Indian retail drug sales jump 10% amid slowdown

Retail sales of Ranbaxy Laboratories, Cipla, Nicholas Piramal, Lupin and other drug makers have jumped by over 10 per cent in the domestic market despite the sales of generics or copycat versions of patented drugs falling in leading global markets such as the US and Europe.

The drug makers' sales in the local market grew by 10.3 per cent till November 2008, at Rs 33,769 crore (Rs 337.69 billion), compared with the corresponding previous 12 months, according to ORG-IMS, which tracks sales of pharmaceutical drugs in India.

As against this, the growth rate of the global generics industry dropped to 3.6 per cent, to $78 billion (approx Rs 390,000 crore) in the 12 months ending September 2008, from 11.4 per cent in 2007, IMS estimated. The US, the world's largest generics market, which sees 42 per cent of the global sales, experienced a 2.7 per cent sales decline at $33 billion (approx Rs 165,000 crore) in annual sales, compared with $34 billion last year.

According to a recent Yes Bank study, demand for drugs in India is growing due to rising population, especially those over 60 years, and rising income. It estimates the domestic formulations market to touch $21.5 billion by 2015. A KPMG analysis says the domestic market is projected to grow at a CAGR of 13.1 per cent over the next five years to reach $11.2 billion by 2011-12.

KPMG estimates that the future demand for domestic formulations is expected to be driven by chronic therapeutic segments such as anti-diabetic, central nervous system, cardio vascular system and gastrointestinal drugs, on account of the changing lifestyles.

Domestic companies such as Wockhardt, Dr Reddy's and Elder Pharma are also launching in-licenced drugs in India, targeting specific therapy segments. For example, Wockhardt launched over a dozen in-licenced drugs in the recent past, mainly in the dermatology segment.

Analysts also noted that multinational pharmaceutical companies, which account for 20-22 per cent of the domestic pharmaceutical market, are increasingly launching more patented products in India, thanks to the product patent regime in India since 2005. Pfizer launched patented drugs such as Viagra, Lyrica, Caduet, Genotropin and Champix.

Similarly, GlaxoSmithKline, one of the leading drug sellers in the Indian market, launched drugs such as Avandia and Carvedilol. While Roche brought in drugs such as Tamiflu and Pegasys, sanofi aventis launched drugs such as Avalide and Ambien. Earlier, MNCs used to launch patented drugs in India after a few years of sales in the developed markets.

Improving rate of health insurance penetration, favourable regulatory and government support such as increased budget allocation for health, introduction of projects such as National Rural Health Mission (NRHM) and emergence of the country as a medical hub are contributing to the growth of drug sales in the domestic market.

"Local companies will maintain growth momentum by leveraging wider product basket, focusing on chronic segments, strengthening brand building skills and by targeting rural areas," noted Nitin Agarwal and Samir Bhise, analysts with IDFC-SSKI.

They also said most domestic players make 25-30 per cent margins in the domestic market with limited capital expenditure.