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Explore new markets, govt tells pharma exporters

business Updated: May 27, 2016 07:27 IST

NEW DELHI: With mounting regulatory hassles leading to declining sales in the US and Europe, the government wants Indian pharma companies to shift their focus towards smaller, unexplored markets.

“Commerce minister Nirmala Sitharaman in a recent interaction with her office asked exporters to re-look diversification plans and start expanding their feet in untapped markets,” a senior commerce ministry official told HT.

“Emerging markets for pharmaceutical products are Myanmar, Per u, Ecuador, Columbia, Turkey. Venezuela is also a potential but US dollar shortage is creating problems,” PV Appaji, director general of pharma export promotion council, Pharmexcil said, adding, that these are small markets with good future potential.

The strategy was chalked out considering the decline in global demand especially from developed countries. The official added that one of the major challenges for exports has been the concentration on a few big and traditional markets.

In addition to the government, global rating agencies have expressed caution against falling drug exports.

Recently Crisil, in a report flagged concern over a slowing US economy and its possible impact on Indian drug makers. The report said that pharmaceutical sector is heading for a tough time as exports growth in formulations is expected to almost halve to 10-12% annually over the next five years.

The fall is likely to hit some of the major drug producers that have a huge exposure to the US and the EU.

Companies such as Dr. Reddy’s Laboratories and Sun Pharma derive close to 60% of their revenue from exports to the US. Lupin too, gets 45% of its revenue from generic formulation sales to the US, while others like Cadila Healthcare, Torrent Pharma and Glenmark Pharmaceuticals earn between 30% and 35% from the world’s biggest economy.

Exports of generics have been the growth engine of the industry for a long while now, but the script is changing because the value of drugs going off-patent is declining even as pricing pressures are increasing.

India is the world’s biggest supplier of generics and accounts for 20% of global sales.