From Novartis To Sanofi, Pharma MNCs Are Either Leaving India Or Shrinking: Here's Why

While India’s healthcare market is growing, some of the biggest global names in pharmaceuticals are either exiting India or their Indian business is shrinking. Swiss pharmaceutical (pharma) company Novartis AG announced that it would be evaluating its India business, while French drugmaker Sanofi has already sold its nutraceuticals business to an Indian company. Global multinational companies (MNCs) find it easier to do business in India till the drugs have a patent but once the patents are over, Indian pharma companies benefit because the drugs become cheaper due to scale of production.

“What we are up against is Indian competition, which has bigger and perhaps better marketing teams, the MNCs (multi-national companies) have to deal with compliance risks, I think the Indian companies know how to deal with that compliance issue,” Murali Neelakantan, formerly Indian pharmaceutical company Cipla’s first global general counsel told The Core. 

On February 16, Novartis said that it would carry out a strategic evaluation of its subsidiary, Novartis India Limited. The comprehensive review of the public-listed company will examine, among other things, Novartis AG's ownership stake of 70.68% in the Indian entity.

In 2021, Sanofi sold its 50-year-old brand Soframycin to a company called Encube Ethicals which had been contract manufacturing Soframycin skin cream for over 20 years. It also its nutraceuticals business in 2021 to Universal Nutriscience, an Indian company.

Patents V/S Generics

Patented drugs tend to be more expensive in the Indian market when generics are available. Once a drug’s patent is over, cheaper generics become available in the market. Most pharma MNCs do not have drugs that can effectively compete with Indian pharma companies that have become larger in recent years. Indian companies produce generics more economically and at scale. 

“They (MNCs) should have a reason to do business in India. They've largely been importing the new drugs, they haven't been manufacturing many of the new drugs here. In fact, my own sense is that we have fewer manufacturing facilities created by these MNCs in recent years, and in fact, we see more disposals than the establishment of new facilities by these MNCs,” Neelakantan said. 

The 2022-23 Economic Survey projected that India's domestic pharmaceutical market is estimated to reach US $130 billion by 2030. The country's pharmaceutical exports grew 24% in FY21, driven by Covid-19-induced demand for critical drugs and other supplies to over 150 countries. According to the survey, India is the largest provider of generic medicines globally, with a 20% share in global supply by volume, and is the leading vaccine manufacturer globally with a market share of 60%. 

Sheetal Sapale of integrated business-to-business healthcare platform Pharmatrac told The Core that MNCs are now focussing on their specialised core businesses and exiting from many others as in the case of Novartis or Sanof. Sapale said that Indian pharma MNCs barely contribute 1% of the global turnover of major pharmaceutical companies.

“Yes, the market is growing. But the market is growing in such a way that the patented MNC drug is a small fraction of it unless you come with a breakthrough drug,” Neelakantan said. 

Last year Novartis signed a deal with Indian pharma company Cipla which allowed Cipla to take over manufacturing and marketing in a perpetual agreement from January 2026. In February 2022, Novartis signed a sales and distribution agreement with Dr. Reddy’s Laboratories (DRL) to promote and distribute the painkillers Voveran, Calcium range, and Methergine in India. But the move also saw some 400 jobs being lost in Novartis. Weeks later, Novartis sold its cardiovascular brand Cidmus to Indian pharma company Dr. Reddy's Laboratories and then sold another cardiac trademark, Azmarda, to JB Chemicals. A year later, Novartis sold 15 ophthalmology brands to JB Chemicals for close to Rs 1,000 crore.

Leaning Towards Contract Manufacturing

In 2023, Sun Pharmaceutical Ltd, Dr. Reddy's Laboratories Ltd, Cipla Ltd, Torrent Pharmaceuticals Ltd, and Zydus Lifesciences Ltd were India's top 5 pharma companies by market share. The top 10 pharma companies in India had a total market capitalisation of $77,093 million (as of Mar 31, 2023), with Sun Pharma having the highest ($28,738 million), followed by Dr. Reddy's ($9,355 million), and Cipla ($8,855 million), while IPCA Laboratories Ltd is the lowest ($2,505 million). In contrast, Novartis India in FY24 had a market capitalisation of Rs Rs 2,556.61 crore (Rs 25,566 million).

Selling drugs also involves field forces and for pharma MNCs, adhering to global standards becomes difficult, including at the manufacturing stage. It has been reported that Hyderabad-based Dr Reddy's is looking to buy Novartis AG's entire stake in Novartis India. 

Historically, pharma MNCs have found it difficult to do business in India. In 2013, the Supreme Court dismissed Novartis AG's attempt to win patent protection for Glivec, the anti-cancer drug, setting a benchmark for intellectual property cases in India. 

“They're (global MNCs) are probably going for contract manufacturing, where they have to manufacture in India for the Indian market, which is Indian quality at Indian costs. And that means they have a leaner corporate structure and easier compliance. So even when they are manufacturing domestically for the domestic market, more likely to be contract manufacture,” Neelakantan said.