Domestic pharmaceutical sales growth at eight year low, slips to 5.5%

GST, price caps impact sales but drug makers optimistic of growth revival in 2018

Domestic pharmaceutical sales growth slipped to 5.5 per cent in 2017, the lowest in eight years as business was impacted by the GST (goods and services tax) roll-out, delayed product approvals and inclusion of more products under price caps.

On an industry-wide basis, pharmaceutical companies recorded sales of Rs 1.16 trillion in 2017 which was 5.5 per cent higher than the previous year. In 2016, industry-wide sales grew 10.7 per cent to Rs 1.10 trillion, according to AIOCD-AWACS, the market research wing of All India Organisation of Chemists and Druggists (AIOCD).

Drug makers, however, are confident of revival in 2018 with the launch of new products and increased market penetration though some experts believe growth will be hinged on government policy actions.

AIOCD-AWACS pointed out that the contribution of price rise to sales growth fell sharply and turned negative in 2017 indicating the impact of government’s pricing actions. Contributions to sales growth from new products, too, fell compared to 2016. In fact, industry-wide sales growth fell to single digits in 2017 for the first time since 2009.

“Growth has been impacted due to regulatory actions. In 2016, the government banned over 340 fixed dose combination drugs. Further there have been delays in approval of new drugs. The industry will continue to suffer unless correct policy decisions are taken,” said D G Shah, secretary general of Indian Pharmaceutical Alliance.

Last month, the National Pharmaceutical Pricing Authority eased the approval process for new drugs following a six-month tussle with the industry. Over hundred product applications were held up and are expected to be cleared following changes in norms.

There were other headwinds too. The GST-led to disruption with distributors cutting down inventory in the run-up to the tax introduction in July. The industry-wide sales declined 2.4 per cent on a year-on-year (YoY) basis in July. Recovery was slow and in August and September sales growth was under 3 per cent.

But drug makers feel recovery is round the corner. “In 2018 we are optimistic that the Indian pharma industry will pick up pace and see growth,” said a Sanofi India spokesperson.

“After a quiet first six months of the financial year we have seen the pickup in secondary sales growth across major segments. This revival has been across major therapeutic areas and we feel that the industry growth will bounce to its normal levels in the coming months,” said a Glenmark spokesperson.
 

Lupin’s India region formulations head Rajeev Sibal, too, expressed optimism. “The last two quarters of the year showed definite signs of recovery which is reflected in the 7.8 per cent growth for the quarter ending December. Lupin’s India formulations sales grew 24.3 per cent during the second quarter of FY 18 on a Q-o-Q basis and 16.4 per cent on a Y-o-Y basis.”

Chronic therapies like anti-diabetes drugs have been growing at a faster clip than acute therapy drugs since 2013 and the trend continued in 2017.
 

Vaccines and chronic therapies including anti-diabetes drugs and dermatology products showed the fastest growth in 2017 while anti-infectives and anti-malarial drugs showed a decline.

Diabetes segment sales showed 14 per cent hike driven by new product launches and rapid growth in sale of anti-diabetes drug molecule tenelegliptin that has been introduced in over 100 brands in two years. Teneligliptin drugs now have a market size of over Rs 500 crore.

“Last year the slowdown was due to macroeconomic factors that primarily impacted the acute category of drugs and consumer health care products as well. Chronic care, on the other hand, because of its very nature (chronic) and because the market is largely present in metros was less impacted. In fact Sanofi’s India diabetes and vaccine businesses grew by 13 per cent and 46 per cent respectively, while our consumer health care business grew in line with the market,” Sanofi India spokesperson added.