The Hindu Business Line : Drug majors upbeat on regulated markets

THERE is no room for pessimism among Indian drug majors over their plans for regulated markets such as the US. Competition notwithstanding, they point out, the global pharma-pie continues to be an alluring option.

Shrugging-off the pessimism that emerged in the wake of the rapid price-erosion seen when the antibiotic Ciprofloxacin went off-patent recently — Indian drug companies say that they have more tricks in their bag.

Besides, they point out, developments such as drugs going off-patent and the subsequent price-erosion do not creep upon them over-night and companies have in fact factored in such situations into their global projections.

Wockhardt has no plans to scale back its US plans, said the Chairman, Mr Habil Khorakiwala. ``Generic prices in large volume products always crash dramatically. This is nothing new. It has happened in the past too," he observes.

When prices fall, Indian companies' competitive position actually improves, in terms of price flexibility, he indicated.

On similar lines, Ranbaxy officials point out that the company earmarks to file 25 new drug applications in the US every year.

Sun Pharma representatives too opine: "Historically, the nature of the generic business in the US has not changed in terms of competition on block-buster products, the subsequent price erosion and the entry of similar products at lower price points."

There is concern, however, the official said in terms of "authorised generics", where a patent holder authorises another company to make a chemically equivalent product. This takes away the shine from strategies that look to gain a 180-day marketing exclusivity through innovating on a drug.

Nevertheless, the official adds: ``At Sun Pharma, our interest and view for the US market is long term and this is not impacted either by intensifying competition or the emergence of authorised generics.''

Caraco (Sun's US subsidiary) has three filings awaiting approval, seven filings will be made this year and a total of 14 new drug applications have been cleared for marketing, the official said.

Sun Pharma has about five filings till March this year, the representative added.

Echoing similar sentiments, analysts point out that fewer companies are going in for aggressive strategies involving patent challenges. The sudden nervousness triggered by Dr Reddy's (DRL) recent loss in the amolodipine maleate litigation and the negative impact of high regulatory and R&D costs on the company's profitability may not be a touchstone for the industry, they point out.

``DRL is not a proxy for the sector. In fact, it is the least relevant for comparison. Indian companies with excellent chemistry skills and low cost would be best placed to compete in the market,'' said Mr Prashant Nair of Edelweiss Capital.

The US generics market alone is estimated to be around $15-16 billion in 2003. Drugs with annual sales of around $80 billion are expected to go off patent till 2010. "Even after factoring in a price erosion of 80 per cent post expiry, we are looking at an incremental market of $16 billion being added over this period. Indian companies are expected to target a large part of this market either on their own or through partnerships," he said.