Generic medicines: Indian pharma market is at crossroads of systemic shift

Companies must start preparing their business models to adjust to the reality of the shift to medical practitioners prescribing only generic molecule names

The National Medical Commission (NMC) – India’s apex medical regulator – created a stir when it recently mandated registered medical practitioners (RMPs) to prescribe only generic molecule names (GMP), i.e., without brand names, to patients. After subsequent deliberations among the government, NMC, Indian Medical Association (IMA) and industry bodies, this has been put in abeyance. However, in our view, the writing on the wall is clear: The question is not whether a shift to Gx-Gx will happen, rather, when will this shift happen?

An assessment of other countries where such a shift has happened points to the following possibilities:

• Doctors prescribing generic name (INN) with brand name in brackets with no mandate on substitution by pharmacist / chemist (e.g., Hungary, Czech)
• Doctors prescribing generic name with company name in brackets with no mandate on substitution by chemists
• Doctors prescribing generic name with the chemist choosing the brand to dispense, basis economic incentive (e.g., Netherlands, the US)

India could move across these models or evolve an entirely new model. This, however, would necessitate structural changes in the industry, including actions to improve the quality standards in India to align it with Western nations as well as ensure that the right capability / awareness is built in the chemist channel to enable them to dispense using generic molecule names. As we know, steps are being taken towards the quality standards objective: Case in point being the recent Ministry of Health and Family Welfare guidance on the mandatory adoption of GMP for all pharmaceutical companies in India. And of course, over time, the chemist capability/ awareness build agenda also could be addressed.

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Therefore, we believe that Indian pharma companies must start preparing their business models to adjust to this long-term reality over time. Choices need to be made across portfolios, ways of working, and internal capability built across three time-horizons: Near-term / no regret moves, mid-term, and long-term.

Reimagining portfolio

In the short term, companies must look towards turbocharging differentiation in the existing portfolio while slowly building presence in the emerging trade generics space. The mid-term strategy could entail entering newer geographies (expansion to branded generic market in the rest of world for companies which are under indexed in those type of markets) as well as considering entry into/ accelerating new segments (e.g. OTC, adding biosimilars to the mix where brand names might still be open for longer). In the long term, the key to sustained growth would be ensuring the right level of investment in product as well as technology innovations across the value chain for the Indian market.

The Gx-Gx shift will also compel companies to start looking at their current ways of working and layout a roadmap of what needs to completely stop, start, and continue. Multiple and carefully considered choices need to be made soon, e.g., moving a portion of the marketing dollars from brands to building a corporate brand identity, deepening trade / channel engagement esp. chemists who could become key influencers in the value chain and turbo-charging direct reach in tier 2/3/4 towns, especially via digital (e.g. AI/GenAI). There is a lot to learn from FMCG companies in building some of these capabilities and adapting them to the pharma context. In the long term, a cradle-to-grave approach on the chosen portfolio (e.g., from key starting material/ intermediates to drug product manufacturing and distribution) will also be critical to maintaining a sustained competitive advantage.

Preparing for this new reality will need strong funding support without diluting margins for pharma companies. Therefore, aggressive cost optimisation is the need of the hour – it will enable companies to invest in building new capabilities as well as innovation.

To summarise, the Indian pharma market is at the crossroads of a systemic shift. The health of India business is material to most Indian pharma companies, and any dent here could impact the long-term sustainability of these companies and IPM at large. The bottom line is that Indian pharma companies do not have the luxury of too much time. Companies which take this shift seriously and endeavour to figure out the new equilibrium through a creative mind will win. Those who think that this is a fad that will pass should take a moment to reconsider.

Vikash Agarwalla and Mustafa Rangwala are managing directors and partners at Boston Consulting Group. Palash Gupta is a consultant at BCG.