In the old days, each time I visited my doctor, they would want to switch out my trusty old generics for something newer and shinier—the newest gliptin, gliflozin, statin, etc., often a brand of a large foreign multinational corporation pharmaceutical giant. These days, the new pills no longer happen to be from an MNC.
The recent news of several of these companies selling brands to Indian companies, downsizing their sales and marketing teams, and their diminishing share of the Indian market should make us sit up and notice the changing landscape. It's enough to make anyone wonder—where are these MNC pharma companies in India headed?
Now, don't get the wrong idea. MNCs hold considerable influence in certain niche medical areas like vaccines and medical devices. For some conditions, it's their patented, and admittedly cutting-edge, therapies, or bust. But they tend to stick to specific product lines. In the vast market of generic drugs, MNCs usually offer their patented products and/or the generic versions of their own off-patent medicines.
These brand-name options can strain a family's budget, which can be an issue in a country with an extensive but not always comprehensive public health system. As a result, once the patent on the drug expires, there are several Indian competitors in the market and the price drops substantially. Also, unlike other markets, a new patented drug does not monopolise the market in India by driving the older drugs out of the market. When a new drug launches in India, older and cheaper solutions still linger on the pharmacy shelves. For example, the older gliptins and statins still have a significant market share despite newer versions being available.
Where MNCs used to thrive on specialist sales teams, they're increasingly finding themselves outmatched by nimbler Indian competitors. While the MNCs are limited by their own portfolio that is decided in their HQ overseas, Indian competitors have a broad portfolio of generics and combinations. Indian pharma outfits also have a far better grasp of the market, navigating complex compliance needs with greater ease.
Another obstacle for MNCs is reference pricing. Governments look to other countries where that drug is sold to determine the price they're willing to pay. MNCs find themselves in a bind—sell in India at a lower price and risk global price erosion as other countries demand the same deal, or avoid launching altogether. This further erodes their potential market share in an already challenging environment. One only has to look at the divestments of brands by MNCs when patents on those drugs expired and generic competition entered the market.
What about manufacturing? After all, India is the pharmacy of the world, isn't it? Many MNCs still primarily import new drugs to India, with barely any new manufacturing facilities being established by them recently. Some manufacturing facilities have even been sold off in recent years. That makes sense at multiple levels. Contract manufacturing with Indian costs, for Indian quality standards, not only gives MNCs the cost advantages but also reduces compliance overhead and minimizes regulatory risk.
But despite all these measures, the bottom line doesn't seem to impress folks back at the MNCs' global headquarters. Profits from subsidiaries in India contribute barely a sliver to their worldwide revenues, yet require outsized corporate bureaucracy and hefty overheads to manage.
Here's a glimpse: Pfizer Ltd. reported roughly Rs 130 crore in profit and Rs 540 crore revenue for their last quarter in India. Novartis India Ltd. clocked in around Rs 265 crore profit and Rs 840 crore in revenue, Sanofi India Ltd. reported Rs 152 crore profit and Rs 715 crore in revenue, AstraZeneca Pharma India Ltd. had Rs 16 crore profit and Rs 306 crore in revenue and Abbott India Ltd. posted Rs 311 crore profit from Rs 1,437 crore revenue.
These same profits could probably be achieved through far leaner structures with licensing deals with Indian pharma giants like Dr. Reddy's Laboratories Ltd., Sun Pharmaceutical Industries Ltd., Cipla Ltd., Lupin Ltd., JB Chemicals and Pharmaceuticals Ltd., or a dozen more Indian pharma companies with aggressive sales and marketing teams. Strategic licensing isn't just about easy profits; it also shields MNCs from patent challenges. Is it any wonder that these patent challenges have almost disappeared in recent years?
Ultimately, the thrill of direct presence in the Indian market seems to be dwindling for most MNC pharmaceutical companies. They're discovering that India is a country where cost-effective treatments reign supreme and deep market understanding wins out. It's now a street fight for dominance, but licensing, selling imported drugs and devices, and strategic marketing ventures might just offer the smartest and most profitable ways for MNC pharmaceutical companies to make the most of this complex and unique healthcare landscape.
Murali Neelakantan is the Principal Lawyer at Amicus. He was previously the Global General Counsel at Cipla and Glenmark.
The views expressed here are those of the authors and do not necessarily represent the views of NDTV Profit or its editorial team.
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