SpicyIP Tidbits: Pharma MNCs struggle in India

Three years after India’s patent law refurbishing exercise, the verdict is out: MNCs are still struggling to carve a sizeable pie of the Indian market share, while domestic pharma majors continue to rule the roost.

A report by Noemie Bisserbe of the ET gives several probable reasons for Pfizer, Novartis and Merck losing market capitalisation over the past three years, including poor pricing strategies and fewer global product launches.

Elsewhere, at an ET summit on the Indian pharma industry, Dr Swati Piramal projects that by 2010, India will have discovered at least five new drugs, and estimates that the cost of innovating a new drug at home was under USD50 million.

And ‘Nano’ is surely the buzzword of the year in India! Even Kapil Sibal has put his two cents in, of the possibility of replicating the low-cost model in pharma. (The cynic in me refuses to use the word ‘success’, because the model is yet to be tested in the market, even if only in the automobile sector.)


  1. AvatarSumathi Chandrashekaran

    Hi Sai Deepak: thanks for the link to the BS article. I have to mention, though, that the ET report appeared to suggest that there were fewer *global* pharma product launches itself, not exclusively in India.
    I quote:

    “The new product pipeline of global pharma companies has become weak,” said Shailesh Gadre, managing director, ORG IMS Research.

    “Besides, today, most new drugs launched globally belong to speciality therapeutic areas. In India, drugs for chronic ailment still represents a small share of the market, while primary care products continue to account for 75% of the market,” said Mr Gadre.”

    While the design of Indian patent laws/litigation woes is one popular line of defence (as the BS article seems to suggest), poor marketing strategies by international pharma companies seems equally plausible and convincing. What do you think?

  2. AvatarJ. Sai Deepak

    Dear Madam,
    I am more into the earthy aspects of patent law such as office practice, patent analysis etc than policy issues, for I believe the latter needs a more broad-based comparative approach. Nevertheless, let me attempt to make sense. The question is about the performance of pharma MNCs in India, particularly with respect to the pre-product patent regime and post-2005 laws. There are a few possible conclusions which one may reach. First, there hasn’t been a positive change in the fortunes of MNCs despite change in laws. Second, there’s been a decline. Third, their performance has improved and finally, it may have improved but not to the extent expected.
    Now what are the factors which lead to these situations? Though it is not exhaustive, the factors could be:

    1. Competitiveness in R&D: Hypothetically one may assume that Indian players have now become better at creating new products at cost-effective prices than just reproducing costlier ones at dirt-cheap rates.
    2. The most obvious factor is that of competitiveness in terms of manufacture of generic drugs.
    3. Marketing strategies which the article refers to and this would include the respective segments (market profiles) to which MNCs and Indian companies cater to.
    4. Relative performance of these MNCs in other similarly placed emerging markets such as China, Brazil, Mexico etc. But this factor would again lead us to focus on local conditions prevalent in other markets.
    5. and finally strength of IP laws and consequently its impact on the performance of MNCs

    I realise that it is not necessary that every factor be relevant to every situation. Moving to the heart of the discussion, the global product line in general may have been weak, but how much of this translates to poor performance of MNCs in India which is specifically attributable to poor marketing strategies? Agreed that poor IP protection has been an oft-quoted defence, but has poor marketing strategy supplanted poor IP protection and a host of other factors to become the sole or atleast the most significant reason for the not-so-good performance of MNCs? If the performance of these companies in other markets has been good in absolute terms and in comparison with India, then one would have to find out if this is because of better IP protection in other countries or better marketing strategies of Indian companies or poor R&D in other countries. Let me explain myself better with a few figures which I have borrowed from a project report submitted by 3 students of Xavier Institute of Management, Bhubaneshwar, namely Soumik Tripathy, Sourabh Anand, Subhra Prakash Rath to Prof.D.V.Ramana on 24-09-2007. The project report is titled “Project in Financial Accounting: Dr.Reddy’s Laboratories”. It is clear from the title that the project does not have a rigorous legal perspective to it, but the statistics provided are comprehensive enough to be quoted. Drugs which were patented after January 1, 1995 form only 20% of the total number of the drugs with the earlier patents on the rest of the 80% yet to expire and which are still available for generic manufacturers to continue dominating the market. Most of these drugs are the primary care products which the ET article refers to. This means that though the product patent regime has been in force for 3 years now, the situation on the ground isn’t completely different from it was before the amendment. So until the point this pool of drugs is exhausted, it would be too early for us to say that Indian drug manufacturers have better marketing strategies in the strictest sense, for only when there is truly an even ground where we have competing formulations which have been indigenously developed at competitive prices does the question of a better marketing strategy arise.
    Moving to the issue of indigenous R&D, the ET article cites Swati Piramal as saying that they have developed 5 molecules at less than $50 million. Such being the case, one would have expected the article to sound equally chirpy about the R&D scene as it did about our marketing strategies, but it doesn’t. Let me rephrase my statement. According to the article, MNCs have a tough time in India because of better marketing strategies, and poor IP protection which the article doesn’t deny. The situation in China is different and here again I quote an ET article dated 26-12-2007 and titled “Global Pharma MNCs find China tough”. This article cites the case of indigenous Chinese medicine making life difficult for MNCs. This is not to say that counterfeiting is absent there, the article certainly mentions copycat drugs. But the emphasis is more on indigenous technology growth than on marketing or copying. Incidentally, Swati Piramal was also present at the launch of Database for International Intellectual Property at Mumbai saying that ultimately Indian manufacturers too need protection from counterfeiting.
    Then we also have the drug pricing control issue with 354 drugs being proposed to be brought under the scheme, most of which affect MNCs more than Indian companies. There’s also the issue of Data Exclusivity which Indian manufacturers have steadily opposed and the compensatory liability model which our manufacturers do not wish to adopt. So with all this going on, I am not sure if one could give full credit to our marketing strategies. On a different note, I might add that a few articles tend to quote the Indian manufacturers all the time and a few others quote MNCs, making it difficult to judge the merits of the information objectively. All the same, I sincerely hope that I don’t sound like a party-pooper, for my point is, popular though the defence may be, poor IP protection in India nevertheless is still relevant to the debate. I thank you for taking time out to initiate this discussion.

    J.Sai Deepak.

  3. AvatarJ. Sai Deepak

    There’s a small correction.I have stated by oversight that Nicholas Piramal has already developed 5 molecules when it was rightly pointed out that the molecules would be ready by 2010. yet this correction does not affect my opinions.


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