The Indian domestic healthcare landscape is changing rapidly. While rising income levels, increasing healthcare awareness, better medical facilities and aggressive push in medical insurance sector augur well for the pharma sector, the performance of the pharma companies is not reflecting these positives.
Barring a few, most companies have registered a single digit growth or have shown a decline in the top-line in the last financial year. The margins have been under squeeze. The explanation lies in their historical focus on the overseas markets. In recent times, the regulated markets of the US and Europe have proved difficult for pricing due to stiff competition. The global pharma giants have also registered profit declines in their global operations as they have had to make huge increments in their tax provisions due to US tax laws and pressures in pricing have continued coming from ANDA approvals to generic versions. The developed markets have therefore proved extremely difficult in eking out growth opportunities.
As a result, some of the leading players have started focussing on the emerging opportunities in the domestic market itself. Apart from factors quoted above, the pace of growth of branded generic products has also been encouraging. The hospital segment in various formats has been a large area of expansion. The growth will come not only from a range of medical therapies but also from marketing and sales pushing the boundaries of market coverage. In terms of geographies, while Metro and Tier I towns will be drivers of growth, the rural expansion will make the pace faster.
To take full advantage of the Indian market, the companies will need to scale up, albeit with a profitable model in place. Some companies have already started ramping up their sales force and channels of distribution to penetrate deeper into the existing markets and expand their footprint. Newer markets need to be developed. The capability to handle the front end of the business is extremely critical and requires leadership support. This will mean developing a sales force organization with a strong leadership and structure and having the right kind of sales force execution and performance orientation.
Moreover, in the current market scenario, there is a cut-throat competition in pricing and discounting at the trade level itself before it reaches the consumer. Marketing and promotion efforts to create brands and new markets would be critical to make the domestic model work. Interestingly, while some pharma companies already have, others too will need to look at talent from the consumer industry to play a large role in developing the sales and marketing organization.
The viability of the commercial model will also depend on the supply chain efficiencies which get inbuilt in the effort to reach out to newer and far-flung markets. This would require some risk-taking capability of the leadership to keep investing in difficult markets which may have the potential to turn around over a period of time.
Overall, it remains to be seen as to how the pharma companies, focused so far on the US market, are able to build their priority and strategy for the growing Indian market.