Drugmakers in the US are curtailing their research and development investments due to slowdown in innovation after the Covid-19 pandemic, but Indian pharmaceutical companies are ramping up their R&D operations, countering the effects of the post-pandemic slowdown in the segment.
In fact, domestic pharma companies believe that the R&D slowdown in the US will benefit the Indian drugmakers, creating more opportunities for demand-led growth in the pharma and healthcare sector here.
A recent report by the Wall Street Journal stated that US drugmakers, which had increased their research and development activities during Covid-19 in a race to discover more vaccines and treatments, are now cutting their R&D costs as the Covid effect is over.
The report highlighted that there are profound cuts announced by the US pharmaceutical companies that are “unusual” and “sudden”.
The report said that the US pharma companies had warned that they might need to cut back on innovation as the US government forces some companies to negotiate prices of their top-selling drugs. Further, the report said that clients are blaming the cuts on the Inflation Reduction Act, which allows Medicare (federal health insurance scheme in the US) to negotiate some drug prices directly with the manufacturers.
However, the Indian pharmaceutical industry is hardly susceptible to any cost-cutting challenges as of now, according to industry experts and drugmakers. In fact, domestic drug manufacturers are of the view that such gaps overseas can turn into a growth opportunity for India.
Nikkhil K Masurkar, chief executive officer at Entod Pharmaceuticals Ltd., said, "Indian pharma companies see this shift as an opportunity to fill gaps left by larger international firms."
He added, "With a robust generic drug manufacturing base and a growing capability in innovative drug development, Indian firms are well-positioned to capture market share."
Indian Pharma Market Posts 6% Revenue Growth In July
According to Wockhardt Ltd.'s Founder-Chairman Dr Habil Khorakiwala, "Indian companies can not only fill gaps left by global firms but also position themselves as key players in the global pharmaceutical landscape."
The cost-cutting "will act as a good growth opportunity for Indian pharma companies; by leveraging their strengths in generics, biosimilars, cost-effective manufacturing, and increased market penetration in emerging markets," he said in a brief interaction with NDTV Profit.
Even Dr Soumitra Banerjee, director at Ahmedabad-based pharma major HOF Pharmaceuticals Ltd. had a similar view. "This is also combined with the fact that India has the largest number of USFDA inspected plants and also, clinical research companies in India are FDA inspected. So, India provides the solution for research," he said.
According to him, "What is very important is the fact that the cost of doing R&D in India is 10–20% of the US cost and hence India will always remain as the preferred outsourcing solution for major pharma firms."
Companies also attributed their optimism to favourable domestic factors, including government's focus on improving R&D to stand out in global competition, and reduce reliance on exports for manufacturing drugs. Data from rating agencies also reflect the same.
According to the latest report by ICRA Rating Agency Ltd., manufacturers of active pharmaceutical ingredients in India are likely to grow by 7–8%, while operating profit margin is expected to improve to 12–14% by the end of the current fiscal.
Further, India's healthcare system is still at a developing stage with a large part of the population still devoid of affordable and adequate medicinal treatment, which leaves a lot of headroom for pharma and healthcare companies to grow, according to experts.
According to Wockhardt, R&D activities are yet to catch up with that in countries such as the US, even though the scale of investment and regulatory environment in India have vastly gone north. Hence, R&D activities in India are not expected to slow down.
Further, "the Indian pharmaceutical sector is undergoing a paradigm shift in terms of R&D prospects. While historically focused on generics, there is a clear shift towards innovation, driven by both market demands and government support," Khorakiwala said, pointing to the Indian pharma companies exploring segments other than generics due to excessive competition in this space.
Ola Electric Sets Sight On Profitability, To Invest In Cell Manufacturing And R&D
Moreover, "The once-booming generic drug market is now facing intense competition, squeezing profit margins. To stay competitive, Indian companies are seeking higher-value products, which require significant R&D investment," Alpana Srivastava, partner at consulting firm Desai & Diwanji, told NDTV Profit.
However, even though the overall scenario for R&D remains optimistic, there is still some caution in the air, with the companies closely monitoring the global macroeconomic uncertainties due to conflicts at the Red Sea, inflationary challenges, and the need for cost optimization after the pandemic. In such cases, "some companies may prioritise short-term profitability over long-term investment in R&D", Entod Pharmaceuticals' Masurkar said, shedding light on the contrary view.
Further, challenges around faster drug approvals from domestic regulatory bodies, higher cost of chemicals used in labs, and the narrowing gap of employee costs between India and the US are some key challenges cited by the Indian drugmakers.
When asked about job avenues, the companies held a unanimous view that the Indian pharma sector is poised for robust job avenues, across various traditional functions, such as R&D, manufacturing, regulatory affairs, sales and marketing, followed by more opportunities in the growing digital space with the advent of artificial intelligence.
“While there are concerns related to skill gaps, automation, global competition, and regulatory challenges, the industry's growth potential also presents significant opportunities,” Wockhardt's Khorakiwala said.
Orchid Pharma Aims Up to Rs 300-Crore Sales From Anti-Microbial Division In Next Two Years. Read more on Business News by NDTV Profit.