The organized sector of Indian pharmaceutical industry continues to perform exceedingly well despite all the problems of price control, patent law changes, MRP based excise levy, shrinking margins from exports and many others. This ability of Indian pharmaceutical sector to successfully manage adverse conditions was revealed by a recent Pharmabiz study of 75 large, medium and small companies listed in stock exchanges. These companies have registered a 27 per cent growth in net profit on a sales growth of 18.4 per cent in 2005-06 as compared to the previous year. The combined net profit of these 75 companies amounted to Rs 5,136 crore on an aggregate sales value of Rs 36,093 crore. The net profit as a percentage of net sales of these companies has improved to 14.2 in 2005-06 from 13.3 in the previous year. The top ten companies in this group of 75 consisting of nine Indian companies and GSK accounted for 50 per cent of the aggregate net sales and just over 55 per cent of the aggregate net profit during 2005-06. A notable feature of the study is that despite a meagre 9.4 per cent growth in sales of 10 listed MNCs, their net profit moved up by 27.7 per cent during the year. Companies like Dr Reddy’s, Orchid, Lupin, Natco and Panacea registered a record profit growth more than 100 per cent during the year. Three major companies namely Ranbaxy Labs, Morepen Labs and Krebs Biochem, however, reported a drop in sales during 2005-06.
The financial performances of pharmaceutical companies are truly enviable when compared to corporates operating in other sectors of the economy which have neither any price control on their products nor have to comply with tough regulatory requirements. An important contributing factor to this performance is the export efforts of large and medium scale companies. India’s pharmaceutical exports is in the region of Rs 20,000 crore which is close to 50 per cent of country’s total pharmaceutical production. A large part of these exports is going to the developed markets of the US and Europe yielding excellent margins. That sufficiently testifies the quality of Indian pharmaceuticals in the global markets. Another factor which is pushing up the bottom lines of pharmaceutical companies is the current marketing strategy adopted by pharma companies in the domestic market. Several top companies have discontinued the production of drugs under price control during the last five years. Almost 30 drugs out of 74 drugs under price control, are not being produced in the country by several companies as they consider the profits from drugs under price control are not adequate. On the other hand, they have taken up the manufacture of several expensive drugs which are outside price control on a big scale. The companies are free to fix any price for these products and can get them easily prescribed by doctors. And with attractive trade margins, chemists are only too happy to stock and promote these expensive products.