The emerging pharma markets - including India - are growing at a high pace, compared to the downturn in mature markets. Shares of the top three markets - the U.S., Europe and Japan - slipped to 46% last year from a hefty 74% in 2001, while the emerging markets moved several notches up to 25% from a mere 8%. By 2020 emerging markets could well reach $400 billion - equivalent to current combined sales of U.S. and key EU markets, according to IMS figures.
India's pharmaceutical market may expand by more than 12% a year, reaching $20 billion by 2015, McKinsey & Co. said in a report. Obviously, it is yet a long way for the $7.8 billion Indian pharma arena to figure in as a key participant in the global marketplace in terms of value. Notwithstanding this, the Indian market can still be a valuable hedge for pharma giants facing slowdowns from the loss of exclusivity, fewer new products and governmental price pressures, analysts say.
Differential Pricing Strategy
A burgeoning middle-class and changing disease profiles are prompting the drug majors to reconsider the world's second most populous country. To secure a firmer foothold in this fast-changing marketplace, multinationals are trying various strategies. This includes selling new products at far less a price - something that an innovator would always abhor to do for its patented drug products - to suit the Indian market.
As a case in point, Merck Sharp & Dohme (MSD), the Indian affiliate of Merck, recently launched its breakthrough anti-diabetic pill Januvia (sitagliptin) in India for one-fifth of its selling price in the U.S. Back in India after an absence of more than three decades, Merck now wants to be among the top five players here and plans to introduce at least two new products each year to this market.
"Almost 50% of the world's diabetics are in Asia Pacific, over 50% of the world's cervical cancer mortality is in the region and experts have described a cancer epidemic occurring in this part of the world," said Vince Docherty, MSD's spokesperson for Asia Pacific. India contains the biggest diabetic population in the world. Merck is now awaiting Indian regulator's nod to launch its high profile cervical cancer vaccine Gardasil.
GlaxoSmithKline makes another addition to the India-specific pricing strategists' list. The third largest player in the country launched its breast cancer drug Tykerb (lapatinib) in May at a price 25% lower than its overseas cost. More such firms are expected to follow this "differential pricing" model.
"India is a highly price-sensitive market. Those drug makers who were averse to a dual-pricing strategy have not fared well here," pointed out Sanjiv Kaul, managing director, ChrysCapital, a leading investment firm.
In addition to a large consumer base, a higher level of sophistication in manufacturing and research achieved by the Indian firms is another lure for the multinational corporations (MNCs). "Big pharma is tapping into India's research skills for new drug discovery and trying to cut down the time to market through 24/7 operations," explained Ranga Iyer, president, Organisation of Pharmaceutical Producers India – the representative body for MNCs.
Mr. Iyer happens to be also the managing director of Wyeth Ltd. In May, Wyeth expanded its 2006 discovery chemistry alliance with contract research firm GVK Bio to include discovery of potential drug candidates.
Capabilities in reverse engineering and manufacturing, evolved IT expertise, highly educated and western trained scientists, among other things, add to the attractiveness quotient for the pharmaceuticals, according to Mukta Arora, who heads Eli Lilly's global sourcing division. Lilly, like Merck and AstraZeneca, has several R&D programs in India. Thus the proposition of establishing operations in an emerging market like India "adds value from several dimensions" to the big-time companies, averred Ms Arora.
On top of it, there is a supply chain advantage. MNCs can leverage the India platform to stretch out to extended geographies for a greater exposure. While announcing its intention to buy a controlling stake India's top drug maker Ranbaxy in June, Daichii Sankyo also made it clear how the emerging markets are going to be a matter of great interest for the Japan's #3 player.
Put together, this may partly explain why MNCs are getting more aggressive about India despite patent concerns, high competition and pricing. According to Mr. Kaul, when it comes to India, it is better that drug majors consider the opportunities it offers "more holistically" than in parts.