Indian API market on the up as domestic drug prices fall

Indian API manufacturers are branching out into new markets, while international suppliers could be hit by lower prices in the domestic market, writes Asia correspondent A Nair

Meanwhile the prices of 348 medicines, including life saving drugs, will fall by up to 80% in India in the wake of a new Drug Price Control Order

Indian pharmaceutical companies filed 417 Drug Master Files (DMFs) with the US FDA during 2012 compared with 404 in the previous year. The number of DMF filings during the years 2010 and 2009 were 311 and 271 respectively. This clearly shows that the active pharmaceutical ingredient (API) segment in India is intent on spreading its wings in markets with higher filings.

India remains one of most favoured API destinations globally. Despite several adverse factors like stiff competition, the slowdown in the world economy, cost cutting measures in highly regulated markets and unfavourable foreign exchange rates, Indian API players have dominated market share after their Chinese counterparts.

Domestic majors like Dr Reddy's Laboratories, Lupin, Aurobindo Pharma, Divi's Laboratories, Ipca Laboratories, Alembic Pharmaceuticals, Glenmark Pharmaceuticals, Jubilant Life Sciences, and Shasun Pharmaceuticals have established strong presence in these markets and are set to capture future opportunities.

India has been recognised as one of the leading global players with the filing of large number of DMFs and dossier registrations for APIs, with several manufacturing facilities approved by the regulatory authorities of developed countries.

While Hetero Drugs filed 24 DMFs, Emcure Pharmaceuticals filed 16. Hetero Laboratories filed 15 DMFs, Aurobindo Pharma and Dr Reddy's Laboratories filed 13 each, Lupin filed 12 and Cadila Healthcare 11 DMFs during 2012. Macleods Pharmaceuticals and Sun Pharmaceutical Industries filed nine DMFs each.

The same trend is likely to continue in the current year: during the first quarter of the year to the end of March Indian companies filed 79 DMFs. Jubilant Life Sciences filed six DMFs, followed by Lupin and Sun Pharmaceutical who filed five each.

India's API manufacturers have maintained the momentum in filing DMFs in the US with higher investments in their facilities. Major factors like better infrastructure, improved cost-effectiveness, contract research and manufacturing services and tie ups with international players have assisted these players.

Domestic drug prices to be slashed

Meanwhile the prices of 348 medicines, including life saving drugs, will fall by up to 80% in India in the wake of a new Drug Price Control Order. The Indian government has notified the Drug Prices Control Order 2013 with effect from 15 May, replacing the older 1995 order.

Implementation of the new drug policy is set to lead to slashing of prices of many anticancer and anti-infective drugs by 50-80%. The prices of 270 medicines will fall by 20%, but HIV drugs will slide by 70%, and a few other drugs will slip by 88%.

While the policy will have a moderate impact on domestic majors like Cipla and Cadila Healthcare, with potentially 8-10% earnings downgrades by broking agencies, Sun Pharma and Lupin are likely to be least affected, given the fact that they have strong `tailwinds' from the US business. However, multinational companies, especially Glaxo Smithkline, are likely to see a significant downward price revision.

Also nervous about the change are Allergan, AstraZeneca, Novo Nordisk and Lundbeck. Already apprehensive after India's Supreme Court verdict over the patentability of Novartis’ incrementally improved version of a cancer treatment drug Glivec, multinationals are also facing the potential `patent cliff'.

From 2008 to 2012, many top selling drugs lost their patent protection, losing more than US$100bn in sales. This year has been termed critical for multinationals, especially when revenues losses of $29bn are expected, given more patent expiries this year. The current scenario has indicated more financial pressure on blockbuster drugs, which will lead to an incremental reduction in R&D of new drugs.

Ranbaxy scrutiny continues

Ranbaxy continues to feel the fallout of its recent fine for data integrity misconduct and cGMP violations at certain Ranbaxy facilities in India. Daiichi Sankyo, the Japanese parent of Ranbaxy Laboratories, is said to be weighing legal options to sue the former promoter-shareholders of the generics drug maker. Daiichi Sankyo has accused the former owners of withholding information regarding the Indian company's disputes with the US FDA. The original promoters have denied the accusations.

Having come under intense US FDA scrutiny the company, along with seven other drug makers, including Denmark's Lundbeck, is now facing a fine from European antitrust regulators for limiting the supply of low cost medicines.

The move is part of the European Commission's efforts to clamp down on what has been termed the pay for delay deals. These pacts were ostensibly signed by drug majors holding patents with makers of generic drugs to delay the onset of cheaper versions of their medicines.

The US FDA charges have triggered probes by other regulatory bodies. The recently concluded US Department of Justice investigation, which highlighted quality lapses at Ranbaxy, has spurred the Drug Controller General of India to also probe into dossiers filed by the company.

Though the Indian firm has clarified that it has undertaken corrective actions and invested $300m to improve the manufacturing and quality practices, more audits of the dossiers filed in various markets are underway, which could bring on more regulatory probes.

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