The participation of Indian pharmaceutical companies in reducing the price of medicine is creating an earthquake with the US drug industry. Slower revenue growth has forced Mylan Group to increase sales, mergers (M&A) of smaller pharmaceutical companies to own the right to trade cheap new drugs.
For many people, especially patients, the pharmaceutical industry is probably a lucrative market as drug companies make a big profit from the kind of product that customers cannot help but buy. However, American pharmaceutical companies, companies that are dubbed leeches to suck blood from victims who have raised drug prices blatantly are having a headache with a new war on prices and the killer. besides my Indian colleagues.
In August, Teva Pharmaceutical Industries had to cut dividends while Milan NV had to lower its expected profit. Even the famous Indian pharmaceutical company, Sun Pharmaceutical Industries, announced a loss in the first quarter of 2017, the first thing that happened in the past 12 years.
The main cause of all this is the explosion of family-owned pharmaceutical corporations in India and the fierce price competition as the globalization process expands, bringing drug prices down.
While small Indian pharmaceutical companies started to rise, the US Food and Drug Administration (FDA) tried to increase competition to promote development and lower drug prices for patients by solving. launching more patents to pharmaceutical companies so they can be free to manufacture and trade.
Revenue growth of major US pharmaceutical companies went down (February 9, 2014 as a landmark).
Fat market share
The move by the FDA is grounded as India has become an exporter of generic drugs, which have expired copyright protection and are cheaper, the world's largest with $ 16.4 billion in revenue in 2016. In the first half of 2017, FDA data showed that Indian pharmaceutical firms accounted for up to 40% of the total number of new copyright licenses from US companies, an increase of 35% over the same period last year.
“With more and more companies participating in the drug market, competition in the industry is gradually increasing. The generic drug industry is really undergoing a price cut, ”said President Pankaj Patel of Cadila Healthcare.
Indian government figures show that India currently has about 6,000 drug manufacturers but the domestic market does not seem to meet the demand due to price controls, low-income patients and insurance. not developed. As a result, foreign markets like the US have become a lot fatter with Indian pharmaceutical companies.
With a huge advantage in production costs, Indian pharmaceutical companies are willing to discount or pay up to 90% commission to distributors to gain market share with large corporations. Under these circumstances, US domestic pharmaceutical companies have been forced to reduce prices but increase production to cope with new competitors.
In the first half of 2017, about 32 Indian pharmaceutical companies received licenses to trade in new generic drugs in the United States, an increase of 100% compared to two years ago. Bernstein's data also shows that the market share of the top 10 pharmaceutical companies in India has increased from 14% in 2010 to 24% today.
The two leading Indian pharmaceutical companies, Aurobindo Pham and Cadila, are the most licensed companies, although they have recently entered the US market. The total capitalization of these two companies is 6.8 billion USD and 8.2 billion USD, respectively.
Indian pharmaceutical companies are increasingly licensed to trade more drugs in the US
Even small Indian pharmaceutical companies are now looking overseas. Macleods Pharmaceutical is not the largest pharmaceutical company in India but has been actively accessing the US market since 2012 with 12 drug trading licenses. From the beginning of the year until now, the company continues to receive 8 licenses to trade in generic medicines.
Ajanta, meanwhile, has a market capitalization of 1.6 billion USD and received only 2 licenses from the US in 2014, received 9 licenses for generic drugs in 2016.
American pharmaceutical industry before the storm
The participation of Indian pharmaceutical companies in reducing the price of medicine is creating an earthquake with the US drug industry. Slower revenue growth has forced Mylan Group to increase sales, mergers (M&A) of smaller pharmaceutical companies to own the right to trade cheap new drugs.
Meanwhile, the declining income situation and increasing debts due to M&A has led Teva pharmaceutical company to cut back on labor and risk leaving some drug segments. Data from Bloomberg shows that US generic drugs dropped by 8% in the second quarter of 2017 but sales increased by 4%.
In the past, special drugs in the United States often pushed prices too high and suffered fierce criticism from the public as well as politicians. The government's investigation as well as US President Donald Trump's commitment to lowering drug prices will make it more difficult to make a profit from increasing the price of exclusive drugs.
Therefore, pharmaceutical companies are quite interested in the battle of generic drugs when they no longer receive great benefits from self-developed and unexpired drugs.
A study by Motilal Oswal Securities showed that intervention by Indian drug companies to gain market share could reduce sales of US pharmaceutical companies by 50%.
Normally, domestic pharmaceutical companies will use protection barriers or quality standards to create a monopoly on the market. However, with a change of policy from the Trump administration, a new earthquake may occur with the US pharmaceutical industry.
