Market intelligence firm Evaluate has cut the 2022 global pharmaceutical sales forecast by $60 billion amid rising scrutiny of drug pricing and price erosion in various markets.
A report by the firm states that patent expiries of drugs valuing $194 billion will erode sales of multinational pharmaceutical companies, but this will benefit Indian drug makers who are facing pricing pressure and regulatory issues.
Evaluate estimates global pharmaceutical sales at $1.06 trillion in 2022 down from $1.12 trillion .
“This slight retraction is likely due to a number of factors but the continued squeeze on pricing is almost certainly a major one. Although (US President) Donald Trump has yet to directly intervene on the US drug costs, the threat remains ever present and some pharma companies have announced their own pre-emptive strikes by publicly announcing caps to price hikes,” Evaluate said.
It also cites other challenges such as increasing costs of introducing novel therapies to market and problems related to market access.
Global prescription sales were $768 billion in 2016. Generic drug sales, which are mainstay of Indian companies, accounted for $79 billion, while proprietary innovative products contributed $575 billion. The remainder comprised of orphan drugs used for treating rare medical conditions.
“I see bigger challenges from price regulation for innovator companies than Indian generic drug makers. As it is prices of generic drugs are low,” said Kewal Handa, promoter-director of Salus Lifecare.
According to Handa, Indian companies stand to benefit from patent expiries and should seize opportunities in developing biosimilars and orphan drugs — two segments that will see a big growth over the next five years. “While there are opportunities, Indian companies need to negotiate headwinds such as regulatory challenges, competition and consolidation in main markets like the US,” said Hitesh Sharma, leader of life sciences at EY.
In their latest report, Credit Suisse analysts Anubhav Aggarwal and Chunky Shah had said margins of pharmaceutical companies could decline by 10 per cent with the increase in trade channel consolidation and increase in product approvals for new entrants in the US.
“Price erosion risk is more for firms with high exposure to drugs with less than five generic approvals. Our analysis of individual portfolio concludes Taro (Sun Pharma), Dr Reddy’s and Lupin should face double digit erosion, others should have erosion of 8-9 per cent (excluding channel consolidation impact) with the exception of Aurobindo, as its portfolio is the least vulnerable,” Credit Suisse said.