Rohan A T | Thursday, 11 August 2022
With an estimated market value of USD 24.53 billion this year, the generic drugs market amounts for the major share of the Indian pharmaceutical industry. When compared to other countries in the global generic drug market, the Indian industry is primarily made up of low cost medicines, while the patented ones are imported from foreign countries.
Even with that being the case, the overall export of Indian drug and pharmaceuticals reached USD 24.44 billion last year and this is primarily owing to the fact that India is the largest generic drugs provider in the world. And with over 3,000 drug companies as well as, 10,500 manufacturing units, India has one of the most well-established drug manufacturing infrastructures in the world. Last year, Finance Minister Ms. Nirmala Sitharaman also announced a five year USD 26,578 million pharmaceutical PLI initiative prioritizing on improving the drug intermediaries and pharmaceutical ingredients among many others. Still, there are multiple pain points that are holding back the real potential of the Indian generic drugs market. Let’s analyze these challenges and its potential solutions.
The Sky-high Raw Material Prices Last year, the country witnessed a 140 percent increase in the price of Active Pharmaceutical Ingredients (API) which is the essential raw materials for drug manufacturing. The supply disruptions in China and the high cost of imports can be attributed to this steep price increase for APIs which has dealt a major blow for generic drug manufacturers in the country.
Industry experts believe that the over dependence on China for APIs which stood at nearly 70 percent should be changed if the country wants to move forward in the generic drug manufacturing space. And owing to the fact that these generic medicines are under price controls, drug manufacturers have to absorb the brunt of the losses caused by the increasing cost of APIs which has significantly disrupted the operations of small and medium drug manufacturers. Owing to the rising prices of APIs in the generic drug manufacturing space, many industry associations have asked interventions from the Department of Pharmaceuticals (DoP).
The primary issue raised by these associations is to revise the price ceiling of generic drugs as per the Consumer Price Index (CPI) and not the Wholesale Price Index (WPI). Experts also said that drugs whose retail prices are below the ceiling price should be raised by making changes in the Drug Prices Control Order (DPCO). Also, foreseeing the hike of prices in APIs, the Government of India had introduced two PLI schemes in the last two years to boost the domestic manufacturing of generic drugs and APIs. Generic drug manufacturers as well as policy makers are hoping that these amendments and policies will have a cascading effect and help manufacturers deal with the increasing prices of APIs while at the same time, become more self- reliant.
The Implications of TMR TMR or trade margin rationalization is the difference between the price at which the drug manufacture sells the drug to stockists and the price at which these stockists sell the drugs to the consumers. Recently, the National Pharmaceutical Pricing Authority (NPPA) met with key stake holders in the industry to discuss about TMR and reduction of prices of more generic drugs. While this can make drugs more affordable to the general public, the small and medium drug manufacturers will be adversely impacted by the introduction of TMR as their market shares will decline even more which will help bigger drug manufacturers to monopolize the market.
All India Organisation of Chemists and Druggists (AIOCD) General Secretary, Rajiv Singhal, told ET that, “The AIOCD has suggested that the government should come out with a clear-cut definition for generic medicines. For generic medicines we have suggested a trade margin of 15% to wholesalers and 35% to retailers on MRP”. To tackle this issue, entities such as the Small and Medium Pharma Manufacturers Association (SMPMA), and Laghu Udyog Bharati are battling for the adoption of ‘one molecule one MRP’ formula. With the adoption of the one molecule one MRP approach, drugs that have similar chemical compositions will have the same price and this, in turn, will result in the prices of drugs not being affected by the brand image of the drug manufacturers.
One molecule one MRP formula brings uniformity to the pricing structure which will help medium and small drug manufacturers to compete with bigger companies and open up the generic drug manufacturing market in India.
Supply Chain Dilemmas While Indian drug manufacturers invest heavily in R&D, and quality control, they still try to cut costs when it comes to logistics and supply chain. Many companies view supply chain as an area where they could make some money back. This has led to multiple supply chain dilemmas including lack of transparency and the lack of digitization in the market. Owing to the lack of care given to logistics and supply chain, a report from World Health Organization states that 20 percent of products that are temperature sensitive are damaged during transportation.
And in a segment where nothing less than 100 percent can result in significant repercussions and cost lives, it is high time that generic drug manufacturers give supply chain the importance it deserves. Headquartered in Quebec, Canada, OPTEL is one of the premier names when it comes to pharmaceutical supply chain solutions. Leveraging more than three decades of their experience, the company has been able to deploy more than 6000 solutions in the pharmaceutical industry across the globe. Through their supply chain solutions, OPTEL focuses on increasing the adoption of technology and by doing so, enhancing security in pharmaceutical supply chain.
The company’s comprehensive Track-And-Trace Technology helps their clients to not only comply with regulations across the globe but also increase the effectiveness of their supply chain multifold. Innovation is a crucial facet of OPTEL’s operations and the company has been widely recognized for the reliability, performance and interoperability of their supply chain solutions.
The Indian generic drugs market is expected to grow at 10 to 12 percent annually for the next couple of years. And the increasing global demand of these drugs is the primary catalyst driving this growth. Players outside India is also seeing the growth potential in this segment which is showcased by the increasing FDI inflows in the Indian drugs and pharmaceutical industry which recorded a 200 percent increase in 2020-2021. As this is the case, going forward, with the proper support infrastructure, the Indian generic drug market can reach for greater heights.
