MNCs beat Indian drug firms in December sales

Multinational pharma companies, which were hit the most by price control in 2013, are back on a roll in India. They have outperformed the Indian drug makers in October-December quarter sales following a yearly price increase taken by all pharma companies during the April-June quarter. According to analysts, the MNCs are also likely to post better sales growth during the current quarter.

MNCs had to face a greater impact of price cuts than their Indian counterparts after the Drug Prices Control Order (DPCO) came into effect in July 2013, since they had higher basket of products under price control. According to the DPCO, 2013 the ceiling price of essential medicines is fixed based on the simple average of the prices of all brands of that drug that have a market share of at least 1%. As per the latest data released by pharma market research firm AIOCD AWACS, MNC sales grew at 17.5% versus 12.1% for Indian companies in December.

"Among the top 50 in MNCs, Merck grew by 37.8% for the month of December followed by Ranbaxy at 28.7%, MSD at 26.1% and Pfizer at 24.3%. Under the non-National List of Essential Medicines (NLEM) category, Indian companies grew at 13.6% whereas MNCs grew at 18%," it said.

For the December quarter, the MNCs volumes grew 6.4% versus 1% for the Indian companies.

In November 2014, MNC sales grew at 14.9% as compared with 9.5% for Indian companies. Under the non-NLEM category, Indian companies grew 0.4% while MNCs grew 11.1%. For October 2014, the growth rate was 5.7% for MNCs, and 5% for Indian companies. Under the non-NLEM category, Indian companies grew 6.7% while MNCs grew 6.9% in October 2014, it said.

The pharma market recorded slower growth after DPCO 2013 came into effect. The domestic market recorded a mere 4.3% growth in the September quarter of 2013-14 which increased to 6.5% in the October-December 2013 and to 7.8% during the subsequent March quarter. While MNCs were hit the most by DPCO, 2013, Indian companies also reported some impact. However, less number of their drugs were affected by the price control.

After pharma companies were allowed to take a price hike from April 1, 2014, the pharma growth inched up, rising 9.8% in June quarter, 12.8% in September quarter and 10.3% in December quarter. Hari Natarajan, vice-president, business intelligence, India and Global Audit of AIOCD AWACS, said, "Most of the MNCs had to cut down the prices of drugs under NLEM in 2013 which impacted their sales and margins. But they were able to take the price increase for both NLEM and non-NLEM categories around May-June 2014. However, this did not reflected immediately since earlier stocks were already available in the market. So while July-December of 2013 had been a bad period for the industry, 2014 had been a far better year, largely on the back of a lower base. Also in terms of the industry growth, around 5% of growth came from the price component."

For all NLEM-listed treatments, yearly price increases were allowed in line with or below the wholesale price index, and for medicines not listed on the NLEM are permitted for up to a 10% annual price increase.

However, according to data by healthcare consulting, technology, and informatics provider IMS Health, Indian companies continue to capture the larger share of Indian pharma market at 73% during December with a growth of 14.4%. With three MNCs such as Abbott, GlaxoSmithKline and Pfizer in the top 10 companies, the share of MNCs constituted 30% of the market.

According to a few other pharma analysts, the multinationals will have a better growth rate on the back of better volumes and lower base. "Except for Sanofi, all MNCs are likely to outperform the industry in the December quarter. Sanofi had to take another price cut in July due to the National Pharmaceutical Pricing Authority's move to bring 108 non-scheduled drugs under price control which may result in a muted December quarter," said an analyst.