Top Indian drug firms are way ahead of their multinational peers when it comes to launching new drugs in the domestic market. According to a recent department of pharmaceuticals (DoP) report, the launch of new medicine brands by Indian drug makers in the last two years is three times that of leading multinational corporations (MNCs) present in the country.
This report also happens to be one of the reasons why the Arun Maira-led high-level committee on foreign direct investment (FDI) policy in the Indian pharma sector decided not to suggest drastic changes in the FDI regime. There are sharp differences within the government on whether FDI in pharmaceuticals ? currently allowed 100% through the automatic route ? be regulated for brownfield investments.
The difference in the number of new product launches further widens when the record of domestic drug makers is compared with those Indian pharma firms that have been recently acquired by the multinationals. The report also concludes that the recent spate of acquisitions in the Indian pharma sector has so far not led to any escalation in prices of drugs.
?This gap stems out of the propensity of domestic drug firms to launch more combination drugs. MNCs do not launch as many of them for the simple reason that they have to conform to stringent internal global protocols set by the parent firm, which entails conducting time-consuming, expensive clinical studies before they can introduce any of these products in the market,? said Hemant Bakhru of brokerage firm CLSA.
Agreed Centrum Broking senior vice-president Ranjit Kapadia, ?Most of these new drug launches by domestic firms are product line extensions. The strategy of subsidiaries of multinational drug companies here has to be in alignment with its parent firm. Since the cost of compensating adverse effects, liability of recalling drugs in case the drug is found wanting in any aspect, is very high, every drug launch by an MNC here must have approval from the headquarters.?
The findings of the DoP study are being challenged by sections of domestic drug manufacturers.
?It is too early and inappropriate to measure the impact of this profound shift by change in price levels or impact on competition in a short period. Also, the methodology that the study has adopted has many flaws. For instance, the assessment of price changes is based on the number of packs, while the turnover of each pack should have been the right criterion. Also, the analysis is strangely mum on price increases in the 5-15% band,? said DG Shah, secretary general, Indian Pharma Alliance, an industry body of leading domestic drug firms.
The top seven domestic pharma firms ? Cipla, Sun Pharma, Lupin, Zydus Cadila, Mankind, Alkem and Intas ? have introduced 1,439 new formulations in the domestic market since May 2009, according to the report. On the other hand, the top seven multinationals present in the country ? Abbott, GSK, Pfizer, Sanofi Aventis, Novartis, MSD and Merck ? launched 512 new products during the same period. The seven companies ? Ranbaxy, Ranbaxy Global CHC, Orchid, Shanta, Paras, Dabur and Piramal ? recently acquired by overseas pharma majors launched only 341 drugs.
Overall, 4,722 new formulations were launched in the domestic market in 2010, up from 4,142 in 2009, according to the pharma marketing research firm, AIOCD AWACS. The first half of 2011 has witnessed 1,264 drug launches.
The DoP study also found that in case of 99.85% of the drug packs surveyed in 2010-11, prices remained unchanged compared to prices the year before. A similar trend was seen in 2009-10, when prices of 96.69% of the drug packs remained unaltered.
A detailed break-up reveals that in case of top seven domestic firms, only 6.7% of drug packs have seen a price hike of up to 5% while 1.8% witnessed a price increase of more than 15%. The comparable figure for seven leading multinationals stands at 7.6% and 5.1%, respectively, while in case of erstwhile Indian firms, recently bought by MNCs, prices have risen up to 5% in case of 6.8% and over 15% in case of 2.9% of the drug packs surveyed.
?It may be seen that factually the trend in prices for all the three categories (domestic, multinational and acquired companies) is similar so far and no conclusion can be drawn to support the fact that acquisition by MNCs of Indian companies has resulted in price increase,? the DoP report summarises.
