5 Minutes Read
Indian pharma market embraces generic drugs amid focus on quality and govt initiatives
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
Listen to the Article (6 Minutes)
Summary
The key USP of generic drug is that they are cheaper, as much as 90 percent. For example, a strip of paracetamol costs as little as Rs 7 in a government run store, Rs 8-9 online from an unbranded generic and up to Rs 40-70 when it comes to a branded version. These price differences have seen savings of as much as Rs 6,000 crore for Indian patients in a year.
The landscape of the Indian pharmaceutical market appears to be undergoing a transformation. Generic drugs, which contain the same active ingredients as their branded counterparts but come at a lower cost, are gaining significant traction among Indian patients, bolstered by government initiatives. This trend is sparking concerns that branded generics, which have been the cornerstone of Indian pharmaceutical companies and have been growing at an average rate of 10 percent, might face a slowdown.
One prominent example of this shift is the government’s Jan Aushadhi Scheme, which offers generic drugs at prices 50-90 percent lower than their branded equivalents. This program has expanded its reach, with over 9,000 centers now available across 740 districts. In the fiscal year 2023, it recorded an impressive 38 percent growth, boasting a 54 percent compound annual growth rate (CAGR) over the past five years. This initiative has also captured a notable 4.2 percent share of the Indian pharmaceutical market by volume.
Similarly, Trade generics, the generic division of pharma companies, currently enjoys a 20 percent volume, at least 5-6 percent value share in the Indian pharma market is currently growing around 500 bps more than its branded counterparts.
For example, Cipla which is the largest player in the trade generics segment is generating Rs 50 crore of sales from eight of their drugs in the portfolio. Alkem is a significant player too while Torrent is looking to scale up.
And well-established companies with deep pockets such as Dr Reddy’s Lab have also thrown their hat in the ring by launching a dedicated division RGenX earlier this year. While pharmacies such as Medplus announced the launch of their own generic drugs in their pharmacies.
The key unique selling point (USP) of generic drugs is that they are cheaper, as much as 90 percent. For example, a strip of paracetamol costs as little as Rs 7 in a government-run store, Rs 8-9 online from an unbranded generic and up to Rs 40-70 when it comes to a branded version. These price differences have seen savings of as much as Rs 6,000 crore for Indian patients in a year.
The main reason the drugs cost less is because there are no marketing or promotion costs. The lower costs allow companies to gain share across tier-2 to tier-6 and rural markets and provide better margins across the supply chain. The head of Jan Aushadhi, Ravi Dadhich said the reason the kendras (centres) can offer such cheap drugs is because they remove many lowers allowing the patients to benefit.
And when it comes to supply chains, a distributor of generic drugs is incentivised as margins of a trade generic can go up to 50-70 percent versus branded drugs which are capped at 8 percent to 20 percent.
Analysts expect generic drugs to only see a further fillip with focus on quality which has been a worry for generic drugs and the government pushing adoption. Dadhich pointed out that all Jan Aushadhi drugs are procured from WHO-GMP (World Health Organisation, Good Manufacturing Practice) certified suppliers and tested at certified labs. Separately, established pharma companies adhere to the same high-quality standards when manufacturing trade generics as they do for their branded counterparts.
As for growth, all Central Government hospitals have the diktat to prescribe only generic medicines while doctors have been encouraged to write generic drug names. The government is planning to further increase reach, Dadhich said they are looking to expand Jan Aushadhi stores to 25,000, a target announced by the Prime Minister.
However, pharmaceutical companies express concerns about generic substitution potentially eroding sales of branded generics. As these companies vie for market share, analysts anticipate lower blended profit margins despite increased sales volume. There’s also apprehension about possible cannibalization of a company’s own branded product portfolios.
Also, a few trends are emerging in the generic drug space. These include the increase of generic drugs for chronic conditions. Jan Aushadhi, for example, Dadhich pointed out, is seeing high traction in diabetic, and cardiovascular drugs.
Snehdeep Bohra, Director–Corporate Ratings, Fitch Ratings told CNBC-TV18, “The medicines under Jan Aushadhi are priced at a principle of 50-90 percent cheaper than the branded medicines. And the procurement of these medicines is done by the government agency in a very transparent manner. There are less number of levels where we have to spend money, so we save money on that and that benefit is transferred to the customers directly.”
For the entire discussion, watch the accompanying video
Also, catch all the live updates on markets with CNBC-TV18.com’s blog
Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout
3 Mins Read
Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter
Daily Newsletter
