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Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
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Will Indian pharma buckle under regulations? 
(Tue, 21 Apr Pre-Open) 
 
Indian pharma companies have been facing the heat from a stringent US Food and Drug Administration (USFDA). As a majority of domestic generic companies derive a lion's share of revenues from the US market, the largest number of FDA-approved plants outside the US belongs to them.

In recent times, several domestic pharma companies have been pulled up for data integrity issues that include deficiency in manufacturing practices and drug tests. This has led to import alerts against companies such Sun Pharma, Wockhardt, Cadila Pharma, Orchid Pharma and Ipca Labs. In extreme cases, companies such as Ranbaxy were penalized with import bans imposed on some of its plants.

Apart from this, higher vigilance by USFDA has led to increase in waiting period for new drug approvals from 30 months to 42 months. This has pulled down the number of approvals from 100 in FY14 to 57 in FY15. Resultantly, domestic drug companies are expected to witness pressure on earnings in the short run.

However, the long term demand potential for generic drug companies remains bright. Indian drug companies have been strengthening quality and control processes to comply with USFDA's strict rules. As a result, the number of import alerts has come down from 21 in 2013 to 8 in 2014 (Source: India Ratings and Research).

According to The World Generic Medicines Congress Europe 2015, the patent on drugs valued at US$ 170 bn are set to expire in 2015 spurring demand for generics with the US market alone accounting for a huge share of 86-87%. It remains to be seen how well Indian drug companies will gear up to tap this huge off-patent drugs opportunity.

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