Millennium Post

Pharma sector takes dose of bitter pills, few booster injections this year

Domestic firms coming under increased scrutiny of global regulators, resulting in Ranbaxy paying a record $500 million fine, and drugs becoming cheaper in India thanks to a new pricing policy marked a roller-coaster year 2013 for the pharma industry.
The Indian pharma sector, estimated to be around Rs 1.5 lakh crore, recorded single digit growth for the first time in several years on account of deeper price cuts under pricing policy and selective boycott of companies by the retailers.
For the multinationals, it was a year to raise concerns over India's patent regime as Novartis' patent for cancer drug Glivec was rejected by Supreme Court, while patent for GSK Pharma's popular breast cancer drug, Tykerb was shot down by the Intellectual Property Appellate Board (IPAB).

It was also a year when the government decided not to lower foreign direct investment (FDI) in existing pharma companies to 49 per cent despite concerns from many quarters over the increased takeovers of Indian firms by foreign companies.
Interestingly, the other highlight of the year was the overseas acquisitions made by domestic firms such as Dr Reddy's and Cipla. In a big blow to domestic drug makers, including Ranbaxy Laboratories and Mumbai-based Wockhardt, the US health regulator (USFDA) continued its strict vigil over manufacturing standards, resulting into warning letters and ban of imports of drugs from their facilities.
The year will be remembered for Ranbaxy Laboratories' agreement to pay $500 million (around Rs 3,092 crore at current exchange rate) to US authorities after pleading guilty to felony charges over violation of manufacturing norms at its plants in Dewas in Madhya Pradesh and Paonta Sahib in Himachal Pradesh.

This was the culmination of a case that began in 2008 when the USFDA had banned the import of 30 generic drugs manufactured by the company at the two plants.

The trouble for the Gurgaon-based firm didn't end there though, as its third plant at Mohali was put under import alert by the USFDA in September which banned import of drugs manufactured there. Ranbaxy was also in the news for another wrong reason as it was among nine firms which were imposed a total fine of 146 million euros by the European Commission for delaying market entry of cheaper generic versions of Danish company Lundbeck's branded citalopram, a blockbuster antidepressant. Another domestic major, Wockhardt also had a rough time in 2013 dealing with regulatory and compliance issues. The company's manufacturing facilities at Waluj was pulled up by USFDA and UK health regulator MHRA which issued import alerts on the drugs produced there.
The MHRA also imposed restrictions on import of medicines made at Wockhardt's unit at Kadaiya in Nani Daman for manufacturing norms violation.  Adding to Wockhardt's woes, the USFDA also imposed restrictions on import of medicines produced at the company's Chikalthana plant at Aurangabad in Maharashtra.

While there was concern in India over acquisition of homegrown pharma firms by the multinationals, it didn't deter domestic firms from carrying out similar activities overseas.
Hyderabad-based pharma major Dr Reddy's Laboratories acquired 93 per cent stake in Netherlands-based speciality pharmaceutical company OctoPlus NV for an undisclosed sum.

Likewise, Cipla also completed the buyout of South Africa's Cipla Medpro for an aggregate consideration of Rs 2,707 crore. It also gained majority stake in Uganda-based Quality Chemical Industries Ltd with the acquisition of additional 14.5 per cent stake for $15 million.
During the year, Cipla also acquired Croatia-based firm Celeris d.o.o, distributor of its products in that country.
Similarly, Piramal Enterprises acquired over-the-counter (OTC) skincare brand Caladryl in India from Valeant Pharmaceuticals International Inc for an undisclosed sum.

Yet, it was not always a cake walk for the Indian firms as domestic major Sun Pharmaceutical Industries found out. It had to call off its Rs 3,100 crore bid to acquire outstanding shares of Israel's Taro Pharmaceutical citing pricing issues. The unexpected development negated Sun Pharma's efforts to fully acquire Taro Pharmaceutical.

Keeping the merger and acquisition activity alive in the domestic scene, the year saw Torrent Pharmaceuticals' Rs 2,000 crore deal to acquire branded formulation business in India and Nepal of Elder Pharmaceuticals.

Vivimed Labs also acquired a manufacturing facility of Actavis Pharma Manufacturing Ltd for a total consideration of Rs 122 crore.
In another development UK-based GlaxoSmithKline Plc (GSK) announced an open offer to buy 24.33 per cent stake in its Indian arm GlaxoSmithKline Pharmaceuticals for a total consideration of Rs 6,389.02 crore.

The penchant for multinationals to take over Indian firms was clearly indicated when US pharma major Mylan Inc decided to acquire Agila Specialties, maker of generic injectable products, from Bangalore-based Strides Arcolab Ltd for $1.6 billion (about Rs 8,700 crore). In a case highlighting uncertain nature of international collaborations, Dr Reddy's Laboratories and Fujifilm Corporation decided to terminate a pact to establish a joint venture and an exclusive partnership for generic drugs business in the Japanese market.

2013 will also go down in the history of Indian pharma industry when landmark decisions were made. The Supreme Court rejected plea of Swiss pharma giant Novartis, for a patent on cancer drug Glivec paving way for Indian generic firms to offer cheaper alternatives.
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