Overview

• Comprises of simple headache pill to sophisticated antibiotics

• 15.7% growth rate last year – Expected to touch US$74 billion sales by 2020

• 3rd largest in terms of Production volume and 4th in terms of Consumption value

• Cost of innovation is high• Indian companies manufacture

Generic Drugs Intermediaries Bulk drugs or APIs

Major PlayersRevenue in 2012 (Rs. Crore)

Ranbaxy Labs 7,686.59

Cipla 6,977.50

Dr Reddys Labs 6,686.30

Lupin 5,364.37

Aurobindo Pharm 4,284.63

Cadila Health 3,152.20

Jubilant Life 2,641.07

Wockhardt 2,560.16

Ipca Labs 2,352.59

GlaxoSmithKline 2,345.88

Drug development process

Research & development Screening Tests on Animals

Clinical trialsFDA approvalDevelopment of

production process

Value chain in Pharma industry

Why is Forecasting important in Pharma?

• Projections of the sales of new drugs, especially of blockbuster drugs, have almost always been too high. Investors have been burned so many times with this game that it is difficult to understand why they continue to play it.

Company Drug name Estimated ActualMerck Blocarden 500-1000 15Sterling Amrinone(Oral) 500 0Smith Kline Tagamet 200 1000Searle Aspartme 0 585

Peak sales(in mn US$)

Forecast Links to Other Functional Areas

Forecasting Methodology

• Data Collection, Analysis and product segmentation• Managerial participation for segment validation• Generation of time horizons and set of forecasting

policies• Identification of set of suitable sales forecasting

algorithms –time frame, behavior & the possible existence of pattern

• Development of User interface for algorithms • Solution Testing and roll out plan • Implementation

Production ProcessGranulation

• Process in which primary powder particles are made to adhere to form larger, multiparticle entities called granules.

Compression

• It a key unit operation in order to develop solid oral dosage forms such as tablets.

Coating

• Sugar coating. It is done to prevent bitter taste, to improve stability (prevent oxidation of active drug ingredients).

Packaging

• It is done in order to keep the end products free from contamination, hinder microbial growth, and ensure product safety

Why ERP?

Track InventoryMake sure we got what the Wholesaler wantsMake sure we don't manufacture too much

Product Orders are sent via EDIOrder ConfirmationDocumentation

Manufacture of Controlled ProductsProduct Development Area

Operator Verification & QualificationFDA Regulations for Training

ERP Modules

SCM

Order Mgmt.

Pharma Specific

HR

Benefits of ERP

Inventories of Reagents

Shelf Life

Outsourced Integration

Operational excellence reducing waste, running more efficiently and maximizing utilization

Enhanced and market aligned decision making

Compliance with evolving USDA, FDA and ICH and other regulations

Consistently producing the highest-quality products.

Manufacturing agility enabling better reaction to opportunities and obstacles

Managing profitability for greater business growth

Competitive advantages

Functions of Packaging

Containment- Not to leak, nor allow diffusion and permeation- Strong enough to hold the contents during handling

Protection- Light- Moisture- Oxygen- Biological contamination- Mechanical damage- Counterfeiting

Material characteristics - It must preserve the physical properties of all dosage forms and protect them �against damage or breakage.

- It must not alter the identity of the product.�

- It must preserve the characteristics properties of the product to comply �specifications.

- It must protect product against undesirable or adulterating chemical, biological or physical entities

Importance of quality in Pharma

? MEDICINE QUALITY

Manufacturing process

Packaging Transportation Storage

condition

§ Lack of therapeutic effect:§ Prolonged illness§Death

§ Toxic and adverse reaction

§ Waste of limited financial resources

§ Loss of credibility

Determinants of quality of medicines

Identity: Active ingredient Purity: Not contaminated with potentially harmful

substances Potency: Usually 90–110% of the labeled amount Uniformity: Consistency of color, shape, size Bioavailability: Interchangeable products? Stability: Ensuring medicine activity for stated period

How is quality of medicine assured?

Product selection Long shelf-life Acceptable stability Acceptable bioavailability

Selection of appropriate suppliers Supplier pre-qualification Request samples from new suppliers Request specific reports and data for certain medicines (e.g.,

bioavailability and stability studies) Collect and maintain information on supplier performance

Product certification GMP certificate of manufacturer Product/batch certification (COA) Random local testing

Key Challenges in Pharma Industry

Pharma Company

Wholesalers/Patients

Raw material suppliers

Contract LabsAPI suppliers

Contract manufacturers

CMO’s

• Lack of Visibility to manufacturing schedules

• No collaboration on forecasts

• Quality Control• Short Shelf life• Increasing prices

• No collaboration• Excess inventory• Increasing

inventory

• No visibility to labs• Unexpected delays• Increasing

regulations

• Fluctuating demands, seasonality, epidemics

• Competitive pressures• Shortening delivery lead

times• Excess inventory• Limited shelf life

• With increased outsourcing in the pharmaceutical industry managing inventory is becoming very important

• The pharmaceutical industry is undergoing major change many ‘blockbuster’ patents are expiring and generic competition is increasing and this is leading to higher pressure on prices

• Biopharma companies traditionally have long supply lead times, starting with raw material sourcing and continuing through API/drug substance production, drug product production, and packaging/labeling/distribution- This is leading to high amounts of inventory at each stage of the process

• By reducing inventory, companies can ensure:- higher service levels with reduced inventory- simplified planning processes- reduced obsolescence- significant liberation of cash

Inventory Management in Pharma Industry

VMI is one of the methods by which inventory can be reduced

Lean manufacturing is being adopted in Pharma industry to reduce costs

• Globally large companies like Merck, Novartis are adopting lean manufacturing techniques to improve profitability

• Merck has developed the Merck production system (MPS) based on lean principles, the core philosophy of MPS is:

Waste elimination

• Reduction in change over times

• Reduction in inventory

• Reduce wastage of Overproduction

Demand pull system

• Network of automated pull signals was created

• Merck moved from a rigid monthly schedule to a flexible one driven by customer demand

Continuous manufacturing

• Based on value stream mapping wastages were identified in the processes

• Reduction in lead times

Results of Merck’s lean production System

• 50% overall reductions in cycle time• 65% reduction in product testing time• 30% reductions in inventory for some product• 10 to 20% operating expense reductions• 50% reduction in changeover time on some

packaging lines

Large company

• Ex : Cipla, Ranbaxy etc.• For generic products – own manufacturing facility

and distribution network• For expert products – contracts with companies• Product types – capsules, liquid, cosmetic

products• Quarterly plan• Primary aim – Downsizing the competition• Pump in more than the market demand

Small/medium sized company

• Ex : Audax pharma, Gems etc.• Contracts with factories for manufacturing• Manufacturing process – MTO• Gems – Outsources to factories in Faridabad• Order selection done by factories on basis of batch

volume – cost saving• Vague inventory – independent of market share• Transportation – By road ; C form mandatory

Process flowOrder given to factories

Factories place order for packaging based on the order received

Manufacturing starts once raw material for packaging is received

Testing and quality check

Packaging and Distribution to wholesalers