The PGPX class of 2017 at IIM, Ahmedabad put on their best business formals to welcome Mr. Anil Iyer, PGP batch of ’87, Business Head of Established Medicine, Novartis International for the first edition of Speaker Series. Motivation behind this excitement was to get an insider’s view of the Indian Pharmaceutical industry through a very immersive talk and interactive Q&A session. In fact, 5 of the 90 participants in the diverse class of 90 come with significant experience in Healthcare & Pharmaceuticals.
Mr. Iyer started the discussion by driving home the fact that Indian Pharmaceutical sector is heavily impacted by global trends as some large pharmaceutical multinationals are based in and operate out of India.
“The global pharma industry is expected to be $1.5 Trillion by 2020, and 1/3rd of this growth is going to be from emerging markets. The emerging markets are expected to grow from $205 Billion to about $500 Billion. These are high population density areas and hence drive the growth, and by 2020, they are expected to account for 14% of the global Pharma sales”, said Mr. Iyer as he talked about global trends.
Adding to this, he pointed out that the demand for innovative medicines for old and new conditions is growing, not shrinking. His insights into how an ageing Chinese population, how emergence of mutated new variants of old diseases like tuberculosis, as well as communicable diseases like SARS or H5N1 that spread very fast and how emerging insurance re-imbursement models are shaping the strategy of Novartis and the global pharma industry as a whole, captivated the batch of keen learners and piqued our interests.
Of special interest were Mr. Iyer’s thoughts on the Indian context in the pharma sector, the third largest Pharma market in the world by volume, 13th largest by value, and growing at 15% per annum (thrice the global rate). The second largest API manufacturer in the world, India comprises of 3000 pharma companies, and is one of the few markets in the world that sells branded generics. “It is a fragmented market and is characterized by long–lasting brands, self–pay and free pricing except 350 drugs that are listed under the essential medicines list”, he added.
Talking about the variation in business models between India and the rest of the world, he shared that the EBIT margins for Indian pharmaceuticals are same as the MNCs but the COGS are low as they mostly manufacture in-house. But what they save on costs, they spend on medico marketing. Speaking of the Indian geographical base, Mr. Iyer said that while the MNCs mostly operate in the urban premium and value segments, the semi-urban and rural markets in India are where growth is imminent. Novartis has a play in this market”. He also answered several questions about pricing and marketing in the pharmaceutical industry,speaking of clinical superiority with respect to the existing standard of care as a differentiating attribute, while sharing several interesting anecdotes and also talking about the RSBY (Rashtriya Swasthya Beema Yojana) as an effective scheme that makes a significant difference to a significant section of the rural population. He also shared that insurance has started to gain momentum in India, and a lot of insurance companies are now talking about OPD and pharmaceutical payment. This is fuelled by an emphasis on closed loop systems focused around specific diseases.
Speaking of Novartis’s branding strategy, Mr. Iyer talked about having different brands and price points for the entire offering of products. “We work with e-commerce. It is a closed loop system where the customer comes through our Win for Patients portal and goes to the e-commerce portal from there where he/she can avail the discount. We are the only company in India to have such a system”. He shared that Novartis’s marketing programs in step change are well appreciated by the regulators, specially MCI and DIPP. “We have a dual brand strategy to protect our patents. Although we are the second largest player in oncology, we don’t have a single compulsory license in Novartis. We generate a lot of evidence for pricing which is not just clinical but are also around aspects like productivity, longevity, etc. It is a large emerging area called health technology assessment”.
The insightful and interactive session was wrapped up with a long informal interaction with the smell of samosas and coffee wafting in the air as Mr. Iyer reminisced about his time at IIM-A and reflected on how some elements of nostalgia like beetroot cutlets are better left unvisited.
Written By Tulika Verma IIMA PGPX Class of 2017
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