BITTER PILL

India’s pharmaceutical industry may be considered as a defensive play in the stock markets as it is not subject to business cycles, but the sector is also going through a slowdown.

The Indian pharmaceutical market saw its pace of growth slowing to 9.8 per cent in 2013 from 16.6 per cent in 2012. According to a CII-PwC report —India Pharma Inc; changing landscape of Indian pharma industry — the slowdown is a result of the new drug pricing policy and the regulatory interventions over the past year.

 

While the growth rate declined after November last year from an average 16 per cent to 8 per cent, the sector showed a compounded annual growth rate (CAGR) of around 15 per cent from 2010 to 2012.

“This slowdown can be attributed to the national pharmaceutical pricing policy announced in 2012, higher growth in the corresponding previous quarters and the price corrections leading to low uptake among stockists in the second quarter of 2013 after the price policy was implemented.

Through the new policy, the government brought 348 drugs under price control from 74 earlier.

Both Indian and multinational companies were hit by the slowdown. However, the slowdown was more prominent among MNCs. In 2012, the top five MNCs had grown at the rate of 16 per cent, which fell to 7 per cent this year. The top five Indian companies saw their growth declining to 12 per cent in 2013 from 16 per cent in the previous year.

The number of new products introduced went down from around 1900 in 2010 to, approximately, 1700 in 2012. Of all the launches by April this year, the maximum were anti-infectives (468), pain-analgesics (435) and gastro (389) therapies.

 

Moreover, the sector was facing delays in clinical trial approvals. The government’s FDI policy has also sparked some confusion. The government allows 100 per cent FDI in greenfield investments under the automatic route. But since November 2011, brownfield investments require the approval of the FIPB.