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this podcast is brought to you by Indian
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knowledge at Warton please visit
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knowledge. won. up.edu India for more
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information India imagine was the theme
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of the 2008 Wharton India economic Forum
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that was held in Philadelphia recently
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the dayong event attracted several
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leaders including apj Abdul Kalam former
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president of India as well as CEOs of
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Indian companies nonprofit groups
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Consulting and private Equity firms
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Indian knowledge at Wharton brings you
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one-on-one conversations with these
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leaders we're speaking with Rajiv gulati
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who is director for China India strategy
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at Eli lilan company today uh thanks
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very much for joining us it's a pleasure
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to be here uh Rajiv uh what what was
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behind Eli Lily's joint venture with
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Ramba in the 1990s I understand that you
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joined Eli Lily from Ram ta around that
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time uh when the companies uh formed
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this joint venture so what was the basis
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for that okay uh let me talk from Lily
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side because that was your uh
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question U for a long time Lily had been
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a Midwest base a conservative
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pharmaceutical company where us was the
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biggest market so it used to be us and
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ous business which was much smaller and
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I would say the culture of the company
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changed when the new chairman Randy
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tobas has uh joined from AT&T and he was
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head of international business and he
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believed that there is growth outside
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the US and that was the time that Lily
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started operating in China
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Indonesia India Bangladesh Sri Lanka and
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many countries in in Asia where it was
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never never present and when Lily was
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starting in
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India India just started liberalizing
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and it was the business environment was
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still tough and it's a difficult Market
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too the distribution for example there
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are
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271 cities with more than 100,000
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population now how do you reach them uh
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to go in as a new company and set up
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distribution all the regulatory
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approvals uh the manufacturing needs
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which were there those times it's not
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easy uh that's where the partnership
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with renxi made sense renxi was at that
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time the largest uh Indian company uh
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operating in India IND and that's where
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the partnership came about which really
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facilitated uh Lily's entry into the
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Indian market okay well now uh companies
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like Rami and Dr reedy's are challenging
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drugs that are going off patent so how
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uh how how is a company like El Lily
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protecting itself from that
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Trend
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um see this these challenges have been
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there will be there so you protect your
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yourself legally so question is not so
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much how multinationals or
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multinationals like Lily protect
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themselves I I think there's a very uh
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strange question that Indian companies
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are struggling with on one side uh the
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patents have been reintroduced into
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India and all large Indian companies
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want to become Innovative pharmaceutical
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companies with their own patents on the
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other side they have this huge generic
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business which is profitable which is
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global that's where they are uh you know
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fighting lawsuits with the
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multinationals for the for the patents
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so to go off to so that they can sell
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their generics now how do they make
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transition from a very large generic
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company to becoming Innovative so I
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think that that's a challenge they are
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facing multinationals will have these
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challenges a given because patents have
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a limited life uh when the patents are
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challenged there is a six months
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exclusivity that's where generics make
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most of the profit because after that
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it's a commodity where the profit is
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much less uh so that's a business model
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that all generic companies have
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worldwide in fact there is a company in
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the US and one year I think it
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made more profit by out of court
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settlements than by selling generics so
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that's a business model that was
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operating in the US for a long time and
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now Indian companies are following the
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same one what would you say are sort of
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a primary deterrence of in Innovation or
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maybe the primary hurdles for innovation
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in the pharmaceutical industry in India
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if there
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are uh everybody talks about
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intellectual property protection
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intellectual property protection is a
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reward for Innovation if you don't have
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adequate protection it does not reward
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Innovation and it hampers Innovation and
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that's what uh on behalf of Lily and
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other companies even as an Indian I have
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been talking to the Indian government uh
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that you cannot have research and
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investment in research within the
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country unless you have adequate
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safeguards to protect intellectual
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property now how how does Eli L's
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strategy for China differ from its
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strategy for
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India China is one of the fastest
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growing pharmaceutical markets in the
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world it's already moved from the 12th
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largest to being eighth or ninth largest
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in next 5 years it will be the fifth
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largest and by 2020 or 2025 this will be
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the second largest pharmaceutical Market
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in the world overtaking Japan and just
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second to the US so such a large and
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attractive
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Market uh demands investment a
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comprehensive presence uh please
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remember that in China it's it's
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centralized uh even the courts reporting
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to the government at one time the
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pharmaceutical factories in China used
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to report to the FDA equivalent in China
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which is a very strange situation and
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therefore when you are dealing with the
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government you're working with them and
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they want comprehensive presence too so
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all your regulatory approvals your
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pricing situation your intellectual
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property they're all linked with one
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central power so you work with that with
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that Authority and for sales marketing
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investment in manufacturing investment
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in R&D it's all linked and part of one
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large business uh process to have a
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comprehensive presence in a large Market
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whereas in India the local industry is
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extremely strong because of lack of
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patents for the last uh 35 years or more
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and in that market to compete even today
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at low prices and very high volumes is
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not a model which multinationals have
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perfected yet therefore India has much
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more to offer because of their local
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industry strength and highly educated uh
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scientific pool of talent as a source
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for conducting clinical trials for
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conducting Discovery research uh I would
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say for formulation devel velopment
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chemical research and so on so I would
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say India is far more important can add
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far more value by Outsourcing research
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and other services to that country
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whereas China adds much more value as a
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market and that demands comprehensive
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presence so the you need to look at
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these two significantly differently very
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separately how uh what what significant
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um Trends do you see on the horizon for
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the pharmaceutical pharmaceutical
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industry pharmaceutical
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industry worldwide is a huge challenge
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all of us know that uh large patents are
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expiring and if you look at the quantum
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uh we are talking of something like
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between 50 to 100 billion dollar worth
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of patents expiring in three or four
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years remember this is a $600 billion
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industry worldwide so one sixth of the
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global sales or more importantly 1/4 of
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the Us sales for large pharmaceutical
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companies will vanish in next 3 to four
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years that's one challenge uh Second
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Challenge is the rising cost of health
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care which most developed countries
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cannot afford in the US we have 15 to
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16% of GDP being spent on
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Healthcare uh in in in Europe in
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Australia in Canada government pays for
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healthcare and they are broke too and
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all across the developed World Japan
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Europe even the US population is aging
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now aging population means less
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productive people contributing to the
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pool
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and more people using the healthcare
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services which insurance companies of
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the government has to pay for which
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means that some kind of a control on
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costs which will include pharmaceutical
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industry either the uh the pressure on
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prices or in Europe it's very difficult
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to get new products on the formulary
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where government reimburses so you have
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government pressures you have challenges
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of uh patents expiring and the third
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thing is FDA because of the recent
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happenings it's become very very strong
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trict in approving new molecules if you
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look at the trend the new molecules
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approved by FDA every year has been
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falling so you have patents going off
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you cannot replace this with new
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products and you have pressures on cost
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uh and formulary or the excess worldwide
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now this is a challenge all
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multinationals are facing and it's a
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very very difficult time uh for the
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industry as a global industry evolves do
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you think that the differences between
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these markets are going to disappear
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just give you a small number in the US
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today 70% prescriptions that are written
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are of generics so by volume that's
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already a very large market and those
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models have been operating uh always
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it's it's the 30% prescriptions of
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patented which have most of the value
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because the price difference is huge uh
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which is under a huge threat going
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forward right and do you think that it's
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still going to be an issue going forward
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uh reaching reaching population in India
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um it sounds you said you originally
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said that there was an issue with um
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actually accessing that population
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getting drugs out to them it is it is in
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fact most of the uh presentations that
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you are seeing today uh show that 60 to
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70% of the population in India does not
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have access to medicines of the
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Physicians uh so that's a huge
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challenge India is 13th largest
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pharmaceutical Market by value and
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fourth largest by volume it is has the
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lowest prices in the world and the
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latest medicines in the world available
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at those low prices and yet more than
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60% of population does not have access
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to medicines and that's some things
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which got to change if
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if U I think government industry
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everybody needs to look at it completely
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differently if that has to change and
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access to medicine has to improve what
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kinds of moves are companies like Lally
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making towards changing that
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ili there's working on some specific
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therapeutic areas as far as that is
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concerned and I would single out
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diabetes uh Lily was the first company
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in the world in 1923 to launch insulin
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you know discovered by Dr Banting and Dr
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best and India and China between them
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have the highest number of diabetics in
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the
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world and making low price insulin
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available that's one thing but it's more
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about the awareness the education the
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diagnosis of diabetes and you cannot
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treat diabetes only by insulin insulin
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is in fact a drug of The Last Resort you
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start by diet by exercise uh then you go
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on to the oral tablets and so on and
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that's an area where Lily is making
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significant efforts in both the
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countries India and China to raise the
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awareness awareness level the education
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level and making sure that you are
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diagnosed early and and you are able to
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take care of it so that you don't even
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need insulin in the or maybe you can
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delay uh using medicines for for a while
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right right well thanks very much for
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speaking with us today it's a pleasure
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to be here as I said thank
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you for more information please visit
00:12:17
knowledge. won. up.edu India
