While the big boys of the global pharmaceutical industry waltz into mega mergers, some of their key gaming fields lie in India and China, which are the bases for lucrative and critical generic drug manufacture while the giants pump scarce money to discover blockbuster drugs.
Merck & Co Inc’s $41.1 billion acquisition of Schering-Plough Corp marks the second big ticket in the global pharmaceutical firmament with potential major implications for the domestic pharmaceutical industry.
The move, which follows Pfizer Inc’s recent purchase of Wyeth for $68 billion, is seen by many the beginning of long phase of consolidation in the pharmaceutical industry that finds itself caught between the credit crisis, a shrinking pipeline of original patented new molecules and growing competition from generic drug companies from emerging markets including Indian and Israel.
Pfizer Inc last week inked a deal to source generic drugs from Hyderabad-based Aurobindo Pharma. Deals like the one involving Merck could result in similar deals for Indian firms. France’s Sanofi-Aventis acquired Czech firm Zentive which is into generics while last year, Japan’s Daiichi acquired India’s Ranbaxy.
“Rising costs, fewer new drug approvals, and government pressure to reduce healthcare costs are much bigger challenges for large pharma companies. This has resulted in increased focus on core activities and drug discovery and outsourcing of non-core activities to low cost destinations such as India and China,” said an Manoj Garg, a pharma research analyst with Emkay Research.
The global market for generic drugs that are in the off-patent regime is currently valued at around $270 billion.