The sharply higher number of import alerts by the US drug regulator against medicines produced by several large Indian pharmaceutical companies will pull down pharmaceutical exports, industry officials have said.

India, which exported $14.6 billion (Rs 79,500 crore) worth of medicines in 2012-13, was expecting growth to stay stable at 10% during 2013-14, but that is unlikely to happen. Officials tracking pharmaceutical exports said India could record a little over 3% growth during the ten months which ended in January 2014 largely because of frequent disruption of production at facilities under Food and Drug Administration scrutiny. Growth for full year may not exceed 5%.

Large industry players like Ranbaxy, Wockhardt, Sun Pharmaceuticals and Strides ArcolabBSE 0.04 % were among those that suffered fall in exports to the North American market because of actions by the FDA, said the officials.

The US accounts for nearly 28% of Indian pharmaceutical exports, followed by the European Union at 18% and Africa at over 17%. According to the provisional data compiled by the Pharmaceutical Export Promotion Council (Pharmexcil), the country reported $12.4 billion of drug exports during the first ten months of 2013-14.

PV Appaji, Pharmexcil's director general told ET, "The actual export growth rate for fiscal ending March 2014 would be far less than what we had projected at the beginning of the year. This is largely because of the regulatory actions." Exports would have shrunk had it not been for players such as Dr Reddy's Laboratories, LupinBSE 0.23 % and Aurobindo PharmaBSE 0.61 % picking up the slack, he said.

India is the third-largest exporter of medicines to the US market by volume and it has the second-largest number of FDA-approved manufacturing facilities (370) outside the US. With increased frequency and intensity of inspections by the FDA, Indian copycat drug manufacturers suffered frequent and prolonged disruptions to production at their facilities under the scrutiny. Analysts expect that the problems of Indian generic manufacturers could only go up as the foreign inspections of FDA will only rise.

"Among Indian players, RanbaxyBSE 0.53 % and WockhardtBSE 1.33 % have had multiple and severe compliance issues in the recent past with significant adverse implications on their business.

Recently, even Sun Pharma's Karkhadi (March 2014) facility received an import alert. While the financial implication of this ban was insignificant for Sun, it highlights the increasing regulatory risk for all US-focussed generic players in India," wrote Nitin Agarwal and Param Desai, analysts with IDFCBSE 1.50 % Securities in their March 25 report.

On the proposed acquisition of Ranbaxy by Sun, Appaji said the latter has the capabilities to pull Ranbaxy out of its US troubles. The combined entity will be the world's fifth largest generics maker with $4.2 billion in revenue, with the US accounting for $2.2 billion.

Stricter FDA scrutiny and the resultant manufacturing disruptions, among few other factors, would enhance the competitive intensity and inject unpredictability in near-term growth prospects of Indian drug makers focussed on the US market, the IDFC analysts predicted. "Overall, this will likely dilute the earnings visibility for US-focussed larger Indian pharma players."

Source:- economictimes.indiatimes.com