US Healthcare Law: Indian drug firms are not celebrating yet
The Bill expands coverage to 32 million more uninsured Americans.
The Healthcare Reforms Bill passed by the US House of Representatives would boost generic drug sales, but may not trigger big business for Indian companies soon.
Further, the provisions in the legislation to allow 12-year exclusivity to new biologics or patented biotech drugs would delay plans of Indian companies to launch generic biologics in the US market, say industry circles and analysts.
The Bill expands coverage to 32 million more uninsured Americans, besides bringing in major changes in the current structure of medical insurance given to the elderly, and promotes use of low-cost medicines.
Analysts say though the generic market in the US will expand with more Americans coming under the health insurance net, this will lead to bigger competition and further squeeze in margins.
“The Bill is an effort by the Obama administration to make health care affordable to all US citizens and Indian companies will need to play a pivotal role in achieving that objective,” said Glenn Saldanha, chief executive and managing director of Glenmark Pharmaceuticals.
“The reforms will definitely boost sales of Indian companies targeting the US market, but we will have to wait and watch,” he added.
The largest drug market in the world, the US accounts for over half of global drug sales with close to $300 billion every year. Out of this, generics contributed only $60-70 billion, despite 65 per cent of prescriptions generated in the US are for generic drugs.
“It is a reform of the healthcare structure in that country and this does not mean the huge increase in generics business will happen tomorrow for Indian companies. There are also negatives in the Bill, like delay of entry of generic biologics in that market,” said D G Shah, secretary general of Indian Pharmaceutical Allianc.
T S Jaishankar, chairman of Confederation of Indian Pharmaceutical Industries, says the US market has already stagnated and most of the leading Indian companies are now concentrating on emerging markets to continue their growth in the past. “The health care reforms will mainly benefit US-based companies, as there are preferences in the Bill for domestic players. Indian companies lack marketing set-up in that country,” he said.
“The margins for Indian companies are already minimal, as the companies undertaking marketing in the US enjoy maximum margins,” Jaishankar added.
Lupin, ranked eighth, and Dr Reddy’s Laboratories at 10th position are the only two Indian generic companies among the top 10 generic players in the US, which is dominated by players like Israel-based Teva Pharmaceuticals and US-based Mylan Pharma.
According to the National Prescriptions Audit for December 2009 by IMS Health, Lupin’s share of the generics market in the US is 3.5 per cent and for Dr Reddy’s Laboratories, it is 2.7 per cent.
“In the medium- and long-term, the reforms should benefit all low-cost generics manufacturers, including Indian companies, as the whole programme is aimed to reduce healthcare costs,” said Ajit Mahadevan, partner, Health Sciences Advisory Services, Ernst & Young.
Sujay Shetty, associate director, Pharma Practice, PricewaterhouseCoopers (PwC), says provisions like 12-year exclusivity for biologics drugs will ruin Indian companies’ plans to tap the current $18-billion US biologics market. Companies such as Wockhardt, Biocon, Dr Reddy’s, Reliance Life Sciences are building a big portfolio of biotech drugs going off-patent in future for launch in global markets.