The economic slow down affecting the global economy has given yet another blow to India's pharmaceutical sector. Pharmaceutical companies are already experiencing a drop in the export orders from the US and Europe since last two months. Indications from the developed world show that the decline in purchases of pharmaceutical products by the countries there will continue for several months. There is also pressure on the Indian exporters to reduce the prices of their products with steady depreciation of the rupee. The worst affected in the emerging scenario will be the medium and small scale pharmaceutical companies from the country who do not have sufficient financial strength to survive in tough market conditions. Pharmaceutical industry in the country has been one of the high performing sectors of the Indian economy for the last some years mainly on account of its export oriented growth. Top companies like Ranbaxy, Dr. Reddy's, Cipla, Lupin, Sun Pharma, etc. have been exporting more than 50 per cent of their production to the developed countries for years with attractive margins despite competition from other generic players. Several medium and small scale pharma companies had also jumped to the export bandwagon later. A Pharmabiz study of 75 listed pharmaceutical companies during 2006-07 had thus showed a 44.5 per cent growth in net profits and a 23.5 per cent growth in sales. Such brilliant performance was possible for this industry only because of the export oriented growth.

The generic competition in the US and European markets has been growing since last two years affecting Indian exporters with a sudden drop in margins. In 2007-2008, the generic competition in the world markets has actually started hitting the Indian companies with a sharp fall in their profitability. 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 this year. Then came the economic crisis in the US. The US action against Ranbaxy and the current US economic crisis are seriously threatening the export led growth of the Indian pharmaceutical industry. India's exports of pharmaceutical products to the US account for almost 50 per cent of its total exports. Domestic sales alone cannot sustain even moderate rate of growth of pharmaceutical industry of the country. That would mean industry and government should jointly work towards the goal of maintaining at least 10 per cent export growth. Pharmaceutical industry has sought the intervention of commerce ministry, chemicals ministry and the Prime Minister's office in this regard. Although in a liberalized economy, there is little scope for subsidy based growth, the government has to consider extending support to industries in distress for the overall health of the economy.