GSK plans new Indian plant after wholesalers protesting DPCO stop buying

By Gareth Macdonald

- Last updated on GMT

Related tags Pharmacology Pharmaceutical drug

GSK plans Indian plant after protesting wholesalers stop buying
GSK plans Indian plant after protesting wholesalers stop buying
GSK has announced plans for a new manufacturing plant to "bring more medicines to the people of India" weeks after revealing that some drug wholesalers in the country have stopped buying its products.

The UK firm’s Indian unit - GSK Pharmaceuticals​ – announced its intention to spend £85m ($137m) on the new anti-inflammatory and digestive system drug plant last week​, explaining that – while it has not yet selected a site – a location in Bangalore is the front runner.

GSK said it will build the plant in collaboration with local design and construction firms and added that the facility will house continuous manufacturing technology, automated manufacturing systems, warehouse capacity and a packaging unit.

The firm also predicted that, when fully operational in 2017, the facility will make eight billion tablets and one billion drug capsules a year for the local market and employ a manufacturing staff of around 250 people.

Market motivation?

GSK did not say what prompted its decision to invest in the new plant, other than that it is “part of its continued commitment to ensuring access to medicines for people in the country​” and did not respond to requests for additional information.

One motivation may by an effort to compensate for declining sales.

According to financial results published last week​, GSK Pharmaceuticals’ net sales were INR6.2bn ($99m) for the three months ended September 30, down 7.1% from the comparable quarter last year, while operating income slipped 7.2% to INR6.2bn.

In October​, GSK revealed that: “In the major pockets of the country our products are not being purchased by the trade from September 15, 2013. On account of the above, sales of the Company continue to be affected​.”

GSK did not provide additional detail.

However, unnamed sources quoted by a Reuters​, suggest that recent Indian Government efforts to cut the cost of essential drugs - the Drug Price Control Order (DPCO) which reduces what wholesalers are allowed to charge for these products - have resulted in protests that have negatively impacted the UK drug firm's sales.

"The retailers are using pressure tactics by not purchasing drugs from companies who have reduced their margins to comply with the new directive​," one of the sources told the newswire, adding that multinational and domestic companies had been hit.

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