Johnson & Johnson blames price cuts in India for poor show in knee-implant business
, ET Bureau|
Oct 18, 2017, 11.17 PM IST
MUMBAI: Drug giant Johnson & Johnson took a $10 million (Rs 65 crore) hit on its international knee implant business in the July-September quarter, which it blamed on price cuts in India.
The US company, one of the biggest makers of medical implants, called India's decision to limit prices of stents and knee implants as one of the "extreme examples of what it has seen in other marketplace".
The company's medical device business, which reported total revenue of $6.6 billion for the third quarter through September, saw the knee implant business decline to $343 million from $355 million. Revenue in the segment's international business, which includes India, fell to $122 million from $132 million.
Addressing a conference call with investors on Tuesday, J&J executives said the performance in knees business outside the US was hurt by new legislation in India, which was lowering the pricing of implants. "That impact was approximately $10 million in the quarter," the drug giant said in the investor presentation.
In August this year, the National Pharmaceutical Pricing Authority, India's drug pricing watchdog, slashed the prices of different components of knee replacement systems by as much as 69 per cent using an emergency provision in the drug control order. According to a government statement, this decision was expected to save Indians Rs 1,500 crore a year.
Though J&J's overall medical device business grew 7 per cent to $6 billion, the company said price cuts by governments were happening everywhere. But the India reaction, the company said, was one of the "extreme examples".
"Our sense of it is that in some of these markets it's an episodic thing that happens and it's not that unusual over time," said Sandra E Peterson, J&J's group worldwide chairman.
"Obviously, the situation in Inidia — this one-time price impact on knees — clearly has an impact on the marketplace in that regard. I think that's a much more extreme example of what we've seen in other marketplaces, which are a lot more moderated," she explained to an investor query on this issue. Peterson said the company has had the opportunity, in some cases, to have broader considerations with the Indian government.
"It's part of why we have changed our business strategy to show up as an integrated business talking to them about a number of different things beyond purely the physical product on going forward," she added.
The US company, one of the biggest makers of medical implants, called India's decision to limit prices of stents and knee implants as one of the "extreme examples of what it has seen in other marketplace".
The company's medical device business, which reported total revenue of $6.6 billion for the third quarter through September, saw the knee implant business decline to $343 million from $355 million. Revenue in the segment's international business, which includes India, fell to $122 million from $132 million.
Addressing a conference call with investors on Tuesday, J&J executives said the performance in knees business outside the US was hurt by new legislation in India, which was lowering the pricing of implants. "That impact was approximately $10 million in the quarter," the drug giant said in the investor presentation.
In August this year, the National Pharmaceutical Pricing Authority, India's drug pricing watchdog, slashed the prices of different components of knee replacement systems by as much as 69 per cent using an emergency provision in the drug control order. According to a government statement, this decision was expected to save Indians Rs 1,500 crore a year.
Though J&J's overall medical device business grew 7 per cent to $6 billion, the company said price cuts by governments were happening everywhere. But the India reaction, the company said, was one of the "extreme examples".
"Our sense of it is that in some of these markets it's an episodic thing that happens and it's not that unusual over time," said Sandra E Peterson, J&J's group worldwide chairman.
"Obviously, the situation in Inidia — this one-time price impact on knees — clearly has an impact on the marketplace in that regard. I think that's a much more extreme example of what we've seen in other marketplaces, which are a lot more moderated," she explained to an investor query on this issue. Peterson said the company has had the opportunity, in some cases, to have broader considerations with the Indian government.
"It's part of why we have changed our business strategy to show up as an integrated business talking to them about a number of different things beyond purely the physical product on going forward," she added.
