Indian pharma urged to invest in R&D.

The U.S. Food and Drug Administration (USFDA) will continue to scrutinize Indian pharmaceutical companies and their products, unless the quality of manufacturing is raised, says an industry report by S&P Global Ratings.

“We do not expect any let up in the scrutiny of Indian pharma companies by the U.S. Food and Drug Administration (USFDA),” said S&P analyst Vishal Kulkarni.

“These companies will, therefore, need to strengthen systems and controls to effectively address regulatory issues,” he said, citing the report “Indian Pharma Companies Need To Pass The Trials, But Can They Shape Up?”

The report has also urged Indian pharma companies to step up investments in research and development to comply with global regulatory standards and take on increasing competition, according to a recent report.

“We believe Indian pharma companies will feel growing pains, at least over the next two to three years.

“However, companies that continue to invest in meeting compliance standards while growing are likely to emerge stronger over the longer term, thanks to their still-healthy margins, low leverage, and support from promoters,” said Kulkarni.

The report notes that pricing pressure will continue to hurt the operating and financial performance of Indian pharma companies.

That is largely due to: (1) intensified competition among generics companies after a drop in the number of products coming off-patent from the highs of 2012 and 2015; and (2) continued consolidation of distribution channels in the U.S.

“We expect Indian drug-makers to continue to push into complex, specialty drugs to negate margin pressures,” observed Kulkarni.

“New product opportunities in this segment are relatively lucrative and pricing pressure is lower due to limited competition and bargaining power for buyers. However, such diversification has significant risks–the time taken to develop is long and the costs are high, exerting pressure on margins till the products are commercialized.

“We expect Indian drugmakers to seek acquisitions–mostly of products in select therapeutic areas or geographic regions–to support growth while maintaining their low leverage levels,” he said.

“The impact of the proposed U.S. and Indian government policies on drug-makers is untested, in our view.

“Some of the policies currently being discussed in the U.S., especially related to tax changes to lower trade deficit and bring manufacturing to the U.S., could affect margins of Indian drugmakers,” he said.

At the same time, the government’s focus on lowering healthcare costs will benefit Indian companies because it will promote use of generics.

S&P Global Ratings believes Indian pharma companies may feel some pain as they adjust their quality ethos, invest to grow the business, and support the governments’ vision of providing inexpensive healthcare. However, they have a record of growing through such headwinds by adjusting their business models. fii-news.com