The Hindu Business Line : Subsidiaries of pharma MNCs brace for global economic chill

MNC subsidiaries in emerging markets like India and China stand in good stead as they are a small part of the total business, though a huge part of the MNC’s future investment plan.

P.T. Jyothi Datta

Mumbai, Oct. 28 When the cold wind blows, one has to think of how to deal with it, says Novartis India’s chief Mr Ranjit Shahani, of efforts taken by Indian arms of multinational drug-majors, as they brace themselves to tackle the tough economic environment facing their parent companies in ovserseas markets.

Last week, Novartis announced its decision to lay off 300 of its field-force. In the past, Pfizer had stated it would reduce employee strength by about 10 per cent of its global workforce in 2008; and GSK had announced its reduction of 850 research and development staff in the US and UK – just a snapshot of the economic chill blowing over companies in international markets.

But cost-cutting measures overseas may not necessarily bring an “avalanche” of jobs to India, say MNC representatives. Nevertheless, MNC subsidiaries in emerging markets like India and China stand in good stead as they are a small part of the total business, though a huge part of the MNC’s future investment plan, observes a pharma analyst.

Novartis’ field-force reduction in the US has no connection with India, Mr Shahani told Business Line.

However, there is an over-riding concern on cost, and the pressure to outsource will only increase, he observed.

Companies will look to effectively use assets, prune expenditure and tighten organisational efficiencies, he said, responding to how they would tackle the economic melt-down.

GSK’s India chief, Dr Hasit Joshipura, said a clear picture would emerge only some months down the line. The liquidity crunch will impact conspicuous spending and consumption, he added. But it was not clear yet, whether more research jobs will come to India or whether the credit squeeze would in fact reduce jobs being outsourced.

There are no indicators in the local pharma market, showing the adverse impact of the meltdown, said Pfizer India’s head, Mr Kewal Handa. But the liquidity crisis would affect demand and supply in the market, he added.

Drug companies may not take as bad a hit as the financial sectors, as there is always a demand for medicines, said the analyst. There is pain globally and it will trickle down to local firms.

But research and other services will continue to come to emerging markets, in the aftermath of the economic down-turn because of the cost to bring new drugs into the market and the increased accent of several governments on branded generic medicines (off-patent medicines that are less expensive than original drugs), he pointed out.

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