Backliwal says, "The bigger pharma companies will likely take the brunt of the revenue erosion but they will also be more able to balance the drop in profits with higher volumes due to greater market reach and brand value. The major impact will be felt by mid-level pharma companies who will need to draw up new strategies and look beyond the price-differential advantage that they currently leverage to grow sales. Also, companies with brands under the older DPCO 1995 regime will be now able to take annual price increases and make up for the losses (to some extent) from their portfolio, which will fall under the newer regulation."
Shetty adds, "Companies may carefully examine their current portfolio for the exposure to NLEM and level of diversification and realign to negate the effect of the new policy. They can look at ramping up chronic portfolio to reduce their dependence on acute therapies, which have been growing at a slower pace. Enhanced focus on over-the-counter products, vaccines, and biosimilars would start gaining importance in overall business strategies. Companies will look at in-licensing initiatives, comarketing, and alliances with MNCs over the long run."
Outlook
Despite this, foreign companies are not likely to move away from India given its promising market. With a 12.5% (± 4.0%) estimated compound annual growth rate over the next few years, India is the second fastest growing country among the emerging markets, ranked only behind China.
The Indian market is driven by rising incomes, macroeconomic expansion, and increasing access to medicines, supported by a range of government policies and programs. Revenue may be eroded as a result of DPCO 2013, but Big Pharma's greater challenge is to obtain and enforce intellectual-property protection rights. Compulsory licensing, patentability, patent enforcement, regulatory approval, and data exclusivity are issues that they will need to grapple with.
The revised drug-pricing policy will encourage small- and medium-size domestic players to invest in R&D. It will also help some small players achieve price parity in certain niche segments. Locally discovered and developed drugs are eligible to avoid price control for five years. Drugs developed using indigenous R&D and granted patent under Indian law can seek exemption from price control from the commercial production date in the country.