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Outlook for pharma, education and microfinance in 2017

What can the Indian pharma companies hope to look forward to in the new year? After all, market headwinds in the form of drug pricing pressures , both in India and the US, and regulatory compliance issues are expected to continue even in 2017. Some of the industry veterans feel a greater focus on smart portfolio choices will get even more critical in 2017. 

twitter-logoE Kumar Sharma | January 2, 2017 | Updated 18:47 IST
Outlook for pharma, education and microfinance in 2017

Smart portfolio choices will decide success rate

What can the Indian pharma companies hope to look forward to in the new year? After all, market headwinds in the form of drug pricing pressures , both in India and the US, and regulatory compliance issues are expected to continue even in 2017. Some of the industry veterans feel a greater focus on smart portfolio choices will get even more critical in 2017. 

This, they say, is crucial in the context of the factors that characterized 2016. For the year just concluded stood out for the noise around regulatory hurdles and price control pressures. In the Indian market, the moves by the government around bringing in price control, be it for essential medicines or for medical devices like stents, was loud and clear. The drug pricing pressures were an equal concern if not more, for Indian companies operating in their biggest global market, the United States of America. The presidential election campaign put medicine pricing as an important area for concern.

This, on top of channel consolidation, added to the pricing pressure. For instance, the US now has only about four large wholesalers and chains that source generic drugs compared to about a dozen three years ago. This only means that they have a great deal of bargaining power vis-a-vis the generic drug companies. These were the developments that characterized the year.

Some of the companies, like Lupin or Sun Pharma, tried to overcome these through better portfolio choices. This meant launching those products in the US which were either difficult to make or were differentiated generics  so that they had the benefit of limited or lower  competition or where the complexity of drug making ensured barriers to entry for many.

Glenmark, for instance, pointed out that it intends to build on the index for innovation. How that will play out for these companies needs to be seen. However, company examples notwithstanding, the underlying message from some of the announcements seems to be clearly driven by an end goal to look for opportunities to improve profits and the return on capital employed.

The concerns in the new year do not seem to be materially very different from those in 2016. There was the volatility in the emerging market currencies but that got played out in 2016. Concerns on this front do remain even now. Other than that, concerns still hover around the drug pricing scenario and the progress that many of them - be it Sun Pharma, Dr Reddy's and others - can make on the regulatory compliance issues.


THE OUTLOOK FOR EDUCATION IN 2017

Expect to see greater use of technology

"India will start seeing a lot more use of technology in higher education," says Ajit Rangnekar, the former dean of the Indian School of Business (ISB), with campuses in Hyderabad and Mohali. Already, the concepts of flipped classrooms (pedagogical model where short video lectures are viewed by students before they attend the class. The in-class time is devoted to discussing it or other related activities) and MOOC (Massive Open Online Course) have already started taking off, especially in some of the leading Indian institutions. The focus is expected to be not just on the way education is delivered using technology, on the nuts and bolts of how we teach (the use of artificial intelligence, machine, video technology, bigger telecommunication standards), be it 4G or 5G for facilitating learning, but the thrust increasingly will also be on technology-related areas for career choice. This trend is not likely to be confined to higher learning but is expected to play out across various levels of learning leading to more being delivered electronically as and when students want. Some of this is being seen in the use of fintech (or financial technology, where technology is applied for delivering financial services) for instance.

On the regulatory front also, those who have been tracking the Indian education space see reason for hope in the new leadership in the HRD ministry. The sector is likely to see a move towards giving greater autonomy to government backed institutions -- like the Indian Institute of Managements (IIMs) -- in deciding their future. This is more likely to be in the fashion of allowing  them the freedom to experiment with technology and with the new ways of reaching out to people. Finally, the IIM bill could address all the major concerns of some of these institutions.

THE OUTLOOK FOR MICROFINANCE AND SMALL FINANCE BANKS IN 2017

It's wait and watch in the first quarter of the new year

January is the time the microfinance institutions add new clients and traditionally the sector has seen players opening new branches. There is not much expected on this front as the sector --that was on a near holiday after demonetisation -- has still to see loan disbursements and repayments returning to normalcy. Therefore, many in the sector want to observe how the first quarter pans out and see if the business returns. It has been a shock for the system said an industry insider.

Reason: There are two dimensions - one, is the simple fact about notes not being available and the second, and more worrying to many, is the decline in business and the fact that this development lasted for more than the week or two as was initially expected. An added dimension is that many of the new small finance banks are expected to start their operations in the first quarter of 2017, which may not necessarily be the best of times to start out (one could say that it could be a lesser challenge for the urban and non-farm focused ones). What has baffled many is the inability to interpret the measures and what exactly it could mean for the various stakeholders. For instance, is it a move that will boost the payment banks? Indeed, it is still not clear how it will help them. Not many are bothered by the issue of payment methodology, which may take a month or more but will eventually get sorted out, but the bigger issue is of business taking off, which is taking time.

Therefore, what one can gather at the moment is that there is going to first six months of uncertainty and after that the expectation is that business will get back on track.

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