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The Indian Pharmaceutical Market to 2011

THE AUTHOR: Revati Nehru               From: Business Insights

Introduction

This chapter will provide a background to the Indian pharmaceutical market by discussing top-line sales values and growth rates, the leading therapeutic areas and the leading ten domestic pharmaceutical companies and brands.

Pharmaceutical market environment in India

In 2005, the Indian pharmaceutical market was valued at $4,660m, having expanded at a rate of 9.5% over the 2001-05 period. However, growth in 2004-05 was pegged at 8.3%, thus underperforming the CAGR registered for 2001-05 by 1.2%.

In comparison, the 5 major European markets (France, Germany, Italy, Spain, and UK) and the US reported an average growth rate of just 4.8% and 5.2% respectively for 2005. The global pharmaceutical market grew at 7.3%, representing an increase of $36,284m, from $498,567m in 2004 to $534,851m in 2005. Figure 1 illustrates the relative growth experienced by the different geographies comprising the global pharmaceutical market in 2004-05.

Figure 1: Comparison of pharmaceutical sales in the markets of India, EU5, US, Brazil, Russia, China and Japan, 2005

Source: IMS; Business Insights

On a global perspective, the Indian pharmaceutical is ranked among the lowest as per sales potential in 2005. However, the rate of pharmaceutical spending is expected to continue growing at a rapid pace, based on 5 year CAGRs (compound annual growth rates) over 2001-05. Using Spain as a benchmark market for size and growth, the Indian market is forecast to reach a comparable level of development by 2018. In comparison, other developing markets such as China are forecast to grow to the size of Spain’s current pharmaceutical market by 2009, with Brazil reaching a similar level of development by 2012 and Russia’s by 2011.

In the past, the Indian government disregarded the TRIPS (Trade Related Aspects of Intellectual Property Rights) treaty in an effort to protect and boost the growth of domestic pharmaceutical companies. In order to gain accession to the WTO, the Indian government bowed down to international pressure and has since enforced compliance with TRIPS effective from 2005. Despite this, growth in the Indian pharmaceutical market remains restricted because of an under developed healthcare system, severe price controls and limited implementation of policies on healthcare reimbursement and treatment priorities. The Indian pharmaceutical market also suffers from problems typical to that of a developing economy, which include bureaucratic impediments, corruption and counterfeit drugs.

Pharmaceutical spending in the Indian market

Pharmaceutical prices in India tend to be low due to fierce competition and government control (aimed at increasing access to medicines across deprived economic groups). Prices are controlled by the National Pharmaceutical Pricing Authority (NPPA) that carries out price revisions on a regular basis in order to limit manufacturers from over charging. In 2002, a new pharmaceutical policy was carried out that exempted products that cost the consumer under Rs.2 ($0.05) a day from price controls.

Although price reductions have been carried out with the intention of increasing access to lower income populations, the government has not initiated any schemes wherein long term expensive treatments for diseases such as AIDS and cancer are provided free of cost or heavily subsidized for the affected population. The lack of acknowledgement of the seriousness of the AIDS epidemic in the country is unanticipated, since Indian companies such as Cipla have been marketing their products at lowered price points to other low income countries in Africa.

Figure 2 illustrates the comparison of per capita pharmaceutical spending between the US, major 5 EU markets and India in 2005.

Figure 2: Comparison of pharmaceutical spending in the markets of India, EU5, and the US, 2005

Source: IMS, WHO

The annual per capita spending on pharmaceuticals in India was reported at $4 in 2005, as compared to $314 in Spain and $796 in the US. Even though pharmaceutical price points are so low in India, western drugs are unaffordable for a sizeable portion of the population who turn to cheaper and more easily available alternative forms of medicine. Competition in this market is price based and very intense, which dissuades companies from entering the market. However, the rapidly increasing middle class population of India with its increasing willingness and ability to pay for expensive, branded treatments remains an attractive feature of this market for potential pharmaceutical marketers.

Performance of Therapeutic Areas

Table 1 displays the sales accrued by different therapeutic areas in the Indian market for 2005.

Table 1: Breakdown of the Indian pharmaceutical market by therapy area, 2001-05

Table 1: Breakdown of the Indian pharmaceutical market by therapy area, 2001-05
Sales ($m) Growth 04-05 (%) Mkt. share 2005 (%)
2001 2002 2003 2004 2005
Alimentary Tract& Metabolism 811 883 1,007 1,107 1,230 11.1% 26.4%
Anti-infectives 853 900 960 1,000 1,059 5.9% 22.7%
Cardiovascular 432 487 564 659 732 21.6% 15.7%
Respiratory 325 343 402 418 433 3.5% 9.3%
CNS 242 248 297 321 353 10.1% 7.6%
Musculo- Skeletal System 217 240 267 295 297 0.7% 6.4%
Women’s Health 132 146 168 195 212 8.6% 4.5%
Dermatology 124 126 151 167 188 12.7% 4.0%
Cancer 16 19 27 36 44 24.0% 1.0%
Others 88 95 104 106 113 6.3% 2.4%
Total 3,240 3,487 3,948 4,304 4,660 8.3% 100.0%

Source: IMS, Business Insights

In 2005, the strongest performance was recorded by products indicated for the treatment of alimentary tract and metabolism related disorders, which accrued sales of $1,230m, representing a market share of 26.4%. The bulk of sales captured within this therapeutic area are believed to be by vitamins, products indicated for the treatment of diabetes, anti-ulcerants and antacids.

Anti-infectives are positioned at number two with a share of 22.7%, attributable to India’s epidemiology that continues to feature a strong prevalence of infectious and communicable diseases. This therapeutic area garnered sales of $1,059m in 2005. The cardiovascular therapy area has expanded at a strong CAGR of 14.1% over the period of 2001-05, representing 16% of the market in 2005 with $732m in sales. This strong performance is attributed to the high prevalence of risk factors of cardiovascular disease, thus generating strong demand. Despite CNS disorders representing a modest 7.6% of the market with sales of $353m in 2005, this therapy area witnessed a strong growth rate recorded at 10.1% for 2004-05. However, majority of sales in this therapeutic area are accounted by analgesics, most of which are available as OTC products in India.

Therapies for respiratory disorders accounted for a strong 9.4% of the market having captured sales of $433m in 2005. In spite of the recent increased availability of domestically manufactured generics and inhalation devices, growth in this market remains low. The lowest market share was reported by cancer therapies, which account for a mere 1% of the market. Despite the strong presence of domestically manufactured, cheaper versions of cancer drugs, treatments for cancer remain extremely expensive in the Indian market, which when combined with limited availability of reimbursements and/or subsidies, render these treatments unaffordable for the majority of patients.

Figure 3 illustrates 2005 sales performances of different therapeutic areas in the Indian market.

Figure 3: Sales performance of different therapeutic areas in the Indian market, 2005

Source: IMS; Business Insights

Performance of leading companies in the Indian market

Table 2 illustrates the sales and sales growth rates of the leading pharmaceutical companies in India for the period 2004-05.

Table 2: Sales of leading pharmaceutical companies in India, 2004-05

Table 2: Sales of leading pharmaceutical companies in India, 2004-05
Company Sales ($m) Growth04-05 (%) Share 05(%) CAGR01-05 (%)
2004 2005
Glaxo SmithKline 275 291 6.1% 6.3% 8.5%
Cipla 220 233 5.8% 5.0% 12.3%
Ranbaxy 198 210 6.2% 4.5% 5.7%
Nicholas Piramal 183 192 4.7% 4.1% 5.9%
Sun Pharma 154 181 17.4% 3.9% 19.1%
Zydus Cadila 169 163 -3.6% 3.5% 6.0%
Sanofi-Aventis 147 153 4.0% 3.3% 7.4%
Dr Reddy’s 108 123 14.4% 2.6% 8.5%
Alkem 104 116 11.3% 2.5% 12.1%
Abbott 89 108 21.1% 2.3% 8.9%
Lupin Laboratories 93 106 13.7% 2.3% 5.8%
Pfizer 99 100 0.7% 2.1% 0.8%
Aristo Pharma 82 96 17.1% 2.1% 15.8%
Torrent 76 87 15.6% 1.9% 9.9%
Wockhardt 82 86 4.9% 1.8% 2.0%
Novartis 80 85 6.4% 1.8% 7.1%
U S V 73 76 4.8% 1.6% 5.6%
Micro Labs 68 76 11.6% 1.6% 10.7%
Alembic 62 67 8.4% 1.4% 6.7%
FDC 57 66 15.8% 1.4% 19.7%
Leading 20 companies 2,418 2,615 8.1% 56.1% 8.5%
MNC total 690 737 6.9% 15.8% 7.0%
Leading Indian companies 1,728 1,878 8.7% 40.3% 9.2%
Others 1,886 2,046 8.5% 43.9% 10.8%
Total 4,304 4,660 8.3% 100.0% 9.5%
Note: Sales values displayed are sales accrued by companies from the Indian market only and are not representative of total company sales.

Source: IMS, Business Insights

The leading 20 companies garnered $2,615m in 2005, accounting for 56.1% of the total market. Of these companies, five are multinationals with an Indian presence. These include GSK, Sanofi-Aventis, Abbott, Pfizer and Novartis. Sales accrued by these five multinationals a mere $737m in 2005, thus representing 15.8% of the market. Combined sales from these companies have expanded at a CAGR of 7.0% for the period of analysis (2001-05), thus underperforming the market CAGR for the same period by a significant 2.5%. On the other hand, the leading fifteen Indian companies represented 40.3% of the market, having grown at a rate of 8.7% for 2004-05 with sales of $1,878m in 2005.

GSK led the Indian market with sales of $291m in 2005, representing 6.3% of the market at a growth rate of 6.1% for 2004-05. Although, GSK has retained is position as market leader over the period of analysis, there has been an overall decline of 6.0% in growth rates, which declined from 12.1% in 2001-02 to 6.1% in 2004-05. This decline is attributed to the heavy presence of cheaper, locally produced versions of the same drugs, thus preventing sustainable growth patterns for branded products.

Positioned at number two with 2005 sales of $233m, Cipla registered an increase of 5.8% or $13m from 2004 sales reported at $220m. Cipla’s marketed portfolio, which has a strong presence in the respiratory disorders area, witnessed heavy volatility in sales growth over the period of analysis, with a reported CAGR of 12.3% for the entire period. This volatility has been attributed to market saturation and lack of innovative product offerings.

Following Cipla, with sales of $210m in 2005 is Ranbaxy, which represents a market share of 4.5% of the Indian market. Although, the company trails behind Cipla by a modest $23m in sales, Ranbaxy has registered a low CAGR of 5.7% for the period 2001-05. This low growth rate for the Indian market is attributed to the company’s focus on expanding its global presence in an effort to capture international generics markets.

Nicholas Piramal has been facing a steady decline in sales growth over the period of analysis, and reported revenues of $192m in 2005 at a growth rate of 4.1%. Sun Pharma on the other hand, witnessed a strong growth of 17.4% in 2005 representing sales of $181m for the same year. This increase in revenues has been attributed to the strong performances the company’s cardiovascular, alimentary and metabolic diseases’ therapy portfolios, which witnessed a major growth in 2005.

Zydus Cadila was the only company in the Indian market to register negative growth in 2005, reported at -3.6% and representing a decrease of $6m from 2004 sales of $169m to $163m in 2005. Although the majority of products in Zydus’ marketed portfolio have registered a decline in sales, the cardiovascular and women’s health portfolios witnessed the sharpest decline in revenues reported at -8.3% and -10.4% respectively in 2005. It is likely that the company’s marketed franchise has fallen prey to the strong presence of other alternative local brands available in the Indian market.

In spite of Pfizer’s reputation as a leading pharmaceutical company in the world, its India franchise recorded poor performance in 2005 with an increase of a mere 0.8% ($1m) in revenues, from $99m in 2004 to $100m in 2005. This mediocre performance has been attributed to the company’s inability to compete at such low price points as the Indian market demands. Pfizer draws its current revenues streams from products falling under the respiratory and anti-infectives drug classes, which account for a combined share of 45.2% or $45m of total Indian revenues.

Similarly, Novartis, represented a mere 1.8% of the Indian market having accrued sales of $84m for 2005. Sales from Novartis’ marketed franchise are weighted heavily on the performance of musculo-skeletal disorders area, which accounts for 29.4% of its total revenues.

 

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