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The flood of drug launches may have diluted the process of brand building, says Dr V. Mohan

CHENNAI, May 6

BRAND building, the foundation of the domestic pharmaceutical market, may have been diluted over the last couple of years on the heels of a large introduction of new drugs.

According to a report prepared by the market research agency, AC Nielsen ORG-MARG, about 3,000 new products were launched in the last two years (2001 and 2002) in the domestic formulations (drugs in final form such as tablets) market. The report indicates that about 99 per cent of the market growth in the last two years came from new drugs launched as against 73 per cent growth from new launches in 1998 and 1999.

Traditionally, a strong brand has been the engine of growth in the pharmaceutical formulations market. However, the flood of drug launches may have diluted the process of brand building.

``Every company wants to get into every drug. In a small field such as diabetes, when 40 or 50 companies manufacture drugs, it is not possible to remember names. We stick to the first couple of guys,'' said Dr V. Mohan, Managing Director of the Chennai-based M.V. Diabetes Specialities Centre.

The ORG report identified speed of a drug launch as a critical factor in its success. According to the report, in most successful drug launches, the first five companies have gathered more than 50 per cent of the market share.

Even after a brand is established opportunities do not dry. For instance, in the last two years, companies that own 20 of the top 50 pharmaceutical brands have launched line extensions of the brand. He said there was a tendency among doctors to stick to brands they are familiar with which confirms the logic of the line extensions.

The far reaching changes to the patent regulation that will have to be enforced by 2005 to fulfil India's commitment under World Trade Organisation (WTO) obligations, and the relatively high profit possible in specialty therapeutic segments such as diabetes have sparked the flood of launches, said the spokesperson for Sun Pharmaceutical Industries.

The new launches may not easily reap riches because of the unique selling requirements in each therapeutic segment. ``In specialty segments, a lot of convincing has to be done,'' said the Sun Pharma spokesperson.

Segments such as psychiatry and cardiology are strong areas for the company. A few new entrants, however, have established a mark in the new areas that they have entered. Once this trend achieves some kind of critical mass, Sun Pharma foresees a shakeout in the market.

A shakeout may already be underway, and the market reaction to a decline in drug price may provide a clue. The ORG report indicated that new launches had a downward impact on prices.

According to the report, "more than half the newly launched products come with prices lower than the average price of the drug- at the time of its launch". Reputation may hold the key in determining the competition's reaction to price cut.

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