Mumbai: Even as a sluggish growth is predicted in the world’s seven largest drug markets by sales, including the US and Japan, Indian drug makers could benefit from severe profit pressures at the world’s leading pharmaceutical companies that could push them to look for cheaper ways to make drugs. This could open up bigger opportunities for the Indian drug industry as a partner for pharmaceutical service outsourcing services.
Growing market: G.V. Prasad, vice-chairman and CEO, Dr Reddy’s, says Indian drug makers will be shielded from the US market slowdown.
John Morris, global chair, pharmaceuticals and chemicals, KPMG in the UK, expects India to corner even up to 40% of the global custom research and manufacturing opportunity in five years. That market is pegged at about $53 billion (Rs 208,290 crore).
Drug retail audit firm IMS Health Inc says in its latest report that sales growth in the US and five largest European markets is expected to range between 4% and 5% in 2008, a historic low for the US. Japan is expected to post even less increases, only 1-2% next year, down from the 4-5% pace likely in 2007.
IMS forecasts growth in emerging markets accelerating to nearly 25%. The seven markets—China, Brazil, Mexico, South Korea, India, Turkey and Russia, dubbed “pharmerging” by the IMS report—are expected to grow 12-13% in 2008 to $85-90 billion.
Meanwhile, India is set to gain in terms of pharmaceutical service outsourcing business as well as the growing generic drug market overseas, say industry experts.
IMS predicts the generics segment will cross $70 billion, clocking growth rates of 14-15% in 2008. The push will come from drugs, worth $20 billion in annual sales, that will go off patent in 2008.
Pankaj R. Patel, chairman and managing director, Cadila Healthcare Ltd, says there will be “no slowdown or downturn” for Indian drug makers that are largely in the generics segment. He says large multinational companies may have aggressive plans for the Indian market to push sales but face difficulties in terms of intellectual property issues, pricing and knowledge of the market.
Increased use of generics in developed markets will lower drug treatment costs in major therapy areas, with costs per day in US falling by as much as 20-40%. Swati Piramal, director, strategic alliances and communications at Nicholas Piramal India Ltd, a drug maker actively present in contract manufacturing, believes this raises the hope for increased sales of Indian generic drugs in the US market. “Outsourcing to Indian drug companies will increase as a result of this,” says Piramal. “What choice do the drug makers there have if they want to cut costs?”
Adds G.V. Prasad, vice- chairman and CEO of Dr Reddy’s Laboratories Ltd: “Indian drug makers won’t be at the receiving end of the US market slowing down as it will largely be in the branded drugs segment.” KPMG’s own report, released at the Confederation of Indian Industry’s Pharma Summit 2007, predicts the generics segment will grow at 11% between 2006 and 2011, and touch $94 billion by 2010. India has about 10% market share in the global generic drug market, estimates KPMG.