Come September, pharma glows with health

PT Jyothi Datta | Updated on October 26, 2019

The segment could strengthen further if the policy environment is stable

It may not be a cracker of a season for the general economy, but reality seems to be a tad different with pharmaceuticals.

In September, the pharmaceutical industry notched up a “healthy” 11.9 per cent growth, and the double-digit performance was not lost on industry watchers, at a time the overall economy is going through pain.

From a healthcare perspective, growth in the pharmaceutical sector in effect means that more people are consuming medicines for one or the other reason. But looking at it through purely an industry lens, the sector’s performance seems to shine in comparison to last year’s growth at 7.5 per cent in September 2018. In fact, last month was better than its preceding month as well, with August 2019 showing growth of 9.4 per cent, according to data from industry tracker, AIOCD-AWACS.

The robust trend was reflected in the three months ended September, as well, clocking 11.5 per cent growth compared to 9.7 in the same quarter last year.

So does September signal a glimmer of hope for a segment that often fares better than other industry segments, but is under pressure nevertheless? Or should the outlook continue to be cautious, as one swallow does not a summer make?

The pharmaceutical sector has an “under-leveraged” demand, says Sudarshan Jain, Secretary General with the Indian Pharmaceutical Alliance, a platform largely for major domestic drugmakers. In the past, three policy decisions, GST, demonetisation and price-control have disrupted the segment and there was too much unpredictability, he says.

The latest industry data, is “a healthy sign in an unhealthy environment” and comes from a sense of stability. Besides, with medicines, it’s not like buying a car or a perfume, that you postpone the decision to buy, says Jain, adding, “If you have diabetes, you will buy the medicine.” Jain is optimistic that the latest numbers “are early signs that the segment can grow at double digits if the policy environment is stable.”

Daara Patel of the Indian Drug Manufacturers’ Association that speaks for medium and small-scale companies, says that the bounce-back in growth was along expected lines. “All this while there was single-digit growth. But given a combination of factors, an extended monsoon, and stabilised environment, this was expected.”

At the other end of the pharmaceutical spectrum and representing multinational drugmakers in India, A Vaidheesh, President with the Organisation of Pharmaceutical Producers of India, is careful not to come to a conclusion just yet.

It was an extended “season” in that there was more than the “normal” period of rain, points out Vaidheesh. That could have contributed to the growth in the acute segment of the business, which includes anti-infectives, pain medicine, gastro-intestinal drugs, vitamins and mineral and others used in short-term interventions.

The acute segment, which accounts for 47 per cent of the Indian pharmaceutical market, grew at 11.7 per cent, AIOCD-AWACS data revealed, while chronic, which accounts for 31 per cent of the domestic market, exhibited 13 per cent growth. The chronic segment includes medicines for diabetics, heart and neurological ailments that are more long-term in nature.

Though Vaidheesh does not see distressing signals from across the country and rural areas, he feels that the days of a “runaway growth of 14-15 per cent for the industry” are a thing of the past. “We have to be happy with growth hovering at between 9 and 10 per cent,” he says, pointing to factors such as internet pharmacies and the heavy discounting in the “traded” generic drugs segment, where the same molecule is sold at different prices by the same company.

Insulated industry

The pharma industry’s double-digit growth comes at a time of job losses, a manufacturing slowdown in some sectors and a stressed banking system.

“Traditionally pharma is insulated from the trends in the rest of the economy, even in the worst of times,”says IDMA’s Patel. He expects the double-digit growth to continue into the next quarter, unless there is some major policy-related stumbling block.

OPPI’s Vaideesh too observes that pharmaceuticals has not been badly affected by the squeeze in the economy. There have been restructuring and job layoffs in line with changing business strategies, he says, adding, however, that it was not as bad as the other sectors.

Attrition in the industry continues to hover at 18 to 20 per cent, say industry experts, adding that there isn’t much new hiring. And that will be the uncomfortable insight that will be watched, as the segment has also been, traditionally, a large employer.

Published on October 25, 2019

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