In­ces­sant Fall

In­dia is see­ing a slump in drug ex­ports since the be­gin­ning of the fis­cal driven by a de­cline in the sale of In­dian drugs in the US.

Business Today - - CONTENTS - BY NITI KIRAN @ni­tiki­ran

In­dia drug ex­ports have de­clined with sale of In­dian pharma drugs in the US fall­ing

Con­tin­u­ing on a down­ward tra­jec­tory for the fourth month in a row this fis­cal, In­dia’s drug ex­ports de­clined 5 per cent to $ 1,391.9 mil­lion, in July, com­pared to the same pe­riod last year. A de­cline of over 8 per cent was recorded in the first two months of the fis­cal, while in June the de­cline was 2.5 per cent. Be­tween April and July 2017, drug ex­ports cu­mu­la­tively fell by 6.1 per cent to $5,273 mil­lion com­pared to the cor­re­spond­ing pe­riod last year.

The over­all ex­port num­bers for In­dia are not en­cour­ag­ing ei­ther – af­ter a dou­ble-digit growth be­tween February and April 2017, ex­ports have sig­nif­i­cantly fallen be­low 10 per cent, and it has been grow­ing at a de­cel­er­ated pace since then.

The phar­ma­ceu­ti­cals in­dus­try gen­er­ates al­most half of its rev­enue from ex­ports. The US is the pri­mary ex­port des­ti­na­tion for In­dia, ac­count­ing for nearly 33 per cent of to­tal drug ex­ports, fol­lowed by South Africa (3.7 per cent) and UK (3.1 per cent). In­dia’s drug ex­ports to the US – which has been con­tin­u­ously fall­ing since April 2017 – has de­clined by 9.3 per cent in July.

Amey Chalke, an an­a­lyst with HDFC Se­cu­ri­ties cites the slow­down in the sale of many In­dian pharma com­pany drugs in the US as one of the key rea­sons for the de­cline in ex­ports. In fis­cal 2016/17, the in­dus­try faced sev­eral road­blocks – there was in­creased scru­tiny and reg­u­la­tory in­ter­ven­tion which raised qual­ity and com­pli­ance is­sues with the United States Food & Drug Ad­min­is­tra­tion. Ac­cord­ing to a re­cent CARE Rat­ings re­port, “The prime rea­sons for weak ex­ports were price ero­sion in the generic mar­ket in the US due to con­sol­i­da­tion among cus­tomers, i.e., the dis­tri­bu­tion chan­nels, in­crease in com­pe­ti­tion, ab­sence of block­buster drugs go­ing off patent and reg­u­la­tory is­sues faced by In­dian pharma com­pa­nies.”

Drug ex­ports to UK and Nige­ria have fallen by 22.6 per cent and 21.8 per cent, re­spec­tively. How­ever, ex­ports to South Africa, Brazil and Rus­sia have risen by 15.1 per cent, 53.2 per cent and 10.4 per cent, year-on-year, re­spec­tively.

Pric­ing and reg­u­la­tory is­sues aside, the ap­pre­ci­a­tion of the In­dian ru­pee against the US dol­lar has added to the woes, Chalke adds. In­dian ru­pee has ap­pre­ci­ated around 1.2 per cent against the US dol­lar in the cur rent fis­cal (till date). It had ap­pre­ci­ated by 0.7 per cent in July.

Drug im­ports, too, have been fall­ing over the past months – 4.2 per cent in June and 11.7 per cent in July ( in dol­lar terms). In­dia’s drug im­ports from China, the largest source mar­ket, which ac­counts for around 41 per cent share in the to­tal im­ports, saw a de­cline of 11.9 per cent. With a view to re­duce the de­pen­dence on drug im­ports and en­cour­age lo­cal pro­duc­tion, the govern­ment with­drew cus­toms duty ex­emp­tion on a to­tal of 71 drugs in February last year.

In­dian pharma com­pa­nies will con­tinue to wit­ness pric­ing pres­sure in the US generic drug mar­ket due to con­sol­i­da­tion of dis­tri­bu­tion chan­nels and in­crease in com­pe­ti­tion. Pharma ex­port vol­umes from In­dia to the US, how­ever, are ex­pected to rise. “This will be backed by about $ 55 bil­lion ex­pected sales gain to generic drugs on ac­count of branded drugs go­ing off patent dur­ing 201719 which will cre­ate an op­por­tu­nity for the CRAMS (Con­tract Re­search and Man­u­fac­tur­ing Ser­vices) seg­ment,” states the CARE re­port. ~

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