Ray Of Hope

The worst seems to be behind for Sun Pharma as its Halol plant seems set for clearance and its specialty portfolio tests water in the US.

- Khushboo Balani

It is a question I ask myself everyday… but I have no clear answer. From a day-to-day perspective, I am not seeing the pressure reducing,” said Abhay Gandhi the CEO of Sun Pharma’s North America business, in a rather pensive mood at the company’s third-quarter earnings call. Sun Pharma, India’s largest pharmaceutical firm has been fighting tooth and nail to hold its ground in an extremely competitive pricing environment in its biggest market, the US. Companies across the pharma industry, both main players as well as channel partners, are consolidating even as prices of drugs are falling like there’s no tomorrow. The carnage seems never-ending — at least for a few years.

And there are two solid reasons why the pricing pressure on the generic business will continue. First, there is rapid consolidation among customers of generic drug makers, which drastically reduces their bargaining power and second, the intense competition among generic drug-makers. “Earlier a pharmacy was acquiring another pharmacy; an insurance company was acquiring another insurance company. Now, the retail firm is acquiring the insurance firm and vice versa. While there was vertical consolidation earlier, now it’s horizontal, but consolidation itself is relentless. So, negotiating power of the generic companies is reducing vis-a-vis the big customers, who are buying the medicines from them,” explains Deepak Malik, pharma analyst at Edelweiss Securities.