Dr Reddy's Laboratories Ltd has said it expects consolidation of drug selling channels in the US to continue, resulting in pricing pressure on pharmaceutical companies including on itself in future.
The Indian drug maker in a regulatory filing said its top ten customers in the USA account for approximately 77 per cent of the revenues from North America Global Generics.
"Consolidation and integration of the drug wholesalers, retail drug chains, private insurers, managed care organisations and other purchasing organisations may continue to adversely affect pharmaceutical manufacturers.
Such consolidations have resulted in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business.
We expect this trend of increased pricing pressures to continue. Such pressures have reduced, and could continue to reduce, our revenue, margins and profitability," DRL said.
In the United States, similar to other pharmaceutical companies, Dr Reddy's sells its products through wholesale distributors and large retail chains in addition to hospitals, pharmacies and other groups.
Revenues from generics from North America stood at Rs 12,290 crore ( USD 1.78 billion) in 2018-19 fiscal against Rs 11,401 crore ( USD 1.65 billion) in FY18-a growth of eight per cent.
Additionally, the emergence of large buying groups representing independent retail pharmacies, and the prevalence and influence of managed care organisations and similar institutions, creates competition among pharmaceutical companies to have their products included in the formulary of those groups.
In January 2018, Amazon Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co., announced plans to join forces by forming an independent health care company for their combined one million U.S. employees.
"Initiatives like these are expected to further increase competition and enhance price erosion. These changes to the traditional supply chain could lead to our customers having increased negotiation leverage and to additional pricing pressure and price erosion," Dr Reddy's had earlier said.
The drug maker also said the Trump administrations's decision to withdraw preferential trade treatment for India under its Generalized System of Preferences (GSP) may not have any direct impact on US imports of pharmaceutical products.
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