Future of Indian pharma industry

Indian pharma companies learnt to make cheap copies of patented drugs. Local laws permitted such copying if it used a production method different from the patented process. These companies had also gained expertise making ingredients for multi-national drug makers. Soon, US became the largest market for Indian pharma companies, but, many experts claim that tide is turning slowly.

For around last 2  years, Indian pharma companies are underperforming due to various reasons (there profits are no longer what it use to be). Alarmed by news of inspections, warnings and import alerts, investors have fled the sector.

Two main reasons for margin pressure in overseas market: 

  1. prices have fallen with rising competition and distributors buying jointly in the US
  2. quality issues.

As new companies enter US and existing ones seek to introduce more products, competition has increased, depressing prices and making it tough to maintain market share. While there is higher competition from more Indian companies in the US, Chinese firms are also increasing their presence.

It has become critical for pharma companies to develop complex generics, specialty products, biosimilars and innovative products, which will drive future growth and offset pricing pressures in plain vanilla generics.

Generics have been an attractive, lucrative development path for more than three decades. As the market has become saturated with simple generic products, biopharma companies are turning their focus to complex generic drugs, which deliver more value to patients by addressing additional unmet needs and which enable them to achieve market differentiation and opportunities for higher margins.

In my opinion below theme in pharma sector may play out better in coming 2-3 years

  1. Company with exposure in South American or African market
  2. Companies with capability and planning/execution for complex generics
  3. Companies doing job work for other major pharma companies.

I also feel that better managed mid caps may perform better than large caps.

Some commonly used terms in pharma sector:

Generic medicine: 

The U.S. Food and Drug Administration (FDA) defines a generic drug as one that is identical – or bioequivalent – to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. • A simple generic is a copy of a small molecule reference drug and is chemically identical to its branded counterpart. 

Complex Generic: A complex generic is a generic that could have a complex active ingredient, complex formulation, complex route of delivery, or complex drug device combinations.

It is challenging, time-consuming and expensive to develop complex generics and demonstrate the equivalence, safety and efficacy of the therapy.

Active pharmaceutical ingredients or APIs can be defined as the chemicals used to manufacture pharmaceutical drugs. The active ingredient (AI) is the substance or substances that are biologically active within the drug and is the specific component responsible for the desired effect it has on the individual taking it.

Simply put, that part of the drug product, which is responsible for its curative action is API. If a consider an example – in a Crocin brand tablet, Paracetamol 500 mg is actually the API (the powder which is responsible for the tablet’s power to cure fever). But actually the tablet contains a lot more than just 500 mg of paracetamol. The may be some colorants, binders, fillers, preservatives etc. as well in the tablet, apart from paracetamol. All these materials together are termed’Excipients’. So API (paracetamol) in combination with excipients (binders, fillers, colorants etc.) constitutes any finished drug product (tablets, capsules, syrups etc.)

Any drug or medication is composed of two components. The first is the API – which is the central ingredient. The second is known as the excipient, which is the inactive substance that serves as the vehicle for the API itself. If the drug is in a syrup form, then the excipient is the liquid that has been used to make it as such.

Formulations: Pharmaceutical formulation, is the process in which different chemical substances, including the active drug, are combined to produce a final medicinal product.

Intermediate: A material produced during steps in the synthesis of an API that must undergo further molecular change or processing before it becomes an API. Reference: Manufacturing, Processing, or Holding Active Pharmaceutical Ingredients FDA Guidance

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