Here's why Indian pharma firms need regulatory experts on their boards
Indian pharma firms are ready to take the global stage but there are a few issues to be addressed before India can be a global force, says Ian Wilcox.
Wilcox notices that most of the Indian companies are promoter driven. "That is a unique India story. They need to be globalised in terms of management and professionalised," says Wilcox who is a Canadian- American. He says the crucial part for these promoters is to identify and hold on to what is best for the company and the values perhaps his family has brought in, and at the same time globalise the company.
And when it comes to cross border acquisitions, there are certain things to keep in mind. "On the people and organisation front, they need to look at the quality of the talent and cultural symmetry. When you do your due diligence, you have to look at people and training and look beyond the financials. Those are the intangibles when it comes to due diligence," says Wilcox.
When you are buying a whole company, which has a different expertise when compared to your company's core competence the level of risk is totally different. You need those people, you need their expertise. "If I am a promoter sitting in Mumbai, how do I make sure that they stay? How would I bring them in, rather than distancing them from myself. The farther the Indian promoters go geographically and culturally, the higher the risk they face," says Wilcox who advises companies in M&A due diligence. He says, this is why it is important for promoters to know, what is it that they don't know. It is not always a financial gamble, it is more of a cultural one.
The US Food and Drug Administration has increased its scrutiny in recent years and in turn, costs have gone up for companies who are trying to export to the US. India has the opportunity and the need to step up the manufacturing quality to that level of expectations since the US is such an important market.
Wilcox sees this as an opportunity for the Indian industry is to say, 'you know what, quality is what we want to be known for.' And he finds an analogy with Toyota and the Toyota manufacturing process. "Toyota's is the gold standard in manufacturing. In pharma, we have always looked at manufacturing as a cost. We have not looked it as a core capability," says Wilcox.
The US FDA has recently come up with the Office of Pharmaceutical Quality to have a closer look at the imports. "We can see this as big government regulatory coming in and scrutinising us or we can look at it as an opportunity for CEOs to say, 'How do I step in to this and create a Toyota Production System (TPS) like benchmark and particularly how to make the Made in India brand a gold standard.' That is the opportunity for India," says Wilcox.
He talks about a report which came out from the ministry of chemicals and fertilisers which talks about how the government wants to have a robust pharma sector. Wilcox says India has a huge core competence in manufacturing. "What is holding them back are some of the perceptual issues and issues with the FDA (U.S Food and Drug Administration). But if you make the investments, it will pay back," says Wilcox.
What are those investments? They are investments in systems and processes and human resources—the quality of individuals. Leaders should not look investments in quality as an afterthought, but a fundamental way of working.
The challenges before India, are the perceptual issues and some of the significant setbacks that happened with a few companies in the past, with respect to FDA compliance.
That challenge relates to underfunding, resourcing, infrastructure that needs to be invested in terms of manufacturing systems and processes, putting the IT systems in place that are more robust.
Second issue is human capital—training, the cultural pieces that really allow people who are in the manufacturing sites to feel accountability and ownership. In the auto industry, quality is engrained as an ethos. "That is again a culture shift that needs to be made. That is a cultural attribute the leaders at the CEO level should be thinking about," says Wilcox.
He says that the industry leaders need to take note of the fact that pharma experts need to be on the board. "We should see more of retired executives of companies known for quality in manufacturing, be it pharma or outside pharma, actually taking a position on the boards of some of these companies," says Wilcox. "CEOs should talk about quality as in intrinsic and implicit value."
He says if one looks at boards of publicly traded Indian companies, he can see investors and finance persons. "But wouldn't it be interesting to have a former regulator, may be from the EMA (European pharma regulator) or FDA, having a seat on an Indian board? That would be quite a statement," advises Wilcox.
According to Wilcox, the next big thing in the pharma world would be biosimilars. A biosimilar is a biomedical product which is similar to an original product of a different company. Wilcox says, "If you look at where the generics industry is going, for India to make the next wave in the next 10 years, it will need significant investment because many of the blockbuster drugs have already started to come off patent."