'Pharmacy To The World' - In today's global pharmaceutical industry 2.0, emerging regions led by India (BRIC - Brazil, Russia, India, China) have moved to the front row in terms of new market growth, outsourcing production-scale commercial manufacturing, and- most commonly - the sourcing of intermediates and APIs for finished formulations.

India and China these days command more and more attention for sourcing pharmaceutical ingredients and finished generic drugs. China and India now source 80% of active pharmaceutical ingredients (APIs), and India provides the U.S. with 25% of its generic drugs while at the same time India is heavily expanding its "pharmacy to the world" reach.

Experiences or results when Western companies source from India vary widely, from successful to "could have been better" to "what a nightmare!". Why is that? In a nutshell: homework (or lack thereof).To start with, India is a land of contrasts and presents challenges with its myriad languages, customs, religion and culture.

Where else in the world can anyone find:

• Electronic voting machines being transported on elephant backs?
• Fiber-optic cables laid by digging out concrete or dirt roads with picks and shovels?

Yet find:

• A global state-of-the-art cytotoxic, Category IV HPAPI (high-potency API) manufacturing facility that matches, even exceeds, European and U.S. occupational exposure limits (OELs) and containment standards but can perform and deliver at a substantially lower cost. http://fdasmart.com/hpapi/fdasmartposter.html
• The largest number of manufacturing facilities approved by the U.S. Food and Drug Administration outside the U.S. (close to 200), many with their own U.S. FDA generic abbreviated new drug applications filed.
• A unique dhaba walla system that delivers thousands of homemade, precooked lunches in stacked aluminum containers all over Mumbai offices on foot, bicycles and trains without computerization by mostly illiterate couriers that has earned a Six Sigma standard of reliability or accuracy rating from Forbes magazine. http://vimeo.com/60748502

To source from India successfully, one needs to understand India first, i.e., the history and evolution of the pharmaceutical industry, its entrepreneurial and highly fragmented state, and its people and culture. Buyers can then better map their needs against the supply chain and navigate the sourcing terrain while avoiding "land mines". Let's get started:

India today is arguably considered the 800-pound gorilla of generic drugs. The Indian pharmaceutical industry is the third-largest in the world in terms of volume but stands only 14th in rank by dollar value.

India, however, provides 25% of the generics in the U.S. markets. Since 80% of drugs consumed in the U.S. are generics, this essentially translates to India supplying 20% of the drugs in American medicine cabinets. Indian pharma manufacturing is cheaper and for the most part meets good manufacturing practice (GMP) quality mandates demanded by the U.S. Coupled with the global appetite for generics these days, this explains India's rise.

Memory Lane

How did India pharma get here? What was the Indian pharmaceutical industry like before it evolved? Soon after India's independence in 1947, India's pharma industry was largely dominated by Western multinational corporations (MNCs), with eight out of 10 of the largest firms being foreign.

The Indian pharmaceutical industry was largely import-dependent through the 1960s until the Indian government initiated policies stressing pharmaceutical production in India. Then along came the New Patent Law in 1970, which basically mandated that patents would be granted only on the process level not the product level.

MNCs soon found extreme competition from government and private sector reverse engineering drug molecules by altering some of the manufacturing process, bypassing patents to get approval for markets in India. This drove MNCs out of the Indian pharmaceutical markets, at least for while.

This led to the rise of thousands of entrepreneurial and in some cases government-led enterprises.

In 1984, the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, was passed in the U.S. That spawned and legitimized the generics industry globally, starting with the U.S. But by then, India had developed a cadre of scientists, engineers, entrepreneurs and investors that recognized a generics bonanza was ahead with the passage of the Hutch-Waxman Act in the U.S.

Finally, the Patent Act of 2005 came along, and Trade-Related Aspects of Intellectual Property Rights (TRIPS) mandates obliterated the Indian pharma process patent "free ride." India buckled to the WTO, and now Indian manufacturers were forced to comply with product patents. But Hutch-Waxman provided the Indian pharmaceutical industry with an alternative route that leveraged India's copycat prowess.

With India's past astute legislative reforms (process vs. product patent), the growth in pharmaceutical contract manufacturing and outsourcing plus India's mastery of reverse molecule re-engineering peppered MNCs and more novel technology, India has labeled itself as the "pharmacy to the world."

Fast-forward to today: India has close to 20,000 pharmaceutical firms, most of which are small companies. A survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) tells the story, that is, the fragmented pharmaceutical scenario in India with 5,700 small firms vs. only 100 large companies.

So why does this matter? India has a highly fragmented pharmaceutical industry, which one needs to keep in mind when sourcing APIs or finished formulations or even outsourcing manufacturing, custom synthesis or R&D in India. Calibrating your approach is key to dealing with India; there's no "one size fits all."

Know Your Supplier

You have to know whom you are dealing with in India, then map your business practices accordingly.

Dealing with a small to medium-sized manufacturer of API, for example, demands you force Western discipline into what seems like a disorganized, mostly verbal and undocumented, make-it-up-as-you-go-along mentality from your Indian supplier. Social "bonding" needs to be a prelude to talking business. You will likely be dealing with younger second-generation family members handed down a family business they run with advice from a senior, more experienced, professional the founder hired but who is powerless to make decisions.

On the other hand, though large enterprises conduct business in a manner more familiar to Westerners, they are not immune to India's grip on culture and religion. Delivery deadlines could be missed because the senior employee-in-charge, for example, had to travel to his hometown for a sudden wedding or known religious holiday left out during project planning and scheduling discussions.

Then there's the Indian "wobble," http://vimeo.com/26825997 unique to India.

An Indian nodding his head side to side often means an agreement to the context of the conversation but could also be a polite way to acknowledge what is being said with hesitation to say "no." Old India traditions are steep; Indians find it hard to say "no," so best you ask with a question like, "Do you agree?" and wait for an answer.

Get to know India first with your feet on the ground if possible. Leave those expensive market analysis reports back home.