Pharmacy Back-Office to the World?
Global Capability Centres in India aren't new. But can they become global R&D hubs, which will then act as the spark required for the pharma industry to invest in R&D?
If you follow the news, you would see that recently there is a huge uptick in GCC (Global Capability Centres) activity in pharma with almost all top MNCs including BMS, Lilly, AZ, GSK etc setting up such centres or expanding existing ones. How should we view this? Will these Indian GCCs emerge as the sandboxes of cutting-edge innovation across operations, including the R&D domain and commercial engine or is there a bit of hype?
Just to be sure, the GCC phenomenon is not limited to pharma alone. Actually we are a little late to the game. India is home to more than 1,800 global capability centres, which employ over 1.3 million people. These GCCs are spread across sectors including technology, engineering, consulting, manufacturing, BFSI and many more. Pharma has only just entered. That said, a recent OPPI report mentions that there are 38 Pharma GCCs in India employ 75,000 people.
The idea of setting up a GCC in India, is for cost arbitrage. It is the central and most important objective. Earlier, in the IT era, they were called “backend offices”. In the 2020s, they are now referred to a bit more politely.
Of course, pharma companies seem to match the local skill sets with the work that is outsourced. Hence we see a variety of data management services, analytical work, content creation and digital/omnichannel operations being directed to GCC offices in India. As of now, they do not appear to be sandboxes of cutting-edge innovation across operations at all. One hopes however, that they progress in that direction to become hubs of innovation for global pharma and provide the much needed spark for other players to invest seriously into R&D-led innovation.
On another note ,the scale of employment in the GCCs provide some insights into the strategic outlook of some global companies. For eg: Novartis houses around 8500 people in its GCC and has hived off most of its front-end operations. This could reflect on the future product pipeline which contains a lot of cell & gene therapies. Yet, unless the healthcare sector in India sees structural reforms, it is unlikely that said therapies as well as several other precision medicines that Novartis plans to commercialise, will have a price range suitable to the Indian market. So if India isn’t a commercially attractive market, what does Novartis do?
Interestingly, these products lend themselves to a lot of data management opportunities as patients on such therapies will have to be followed up over their lifetimes. In such a case, the utility of the Indian market appears very different globally. Fewer sales personnel in the front-end and a stronger team in the back-end operation might be required. In Novartis’ case the composition of the Hyd-based GCC seems to complement this view.
Most of the other GCCs are relatively new, and their role in the company’s overall strategy will crystallise soon. For GCCs to succeed, India surely needs to ensure key ecosystem changes to see an evolution from being cost arbitrage hubs to becoming strategic partners for MNC headquarters. Most importantly this requires a system that can support complex R&D and large scale manufacturing and ultimately move to new drug discovery. This is what China did in the last two decades. Will India Pharma then do a China 2.0?
The path taken by the IT industry suggests that. Tech GCCs evolved from being the hub of back-end offices to become a manufacturing hub for semiconductors and high end mobile phones. The state had a large role to play in that. Political will and foresight is important. Tech executives played a major role in the way the sector emerged. Pharma leaders will find a greater role in advising policy makers on similar lines.
An important leap for pharma to make is to evolve beyond re-engineering molecules and begin investment in fundamental research. We have a strong supply of educated youth but improving the quality of that education will be paramount. Strengthening the industry-academia bond to update curricula into the 21st century, using private equity networks to help Indian majors tie-up with silicon valley research biotech players and diplomatically cross the regulatory chasm (that China is negotiating in the US) would definitely be some of the goals for the next decade.
The impact of this ecosystem will be felt globally. GCCs work very closely with global teams in R&D, supply chain, and commercial to help with data analysis and insight generation. This helps them make decisions on drug discovery, optimise forecasting and product inventory and also decide on Go-To-Market approaches for new products.
Most of the work done by GCCs in India consists of market archetyping, customer segmentation, promotional message generation, attribute analyses, competitor benchmarking and more recently customer persona generation, content designing and repurposing for omnichannel engagement.
Therefore, there is immense potential for a step up in the role of India GCCs, given the opportunities and disruptions possible using GenAI in building new capabilities and improving organization and personnel performance by reworking and redesigning workflows to improve efficiency.
AI in general allows exponential increase in efficiencies and is therefore a friend of the GCC. This of course needs meaningful data architecture and algorithm deployment to leverage its full potential. This is where current challenges lie and must be dealt with.
Currently GCCs maybe viewed by their parent companies as cost-effective outsourced process hubs, but if we learn anything from the IT industry, we must plan for its subsequent growth into the epicentre of innovation. They become the ideal places to spot new trends, try new business practices and ideate on new products and services. With the right talent, infrastructure, and support, Big Pharma must make GCCs the transformation hub of the parent organisation.