The pharmaceutical market is worth Rs 77,000 crore a year.
The Indian pharmaceutical business, which saw a sharp sales decline in August to October and a deceleration in the decline in November, is expected to grow at 9-10 per cent in 2013-14. In 2014-15 it will grow much faster at 12-14 per cent. The pharmaceutical market is worth Rs 77,000 crore a year.
According to data of market research firm IMS Health, November saw growth of 13.8 per cent. The sector had seen single-digit growth in each of the three months of August to October. In September growth was at as low 1.8 per cent.
However, according to AIOCD AWACS, another market research firm, growth was only 6.9 per cent in November.
Ranjit Kapadia of Centrum Broking said, “The outlook is positive for the sector. The price issue is now discounted, though the trade-margin issue continues and requires government intervention. Once the issues get sorted, there will be a quantum jump in growth. In 2013-14 growth of 8-10 per cent in domestic business is estimated. The growth will be 12-14 per cent next year.”
According to Emkay Global, the domestic business growth will recover to 12-14 per cent in FY15 from 7-9 per cent in FY14.
Earlier this year the government replaced an 18-year old regulation with a new control order that allows it to impose controls on 348 essential medicines instead of 74 earlier. The decision has impacted revenue growth and profitability of most drug companies.
On top of that the trade margin issue also impacted sales. Most stockists and chemists did not stock these medicines, complaining of a squeeze o their margins.
According to the IMS Health, the national list of essential medicines (drugs under price control) has reported consistently negative growth since August. In that month these drugs registered negative growth of 8.7 per cent, slowing further to 9 per cent in September and 10.7 per cent in October.
But November saw a marginal improvement, with a decline of only 4 per cent. On the other hand, medicines outside the control, which account for 80 per cent of the market, saw healthy sales growth of 15 per cent in November.
“After clocking an annual growth of 15 per cent during 2008-12, the market has slowed progressively, and we expect it to register single-digit growth of 8-9 per cent in 2013,” said Kumar Hinduja, senior director of IMS Health.
He said the price control and trade and company uncertainty about its implementation, plus the overall slump in economy, contributed to the slowdown to a large extent. The domestic market registered a growth of nearly 12 per cent in 2012. In March, IMS Health had projected a growth of 12 per cent, but has now lowered the estimate.
Kapadia said new product introduction had slowed, whereas combination drugs, outside the price control, flooded the market. “Besides, the cabinet is working towards freeing the sustained release, slow-release and delayed-release capsules and tablets outside the price regime. This segment contributes Rs 4,000 crore. Once that happens, the industry will see better growth,” he said.
But exports look promising with a number of FDA approvals to Indian generic medicine companies. Dhananjay Sinha, institutional research head of Emkay Global, said, “Generics have got re-rated over the past few years, primarily due to higher growth in the US. Moreover, most companies have seen significant export momentum in other markets due to the rupee’s depreciation. Beyond the US, Indian companies are big exporters to Europe, Latin America, Russia and CIS.”
He said Indian firms had proved international quality standard capabilities, going by the number of ANDA approvals, DMF filings, US FDA and UK MHRA-approved factories or bio-equivalence centers – all considered key indicators for assessing the capabilities of the sector.
Still, he added, India’s contribution to the global pharmaceutical market was only 2 per cent. “Hence, there is scope for multiplying exports even with a marginal increase in the market share.”
But lately with the rupee stabilising, growth in the second half this year would not be in line with the first half. “The 15 per cent increase in export earnings due to the rupee’s depreciation is unlikely to be seen in the second half,” Kapadia said.
