Ratings agency Icra on Wednesday said the Indian pharmaceutical industry is expected to grow around 10-12 per cent between FY2019 and FY2022 while maintaining a stable outlook on the sector.

Icra cited abating headwinds from pricing pressure in the US (which is the largest regulated market), stable growth for the Indian market driven by increasing healthcare spending and better accessibility as likely key growth drivers for the Indian pharma companies, coupled with comfortable balance sheet structure.

It, however, said increased cost related to regulatory compliances, especially for the US market, price controls across markets and mandatory genericisation for Indian market remained key risks.

“The domestic pharmaceutical industry has gained adequate scale and generic drug development capabilities over a decade of growth which will keep them in good stead to capture bigger opportunities, especially in the speciality/niche segments in the regulated market,” Icra said in a statement. The FY2019-2022 compound annual growth rate (CAGR) is expected to be around 10-12 per cent for domestic pharmaceutical companies, it added.

Icra said growth from the US picked up in FY2019 to 12.1 per cent after seeing a decline of 13.1 per cent in FY2018. “The growth was supported by higher market share for Indian players as several generic MNC players optimised product portfolios along with new product launches,” it added.

The pricing pressure led by consolidation of supply chain in the US market and faster abbreviated new drug application approvals is abating and is expected to remain in mid-single digit in FY2020 compared to low teens in FY2018.

Icra, however, warned that while the US growth is expected to remain at high single digit to low double digit, it will face headwinds given the relatively moderate proportion of large size drugs going off patent, generic adoption reaching saturation levels in the US market and increased regulatory scrutiny as reflected in increased issuance of warning letters/import alerts.

It further said productivity of research and development expenditure, operational risk related to increased level of due diligence by regulatory agencies and price controls were key concerns.

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