Healthy opportunities

At the point when a branded medicine’s UK patent expires, manufacturers of generic versions are poised to swoop in.

“On the very day a product comes off patent, you will see 15 different competitors entering the market,” says Venugopalan Muralidharan, President – European Formulations Operations at Aurobindo.

“The market is flooded with the product and the price drops. So we need to showcase why we are the best, whether in terms of price or supply continuity and stability.”

Half of the generics suppliers in any such scenario are likely to be Indian-based businesses, like Aurobindo itself. Despite the fierce competition, they see the UK pharma market as a highly attractive one.

Historical and language ties are still strong. More practically, Indian pharma firms are drawn by the strength of the UK market, Europe’s fourth largest after Germany, France and Italy.

For generics manufacturers, the UK is especially attractive: generic drugs make up 87% of the medicines volume. The UK’s pool of highly qualified talent is another draw; the presence of the highly-regarded Medicines and Healthcare products Regulatory Agency helps too.

With a $3.3bn turnover – the second-largest of any Indian pharma company – Aurobindo is a giant in the market, not just domestically but across the world.

In terms of volumes dispensed, it is the largest generics business in the US. The company also boasts a strong presence in Europe: it has operations in nine countries, ranking among the top 10 generic suppliers in seven of those.

Aurobindo’s first step into the region came in 2006, with the acquisition of the UK company Milpharm. It went on to expand its footprint across the continent, setting up subsidiaries in markets such as France, Germany and Spain.

The establishment of a corporate lab in Malta enabled the company to carry out its own testing for European markets. More recently, it has added a manufacturing facility in Portugal and a vast logistics base in France.

The UK was the gateway for these developments, but remains a critical market in its own right for Aurobindo, says Muralidharan.

“When we acquired Milpharm, it was a £5m organisation. Today our UK operation is a £75m organisation, which is significant growth over 15 years,” he says. “The UK is a high-focus market for us – we’d like to bring more and more products on board here.”

The unique structure of the UK pharma market presents challenges as well as opportunities. Sales outlets are limited, because the market is dominated by a few big pharmacy wholesalers. But this makes the UK relatively inexpensive compared to European countries, where Aurobindo requires a pharmacist salesforce.

The potential for new products is strong too. The UK’s adoption of ‘biosimilars’ – drugs that, while not identical to the original medicine, have no clinically meaningful differences – has been more enthusiastic than in other markets such as the US, Muralidharan says. Aurobindo expects UK approval for its first biosimilar in 2023, and has at least 10 further biosimilars in the pipeline.

Brexit has inevitably brought changes, notably the end of mutual UK/EU approval of medicines through the European Medicines Agency. That means a requirement for additional filings and documentation.

Further bureaucracy is generated by the UK’s establishment of its own pharmacovigilance system to monitor adverse drug reactions. Supply chain flows have also slowed, due to new customs requirements.

On the positive side, Aurobindo is still able at present to test products for the UK in its Malta laboratories. For the future, Muralidharan says, pharma players are likely to set up UK labs in anticipation of further rule changes.

With its extensive global footprint, HSBC is well placed to support Aurobindo in its global ambitions.

In particular, the bank is helping the company to introduce risk mitigation solutions to the accounts receivables process with its multitudes of customers across Europe. HSBC is also working to help the business achieve efficient liquidity management across currencies.

“HSBC recently extended our credit for export receivables, and we see vast scope for more collaboration as our business expands,” says Muralidharan.

Muralidharan attributes Aurbindo’s UK success to date to its profound understanding of its price-sensitive market, as well as strong client relationships built over 15 years.

“We have a balanced portfolio of products that’s growing every year – covering antibiotics, antihypertensives, antidiabetics – and we have the ability to handle large volumes,” he adds.

In fact, Aurobindo now supplies around 75m medicine packs to the UK market every year, or over 2 bn tablets and capsules. That equates to 5% of the company’s global volumes – a proportion that is only likely to grow.