Drug firms eye over-the-counter market in bid to buttress growth

index.jpgSource: LiveMint.com, Dec 27, 2016

Mumbai: A fast growing market for wellness products such as health supplements and weight management products is luring traditional drug makers in India. Some of India’s largest drug makers such as Sun Pharmaceuticals Industries Ltd, Dr Reddy’s Laboratories Ltd and Glenmark Pharmaceuticals Ltd are creating a portfolio of over-the-counter (OTC) products.

This $3 billion market has hitherto been dominated by consumer goods firms such as Reckitt Benckiser, the maker of Dettol, and Dabur India Ltd, which makes the Hajmola digestive supplement. “In India, there are a lot of regulations on prescription drugs but consumer healthcare offers a slightly more positive and open environment, especially on the pricing side,” said Subodh Marwah, vice-president and global head of consumer healthcare at Sun Pharma. “So, I believe growth potential, less stringent regulations, higher margins and sustainability are the reasons for this growing interest in consumer healthcare.”

Sun Pharma has at least six OTC products such as Revital, a health supplement, and Volini, a pain-relieving cream.

To be sure, multinational drug makers such as GlaxoSmithKline Plc and Johnson & Johnson Inc., have a firmer foothold in the market, but Indian drug firms have been more aggressive in recent times, looking to tap a market growing at 10-15% annually.

For instance, Cipla Ltd spun off its consumer healthcare business into a joint venture subsidiary Cipla Health in 2015, while Lupin Ltd, which only has prescription medicines in its portfolio currently, has rolled out a pilot project for entering the OTC market.

“This is the first serious foray by the company into the OTC market, despite the few products we have had in the past. The OTC portfolio will be made up of proprietary products,” Lupin’s managing director Nilesh Gupta had said at the time of the company’s September quarter earnings.

However, the going won’t be easy because of the different market dynamics which resemble that of packaged consumer goods. Firms will have to create a strong marketing and distribution network and invest heavily in advertising and promotion.

“You have to compete with big FMCG companies for airtime,” said Kedar Rajadyne, president and chief operating officer, consumer products, Piramal Enterprises Ltd. “OTC is an investment game and it is long term. The gestation period for firms to be sustainable and grow is quite long.”

With the base business of pure pharma and pure consumer packaged goods companies facing growth challenges, the consumer healthcare segment is garnering interest from both sectors, said experts. “Consumer behaviour has changed and we are seeing demand for health and wellness products. People are also going for self-medication and looking for quick relief products. This is driving the OTC market,” said a consultant, who did not wish to be named.

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