“Our vision is to get generics manufactured in the most quality regulated plants for Indian consumers”

September 11, 2021 0 By CH Unnikrishnan

Generic medicines in the US market are typically priced about 80 to 85 percent lower than the price at which they are sold under a brand name before patent expiry.  Because of this, the US healthcare system saves trillions of dollars when a patent expires on a drug molecule. Indian pharmaceutical companies play an important role in helping realize these trillions of dollars in savings. However, in India, the same companies sell these patent-expired drugs at a price that is 80 percent higher compared to a generic drug because they put a brand name on it. This is the biggest contradiction that remains unresolved in the Indian pharma market, the result of allowing both branded generics and generic generics in the market. However, a few generic pharmacy chains are trying to break this dichotomy. 

Although  the government set up Jan Aushadhi stores to promote cheap generics in the country, they haven’t made much of an impact in the market as there is a general apprehension among the consumers regarding the quality of such cheap generics. Nevertheless, trade experts are of the opinion that it is just a matter of time before the Indian pharma trade sees a revolutionary change, triggered by fast-increasing consumer awareness ushered in by quality players in the cheap generics market. The trend will be buttressed by efforts to put strong systems in place in terms of quality assurance and the passing on of significant price benefits to consumers, says 

Siddharth Gadia, co-founder and CEO of Zeno Health (erstwhile Generico), a fast growing generic pharmacy chain. Excerpts of an exclusive interview with Editor CH Unnikrishnan

 As far as the Indian market is concerned,  branded generics has always been a lucrative business in pharma both for the manufacturers as well as the traders due to the high levels of profitability. Why did you choose generic-generics, where prices are low and so as the margin, as a choice of business?

 To be very frank, we knew hardly anything about the pharma trade when we, myself and my partner Girish Agarwal, wanted to do some business on our own as we were working with some multinational companies as tech professionals after our IIT graduation. The only connection that we had with the pharma and healthcare industry was that we used to write software for pharma companies helping them promote retail. But a few interactions with pharma retailers when we were bitten by the entrepreneurship bug made us curious as to why these big pharma companies in India make both branded generics as well as non-branded generics of the same molecule and why the trade margins of these two are so widely different. 

It is a known fact that Indian drug companies, including the top ones, which do not do R&D, are mainly marketing companies of generic drugs and they spend huge money on marketing their brands and almost 80 percent of the MRP (maximum retail price) that they print on such branded generics is purely marketing cost and just 4 to 5 percent is the manufacturing cost. So, they sell the branded generics in markets where they can push their products by making some ‘innovative’ combinations and through heavy marketing, while the markets where they fail to do the same are pure generic spaces, where they pull in the consumer by passing on that huge savings on marketing cost, to the trader. So we decided to make one rupee margin from ten customers instead of 10 rupee from one customer by passing on a good portion of our margin to them. That is all about a pure generic play, which we are sure is going to change the whole dynamics of pharma retail sooner or later in India.  ZenoHealth has so far helped consumers in Mumbai to make an accumulated savings of about Rs 170 crore in the last three years.  

 But the big question here is about the quality of cheap generics that these companies make and sell without putting a brand name on it. The Indian consumers have come to believe, or fear, that the unbranded generics are bad in quality. This is a fact too, to some extent. How do you overcome the perception challenge?  

 When we started in 2017, we just had one store in Mumbai and we couldn’t even imagine dictating terms of quality to the companies. But we decided to source products only from big or top ranked companies with the assumption that they won’t compromise on quality. But, later, we realised that there are even big companies with good reputation whose generic products sometimes do not match the quality that we expected. For instance, we have even rejected many batches of a couple of well-known companies. Those days, many companies didn’t even have a digitised system to maintain the batch records, hence had to trace the data manually.  So, we kept a strict policy that the sourcing will be only from big companies where systems and processes are in place. I must also say that there are many such companies which deliver good quality generics.      

Gradually, when we achieved good volume with several more stores in Mumbai — currently we have 85 stores in Mumbai and have expanded the presence to neighbouring cities like Thane, Pune etc., by adding over 100 stores — we have started getting generic drugs of our quality, manufactured by our own contract manufacturers. Because, some of these unbranded generics were not even available with big companies. 

Today, we have our own very robust mechanism and an in-house team to ensure quality. We started with a kind of auditing of certifications like the WHO GMP, cGMP approvals, US FDA authorisations etc.. We have now graduated to the level of quality checking by matching the product assays generated by us with the assays made by the manufacturers. Going forward, our vision is to ensure that we get all these cheap generics manufactured at the most quality regulated plants, like the ones with US FDA and European standards and make sure that they are even better than the branded generics. 

 The other challenge in the generic-generics business is allegedly doctors’ strong resistance to prescribing drugs by their generic names, despite a number of advisories and circulars issued by the Medical Council of India (National Medical Commission) and even by their own professional bodies. The reason could be obviously the strong influence of branded pharma companies or perhaps their own apprehension that such products may not be of the requisite quality and may end up affecting their professional reputation. Isn’t this a problem for you?

 Absolutely, this is a major challenge among several. We all know why this is happening. Had the doctors been prescribing only generic names, ZenoHealth wouldn’t even have come to the market. But I believe that the situation has become so pressing that consumers have started searching for cheaper substitutes due to the escalated prices of branded products. Rather, people in an evolved society are becoming more and more aware that there are non-branded generics available in the market, and when in doubt, they even go back and ask the doctor if they should buy it. It has also been observed that doctors do not always say ‘no’ when the patient asks them about the cheaper substitute, showing the packaging of a generic pill.  

Certainly, we too try to create awareness and educate the people on safe and quality generics. But it is just a matter of time. India is also moving in the same direction as the western world, where the pharmacist helps the patient to choose the best composition of medication and takes a bigger role in community healthcare.

 How do you see competition coming from Jan Aushadhi stores, where the government plays a greater role in promoting generics with still lower prices?  Can a potential quality compromise in the government procurement system impact the reputation of generics?

 I don’t think Jan Aushadhi actually creates competition for generic pharmacy chains like us, because the consumer target for us is entirely different. The segment targeted by Jan Aushadhi stores are usually so backward economically that they can’t even afford to buy drugs. As such, the price point at which the government stores sell the drugs are even lower than ours, which only the government can afford. This is not really viable for us with our quality checks and processes. So that way, we don’t see it as a competition and we both are there with the same mission rather. In fact, the market is huge enough for the government as well as private players.      

Of course, Jan Aushadhi stores have limitations on many fronts including quality procurement and supply systems, even though it has been trying to improve on that front. But then maintaining the same price level, which is at least 20 percent lower than us, will become difficult. On the other hand, the population that is targeted by us are the ones who are price conscious, yet are not ready to compromise on quality. Therefore, it generates an opportunity for pure generic pharmacies like us who can ensure the quality, and at the same time,
are capable of passing on the huge margins offered by the drug makers by saving on the marketing costs of a branded generic. This helps us win consumer confidence both ways. Besides, we have a whole bunch of value-added services at the outlets as well as through the omnichannel route, including community pharmacy concepts and several other consumer awareness and rewards programmes, to ultimately satisfy an informed healthcare consumer.