Indian pharmaceutical companies are defying pricing pressure in the United States by betting on new launches and supply chain management, according to BloombergQuint.
Drugmakers like Sun Pharma and Alembic Pharma are planning to launch specialty drugs to complex generic drugs to counter pricing pressure.
More and more companies are making this strategy as competition continues to take away pricing power, reducing margins.
Gaurav Jain, Director at GS Capital Advisors, told BloombergQuint that prices of generic drugs sold by Indian companies in the US market have fallen in high single-digits in the last three quarters.
He said, “FY21 saw a relief in price erosion due to COVID-19 after high erosion witnessed from FY18-20. Supply issues in FY21 due to Covid-related lockdown and stocking prevented price erosion in FY21. The pressures of FY21, he said, are being reflected in FY22.”
The market growth slowed as well. For instance, sales of Sun Pharma, Lupin, Cipla, and Dr. Reddy’s Laboratories increase in single digits over a year earlier in the three months to December. Sales of Zydus Lifesciences remained flat, while Alembic, Torrent, and Aurobindo reported a decline.
Indian drugmakers are striving to “scale up the value chain in terms of product complexity,” according to Systematix Institutional Equities, a brokerage firm.
Sun Pharma, which earns about 30% of revenue from the US market, said it has been able to combat the pricing pressure in the US with new product launches and supply chain management.
Drug companies were hopeful about pricing trends reversing and margins improving but that is not reflected in any data, Aditya Khemka of InCred Capital told BloombergQuint.
Indian drugmakers are still operating on thin margins in the US market, with no clear signs of bottoming out.
Jain said drug pricing pressures may continue for a couple of quarters before bottoming out.
Strides Pharma Science, another Indian company, said the quarter-on-quarter trend for generic drugs in the US is showing signs of stability, but it will take time for a full recovery.
Vishal Manchanda of Nirmal Bang, a trading company, said if US prices fall below current levels, it might be unprofitable even for Indian pharma companies.
Manchanda said he sees high-competition oral solids to be the first to see an improvement in the pricing situation. He said companies like Aurobindo and Lupin, which relatively have higher exposure to this category, might be the first ones to benefit.
