The report said that a sizeable erosion in branded generics sales share will affect Indian pharma companies’ profitability, as sharply lower average prices will outweigh potential benefits from lower marketing costs. “Even so, we think the new guidelines are unlikely to trigger an immediate shift away from branded generics,” it said.
According to Fitch, the domestic pharmaceutical market is mainly a ‘branded generics’ market in which pharma companies sell off-patented drugs under their own brand names with varying prices among competitors.
“Branding and marketing activities remain important in pharma companies’ sales strategy, considering less stringent quality and testing standards than other regulated markets such as the US. Pharma companies employ sizeable sales teams in India as part of their outreach to physicians who are the primary decision-makers amid low insurance coverage,” it said.
The presence in the domestic pharmaceutical market aids the credit profiles of most of the leading Indian pharma companies, considering the healthy long-term growth potential, adequate profitability and the diversification benefit. The rating agency said that the implementation of this mandate faces practical challenges, as India’s less stringent drug quality norms may lead to variability in drug quality and efficacy among various manufacturers.The mandate may even lead to a shift in the decision-making process about the choice of drug manufacturer from physicians to pharmacists who may not be adequately qualified or lack alignment with the interests of patient safety and drug efficacy. A national association of Indian physicians has already requested the government defer the new guidelines, citing the challenges it will pose on physicians in ensuring patient safety and treatment efficacy.
The latest guidelines are part of the government’s efforts to improve healthcare affordability by promoting the use of unbranded generic medicines that cost up to 80-90 per cent less than the branded versions in some cases.
The efforts, which include setting up a nationwide chain of generic-focused pharmacy stores, have supported an uptick in sales share of trade generics or the drugs sold without the physicians’ involvement. Still, branded generics continue to account for more than 75 per cent share by volume and 90 per cent by value.
“This is because of concerns around continuous availability and quality that have limited their traction in non-rural markets in India,” the report said.
