‘Italy can act as a gateway’
Manuela Cimini, Managing Director, Consulting Edge, Italy, was in the city recently after the firm tied up with Mumbai-based Interlink Marketing Consultancy. She shares her views with Nandini Patwardhan on the Italian and Indian markets.
What are the similarities between Italian and and Indian pharma markets?
The Italian market, like India, was not an R&D driven market. We did not have R&D companies and hence we were forced to forge co-marketing agreements from the very beginning. Thus today, the Italian market is a market made of co-marketing agreements which are about to expire. We also developed ourselves into API leaders and diversified into formulations. As is the case in India, we treated the issue of patents and the law very lightly. When the patent law was finally introduced in 1978, originator companies obtained extensions to patent protection in Italy. Italy has upto five years more of patent protection than any other European country. So the Italian pharma market is very similar to India.
How are the Italian and Indian markets different from each other?
The Italian generics market, unlike in India and Europe in general, is not developed yet. Europe is driven by economic price, aging population and increasing quality of life and is looking to curtail the cost of healthcare. As far as Italy is concerned, the healthcare system is challenged a lot by free access to healthcare, decreasing budgets for drugs and increased focus on chronic diseases and diseases related to the elderly. Companies in the country have been facing cost pressures through co-payment issues for sometime now. Hence there is pressure on them to continuously reduce price, which has affected their margins. The only remaining viable solution for the containment of the pharmaceutical costs is the development of generic market.
What are the hurdles that block development of generics?
Italy is expecting the generics market to grow for a long time now, but somehow there have been many stumbling blocks in the form of various political and industry lobbies. However, now, the need is very strong. Healthcare managers are now working independently at various regional levels in the process of cost containment because the central government is not compensating any over spends beyond the specified budgets at the end of the year. As a result, today, not only at governmental level but also at regional level there is strong interest in the generic market.
The Italian Government has recently agreed to implement one of the major drivers for generics, which is pharmacist substitution. There is a need to fine-tune it because pharmacist level substitution simultaneously activates two other issues. One is that the patient in Italy is wary of generics. They have a perception that generics mean quality B (low on quality) and as a result they won’t touch a generic. So it is necessary to inform the patient that the generic is equally good. This has been happening in other countries like Germany, where initiatives are being undertaken to inform and reassure the patients.
The second issue is to offer incentives for the pharmacist to activate substitution. So if the pharmacist has to be as effective as in other countries in Europe, he needs to be given incentives. Unfortunately at the moment they are not motivated since their margins are fixed are proportional of the value of the drug sold. For instance, in the Netherlands, they pay the pharmacist for every saving that he can provide. In Italy, we are still mixing and fine tuning this.
|Interlink Marketing Consultancy, under the aegis of Dr R B Smarta, has been actively pursuing the healthcare sector with over 200 assignments covering national, international and government organisations including WHO.
Interlink was recently in news for its alliance with the Italian firm, Consulting Edge. Interlink Marketing Consultancy, through this alliance, looks at assisting Italian companies in developing their ‘way to India’ and Indian companies willing to put in place their ‘way to Italy’. It will also evaluate and process Indian advantage according to Italian healthcare/pharma scenario to catalyse other business needs of the Italian and Indians companies.
What are the characteristics of the Italian market that would make it a good deal for alliances?
Currently, the Italian generic market stands at only four percent in volume and two percent in value of the Italian pharma market (13 percent of the about 100 billion Euro Public Health Expenditure). It explains the huge potential of the Italian generic market. Italy can act as the last gateway to any company’s European dreams. Today, if companies look at entering Europe through Germany, it will not be a feasible solution for smaller companies. This is because they will be entering in a market which is already stabilised and concentrated. There will be a lot of competition, which, in some ways, can be mitigated through economies of scale only or vertical integration, which means being bigger and bigger. Germany was a very promising lucrative option beginning of 90s when the generic business started.
But today, companies need to change their strategies. Approaching Europe through Italy seems to be one of the last door available of entering into the generic market. So this is a very unique proposition for Indian companies.
Are Italian companies looking at India for partnering?
It is not that Italian companies want to come to India and are actively looking at the country. As of now, for them India is far away. Italian companies typically go about conquering the world. There needs to be a perception change but there are a lot of potential synergies and win-win opportunities, given the characteristics of the two markets and their different evolution stages.
What is the agenda of your partnership with Interlink in Italy and in India?
Italians are in a situation of pressure, which is forcing them to move. Pressure of cost containment, co-marketing and generics which could come any day. But for Indian companies, it is more of an opportunity
When we started, we identified many common points that need to be taken care of. For instance, we decided to really invest in understanding how to synergise between the two countries by anticipating the changing environment and at the same time, focus our attention on understanding the entire value chain. We have also looked at every aspect of the chain to discover opportunities for companies from both the countries. In each of these steps we have identified a rationale to sustain a strong value proposition which is strategic for companies in both the countries.
Italians are in a situation of pressure, which is forcing them to move. Pressure of cost containment, co-marketing and generics which could come any day. But for Indian companies, it is more of an opportunity. It is an opportunity for Indian pharma companies to secure a bridge into Europe because Europe is where the market is. This has resulted in a matching of situations for companies in both the countries to an extent.
How will you help assist Italian companies in developing their “way to India” and vice versa?
India, in addition to representing a huge domestic market is emerging as a cost-effective hub for variety of activities in pharma and healthcare sector and also as a potential export bridge towards other Asian countries. Interlink will identify opportunities of in-licensing and acquisitions in the domain of pharmaceuticals, pharmacists, CROs and new drug delivery systems and undertake assignments for mutually beneficial outcomes. These services will be offered with the collaboration of our Italian partner who is well experienced in the healthcare/pharma context both at Italian and European level.