The decision by drug maker Pfizer Ltd to sell branded generic drugs in India is part of its parent’s strategy to focus on emerging markets.
All big pharmaceutical firms—just like other big firms—are focusing on newer markets for growth. Developed markets are large and important but have not been able to deliver. Of the 70 emerging market countries that Pfizer Inc. operates in, India is one of its priority markets.
Pfizer Inc.’s current thinking for emerging markets is driven by a new business model, which talks about a strong local presence, faster responses, addressing the lower end of the market, and developing medicines specifically for emerging markets. This is as opposed to developing medicines for the US and EU and then seeding them in emerging markets. It will follow a regional hub approach, rolling out successful products across the region. The strategy reads similar to that of consumer firms such as Hindustan Unilever Ltd and Nestle India Ltd, addressing local markets using local strategies.
Branded generics is a sound strategy for India. Multinational pharmaceutical firms have lagged Indian companies in growth. In the year ended December, India’s pharmaceutical market grew by around 10%, according to ORG IMS Research Pvt. Ltd. Indian companies grew by 12%, more than twice the rate of their multinational rivals. Pfizer India did quite well, with sales growing by 12%, after excluding sales from products sold to Johnson and Johnson.
Launching generic products is only one part of Pfizer Inc’s strategy. It will also pursue acquisitions and alliances. Pfizer has entered into alliances with Aurobindo Pharma Ltd for supply of around 60 generic drugs for sale in emerging markets. Pfizer India expects the Indian pharmaceutical market to grow by 11-12% and reach $20 billion (Rs97,000 crore) by 2015. In the current fiscal year to March, Pfizer has been growing faster than the market. Its entry into the generics market will drive its growth rate further, as its generics product portfolio becomes bigger and market penetration grows.
On the flip side, there will be some moderation in margins, as the domestic market for generic products is very competitive. Profitability improvements would come from a higher share of products that have patent protection. Pfizer India can rapidly grow share in the generics market, if it wants to, to get the scale advantage. It has adequate firepower, with Rs540 crore cash in hand as on November and no debt.
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