Indian players have realigned and restructured their operating paradigms reflected in lean cost structures, vertically integrated models, geographically diversified presence, vast product ranges and increasing presence in niche segments
These are interesting times for Indian generic players, who have been undergoing a change in growth drivers and business models.
Indian companies have already proved their mettle in the fiercely competitive global generic space, with 23% of total abbreviated new drug application (ANDA) approvals and 48% of the total Drug Master File (DMF) filings. India’s cost advantage is highly compelling. Coupled with strong chemistry and regulatory skills and the largest number of US FDA-approved plants outside the US, this makes India one of the most dominant players in the global generic space.
To remain competitive and maintain their dominance, Indian players have realigned and restructured their operating paradigms reflected in lean cost structures, vertically integrated models, geographically diversified presence, vast product ranges and increasing presence in niche segments. With growing competition in the developed markets, technology-driven products and emerging markets are set to drive future growth. With extensive experience in emerging markets, Indian companies are best placed to maximise these opportunities.
On the one hand, the US market is experiencing intensely competitive business conditions, while on the other, complex technology drugs, brands and semi regulated markets are expected to become the new growth markets. Operational restructuring and business realignment would help Indian companies survive the competitive environment in the US and EU markets, note analysts.
Following structural healthcare reforms in many countries, the challenging macroeconomic scenarios ahead are set to favour higher consumption of generics.
The US continues to be a major market for generics, and accounts for more than 28% of the world’s generic market. Despite severe pricing pressure and declining profitability, the US market would continue to be attractive as drugs worth US$55bn are expected to go off-patent in 2013-17. Obamacare is set to extend the generic user base in the US among the uninsured. The positive side-effect is that the addition of senior or matured individuals would mean a higher prescription utilisation rate that would lead to higher sales. Nevertheless, the pricing of the drugs would be affected by the new legislation that is designed to reduce public spending.
Analysts have maintained that Lupin and Dr Reddy’s sales in the US through Medicare would be negatively impacted due to the application of the new Act, on account of the price impact.
In the meantime, domestic pharmaceutical companies in India are set to deliver healthy growth for the last quarter of the financial year 2014, despite a slowdown in business at home resulting from the National Pharmaceutical Pricing Authority (NPPP) effect. Thirteen companies are likely to report year-on-year growth of 20%.
The domestic market grew by more than 6% during the fourth quarter, according to analysts. Abbott India, Biocon, Lupin, Sanofi India and Sun Pharma are likely to report revenues up by more than 20%, they claim.