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United States is approving drugs by the dozen. Why is it worrying Indian pharma companies?
 
Seven hundred through, 300 more to go-the United States Food and Drug Administration is doling out new drug approvals by the bag. That is good news for Indian pharmaceutical companies, many of whom have, in recent years, faced the regulator's ire over quality lapses.

However, that will hardly satiate their profit pangs. Because more drug approvals will only increase competition, squeezing drug prices further in the US, the world's most coveted pharma market.

One of India's marquee drug makers, Lupin, is one to share the pain. "I would think that there is going to be a pricing pressure again in 2018-19," Lupin's chief financial officer Ramesh Swamina than said in an interview to the television channel ET NOW on January 4. "That apart, of course, there is going to be expedited approvals coming in from FDA and that would actually mean the intensity of competition is also going to be little more rampant."

For leading Indian drug makers, profits have come under pressure not just because of competition but also from channel consolidation in the US, their largest market. Channel consolidation refers to wholesale and retail suppliers teaming up to procure generic medicines, bringing down prices. Various estimates project a fall of at least 10% in generic drug prices in the US in the next couple of years. This affects Indian companies’ ability to price their products higher.

So the stakes are high for India, which exports drugs worth $16.5 billion to the US annually. The industry body Assocham expects this figure to rise to $20 billion by 2020-a compounded annual growth rate of 30%. However, the Indian pharma industry, home to the largest number of manufacturing units outside the US, doesn't share that optimism.

Its hopes are pinned on several patented drugs losing their monopoly in the US over the next few years. But increasing competition and channel consolidation could limit whatever advantage accrues to it from this. Industry observers, too, expect revenues from the US to take a hit.

Even companies that sold branded generics in the past are not immune. With the internet-led information boom, patients are empowered and even large drug makers are losing monopolies. A senior official from Teva, the world's largest generic drug maker, called this the "democratisation of healthcare".
So even as Indian pharma looks to reinvent itself out of a crisis, the writing on the wall is clear. It won’t be just a game of volumes, it is time for new ideas. Suitably, the top five Indian pharma companies spent nearly $1.2 billion on research and development in financial year 2017-a six-fold increase from seven years ago.

Clearly, they have realised that cutting corners can never be a long-term solution in business

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