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Pricing pressures, regulatory scrutiny persist in US generics pharma industry: ICRA

New Delhi: The US has all the time been a key marketplace for Indian pharmaceutical firmsaccounting for ~29 per cent of FY2022 revenues of ICRA‘s pattern set of eight main pharmaceutical firms. However, over the previous few years, the revenues from the US market have grown at a comparatively modest tempo, reflecting a confluence of challenges being confronted by firms within the type of constant pricing stresslack of main generic product launches and elevated regulatory scrutiny.

Giving additional insights on the US market, Kinjal Shah, Vice President and Co-Group Head, ICRA says, “Off-late, Indian pharmaceutical companies have reported sizeable provisioning and settlement pay-outs against some of the ongoing litigations, which have impacted their earnings and balance sheets to an extent. Indian pharmaceutical companies remain exposed to regulatory risks arising out of regular scrutiny by regulatory agencies including the United States Food and Drug Administration (US FDA), the United States Department of Justice and the Securities and Exchange Commission (SEC). Most major companies have various ongoing litigations related to patent claims, anti-trust litigations, etc and remain vulnerable to any further adverse developments on the same.”

In FY2022, the revenues from the US pharmaceutical marketplace for our pattern of main pharmaceutical firms declined marginally by 0.2 per cent owing to excessive single digit to low teenagers value erosion, Accordingly, the share of revenues from the US for ICRA’s pattern set has declined from ~40 per cent earlier over the previous few years on account of muted income development within the general US generics market in FY2021 and FY2022, coupled with an elevated concentrate on different regulated and semi-regulated markets. Nevertheless, the US stays probably the most necessary markets for Indian pharmaceutical firms, each from development and earnings perspective. Companies will proceed to concentrate on new product launches and complicated generics, together with first-to-file alternatives to enhance margins for the US enterprise.

On the outlook for the US generics market, Shah provides, “ICRA expects mid to high single-digit price erosion to continue to exert pressure over the near term, resulting in muted revenue growth for the Indian pharmaceutical companies from the US generics market in FY2023 . Further, the impact of elevated raw material prices and packaging costs in addition to relatively higher freight rates and impact of supply chain disruptions, if any, on their margins will remain key monitorables.”

With considerable consolidation of the supply-chain, the US generic market has been witnessing significant pricing pressure. Resultant, leading Indian pharmaceutical companies rationalized launches from the existing approved product basket to focus on profitability and ease burden on manufacturing and supply chain infrastructure. This led to a healthy growth of 10.7 per cent in FY2019 and 6.9 per cent in FY2020 in revenues from the US market for the sample set. However, COVID-19 impacted the pace of new ANDA approvals and revenue growth for companies in FY2021, and pricing pressures impacted growth in FY2022.

Companies with a limited basket of products and deriving majority of their revenues from the oral solids segment are relatively more vulnerable to heightened competitive intensity in the segment. With relatively lower number of approvals for new products, the players who had earlier reduced their focus on some molecules re-entered these products, impacting the realisations, and in turn leading to higher pricing pressures in the oral solids segment. Moreover, citing continued pricing pressures and intense competition in the US generics business, in recent quarters, some major Indian pharmaceutical companies reported sizeable impairment losses and also announced discontinuation of some products or segments due to lower earnings potential.

The pace of ANDA approvals as well as issuance of warning letters to Indian pharmaceutical companies has been lower over the past two years, given US FDA’s inability to conduct physical inspections in the light of the pandemic-induced restrictions. However, the same is likely to pick up over the medium term as inspections gain traction.





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