Chris Viehbacher, Chief Executive Officer (CEO) of Sanofi, signalled his company’s continued interest in India as an investment destination and healthcare market in spite of challenges facing foreign-owned pharmaceutical companies in the country such as foreign direct investment (FDI) restrictions and drug price controls. He also drew attention to his company’s local manufacturing investments to counter the perception that foreign acquisitions of domestic firms were creating little value for the country.
Sanofi is among the fastest-growing foreign pharma companies in India, the world’s second-most populous country and its fourth-largest pharmaceutical market in volume terms, where a sizeable chunk of the population does not have access to medicines.
Speaking at the annual general meeting of the Organisation of Pharmaceutical Producers of India in Mumbai yesterday, Viehbacher said it would be wrong to evaluate countries in the short-term. “The question is are we making progress,” he said. “I personally would never bet against demographics,” he said.
Policy reversals
Viehbacher’s vote of confidence is surprising. In recent months, India has reversed a decade-old decision to allow automatic approvals to acquisitions that put control of local companies in foreign hands. These proposals are now cleared on a case-by-case basis by the government’s Foreign Investment Promotion Board adding an element of uncertainty and unpredictability to the process.
And reports suggest that more curbs are around the corner in so-called “critical” sectors such as vaccines and life-saving medicines, motivated by the fear that foreign companies would discontinue their development and manufacture for the Indian market or raise prices.
The Shantha factor
While expressing optimism, Viehbacher was careful not to dismiss these concerns out-of-turn. Instead, he sought to assuage them by offering as a counter-argument, Sanofi’s acquisition of homegrown vaccines producer Shantha Biotech in 2009. Defending his company’s post-acquisition strategy, Viehbacher stated that Sanofi had invested $150mn in building manufacturing facility at Shantha, and also transferred to it some of the technology used in the manufacture of one of its paediatric vaccines.
He added that Sanofi was geared to putting Shantha’s five-in-one children’s vaccine back on the World Health Organisation’s pre-qualification list for global supplies by January 2014 after it had been struck off for quality issues in 2010. “My personal interest is to make sure that in everything that we do, we realise Varaprasad (Reddy, founder of Shantha)’s vision to make vaccines affordable to all,” he said.
After Shantha, Sanofi purchased the over-the-counter unit of Mumbai-based Universal Medicare in 2011, and the animal health business of Dosch Pharmaceuticals earlier this year. Speculation is rife that Elder Pharmaceuticals’ domestic formulations business will be next.
Sanofi’s acquisitions pre-date a report by Indian parliamentarians this August that decried foreign takeovers of local pharmaceutical assets and recommended a blanket ban on FDI in so-called “brownfield” pharma projects. “Significant strides have not been made (itals mine) in creating fresh jobs and transfer of technology (post-acquisition),” it reportedly said.
India, not just a market
No wonder then that at a press briefing yesterday, Viehbacher sought to underscore his commitment to local manufacturing and job creation. Sanofi was not a “colonial company” that confined manufacturing to its home country and merely looked to open up new markets abroad, he said. “We produce locally and are interested in helping healthcare locally,” he said.
As proof of Sanofi’s interest in “supporting sustainable healthcare systems,” Viehbacher yesterday also announced a three-way partnership between Sanofi, the International Diabetes Federation and the Public Health Foundation of India to create awareness and support structures in Indian schools for children with type one diabetes (also known as juvenile diabetes).
The partnership will visit public and private schools with the dual aim of acquainting school staff, parents and children with type one diabetes, its prevention and management, and providing schools with the tools needed to support children with the condition. It will also attempt to dispel misconceptions and stigma.
Sanofi markets the blockbuster long-acting insulin Lantus in India and oral anti-diabetic drugs for type-2 diabetes.
Tough times
It is not easy being a foreign pharma company in India, these days. In addition to FDI norms, uncertainty also surrounds the fate of drug trials in the country many of which are sponsored by them. And companies continue to be unhappy with India’s patent laws that they believe are weighted in favour of infringers. In parallel, the entire drug industry is struggling to transit to a new price control regime. Executives at these companies may be forgiven for thinking that circumstances are weighted against them.
The question is whether the potential of the Indian market, that Viehbacher is no doubt banking on, will continue to provide a strong enough counter-weight.
Pic sourced from prospects.rsc.org
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