Obama's reforms to favor Indian pharma industry

Mumbai: President elect, Obama's vision on reforming the U.S. healthcare system is expected to turn good for Indian pharma industry as a new legislation favors the use of low-cost generic drugs, reported The Economic Times.

India, one of the largest generic drug suppliers in the U.S. is likely to strengthen its strong hold further in the world's largest health care market, where the expenditure in this segment surpassed at $2 trillion last year.

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Sources close to the development said that Indian generic players would compete with their U.S. counterparts on both the quality and cost parameters.

Sujay Shetty, Associate Director, PriceWaterhouseCoopers said,"The president elect has laid out a vision for reforming the U.S. healthcare system in a way that protects the quality of care while making it affordable and accessible to all." He believes that this move will encourage increased use of generics in government-funded programs and should boost Indian generic drugs which accounts for one fifth of the global production.

As the health care costs are increasing enormously in U.S., the government, employers and consumers struggle to meet these costs. Health care spending in U.S. has reached at $7,026 per resident in 2006, which is accounted for 16 percent of the nation's gross domestic product (GDP).

"Obama's win will also allow for the re-importation of drugs, with a caveat that prices of the re-imported drugs should be lower than their cost in the U.S. Allowing re-importation would provide Indian manufacturers with greatly expanded access to the profitable U.S. market," Shetty mentioned.

"I think the new U.S. government will be clearly more pro-generic. So to that extent, more Indian companies will gain," said Dilip Shanghvi, Chairman, Sun Pharmaceuticals.

According to Industry analysts, the new U.S. Administration may speed up regulatory pathway for bio-generics. "Although bio-generics are already being manufactured in Europe and India, there is no pathway for regulatory approval in the U.S., stalling their introduction into the lucrative U.S. market. This will be beneficial to those Indian companies like Biocon and Dr Reddy's who already have built capabilities in Biosimilars," analysts foresee.

Alok Dalal, an analyst with Religare research said, "There is high competition in the generic space and with price erosions of 95 percent, whether sizeable profits can come from there is doubtful, unless you have niche products."