Continuing on a downward trajectory for the fourth month in a row this fiscal, India's drug exports declined 5 per cent to $1,391.9 million, in July, compared to the same period last year. A decline of over 8 per cent was recorded in the first two months of the fiscal, while in June the decline was 2.5 per cent. Between April and July 2017, drug exports cumulatively fell by 6.1 per cent to $5,273 million compared to the corresponding period last year.
The overall export numbers for India are not encouraging either - after a double-digit growth between February and April 2017, exports have significantly fallen below 10 per cent, and it has been growing at a decelerated pace since then.
The pharmaceuticals industry generates almost half of its revenue from exports. The US is the primary export destination for India, accounting for nearly 33 per cent of total drug exports, followed by South Africa (3.7 per cent) and UK (3.1 per cent). India's drug exports to the US - which has been continuously falling since April 2017 - has declined by 9.3 per cent in July.
Amey Chalke, an analyst with HDFC Securities cites the slowdown in the sale of many Indian pharma company drugs in the US as one of the key reasons for the decline in exports. In fiscal 2016/17, the industry faced several roadblocks - there was increased scrutiny and regulatory intervention which raised quality and compliance issues with the United States Food & Drug Administration. According to a recent CARE Ratings report, "The prime reasons for weak exports were price erosion in the generic market in the US due to consolidation among customers, i.e., the distribution channels, increase in competition, absence of blockbuster drugs going off patent and regulatory issues faced by Indian pharma companies."
Drug exports to UK and Nigeria have fallen by 22.6 per cent and 21.8 per cent, respectively. However, exports to South Africa, Brazil and Russia have risen by 15.1 per cent, 53.2 per cent and 10.4 per cent, year-on-year, respectively.
Pricing and regulatory issues aside, the appreciation of the Indian rupee against the US dollar has added to the woes, Chalke adds. Indian rupee has appreciated around 1.2 per cent against the US dollar in the current fiscal (till date). It had appreciated by 0.7 per cent in July.
Drug imports, too, have been falling over the past months - 4.2 per cent in June and 11.7 per cent in July (in dollar terms). India's drug imports from China, the largest source market, which accounts for around 41 per cent share in the total imports, saw a decline of 11.9 per cent. With a view to reduce the dependence on drug imports and encourage local production, the government withdrew customs duty exemption on a total of 71 drugs in February last year.
Indian pharma companies will continue to witness pricing pressure in the US generic drug market due to consolidation of distribution channels and increase in competition. Pharma export volumes from India to the US, however, are expected to rise. "This will be backed by about $55 billion expected sales gain to generic drugs on account of branded drugs going off patent during 2017-19 which will create an opportunity for the CRAMS (Contract Research and Manufacturing Services) segment," states the CARE report. ~