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Branded pharmaceutical companies establishing beachheads in India is a logical choice as they see access to a market to growing at 10+ percent. India is a source of revenue and profit replenishment for these multinational firms. The end result of such acquisitions is going to be higher drug prices for the masses – or government intervention. It’s going to be interesting to see what develops.
However, there is an underlying question about the sale of Indian pharmaceutical companies. Why?
Since 2005 Indian companies have challenged the multinationals and have forced a landscape change. Why are these companies being sold now when they have created very successful franchises? One could say the price was too good to refuse. May be, but has anyone considered another reason i.e. lack of succession in the entrepreneur families or letting trained managers run and grow the companies to compete with the brand companies.
The Singh family (Ranbaxy) allegedly had a family feud and they brought in Dr. Brian Tempest to cool the storm. However, under the Singh family regime there were quality lapses as manifested by the US FDA’s actions. Were these lapses beyond the company’s control to fix? Under these circumstances the Singh family got an offer they could not refuse. Could that be the case with the Piramal family?
Consolidation within India i.e. one successful company buying another pharmaceutical company is not in the culture. Thus, unless there is strong succession planning, we will see repeats of Matrix Labs, Ranbaxy, Shantha Biotech and most recently Piramal Healthcare.
If the entrepreneur families do not pass the baton to trained professionals, I believe Indian pharmaceutical manufacturers, API (active pharmaceutical ingredient) companies, formulators and others associated with the Indian pharmaceutical industry will be selling out to multi-national corporations. It will be a case of take your money and run.
