While some of the big players are readying to go beyond ERP, the smaller players—which constitute the bulk of Indian pharma—find it unviable to invest in best of breed solutions
By Heena Jhingan
Hyderabad-based drug manufacturer and exporter Aurobindo Pharma is powered by Oracle’s enterprise resource planning (ERP) solution, E-Business Suite 11, though it also relies extensively on other solutions like Ariba e-procurement and Matrix Stream QoS (Quality of Service). CIO Mahesh Kumar Pinnamaneni finds his hands full, trying to devise a strategy to standardize the company’s IT apparatus that is currently formed of disparate solutions. To plug the inefficiencies resulting from several heterogeneous systems, he plans to gradually run all the solutions on the Oracle platform.
Take another instance: Meyer Organics Pvt. Ltd. is in the process of integrating its SFA tool (a reporting system for medical reps from E-Tech Solutions) with the ERP so that the company can use a common platform for all its communication needs with the MRs.
This kind of a disconnect between the various IT systems is a common sight in the largely unorganized Indian pharma industry. The country’s pharma market is teeming with over 24000 firms of varying capacities and revenues that operate across different facets of the pharmaceutical manufacturing process—ranging from the production of APIs (active pharmaceutical ingredient) to packaging and contract research and manufacturing services (CRAMS). A recent study by the Organization of Pharmaceutical Producers of India observes that the organized sector accounts for only 5%. While the organized players rake in most of the revenues, the remaining 95% still contribute a significant 35%.
The market dynamics and technology adoption compulsions of the big players are different from those of smaller firms. Some of the driving factors for Big Pharma include mergers and acquisitions (such as Abbott acquiring Piramal Healthcare’s domestic formulations business); joint development and marketing of generic drugs (such as the MNC Eli Lilly and India’s Strides Arcolab jointly manufacturing and distributing generic cancer drugs) for developing countries; and India becoming a pharma manufacturing hub for export of generics to advanced countries like the US and the UK.
Many large pharma companies in India have already deployed software such as ERP and are on their next evolutionary stage to adopt collaboration, communication and analytics. However, most small and mid-size players find it hard to justify their investment in ERP, especially big-ticket solutions from the likes of SAP and Oracle.
From an IT perspective, the scenario presents both a challenge and an opportunity. While the fragmented market creates significant space for information technology vendors to enable process automation, the challenge lies in facilitating standardization of manufacturing processes of the firms that are currently at varying stages of maturity in terms of technology readiness.
According to a McKinsey & Company report titled “India Pharma 2015 – Unlocking the Potential of the Indian Pharmaceutical Market,” the Indian market is growing at a compounded annual growth rate of 12 to 14 percent and is projected to reach $20-24 billion by 2015. And IT is expected to facilitate this growth by bringing in manufacturing and supply chain efficiencies, in addition to enabling the domestic pharma players to compete with their global counterparts.
Strengthening the ERP backbone
In the current pharma milieu of the country, IT is increasingly being seen as automation driver. According to Pinnamaneni, even in the case of manufacturers engaged in production for domestic consumption, the minimum set of compliance requires companies to automate their processes. Most of the pharma firms have invested in ERP solutions to automate their transactional and manufacturing systems.
However, unlike the larger players, the smaller manufacturers operate on very thin margins and it is often not feasible for them to put money in the best-of-breed ERP solutions like SAP and Oracle. For them, several smaller players have emerged, such as Progen and CCE Software, that offer ERP solutions designed to meet their needs at affordable price points.
Despite the availability of such niche solutions, CRAMS such as Piya Nutrition prefer to use generic software that are compatible with systems of their accounting agencies. Prashant Ahuja, Partner, Piya Nutrition, feels that generic solutions work out to be more cost effective. “We are currently using a full version of Tally for our financial and accounting needs. We evaluated some software solutions provided by big vendors, but found the costs too restrictive for our scale of operations. At present, the solution that we use costs us about Rs 250-500 per month for a user; migration to a large solution vendor’s offering will not fit out IT budget,” he explains.
“The other big consideration is that our accountants commonly use Tally and that helps in having a common interface across the value chain,” he adds.
So, what is the value that a player like CCE Software has to offer to the small pharma manufacturers like these? Ashish Dutta, Director, CCE Software, says, “However small the pharma manufacturer might be, it must adhere to the compliance guidelines and meet the quality standards. The biggest differentiation for a pharma solution is its compliance with the c-GMP guidelines, for which certain modules like Audit Trail, Batch Manufacturing Record Management and Standard Operating Procedure (SOP) Management are a must.”
A peculiar aspect of IT usage among small pharma companies is that even though many of them may have adopted ERP or other software solutions, a significant chunk still maintains manual records in parallel so as to meet audit requirements. That is a gap that vendors in this space must keenly look at.
Beyond ERP
It is more or less accepted wisdom in the pharma industry that ERP is the need of the hour. But what can the players do next? Analysts see the way forward in integrating the other software support systems to the ERP nerve center. The next wave of IT adoption push is seen coming from the industry’s focus on process simulation models to drive safe and cost-effective manufacturing.
According to an HP spokesperson, with the release of FDA regulations on automated goods manufacturing processes, pharmaceutical companies have begun investing in pan-organizational process simulation platforms. These platforms provide a view of the efficacy of the manufacturing processes and help manufacturing facilities monitor potential process efficiencies and define the prerequisites and ideal conditions for scale-up of new drug manufacturing. This enables pharma companies save substantially through identification of process leaks and areas of production enhancement. For instance, computational modeling tools can enhance specific processes such as powder mixing, spray drying and tablet coating.
Given that many pharma firms in India are aligned with rules from authorities such as FDA for contract manufacturing or export of generic drugs, they are also likely to adopt these simulation platforms.
A visible trend across the drug manufacturing companies today is the thrust on quality by design (QbD) and process analytical technology in transforming manufacturing facilities. “The transformation of pharmaceutical manufacturing facilities into QbD enabled sites is being driven by parallel investment in Process Analytical Technology (PAT) that employs sensitive analytical metrics which optimize the processes incumbent in actualizing the QbD manufacturing output within predefined metrics
laid by regulatory bodies and the pharmaceutical organization. This is becoming mandatory under Abbreviated New Drug Application (ANDA), an application for a US generic drug approval for an existing licensed medication or approved drug,” points Venkat Iyer, CIO, Wockhardt Ltd, a leading pharmaceutical contract manufacturer.
Another area of concern for pharma companies relates to theft and counterfeiting. As a result of these challenges, they are now deploying IT solutions in manufacturing areas that have traditionally been taken care of manually, says Mohan Joshi – Senior Director, Applications, Oracle India. Art Work Management is one such field. A number of leading pharma companies are now making efforts to tie up with technology partners to enable their consumers identify genuine products in the market.
Drug makers such as Ranbaxy Laboratories, Lupin, Glenmark Pharmaceuticals, Elder Pharmaceuticals and Unichem Laboratories are all investing in technological interventions to check the availability of counterfeit medicines in the market. In some cases, drug makers are spending as much as 8-10% of a medicine pack’s total production cost only on solutions to protect it from duplication and counterfeiting, according to company executives. The need for serialization of primary packaging materials to avoid counterfeiting is driving investments in barcode technologies.
The PLM push
In the recent past the pharma industry has undergone some changes for good. Manufacturing is no more treated as a standalone activity; instead, it is now viewed as a cycle of inter-linked processes. Each step acts as a critical link in the entire life-cycle of products.
With more information flowing in from varied sources—including molecule performance data in R&D, smart instrumentation dashboards in manufacturing, and customer feedback and segment-specific data on drug impact from marketing functions—the pharma manufacturing units are being faced with the challenge to optimize production and stock keeping forecasts. Meeting these challenges, especially in the context of increased reliance on unstructured and structured data, calls for the firms to deploy analytical tools.
Further, globalization and transfer of manufacturing facilities as a cost arbitrage necessitates synchronization of process flows, quality controls and demand management for the pharmaceutical organization.
Hence, it is not surprising to see pharmaceutical majors investing in a wide array of analytics platforms and Product Lifecycle Management (PLM) systems to capture data from across the organization to optimize drug production and supply chains for specific regional needs.
According to Iyer, these PLM solutions, coupled with collaborative tools, will be instrumental in giving online quality testing a push against the current process of offline testing through sampling.
Joshi of Oracle says that another factor why firms are embracing the PLM solutions is compliance. “A case in point is the ‘Consent Decree’ ruling passed by the US FDA against Ranbaxy, in which the US FDA slapped $500 mn penalty on Ranbaxy for failing to comply with the manufacturing parameters at a few of their Indian manufacturing plants. Ranbaxy is now deploying a PLM solution to comply with the guidelines. We believe that compliance might emerge as a key driver of PLM solutions in the near future,” he says.
In addition, pharmaceutical firms are also engaged in building or commissioning communication platforms that help remote management of production resources and shop-floor work streams. These tools also help in strategizing the allocation of facilities for drug manufacturing based on inputs from analytics dashboards on various facets such as production capacity, demand and logistics. Of late, these factors have become dynamic as a result of genomics-driven medicines.
Productive and sustainable
As a result of stringent regulations governing the industry, pharma firms are slowly getting conscious about eco-friendly production environments. Providing actual assessment of IT investments against sustainability policies is a matter that requires in-depth study. However, it is reported that global pharma players like Johnson & Johnson, Bristol-Myers Squibb, Amgen and others have begun leveraging information technology as a strategic asset to reduce their environmental footprint.
According to Mandar Paralkar, Director, Life Sciences Solution Management, SAP Americas, “Sustainability initiatives like monitoring impact of waste and plant utility consumption, ability to recycle materials, etc., are very important.”
Therefore, many pharma companies are making investments in automated PLM tools to analyze and identify the key areas in manufacturing operations that are consuming the most energy. Industry watchers say bigger opportunities lie in leveraging cloud computing, analytics and mobility solutions apart from an increasing focus on shop-floor automation solutions.
Interestingly, the emergence of cloud computing has led several of these companies to eliminate their direct carbon footprint by hosting most of their data on secure cloud environments.
Analysts say that the cloud could help cement the gap of IT maturity between the large and small pharma firms, who can now buy software solutions, including ERP, over the cloud and pay only for what they use. But it still remains to be seen whether the cloud becomes a major IT enabler for most companies or treated as one more complication to handle.
