US Ban on Indian Drugs Hits Pharmaceutical Industry: US Domestic Production Goes Up

Indian Drugs

Indian Drugs

The Indian generic pharmaceutical product maker Wockhardt recently reported a 97% fall in its Quarter 2 net profit. The dip in net profits is not very surprising as the major market for Wockhardt was the US and last year the American Food and Drug Administration (FDA) banned drug imports from Wockhardt over quality control issues. The American FDA had also banned imports from other Indian generic drug makers like Ranbaxy, Sun Pharmaceuticals, Dr. Reddy’s and Lupin Ltd.

This created distrust for the Indian pharmaceutical industry in the world market. It is visible from India’s declining pharmaceutical exports. The ban has had a heavy impact on the companies negatively. The growth of exports declined from around 25% two years ago to 2.6% in 2013-14.

Generic drug production in US up

According to a study, around 25% of the US domestic pharmaceutical manufacturing companies are looking for acquisitions in the international market to cut down on production cost. The published study went further to report that a majority of domestic net sales of pharmaceutical drugs was of domestic pharmaceutical companies (60%) and the international companies had only 10% of sales in the US market. This provides the explanation for 30% of international pharmaceutical companies planning domestic acquisitions in the US as against the 25% international acquisitions. The reason as cited from the report for the high interest in domestic acquisitions is to ‘increase potential domestic margins’.

Another reason for the increase in the domestic production of generic drugs in the US is the sudden increase that has been visible in the prices of these  drugs. These are majorly the drugs that have expired patents. The US drug market is unlike the Indian drug market wherein the prices of drugs are regulated. In the US it is a free competitive market where prices are decided on the basis of market competition.

It has been reported that some of the Indian generic drug companies like Dr Reddy’s and Sun Pharmaceuticals have hiked the prices of the generic drugs that they manufacture by a very high percentage which has invited investigations from the US Congress and they are planning to manufacture these generic drugs locally to save costs.

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