Indian Fharma Firms Hit by Price Erosion in US Market

Indian pharma companies have been impacted by price erosion in the US market, a major export destination for Indian players. Price erosion in the fourth quarter of the last fiscal is said to have been around 8-10% and this is expected to continue in the current financial year. The pricing pressure is the result of customer consolidation and recent measures by the US government to lower drug prices for customers.

An analysis of the industry numbers will give a sense of the scale of the price erosion and the adverse impact it has had on the businesses. The overall sales in the US were down 3.3% at $368-mn for Sun Pharmaceutical Industries, accounting for approximately 35% of overall sales in the fourth quarter. According to Mr. Abhay Gandhi, Chief Executive Officer (North American Business), the main reasons for the year-on-year decline in the US reve-nues include pricing pressure, among other factors.

The revenue from global generics segment of Dr. Reddy’s Laboratories in North America declined 6% at the end of the fourth quarter last fiscal. The company had attributed this to “higher price erosions due to channel consolidation’’ apart from increased competition in some of its key molecules. It’s Chairman Mr. K. Satish Reddy hinted that it was not possible to predict how long the pressure will continue. For Aurobindo Pharma, US formulations contributed 43% of the overall revenues in Q4 FY2017-18 against 45% in the corresponding quarter of last year. According to Mr. N. Govindarjan, Managing Director, Aurobindo Pharma, the price erosion was around 8% year-on-year for the fourth quarter of last year. It expects price erosion of about 5% for the next one or two quarters, especially in base products.

Pharma companies are adopting a slew of measures to tackle pricing pressure. Dr. Reddy’s plans to step up launches of value added products. Some others including Aurobindo plan to diversify market presence beyond the US, though this may take a long time.