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'China will snatch our market from us'

By Vandana Gombar and Joe C Mathew
November 27, 2009 10:48 IST
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Atul Sobti took over as the chief executive officer and managing director at Ranbaxy Laboratories, six months ago. He wants to make Ranbaxy (now owned by Japan's Daiichi Sankyo) the largest drugseller in India, a market that is price-controlled, but growing.

This focus on the domestic market is not due to the problems that the company has been facing in the US, he tells Vandana Gombar and Joe C Mathew in an interview where he also makes a case for direct subsidy for medicines instead of price controls. Excerpts:

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Atul Sobti, CEO and MD, RanbaxyWhy has India become a focus market for Daiichi-owned Ranbaxy - you want to move up to the top slot from the current number two position - when it clearly wasn't so under its former promoters?

In the mid 1990s to early part of the century, the focus was on the US market. Ranbaxy would not be the company that it is if it had not gone to the US market. India was always important, that's the reason we are number two in the market. But you can't give your full attention to two large areas at the same time. It would make a lot of sense to focus on India. For any company going global, you need to be strong domestically and leverage that. And then there is the benefit of India itself - the domestic market is the best potential market.

The logic of the India market was there earlier also.

It was perhaps 50-50, but it can never be as good as 100 per cent attention. It should have happened two years ago. In India we are growing at 10 to 12 per cent, which is not bad. But for me Ranbaxy needs to go for higher growth.

Is this change in focus the result of the regulatory problems that you are facing in the US, with two of your manufacturing facilities being under the scanner of the US Food and Drug Administration, and not having permission to export to the US?

Even without those problems, the focus would be India.

How do you rate India's drug price-control system? Is it liberal enough to provide sufficient margins for the industry? Does it need to be eased, or tightened, as some are demanding?

It is not excessive on either side. The question is what is the long-term vision we have for healthcare in the country. India has the makings of a major global player in this sector. Healthcare can do many times better than IT, and it is more employment-intensive. There are opportunities in research, in development, in manufacturing and in lots of value-add.

We can be a partner to the developed world. We can invest in therapies closer to India. There is so much that can happen, but for that it cannot be industry alone, and certainly not industry under price control. We have got this far without any help from the government. Rather than giving help, it should just let go. This industry requires solid investment on an ongoing basis. We cannot have price control and invest in future research and also go global.

There is surely a case for price control to ensure access to medicines for the marginalised?

To solve 20 per cent of the problem, you put 100 per cent control. I think a direct method needs to be found to ensure access at low prices for these people, while the rest of the market can be competitive. In any case, we have the lowest prices in the world and competition will ensure that low prices will continue.

The competitiveness of the market can be seen form the fact that the number one player has just a 5-6 per cent market share. In fact, sometimes manufacturers' may feel that it is not worthwile to manufacture at such low prices. We are missing the opportunity of being a global player.

If we don't get our act together, China will again be snatching the opportunity from us. They are already strong in bulk drugs. It is a matter of time before they get into formulations and clinical trials. We should work out a direct answer to drug price control and get into price monitoring. If we are happy to be domestic, then it is a different matter altogether.

How do you see the domestic market evolving?

There will be a shake-out. As bigger companies go into rural India, smaller players will get impacted. It might take 10 years before medicines of decent quality and price reach right down to the last village of India. Ranbaxy, with its India focus, intends to get there in five years.

Is health insurance the answer to India's healthcare challenges?

It may not be. The first thing is to resolve access for healthcare and for drugs. Then, I think, we need to look at preventive initiatives like sanitation and vaccination, especially starting with the kids. I think public private partnerships are the way forward.

What is the agenda for 2010?

For India, it will be a quantitative path that we will unveil on January 10. The India story will definitely have a rural segment. The Daiichi-Ranbaxy synergy plan will be also be comprehensive and quantitative. Getting the US business back on track and salvaging our First-to-File (which grants it exclusive rights to sell the generic version for six months) is also a priority.

Shouldn't these synergies between Daiichi and Ranbaxy have been worked out sooner? The owners changed over a year ago.

When a Pfizer buys a Wyeth, it's an innovator buying an innovator. The business models are the same, every function is same. The matter ends in two minutes. This is an innovator buying a generic. Here business models are different, governance is different. We sometimes start where they end and they sometimes start where we end, whether it is in patents or research and development.

They bought Ranbaxy keeping in view the Japan generics business. They need a backup, a low-cost production facility. When Japan opens up to generics in a big way, like the US did, Ranbaxy will do for Daiichi what Sandoz did for Novartis.

Secondly, they are very keen to be a global player. It may sound odd that an Indian company will help Japanese big pharma go global. So we give them Japanese generics, we make them global. The rest comes as bonus. Ranbaxy's discovery R&D has the top 200 scientists of India. They can use this R&D for their own products.

There have been some exits from the R&D function. In fact, the R&D staff were the most worried of all Ranbaxy employees after the takeover.

There could be people who want to leave, but the best would want to stay on. What better deal can you get if you want to be a discovery scientist than to work with an originator Japanese pharma company? As a scientist, you cannot get a better future.

The R &D staff was the most worried because last year, discovery was being moved out of Ranbaxy. If you ask me, they are waiting to see Daiichi Sankyo move its research work to India, because their ambition is to be with a global pharma innovator.

Are you shifting operations to Mumbai?

Indian pharma is located in Mumbai. We are probably the only big pharma company outside Mumbai. We have debated this issue a lot. We have one-third of our team in Mumbai and two-thirds here. I would always say the leader and the team should be in one place.

That's the best way to do it. If getting talent is easier in Mumbai, if getting collaborative agreements with other companies is easier, if competitive information is faster, then we are totally for it. This is one of the things which should have happened two years ago.

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Vandana Gombar and Joe C Mathew in New Delhi
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