Read the Conversation
EF: In an interview 5 years ago you mentioned three priorities: build generics, foster multinational partnerships and expand the biosimilars market. What are your priorities now, have they shifted, if at all?
AP: Five years ago we had a platform of five priorities. In our platform, we have generics, biosimilars, MNC partnerships, defending the core, and ARVs. Our growth today is still based on the platform we set in place five years ago. Our generic business continues to grow at a pace slightly ahead of the market. Access and affordability of generics will continue to be the most important elements the prescription business is built upon. In terms of access and affordability, an Adock Ingram prescription medication is half the price of the market average. We believe that in order to build infrastructure and provide access, medication must be more affordable.
With biosimilars, we had decided to enter that space some 4 to 5 years ago. Through a long term partnership with a Korean company, we are anticipating the launch of our first biosimilars this year. Getting the biosimilars through regulation has been difficult in the past few years, but recently regulation has improved substantially. These biosimilars will open up access to more expensive biological medication by being more affordable.
At Adcock, we do formulation development in the pharmaceutical space but no formal R&D. Through the mature portfolios of the MNCs we represent, we are number one in women’s healthcare and the number one company in dermatology in South Africa. We will be entering other therapeutic areas like oncology and we plan to be a top three player in any therapeutic area.
Another priority is to defend the current business. We have brands and intellectual property that still have value even if they come off patent, and we want to create access to some of those products. The fifth priority on our platform is ARVs. In the ARV sector, we are the second largest player, partly based on agreements we’ve arranged in the private sector and with the commitment to have the most affordable ARV products.
EF: What sort of impact could make South African healthcare more sustainable?
AP: I would like to see the following:
i) An agreement local manufacturing for strategic products. Considering our country’s disease burden – ARV, cardiovascular, TB, Malaria, HIV, diabetes – it is important see a commitment to local manufacturing. There should be an agreement for 25 to 30 of the most important molecules to be manufactured locally.
ii) Much longer tender runs. Preferably tender runs lasting between 5 to 8 years.
iii) Strategic pricing for local manufacturing. There can be a band of 20% of the price of imported goods from China and India to incentivize more local presence.
With those three elements, our factories would be much more sustainable and investors and R&D companies would be more willing to open up factories here.
EF: What would be your advice to managers in other sectors on managing a triple bottom line ? What is it they could learn from pharmaceuticals?
AP: Adcock has been involved with some initiatives that can serve as an example of transformation, particularly around skills development and preferential procurement. One of our initiatives is called My Walk. Our Critical Care division has partnered with NetCare to recycle all of our PVC waste. Normally all this waste goes into landfills but we have developed a process where we take plastic PVC, clean it, refine it, break down the PVC, form it again through forms and presses to create shoes. 20 PVC bags create one pair of shoes that gets donated. Through NetCare and Adcock, tens of thousands of shoes are being donated to the poorest communities. It is environmentally friendly, sustainable, develops skills, good for people and ultimately not a bad shoe. There are 5 million kids in this country that go to school without shoes and we are addressing this need. A pair of shoes costs about 25 rand to make and we make it available to charities. A similar practice could easily be done in other industries. When the shoe comes to an end, it can be taken back again, break it down, and produce a new pair of shoes. Our goal is to have 50 thousand pairs of shoes going out for the first year and with 250 thousand pairs of shoes every year after.
EF: On the company’s performance, you have been growing in double digits particularly your division, so what are the growth drivers, what has been the formula for consistent growth?
AP: From 2014 to 2019 our level of growth has been sustainable mainly because, in 2014, there was a major structural and organizational change when Bidvest and PIC became the main shareholders. shareholders. The company used to be structured where the commercial and supply chain were run together, but this wasn’t very efficient as the business grew. The focus shifted to decentralization and specialization which caused Adcock to split into 4 divisions. There has been growth in all four divisions because we have a relentless focus on who our customer is. My division is the prescription business and our customer is the doctor. In OTC, the customer is the pharmacist. In the consumer division, the customer is the retailer. In critical care, the customers are the hospitals. Restructuring has been critical in generating growth as each division is now able to focus on their own needs and clients. It has allowed my team to grow in decision making and efficiency.
We applied this idea for my division when we bought a company named GENOP, a family owned business selling a mix of pharmaceutical, surgical equipment, and medical devices. Instead of breaking it up, we kept it running as a separate company with its own managing director and people. This year the results are performing ahead of expectations. Genop performance was a substantial part of the growth in my division. Our international partnership with a Danish company, whose dermatology business we have looked after, was also a key factor in our performance. Because Adcock has multiple different divisions, if one division isn’t growing, we can leverage one that is growing and balance our performance.
EF: What do you think are some of the biggest innovations to change healthcare in the next few years?
AP: I think the biggest change in this market will be in digital health. Access to healthcare will dramatically open up for poor people worldwide. Now in rural communities, people have to wait three days to get their Panadol. Through electronic means, doctors and nurses can be diagnosing 90% of everything. The technology isn’t expensive to do the basic primary care for 90% of the population. This can free up physicians’ time load and revolutionize healthcare. Someone who has been waiting 5 hours to see a doctor can see a doctor in 5 minutes through tele-medicine since the doctor could be anywhere in the world. Business models will change. Healthcare will be more integrated through partnerships and access to medicine will be both more individually tailored and more efficient.
EF: Is there any final message you would like to add?
AP: In a country that has gone through Apartheid and still suffers great inequity between the poor and the rich, black and white, one of the goals of our company was to focus on BBBEE transformation and targets. Last year we were a level 3 company and we had committed to the YES program where 132 graduates came from. When we do preferential procurement, 50% of our procurement is with other companies whose BBBEE status is 4 or better. Additionally, more than 5 hundred million rand of our procurement goes to 50% of women owned companies. Two month ago, we went from level 3 BBBEE in our certificate to level 1. We are the only company in the pharmaceutical industry that is now level 1 which is incredibly important in terms of transformation. These commitments make us a better employer and more attractive to our present and future employees. It is representative of our pride in being a local South African company. Adcock is currently the second largest local player, but our most important goal is to be a high quality company with accessible, affordable medicines that bring value to South Africans. Our mark is South Africa and this is where we play. We believe there is still room for growth.
