Financial performances of top 100 pharmaceutical companies during 2014-15 indicate the hard times ahead for this once best performing sector of the Indian economy. The key reason for the poor performance of pharmaceutical companies is the setback it has been receiving from the export markets. The profitability and sales growth of Indian pharmaceutical industry during the last 15 years is mainly derived from the export of 50 per cent of its production to developed nations. But since last two to three years more than a dozen top companies have been facing export curbs in the US and European markets on the quality front from the regulatory authorities. Fierce competition in the US and European markets has also been hitting the exports and profitability of Indian companies. The Pharmabiz study of financial performances of 100 top companies during the year ended March 2015 clearly shows this disturbing trend. The net sales of these 100 companies increased only by 7.2 per cent at Rs 171,201 crore from Rs 159,747 crore which is the lowest growth rate in last five years. And the net profit of these companies during the year grew by just 1.8 per cent at Rs 19,703 crore as against Rs 19,355 crore in the previous year. A significant development of the year was the merger of Ranbaxy with Sun Pharma making the merged entity a giant in the domestic market with a turnover of Rs. 27,287 crore. The number two in the sector, Dr Reddy's Labs, is far below with a net sales of Rs 14,819 crore.
Among the 100 companies, Aurobindo Pharma registered highest net sales growth of 50 per cent at Rs 12,043 crore during 2014-15. Cadila Healthcare is another company which recorded a good growth rate of 20.4 per cent at Rs 8,497 crore in this bad year. Piramal Enterprises and Torrent Pharma also reported sales growth of above 13 per cent. But, net sales of 31 companies declined while 27 companies registered only single digit sales growth during 2014-15. Some of these large companies are Wockhardt, Ipca Laboratories, Orchid Chemicals, Elder Pharma and Strides Arcolab. Overall poor performance of the pharmaceutical sector during 2014-15 was on account of the difficult phase Indian industry has been passing through during last five years on account of quality issues, stringent approval process in developed countries and growing global competition. These are the hurdles which were not existing for the Indian pharma sector for many years. Now, these realities are going to stay and pharmaceutical exporters have to overcome these challenges. First and foremost is to address the quality issue. The numerous inspections of manufacturing facilities of top Indian companies and actions against them by the US FDA in the past brought a bad name to the country. Pharmaceutical exporters should know that they have to adhere to stringent quality norms specified by the regulatory authorities to remain in the global markets. Secondly, pricing of products have to be reasonable and competitive in the overseas markets considering the fact that the patient community is well organized and vigilant especially in the developed countries. There were complaints of overpricing of certain pharmaceutical products in the US market by some top Indian pharmaceutical companies in the recent past. Such practices need to be avoided.