the development of HIV therapies as necessary public service but unprofitable. This has changed due to increasing innovation in development of novel drug delivery mechanisms, lowering of cost and increased market reach. I would like to think this is the result of the aggressive lobbying by donor agencies & foundations but it ultimately happened because it was profitable.

Running a risk of sounding redundant - How does one address these issues of diseases with massive prevalence (and incidence) by tapping into enormous fund pools? – The answer, I believe, is Alliances.

Open Source Collaboration in Drug Discovery

All of us have known and witnessed Wikipedia as an excellent example of collaborative effort to accumulate the world’s knowledge in a re-usable format catering to even the most uneducated of its audience.

Consider a similar use-case in the Pharma industry, where the drug development costs are exorbitantly high to the tune of about a US$ 1 billion and above, often taking more than 10 years for a molecule to come from the lab to the patient. With phases of inconsistent investor interest/ confidence and also a pressing need for innovative therapies, it is important to bring out new novel molecules cheaply and quickly.

Additionally, against an extremely challenging backdrop of declining R&D productivity, a looming “patent cliff” in which more than US$ 150 billion worth branded drugs lose patent protection, industry consolidation – focusing even more on R&D has become an imperative. As Andrew Witty, CEO –  Glaxo SmithKline says “The pharmaceutical industry needs to do more with less and still be innovative”. Such challenges could not be more apt for open collaborations between pharma companies, academia and niche specialist firms for rapid innovation. (The importance of alliances in my previous post – here)

Here are a couple of such examples which are successfully functioning and sustainable (?, Let’s see):

Open Source Drug Discovery (OSDD)

In their own words “OSDD is a CSIR Team India Consortium with Global Partnership with a vision to provide affordable healthcare to the developing world by providing a global platform where the best minds can collaborate & collectively endeavor to solve the complex problems associated with discovering novel therapies for neglected tropical diseases like Malaria, Tuberculosis, Leshmaniasis, etc. It is a concept to collaboratively aggregate the biological and genetic information available to scientists in order to use it to hasten the discovery of drugs. This will provide a unique opportunity for scientists, doctors, technocrats, students and others with diverse expertise to work for a common cause”

Since its inception there are over 800 scientists across the world working on discovering novel therapies for Tuberculosis. Based on its business model, all these scientists are engaged in target identification, validation and screening to provide qualified leads. Post this phase, the OSDD involves the  industry through Custom Research Organizations (CROs) to optimize candidate drug and proceed for clinical trials.

The organization has been able to identify a few qualified leads (hits) in a little over 2 years – something that would have taken a pharma company at least 5 years and a lot of money to accomplish.

More details about the organization here

Medicine in Need (MEND)

This is another good example of industry academia collaboration in order to bring drugs quickly and cheaply to the market. The organization initially started off with a seed funding from Bill & Melinda Gates Foundation is now able to sustain itself through drug sales.

The organization functions through two related but independent divisions MEND Biotech Development (MBD) maintains wet-lab expertise in Boston and Pretoria and performs activities like drug delivery system design, assaying, stability testing, formulation development etc. and MEND Innovation & Translational Alliance Management Division (MITAM) that manages partnerships between pharmaceutical scientists, academia both from developed and developing worlds in order to discover novel therapies and delivery systems.

By their own admission, this is what they say about themselves – “Medicine in Need is a not-for-profit research organization devoted to the successful development and manufacture of affordable and effective vaccines and therapies with characteristics that allow their widespread use despite the daunting economic and logistical constraints of the developing world”

Pink Army Cooperative

(Cooperative is an interesting choice of word – more on this here)

This one is even more unique in the sense that it provides “personalized medicine” for breast cancer patients. It is an open-source biotechnology venture which operates in a not-for-profit basis.

As cost for gene sequencing has been drastically falling and immense computing power is now available at free or affordable cost (Google Exacycle), it would be theoretically possible to create personalize medicine and not declare bankrupcy!

An overview of this initiative is here