For Big Pharma, the focus is rural India

The west wind, rising, made him veer. “Eastward,” said he, “I now shall steer.” The east wind rose with greater force, said he: “‘Twere wise to change my course.”
— John Masefield

Big Pharma seems to have surely taken Masefield seriously. The East, namely India, is where they are moving with greater force.

The year began with a bomb, with speculation that Piramal Healthcare is up for grabs and GSK or Sanofi Aventis are prospective buyers. Mid year, speculation was rife that Hyderabad-based Dr Reddys was up for sale, with GSK pointed out as a buyer.

As the year drew to a close, daggers pointed towards Torrent Pharma being sold off to Japanese major Takeda Pharma.
But speculation apart, an acquisition did happen, with vaccine major Shantha Biotech getting picked up by Sanofi.

Industry experts say going for mergers and acquisitions is just one strategy being pursued by Big Pharma for spreading its wings in the country.

The domestic pharma landscape will rapidly change after the next two to three years, with multinationals gaining significant clout, says Sujay Shetty, associate director of professional services firm PricewaterhouseCoopers (PwC).  “In the next three years,
Indian drugmakers will continue playing a dominant role, but it will change after that,” says Shetty.

Sourcing strategies, collaborations, licensing agreements, etc. between Indian companies and multinationals will happen more, and benefit both parties.

Deals like Pfizer-Aurobindo Pharma and GSK-Dr Reddys, which were sealed to facilitate marketing of generics manufactured by the Indian companies in overseas markets by the MNCs, would only grow in future.

The vast knowledge base, over 100 US Food and Drug Administration-approved facilities, and the 30-40% lower production costs in India are factors emitting magnetic resonance to attract MNCs.

Foreign firms get ready access to distribution and marketing channels by joining hands with local players, and local players, in turn, can get access to innovator drugs and vast geographies of the multinationals.

DG Shah, secretary general of Indian Pharmaceutical Alliance, says there is realisation  among MNCs that future growth will come from emerging markets.

“As they don’t have the basket of products for emerging markets (generics), they are looking for opportunities to acquire or form strategic alliances with Indian companies to source generic products”.

Currently, Indian companies hold a 75% share in the domestic market, while the rest is held by multinationals, a top executive from a Mumbai-based company said. “In the next five years this equation will change, and the share of both foreign and Indian companies in the domestic market will be more or less equal.”

MNCs are also targeting the rural and semi-urban markets in a move to consolidate their presence. Players like Novartis, Roche Diagnostics, Novo Nordisk, Sanofi Aventis, and Eli Lilly are drawing up blueprints to tap the rural healthcare market in India, which suddenly appears attractive like never before.

The rural market makes up 17-18% of the country’s Rs 1 lakh crore domestic pharma market. Novartis introduced the Arogya Parivar model, which aims at ensuring availability of products at same prices but with different pack sizes.

Eli Lilly, the US major, has a project with the Self-Employed Women’s Association (Sewa) in Ahmedabad to educate people on tuberculosis and encourage them to take treatment.

Sanofi Aventis, which introduced the initiative “Prayas”, aims at boosting generic drug sales in towns and rural India. Bhuwnesh Agrawal, chairman and MD of Roche Diagnostics India, said as two-thirds of the population is in rural areas and the standard of healthcare is inadequate, it’s important to hit that market.