Drug policy to hit GSK, Ranbaxy harder

Written by Soma Das | New Delhi | Updated: Oct 4 2012, 08:38am hrs
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Glaxosmithkline (GSK), Ranbaxy Labs and Cipla are likely to be hit the worst due to the new drug pricing policy proposed by a group of ministers last week. Sales of GSK may shrink by over R180 crore in the domestic market, according to an analysis by pharma market research agency Aiocd Awacs, which has measured the impact on 80% of the coverage in the National List of Essential Medicines.

The companys annual revenues in the Indian drug market, which stands at R3,153 crore, is likely to shrink by 5.7%. Besides this, two other firms likely to see a squeeze of over R80 crore in their revenues are Ranbaxy and Cipla. This translates into an erosion of domestic sales of Ranbaxy by 2.9% and Cipla by 2.3%. Revenues of Alkem could also be impacted by over R76 crore, which is 3.8% of its domestic revenue.

Rival pharma market research firm IMS Health has estimated that both GSK and Ranbaxys domestic market sales may shrink by close to R150 crore each, which is 5.1% of their revenues in the Indian market. According to it, Cipla may take a hit of R88 crore, which means its sales would decline by 2.6%.

Most of these firms have a high representation of anti-infectives in the basket of therapies they retail here. In the case of Cipla, it is respiratory drugs in addition to anti-infectives which has magnified the impact of the proposed drug pricing policy, said Ameesh Masurekar, director, Aiocd Awacs. While the share of anti-infectives in the case of Cipla is close to 27% of its domestic drug sales, respiratory drugs constitute around 29%. In Ranbaxys case, 34% of its domestic sales are accounted for by anti-infective drugs.

Both market research agencies project that the total sales of pharma firms in the domestic market would slump 2-2.3%. While Aiocd Awacs projects that the R67,500-crore domestic drug retail market will decline by 2.3%, IMS Health estimates that the new pricing policy is likely to bring down the market by around R1,300 crore, which translates to 2% of the current retail pharmaceutical market, which it pegs at R68,000-crore.

Further, IMS Health estimates that the top 10 companies that together clock domestic revenues worth R28,491 crore are likely to take a hit of R729 crore, which constitutes 2.6% of their total domestic revenue. The next 10 big pharma firms ranking between 11 and 20, which post a combined revenue of R14,902 crore, are likely to lose R224 crore, which is 1.5% of their domestic revenues. Companies ranking 21 to 50, which clock around R14,471 crore annually, stand to lose R238 crore or 1.6% of their total domestic revenue. Similarly, drug firms ranking between 51 and 100, which clock sales of R5,943 crore, are likely to see revenues fall by R78 crore or 1.3% of their revenue.