Key takeaways for Pharma sector from IIFL’s 14th Enterprising India Conference, February 2023

20 Feb 2023 , 11:01 AM

Analysts at IIFL Capital Services hosted Mr. Sharad Tyagi, former Managing Director, Boehringer Ingelheim India at IIFL’s 14^th Enterprising India – Global Investors’ Conference in Mumbai. Mr. Tyagi highlighted that volume growth in the domestic pharma market will improve meaningfully from 2-3% levels currently, only upon an increase in the rate of disease diagnosis in India. This can potentially be achieved through portable, digital point-of-care diagnostic testing, digital solutions, and patient awareness and counselling through medical camps. Strong OTC framework can drive deeper penetration of commonly used medicines in India beyond Metro/Tier-1 towns into smaller markets. While pharma companies’ and the government’s focus on non-communicable diseases (NCDs) is a step in the right direction, incrementally more emphasis is required on therapies such as immunology, oncology and rare diseases. A sound insurance reimbursement infrastructure in India can help improve affordability and accessibility of biologics treating these diseases.

Volumes not picking up despite price control; Rate of disease diagnosis needs to improve significantly

Although pharma companies and the government are focusing on NCDs mainly cardiac, diabetes and respiratory through new launches as well as price caps through NLEM, volume growth in the domestic pharma market is not picking up meaningfully given the limited coverage of quality healthcare infrastructure for the diagnosis of these diseases and subpar availability of doctors in several rural markets. While the India Pharma Market (IPM) has grown consistently at 10-11%, volume growth currently drives only 2-3% of market growth versus 6-7% growth 10 years ago.

The doctors in India have been prescribing a higher number of products in supporting therapies (such as vitamins, nutraceuticals, etc.) versus 10-15 years ago. This, along with price hikes, is driving a meaningful portion of the overall market growth, thereby masking weak volume growth in many of the underlying core diseases. While lower prices can supposedly drive higher volume growth, NLEM-led price caps have not aided IPM’s volume growth meaningfully, given that there have been very limited initiatives by pharma companies and government to expand the accessibility of essential medicines across all pharmacies and hospital formularies.

However, the government and pharma companies have been focusing on driving penetration beyond Metro/Tier-1 towns, where the availability of qualified doctors seems to be an issue. A strong OTC policy could make the most commonly used medicines widely available in such smaller markets and towns. Additionally, innovative portable, digital point-of-care diagnostic testing devices can help accelerate the detection of NCDs and diagnose early conditions of NCDs (such as pre-diabetes). These two initiatives, along with focus on patient awareness and counselling, can aid accelerating volume growth in the IPM.

Better diagnosis, biologics can help address gaps in immunology, oncology and rare/orphan diseases

Tepid volume growth in NCDs is also due to limited innovation in small molecules globally, leading to lower number of new launches in therapies of cardiac, diabetes, respiratory etc. This is primarily owing to global innovators’ focus and product pipelines majorly shifting to new-age therapies of immunology, oncology and orphan diseases.

Affordability of high-priced biologics remains the key issue in India, considering the country is largely an out-of-pocket healthcare market. Creating a solid reimbursement framework involving healthcare players, the government and insurance players could help improve the affordability and accessibility of biologics in India. The reimbursement infra is also critical, given that biologics cannot be included under the NLEM, which will make unit economics so unattractive that the same will rather disincentivize pharma players, especially MNCs companies. The government can consider covering innovation molecules and biologics under Ayushman Bharat scheme to help expand affordability and accessibility of the biologic products.

However, efforts towards creating a reimbursement ecosystem is lacking in India, given the predominant focus on NCDs and old therapies from pharma players as well as government. Given the high capital requirement and significant uncertainty around successful clinical trials, there are very limited biologics development programs currently in India. However, through in-licensing biologics from MNCs, the pharma companies can accelerate the adoption of biologics in India. To increase the no. of in-licensing deals in India, a stricter compliance with patent laws and doing away with compulsory licensing is needed.

Patient awareness, counselling and better cGMP compliance can improve quality of healthcare in India

Selling medicines in boxes with patient guides having warnings/side-effects instead of individual strips, and doctors educating patients about the potential side-effects as also the adherence to medication can significantly improve the quality of healthcare in India.

Allocating higher funds to the Indian drug regulators can potentially ensure higher no. of manufacturing facility inspections at regular intervals, which in turn can weed out low-quality/fake medicines from the market and lead to stricter compliance with cGMP norms.

This can be implemented effectively through either a centralized drug regulator, or by assigning more powers to CDSCO mainly for manufacturing facility inspections.