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| Within reach: The
industry is in favour of more drugs being sold over-the-counter,
The government is against it; arguing that it will lead to
improper self-medication |
One of the big ironies of
the Indian pharma story is this: Neither Indian drug manufacturers
nor their investors are too excited by the domestic market. On the
face of it, that must seem strange. The Indian pharma market is
the fourth-largest in the world by volume. But by value, the Rs
27,000 crore that manufacturers toted up in domestic sales during
2005-06 puts India at a distant 13th in the global stack-up. Now,
the country's Chemicals and Fertilisers Minister, Ram Vilas Paswan,
wants companies to subject more of their drugs to governmental price
controls. Not surprisingly, the industry is crying murder. "A
staggering 97 per cent of the drugs manufactured in India are generic
versions of almost every drug under the sun," says Harinder
Sikka, Director (Corporate Affairs), Nicholas Piramal, implying
that drug prices are already very competitive.
It's easy to believe him. With an estimated 20,000 manufacturers
(there's another count that puts the number at just 6,000), the
industry is awfully competitive. Drug prices, the industry points
out, have risen between just 1 and 3 per cent a year historically,
well below the annual rate of inflation, and that prices of some
life-saving drugs are lower in India than in poorer countries
such as Pakistan and Bangladesh. "Any move to bring intrusive
price control measures will stymie the much-needed effort and
capital required to augment crucial R&D efforts," says
Ramesh Adige, Director (Corporate Affairs), Ranbaxy Laboratories,
the market leader. "The industry already has a lot on its
plate and grappling with such unproductive diversions consumes
a lot of energy and time," he adds.
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| How much cheaper? Chemicals and
Fertilisers Minister Paswan wants more drugs to be brought
under governmental price control |
Adige has a point. The industry is competitive enough to ensure
that prices don't spiral out of consumer reach even over the next,
say, 10 years. But the issue of pricing will need to be addressed
thereafter-not for the generic drugs, which will continue to be
the bulk of the market, but patented drugs that Big Pharma is
looking to launch in India. Of course, what has made the environment
favourable for patented drugs is the introduction of the Product
Patent regime in 2005. Until then, India only recognised process
patents, which allowed Indian manufacturers to reverse engineer
drugs patented abroad and build a highly competitive industry.
According to a yes Bank report, 15 per cent of the Rs 60,000-crore
domestic pharma sales by 2015 could come from patented drugs.
The question is at what price will these drugs be launched?
Consider some of the patented drugs that are expected to be launched
in India soon: Novartis' anti-cancer drug Avastin costs $2,750,
or Rs 1,23,750, for a 400 mg or 16 ml solution in the us. According
to a report in usa Today, "adding Avastin to standard chemotherapy
raises the price to $21,000" for an eight-week treatment
in the us. Even American consumers are outraged by the price of
the new generation drugs. (According to the same report, "treating
all 56,000 Americans with advanced colorectal cancer could total
$1.2 billion, or Rs 5,400 crore".) Similarly, another new
age drug, also from Novartis, called Lucentis (for treatment of
macular degeneration in the eye), costs $1950 (Rs 87,750) per
injection in the US.
Will the innovator companies launch such drugs at their exact
us prices? Perhaps not. But even at 'India prices', these drugs
may be affordable only to the most affluent consumers. (For the
record, some Big Pharma companies have a policy of selling critical,
but high-priced, drugs to the poor free of cost.) How will the
drug regulator deal with this issue? Not an easy question to answer,
but neither a significant source of worry right now. For one,
no drug company will price a product beyond the purchasing power
of its consumers. Two, the government retains the right to compulsorily
licence the drug-that is, in case of a deemed national emergency,
the government can ask other manufacturers to produce the drug.
"Patent offices here are still not equipped to handle applications.
The absence of clear-cut procedural guidelines, and delays in
disposing of pre-grant opposition are some of the issues that
need to be addressed," says a director at a pharma MNC.
Changing Topography
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| A bitter pill:
Companies like Ranbaxy are more focussed on global markets,
but India is key in terms of volumes |
Meanwhile, the fragmented domestic industry is likely to consolidate
further. In fact, in some sense, it is already fairly tight-knit.
In branded formulations, for example, the top 50 companies account
for 80 per cent of the market. There will also be further shift
towards improved drugs-that is, ones that are more efficacious
or come in a different and more convenient form or dosage. In
industry lingo, it's called novel drug delivery system, or NDDs.
In addition, drug makers will target life style-related diseases.
Over the recent years, therapeutic segments such as anti-diabetic,
cardiovascular, and neurological have grown rapidly, even as traditional
segments, including anti-infectives, have declined. Most analysts
expect the former to drive the industry's growth in the years
ahead.
Over-the-counter (OTC) drugs are something else the industry
is betting on. Currently, 80 per cent of OTC drugs is sold via
standalone chemists and drugstore chains. Selling OTC products
through grocery stores is only permitted in rural areas of less
than 1,000 inhabitants, but the industry has been lobbying for
a change in this rule. "Wider access to non-prescription
products will bring opportunities to manufacturers to sell to
a wider consumer base and will allow retailers to expand their
current product offering, thereby improving the quality of healthcare
in the country," says D.G. Shah, General Secretary, Indian
Pharmaceutical Association.
The government is in two minds over expanding the OTC list.
The industry argues that putting more household remedy drugs such
as calcium supplements, antacids, skin ointments and medicated
inhalers will create a market worth Rs 3,000 crore. However, Union
Health Minister Anbumani Ramadoss doesn't seem to be in favour
of it. The argument against widening the OTC list is that 61 per
cent of Indians are illiterate and, therefore, there are chances
of improper self-medication.
A growing middle class and greater incidence of life style-related
diseases mean that the domestic market will continue to grow.
In fact, a CII study estimates that the industry revenues will
touch Rs 1,20,000 crore by 2010. It may still not be large enough
to excite Indian drug makers, but it is this base that allows
them to reach out to global generic markets.
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