Is Pharmaceutical Industry Really Immune?

Is pharmaceutical industry really immune to recessionary cycles? Well, the answer to that would be clear in the next 2-3 years, and it would be most probably be ‘NO’. In fact it is going to face a situation that big fish will eat up all the small fish.

Take the case today, where the majority of the blockbuster drugs would end up on their patent protection. Blockbuster drugs like Zocor, Pravachol etc., have already gone off patent. The highest selling drug in the world, Lipitor will go off patent in 2012. Some other blockbusters accompanying it would be Viagra and Plavix.

Take the instance of Lipitor, a prestigious product of Pfizer Inc. It generated annual sales of $13.1 billion for the company, which is indeed the highest selling drug throughout. Now, foreseeing the loss of its patent protection, Pfizer has undertaken a lot of projects. Some of which included acquiring Wyeth, tying up with Claris Inc for manufacture of Injectables, planning to launch a host of branded generics in various countries. It is assumed that it would go on a few more acquisitions in order to regain its probable loss of dominance. But the question is that how far can it go on an acquisition spree and to what extent can it retain its hefty balance sheets?

Whatever be the number of the branded generics launched in the market, whatever be the companies acquired, it cannot regain those huge profits it made by selling Lipitor, which is indeed unparalleled.

There are several strategies that can immensely help this industry to save itself from the clutches of a possible slowdown. But these strategies have to be implemented right now.

Firstly, companies should try to concentrate on developing newer drug delivery systems. This is still an area which is in between introduction and growth stage as its full potential has not been tapped yet. We have seen in the recent past that such delivery systems help in increasing the patient compatibility and improving the release mode of the drugs. These systems are also patentable. Especially in the case of cardiovascular patients where multiple doses are required to be taken every day, these systems can help a great deal in decreasing the medication frequency.

Secondly, veterinary market in various countries is also untapped to a huge extent. As in the case of developing countries like India, where a great deal of population is dependent upon the animal productivity and emergence of animal related diseases like Swine Flu, the governments are now shifting their focus towards this segment. In these markets, the generic competition is much less and can prove to be one of the most lucrative segments in the near future.

Thirdly, branded generic is one such segment that can help a company to gain popularity and earn huge profits. Several companies in India like Cipla, Ranbaxy, Dr. Reddy’s have explored this segment in the past and have attributed their success to it. Some branded generics have also become blockbusters in the recent past. Some remarkable branded generics in the pharmaceutical market are - Tenvir (Cipla), Omez (Dr. Reddys), Rosuva (Ranbaxy).

Lastly, bringing down of the operational costs is another imperative strategy that can help in cost cutting and cost reduction. Some companies like Lupin, Aurobindo & Ranbaxy have been practicing vertical integration since a long time. This has resulted in bringing down of their operational costs by a substantial amount. Same practices can also be followed by other companies as well.
Right now, the world is battling rising healthcare costs. This is the need of the hour. Even the US Govt has stressed upon this thing vividly. This should be a perfect opportunity for the Indian companies and has to be realized urgently.

By
Tarunvir Singh, MBA-IT (Pharmaceutical Management)
UIAMS, Panjab University, Chandigarh, India.