Insulin mfrs slash vial prices but retain margins on cartridges

Ananth Iyer - Mumbai

Novo Nordisk and Eli Lilly, the two best-sellers of insulin in India, have effected a deep cut in prices of human insulin by 25 per cent and 30 per cent respectively. However, the rate cut covers only the injectible vials and not the cartridges, which is used as a delivery vehicle in reusable insulin pens and pre-filled syringes.

Reusable pens and pre-filled syringes are the popular mode of insulin delivery across the world. In India, it is the injectible vial that is more popular for the obvious reasons of cost. Before the price cut, the price of a vial was between Rs 210-230 (400 IU). This has now been brought down to Rs 150-170, while that of 3 ml cartridges is maintained at Rs 260 (300 IU).

Cartridges account for 16 per cent of the Rs 166-crore human insulin market, according to IMS Health, while pre-filled syringes have just one per cent market share. Interestingly though, while the total insulin market is growing at 20.5 per cent and that the growth in injectible vials is estimated at 16 per cent as on November 2003, the cartridges are growing at 47 per cent, while the sales of pre-filled syringes is tripling every year.

If the present growth rates were to continue, then by the end of 2003, the human insulin market would shrink to Rs 134 crore (after factoring in an average 25 per cent price drop). This means the market will actually show a 24 per cent drop in value by 2003 end.

As against this, the total sales for cartridges would have grown from Rs 26 crore to Rs 38 crore, while sales of pre-filled syringes would jump from Rs 1.4 crore to Rs 4.4 crore. In terms of market share, cartridges would account for 28 per cent (up 12 per cent) by end 2003, while the share of pre-filled syringes would grow to 2.5 per cent (up 1.5 per cent).

Will the price drop lead to increase in consumption of human insulin? To an extent, yes, say industry analysts, but it may not be substantial. The chances are that the two leading drug companies - Novo and Lilly - will now go all out to increase the usage of insulin pens and pre-filled syringes, says a Mumbai-based analyst.

For one, the growth in the consumption of vials, for the 12-month period ending November 2002, was only 16 per cent, which is below the 20.5 per cent growth estimated for the human insulin market during the same period.

Novo Nordisk, which markets its human and animal insulin range through Knoll, recorded a turnover of Rs 115.7 crore for human insulin for the 12-month ending November 2002 and a growth of 27 per cent. Vials (Rs 94 crore), which account for 81 per cent of Novo’s total sales, grew at 20 per cent, while cartridges (Rs 20.4 crore) and pre-filled pens (Rs 1.35 crore) grew at 46 per cent and 236 per cent respectively.

At the current growth rates, Novo’s sales from insulin vials would increase from Rs 94 crore to Rs 112 crore. However, if the 25 per cent price drop is factored in, the turnover of this product form would actually go down to Rs 85 crore - a drop of Rs 9 crore from current sales. On the other hand, at constant price, the sales of insulin cartridges, which is growing at 46 per cent, would increase to Rs 30 crore. The company is also expected to increase the turnover of its pre-filled pens by Rs three crore in a year’s time. In other words, though Novo stands to lose Rs nine crore by slashing the prices of vials, it will more than compensate for this loss by adding Rs 13 crore to its kitty in a year. However, Novo’s overall growth in this segment will come down from 27 per cent in 2002 to 3 per cent in 2003. Eli Lilly, on the other hand, will have to take a cut of Rs 0.5 crore on its topline sales. By 2003 end, Lilly would have generated Rs 2.6 crore additional revenue on cartridges, but it will stand to lose Rs 3.1 crore on the overall sales of human insulins.

However, all the above calculations would fall flat if Indian companies enter the fray with cartridges of their own. And it is likely to happen as early as June, or even early in April. USV, which accounts for 2.3 per cent of India’s human insulin market, is negotiating with 2-3 foreign companies to source cartridges. It has already signed a sourcing contract with the UK-based Owen Mumford for reusable and pre-filled pens. “We are negotiating with 2-3 companies for sourcing cartridges. We expect to launch the product in mid 2003 at a subsidy. I cannot comment on what the subsidy could be at this point of time,” USV managing director Prashant Tiwari told Express Healthcare Management.