Domestic pharma firms zoom past MNCs in growth, market share

Domestic pharma companies enjoy a 77% share of the Indian pharma market, and this share has been consistently above 74% in the past four years or so

Domestic pharma companies enjoy a 77 per cent share of the Indian pharma market, and this share has been consistently above 74 per cent in the past four years or so. When it comes to growth rates, Indian companies have been steadily beating the multinational pharma players hands down for the past many years. Industry insiders believe the trend is unlikely to reverse anytime soon.
 
According to data from AIOCD-AWACS, the market research wing of All India Organisation of Chemists and Druggists (AIOCD), in terms of growth in moving annual turnover value, the Indian pharma market clocked 11.4 per cent growth in March 2013 over March 2012, while the Indian pharma companies grew 12.6 per cent whereas the multi-national companies (MNCs) clocked 7.9 per cent.

 
Similarly, the Indian companies clocked 8.9 per cent, 13.8 per cent and 13.1 per cent growth rates in FY14, FY15 and FY16, respectively. At the same time, MNCs lagged clocking flat growth in FY14 (when the moving annual turnover value remained stagnant at Rs 18,269 crore in March 2014 over Rs 18,263 crore in March 2013), followed by 9.8 per cent and 10.5 per cent growth rates in FY15 and FY16.
 

Commenting on the trend, a Mumbai-based analyst (who did not wish to be named citing company policy) said the domestic firms have more flexibility to launch new products in the market, while the MNCs primarily depend on the parent firm for their pipeline. “Another issue is that of the field force; MNCs have a much smaller field force and usually target specialist doctors for their products, while the field force size of Indian companies is much larger and they leave no stone unturned to tap the general physician in the neighbourhood store.”

 
It is a mix of higher brand equity, better recall with doctors and obviously strategic marketing that help the domestic firms beat their MNC counterparts.
 
Rajeev Sibal, president, India region formulations at Lupin, explained: “You are correct when you say domestic pharma companies have outperformed their MNC counterparts when it comes to growth over the past couple of years. There are multiple factors at play when you look at the reasons. The obvious ones are better geographic reach and penetration, higher brand equity and recall with doctors and health care practitioners, innovative marketing strategies and programmes to increase presence in tier-II and tier-III cities as well as rural areas and finally, a more adoptive and flexible business model when it comes to creating new opportunities and growing market share in a hyper-competitive and fragmented market place.”

 
A senior executive with an MNC admitted that there was indeed an issue with penetration. “Since some of our drugs are priced more than the domestic counterparts, at times it is difficult to penetrate deeper into the hinterland. Also, we’re innovator companies. So, instead of focusing our energies on managing a field force, we are more into drug development.”
 
On an average, Indian drug majors launch 25-30 drugs a year, say industry insiders. In comparison, MNCs launch less than 10 drugs a year. “MNCs focus on their patented molecules and as such, the number of drug launches in the market is low. There is this new drug teneligliptin, and there have been numerous launches by Indian players in the past few months, and almost 50 products are available in the market at the moment. Hardly, any MNC firm has this product in the Indian market at the moment,” said Hari Natarajan, vice-president (business intelligence), India and global audit at AIOCD Pharmasofttech AWACS.

 
The competition in case of such popular drugs is intense. Take the example of Cadila Healthcare, which launched its Tenglyn (teneligliptin 20 mg) tablet, which belongs to a new class of oral anti-diabetic agents, gliptins, in November last year. The company priced the drug at Rs 7 a tablet, one-sixth of the price at which the gliptins were initially launched in India.
 
If one takes Lupin’s India business, the company created new divisions and is creating speciality groups to sharpen its approach in the existing therapy segments. Sibal said, “For Instance, the company created five new business divisions to dig deeper into high-growth therapies such as diabetes, inhalation etc and launched as many as 19 brands during FY16.”

 
Over the past four years, Lupin has also entered into strategic partnerships and introduced some 20 products into the Indian market, specifically in high-growth therapy segments such as cardiovascular, diabetes and the inhalation segments.
 
These partnerships have also emerged as key growth drivers, Sibal added.  It recently formed an alliance with Germany’s Boehringer Ingelheim GmbH to co-market the latter’s diabetic drug empagliflozin in India. Cadila Healthcare got into an in-licensing agreement with Swiss Neovii for an immunosuppressant, Grafalon.
 
Analysts, too, feel that licensing agreements have further propelled the Indian firms to boost turnover.