Market Environment and Competition in the Pharmaceutical sector What is to be done? Dr.Amit Sengupta Jan Swasthya Abhiyan
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Market Environment and Competition in the
Pharmaceutical sector
What is to be done?
Dr.Amit Sengupta
Jan Swasthya Abhiyan
The Context of the Health Care System
SourceLocation(percent)
Income Quintile(percent)
Total
Urban Rural Lowest Second Middle Fourth Highest
Public sector
29.6 36.8 39.4 37.1 39.0 33.9 22.6 34.4
NGO or trust hospital
0.5 0.3 0.3 0.3 0.3 0.5 0.5 0.4
Private sector
69.5 62.5 59.9 62.2 60.4 65.3 76.4 64.8
Other source
0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Source of Health Care
State of Public Sector encourages Growth of Private Sector
• State of the public health system forcespeople to access the unregulated private sector
• As a consequence in excess of 80% of medical care costs are borne by people through “out of pocket” expenses
• Survey shows that, in the case of ailments considered serious by respondents, 40 percent cited financial reasons for not taking recourse to treatment
Health Exp. (Rs.)
Exp. on Medicine (Rs.)
Medicine % Health
Quintiles Rural Urban Rural Urban Rural Urban
Lowest 7.72 11.71 6.68 9.91 86.47 84.60
Second 13.79 21.66 11.71 17.49 84.89 80.71
Third 19.61 29.73 16.46 22.72 83.94 76.44
Fourth 29.98 47.00 24.44 34.34 81.53 73.05
Fifth 77.47 105.67 55.46 65.90 71.59 62.36
Total 29.58 43.27 22.85 30.14 77.24 69.66
Pattern of Out of Pocket Expenses on Medicine and Health Care
The Indian Pharma ‘Success’ Story and after…
Self Reliant Production of Medicines
• India is the 4th largest Producer of Medicines in the World
• Indian Medicines are exported to over 200 countries
How did this Happen?
• Indian Patents Act 1970.• Foreign Exchange Regulation Act.• New Drug Policy 1978• Establishment of public sector
manufacturing factories like HAL and IDPL
What has changed?
• Reversal of basic tenets of Drug Policy 1978:
1.Sectoral Reservation
2.Price Control
3.Differential treatment for Domestic companies
4.Ratio parameters (Bulk to Formulations)
• Amendment of Indian Patent Act in 2005
• Relaxed FDI Norms
• Closure of public sector
Consequence of Change in IP Act: Prices of New Drugs
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Recent Trends in Drug Industry
• Manufacturers – especially large manufacturers – compete for up-market consumers who can pay heavily to ‘buy’ health care
• Production of expensive drugs outstrips demand while less expensive drugs (but essential) medicines are often in short supply
• Companies continuously shift productiontowards newer and expensive drugs within the same therapeutic segment
• Intent to circumscribe price controls
Shifting Trajectory of New Drugs being Marketed
• Between 2004 and 2014 domestic market expanded 25,000 to over 80,000 crores
• Does not reflect a growth in therapeutic value, but a shift to more expensive medicines
• Clear slowing down of registration of NCEs and a huge growth in registration of ‘me too’ combinations of dubious value
• Cos. attempt to compensate for their inability, in the post-2005 situation, to register NCEs by concentrating on irrational combinations
Present Business Model of Pharma in India
• Reliance on Retail Sales – profits come from sale of formulations and not from basic manufacturing
• Huge variation in prices of same drug shows there is no real competition --Premised on Sales and Distribution Network with various layers
• Crucially dependant on irrational prescription and aggressive promotion
Present Business Model relates to:
Trade and Industrial Environment
• Increasing reliance on imported bulk drugs
• Increased reliance on export market
Policy Environment
• Liberalised imports (esp. post WTO)• Price and Production Decontrol• Liberalised FDI norms• New IP Act
From ‘manufacturer to trader’?
Present Business Model leads to:
• Retail sales driven by marketing tricks
• No major interest in manufacturing
• While there are a large number of manufacturers, clear evidence of oligopoly
Variation of Drug Prices –Evidence of Profiteering
• Wide variations of prices in retail market, between prices of the same drug sold by different companies
• Very wide variation in the prices of drugs sold in retail and those sold in bulkthrough tenders to institutions -- from around 100% to 5600%
Increasing Import Dependence
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Comparison of Increase in Bulk Drug and Formulation Production
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Dependence on Imports from China
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Increased role of Exports in Pharma Sector
Slide Courtesy Reji Joseph, Presentation in RIS, 2012
Indian Generic companies as ‘Junior’ Partners of Big
Pharma
MNC INDIAN THE DEAL FROM RATIONALE
Daiichi Sankyo
Ranbaxy Acquired June 2008
Access to low cost manufacturing
Pfizer Aurobindo Contract Manufacturing
March 2009
60 products for regulated markets
Fresenius Dabur Acquired April 2009
Access to oncology manufacturing
Pfizer Claris Lifesciences
Contract Manufacturing
May 2009
Access to sterile injectable drugs
GSK Dr Reddy’s Partnership June 2009
Develop & market select products
Mylan Labs Biocon Contract Manufacturing & Developing
June 2009
Develop monoclonal antibody
Acquisitions and Tie Ups
Acquisitions and Tie Ups
MNC INDIAN THE DEAL FROM RATIONALE
Mylan Labs Famy Care 15% stake August 2009
Access to oral contraceptive mfg.
Sanofi pasteur
Shantha Biotechnics
Controlling stake
August 2009
Access to vaccine manufacturing
Hospira Orchid Chemicals
Buyout of injectable antibiotics
Dec 2009 Access to low cost manufacturing
Pfizer Strides Collaboration Jan 2010 & May 2010
Access to 78 oncology products & sterile injectables
Abbott Nicholas Piramal
Takeover of healthcare business
May 2010 Access to generic products
Litha Healthcare
Natco Pharma
Marketing of products
Sept 2011
Access to multitude of dossiers
What do we need to do?
Long Term Strategy
• Public Investment on Health Care• Revival of the Public Sector• Production Controls• Support to Small and Medium
Enterprises• Liberal use of Compulsory Licenses
for Patented Drugs• Rational Prescribing (including
generic prescribing) + effective check on promotion
Thank You!
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