The Hindu Business Line : `Govt must do a lot to push pharma on to global stage'

A recent market strategy report, `Ballot proof picks,' lists NPIL among the top seven stock picks, along with companies such as Bharti, Maruti, Gujarat Ambuja, Reliance, Ranbaxy and Infosys.

"We entered the industry in 1988, our turnover then was Rs 19 crore. Today, after 16 years, we have grown at CAGR of 31 per cent and have a turnover in excess of Rs 1,400 crore," reflects Mr Ajay Piramal, Chairman, NPIL. Along with his wife, Dr Swati Piramal, who is also NPIL's Director (Strategic alliances), the Piramals list out what the Indian pharma industry needs to get its place under the sun.

The Drug Policy is in court and so is the new Drug Price Control Order (DPCO), how does this affect companies like you?

Ajay: As a company, frankly, we have kept it aside. We have to grow irrespective of what happens in the Government. We understand that the Government can be a facilitator, but if that does not happen, our overall strategy is that we don't keep worrying about it. But yes, the Government can do much more and they ought to do much more. Because if we want to position this industry to be a significant player in the world, then policy measures have to be taken. Whenever Government has brought in the right framework of policy, industry grows. Look at telecom, the new Electricity Act.

Swati: Even insurance...

But is price control a redundant concept in the day of market forces?

Ajay: As for drug price control, you cannot have artificial drug prices. In terms of volume, India is the fourth largest market in the world, but in terms of value we are the 13th largest. You can't have such a wide variation and expect industry to grow. There should be relaxation in price and that benefit goes towards research and development (R&D) - that's where the true strength of India lies. The R&D budget of Pfizer is higher than the whole turnover of the Indian pharma industry. While you can talk about the competitiveness of Indian research, you cannot compete with such numbers and we need to understand that.

The National Pharmaceutical Pricing Authority (NPPA) was established to encourage industry growth following the abolition of the DPCO committee. But, it has become a bigger bureaucracy and that has become tougher on price.

Pricing is an emotional issue, for fear that medicine prices will go beyond the reach of the masses.

Ajay: I don't think that can happen, post-2005, as there is so much competition today. (Product patents come into vogue in India from 2005.) Price falls are faster on products that are out of price control, than they are with drugs that are under price control. Last year, the pharma industry has seen a price de-growth. That is not an issue. The Government has to work on the DPCO and a policy to encourage research. There are still barriers in the way of research, in terms of animal trials and issues with clinical trials that make it difficult to do it here in India. Part of our research we are out-sourcing abroad, where the costs are much higher, only because regulations don't allow us to do animal trials here. They don't easily give clinical approvals here. It is easier to get to a clinical trial in Europe than in India. I am not saying that it should be unregulated, you must have regulation, you must have ethical standards. Follow that and we must get fast approvals. Approvals for clinical trails in Europe take less than a month.

Swati: Canada recently said that its approval for clinical trials is seven days. We are trying to hit 60 days, for the last two years. But our competition is running so fast.

Ajay: The other issue is on patents; we need a much stronger and bigger patent office because it is just too archaic. We need to have more trained people, because it is a highly specialised segment. These are things focused upon by the Mashelkar report, but implementation has to come.

Swati: Both Dr Mashelkar's reports on the pharma industry are very good, they need to be implemented and with the teeth of application.

NPIL has a history of inorganic growth. But are acquisitions a drag on performance?

Ajay: We've been pretty successful in terms of integration. In the last five years, our turnover has grown 37 per cent. It depends on what you do with the integration. If you have a strategic fit and a clear plan with what to do with the acquisition, one can deliver. Take the classic example of Rhone Poulenc, we have been able to demonstrate very high growth. Phensedyl (a cough syrup) has grown as per ORG at 14.5 per cent, last year. Whereas Corex (a Pfizer product), which is the leader has actually had a de-growth of 8 per cent.

What will drive domestic growth for NPIL?

Last year, our growth was 13 per cent and industry had grown at 7.5 per cent. Look at the last six quarters, quarter on quarter our performance has been better than that of industry. This has happened because we are investing in our field-force. With 3,000 people, we have the largest field-force in the country. We are doing a lot of brand building in our market. We are trying to get an FMCG culture.

With more churning expected in the pharma segment, more acquisitions on the cards for you?

Ajay: Our policy is clear, if there is a strategic fit, if there is a willing seller and if it makes economic sense for us, we would go in for it.

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