Domestic drug companies beat MNCs in growth during 2013

DPCO considered the main reason behind the difference in growth rate

While Indian companies might be struggling to meet compliance norms to export drugs to one of the world's biggest pharma markets, the US, when it comes to home-ground, they have beat their foreign peers hands down in terms of growth last year. If one looks back at the calendar year 2013, an interesting story unfolds in the pharma space; local drug firms have significantly out-performed multinational drug players, registering a growth of 11.4 per cent versus 6.5 per cent respectively.

As per data from the market research organisation IMS Health, for the full year 2013 (calendar), when the overall pharmaceutical market in the country reported a 9.9 per cent growth over same period last year to touch Rs  78,644 crore, local drug firms reported a stronger growth at 11.4 per cent, significantly higher than the 6.5 per cent growth registered by MNCs. IMS Health data shows, while MNCs like Abbott India, Pfizer, GlaxoSmithKline and Sanofi registered value growth rates of 3.4 per cent, 7.3 per cent, 6.4 per cent and 7.3 per cent respectively; local firms like Sun Pharma, Mankind, Macleods, Emcure, Dr Reddy's Laboratories and USV posted much stronger value growth rates at 18.3 per cent, 14.8 per cent, 15.3 per cent, 12.7 per cent, 15.1 per cent and 18.9 per cent respectively.

Industry players and market analysts point out two major reasons behind this gap in growth rate; one is the impact of the Drug Price Control Order (DPCO 2013), and secondly MNCs on an average have launched less drugs in the Indian market.

As Shakti Chakraborty, group president, India & Commonwealth of Independent States(CIS), Lupin Limited said, "It's true that domestic Indian companies outperformed MNC’s through 2013 which was primarily due to the DPCO coming into effect as also because Indian companies were far more focussed on not only entering new segments outside the ambit of the DPCO but also deployed more aggressive penetration strategies to increase and gain more market share in existing therapy segments."

The pharma market has remained almost static during the second half of 2013, especially after the DPCO impact was felt mainly during the August to October period. Data from IMS Health further shows that on a month-wise basis, while local players grew by 15.3 per cent in July 2013, MNCs registered a 10.1 per cent growth, then in August when local firms growth moderated (5.7 per cent) but MNCs saw a sharper dip in growth rate (2.8 per cent). In September MNCs growth rate was at 1.3 per cent while local players grew by 2 per cent. Then again in October when MNCs reported a negative growth of 1.6 per cent, local firms actually managed to grow at 7.9 per cent.

For the full year 2013, the National List of Essential Medicines (NLEM) segment with contributes around 17 per cent of the pharma market has shown a decline of 1.1 per cent over the previous year; rest of the market (non-NLEM segment) has grown at a healthy rate of 12.4 per cent, IMS Health points out.  

Pharma analyst with Angel Broking Sarabjit Kaur Nangra pointed out, "While for 2013, the impact of the DPCO is very apparent, another reason behind local drug firms clocking a better growth rate compared to MNCs is related to the number of drug launches. MNCs traditionally tend to bank on their existing block-buster brands, while local firms tend to to launch more products. In a volume driven industry that is why local firms have done well." She added that on an average while local firms would launch 25-30 products in a year, an MNC would launch one to two products on an average.

Sun Pharma, for example, brought about 16 new products in the market. While the company did not wish generalise, a spokesperson, nonetheless pointed out "Part of the reason could be the uncertainties after the DPCO, and the trade reaction to margins.  Some of the slowdown could be on account of company or portfolio specific reasons."

Another local firm, Lupin continued to clock in double digit growth if one was to look at it from a calendar year perspective. Chakraborty claimed, "Our internal figures would suggest close 14-15  per cent growth for the calendar year. This was largely due to us increasing our market share in key therapy areas like cardiovascular and diabetics as well as the respiratory segments. We launched 29 products including new line extensions for existing products. We launched a few drugs which were a first for the market like Oxaceprol and Nimorazole to name a few."

A senior official in a multinational drug firm said on grounds of anonymity, "The impact of DPCO has been larger in our case, as the price erosion has been significant given our drugs were priced higher compared to Indian peers." He, however, did not seem to agree with the less drug launches theory, adding that  MNCs in India are also working on bringing in new products to the market. His firm, for example, has launched over 10 products in 2013.

As for the year 2014, IMS Health forecasts an overall growth in the range of 10-13 per cent, with  a caution that factors like political stability, reforms implementation and seasonal swings may alter this to some extent.