Why pharma MNCs are realigning their India operations

Earlier this month, Swiss drug major Novartis India sold its three established brands to Dr Reddy’s Laboratories and terminated the employment of 400 staffers. In October, US drugmaker Eily Lily sold the marketing rights of its anti-diabetes drugs to Cipla and laid off 120 employees in India. Around the same time, Danish pharma company Lundbeck decided to exit India as part of its global strategy. In 2019, US drug major Pfizer closed two facilities manufacturing injectables in the country in response to falling demand.

At a time when the local market is assuming the centre stage of the growth strategy for Indian pharma companies, are restructuring their businesses in India – by selling brands, closing non-core units, or laying off employees. The stocks of listed MNC pharma companies have hardly been attractive for investors compared to those of their Indian counterparts. “Pharma MNCs do not consider India a favourable market – their product portfolios are inadequate, their penetration is limited to metros and tier-1 cities, and they get beaten by their Indian peers,” said Salil Kallianpur, a pharma consultant and former executive vice president at GSK Pharma. “While input cost is rising, there are price caps to contend with in case of certain essential drugs. This creates pressure on P&L – leading to decisions like reducing staff. Besides, there is a lot of work yet to be done on the policy of marketing and distribution of drugs in India. Consequently, the MNCs are exploring newer models of doing business in India – right from outsourcing, contracting, marketing collaborations and out licensing of molecules,” he added.

As per AWACS data, the Indian-MNC breakup in the local pharma market has been 80:20 for the past several years.

According to Ajit Dangi, CEO of Danssen Consulting, pharma MNCs are basically restructuring their business in India to make it more responsive to the changing market environment. “IPR environment has improved, and it is no longer easy to copy patented molecules in India. No compulsory licence has been granted since 2014,” he said.

“Regulatory approval for NCEs (new chemical entities) which are already approved in developed countries such as by the USFDA, UK MHRA or EU EMA can now be fast tracked in India. Over 328 irrational fixed dose combinations – most of them approved by the state FDAs – have been banned after a protracted legal battle. This has created space for original research molecules of MNCs to be promoted scientifically,” he added.

During the pandemic, the MNC pharma companies were found to be involved in strategic collaborations with Indian companies. For instance, American drug company Gilead licensed its remdesivir molecules to seven pharma companies. The transfer of Covid vaccine technology by AstraZeneca to Serum Institute and J&J to Biological E, and Merck’s voluntary licence to five Indian pharma companies for Covid antiviral pill molnupiravir for global supply are cases in point.

“MNCs are also known to focus on limited therapy areas and build bigger legacy brands,” said Sheetal Sapale, president marketing at pharma market research firm AWACS. “In Covid times, players like GSK, Abbott, Janssen and Pfizer who had strong brands in pain, gastro and nutritional’s category could make it big due to strong top-of-the-mind recall coupled with a surge in demand.”