Drugmakers begin to feel pain of food inflation

Food inflation impacts everyone and every sector — even pharma.
With high food inflation eroding people’s capacity to spend on medicines, pharma cannot but be impacted, say experts, pooh-poohing accepted belief that the sector is unruffled by the vagaries of the external environment.

Food inflation has ruled high for much of this calendar, averaging 10.26% in January-August, as per government data. For the week ended September 3, food inflation came in at 9.47%, still way off comfort levels. The impact of this may be getting visible already.

In the January-December 2010 period, growth was around 16.5%. But in the first eight months of 2011, it has failed to breach 15%.
Shakti Chakraborty, group president, India region formulations, at Mumbai-based drugmaker Lupin, agreed that people tend to skip medicines during times when prices of food items are on the upswing, particularly for ailments where the consequences of not taking medicine are not severe.

“We have been managing 18-19% growth, but we would have expected growth of 23-24%,” said Chakraborty.

A senior official from a Bangalore-based pharmaceutical company, however, said growth for his company from the domestic market has been in low-double digits.

“Pharma is highly price sensitive and inflation will have an impact. The vast majority of middle and lower class Indians accord more importance to food than medicines. These are behavioural patterns seen when prices rise,” said Sujay Shetty, partner, PricewaterhouseCoopers.

Experts see medicine categories like cholesterol reducing agents, cough and cold tablets and syrups, anti-depressants, anti-hypertension medication, vitamins, as well as drugs for stomachache, headache and other painkillers getting directly impacted by a rise in food prices.    

“There is a possibility of people digging into home remedies,” said a general practitioner with a leading hospital in Bangalore. But medication for more serious ailments such as malaria, cancer and AIDS may not see spending curbs, he said.

Then there are cases of people discontinuing medication once they start to feel better rather than continue the full course, said Nitin Bidikar, associate director, KPMG.

“If the course duration for any treatment is 5-6 days, people tend to stop treatment on their own once they feel better. This can cause drug resistance. But people think it saves them some expense,” said the general practitioner.