Report: The Future of Healthcare

Sector: Healthcare

Publication Date: 2020

Berit Lindholm, President and CEO at Bluefish Pharmaceuticals

Generic drugs are typically cheaper than brand-name pharmaceutical products; they free up healthcare budgets to finance the next wave of innovation and the development of new drugs, says Berit Lindholm, President and CEO of Bluefish Pharmaceuticals.

Could you please start by introducing the evolution of Bluefish as a company?

A Swedish entrepreneur called Karl Karlsson founded Bluefish Pharmaceuticals back in 2007. He had no formal background or training in medicine as such, but had been working on commercials for the pharmaceuticals industry. Essentially, he spotted a market opportunity to source suppliers from India, to in-licence products and launch competitive genericized medicines across Europe.

Nowadays the complexion of the company looks rather different. We are already present across almost all of the main therapeutic categories and have started to develop some of our own proprietary products as well. Since I was appointed CEO, we are focusing our geographic footprint on those markets where we can generate most of an impact, which involved some hard choices such as withdrawing from certain markets. We now possess eight affiliate offices spread across different markets, and for the rest we have entered into import-distribution agreements with local partners on the ground.

Please tell us more about your business model and your concept of progressive generics?

We don’t have the muscles of big generics outfits like Teva, Sandoz or Mylan, so we have to play a different game. We enter the market as the “underdog”, with a clear focus on a specific segment, introducing a limited product portfolio customised for local customer demands. We are highly flexible and opportunistic when electing which products to develop, either pursuing niche products or commodity products depending on the intricacies of the local ecosystem.

The aim is then to gradually advance and capture significant market share and increase the product range. By offering affordable premium generics on a consistent basis, Bluefish is ultimately able to establish strong and lasting customer relationships based on trust and a track record of reliability that stand the test of time.

We are a progressive generics player in the sense that we are willing to look beyond mere price competitiveness and will not engage in a race to the bottom on price to the detriment of quality or consistency. Our calculation is that, for payers, having a stable partner who can guarantee security of supply of high-quality products is actually just as important as having an affordable price tag. Super low prices become meaningless if there are stock-outs and the product disappears from the pharmacy shelves entirely. What sets Bluefish Pharmaceuticals apart from many of our competitors is that we can maintain a 95% service level and are renowned for our dependability and our higher quality standards. Increasingly, we end up as the first port of call when a public authority finds they have a stock-out situation on their hands.

What would you say have been the main ingredients of your success thus far?

The key lies in close collaboration between our country managers who know their markets inside out and IP specialists who can evaluate the lifecycle of a product based on different factors such as the patent expiry date, the evolution of the standard of care and the potential introduction of new treatments. You need to have your ear to the ground to be able to spot market gaps as soon as they arise and then to have the rapid reaction speeds to be able to opportunistically seize the initiative.

This boils down to the calibre of our workforce and to having a corporate culture that is not afraid of failure and encourages our personnel to try outside-the-box strategies. For example, if I hire a traditional salesperson, we will get traditional business with expensive armies of sales representatives. That is not what we want. We recruit creative, self-starters who are bold enough to experiment with alternative strategies and take calculated risks. And, when they do so, as a company, we back them enthusiastically.

Thanks to our experience, flexibility and efficient organisation, Bluefish is able to introduce new products on the market at pace and to react effectively to market changes as they arise. To give you an example of the latter, we were a major player when it comes to public tenders of the Spanish region of Andalucía, but the political context changed practically overnight invalidating the existing business model in the process. We were nimble enough to adjust course and have now launched a digital platform, and we are getting partners on board to assemble an attractive product portfolio to offer direct to the pharmacies.

What has been the impact of the EU’s Falsified Medicines Directive on your ability to offer consistent supply?

Serialisation has certainly produced a bit of a shakeout in the market, and we have been big beneficiaries from some other companies’ stock-outs, where we have been able to step in. We’ve equally been managing to pick up some tender opportunities that our competitors would usually have been competing in, but didn’t dare bid in recent rounds because of the penalties incurred if they weren’t able to ensure uninterrupted provision.

As we have made security of supply one of our major points of differentiation, we already had a tremendously robust supply chain in place that we could rely upon. Competitors who hadn’t emphasised this capability were caught out because you can’t just change a key supplier overnight. Furthermore, I am proud to say that we adapted our procedures very early on to align with the requirements of the EU’s Falsified Medicines Directive and took proactive steps to ensure that our supply chains were also future-proofed as far as possible.

The majority of our suppliers were prepared, and in instances where we saw that one of our suppliers was going to fall behind, we tried to mitigate any effect with appropriate stock build. Naturally, there are some instances where I wish we could have assembled even more stock, but to do that you need to ask a year and a half ahead, and with competitors doing the same, you are sometimes stuck with the original volumes. We also chose to go for the most established and largest track and trace network system called TraceLink, which is actually the system that around 70% of our CMOs are using.

It certainly seems that Bluefish’s reputation for reliability and dependability was instrumental in winning recent big-ticket German tenders…

I am confident that we have positioned ourselves on the right side of history. Undercutting on price no longer suffices as payers have become wiser, and the German system is actually one of the most enlightened on this score. In the latest tender of the German health insurance, AOK, covering around 36% of the nation’s population, Bluefish was awarded exclusivity for four products for a 22 months contract period at an ex-factory-price of around €22 million. The real value will actually be quite a bit lower when rebates are taken into account, but nonetheless this constitutes a significant landmark for us and demonstrates to me that we have got our priorities right in the eyes of the client.

How well are generics perceived across Europe these days, both from a payer and consumer perspective?

These days I seldom see any discussion anymore about the quality or integrity of generics. Public healthcare budgets are overstretched all across Europe and both regulators and payers have come to realise that generics are a vital part of the equation in rendering care more financially sustainable. Even innovator drug makers nowadays acknowledge that novel treatments and their genericized versions are two sides of the same coin. Traditionally innovator drug producers considered generics firms as their opponents, but this is no longer the case. Instead they now recognise that it is the savings generated by generics that free up budgets to finance the next wave of innovation.

The authorities in the European countries also recognise that generics are driving big savings in the health budgets. This in itself leads to having more money to spend on other patient groups, all to the benefit of the society. Generic patients pay less, and more patients can be treated for the same money.

Innovator and generics associations in many markets these days tend to work in concert towards shared goals and enjoy largely constructive relations. This is perhaps partly a reflection of the fact that there are effective mechanisms in place to protect both parties. For example, many more patent extensions are awarded to ensure that new drug discoverers can recover the investments they made in developing a molecule and still generate some kind of profit.

You mentioned that Germany has taken an enlightened approach towards enabling a sustainable generics market. Tell us more about variance across Europe and which jurisdictions you consider to be properly integrating genericized medicine.

There’s been a lot of turmoil in the generics segments of many markets and governments are increasingly looking to interfere as a stabilising force. For a volatile market, one needs to look no further than the UK, where free market forces enable a race to the bottom on price to the point where companies are unable to compete and withdraw their products entirely from the marketplace, leading to stock outs and eventually higher prices.

Germany, by contrast, is definitely leading the way with a more sustainable concept. Service level is crucial for the German tenders because if you cannot supply, you incur high penalties and eventually get kicked out. Reliability is embedded in the adjudication process because they take into account your track-record and the reputation you have built. Moreover, they don’t allow you to sell at a price lower than your costs; so you have to submit a Profit & Loss statement to prove you’re not making a loss and can properly recover your costs.

Nordic countries such as Denmark and Sweden also tend to have a strong grip and control of the generics segment, for example in Sweden they implement a price cap that you can’t go above. One of the big advantages of the German market is they award tenders for a two-year period which gives generics firms stability and allows them to structure their business plans accordingly, whereas in Sweden the contract duration may only be for a month.

What do you identify have been the main emerging trends in the generics industry of late?

We've seen a lot of consolidation as companies like Teva and Mylan went on a spending spree and amassed assets to attain scale and cut the cost base. Some of these companies then calculated that they could drive the prices so low that they could push out smaller competitors from the market place, even operating at a loss temporarily if need be. However, that strategy has not paid off, and the large multinationals have simultaneously found themselves exposed to a deteriorating operating environment in the United States.

Other companies are looking to geographic expansion and particularly comparatively underexplored markets such as Australia, New Zealand and Canada as a way of getting the volumes up in their plants. Many of the smaller generics firms have been dropping the common drugs and focusing on specialised, overlooked niches where volumes will be low, but the margins higher. We are part of this trend in the sense that, aside from blockbuster products where patents are due to expire, Bluefish nowadays seeks out complex formulations and more niche-oriented areas such as our Miglustat generic for Gaucher disease, a rare lipid storage disorder. Sales force effectiveness has also become a big thing as companies like us try and connect with those pharmacies that never have sales representatives visiting them.

What sort of additional opportunities do you perceive ahead for scaling the value chain?

The larger companies will be trying to get into Biosimilars and secure a slice of that action, but the barriers to entry are high, because we’re talking about a very technically complex reverse-engineering of biologics, and the end product is not substitutable in quite the same way as generics. Nor are there, for that matter, viable and bespoke regulatory pathways for bringing such products to market yet in place in many jurisdictions.

For companies like Bluefish, the next step up the value chain would be to look at incremental innovations such as coming up with more effective delivery mechanisms than the originator product. Already you can find some innovations in delivery appearing in markets such as thin papers that you place on the tongue that enable a far more rapid adsorption more akin to say a nasal spray. However, this is for the longer-term future because the upfront investments and associated risk are high.

What, then, are your main priorities looking forward?

We will continue with the successful launch of Bluefish own developed products given that we already have proof of concept and strategy with the success of Anagrelide and Hydroxyzine. At the same time, we have some ideas for opening one or two new affiliates, and I will also be looking to establish a solid foundation ahead of a possible future IPO of the company.


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