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Indian Pharma – Likely Future Trends

Years back, Isaac Asimov said, “Life is pleasant. Death is peaceful. It's the transition that's troublesome.” While it may not be a matter of life and death for the Indian pharma industry, it certainly is the transition time and like any transition, it has its pain, as well as gain.

 

Indian pharma has enjoyed a decadal growth rate of ≈13%, except for the year 2013, when due to large number of formulations coming under price control, growth rate plummeted by more than half to little over 6%. In couple of months of that year, pharma market actually de-grew - a first in the last 50 years! That was unthinkable. Clearly it was the time, which made people pause and think.

 

And that lead to churning in the thinking of the companies – what’s the road ahead? For sure, during 2014, companies have been busy regaining their composure and the lost sales, but parallely, they have been trying to answer the vital question – what’s next?

 

Everybody believes that the industry will continue to grow at double digit rate in the foreseeable future. But will the existing business model be the only key driver of the growth, is an open question, with multitude of the views. One thing seems pretty certain that the pharma industry will not remain same in immediate to medium future.

 

For starter, industry will learn to live with more price control at regular intervals. Same happened in 2014, and will continue in 2015 and beyond. There is absolutely no ambiguity in government thinking on this issue. Even now, only around 15% of the domestic market is under price control, and hence government feels there is scope to ‘do more’ on the issue of price control, which will put further pressure on profitability. This would possibly lead to change in distribution and marketing model, with medicines for at least chronic medicines being supplied directly to consumers. It’s a nascent trend internationally, but being experimented. AstraZeneca started with Arimidex Direct in 2012 to provide its off-patent breast cancer therapy via Express Scripts directly to consumer. Earlier Pfizer had taken this approach for Lipitor (with ‘Lipitor for You’ programme) and Viagra.

 

In the generics branded formulations market, a staple for every Indian company, there is a stiff competition in this space. Going forward, companies will increasingly move up from ‘easy to copy-low value generics’ to ‘difficult to copy-high value generics’. Companies will focus on niche areas like oncology, hormones etc.  There would also be increasing trend towards biosimilars. Herceptin biosimilar (CANMAb) by Biocon is one of recent example in this category.

 

Another interesting trend that is being seen is the emergence of new pharma companies with differentiated product strategies. For instance, a very young company, not even two years old, launched its product range with clear focus on ‘first co-prescribed product’ for selected therapeutic areas. In its first year of operation, it has achieved good success in terms of revenue. Or there is another company, around 4 years old and with revenue of Rs. 400 crore, focused significantly on women’s health segment. This company is already among the top 50, while it only operates in the 15% of the overall market. Success of such companies may spawn the launch of more new companies, which will have focused and differentiated product strategies

 

On the discovery front, there is an emerging trend of pure-play discovery companies focusing on biologicals. Now traditionally, Indian pharma strength is chemistry and not biologics. However, there are young discovery companies, which are doing cutting edge biologics focused product development work for diseases like diabetes, arthritis etc. Large pharma companies would have no option but to do more work in this area but also develop the required skill set. Just for statistics, last year 40% new drugs approved by USFDA were biologics. Regenerative medicines (based on stem cells) will pick-up momentum. Already there are companies working on treatment for diabetic ulcer, critical limb ischemia, burn cases etc.

 

In drug exports, pharma companies would continue to face pressure, especially from USFDA. Let’s admit, this issue has been brewing up, and now it is out in open in a big way. Early December, Bloomberg carried a stinging story on this issue and mentioned big names like Sun Pharma, DRL. The result of this pressure would be that Indian pharma companies would in all likelihood will diversify in their exports market. Today around 37% exports happen to US, with very little in other regions - < 5% to Latin America, around 5% to Russia. So there would be trend towards companies focusing more in these markets and in MENA region, to hedge any likely risks. 

 

With both healthcare services affordability and accessibility remaining a critical issue, there is likely to be an increased trend towards OTC medicines. Secondly, it has been seen globally, there is a direct co-relation between the GDP growth and the OTC market growth. So with Indian GDP likely to be on an upward trajectory, OTC market should grow at a faster rate and may in fact double to more than $ 6 bn during next 3-5 years. Increased consumer awareness will also drive this market.

 

It’s quite likely that other important trends during next year and beyond could be increasing collaboration between MNC & Indian pharma companies, increasing focus on IPR issues and more conflicts on account of this, more FDI in pharma. But one thing is sure that the shape of the Indian pharma industry will change. Hope is that change is for the better.

 
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