The OTC pharmaceutical market in India
Summary
- The OTC pharmaceutical market in India reached around $2.9bn in 2009, witnessing a Y-o-Y growth of around 7.1%. In 2009, the vitamins and minerals category led the OTC pharmaceutical market with a 25% market share by value, followed by cough, cold and allergy at 20% and analgesics at 18% market share.
- The leading OTC pharmaceutical players in India include GSK, P&G, Dabur, Novartis, Pfizer and Ranbaxy. The OTC market witnessed a flurry of product launches in the traditional medicine category in the recent years.
- The main pharmaceutical regulatory laws in India are "the Drugs and Cosmetics Act", 1940 (DCA) and "the Drugs and Cosmetics Rules", 1945 (DCR). OTC classification is not legally recognized in India and the drugs which are not a part of "prescription only" drug list are considered as OTC.
- Although, the distribution of OTC products is dominated by the pharmacy channel accounting for almost 70% of OTC sales, alternate sales channels such as retail and grocery stores are gaining ground due to their reach in rural are
- The key drivers for the growing attractiveness of the OTC market in India are changing consumer attitudes towards illness prevention and wellness. Other factors driving the market include the expansion of distribution networks, growing economy resulting in increased purchasing power and the high cost of medical treatment and prescription drugs.
India
Overview
India
is the second most populous country in the world after China, with an estimated
population of 1.1 billion in 2009. It is estimated that the population of India
will overtake that of China by 2030. The Indian government has introduced
multiple family planning programs to control the increasing population, which
has resulted in a decline in the birth rate in the last few years. India is
primarily home to a rural population, with over 70% of the total population
residing in rural areas. However, the rate of urbanization is increasing
rapidly and it is expected that by 2050 over 50% of the population will dwell
in urban areas. The median age in India is estimated to be 26 years, a marginal
increase since 2000 (24 years), which is indicative of the fact that India has
a large working age population. A large working population is expected to
provide an impetus to the economic growth of the country.
The
Indian economy has recorded strong growth in the last few years. Economic
liberalization, including reduced controls on foreign trade and investment, has
been instrumental in the economic growth of the country. However, the growth
has primarily been in urban areas. A large section of the population has
limited or no access to appropriate healthcare, particularly the rural
population. Private institutions dominate the healthcare environment in India
and most healthcare expenditure is through out-of-pocket payments, since only a
small proportion of the population has insurance coverage. The Indian
government is introducing multiple initiatives to provide improved healthcare
to the rural population of India. There is also active support for alternative
medicines in the country, including Ayurvedic, yoga and naturopathy, Unani and
homeopathy. The government promotes education and infrastructure for the
researching of herbal-based compounds developed by the pharmaceutical industry
from which to derive new chemical entities (NCEs).
India's OTC pharmaceutical market
The
OTC pharmaceutical market in India was valued at $2.9bn in 2009, witnessing
year-on-year growth of 7.1%. In 2009, the vitamins and minerals category led
the OTC pharmaceutical market with a share of around 25% by value, followed by
the cough, cold and allergy category at 20% and analgesics at 18%. The
distribution of OTC medicines in India occurs primarily through pharmacies and
drug stores, which accounted for over 70% of the total OTC market’s sales. This
is due to the fact that supermarket and grocery stores are not permitted to
sell the majority of OTC medicines (with the exception of 'Ayurvedic'
medicines). The leading OTC pharmaceutical players in India include
GlaxoSmithKline (GSK), Proctor & Gamble (P&G), Dabur, Novartis, Pfizer
and Ranbaxy. The main reason for the growing attractiveness of the OTC market
in India is changing consumer attitudes towards prevention and wellness,
although other factors include the expansion of distribution networks, the growing
economy resulting in increased purchasing power and the high cost of medical
treatment. The increased attractiveness of the OTC medicine/drug market in
India is driving pharmaceutical companies to intensify their focus on this
market.
Recent
years have seen India's OTC market flooded by new pharmaceutical players and
new product launches. However, the majority of the products launched are
herbal-based, in line with the growing preference to use products with natural
ingredients. In 2010, Novartis announced its plans to enter the Ayurvedic
market in India with a focus on the skin care, fungal infections and lifestyle
categories. Meanwhile, in 2009, Cipla announced its plans to launch 25 new
products within the Ayurvedic and homeopathic segments. In the same year,
Hamdard, one of the largest OTC players in India, made its first foray into the
lifestyle segment with the launch of its 'Nature Wonder' range of OTC products
for lifestyle disorders. The range includes LipoTab, a natural formulation for
cholesterol, and Jigreen, a natural product for liver disorders, including
hepatitis.
Market segmentation
Vitamins
and minerals led the OTC market accounting for around 26% of the market by
value in 2009. The drivers for the growth of this category have been the
changing attitude of India's population toward health and wellness along with
other factors such as increasing disposable incomes and increasing incidence of
lifestyle diseases. Rural areas are expected to drive the growth of the cough,
cold and allergy and analgesics categories, as over 70% of the population in
India reside in rural area while around 80% of the doctors live in urban areas.
Due to the unavailability of adequate healthcare, the rural population is
shifting to self-medication.
Most
players targeting rural India are introducing small pack sizes in order to
better drive consumption. The market for traditional medicine is also expected
to grow due to access to alternate sales channels such as grocery stores and
small retailers (although other OTC medicines can only be sold through licensed
pharmacies).
Regulatory framework
The
main pharmaceutical regulatory laws in India are the Drugs and Cosmetics Act
1940 (DCA) and the Drugs and Cosmetics Rules 1945 (DCR). Other pharmaceutical
legislation includes the Drug Prices Control Order 1995 (DPCO), the Drugs Magic
Remedies Objectionable Advertisement Act 1954 and the Pharmacy Act 1948. These
bodies jointly regulate the import, manufacture, distribution and sale of all
categories of drugs, including allopathic, Ayurvedic, Siddha, Unani and
homeopathy. However, OTC classification is not legally recognized in India and
it is only the drugs which are not included on the 'prescription only' drug
list that are considered as OTC.
According
to the DCA, there are primarily four 'schedules' for allopathic substances (or
drug ingredients). Substances listed in Schedule H and Schedule X, for
instance, are dispensed with a prescription and sold only through pharmacies,
while drugs listed in Schedule G can be dispensed without a prescription but
are sold only through pharmacies. Drugs registered as 'Ayurvedic' can be sold
through other channels such as supermarkets and grocery stores, as well as
pharmacies. To qualify as Ayurvedic, a drug must have plant-based natural
active ingredients. Some Ayurvedic treatments in India include Amrutanjan pain
balm, Zandu pain balm, Iodex pain balm, Moov pain cream, Eno antacid and Vicks
cough drops.
Drugs
within Schedule G must be labeled 'Caution: it is dangerous to take this
preparation except under medical supervision'. Presently, while there is no
governing law in India that prohibits the advertising of any type of drugs in
any media, as an industry practice prescription drugs are not advertised in the
interests of consumer safety. In India, OTC drugs are not sold through online
shopping and teleshopping as only authorized licensed stores are permitted to
sell OTC drugs. The National Pharmaceutical Pricing Authority (NPPA) controls
their prices, although this does not apply to Ayurvedic medicines.
Growth drivers
Changing consumer attitudes
The
rising population of India, growing urbanization and increasing disposable
income has resulted in an increased consumer base for OTC products. The number
of key consumers of OTC drugs, the middle class population, is growing rapidly,
driving the growth of the OTC market in India. In urban India, contemporary
lifestyle trends, international exposure and growing interest in personal
appearance has resulted in an increased consumption of niche OTC products such
as vitamins, minerals and weight loss products. In rural India, the lack of
appropriate medical facilities, rising medical expenditure, increased
availability and accessibility has led to the increased consumption of OTC
medicines for minor ailments such as coughs and colds. Most of the expenditure on
healthcare in India is primarily out of pocket, which also contributes to the
growing preference for OTC products.
Widening distribution channels
A
rapid expansion of the OTC market in India has resulted in significant changes
to the distribution model. While in urban areas there has been a surge of
branded pharmacy chains, alternative distribution channels such as grocery
shops are helping to drive OTC drug sales in rural areas. These stores stock
OTC products including Ayurvedic treatments, cough and cold treatments,
anti-allergic balms and low-dosage non-steroidal anti-inflammatory drugs
(NSAIDs). The government is also keen to widen the availability of OTC products
to outlets other than pharmacies, and in 2005 the Organization of
Pharmaceutical Producers of India (OPPI) went as far as to suggest selling them
in post offices.
Liberal regulatory guidelines for OTC
The
term OTC does not have any legal validity in India; rather, any drug that is
not listed as prescription-only is considered to be OTC. Thus, the regulatory
framework for OTC is not very stringent—the Ayurvedic class of medicines does
not even have a regulatory structure for pricing—which is an important factor
driving the growth of the OTC market. Against this backdrop, the OTC Committee
of the OPPI is instrumental in the promotion of responsible self-medication
with an aim to growing the OTC sector. OPPI also aims to promote the
accessibility of OTC products and increase awareness of the importance of
responsible self-medication, with regulatory support from the Indian
government.
Product availability at different price points
In
India, OTC products have always been considered to be targeted toward the urban
population. As a result, OTC products have struggled to penetrate the rural
markets. Most of the leading companies now offer products at all price points
to capture all segments of the population. Moreover, many companies are
launching products specifically targeting the rural market, such as the
'sachet' concept for OTC products (inspired by similar strategies in the
consumer goods sector). For example, Paras Pharmaceuticals has introduced
smaller pack sizes of pain balms for a lower price to drive rural consumption.
Going forward, the spread of products across the entire price spectrum will
contribute to the growth of the OTC market in India.
Higher margins in OTC
Higher
profit margins in OTC products are driving companies to enter the OTC market in
India. The profit margins for OTC products are over 20%, while for prescription
products they range from 15% to 20%, making OTC more profitable for companies.
As OTC retail is very fragmented and unregulated, grocers' margins are much
poorer than those of the pharmacists. Moreover, pharmacists are becoming very
demanding and expect higher incentives and enhanced partnerships in marketing
activities, which has led manufacturers to a shift to other distribution
channels than the pharmacies.
