Indian pharmaceutical companies have been relying heavily on exports for their growth and profitability for some years now. Most large companies have been reporting huge profits largely on account of their exports to the US and Europe. All that seems to have ended for the time being. Today, country's pharmaceuticals exports to these key destinations are on the decline. This is being reflected from the latest export figures available from the Pharmexcil. Out of the 25 importing countries analysed by the Council, the pharmaceutical export to almost 18 countries has shown a decline during January 2009 as compared to the exports achieved in January 2008.The exports to the US, the largest market for pharmaceuticals, showed a decline of 10.1 per cent in January, 2009. Exports to Germany, another major importer, declined by 12.06% in the same month, export to China fell by 20.97% and to Italy it dropped by 26.6%. The exports to Spain and Brazil also declined by 35.21 per cent and 30.74 per cent respectively. These figures do indicate the bad times ahead. It is possible that exports to some of these countries may revive in subsequent months of the current year. But that will be more of a hope considering the declining margins from generic exports and emerging trade barriers.
The generic competition in the US and European markets has been growing since last two years hitting the Indian exporters with a steady drop in margins. In 2007-2008, the competition worsened further eroding the overall profitability of Indian companies. The worst blow came when the US FDA took action against Ranbaxy, the largest Indian pharmaceutical company, for not maintaining quality norms in its two approved manufacturing facilities in India. The US FDA imposed a ban on the import of 31 drugs of Ranbaxy in September last year. Since then, imports of pharmaceuticals from India came under stringent scrutiny by the US and European regulatory authorities. This was followed by in transit seizures of pharmaceutical products from India at European ports especially in Netherlands by the customs authorities there. Export consignments of Dr. Reddy's, Cipla, Aurobindo, Ind-Swift and many others going to Latin American countries, got confiscated by the European customs. Representations made by the affected companies and the commerce ministry to EU authorities did not make any difference. Now, the Indian companies are finding it difficult to export pharmaceuticals to African countries. The strong lobby of multinational companies seems to have launched a war against generic exports to African countries as that has started hitting the big pharma. African nations are changing rules to disallow imports of generic drugs into their countries. This propaganda against generic exports and in particular against Indian exporters is bound to continue whatever initiative commerce ministry takes to help Indian exporters. The lesson to learn here is that too much dependence on overseas markets is not the right strategy for stable growth. It is time for Indian pharma companies to look seriously at expanding sales in the domestic market.