Indian drug firms' growth slowed in 2017 on slow approvals, MNCs' caught up

GST rollout, more medicines being brought under price control, slow rate of drug approvals by NPPA hit Indian players, which control 80% of the domestic pharma market

Home-grown pharmaceutical companies in 2017 saw some erosion in their edge over multinational peers in the domestic drug market. Tempering the past year’s trend of a significant lead, Indian drug firms grew at almost the same rate as their MNC counterparts.

While Indian pharma players clocked a 5.54 per cent growth rate during 2017, multinational ones grew at a shade higher (5.55 per cent rate), show data. This was partly because overall pharma growth slowed during the year, thanks to several factors, even as multinational companies saw a few months of high growth with specialised product launches.

According to data sourced from AWACS, the market research wing of the All India Organisation of Chemists and Druggists (AIOCD) which represents over 500,000 medicine sellers across the country, the Indian pharma market (IPM) clocked 5.5 per cent growth in moving annual turnover (MAT) value – the lowest rate in eight years.

In 2016, IPM had grown 10.68 per cent – home-grown companies, with 11.85 per cent growth, had beaten the industry rate, while multinational firms with a presence in the domestic market had clocked 6.42 per cent growth.

There were several reasons for a decline in domestic pharma sales growth in the 2017 calendar year. Besides the rollout of the goods and services tax (GST) regime disrupting the inventory channel, there also were delayed product approvals by the National Pharma Pricing Regulator (NPPA) and the inclusion of more products in the list of medicines with controlled prices.

Home-grown companies, with a share of 79.4 per cent, however, continue to enjoy the lion’s share of the Rs 1.16-trillion domestic pharma market, while the foreign firms have a 20 per cent market share.

Among Indian companies, Sun Pharmaceuticals has the highest market share – 5.45 per cent overall, and 6.87 per cent among Indian players. Sun is closely followed by Cipla and Cadila Healthcare, with 4.62 per cent and 3.93 per cent share of the overall domestic pharma market, respectively.

Abbott Healthcare rules the pack among foreign companies, with a 3.1 per cent share of the market. It is followed by GlaxoSmithKline (3 per cent) and Pfizer (2.36 per cent). Abbott, in fact, enjoys a 15 per cent market share among multinational peers.

According to Cadila Healthcare Chairman Pankaj Patel, who is also the president of the Federation of Indian Chambers of Commerce and Industry (Ficci), when it comes to market share, domestic pharma companies have historically done well because they are present in the high-volume segment. "Domestic pharma companies make the essential drugs, which are listed in the National List of Essential Medicines (NLEM) and are high-volume drugs. MNCs, on the other hand, are primarily focused on high-margin products," he says.

Indeed, multinational companies’ strategy of focusing on specialised products spiked their growth rates during some months of the year. In August, for example, while Indian companies clocked a 1.4 per cent growth rate, MNC firms (led by Boehringer Ingelheim’s 18.3 per cent growth, AstraZeneca’s 11 per cent and Janssen’s 10.6 per cent) clocked a 6.2 per cent growth rate, AIOCD-AWACS data show.

A senior official at a Gujarat-based pharma company who did not wish to be named said multinational firms at best launch eight to 10 products in a year, but their growth rate in 2017 beat domestic firms as they tend to avoid the NLEM medicines. "While they have not gained market share, the growth rates of multinational and Indian firms have been similar, as Indian firms were affected more by the delays in approvals for launching drugs under price control," he said. Besides, the growth rate of anti-infectives, a mainstay for Indian firms, saw a decline in 2017.