Financial Daily from THE HINDU group of publications
Thursday, Aug 25, 2005
Industry & Economy - Pharmaceuticals
Marketing - Brands
`Brand-repair' a major issue for drug cos: KPMG
P.T. Jyothi Datta
Mumbai , Aug 24
DRUG companies are indeed having a bad PR (public relations) day, if the Vioxx-aftermath is any indicator to go by.
Not surprising then, `brand repair' is one of the major risks identified by global consultants KPMG for the drug industry, in its yet to be released study.
Besides cost-reduction, brand-repair is one of the issues that global drug companies are faced with, since it also involves integrity issues, observed Mr Richard Sharman, Partner with KPMG's Risk Advisory Services.
His observation assumes significance against the backdrop that over 4,000 litigants have already reportedly lined-up in just the US to haul Merck to the cleaners, over the side-effects of its pain-killer drug.
Companies need to assess their risks and get the information "to the right people at the right time", he said. Besides putting in place systems in the company to deal with the issues, he stressed the need to communicate to investors and other stakeholders, as well.
The investment community sees the industry as both risky and profitable, he added.
Mr Sharman was in the city to give a preview on the pharma risks-related study, done in collaboration with the Massachusetts Institute of Technology (MIT), to top-brass in the pharma industry in India.
He told Business Line that one of the conclusions of the global study is that the drug industry is about 50 per cent risk-ridden. The risks have changed over the last five years and drug companies are improving at identifying their risks and addressing them, he said.
Touching on the risks faced by Indian drug companies looking at the global market, Mr Sanjay Aggarwal, also Partner with KPMG said that they will have to strategise to be present in key markets. And the challenge for local generic drug majors just got more daunting with more generic giants being created in the recent past.
Branded drug-major Novartis, for instance, just consolidated its place in the generic-space through an $8 billion acquisition by its subsidiary Sandoz. More recently, Israeli generics major Teva forged a deal to buy its US rival Ivax in another $7.4 billion transaction.
The opportunity for Indian drug companies is that they can learn from the global mishaps. But then again, they will be competing with deep-pocketed multinationals, he said.
Companies of both global and local hue will have to look at operational challenges such as how a market works and product pipeline-related issues. Competitive challenges, he said, can be overcome through good business strategies.
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