| Supply |
Higher for traditional therapeutic segments, which is typical of a developing market. Relatively lower for lifestyle segment.
|
| Demand |
Very high for certain therapeutic segments. Will change as life expectancy, literacy increases.
|
| Barriers to entry |
Licensing, distribution network, patents, plant approval by regulatory authority.
|
| Bargaining power of suppliers |
Distributors are increasingly pushing generic products in a bid to earn higher margins.
|
| Bargaining power of customers |
High, a fragmented industry has ensured that there is widespread competition in almost all product segments. (Currently also protected by the DPCO).
|
| Competition |
High. Very fragmented industry with the top 300 (of 24,000 manufacturing units) players accounting for 85% of sales value. Consolidation is likely to intensify. |
|
|
FY07/CY06 was a considerably much better year for domestic pharma companies in the US generics market as compared to FY06/CY05. The potential in terms of the innovator sales of drugs going off patent was the highest this year, thereby augmenting revenues for generic companies worldwide, including Indian companies. Having said that, while pricing pressure continued unabated in this market, the erosion was considerably higher in new molecules facing patent expiry with more than 10 players launching their generic versions on day 1 of patent expiry. The price erosion on the base business was not as severe as that witnessed in CY05/FY06.
| |
Many of the domestic pharma companies were successful in garnering the 180-day exclusivity period. The most notable among them was the authorised generics deal that Dr.Reddy’s entered into with Merck for the latter’s drugs ‘Zocor’ (‘Simvastatin’) and ‘Proscar’ (‘Finasteride’). Other important 180-day exclusivities during the year were Dr.Reddy’s for ‘Zofran’ (‘Ondansetron’), Ranbaxy for ‘Simvastatin 80 mg’ and Sun Pharma for ‘Ultracet’. The year also saw domestic pharma companies settle patent suits with innovator companies in order to mitigate the risks associated with legal suits. For instance, Dr.Reddy’s settled with GSK Plc for the latter’s drug ‘Imitrex’ and Ranbaxy settled with GSK Plc for ‘Valtrex’. The revenues from these are expected to accrue in FY09. Also, Ranbaxy is likely to get the exclusivity period for Pfizer’s ‘Lipitor’ in CY10 after successfully challenging one of the two patents on the drug.
| |
Most of the domestic companies, both in the generics and the CRAMS space, recorded a strong growth in the topline, which besides the growth in the core business, was attributed to the contribution from acquisitions made in the previous year. Examples include Dr.Reddy’s (Betapharm), Ranbaxy (Terapia), Nicholas Piramal (Avecia and Morpeth), Wockhardt (Pinewood), Matrix (Docpharma) and Dishman (Carbogen Amcis) amongst others.
| |
The European market posed a set of challenges for Indian generic companies. While the UK was bogged with severe pricing pressure, the governments of Germany and France undertook various healthcare reforms, which impacted the revenues of companies having a presence in these countries. More importantly, companies having a foothold in the German market such as Dr.Reddy’s, Ranbaxy and Wockhardt faced a decline in revenues from this market due to pricing pressure.
| |
In the domestic market, FY07 was a strong year for the pharmaceutical industry with the top players clocking a healthy double-digit growth, with both the acute and the chronic therapy segments recording strong growth.
| |
MNC companies performed poorly as compared to their domestic counterparts in FY07/CY06. For instance, on an average, while the domestic companies grew their topline by around 12% to 16% in FY07/CY06, MNC companies were able to clock topline growth in the range of only 9% to 10%. Various factors contributing to the lower growth were increasing competition, low number of new product launches, trade related issues, divestment of certain businesses and the like.
|
|
|
The product patents regime heralds an era of innovation and research resulting in the launch of new patented product launches. In the longer run, domestic companies would face fresh competition from MNCs, as they would make aggressive new launches. However, the latter would most likely be subject to price negotiation.
| |
Drugs having estimated sales of over US$ 45 bn are expected to go off patent in the US between CY07 and CY10. With the governments in the developed markets looking to cut down healthcare costs by facilitating a speedy introduction of generic drugs into the market, domestic pharma companies will stand to benefit. However, despite this huge promise, intense competition and consequent price erosion would continue to remain a cause for concern.
| |
The life style segments such as cardiovascular, anti-diabetes and anti-depressants will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyles. Growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment.
| |
Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. India’s competitive strengths in research services include English-language competency, availability of low cost skilled doctors and scientists, large patient population with diverse disease characteristics and adherence to international quality standards. As for contract manufacturing, both global innovators and generic majors are finding it profitable to outsource production. Currently, India has the highest number of US FDA approved plants outside the US at 75.
|
|
