From Cipla to Glenmark, pharma companies' double-digit growth in doubt

Govt's proposed changes in pricing policy could play spoilsport

Domestic drugmakers are targeting double-digit growth in 2018-19 on the back of product launches and expansion in new therapies but the government’s proposed pricing changes could put the brakes on their plans.

Cipla has guided for $1 billion (around Rs 67 billion) in domestic sales in 2018-19 with product launches and an uptick in its cardio-metabolic drugs. Cipla had sales of around Rs 59 billion in the last fiscal year and will have to achieve around 15 per cent growth to reach sales of $1 billion.

Glenmark too is targeting 12-15 per cent with the launch of differentiated products and expansion of over-the-counter (OTC) offer while Lupin is evaluating acquisitions and is planning expansion in fast-growing therapy areas such as dermatology, urology and oncology.

Unlike the US market, where risks are high and rewards uncertain, the domestic business for pharma majors is steady. Operating margins average 25-30 per cent. Compliance and R&D costs in the India business are low and credit cycles are shorter and thus a rebound in the domestic market is important.

However, a government proposal to extend price caps to non-scheduled medicines will prove to be a dampener. "The proposal is damaging. The industry will suffer a setback if the proposal is implemented and will not be able to invest in innovation and quality compliance," said D G Shah, secretary general of the Indian Pharmaceutical Alliance.

Currently prices of around 850 scheduled drugs are fixed in accordance with the wholesale price index. The government is now considering extending the caps to all medicines.

Pharmaceutical companies did not immediately comment on the government's pricing proposal. 

Companies have, however, expressed optimism on growth revival in the current fiscal year. 

A Cipla spokesperson said its in-licensed cardio-metabolic drugs (launched in the past 12 months) had started gaining higher traction. 

In February Cipla partnered Swiss drugmaker Roche to sell two drugs to treat rheumatoid arthritis and cancer.

“Driving productivity and strengthening in-clinic practices continues to be a major focus area. Moreover, we are working on innovative solutions to expand patient pool in core areas such as respiratory through direct to consumer campaign and low cost early diagnostics. We are quite confident of strong growth in the domestic market where we hope to achieve sales of $1bn in FY19,” Cipla spokesperson added. “We will continue to consolidate our chronic portfolio which includes cardiac, anti-diabetes and respiratory segments. In addition to these, we will be strengthening our presence in dermatology, oncology and urology therapies. We are aggressively evaluating potential inorganic opportunities to usher our portfolio. One important outlook will be to enter into strategic alliances with MNCs (for chronic therapies) in order to bring in a new class of drugs for Indian patients,” said Rajeev Sibal, Lupin's president of India formulations business.

Last year, Lupin expanded its field force by 1000 representatives and hiring this year will be at same levels as last year but focus will be more on productivity, he said. “Our future strategies will involve a lot of digitalisation and technology adoption,” Sibal said and added that firm had already launched initiatives like tele-marketing and digital outreach to create product awareness in remote areas.

AT A GLANCE

• Large drugmakers such as Cipla, Glenmark, Lupin and Sun Pharma earn around 25-40 per cent of revenue from domestic market
• Industry-wide domestic sales growth fell to 5.3% in FY 18 compared to 10.3 % in FY 17 because of the GST, delayed product approvals et.
• Companies such as Cipla and Glenmark have guided for double-digit growth in FY19 but changes in pricing policy could play spoilsport