The Decline in New Product Launches & its Impact on Indian Pharma
The numbers speak for themselves. In 2011, reports showed new drug launches in the range of 3,500 across the country. In 2018 however, it’s a completely different picture, and a worrying one at that. The numbers from a leading market research agency report report a significant drop down to 3,000 new product launches in the last year. Analysts say that new drugs used to contribute about four percent of the overall domestic market sales in the country. Today that number has dropped to two percent.
According to the AIOCD AWACS which tracks pharmaceutical retail sales in India, this decline in new product launches can be related to a number of interconnected factors. Some of these include the launch of “me too” drugs with no real distinction between various brands, the ban of fixed dose combination drugs, increased investigations and audits resulting in Warning Letters and even the shut down of entire manufacturing plants. Add to these the delay in getting new product approvals, and one can trace the slow growth of the Indian pharma market over the last five to seven years.
Another reason for this decline could be attributed to recent product launches in the areas of chronic therapy areas or select therapeutic segments. When the new launches in the market are restricted to biosimilars, they bring with it another set of problems. Copies of biosimilars are more capital intensive to produce and require specialised skill sets, therefore increasing their prices.
So what does this overall decline in new product launches mean for the Indian pharma industry today? Well, for an industry already struggling with single digit growth over the past few years, this is not good news. The USFDA regulations have kept R&D at a minimum and manufacturing sluggish. This comes on top of price erosions and price caps in the US market as well as the death knell to domestic sales as a result of demonetisation and GST in the last two years.
“The US generic drugs market expanded at a compounded annual growth rate (CAGR) of 15% in 2010–15, but is expected to slow down to 5% CAGR in 2016–20 due to the lower value of patented drugs expiring during this period,” Broking firm Edelweiss Securities had said in its November 2015 report. Competition in the US has also increased as a result of new companies and coalitions in the pharma industry as well as existing companies that are introducing more products thereby depressing prices and making it tough to maintain a equitable market share. And let’s not forget the ever increasing presence of the Chinese pharma firms in the US.
Most of the predicted growth spurt for 2018 relies heavily on hopeful government policy actions over the next six months. “After a quiet first six months of the financial year we have seen the pickup in secondary sales growth across major segments. This revival has been across major therapeutic areas and we feel that the industry growth will bounce to its normal levels in the coming months,” said a spokesperson from a leading pharma company. Without these government interventions however, many experts believe that the predicted turn around for the pharma market will be impossible. D G Shah, secretary general of Indian Pharmaceutical Alliance stated that, “in 2016, the government banned over 340 fixed dose combination drugs. Further there have been delays in approval of new drugs. The industry will continue to suffer unless correct policy decisions are taken.”
According to experts and analysts across the board, the verdict is unanimous. For pharma companies to progress in today’s climate there is an urgent need to develop complex generics along with specialty and innovative products. This is the only way to drive future growth and offset pricing pressures. In order to evolve as an innovator, pharma companies need to adopt different strategies as well as resolve compliance issues and improve overall quality.
All this is definitely easier said than done, especially when the bottom line of profits and margins determine every decision. At a time when costs are ever increasing in the field of R&D and audits and investigations bring with them their own set of operational problems that demand immediate solutions, there is a very real need to take a long hard look at cost structures and productivity to find ways of improving performance and profits. Capacity utilisation and inventory management need to improve, which will help in enhancing competitive advantage of companies. Until then, the pharma sector is likely to remain under pressure, and stagnancy to be the order of the day.
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