The year 2013 is expected to be no less eventful for the pharmaceutical industry, which witnessed a number of policy actions during the past 12 months. Be it pricing, foreign investment or curbing promotional expenses, the government initiated a number of moves to put in place a stringent regulatory mechanism for multinational, as well as domestic, drug makers.
The new year will not only witness the implications, but also unfold innovative strategies that pharma companies would adopt to tackle the policy decisions and move ahead.
Key things that the industry would look forward to during the year include the Supreme Court’s final word on the new National Pharmaceutical Pricing Policy, more clarity on foreign direct investment in brownfield pharma and the proposal to introduce a legislation to keep a check on the nexus between drug makers and medical practitioners. Besides, the apex court order on Novartis AG’s Glivec patent case is also expected during 2013 and is keenly awaited by many.
The much awaited drug pricing policy, which increased the span of price control to 348 essential medicines during 2012, is likely to drive most activities in the sector in 2013 as well. Revenues of major pharma companies such as GlaxoSmithKline, Abbott Laboratories, Ranbaxy Laboratories, Cipla and Cadila Healthcare are expected to take a heavy dent during 2013, due to the new pricing regime.
“Though the sector would be operationally efficient, it would be interesting to see how 2013 evolves for the industry with implications of all the regulatory decisions taken by the government during the passing year,” says Sujay Shetty, partner, PricewaterhouseCoopers.
However, the industry is optimistic that despite stringent regulatory measures, it would continue to grow, backed by strong product portfolio and demand.
“I expect the Indian pharma industry to fare well in 2013, with growth spurred by increased demand for generics in advanced markets of the US, Europe and Japan. The Indian drug market should also continue to clock double-digit growth and would expand by around 12 to14 per cent,” says Lupin chief financial officer Ramesh Swaminathan.
Analysts opine companies may opt for new strategies to tackle the pricing and other regulatory pressures.
“The year 2013 and beyond will certainly see refocusing of strategies among top pharma companies,” says Praful Bohra, a senior pharma analyst at Nirmal Bang.
Ernst and Young partner - life sciences, Ajit Mahadevan, agrees. According to him, drug makers may now again be required to weigh brand building and will evaluate cost-effectiveness to realign product mix.
Pharma companies are also expected to take a relook at their business strategies and product portfolios because of the increasing generic penetration and the patent cliff in developed markets such as the US.
“The focus of companies would shift from developing too many products to high-value differentiated products. Some companies have already started doing so and more Indian companies are likely to follow the trend,” Mahadevan said.
Apart from differentiated products, biosimilars and other biotechnology products are also likely to attract many Indian pharma companies. Ranbaxy, Dr Reddy’s Laboratories, Wockhardt and Cipla have already initiated major investments in biotechnology.
“There will be increased thrust on biosimilars. Companies have already started laying foundation in this segment and 2013 will see more investments coming into this. This will reap results over the next three-to-five years,” says Aashish Mehra, partner and managing director, Strategic Decisions Group, a US-based strategy consultancy firm.
However, Bohra maintains that some Para IV opportunities in the US, where generic drug developers enter litigation on patented products to gain 180 days of exclusive marketing right, will continue for Indian drug makers. “Big-ticket opportunities may, however, remain missing for Sun Pharma and Ranbaxy in 2013.”
Besides, companies will increasingly eye emerging markets like Russia, Brazil, Malaysia and South Africa for the next round of growth, analysts say.
The industry is also expected to see more in-licensing agreements and a few mergers and acquisitions. “Acquisitions are imperative for companies like Sun Pharma, whereas Lupin and few others may look at buying smaller players,” Bohra said.