Professional Documents
Culture Documents
Abhay Kishore 01 Abhishek Kunal 05 Anil Kumar Jadli 11 J.Harish 25 Khushal Malik 28 Sharad Singh 49
CPMP Europe
MHW Japan DPCO & Indian Patent Act - India
Size of industry : USD 960 billion in 2012. Few Firms control entire market (Oligopoly).
24% ROW
Covered the chemical substance itself Offered typically 20 years of protection Usually a lag time of 1012 years by the time the patent was obtained and the launch date
Covered the method of processing or manufacturing the product Very little protection because it was easy to slightly modify the process
Prices in of the drugs varied in developed countries US & Canada by factor 1.2 to 2.5. Europe by factor 1.1 to 2.5.
Parallel Trade: an outside company sells a patented product in a market not designated to sell the drug.
o
Independent firm exploited parallel trade by using the differentials in price across various countries.
Posed as major challenge for pricing power of large pharma companies. No additional expense for drug R&D of new compounds. Generic companies made money by copying the products discovered & developed
Drug Price Control Order (DPCO) instituted price control by which govt.
stipulated prices for all the drugs. Indian drug prices hovered around 5%-20% of U.S. prices due to these. Prime minister Gandhi had said at World Health assembly in 1982: The idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death. In 1990s , post globalisation, FDI upto 51% (up from 40%) was allowed in Drugs & Pharmaceuticals industries. A suitable Environment for entry of Eli Lilly entry into India.
Strategic Environment
Strategic Context
Lilly is re-evaluating its strategy for India and the direction for the JV, with Ranbaxy signaling an intention to sell its stake (p. 229) Lillys product portfolio for India is limited ELR JV depends for manufacturing and distribution on Ranbaxy India: Healthcare expenditures in India are rising; Increasing demand, improving regulatory framework, better infrastructure; WTO membership and resulting change in ownership requirements, trade, IPR/patent protections Industry: Slowdown in growth (price competition, shift in demand, entry of large competitors); Internal consolidation to achieve synergies and economies of scale; Increasing rivalry and fierce competition
Strategic Objectives
Take advantage of the opportunities present and developing in the Indian market Emphasis on emerging markets (such as India) to manage company growth Maximize returns and achieve long-term sustainability Shape opinions be a driving force in the industry
Economies of scale exist High start-up capital requirements as well as investment intensive operation (R&D, clinical trials, etc.) Forward & backward integration Access to distribution Experience/learning curve Strict government policies/controls Proprietary knowledge and patents Brand identity/loyalty relating to patents
Threat of Substitutes
Substitutes are available generics vs. prescription, parallel trade Some products exist that perform the same or similar function Buyers may face uncertainty and/or inconvenience when switching Existing substitute products (generics) satisfy price, value, and quality expectations Brand loyalty usually exists
SWOT Analysis
Strengths Lilly is one of the largest pharmaceutical companies in the world (12th largest) Large, durable organization Commitment to scientific and managerial excellence Global influence spans 151 countries Leading brands and R&D capabilities Ethical marketing & integrity Good stakeholder relationships World-class sales process Expertise in clinical trials Weaknesses Patents infringement vs. expiration Financial risks increasing costs vs. pricing constraints Limited product focus (two groups off-patent drugs & patent drugs with barriers to entry) Dependent on international sales
Opportunities Changes in population, markets, and demands Emerging markets low cost labor, new customers, etc. Use world for clinical testing Shape opinion with leaders in the medical field around the world Strong performance of ELR JV Shift in R&D focus (chronic therapies) Positive changes in Indias business environment
Threats Ranbaxy is local market leader Competitive structure of the industry is evolving consolidation trend, entry of new & large competitors India weak IP protection/enforcement, new competitors Limitations on pricing small margins -> cash flow constraints Escalating costs (R&D, clinical trials, pricing pressures etc.)
Ranbaxy
Ranbaxy helped JV in getting govt. approvals, licenses, distribution & supply. Technical learning for Ranbaxy. Lillys training program was made available to Ranbaxy. Ranbaxy learned global HR practices about non-unionised workforce.
Why it worked !
Cultural Fit
Andrew Mascarenhas of Lilly and Rajiv Gulati of Ranbaxy were put in
charge, shared a good rapport. Able to see eye to eye on most of the issues. Both companies had commonality on following:
No cannibalisation of each others employees Clarity on Governance structure, Selection of alliance managers, exit terms & conditions outlined before hand
ALLIANCE MANAGEMENT
Alliance Performance ..
New Product launch on Human Insulin,
Focus on therapeutic areas where Lilly had a niche. Focus on two group of products : Off potent drugs, Patented drugs where significant entry barriers, Existing product of Ranbaxy like Seclor marketed by adding significant value in form of medical information to physician In 1996, JV achieved break even point & became profitable. New initiative like Medical U regulatory unit which handled product approval
increased R&D cost and development, Approval time & Competition from generics.
Consolidation trend in industry through Merger & Acquisition. In 1990 top
10 Cos accounting for 28% Market, In 2000 same were accounting for 45% of market. Partnership on pharmaceutical & biotechnology companies was growing
rapidly.
Increased challenges of
increased R&D cost and development, Approval time & Competition from generics.
India signed GATT & became member of WTO, according to which India would grant product patent recognition form 2005 onwards. Indian govt. decision to allow 100% FDI in Drug and Pharmaceutical industries in 2001.
Change in Order ..
Eli Lilly had established foothold in Indian market & expanded their network. Ranbaxy formulated a new mission to be a Research based International Pharmaceuticals Company. Ranbaxy started forming JVs for developed market for US, Canada & Ireland. Due to increased competition in India JV might be less profitable than other markets.
Strategy Alternatives
Strategy A
Restructure - renegotiate JV with Ranbaxy Pro: maintain successful JV; retain access Ranbaxys manufacturing and distribution; well established relationship Con: Ranbaxy may not easily be swayed to continue JV possible result: lack of commitment; companies goals, structures and visions have changed alignment may be difficult/impossible; JV mission and goals have been achieved
Strategy B
Form a new JV - find a new partner Pro: cooperative partner support; potential access to manufacturing and distribution; share risk and burdens Con: difficult to find suitable partner; negotiations take time; Ranbaxy may transfer shares without concern fro company fit; JV purpose/mission?
Strategy C
Terminate JV establish subsidiary Pro: India offers many opportunities; decisions can be made with the interest of Lilly in mind; ELR successful, reputable company in India; revenue to support parent company; integrate technology and knowhow of subsidiary to realize company strategy Con: large financial commitment; country and market risk exposure; lack of manufacturing and distribution channels
Eli Lilly had established foothold in Indian market & expanded their network. Ranbaxy formulated a new mission to be a Research based International Pharmaceuticals Company. Ranbaxy started forming JVs for developed market for US, Canada & Ireland. Due to increased competition in India JV might be less profitable than other markets.
The strategy
will help Lilly to increase and strengthen its foothold in India which it
Address key issues and concerns faced by Lilly, while allowing the company to
respond to global as well as local industry changes.
Will be able to utilize its core competencies to take advantage of the many
opportunities present in the Indian market. To use India for clinical testing through
ELRs medical infrastructure and expertise in clinical trials. It will allow the company to provide clinical trial data to support global registrations as well as proactively manage costs which is a global concern.
Help to
strategic objectives .
Thank you