Mumbai, Nov 22: A growing multinational interest, extension of global mergers to India, the proposed introduction of product patents and a growing export focus will drive the shakeout in the domestic pharmaceutical industry, according to Arthur Andersen partner, Munesh Khanna.

Speaking at the annual general meeting of The Pharmaceutical & Allied Manufacturers & Distributors' Association (PAMDAL), Khanna said with the slow down in growth in developed countries, several multinationals are looking at the developing nations to shore up their top-lines. "India on account of its huge population, remains one of the more attractive investment destinations for multinationals," he said.

Besides, with the declining profitability of domestic operations, companies are increasingly looking towards the high margin overseas markets. In fact, firms like Sun Pharmaceuticals, Ranbaxy and Wockhardt have acquired units overseas to speed up regulatory approvals. "As players continue to seek quality manufacturing units with economies of scale, these acquisitions are likely to continue in the future," Khanna added. Domestic companies, he said, seemed to be adopting multiple strategies which can be captured by the acquisition-diversification-specialisation (ADS) model (largely based on the A and S dimensions), in preparation for the future. Players growing along the `A' dimension are pursuing acquisitions, the `D' dimension implies a diversification into healthcare while players growing along the `S' dimension are focusing on core competencies or fundamental specialisation to stay competitive.

`A' dimension players include Nicholas Piramal, Sun Pharmaceuticals and Wockhardt while `S' dimension companies include Dr Reddy's, Dabur and Zandu. With the probable exception of Ranbaxy which has a joint venture with Cigna for managed healthcare, not many players seem to be contemplating a shift towards the `D' dimension, he said. However, despite the consolidation, demand for older cheaper products will ensure that the future market will have its share of small and big players. "Survivors in future will be ones which will have a well thought strategies that take into account individual competencies and needs of the changing marketplace," Khanna added.

Earlier, PAMDAL president and Johnson & Johnson vice-president Ajit V Dangi, said that investment in research and development (R&D) was essential if companies want to play a role in the non-generic, non-me-too product market. He also added that the opening up of the health insurance sector, besides enhancing investment in hospitals will also offer affordable healthcare to the public at large.In a hard-hitting presentation at PAMDAL's annual general meeting, Maharashtra Food and Drug Commissioner AK Lakhina, stressed the need to put quality consciousness in food and drugs as a priority item on the political agenda.Lakhina pointed out several lacunae in current legislation on drug recall procedures, sale of physicians samples and stressed the need for tremendous reforms in storage and distribution of drugs. "Forty per cent of drugs are expected to be kept in a cool and dry place, failing which it could lead to problems in drug potency. Pharmacies need to be classified on the basis of facilities offered," he said. He sought the creation of a separate enactment on the regulation of medical devices.

Lakhina also spelt out various measures initiated by the FDA to meet the challenges of the future including an attempt towards financial self-reliance, association with domestic and foreign FDAs and a shift to management by exception.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.