What is the biggest challenge in health in emerging markets today and how should we respond?
It’s noncommunicable diseases. The only way we can handle the challenge is for healthcare providers to effectively educate the patients about the early warning signs. Unfortunately, most patients in emerging markets don’t even realize that they are facing these diseases until it reaches a very advanced stage. Education can make patients more proactive and less reactive. Secondly, we need to ensure access to lowcost medication. We have seen this done for communicable diseases like AIDS with organizations like the Bill & Melinda Gates Foundation working with certain countries so it should be done for noncommunicable diseases too.
Why is access to pharmaceutical products in emerging markets so key to raising the quality of healthcare?
Without access to quality pharmaceutical products, there is no healthcare that can be provided either for communicable diseases such as the cold, flu, chickenpox, H1N1 (swine flu), HIV-AIDS, and hepatitis—or noncommunicable diseases, which develop over time and are now the biggest killers of people worldwide. Examples of noncommunicable diseases include heart attack, high blood pressure, stroke, cancer, diabetes and arthritis. While substantial focus is given to communicable diseases, there needs to be a stronger focus on education about noncommunicable diseases coupled with access to affordable medication to improve the overall quality of healthcare.
Do you think access to quality, affordable medications in emerging markets is improving?
Yes, I do. At one point in time, when a product could not be sold in the United States, it would be considered for emerging markets. Today, the system of regulatory compliance is changing. The regulatory inspections are extended and auditors are coming to us to check the quality and compliance levels. We used to only deal with the U.S. Food and Drug Administration (FDA) and the European authorities, but now emerging countries send in their regulatory auditors before buying our products. This results in constant improvements of our facilities.
How has Granules positioned itself to meet the rising demand for pharmaceuticals in emerging markets?
Number one is our regulatory compliance. Nowadays, twice in every quarter, one of our plants gets audited for compliance and quality by various regulatory authorities including the FDA, the Europeans, Australians, Canadians, Russians, and Mexicans. We always demonstrate our focus on regulatory and quality compliance. Each of these audits reinforces our teams’ competencies.
We divide our business into the core and niche. Core business focuses on high volume and niche focuses on low volume. In both segments, the focus is on innovative thinking and operational efficiencies. The core business is first-line-of-defense products like acetaminophen, ibuprofen, metformin for diabetes, guaifenesin for mucous thinning, and methocarbamol, which is a central muscle relaxant. Take metformin: we supply about three and half billion doses a year to the U.S. market alone, which translates to about 46 percent of the U.S. market. Similarly, we supply 30 percent of the U.S. prescription market for ibuprofen. So, the volumes at which we work, the efficiencies we get in, and the cost advantage put us in a sweet spot to meet any future demand from anywhere in the world from a reliability and sustainable supply standpoint.
Selling across the supply chain gives us a unique advantage. We make our own Active Pharmaceutical Ingredients (APIs) and Finished Dosages (FDs). We also make the intermediate between API and FD, the Pharmaceutical Formulation Intermediate (PFI) and commercialize it, which is our innovation that we have popularized across the world.This makes manufacturing simple for our customers as they are just one step away: they put the granulated product into compression machines and the tablets just keep churning out.
What distinguishes you from your competitors?
We always consider ourselves a typical manufacturing company, not a pharmaceutical manufacturing company. The pharmaceutical industry is known to complicate things and get inefficient. We try to simplify and build flexibility in any product manufacturing, be it API or formulation. We look for out-of-the-box processes. If I start producing a product, what competitive advantage do I get if I make it in the traditional way? Let’s say someone else takes six steps to arrive at a product; we try to do it in only two or three steps by means of telescoping, which reduces the manufacturing footprint, lowers costs drastically, and increases consistency in quality and robustness.
For example, we make 24,000 tons of tylenol a year, which translates into 30-40 billion FDs. By keeping things simple, we manage to do it in a 50,000-square-foot facility that we built, whereas a competitor will do it in a 200,000-squarefoot facility. We also make certain products at lower volume—about 20-40,000 pills a year—but at a higher price, especially at our U.S. plant in Chantilly, Virginia.
What mistakes do pharmaceutical manufacturers commonly make?
They rush into product development and try to get product approvals at a much faster pace than the ramping up of capacities and competencies, which results in several complexities and inefficiencies across the value chain. For us, we are not in a rush, we don’t want to be first in the market. We don’t mind handling products that have been on the market for 15 or 20 years. But when we do get in, we will be the simplest, the most sustainable, and economical producer.
What kinds of products do you specialize in?
We don’t concentrate on a therapeutic category. If we were a marketing company, that might be more meaningful but we always felt that as a manufacturing company we should do whatever processes suit our capability and focus on technology platforms. So, for example, we do about six different products that are used to treat Attention Deficit Disorder. Future avenues that we intend to pursue include oncology and peptides.
Where are the biggest growth markets for pharmaceutical manufacturers?
While highly regulated markets like U.S. and EU remain the top priority, if any pharmaceutical company wants to grow big, in the long run it must get into emerging markets. The established markets, especially Europe, are getting stagnant; there is a lot of pricing pressure from governments so they are not as lucrative as they were in the past. The emerging markets that I think will grow the most are Africa, India, and the Middle East. Latin America would come next. Sub- Saharan Africa is really going to take off. The bigger markets like Nigeria and Kenya have already been growing for a bit so I see bigger growth potential in many other African countries.
Do you have plans to build a facility in Africa?
Not at this point. As a growing company, we need to prioritize and focus on strategic investments. So far, we have created strong manufacturing footprint by investing in India. We also operate a joint venture in China with a Chinese company so we are in the Chinese market too. We have another joint venture with the Belgian pharmaceutical manufacturer Ajinomoto OmniChem for Contract Research and Manufacturing Services (CRAMS) business. We are present in the U.S. and in Europe where we have been supplying products over the past 15-20 years. Recently, we have started to expand our R&D and manufacturing footprint in the U.S. In the U.S. and European markets, we see that even though growth is not very high for our product range, we are able to clinch substantial business from competitors and get into a leadership position because of our efficiencies and reliability.
Established in India in 1991 by Krishna Prasad and headquartered in Hyderabad, Granules Ltd. is a publicly traded (Mumbai Stock Exchange) pharmaceutical manufacturer that concentrates on production of generics. Granules has seven manufacturing facilities: five in India, one in the United States, plus joint ventures in China with Hubei Biocause, and in India with Belgian-based Ajinomoto OmniChem. An IFC client since 2007, the most recent transaction was a $48 million IFC loan approved in 2017. This investment is helping Granules to expand and upgrade its manufacturing and warehousing capacity and to enhance quality controls. It should lead to around 1,700 additional high-quality jobs by 2022.