Indian drug maker Dr Reddy's Laboratories (DRL) has split a key marketing division into two parts in a bid to resurrect its ailing domestic business. But analysts remain skeptical whether the move can help the company strengthen foothold in the intensely competitive domestic drug market.

The Hyderabad-based drugmaker, which has been struggling to grow in the domestic market, has split its marketing division Acura into Acura High Growth and Acura Sustained Growth Products to give a push to some of its popular brands such as Omez and Nise. The impact of the move will be reflected in the fourth quarter earnings, he said.

However, experts are doubtful whether the initiative will help DRL make significant gains in the domestic market. According to data from industry association, All India Organisation of Chemists and Druggists (AIOCD), DRL has been growing at 7% in the last three months, nearly half of the industry average. During the period, the company lost significant market share to smaller players such as Mankind and McLeod's Pharma. DRL's revenues took a beating after the health ministry this year banned its popular pain killer Nimusilide, sold under brand Nise, for children's usage, a decision that was later revoked by Madras High Court. But the company said the bad publicity for the drug led to lower consumption by adults as well.

However, analysts are betting big on the stock due to its growth prospects in overseas markets such as US and Russia, which together contribute a major chunk of its total revenue. Elara Capital has been positive on the stock, but said it has discounted the domestic business in its view. In the past, other domestic drugmakers such as Cipla have undertaken similar changes in their domestic business in an effort to boost revenue.

In September 2011, Cipla disbanded its key marketing units and merged it with the parent company to squeeze out better productivity from its existing brands. In the past two months, domestic pharma market has been posting double-digit growth, forcing firms to focus on back home. In November, domestic drugmakers posted sales of Rs 4,912 crore compared with Rs 4,668 crore in October. Even multinational pharma firms have lined up acquisitions and tie-ups to expand in the Indian market.

Pfizer India Ltd has taken the drug price regulator to court for reducing the price of a popular cough syrup, Benadryl, a brand it no longer owns. The Indian arm of the $68-billion US company has challenged the National Pharmaceutical Pricing Authority's (NPPA) price notification and penalty notice alleging overcharging, a company spokeswoman said. Benadryl, sold by Pfizer to Johnson and Johnson in 2008, has annual sales of Rs 14 crore, according to pharma market research firm IMS Health India.

The brand logged sales of Rs 30 crore in 2007. The NPPA had slashed prices of Benadryl 100 ml to Rs 38.61 four years ago citing "public interest" after its study found that Pfizer had increased the maximum retail price of the medicine by more than the then permissible 20% limit in 12 months. This margin is currently 10%. The Mumbai High Court, which is hearing the case, has scheduled the next hearing on January 17. Benadryl does not fall under the list of drugs whose prices are directly fixed by the government.

But under India's drug price monitoring laws, NPPA can force companies to slash their profit margins if they increase more than the 20% (then) in 12 months to ensure that prices of drugs don't go unchecked.

Pfizer had filed a review petition contesting the price watchdog's order with the department of pharmaceuticals (DoP), which in turn upheld NPPA's order. Last month, NPPA levied a penalty of Rs 6-7-crore on the American company for overcharging consumers.

According to Indian laws, companies have to follow the revised price during the pendency of the settlement of the dispute. The Pfizer spokeswoman declined to say which firm would bear the financial liability, but a person close to the development said Pfizer would be accountable for the charges.

NPPA has a dismal track record of recovery of overcharged amount, having received just Rs 217 crore of the total demand of Rs 2,357 crore at the end of October 2011 as most of its notices have been challenged and are under litigation.

Glenmark Pharmaceuticals said it is filing for arbitration after US-based Napo Pharmaceuticals terminated a collaboration agreement. The companies had entered into the pact in July 2005 for development and commercialization of a novel drug for gastrointestinal diseases.

BSE-listed Glenmark said Napo Pharma's claims of breach with regards Crofelemer are unfounded. Glenmark had the licence to sell the drug undergoing clinical trials in 140 emerging countries globally.

Crofelemer, Napo Pharma’s lead compound is under development for four distinct product indications: for diarrhoea-predominant irritable bowel syndrome (IBS), for AIDS-related diarrhoea, acute infectious diarrhoea and paediatric diarrhoea. The US FDA has granted fast-track status to the application for IBS and HIV conditions, Napo said on its website.

Napo Pharma had terminated the pact on November 10, according to a press release posted on the US-based firm’s website. That would put at risk Glenmark’s ambitious plans to exclusively market the drug that is produced from the bark latex of the Amazonian tree — Croton lechleri, sustainably harvested in many countries in South America.

Napo Pharma was the initial developer of the molecule who licenced it out to Glenmark and Salix.

Glenmark expected peak sales of $80 million from its licenced geographies for HIV-related diarrhoea indication alone, according to Napo. The US firm also claims on its website that, it has allied with relief organisations to provide affordable Crofelemer for paediatric diarrhoea to resource-constrained populations in developing territories Glenmark, in a press release, denied Napo had any basis to terminate the agreement. “Glenmark continues to develop Crofelemer for all indications that we have rights to.

Filing timelines will be dependent on the availability of the complete regulatory dossier data. We anticipate such filings to begin for rest of the world markets in 2012 and hope to obtain approvals by H1 2013, as planned,” said a press note by Glenmark. Napo on its website, however, said that Glenmark anticipated regulatory approvals starting in 2010.

Glenmark, one of the most valuable listed pharma companies in India, had in August 2011 filed for arbitration claims against Napo Pharma to prevent the latter from distributing Crofelemer in Glenmark’s territories through relief agencies. The Indian company in July 2011 received $15 million (Rs 80 crore) from Salix Pharma towards upgrading the manufacturing facility for Crofelemer and was expected to get another $6.6 million (Rs 35.2 crore) in five equal instalments.

Union health ministry's plan to bring 348 drugs of the National List of Essential Medicines (NLEM) under price control is facing stiff resistance from the pharma industry.

According to ASSOCHAM, around 75% of the industry will come under price control in case the draft National Pharmaceuticals Pricing Policy (NPPP, 2011) is pursued in its present form.

At present, prices of only 74 bulk drugs and formulations, containing any of these scheduled drugs, are under the price control regime. Once a medicine is brought under DPCO, it cannot be sold at a price higher than that fixed by the government.

NLEM has 348 medicines that cover 489 formulations, including 16 fixed-dose combinations. These drugs are considered to be adequate to meet the common contemporary health needs of the general population.

A Planning Commission panel had said drug prices have shot up phenomenally in India over the past decade and a half. It pointed out that there was nearly 40% rise in all drug prices between 1996 and 2006. It said that during the same period the price of controlled drugs rose by 0.02%, while those in the Essential Drug List (EDL) increased by 15%. The price of drugs that were neither under price control, nor under the EDL grew by 137%.

They suggested that all the drugs in the NLEM should be brought under price control since the cost of medicines constitutes over 60% of the total cost of healthcare.

India's latest NLEM has 348 essential medicines, while the 2003 list had 354. Around 47 drugs have been deleted from the 2003 list. However, no anti-cancer or anti-HIV drugs have been deleted. With the addition of around eight new cancer drugs in NLEM, 2011, the aggregate stands at 30. Carboplatin, Chlorambucil, Daunorubicin, Filgrastim, Ifosfamide, Imatinib, Mesna and Oxaliplatin are the new cancer drugs that have been included in the list. About 43 new medicines have been added in NLEM, 2011, which are from 27 therapeutic categories.

The pharmaceutical industry will remember 2011 as a year in which the government sought more to exercise more control over the business, be it big ticket acquisitions of domestic firms by MNCs or price controls on drugs.

Amid these tussles with the government, domestic companies carried on with their business as usual.

While Ranbaxy heaved a sigh of relief after finally reaching an agreement with the US health regulator to remove a ban on the sale of drugs from certain Indian plants in the American market, Sun Pharma sought to consolidate its grip over Israeli firm Taro by proposing a complete takeover.

Furthermore, Lupin acquired I`rom Pharmaceutical Company in Japan as part of a global expansion drive. Nevertheless, policy was the centre of the action during the year as far as the industry was concerned.

Alarmed over the trend of big Indian pharmaceutical firms being acquired by MNCs, which could have an apparent implication on drug prices, the government decided that it was high time some control mechanism was put in place.

After deliberations and debate with stakeholders, the government introduced checks by doing away with automatic approval of Foreign Direct Investment (FDI) in existing domestic pharmaceutical companies.

According to the new guidelines, for any merger or acquisition, overseas investors will now have to seek permission from the Foreign Investment Promotion Board (FIPB).

After six months of such a proposal being approved, monopoly watchdog Competition Commission of India (CCI) will vet such deals.

The decision followed a directive from Manmohan Singh,Prime Minister, who, along with his senior Cabinet colleagues, had deliberated over concerns arising out of several acquisitions of domestic pharma firms by overseas firms.

The decision was influenced by acquisitions of Indian firms, including that of Ranbaxy Laboratories by Daiichi Sankyo of Japan, Shanta Biotech by Sanofi Aventis of France and more recently the domestic formulations business of Piramal Healthcare by US-based Abbott Laboratories.

The government feared that a monopoly by MNCs will have an impact on the availability of affordable drugs in India. However, in the case of greenfield investments, 100 percent FDI will be allowed under the automatic route, under which investors only inform the Reserve Bank about the inflows and no specific government nod is required.

Focused on emerging markets, GlaxoSmithKline’s Pakistan subsidiary is gearing up for expansion in its consumer healthcare arm. The company has been making targeted acquisitions and is looking to expand its core area away from the products in which the government regulates prices.

The GSK chief said they want to do it in two steps: maximise support for the existing portfolio brands that include Panadol, Sensodyne and Aquafresh – in oral care – and Horlicks on the nutrition side. In the second step, Burney said, GSK – which has revenue growth of about 12% in its pharmaceutical line – may also go for new opportunities such as acquisitions and other new launches.

On the pharma side, the company has been acquiring rival industries on a targeted basis – antibiotic manufacturers for example. It has been investing heavily on acquisitions of new assets and rebranding of certain products.

GSK launched five new products this year including Votrient, Duodart, Avamys, Synflorix and Fixval. The company is soon going to launch one or two antibiotic products.

GSK’s selling marketing and distribution expenses amounted to Rs2 billion for the nine months ended September 30, up 20.6% from Rs1.68 billion in the corresponding period last year – reflecting its recent investments.

The government of Pakistan currently controls the price of pharmaceutical products it deems "life saving", a policy that has hurt investment in the sector. Sources say the Swiss pharmaceutical company Roche wound up its operations in Pakistan for this very reason.

While GSK has invested heavily on acquiring assets and is likely to continue doing that a source from one of its competitors – who requested not to be named – said the recent acquisitions have not paid off as desired.

Their research molecule has not been as productive or at least it has not been realized as desired, the source said. However, they still have many cash cows.

Despite challenges facing GSK, the chief executive is optimistic about the company’s growth. Pakistan’s strategic advantage is it is capable of setting up a globally competitive pharma industry.