By Nils Pratley (May 2004).
Reproduced from MT magazine with the permission of the copyright
owner, Haymarket Business Publications Ltd.
entrepreneur is supposed to have a different story to tell, but
it's not true in the case of the British pharmaceutical distribution
industry. The astonishing fact is that six of the most successful
companies supplying medicines to Britain's pharmacies and hospitals
are owned and managed by Kenyan Asians in their early fifties. It's
a story of enterprise overcoming adversity. Nils Pratley examines
came to Britain in the late 1960s and early '70s, having been raised
in relative - and in some cases extreme - poverty in Kenya. They
achieved pharmacy qualifications in Britain generally by supporting
themselves through college with menial part-time jobs. All then
established their own retail pharmacy businesses before building
much larger wholesaling operations. Now all are multi-millionaires,
some worth more than £100 million individually.
couldn't call them a Kenyan rat pack - for a start, most are far
too shy of publicity - but they do see each other socially. They
are all based in or near London and in the past have traded with
each other; for the most part, though, they compete for the same
& BIKHU PATEL
rise of the Patels is an original rags-to-riches tale. Vijay
and Bikhu were brought up in poverty in Eldoret in the western
highlands of Kenya; they now own and run a business with 700
employees and a turnover of £280 million. Vijay came
to Britain at the age of 16 with £5 and some O-levels.
He took menial jobs to pay his way through sixth form and
the College of Pharmacy in Leicester. A loan from an uncle
allowed him to open his first pharmacy in Leigh-on-Sea in
Essex in 1975. The company took off when it entered the wholesaling
and distribution market in 1984 and started to supply hospitals
and other pharmacies.
brother Bikhu, who had trained as an architect, joined Waymade
and the pace of growth has been exceptional - profits were
£1.4 million in 1995, £9.8 million in '98 and
about £22 million last year. The Patels rank among the
richest Asians in Britain. Vijay has long spoken of his ambition
for Waymade to become a mini-Glaxo. Last year, the brothers
launched Amdipharm to develop medicines that are too small
for the big pharmaceutical firms. Palliative care and the
relief of post-operative pain are two early areas of concentration.
An Aston Martin has been one of Vijay's few luxury indulgences,
but the Waymade millions have also funded a school in Kenya
and regular medical camps in India. 'I never want to go back
to living in poverty,' Vijay says. 'That has been the biggest
stimulus for me to get on in life and to succeed. I knew I
couldn't get any lower than where I have been.'
is no simple explanation for the phenomenon, except a shared cultural
specialism in medicine, says Bharat Shah, whose Sigma Pharmaceuticals
turned over £190 million last year. 'All of us have one thing
in common - we are all from Kenya. When we were young and doing
our O-levels in Kenya, everybody in the Asian community tended to
do the same things. So if one person went into pharmacy, everybody
did. The majority of East African Asians are not engineers or teachers;
they are pharmacists or accountants.'
adds that 'we all learned from each other and talked about failures
and mistakes', which is understandable: they are leaders of an industry
that often finds itself in conflict with the big pharmaceutical
giants. It deals in generics - copycat versions of a drug produced
after the expiry of a patent - and in parallel imports.
Bharat Shah says the support of his family has helped him
build Sigma from a single pharmacy in Watford to a company
concentrated on wholesaling that made profits of £4.8
million on turnover of £190 million. Two of his brothers
work in the business - Manish, an accountant, and Kamal, who
works in operations. And now his son Halul runs retail pharmacies.
'It's an Asian way of working,' says Shah. 'We are all focused
on what we are doing and we are working for succession. It's
all in the family. We are not growing the business for an
exit route.' Of the success of so many Kenyan Asians in the
same field, he says: 'We all had one thing in common - we
came to a country where we had to make it and our families
supported us. My wife didn't mind me working 14 hours a day
on the business and not being home to read the children bedtime
stories. But we had, and still have, a good relationship.
We have no regrets.'
latter is more controversial, as it includes the latest patented
medicines. A British parallel importer will buy the drugs in countries
such as Spain, where wholesale prices are much lower, and repackage
them for the home market. It's the same chemical compound, usually
produced in the same factory; only the price is different.
categories are not only highly regulated but officially encouraged.
The Government, after all, hardly wants to deter anybody who promises
to reduce the NHS's drugs bill. It's the pharmaceutical giants that
complain. They defend their patents until the last possible moment
and argue that parallel importing diverts cash from the British
science base. But they have never succeeded in eliminating the entrepreneurial
opportunities. 'If I could have my time again, this is the business
I would have gone into,' confesses one executive of a British pharmaceutical
Engineer's story demonstrates the possibilities, even though his
firm, Chemidex, is one of the few generic specialists that has not
also expanded into parallel importing. He was sent to London in
1969 at the age of 16 to live with his aunt, with £75 in his
pocket. He worked in the Wimpy burger restaurant on Oxford Street
in the evening and at weekends to support himself through sixth
form and then the London School of Pharmacy.
graduation, he took a job as a pharmacist with Boots. Already feeling
the company was 'a little bit like the civil service', he was infuriated
by the demand of a visiting area manager for a cup of tea at a moment
when he was busy dispensing prescriptions. 'I made the cup of tea,
but that night I went home and wrote a letter of resignation,' says
Engineer. 'It was the best thing that ever happened to me.'
set up his own pharmacy in Chertsey, Surrey, on the site of a former
grocery store. He opened long hours, including Sundays, on the principle
that 'your body doesn't decide to be ill when the shops are open'.
expanded the business, even buying a former Boots store in Addlestone,
near Weybridge. By 1999, he had 14 pharmacies and their value had
increased after the government acted to prevent a free-for-all in
the market by restricting the grant of new pharmacy licences. German
group GEHE - one of three companies trying to consolidate the pharmacy
market - came knocking. 'They kept on increasing their offer until
it was irresistible,' he says. The final price was a cool £12
chose to invest much of the proceeds in his much smaller wholesale
business. He bought some small branded pharmaceuticals from big
pharma companies, typically medicines turning over £2 million
or less, and made instant savings by switching production to established
factories in eastern Europe and the Far East.
he moved into generics, an area that requires specialist knowledge
and a willingness to take calculated risks. Engineer reckons it
costs between £200,000 and £250,000 and takes two or
three years to develop a generic pharmaceutical. The first step
is to identify the patent that is about to expire and then to make
sure you do not infringe it as you develop a copy-cat version.
patent lawyer alone can cost £50,000. 'You have to make sure
you are on firm ground,' he says. 'I would rather spend £50,000
doing that than get a writ from somebody saying: "You have
infringed my patent", and then you could get into a legal battle
that could cost £500,000 or £1 million.'
is also product insurance to be paid, plus the costs of proving
the efficacy of the drug. 'If it doesn't work in the biostudy, then
you have to start again,' he says. 'The regulatory authorities don't
have half-measures. The regulations are so controlled that generic
products are of a very high standard.'
hurdles may be high, but Chemidex now has 42 generics. They include
treatments for gout and depression, an antibiotic for anthrax and
even a generic version of the famous Prozac. They all contributed
to profits last year of £9 million - not bad for a wholesaling
business that was originally subordinate to Engineer's retail pharmacies.
Navin Engineer, now 51, arrived in Britain in 1969, he was
driven by a burning desire to work for himself, in contrast
to his father, who worked for years in the Kenyan civil service.
'I believed in working hard and wanted to be rewarded for
what I did,' he says. He founded Chemidex with his wife Varsha.
'None of this would have been possible without her,' he says.
'She gave 100% support in running the shops and the pharmacies.
You need a rock.'
have two children, both of whom are studying medicine. Having
sold its pharmacies, Chemidex is now a wholesaler of both
branded and generic medicines, but not parallel-imported drugs.
Engineer is in no doubt that growth in cheaper generic medicines
has contributed to a more efficient healthcare market. 'Wearing
my hat when I am selling brands, I would say we need new molecules
and new discoveries and we need to pump money into that,'
he says. 'Fifty years ago, people were dying of tuberculosis
and high cholesterol and we couldn't transplant organs or,
if we could, we didn't have the drugs to make sure that rejection
didn't take place. But now we have drugs to do all these things
and because of the budgetary pressures on the NHS, it has
to look to save money.'
RETAILING TO WHOLESALING
of the other Kenyan Asians made the switch from retailing to wholesaling
much earlier. Shah sold two of his three pharmacies in 1980 and
set up Sigma two years later in the back of his remaining shop in
Watford. The big boost for the generic market came in the mid-80s,
he says, when the government effectively banned the NHS from prescribing
famous drugs such as Valium and Benylin, and insisted that it use
cheaper generic versions. General practitioners were encouraged
to switch their systems to prescribe drugs by their generic medical
name rather than the brand name.
effect on prices when generics appear can be swift. A few years
ago, Zocor, a statin for lowering cholesterol, was reputed to account
for £250 million of the annual NHS drugs bill. In its branded,
patented form, the drug cost more than £30 per prescription.
When generics started to appear, the NHS immediately halved the
price it was willing to pay. With the arrival of more generics,
the price has at least halved again. It is an industry where the
costs of production are low and getting lower.
Naresh Shah and his wife Shweta founded Jumbogate in 1982
and the business is firmly rooted in wholesaling - its retail
chemists generated less than 0.5% of the group's £97
million of sales last year. But it is rather harder to work
out what is happening in the rest of the business - and Shah
refuses to talk to the press. The accounts for the 12 months
to 31 March 2003 show that Jumbogate fell from a £7.77
million pre-tax profit to a loss of £5.46 million. That
doesn't tell the whole story, though, because the biggest
contributor to the swing was a £15 million jump in employment
costs. Some £6 million of that went to Shah himself
- shown as the sole director during the year. It may be a
simple case of an entrepreneur taking some cash out of a successful
the mid-90s, Bharat Shah (Sigma) was moving further up the supply
chain. 'It got very competitive,' he says. 'We decided not to be
just a trader, but to go into manufacturing. We got licences for
popular generics and got the products manufactured outside western
Europe - places like Turkey, the Middle East and India, where the
cost bases are very low.
big problem was that most of the factories were not approved for
Europe, so we did a fair amount of work to get two or three approved
for the UK. That was the big breakthrough - we could compete with
the market.' Sigma now has access to about 100 generic licences,
with products ranging from antibiotics to cardiac treatments.
an early legal scare, Shah was wary of getting into parallel importing.
'We were taken to court by Glaxo in 1986, but we were much too small
to fight a multinational like that and we backed off,' he says.
'Indeed, we backed off to such an extent that we didn't go back
into parallel importing until 1993-94, when that market was expanding
has been boom time ever since for parallel importers. It is an industry
that operates on the simple principle of buying a medicine in a
country where it is sold cheaply and selling it in a country where
it costs much more. Spain and Greece are prime examples of cheap
countries; Britain, France and Germany are expensive. Transport
costs are usually tiny - most parallel importers just use an overnight
freight service. Then there is the relatively straightforward process
of repackaging for the British market, which usually means little
more than translating the patient information into English.
& KETANH MEHTA
Brothers Bharat, 52, and Ketan, 46, came to Britain from the
Kenyan capital Mombassa. They founded Necessity Supplies in
Uxbridge, Middlesex, in 1986. Much of its growth has been
driven by parallel importing, and in 2002 the company made
profits of £15.3 million on sales of £144 million.
They keep a low profile. Almost their only public utterance
has been about succession - a worry that their children may
not wish to run the firm. 'All they think of is computers,'
says Bharat Mehta.
PRICING - A MINEFIELD
Medicines & Healthcare Regulatory Authority, the successor to
the Medicines Control Agency, acts as regulator, overseeing the
licences to assemble in English. 'Prescription drugs in some European
countries can be as much as 80% cheaper than they are in Britain,
or as little as 15% to 20% cheaper,' explains Shah. 'Pricing is
a minefield that only the multinational pharmaceutical firms understand.'
is the right word. The bottom line is probably this: the drug firms
recoup their research costs where they can and from whoever can
afford it. Prices of patented drugs in the US are the highest in
the world. The pharma giants still lobby furiously to stop cross-border
trading, but they are losing the fight.
Britain, a trade body of the largest parallel importers called the
British Association of European Pharmaceutical Distributors handles
the legal battles on behalf of its members. Five of its 13 members
are companies that are owned by Kenyan Asians, and Ravi Karia of
Chemilines and Bhikhu Patel of Waymade sit on its council.
Founded 18 years ago, Chemilines consistently makes the top
ranks of surveys of Britain's fastest-growing companies -
profits for 2003 are expected to be £4 million on sales
of £60 million. It was founded by Ravi Karia, who has
day-to-day control of operations, while brother Jagdish heads
the sales team. In March this year, the company opened a new
90,000 sq ft repackaging and warehouse facility in Wembley.
imports and generics have helped the NHS,' insists Bharat Shah (Sigma).
'When the NHS talk to us, they like us and support us. They realise
that the generics boys have done a sterling job in terms of reducing
the NHS drugs bill. And parallel importing saves them about 10%
on their drugs bill.'
the future, Sigma plans to enter the French market - 'France is
where Britain was in 1985,' he says. At Waymade Healthcare, the
largest of the Kenyan Asian firms, Vijay Patel is even making a
tentative push into drug development. It seems that the extraordinary
growth story of these six companies has a long way to run yet. 'I
don't think I ever envisaged that our family business would ever
get to be this big,' confesses Shah. 'It's in the Asian blood that
we would work all hours of the day if it gives us the return, so
it grew by default, really.'