Prognosis for 2014: Healthy but regulatory reform remains a concern

The last month of 2013 had a significant number of fairly high profile, high value private equity (PE) deals focused on the pharmaceutical and healthcare sectors. While Blackstone sold its stake in Emcure Pharmaceuticals to Bain Capital, Carlyle picked up minority stakes in Medanta Hospitals, and Quadria Capital bought majority stakes in Medica Synergie.

Late December also saw GlaxoSmithKline (GSK) announce an open offer to raise its stake by around 25 per cent in its Indian pharma arm, intending to take it up to 75 per cent. The company had already done the same in its consumer health arm earlier this year. November’s announcement of an investment of Rs 864 crores to set up its sixth manufacturing unit in the country, is another serious vote for India.

And Torrent Pharma’s buyout of Elder Pharma’s domestic formulation business once again raises hopes that the long-over due consolidation among domestic companies will finally pick up momentum. Torrent jumps up five places in market share rankings and analysts have hailed this deal from all angles. So will 2014 see more consolidation in the fragmented Indian pharma industry? Will ‘selling the family silver/selling out’ be seen as a much more strategic tactic rather than merely survival?

And what about MNCs like GSK who are digging themselves deeper into the trenches in developing markets like India? Is GSK’s move a reaction to the flak it is facing from China’s regulatory whips? Is India seen as a softer regime, when it comes to such regulatory matters? Growth in the matured markets like the US and EU has, well, matured to low single digit growth and many pharma MNCs are girding themselves up for even worse times, as the Affordable Care Act and the Sunshine Act gather momentum in the US market.

In preparation for such moves, MNCs like GSK and AstraZeneca have already announced measures to fall in line, by withdrawing sponsorship of doctors for conferences as well as de-linking performance assessments of their sales personnel from prescriptions generated. Developing/ emerging markets (EMs) are thus where the volume growth is projected to come from, especially as the spend on medicines per person is far below global figures.

The Indian pharma market too has seen shrinking sales, hit by new pricing norms. The many policy changes (clinical trial regulations, FDI policy) as well as impending general elections seem to have spooked most corporates into a wait-and-watch mode.

On the patent front, the stand off between developing and developed nations is set to reach new flashpoints in 2014, as the later try to get the former to sign regional trade pacts beyond existing ones like ACTA and TRIPS. There is a growing school of thought that developing nations need an alternative patent system. The World Intellectual Property Organization is already doing this for traditional knowledge and cultural expression (imagine that the numerous Indian folk arts and crafts can be protected by patents!)

To take the discussion further, Express Pharma gets two experts from opposing sides to present their arguments. Dr Gopakumar Nair, founder of Mumbai-based Gopakumar Nair Associates, argues that provisions like Sec.3(d) which has helped restrict ‘ever-greening’ need to be further strengthened. In an equally meritorious counterargument, Dr Kristina Lybecker, Associate Professor in The Colorado College’s Department of Economics & Business points out that 63 per cent of the drugs on the WHO’s Essential Drug Lists are follow-on drugs and incremental innovation is especially critical to developing world patients as such innovations provide for more convenient, extended-release dosing and formulations that do not require refrigeration or are less temperature sensitive, which are valuable characteristics in developing country settings. (Read more on pages 30-33)

In the light of all these changes, Express Pharma asked industry leaders to share their plans for 2014. Everyone seems anxious to bury 2013, confident that 2014 will be better for business though some analysts predict that the Indian pharma market will lag other EMs. Read more in our cover story (pages 8-16).

But life is more than a corporate snakes-and- ladders game. With increasing stress levels, maintaining a work-life balance, (with family, friends, fitness regimes and hobbies), is more than important. We got top honchos to share their New Year Resolutions with us (pages 62-66). And with that, I wish our readers all the very best for 2014 …

Viveka Roychowdhury
Editor

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