CARE Ratings has pointed out that the drug patent expiry in the USA will create new opportunity for Indian pharmaceutical industry in the coming years and the pharma industry will gain a larger foothold in the world's generic market. In the long term, semi-regulated markets like Latin America, Africa and Asia may offer the next growth avenues for Indian pharma companies as these markets have high demand for drugs and relatively less stringent regulatory compliance resulting in lower cost of servicing these markets.
However, CARE said that higher number of import alerts issued by the US FDA may hamper the image of Indian pharma companies and there marketing efforts. If this continues in the long term, it may hurt the profitability of Indian generic drug producers. Thus, the need of the hour is that Indian firm should make sure the quality standards are adequately met.
Out of the total 103 pharma companies rated by CARE, more than 50 per cent are in investment grade category ('BBB' or above category) driven by good profitability metrics, comfortable solvency position, and moderate liquidity profile. Additionally, some of the pharma companies are in the high investment grade categories ('AAA' and 'AA') on account of their wide geographical presence and well-diversified product portfolio.
CARE report said, India's pharma industry is the world's third-largest market in terms of volume and 13th largest in terms of value. The lower market share in terms of value can be attributed to the predominance of generic medicines which command lower prices. As per the industry experts' the industry size is expected to increase from US$ 24.87 billion in 2013 to US$ 47.88 billion by 2018 at a CAGR of 14 per cent.
This growth would be primarily driven by factors like increasing sales of generic medicines, a greater penetration in rural markets and heightened health awareness. Other factors are increasing affluence, changing lifestyles resulting in higher incidence of lifestyle-related diseases, increasing government expenditure on healthcare such as Central Government Health Scheme (CGHS), National Programme for Healthcare of the Elderly (NPHCE), Rashtiya Arogya Nidhi (RAN) and Janani Surakasha Yojna (JSY). The industry is highly fragmented with more than 20,000 registered manufacturing units, of which approximately 250 large units that constitute about 70 per cent of the total domestic market value.
According to CARE report, domestic consumption accounted for about 47 per cent and export market about 53 per cent of the total production in India in FY'13. The domestic market has grown at a CAGR of about 11 per cent in the past five years ended FY13 on the back of increase in lifestyle-related diseases, rising penetration of medical insurance, healthcare infrastructure development, increase in per capita income, etc. On the other hand, export market has grown at a higher CAGR of about 19 per cent in the past five years ending FY13 due to increase demand for generics on the back of patent expiries of several high-value drugs such as Lipitor (Pfizer), Boniva (Roche), Combivir (GlaxoSmithKline), etc.
India exports pharmaceutical products to more than 200 nations and the USA is the largest export market among all countries; being the world's largest generic drug market. Exports to the USA are primarily driven by increased ANDAs approvals by US FDA and Indian pharma companies ability to produce high-quality medicines at competitive prices.
According to the commerce ministry data, the country's pharma exports aggregated US$ 10.1 billion during FY13 as against US$ 8.48 billion during FY12. Exports to US accounted for approximately 31 per cent of the total pharmaceutical product export by India during FY13. During first nine months of FY14, the country's pharma exports aggregated to US$ 8.04 billion, out of which USA accounted for 31 per cent.
Indian pharma companies have the opportunity to capitalise on the patent cliff and gain a greater share of the growing generic market. Currently, India accounts for nearly 40 per cent of generic drugs and over-the-counter products and 10 per cent of finished dosages used in the USA. During 2014-2016; about US$92 billion worth patented drugs are expected to go off patent in the USA as compared with US$65 billion during 2010-12. Indian companies share in the US generic market has growth rapidly on the back of aggressive ANDA filings and successful pursuit of Para-IV, captalising on the patent expiries of blockbuster drugs.
CARE report pointed out that Indian pharma companies secured 39 per cent of total 400 ANDA approvals from US FDA as against 37 per cent of total 476 ANDA approvals during 2012. Thus, generic manufacturers are leveraging this opportunity by increasing their ANDA filings. Further, low-cost manufacturing base and around 523 US FDA drug manufacturing facilities as at the end of March 2013 will able to tap future opportunity. Rising M&A activities and US Healthcare Insurance reforms will also play positive role in future growth.