Low December Growth Sparks Jitters As Indian Industry Scales Back Medical Rep Expansions
This article was originally published in PharmAsia News
Executive Summary
A combination of seasonal factors may have slowed down the Indian pharmaceutical market, but executives are concerned about an emerging trend. As a result, a few large companies may halt further expansion.
MUMBAI – Is the Indian pharmaceutical market slowly losing its sheen? That question is gaining traction among some executives as market research agency AIOCD AWACS put out dismal numbers for December 2012.
The pharmaceutical market growth stood at a meager 5%, down from the highs of 18% reached at the beginning of 2012.
A number of large companies that managed to buck the trend of slow growth included Sun Pharmaceutical Industries Ltd. growing at 17.3%, Zydus Cadila with 16.2% growth. Mankind Pharma Ltd. grew 14.5% but fell short of its average – above 20% – and Macleods Pharmaceuticals Ltd. grew 16%.
Analysts suggest drug firms with a wide exposure to the anti-infectives segment and respiratory drugs have had more difficulty than their peers. For the second straight month, the industry has decelerated.
The signs certainly point to a disturbing trend. A note circulated by AIOCD said December 2012 had one of the lowest pharma growth rates in recent history, excluding the impact of the Diwali holiday in November 2012 (Also see "Mystery Of India’s Dismal 4% November Growth Hidden In Diwali Puzzle" - Scrip, 14 Dec, 2012.).
The year 2012 started with a bang – growth through March reached 18.7% – but ended on a whimper with Oct-Dec growth slipping to 9.1%, said Ameesh Masurekar, director of AIOCD AWACS. “The trend of Q1, Q2, Q3 and Q4 – 18.7%, 16.9%, 13.5% and 9.1%, respectively – definitely points to a slow-down, although it does not seem as drastic as the last quarter suggests,” Masurekar said in a Jan. 12 report.
Industry stakeholders will analyze the data to assess the slowdown, but certain indicators are starting to emerge in industry reports.
Surprises In Store
Generics are acquiring bigger share of the Indian market, a slowdown in new patient detection in chronic therapies, as well as subdued seasonal anti-infectives market due to lower respiratory infections compared to the previous year have all contributed to India’s slowdown, according to AIOCD.
Masurekar said the market was impacted by elements that have always been feared. “Anti-infectives with the largest market size and a 17% weightage are flat, leading to a lowering of growth rates for the first time ever,” he said, The entire anti-infectives segment grew at a negligible 0.3%.
Coming as a surprise, the diabetes market is growing slower than the cardiovascular market. Diabetes grew higher than cardiovascular for the most part of the last several years, and the reversal is a new observation, according to Masurekar. He noted that the boom seen in the dipeptidyl peptidase-4 (DPP-4) segment led by vildagliptin of Novartis AG and sitagliptin of Merck & Co. Inc. is plateauing (Also see "India Case Study: Novartis’ Galvus Inches Closer To Merck’s Januvia As Battle For Brand Supremacy Rages On" - Scrip, 30 Nov, 2011.). “You may see a time when the non-gliptins will be back with a higher growth rate,” he said.
But that may not come soon. Global companies marketing DPP-4s have held on to their prices. “None of them may have felt the urge to drop prices to build volumes, but a few new entrants may change the game to position themselves competitively for a head start,” an analyst said, asking not to be identified.
The diabetes market dropped below 10% growth during December, which came as a big surprise to industry watchers.
Additionally, the respiratory and the pain/analgesics segments were sluggish. “Another market that is virtually stagnant for the month is respiratory along with pain and analgesics. While anti-infectives, respiratory and pain/analgesics (including antipyretics) can have seasonal influence, the slowdown in cardiac and diabetes points to a definite lowering of mid-term [Indian pharmaceutical market] growth forecasts,” the AIOCD AWACS note said.
Imminent Scale Back?
Given the new signs, which are contrarian to high-teen growth projections, at least three executives from Indian drug companies who asked not be named said they may apply brakes on additional field force expansions. Companies such as Abbott Laboratories Inc., Cipla Ltd., Lupin Ltd., Mankind Pharma, Dr. Reddy's Laboratories Ltd. and Ipca Laboratories Ltd. have expanded to between 5,000 and 7,000 medical representatives in their quest to capture new prescriptions in urban pockets and rural areas.
A senior brand management and marketing consultant based in Mumbai said mindless additions may not always translate into higher returns, and at some point of time the industry will need to temper its expectations and take stock, he added. Beyond restraining further additions, he said some companies may already be contemplating cutting down their marketing operations to increase productivity.
Still, a number of firms are gung ho about the Indian market and may not be averse to large expansions. Boehringer Ingelheim GMBH, for one, added to a few hundred staff during the last year.
Despite the slow growth, AIOCD Director Masurekar advised companies to continue to expand into the market. Expressing his optimism for the market, he sent out a veiled caution, “The first quarter of 2013 is a crucial period wherein focus needs to be reoriented into profitable rural penetration, higher detection and patient conversion into chronic therapies and improving compliance to drive the overall market growth by volumes. Despite one of the toughest quarters, nobody doubts the positive outlook of the Indian pharmaceuticals growth story.”