Drugmakers drool as El Dorado in America beckons

The US consumes drugs worth $310 billion — equivalent to India’s foreign exchange holdings — every year.

That number is set to surge by $40 billion in the next three years, or four times the size of India’s pharma industry.

Of this, generic medicines, or those on which patents have expired, are growing at 12-15% annually.

Meaning, every year a pharma market far bigger than India’s gets added in America.

If that’s not enough, over the next few years, drugs with annual sales of $59 billion are going off-patent in the El Dorado.

That local drugmakers are frothing in frenzy is underscored by the 100 to 200 abbreviated new drug applications (ANDAs) each major player has filed with the US Food and Drug Administration (FDA) in an attempt to chop away at the gargantuan spoils.

Through ANDAs, drugmakers seek to sell copies of off-patent medicines in the US.

The company that’s declared the first to file an ANDA gets 180-day exclusivity — that is, it alone will sell the generic version of the drug in the world’s largest market for six months.

Others who follow suit can enter once this period is over.
This is such a prized pot, half to a third of sales at top Indian pharma firms’ come from the continent.

For example, in the December quarter, US sales were 55% for Ranbaxy, 48% for Sun Pharma, 40% for Dr Reddy’s, 35% for Lupin and 31% for Glenmark.

Industry estimates said the share of generics in the overall US market will rise to 21-22% by 2015 from around 13-14% now.
That’s good enough to ensure pharma exports from India will double every three years, said the Pharmaceuticals Export Promotion Council, or Pharmexcil.

It sees overseas sales touching a staggering $25 billion in two years, up from $10 billion in 2009-10.

Among the blockbusters, or drugs with sales of over $1 billion, which will see their patents expire going forward are Lipitor (cholesterol), Actos (diabetes), Plavix (anti-platelet), Eloxatin (cancer) and Lexapro (depression).

Given the bullish projections, the FDA is developing a system by which generics makers will pay it fees when filing an ANDA.

“The money will enable the FDA to increase resources to inspect manufacturing plants and evaluate applications faster, which could mean quicker introduction of new generic medicines,” said a research analyst from a brokerage, who did not wish to be named.

Adding to the feel-good for local pharma is the 7% drop in the rupee’s value versus the dollar since February 3. Exporters benefit because they get more rupees for the dollars earned.

On their part, Indian companies have done well to capitalise on and play a crucial role in the genericisation of the US, said Bhavin Shah, analyst with Dolat Capital.

Generic approvals during 2011 stand testimony. Indian firms ended up cornering about 35% of the total ANDA approvals in the US that year.

Indeed, depending on their marketing and distribution networks and manufacturing capacities, Indian firms could see as much as 15-28% annual growth from the US, say experts.

Going by the opportunities available, Lupin expects a 20-25% year-on-year growth from the US market, said Ramesh Swaminathan, its president of finance and planning.

For Satish Reddy, MD and COO, Dr Reddy’s Laboratories, limited competition segments like injectibles are an attractive bet in the US. “Niche therapies like dermatology, ophthalmology, oral contraceptives, as well as novel drug delivery systems should be good bets since low competition would increase chance of high success,” said Swaminathan.

But it’s not going to be a smooth ride all the way for local companies. Indeed, with generic giants such as Teva, Watson, Mylan and Sandoz in the fray, competition will be intense.

“But Indian firms will cut down their prices and play a volume game,” said Adithya Bhat, MD of Protiviti Consulting.