Cipla Situation Analysis

Executive Summary:

The present case illustrates about Cipla which the leading generic pharmaceutical company is based in India. Cipla uses the reverse engineering method of patented drugs to make affordable medicine for the third world countries and India. Cipla is different from the big pharmaceutical companies which are profit oriented and uses the patent to keep their medicines costly. Due to TRIPS agreement of patent compliance law by WTO in the upcoming two years, Cipla is facing threat to its manufacturing of generic drugs. This will create problem to manufacture the drugs at lower cost and hence will make the drugs costly for its customers. Cipla focuses on the developing and undeveloped nations where their customers are the majority of poor people. Cipla should understand its strength that is their large customer base and try to keep manufacturing generic medicines. It should focus on the lack of patented medicine to manufacture the drug. It should focus on the R&D of the drugs by joint venturing with the giant Pharmaceutical company having strong R&D.

Situation analysis

Introduction-

The case presents the upcoming problem for Cipla, Indian Pharmaceutical Giant, regarding the changes to be brought in their production strategies for drugs within the next two years when strict patent laws for the manufacture of generic drugs from patented drugs would be enforced in India. Cipla has been one of the pioneer providers of necessary drugs at large scale in times of war and epidemics in India. The key strategy they adopt is reverse engineering of patented drugs and manufacturing a low-cost generic drug which they sell in India, other third world countries as well as to European countries and US. the multinational competitors of Cipla find this very unfair that in India and other third world countries as Cipla’s low cost generics of their medicines took away huge market share Since 1972 Hameid had convinced the Indian government to keep pharmaceutical drugs out of the patent law and thus by using different production technology had been successful in providing anti asthmatic, anti-malarial, anticancer and  anti-inflammatory drugs in India.

In the past few years, Cipla was into providing low cost AIDS treatment medicines in Southern Africa. After many price wars, Cipla had introduced a drug called Trioumine which was a combination of three different drugs patented by three different companies. He was concerned that after implementation of trips the entire generic drug production lines would have to be closed and the already manufactured products would also become unsaleable. Further, as we see that Cipla’s R&D expenditure was just 0.2% and to increase it within two years at a big level with fruitful results seems too much assumptive. We also see that the other multinational pharmaceuticals were earning hefty profits before tax from their niche markets in developed economies and were trying to penetrate in the third world countries with their high cost medicines without considering humanitarian issues of poverty prevalence in these countries. Cipla, on the other hand, had launched generic drugs at affordable prices in these poor countries seeing the fact that a large population was suffering from diseases like AIDS with very poor financial conditions to be able to afford high cost patent drugs. However, the date of India implementing TRIPS laws was just two years down the line and Hameid had to think of a new action plan to keep the company growing profitably.

Statement of Objectives:

1. To secure the sustainability of CIPLA in the long run.
2. To continue the humanitarian strategies of business that the company has been following since its inception.
3. To make sure that the third world countries get the medicines at low cost.

Decision Problem Statement

What steps should Dr. Hamied take for Cipla’s generic medicine production and long-term sustainability in the pharmaceutical market after the TRIPS implementation in India in the upcoming two years?

Criteria for decision making

1. Complying with new patent rule after TRIPS implementation in India.
2. Maintaining the competitive market advantage of Cipla.
3. Continuing with its core competency of providing the low-cost generic medicines to Third World Countries.
4. Disposal of generic drug stocks of Cipla which will become unsaleable after the implementation of TRIPS.

Generating Alternatives

1. Urging the government to exclude Food and Pharmaceutical products from TRIPS.
2. Allocate more budget in R&D, sell the drug to the government and ask the government to subsidise these high - cost drugs.
3. Lobbying with other generic drug manufacturing companies for rescinding the TRIPS patent law.
4. Production Joint Venture with International Pharmaceutical Company which has an extensive R&D budget.

Evaluation of Alternatives

First Alternative: This alternative would not comply with current TRIPS rules and regulations. Cipla would be able to provide low cost medicines and could sale stock of generic drugs but the chances of change in TRIPS regulations are very deemed and company could not simply rely on it.

Second Alternative: As per the given data of financial expenditures of various pharmaceuticals in R&D Cipla lags far behind with a very low budget allocation of 0.2% while other companies have their R&D much more strong with allocations as high as 15% .in the small span of two years even if Cipla increase expenditure on R&D it won’t be able to come out with novel drugs and would ultimately lose its market in generic medicines as well. Also depending on Government to buy their drugs based on their past records is assumptive.