US generic business to become more challenging for Indian pharmas

Validating the risks for the Indian pharmaceutical companies, credit rating agency ICRA said that the US generic business is expected to remain challenging for the Indian companies in 2018. Adding that the Indian pharma companies are expected to record a pricing pressure of 10-12 per cent. 

According to the ICRA report, the pricing pressure on the US generic business is likely to remain unchanged through the next 12 months, notably impacting the profits and cash flows of the companies. The US generic business that is a significant contributor to the growth and profitability of the Indian generic firms has recorded a considerable slowdown over the past few years and reported a decline in the last three quarters up till September 2017.

Consolidation in the US generic pharma industry triggered by joint purchase agreement between drug wholesalers and big pharma retailers constitutes 80 per cent of generic purchases in the U.S. These agreements have significantly brought down the prices of generic drugs in the US market and the market is now controlled by three large entities including Mckesson-Walmart and Walgreen Boots Alliance Development GmbH (WBAD) and Econdisc Contracting Solutions.

The full impact of these joint purchasing arrangements is expected to appear completely from FY19 onward, according to the ICRA report. Thus, posing a greater threat and price erosion pressure on the Indian pharmaceutical companies.