The Hindu Business Line : Pharma cos target niche areas for higher margins

IT'S all about discovering a niche. The highly competitive nature of the pharmaceutical market is forcing companies to look at speciality and niche segments, especially those that offer higher value and margins.

And it's different strokes for different folks. Indian companies are either focusing on specific therapeutic segments or are looking at adding value to existing products, making them unique. The multinationals, on the other hand, are introducing patented products that have virtually no competition.

For instance, the Hyderabad-based Dr Reddy's Laboratories Ltd has been looking at the dermatology segment in a big way, while Nicholas Piramal India Ltd (NPIL) is focusing on the ophthalmology segment. Home-grown Ranbaxy is trying to capture international markets by launching products through novel drug delivery systems (like the launch of the liquid form of metformin for diabetes). Foreign companies such as Eli Lilly are committed to bringing only patented products into the Indian market.

According to market analysts tracking the sector, "Companies are looking at niches in dosage forms or are launching different forms of the same drugs. These may be high-margin products."

The reason why companies are focusing on a specialised set of products is because the margins are better. "If a company focuses on lifestyle-related ailments like cardiovascular diseases or diabetes, the medicines have to be taken for long periods of time. Once a patient gets used to a particular brand or product, it is very difficult for him to switch to another. Unlike fast moving consumer goods , brand loyalty is quite high in the pharma sector," said a Mumbai-based company official.

Other companies are adding value to existing therapy brands, especially in a cluttered segment. "Companies such as Ranbaxy are trying to differentiate their products especially for the international markets. By launching a new version of the drug, like liquid metformin, the company has found a niche, especially in the international markets," said an analyst.

The focus on specialised products also helps the company reduce its distribution costs. "These products can be targeted through specialist doctors and will not require an extensive distribution network. This helps in saving costs," said Mr Surjit S. Aurora, Vice-President, Marketing and Sales, Win-Medicare Pvt Ltd, which is a distributor for about seven foreign companies.

Meanwhile, several MNCs have decided to launch drugs for very specialised treatments in the country. Eli Lilly's Managing Director, Mr Rajiv Gulati, had categorically told Business Line that it is the only company that offers the drugs Forteo, Xigris and Reopro for osteoporosis, sepsis and interventional cardiology respectively. And this would be the strategy for the company .