Minimal impact of Covid-19 on Indian pharma industry: ICRA
The domestic pharma industry is expected to grow at a 4-6 per cent in FY-2021 owing to Covid impact, though FY 2020-2023, CAGR is expected to be in the range of 8-11 per cent on the back of healthy demand from the domestic market given increasing spend on healthcare along with improving access, rating agency ICRA has said.
In its analysis of the pharma industry in India, the rating agency said that along with demand growth in India, moderation in
new launches and market share gains for existing products and consolidation benefits will drive growth for the industry over the medium term.
Several Indian pharma companies (Aurobindo, Dr. Reddy,
ANDA (abbreviated new drug application) portfolios which will aid growth going forward. The growth in FY-2021 is expected to be supported by 1.88 per cent WPI linked price hike for domestic NLEM (National List of Essential Medicines) portfolio.
The prospect for current year comes on the backdrop of the Indian pharmaceutical industry’s stable growth of eight per cent during FY-2020 led by rebound in domestic growth in Q2 FY2020 to 14.2 per cent (Q1 FY-20 at 4.8 per cent) supported by seasonal factors and stable growth in chronic therapies.
Based on the trends, ICRA Vice President and Co-head Gaurav Jain said, “The global demand scenario is largely expected to remain stable for Indian pharmaceutical industry owing to inelastic nature of prescription drugs though some impact on volume growth will be felt owing to lockdown (lesser OPDS/ elective surgeries) and lower economic growth. The impact of lower demand will be felt more in less developed countries which are additionally negatively impacted owing to low crude oil prices.”
As per ICRA research, post onset of Covid-19, manufacturing activity has gradually started in China with shipments/air cargo arriving in India for APIS, Inter
Materials). This has led to production continuation for Indian players though the capacity utilization across plants is yet to reach pre-covid-19 levels.
The lower capacity utilization is largely contributed by restricted movement of personnel and availability of non-critical raw material (e.g. packaging material) during the lockdown period in India. Indian players hold 2-4 months of inventory (raw material & finished goods) and similar levels in distribution channel (finished goods) which will largely suffice demand in the near term till situation normalizes.
The outbreak of the Coronavirus in China and the consequent lockout in parts of China had earlier resulted in a shutdown of production units in China. The domestic pharmaceutical industry is highly dependent on imports, with more than 60 per cent of its active pharmaceutical ingredients (API) requirement being imported, and in some, specific APIS like cephalosporins, azithromycin and penicillin, the dependence is as high as 80-90 per cent. Of the total imports of APIS and intermediates into India, China accounts for 65-70 per cent.