Business has been booming in the pharmaceutical sector. Big companies and small have been rushing in to cash in on the rise in trade volumes both in both domestic and international markets. One of the by-products of this increase in business is the emergence of PCD franchise company in the sector.
So, far this has been a win-win situation for PCD and pharma companies. While one gets a readymade premium product, the other benefits from an aggressive marketing and distribution program. The net result is an increase in sales and revenues. But as we go forward, it is also important that we understand the challenges faced by the industry.
Increasing competition
The growing business has, to some extent, boomeranged on itself. Rising revenues and an expanding international market has attracted a plethora of manufacturers, franchises and PCD franchise companies to the market. This has naturally reduced the share of each player. Fortunately, the market is still growing and there is still scope for everyone, but a slowdown is likely to hit sooner rather than later.
Less focus on R&D
One of the Indian pharma’s biggest problems has been its lack of attention to R&D. A number of companies even today see this as an unnecessary indulgence, while some companies (particularly those in the SME sector) simply lack the funds to invest in time-consuming long-term research projects. As a result few companies produce groundbreaking medicines that can put a pharma company at the top of the ladder.
Focus on volume, not value
According to trade figures the Indian pharmaceutical sector accounts for 10% of the global trade in terms of volume. However, this share is just 2.4% in terms of value. Clearly, the focus is on increasing the volume and not the value. The reason behind this is the emphasis on low-priced generic drugs, rather than higher priced premium branded medicines.
Behind this is again the lack of focus on R&D and making unique drugs. The lack of revenue from high-priced drugs is made up by making higher volumes of generic drugs.
Plateauing international markets
One of the biggest source of revenues for the Indian pharmaceutical sector has been the international markets, particularly the developing or underdeveloped companies. The reason for the rise in trades is the low cost of Indian drugs. Medicines from developed countries are usually too high-priced for the severely cash-strapped buyer in such markets. As a result, Indian drugs that are considerably cheaper, dominate the markets.
However, this domination may not last for long as these markets are slowly reaching saturation point. Once a market with high scope, increased competition and saturating market has ensured that the pie is getting smaller for each player.
Lack of ethics
Manufacturing medicines has a much higher ethical responsibility than any other product. Medicines and drugs are concerned with the health of the buyer, sometimes a matter of their very life. This means that there is much higher obligation on the manufacturer to stick to the prescribed norms, rules and ethics.
Unfortunately too many companies have cut corners to hurry production, resulting in stringent sanctions and fines from a number of EU and American courts. This is a matter of serious concern since it effects the reputation of the Indian pharmaceutical industry as a whole. This has already resulted in greater scrutiny by the American authorities.
Events in the US
The current administration’s view on international trade is expected to hit the Indian industry hard. As the emphasis shifts to domestic manufacturing, the government is discouraging importing medicines. This has resulted in the tightening of USFDA regulations. An expected Border Adjustment Tax (BAT) will further hit the Indian industry hard. Together these measures will make export to the US harder. What will get exported will be much more expensive and hence, lose its main USP.
Tightening rules & regulations
The tightening of rules and regulations by international as well as domestic authorities will further tighten the belts in the pharma sector. Already a number of Indian companies are coming under increasing scrutiny by US authorities on violations. The Indian regulators too have imposed a stricter environment to ensure pharma companies meet every guideline. On the positive side, it will force the pharmaceutical sector including PCD franchise company to clean up their act.