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Tuesday, Oct 18, 2005


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Industry & Economy - Pharmaceuticals

Antibiotics segment ailing due to high input costs

Nithya Subramanian

"About 10 years ago, antibiotics contributed to about 25 per cent of the total pharmaceutical industry turnover. But today, it accounts for less than 16 per cent of the market and is falling year after year."

New Delhi , Oct. 17

PRICES of antibiotics may be on the rise, but this category of drugs, commonly prescribed to cure bacterial diseases, is losing dominance in the industry.

According to ORG-IMS Retail Audit data, the segment has witnessed a fall in growth of two per cent for the August 2004-July 2005 period, even as the total value stood at Rs 3,215.90 crore in the same period.

While Cephalosporins continued to grow by 6.3 per cent, sales of others such as Quinolones and Ampicillin/Amoxycillan (used for throat infections, pneumonia, etc) declined by 11.5 per cent and 2.9 per cent respectively. It was status quo for Macrolids and other antibiotics.

Mr Rajiv Gulati, Chairman and Managing Director, Eli Lilly and Company (India), said, "About 10 years ago, antibiotics contributed to about 25 per cent of the total pharmaceutical industry turnover. It was amongst the fastest growing therapeutic segments. But today, it accounts for less than 16 per cent of the market and is falling year after year." Even five years ago, the segment was growing at 15-16 per cent.

The main reason for the decline in the segment is the erratic supply of raw materials. "There is a large scale fluctuation of prices of the active pharmaceutical ingredient (API). For instance, the price of Levofloxacin has gone up, due to a sudden spurt in prices of its raw material," said Mr J. Paraswani, Vice-President, Marketing, Cadila Pharmaceuticals. Another example is the recent hike in the price of Ciprofloxacin due to the shortage of its raw material. Analysts said that the price rose by 100 per cent and this trend is expected to continue till the end of the year.

"The reason for the shortage of raw materials, which is imported from China, is because four raw material manufacturing facilities there were closed down due to environmental reasons. Now there is just one supplier and it could take several months before a new player can enter the segment," he said.

Companies are increasingly finding the business unprofitable due to the pricing pressure. "Since the raw materials have almost become commodities, the margins in the business are not very high. Also, as prices are controlled by the National Pharmaceutical Pricing Authority (NPPA), companies are unable to increase them," Mr Paraswani pointed out. Added to this, the increase in health awareness and the recent attempts by Governments to clean up the environment have also led to a decline in the segment.

Analysts said that new research is being done on hospital infections and there is very little value addition in drugs used for treating other infections.

Dr John Paul Quinn, who is part of the advisory board of Merck & Co said, "There is a nationwide campaign in the US to limit the use of antibiotics. But in a hospital environment, it is important to use antibiotics to keep infections low."

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