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Pharma industry no longer immune to slowdown

Pharma industry no longer immune to slowdown

Mumbai: The pharmaceuticals industry, once thought to be recession-proof, is no longer immune to an economic slowdown, with sales of prescription drugs contracting in October and November for the first time in four years, said a pharma retail auditor.

According to data released by ORG IMS Research Pvt. Ltd, the country’s largest drug retail audit firm, prescription drug sales actually shrank by an average 1.2% to Rs2,877.7 crore in October last year, against Rs3,226.3 crore in September. It improved marginally in November, with sales growth of 6.8% at Rs2,903.4 crore, but was still less than September sales.

The sales growth in October and November were between 8% and 10% in 2006 and 2007, according to an internal industry survey conducted by drug companies.

Also See Growth Declines (Graphic)

“The overall industry growth has shown a marked drop—from 12% to an average of 7%, especially in the last two quarters," Kewal Handa, managing director, Pfizer Ltd, the Indian subsidiary of the world’s largest drug maker Pfizer Inc., said in an email. “The slowdown, coupled with liquidity crisis, has resulted in low demand for pharmaceutical products."

ORG IMS collects data from a panel of 6,000 doctors across India. No independent audits are conducted on the sales of over-the-counter medicines. The country has about 500,000 registered medical practitioners.

“...the key reasons could include a slow cut in expenditure on costly drugs, maybe dividing purchases to small quantities, shift of focus to low-cost medications, and certainly the winter season trend of more focus on over the counter medications to address temporary ailments like cough and cold, infections, etc.," said R.D. Joshi, senior consultant, knowledge management, at the Mumbai-based pharmaceutical marketing consultancy firm Interlink Marketing Consultancy Pvt. Ltd.

“This period (October-November) is a healthy season, which shows less prescription for therapeutic areas other than asthma and COPD," said Shashank R. Joshi, a Mumbai-based consulting endocrine and metabolic physician, and editor of Journal of Association of Physicians of India. COPD is short for chronic obstructive pulmonary disease, in which airflow to the lungs is obstructed.

“However, if the decline is beyond the previous year’s average, then it’s alarming, though no cases of under-dosage has been noticed among my patients so far," he said.

Amithav Chakraborti, a Pune-based oncologist, said he has heard of several recent cases of poor prescription compliances that means postponing treatment and buying less dosage than prescribed.

“These cases, though they may not be exactly with doctors’ approval, have been observed among even affluent patients, especially the business community and high-income professionals," Dr. Chakraborti said, adding that poor drug compliances are common among low-income groups.

Hit with what could likely be purse-tightening by consumers, three of India’s top retail drug companies, GSK India Ltd, Dr Reddy’s Laboratories Ltd and Alkem Laboratories Ltd, were the worst affected. GSK’s sales contracted by 17.1% and 3.5% in October and November, respectively, while that of Dr Reddy’s fell by 16.4% and 9.6%, respectively, ORG IMS said.

Sun Pharmaceutical Industries Ltd, India’s largest drug maker by market valuation, has lost some ground with sales growth slowing to 8.5% in October and 14.4% in November, compared with 23.6% in September. “We have told our investors that at the moment we do not see a need for modification of the guidance. However, we have also told them that if we see a slowdown, we will revise our guidance," a company spokesperson said.

Both GSK and Dr Reddy’s Laboratories did not respond to emailed queries sent to them relating to their market performance in these months.

Some drug companies, however, are trying to take the slide in their stride, while others, such as Alkem, are disputing ORG IMS’ data.

“The trend in Alkem is quite robust and doesn’t suggest any adverse impact due to general industry slowdown," Alkem’s spokesperson Sandeep Singh said in an email. “In fact, our internal figures of sales and payment collection are much different than what is projected by ORG-IMS."

Among the big firms, Piramal Healthcare Ltd was the only one to buck the trend, bouncing back to a 25.5% growth in November, after 10.2% in October and 18.3% in September.

“We were not affected by the slowdown trend as we had initiated different strategies," said Swati Piramal, director of strategic alliances and communications, without giving details.

The company had last year initiated a rural marketing initiative with a diagnostics-to-drug supply chain to tap into a high-volume but low value per patient prescription market.

Graphics by Sandeep Bhatnagar / Mint

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