Multinationals Threatening Domestic Growth of India’s Generics Firms

Wednesday 10 April 2013, Amsterdam

Previously considered a thorn in the side of Big Pharma, the Indian generics industryis emerging as a key hunting ground for Multinational Corporations (MNCs) looking to extend their reach into emerging economies. Domestic players, however, may pay theprice for  the  intrusion,  states the  latest  report from  research  and consulting.

The new report – the first in the company’s new PharmaSphere series – explains that while the Indian generics industry has witnessed significant growth over the last year, pharmaceutical giants, which are keen to leverage  the nation’s  relatively low cost of production and high quality facilities, may slow the growth of India’s  domestic companies.

Adefemi Adenuga, analyst with Industry Dynamics Team, says: “Indian generics companies, particularly the smaller ones, do not possess the capabilities to match those of these larger players, and are therefore not able to enjoy the resultant scope and scale economies, which are two key requirements in the price-sensitive generics business.”

Indeed, MNCs are actively positioning themselves to capture a significant portion of the Indian generics market, primarily through authorized generic versions of their off- patent blockbusters. Adenuga states: “The branded generics offered by these large companies may appeal more to the brand-sensitive portion of the Indian population, which now numbers over 1.2 billion, especially if these products are sold at prices that compete well with unbranded pharmaceuticals.”

Our analyst also believes that the future of the Indian generics market will be shaped by how its government reacts to the current pressure by MNCs regarding the nation’s patent laws. Both Bayer and Novartis have launched strong challenges against India’s compulsory licensing of key drugs over the last 12 months.

“Although the government is currently standing its ground, increasing pressure may force it to relax some of its more stringent laws to favor foreign companies, considering the economic implications of their presence in the country.

“This will come as a blow to domestic generics manufacturers, who often reap thebenefits of compulsory licenses and legal rulings against foreign multinationals.”