India's major drug players bet on new brand launches, shows data

Indian drug firms have been prolific with brand launches over the past 10 years despite the reduction in growth contribution from new products in recent years.

Industry insiders say brand launches are the lifeline of the pharma industry, and ensure steady volume growth and market share. The data from research by Systematix Institutional Research shows the top drug firms launched 284-457 brands a year between FY10 and FY20.

On average, that comes to about 300, including brand extensions, a year (see chart).

Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance (IPA), which represents the top 24 drug firms in the country, said: “Brand launches and new product introductions are the lifeline of the drug industry. So many molecules are going off patent, and at the same time, many new ones are being developed. Companies rush to launch off-patent molecules and patented products through licensing agreements.”

Drug firms tend to have the entire basket of products in a particular category such as gynaecology and gastroenterology, he said. A large drug firm has 12-15 therapy divisions, and if each launches a few drugs, the company brings to the market 30-50 brands a year.

The marketing head of a Mumbai-based, mid-sized pharma firm said brand launches were a way of remaining relevant, and having a doctor recall.

During the pandemic years of 2020 and 2021, brand launches did see a lull, but companies continued to launch brands through online conferences, doctor connect programmes, etc.

Sheetal Sapale, president of market research firm AIOCD Awacs, said in the past two years (hit by the pandemic), brand launches had been primarily in segments which looked attractive.

“There have been launches in molecules like azithromycin, ivermectin, enoxaparin, remdesivir, and favipiravir, which have seen high demand for treating Covid patients. Companies also knew this season would be over soon,” she said, adding that other therapy segments had seen a relative lull in terms of launches. Molecules that went off-patent, like dapagliflozin (an anti-diabetes drug), too saw a rush among drug firms to launch their own brand.

Systematix analysts have said India-focused companies have outperformed the Nifty as well as their pharma peers over the past five years.

“Companies with a larger share of EBITDA (earnings before interest, tax, depreciation, and amortisation) from the India business (Ipca and Alkem) have reported better returns on capital employed than export-oriented companies. India-focused companies have largely outperformed the IPM (Indian pharmaceutical market) over FY15-21, which has helped them mitigate the pain encountered in regulated markets,” the analysts noted. Between FY15 and FY21, IPM growth was about 9 per cent despite hiccups like demonetisation and goods and services tax.

The marketing executive quoted above, however, pointed out a lot of these brand launches had been in the trade generics space. These drugs are not sold through the physician channel but are directly pushed to trade.

Generic (Gx) is now a focus area for many companies because the segment has been witnessing robust growth in recent times. Cipla and Alkem are two of the largest players with Gx accounting for 15-20 per cent of their domestic sales.

The chief financial officer of one of India’s top five drug firms said that brand launches and portfolio extensions were equally relevant in Gx.

“Brand launches and portfolio extension are critical for Gx very much because till now Gx was largely acute therapy. However, going forward we have to focus on chronic as well since lifestyle diseases will explode big time,” he said, adding that Gx is a good model to improve access throughout the nook and corner of India.

Sales through the Gx channel are not captured in Indian pharmaceutical market (IPM) revenues as the segment is largely focused on tier 3 and 4 cities. According to industry estimates, the Gx channel accounts for 5 percent of the IPM in value terms but may be 25-30 percent of industry volumes.

A deeper analysis reveals that the share of new introductions (NI) in overall IPM growth has been on the decline. From 6.1 percent growth from NI in FY15, in FY21 it had slipped to 2.6 percent. Price growth; however, seemed to do well during the same period – from 1.7 percent in FY15 to 4.8 percent in FY21.

This has hardly dampened the pace of brand launches in recent years. Whether the needle shifts in favour of lesser brand launches or new introductions needs to be seen, however.