Late night on 16th February, Swiss pharma giant ‘Novartis’ has made a special announcement. Some things have been listed under this announcement. Strategic review of Novartis India Limited has been started. On the basis of which it can stop manufacturing medicines in India. In which its stake in the subsidiary company is being assessed. Exactly three months ago, UK’s big company AstraZeneca had also announced that it may exit the drug manufacturing company in India on the basis of Global Strategic Review.
These announcements follow the pattern in which pharma giants like Pfizer, Sanofi, AstraZeneca and GSK have reduced manpower and cut operations in core functions such as manufacturing, sales and marketing over the past few years. Some of them have a considerable heritage in India, which is 100 years old. So, why are they underperforming in the Indian market, where not long ago they were vying for the lead?
Cost, Competition, Patents
India is a market of more than Rs 2 lakh crore. Which has some of the most serious health challenges, but increasing competition, higher operating costs and less viable business have forced multinationals to rethink their strategies. They are focusing on core competencies and disinvesting non-core assets, especially post-Covid.
From the previous strategy of manufacturing in India they have shifted to licensing and marketing agreements. Over the years, Novartis, Roche, Eli Lilly and Pfizer have tied up with domestic companies like Torrent, Lupine, Cipla and Glenmark for key treatments. For example, Novartis recently sold its high-growth ophthalmology brands to Mumbai-based JB Chemicals for a little over Rs 1,000 crore.
Some multinationals are concerned about India’s intellectual property regime, which discourages the evergreening of patents and may impose compulsory licensing. Which allows a third party to make the drug without the consent of the patent owner. Therefore, without exiting the country completely, they are reducing risk by trimming portfolios and avoiding new investments. Faced with regulatory hurdles, IPR challenges and pressure from parents to generate profits/value from their Indian businesses, most MNCs are reevaluating their strategies for the Indian market, says Ranjit Shahani, former vice president, Novartis India. .
Moving up the value chain
Utkarsh Palnitkar, independent life sciences consultant, says the pharmaceutical industry is inherently global. And companies can reallocate resources to markets with higher growth potential or more favorable business environments. He further said, changing priorities may prompt multinational companies to reduce their exposure to some markets, including India.
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