Pharma firms’ double-digit gains in doubt

Domestic drugmakers are targeting double-digit growth in 2018-19 on the back of product launches and expansion in new therapies but the government’s proposed pricing changes could put the brakes on their plans.

Cipla has guided for $1 billion (~67 billion) in domestic sales in 2018-19 with product launches and an uptick in its cardio-metabolic drugs.

Cipla had sales of around ~59 billion in the last fiscal year and will have to achieve around 15 per cent growth to reach sales of $1 billion.

Glenmark too is targeting 12-15 per cent with the launch of differentiated products and expansion of over-thecounter (OTC) offers while Lupin is evaluating acquisitions and is planning expansion in fast-growing therapy areas such as dermatology, urology and oncology.

Unlike the US market, where risks are high and rewards uncertain, the domestic business for pharma majors is steady. Operating marginsaverage 25-30 per cent. Compliance and R&D costs in the India business are low and credit cycles are shorter, and thus a rebound in the domestic market is important.

However, a government proposal to extend price caps to non-scheduled medicines will prove to be a dampener. “The proposal is damaging. The industry will suffer a setback if the proposal is implemented and will not be able to invest in innovation and quality compliance,” said D G Shah, secretary general of the Indian Pharmaceutical Alliance.

Currently the prices of around 850 scheduled drugs are fixed in accordance with the wholesale price index. The government is now considering extending the caps to all medicines. Pharmaceutical companies did not immediately comment on the government’s pricing proposal. Firms have, however, expressed optimism on growth revival in the current fiscal year.

A Cipla spokesperson said its in-licensed cardiometabolic drugs (launched in the past 12 months) had started gaining higher traction.

In February Cipla partnered Swiss drugmaker Roche to sell two drugs to treat rheumatoid arthritis and cancer.

“Driving productivity and strengthening in-clinic practices continue to be a major focus area. Moreover, we are working on innovative solutions to expand the patient pool in core areas such as respiratory through direct to consumer campaign and low-cost early diagnostics. We are quite confident of strong growth in the domestic market where we hope to achieve sales of $1 billion in FY19,” the Cipla spokesperson added.

Govt’s proposed changes in pricing policy could play spoilsport