Pharma Cos Urged To Use M & A Route For Growth
Domestic pharmaceutical companies have been urged to go in for acquisitions, diversification and specialisation in the radically different post-GATT scenario.
Drugs controller general of India P Dasgupta said here on Saturday that drug industry would have to take note of the changing world scenario, where only about a dozen pharmaceutical companies have a presence. The sudden increase in the off-patent products have led drug firms the world over to formulate new strategies.
Analysing the growth patterns, Dasgupta said since 1996 the domestic industry has grown by 15.8 per cent, as compared to 11 per cent in Italy and 10 per cent in the US.
This is attributed to the expiry of a number of patents, giving a surge to generic products. In the US alone, 40 products worth about $16 billion have become offpatent drugs.
Is the domestic industry ready to compete against global majors by manufacturing and marketing these 40 drugs? Dasgupta asked members of the Indian Drug Manufacturers Association (IDMA), whose national executive committee met here.
To meet the patent gaps, global players are making forays into new areas like biotechnology with the intention of creating niche markets. For instance, in 1996, US firms entered into 180 collaborations worth $2.8 billion for research in biotechnology alone.
The global over-the-counter (OTC) market grew by $48 billion in 1996 with bulk of the growth being recorded by developing countries.
Generic market is a different ball game. Locally, the rural areas should be tapped by domestic drug companies for generic products.
Observing that domestic companies are relatively small operators, Dasgupta suggested commercial cooperation inplace of corporate warfare for survival.
Cooperation will have to take the form of mergers and acquisitions (M&As). M&As will help develop research facilities, which is essential for survival and growth. M&As between big and medium-sized firms will result in mutual exploitation. M&As between big and small-sized firms will lead to cost effectiveness, quicker launching of products, mutual help and exploitation.
Dasgupta urged IDMA to create consultancy facilities for firms venturing into new areas. For firms in the small scale sector, Dasgupta recommended a consortium approach with co-marketing and co-brands.
He felt drug firms of all sizes should consider carefully licensing relationships and equity partnerships, and that foreign firms should not be given leeway to gobble up local firms.