Is data becoming the new API of the pharma industry?

pharma industry

Digitalization, infrastructure and healthcare are three crucial themes many experienced investors have been betting on nowadays. But guess what, some of India’s leading pharmaceutical companies seem to be eyeing a combination of these three themes—integrated digital health infrastructure.

Going by the latest disclosures, Sun Pharmaceuticals, Lupin, Cadila Healthcare, Alkem Laboratories and Torrent Pharmaceuticals made a capital contribution of Rs 40 crore each to a recently incorporated Limited Liability Partnership (LLP), ABCD Technologies LLP. Each of them will have a 20% share in the profit/loss of ABCD Technologies.  

The said LLP was incorporated on February 10, 2021 and hadn’t commenced operations as on March 30, 2021. It will soon be renamed as IndoHealth Services LLP. No further information about ABCD Technologies LLP is available in the public domain at this juncture.

Nonetheless, you may want to closely track all future developments on this front.

Five companies teaming up and investing in an entity catering to digital healthcare services is a crucial development although the revenue implications and investments might appear insignificant for now.

Five companies investing ABCD Technologies LLP have a significant India presence

(Source: Company records)

The stated objective of the aforesaid investments by five pharma giants has been to facilitate, enable and promote efficiency and Good Distribution Practices (‘GDP’) including digitizing healthcare infrastructure thereby supporting the National Digital Health Mission (NDHM) of Government of India.

NDHM’s success would be an important milestone to achieve

As you might be aware, India launched NDHM on August 15, 2020.

NDHM has recognized the need to develop an integrated healthcare ecosystem by leveraging technologies to support universal health coverage in an efficient, accessible, inclusive, affordable, timely and safe manner.

Some of the prominent facets of NDHM include health ID, healthcare professional registry, health facility registry, personal health records, e-pharmacy, disease registry, tele-medicine, health analytics and Health Information Exchange (HIE) amongst others.

Interoperability is a crucial factor for improving the effectiveness of healthcare systems in today’s age. NDHM envisages achieving interoperability of healthcare data through a unique identifier for the provider and patient across the healthcare system. Thus, many experts have been calling NDHM a game changer, especially in the light of the COVID-19 pandemic.  

Good Distribution Practices and NDHM will go hand in hand, as far as the pharmaceutical companies are concerned.

The guidelines on Good Distribution Practices emphasize on ensuring the quality and identity of pharmaceutical products throughout the process of distribution including procurement, purchasing, storage, distribution, transportation, documentation and record-keeping amongst others.

Are you wondering how interoperability could help pharmaceutical companies?

Interoperability of healthcare data can help pharmaceutical companies effectively plan their supply chain, inventory management, marketing function and more importantly, product development decisions.  

It’s noteworthy that the draft implementation strategy of NDHM allows verified health facilities to collaborate with pharmaceutical companies, clinical research organizations in due course through consented access. Will it not go a long way?  

An excerpt from Cadila Healthcare’s conference call post Q3FY21 earnings may perhaps best explain this.

 Sharvil Patel, MD of Cadila Healthcare: “We strongly believe, as a pharmaceutical company, we have to look at health outcomes and reduce disease progression as well as show positive outcomes. So, on certain therapies, we are building our capabilities to be able to work with the medical practitioner and most importantly, patient to make sure that we can reduce the disease progression or show better outcomes.”

Sounds like a win-win situation for all stakeholders, right?

The possibilities that NDHM and other similar initiatives can unfold are limitless.

Did you know, India has reported 450 diseases so far which are considered ‘rare’ globally? A rare disease is defined by WHO (World Health Organization) as a debilitating lifelong disease or disorder condition with a prevalence of 1 or less, per 1,000 population. However, many countries define a rare disease based on the prevalence of the disease with respect to their population.

For example, the US defines a rare disease as one affecting fewer than 2 lakh people; while Japan identifies a rare disease as one with less than 50,000 prevalent cases.

Since India doesn’t have enough epidemiological data to be able to define rare diseases in terms of prevalence or prevalence rate, so far, the success of National Policy For Treatment of Rare Diseases has remained limited. The new digital health ecosystem might help address such critical issues in a timely manner.

Bottom line

The news of five pharmaceutical companies investing in a digital healthcare services enterprise may not be big from the immediate revenue generation standpoint of the concerned companies. However, it could be a significant development for NDHM.

In the age of data, insights define the future trajectory of revenues! Is the paradigm shifting for the pharma industry?

Please Note (read as a disclaimer): None of the stocks discussed in the article are recommendations to buy, hold or sell. This could just be the starting point for deeper analysis that you might want to carry out on your own. You may also take professional help as you feel appropriate.

If you are investing in any family run company, besides governance, you may also want to take stock of significant developments in the lives of the promoters. Sometimes, their personal life can overshadow market sentiments. Also pay attention to issues such as pledging of shares by the promoter group and the working capital.

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Disclaimer:

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

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