Indian Pharma Market Grows 16.5% in 2010; ARVs Significant Growth Driver for Domestic Firms

India's Domestic Pharma Market Grows by 16.5%

India's domestic pharma sector saw 16.5% year-on-year (y/y) growth for the year ended 31 December 2010 to surpass 467.87 billion Indian rupees (USD10.3 billion), according to the Times of India, citing IMS health data. According to the source, domestic pharma growth in December was significantly lower at 6%, compared with 11.3% the previous year. Cipla (India) maintained its top position with a 5.21% market share, US majors Pfizer and Abbott pushed Indian firms Lupin and Aristo out of the top-ten. with the former dropping from 9th to 11th position, and the latter from 10th to 12th position. Almost all companies recorded growth of over 10% in 2010, Mankind registering the fastest growth of approximately 34%, followed by Abbott's 26% (excluding Indian subsidiary Piramal's 11.4% growth), and Zydus' 18% growth. During 2010, Pfizer's cough medication Corex continued its dominance in the retail market as the largest selling brand, with revenues of INR2.05 billion. Swiss major Novartis' painkiller Voveran lost its second spot to Abbott's insulin human mixtard, which grew by 27% y/y compared with Voveran's 6% y/y growth. Fourth position was Piramal's cough syrup Phensedyl, while UK major GlaxoSmithKline's antibiotic Augmentin rounded off the top-five largest selling brands in 2010.

ARVs Significant Growth Drivers for Aurobindo, Cipla, and Hetero Drugs

Anti-retroviral (ARV) drugs are major growth drivers for Indian generics Aurobindo, Cipla, and Hetero drugs, with the three accounting for 65–70% of the USD900-million global generic ARV market (source: Times of India). Aurobindo's ARV business grew 37% to INR4.93 billion, while Cipla's grew 40% to INR5.5 billion, and Hetero's 10% in the nine months ending 31 December 2010. The growth has been spurred by global-procurement contracts and tenders from governments and non-governmental organisations (NGOs) such as the US President's Emergency Plan for AIDS Relief (PEPFAR), the Clinton Foundation, and the Bill & Melinda Gates Foundation, which purchase 80% of their ARV supplies from India according to the Journal of International AIDS Society. Currently, Aurobindo has the largest generic ARV supplies under contract with a 35% market share, and expects to achieve 5–10% growth in its ARV business in 2011–12 due to supply constraints. Cipla, the largest generic ARV manufacturer, expects 15% growth in its ARV business spurred on by increased demand. According to the source, the ARV segment is expected to post a 22% compound annual growth rate over 2010–12 to touch INR7.3 billion.

Outlook and Implications

India's domestic pharmaceutical sector has maintained its surge of double-digit growth, continuing the average 15% y/y growth seen over the last four years. The 16.5% growth was expected due to growing patient demand, a growing economy, rising middle class, and a growing double-disease burden. The growth also signifies that pharma/generic firms' marketing strategies to expand market reach across both urban and rural India are paying off. Cipla maintained its position at the top mainly due to the fact that revenues from Abbott and its newly acquired Piramal Healthcare Business Solutions were not combined, which otherwise would have propelled Abbott to the top spot with an approximately 7% market share. Pfizer's entrance into the top-ten shows that its strategy to enter both the innovative and branded generics segments in India is paying off. The top-ten companies reflect the dynamics of the domestic market, with seven of the positions occupied by domestic generic firms against three multinationals. Cough syrups, antibiotics, and insulin products among the top-ten selling brands is an indication of India's growing burden of communicable and non-communicable diseases. India's domestic market is expected to maintain similar growth over 2011 as patient demand, reach, access, awareness, and disposable income increases.

ARV revenues for Aurobindo, Cipla, and Hetero have continued to climb as the demand for low-cost generics grows. This demand follows the scaling back of donor community donations during the economic downturn, making it imperative for NGOs and developing country governments to scale back their drug expenditure budgets and procure low-cost alternatives. The volumes of ARV generics procured is expected to continue to grow, although their value is expected to dip as emerging market governments step up coverage and access to ARVs for their affected populations while negotiating lower prices. South Africa is an example of this trend, where it was recently announced that drug tenders worth 4.28 billion South African rand (USD625.2 million) with an average 53.1% reduction in ARV prices (see South Africa: 15 December 2010: South African Government ARV Tender 2011/12 Sees 53.1% Reduction in Cost, Aspen Grabs 40.6%). Aurobindo, Cipla, and Hetero will continue to enjoy the majority of the ARV tenders and contracts available due to their extensive product portfolios, which allow governments and organisations to reduce the number of pharma/generic firms with whom they have to negotiate. Most countries are aspiring to expand treatment access to around 80% of those in need. As per 2010 UNAIDS data, ARV therapy coverage stands at 36%, covering only 5.25 million patients, with 14.6 million patients still in need of treatment worldwide. With the 80% target still to be met, the potential growth for generic ARV revenues remains vast for the firms involved.